Tacloban Tragedy: A Painful Wake-up Call

Tacloban after Super Typhoon Haiyan

Note: This was originally a status update from FB that went viral. We were able to  get permission to publish it from the lady who was able to speak with several survivors of Super-Typhoon Haiyan (local name: “Yolanda”) particularly the update of her own cousin who was in Tacloban when the disaster happened.

We’ve been instructed by her to edit some areas of the original post, in order to protect the witnesses who recounted their tales. But it is really important that we who were not there on the ground be able to read accounts like this. We’ve also modified some of the formatting and have italicized or set some of the text in bold where the original author sought to emphasize certain words or phrases.

The original Facebook status update was written on November 17, 2013, so please take note that “yesterday” refers to November 16 and calculate other time references accordingly.


     Krizette_FB

Dear friends,

Yesterday we met and talked to six survivors, not including my husband, who only had to survive the aftermath. In truth, for all the images we see here in Manila, all of them say that we cannot fully comprehend the extent of the devastation unless we see it with our own eyes — or smell the stench of death that sticks to clothes.

“The storm only lasted for 5 hours,” says my cousin. Her home, situated in front of Robinsons Place Tacloban and MS grocery, suffered minor damage. It was only after going out to survey the damage that she only fully understood the severity of the situation: Everywhere she looked she saw people walking dazed, frantic, and calling out for loved ones. She is a volunteer, so she walked to the city hall to help out the local government, saw bodies lying by the side. She and other volunteers, she says, repacked goods during that first couple of days. It was also understood that they would be given a pack each. “We saw it loaded in a truck, the truck drove away, and we never saw it again,” she remembers. “The volunteers were also not given anything.” 

Day One, she says, people waited patiently for help. By the end of Day Two, people became frantic. (Imagine finding your family members dead, your house completely damaged, no water and electricity, all compounded by no food.)

The first “looting” at Robinsons grocery was relatively peaceful, says another survivor who does not want to be named. People helped themselves and each other. “They were friendly, you can ask people where the baby food aisle is and they’d even help you go there,” says the survivor. People only took what they needed.

“It only became violent in days three and four, when people had been going for days without food or water and the bodies were still in the streets,” adds my cousin. Another grocery right beside Robinsons Mall, Market Savers, which is set up like Makro or S&R (warehouse style) stationed several armed men in the entrance protecting already-damaged goods. For 3 days, people ignored it. And then because starvation can make you do desperate things, on the fourth day, the guards were overpowered by a hungry, angry mob. Guns were reportedly fired, and some people got hurt.

“People have been neglected without nothing to eat for almost a week, their family missing, and you didn’t see any semblance of government,” says my cousin. Save for the organized criminals who attack the stores with guns and trucks, the ordinary looters only went in the stores days after inaction from the government, and only got what they needed. Another store, a corner mom and pop operation, was also looted, but the owners decided to just distribute the goods by “throwing” them from the second floor of the building. To be fair to the businessmen of the city, they gave away what they had. Another cousin of mine who owns gas stations gave away their gas before heading to Manila. My cousin also told a local official that somebody should go around with a megaphone to announce the schedule of the delivery of food, to calm the masses. “In one ear, out another, “ My cousin says, shaking her head ruefully.

There’s no use sugarcoating this: the government bungled the operations. The local government of Tacloban is ill-equipped; the national government’s attempts are half-hearted at best. I chatted on FB with the wife of the highest official of Tacloban and she believes the help did not come because of politics.” She laments, “They are so evil, they are so mean.” “They” refers to the national government. I shiver to think that President Aquino would intentionally neglect the people of Tacloban because it is a Romualdez bailiwick. But, guess what, I wouldn’t put it past him. Pakabili po siya ng empathy at sympathy, dahil wala po nun ang presidente natin.

Still, because it is human nature to move forward, you can see the first signs of life in Tacloban. Some stores are already opening — yesterday, too, some businessmen who are now in Manila met to discuss the economic future of the city, yet some will be forever boarded up. How can you recover when the chain of supply and demand is broken? The businessmen in the city lost their stocks, which amounts to millions. They have suppliers they are answerable to. Some of these goods were purchased on credit. In one fell swoop, all they worked hard for all their lives are gone, just like that. And then there are ordinary employees who now have no work and no means of income, because the offices will not be open in at least a couple of months. The scenario that looms for most: No house, no food, no money. There are those retirees who spent all their retirement money to finally purchase their own modest houses, and now they have nowhere to live. It’s hunger + helplessness + depression. Lesser people would have crumbled — but Warays aren’t getting sad, they’re getting mad.

Mr. President, people are not statistics. It only took one day—sorry, I meant five hours—for everything to change for them. Waraynons are naturally courageous and resilient, our ancestors after all were warriors, but we need help rising up from the rubble. You don’t think we’re even worthy of one day worth of your attention. You have not stayed even one full day to assess the damage.

Only 29 towns have been given relief—Leyte has more than 40 towns—7 days after the typhoon. The situation may be getting better, but not nearly fast enough for the millions of people at the mercy of a President who may care, but not nearly great enough.


The Wake-up Call

As you may already know, the issue of the national government’s unwillingness or inability to respond appropriately in providing relief to the victims of Supertyphoon Haiyan (aka “Yolanda”) is all related to the low quality of leadership over at the Palace. This is all a result of the election in 2010 of a man who was not only ill-prepared to assume the responsibilities and duties of being the top decision-maker of the country, but was totally unwilling to even try to get himself up to speed.

This was thanks to the dynamics of the Philippine system of government and the way elections occur within a Presidential System. Aside from all the research done by world renowned political scientists which has revealed numerous problems of presidentialism such as gridlock, a tendency to make extensive use of discretionary pork barrel funding, and a tendency towards greater corruption, our Presidential System has unfortunately caused many ordinary Filipinos — including highly educated ones — to tend to vote based on personality and name-recall. Presidential Systems tend to make people care less about platforms, programmes, and principles, and care more about “the personality of the person we voting for” and look at markers like “who his parents were” or “what surname does he have.”

Had we instead had a true Parliamentary System (not the fake/bogus one we had under Marcos’ martial law era or the French-style “strong president” semi-presidential system Marcos shifted to in 1981 when martial law was lifted), the Philippines’ electoral dynamics would have been very different.

In Parliamentary Systems, people do not care only about voting for who their local district representative would be but also care about who the party leader is of the party that the local candidate they choose belongs to. As such, instead of looking only at one personality, voters are forced to look at two main people: the local representative who will represent their constituency, and the party leader who will become the prime minister should his party win a majority of all seats. Since a vote for the local representative means a vote for his party’s leader as well, voters tend to think from within a “big-picture” perspective, putting more importance on the the party affiliations of the local candidates they vote for, knowing fully-well that their local candidates’ party affiliation will likely determine who will ascend to the post of Prime Minister, and which party’s members will constitute the Cabinet.

(Let’s take the UK’s example. When a person votes for the local member of parliament in his own district/constituency, he looks at what parties the candidates belong to.

One candidate might be named “John Smith” who represents the Conservative Party while another candidate named “George Jones” may represent the Labour Party. The Conservative Party is currently headed by David Cameron, while the Labour Party is headed by Ed Milliband. If the voter personally likes John Smith, he also has to consider that voting for John Smith represents voting for David Cameron to continue on as Prime Minister. If he doesn’t particularly like David Cameron for whatever reason, then the voter must then take a step back and look at what “John Smith” has in common with David Cameron: being from the same party and having Conservative Political Leanings. Does the voter agree with those political leanings? Well, that’s what the voter will be forced to deal with. Ultimately, in parliamentary systems, voters care a lot more about party platforms and their manifestos simply because of this electoral dynamic.

More importantly, it’s not just about who is going to be the Prime Minister. It’s about who will become the ministers. If a majority of the members of parliament come from the Labour Party, then the Prime Minister and his Cabinet of Ministers will all come from the Labour Party. If a majority of the members of parliament come from the Conservative Party, then the Prime Minister and his Cabinet will all come from the Conservative Party.)

This change in electoral dynamics goes a long way in improving the way people vote. It also changes the way politicians will campaign during elections. Since Presidential Systems are more about the candidates’ personalities and “who they are”, that’s what candidates and politicians concentrate on selling and what they stand for takes a back-seat. But in Parliamentary Systems, where party affiliation is of greater importance, candidates campaign more about what their own parties stand for. There is less of the “epal” credit-grabbing meant to gain name-recall among the populace. Instead, candidates in parliamentary systems are much more likely to talk about the ideas and principles that their parties stand for and plan to achieve as well as the programs and projects their parties plan to implement.

There are many other major advantages to Parliamentary Systems, including the absence of gridlock as well as the ease of replacing non-performing leaders such as ministers or even the prime minister himself. In addition, the Opposition plays an official and active role in scrutinizing the incumbent government’s policies and implementation thereof so that each minister is “shadowed” (aka “followed around” in meetings) by an official opposition counterpart known as the “shadow minister.” Each minister, including the prime minister, is shadowed by a member of the Shadow Cabinet. The Minister for Education is “shadowed” by the Shadow Minister for Education, etc, and the Prime Minister himself is shadowed by the Leader of the Opposition.

Come question period (which is at least once a week in open parliament), the Shadow Ministers each grill their corresponding ministers in government regarding their decisions and their performance. The most exciting question period of the week occurs when the Leader of the Opposition grills the Prime Minister. This constant scrutiny by the Opposition Shadow Cabinet of the Cabinet Ministers keeps all of them on their toes and prevents them from engaging in corruption, since the opposition and its shadow ministers are always in constant surveillance – looking for any sign of wrongdoing by the government that it can exploit in order to discredit the government and use to further their cause in seeking to take over. This constant surveillance by the opposition is why parliamentary systems have been proven to be generally less prone to corruption than presidential systems.

Imagine if we had a parliamentary system in the Philippines. Noynoy, Dinky, and Mar Roxas would be hard pressed to make excuses they way they did in front of journalists. Unlike journalists who tend to ask neutral questions, the opposition shadow cabinet tends to feature opposition leaders who are out to probe, grill, and cross examine government ministers in the open parliament. No more palusots. No more lame excuses. No more tolerance of incompetence. Noynoy or any other vote-magnet puppet simply cannot survive Parliamentary Question Period.

Post-Disaster Economic Reconstruction

It is also necessary that when thinking about the reconstruction efforts of all the affected areas, we must understand that we will need a lot of Foreign Direct Investments as the quickest way to help out in creating the much-needed jobs that will get people who have lost their livelihoods back on their feet.

Look at this graph of ASEAN’s 2012 Foreign Direct Investment in-flows:

2012 FDI in ASEAN

The Philippines is lamentably at the bottom of the ASEAN pile as far as attracting FDIs goes (which explains the high unemployment rate) and the super-typhoon’s destruction has obviously made things much, much worse as far as unemployment is concerned. We have continued to experience a dearth in domestic job-creation such that more than 10 million Filipinos have been forced to find employment abroad as OFW’s and emigrants. Now, an estimated 4 million people are said to have been displaced. How many of them lost their livelihoods? (Now we can see just how badly we need rapid job creation to occur in the Philippines on a massive scale.)

Removing all of those anti-FDI restrictions as well as the 60/40 ownership limits in the Constitution (as well as laws) will go a long way in attracting more and more investors to set up in the Philippines and create much needed employment for our people. Bringing in FDIs by removing anti-FDI restrictions has worked everywhere it has been tried and it is the secret of Singapore’s success and ascent into First World status despite having been poorer than the Philippines more than half a century ago. Massive FDI-attraction was the jump-starting spark that got China out Maoist Communist economic lethargy to become a major capitalist powerhouse and the second largest economy in the world, and it is also the key ingredient in Indonesia’s rapid rise within the ASEAN region.

We’re all so happy to receive aid and assistance from other countries but we have to realize that aid is temporary. Asking for aid long-term is mendicancy and that is unsustainable. As such, once it’s time to rebuild the Philippines and all the areas hit by disaster, we will start needing to earn our keep. We will need to work to earn some money for ourselves. Whether we like it or not, Foreign Direct Investments create employment opportunities and these pay salaries. We’re not asking for alms: we’re working for a livelihood.

Does it really matter if the companies we work for are foreign-owned versus Filipino-owned? Think about it — more than 10 million Filipinos are working abroad for foreign employers anyway. Bringing foreign investors in allows rapid job creation to happen in the Philippines so that our people can be with their families and find jobs without having to depart for faraway shores.

But lastly, we also need to make sure that when job creation does happen, it happens in the regions, not in the already overcongested Metro Manila where far too many rural peasants have gone in search of work to end up becoming the capital city’s urban poor. That’s why we need Evolving Federalism (aka “Region-based Decentralization”). We need to empower the regions in order to have the necessary autonomy they need to create their own pro-business economic policies that would be more conducive to fostering economic development and attracting investors – both Filipino and foreign.

Ultimately, when all three reforms are done, the Philippines can truly get back on its feet and turn itself around so that it ceases to be Southeast Asia’s laggard. This is not just about  the reconstruction of the affected areas hit by the recent super-typhoon. This is about doing what we should started to do long ago in order to improve our country as the Philippines has continued to slide and get left behind by other ASEAN countries who used to look up to us.

Super Typhoon Yolanda (international name: Haiyan) ought to be the wake-up call that gets all Filipinos uniting behind this most important reform advocacy. This is, after all, for the benefit of ourselves and our future generations. The selfish Oligarchs and the ignorant anti-reform forces have held us back for far too long. It’s time all Filipinos learned more about these necessary reforms and started pushing for them so that we can achieve our rightful place among the successful and competitive countries of the world. Now is the time to spread the word!

CoRRECT™ the Constitution!

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About the Author

OrionOrion Pérez Dumdum comes from an IT background and analyzes systems the way they should be: logically and objectively.

Being an Overseas Filipino Worker himself, he has seen firsthand how the dearth of investment – both local and foreign – is the cause of the high unemployment and underemployment that exists in the Philippines as well as the low salaries earned by people who do have jobs.Being Cebuano (half-Cebuano, half-Tagalog), and having lived in Cebu, he is a staunch supporter of Federalism.

Having lived in progressive countries which use parliamentary systems, Orion has seen first hand the difference in the quality of discussions and debates of both systems, finding that while discussions in the Philippines are mostly filled with polemical sophistry often focused on trivial and petty concerns, discussions and debates in the Parliamentary-based countries he’s lived in have often focused on the most practical and most important points.

He has a nephew and niece who are related to Noynoy Aquino which is why Orion really wants Noynoy to be able to succeed at reforming the flawed Philippine system via Constitutional Reform. Rather than having his nephew and niece suffer the consequences of being related to Noynoy who is turning out to be a failure, Orion would like Noynoy Aquino to do the right thing and regain the honor he has lost so that his own niece and nephew won’t have to suffer that stigma. Noynoy must get the ball rolling for Constitutional Reform.

Orion first achieved fame as one of the most remembered and most impressive  among the winners of the popular RPN-9 Quiz Show “Battle of the Brains”, and got a piece he wrote – “The Parable of the Mountain Bike” – featured in Bob Ong’s first bestselling compilation of essays “Bakit Baligtad Magbasa ng Libro ang mga Pilipino?” He is the principal co-founder of the CoRRECT™ Movement to spearhead the campaign to inform the Filipino Public about the urgent need for Constitutional Reform & Rectification for Economic Competitiveness & Transformation.

Benign0 is just as clueless as “Benigno”

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Yes, you read it right.

We’re talking about Benign0 (the “Get Real Philippines” guy who uses the “Jimi Hendrix” avatar on the left) being just as clueless as his “namesake” Benigno S. Aquino III. Why so?

Because just like his “namesake” Benigno S. Aquino III, benign0 is rabidly against Constitutional Reform, and just recently came out with a new article that highlights his total lack of insight and analytical ability when he attacks the notion of removing the blanket anti-Foreign Direct Investment restrictions found in the 1987 Constitution which actively discourage Multinational Corporations (aka “MNC’s”) and Foreign Direct Investments (aka “FDI”) from coming into the Philippines.

Check this screenshot out:

bobonign0

Oh wow. Really, benign0? Do you really think that your namesake’s point was “before you sell your building you need to fix its rotten floors first lest the new owner’s furniture fall through it?” Or did you not realize that your namesake is just simply clueless, doesn’t know anything about economics, and is simply out to protect the monopolistic vested interests of fellow members of the oligarch class that he was born into?

Wait a minute, benign0, did you not see the blatant error that your namesake Benigno S. Aquino III made? It’s this one here:

tanganign0

Did you not notice the error,  benign0?

Did your “critical thinking faculties” fail you when you could not see that your namesake Benigno S. Aquino III committed a major logical blunder when he introduced a fallacy in the form of a “red-herring?”

Perhaps you do not get it despite me pointing out to you in red what the fallacious snippet was…

You see,  benign0, it seems like you – just like your clueless namesake Benigno S. Aquino III aka “Noynoy” – are incapable of understanding the difference between:

(1) Business/Corporate Ownership by foreigners
(2) Land/Real Estate Property Ownership by foreigners

As it turns out, your namesake Benigno S. Aquino III was trying to mislead the Filipino Public that the whole “60/40” and “anti-Foreign Investor restrictions” issues are related to the whole Land Ownership issue. They are not.

One is about whether or not Foreigners are to be allowed to own businesses or perhaps limiting them to a small minority share of entire businesses, while the other one is about allowing Foreigners to own land. They’re totally different issues altogether.

What matters primarily to MNC’s and Foreign Direct Investors is whether the country in question freely allows or restricts foreign entities to own businesses in the country. As we all know, countries that are more open to allowing majority ownership of corporations and businesses or even allow up to 100% ownership by foreigners are more likely to be able to attract foreign direct investors than those countries that are more closed. That is obvious.

Allowing land ownership to foreigners on the other hand, is merely a secondary or “extra” feature that can help bring in more investors. It is possible for countries to allow 100% corporate ownership by foreigners, but ban the ownership of land by foreigners. China and Vietnam are countries that allow foreigners to own up to 100% of companies, but prohibit everybody – both foreigners and local citizens – from owning any free-hold real estate property.

President Benigno S. Aquino III  aka “Noynoy” simply couldn’t make the distinction between the two. He either didn’t know anything about the topic and made an erroneous statement showing his sheer ignorance and inability to distinguish between the two issues of “corporate ownership” versus “land ownership” or he was actively trying to distract the public by using the “land ownership issue” as a kind of smokescreen distraction to throw everyone off the real issue.

How could you miss that, benign0?

Weren’t you supposed to be intelligent? Aren’t you supposed to engage in critical thinking?

Looks to me like you were following “the other Benigno.” Don’t you remember Obi-wan’s famous words, eh benign0?

* * *

Here’s how it works, Ladies and Gentlemen:

For benign0, the Philippines should not even attempt to try to emulate the tried and tested best practices of Singapore’s “Third World to First” strategy in trying to create massive employment opportunities for their people by removing all sorts of anti-FDI restrictions and actively inviting as many Multinational Corporations and Foreign Direct Investors to set up local operations in order to hire as many local employees as possible, thus easing (and eventually eliminating) the persistent unemployment problem. GRP’s webmaster benign0 seems to have actively ignored (or perhaps forgotten) that Singapore was not the only country that actively employed the “actively invite MNC’s and FDI’s in by removing anti-FDI restrictions” strategy.

Let’s see… Aside from Singapore, here are examples of countries who actively dismantled anti-FDI restrictions in order to bring in massive MNC-and-FDI inflows that caused rapid job creation for their people, resulting in the step-by-step reduction of poverty and many of the other issues that result from poverty:

1) Malaysia under Mahathir bin Mohamad

2) China under Deng Xiaoping (邓小平)

3) India under Narasimha Rao

4) Vietnam under the current “Communist” Party of Vietnam

5) Indonesia under  Susilo Bambang Yudhyono

6) Cambodia under the late Norodom Sihanouk

Singapore started the ball-rolling.

It was Singapore that went against the grain of most people in the “Developmental Economics” field which had long since been dominated by Marxists and other ideologically-fixated proponents of the “closed economy”-centric and autarky-based “national industries” model of development which erroneously held the zero-sum theory that “economics means that if one makes money, someone else loses money” as opposed to the win-win theory that economics involves a free exchange of value wherein both parties have a net gain as a result of the exchange than prior to when the exchange occurred.

Thanks to the aggressive policy of bringing in MNC’s into Singapore and getting them to create so many jobs, the Singaporean public now gained a huge purchasing power and people who previously had little or no income now had incomes that would allow them to feed themselves and pay for their most basic needs.

It is no wonder that the rest of the ASEAN region and many in the wider Asian Region are emulating Singapore’s “bring-MNC’s-in” approach by removing anti-FDI restrictions in their laws and economic policies.

Let us review how things turned out on the FDI-inflows front in ASEAN back in the period of 2010-2011:

ASEAN with Singapore

Alright. Let’s look at those values so that we all have a good sense of comparison:

Singapore   113,000,000
Indonesia    32,000,000
Malaysia     21,000,000
Thailand     17,000,000
Vietnam      15,400,000
Philippines   3,500,000

As you can all see from the graph, Singapore is pretty much “off-the-charts.”

I colored it GREEN just to show that it is the leading country in the pack. The laggard is colored RED. Poor laggard. Poor us. We’re the unfortunate laggard: the “runt of the litter.”

And we’re the laggard because we are the weakest as far as FDI inflows are concerned. Oh wait a minute! Yes, that also corresponds with the fact that among all these countries listed in the graph, we also happen to be the country with the worst incidence of unemployment and underemployment. Oops!

And First World Singapore is the country that happens to have the highest FDI inflows. Hmmm… Is this a coincidence? Or is this clearly connected?

Well obviously it is connected! Attracting FDI’s and MNC’s to come to Singapore was precisely the reason why Singapore became a First World country in just around 30 years in the first place. Malaysia, for the longest time, also had the second best FDI-inflows, and that’s why Malaysia had also been one of the more dynamic and better countries in the region, seen as being second to Singapore, often “stealing opportunities” from Singapore by touting itself as a half-priced Singapore. It just so happens that Indonesia decided to really work hard at getting more FDI’s flowing in because their leadership is dead serious on job creation and real economic development.

Ok. Since Singapore is already a First World country and it pretty much is in the league of the Big Boys (the Western Countries plus Japan — oh wait… It bested Japan to become the richest country in Asia based on GDP per capita!), so to be fair, let’s compare ourselves among other third worlders. Let’s take Singapore out of the picture:

Asean minus Singapore

Geez, we’re looking really really bad here!

In the first graph where Singapore was around, the inclusion of the First World country, its FDI-attraction figures totally dwarfed everyone else’s, so in a way, the Philippines kind of didn’t look that bad since “everyone else was dwarfed by Singapore.”

But looking at this second graph, with Indonesia taking top spot (in GREEN) our status as the worst country in the region as far as unemployment and FDI-inflows is concerned should wake everyone up.

It should wake benign0 up, since it was he who said:

loser-benign0Thus spake the clueless one.

“Reliance on foreign capital and foreign commercial activity is an obsolete concept embraced by losers.”

Now that was one of the most ridiculous things I’ve ever read coming from benign0

Clearly, benign0 just doesn’t get it.

He simply hasn’t read up on economics and economic history enough to realize that it is actually the AUTARKY-based “Import Substitution”, “Closed Economy” and “National Industries” economic model that is obsolete. It has already been proven time and time again to be the slower and more-prone-to-failure approach to economic development.

He simply hasn’t realized that it is the Open Market concept of freely allowing FDI’s and MNC’s to freely flow in that has worked the best and the fastest in transforming poorer countries to become richer countries.

benign0 also forgets that the country he emigrated to – Australia – is the result of a huge Foreign Direct Investment venture by the British Empire. Worse, he ignorantly forgets that many industries in Australia were started by British foreign direct investors and Australia’s mining industry was actually jumpstarted by foreign companies. Ho boy.

The guy needs to do some research (which, by the way he never does which is why he always loses to me in debates during the few chances that I have the time to engage that slacker), but of course, he is lazy to read. He hasn’t even read Lee Kuan Yew’s “From Third World to First” which he bought, and if he read it, he would have realized that the cornerstone of Singapore’s rapid rise to First World status was its openness to foreign direct investments.

Would you believe this was in Singapore?

Would you believe this was in Singapore back when it was still “Third World” — …Akala mo siguro nasa Pinas, ano?

(Take time to notice how the photo of Singapore back when it was still “Third World” looks very much like a scene from the rural Philippines. Well, obviously, just looking below, one can see just how Singapore got built up into a First World international hub of business all thanks to Foreign Direct Investments.)

Marina Bay Sands, the Singapore icon, is a Foreign Direct Investment by Sands of Las Vegas

Benign0 doesn’t realize that Marina Bay Sands, Singapore’s new representative landmark, is a Foreign Direct Investment by Sands of Las Vegas

Singapore is just one case in point, but in Western Europe, the old perennial laggard Ireland too became one among the fastest growing economies in the world at the time that the Asian Tigers (yes, including Singapore) were getting a whole lot of attention, giving it the monicker the “Celtic Tiger.”

How did Ireland do it? Simple: It did what Singapore did…

It allowed FDI and MNC’s to come in and create lots of jobs for their people!

In the end, FDI and MNC-attraction was the key in all these examples of fast-growing “former laggards” who got their acts together.

Even  benign0‘s ignorance of Philippine Economic history gets highlighted as he clearly doesn’t even realize that the very reason for why the Philippines was “second only to Japan” back in the 1950’s and 1960’s was because of the post-war reconstruction programmes that the Americans helped us out with. True, they sent us aid. They paid “rent” for the US military bases on Philippine soil back then. But most importantly, they sent in hundreds, even thousands of American investors and corporations to invest in the Philippines to create jobs.

Luckily, despite all the existing anti-FDI legislation that had been existing as well as the anti-FDI public utilities and natural resource provisions in the 1935 Constitution, the Philippines inserted a new amendment into the 1935 Constitution that allowed all American citizens and American entities to enjoy the same economic rights guaranteed to Filipino citizens and Filipino entities. This was known as the Parity Rights Amendment. As such, many American companies did not have to deal with whatever 60/40 rules existed in legislation in certain sectors. Whatever Filipinos could own, Americans could own too. There were just so many Americans and American companies in the Philippines at the time so that a lot of employment was generated by the massive hiring that American companies did.

Alright. So now it’s clear.

benign0 simply doens’t know what he’s talking about. (As usual. He comments about a lot of stuff he hasn’t done any research on)

Rather than actively looking for solutions that could make the Philippines a better place, he’d simply prefer to just yak and yak about how “Filipinos are destined to be losers” or how “Filipinos will never succeed” or how “Foreign Investments are a shortcut to success.”

That last idea is the whole point of why we are fighting for the removal of all those anti-FDI Constitutional restrictions! Yes indeed, Foreign DIRECT Investments are a shortcut to success! There’s nothing wrong with taking shortcuts that work and have no side-effects.

Why take the long and painful route of forcing autarky upon ourselves through the use of a closed economy when we can take the tried and tested faster way of rapidly creating massive employment for millions of Filipinos simply by removing all of those anti-FDI restrictions that shoo MNC’s and foreign investors away?

(I mean, come on, everyone else is using the short-cut route already! Everyone else in the ASEAN region is going with the MNC-attraction strategy. Why should we make things harder for ourselves than it should be?)

Is benign0 a masochist? Or does he just want Filipinos to continue to suffer when in fact bringing FDI’s in is one way of creating jobs and training opportunities that can jumpstart economic development?

As it turns out, it looks like benign0 just really prefers to see Filipinos continue to fail, because that justifies to him that his decision to leave the Philippines back in 2000 to emigrate over to Sydney was “the right one.” After all, should the Philippines improve itself after he left, it could make him and his wife Ilda think that they jumped the gun and quit.

How can benign0 actively go against Constitutional Reform (particularly economic liberalization as discussed in this article) when it is obviously the key missing ingredient in the Philippines’ quest to move up the value chain and get rid of its massive unemployment, poverty, overdependence on OFW Remittances, and its host of so many other social issues derived from all those I’ve just mentioned?

Oh well. The obvious conclusion anyone can get from reading this article is simply that the benign0 from GRP is just as clueless as the other Benigno (Aquino III) from Hacienda Luisita.

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A Tale of Two Countries

(Borrowed from the Far Eastern Economic Review)

by William McGurn (June 1994)

Editor’s note: While it is true that this is an old article from June 1994, the author William McGurn’s analysis is so spot-on and remains extremely relevant today such that this article seems as if it was written just yesterday. If anything, it is worth noting that the Philippine situation is even far worse now (some 20 years after this article was written) so that whatever the author wrote in 1994 has become even worse in terms of degree. That this article was written in 1994 does not diminish the Truth that this article speaks.

The human costs of protectionism 

Teresa Concepcion had high hopes for her future.

Although her father was only a farmer with a grade-school education, things were looking bright for the new generation of Filipinos. By the time Teresa (not her real name) was born, the country had risen from the ashes of World War II to achieve not only independence and a working democracy but the second-highest standard of living in the Far East after Japan’s. In 1970 she entered a local university. Four years later, degree in hand, she took a job as a social worker supervising day-care centers. That’s when her dreams began to dissolve.

Teresa had expected only a modest salary. Upon entering the working world, however, she was stunned to find out exactly how low wages were, not only in her profession but throughout the Philippines. Her paycheck brought in barely $40 a month. By now she was married and had given birth to the first of three sons. Her husband, a surveyor’s assistant with the Bureau of Land and Natural Resources, made no more than she did. Even such basics as clothing and baby food became more than they could afford. And so, after eight years of incessant financial struggling, Teresa and her husband made a critical decision.

In the summer of 1983, she hugged her husband and three boys–ages 7, 5, and 3–and, with money borrowed from her in-laws, boarded a plane bound for Hong Kong at Manila Airport. At age 33, she was leaving her family behind to begin a completely new career: as a maid

Teresa was not alone. Some 105,000 Filipinas labor in Hong Kong as amahs, or maids. Almost a decade after the People’s Power revolution that toppled Ferdinand Marcos, the plight of these women remains a standing indictment of the Philippine government’s staunchly protectionist economic policies. Like Teresa, the amahs are for the most part smart, relatively well-educated women who found the door of opportunity slammed shut at home. They have college degrees in disciplines ranging from accounting to education, yet they find themselves cooking meals and scrubbing floors for Hong Kong shop clerks and secretaries. Like Teresa, many of them are mothers who are now raising other people’s children while their own grow up without them. Underscoring their predicament is a cruel irony: A generation ago, Filipino families imported Chinese maids.

Today the situation has reached crisis proportions. Within East Asia, disparities in prosperity have led to huge labor outflows, mostly from poorer countries such as the Philippines to richer ones such as Hong Kong, Singapore, and Korea. The maids are only the legal tip of a Filipino iceberg that includes such diverse occupations as nightclub dancers, construction workers, shop clerks, and mechanics. Their growing numbers and negative image have become sensitive issues both at home and abroad. When Teresa first arrived in Hong Kong 10 years ago, there were only 24,800 Filipina amahs at work; now there are more than four times that many, and locals complain that the women occupy the city center on Sundays, their one day off.

In the Philippines, the debased condition of these women has led to legislation calling for an end to the Overseas Worker Program. In 1993, Philippine public opinion was outraged by the death of a Filipina nightclub hostess in Japan whom Japanese authorities said died from hepatitis but whose family claimed she had been beaten. Filipinos are also upset by the virtual identification of domestic with Filipina throughout the region.

The current president, Fidel Ramos, has vowed to reverse some of the longstanding policies that have sent so many Filipinos abroad–a promise that the Philippine people have heard many times before. Ramos’s biggest obstacle is a reluctance among the Philippine establishment to admit that its self-perpetuating economic policies are largely responsible for the country’s descent into poverty.

Over the years, Philippine leaders have ascribed their abysmal economic failure to any number of root causes, including their colonial heritage, Marcos-era greed, and a series of natural disasters. The truth, however, is that the country’s poverty is no accident and the quandary in which Filipina maids find themselves owes itself almost directly to the most pernicious of economic sins: protectionism. For the past 40 years, under the guise of ensuring the country’s economic sovereignty, successive Philippine governments have enacted laws that have discouraged foreign investment, concentrated wealth in fewer and fewer hands, and diminished the standard of living for the average Filipino to the point where less than 50 percent of the country earns a subsistence wage. 

Nowhere is this clearer than in a comparison between the Philippines and Hong Kong, just a two-hour flight from Manila and the destination of so many Filipino laborers desperate for work. Just as the Philippines owes its current status as “the sick man of Asia” to longstanding protectionist policies, Hong Kong owes its stupendous wealth today to an ongoing commitment to open markets and a hands-off approach to business. For the past decade, Hong Kong has boasted an unemployment rate of under 2 percent, and its residents purchase more each year than the Japanese, other Asians, or Europeans. In 1993, Hong Kong’s per-capita income even surpassed that of its colonial protector, Great Britain.

But Hong Kong was no more destined to be wealthy than the Philippines was destined to be poor. If anything, it was a prime candidate for the sort of economic anemia that afflicts the Philippines. Lord Palmerston’s remark about Hong Kong upon its 1842 acquisition by the British–he called it “a barren island with hardly a house upon it”–was a fair description of its seeming promise, and even today its crowded population is spread over an inhospitable terrain that makes it utterly dependent on its neighbors even for basic resources such as water.

If Hong Kong’s natural obstacles to wealth were considerable, the man-made ones were downright staggering. No sooner had the colony begun to recover from the Japanese occupation of World War II than the Communist takeover of the mainland sent hundreds of thousands of desperate refugees to its shores. A few years later, a United Nations-imposed boycott of China saw Hong Kong lose its largest market overnight. Back in the 1950s and ’60s, the experts were not talking about the “Hong Kong miracle.” Back then, they were wondering if Hong Kong would survive.

Hong Kong withstood these pressures primarily by remaining open to foreign investment. While the Philippines and other East Asian nations chose to coddle their industries and put their faith in central planning, Hong Kong forced all its industries to compete with the rest of the world on their own merits and on a completely equal basis. And now, when countries such as South Korea are busy trying to pare down huge bureaucracies spawned by protectionism, Hong Kong is free to do productive business. There are no foreign exchange controls, and foreign companies are free to take their profits out if they choose. Taxes are stable and minimal, with none on capital gains and a flat tax on corporate profits. As Milton Friedman once quipped, “To see how the free market really works, Hong Kong is the place to go.”

This prosperity and freedom are largely the legacy of Hong Kong’s legendary financial secretary, John James Cowperthwaite. During the 1960s, Hong Kong was said to be governed “by the gospel of Adam Smith as expounded by his disciple John James Cowperthwaite.” Arriving in the colony as acadet officer in the civil service just three months after the Japanese surrender and charged with getting the economy back on its feet, Cowperthwaite immediately noted the degree to which Hong Kong’s resilient economy had already recovered without any government help. Cowperthwaite’s strength was that, more than most, he understood that even the most brilliant planner was no match for the collective genius of the market.

Whether it was water–which in those days was always in short supply–or food or energy, Cowperthwaite insisted that the best way around the problem was to allow free pricing among suppliers and to keep the doors open to anyone who wanted to enter. He did his part by keeping taxes low and refusing to spend more than he took in. “I see no reason,” he once said to a request for government to finance lower water rates, “why someone who is content with a cold shower should subsidize someone who is able to luxuriate in a deep hot bath.” Cowperthwaite, in fact, was so distrustful of intervention in the economy that he refused to allow the government to keep statistics on gross national product–on the grounds that if the government kept the statistics they would only misuse them.

This strategy was not simply do-nothingism. At the same time the government was keeping taxes low and spending under control, it embarked on a public housing scheme that would eventually shelter more than half the population. The difference was that Cowperthwaite could afford to do this since he maintained fiscal restraint and resisted calls to subsidize Hong Kong industry or give them any protection.

“Had Cowperthwaite taken the advice or yielded to all those who wanted more government intervention,” says Richard Wong of the Hong Kong Center for Economic Research, “Hong Kong would not have prospered. By keeping Hong Kong open he ensured that it would remain competitive.”

Certainly history has vindicated Cowperthwaite’s judgment. During the 10 years between 1961 and 1971 that Cowperthwaite was Hong Kong’s financial secretary, income grew faster there than anywhere else in Asia. The policy of keeping the door open to imports also fueled an export boom–at a phenomenal average annual rate of 13.8 percent over these years. Real wages increased by more than 50 percent over this period and remain roughly twice those of both Korea and Taiwan.

Hong Kong’s disavowal of protectionism extends to the lack of anti-dumping laws that are used even in the United States to keep competitors out. “Any economist will tell you that when you keep foreign business out you simply hurt your own people,” says Hong Kong treasury secretary and former trade negotiator, Donald Tsang. “All you are doing is cutting your nose off to spite your face. We keep our economy open because it is in our self-interest.”

(Note: Sir Donald “Bow-tie” Tsang went on to be Hong Kong Chief Executive at the time when Noynoy Aquino committed terrible embarrassing diplomatic blunders during the HK Tourist Bus Hostage Crisis.)

If Hong Kong owes its impressive wealth to a conscious political decision not to micro-manage the economy, the Philippines’ pervasive poverty represents the negative version of the same argument. There, a series of conscious economic choices made over the past four decades–especially a hostile attitude toward foreign investors–has allowed local monopolies to flourish at the expense of both workers and consumers.

Some have called it “crony capitalism.” But the preferences enjoyed under this arrangement have little in common with capitalism, and the cronies would lose their protected empires tomorrow if the state weren’t propping them up. The ruling elite in the Philippines has taken a country with a well-educated English-speaking work force and an enviable location smack dab in the midst of the world’s fastest growing market and turned it into an economic basket case.

This took some doing. Providence had bequeathed the Philippines many advantages, including an almost inexhaustible supply of natural resources: gold, iron ore, copper, cement, salt, granite, marble. Its soil was rich and its produce bountiful, including rice, sugar, coconuts, tobacco, bananas, and avocados. In the late 1950s and early ’60s, it was second in Asia only to Japan, and everyone assumed that its future would be as bountiful as its present.

As the World Bank put it in an upbeat report, “By comparison with most underdeveloped countries, the basic economic position of the Philippines is favorable…. |Apart from its~ generous endowment of material resources and high level of literacy, other favorable factors are the growth of the labor force, the availability of managerial and technical skills, the high level of savings and investment, rather good prospects for most of the Philippines exports, and considerable possibilities for import substitution.” The Philippines was considered so successful, in fact, that in the ’60s Manila was sending specialists to Korea to advise them on their development.

But the Philippines never realized its potential. Instead opening the door to foreign investors with the money and the wherewithal to make something of its resources, the Philippines wrapped itself in the cloak of protectionism. Under the guise of nationalism–the country had achieved independence in 1946–the Philippines passed a series of laws limiting what they called “alien” (foreign) involvement in the economy. It started with a limit imposed on alien-owned market stalls in Manila and soon covered everything from access to credit to quotas on imports. By the end of the ’50s, this had evolved into a full-fledged ideology called “Filipino First” that would figure prominently in the presidential elections for years to come.

In 1960, Philippine President Garcia summed up the Filipino First policy as merely “an honest-to-goodness effort of the Filipino people to be master of their own economic household.” His secretary for commerce and industry, Manuel Lim, likewise described the policy as simply an effort to ensure that Filipinos get some share of the benefits flowing to foreign investors. Of course, it was slightly more than this. Although both Garcia and Lim went out of their way to say the Filipino First policy would be fair to outsiders, they both saw foreign involvement in the economy as a “threat” and a cause for alarm. Although the policy was later relaxed somewhat, the emphasis remained on ensuring Philippine “supremacy.”

“It’s the classic mistake for developing countries,” says Richard Wong. “Despite all the populist rhetoric, whenever you make it more difficult for foreigners, all you are doing is taking money from the public and putting it into the hands of the vested interests.”

In the Philippines, protectionism was intertwined with racism. Many of the local entrepreneurs belonged to the country’s sizable Chinese minority, and many of the government regulations attempted to force them from their economic niches. Two of the most infamous regulated participation in retail selling and the corn and rice industries. In June 1954, President Ramon Magsaysay signed “An Act to Regulate the Retal Business,” which was followed by a 1964 measure that tightened the screws even more. The gist of the regulations was that no industry or store could sell directly to the public unless it was Filipino owned; otherwise the business had to sell to a Filipino first. The object was to make sure that Filipinos got a piece of the action on every sale. But in practice, the regulations simply created a middleman who raised the final cost to the consumer. The almost-immediate effects included a precipitous drop in the number of newly registered retail businesses and a sharp rise in general prices.

Much the same thing happened in 1961, when the Philippines passed another protectionist act, this one “Limiting the Right to Engage in the Rice and Corn Industry to Citizens of the Philippines.” Like the retail business law, this one took aim at the Chinese merchant population by decreeing that only Filipinos would be allowed to participate in rice and corn production. This was a big decision, because at the time rice was both the chief staple of Filipinos’ diet and a significant commercial export. In 1960 there had been 6,100 foreigners registered in the rice and corn business, but by the summer of 1962 the executive director of the Rice and Corn Board, E. V. Mendoza, reported that the program had “worked” in running foreigners out.

“Success,” however, was curiously defined. Apart from encouraging fraud–some foreigners simply put their companies in the names of their Philippine wives or friends–it had a disastrous effect on production and prices. Mendoza was correct in noting that by year’s end most of the rice and corn business was forced out of foreign hands. But the price paid by the population for that change was a severe rice shortage. The Philippines went from a country that exported rice to one that imported it, a situation that did not change until much later in the decade when scientific advances introduced a new, “miracle” rice capable of tremendous new yields.

The government’s continuing support of protectionist policies in the face of such abject failures is the reason why Max Soliven, editor of The Philippine Star and the country’s most popular columnist, blasts the Filipino First philosophy as “the pirate flag of convenience for vested interests.”

“Every big foreign investment project,” says Soliven, “is slandered as ‘a scam’ or labeled ‘imperialist exploitation,’ and thus those two cabals of conspiracy, the Old Rich and the nouveau riche, manage to fight off and repel ‘the enemy.'” Filipino First, says Soliven, should really be called “Filipino Last and Always.”

As far back as the early 1960s there were voices raised in warning. In 1962 the president of the Philippine Chamber of Commerce, Alfonso Catalang, went on television to say that Filipino First was shooting the country in the foot. My magazine, the Far Eastern Economic Review, warned that “Filipino politicians seem to favor securing foreign loans instead of inviting foreign capital to come in.” The direct result of such choices were the bloated Philippine monopolies that still stand before us today, protected from foreign competition and unresponsive to the needs of the country.

Although myriad regulations restrict foreigners doing business in the Philippines–foreign banks, for example, have not been permitted to open new branches since 1948–the most effective way of keeping them out has been a law limiting the amount any foreigner can own in a business to 40 percent. At the start of his reign, President Marcos made some moves to open up the economy, but instead of busting the monopolies he merely put his own buddies in charge of them. Nor did things improve with the People Power revolution of Cory Aquino. By 1991 foreign investment in the Philippines totaled only $783 million–compared to about $5 billion for Thailand and almost $9 billion for Indonesia, which is just about as poor as the Philippines.

In many ways, in fact, Aquino only made the situation worse. The constitution drafted by her associates specifically blocks or severely limits access to vast segments of the economy by outside developers, especially in the area of natural resources. Section 12, for example, requires that the “State shall promote the preferential use of Filipino labor, domestic materials and locally produced goods.” In effect, the revised constitution applies the 40-percent limit to all but a few areas. Filipino First is back with a vengeance.

The reason the 40-percent limit is so debilitating is that as long as votes in a company are pegged to the owner’s share, no foreign investor will have control over his money. This is particularly distressing in a developing country such as the Philippines, where the economic climate is uncertain and the risks are already high. Foreigners are unlikely to invest millions of dollars if they don’t have a say over how the money will be spent.

“If I had to name one thing that has hurt the Philippines more than anything else, it’s this 40-percent limit,” says Peter Wallace, an international business consultant and economist who has lived in Manila for many years. “We had a similar problem in Australia years ago–we were resource rich but cash poor. Much of Australia’s development came about because it opened the door to those who had the money to develop, especially in the mining industry.” In testimony before the Philippine Congress, Wallace pointed out that if the Philippines followed Australia’s lead, the country’s abundant resources would finally start paying some dividends.

The development of natural resources is hardly the only area of the Philippines’ economy affected by the lack of foreign capital. The nation’s infrastructure, for example, remains one of the worst in Asia. President Ramos has recently eased the ongoing power shortage that just last summer was responsible for blackouts of 10 to 12 hours a day. But the shortage never would have occurred had the country opened energy development to foreigners. “Making yourself open to foreign investment does much more than bring in money,” says Wallace. “It brings in badly needed technology. It grows your exports. It creates jobs, and it generally also develops a host of industries that pop up to serve the new investors.”

The Philippines’ nationalism has, in fact, managed to strangle every aspect of economic development. Foreign goods remain a luxury that only the protected rich can hope to afford. Recently Philippine Sen. Blas Ople pointed to a study by the government’s own assistant secretary for trade documenting that no less than 167 signatures were necessary to release an imported car from the Bureau of Customs. Ople had a field day when the customs commissioner proudly announced he had greatly reduced the number of necessary signatures: to 50.

The regulatory choke hold is also responsible for a phone system so abysmal that it is an international embarrassment. In a November 1992 visit to Manila, Singapore’s senior minister, Lee Kuan Yew, publicly spoke out against the Philippine telephone company as “an example of a powerful vested interest … which has had a monopoly for 64 years.” He also cited a standing joke that “98 percent of Filipinos are waiting for a phone and the other 2 percent are waiting for a dial tone.” In fact, fewer than 2 out of 100 Filipinos have phones in this nation of 61 million people, and the Philippine Long Distance Telephone Company controls more than 90 percent of the existing 600,000 lines. Their monopoly has been helped along by Supreme Court decisions that shut Eastern Telecommunications out of the market and awarded a contract to PLDT even though its foreign-backed competitor had outbid it by a factor of six.

Comparing the Philippines’ phone system to Hong Kong’s actually provides a thumbnail sketch of how two economic systems produce hugely different results. While the Philippines stagnates with one of the worst phone systems in the world, Hong Kong boasts one of the best: fully digitalized with about 63 phones per 100 population, about double the number of another East Asian powerhouse, South Korea. It is so easy to get a phone in Hong Kong that almost all the colony’s shops have a phone sitting out front that customers can use free. And with new developments in related technology (such as cellular phones) now becoming popular, the government reviewed its telecommunications policy and decided to open up additional networks to increase competition.

Beyond all the theoretical and statistical explanations, however, the painful human costs of the different economic strategies pursued by Hong Kong and the Philippines are dramatically illustrated by the booming growth of domestic helpers in Hong Kong. A generation ago, middle and upper-class Filipinos were likely to have poor Chinese as amahs. Today the situation has flip-flopped. Thousands of desperate Philippine women just like Teresa Concepcion–college educated and with children of their own–are forced by circumstances beyond their control to go abroad and work as domestics. The ones who are lucky go to Hong Kong. Many go to the Middle East or other parts of Asia, where the work is even more demanding and the environment even more difficult.

Despite their relative good fortune, their life in Hong Kong is not an easy one. According to a survey by Asian Labor Update Research, some 40 percent of these maids work 14 to 15 hours a day and 30 percent work 16 to 17 hours a day for a standard monthly wage of $415, much of which is sent back home. If they are “lucky,” as is Teresa, they have an “amah’s room” off the kitchen–a non-air-conditioned eight-foot-by-six-foot cell barely big enough for a twin bed. Less fortunate amahs sleep on a couch or share a room with the younger children of their employers.

Life on the bottom rung of society has its other problems as well. Filipinas often report that the Chinese look down on them and treat them harshly. Indeed, one of the colony’s biggest companies, Hong Kong Land, recently tried to bar them from sitting on its grounds on weekends when they congregate with their friends in the center of town.

Occasionally, their work may even prove fatal. One Filipina, Pascuela Destas, gave her life for her 5-year-old charge by pushing him out of the way of an out-of-control bus. But saving the life of her employers’ son meant that Destas left her own three boys back in the Philippines without abreadwinner.

Although life in Hong Kong may be difficult, the maids agree on one thing: It is better than being in the Philippines. Thirty-eight-year-old Eppie Cruz is typical. Ten years ago she received her B.S. in accounting from the Philippines’ University of the East. After her graduation, she came to Hong Kong to work as a domestic to support her sisters back home. “Of course we would like to stay in the Philippines if the opportunity was there,” says Eppie. “But the jobs are here.”

Eppie is wearing a Giordano blouse, a popular brand in Hong Kong roughly equivalent to the Gap in America. In the Philippines, she says, it would cost three times as much as it does in Hong Kong. The same goes for her Sony Walkman. Back in her tiny room, she has a telephone, an air conditioner, a JVC television, and a host of minor appliances that are standard in Hong Kong but would be regarded as luxuries in the Philippines.

Or consider 49-year-old Cora Alanunay. Cora is the mother of six children–two of whom are with her in Hong Kong, also working as domestics. One son, Ramon, is working in a hospital in Saudi Arabia. She came to Hong Kong shortly after she was widowed and needed work, and like her friends she is impressed by Hong Kong’s commercial openness and the opportunity it breeds. Although Cora makes only a minimal wage in Hong Kong, it’s far more than what another son makes back in the Philippines as a bank executive.

The incentives are as clear as they are heartbreaking. Today Teresa Concepcion’s children are 16, 14, and 12. Since leaving the Philippines nine years ago, she has seen her boys and her husband just once each year for a few weeks’ holiday. Yet she has little choice. Her salary of $520 per month is 13 times what she could hope to make in the Philippines, and each month she mails half of it back home. Like other Filipina exiles in Hong Kong, Teresa stoically accepts the trade-offs: “I constantly remind myself how important it is to send back the money to them. Otherwise I would get depressed thinking about the kind of work I’m forced to do.”

These amahs are not alone. Ever since the Philippines started its Overseas Employment Program in the mid-1970s, hundreds of thousands of Filipinos who would otherwise have stayed at home have gone into exile to provide for their families. They have also provided for their country. Last year, the 4.5 million Filipinos working abroad helped bail out their country’s cash shortages by sending home an estimated $2.5 billion in foreign exchange-more than the revenue from a number of important Philippine industries, including tourism.

Having inherited an economy that so demeans productive workers, President Ramos has moved to open up the banking system and, most recently, has vowed to fulfill promises to sell off state enterprises. But the problems remain formidable–particularly the protectionist constitution that walls off investment in any number of areas and a Filipino First legacy that endures. Perversely enough, at a time when the Philippines ought to be out begging for multinational investment, a major argument in the national legislature against the privatization of firms such as Petron Oil is that they may be bought by foreigners.

Ramos, too, for all his stated intentions to the contrary, is not above playing the old games. Back in 1975, Imelda Marcos erected pretty white fences so that the delegates to the annual IMF/World Bank meeting would not have to be offended by the sight of the very poor they were supposed to serve. Last year on May Day, President Ramos announced plans to close the Smoky Mountain garbage dump–long a favorite of foreign reporters looking for a symbol of the Philippines’ crushing poverty. The thousands of scavengers who eke out an average $3.00 per day picking through Smoky Mountain’s waste for anything they can sell, use, or eat are upset that the government is once again taking away what little livelihood they have. The Philippine poor will be forced to move out of sight, if not out of poverty.

And in Hong Kong, Filipina mothers and daughters continue to pay a devastating social and economic price for the protectionist schemes of their government. Most of these women started out with big dreams; Teresa Concepcion thought that with her college degree she’d have a fulfilling career in the Philippines, not a job scrubbing floors in Hong Kong. Today she just wants to go home. “I’d like to return to the Philippines in two or three years,” she says, “maybe to farm with my husband.” Even if she is lucky enough to do so, it will mean her children will have grown up without her. What kind of protection is that?

William McGurn is a senior editor at the Far Eastern Economic Review.

Here's how bad the level of FDI has been in the Philippines when compared to the rest of ASEAN.

Here’s how bad the level of FDI has been in the Philippines when compared to the rest of ASEAN.

Tale of Two Countries

Making the economic comeback w/ higher private FDI

Dr. Gerardo Sicat

(taken from the Philippine Star – originally published: 13 June 2012)

by Dr. Gerardo Sicat

As economic opportunity knocks on the country, the question is how to maximize the gains for the social and economic good.

“Two needed market reforms.”

There are two market reforms that can bring us to the front ranks of high growth countries. These reforms concern, first, the attraction of private foreign capital in critical sectors of the economy and, second, the improvement of flexibility of the labor market to create greater employment.

I have written extensively on these topics on previous occasions. I will try to introduce new arguments in support of these reforms as much as practicable. (Today, I discuss FDI policy.)

“Broadening the capital base of the economy.”

The improvement of the flow of private foreign capital has to do with the liberalization of the constitutional restrictions on foreign capital.

These restrictions deal with provisions of the constitution with respect to special sectors of the economy: land, natural resources and public utilities. In terms of the corporate framework, the restrictions are summed up in the “60-40” equity rule favoring Filipino over foreign capital participation.

The policy as it stands permits all foreign investments to come to the country except those that are specified in Foreign Investments Negative list. This list enumerates specific economic activities where foreign equity is either limited or banned. But direct incentives to promote specific investments rest mainly with the BOI, further constrained by the restrictive economic policies pertaining to foreign capital.

“President Aquino’s position on the ‘60-40’ rule?”

It is unfortunate that when asked pointedly during the talk that he gave before the alumni group of US business schools recently, President Aquino replied that he felt more “nationalistic” on this issue, implying that he does not intend to work to amend this provision.

The President can speed up economic growth by directing more foreign direct investments to the country through the liberalization of these provisions. The question cannot be put aside. New investors will always ask the same fundamental questions, and they compare our answers with what other countries do. Why not simply do away with the issue?

Nationalism has been used as main cover of the standard argument in support of these restrictions. While indeed the economy has grown, because of the limitations imposed by this policy, the nation’seconomic growth has been limited and less inclusive.

The benefits of development have been confined to a smaller segment of the population. In this respect, the policies have hampered growth, thereby reducing employment and productivity at home.

“Wide gaps in investment needs.”

Today, the big gaps in services exist in public utilities, transportation, and infrastructure. Despite our good natural endowments, there is also under-investment in the natural resources industries and in agriculture.

These are sectors in which the involvement of private foreign capital leaves much to be desired. Energizing private foreign capital to invest in these sectors would imply providing greater leeway to allow foreign capital to move into these sectors.

“PPP participation is narrow.” 

A most noticeable aspect of the PPP (public-private partnership) projects is that there is limited participation of private foreign capital in them.

Many of the infrastructure projects require huge financing and also a high level of technical capacity of the main contractors. And private foreign capital is in search of good investment projects because of low world demand.

A liberalization of the rules regarding the constitutional restrictions – which could only be amended by a concerted effort to deal with the issue through constitutional amendment – would line up more players to the PPP infrastructure projects pipeline of the government.

A consequence of this provision is that foreign capital will seek Filipino partners to do their job well. In their homeland, Filipino enterprise can leverage their contributions to the projects even if in the process they allow a larger proportional inflow of foreign capital and foreign expertise to get the job done.

Solving the infrastructure problems of the country has a sizable impact on raising the country’s economic productivity, thus accelerating the growth of the whole economy. The sooner the better.

“Raising Philippine international competitiveness.”

A perverse outcome of the “60-40” investment rules in the availment of BOIinvestment incentives is that we have promoted relatively weak national firms in the domestic economic sector. This is a setback since we are entering a new stage of competition within the larger free trade ASEAN market.

The best evidence of this can be found in our department stores, grocery shops, and in the hardware and construction supermarkets of the country. Goods that are made in other ASEAN countries can be found that give us tough competition. Our locally made products tend to be more expensive in these stores and sometimes suffer from comparison.

These are products produced for home consumption and for the domestic market. Sometimes we find products that they produce which we do not make at home. The countries that have welcomed foreign direct investments with less restrictive conditions compared to us.

The joint venture enterprises and FDI owned companies in these other countries have managed to encourage firms that produce goods that are of high quality under competitive international pricing. These products could have been produced in the Philippines but the foreign investors had moved to the other countries where they located their factories.

“Integrating the industrial export sector with the domestic economy.”

Another perverse consequence of the “60-40” is the disconnect that exists between the domestic industrial sector and the export sector. The export sector imports raw materials to process them for export.

Our record in industrial export has been reasonably successful. However, we have not developed greater depth in domestic industrial sector because of restrictive policies on joint ventures. The result is that there is very low domestic procurement ratio for industrial export firms.

There are not enough world class FDIs and domestic firms that produce for the local market. The foreign investment promotion laws have segregated domestic enterprises with the enterprises that produce for exports.

This is unlike in Thailand, Malaysia, and now, also in Indonesia and in Vietnam! PEZA-located firms prefer to buy their inputs from world supplies rather than from domestic firms because the latter do not have competitive sources of supply if they exist at all in the domestic economy.

Of course, the evidence for this is simply that PEZA has succeeded more in inviting foreign direct investments compared to the BOI. And PEZA has only a more recent history compared to that of the BOI which dates back to 1967.

* * *

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The author’s email is: gpsicat@gmail.com. Visit this site for more information, feedback and commentary: http://econ.upd.edu.ph/gpsicat/

Dr. Gerardo Sicat is an economist who advocates bringing in more FDI and MNC’s as a means of increasing the number of jobs in the Philippines by removing the anti-FDI provisions in the economy that have caused the Philippines to remain poor and unable to provide jobs to its people.

 

‘Sensya na po, Sir…’

Tara, party!

Once upon a time, may isang galanteng gustong mag-imbita sa kanyang mga kaibigan na mag-party sa bahay…

Mr. GALANTE: “Uy mga kaibigan, MAY PARTY AKO SA SABADO!! Kainan, Inuman, Kantahan, Sayawan… PUNTA KAYO SA BAHAY, HA…”

Pagdating ng Sabado…

(Sa gate ng bahay, may bouncer.)

GUEST: “Nandito kami para sa party…” 

BOUNCER: “May dala ba kayong 10,000 pesos?”

GUEST: “HA? Anong 10,000 pesos? Akala ko ba party ito?? Inimbita kami eh.”

BOUNCER: “Sensya na, may 10,000 pesos na entrance fee sa party ni boss…”

GUEST: “Teka, eh siya mismo ang nag-imbita sa amin na pumunta rito tapos ngayon hihingan niyo kami ng 10,000 pesos na entrance fee? Sira-ulo ka ba?”

BOUNCER: “Sensya na po Sir, nakasulat po sa rules and regulations ng bahay ni Boss na pwera lang sa mga kamag-anak, lahat ng papasok dito sa bahay niya ay dapat magbayad ng 10,000 pesos entrance fee. Eto po Sir oh, eto ang Handbook namin. Kita niyo po…

Page 23, line 5:

“Everyone who is a non-relative (within 3 degrees of consanguinity) may not enter the premises, even if there is a party, unless they pay the standard entrace fee of 10,000 pesos.”

GUEST: “Walang hiya naman, nag-imbita ng party eh yun pala may entrance fee!! Sira-ulo pala yang boss niyo!! Doon na lang kami sa ibang party pupunta, at least OPEN HOUSE sila!

BOUNCER: “Sensya na po, Sir, yun po kasi ang nakasulat sa Rule Book namin eh. Tagasunod lang po kami…”

bouncer

Yan ang kwento ng Pilipinas…

Mag-iimbita ng mga “FOREIGN INVESTORS” na pumunta raw sa Pilipinas.

Pagdating ng mga investors sa Pinas, meron palang mga RESTRICTIONS sa Constitution na nagsasabing kelangan muna silang maghanap ng local partner…

Kamot-ulo si investor: “AKALA KO BA INIMBITA NIYO KAMI NA MAG-INVEST, eh bakit kayo may mga kalokohang restrictions na yan???”

Tuloy, pumupunta na lang sa Singapore, Malaysia, Indonesia, Vietnam, Cambodia, India, China ang mga investors… Kawawa naman ang Pinas…

Read more about the issue by clicking here!

Crucifying Cruz

Neal H. Cruz at center: He is anti-Foreign Investment, anti-Constitutional Reform, but he is sipping Foreign Wine with pro-Foreign Investment, pro-Constitutional Reform Speaker Belmonte

After reading the article written by Neal Cruz last October 17, 2011  titled Cha-cha will let foreigners grab our lands, I couldn’t help but have the urge to reply to some of the claims made by Mr. Cruz on the aforementioned article.  Had not he been so serious about the claims he had made, I could have easily dismissed it but with the amount of vitriol he likes to throw against the “evils of foreigners” and other assorted nationalist rah rah, I felt I really needed to write this as a response.

In his article, he writes that the proposed ChaCha or Charter Change, which aims to amend provisions of the current 60/40 ownership restrictions placed on foreign investors, will allow foreigners to “grab land from the Filipinos.” Despite not having anything to back this statement up, for him it is a fact simply because it stirs nationalism in the hearts and minds of Filipinos against the much-dreaded “evil white man” and when most of the populace has to deal with the harsh realities of life, nothing is more comforting than the nationalistic wails of “Pinoy Pride” or “the Philippines belongs to Filipinos only.”

Let me explain why his statement of foreigners “grabbing” all the lands here is both dubious and ridiculous. Vietnam and China, both countries who have really large foreign investments, allow foreigners to fully own 100% of any company set up in these countries. Section 8 of Article 2 on the 1996 Law of Foreign Investment in Vietnam states that a foreign investor is defined as “An enterprise with one hundred (100) per cent foreign owned capital means an enterprise in Vietnam the capital of which is one hundred (100) per cent invested by foreign investor(s).” Clearly this states that any foreign company who wants to invest in Vietnam can invest with 100% foreign ownership. As per land ownership, Section 1 of Article 5 of the Vietnamese Law on Land states that “Land belongs to the entire people with the State as the representative owner” meaning that land ownership lies in the hands of the State, which then leases the land (or sells time-bound “land-use rights”) to foreign investors. That’s because the two countries aforementioned follow the principles of Georgism, which states that anything that is not created by man, in this case the earth, cannot be owned.  No evil white man grabbing land there.

Skyline of Hanoi, capital of Vietnam

Although his claim that marginalized local folks will “run out of land” if we allow the “evil white man” to own lands in the Philippines due to the country’s small size and ever-increasing population sounds academic to some, it is false since there are other countries that are smaller with lesser land area that allow foreign ownership of lands yet their citizens are neither “marginalized” nor “evicted” from their lands to pave way to foreign ownership. Singapore, which is a lot smaller compared to the entire island of Luzon (Singapore, with a total land area of 778 km2, is even smaller than Marinduque, which has a land area of around 963 km2), allows foreigners to own land under the 1973 Residential Property Act which states that “The Act seeks to strike a balance between giving Singaporeans a stake in the country by being able to buy and own residential properties at affordable prices, while attracting foreign talent by allowing permanent residents, foreign companies and limited liability partnerships that make an economic contribution to Singapore to purchase such properties for their occupation.” Yet you never hear of any “oppressed” or “marginalized” Singaporeans who cannot own land. Seems like there is something so special about the Philippines that makes “evil white men” want to grab all the land.

Adding more fuel to his “Pinoy Pride” ultra-nationalism is his statement about “European settlers grabbing the lands of Amerindians and confining them to reservations”, as nothing is more dreadful than instilling the thought that evil foreigners are out to get your land and have their way with the local women, despite being historically inaccurate. When the first batch of Europeans arrived in 1492, this vast land now known as America was not owned by the Amerindians as a nation as there was no “Amerindian or Cherokee” nation that existed during the time, despite claims made by these sponsors of White guilt. The land was inhabited by several Indian nations such as the Cherokee, Iroquois, Apache, Mohawk and others who among themselves fought for land ownership. Historical facts be damned in the name of “Pinoy Pride.”

This is the result of very little investment (foreign or local), resulting in very few jobs…

And his claim that the 40% limit of foreign ownership of companies and utilities here in the Philippines is for the “benefit” of the Filipino people is ludicrous as the results has proven to be detrimental to the Filipino people. Looking at utilities alone, the Philippines ranks as having the highest power rates in Asia, and among the highest power rates in the world. Why? Because power generation is monopolized by the state-owned NAPOCOR , which then provides little or no competition to other foreign/local energy generation firms which then gives little incentive for NAPOCOR to generate electricity at lower prices through the use of less fossil fuel/coal dependent means such as geothermal and hydroelectric power as they do not have to compete in the consumer market with lower power rates and value-added services, which is the very essence of competing companies in free markets. This in turn allows them to sell electricity at fixed rates to various electric providers, who in turn have the liberty of overcharging for their services as there is no one else competing with them. As a result, many Filipinos have to suffer as foreign investors are hesitant to set shop in the Philippines due to the high energy costs which in turn keeps most of the population jobless and local businesses too have to struggle with the high power costs to keep themselves operational and the regular Juan Dela Cruz has to endure paying high electric bills.

Another example is the Internet. According to SpeedTests.net, the Philippines ranks 121st in terms of internet speed (Average download speed/download rate) at 787 kbps (0.8 mbps) or 98 KB/sec, lower than its Southeast Asian neighbors(Malaysia at 1269kbps or 159kb/sec, Singapore at 4078kbps or 510kb/sec, Thailand at 3529 kbps or 441kb/sec) Want to know why? Since foreign investors have limited ownership and because foreign ISP’s cannot invest in the Philippine market, which also allows them to invest in the technology for high-speed internet, the populace is left with a few major internet providers who are free to jack up internet prices or provide cheap internet but with terrible service as these companies have no competition in the local market. I don’t think the average Filipino wants to pay higher electricity or live with mediocre internet connection all in the name of “Pinoy Pride.”

His third to the last statement made about Petron’s sale to ARAMCO smacks of his ignorance on the free market system. Free markets work through the basic law of supply and demand, which states that when the demand is low and the supply is high, prices are low and vice versa. By allowing the government to intervene, which is what he wants through price controls, this creates an artificial demand as lowering prices for the sake of the “poor” masa only allows for more demand, and when supply can’t keep up, you eventually run out of supply, the end result being long bread lines, just like in communist countries such as the USSR in the late 1980’s.

It is true and sad that most Filipinos cannot afford the means to buy housing and their own land, coupled with the skyrocketing costs of commodities and other necessities. But the solution does not lie in big government, corporate monopolies and autarky. By keeping out foreign investors and kicking them out, which at the end of the day is what Mr. Cruz wants, it will only worsen the plague as there will be no new jobs generated and we’ll end up with high costs of products & services and more poverty. Without a lot of lucrative job opportunities for local employees, it destroys both the ability of the local economy to grow through the multiplier effect and social mobility, meaning the ability of those who want to move up the financial food chain to do so, thus leaving us no choice but having to rely on our overseas workers for their dollars.

Looking at our more successful neighbors like Singapore, one of their formulas for success is by allowing foreign investors to invest in the country with 100% ownership and removing the protectionist and ultranationalist policies that were in place. As a result, Singapore is among the wealthiest nations in Asia and has truly gone “From Third World to First” alluding to the title of Lee Kuan Yew’s book on Singapore’s success. As the late Paramount Leader of China, Deng Xiaoping once said: “It doesn’t matter if it’s a black cat or a white cat, if it catches mice, that’s a good cat.”

In the age of globalization and advancing technologies, where whole economies are intertwined by free trade and the world is made even smaller by the internet through e-commerce, there is simply no room for such ultranationalistic backwardness. But unfortunately, many of the likes of Mr. Cruz will still push for over protectionist policies and kick out people who will bring further wealth to the country all in the name of “Pinoy Pride” or “Brown Power.

Too bad it neither puts food on the table nor buys the clothes on your back.

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About the Author: James Aron Mangun, known simply as James or “Jim” to colleagues, is a former BPO English Trainer in several companies and now a freelance BPO consultant/businessman who regularly visits political Philippine blogs and websites to offer his two cents on current events/affairs.

He is an ardent believer of the free market system and is an avid fan of Ludwig von Mises, Ayn Rand, and Milton Friedman. He currently runs the Mangun On Markets website with his father John where they offer advice/tips to people interested in investing in the PSE. You can visit his site at http://www.mangunonmarkets.com

 

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