Obama is a free-market guy after all!

US presidential candidate Barack Obama after all “loves the market,” contrary to his earlier posturing as a protectionist. On CNBC, courtesy of Paul Krugman’s blog “Conscience of a Liberal,” he said: “Look. I am a pro-growth, free-market guy. I love the market” to the dismay of globalization hater Naomi Klein who castigated Obama for appointing in his policy team Chicago School economists who are supposed to be disciples of free market guru Milton Friedman.

Says Klein: “Obama's love of markets and his desire for "change" are not inherently incompatible. "The market has gotten out of balance," he says, and it most certainly has. Many trace this profound imbalance back to the ideas of Milton Friedman, who launched a counterrevolution against the New Deal from his perch at the University of Chicago economics department. And here there are more problems, because Obama—who taught law at the University of Chicago for a decade—is thoroughly embedded in the mind-set known as the Chicago School.”

Politics and politicians—they are the same all over the world. I wonder if his sentiment extends to international trade, say the Doha Round of trade talks where American leadership is sorely needed. But who knows, he might just change his tune again once he feels it’s necessary to do so just to get the votes? It’s really all about political marketing, if ever there is such a thing. And by the way, if John McCain loves the market and Obama loves the market, will anybody tell me who is who?

The secret sauce for progress: lessons from 13 economies

If you want to lick poverty, it’s necessary to achieve high economic growth. That’s commonsensical, right?. But how do you achieve high economic growth and sustain it? Experts say there is no silver bullet. But in a latest study by the World Bank on 13 fast growing economies, experts say they were able to identify the ingredients of a secret sauce. These fast growing economies fully exploited the world economy; maintained macroeconomic stability; mustered high rates of saving and investment; let markets allocate resources; and had committed, credible and capable governments.

These 13 countries are Botswana, Brazil, Hongkong, Indonesia, Japan, Korea, Malaysia, Malta, Oman, Singapore, Taiwan, and Thailand. These countries posted 7 percent growth rates over 25 years or more after World War 2.

How to sustain high growth? Says the Report: “For growth to be sustained, it must be growth that takes into account that we are living in a more and more globalized world,” says Danuta Hubner, European Commissioner for Regional Policy. “We need growth that is using all the opportunities that are offered by the global economy.”

There you go! Globalization, and making the most out it, is the key.

The DC as Obama country?

If it's only Washington DC that determines the fate of America, Barack Obama should be president this coming American presidential elections. I don't know but most people I've met here are all crazy about the audacity of Obama's presidential hope. Obama T-shirts are selling like hotcakes. Or so it seems.

Over brunch, Mara, a DC-based journalist friend asked me how I think an Obama presidency would impact on the Philippines. And how Filipinos perceive him.

"I really think most Filipinos do not really care who sits at the White House," I answered. "Of course, Americans don't care what Filipinos think either. Obama or McCain or Hillary--America will always pursue her own 'national interest' and it would be good it that interest would converge also with our interest, whatever that is. But one thing is certain: Most Filipinos would always be pro-American for historical and many other reasons."

I added: "But in general, many Filipinos seem to like Obama, maybe because he looks cute, talks smoothly, and appears different from the typical American politician. Just like in the Philippines, people who want "change," whatever that means, would always vote for a politician who looks and talks quite differently from the usual, typical politician."

Yeah, we want a duck that doesn't quack like a duck.

Personally, I'm concerned that an Obama presidency would drift towards protectionism. That's would be bad for the trade-oriented Southeast Asia, given his tendency to pander to local protectionist passions. But I could be wrong. His anti-free trade and anti-outsourcing tirades are probably just political marketing, and its something that he cannot enforce anyway given that American businesses are able to maintain global competitiveness because of outsourcing.

But his foreign trade policy statements suggest that an Obama presidency would never be expected to lead the push for a global free trade deal the way Bill Clinton did,or tried, when he was at the White House. That would be bad for developing countries. But then again, neither Hillary nor McCain are probably inclined towards a new and better global trade deal. So let's see.
Anyway...

Hey Mara! Thanks for that really nice chat and brunch. Really love that we were able to catch up. And oh, Busboys and Poets [the restaurant] is really great. I enjoyed being there a lot! See you next year, my friend.

Who's afraid of the "organization of rice exporters"?

Who’s afraid of Orec or the supposed “organization of rice exporting countries”? Well, importers including the Philippines seem to have been rattled by the news but the fact is that Orec is a dumb idea. We should better laugh it off. Why?

First, those countries on the Mekong like Thailand and Vietnam just cannot store rice forever. Unlike oil, rice deteriorates in just a few months of storage in the warehouse. And the Thais and the Vietnamese could eat only so much rice.

In fact, forming Orec is counterproductive for these rice exporters. When they hoard their own rice, local prices decline, thus hurting their own farmers. If they want to benefit from the current situation, it’s in their best interest to sell rice and not hoard it.

Besides their geographical advantage of having the Mekong River and extensive sources of irrigation water, the main incentive why farmers are producing more rice in these countries is the fact that they are able to sell in the global market place. There’s money in rice exports. Once their governments remove that incentive through export restraint, that incentive would be gone and farmers might just shift to other more profitable crops.

Forming that cartel would be tantamount to shooting themselves in the foot. The only real beneficiaries of Orec are the rats and bugs that will have an ample supply of rotting rice in Vietnamese and Thai warehouses.

On the food crisis: Poor and hungry cannot afford to wait, World Bank President says

Friends, please allow me to publish this statement by World Bank president Robert B. Zoellick after a meeting in Berne, Switzerland of the United Nations System Chief Executives Board for Coordination (April 29 2008).

The next few weeks are critical for addressing the food crisis. For 2 billion people, high food prices are now a matter of daily struggle, sacrifice and for too many, even survival. We estimate that already some 100 million people may have been pushed into poverty as a result of high prices over the last 2 years. This is not a natural disaster. Make no mistake, there is nothing natural about this. But for millions of people it is a disaster.

Donors must act now to support the WFP’s call for some $755 million to meet emergency needs. Roughly $475 million has been pledged, but pledges won’t feed hungry mouths. Donors must put their money on the table, and give WFP maximum flexibility – with a minimum of earmarking – to target the most urgent needs.

This crisis isn’t over once emergency needs are addressed, as critical as those are. Though we have seen wheat prices fall over the last few days, rice and corn prices are likely to remain high, and wheat relatively so. The international community needs to commit to working together to respond with policy initiatives, so that this year’s crisis doesn’t become a generation’s fact of life. Already hunger and malnutrition, are the underlying causes of death of over 3.5 million children every year, robbing the future potential of many millions more.

Many donors, governments and international agencies have plans and policies. Over the last days we have seen pledges of financial support. The key now is to work together so that we can have an integrated international response.

So I thank the Secretary General for convening this session of UN Chief Executives to help organize the UN response.

Ministers from over 150 countries have endorsed a New Deal for Global Food Policy. We must turn these words into action.

As we discussed here in Berne, a New Deal must embrace a short, medium and long-term response: support for safety nets such as school feeding, food for work, and conditional cash transfer programs; increased agricultural production; a better understanding of the impact of biofuels and action on the trade front to reduce distorting subsidies, and trade barriers.

The World Bank Group will work with the UN agencies represented here to identify countries most in need so that, with others, we can provide concessional financing and other support. We are already working closely with the IMF and regional development banks, to integrate our work.

At the World Bank Group, we are exploring with our Board the creation of a rapid financing facility for grant support to especially fragile, poor countries and quicker, more flexible financing for others. To address supply issues, we are doubling our lending for agriculture in Africa over the next year to $800 million.

We are urging countries not to use export bans. These controls encourage hoarding, drive up prices and hurt the poorest people around the world who are struggling to feed themselves.
Ukraine set a good example last week by lifting restrictions on exports of grains. This had an immediate effect by lowering prices in the markets. Others can do the same.

As we co-ordinate action, we must bring in the private sector and agri-business.
These are all critical issues for international action that must be fleshed out in the coming weeks so that millions do not find themselves in this same position next year.

But first and foremost donors must act now to meet the emergency and raise the $750 million for the WFP. The world can afford this. The poor and hungry cannot.

The demise of social networking?

Nah, I don't really mean that. What I'm saying is that social networking sites really have to evolve innovative revenue models to keep on thriving. Right now, many of them, according to the Economist are not making money.

Consider the premise behind these social networking sites: it’s all about profits, about making big someday, by getting being purchased by the big shots like Rupert Murdoch. And the likes of Murdoch are buying these sites by the billions hoping that someday, they could earn more billions from online ads. But it seems the premise or the assumptions about the business potentials of social networking are not necessarily accurate. Says the Economist:

"The big internet and media companies have bid up the implicit valuations of MySpace, Facebook and others. But that does not mean there is a working revenue model. Sergey Brin, Google's co-founder, recently admitted that Google's “social networking inventory as a whole” was proving problematic and that the “monetisation work we were doing there didn't pan out as well as we had hoped.” Google has a contractual agreement with News Corp to place advertisements on its network, MySpace, and also owns its own network, Orkut. Clearly, Google is not making money from either."

Same with Facebook. Economist observes:

"Facebook, now allied to Microsoft, has fared worse. Its grand attempt to redefine the advertising industry by pioneering a new approach to social marketing, called Beacon, failed completely. Facebook's idea was to inform a user's friends whenever he bought something at certain online retailers, by running a small announcement inside the friends' “news feeds”. In theory, this was to become a new recommendation economy, an algorithmic form of word of mouth. In practice, users rebelled and privacy watchdogs cried foul. Mark Zuckerberg, Facebook's founder, admitted in December that “we simply did a bad job with this release” and apologised."

“So it is entirely conceivable that social networking, like web-mail, will never make oodles of money,” says the Economist. And if they couldn't make lots of money, what’s the incentive of maintaining them? Are we going to see consolidation, of one site being gobbled up by the other? Scary thought, isn’t it.

Barack Obama's "Asian problem?"

Does Barack Obama have an "Asian problem?" I think so, given the huge support Asians are giving to Hillary Clinton. Is it racism, as what some “analysts” would like to think? I don’t think so.

This is my take: the rise of China, India, and the rapid economic growth of countries in the Asia-Pacific region, including the Philippines, is significantly caused by foreign policy pursued by the Clinton administration. It was Bill Clinton’s leadership in the Asia-Pacific Economic Cooperation (Apec) that led to the Bogor Declaration envisioning a global free trade by 2020. That one really pressured the Europeans to relent on the Uruguay Round of trade negotiations, thus paving the way for the birth of the World Trade Organization. WTO is not a perfect treaty but that one really opened lots of markets for Asia’s exports, this boosting the economies in the Asia-Pacific region. Globalization in general in which the Asia-Pacific region is a major beneficiary accelerated during the time of the Clintons in the White House. So Asians have a generally warm view of the Clintons, including Hillary.

After Iowa, Obama issued statements against “the violence of outsourcing” and swore to adopt measures against the practice, a move that drew criticisms from the Asia-Pacific region. Hillary of course also seems to pander to the protectionist sentiments among the American electorates, but given the Clintons’ track record, Asians tend to look at those pronouncements as a message addressed largely to the home political market.

Plus Asian's in general don't have hang ups about having females as top political leaders.

After the Neocons: America at the Crossroads

Review
After the Neocons: America at the Crossroads
By Francis Fukuyama, 2006
Profile Books Limited, 226 pages

“Neoconservatism” as a way of thinking is a mishmash of contradicting social and foreign policy ideas originated by some New York City intellectuals who used to worship Leon Trotsky, Vladimir Lenin’s buddy who espoused “world proletarian revolution.” How these once communist intellectuals and their thoughts permeated into America’s foreign policy during the administration of George W. Bush and brought the world’s superpower to a disastrous misadventure in Iraq and the Middle East, therefore, is a very compelling story. In his latest book After the Neocons: America at the Crossroads, Francis Fukuyama, political scientist and a former neocon himself, tells us this story with great depth and forceful insights, then proceeded to disavow and castigate the movement that he was once a proud member of.

Fukuyama traces the origins of neoconservative thinking to a group of working class intellectuals studying at the City College of New York in the 30s. They were once Marxists who turned to the right shade of the political spectrum following Trotsky’s exposes of Joseph Stalin’s brutality. Thus from being ardent supporters of socialism, these intellectuals, mostly Jews, became haters of communism and bitter critiques of “social engineering” programs and social planning that they thought tend to create unintended social consequences that make societies even worse off. When America joined the Allies to defeat Germany and Japan during World War II, the neocons started to see American military power as a force for good, something that America’s leaders should use to transform the world in an exercise of “benevolent hegemony.”

Neocons, having taken some pages from Plato and Aristotle, believe that “regime” or the internal character of states matter in foreign relations. “Rogue states” are likely to become a destabilizing force in global affairs, as “regimes that treat their own citizens unjustly are likely to do the same to foreigners.” America and her allies usually deal with these totalitarian and tyrannical states through carrot and stick but said measures are likely to be ineffective, according to the neocons. The best way out therefore is through changing the “underlying nature of that regime,” a phrase that translates into what is known as “regime change” under the Bush administration.

Prior to the collapse of Berlin Wall, foreign policy circles in Washington DC didn’t really take the neocons seriously even if their views fitted well with Ronald Reagan’s Cold War rhetoric about the Soviet Union as “evil empire.” The more credible voice then were the “realists” in the tradition of Henry Kissinger who respect power, downplay human rights as well as the internal character of states. For the realists, all states whether liberal democratic or authoritarian, seek and power and America and other democratic societies have to accommodate them.

After the collapse of the Soviet Union, however, the influence of neocons soared, vindicated as they were with the fact that the communist threat didn’t vanish through containment and détente as proffered by foreign policy “realists” but by the transformation of Eastern Europe and Russia into “democratic states.” It was a profound lesson Fukuyama thinks that Neocons—deeply ensconced into the mainstream foreign policy establishment under George W. Bush—wrongly applied in a world that has drastically changed since 911.

For Fukuyama, the Neocons, in a rapidly globalizing world, have failed to appreciate the growing influence and power of non-state actors (e.g. terrorists groups like Al Qaeda and Hamas) that couldn’t be deterred by conventional military forces. They have overestimated the capacity of the American military that, while unmatched in the conventional and high-tech warfare, was not prepared to deal with insurgency and the task of nation building. Neoconservatism, he argues, has proved contradictory in the real world in that, while neoconservatives loathe social planning and “nation-building,” measures toward these ends are necessary if Bush’s democratization project in Iraq and Middle East has to succeed.

The Neocons assumed that the world will buy the idea of America’s “benevolent hegemony” and confer her actions—clothed with scary rhetoric about preemptive wars against the axis of evil—with legitimacy, unmindful of the fact that anti-Americanism had been brewing all over the world decades prior to the American invasion of Afghanistan and Iraq. Anti-Americanism—Fukuyama contends—came about as a result of several factors, among them the American-led IT revolution and globalization that are perceived by Europeans as threats to the European welfare state system, the uneven result of “Washington consensus” (i.e. structural adjustment loans that tried to foster market-driven policies) in Latin America, and the Asian financial crises precipitated by American pressure to open up financial markets without adequate safeguards.

This book is Fukuyama’s way of explaining why he turn-coated on the neoconservative movement. And yet, he remained a Neocon in essence, warning against the greater dangers of American isolationism following the debacle in Iraq. This time, however, he labels his new advocacy as “realistic Wilsonianism” characterized by the greater reliance on soft power, the promotion of economic and political development worldwide, and the creation of legitimate international institutions that could respond effectively vis-à-vis global threats and issues emerging out in this brave new world of globalization and technological change.

Readers won’t probably agree with all the things that Fukuyama say in this book, but this piece of work once again seems to prove why many think Fukuyama is one of most engaging thinker and analyst of this era. It’s his finest piece since his equally controversial work, The End of History and the Last Man, came almost two decades ago. It’s a must-read for all those who want to understand the nature of America’s foreign policy after 9/11 and figure out where it is heading for.

A new era for Australia?

Australia has a new prime minister in the person of Kevin Rudd, who promised to pull out Aussie troops in Iraq and ratify the Kyoto Protocol. Are we going to see a sea-change in how Australia will do its economic and foreign policy? Time Magazine’s observations are interesting:

The new P.M. is likely to go Howard's way on foreign policy, too. What he described as "fundamental differences" with Howard — his vows to ratify the Kyoto Protocol on climate change and pull troops from Iraq — are largely symbolic. Though Australia is outside the Kyoto regime, the country has met its emissions targets. And on the question of a successor treaty to Kyoto, Rudd in mid-campaign abruptly took the Howard position: a Labor government would not ratify Kyoto II unless it required China and India to limit their emissions. On Iraq, Rudd has moderated Labor's earlier "pull-out-now" policy. He says he will bring home the 1,400 Australian troops in Iraq and the Gulf gradually, in a "negotiated, staged withdrawal." He is prepared to send more troops to Afghanistan.

Australia under Labor will remain a "rock solid" friend of the U.S., Rudd has said, but reserve the right to act "independently." Rudd, who spent eight years as a diplomat in Beijing, has criticized China's human-rights record but appears more sympathetic to the People's Republic than Howard. Rudd rejected the Howard government support of a potential alliance between the U.S., Australia, Japan and India, saying China would feel encircled.

Reminds me of France’s president Nikolas Sarkozy. He marketed himself as critical of Anglo-Saxon capitalism during the campaign but immediately turned pro-American and instituted market-oriented policies after gaining power. He is now battling the unions and is apparently winning.

Apec should get real

Sadly, hopes that Apec would provide a valuable arena in which to pursue the goal of open markets for trade and investment have fizzled. As the trade agenda has weakened, interest in Apec around the region has waned, and some nations have turned their attention to other regional or bilateral agendas.—Edward B. Lincoln, Brookings Institution, Washington DC, December 2001

The conclusion of the meeting by Apec leaders about two weeks ago was pure ho-hum that it didn’t even merit any story from prominent newspapers like Wall Street Journal. It was as if the meeting didn’t happen at all. The International Herald Tribune online did banner the story in its Asia-Pacific section, but the article said it as what the meeting really was a junket for politicians that “fizzled into an inconclusive end.”

The ministers actually managed to come up with some vague statements on climate change, energy security and a code of conduct on corruption. But observers read these statements with a yawn as these simply highlighted the lack of tangible progress on trade and investment liberalization, the raison d’etre of the organization.

The last Apec summit should be a big disappointment for many who see it as a possible forum for resuscitating the Doha Round of trade negotiations that gave so much promise to the developing world.

Apec actually played that role when the Uruguay Round of trade negotiations under the General Agreement of Trade and Tariff (GATT) was sputtering due to the continued resistance of the European Community to subject agriculture to the trade-reform effort.

When Apec economies, however, issued the Bogor Declaration on November 15, 1994, calling for Asia-Pacific free trade starting 2010, Europe noticed and started softening on the draft agreement in agriculture, leading to the conclusion of the Uruguay Round of Trade Agreement (Gatt) in Marrakesh, Morroco, in 1994. That day, developed economies promised to do away with trade and investment barriers by 2010 and the developing economies by 2020.

In 1997 Apec members decided on the acceleration of the removal of tariffs on information-technology products, a landmark agreement that was eventually adopted by the World Trade Organization (WTO).

Since then, however, Apec started to drift into irrelevance as it has started moving away from its economic thrusts, especially after 9/11, when America’s attention shifted to the “war on terror.”

Some analysts, however, have been saying the problem lies in the structure of Apec itself, especially on how it does its business.

One such weakness is Apec’s belief in “open regionalism.” It means that members of Apec are supposed to eliminate barriers to trade and investments on a “most-favored-nation” basis, meaning that members and nonmembers alike benefit from the trade reform.

Economists would love this concept, but it appears to be naive since other countries wouldn’t have the incentive to offer concessions in return since they enjoy free-rider benefits. Let’s face it, even the most ardent admirer of free trade thinks like a mercantilist when it comes to trade talks.

Compounding this problem is its adoption of the principle of “concerted unilateralism. Under the WTO, countries negotiate concessions from each other. In Apec, members are supposed to voluntarily remove investment and trade barriers through individual action plans (IAP).

The results have been that most IAP simply echoed their commitments with the WTO, with no real tangible results except annual photo-ops of presidents and prime ministers wearing national costumes of the host country.

It has become a social club where leaders are not supposed to tax each other’s patience with real demands for real reforms in trade and investments, an annual masquerade ball that is fast drifting into irrelevance. Proof of this is the growth of the bilateral free-trade agreements between and among Apec members, a process that has undercut the influence of Apec as an economic forum.

Solution? Experts like Alan Oxley from Monash University think the economic grouping should now have a new mission focused on “growth and productivity.” That is certainly a laudable objective, but such a thrust would simply undermine further Apec’s relevance.

If its members want to remain relevant, it should stay within its core objective of promoting trade and investment liberalization, where growth and productivity are certainly assumptions.

It should consider reforming its ways of doing things and adopt what Edward Lincoln and Kenneth Flamm (analysts from the Washinton DC-based Brookings Institution, a think tank) consider as “open reciprocal regionalism.” Members should start negotiating among themselves, and the benefits of trade reform should accrue to all who reciprocate such reforms.

This way Apec could achieve three things. First, members would get serious in preparing their trade and investment-liberalization action plans. Second, the group would be able to address the free-rider problem inherent in its current setup. And third—who knows, Europe and the rest of the world might yet be interested in reviving the stalled Doha Round.

And why not? Apec certainly has the pull for it accounts for more than half of world trade and counts among its members the world’s largest and fastest-growing economies, including the US, Japan, Australia, Korea, Taiwan, China and India.

All Apec needs to do now is get real.

Power of the blogosphere: Malu Fernandez (who?) resigns

After reading tingog.com, ederic@cyberspace, Manolo Quezon, Brianboy, bayanihan blog network, Watson online, and many others, I thought I had enough of this Malu Fernandez thing. ‘Tang na!, we are now obsessed with this creature, hahaha! Then came Lalaine Chu-Benitez’s letter written in a beautifully indignant prose saying the whole affair was an abuse of press freedom. Take it from Lalaine who is the publisher of the illustrious Illustrado magazine based in Dubai. Below is her letter:

To the Editors of Manila Standard and People Asia—This is regarding the articles ‘From Boracay to Greece’ (People Asia, June 2007) and ‘Am I being a diva? Or do you lack common sense?’ (Manila Standard Online, 30th July 2007), written by your columnist Malu Fernandez.

We are among the over 2M Filipinos who are based here in the Middle East, and to say that we were shocked to have read the above articles that you deemed fit for publishing, is a gross understatement.

We will save our comments about your columnist who is so obviously lacking in knowledge, understanding and finesse, but the real question here is how your publication (with your team of educated and qualified editors), known for its ‘fairness and objectivity’, allow such ignorant and putrid display of bigotry.

That you allowed your publications to be a dumping ground of ‘personal garbage ’ mocks true freedom of the press and has truly degraded, not only your paper, but also your entire staff.

Just in case you don’t know - there are over 2M Filipino expatriates in the Middle East region. Apart from facilitating the billions of dollars in remittances that help keep our country afloat, this community also represents a huge potential market for Philippine-based industries.

Furthermore, Filipinos have contributed greatly to the growth of the region – just a small example is the phenomenal infrastructural development in cosmopolitan Dubai – the New York of the Middle East, which was largely the work of great Filipino architects, engineers and planners. We have senior executives, managers and directors in different business fields, as well as educators and entrepreneurs. And our compatriots who work in blue-collared jobs (comprising only 17% the UAE Filipino segment) are some of the most well-educated and sought-after workers (as compared to other nationalities) in that category.

A lot of us here are trying very hard to uplift the plight of our kababayans who have sacrificed their lives to earn a decent living outside the homeland, but it is irresponsible articles like these which perpetuate the Filipino stereotype - that we are all uncouth, uneducated victims of our own circumstances – and yes that we cannot be united even if our lives depended on it.

While we squabble amongst ourselves in an ugly discussion started by such a negligent act, the rest of the world looks on shaking its head in consternation, at yet another ‘onli in da Pilipins’ episode. And because perception is reality, we OFWs out here have to contend with another kind of discrimination – thanks to our very own people.

It is tough enough to compete and earn respect within the international community, without such actions weighing us down even further.

These are very sad times, not only for OFWs but for Philippine journalism.

By the way, I heard from reliable sources that Malu Fernandez has resigned (was forced to resign) from both Manila Standard Today and People Asia.

Talking about the emerging power of the blogosphere...

Asia Times: Disconnect in Manila over China deal

The Philippine government has misplaced the contract for a multimillion-dollar broadband project with Chinese telecom giant ZTE. That only adds to the suspicions raised over the deal, in which the Chinese company prevailed over lower-cost bidders. It all could dial up more trouble for President Gloria Macapagal-Arroyo's administration. (By David Llorito)

You may read the rest of the story in Asia Times.

Marshall Plan for Mindanao

In considering the requirements for the rehabilitation of Europe, the physical loss of life, the visible destruction of cities, factories, mines and railroads was correctly estimated, but it has become obvious during recent months that this visible destruction was probably less serious than the dislocation of the entire fabric of European economy. —US Secretary of State George C. Marshall, in his June 5, 1947, speech launching the “Marshall Plan” that rehabilitated Europe after World War II.

SPEAKER Jose de Venecia Jr. recently called for a “Marshall Plan” in Mindanao to solve the ongoing conflict in the area once and for all, particularly in certain places like Basilan and Maguindanao. It’s a call that is supported by Sen. Gregorio Honasan, who, as a former soldier, saw extensive action in Mindanao a few decades ago.

De Venecia said Mindanao needs a P46-billion five-year program to build infrastructure, schools, hospitals and farm-to-market roads to be financed by donations from the United States, Europe, Scandinavian countries, Australia, Japan and our neighbors in Southeast Asia. The program, he says, will be “electrifying and effective” such that rebels will be lured from their lairs to rejoin mainstream society.

Such a grand vision for Mindanao, and certainly Mindanaoans are hoping the Speaker would follow up on his pronouncements. But all this talk about a Marshall Plan for Mindanao should be sounding like a broken record for Mindanaoans now as politicians in the past have always parroted it like a magic spiel every time firefights between rebels and soldiers, which dislocated thousands of civilians, erupted. Speaker de Venecia always talked about it during the time of President Fidel V. Ramos. President Ramos actually moved a step further by commissioning the drafting of the Mindanao 2000 Framework Plan, but all those efforts came to naught as the House of Representatives, then headed by de Venecia, didn’t provide the money.

In March 2003, Foreign Secretary Blas Ople also mouthed the same thing following a major conflagration in Maguindanao, promising a $100-million expenditure program to “accelerate the region’s economic and social development.” Nothing really came out of the said pronouncement. And lately, following recent ambushes of soldiers in Sulu and Basilan that claimed the lives of more than two dozen, de Venecia is singing the tune again. Is he serious this time? Should we now start to rejoice?

We certainly hope so, because an honest-to-goodness economic deal for Mindanao would surely go a long way in addressing this age-old scourge that has been stifling development, not only in Mindanao but the entire country.

In the last decade or more, our neighbors in the Asia-Pacific region have been growing fast and have been lifting up millions of people out of poverty. Yet in all those years, the Philippines hardly made a dent on poverty and joblessness simply because our resources are stuck and wasted in a low-intensity but festering war.

The Philippines has also not been able to attract sizeable foreign direct investments as the continuing stream of bad news out of Sulu and Maguindanao have kept us out of the investors’ radar. We will only be taken seriously by the investor community if it sees that the leadership of the country is serious about addressing the age-old “Mindanao conundrum.”

Supposing the government and the international-donor community indeed are able to muster the will to launch a Marshall Plan for Mindanao, how should we proceed? We should take cues from George Marshall, former US Secretary of State, who launched the original Marshall Plan that rehabilitated much of Europe after World War II.

In a speech at Harvard University on June 5, 1947, Marshall said: “It is already evident that, before the United States government can proceed much further in its efforts to alleviate the situation and help start the European world on its way to recovery, there must be some agreements among the countries of Europe as to the requirements of the situation and the part those countries themselves will take in order to give proper effect to whatever action might be undertaken by this government.”

“It would be neither fitting nor efficacious for this government to undertake to draw up unilaterally a program designed to place Europe on its feet economically. This is the business of the Europeans. The initiative, I think, must come from Europe.”

Translation: the first step would be for the different stakeholders in Mindanao to come together and draw up a grand plan with a clear vision, objectives and detailed programs and projects, together with national and regional planning agencies, the private sector, civil society and the donor agencies. A participatory approach should be necessary to ensure that most sectors of Mindanao society should have a sense of ownership on the outcome of the planning process.

In fact, the participatory-planning process itself should be part of the healing process that Mindanao has to undergo to build “social capital” and ensure sustainable peace. And for very practical reasons, it’s necessary to ensure that programs and projects are those that would have the greatest social return.

From a cursory look at the basic statistics, it’s quite obvious that Mindanao, especially those in areas of conflict, has long been deprived of the basic necessities of life: potable water, sanitation, health services and basic education. A truly participatory-planning process would ensure that programs to provide these basic necessities would reach their intended beneficiaries.

Despite their limited resources, government agencies actually tried to provide these basic necessities, albeit incrementally. But massive corruption at the local levels and cultural baggages like “rido” (clan wars) always came in the way of progress. Take note that after the “peace process” with the Moro National Liberation Front, the national government and foreign donor agencies actually poured billions into the Autonomous Region of Muslim Mindanao, but nothing tangible has materialized from the supposed spending.

So, if there’s one big component that should be included in a Mindanao Marshall Plan, it is massive training in local governance and extensive buildup of human capital. It takes two parties to stop trading in lethal ordnance. But it takes a bigger, Mindanao-wide army of public- and private-sector managers, entrepreneurs and civil-society leaders to usher in broad-based development and progress. (Note: An original version of this was prepared as editorial for BusinessMirror, 21 August 2007)

Please read related posts
Disconnectedness defines danger
Dysfunction in Philippine shipping policy
The power of access

Thanks to http://www.emediawire.com/ for the photo

Apec free trade as the second best option

The case for trade is not just monetary, but moral. Economic freedom creates habits of liberty. And habits of liberty create expectations of democracy. —US President George W. Bush in a speech on November 19, 1999


THE other day, senior ministers of the Asia-Pacific Economic Cooperation (Apec) agreed to review the proposed free-trade area as envisioned by the Bogor declaration in 1994.

This is certainly a laudable move on the part of the senior ministers, given two major developments lately—the collapse of the Doha Round of trade negotiations, and the acceleration of free-trade agreements between and among members of Apec itself.

We believe that a continuing global engagement to achieve a breakthrough under the World Trade Organization is the best thing that could ever happen to both developed and developing countries. But given the current mood in the developed world, especially the weakening commitment toward multilateral trade initiatives among politicians in the United States, as well as the increasing political backlash against offshoring in that country, it’s not likely that we could ever see the revival of interest in the Doha development agenda soon.

More so in Europe, where its leaders seem to have made a virtue out of bashing globalization in a time when such a phenomenon has started to metamorphose as a geopolitical shift of power and influence toward the Asia-Pacific region, especially India and China.

Given the importance of American leadership in global trade talks, we are only going to see a clear signal on the prospects for multilateral engagements on trade matters among the Americans and Europeans probably after the US 2008 presidential elections, when a new American president is elected.

The Asia-Pacific region, specifically the Philippines, could probably not wait for that signal for us to discern our own future. If we couldn’t have the best option, therefore, we might have to settle for the second best—Apec. Our active participation in this effort to review the direction of Apec is crucial.

Apec counts 21-member economies: Australia, Brunei, Canada, Chile, China, Hong Kong, Indonesia, Japan, South Korea, Malaysia, Mexico, New Zealand, Papua New Guinea, Peru, Philippines, Russia, Singapore, Taiwan, Thailand, the United States and Vietnam.

These economies account for more than half of global trade, and the US, Japan, China, Hong Kong, Singapore, Malaysia, Taiwan and South Korea account for 73 percent of exports. Practically the same economies, plus Thailand, account for 66 percent of Philippine imports.

These numbers suggest that revving up investment and trade among Apec members is generally favorable for the Philippines, since most of its trading partners are already within the organization. Besides, China and India, the world’s fastest-growing economies, are part of Apec. Hitching on their growth bandwagon would surely be in the interest of the region and the Philippines.

Now that the senior ministers are going to review how Apec does its business, they might as well do a serious soul-searching on its core principles.

Since its founding in 1989, Apec has been operating on the basis of “nonbinding commitments and open dialogues.” Decisions are based on “consensus” and commitments are undertaken as voluntary efforts. This approach sounds virtuous, but it also means that Apec could probably never create meaningful strides toward achieving goals of the Bogor Declaration for a “free and open trade and investment in the Asia-Pacific by 2010 for industrialized economies, and 2020 for developing economies” if it relies on nonbinding commitments.

Perhaps it’s high time for Apec members to think about converting the economic group from a mere “forum for facilitating economic growth, cooperation, trade and investments” and costume photo-ops for politicians into a mean-business negotiating body.

Who knows, the Europeans might yet again notice and buckle down to reform dirigiste policies and rejoin the global community for a fairer and more liberalized trading system. If not, economic interaction within a dynamic group of fast-growing economies is really not such a bad idea.

Related posts
Doha round’s demise: implications for the Philippines
Doha round as dead thing walking
Demystifying the World Trade Organization

Philippines' NBN: government porn at broadband speed?!

There’s really something very wrong with this "national broadband network (NBN), especially when you compare it with how the Australians are going to do it.

“SYDNEY (AFP) - Australian Prime Minister John Howard on Monday announced a 2.0 billion dollar (1.68 billion US) plan to provide fast and affordable Internet access across the vast country.

Howard said Optus, the Australian offshoot of Singapore telco Singtel, had been awarded a 958-million-dollar contract to build a broadband network in the bush with rural finance company Elders. The joint venture, known as OPEL, would contribute a further 900 million dollars to provide broadband of at least 12 megabits per second by June 2009.

"What we have announced today is a plan that will deliver to 99 percent of the Australian population very fast and affordable broadband in just two years' time," Howard said.

An expert group will also develop a bidding process for the building of a fibre-to-the-node (FTTN) broadband network, funded solely by private companies, in major cities.”

In short, they are going to have wireless for the rural areas through a joint government-private initiative and purely privately-financed fiber optics for the cities. Both are going to earn money as users, both government and private households, are going to pay for them. They are going to be run by the private sector as business endeavors. The speed? 10-12 megabits per second! We are talking about a clear way of bridging the digital divide. Take note the important role to be played by the private sector.

In contrast, DOTC’s deal with the ZTE ($329 million loan) will be for the sole use of government agencies. It will be financed through loans (with no bidding) that will be paid by each taxpayer for 20 years. It will be run by DOTC salarymen financed from money allocated yearly by Congress (read: taxpayers' money). But the taxpayers are not going to benefit from it because those broadband connections are for government use only! Private citizens are supposed to connect instead to private broadband providers.

DOCT says about 50 percent of the barangays are going to get connections. How are the barangay officials going to use the broadband connection boggles me. For "better governance"? Oh please! Those broadband connections are likely to be used primarily by barangay officials for watching porn—at taxpayers’ expense!

Please see related posts:
NBN: a backbone of waste and shame
RP badly needs a “Freedom of Information Act" to curb corruption

The Chinese food safety issue is also about democracy—or lack of it.

Consider this AP story on China:

“BEIJING - China executed a former director of its food and drug agency Tuesday for approving fake medicine in exchange for cash, illustrating how serious Beijing is about tackling product safety, while officials announced steps to safeguard food at next summer’s Olympic Games.During Zheng Xiaoyu’s tenure as head of the State Food and Drug Administration from 1997 to 2006, the agency approved six untested drugs that turned out to be fake, and some drug-makers used falsified documents to apply for approvals, according to state media reports. One antibiotic caused the deaths of at least 10 people.”

And this one:

“The head of a Chinese toy manufacturing company at the center of a huge U.S. recall has committed suicide, a state-run newspaper said Monday. Zhang Shuhong, who ran the Lee Der Industrial Co. Ltd, killed himself at a warehouse over the weekend, days after China said it had temporarily banned exports by the company, the Southern Metropolis Daily said.”

Lee Der made 967,000 toys recalled earlier this month by Mattel Inc. because they were made with paint found to have excessive amounts of lead. The plastic preschool toys, sold under the Fisher-Price brand in the U.S., included the popular Big Bird, Elmo, Dora and Diego characters.”

Hmmm, I think this food contamination issue is really more about democracy, or lack of it, and less about food safety per se. When you don’t have free press, no one could really check on issues like this. Government could be all powerful and well meaning but it could never have all the eyes and ears all the time to guard against nefarious business practices. Not in a society and economy as big as China. Only a free and open society, with free and strong institutions, especially media, could effectively deal with that.

The Chinese government is taking corrective measures, and sometimes the punishment is death, simply because there is a global outcry against certain Chinese products sold in the global market place. But what about those contaminated products that are not sold abroad? It means that the primary victims of this food safety problem are the Chinese themselves who don’t have the voice to complain.

Even in China, English—not Mandarin—is king!

While we Filipinos are still waivering as to the importance of English, the Chinese and Koreans are moving heaven and earth to learn the global language. In South Korea, even the unborn are learning English. Says recent Newsweek report:

[T]he nation seems to be suffering a profound case of English fever. South Korea now boasts at least 10 "English villages"—mock Western communities complete with post offices, pharmacies and the like where kids can practice their language skills. An entire English-only town is due to open on Cheju Island in 2010. And one Internet-based company here even offers English courses for fetuses in the womb.

And for the Chinese, English is king, not Mandarin, contrary to popular opinion. Says Newsweek:

“Next door, mighty China itself seems to have caught the English bug. Beijing guesses that more than 40 million non-native speakers now study Mandarin worldwide. But that pales next to the number of those learning English. In China alone, some 175 million people are now studying English in the formal education system. And an estimated 2 billion people will be studying it by 2010, according to a British Council report last year. "The impression is that 'Mandarin fever' is rampant and spreading, but a close look shows this is an exaggeration," says Stephen Krashen, a second-language-acquisition expert at the University of Southern California. "The dominance of English as an international language is growing."

What’s the reason for this mania for English? In China as in India no mastery of English means no social mobility.

“Driving that growth is China's rising standard of living. Middle-class parents feel intense social pressure to enroll their offspring in buxiban so they can keep pace with their peers. And the long-term benefits of English acquisition are widely touted. According to New Oriental, medium proficiency in English now gives a Chinese child an almost 25 percent salary boost when he or she enters the working world; advanced English provides a more than 70 percent boost.”

You may read the full report by clicking here.

You may also read related posts below:
Master English or perish!
Mastering English the Chinese way
Philippines needs a globalized nationalism
Addressing jobs-skills mismatch in the Philippines

China is no model for the Philippines

‘THE Philippines should emulate China by posting a 9.5-percent growth continuously for 25 years. Maybe then, it would become a First World country,” said an official from the Asian Development Bank (ADB) at the presentation of the results of the 2005 Purchasing-Power Parity Preliminary Report.

That ADB official is right about the need for a sustained high growth rate to achieve progress in the Philippines. What he didn’t tell us is that we can’t emulate the strategy of China in achieving our development goals.

China, or even India, for that matter, is a unique experience that could never be replicated by anyone else. The Philippines should evolve its own strategy.

But surely, we need an investment-driven growth strategy à la China. In the last several years, China has been growing at 10 percent to 11 percent, courtesy of about $60-billion to $70- billion worth of annual foreign direct investments. These dollars are channeled to manufacturers using cheap labor and repressed laborers.

And lately, China is trying to go up the value chain by attracting high-tech operations by multinationals, as well as by overseas Chinese.

It would be hard to follow the China route. For one, we don’t have an authoritarian form of government that could impose a Chinese-style “political stability.” We have already rejected that route when we toppled Marcos in February 1986, spurned the continuing offer for a “dictatorship of the proletariat” by the local communists, and resisted the siren songs of Gringo Honasan when he still had dark hair and youthful energy for military coups.

And more basically, we no longer have the cheap labor to dangle to multinationals—thanks to long years of minimum-wage legislations and a more progressive regulatory framework in industrial relations.

China has enough of these investments within her shores. Lately, there is an increasing trend toward “innovation offshoring,” or the internationalization of product research and development (R&D) by multinational corporations (MNCs). In reality, most of what the MNCs are doing in these R&D centers is more of “development” rather than high-end research.

The R&D centers are intended largely to tailor-fit existing products and technologies for the local Chinese market. It means that those investments are intended to take advantage of the huge Chinese market.

We don’t have such a huge market to attract those innovation-type investments. That explains why we can’t seem to attract the level of investments the way that our neighbors are getting.
You probably wonder why Vietnam, Laos and even Cambodia are registering 7-percent growth rates or higher these days. It’s because of their advantage in labor arbitrage, or the tendency for jobs to move in areas where labor is inexpensive.

MNCs are there for that reason—cheap labor. And why is India, or at least an urban-based segment of its economy, booming? It’s because—just like China—it has a huge domestic market (1.3 billion Indians), a growing middle class and millions of engineers that MNCs could tap for having innovation-type operations. On both counts, labor arbitrage and market size, the Philippines doesn’t have those advantages.

So what’s the best model for the Philippines? We may have to get back to the old model: Japan. Why Japan? Because it has a low population base and yet, was able to grow fast and become First World in just a few decades.

Its open secrets are three things: education, education and education. According to Nobel laureate Amartya Sen, this is the same secret being followed by the tiger economies of South Korea, Taiwan and Singapore—and look where they are now.

When society produces lots of scientists and talents, it would be easy to generate products, services and intellectual properties that entrepreneurs could sell to the rest of the world—and whose competitive advantage depends less on labor cost and more on knowledge content and other intangibles (like branding).

There is a gold mine of Filipino scientific talent in the Philippines and abroad, doing great and innovative products, but their operations are hard to scale up to make a difference because we don’t produce hundreds of thousands of engineers or scientists at the scale that China and India are churning out each year.

Investing in education, especially in primary, is a long-term social investment. However, while reforming education, we could actually hasten progress by just tweaking existing economic policies.

We seem to be so happy to know that we increasingly have Korean and Chinese visitors in the hundreds of thousands. And yet, that’s miniscule, considering that Thailand and Malaysia are attracting millions of them each year. Why? It’s because they have more flights from those countries, an argument that bolsters the need to open our skies to ensure more flights coming from the rest of the world, even as reciprocity remains a relevant issue also.

Corollarily, we also need to open our seas and our ports to more participants to foster competition and lower charges. That would be a big boost to producers of farm products in Mindoro, as well as the islands of the Visayas and Mindanao.

Infrastructure development is crucial. Since Congress can hardly include big-ticket projects in the annual budget, the only way we could finance these huge projects is through private money. Our experiences in build-operate-transfer projects have not been good because of corruption during the bidding.

The only way to address this is by legislating a “transparency in governance” or a “freedom of access to information” law that would allow every citizen in this country access to all documents and contracts being proposed by the bureaucracy for signing with local or foreign providers and vendors. We had all those infrastructure-related scandals (e.g. PEA-Amari, Naia Terminal 3, and lately, the national broadband network) because of this utter lack of transparency.

These reforms could be done right away if only the country’s political leadership has the guts to do so. And the impact, in terms of propping up economic growth, would be immediate.

Hello, Malacañang. Hello, Congress. (Note: Originally drafted as editorial for BusinessMirror, August 2 2007)

Blogging the revolution from beyond

Yesterday, Manolo Quezon asked me on air (The Explainer) what I want to achieve with this blog. It was a tough question to answer without sounding too presumptuous. But I did mean it when I say I want to contribute a little to our own collective efforts to understand the dynamics obtaining here in the Philippines.

We have lots of bloggers around discussing day-to-day politics and everything. Bloggers like Manolo Quezon, Dean Bocobo, and Ellen Tordesillas are among the best in political blogging. I didn’t want to duplicate their efforts so what I’m doing is looking at Philippine political, economic and social issues through the prism of globalization, something that most bloggers ignore. Hence the title “Philippines Without Borders.”

Let’s face it, many things happening these days are offshoots of what Thomas Friedman calls “Revolution from Beyond” in his book “The Lexus and the Olive Tree.”

It was the tariff reform program, apparently imposed by the IMF and the World Bank, which introduced more competition into the country’s industry sector. It’s the same pressures from international institutions that forced us to deregulate, although at a limited extent, aviation and telecommunications.

We are so obsessed with our cellphones and cyber cafes now; these amenities were the results of the same global dynamics. It’s the same thing with outsourcing, the rise of electronics and semi-conductors, and other new economic growth drivers. It’s the same dynamics that’s accelerating the Pinoy diaspora and yielding billions of dollars in remittances that are in turn propping up the banks, malls, real estate, and other sectors. In fact, globalization has been a stabilizing force in the Philippine economy—so far.

There is a flipside to globalization, of course, and its also a major concern in this blog. Issues like its negative impact on the unions, and the print media have been a continuing concern here. And many, many more.

Globalization will increasingly affect all aspects of our lives and "Philippines Without Borders" will keep reflecting on these things here. Mabuhay tayong lahat!

National Broadband Network: A backbone of waste and shame

"The bloated NBN (national broadband network) and the CEP (cyber-education projects) are parables whose moral cannot be reiterated enough. The only backbone the government needs today is a moral one; not fiber-optic but fibre politique." —Raul Fabella and Emmanuel de Dios, economics professors from the UP School of Economics


IF the President still thinks of her legacy in the last three years of her administration, she had better heed the call of her colleagues (she is economist, remember?) from the University of the Philippines’ School of Economics.

The professors are advising her, albeit implicitly, to stop the multibillion-peso national broadband network (NBN) and the so-called cyber-education projects, for they cannot be justified on sheer economic logic. It’s a complete waste of people’s money.

We agree with the professors’ call, especially in the case of the NBN. It was apparently negotiated in utmost secrecy with the Chinese government; and, with the subsequent “loss” of the signed contracts in a hotel room in China, the hush-hush deal seems to have the makings of another scam that could push this country into another cycle of economically destructive political spasms.

Take the case of NBN. Drumbeaters for the NBN from the Department of Transportation and Communications say the government is going to save P27 billion over the 15-year span of the project and reduce telephone expense by 8 percent.

What they are not telling us is that the government is going to spend P31 billion in operations and maintenance for the network within the same period—a huge amount of money that will be collected straight from taxpayers. That’s a conservative figure, given that taxpayers are also going to pay for the interest and principal, plus the possible extra spending on delays and cost overruns. This extra cost is expected given the consistently bad record of the government in implementing infrastructure projects.

And for what? For that huge amount of money that the State will squeeze off taxpayers, we are going to have a network that is destined to be another lemon. Why? For two major reasons.

First, it’s in the nature of government, particularly the Philippine government. The NBN is going to be run by bureaucrats who have no stake in the system but just receive their monthly salaries; no discipline that could only be ensured by the need to make the business profitable, and is therefore likely to be managed inefficiently.

Remember the multibillion Telepono sa Barangay Program? We no longer hear from it, but we know taxpayers paid P10 billion for it without alleviating the rural areas’ need for communications access. And how could the government make a difference this time?
Second, it’s in the nature of technology. As explained by the two economists, technological change in the information and communications technology (ICT) sector is quick, driven by competitive market pressures.

The anecdote is that ICT technologies are obsolete even before contractors have finished setting up the cables. Private companies, therefore, keep on updating their ICT capability as a way to ensure competitiveness.

But there is no similar imperative among bureaucrats, whose primary motive is getting their monthly salaries.

That implies that the NBN could be nothing but some clunky museum relic by the time the government is done paying it with people’s blood money. And even before the government has written the last check for the Chinese after 20 years, government agencies may have completely abandoned the network for its sheer inefficiency and obsolescence.

We are talking here about the possibility that we are going to continuously pay people’s hard-earned money for a system that’s doomed to be inutile in just a few years of operation.
With such a huge cost and questionable, nay, probably even negative, social benefit, one can’t help but ask whose interest the government is trying to satisfy with its not-oh-so secret pursuit of the NBN.

If its social benefit is in doubt, one could be tempted to think some private motive is the primary consideration. It’s so tempting to think that way because the government seems to be moving heaven and earth to keep the issue hidden from public scrutiny.

We all know the project started with an unsolicited proposal from Amsterdam Holdings Inc. (AHI) for a build-operate-transfer (BOT) project amounting reportedly to about $260 million, supposedly at no cost to the government.

President Arroyo supposedly favored this approach since the government is penniless. Not to be outdone, Americans came up with their offer from Arescom for a lesser amount, reportedly about $135 million, to be financed through overseas development assistance.

Then suddenly, the Chinese-owned ZTE came into the picture, with an offer equivalent to that of AHI, plus supposedly a “superior” technology.

Suddenly, the government forgot all about Arescom and AHI, and came for ZTE. Come signing time, however, the total amount for the project rose to US$329 million, payable in 20 years to the China Export-Import Bank. Hence, from a BOT deal, it has become a supply contract with ZTE.

To top it all, the Chinese bank also offered $500-million more for an e-education project, on condition that this money is going to be spent on Chinese equipment. And of course, all the transactions are supposedly covered not by Philippine laws, but by Chinese laws.

After the signing ceremony, no less witnessed by the President, the signed documents were supposedly “stolen” in the hotel, a convenient excuse for bureaucrats to hide details of the contract. Those bureaucrats may have committed our souls to Mephistopheles, and we wouldn’t know it because someone “stole” the document! Of course, the government could have easily asked the Chinese to fax us their copy for distribution to the media and whoever is interested, in the interest of transparency, while reconstructing the Philippine copy—but it seems the government is not willing to do that. Or maybe the Chinese have lost their copies of the contract too? Strange world this is.

(Note: originally prepared as editorial for the BusinessMirror, 31 July 2007)