Globalizing Pinoy's manners

THE Philippine economy is highly globalized whether we like it or not. The next thing we should do is “globalize” our Pinoy habits, traits and manners as well, if only to improve our image abroad as a people.

Close to 60 percent of the country’s gross domestic product—the value of goods and services traded within the country’s borders—are accounted for by the country’s merchandise exports and dollar remittances from overseas workers. And close to 70 percent of the country’s exports is electronics, proof that we have become an important player in the world’s production of trade of electronics and semiconductors. Of course, the top generator of jobs these days are call centers and other outsourcing industries, globalization’s latest and the most tangible metamorphosis.

Anybody who watches CNN or BBC each day would notice that for all the world’s misfortunes and mishaps (e.g., hostage-taking in an oil rig in Nigeria, bombing in Indonesia, tsunami in Thailand, war in Lebanon, a shipwreck in Korea), at least a Filipino is always involved. Yes, that’s how the Philippines has become so globalized.

Right now there are more than 8 million Filipinos working and living abroad. Every day, close to 3,000 Filipinos are leaving the country for foreign jobs. And each year, they send back home at least US$12 billion that translate to spending on food, education, cellular phones, and the building and repairs of houses. That in turn has buoyed the country’s factories, banks, restaurants, school, and shopping malls. And that trend will continue for as long as the country’s domestic productive capacity remains constrained by ruinous politics, sloppy governance and slow growth.

With all these adventures abroad, Filipinos have developed quite a reputation as good finance managers in Indonesia, smart technical guys in Vietnam, efficient nurses in Florida and California, and hard-working engineers and technicians in oil rigs and oil platforms in Nigeria and Gulf States, and “courageous” mercenaries in Iraq. The flipside of this, however, is the negative perception of us Filipinos because of some bad habits that some of our countrymen bring with them when they work abroad. There are only a few of them but it takes one rotten tomato to spoil the entire basket.

We hear embarrassing stories of some Pinoys in the Gulf States using the peso coins to take cans of softdrinks off the dispensing machines. We often hear about some Pinoys bringing with them bath towels from hotels as well as head sets from airlines as “souvenirs.” Don’t be surprised if some of the headsets you see your fellow passengers at those FX taxis bear the tag “Cathay Airways” or some such airline—probably the man or woman beside you brought home the headset that’s issued during all flights.

Some of our countrymen probably think these acts are harmless and innocent, but this is the type of behavior that puts the Filipino nation in a negative light. Surely, those Arabs who felt cheated upon opening their soda- dispensing machines full of Pinoy peso coins must have thought Filipinos are a bunch of thieves.

In the last three years, tourist arrivals in the country have been growing at double-digit rates, thanks to the successful efforts by the Department of Tourism to attract East Asians, particularly Koreans. We also have lots of foreigners coming in, many of them investors and top managers for the blooming outsourcing companies here in the Philippines. They may have come here in the country with the thought that we Filipinos are gracious and hospitable.

As a people Filipinos are indeed gracious. But many of us still have a lot of things to learn, especially when it comes to living in an urban context. Surely, lots of our foreign visitors are shocked to see Pinoys pissing against a wall and throwing garbage in the streets. Worse, Filipino drivers, both rich and poor, behave like rascals behind the wheels. One recalls a very innocent question that an 8-year-old Filipino-Aussie boy asked his mother barely 10 minutes after they hit the road from the international airport: “Mom, don’t they have lanes here?” To which the irrepressible mother replied, “No, they make their own.” Imagine what went on in the mind of a boy so used to Sydney’s strict traffic rules.

In places like Brunei, Malaysia, New York, and Washington DC, drivers immediately slow down upon seeing pedestrians attempting to cross the streets. In the Philippines, drivers would even harass the pedestrians by stepping on the gas pedal upon seeing them trying to cross the street. Such barbarian behavior should have no place in the country’s “globalizing cities.”

Such behavior signals one thing—that most Filipinos are nothing but hillbillies trapped in the urban setting. This is not to denigrate rural dwellers but to highlight the fact that the pattern of human settlements and disparity in population density means the rules of human behavior are different in rural and urban, nay globalized, settings. For instance, waste in rural areas is largely organic; disposing them straight to the environment is even “sustainable.” In the rural setting, settlements are sparse; letting the animals run wild is romantic. In urban, globalized settings, people who now ride cars and jeepneys must learn to respect those who walk the streets. And those who walk the streets should learn to appreciate the fine and manly art of going to toilets to relieve themselves. And everybody should learn the value of proper waste disposal.

Filipinos never had an industrial revolution; thus, most of us have not experienced working and living under the strict rules of compact, organized, regimented and rules-based existence. Many of us, rich and poor, simply came to the “city” and went straight to working mostly in the formal and informal services sector, bringing with us obsolete values, traits, and habits. In other countries that experienced a similar path of development, the State through its instrumentalities—city ordinance, traffic rules, educational system, local government units, zoning, among others—played an important role in changing people’s behaviors.

In the Philippines, the state failed in this job. But it’s not too late to work on this one. Maybe the private sector could help. It’s time we brought the Pinoy’s habits, traits and behavior up to “global standards.”

State of the Nation Address: Show me the money!

NOW it can be told: the wish list embodied in the State of the Nation Address (Sona) was basically a lot of hot air. As reported on this paper’s front page Monday, the government really has nothing to show in terms of financial planning vis-à-vis the humongous infrastructure programs unfurled to the nation last week. All along, we had raised the theory that it was all just a rainy-day storytelling. Subsequent reports bore out this suspicion.

The source of the new information is no less than the Commission of Audit. A report of the COA said the medium term development plan (MTPDP), from which all development policies, programs and projects emanate, “has failed to consider the funding sources” for the public investment component of the plan. We all know that despite all the high- sounding words contained in all “development plans,” such document is really nothing until one sees the specific programs and projects and how government is going to fund them. In short, projects make the plan and money makes the projects. Without the money, plans are plain-ah, sorry for the strong word, bullshit.

Which brings us to the dynamics regarding the preparation of the President’s speech. Much has been made of the fact that the Sona wasn’t so much a “state of the nation” as a list of the administration’s plans between now and 2010. Well, if the Executive sees no reason to render its own state of the nation and leaves it to the people to render theirs, that is its lookout. By doing so it has merely opened the floodgates to so much more interpretation of what’s really going on in this country.

We are told the Executive is fine with that because the President deemed it more important to let people know her ambitious vision for the future-a vision that a concededly hardworking President like her could lead us through, given the right resources, and assuming she didn’t suffer from credibility questions.

But with the multiple versions of how exactly the vision will be funded, serious questions have arisen since July 24. Could it be that those “super regions” and the infrastructure projects that go with them may have been proposed as a last-minute addition, an afterthought?

A well-prepared government is expected to have a matrix of the objectives, the programs and their parameters, the specific project per programs, and amount of the money to be spent per project, the source of money, and the performance indicators. Right now, the government doesn’t seem to have this very simple information. Maybe Neda really doesn’t have all the information just yet because the Neda people weren’t given time to do any serious planning for this. And, until now, the government agencies, including Neda, doesn’t seem to have a handle on any number. Is it P1.5 billion or P1.5 trillion?

One might wonder why the President had to rush the idea of “super regions” without the benefit of thorough planning. The inevitable suspicion again is that it’s really about the politics of survival. Weeks prior to the Sona, the Social Weather Stations Inc. (SWS) had released survey results saying the President’s net satisfaction rating has remained in the negative since the Garci controversy and the Joc-joc Bolante fertilizer scam. Furthermore, the government’s drive for Charter change was also foundering. On 13 July, the SWS released its poll results on Cha-cha, showing 67 percent are against any constitutional amendments that the President wanted.

Apparently, the President felt she needed something new, something that could generate shock and awe for her remaining three years in office. Well, Superman has just returned to the cinema in glorious 3D to wow the nation. Certainly, another “super” attached to something that easily rings a bell (infrastructure!) to the ears of local politicians and congressmen would create excitement and a new sense of “direction” for the administration. So now we have the “super regions” and all the buzz about megainfrastructure like highways, bridges, roads, and cybercorridors.

Make no mistake about it; the country needs a shot in the arm through massive investments in infrastructure development, besides other important programs like education. These will help it catch up with its Asian neighbors. Investments both in public infrastructure and in human development must run alongside, as we stand in peril of lagging even further in our commitments under the UN Millennium Development Goals.

In the last several years, the government has allowed most of our economic infrastructure to deteriorate in its single-minded pursuit of “fiscal consolidation.” Study after study of various organizations, including the World Economic Forum, the Asian Development Bank, and the World Bank have shown that the country has been losing competitiveness simply because the government has neglected infrastructure development. So if the government is serious, Malacañang and the Neda should prove the critics wrong by showing us the specifics of the plan, the programs, the projects, and-most of all-the money.

No, Joey Salceda may be smart, but it’s not enough for him to tell people, “read my lips: no new taxes” will be needed to pull off GMA’s vision.

As a recent UNDP-funded study by graduate students at the UP National Center for Public Administration and Governance (NCPAG) said it so aptly in tracking the state of financing for the eight MDG goals: “May pera pa nga, pero kulang na kulang na [Yes, there’s still money to meet the MDGs, but it’s woefully not enough].”

State of the Nation Address: Story telling on a rainy day

“I’ll build a bridge that will link us to the future.”
“No need; we don’t have a river here.”
“Don’t worry; I’ll build a river as well.”


WAS that the president of the republic talking or some fantasy story teller?

For a State of a Nation Address, that speech did not dwell on the “state of the nation” but rather on the wishful thinking of a president hoping to survive, hoping to get a better positive survey rating. She peddled solutions-a massive infrastructure program- without analyzing the roots of the problem. What are the problems based on people’s perceptions as gauged by Social Weather Stations and Pulse Asia surveys? Inflation, jobs, hunger, poverty, deteriorating education system. And what’s GMA’s solution? Infrastructure-roads, bridges.

That’s nice except that the message was probably intended for certain constituencies like politicians who are salivating for more pork barrel and kickbacks. The message seems to sound this way: “Friends, stay with me until 2010. Don’t impeach me for I have something for every body.”

Why did the President not dwell on the state of the nation? Critiques say there’s nothing to tell. The President actually rattled off a few statistics about people getting removed from poverty but it’s also true that these changes are imperceptible. People simply can’t eat her statistics. For every ripple of numbers about how things are getting better, comes a flood of other numbers of rising cynicism, hopelessness, and negativity-something that a Sona could not force off people’s consciousness. For a line on graft and corruption (“We are lining up corrupt officials to face the consequences of their misdeeds”) comes back the image of Joc-joc Bolante escaping to America so he could avoid the Congressional inquiry on the billion-peso fertilizer fund scam.

And for her vow to stop political killings comes the image of General Jovito Palparan, grinning among a riotous crowd in the gallery of supporters like Darth Maul, the dreaded Iridonian Sith apprentice in The Phantom Menace sans the six horns and the black ominous cape, able and maliciously eager to terminate the enemies of the little Empire with extreme prejudice. In fact, the President herself called on Palparan from the crowd of sycophants, like Darth Sidious revealing her new lethal apprentice to the rest of the trembling galaxy.

In truth, there are a few good things to tell. The economy has been growing at 5 percent or more in the last several quarters. It has been resilient despite the continuing rise in oil prices. Business process outsourcing has been growing fast, thus providing job opportunities for many fresh graduates. Henry Sy is still building malls in all corners of the country. Overseas workers are still sending in dollars, giving their families money for education, health, and cellular phones. Indeed, there are many positive news among the flood of bad news and misfortunes. But certainly, the President did not have to dwell on them because, in truth, these tales of heroism from people and entrepreneurs, are not part of Malacañang’s accomplishments. The people achieved them despite the government, despite the monkeys on their backs, so to speak.

Well, if you could not tell the truth because it’s just too painful you might as well tell children’s fairy tales, like those tall talk and dreams about some kingdoms called “cybercorridor,” and “super-regions.” After all, no one could criticize dreams and fantasies. Panaginip na lang, pinag-iinitan niyo pa! We all know how “regional planning” works in the Philippines: they are usually all about “vision-mission-objectives” and not much details on programs and projects and how they are implemented. You hire highly paid “consultants” to prepare those fancy documents for a press conference then keep them in some shelves to gather dust.

And yet, we should really take a closer look at those mega-projects being dangled before our eyes. Those projects are worth billions of pesos and we are not sure how they are going to spend them. Next year, we will have a mid-term election and the fertilizer scam is still fresh in our memory. Those billions are going to be spent in the regions, in infrastructure projects that are likely to be used to win the “goodwill” of local officials and lawmakers. If there’s one language these politicians gravitate to like ducks to water, it’s “infrastructure money” where one could have something to hang a sign board on (“another project of Congressman….”) besides the usual percentage kickbacks.

Apparently, occupants in Malacañang fear the 2007 mid-year elections are going to be a seen as a “referendum” on President Arroyo’s continued stay in power. A decisive victory of her allies therefore is necessary for her to say she has another fresh mandate-hopefully, to erase all doubts about the stains of Virgilio Garcillano’s tapes and Bolante’s politically toxic fertilizer. Of course, if we should learn from history, the dictator Ferdinand Marcos had all those huge 11 industrial mega projects when he felt his Administration was on its last legs. Tales of corruption followed until it collapsed under the pressure of people power mass actions. We therefore have to be extra watchful these days because it might just be history repeating itself.

Government's bikini reports

"Statistics are like bikinis. What they reveal is suggestive, but what they conceal is vital.”-Aaron Levenstein

IF statistics could only be eaten, or provide us jobs where we could derive money from, this country may yet be the most prosperous in the world.

Regularly, government agencies are releasing figures hinting that things are improving, that exports are rising, investments are increasing, the budget deficit going down, jobs are being created, and economic growth has been robust-yet ordinary citizens are always wondering why life seems to be getting more miserable, living standards are slipping, commodity prices are skyrocketing, and every thing in the country seems to give us this sinking feeling.

Why is this so? Well, statistics are cold and abstract and what they measure at the social levels are events or phenomena that are largely incremental and therefore subtle. For instance, a 5-percent to 6-percent growth rate in the gross domestic product, especially if driven by the services sector, is not likely to create factories that would soak up the bums in the neighborhood. Yet we believe that the real factor could be lack of credibility of most of these statistics. One possible reason is that outside observers could hardly verify the veracity of these statistics.

Take the Philippine Economic Zone Authority (Peza). Periodically, Peza issues press releases about its export performance, investments accumulated and jobs generated. The reports are always glowing, as if overnight the Philippines has become an investment haven. But try verifying the statistics by asking for details at the firm level, something that the Board of Investments (BOI) does quite openly, and a researcher will encounter resistance. Try asking from them if they have basic data on rental rates, utility rates and other harmless information and they will tell you these are not available. “Try asking each ecozone,” they will say. These are perfectly public documents, and perfectly neutral they are almost useless, yet one can hardly get them from Peza.

If the BOI can provide this basic information, why can’t Peza? Is it hiding something? Is it fudging data and doesn’t want the public to know the real score? Maybe so, maybe not-but there’s no way to know because they are so secretive for reasons only God and the Peza’s conscience knows why.

Lately, Peza issued a press release saying investments in economic zones had increased 13 percent from P25.91 billion in the first half this year from P22.287 billion in the same period last year. Great!

Then the other day, the Department of Trade and Industry released another report saying investments generated by both the BOI and Peza actually went down 20 percent. Question: what agency are we supposed to believe? Should it be DTI or Peza?

Well, the truth is that investments are indeed declining significantly, contrary to the glowing press releases of Peza. That is, if we believe the reports of the Bangko Sentral ng Pilipinas (BSP). People are probably inclined to believe the BSP people, as they are the ones that count the real money, unlike BOI and Peza, which only count promises of investments. Promises!-and yet Peza is guarding its secret like crazy.

In fairness, the Peza seems to be very popular among its clients, largely the executives of companies located in these ecozones. Or at least, its website says so. But that’s expected because these companies are enjoying lots of fiscal incentives being doled out by the agency. Or maybe it’s a really, really good agency in delivering services to companies doing business in the Philippines. But Peza is also a public agency tasked to perform certain social functions and therefore the public, including the media, is also among its important clients. As a public institution, it is duty-bound to be transparent. Ultimately, it’s only in transparency and openness where its true worth to society can be weighed. Lately, the Senate has come up with a new bill dissolving Peza and forming a new one to supersede it. Which leads one to ask: if Peza is such a knight in shining armor, why are the senators dumping it?

Philippines needs a second wave of reforms

THE Philippine Chamber of Commerce and Industry (PCCI) on Tuesday stressed that the country needs more reliable and affordable energy and such requires a broader ownership of privatized power assets. Supporting the National Economic and Development Authority (Neda), the PCCI also said government should put stricter limits on the cross ownership between power generation and distribution utilities in order to prevent pockets of monopoly in the power sector.

“It is necessary for both industry and consumers to have access to affordable power to lower the cost of business. And for this to be possible, the privatization effort of the National Power Corporation assets must have broader ownership base,” said Donald Dee, PCCI’s president.

One couldn’t agree more. Certainly, this is a principled stand on the part of PCCI, which should be commended for saying so. For so long, the country’s economy has been hobbled by monopolies and oligopolies, one of the major factors why we find it hard to improve the lives of the Filipino people.

Standard economics textbooks tell us about the evils of monopoly: their tendency to produce shoddy but expensive products and services. That is bad enough, but the heavier burden lies with the fact that monopolies are a drag to development, either because they tend to discourage competition or they deprive people of the vital goods and services they need to improve their lives.

Take telecommunications. Before deregulation, anybody who wished to have a landline telephone would have to wait for four years before getting one. Entrepreneurs therefore had to be “entrepreneurial” by buying the telephone lines of those who already had. Others had to share a “party line” and had to quarrel with them all the time for a chance to make or receive calls.

That was then. Now, almost everybody has a cellular phone, to the extent that phone companies must offer all sorts of inducements for landline subscribers, including super-low fees and quick (sometimes, “one-day”) processing. Imagine, from four years to one day. What a difference reform makes.

Still, the issue today is that the country could have progressed a lot more had the entire telecommunications industry been totally open to foreign investments. Today, we are no longer talking about monopoly but oligopoly or an industry dominated largely by two or three players. Had the industry been open just to anybody who wants to come in, Internet penetration could have increased, value-added services like voice-over-internet-protocol would have been common, and the brave new world of information revolution could have unfolded a lot faster to transform our lives for the better.

Indeed, what the country needs right now is a second wave of reforms that were started after the Edsa Revolution.

After the fall of Marcos, we saw the end to monopolies in sugar and coconut trading, telecommunications, and aviation. We had limited reforms in banking and retail. We allowed private participation in infrastructure development and water distribution. We liberalized international trade and reduced tariff and nontariff barriers to force our own industries to grow, mature, and become competitive. Somehow, Filipinos are reaping the benefits of these reforms through relatively lower inflation rates (which preserved much of the people’s purchasing power), greater options for consumers, and greater access to information technology. The privatization of the water distribution has hit a snag with the failure of the Lopez family and its partners to make their water concessions work and had to seek a bailout from the State. Nevertheless, water supply in general has ceased to become a daily gripe of Metro Manila dwellers, thanks to the better performance of Manila Water, and the increasing availability of potable water in general.

Nevertheless, the reforms are not enough because the post Edsa reformers failed to finish the job, either owing to ineptness or the stronger backlash from the country’s oligarchs, or, in some cases, a failure to draw the right kind of foreign investors or partners—meaning, flashy with no real money, technology or expertise and experience. Retail has remained the preserve of a few mall owners, thus discouraging the entry of foreign competitors that could have put greater pressures on local players to reduce prices and offer better or innovative services. The banks continue to behave like cartels, offering low uniform savings rates, while charging high interest rates to borrowers and credit card holders, thus turning off savers. Exporters and integrators continue to complain of high freight rates, saying it’s cheaper to buy corn from Argentina than ship them from Mindanao, and are blaming oligopoly and the one-port-one-operator rule as the main culprits. And of course, we continue to suffer from high power costs owing to the continuing failure to broaden ownership and control of power generation and distribution assets. The list is endless.

We need to pursue this second wave of reforms to improve the Philippine economy’s competitiveness and efficiency. There’s no other way this country could move forward as the results of the first wave of reforms following the Edsa Revolution seemed to have exhausted its promise. For long, wealth creation by the country’s economic elites has largely been through extra-economic means or political connections and undeserved favors from the state (like state-guaranteed monopoly or oligopoly position through high tariff walls, “fiscal incentives,” restrictions on foreign investments, among others). A second wave of reforms that will force the country’s economic elite to behave based on the dynamics of the market and competition would force them to be innovative, thus raising the entire country from the rut that we are trapped in right now.

A 5% GDP growth is no promised land!

WILL the government please stop crowing about the country’s 5-5.5 percent GDP growth rate achieved in the last few quarters?

Listening to the official town crier, it’s as if that level of growth we have achieved so far already corresponds to some satisfactory definition of the Promised Land. Well, the most conservative economist in this country, Dr Bernardo Villegas of the University of Asia and the Pacific (UA&P)—and also the most optimistic—said we need to grow 7-9 percent in order to raise the country’s living standards.

Last week, economist Josef T. Yap, president of the Philippine Institute for Development Studies (PIDS), a semigovernment think tank, said the 5- percent growth rate shown by the economy in the last several quarters proves that the Philippine economy is out of crisis. Nevertheless, at that level of growth, the Philippine economy has only been muddling through. The Philippine economy, he said, needs to grow as fast as China or India—7-9 percent in the next 5-10 years—if we are to see any real improvement in the people’s living standards.

In short, the threshold is 7-9 percent GDP growth rate. Less than that level of growth means we are in the same old kangkong economy—no offense meant to the lowly but nutritious leaf!

In the 80s through the 90s, when the Philippine economy could barely muster 3-4 percent, a 5-6 percent growth rate was almost a dream for the country. That was when the toast of the world were the tiger economies of Singapore, Taiwan and South Korea, then growing at 6-7 percent on the back of export-oriented industrialization. During those times, the Philippines was bouncing up and down in a boom-and-bust cycle until the post-Edsa Revolution reforms like deregulation, liberalization, and privatization started to show positive results: i.e., modest gains in telecommunications, transportation, aviation, utilities, finance, agriculture, and to some extent, manufacturing.

In the last 10 quarters, the Philippine economy has shown itself capable of growing at 5 or even 6 percent, owing to the continuing robustness of the dollar remittances from overseas workers, business process outsourcing, agriculture, and the transportation and communication subsectors. This figure, however, came at a time when the rest of the region, particularly China, India and Vietnam, are growing at 7-9 percent because of a surge of foreign direct investments in these countries. Besides, the current growth rates have proved to be unable to soak up joblessness, a major reason why people, including skilled workers from the middle and lower middle classes, are still flocking to foreign embassies to get visas for jobs abroad. Lawyers, cops, soldiers, journalists, accountants, doctors, engineers—practically every body else in the middle class—is taking up nursing so they could escape the seeming hopelessness and negativity in the country.

We are not playing down these seemingly decent growth rates. In fact, we acknowledge that these growth rates were rather fantastic given the extraordinarily difficult circumstances Filipino entrepreneurs and ordinary citizens are in. High power rates, an inept and corrupt bureaucracy, political instability, recurrent coup threats, the killings of political activists—they all continue to cast a shadow on the political landscape and it’s just so difficult to expand business and create anything in such a poisoned atmosphere. Added to this burden is the continuing deterioration of the country’s infrastructure because of the government’s continuing failure to invest in infrastructure development. Government, of course, has the money but it would rather use such resources in silencing or buying off critics, including the bishops, rather than spending them in an honest-to-goodness infrastructure development program.

The point being stressed here is that current growth rates have largely been achieved despite the worst of times. The credit goes to the private sector that has been doggedly doing business despite the odds, entrepreneurs in the outsourcing business who have been persistent despite the difficulty of finding English-speaking staff, the farmers tilling the lands despite the perennial lack of rural infrastructure and support services, and the OFWs who continue to send the money home despite high transactions costs. But their efforts are largely not enough to raise the economy to greater heights. And it would serve no purpose for the government to brag about it because the government does not even have any contribution to such modest improvements in the economy.

For a long time, some people in the private sector, sick and tired of the political deadlock, have been saying that all the country needs to do is stop minding politics and focus its energies on business. To some extent, that is correct. However, the current situation shows that private sector efforts could only do so much. There is a limit to what they could do. The government should take its responsibilities to heart by putting more resources and energy to building up economic infrastructure and competitiveness. Economic infrastructure is necessary to free up more entrepreneurial energies from the private sector. Of course, the government will have to address the sense of drift that is plaguing the country. It has to inject a new vigor, a sense of direction, and dynamism that should inspire investors and entrepreneurs. This should have been done decades ago, but it’s never too late to embark on such a program—and soon!

Call centers are lazy employers

THE call center industry here in the Philippines is one damn successful business. Nowhere in the world can one find an industry growing at 60-70 percent per year in the last five-to-six years. But it’s also such a lazy employer it is now shooting itself in the foot—at least that’s the view of very perceptive industry watchers. Surely, the Philippines need more of this business, probably double or tripe its size, but if the industry players keep pirating from each other, this budding industry will end up hurting itself and the country’s prospects for a better life for many Filipinos.

It’s the only industry in the world where recruits get paid even before they start working. That’s nice really, except that they just actually hire from each other. Most call centers these days are transforming each of their staff members into petty headhunters by dangling 3,000 to 10,000 prize money for each staff recruited. And who do these people usually recruit? Their friends and former classmates who happen to work in a call center in the adjacent buildings. They even send recruiters into the foyer of each other’s buildings to distribute calling cards just in case a call center agent would be interested to transfer. At the rate they are doing that, one could actually accumulate cash and build a “career” playing rigodon with different call centers.

Certainly that is a funny story. But it’s not funny when you think of the consequences.

First, call centers are encouraging job-hopping and high attrition rates. That’s a prescription for disaster. Second, it sends the wrong message to potential investors who are thinking of investing in the Philippines. This country needs more investments and yet what these call centers have been doing is cry in public that they only have 3-8 percent hiring rates, that the attrition rate is 20 percent, that the country is now suffering from a crunch in skilled labor, that the country’s educational system is deteriorating—the list of complaints is endless.

And yet, most of these call centers must share the blame for this sorry state of affairs. By resorting to cut-throat competition in hiring, they have encouraged their workers to be footloose, nay, even to consider jobhopping as a virtue, and the traffic in jobhoppers as a lucrative sideline. Now, karma has caught up with the “pirates.”

More crucially, they hardly invest in the training of their staff. They don’t provide them career track, no employee retention plan, no long-term human resources plan. They don’t give their employees the chance to dream with them. Ask any call center agent these days if they intend to make a career out of call center work and most of them will say it’s just a temporary job for them until they find a “real job.” These people of course are in their early twenties who are still figuring out the meaning of their lives and their own places under the sun. But the real reason for their vagueness about their plans is that their employers simply look at them as a blur in the outsourcing horizon who come and will soon be gone. Getting this signal from employers, why should they then consider themselves as having a long-term stake in one call center?

The huge mistake of call centers here is that managers have simply copied the human resource strategy in the US where the bosses are resigned to the idea of losing in the afternoon the people they hired in the morning, like the mists that fade as the temperature rises. You reap what you sow.

It’s good that other cyberservices industries are wise enough to really think through, this early, their human resource strategy. Lately, we have heard about huge companies doing back office operations here that are really investing huge money to train their staff. They give them hope and let these young people dream dreams with them. Yes, some even sending their staff to take master’s degrees abroad. No wonder back-office operations businesses are currently growing like mad. In the first half of this year, about 7 out of 8 new huge investments in outsourcing in the country were into back office operations or shared services.

Of the eight new investments only one is a call center—too bad because we need more of them to create more jobs. Right now, the entire cyber services industry employs almost 200,000 people. Government hopes the industry could accumulate about a million jobs by 2010. Without new big-ticket call center projects, however, we can hardly achieve that target.

But one should not wonder for this less interests from investors to put money in call centers. In the last few months, Newsweek and Asia Times Online were quoting executives of call centers complaining about the skills crunch in the country. Surely this information has negatively affected the decision of investors to rethink setting up shop in the country.

Certainly, the complaints about the deteriorating English-language skills and the poor school system are valid. The government indeed should do something about it. But call centers should do their own homework by adopting a better human resource strategy, investing in skills training, providing career tracks for their staff, partnering with schools and universities, and looking at their employees as a precious resource. They should continue pestering the government about the investment environment but they should also exert all efforts to develop concertedly the industry’s human resource. After all, they are the ones who are going to rake in money should their operations succeed.

Call centers should stop whining and get real.

A credit rating upgrade despite...

LET’S be happy that the Japan Credit Rating Agency, Ltd (JCR) has recently upgraded the country’s foreign currency rating from BBB-/Negative to “stable.”

Theoretically, an upgrade means that the country could borrow money at favorable terms, thus reducing the cost of capital needed to boost the performance of the Philippine economy. The JCR identified three positive factors for the rating, namely, good policy management, relatively stable economic performance, and relatively sound foreign liquidity position. Other positive factors cited include a 5.5-percent growth rate in the first quarter, the recovery in exports, and a slight decline in fiscal deficit in January to May this year. JCR has also identified several lingering problems like political instability, weak fiscal position, and poverty but, apparently, the ratings agency thought the positive outweighs the negative.

It’s actually the second upgrade from JCR this year. In April, JCR had upgraded its ratings for the country’s domestic currency from BBB-/Negative to stable, owing to factors like President Arroyo’s survival from impeachment charges and coup attempts, and the implementation of the expanded value added tax.

That’s one rare good news that Filipinos need to savor because, in a sense, the upgrade could also trigger an improvement on how foreign investors look at the Philippines as an investment destination. Hopefully.

What is funny though is the government’s reaction to the new ratings. No less than President Arroyo herself said that the new rating is proof of the soundness of the tough economic decisions she had made to improve investor confidence in the country.

In truth, there’s nothing really there to indicate that improvements in the economy were due to government policy decisions. Factors like “good policy management” sound so hollow in the face of the government’s failure to pass the budget, its inability to provide leadership for the passage of the fiscal rationalization bill, and its continuing failure to provide money for infrastructure development.

“Stable economic performance” is certainly valid with the 5.5-percent growth rate in the first quarter and it seems the trend is likely to continue in the second half. Again, its something that could never be credited to better governance as the growth figure has, in the last 10 quarters, largely been underpinned by the ever-growing dollar remittances from overseas Filipino workers.

The recovery in exports simply reflects the recovery of global demand for electronics that comprise more than 70 percent of the country’s exports.

Investors have been complaining about the country’s rickety infrastructure and yet our national income accounts reflect the government’s continuing failure to boost investments in much-needed roads, bridges, schools, research and development that are needed to enhance competitiveness. Same with “sound foreign liquidity position”—it’s all about rising remittances from people who in the first place have escaped the Philippines to find better employment opportunities beyond the shores.

The ratings upgrade, therefore, is really just a case of people trying to make the best out of everything regardless of constraints. To some extent, the Philippine economy has developed certain firewalls against the political turmoil. However, this is largely due to the growing globalization of certain sectors of the Philippine economy, a trend that has nothing to do with how well the government runs the affairs of the state. In fact, these globalized sectors of the economy—exports, migrant labor, outsourcing, among others—could have grown a lot faster had poor governance not got in the way.

The key factor that could really make a difference is improvement in governance and, sadly, they remain in the “negative” side of the balance: political instability, weak fiscal position, lingering poverty, among others.

Are there clear efforts to effectively address the inadequate infrastructure system? Are there consistent efforts to reform and upgrade the education system? Are there sincere efforts to address leakages in tax collection system besides imposing more taxes? Are there consistent efforts to address poverty? These are all questions that the government needs to show good records on before it can really claim credit for improvements in credit rating.

Potentials of biopharming

It’s nice to hear that the government, particularly the Department of Agriculture and the Department of Science and Technology, are getting serious about biopharming. They have made the right move; it might just be among the most important things that could really make a difference in our sisyphian struggle for progress, respect, and recognition in the global community of nations.

We are not hyping here. No less than Henry Miller, biotechnology expert and a fellow at the Hoover Institution and the Competitive Enterprise Institute would attest to the Philippines potentials in this emerging technology.

Biopharming refers to the use of “gene-splicing” techniques to program common crops plants like rice, corn, and tobacco to synthesize high-value-added pharmaceuticals. Plants are harvested and the drug is then extracted and purified for various applications including vaccines for certain ailments like typhoid fever, rabbies infection, and human immuno deficiency syndrome (HIV) as well as chemicals and lubricants.

In a dialogue with the local media a few months ago, Miller said that the Philippines has the critical mass of scientists and experts to go full blast in biotechnology. The country has actually generated a lot of success stories. One example is the papaya industry that was almost wiped out by the papaya ring spot more than a decade ago. In response, the Filipino genetic engineers responded by developing varieties that are resistant to the disease, thus saving the industry. Currently, we heard that Dr Nina Barzaga, a biochemist from the University of the Philippines Manila has made breakthroughs in developing possible cures and vaccines for typhoid fever, rabbies, and HIV-AIDs.

Recently, the DA has announced the successful production of the “Super Buffalo” through cloning as well as the development of pest-resistant variety of eggplant, better-tasting and faster-growing bangus (milkfish) and tilapia, vitamin enriched rice, and virus-resitant coconut and tomato.

In summary, the Philippines has the “intellectual capital” to succeed in this emerging sunshine industry. The truth is that we could actually be a major biotechnology center in Asia and the world if the country’s leaders in both the private and the public sector could really put their minds into it. Besides possessing the skills and science, the Philippines has the biodiversity, the flora and fauna, that could serve as inputs in biotech processes. All that the country needs is greater resources from the government and the private sector. If only the country’s taipan’s could really cough up more money for biopharming besides their investments in malls and real estate, these taipans might yet propel this country up the ladder of progress.

Remember that the Philippines has already missed the manufacturing revolution. More than 70 percent of the country’s merchandize exports are accounted for by electronics and semiconductors. The country’s services sector is also doing well, thus providing more boost to the country’s gross domestic product.

These industries are providing millions of jobs but by themselves they are not yet strong enough to soak up joblessness in the country. Simple: electronics and semiconductors are highly import-dependent; they don’t have significant linkages with the rest of the economy, thus constraining their job-creating capabilities. Also, jobs in the services sector are urban-based and require highy-skilled professional and technical staff, thus limiting the benefits of the sector’s its impressive growth to the professional and the middle classes. This trend suggests that other sectors, specifically the farm sector, should step up and provide more contributions in terms of value added and the creation of jobs. And what better way to achieve this than a more serious drive for excellence and competitiveness in biotechnology, particularly biopharming?

With biopharming, the country could have two birds in one shot. Surely, a vibrant biopharming industry could mean greater involvement of the rural sector while mobilizing the talents of the country’s pool of scientists.

Time is of the essence here. In the last few years, the Philippines has been suffering from the diaspora of skilled professionals including scientists. We have seen the hemorrhage nurses, doctors, doctors who became nurses, engineers, information technology professionals, pilots, aircraft mechanics, geologist, and accountants. If the country’s leaders from both the government and the private sector could take advantage of this opportunity, the country’s scientists may eventually leave especially if they have started to feel the absence of worthwhile biotech projects to work on. China, India, Singapore, Europe, and United States are scrambling on their feet to jumpstart their own biotech industries. Sooner or later, these countries will just harvest our local scientific talent pool if local scientists are not put to productive and rewarding use within the country.

Doha round as dead thing walking

BY the looks of it, the Doha round of trade negotiations dubbed as the “development round” is dead. By end of this month, US President George Bush’s presidential trade-promoting authority expires, making it difficult for America to take the lead in negotiating for a global reduction in barriers to trade. It’s called the “development round” because, according to a World Bank study, a reduction in agricultural tariffs and subsidies could raise global exports by $300 billion, thereby lifting lots of countries in the developing world out of poverty.

Certainly, it’s so easy to blame members of the European Union, particularly France, for their reluctance to reduce agricultural trade barriers and subsidies that are hurting lots of farm exports from the developing world. They actually offered to cut farm tariffs by 40 percent, but with the caveat that they be allowed to put at least 160 products into the sensitive list, thereby making these products beyond reform. The Americans also share the blame for not showing leadership in the trade negotiations at a crucial time when the rest of the developed world is having problems with the recent successes of China and India in the exports of manufactured products.

But certainly, the blame really should be equally shared also by the major players like India, China and Brazil as they have been reluctant to open their markets for industrial goods, something that could promote South-South trade deemed beneficial to other developing countries as well.

One should note that China, Brazil and India are the leaders of the Group of 20 that have largely benefited from rising agricultural exports in the last decade since the formation of the World Trade Organization. China has also been the major beneficiary in the global liberalization of manufactures, its success causing worsening trade deficits in the US and many parts of the world. And yet, China has not been willing to liberalize its services, particularly telecommunications and banking, where the West has keen interest and competitive advantage. Negotiations are a give-and-take but if one would only want to take, the talks are sure to bog down the way it is unraveling right now.

Where does that leave the Philippines? The Philippines is part of the G20 but one wonders what sorts of benefits Filipinos get from its membership. Beside mangoes, asparagus, pineapples, and bananas, the Philippines really does not have significant volumes of agricultural exports to the EU and US. On the other hand, the failure of the Doha Round means that high tariffs for the Philippines’ sensitive agricultural products like rice, corn, livestock and poultry, sugar are going to stay. That probably explains the Philippines’ ambivalent attitude about the entire process. Our negotiators, mindful of the pressures from local vested interests and the anti-globalization activists probably don’t give a heck whether or not the Doha Round pushes through.

That’s a pity because the collapse of the Doha round would surely threaten the raison d’etre of the entire multilateral trading system. A worst-case scenario could be the unraveling of the most-favored nation approach to trade negotiations (i.e agreements agreed by two parties automatically applies to all members of the World Trade Organization), replacing it with bilateral talks that would certainly favor countries with greater political clout and economic influence. Without an effective global framework for addressing trade liberalization issues, countries are likely to settle trade disputes through litigation, a costly process that works in favor of the rich countries.

One might ask that if indeed “free trade” is a win-win situation, as its advocates would say, why are these countries that are supposed to benefit most, the ones that won’t budge to make way for the successful conclusion of the Doha round?

Simple: it’s politics. All countries joined the WTO with a clear understanding of the economic benefits of trade liberalization and globalization but they do come to the negotiating table behaving like 18^th century beggar-thy-neighbor mercantilists. Negotiations are like theaters where negotiators play to a gallery of lobbyists and interest groups at home. Their performances are judged by the concessions they gain and not the compromises they made to make the entire process succeed.

But ultimately, those talks are likely to revive again once the new crop of political leaders with fresher mandates and less political trauma rises in a year or two after new rounds of elections. The $300-billion rise in global exports is just too huge an economic benefit for global trade to miss. That means the Philippines should look at the lull as a period to strengthen the country’s competitiveness by building economic infrastructure like irrigation, road, bridges; introducing more competition in inter-island shipping to reduce cost and enhance efficiency in the economy; and reviving the education system. Yes, the failure of the Doha round is an even stronger reason for the Philippines to do its much-delayed homework.

Escape from the Philippines

OUR policymakers are probably thinking that the current diaspora of nurses is all about nurses and doctors leaving the country in droves, which is bad enough. Recent information gathered by the Research Staff indicates that there are now certified accountants, lawyers, cops and former cops, engineers, remote sensing experts, computer programmers, mathematicians, statisticians, teachers, biologists, soldiers, journalists, and bankers who are taking up nursing.

In short, it’s practically the entire professional class—the knowledge workers—who are taking nursing and we could assume it’s just another way for them to escape the Philippines. And there are a thousand and one ways of doing so: as mercenaries, computer technicians, welders, domestic helpers, entertainers, construction workers, graduate students, and what-have-you.

One day, our business and political leaders will awake to find the best brains around are no longer there—gone to all those nooks and crannies of the world where their talents are more appreciated and their future secure. Yes, even if part of the price they pay for this is to give up their original professions to take up the skills more marketable in the world, nursing. That scenario is not just a nightmare of perception—it would be bad for a Philippine economy that has been muddling through, because the skilled workers who have a better chance at getting it out of this rut will no longer be there.

Certainly, economic factors are one of the main driving forces for this trend of professionals leaving both country and careers just to be nurses. After all, this is the brave new world of globalization where borders are crumbling and dreams for betterment are no longer constrained by friction of distance. But knowing the character of the Pinoy—the love for the family, romantic attachments to friends and sweethearts, the penchant to hang around with barkadas—the professional Pinoys wouldn’t leave if only he or she still sees good prospects for economic and social mobility in this country. Apparently, with the constant bloodletting—literally in the streets as killings go on with impunity, and symbolically, ub the political arena, the professional Pinoys don’t see anything promising or worth staying for.

In short, the diaspora of the professionals is an indictment of the entire country as a system. The System can no longer respond to their dreams and to their aspirations for a better life for their offspring. The ideals of serving the Motherland have been totally replaced by a desire for sheer survival. And who can blame them? When prospects are dire, one could only think about the family; and the prospects of seeing one’s child suffer the same sense of hopelessness is enough to drive every Filipino to foreign shores.

In fairness, the Philippine economy has been growing pretty well in the last 1- quarters. The 5-6 percent is quite decent, but economists like Dr Joseph T. Yap of the Philippine Institute of Development Studies (PIDS) say that that level of economic performance is not enough to improve the Filipinos’ standard of living. That growth rate, Yap says, indicates we are not in dire straits, yet it’s also not enough to lift us out of poverty. Nakakaraos lang nang konti. And that is not the kind of environment that would nurture the talents of those among us who have great dreams for themselves and their families. If we have to restore confidence in the future, the country, according to Yap, needs to grow at 7-8 percent in the next five years to really make a difference. Given the current political environment, that’s a tall order and it’s fair to expect the diaspora of the country’s professionals will only get worse before it could get better.

But there are actually a lot of things that the government and the private sector could do to lessen the number of professionals escaping to foreign shores. For instance, there’s really a great need for the private sector and the government to review the way we determine wages. For so long, politicians and bureaucrats have thought of the minimum wage workers whenever they adjust workers’ pay in response to economic shocks like the sudden rise in oil prices. Since the pay scales of skilled professionals are always a little bit higher than the minimum wage rates, they are usually excluded from the wage adjustments despite their strategic and greater contributions to their companies and organizations. Thus, over the years, the pay levels of skilled professionals have been deteriorating in real terms, forcing them to seek employment opportunities abroad.

At the surface, business leaders don’t notice this disillusionment among their knowledge workers because, as usual, they report to office in their Sunday best. But increasingly, many of them are leading secret lives: knowledge workers by day and nursing students by night. And on free time and weekends, they trawl the internet job sites for the latest job offers abroad, scan job advertisements in newspapers, hoping they could find that all-important break. And someday, because they are skilled people, many of them might just succeed.

Sad but true. It’s time policy and decision makers both in the government and the private sectors come to terms with this problem before it’s too late.

Dysfunction in Philippine shipping policy

IS the Maritime Industry Authority (Marina) a defender of public interest or a lobbyist for the shipping industry? Marina’s leaders had better figure that out because it appears it’s behaving more of the latter.

Late last week, Marina, a government agency tasked with regulating the Philippine domestic shipping industry, announced it will soon cut the number of vessels plying the same route “to stop cut-throat competition among shipping companies” and “reduce inefficiencies” that should supposedly lower cargo handling rates. “We have to limit business cost to the lowest possible figure so that we could maintain current rate levels if not reduce or prevent rate increases altogether,” said Vicente Suazo, Marina administrator.

That statement is interesting because if indeed Marina wants to raise efficiency in the industry and reduce shipping charges that are penalizing shippers of goods all over the country, that best way to ensure that is by introducing competition. Economics 101 says that only competition can force producers and suppliers of goods and services, shipping included, to make their operations more efficient and cheap. What Marina is trying to do, it seems here, is to encourage the formation of monopolies and oligopolies in the shipping industry—basically, just the forces that make the industries inefficient and uncompetitive, thus penalizing the growth of other sectors in the economy.

For so long, shippers in Mindanao have been complaining that they could not make much headway because of prohibitive freight charges. The common anecdote among the country’s poultry and livestock integrators seems to be, for instance, that it’s cheaper to import corn from Argentina than ship the same product from Mindanao—essentially because of the oligopolistic nature of the domestic interisland shipping industry.

It is the nature of these complaints that forced the government to deregulate the country’s shipping industry in the early 1990s. And indeed, analysts have noted a substantial improvement in the quality of service provided by shipping companies. Marina’s recent policy pronouncements therefore tends to reverse these gains, and bring us back to the days when most routes were operated only by one shipping firm, resulting in sloppy services and prohibitive freight charges. In fact, what Marina should do is continue the momentum of the reform process so the country could have a competitive shipping industry that provides efficient service to the rest of the economy.

Marina’s recent policy backsliding came following complaints by certain big shipping companies that “cut-throat competition” is hampering the growth of their businesses following the introduction of the roll-on/roll-off vessels. But the right response is not to remove competition but to examine the overall policy environment that has been hampering the operations of the market forces. And surely, there are still a lot of policies out there that need to reformed to ensure a more competitive and efficient industry.

For instance, the government still regulates the third-class passenger service and requires ships to devote 50 percent of passenger capacity to third class, thus making passenger ships uncompetitive vis-à-vis the cargo-only vessels. Another government policy that is stifling the shipping industry is the ceiling on return on incentives. Certainly, a ceiling on ROI deters companies from providing a better and more efficient service because the returns may not be commensurate to the level of service rendered. It’s also a disincentive to would-be investors. Of course, deregulation would allow shipping firms to raise their fare and freight charges, but at least they cannot do so indiscriminately if the industry is open to foreign competition and they would have to reckon with possibly more efficient players and lower rates. Yes, total deregulation that should include the lifting of the “cabotage law” is the key.

Abolition of death penalty amidst the slaughter of the innocents

PRESIDENT Arroyo’s signing of the law that abolished capital punishment has been billed by critics as simply a show to please some clerics living in Rome. That may be so, but at least she had the candor to credit Congress with rushing the law that gave her a fitting enough “gift” when she meets the Pope. Now, we join the ranks of countries enlightened enough to realize that the death penalty can never be a proper means for exacting justice—especially in countries like ours where the justice system is still ages away from reforms that ensure the guilty get caught, regardless of their station in life and influence; that they get punished; and that the victims get redress.

That said, while the repeal is something to celebrate about, the truth is that it won’t improve our daily lives just yet. The sense of fear that we feel as we walk the streets day or night, won’t fade away like the hot summer for as long as the country’s law enforcement and judicial system remains ineffective.

Still, on the surface, there seem to be at least three major reasons why we should be happy with the abolition of the death penalty.

First—it’s a worldwide trend. Data from Wikipedia suggest 88 countries, including the Philippines just recently, have abolished capital punishments for all offenses and 11 for all offenses except under special circumstances; 25 others have not used it for at least 10 years while about 72 countries retain it. In the developed world, the United States and Japan still have capital punishment but the Europeans have constantly been castigating them for that.

Second—death penalty has long been used by authoritarian governments worldwide both as an instrument to enforce social order and as well political repression. Sri Lanka recently ended its moratorium on the death penalty while China, Singapore and Iran are still using it regularly. In 2004, for instance, China performed 3,400 executions, accounting for 90 percent of the total. In terms of execution per capita, Singapore has the highest, about 70 hangings a year for a population of only about 4 million. The point here is that we should have forsworn this barbaric a practice long time ago.

Third, it’s just as well we abolished death penalty because our justice system and the law-enforcement agencies are weak and ineffective and it’s highly probable that a significant number of those people convicted of crimes punishable by death are poor and innocent. Many of them are probably victims of frame-up and corrupt lawyers or judges, or simply by harassed bureaucrats who let their cases fall through the huge cracks of the system—thus causing many detention prisoners to suffer for years in periods far exceeding the penalties for their alleged offense, assuming they were guilty.

Still, there’s a huge dark cloud hanging over the initial celebration for repeal of the death-penalty: the unabated killings—with impunity—that have victimized dozens of activists and political followers, journalists and lawyers and judges around the country.

In reality, the death penalty still operates in the land with the continuing deaths of the leftists, crusading journalists, and suspected rebels. And this is the worst kind of “death penalty” as the killers have become the judge, jury, and the executioners. In the court of law, suspects—even defended by the dumbest lawyers—would still have a chance to win acquittal. Under the current political environment, leftists and suspected rebels or rebel sympathizers, are dead men walking—deprived of the chance to argue against the triggerman whose “mission” is only to kill the “enemies of the state.” Add to that climate of impunity the long list of journalists and lawyers and judges who have been killed the past two years, notwithstanding the “shame campaign” to which we have been subjected to by various international human-rights groups and fact-finding teams. These foreign groups cannot reconcile our image as Southeast Asia’s only “real democracy” with the way we allow our activists, journalists and lawyers to be killed so brazenly—and their killers to get away so easily. Imagine, last year the Philippines was billed as the second most dangerous place in the world for journalists to practice in, next only to Iraq.

Meanwhile, to make matters worse, the government has lately warned that citizens who “coddle” rebels and subversives would also be legitimate targets for government troops who are out to run communist rebels to the ground. The reality in the rural areas is that people are often forced to give food and shelter to anybody, especially those who bear arms for fear of reprisals. That would make them targets by government troops who are just too eager to pull the trigger.

The government may have abolished the death penalty officially, but it seems the slaughter will continue for much longer.

Perks for those who don't need them

THAT we need investments, both foreign and local, is not the issue in the debate about fiscal incentives in the Philippines. We have been stressing that the Philippines needs everybody’s help, including those of foreign and local investors, to develop this country. Whether or not fiscal incentives are the best way to achieve them, however, is the real question. Our position has been consistent and clear enough—that there are better and effective ways to promote investments other than fiscal incentives. The Federation of Philippine Industries (FPI), for one, has made a good case of the more important tack of lowering the cost of doing business than, say, haphazardly giving income-tax holidays.

Admittedly a few fiscal incentives, well-thought-out and validated by experience, may do the trick, but these are rare. Moreover, there are ways to reform the system that do not disrupt the operations of those who are already doing business within the country’s borders and have enjoyed such perks.

How? Remember that fiscal perks, say tax holidays, are time-bound and constitute, in effect, a contract between the government and the investors. The government therefore will have to allow them to complete the full terms of those projects, providing safeguards against abuse while Congress is reforming the system that has been draining the country of substantial forgone revenue.

Our main problem with fiscal incentives is the ease with which they can be easily abused to the detriment of the public. The BOI, through its Investment Priorities Plan, has been granting incentives to certain industries, without a clear and strategic view of what it wants to achieve for the country. To attract investments? Certainly it has fallen below expectations here. To spread investments in the countryside? It has failed in this regard also because fiscal incentives are not likely to counteract serious barriers to investments like poor roads, peace and order problems, and other constraints borne out of the structural problems.

Do we need to promote export? To promote tourism? Or information technology? Definitely yes. But according to Prof. Renato Reside of the UP School of Economics, 95 percent of the overall value of BOI investment portfolio is not exporting. It’s not IT-related. Neither is it tourism-related.

These statistics mean that those who got the perks are mostly those who don’t need them or would have invested just the same because there is simply too much money to make with or without the perks. Reside says that companies investing could be classified into domestic market-seeking, resource- seeking and efficiency-seeking, and the first two are simply redundant ones that don’t need the perks. In a word, the good professor says that a regime of misplaced incentives” is largely to blame for deepening poverty in this country.

In a saner context, industries like telecommunications, mining and real property development don’t need the perks because they are just too profitable and redundant. Yet most of these projects got the perks for some reason that only the BOI and PEZA can explain. The result is that the government is not collecting the money that the country needs to finance development. Lacking the money after giving all the perks to rich, the government instead is squeezing the general public—nay, the fixed-income employees—as well as the consumers to fund the operations of the state through higher income and value added taxes. As one analyst put it, this seems to be the case of a government that gave the money to the rich and then squeezes the poor.

Who determined which industries needed these perks? They are unelected bureaucrats of the BOI, Peza and other government agencies—and the apparent irrationality in some of their decisions have inevitably led to suspicion in some quarters of collaboration with certain vested interests. The suspicions could have been quelled if the basis for their decisions were clear. Nobody seems to know such, however, because these institutions are never transparent.

If mining, real estate development, or telecommunications deserve the perks, why not the lowly sari-sari store at the corner street? Certainly, everybody else—including the magbobote and magtataho—also deserve the perks. But if everybody else deserves the perks, then we might as well abolish them so we could collect taxes from everybody; and so that government can have enough money to spend for the betterment of all, not just a few who are already so rich.

At some point we need to stop institutionalizing favoritism in the country’s economic policy. The way BOI and Peza are running things really looks like it’s rent-seeking plain and simple. In harsher terms, it may be wealth creation through bureaucratic corruption.

The Senate right now is reviewing the country’s fiscal incentives laws to “rationalize” them. We suggest that the Senate form a panel of independent experts to study extensively the country’s fiscal incentives system, including how the BOI and Peza have been implementing them. We suspect they are going to find tons of worms that are gnawing at the guts of the country’s economy.

Abolish the fiscal perks!

THE controversy regarding the granting of fiscal perks by the Board of Investments (BOI) to Smart and Globe for their 3G projects simply confirms what economists have been saying all along: many of the incentives, even before the 3G controversy broke, had been found redundant; many of those industries would have set up shop in the country with or without them; and worse, the indiscriminate grant of perks probably provide just another avenue for graft and corruption. The Philippines has been suffering from a continuing fiscal crisis yet the government—in some misguided belief that all we need to do is dangle those perks to attract investors—refused to collect the taxes that could have gone to financing development.

The Senate right now is thinking about “rationalizing fiscal incentives” by doing its own review of the bills as approved by the House; it might as well look into the possibility of abolishing them and replacing the incentives with a low and uniform corporate income tax to remove bureaucratic participation in the private sector’s investment decisions.

For a long time, analyst after analyst has been telling policy makers that the grant of fiscal perks is not the answer to the lack of investments in the Philippines. Studies have been saying the determinants of investments generation are adequate infrastructure, stable and predictable macroeconomic policies, political stability; effective investments promotion, and good governance. And yet the government has been clinging on to them; legislating hundreds more laws granting perks to every Tom, Dick and Harry. Ask anyone from the government’s planning bodies how many laws and executive orders granting fiscal perks and chances are—and they don’t know. Yes, there are hundreds of them and not anyone in the government knows what firm got what fiscal perks from what law because the system has become so tangled, one could only suspect some people out there in the bureaucracy are making huge money from doling them out to the cronies, clients, and friends. And of course, from that confusing tangle, it’s so easy for some crooked bureaucrat to make money too. For decades, government has been granting them yet we really have nothing to show for it. How much investment do we attract each year? Just below a billion dollars. And our Asian neighbors? About four to five times as much. It’s really nothing but just another venue for “bureaucrat capitalism” or an institutionalized rent-seeking.

In simple terms: gatasan lang talaga ang estado! Why do we suspect this? Because of the total lack of transparency with which fiscal incentives are being administered. Try asking about the criteria by which BOI and its sister company administering those fiscal perks, the Philippine Economic Zone Authority (Peza), as well as several other government agencies, grant those perks; ask for the relevant documents and you wouldn’t get anything. Confidential information, they will say. Peza, for instance, won’t give you basic information like project costs and employment generation per project. They are supposedly public documents, yet these government agencies are guarding such information and documents like hungry dogs. Why? Because they contain truth that’s better not shared with the public?

The government has been trying to rationalize fiscal incentives in the last three decades. But every time policy makers did it, they always ended up messing the issue even more. Why? It’s because there has never been any honest-to-goodness or truly independent study of the policy and how they are being implemented by bureaucrats. In the last two to three decades, it’s clear that these perks never came close to achieving their objectives, yet policy makers and legislators seem to believe that all is well. Well, all is not well and it’s high time legislators look at those with critical lenses.

Here’s our recommendation: First, the Senate should commission an independent group of economists to analyze those perks. These technical people should examine the costs and benefits of having those perks and how government agencies are implementing them. With the tangle of laws from which anybody could claim fiscal perks, it’s highly probable some of those businesses are making business out of double-dipping. The study team should look at this angle as well. And while this is being done, the government should stop granting those perks until a better policy takes shape. At the same time, Congress should also require BOI, Peza, and other incentive-granting agencies to open all documents for public scrutiny to ensure transparency. Only then should the Senate continue deliberating on the fiscal incentives bill once the senators have all the right inputs.

Or better still, the Senate might as well just abolish the fiscal perks— including the BOI, if you ask some critics. In lieu of this body, an investment promotions agency could do the work. Lately, the Federation for Philippine Industries (FPI) has called for a lower corporate tax in lieu of the fiscal perks to lessen opportunities for rent-seeking and corruption among bureaucrats. That proposal makes sense. Those enjoying incentives right now could be given a transition period to adjust to a new policy regime (i.e., low corporate tax, no fiscal perks). They would even welcome it because under this new policy regime, companies could do business without having to see the faces of bureaucrats to make their investments going. Hong Kong and Ireland, which are less corrupt, have done this and they are now attracting more investments than the Philippines.

Indeed, abolishing the incentives system as currently constituted is necessary to give some sense of social justice in this country. Otherwise we will remain the only place on earth where the middle class, or the aspiring middle class, are squeezed through taxes while the rich wallow in fiscal “perks.” No wonder the middle class would rather leave for foreign shores.

Government should get real on car pooling

WILL the country’s transport managers please get serious with car or van pooling? It’s the best way to help reduce the stress of rush-hour commuting that perennially plagues private and public sector workers.

Consider this scene every morning in Bacoor, Cavite: between 7-9 am, commuters are standing by the road hoping to get an AUV or FX taxi that could bring them either to Lawton in Manila, Baclaran or Makati. (This route is not served by public transit like the bus because traffic volume is high only during rush hours and therefore not a economically viable route for a bus franchise.) Once the FX arrives, commuters swarm around the vehicle like locusts, jostling and snarling at each other in order to get a seat. Those who are not quick enough continue waiting for the next FX, hoping they could have a seat next time. Those who are in a hurry are forced to hail a taxi and spend hundreds of pesos of their hard-earned minimum wage. Those who can’t afford the taxi take several jeepney rides to the next transport breaks, hoping to get another public utility vehicle to their destinations. These people end up taking three or four rides to get to their office, arriving to their offices late, their wallets drained, disheveled, tired, with low morale, and smelling like stevedores at the North Harbor.

This scene is repeated in other bedroom communities all around Metro Manila each day. Yet the government’s transport planners and local government units behave as if these things never happen. Worse, they seem to believe that this harsh commuting life for workers, mostly lower-middle-class cubbyhole dwellers, is just another fact of Philippine life that the unlucky ones have to put up with each day. It’s time the government, particularly the Department of Transportation and Communications, looks at this problem carefully.

The last decade saw the proliferation of “bedroom communities” at the fringes of Metro Manila as well as the towns bordering the National Capital Region (e.g. Antipolo in Rizal and Bacoor, Dasmarinas, and Imus in Cavite; and San Pedro, Binan, and Calamba in Laguna; and several towns in Bulacan). They are called bedroom communities because they cater to the housing needs of employees from the private and public sectors working at the NCR. They are literary called bedrooms because each day, hundreds of thousands of employees shuttle home at night for rest and sleep and return the next day to their work in Metro Manila’s central business districts.

Imagine commuting for four hours each day from home to work? Yes, that’s the average time many of them spend each day—two hours in the morning from home to office and two hours back home—because of traffic congestion, inefficiency of the transport system, bad roads, and poor traffic management. It’s a horrible and backbreaking labor, especially for those who don’t have aircon private vehicles—not to mention the health hazard, as proven by abundant anecdotal evidence of commuters getting kidney-related ailments from having to control their bladders for hours on end. And they comprise the vast majority of these harassed commuters.

In Europe and America, commuters are largely middle-class professionals who have nice cars and SUVs. They are in the suburbs because they have the money to afford the best of both worlds: a nice, high-paying job at the city center and a nice sprawling house at the suburb where they could have barbecue and party by the pool on a weekend.

In the Philippines’ megacities, particularly in the NCR, home-office commuters are largely poor minimum wage earners who have no other choice except to get a crowded box of a GSIS-financed house in some backwaters of Cavite and Laguna. The rich ones here also have the best of both worlds: huge houses and condominums in posh enclaves of Bel-Air, Valleverde, Loyola, and San Miguel so they don’t have to share the crowded highways with the riffraffs on weekdays, while maintaining palatial homes in Tagaytay where they hie off to escape the pressure of urban life during weekends and holidays. The point here is that this oppressive commuting is largely victimizing the poor and the powerless, something that the government should address immediately as a matter of social justice.

Necessarily, the woes of commuting are transport congestion problems that are better solved through a combination of measures like traffic demand and supply management (e.g., “number-coding,” maximization of vehicular flow through land use restrictions, improving road networks, among others). But there are practical, doable things that the government can do that does not require public expenditure. One of them is the institutionalization of car or van pools within mega-Manila, comprising the NCR and adjacent provinces like Bulacan, Rizal, Laguna, and Cavite. It’s a commonsensical thing that blends well with the Filipino culture of pakikisama and bayanihan. Sad to say, DOTC continues to ignore this practical measure. In fact, the government discourages this practice. Regularly, the traffic cops arrest and penalize those who take their neighbors in their vans to their destinations for being “colorums” or without franchise.

The solution to this, of course, is giving more franchises to more FX and AUVs, but the DOTC has been deliberately limiting the number of franchises supposedly to prevent traffic congestion. In reality, the DOTC wouldn’t really know the optimal number of franchises for lack of data and planning. Yet this discriminatory policy has been victimizing hundreds of thousands of commuters each day. If DOTC indeed can’t grant more franchises, therefore, it had better institutionalize van or car pooling to address this perennial problem of transport shortages during rush hours in bedroom communities. It’s only a matter of changing its mindset— from that of a cop eager to command and control the transport system to a service- and people-oriented institution that is willing to serve people’s real needs. Once this change in mindset is achieved, the implementation aspects are minor details that could be solved through common sense and experimentation.

Pinay diaspora

Mao Zedong once said that women hold up half the sky. In the Philippines, they may actually hold up more, probably seven-tenths. That’s if we consider overseas employment that pumps in more than $12 billion into the local economy and keeps the Philippine economy afloat.

Everybody is probably familiar with the usual refrain about OFW remittances. We know for instance that personal consumption expenditure (PCE) accounts for more than 70 percent of the country’s gross domestic product (GDP). Any movement in PCE therefore could either push down or boost the economy. In the last several years, the country’s GDP has been growing within the range of 5-6 percent, courtesy of buoyant PCE.

In practical terms, robust PCE means people are buying food, beverage, appliances, cellular phones, vehicles, and services thus giving life to factories, offices, restaurants, and shopping malls. It also means people are sending their children to school. You might think our “industrialists” and “tycoons” are providing wealth to the nation by having these factories, telecommunications facilities, and shopping malls. False. It’s the other way around. These tycoons are rich because billions of dollars are coming in from abroad. Those tycoons are simply raking it in. That’s precisely why we call OFWs “modern day heroes.” Had it not for their remittances, this country could have succumbed to a communist revolution more than a decade ago.

Who are these modern day heroes? Media portrays them as bronzed, muscle men with glittering gold necklaces coming home in blue jeans and jackets. Wrong again. Statistics says that they are women. Since the Year 2000, about more than 70 percent of the newly-deployed OFWs are women, mostly professional and technical workers, clerks, and service workers.

They are mostly nurses; composers, musicians, and related workers; teachers; choreographers and dancers; x-ray technicians; occupational therapists; dental workers; caregivers; cleaners; and beauticians. What these figures mean is that Filipinos are actually sending their mothers, wives, daughters, and sisters to slave out abroad so their husbands, fathers, and brothers would have something to eat, buy their cigarettes with, and send the children to school. So there’s one thing that prevents this country from tearing apart from political bickering, it’s the money sent by our moms, sisters, and daughters.

But there is a bad flipside to this. When you send away a mother, the country suffers, not just from brain drain, but from care drain. No doubt Filipinos are good fathers, some of them anyway, but a household could never be complete without mom’s presence. Right now, estimates show that about ten percent of the country’s population or 24 percent of the country’s labor force are abroad. If you consider the trend that seven of ten newly deployed workers are women, one could sense that millions of children out there are growing up without warmth and guidance of a mother.

What are the social consequences of this trend is open to speculation. But it’s hard not conjure negative images about juvenile delinquency, broken homes, dependency, and criminality. Families of OFW therefore are sacrificing a lot so that this country survives the chronic deficit in political leadership. Of course, the country is sacrificing a lot as well as since we are losing lots of talented people to other countries, at least temporarily. Given the training and experience they would get abroad, their diaspora would ultimately be brain gain. But we need their brains now; we can’t even fill jobs for call centers and back office processing here.

And it seems more families are going to have these sacrifices. In the last decade, statistics says that almost 300,000 newly-hires are leaving for various destinations abroad to earn the dollars. Lately, the US has opened its doors to Philippine nurses but opportunities for medical professionals right now are practically limitless as demand from countries like Japan, United Kingdom, Spain, and most of Europe for nurses and caregivers is rising.

What we would like to stress here is that society owes them a lot. And what better way to repay them than having a community-based support networks for these families if only the children left behind wouldn’t go astray? Ideally, OFWs should bring them their families abroad. But since this option is not always available, the continuing diaspora of mothers, wives, daughters, and sisters might have high social consequences. Necessarily, economic factors are the main driving force behind this feminine diaspora and only when the country’s economy is now capable of responding to families dreams for a decent life would this phenomenon decelerate to an imperceptible degree. But there are short term measures that government and the private sector could do. Philippine embassies for instance should ensure welfare of OFWs and help them fight for their rights. The government could also negotiate for a continuing training programs for hired OFWs so that when they come home, they will bring with them additional skills. At the local front, our tycoons could do a lot, for instance, by investing in our school system and training institutions to ensure the continuing supply of skilled workers and professionals. Yes, they could help the economy more by helping the country strengthen its human resources than selling them house and lots, cellular phones, and raking their money in through those super-sized shopping malls.