Friday, August 31, 2007

Wiretapping as a social leveler

Oh this “Hello Garci” and wiretapping thing won’t just go away. Why don’t we just legalize wiretapping? It will be a great social and economic leveler. Democracy will flourish.

Karl Marx, Alexis de Tocqueville, Martin Luther King, Amartya Sen—we all seek guidance from their wisdom in our quest for economic equality and political development. Forget it. All we need to do is legalize wiretapping and equality in spirit and in truth will reign in the land. The Philippine economy will even soar! How? Click here.

Have a nice weekend!

Wednesday, August 29, 2007

Philippine economy grows 7.5% in second quarter

Whew!!! The figures are quite impressive: a 7.5 percent growth rate in the second quarter this year, the highest in 20 years! Says the National Statistical Coordination Board:

Continued favorable economic conditions such as stable interest rates and strong peso, resilient agriculture sector, vibrant industry and services sectors, plus election-related spending and intensified infrastructure investments further strengthened the country’s Gross Domestic Product (GDP) to an impressive 7.5 percent growth in the second quarter of 2007 from 5.5 percent last year. The expansion in GDP came from the strong performances of Trade, Construction, Transportation, Communication and Storage (TCS) and Manufacturing.

On the demand side, sustained increase in household spending, rise in merchandise exports and investments in construction served as major engines of growth. Continued inflow of remittances from overseas workers resulted in a hefty 16.6 percent expansion in the Net Factor Income from Abroad (NFIA) and pushed the Gross National Product (GNP) to an 8.3 percent growth, a substantial improvement over the 6.4 percent growth in the same quarter last year.

I’ll have a careful look at the numbers later but it seems that the recent ones have been quite consistent with recent trends. In the first quarter, we grew by 6.5 percent. A few weeks ago, the leading economic indicators (LEI) seem to have given us an encouraging sign early on. Man, if we could sustain this growth trend in the next ten years, we will wake up one day to a totally different, essentially better, Philippines.

Of rebels, insurgents and terrorists: a book review

ARE YOU LOOKING for clues as to the possible outcome of the American “democratization project” in Iraq? Try reading David Rooney’s “Guerilla: insurgents, rebels and terrorists from Sun Tzu to Bin Laden” (Brasseys UK, 2004). This book tells as about the history as well as the theory and practice of guerrilla warfare from the ancient days up to the present, featuring a major cast of colorful characters including Judah Maccabee of ancient Israel, the Boer commandos, Michael Collins of Irish Republican Army, Lawrence of Arabia, Giuseppe Garibaldi of Italy, the Chindits of Burma, Mao Zedong, Joseph Broz Tito of Yugoslavia, Che Guevarra, and Osama Bin Ladin. Reading the book, one couldn’t help but conclude that the Americans in Iraq will eventually have to leave—and leave in disgrace.

It’s because guerrillas are usually effective when the raison d’etre of the guerrilla struggle is the presence of a foreign occupier. There’s an overwhelming proof for this: Spanish guerrillas drove away Napoleon Bonaparte out of Spain, the Boers brought the British to the negotiating table and got the status of a free state, Michael Collins forced the British to negotiate for the eventual creation of an independent albeit divided Ireland, Mao help drive away the Japanese eventually capture state power, Tito drove the Germans and became Yugoslavia’s head of state, the VietCong drove the Americans away out of Vietnam, mujahideens drove the Russians back home.

There’s no secret to guerrilla tactic employed. Rooney said all these successful guerrillas adhered to the concepts first codified by Sun Tzu and little has changed since then: the use of terrain, mobility, deception, surprise attack and dispersal, avoiding set battles, the use of secure base, and swimming like fish in the water (the masses), persistence, discipline, the role of propaganda and psychological warfare, among many others. Most of the successful practitioners adapted Sun Tzu’s concepts to specific terrain and context but the basic doctrines haven’t changed. Mao summarized it so well: “when the enemy attacks, we retreat or disperse; when the enemy encamps, we harass; when the enemy runs, we pursue; and when the enemy tires, we go for the kill.”

Bin Ladin however added a new dimension-- religion, thus making guerrilla warfare an even more potent weapon among the discontented and the fanatics. If Bin Laden and Al Qaeda succeeds in getting weapons of mass destruction especially nukes, he might just redefine guerilla warfare to the world's peril.

The determined guerrilla sometimes wins not because of decisive military victories but because foreign occupiers eventually have to leave. And they do leave earlier than expected when they realized it’s no longer politically prudent to stay a minute longer because citizens and politicians back home are increasingly grumbling about the huge expenses in terms of lives, money and materiel.

General Giap’s army in Vietnam was practically broken during the Tet Offensive and the Americans could have given it a coup d’ grace but the citizens back home have had enough of the carnage, mayhem, and body bags. So the Americans had to leave—and they left ignominiously.

Not all guerilla movements succeed though. An example of this is the defeat of the Communist guerrillas in the Federation of Malaya, now Malaysia, by the British SAS and local troops. But the defeated guerillas are not at all discussed at length, thus giving us a bit one-sided view of the whole issue. The discussion of failed guerrilla movements could have given us deeper and balanced insights as to factors that determine success and failure in guerrilla warfare.

But overall though the book is a good read, despite occasional lapses in grammar and editing. And it could be disturbing to those who are in the business of protecting the status quo.

Monday, August 27, 2007

Rice “self-sufficiency” for whom?

THE recent World Bank report, entitled “Philippines: Agriculture Public Expenditure Review,” seems to confirm what has been obvious all along—that our obsession with “rice self-sufficiency” has, in fact, been hurting the rural sector, especially the poorer segments of it, and has prevented the Philippines from diversifying away from the traditional low-earning crops toward the high-value crops.

What the report really brings us is a new urgency to reform agricultural policy since current ways of doing things in the farm sector have also been hampering the country’s overall competitiveness, especially the industry sector.

The idea of “rice self-sufficiency” says that since rice is the country’s staple crop, the government should ensure that the country produces most, if not all, of its rice within the country’s borders. Sounds good enough, except that not all areas in the Philippines are perfect for rice production.

In his time, President Ferdinand Marcos addressed this issue through a battery of policies and rules like quantitative restrictions on imports and price supports, policies that up to this day are practically intact despite our entry into the World Trade Organization (WTO). So two things happened: first, through market intervention by the National Food Authority (NFA), the government was able to maintain relatively high prices for rice and, to some extent, corn; and second, the government has built an elaborate bloated and money-draining bureaucracy to support this market intervention.

The problem is that price supports, by nature, have limited social impact, mostly only on those who have access to the government bureaucracy and who are mostly richer farmers, a fact that is confirmed by the World Bank study. The study said that only 40 percent of rice farmers capture two-thirds of the benefit from price support while small rice farmers, nonrice farmers, upland dwellers, landless workers and the urban poor suffer from high rice prices. What was conceived, therefore, as a poverty-alleviating program has actually contributed to greater inequality and poverty in the farm sector.

And while the government is supporting this narrow rural aristocracy being buttressed by self-sufficiency policies, the government has to increasingly divert the bulk of the country’s limited resources to the rice sector, thus neglecting the growth and development of other crops that have potentially greater potential of raising farmers’ incomes.

The World Bank study computed that 60 centavos for every peso of the Department of Agriculture’s (DA) spending goes to the rice sector, a totally disproportionate share, meaning that most of the people’s money supposedly allocated for the entire farm sector actually accrue to a very limited, but relatively well-off, segment of the rural sector, at the expense of the larger society.

Yes, all these self-sufficiency policies of the government are hurting the larger society as a whole in three ways.

First, when government attention and money are poured into one commodity (rice), when rural infrastructure and government support services are largely concentrated on that crop, the prospect of developing potentially high-earning crops in the countryside dims. Most farmers are probably aware that there’s more money to be made in orchards, vegetables and herbs with great potentials for biopharming; but the absence of support services, technology inputs, reliable market information, credit and infrastructure for these alternative crops creates a lot of uncertainty that deters most farmers from diversifying away from their traditional crops. No wonder only big agribusiness companies are able to quickly respond to market opportunities created by the entry into force of the WTO.

Second, the price and production support (including the quantitative restrictions on imports) that the government provides for rice has made rice expensive. Since more than half of people’s incomes are spent on food, expensive staples, therefore, propel the workers’ demand for relatively higher wages—something that, in turn, accounts partly for why the Philippines has among the highest daily wage rates now in Asia. This situation, in turn, has made doing business in the Philippines more expensive, thus driving away investors toward lower-cost Vietnam and China.

Third, the NFA implementing this price-support system has never been efficient at doing what it’s supposed to do. Consistently, the NFA has been losing money, forcing it to borrow or rely financially on the national government.

The billions of government money and borrowings that the NFA obtains each year partly account for the continuing fiscal problem of the government. Ever wonder why the government can’t raise spending on rural infrastructure? The NFA is one of the major reasons.

What should the government do? The World Bank study is pretty detailed in its recommendations, among them the phaseout of government production and price support, replacement of quantitative restrictions on imports, a review of the NFA role toward separating its regulatory and trading functions, and investments in critical rural infrastructure, including roads and wholesale markets, among many others.

The DA should take a hard look at this study, not necessarily to accept hook, line and sinker all its prescriptions. By considering its policy recommendations, the DA might yet help address not only the problems that plague the farm sector, but also those of the broader Philippine economy. (Originally drafted as editorial for BusinessMirror, August 28 2007)

Reliable source: Manila Standard "didn't accept" Malu Fernandez's resignation

Hmm, it seems that the blogosphere's celebration in response to Malu Fernandez's reported resignation is premature. A reliable source texted me saying Manila Standard Today "didn't accept" her resignation letter. True? I don't know. I don't have to time to verify it. Nor will I try. There are more important things to do.

If this latest rumour is true, it means our manang will continue tormenting Economy class passengers and OFWs with her Jo Malone and would even have the pleasure of writing about it.

Sunday, August 26, 2007

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

After reading, 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...

Thursday, August 23, 2007

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.

Wednesday, August 22, 2007

Slapping the SLAPPers

Ultimately, most SLAPPs are not legally successful. Nevertheless, while most SLAPPs do not succeed in court, they “succeed” in the public arena. This is because defending a SLAPP, even when the legal defense is strong, requires a substantial investment of money, time and resources. The resulting effect “chills” public participation in and open debate on important public issues.—The California Anti-SLAPP Project

THE other day Bayan Muna Party-list Rep. Teodoro Casiño vowed to file a bill aimed at banning “strategic lawsuits against public participation,” or SLAPP suits, saying such legislation is necessary to protect environmentalists, activists and journalists from frivolous legal actions aimed at stopping people from airing their concerns over legitimate issues related to public interest.

We share Casiño’s concern about SLAPP suits as they are often intended to prevent people, especially ordinary citizens, from expressing their rights under the Constitution.

Indeed, SLAPP suits have become a weapon by the powerful to silence the powerless, and it’s even practiced with reckless abandon in supposedly highly democratic societies like the United States.

According to the California Anti-SLAPP project, a SLAPP suit could take the form of a civil complaint filed against individuals or organizations arising from their communications to government or speeches on issues affecting the public interest.

The group said that SLAPP suits are often brought by corporations, real-estate developers, government officials and others against individuals and community groups who oppose them on issues of public concern. These suits usually take the form of civil claims like defamation, conspiracy, malicious prosecution, nuisance and interference with contract as a means of transforming public debate into lawsuits.

Indeed, the Philippines may need some kind of anti-SLAPP legislation to strengthen democracy here. More so because increasingly, more people are expressing themselves on public issues through web logs, online-discussion forums, letters to the editors and mass demonstrations.

But offhand we think it’s not practical to totally outlaw SLAPP suits. We believe that the judgment, whether or not a legal action is a SLAPP, rests on the courts and not someone else.

Besides, activists, environmentalists and journalists are not angels. Sometimes they do commit serious mistakes for which aggrieved parties should have the right to seek legal redress. Activists should always understand that getting legal suits is part of the hazards in the business of saving this world.

Maybe the Philippines could take a few pages from California’s anti-SLAPP statutes. California’s Code of Civil Procedure Section 425.16 allows the judge to decide from the very start whether or not a purported SLAPP suit has the probability of succeeding. Should the judge decide that the suit doesn’t have a chance of winning, she or he may dismiss the SLAPP suit and award the victim (the target of the lawsuit) lawyer’s fees and all other legal defense costs.

Most of the recent local environmental laws contain anti-SLAPP provisions. Section 53 of the Solid-Waste Management Law (Republic Act 9003) says: “Where a suit is brought against a person who filed an action as provided in Sec. 52 of this Act, or against any person, institution or government agency that implements this Act, it shall be the duty of the investigating prosecutor or the Court. . . to immediately make a determination not exceeding 30 days whether said legal action has been filed to harass, vex, exert undue pressure or stifle such legal recourses. . . . Upon determination thereof. . . the Court shall dismiss the case and award attorney’s fees and double damages.”

This indicates that the local statute actually has a strong built-in mechanism for deterring lawsuits simply meant to discourage whistle blowers in environmental controversies.

Now the question is, as usual, whether or not this safeguard within our local law can be used actually to protect the sincere and competent environmental activist as against the “A-C, D-C” types or the “shoot-from-the-hip” types who grandstand without any iota of documentary evidence. The other key question is how this safeguard could protect whistle blowers in other matters when it covers only issues pertaining to the solid-waste management law.

Instead of outlawing SLAPP suits right away, maybe Congress should work for a broader anti-SLAPP legislation covering public participation in all issues related to public interest. This kind of legislation would provide disincentives for the powerful to slap frivolous and whimsical suits against the small guys who are exercising their rights. (Originally drafted as editorial for BusinessMirror, August 23 2007).

Tuesday, August 21, 2007

The Economist: RP's "jeepney economy revs up"!

A few months ago, I said that the Philippines has become a normal country with normal problems of a developing economy. Lately, The Economist, the world’s number 1 economics magazine says our “jeepney economy is revving up”:

[T]hings are looking up. The economy has grown by at least 5% in each of the past three years, for the first time since the 1970s. In the first quarter of this year, growth was 6.9%, year-on-year. Soaring remittances from Filipinos overseas help. Last year they added up to $12.8 billion, equivalent to 11% of GDP. Exports—especially to China and most particularly of microchips—are also booming.
Better economic management also helps. Inflation is now 2.6%, down from 8.6% in 2004. Changes made in 2005 have increased tax revenues without hurting growth. Despite recent wobbles, the government should still come close to balancing the budget next year, compared with a deficit of over 5% of GDP in 2002.
Hardly news for us who hear these numbers each day. But it still feels good when foreign media starts noticing that things somehow are improving this side of the Pacific. Could we maintain the momentum? Let’s see. On August 30, the National Statistical Coordination Board and the National Economic and Development Authority will announce the second quarter performance of the Philippine economy.

I’m crossing my fingers.

Monday, August 20, 2007

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 for the photo

Sunday, August 19, 2007

Guerrilas, patriots, and terrorists in a flat world

If there’s such a thing as “book addiction,” I may qualify as an “addict.” I should always have something to read, something very interesting, or I get depressed. I went home nights ago feeling the blues and I was wondering why. Then I realized it’s been several days since I’ve finished Machiavelli and Adam Smith. I knew right then I needed a visit to Powerbooks.

And look what I got lately!: Guerilla: insurgents, patriots, and terrorists from Sun Tzu to Bin Laden” by David Rooney and “The world is flat” by Thomas Friedman! Powerbooks was having a sale and I got significant (at least 20 percent) discounts.

I got Guerilla because I’m fascinated with these types of people (in the same manner that I’m interested about snipers, ninjas, spies and spec ops). Guerillas are among the hardiest and the most tenacious of peoples in this world. They are creative and determined beings who struggled, persevered, adapted well to local terrain and give hell to technologically and numerically superior foes. Contrary to popular notions, most guerrilla movements are defeated (e.g. Che Guevarra in Bolivia, the Huks in the Philippines, Sandino in Nicaragua, the Communist Party of Malaya, etc) but some of them actually triumphed (e.g. Mao, Tito, Garibaldi, and Spanish guerrillas against Napoleon). Not that I fancy becoming one; I simply think I could use some lessons from their struggles in dealing with my own little adversities in life.

So all over the rainy weekend, I was communing with guerrillas, patriots, and terrorists while heavy rains were mercilessly pounding the roof.

Regarding Friedman, many academic types think his “world is flat” thesis is crap. In fact, its probably more like spiky, meaning that the distribution of the gains of globalization are often concentrated in a few global cities. But I just need to read him before making my own judgment. I need to read the book because it seems everybody else has already read it. I've read Friedman's "The Lexus and the Olive Tree" about globalization eons ago and it would be a shame if I miss on this one which is supposedly a sequel.

And then yesterday, I got Fareed Zakaria’s The Future of Freedom tackling the rise of “illiberal democracy” all over the world. Hmm, too little time, to many books to read.

Wednesday, August 15, 2007

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

Tuesday, August 14, 2007

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.

Monday, August 13, 2007

RP badly needs a "Freedom of Information Act" to curb corruption

If all truths are easy to understand once they are discovered; the point is to discover them. —Galileo Galilei (Italian astronomer and physicist, 1564-1642)

And you shall know the truth, and the truth will set you free.Book of John, Chapter 8, Verse 32

IF there’s one thing glaringly absent from the President’s legislative agenda now lodged with the Legislative-Executive Development Advisory Council (Ledac), it’s the absence of the proposed Freedom of Information Act.

The private sector, especially the foreign chambers of commerce, have been clamoring for it, and yet their pleas don’t seem to get across to Malacañang. It’s a shame because if there’s one reform initiative that would really make a difference quickly in the life of this country in the next three years without entailing any financial cost, it would be such a law. We may call it the “Freedom of Access to Information Act,” or to be more ambitious, the “Transparency in Governance Act.”

Accordingly, the Ledac has divided the current legislative agenda into three—economic progress; educational reform and social equity; and peace and order and the rule of law.

These are all laudable reform initiatives, but even if most of these new pieces of legislation are passed under the new Congress, they would never achieve anything substantial unless these are done under complete transparency. And this country, despite its pretensions to democracy and openness, has never been a completely open society.

Major government transactions, especially those done in the name of “progress and economic development”—transactions that always ended with extracting money from the general public in terms of taxes, fees, levies and sacrifices—have always been done with complete secrecy up to the highest levels of power. It’s only during the time that the general public felt they are being shafted did they start to suspect that some “genius” up there must have sold the country’s soul to the devil.

The rogues’ gallery of failed or dubious projects keeps growing: the Joc-joc Bolante fertilizer scam, the Naia Terminal 3, and, lately, the multibillion national broadband network (NBN) and cyber-education project (CEP).

These are the latest examples, and we don’t seem to run out of these mega scams. Why? The reason invariably points to a complete lack of transparency in governance—thanks to the lack of a formal mechanism by which citizens can demand information from the government. We don’t have clear mechanisms by which each citizen who will suffer the consequences of bad deals being contracted in our name could have complete access to contracts being signed by some bureaucrats. The clearest example of this is the NBN and the CEP, where the people’s clamor for transparency is being shrugged off by the declaration that the multibillion projects are “government-to-government transactions” and therefore could never be questioned.

One could easily know the real story behind these controversial and questionable deals by looking at the minutes of meetings of Neda’s Investment Coordinating Agency, yet journalists and citizens could never have access to these documents because government officials invoke “executive privilege” as quickly as one can blink an eye. If we want this country to move forward and join the rest of the progressive world, we should let sunshine into all government activities, policies, processes, meetings and outputs. A comprehensive law on transparency in governance can ensure that.

As in the United States, the law should mandate making accessible all vital government documents and records, especially those related to infrastructure development revenue collections, loans, procurement and implementation of economic and social programs and projects. It should prescribe simple rules for citizens to access relevant information.

The law should penalize government officials and bodies who hinder access to all these information. By default, all government records, transactions and activities should be deemed public records or documents, which each citizen should have access to, subject to very few limitations on “national-security” grounds.

Each citizen has an inherent right to information; hence, a person filing requests for information doesn’t have to specify the reason for his request. In the US, government agencies are supposed to respond to these requests within 15 days. More important, this law should mandate “open meetings” to allow citizens to participate in important government meetings, should they so desire.

Globally, about 70 countries and territories have freedom of information legislations. These include Australia, Belgium, Canada, Denmark, the European Union, Hong Kong, India and Thailand. At least 17 more countries, including Indonesia, Jordan, Kenya and Sri Lanka, are in the process of crafting their own.

The Philippines should have its own freedom of information legislation. It’s high time the government stops treating people like mushrooms in the dark constantly being fed horseshit. (Note: this piece was originally drafted as editorial for BusinessMirror, 14 Aug 2007)

You may also read related posts below:
More goodies, san reforms
How to attract investments? Let me count the ways
Want to curb corruption? Cut that sleazy nexus!

Saturday, August 11, 2007

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

Tuesday, August 07, 2007

The wage conundrum in the Philippines

AS expected, some labor groups slammed the P12 wage hike granted by the National Capital Region-Regional Tripartite Wages and Productivity Commission, with one describing it as “nothing but alms,” and another saying it’s only good to pay for noodles and eggs. What the workers need, the militants say, is an additional P125 daily-wage increase.

And as usual, the board defended its position by saying that a P125 daily-wage raise would be disastrous to the economy. It would throw more workers off their jobs, said Labor Secretary Arturo Brion.

Expect this wage issue to metamorphose into a morality play in the next few days, with some organized groups painting employers as greedy capitalists squeezing the blood off workers. And employers, especially exporters, saying that many of them are about to close shop because of the strong peso and that a new round of wage increase, therefore, would simply doom their business.

We have been hearing these story lines in the last half century. And it’s likely that we will hear about these things again next year, unless policymakers learned to look at the issue from a broader perspective and deal with the real problem that is causing this annual exercise of a virtual class struggle.

One of the larger considerations here is the comparative wage rates in Asia. At the current wage levels, minimum pay in Metro Manila is close to $8 a day, against Thailand’s $6.35, Beijing’s $3.43, Indonesia’s $3.25 and Vietnam’s $1.27.

What these figures suggest is that an unwarranted increase in local wages would simply turn off investors some more. This consideration is important because, in reality, at the root of this incapacity of many firms to pay higher wages is the small size of the Philippine economy itself.

Despite the significant growth rates we have achieved in the last few years, the Philippine economy and its capacity to create jobs has been generally weak. More so because the new creators of jobs, specifically outsourcing, are in the services sector that needs highly skilled graduates who are normally paid rates higher than the minimum-wage rates.

It’s obvious that minimum-wage workers are probably concentrated in the industry sector, which, by some indications, are fast shedding jobs already—owing to a lot of factors, including poor infrastructure, a strong peso, strong competition from China and Vietnam, and rapid technological change.

To survive, many companies have relocated to China while others are restructuring their cost structures to stay afloat. You put a drastic wage increase in their equations and it’s likely that they are just going to fold up or simply adopt more labor-saving devices.

This is not to deny the need for decent wages in the Philippines. In fact, we need them here. But the reality is that the performance of companies and industry sectors are uneven.

Certainly, firms in electronics, mining, outsourcing, banking, and wholesale and retail are probably doing good. But other firms, especially small and medium enterprises in the manufacture and export of furniture and fixtures, as well as food, are probably ailing owing to the strong peso and other factors.

It means that while other firms could absorb the wage rates, others are not likely to do so, and go under. The ideal policy approach, therefore, is an arrangement that would consider these different business conditions.

A collective bargaining agreement is one option. But then again, only about 4 percent of the country’s work force is organized, and this is due to several factors. Our unions are either lousy organizers who are not adapting effectively to winds of change, or are crowding out each other in the same sites. These days, more than half a million workers are in the “new economy,” and yet unions have not made inroads into their ranks.

Because of this weak presence within the labor sector, labor unions are focusing their efforts on petitions for state-mandated wage hikes to project relevance. But these are measures that ultimately hurt the labor sector, mainly because of their one-size-fits-all approach.

One school of thought says, though, that besides being unable to cope with the impact of globalization in the workplace, some labor leaders have limited their ambitions to landing party-list seats in the House of Representatives.

Of course, the bulk of the labor sector is employed in the small and medium enterprises, many of which are mom-and-pop operations that are not suitable to union organizing. If that observation is true, then we know that the issue about low income for workers and the rest of us Filipinos is really all about economic growth—or lack of it.

Higher, sustained and broad-based growth is the only thing that could ultimately soak up joblessness. Hence, the government should hurry on growth-oriented strategies, which should involve reforms in policies and resource allocation in education, trade, infrastructure development and social services.

That may sound like a vague set of proposals with long- term impact. True. Most of the reforms workers want are those that actually would have an immediate impact. For instance, close to half of workers’ wages are used on food purchases. But trade reforms (say, lower tariff for rice, corn, sugar and wage goods) that would cheapen food, therefore, would go a long way in expanding workers’ purchasing power.

There are so many other policy handles that the government could use to help workers in a way that won’t destroy their jobs as a wholesale wage increase would. Creativity is the key. And the patience to help all stakeholders understand that in a fast-changing world, the usual formulas sometimes just won’t work the same way anymore. (Note: I originally prepared this as editorial for BusinessMirror, Aug 8 2007)

You may read a related post:
Alternatives to legislated wage fixing

Why is RP's political system attracting all sorts of sleazy characters?

“Politics lures sociopaths, expert warns,” says an August 6 2007 PDI front page story. No wonder why our politics is so corrupt. But don’t you ever ask why indeed we tend to attract sleazy characters in our political system? I answered this question a few months ago:

“At the heart of the corruption problem is the way wealth is created here.

The dominant mode [of wealth creation] in the Philippines, is rent-seeking which, according to political economist Anne Krueger, means deriving uncompensated value from society through the manipulation of the economic environment either through influencing government policies, rules and regulations, or just plain graft and corruption.Rent-seekers in this context are those who accumulate wealth simply through access to political power, manipulating it to yield “infant industry” protection, high tariff walls against competitors, monopoly privileges, special import privileges, fiscal incentives (tax holidays), and access to government budget allocation for public procurement activities. Elected politicians and bureaucrats at all levels get their share of the booty simply by facilitating those sleazy transactions. While these people get rich, the economy suffers as the kind of business and economic transactions that they perform, while squeezing value from society through extra-economic means, contribute nothing productive to its development. Instead of spending money on research and development, innovative technologies, and the training of manpower, they would rather buy the bureaucracy to get things done. So we have in our midst an alliance of groups profiting from the nexus between wealth creation and the political system. Since the Spanish times, the powers that be designed the State and its related institutions to strengthen this rotten nexus. In turn, it has been attracting all sorts of rogues.”
You remove political intervention in economic decisions and you can see that “public service” will only attract two types of persons, either statesmen or masochists, and that will be for the good of the country.

Monday, August 06, 2007

On rain dance and emergency powers (or how do we address the water crisis in Metro Manila?)

Water, taken in moderation, cannot hurt anybody.—Mark Twain (1835 - 1910)

Irrigation of the land with seawater desalinated by fusion power is ancient. It’s called 'rain.'Michael McClary, as quoted by Megan Anderson, USGS

IT’S funny that the government is thinking about having “emergency powers” to address the water-supply shortage in Metro Manila. It’s as if the government could force the rains to come by fiat or presidential signature.

Government bureaucrats could probably do the rain dance, but these actions are more likely to attract lightning than the rains that we sorely need to fall over La Mesa dam.

The fact is that the availability of water is first and foremost a question of supply: the coming of the rains, infrastructure, and the ecology that supports the entire water-generation and -distribution system. Not any amount of legislation, especially shortsighted ones, or executive fiat could change that fact.

The government, however, could manage demand through economic instruments to change people’s behavior on how they use water, thereby alleviating our water-supply concern. The structure of the country’s water-supply system lends well to the use of economic instruments, say, a variable charge.

Metro Manila’s water supply is taken largely from Angat dam, where our capacity to store water depends on the weather pattern. We usually have distinct wet and dry seasons, and we take advantage of this by storing significant volumes of water during the rainy season, especially July and August until December, to make sure we have enough to cover for the low rainfall months from March to June. We are practically saving water during the rainy days for the sunny days.

Smart move, right? Yes, but it's not as simple as that. The sad fact is that while we are trying to store water in those dams, public policy allows us to freely use water from the tap to bathe our cars, fill our swimming pools, water the lawns and flush the toilet without serious consequences on our finances.

Why? It’s because water here is so cheap; we have the cheapest rates in Asia, and that’s because the pricing of water this side of the Pacific doesn’t take into account the cost of drawing raw water coming from Umiray River, and the dams in Angat, Ipo and La Mesa.

Water charges here cover only the actual consumption, currency adjustment, environmental charge, sewerage and the value-added tax. When water is so cheap, people feel it’s so abundant that they tend to waste it. No wonder many people don’t bother to fix their faucet or mend the leaks. Nor do they bother to report the leaks to Maynilad or Manila Water when they see a pipe leaking in the streets.

But generating and bringing that water to every household in Metro Manila is not cheap. In fact, we probably have among the most expensive ways of generating, storing, processing and distributing water compared with our neighbors like Thailand, Cambodia or Vietnam. In these countries, what they do is tap directly the mighty Mekong River, process the water and distribute it to city residents.

In contrast, the Philippines has to invest in a network of dams, tributaries, reservoirs, aqueducts and treatment facilities prior to bringing them to the cities through the pipes, mostly through loans from abroad. But we still have the cheapest water compared with these countries because we don’t reflect the true cost of generating and distributing potable water. And it’s such an inequitable arrangement because Filipinos at large are paying for those loans while the major beneficiary of those investments is urban Metro Manila.

Solution? Economic instruments, say, a variable charge, that reflect two considerations: first, the cost of raw water and, second, the cycle of abundance (the rainy season) and scarcity (summer months) throughout the year.

In simpler terms, instead of charging a fixed rate per cubic meter throughout the year, the government may consider a relatively low rate during the rainy season or when the dams are full or overflowing. And as the water level in the dams goes down, the rate per cubic meter should go higher, thus reflecting the true and increasing scarcity of water supply.

This way, people would start modifying their water-use behavior as they feel the increasing scarcity. To save water and cash, they are also going to make sure their faucets don’t leak. Knowing that “unaccounted water” is going to be reflected in everybody’s water bill, they are likely to be watchful about water pilferage and leaks in their communities. Many of them might even consider investing in cisterns for storing water collected from their roofs.

The government, however, may have to calibrate water charges carefully, as extremely high rates may also drive more people into digging deep wells that could wreak havoc on groundwater sources and the environment in general. Right now, environmental scientists are blaming excessive drawdown from groundwater sources, thus causing saltwater intrusion in many parts of Metro Manila.

It is important to reflect the true cost of water, for instance, to include the generation of raw water and the development of future water sources, because of the fact that the population of Metro Manila is growing. The extra money collected could be invested in new sources, infrastructure and water-resources research to meet the growing needs of the metropolis.

This is important because at the rate the services sector is growing, it’s likely that Metro Manila will continue to attract more migrants, thus the ever-rising demand for water. If policymakers won’t be creative in their policymaking, we will just keep on suffering water crises year in and year out. (Note: I originally drafted this as editorial for BusinessMirror, Aug 7 2007)

Thursday, August 02, 2007

Why not use economic instruments to address the water crisis?

What?! The government is thinking about "emergency powers" to address the water supply problem? Crazy! Emergency powers could never force the rains to come. But economic instruments could address the problem if only we have the guts to do so. How? I wrote something about this issue in Manila Times three years ago. Among my conclusions:

"On the demand side, the government should manage demand by reflecting the cost of generating and delivering raw water in pricing for both irrigation and urban water supply. Incomes generated from this service could be used to develop additional sources of raw water.

Better still, the government should consider using “economic instruments”—for instance, variable charge—on the extraction of raw water from the dams and reservoirs to reflect the true scarcity of water. This charge should be low during the times (January, February, November and December) when the water elevation in Angat is usually high or at least above 210 meters. The charge would gradually rise as the water level declines in March, April, May, June and July, depending on the actual situation.

This way, water users—both in agriculture and in urban areas—would be pressured to conserve water in times of scarcity. This measure would require strengthening the National Water Resources Board to regulate deep wells and prevent the excessive use of water.

The water shortage calls for rigorous measures; there is no other way to do it."

That was three years ago...

Wednesday, August 01, 2007

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!