Reciprocity: It Should Cut Both Ways

Should we liberalize professional occupations in the country?

I always have to remind freshly arriving compatriots in Australia complaining about certain “discriminating” policies on skills migration of how discriminating the rules are back home in the Philippines.

For instance, if a doctor from the Philippines wishes to practice medicine in Australia, he or she first needs to spend a few years “paying his or her dues” working under the tutelage of a sponsoring hospital and cannot seek employment elsewhere after this period before undergoing certain theoretical and practical tests. Something similar happens for nurses.

These so-called barriers to entry prevent more skilled professionals from coming to countries like Australia. We can call them discriminatory, but consider the rules in the Philippines, where there is an absolute ban on foreign nationals from practicing their profession.

When I gained permanent residency in Australia, I was eligible to work in a state government department although I was not yet a citizen. When I became an Australian citizen, I became eligible to work for the Federal government even though I had maintained my Philippine citizenship. Yet, if I try to work in government in the Philippines, I will first have to renounce my Australian citizenship (which is probably why I have chosen to blog about Philippine affairs instead of actually working in it).

These prohibitions were conceived of by our politicians as a way of protecting and preserving the domestic labour pool from foreign competition because of the large oversupply of skills that existed and still persists today.

Yet these very restrictions might actually prevent many of our countrymen from accessing jobs from abroad being outsourced to the Philippines. When it was written, our present constitution did not take into account the world we would be living in today where technology has allowed business functions such as accounting and law to be practiced across national borders.

The international standards governing these professions make it possible for a lawyer in Delhi to advise clients in New York or for finance professionals in Singapore to do the same. Education and certification of these professionals can also take place across national boundaries now. Ironically, the things that prevent us from signing on to international trade deals to capture a greater chunk of this growing market are the very laws that sought to maximize employment opportunities for our people.

At a time when the pool of college educated unemployed workers is swelling and where the imbalance between graduates supplied by our educational system and the demand for them domestically is rising, our current stock of leaders need to look at re-designing the institutions incorporated in our Constitution. We need as a nation to examine whether they make us well-suited and adapted to the new global environment that we are living in or in fact impede us from excelling.

At the time the nationalist provisions in our Constitution were framed, there was a deep-seated conviction that only an absolute ban would prevent Congress from eroding over time the principles enshrined in it. What we have to realize today is that the very fulfillment of those principles requires us to move away from an absolute ban and towards a regulatory framework that manages the transnational flows of services from human assets just as we have institutions to handle the flow of earnings from financial and intellectual assets.

The very source of our national competitiveness, our human capital, which props up our foreign reserves and domestic economy could become restrained in the future in its ability to compete for thousands of jobs that could be created in the Philippines unless we find a way around such arcane provisions in our legal system.

Doy Santos aka The Cusp

Doy Santos is an international development consultant who shuttles between Australia and the Philippines. He maintains a blog called The Cusp: A discussion of new thinking, new schools of thought and fresh ideas on public policy (www.thecusponline.org) and tweets as @thecusponline. He holds a Master in Development Economics from the University of the Philippines and an MS in Public Policy from Carnegie Mellon University.

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  • KG

    http://www.investphilippines.info/arangkada/part-iv-general-business-environment/foreign-equity-and-professionals/

    “Recommendations (12):

    A. Create a commission, with NEDA as its secretariat, to review various restrictions on the participation in the Philippine economy of foreign equity and professionals, taking into consideration whether the restrictions impede job creation and competitiveness. The commission should consider the recommendations of the 1999 and 2005 constitutional review commissions, study the current FINL and banking laws, consult with stakeholders, and make recommendations to the president for reforms within six months. (See Table 66) (Immediate action OP, DOJ, PRC, and NEDA)

    B. At the appropriate time, support practicable efforts to remove all economic restrictions from the 1987 Philippine Constitution. To achieve a level playing field, consider zero or minimal successor restrictions, after their removal from the constitution. (Private sector)

    C. In order to develop the country as an education hub, especially for English, encourage foreign investment in education and more foreign teachers and researchers to practice in the Philippines. Find a way to do this in a legal and practicable manner. Grant longer single-entry visas for tourists and students coming to the Philippines for short-term study purposes. (Immediate action BOI, DOT, and CHED)

    D. Anticipating that foreign ownership of land will be allowed when the constitutional restriction is removed, prepare a list of principles governing future foreign ownership of agricultural, commercial, and residential land to be followed in enabling legislation. (Medium-term action by DOJ and private sector)

    E. Adjust the FINL to make explicit that foreign ownership of land in horizontal condominiums, industrial estates, tourism estates, retirement villages, and similar real estate arrangements is allowed. (Immediate action NEDA)

    F. The commission should also conduct a review of laws and IRRs for all regulatory agencies to determine the extent to which each can authorize exceptions to 60-40 public utility equity rules (as in the MARINA special permit authority). (Immediate action OP, DOJ, NEDA, and regulatory agencies)

    G. Maintain the “control test” not “grandfather rule” in respect to the 60-40 rule for equity in public utilities. Consider language for regulated public utility sectors similar to Section 6 of the EPIRA (RA 9136), which clearly states that power generation shall be competitive, not be considered a public utility, and not require a franchise. (Action DOJ)

    H. Remove the practice of professions from the FINL, where it is not a germane provision in a document created by the Foreign Investment Act and intended to catalogue limitations on foreign equity in non-banking business sectors. Clarity is also needed to distinguish ownership of companies that provide professional services and the execution of medical services. (Immediate action NEDA)

    I. Encourage the PRC to relax its interpretation of reciprocity provisions and announce a new policy to invite foreign nationals in professions that are needed to support the Seven Big Winner sectors to apply to work in the Philippines. (Immediate action PRC with support of appropriate departments, including DA, CICT, DENR, DOH, DOLE, DOT, and DTI)

    J. File bills to open the practice of professions now closed by law to foreign nationals (criminology, environmental planning, foresters, pharmacists, radio, and x-ray technology). (Long-term action PRC, Congress, and private sector)

    K. Encourage Philippine legal associations and the Supreme Court to support changing the rule of the court limiting the practice of law to Philippine nationals to allow foreign lawyers to practice. (Immediate action SC and private sector)

    L. Consistent with the current role of Philippine professionals in the global workplace, Philippine diplomacy should seek increased opportunities for Philippine professionals to work abroad, pursuing these in negotiations on the GATS and AFAS. (Immediate action DOF, PRC, DOLE, and DTI)”

  • KG

    Another issue.
    On Foreign ownership of companies.

    The regulators must resolve this SC decision(PLDT) on capital (preferred/common) otherwise we might need charter change for this.

  • GabbyD

    hmmm. just a question on point on information. do the limits on practice of professions include these outsourcing jobs?

    i dont think so. if a filipino company wanted to hire foreign lawyers, it would be ok.

    what the consti doesnt allow is temporary labor migration, i.e for the foreign lawyers to practice their trade here..

    • That has been the traditional argument against liberalizing. If you notice I said in the article that liberalizing in this context would mean moving from an absolute ban to a regulatory framework. That would mean that compensation rules could be applied.

      The flipside of your argument is the case of offshore oil rig workers employed by a Dutch company in Australia where Filipinos were paid below the appropriate amount. The unions filed cases with the industrial relations authorities over this and the Filipinos are also seeking back wages and damages.

      That is what I mean by having a regulatory framework to draft rules of fairness and impose sanctions against those who abuse the system. There will be costs of moving to that framework, but the benefits will mean the ability to increase our share of the pie in the outsourcing industry and employ those people in 40 professions that currently are not able to find employment in the country.

    • GabbyD

      huh? what is the argument? i havent made an argument against liberalization.

      i just wanted to be clear on facts.

      outsourcing, as long as labor (physically) doesnt move across borders, is OK. (there’s WTO trade in services linggo for this, i wanna say mode 3? liberalization)

      but its temporary labor migration that is not allowed by the constitution, yeah? generally speaking.

      • Sorry, GabbyD, that comment above was meant for KG, I just realized now. Yes of course, your point is correct. I also made a point below for KG which I think is more appropriate for your question. A case of giving the right responses to the wrong persons. Oh my, I haven’t fully woken up, I guess!

        • KG

          Doy, Thanks for your insights.

      • UP nn grad

        call-center fwould be jobs, not professions.

        • KG

          noted,but what about services that offer financial ,medical ,legal or whatnot ? Do they require licensed individuals or just people who took a crash course?

          • UP nn grad

            The business corporation has responsibility to match the call-center folks to the service being provided. So you have professionals (nurses) doing call-center functions. The folks they talk to are not receiving “nursing advice” — they are just talking to call-center folks knowledgeable about medical terminology.

          • kg

            ok

  • manuelbuencamino

    Wait and see what happens when Australia becomes populated and its unemployment rises.

    But hey, Filipino lawyers and finance professionals advise clients all over the world and foreign lawyers and finance professionals advise their Filipino clients all the time. Do you actually think that a Filipino investor in Singapore or China or anywhere else is not going to ask advise from experts at his investment destination? The same thing goes for foreign investors. I can employ them here, all that is needed is a work permit and it will be granted.

    There are some australian universities offering online doctoral courses here. You enroll, they send you lectures online. They also send a prof here to lecture etc. IA relative actually looked into it but found the cost prohibitive. But the school was legit and so was the degree.

    Bottomline, I believe, for any country is to prioritize employment of their nationals. Foreigners are welcome if there is space and they have something to contribute.

    • As I said in the article, the way to fulfill the nationalist principles enshrined in the Constitution would be to liberalize, because there are 40 professions that could potentially experience an employment boom if we do so. I am aware that currently there are outsourcing firms employing lawyers and accountants in the Philippines, but the movement to a regulatory framework from an absolute ban would allow us to increase activities in these areas even more. In other words, on balance, we will gain more than we will lose.

  • UP nn grad

    Just food-for-thought —- Madeline Albright was not asked to renounce her Czech ctizenship as she became the first woman to become a United States Secretary of State. She was appointed by U.S. President Bill Clinton on December 5, 1996, and was unanimously confirmed by a U.S. Senate vote of 99-0.

    And Czechoslavakia? Dual-citizenship, allowed…. in fact, then Czech President Václav Havel talked openly about the possibility of Albright succeeding him after he retired in 2002.

    —————————-
    I can understand Pilipinas restricting AFP colonels-and above or Cabinet-Secretary positions only for single-citizenship humans…. but a dual-citizen can’t even be a statistician or a programmer-analyst at Malacanang?

    • manuelbuencamino

      Sec.5 (3) of RA 9225 also known as “Citizenship Retention and Re-acquisition Act of 2003.” says:

      Those appointed to any public office shall subscribe and swear to an oath of allegiance to the Republic of the Philippines and its duly constituted authorities prior to their assumption of office: provided, that they renounce their oath of allegiance to the country where they took that oath;

      But the answer to your question re: employment in Malacanan. Of course you can, just ask Gary Olivarhow he managed to become Gloria’s spokesman without having to renounce his oath of allegiance to the US.

      • UP nn grad

        So ManuB…. you saying that with Noynoy Malacanang, “TheCusp” can be employed full-time?

        • manuelbuencamino

          I said Olivar was illegally employed by Gloria. I don’t know if Noynoy will follow her example.

          • UP nn grad

            is that a Freudian slip suggesting a crack in your loyalty?

            Bert would have said “I am sure Noynoy would not follow her example.”

          • Bert

            Loyalty to good governance—good.

            Loyalty to bad governance—bad.

            Loyalty to GMA—worse, :).

    • You point out a nice historical anecdote, UP nn grad, and MB is equally up to the task in humorously providing the twisted local counterpart.

      Of course, let me set the record straight. Given some of my philosophical differences with the administration’s direction at the moment, I don’t think I would be welcome, nor would I consider working for PNoy’s govt. Besides, it’s a lot more fun commenting on its policies from where I sit.

      • UP nn grad

        is the philosophical difference along economic policies, or is it about where loyalty-to-KKK’s ends?

  • KG

    Let us say we have labor liberalization. The expats will ask for more pay unless perhaps if they come from a poorer country.

    • UP nn grad

      When 2 candidates appling for the same post offer the same credentials/equivalent work-experience and offer the same value to the Enterprise, then Capitalism says the job-offer goes to lowest-bidder.

      Tiebreaker can then be where one of the job applicants is kamag-anak or son-of // daughter-of a BFF.

      • KG

        true.

    • KG, the reciprocity principle is invoked here because we in effect will be taking many jobs away from the West when companies outsource their functions to the Phils. In exchange, it means having a licensed professional from the country of origin supervise their local counterparts in the country being outsourced to. That’s a wonderful trade-off don’t you think?

      But the flipside is that if we don’t liberalize, it would mean losing these jobs to India, Singapore, Hong Kong, China, etc. Oh well, I suppose we could just keep sending our excess college graduates overseas then.

      But just imagine how the global economic environment will operate 10, 20, 30 even 50 years from now. We need to see if our institutions are well-adapted for that world. A government with a truly long-term view will take the lead in forging a national debate and consensus on this and many other issues related to it.

      Please also see my comments above to GabbyD above whom I mistook for you concerning the Filipino offshore oilriggers’ case.

      • KG

        Doy,

        Thank you for your additional inputs.

        We have some multinationals with expat country managers.
        In addition some call centers have a resident expat.

        The Chinese have been learning english.
        The past decade had many chinese enrolled in various business schools in the Philippines..
        Now China has positioned itself as a destination for graduate students(saw it on CNN).

        Sooner or later we might lose our BPO competitive advantage to China.

        India’s turnover(in the bpo biz) is high because many want to be promoted quickly and one of this days India might transfer their bpos to China.

        About low salaries.
        In Africa many chinese firms are closing shop or cutting costs because of some familiar minimum wage issues.

        Again i digress. I am not worried about the saudization because the saudis will demand higher . I might be wrong though.