A Story of Re-Legislating Policies: The Politics of Policy Modification in the Philippines

A Story of Re-Legislating Policies: The Politics of Policy Modification in the Philippines

Bing Baltazar C. Brillo 1

This is an Author's Original Manuscript of an article published in Philippine Quarterly of Culture and Society, (2012) vol. 39, no. 2, pp. 163-183.

Abstract

Policy modification is an area of policy change least explored, as most of the scholarly outputs have concentrated on policy shift. As a legislative process, policy modification refers to the re-legislation of a recently enacted statute in a relatively short period of time to rectify or adjust it to some domestic or external demand in the political system. This definition presupposes two dimensions: first, an initial law is passed by the legislature; and second, after a relatively short span of time, the policy is amended in response to some post-enactment request, petition, or pressure. Moreover, the legislative action entails continuity since the aim is merely to improve or enhance the existing policy due to some post-enactment demand, and not to reverse or drastically change the overall make-up of the policy. This study analyzes three cases of statutory re-legislations— the Foreign Investment Act (R.A. 7042 to R.A. 8179), the Anti-Dumping Act (R.A. 7843 to R.A. 8752), and the Anti-Money Laundering Act (R.A. 9160 to R.A. 9194)— to empirically verify and substantiate the assumptions in literature as well as illustrate the intricacies of policy modifications in the Philippines. The paper contends that the policy modification of the three cases can be elucidated through the following: first, the FIA as internally driven via government learning; second, the ADA by the interplay of domestic strategy and external dynamics; and lastly, the AMLA as externally driven via coercive measures.

Introduction

In the last decade, the bulk of scholarship in Philippine policy making has revolved

around the dynamics of substantive policy formulation and change. For instance: Antonio Pedro

and Eric Batalla assessed the politics of banking and financial liberalization (Republic Act [R.A.]

7721) in 2002; Lourdes Rebullida discussed the dynamics between the urban poor and the

government in formulation of the housing policy (R.A. 7279) in 2003; Jorge Tigno examined the

The author is Assistant Professor at the Department of Social Sciences, University of the 1

Philippines Los Baños and is pursuing the PhD in Development Studies (by Research) at De La Salle University.

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legislation dynamics of the migrant workers and overseas Filipino law (R.A. 8042) in 2004; Ela

Atienza evaluated the effects of the devolution of the health policy (R.A. 7160) in 2004; Amado

Mendoza analyzed the politics behind the legislation of the comprehensive tax reform program

(R.A. 8424) in 2005; and Bing Baltazar Brillo examined the intricacies of the evolution of the

retail trade policy (R.A. 8762) in 2010; and reexamined the quality of pluralism that existed 2

among actors and stakeholders in the legislation of the foreign bank liberalization law (R.A.

7721) in 2012. Although the literature has sufficiently explored substantive policy formulation 3

and change; one form of policy change, specifically policy modification, has largely been

ignored by scholars. 4

Policy modification simply refers to the re-legislation of a recently passed statute in a

relatively short span of time in order to rectify or adjust the policy to some domestic or external

demand in the political system. In other words, policy modification involves the fine-tuning of a

recently legislated policy in order to make it more suitable for the intended purpose or more

compliant to the changing environment. As a legislative process, policy modification has two

dimensions— first, the enactment of the initial law; and second, the eventual revision of the

same law within a short period of time. Policy modification also presupposes the continuity of

the policy. The aim of the legislative action is simply to improve or enhance the existing statute

due to some post-enactment demand, and not to reverse or drastically change the overall make-

up of the policy.

This study seeks to fill the gap in literature by elucidating the dynamics of policy

modification. In particular, the paper provides empirical discussions on why and how policy

Refers to Brillo 2010a2

Refers to Brillo 2012a3

The paucity of scholarly works on policy modification is largely a consequence of being 4

subsumed to the broader literature of policy change, where policy shift (substantive alteration or replacement of the prevailing policy) is given preference over policy modification (rectification or adjustment of the existing policy).

2

modifications come about as well as its subtleties in the Philippine setting. In doing so, it

examines three legislative cases of policy modifications: the Foreign Investment Act (R.A. 7042

to R.A. 8179), the Anti-Dumping Act (R.A. 7843 to R.A. 8752), and the Anti-Money Laundering

Act (R.A. 9160 to R.A. 9194). The cases were selected since the statutes fit the dimensions of

policy modification— that is after the enactment of the original law, the statutes were re-

legislated in a relatively short period of time with the sole purpose of “adjusting” the said law.

The statutes also share a common denominator since all of them are outcomes of the post-EDSA

governments’ adaptation to the global liberalization trend. Furthermore, the paper serves as a

sequel to the previous research of the author, where the policy making of the initial laws—

specifically, the Foreign Investment Act (FIA), the Anti-Dumping Act (ADA), and the Anti-

Money Laundering Act (AMLA)— has been previously studied (see Brillo 2010b; Brillo 2011;

Brillo 2012b). Thus, this paper intends to complete the analysis by focusing on the area least

explored— the post-enactment to the amendment phase of the legislative process.

Two Forms of Policy Change: Policy Shift and Policy Modification

As an analytical concept, policy change was brought to light only in the late1980s in the

realm of policy studies. In modern political systems, probing on policy change is essential, as

policies are constantly evolving and rarely maintained in exactly the same form over time (Peters

1986). This reality, hence, makes the politics of changing policy commonplace among

governments. Hogwood and Gunn (1984) cited three reasons why policy change is frequent in

contemporary legislation. First, the expansion of government activities through the years brings

about overlap in policies which would necessitate reforming existing policies. Second, legislative

oversight, particularly in cases of inadequacies and adverse side effects, may instigate the

changing of the policies. And third, the demands of sustainable economic growth and the

implications of the financial commitment of a government might require the replacement of old

policies. Although prevalent, policy change is always a difficult legislative undertaking since it is

always easier to continue an existing policy than to replace or reform it (Howlett and Ramesh

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1995).This is expected, as people benefiting from the status quo policy would naturally oppose

any move to change the policy.

Broadly, policy change refers to “the point at which a policy is evaluated and redesigned

so that the entire policy process begins anew” (Stewart et al. 2008: 11). Policy change takes two

forms: first is policy shift where the make-up of the prevailing policy is substantially altered or

replaced; and second is policy modification where the existing policy is merely adjusted or

reformed (see Anderson 1990; Howlett and Ramesh 1995; Stewart, Hedge and Lester 2008;

Brillo 2010a). Relative to policy modification, policy shift has been sufficiently studied in both

its empirical and theoretical aspects. For instance, on the empirical side—studies explaining the

pattern of policy shift in American politics. Schlesinger (1986), stated that policy reforms happen

in a regular cyclical alternation between the two dominant political parties— the Democratic

Party and the Republican Party. While Amenta and Skocpol (1989), argued that policy shifts

occur in an erratic pattern among groups in society since policies of one period which favor one

group, serve as stimulus for a reaction in the next period which would favor another group.

On the theoretical side— studies explaining policy shift by means of analytical

frameworks. Sabatier (1987 and 1988) and Jenkins-Smith (1999), via their advocacy coalition

framework, concluded that policy shift occurs mainly through the competition among advocacy

coalitions and through external changes in the policy subsystem (e.g., shift in socio-economic

orientation, public opinion, or governing coalitions). Here, advocacy coalition refers to alliances

of groups (usually consisting of legislators, bureaucrats, interest groups, and think tanks) with

shared beliefs that coordinate actions to push for a particular policy (Sabatier and Jenkins-Smith

1999). Another, Baumgartner and Jones (1991 and 1993), through their punctuated equilibrium

framework, argued that policy shift happens when the prevailing policy monopoly in a political

system is “punctuated” (i.e. challenged and successfully replaced) by a new one. Here, policy

monopoly refers to “a set of structural arrangements that keep policy making in the hands of

relatively small group of interested policy actors” (Smith and Larimer 2009: 84). In a political

system, policy monopoly is usually broken when there is a redefinition of issue (e.g., positive to

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negative image) since this leads to the alteration of a policy subsystem. And Kingdon (1995),

utilizing his three streams framework, contended that, to have a successful policy shift, certain

phases must come together. First, the problem stream where the problem is highlighted and

moved to the government agenda. Second, the policy stream where alternative policies vis-à-vis

the problem is generated. And third, the political stream where the key actors and stakeholders

“bargain” over the policy. Here, all three streams must converge to open a policy window for

policy shift.

Oddly, policy modification, which is the more typical form of policy change— as it is

easier to make adjustments and continue a policy than substantially change a policy— has been

scantily explored. Policy modification, as a policy making process, refers to the re-legislation of

a recently enacted statute in a relatively short period of time to rectify or adjust it to some

domestic or external demand in the political system. The definition presupposes two dimensions

of policy modification. First, an initial law is passed by the legislature (usually resulting in a

policy shift, as this law substantially alters or replaces the old policy). Second, after a relatively

short span of time, the enacted law is amended in response to some post-enactment request,

petition, or pressure. Here, the initial law is fine-tuned in the re-legislation to improve or make

the policy more suitable or compliant to a national or international demand. Broadly, the demand

to rework the policy can come from a multitude of factors, such as error in legislation,

ineffectiveness of enforcement, revelation of unintended consequences, changes in the

environment, or international pressure. Furthermore, unlike policy shift which substantially

changes the direction or essence of the statute, policy modification presupposes the continuity of

the existing policy despite the amendment or revision to it.

Among the policy shift’s frameworks, the closest in explaining policy modification is the

advocacy coalition framework via its concept of policy learning. In general, policy learning

refers to a condition where the policy actors (governmental, stakeholders and coalitions)

continually update their beliefs in response to new information and changes in the political,

socio-economic environment (Heclo 1974, Sabatier 1988, May 1992, Hall 1993, and Rist 1994).

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The literature on policy learning provides two directions that are akin to policy modifications.

On one hand, policy learning is equated to a government’s normal process where decision-

makers attempt to improve the policy or to understand policy failures based on new information

and/or past consequences (Hall 1993). On the other hand, policy learning is deemed as a

governmental activity where decision-makers adjust or revise a policy in response to an external

stimuli or changes in the environment (Heclo 1974). Taken together, the grounds for the

occurrence of policy modification can be inferred as a function of two sources— internal

learning and external changes. In other words, policy modification, as a legislative process, can

originate either from within (based on internal dynamics among the governmental or societal

actors) or from outside (based on externally driven inducements or pressure from international

actors) of the political system. Taking off from the preceding discussions, this study analyzes

three cases of statutory re-legislations. The aim is to empirically verify and substantiate the

assumptions in literature as well as illustrate the intricacies of policy modifications in the

Philippines.

The Foreign Investment Law (R.A. 7042 to R.A. 8179)

R.A. 7042 or the Foreign Investment Act (FIA) was formally signed into law by President

Corazon Aquino on the 13 June 1991. The FIA was conceived when the Congressional Executive

Investment Policy Review (CEIPR) set up from November 1989 to February 1990 concluded

that most of the investment laws of the country are outdated and needed immediate revisions

(Brillo 2012b). Specifically, the CEIPR was referring to Executive Order 226, otherwise known

as Book II of the Omnibus Investment Code of 1987, a law largely taken from R.A. 5186 and 5

R.A. 5455 which were enacted in 1967 and 1968, respectively. The law was considered passé

and discordant with the country’s present economic situation particularly in the contemporary era

of economic globalization. The CEIPR’s assessment reflected the neoliberal orientation of the

Aquino administration. This position was clearly articulated by the Board of Investments (BOI):

those policies to be adopted “should reflect the desire of this government to open up the

Entitled “Foreign Investments Without Incentives,” specifically Article 44 to 56.5

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economy… that is outworld-oriented, (with) a broader base of participation, and with minimum

government intervention” (Congress of the Philippines-Senate Committee Hearings on Foreign

Investments of 1991: 3).

The FIA was the foremost of the package of legislative measures adopted by the Aquino

administration to improve the country’s overall investment climate. The policy was designed to

have a spillover effect since its passage was expected to precipitate the legislation of other

policies that would further liberalize the economy. In particular, the FIA was intended to address

the insufficiency in the capital investment of the country which should ideally be generated

through internal savings. Since the Philippines has a low domestic savings rate, the government

was compelled to explore external sources such as foreign loans and foreign investments.

Foreign loans, however, was not an appealing alternative as the country at the time was already

burdened by a huge foreign debt amounting to $28 billion. Thus, in resolving the country’s

capital deficiency, the only viable option of the Aquino administration was attracting foreign

investments (Brillo 2012b). Under this condition, the Aquino administration impelled the Eighth

Congress to immediately enact the foreign investment law.

Four years afterwards, the Ramos administration called on the Congress to repeal the

FIA. The objective of the amendment was to further liberalize the entry of foreign investment in

the country. Since the implementation of the FIA, the government believed that the policy was

relatively successful in increasing the flow of investments in the economy. For instance, Senator

Ramon Masaysay Jr. cited in his sponsorship speech that “for the years 1993-94, a 403 percent or

more than four times jump in foreign equity investments of BOI-approved projects was realized

when the actual figures rose from P14.414 billion in 1993 to P97.781 billion in 1994. The trend

continued with the period covering the first semester of 1994 to 1995, which showed a

remarkable 53.08% increase in investment over that of the previous year” (Congress of the

Philippines-Senate Session Proceedings on the Amendments to The Foreign Investment Act of

1991: 9). Despite this, the consensus among the government agencies, such as the Bangko

Sentral ng Pilipinas (BSP), National Economic Development Authority (NEDA), Securities and

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Exchange Commission (SEC), Department of Trade and Industry (DTI), and BOI, was that there

is a necessity to amend the FIA so as to maximize its benefits. As stated by Congressman

Margarito Teves, one of the sponsors of the repealing bill, “unfortunately, the opportunities

offered by the new law was not competitive enough to attract substantial foreign capital… from

1991 to 1993, the country attracted only $1.5B or 6% out of some $25.3B foreign direct

investments in Southeast Asia” (Congress of the Philippines-House of Representatives Session 6

Proceedings on the Amendments to The Foreign Investment Act of 1991: 135). Here, the success

of neighboring ASEAN countries was attributed largely to their more liberal investment policies.

Thus, the logic formed was that to be at par with them, there is an urgent need to amend and

improve the FIA.

The move to amend the R.A. 7042 revolved around three substantive provisions. First,

the deletion of the three-year requirement before a domestic enterprise may change its status to

an export enterprise. Second, the reduction of the minimum paid-in capital requirement from

$500,000 to $150,000. And third, the removal/retention of the provisions relating to the Negative

List C (Congress of the Philippines-Senate and House of Representatives Session Proceedings 7

on the Amendments to The Foreign Investment Act of 1991). Except for the last provision, there

was concurrence between the two legislative chambers. The legislation of FIA was facilitated by

its initial success. It alleviated the fear that foreign competition would overwhelm the domestic

industries— as this apprehension did not happen. As a consequence, this psychological fear,

which was a critical factor in the deliberation of the FIA in 1991, was removed from the equation

in the re-legislation. The legislation was further accelerated since the FIA was included as an

integral part of the Ramos administration’s overall development program of liberalizing the

economy. Hence, the government exerted strong efforts to expedite the legislative proceedings

by elevating the status of the FIA’s amendment over other policy agenda in Congress. Under this

Malaysia captured $12.8billion or 50.5%; Thailand received $5.7billion or 22.6%; and Indonesia 6

got $5.2billion or 20.7%.

The Senate version is for the retention while the House version is for the removal.7

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context, the Tenth Congress formally enacted R.A. 8179 which was signed into law by President

Fidel Ramos on 28 March 1996.

The Anti-Dumping Law (R.A. 7843 to R.A. 8752)

R.A. 7843 or the Anti-Dumping Act (ADA) was signed into law by President Fidel

Ramos on 21 December 1994. The ADA was enacted by the Ninth Congress principally to

preempt the perceived detrimental effects of the implementation of the General Agreement on

Tariffs and Trade—Uruguay Round (GATT-UR) agreement in which the Philippine Government

was a signatory. As an economic regime, the GATT-UR, which in 1995 became the World Trade

Organization (WTO), promoted the unhampered flow of goods and impelled the country to open

its economy. The opening of the domestic market and international trade were promoted mainly

through the drastic reduction of tariffs and duties on imported goods. The rationale was that the

entry of foreign producers and imported goods would infuse competition and efficiency in the

economy. This economic arrangement, however, has a downside. It posed a clear and present

danger to the local industries since there was a strong possibility of dumping in the domestic

market (Brillo 2010b). Dumping is considered an unfair trade practice when foreign producers,

in their quest to penetrate and capture a market share, deliberately flood the domestic market

with products that are priced either lower in their own national markets or below the cost of

production. The intent here is to artificially lower the price to reduce or eliminate competition.

With this looming possibility, GATT-WTO encouraged their member countries to legislate an

anti-dumping law for protection. The law was designed as a correcting mechanism where the

government is given the right to adopt measures (e.g., imposition of tariffs or duties) to protect

the domestic producers against unfair trade practices from foreign producers. Under this

circumstance, the Ramos administration and the Ninth Congress agreed to repeal Section 301 of

the Tariff and Customs Code of 1957 (R.A. 1937) and legislate an anti-dumping law.

The circumstance behind the policy making of the ADA was unusual. Although the

legislation was instigated by the GATT-UR agreement, the ADA was enacted primarily to

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respond to domestic demand rather than to diligently comply with the GATT-WTO mandate. The

ADA was deliberately passed before the formal Senate ratification of GATT-UR agreement. This

move was strategic since the objective was to provide adequate protection to domestic industries

before the effectivity of the international trade agreement. As aptly stated by Senator Gloria

Arroyo, a co-sponsor of the anti-dumping bill, the foremost intent of enacting the law is to set up

a safety net to help local industry and only secondarily to comply with the GATT mandate

(Congress of the Philippines-Senate Committee Hearings on The Anti-Dumping Act of 1994).

The lawmakers’ strategy was twofold: first, to overlook some requirements of the GATT-UR

agreement in legislating ADA so as to give ample protection to the local businesses; and second,

to subsequently re-legislate the law (after maximizing the “grace period” allowed) to fully

comply with the anti-dumping provisions of the international treaty. As observed by Brillo

(2010b: 22): “The intent of the legislators was to quickly enact an anti-dumping law tilted toward

the domestic industry before the formal ratification of the GATT-UR Agreement, and to amend

the law again after several years to make it consistent with the commitments to GATT.” Thus,

from the very beginning, ADA was intended to be a “temporary” law to maximize benefits for

domestic industries with the pre-plan of amending it later on.

Four years afterwards, the Estrada administration and Congress became aware of

approaching end of the minimum five-year time table allowed by GATT-WTO for member

countries to strictly comply with its anti-dumping requirements. As a consequence, the

Legislative-Executive Development Advisory Council (LEDAC) in mid-1998 made the repeal of

ADA a priority measure. In Congress, the principal concern of the re-legislation was the issue of

conformity— that is how to align the domestic law with the GATT-WTO agreement on Anti-

Dumping Practices (Brillo 2010b). As stated by Senator Juan Ponce Enrile, the principal sponsor

of the repealing bill and the Chair of the Ways and Means Committee, there is a need to recast

R.A. 7843 to make it clearer, simpler to implement and closely adhere to the mandates of GATT-

WTO which the Senate ratified (Congress of the Philippines-Senate Committee Hearing on the

Anti Dumping Act of 1998). The Tariff Commission (TC), through Commissioner Anthony

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Abad, identified the provisions of ADA that were inconsistent with the GATT-WTO

requirements:

• withholding of the release of questioned importation pending the determination of a

prima facie case of dumping;

• imposition of a provisional measure immediately upon the finding of a prima facie

case, effective up to the final determination of dumping;

• inclusion of substitutes in the definition of like products; • country-specific application of anti-dumping duty;

• limiting the period of submission of replies to a questionnaire to 10 days; and

• retroactive application of definitive anti-dumping duty on all importations within 150

days immediately preceding the filing of the protest (Congress of the Philippines-

Senate and House of Representatives Committee Hearings on the Anti-Dumping Act

of 1998).

The Estrada administration, knowing well the repercussions from the international community if

the government will not honor its commitment, fully supported the move to repeal the existing

anti-dumping law. Under this context, the Eleventh Congress deliberated and enacted R.A. 8752

which was formally signed into law by President Joseph Estrada on 12 August 1999.

The Anti-Money Laundering Law (R.A. 9160 to R.A. 9194)

R.A. 9160 or the Anti-Money Laundering Act (AMLA) was enacted on the 29 September

2001, after a record-breaking deliberation of a little over a month and one day before the

deadline set by the Financial Action Task Force (FATF). The FATF is the principal international

body that promoted the adoption and development of the anti-money laundering law among

countries. The AMLA is a financial regulation policy designed to specifically combat the global

proliferation of illicit money— drug and terrorist financing— in banks and other financial

institutions. The move that successfully enacted the AMLA began in August 2001 during the

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Twelfth Congress, roughly a little over 30 days before the FATF’s imposed deadline. The

accelerated phase of the legislation in Congress was attributed to the “intervention” of the FATF

via the black list or the Non-Cooperative Countries and Territories (NCCT) initiative (Brillo

2011). In the 2000 and 2001 NCCT Reports, the Philippines was identified as one of the 23

countries not complying with the FATF’s financial regulations standard (see FATF 2000 and

2001). As a consequence of being a blacklisted country, the Philippines was subjected to routine

countermeasures and given until 30 September 2001 to legislate an anti-money laundering law.

FATF also warned that if the Arroyo administration fails to do so within the deadline the country

could face severe sanctions from the international financial community. Hence, under this

condition, the Arroyo Administration and the Twelfth Congress closely collaborated to pass the

anti-money laundering law within the required deadline.

Not long after the effectivity of AMLA, however, there were indications that the law did

not fully satisfy the global standards. The FATF pointed out that some stipulations in the law

were inconsistent with the 49 + 9 Recommendations which is the international standard for

money laundering laws. As observed in the June 2002 NCCT Report:

1. Although the Philippines’ authorities interpret the regulations as requiring the

reporting of all suspicious transactions, this nevertheless conflicts with the AMLA,

which only requires reporting of high threshold suspicious transactions.

2. The law allows the AMLC to access account information upon a court order, but a

major loophole remains in that secrecy provisions still protect banking deposits made

prior to 17 October 2001. Secrecy provisions also still restrict bank supervisor’s

access to account information (FATF 2002: 14).

Accordingly, the need to modify the AMLA was confirmed by Vicente Aquino, the Executive

Director of the newly created Anti-Money Laundering Council (AMLC). He revealed that the

FATF’s major concerns are the following: first, the threshold was too high and should be lowered

to the equivalent of US $10,000.00 or roughly P500,000.00 in Philippine currency; second,

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although incorporated in the implementing rules and regulations, the suspicious transaction

reporting requirement was not included in the law; third, the AMLC lacked the authority to

inquire into or examine bank accounts or investments without the order of a competent court;

and fourth, bank deposits and transactions prior to the effectivity of the law may be examined for

the purpose of investigation and not for the purpose of prosecution (Congress of the Philippines-

Senate and House of Representatives Committee Hearings on the Amendments to the Anti-

Money Laundering Act 2002).

The inconsistencies in AMLA were brought about by the insistence of some lawmakers to

disregard the FATF guidelines. This attitude in Congress, in general, was a reflection of either an

ultranationalist sentiment, acts catering to vested interest, or a compromise with opposing

lawmakers for them to agree to pass the bill (Brillo 2011). For instance, the most blatant

deviation in R.A. 9160 was the threshold requirement. Both the Senators and the Congressmen

cited that the FATF’s $10,000.00 (P500,000.00) threshold for reporting suspicious transactions is

unacceptable. Instead, the Senators (proposing $3 million) and the Congressmen (proposing $5

million) compromised and agreed to a $4 million threshold, an amount way above the FATF

ceiling. With these inconsistencies, the FATF called upon the Philippine Government to take the

necessary steps to amend the AMLA so as to conform to the 40 + 9 international standard. The

strong determination of the FATF was manifested when the call was accompanied by an advisory

that noncompliance would result in countermeasures and retention of the blacklisted status of the

country. The FATF insisted, to avoid sanctions and for the country to be delisted, that the

appropriate legislative modifications must be made on or before 15 March 2003 (FATF 2003).

The FATF’s demand was taken seriously by the Arroyo administration and the leadership

in Congress. On the part of the legislators, it was aptly expressed by Senator Ramon Magsaysay,

the Chairman of the Committee on Banks, Financial Institutions and Currencies: “we remain in

the list of non-cooperative countries and territories, NCCT, for failure of the Philippines to

comply with the recommendations of the FATF, hence, the need to amend our present law so that

countermeasures will not be imposed” (Congress of the Philippines-Senate Committee Hearings

13

on the Amendments to the Anti-Money Laundering Act 2002: 8). On the part of the

administration, AMLC Executive Director warned that unless the current AMLA is modified,

drastic countermeasures would be imposed by FATF and that these sanctions would have severe

repercussions considering the Philippine economy is primarily dependent on foreign exchange

remittances of Filipino migrant workers. Under this context, the move to formally amend the

AMLA began in 2002 in the Twelfth Congress and concluded in 7 March 2003 when the

President signed R.A. 9194 into law.

Analysis and Conclusion

Going back to the concept of policy learning, policy modification, as a legislative

process, was presumed as a function of internal learning and external changes of the political

system. Empirically, this meant that the repealing legislation can either be instigated or managed

domestically (by actors such as politicians, bureaucrats, or interest groups) or externally (by

actors such as foreign governments, multilateral institutions, or international treaties/regimes).

Taking cue from the preceding inference, the analysis of the statutory re-legislations of the FIA,

the ADA, and the AMLA reveals the following.

First, the case of the FIA involved policy modification that can be characterized as

internally driven via government learning. The re-legislation from R.A. 7042 to R.A. 8179 was

prompted principally by the government’s pursuit of its ambitious economic development

program. The Ramos administration, under the banner Philippines 2000, was determined to

accelerate the liberalization of the economy (De Dios and Hutchcroft 2003; Almonte 2007). As

one of the forefront liberalization policy, the FIA was reevaluated. The Ramos administration’s

technocrats observed that R.A. 7042 since its implementation in 1991 has been showing inroads

in terms of the inflow of foreign investments. The downside, however, was that compared to the

inflow of foreign investments in other ASEAN countries, the country was still lagging behind

and getting a measly share. This fact was the consensus, as the Ramos administration and

Congress conceded that despite the FIA, the capital flowing in the ASEAN region was still

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bypassing the Philippines (Congress of the Philippines-Senate and House of Representatives

Session Proceedings on the Amendments to The Foreign Investment Act of 1991).The

government technocrats, as a remedy, suggested the immediate repeal of the FIA to enhance the

inflow of foreign investment in the country. Their thinking was that relative to other ASEAN

countries, the FIA was still restrictive and hence, needed to further liberalize to facilitate the

entry of foreign capital. Thus, the legislation experience showed that the government’s

evaluation of the existing policy as well as its assessment of the performance of neighboring

countries served as the main impetus for the amendment of the FIA.

Second, the case of the ADA involved policy modification characterized by the interplay

of domestic strategy and external dynamics. The move to amend from R.A. 7843 to R.A. 8752

was prompted by two attendant circumstances. First was the Ninth Congress’ preplanned action

to deliberately legislate a “temporary” law. And second was the Estrada administration’s decision

to conform to the GATT-WTO terms on anti-dumping practices. During the Ramos

administration, the Ninth Congress hurriedly legislated R.A. 7843 before the Senate ratification

of the GATT-WTO treaty. The intent of the legislature was strategic— to enact a law that

provides an ample safety net to the domestic industries (even though it does not measure up to

the GATT-WTO agreement), and to revise it later when the need arises (that is once the GATT-

WTO demands it). Here, the action was premeditated to give local businesses some advantages

and protection for a certain period of time. Hence, when the allowable “grace period” was to

lapse, expectedly the Estrada administration and the Eleventh Congress took up the cudgels in

re-legislating the ADA so as to fully comply with the GATT-WTO mandate. Thus, in this regard,

both the lawmakers’ earlier orchestrated strategic action as well as the government’s later action

in fulfillment of its international commitment defined the amendment of the ADA.

And lastly, the case of the AMLA involved policy modification that can be characterized

as externally driven via coercive measures. The repeal from R.A. 9160 to R.A. 9194 was

primarily instigated by a multilateral institution; the FATF employing direct pressures was able

to persuade the government to amend the AMLA. From the very beginning, there was strong

15

resistance among the lawmakers in legislating R.A. 9160. As a consequence, compromises were

necessary to enact the law. These concessions resulted in the inclusion of provisions inconsistent

with the 40 + 9 Recommendations which is the global standard for money laundering laws. From

this, the move to repeal the AMLA commenced when the FATF issued a formal plea to the

Arroyo administration. The FATF’s demand, same in its previous plea (in R.A. 9160), was

accompanied by the following: first, a definite deadline on when to enact the amendment;

second, a statement that the country would continue to be blacklisted unless appropriate action

was taken; and third, a warning that countermeasures would be enforced if the no action was

taken by the government. The FATF’s threat was overwhelming since it was enough to overcome

the intense inertia from some lawmakers in Congress. Consequently, the leadership of the

Twelfth Congress and the Arroyo administration, fearing the possibility of severe repercussions

in the financial sector and the economy, worked hand in hand to ensure the amendment and

conformity of the AMLA within the prescribed deadline. Thus, the story of the legislation and

modification of the AMLA is all about the FATF’s demand, deadline, and threat of sanctions.

Summing up, these re-legislation cases illustrate the different dimensions (as well as the

subtleties) of policy modification in the Philippines— the FIA as internally driven via

government learning; the ADA by the interplay of domestic strategy and external dynamics; and

the AMLA as externally driven via coercive measures.

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Documents

A Story of Re-Legislating Policies: The Politics of Policy Modification in the Philippines