Can the Philippines compete in the 21st Century global economy?

February 4, 2016

by benign0

When the term ‘self sufficiency’ is mentioned, what often comes to mind is food. On that alone, self-sufficiency in terms of food is already a big issue in the Philippines. The Philippines is the world’s biggest importer of rice and is a major market in the region for the agricultural exports of many countries. The Philippines also imports many packaged junk food products that it does not need.

Beyond food, however, the Philippines suffers from an even more disturbing dependence on external providers. Philippine society is not intellectually self-sufficient. Much of what drives the economy of both advanced and up-and-coming countries today is intellectual capital. Unfortunately, for the Philippines, its economic engine is not powered by intellectual capital produced indigenously. Its technology is almost entirely foreign-developed, its entertainment industry produces knock-offs of foreign concepts, and its pride is hinged upon validation derived from external thought leaders.

Even the much-celebrated “heroes” of the Philippine economy, overseas filipino workers (OFWs), cannot be considered to be the dynamos of prosperity they are made out to be. What OFWs and, for that matter, the droves of workers that toil in the call centres sprouting all over the Philippines bring to the table is primarily labour-added-value. Indeed, the much-vaunted “heroism” of the Philippines’ OFWs owe their opportunity to be “heroes” to the capital put at risk by capitalists primarily originating in Western Europe, North America, and East Asia to create the businesses that employ them. The willingness to risk capital to create value (which in turn is what “creates employment”) is likely what sets successful cultures apart from the moribund culture that keeps the majority of Filipinos stuck in intractable impoverishment.

Much has already been said and written about how the Filipino-Chinese community, despite being subject to the same dysfunctional government and environment Filipino-Malays are subject to, have risen from being second class citizens to their place as captains of Philippine industry today. There really are no excuses. All Filipinos toiled under the same environment. Why did so many lose while so few win? Why is the reality of the general ethnicity of the winners so stark?

Already there is evidence that the Philippines, despite enjoying a decades-long head start over other formerly basketcase countries in the region, is falling behind. Vietnam, for one, is now being touted as the next Silicon Valley. But it is not the relocation of mere assembly (as opposed to true manufacturing) industries there nor the proliferation of call centres and business process outsourcing (BPO) operations that is being highlighted as the source of all this promise. What is being highlighted is entrepreneurship. Here’s an excerpt from the above BBC article that illustrates this…

For Eddie Thai, entrepreneurship is a family trait. He proudly recounts the story of his grandfather, a Vietnamese farm worker who saved up money to buy oxen, then rented the animals to other farmers. “A kind of Uber for oxen,” he says with a laugh.
His parents migrated to the US with nothing, but were able to start a restaurant and build up a small real estate portfolio, which he says allowed him to have “a normal American life”. He visited Vietnam as a teen.
“I saw how far Vietnam had come, but how far there was still to go. I knew at some point I would be back here to empower others.”
That’s a feeling shared by Quynh-Huong Duong, the French entrepreneur behind GetSpaces, a booking platform for meeting rooms and event spaces in Ho Chi Minh City. She moved to the city from Paris two years ago.
“I wanted to do something for Vietnam,” she says. “The people here are really entrepreneurial. There’s a different kind of mindset than in France. French people are very conservative. Here it’s really like in the US, like: ‘Yes, we can’.”

For starters, Vietnam ranks way above the Philippines in terms of Ease of Doing Business. Whilst the Philippines slipped from 97th to 103rd from the 2015 to the 2016 report, Vietnam moved up from 93rd to 90th over the same period. This is remarkable in itself considering Malaysia slipped from 17th to 18th while Thailand slipped from 46th to 49th.

Two things immediately come to light from this data:

(1) The Philippines ranks the lowest amongst these major ASEAN economies; and,

(2) Vietnam is moving against that general tide its peers in the ASEAN are riding, going up in rank while the others slip.

The Philippines, most importantly, is low and going lower. It is hard enough doing business in the Philippines, and it is getting harder.

On that, alone, it is difficult to imagine the Philippines stepping up to becoming a place where the best, brightest, and most creative people can find a true home. It is not a place that provides a level playing field where the best ideas could take root and flourish. Indeed, it has long been evident that the business landscape in the Philippines is rigged in a way to assure the continued domination of business by an entrenched oligarchy who, by legislation sleight of hand, carve out favourable terms for their existing enterprises.

Even then, the notion that Filipinos remain poor because of a lack of opportunity to compete is wearing thin as well. Again, it goes back to the question of why a minority ethnic Chinese community prospers while the indigenous Malay majority languishes. Indeed, this is a pattern that is quite consistent over much of southeast Asia where local Chinese-originated communities account for a disproportionate share of national wealth and output.

A key to understanding this lack of self-originating drive to succeed may lie in Philippine politics. We can see in the current national “debate” surrounding the coming presidential elections in May this year that intellectual discussion does not figure at all in discussions about which presidential candidate is fit to be Chief Executive of the Philippines.

In effect, Filipinos tend to sit ildly and allow the current options to frame their future. There is no thinking outside the square, for Filipinos it is about dealing with the current crop of idiotic candidates and choosing the least evil amongst them. The thought of rejecting the lot and demanding a qualified presidential candidate in absolute terms either (1) does not occur to Filipinos or (2) is, simply, not an option.

It’s the same with the way Filipino regard their economic fortunes. Much of what Filipinos consider to constitute their “hope” for a “better” future lies in employment. Their choices are limited to employment options and opportunities. And these options and opportunities are always ones created by forces external to themselves — foreign investors and, you guessed it, the government. The idea that people need to go out and create their own fortunes does not seem to form a strong part of Filipino intellectual tradition. Unfortunately the Silicon Valley dream is precisely all about that — start-up culture, venture capital, driving innovation, and an obssession with solving problems.

The message then is quite clear.

For Filipinos to be part of the 21st Century economy, they will have to acquire a culture of starting things, venturing into the unknown, and solving problems using innovative solutions.

A national character based on these abilities is what will spell success for the Philippines in an increasingly competitive global economic landscape. Anything less than that will set Filipinos down the same path of more of the same poverty and mediocrity.