From Pledges to Reality – Part I
Analytical Studies & Perspectives of Roldan G. Gorgonio
The Illusion of Progress: Technocratic Liberalization vs. Constitutional Erosion
President Ferdinand Marcos Jr.’s state visit to China in January 2023 yielded the highest nominal investment pledges, amounting to $24.239 billion (Philippine News Agency, 2023). However, China has historically exhibited a notoriously low realization rate for its economic agreements with the Philippines. For example, data from the Lowy Institute indicates that between 2015 and 2021, China committed $6.2 billion in financial development assistance to the Philippines, but only $262 million actually materialized due to failures in operationalizing pledges in a sustainable and timely manner (Delgado, 2023).
So where lies the primary concern? A core tension exists between the mainstream economic narrative of legislative modernization and the critical legal perspective of constitutional circumvention. Traditional policy analyses celebrate the amended Public Service Act (RA 11659) and the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Law, alongside its successor, the CREATE MORE Act (RA 12066), as historic triumphs over constitutional paralysis (National Economic and Development Authority, 2023).
This perspective posits that by narrowing the definition of “public utilities” and lowering corporate income taxes, the state successfully de-risked the investment environment for Northeast Asian and Western capital (Asian Development Bank, 2024).
This technocratic framing ignores the severe constitutional bypasses utilized to achieve these outcomes. The executive branch’s reliance on administrative reinterpretation rather than formal constitutional amendment represents a fragile and potentially illicit legal strategy. A prime example is Department of Justice (DOJ) Opinion No. 21, Series of 2022, and the subsequent Department of Energy (DOE) Circular No. DC2022-11-0034. These executive instruments reclassified solar, wind, and hydro resources as “kinetic” rather than exhaustible natural resources, effectively rendering the 1987 Constitution’s protective 60-40 nationality cap inapplicable to renewable energy (Loriega, 2023).
This executive maneuver bypassed the legislature. It altered the fundamental sovereign protections of the state without the democratic consensus required for charter change. The reliance on administrative circulars to override constitutional text creates profound legal instability. It exposes foreign developers to future Supreme Court nullification while demonstrating how easily constitutional boundaries can be eroded by executive decree (Loriega, 2023).
Furthermore, the legal vehicles designed to absorb these foreign inflows, such as the Maharlika Investment Fund (MIF) established under Republic Act No. 11954, showcase the hallmarks of autocratic legalism. The MIF was rushed through Congress with minimal debate. It circumvents standard constitutional restrictions on the creation of state-owned enterprises and lacks the rigorous institutional checks required of sovereign wealth funds (Asia Sentinel, 2023).
Legally, the MIF acts as an opaque co-investor. It grants the executive branch unchecked authority to channel both public funds and foreign state-backed wealth into politically favored infrastructure projects, reinforcing elite cartelization and kleptocratic risk (CFA Institute, 2026). The fast-tracked creation of the fund suggests a deliberate strategy to establish an economic vehicle insulated from standard legislative and audit scrutiny (Asia Sentinel, 2023).
Weaponized Gatekeeping and National Security Screenings
The reclassification of strategic sectors has not eliminated regulatory friction. It has shifted the point of friction from statutory bans to highly discretionary executive gatekeeping. Under the amended Public Service Act, sectors like telecommunications, transportation, and digital networks are open to 100% foreign ownership, yet they are simultaneously designated as “critical infrastructure” subject to rigorous national security reviews (Government of the Philippines, 2022). This introduces a potent mechanism for state weaponization. The law grants the President unilateral, non-appealable authority to block or suspend foreign transactions on the vague grounds of “national security” (Yee, 2024).
Such sweeping executive power is open to political abuse. The state can easily deploy national security screenings as a form of legal warfare to target foreign enterprises partnering with political rivals, or to enforce compliance among domestic conglomerates. The screening process lacks transparent judicial oversight. It functions as a closed-door mechanism where the executive branch acts as both prosecutor and judge (Yee, 2024). This structural vulnerability is exacerbated by the lack of clear, statutory definitions regarding what constitutes a “strategic industry” or a “national security threat.” Consequently, the legal framework does not establish a predictable environment for foreign direct investment (FDI). Instead, it codifies a system of executive patronage where market access is contingent on political alignment with the ruling elite (Yee, 2024).
The Geopolitical Weaponization of Investment Law
The actualization of foreign investment commitments has been heavily instrumentalized within global geopolitical rivalries. The Marcos Jr. administration has executed a dramatic pivot away from Chinese infrastructure projects toward United States-aligned technology and security frameworks (The Strategist, 2022). This transition is not merely an economic re-alignment. It is a highly securitized legal strategy. The termination of Chinese Belt and Road Initiative (BRI) projects—such as multi-billion-dollar railway contracts—was legally justified through allegations of non-compliance and national security risks (Heydarian, 2023b). This demonstrates how state-to-state contracts can be unilaterally dismantled when geopolitical winds shift, eroding the foundational legal concept of contract sanctity (The Strategist, 2022).
Conversely, the state has integrated itself into US-led initiatives like “Pax Silica” and the Luzon Economic Corridor, establishing highly fortified economic security zones (Second Line of Defense, 2026). These zones seek to insulate allied semiconductor and artificial intelligence supply chains from regional volatility (U.S. Embassy Manila, 2026b). However, this alignment introduces severe constitutional friction regarding territorial sovereignty and extraterritorial jurisdiction. The Philippine Bases Conversion and Development Authority (BCDA) recently faced intense pressure to place proposed AI hubs under U.S. legal jurisdiction and diplomatic protections—a move that directly clashed with domestic municipal law and sparked fierce sovereignty debates (Beltran, 2026).
This geopolitical “friend-shoring” effectively locks the Philippines into a dependent, subordinate posture within Western-led industrial coalitions. The state’s economic policy is no longer determined by domestic developmental priorities, but is instead dictated by the security requirements of foreign powers (Beltran, 2026). The legal and physical infrastructure of the country is being partitioned into strategic zones that prioritize foreign military and technological alliances over local community welfare, representing a significant surrender of domestic policy autonomy (Beltran, 2026).
The Sovereignty Costs of International Dispute Settlement
For Western investors, international arbitration clauses and Investor-State Dispute Settlement (ISDS) mechanisms are frequently demanded as non-negotiable safeguards to bypass the notoriously slow and corrupt Philippine judicial system (Teehankee, 2018). Yet, these very mechanisms impose severe fiscal and sovereign liabilities on the host state. The Philippine experience with ISDS reveals a pattern of financial exploitation and the erosion of domestic regulatory authority.
+------------------------------------------------------------------------+ | THE COST OF SOVEREIGN DEFENSE | +------------------------------------------------------------------------+ | | | [Fraport AG v. Philippines] | | * German operator sued state for expropriating airport concession | | * Tribunal dismissed claim due to Anti-Dummy Law violation | | * State "won" the legal dispute | | * COST TO TREASURY: $58 Million USD in public legal fees | | | | [SGS v. Philippines] | | * Swiss firm bypassed domestic courts for customs service dispute | | * Tribunal stayed proceedings but asserted latent jurisdiction | | * RESULT: Diminished municipal court authority over local contracts | | | +------------------------------------------------------------------------+
As illustrated, even when the state successfully defends its regulatory decisions, the financial burden is staggering. In Fraport AG v. Philippines, the German investor’s claims were dismissed because the firm violated the Philippine Anti-Dummy Law, which prohibits foreign entities from exercising excessive control over public utilities (Levine, 2015). Despite this legal victory, the Philippine public treasury was forced to expend over $58 million in legal defense fees (ISDS Platform, 2021). Similarly, in SGS v. Philippines, international arbitral bodies encroached upon municipal jurisdiction, undermining the authority of local courts to resolve contractual disputes (SGS v. Philippines, 2004).
The threat of multi-million-dollar arbitral awards creates a profound “regulatory chill” (Georgetown University Law Center, 2023). Host governments are deterred from enacting essential environmental, public health, or labor regulations out of fear that foreign investors will file treaty-based expropriation claims. The domestic legal system is effectively held hostage by supranational tribunals that prioritize corporate profitability over public welfare and sovereign self-determination (Georgetown University Law Center, 2023).
Persistent Operational Gaps and Future Inquiry
The current legal-economic paradigm suffers from a critical gap between high-profile “handshake” pledges and actualized capital. The Department of Trade and Industry (DTI) routinely celebrates billions of dollars in foreign commitments secured during presidential trips, yet the vast majority of these pledges are signed as non-binding Memoranda of Understanding (MOUs) and Letters of Intent (LOIs) (Inquirer Business, 2023). Legally, these documents are “agreements to agree.” They lack enforceable financial or operational obligations (Respicio & Co. Law Firm, 2025). The realization rate remains low because these preliminary documents serve primarily as political theater, allowing the executive branch to claim economic success while the underlying capital remains speculative and volatile (Lazatin, 2026).
Future scholarship must address several critical omissions in the current literature. First, there is a lack of empirical tracking regarding how sovereign-wealth-fund-backed pledges, particularly from Gulf nations, interact with the Maharlika Investment Fund to bypass municipal procurement laws and local environmental assessments. Second, the long-term impact of the CREATE MORE Act’s decentralization of incentive-granting power to individual Investment Promotion Agencies (IPAs) requires rigorous auditing to determine if it facilitates localized corruption and tax base erosion (MTF Counsel, 2025). Finally, researchers must investigate the extent to which the state’s national security screening mechanisms are being systematically weaponized to target domestic corporations affiliated with opposition figures, marking a dangerous convergence of economic regulation and political suppression.
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References
Asia Sentinel. (2023, October 23). Marcos’s Investment Fund Dilemma. Asia Sentinel. https://www.asiasentinel.com
Asian Development Bank. (2024, August 9). Sector-specific PPP landscape*. Asian Development Bank. https://www.adb.org
Beltran, S. (2026, May 24). US Pax Silica hub plan hits Philippine sovereignty wall: ‘no special arrangement’*. South China Morning Post. https://www.scmp.com
CFA Institute. (2026, May 20). The rise of sovereign wealth funds in private markets*. CFA Institute. https://www.cfainstitute.org
Georgetown University Law Center. (2023, August 25). Turning the Tide*. Georgetown Law. https://www.law.georgetown.edu
Government of the Philippines. (2022, March 21). REPUBLIC ACT NO. 11659 – AN ACT AMENDING COMMONWEALTH ACT NO. 146, OTHERWISE KNOWN AS THE PUBLIC SERVICE ACT*. Supreme Court E-Library. https://elibrary.judiciary.gov.ph
Heydarian, R. J. (2023b, November 02). Why the Philippines is exiting the Belt and Road*. Asia Times. https://asiatimes.com
ISDS Platform. (2021, May 15). Fraport vs. Philippines: Win or lose, citizens foot the bill*. ISDS Platform. https://isds-platform.org
Inquirer Business. (2023, December 26). Bongbong Marcos’ foreign trips yield P4 trillion worth of investments*. Inquirer Business. https://business.inquirer.net
Lazatin, C. (2026, January 09). Governance is the tie-breaker*. BusinessWorld. https://www.bworldonline.com
Levine, M. (2015, May 21). German investor’s claim against the Philippines over Manila airport concession fails for the second time at ICSID*. Investment Treaty News. https://www.iisd.org
Loriega, M. (2023, August 03). A comparison of M&A laws: Philippines*. Law.asia. https://law.asia
MTF Counsel. (2025, July 17). Create More’s redefinition of the FIRB and IPAs’ roles*. MTF Counsel. https://www.mtfcounsel.com
National Economic and Development Authority. (2023, January 1). Philippine Development Plan 2023-2028*. National Economic and Development Authority. https://pdp.neda.gov.ph
Respicio & Co. Law Firm. (2025, September 22). Memorandum of agreement vs. memorandum of understanding in the Philippines: Key differences and uses*. RESPICIO & CO. LAW FIRM. https://www.respicio.ph
SGS v. Philippines. (2004, January 29). SGS Société Générale de Surveillance S.A. v. Republic of the Philippines, ICSID Case No. ARB/02/6, Decision of the Tribunal on Objections to Jurisdiction*. International Centre for Settlement of Investment Disputes. https://www.italaw.com
Second Line of Defense. (2026, April 27). The Luzon Economic Corridor and Pax Silica: Reshaping Indo-Pacific Supply Chains Through U.S.-Philippines-Japan Collaboration*. Second Line of Defense. https://sldinfo.com
Teehankee, M. (2018, March 20). The Philippines’ Readiness for the TPP: Focus on Investor-State Dispute Settlement*. Philippine Institute for Development Studies. https://www.pids.gov.ph
The Strategist. (2022, March 18). Philippine elections will shape Indo-Pacific security*. The Strategist. https://www.aspistrategist.org.au
U.S. Embassy Manila. (2026b, April 16). Fact Sheet: U.S. and Philippines Plan the Launch of Historic 4000 Acre Economic Security Zone to Shore Up Supply Chains*. U.S. Embassy in the Philippines. https://ph.usembassy.gov
###### Yee, W. Y. (2024, December 12). How the Philippines Screens Foreign Investments*. Lawfare. https://www.lawfaremedia.org
Addendum
* Ease of Doing Business and Green Lanes: To improve realization rates and compete with ASEAN neighbors, President Marcos Jr. signed Executive Order No. 18, establishing “Green Lanes for Strategic Investments.” During its launch, Marcos explicitly cited Indonesia and Vietnam as highly competitive neighbors where setting up a foreign firm takes only a few days or weeks, compared to the Philippines’ previous 80-day processing time. The Green Lanes framework aims to compress this to 20 days to attract and expedite the operationalization of pledges from partners like Indonesia and China (Austria, 2023).
* Indonesia: By comparison, Marcos Jr.’s state visit to Indonesia resulted in $8.48 billion in investment pledges (Philippine News Agency, 2023). While lower in raw volume than China, investments from ASEAN partners like Indonesia (often targeting renewable energy and downstream mineral sectors) are part of a broader regional integration push. Despite the high pledges from multiple countries, the Department of Trade and Industry (DTI) noted that by mid-2023, only about $88 million across all foreign pledges had fully materialized into ongoing projects, highlighting a general lag between commitments and actualized capital across the board (Inquirer.net, 2023).
* Multilateral Trade Agreements: On a regional level, the realization of investments from both Indonesia and China is heavily supported by the Regional Comprehensive Economic Partnership (RCEP). RCEP acts as a unifying legal trade framework that standardizes tariffs and economic cooperation among ASEAN members and East Asian nations, making cross-border capital flows legally smoother for all participating states (Institute of Leadership Entrepreneurship And Development, 2019).
* Sector-Specific Regulations (Energy and Infrastructure): Both the Philippines and Indonesia are heavily focused on green and sustainable energy frameworks to attract FDI. Indonesia’s investment environment is guided by its National Long-Term Development Plan and the Net Zero Emission (NZE) 2060 target. To align with similar strategic regional investments, Marcos Jr. signed Republic Act No. 12305 (the Philippine National Nuclear Energy Safety Act) in September 2025. This established PhilATOM as an independent regulator to safely facilitate high-value strategic investments—like micro-modular reactors and green energy—from foreign partners (The $84 Billion Green Light, 2025).
* A $120 million business deal between Saudi’s Al Rushaid Petroleum Investment Co., Samsung Engineering NEC Co. Ltd., and the Philippines’ EEI Corp to establish construction export services and a massive training facility (Philstar.com, 2023).
– Clean Energy and Power Generation: Beyond transportation and telecom, South Korea’s DL Group partnered with Meralco in late 2025 to explore Small Modular Reactor (SMR) nuclear energy projects, a high-tech energy infrastructure push that is heavily incentivized under the updated green and strategic priorities of the CREATE MORE framework (Department of Finance, 2025).
– Subways and Railways: The liberalization of the railway sector under the PSA has enabled major engineering firms from Japan and South Korea to participate heavily in the actual construction and potential future operation of the Metro Manila Subway and the North-South Commuter Railway (NSCR) projects (Philippine News Agency, 2025a; Metrobank’s Wealth Insights, 2024).
1. Due Diligence and Freedom to Withdraw: The legally non-binding nature of MOUs and LOIs allows foreign investors to evaluate market conditions and conduct thorough due diligence in the Philippines (Legal Impressions Law Firm, APC, 2022). Because investors face no significant legal penalty for withdrawing at this stage, any economic headwinds or negative feasibility findings can cause pledges to be abandoned, lowering the realization rate (Office of General Counsel – Georgia Tech, n.d.).
2. Unrestricted Capital and Control: Australian developers and EU investment firms can now establish wholly foreign-owned corporate entities in the Philippines. By bypassing the 40% equity cap, foreign investors can assert full operational, technical, and financial control over large-scale RE infrastructure (Nagashima Ohno & Tsunematsu, 2022). This structural freedom directly catalyzes the rapid deployment of Australian capital and the execution of EU-funded green infrastructure projects without the friction of locating a local majority partner possessing the matching financial resources.
3. Lingering Constitutional Land Ownership Restrictions: Despite the liberalization of the energy sector, the operationalization of these pledges still requires navigating remaining constitutional constraints. While European and Australian firms can fully own the energy generation projects, the infrastructure, and the operating contracts, the Philippine Constitution strictly prohibits foreign corporations from owning private land (Business Registration Philippines, 2026). Consequently, foreign developers must secure long-term land lease agreements—which legally span up to 25 years and are renewable for another 25 years—to host their wind turbines, solar panels, and energy storage systems (Business Registration Philippines, 2026).
4. Navigating Local Regulatory Hurdles: To actualize an LOI into a definitive, enforceable contract, investors must strictly comply with Philippine corporate regulations. A major filter for these pledges is Republic Act No. 7042, also known as the Foreign Investments Act of 1991 (The Philippine Embassy in Berlin, 2022). This law, alongside the Foreign Investment Negative List, limits the extent of foreign ownership in certain domestic sectors (Lex Mundi, n.d.). Investment pledges cannot become legally enforceable Joint Venture Agreements or Memoranda of Agreement (MOAs) if foreign entities fail to secure appropriate domestic partnerships or regulatory approvals (ASEAN Briefing, 2025).
5. Bureaucratic Grid and Regulatory Compliance: Although the legal ceiling for foreign ownership has been lifted, the realization of EU and Australian pledges is still governed by strict national regulatory frameworks. Wholly foreign-owned entities are legally required to sequentially secure corporate clearances from the Securities and Exchange Commission (SEC), the Department of Energy (DOE), and the Board of Investments (BOI). Furthermore, foreign investors must independently conduct and pass a System Impact Study (SIS) overseen by the National Grid Corporation of the Philippines (NGCP) to guarantee grid connection capability, proving that while executive circulars remove ownership limits, the burden of regulatory and environmental compliance remains in full effect (Business Registration Philippines, 2026).
6. The Realization Pipeline: The transition from non-binding pledges to legally binding contracts is actively tracked by the Department of Trade and Industry (DTI) and the Board of Investments (BOI). Statistics routinely show a disparity between the headline pledge amounts and the actualized investments due to the time required to draft enforceable contracts. For example, by late 2023, the DTI reported that out of the tens of billions pledged during the President’s initial trips, roughly $5.28 billion (P294 billion) had been successfully actualized into operational and registered projects (Presidential Communications Office, 2023). Continuous tracking by the administration highlights that while MOUs initiate the pipeline and have resulted in thousands of jobs, their non-binding nature requires persistent government follow-through to ensure realization (Government of the Philippines, 2025).
A highly fragmented bureaucratic system poses a severe operational hurdle for incoming foreign investors (International Trade Administration, 2024). Corporations attempting to actualize their pledges must navigate convoluted, multi-layered regulatory processes involving uncoordinated national agencies and highly autonomous local government units (LGUs) to secure operational permits (State Department, 2022). This structural friction is a major deterrent for European investors in particular; the German Ambassador to the Philippines explicitly identified persisting red tape as the biggest hindrance to expanding German FDI, emphasizing that German firms require a “red carpet and not red tape” to seamlessly convert their financial commitments into operational businesses (Philstar.com, 2024).
A prime example of this transition is InfiniVAN Inc., a Philippine telecom company backed heavily by its Japanese parent company, IPS Inc. In December 2023, InfiniVAN registered a PHP 649 million rollout for its Visayas and Mindanao network, which is a core component of the Philippine Domestic Submarine Cable Network (PDSCN) (Department of Trade and Industry, 2024). When President Ferdinand R. Marcos Jr. officially inaugurated the subsea cable network in February 2024, InfiniVAN’s leadership explicitly credited the amended PSA for providing the legal security to expand. The company has since lined up subsequent investments to lay fiber optic backbone infrastructure along Philippine National Railways (PNR) routes and the ongoing Metro Manila Subway Project (Department of Trade and Industry, 2024).