Twenty five years after writing a constitution that has explicit restrictions limiting foreign equity to not more than 40% has left the Philippines with minimal elbow room to change economic policy which is more attuned to the times.
Note further that while our neighbors allow 100% foreign equity in their shores – and are snagging foreign investments which create more jobs and prosperity for their countries – the Philippines is stuck with a 40% cap on foreign equity – and a remittance-driven economy.
The Limits of Resilience
Resilience is defined as ” Able to withstand or recover quickly from difficult conditions” . This is often used as a justification to resist changing the flawed economic constitutionally enshrined policy.
Shouldn’t you instead grow more food, or have the means to buy more food – instead of getting used to or being “numbed” about having bouts of hunger from one day to another – then call it “resilience”? As an individual, just because you can handle a one day fast – does not mean you can be deprived of food for a week, month, years, decades.
The problem with this notion is that the Philippines will just bump from one self-imposed difficult economic situation to another. Certainly you can develop a smaller stomach to adopt to the lesser influx of food. But there’s a point when your stomach can’t grow any smaller, nor can you eat any less food anymore – and you can actually die.
Just because Filipinos are “resilient” does not justify constitutionally self-imposed misery.
The Demerits of Rigidity
The 40% cap on foreign equity deprives Filipino entrepreurs and job seekers of jobs, goods, and services which might very well have been cheaper, lasted longer – and provided more value than lousy PLDT and Globe phones, exorbitant MERALCO electricity, tardy PAL planes.
Open markets also allow the introduction of new ways of doing things – innovation. In fact, the lack of innovation in the Philippines and Filipinos is quite pronounced as Pinoys are wont to stick to tradition and the “that’s the way it has always been done” mindset.
Rigidty is marked by ease of movement. Investors, suppliers, and consumers need the leeway to determine equity structures as they see fit (appropriate to the situation on the ground), on the basis of mutual benefits and advantage – not based on a constitutional mandate on equity. It does not matter whether the business has 20% or 40% or 60% or 80% foreign equity because the outcome is still the same – jobs, goods, services for Filipinos and non-Filipinos (read: human beings, human species) alike.
Rigid economic nationalism is an anachronism that does NOT serve consumers – but only benefits vested interests (i.e. – the oligarchs).
The Philippines reminds me of a business that does not know the meaning of the phrase “the customer is always right”. It is a market where the producers believe they know what’s good for the customer, where the customers hate the Filipino producers’ shabby goods, and the Philippine government has a gun on the consumers head that says – watch ABS-CBN only, use PLDT only, buy from SM only, bank with BPI Ayala only.
Thus, when the poor Juan de la Cruz from the boondocks is shipped to the foreign shores of Jeddah, Tripoli, Dubai, New York, London, Paris, and Tokyo his mind goes into culture shock – how can there be so many choices, how can there be so much wealth whereas in the Philippines – there’s only a sprinkling of brands which you can count by your five fingers.
Remittances are a crutch and should not be a permanent fixture of the economy.
Sending our engineers, scientists, business managers, medical professionals overseas so they can send remittances is a tragic waste of talent. What we are doing is send our best minds to our competitors – and just make money of the crumbs paid by the competitors. Sure all these crumbs can be agrregrated into the humogous remittances that are preyed upon by the BSP so it can loan more money to be wasted by the euro PIGS – Portugal, Italy, Greece, and Spain.
The OFW phenomenon boils down to this – “If the mountain will not go to Muhammad, then Muhammad will go to the mountain”. If good paying jobs can’t be found in the Philippines, workers will go to where the good paying jobs are”.
Often Filipino expats are labelled as “traitors” for not staying behind to “help”. Lemme tell you this – charity begins at home, my stomach, my family’ If you want to help, then get a job so you don’t become a burden to others. It’s the proverbial pursuit of personal happiness – and clearly government economic policies are a barrier to this existential pursuit.
Another thing is the Philippine government and the left keep harping about “protecting the OFWs” – then slap all kinds of permits, fees, and taxes on OFWs. What this really means is protecting government revenue at the expense of OFWs; perpetuating the OFWs so that ABS-CBN has a continuous stream of stories for Maalaala Mo Kaya, and so that Migrante and BAYAN has a perpetual source of union leaders and funds for its organizations. But where does that leave the OFW? He pays the price of isolation, homesickness, broken families – and for that he is called a “hero”.
How about this – let the government be the “hero” – open the economy in order to drastically reduce the pressure to become OFWs since high paying jobs will be available from foreign companies. When high paying jobs are available locally, there’s no need to look at the green grass next door, not when your grass is greener.
With the reduction in OFW deployment comes the reduction in abuses, execution of drug mules and the like. Keep them home, keep their jobs home – that’s how to protect OFWs more effectively than a hundred fact finding missions by Walden Bello, Satur Ocampo, Teddy Cansino, and Pia Hontiveros.
The Myth of the Need for Protecionism and Subsidies Before Opening the Economy
A pervasive myth has been that developed economies had protectionism before opening their economies. The question is – if it worked for them – why was it discontinued – or are in the process of being discontinued.
Growing up, I very often hear the need to “protect Filipino businesses” against foreign competition because if Filipino business close then their workers will lose jobs.
What’s not being said is that these same workers will be absorbed by the competitors – get better compensation, consumers get better products at better rates, and these companies are honest in paying taxes. These companies also expose Filipino workers to new ways of doing stuff, thereby making our workers more competitive and more valuable as in the case of the Ford Philppines workers who will be hired by Ford’s competitors instead of living off on Dinky Soliman’s scam-ridden CCT subsdidy.
The other common mistake is misreading corporatism for laissez-faire capitalism. Corporatism is not the free marketstill evades the neurons of the left – Filipno or otherwise.
When the managerial state assumes responsibility for looking after everything from the incomes of the middle class to the profitability of large corporations to industrial advancement, such a system harks back to Bismarck in the late nineteenth century and Mussolini in the twentieth: corporatism.
The Proverbial Crossroad
The Philippines has already undergone all the political manueverings for the purpose of reducing poverty – and achieved nothing – if not worsen the misery.
Kicking Marcos out only decentralized the corruption from one megacorrupt to a wider body of pork barrel bottom feeders.
Putting Cory in the presidency just led to more rolling power outages.
Kicking Estrada out – and replacing him with an economist didn’t do any better.
Putting another Aquino – just led to Ford Philippines moving to Thailand as BS Aquino hypes the improved competitiveness of the economy.
Yeah, right tell that to KLM, Air France, General Mills, American Express Bank, Societe General, Union Bank of California N.A., First International Bank and Fortis Bank.
The most common explanation is that the economy of the West is at fault. Really? So how come with the Western economies going south, our neighbors are snagging these companies which have moved out of the Philippines?
While Malaysia, Thailand, Vietnam, and more recently Myanmar are on a race to attract foreign investments and liberalize their economies – we are on a path that is contented to send OFWs to Malaysia, Thailand, Vietnam.
Jobs everywhere except the Philippines? Why? Looked at the mirror lately?
Charter Change to remove the 60/40 is not and end in itself – but is just the beginning. Open competition signals that finally, the Philippines and Filipinos have the confidence to compete, the humility to learn, optimism for the future, and the will to persevere. Our country needs the best choice and effort we can make – let us not sell ourselves short.
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