Lee Kuan Yew on Filipinos and the Philippines

(As a tribute to the great Singaporean statesman, Singapore’s first Prime Minister and visionary “Third World to First” leader who passed away early morning of March 23, 2015 (Monday morning), the CoRRECT™ Movement would like to republish an old article written by its principal co-founder. We in the CoRRECT™ Movement maintain that in order for someone of Lee Kuan Yew’s caliber, character, and competence to ever emerge as the top leader of the Philippines, the Philippines must first have a Parliamentary System. Otherwise, if the Philippines insists on sticking with its defective and flawed Presidential System, then the Philippines will continue to be stuck with corrupt traditional politicians, actors and celebrities, and lazy hacienda-owning scions winning elections and doing nothing to fix the Philippines. Only a Parliamentary System can allow a competent Lee Kuan Yew or Mahathir-type of leader to emerge victorious in a Third World country like the Philippines, in the Singapore of the 1960’s or in the Malaysia of the 1980’s.

We invite all who read this article to please learn more about the Parliamentary System in order to understand better on why the way it works tends to produce better-quality leaders than Presidential Systems.

This article was originally published on the 10th of January 2011 in both Get Real Philippines and the old Antipinoy website.)

Lee Kuan Yew

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One of the best ways for us Filipinos to realize the Truth about ourselves and our country is to find out how people from other countries observe us and our society. This is best done when the one observing and describing us is an extremely well-informed and highly intelligent non-Filipino who has had his own fair share of problems similar to the ones that the Philippines has gone through (or is currently going through), and had a hand in actual problem-solving for his own country’s originally Philippines-like issues.

An example of such a person is Singaporean Minister Mentor and former Prime Minister Lee Kuan Yew. Hailed as the Father of Modern Singapore, Lee Kuan Yew and his People’s Action Party were able to craft appropriate solutions for the issues and problems that were hounding Singapore early on in its history as a newly-independent Third World country with no natural resources, a huge number of uneducated people, and security problems resulting from the initial hostility of its neighbors towards it, among many other problems and managed to turn it into Southeast Asia’s oasis of prosperity and development and a First World hub within a region of  what were then  known as “Third World” countries.

The following excerpt which features Minister Mentor Lee Kuan Yew’s observations on the Philippines and of Filipinos should at least entice the readers of www.antipinoy.com to immediately pay a visit to the local Bookstore (those which specialize in real books – not school supplies!) and ask around for copies of the book from whence it came –  “From Third World to First.”

Far from just being a book about Lee Kuan Yew or Singapore’s history of development, “From Third World to First” is also a collection of invaluable lessons in economic development, policy-making, international diplomacy, statecraft, domestic politics, history & culture, behavioural and cultural reform,meritocracy, the principles of pragmatic idealism, and examples of ingenious out-of-the-box thinking. In it, Lee Kuan Yew himself also describes how he and his team of technocrats were able to reform the culture, mindset, and behavior of a people who in the 1950’s were still predisposed to spitting in public and other unhygienic behavior as a result of carefully-planned behavioural-modification policies and systems which have turned Singapore into one of the cleanest and most orderly societies in Asia as well as well as the World.

This book can no doubt serve as a helpful handbook for any would-be leader of any Third World country looking to move into the First World.

I truly encourage all Filipinos who work in government, have an interest in government, or are looking for lessons on how to craft solutions to the problems of the Philippines to please buy a copy of this book. I assure everyone that “From Third World to First” will not just be eye-opening and enlightening, it will also enable Filipinos to understand that finding solutions to our problems is very possible if only we adopted a can-do attitude, a bias for intense learning and analysis, a solid framework for critical analysis and big-picture thinking, as well as a grounding in practical & creative out-of-the-boxproblem-solving.

If Singapore with Lee Kuan Yew and the People’s Action Party could do it, why can’t we?

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(The following excerpt is taken from pages 299 – 305 from Lee Kuan Yew’s book “From Third World to First”, Chapter 18  “Building Ties with Thailand, the Philippines, and Brunei”)

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The Philippines was a world apart from us, running a different style of politics and government under an American military umbrella. It was not until January 1974 that I visited President Marcos in Manila. When my Singapore Airlines plane flew into Philippine airspace, a small squadron of Philippine Air Force jet fighters escorted it to Manila Airport. There Marcos received me in great style – the Filipino way. I was put up at the guest wing of Malacañang Palace in lavishly furnished rooms, valuable objects of art bought in Europe strewn all over. Our hosts were gracious, extravagant in hospitality, flamboyant. Over a thousand miles of water separated us. There was no friction and little trade. We played golf, talked about the future of ASEAN, and promised to keep in touch.

His foreign minister, Carlos P. Romulo, was a small man of about five feet some 20 years my senior, with a ready wit and a self-deprecating manner about his size and other limitations. Romulo had a good sense of humor, an eloquent tongue, and a sharp pen, and was an excellent dinner companion because he was a wonderful raconteur, with a vast repertoire of anecdotes and witticisms. He did not hide his great admiration for the Americans. One of his favourite stories was about his return to the Philippines with General MacArthur. As MacArthur waded ashore at Leyte, the water reached his knees but came up to Romulo’s chest and he had to swim ashore. His good standing with ASEAN leaders and with Americans increased the prestige of the Marcos administration. Marcos had in Romulo a man of honor and integrity who helped give a gloss of respectability to his regime as it fell into disrepute in the 1980s.

In Bali in 1976, at the first ASEAN summit held after the fall of Saigon, I found Marcos keen to push for greater economic cooperation in ASEAN. But we could not go faster than the others. To set the pace, Marcos and I agreed to implement a bilateral Philippines-Singapore across-the-board 10 percent reduction of existing tariffs on all products and to promote intra-ASEAN trade. We also agreed to lay a Philippines-Singapore submarine cable. I was to discover that for him, the communiqué was the accomplishment itself; its implementation was secondary, an extra to be discussed at another conference.

We met every two to three years. He once took me on a tour of his library at Malacañang, its shelves filled with bound volumes of newspapers reporting his activities over the years since he first stood for elections. There were encyclopedia-size volumes on the history and culture of the Philippines with his name as the author. His campaign medals as an anti-Japanese guerrilla leader were displayed in glass cupboards. He was the undisputed boss of all Filipinos. Imelda, his wife, had a penchant for luxury and opulence. When they visited Singapore before the Bali summit they came in stye in two DC8’s, his and hers.

Marcos did not consider China a threat for the immediate future, unlike Japan. He did not rule out the possibility of an aggressive Japan, if circumstances changed. He had memories of the horrors the Imperial Army had inflicted on Manila. We had strongly divergent views on the Vietnamese invasion and occupation of Cambodia. While he, pro forma, condemned the Vietnamese occupation, he did not consider it a danger to the Philippines. There was the South China Sea separating them and the American navy guaranteed their security. As a result, Marcos was not active on the Cambodian question. Moreover, he was to become preoccupied with the deteriorating security in his country.

Marcos, ruling under martial law, had detained opposition leader Benigno (Ninoy) Aquino, reputed to be as charismatic and powerful a campaigner as he was. He freed Aquino and allowed him to go to the United States. As the economic situation in the Philippines deteriorated, Aquino announced his decision to return. Mrs. Marcos issued several veiled warnings. When the plane arrived at Manila Airport from Taipei in August 1983, he was shot as he descended from the aircraft. A whole posse of foreign correspondents with television camera crews accompanying him on the aircraft was not enough protection.

International outrage over the killing resulted in foreign banks stopping all loans to the Philippines, which owed over US$25 billion and could not pay the interest due. This brought Marcos to the crunch. He sent his minister for trade and industry, Bobby Ongpin, to ask me for a loan of US$300-500 million to meet the interest payments. I looked him straight in the eye and said, “We will never see that money back.” Moreover, I added, everyone knew that Marcos was seriously ill and under constant medication for a wasting disease. What was needed was a strong, healthy leader, not more loans.

Shortly afterward, in February 1984, Marcos met me in Brunei at the sultanate’s independence celebrations. He had undergone a dramatic physical change. Although less puffy than he had appeared on television, his complexion was dark as if he had been out in the sun. He was breathing hard as he spoke, his voice was soft, eyes bleary, and hair thinning. He looked most unhealthy. An ambulance with all the necessary equipment and a team of Filipino doctors were on standby outside his guest bungalow. Marcos spent much of the time giving me a most improbable story of how Aquino had been shot.

As soon as all our aides left, I went straight to the point, that no bank was going to lend him any money. They wanted to know who was going to succeed him if anything were to happen to him; all the bankers could see that he no longer looked healthy. Singapore banks had lent US$8 billion of the US$25 billion owing. The hard fact was they were not likely to get repayment for some 20 years. He countered that it would be only eight years. I said the bankers wanted to see a strong leader in the Philippines who could restore stability, and the Americans hoped the election in May would throw up someone who could be such a leader. I asked whom he would nominate for the election. He said Prime Minister Cesar Virata. I was blunt. Virata was a nonstarter, a first-class administrator but no political leader; further, his most politically astute colleague, defense minister Juan Ponce Enrile, was out of favour. Marcos was silent, then he admitted that succession was the nub of the problem. If he could find a successor, there would be a solution. As I left, he said, “You are a true friend.” I did not understand him. It was a strange meeting.

With medical care, Marcos dragged on. Cesar Virata met me in Singapore in January the following year. He was completely guileless, a political innocent. He said that Mrs. Imelda Marcos was likely to be nominated as the presidential candidate. I asked how that could be when there were other weighty candidates, including Juan Ponce Enrile and Blas Ople, the labor minister. Virata replied it had to do with “flow of money; she would have more money than other candidates to pay for the votes needed for nomination by the party and to win the election. He added that if she were the candidate, the opposition would put up Mrs. Cory Aquino and work up the people’s feelings. He said the economy was going down with no political stability.

The denouement came in February 1986 when Marcos held presidential elections which he claimed he won. Cory Aquino, the opposition candidate, disputed this and launched a civil disobedience campaign. Defense Minister Juan Enrile defected and admitted election fraud had taken place, and the head of the Philippine constabulary, Lieutenant General Fidel Ramos, joined him. A massive show of “people power” in the streets of Manila led to a spectacular overthrow of a dictatorship. The final indignity was on 25 February 1986, when Marcos and his wife fled in U.S. Air Force helicopters from Malacañang Palace to Clark Air Base and were flown to Hawaii. This Hollywood-style melodrama could only have happened in the Philippines.

Mrs. Aquino was sworn in as president amid jubilation. I had hopes that this honest, God-fearing woman would help regain confidence for the Philippines and get the country back on track. I visited her that June, three months after the event. She was a sincere, devout Catholic who wanted to do her best for her country by carrying out what she believed her husband would have done had he been alive, namely, restore democracy to the Philippines. Democracy would then solve their economic and social problems. At dinner, Mrs. Aquino seated the chairman of the constitutional commission, Chief Justice Cecilia Muñoz-Palma, next to me. I asked the learned lady what lessons her commission had learned from the experience of the last 40 years since independence in 1946 would guide her in drafting the constitution. She answered without hesitation, “We will not have any reservations or limitations on our democracy. We must make sure that no dictator can ever emerge to subvert the constitution.” Was there no incompatibility of the American-type separation of powers with the culture and habits of the Filipino people that had caused problems for the presidents before Marcos? Apparently none.

Endless attempted coups added to Mrs. Aquino’s problems. The army and the constabulary had been politicized. Before the ASEAN summit in December 1987, a coup was threatened. Without President Suharto’s firm support the summit would have been postponed and confidence in Aquino’s government undermined. The Philippine government agreed that the responsibility for security should be shared between them and the other ASEAN governments, in particular the Indonesian government. General Benny Moerdani, President Suharto’s trusted aide, took charge. He positioned an Indonesian warship in the middle of Manila Bay with helicopters and a commando team ready to rescue the ASEAN heads of government if there should be a coup attempt during the summit. I was included in their rescue plans. I wondered if such a rescue could work but decided to go along with the arrangements, hoping that the show of force would scare off the coup leaders. We were all confined to the Philippine Plaza Hotel by the seafront facing Manila Bay where we could see the Indonesian warship at anchor. The hotel was completely sealed off and guarded. The summit went off without any mishap. We all hoped that this show of united support for Mrs. Aquino’s government at a time when there were many attempts to destabilize it would calm the situation.

It made no difference. There were more coup attempts, discouraging investments badly needed to create jobs. This was a pity because they had so many able people, educated in the Philippines and the United States. Their workers were English-speaking, at least in Manila. There was no reason why the Philippines should not have been one of the more successful of the ASEAN countries. In the 1950s and 1960s, it was the most developed, because America had been generous in rehabilitating the country after the war. Something was missing, a gel to hold society together. The people at the top, the elite mestizos, had the same detached attitude to the native peasants as the mestizos in their haciendas in Latin America had toward their peons. They were two different societies: Those at the top lived a life of extreme luxury and comfort while the peasants scraped a living, and in the Philippines it was a hard living. They had no land but worked on sugar and coconut plantations.They had many children because the church discouraged birth control. The result was increasing poverty.

It was obvious that the Philippines would never take off unless there was substantial aid from the United States. George Shultz, the secretary of state, was sympathetic and wanted to help but made clear to me that the United States would be better able to do something if ASEAN showed support by making its contribution. The United States was reluctant to go it alone and adopt the Philippines as its special problem. Shultz wanted ASEAN to play a more prominent role to make it easier for the president to get the necessary votes in Congress. I persuaded Shultz to get the aid project off the ground in 1988, before President Reagan’s second term of office ended. He did. There were two meetings for a Multilateral Assistance Initiative (Philippines Assistance Programme): The first in Tokyo in 1989 brought US$3.5 billion in pledges, and the second in Hong Kong in 1991, under the Bush administration, yielded US$14 billion in pledges. But instability in the Philippines did not abate. This made donors hesitant and delayed the implementation of projects.

Mrs. Aquino’s successor, Fidel Ramos, whom she had backed, was more practical and established greater stability. In November 1992, I visited him. In a speech to the 18th Philippine Business Conference, I said, “I do not believe democracy necessarily leads to development. I believe what a country needs to develop is discipline more than democracy.” In private, President Ramos said he agreed with me that British parliamentary-type constitutions worked better because the majority party in the legislature was also the government. Publicly, Ramos had to differ.

He knew well the difficulties of trying to govern with strict American-style separation of powers. The senate had already defeated Mrs. Aquino’s proposal to retain the American bases. The Philippines had a rambunctious press but it did not check corruption. Individual press reporters could be bought, as could many judges. Something had gone seriously wrong. Millions of Filipino men and women had to leave their country for jobs abroad beneath their level of education. Filipino professionals whom we recruited to work in Singapore are as good as our own. Indeed, their architects, artists, and musicians are more artistic and creative than ours. Hundreds of thousands of them have left for Hawaii and for the American mainland. It is a problem the solution to which has not been made easier by the workings of a Philippine version of the American constitution.

The difference lies in the culture of the Filipino people. It is a soft, forgiving culture. Only in the Philippines could a leader like Ferdinand Marcos, who pillaged his country for over 20 years, still be considered for a national burial. Insignificant amounts of the loot have been recovered, yet his wife and children were allowed to return and engage in politics. They supported the winning presidential and congressional candidates with their considerable resources and reappeared in the political and social limelight after the 1998 election that returned President Joseph Estrada. General Fabian Ver, Marcos’s commander-in-chief who had been in charge of security when Aquino was assassinated, had fled the Philippines together with Marcos in 1986. When he died in Bangkok, the Estrada government gave the general military honors at his burial. One Filipino newspaper, Today, wrote on 22 November 1998, “Ver, Marcos and the rest of the official family plunged the country into two decades of lies, torture, and plunder. Over the next decade, Marcos’s cronies and immediate family would tiptoe back into the country, one by one – always to the public’s revulsion and disgust, though they showed that there was nothing that hidden money and thick hides could not withstand.” Some Filipinos write and speak with passion. If they could get their elite to share their sentiments and act, what could they not have achieved?

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President Noynoy Aquino and everyone in his cabinet and staff (all secretaries down to the director level) should all get copies of “From Third World to First” and read the book at least twice.

We in the CoRRECT™ Movement encourage all readers of this article to please purchase copies of the late Lee Kuan Yew’s book “From Third World to First.” The insights in the book can give Filipinos a good lesson on how things are best done based on the situation a country happens to be in.

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Lee Kuan Yew’s Profile:

The late former Prime Minister Lee Kuan Yew (Hakka for 李光耀 – Lî Guang Yào in Mandarin) born “Harry Lee Kuan Yew” and known simply as “Harry” to close friends, family, and his late wife, was born in Singapore on September 16, 1923,  a third-generation descendant of immigrants from the Hakka dialect-group hailing from China’s Guangdong Province. He finished law at Cambridge University, England. In 1954, he formed the People’s Action Party, which won the first Singapore general election five years later. Though dominantly English-speaking and fluent in Malay, but originally unable to competently converse in Mandarin or other Chinese dialects, he decided at an advanced age to exert intense effort to learn Mandarin and later Hokkien, because he needed both for political campaigns at the grassroots level. He also changed his public persona from being a British-educated British-accented upper-class Anglophile named “Harry Lee” to being known in public and in the papers as “Lee Kuan Yew.”

Lee Kuan Yew  became Singapore’s first prime minister in 1959, at the age of thirty-five and quickly developed Singapore’s economy through the aggressive invitation of foreign Multinational Corporations by avoiding economic protectionism and creating a business-friendly environment in order to concentrate on the immediate task of job creation for the ordinary citizens. In November 1990, he resigned the office to assume the advisory post of Senior Minister in the Singapore Cabinet and in 2004, took on the title of the “emeritus” role of  Minister Mentor when his successor as Prime Minister, Goh Chok Tong (吳作棟)became Senior Minister after Goh resigned the premiership.

He died on Monday, 23 March 2015 after a battle with severe pneumonia.

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Lee Hsien-Loong

Lee Kuan Yew’s son, Lee Hsien-Loong (李顯龍) now serves as Singapore’s Prime Minister after so many years of being given the most difficult and challenging of job assignments, proving himself academically superior to his peers at school, and needing to prove his worth purely through merit by rising up through the ranks in both the military and the civil service (he became a Brigadier-General), and not because he is the son of Lee Kuan Yew.

About the Author

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

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.

Having experienced OFW-life 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.

He is the principal co-founder of the CoRRECT™ Movement and is an accomplished stand-up comedian in Singapore in addition to having been originally known as one of the most popular television quiz show champions in RPN-9’s Battle of the Brains.

LKY

Commandments Are Not Enough

Keith Breeze Ten Commandments

By the way, Pork is forbidden in the Old Testament.

There has been some debate among Filipino netizens about what is more important when it comes to fixing the problems of the Philippines. Much of it has been centered on the flawed culture in the Philippines and the need to fix this flawed culture. Some netizens have argued that we need to fix the culture first before fixing the Constitution. Others argue that it is the other way around. So which is it?

The following article explains that culture is built up around systems, and so in order to change the culture it is necessary to change the system first:

Chicken or the Egg: Culture Change or System Change?

So instead of trying to fight corruption alone, we must correct the system that encourages corruption. Instead of just telling people to vote wisely, we must first change the system that encourages people to go for name-recall and vote celebrity politicians instead of voting for competent statesmen based on abilities and platforms.

Essentially, it is all about dealing with root causes. To more efficiently and more permanently fix a problem, one must go to the root cause of the problem, rather than just dealing with symptoms.

Of course, it is possible to change the culture through a dictatorship, but I’d prefer doing it through a much more democratic way. What we need is a system that enforces certain wanted behaviors, and discourages certain unwanted behaviors – and switching to a parliamentary system, rather than a presidential dictatorship, is the way to do it.

Think about the 10 Commandments of the Bible. Sure, it is definitely a good moral code to go by. However, it is not enough just to advise people to not steal. Humans are fallible creatures prone to temptations. All humans have this tendency. Some religious traditions even have concepts to explain this: The Jews have the concept of the Yetzer Hara (The Evil Inclination) that is the source of how people can sometimes be harmful (albeit it is also tied in with the human survival instinct), and Christianity has Original Sin.

When it comes to one of the biggest moral flaws of Philippine society, corruption, it turns out that it is actually an intermediate effect of even deeper systemic root causes. It’s to say that corruption is somewhere in between a symptom and a root cause. Corruption causes other bad things, yes, but something deeper causes corruption to occur and/or exacerbates it.

The truth is that the tendency towards corruption is present in each and every person. It manifests itself as an effect of the human survival instinct which, when unregulated, can mean that one tries to survive at the expense of others. It manifests itself as laziness and the tendency of human beings to want to go with the path of least resistance: i.e., to get something for nothing.

Like I said, all humans have this tendency. Call it Yetzer Hara, Original Sin, Temptations, etc.

What we can do, however, is to come up with systems that will minimize the tendency for such traits to emerge. For instance, when people are needy and desperate, there is often a greater chance that they will resort to corruption in “finding the shortest path to ensure their survival” even if this harms others or goes against the rules or standards of society.

As such, a society where people are at least able to meet their most basic needs comfortably can minimize corruption greatly. If we have an economic system that does not provide enough economic opportunities for people to live comfortably, expect higher incidences of corruption to emerge. Then there’s the fact that if you have “more eyes watching”, it causes people to be more likely to avoid being corrupt.

In short, having systems that dissuade people from being corrupt, having systems that provide economic opportunities for the people at large, having systems that reward transparency and punish corruption can minimize corruption and if done properly, practically eliminate it.

It’s not enough to say, “get rid of corruption” or “thou shall not steal” because the question is: How?!?! Sometimes, even if you try to get rid of corruption without addressing the root causes of why some people risk getting caught while doing corrupt acts in the hope of personal gain, you’ll find that the corruption doesn’t really go down.

It’s like trying to swat flies over and over again, but new flies keep emerging. It’s necessary, thus, to look at the systemic root causes for why there are lots of flies in your area, and often, you’ll realize that it’s the preponderance of uncollected garbage that becomes the breeding ground for maggots and flies. No amount of swatting the flies over and over again does anything because new flies emerge to replace the ones who were downed.

The emergence of corruption is not the root cause… It is the effect or symptom of something else. And that often – at the very core – is poverty and the lack of opportunities. People who have mounting bills to pay because they earn so little or probably don’t have jobs themselves may end up seeing an opportunity to “cheat the system” as being advantageous to them or helpful to their survival. Had they not had to worry about that, they then wouldn’t have resorted to corruption.

We need to look at root causes. In the end, our system in the Philippines is conducive to keeping people poor, and poverty makes corruption come out in full force.

If we CoRRECTed the system so that we have a system that creates more economic opportunities, more prosperity, more chances for people to live decent lives, then there’ll be less tendency for corruption to emerge.

Now where do poverty and lack of opportunities stem from? They generally stem from the economic system and how things work as far as the economy goes. Countries that stifle business and economic activity tend to shoo businesses and entrepreneurs/investors away. Countries that allow free business to happen and allow foreign companies to easily set up shop and create jobs for the local population tend to have better job creation and less poverty as a result.

I also have to mention the case of having “more eyes watching.” Well, that’s why parliamentary systems also tend to be less prone to corruption than presidential systems. Because the way parliamentary systems work involves the opposition sending in representatives to the ministerial meetings of the government so that there is always a witness from the opposition present to watch over ministry meetings. While the majority has a government cabinet led by a prime minister, the minority has an opposition shadow cabinet led by the leader of the opposition. Each minister of the government has a corresponding “shadow minister from the opposition” watching over him and attending the meetings of the minister in his ministry. The Minister of Defense, when conducting meetings for the Ministry of Defense has the Shadow Minister of Defense from the Opposition attending and looking at the proceedings and noting all the decisions.

This is why generally speaking, parliamentary systems outperform presidential systems and parliamentary systems are less prone to corruption: Because there’s someone or many people from the opposition watching.

In the end, in order for corruption to actually get lessened, you cannot just ask people to not be corrupt. You cannot just command them not to steal. You must set up systems that prevent the corrupt-tendencies present in all people from emerging and to suppress people being corrupt with systems where “many are watching over.”

CoRRECT™ is really all about systemic change, not just surface changes. System change hits at the root causes of problems. That’s how we fix things in the long term. That’s how we CoRRECT™ the Philippines – by CoRRECTing the flawed system enshrined in the 1987 Constitution of the Philippines.

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