Let's PERMANENTLY Abandon the Concept that Foreign Investors are Invaders
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| Philippine Anti-Fascist League |
Above is a meme found on Facebook that I'd dare say reflect epic levels of ignorance. The picture above represents the Spanish conquest of the Philippines. The Philippines was under the Spanish Empire for nearly 300 years. The Philippines gained independence from Spain on June 12, 1898, and from the United States of America (USA) on July 12, 1948. Basic Philippine history has proven that the natives of the Philippines (before being called Filipinos) have been trading with various foreigners before colonization. The Chinese traded with Filipino natives before they were dubbed Filipinos. Did the Chinese Emperor or the Chinese Empire ever have control over the Philippines because of trading? There is no history in China where the Philippines was once a colony of China before Spain took it over. The Chinese merchants were only interested in trading, not conquering, the 7,107 islands that were later collectively named the Philippines after King Philip of Spain.
Protests by certain leftist or nationalist groups were made when outgoing Philippine President Rodrigo R. Duterte signed the Public Services Act of 2022. It was referred to as "imperialism". Some even view it as a new act of imperialism and colonization. Ignorance is obvious on who say that multinational corporations (MNCs) or any form of FDI is an act of "imperialism" or "invasion". The same went when the late Benigno Simeon "Noynoy" C. Aquino also invited certain FDIs to do business in the Philippines. It's been the same chain reaction all over again. Ignorance is bliss but it's short-term bliss like recreational drugs--they give you a fleeting moment of pleasure. Ignorance is comparable to the likes of party drugs used to feel high. It gives pleasure at the cost of one's mental capacity.
The big difference between investment and invasion
From Imperialism to World War
While the British, French, Soviets, and Americans had large colonial empires to which they could turn turn for access to much needed raw materials, countries such as Germany, Italy and Japan did not. The deterioration of international trade led to the formation of more regional trade blocs with the ‘have’ nations forming blocs along colonial lines, like Great Britain’s Imperial Preference system.While "have-not" nations looked to form their own regional trade blocs, they found it increasingly necessary to use military force to annex territories with the much-needed resources. Such military force required extensive rearmament and thus, in the case of Germany, meant a direct violation of the Versailles Treaty. But, rearmament also reinforced the need for more raw materials and consequently the need for territorial expansion.Such imperialist conquests like Japan’s invasion of Manchuria in the early 1930s, Italy’s invasion of Ethiopia in 1935 and Germany’s annexation of most of Austria and parts of Czechoslovakia in 1938, were all manifestations of the need to expand territories. But these conquests would soon draw the ire of two of Europe’s major powers, and following Germany’s invasion of Poland, both Britain and France would declare war on Germany on September 3rd, 1939, thus commencing the Second World War.The Bottom Line
Despite noble aspirations for peace, the outcome of the Paris Peace Conference did more to reinforce hostility by singling out Germany as the sole instigator of the First World War. The Great Depression and the economic protectionism it engendered would then serve as the catalyst for the hostility to manifest itself in the rise of the Nazi Party and increasing imperialist ambitions among world nations. It was then only a matter of time before small imperialist conquests would lead to the breakout of World War II.
In short, the decline of international trade had encouraged invasion. Some might say that international trade must be discouraged to discourage invasion. Do I need to get a dictionary to get the difference between the two? Get a dictionary and find out that investing is not invasion and vice versa. To invade to enter for conquest and plunder, to have unlawful intrusion, or infringement according to the Merriam-Webster Dictionary. Meanwhile, the same Merriam-Webster Dictionary means to commit money to earn a financial return and make use for future benefits or advantages. We can see the differences there. The Russian troops aren't committing money in Russia for a financial return--they're there to plunder it. Hitler's Nazi campaign for Europe was to plunder resources. They are all unlawful intrusions. Hitler wasn't going to Poland to establish commercial businesses. Hitler was there to invade it and take its resources. Hitler ended up becoming an imperialist while he was a protectionist. A bitter irony, isn't it?
Besides, Hitler was very anti-FDI when he protected the local German businesses from FDIs. Hitler probably thought that FDIs were invaders and decided he would invade other countries before they could "invade" him by opening up businesses in his country. The Mises Institute tells us of Hitler was indeed a protectionist:
In the 1930s, Hitler was widely viewed as just another protectionist central planner who recognized the supposed failure of the free market and the need for nationally guided economic development. Proto-Keynesian socialist economist Joan Robinson wrote that "Hitler found a cure against unemployment before Keynes was finished explaining it."
What were those economic policies? He suspended the gold standard, embarked on huge public-works programs like autobahns, protected industry from foreign competition, expanded credit, instituted jobs programs, bullied the private sector on prices and production decisions, vastly expanded the military, enforced capital controls, instituted family planning, penalized smoking, brought about national healthcare and unemployment insurance, imposed education standards, and eventually ran huge deficits. The Nazi interventionist program was essential to the regime's rejection of the market economy and its embrace of socialism in one country.Such programs remain widely praised today, even given their failures. They are features of every "capitalist" democracy. Keynes himself admired the Nazi economic program, writing in the foreword to the German edition to the General Theory: "[T]he theory of output as a whole, which is what the following book purports to provide, is much more easily adapted to the conditions of a totalitarian state, than is the theory of production and distribution of a given output produced under the conditions of free competition and a large measure of laissez-faire."Keynes's comment, which may shock many, did not come out of the blue. Hitler's economists rejected laissez-faire, and admired Keynes, even foreshadowing him in many ways. Similarly, the Keynesians admired Hitler (see George Garvy, "Keynes and the Economic Activists of Pre-Hitler Germany," The Journal of Political Economy, Volume 83, Issue 2, April 1975, pp. 391–405).Even as late as 1962, in a report written for President Kennedy, Paul Samuelson had implicit praise for Hitler: "History reminds us that even in the worst days of the great depression there was never a shortage of experts to warn against all curative public actions.… Had this counsel prevailed here, as it did in the pre-Hitler Germany, the existence of our form of government could be at stake. No modern government will make that mistake again."On one level, this is not surprising. Hitler instituted a New Deal for Germany, different from FDR and Mussolini only in the details. And it worked only on paper in the sense that the GDP figures from the era reflect a growth path. Unemployment stayed low because Hitler, though he intervened in labor markets, never attempted to boost wages beyond their market level. But underneath it all, grave distortions were taking place, just as they occur in any non-market economy. They may boost GDP in the short run (see how government spending boosted the US Q2 2003 growth rate from 0.7 to 2.4 percent), but they do not work in the long run."To write of Hitler without the context of the millions of innocents brutally murdered and the tens of millions who died fighting against him is an insult to all of their memories," wrote the ADL in protest of the analysis published by the Glenview State Bank. Indeed it is.But being cavalier about the moral implications of economic policies is the stock-in-trade of the profession. When economists call for boosting "aggregate demand," they do not spell out what this really means. It means forcibly overriding the voluntary decisions of consumers and savers, violating their property rights and their freedom of association in order to realize the national government's economic ambitions. Even if such programs worked in some technical economic sense, they should be rejected on grounds that they are incompatible with liberty.So it is with protectionism. It was the major ambition of Hitler's economic program to expand the borders of Germany to make autarky viable, which meant building huge protectionist barriers to imports. The goal was to make Germany a self-sufficient producer so that it did not have to risk foreign influence and would not have the fate of its economy bound up with the goings-on in other countries. It was a classic case of economically counterproductive xenophobia.And yet even in the United States today, protectionist policies are making a tragic comeback. Under the Bush administration alone, a huge range of products from lumber to microchips are being protected from low-priced foreign competition. These policies are being combined with attempts to stimulate supply and demand through large-scale military expenditure, foreign-policy adventurism, welfare, deficits, and the promotion of nationalist fervor. Such policies can create the illusion of growing prosperity, but the reality is that they divert scarce resources away from productive employment.
Regarding Mao's magnificent failure, the Investopedia also describes the protectionist policy of the Great Leap Forward... to disaster:
Agriculture
Private plot farming was abolished and rural farmers were forced to work on collective farms where all production, resource allocation, and food distribution was centrally controlled by the Communist Party. Large-scale irrigation projects, with little input from trained engineers, were initiated, and experimental, unproven new agricultural techniques were quickly introduced around the country.
These innovations resulted in declining crop yields from failed experiments and improperly constructed water projects. A nationwide campaign to exterminate sparrows, which Mao believed (incorrectly) were a major pest on grain crops, resulted in massive locust swarms in the absence of natural predation by the sparrows. Grain production fell sharply, and hundreds of thousands died from forced labor and exposure to the elements on irrigation construction projects and communal farming.
Famine quickly set in across the countryside, resulting in millions more deaths. People resorted to eating tree bark and dirt, and in some areas to cannibalism. Farmers who failed to meet grain quotas, tried to get more food, or attempted to escape were tortured and killed along with their family members via beating, public mutilation, being buried alive, scalding with boiling water, and other methods.
Industrialization
Large-scale state projects to increase industrial production were introduced in urban areas, and backyard steel furnaces were built on farms and in urban neighborhoods. Steel production was targeted to double in the first year of the Great Leap Forward, and Mao forecast that Chinese industrial output would exceed Britain’s within 15 years. The backyard steel industry produced largely useless, low-quality pig iron. Existing metal equipment, tools, and household goods were confiscated and melted down to fuel additional production.
Due to the failures in planning and coordination, and resulting materials shortages, which are common to central economic planning, the massive increase in industrial investment and reallocation of resources resulted in no corresponding increase in manufacturing output.
Millions of “surplus” laborers were moved from farms to steel making. Most were the able-bodied male workers, breaking up families and leaving the forced agricultural labor force for the collective farms consisting of mostly women, children, and the elderly. The increase in urban populations placed additional strain on the food distribution system and demand on collective farms to increase grain production for urban consumption. Collective farm officials falsified harvest figures, resulting in much of what grain was produced being shipped to the cities as requisitions were based on the official figures.
Important: Throughout the Great Leap forward, while millions starved to death, China remained a net exporter of grain as Mao directed grain exports and refused offers of international food relief in order to convince the rest of the world that his plans were a success.
Challenging that thinking made third-world countries, first-world countries
The accepted wisdom of development economists at the time was that MNCs were exploiters of cheap land, labor, and raw materials. This "dependency school" of economists argued that MNCs continued the colonial pattern of exploitation that left the developing countries selling raw materials to and buying consumer goods from the advanced countries. MNCs controlled technology and consumer preferences and formed alliances with their host governments to exploit the people and keep them down. Third World leaders believed this theory of neocolonialist exploitation, but Keng Swee and I were not impressed. We had a real-life problem to solve and could not afford to be conscribed by any theory or dogma. Anyway, Singapore had no natural resources for MNCs to exploit. All it had were hard-working people, good basic infrastructure, and a government that was determined to be honest and competent. Our duty was to create a livelihood for 2 million Singaporeans. If MNCs could give our workers employment and teach them technical and engineering skills and management know-how, we should bring in the MNCs.
Vietnam's great economic reformer, the late Do Muoi was remarkable that made Vietnam no longer a "low-ranked country". I was reading through From Third World to First to find this information on Page 317:
In fact, the Vietnamese had made progress. As a result of more contacts with foreigners and greater information on the market economy, ministers and officials had better understanding of the workings of the free market. Greater street activity, more shops, foreign businesspeople, hotels--these were all signs of prosperity in Ho Chi Minh City and Hanoi.
China was also another example. Deng Xiaoping, though a man in his 70s, was not an old fossil. Instead, when Deng took over, he decided to reverse the economies of Mao. Interesting reads from the book From Third World to First also featured Deng's new mindset of "Poverty isn't socialism. To be rich is glorious." Readings from Chapters 36-40 would tell of Deng's great struggle. One of the chapters was titled "To Be Rich is Glorious." Deng's economic reforms were vastly needed in a country left battered by Mao's inept economic policies. Problems such as outdated textbooks and economic views were there. Deng was challenging it in his old age. Mao became a dumb-dumb in his old age. Deng was gaining wisdom especially when he decided that China is open for business.
Pages 609-610 of From Third World to First had Lee describe Deng in the following light:
He (Deng, emphasis mine) said China had three major economic tasks: first, build up infrastructures like roads and railways; second, upgrade as many factories as possible; and third, improve the efficiency of their managers and workers. He described the problem of inflation. (This was to be the causes of the toruble in Tiananmen four years later.) He wanted more trade, economic and technical cooperation between China and Singapore. China was ready to sign a three-year agreement with us to process not less than 3 million tons of Cinese crude oil per year, and would import more chemical and pretrochemical products from Singapore as long as they were at international prices. Thus began their participation in our oil industry. Their state oil company set up an office in Singapore to handle this businesses and to oil trading.
Page 610 of From Third World to First also described an 81-year-old leader who was open to change:
I was taken to meet Deng. He bantered about his advanced age of 81 compared to my 62. I assured him that he did not look old. He was not worried about age. China had made satisfactory arrangements for personal changes. "Even if the heavens collapsed, there would be people in China to shoulder it." China's domestic development, in every aspect, was reasonably good with many changes in the last five years. Ten old leaders had retired from the politburo, their posts taken by younger leaders. Many leaders over the age of 60 had resigned from the central committee and 90 new, younger ones had been elected. These leadership changes had been in progress for seven years, but were still not completely satisfactory and needed further reshuffling. By right, he, Deng, should also retire but there were problems he first had to solve.
Page 649 of From Third World to First gave this remarkable thing about Deng's different approach from Mao:
China under Deng was more open and willing to learn from the world than it had bene for centuries. Deng was courageous and strong enough in the party and the nation to admit openly that China had lost many years in pursuit of a revolutionary utopia. It was a refreshing time of open minds and enthusiastic progress, a radical change from the years of wild slogans and disastrous campaigns. Deng initiated the fundamental changes that laid the foundations for China to catch up with the rest of the world.
The very nature of foreign investment is also centered on respect for sovereignty. FDIs whether they be MNCs or global partnerships will have to abide by local laws. Back then, when China traded with the pre-colonial Philippines, the Chinese merchants had to bow down to the local tribe leaders. If anybody traded in China--they had to bow down to the Chinese emperor. The Meiji Era opened Japan from seclusion and the Dutch began to trade with it. Japan still remained under the rule of the Japanese emperor (now but a symbolic office) during the Meiji era. Japan did become a colony of the USA from 1945 to 1952 like how the Philippines was once under the Commonwealth. It was the post-war era and the USA left Japan and the Philippines after some time. An FDI is like a tenant--obey the rules or get out. A tenant is free to do business in the leased area as long as rules are followed. If not, the lessor has every right to kick out the tenant for not following the rules. It may or may not have a Filipino partner. However, FDIs are still under the rules of Filipino landowners and the Filipino government. Failure to comply can mean eviction from leased space and deportation like a bad tenant. Success in compliance means the FDI can stay as long as they please or as long as it's feasible for both parties.
The Philippines needs to get rid of that kind of thinking permanently
MANILA - The provisions of the Constitution on foreign ownership should remain because amending it may lead to the Philippines being a "colony" of foreign investors, a former chief justice said Monday.The Philippines has "one-fifth of the richest natural resources" and it was "designed that it should only be for Filipinos," said Hilario Davide Jr., a member of the commission that crafted the 1987 charter.
"If you remove the Filipino citizenship requirement in the exploitation of natural resources, on the acquisition of public lands, or even in mass media, in education, you remove the solemnity of nationalism," he told ANC's Headstart.
Davide said lawmakers should be guaranteed to be incorruptible because Congress can be prevailed upon by foreign interests in order to favor exploitation of the country's natural resources."One country may have businessmen so strong because they have the money. If you are in Congress, there might be a temptation to agree to certain propositions, to reduce the limit, for instance, of Filipino participation and increase the participation of foreigners," he said."In the end, we will become a colony of businessmen of other countries," he added.Davide said the 60-40 foreign equity ratio should stay also because the Philippine population is growing annually and they should have food security."What will you feed the people afterwards if all our assets here, natural assets, would be [granted] to foreign investors?...Congress should stick to it [60-40] and fully implement the same," he said.The Constitution restricts ownership of certain areas of investments to firms with at least 60-percent Filipino capital.The restriction also covers exploration, development, and utilization of natural resources through co-production, joint venture, or production-sharing agreements with Filipino citizens, or corporations or associations.
Not very well said, Davide Jr., if you ask me. Carlos P. Garcia implemented the Filipino First Policy but did it make the Philippines first in ASEAN today? Unfortunately, it has caused a lag in the Philippines in ASEAN. One can always argue that the Philippines has the slowest Internet because we're an archipelago. Yet, Malaysia has better Internet services. The difference is Malaysia has more telecommunication players than the Philippines. The current number of Internet Service Providers (ISPs) is obviously suffering from a bottleneck. Too many subscribers and too few providers. The same happens with the utilities--it's all grounded on supply and demand. Can you expect a lower price for better quality if demand outweighs supply? It's like you're tasked to do too much work that your work quality will get compromised.
Davide's statement on 100% ownership is just plain dumb. When he said, "What will you feed the people afterward if all our assets here, natural assets, would be granted to foreign investors?" It's plain ignorance. First and foremost, 100% ownership is all about shares ownership. There's a limit with the assets and natural resources per person on how much they can use. A foreign investor and a local investor are free to cut down trees if it's lumber season and there's a certain number. The 100% ownership is all about net profit after taxes sharing.
Another United Nations (UN) Diplomat, Kishore Mahbubani of the Lee Kuan Yew School of Public Policy even talked about the misconception. Davide had also served as a diplomat for the UN too. Davide should've known better about world trade when he said his statement. Instead, Davide pushed what he said about foreign investment. Meanwhile, Mahbubani dismissed all the talks of foreign investors as "rapists" as nothing more than hearsay. It would probably be interesting if Davide and Mahbubani will have a formal debate on that issue. Both have been UN diplomats but only one of them is right about foreign investments. Mahbubani is in charge of a country that got wealthy. Davide is still stuck in some what the development economists in Lee's day said about MNCs.
Many others, like Teodoro Casino of Bayan Muna, still insist on the same thing. Yet, one must question if such policies truly made the Philippines great. Casino's statement from Rappler here is really nothing more than questionable with or without an MBA to my degree:
Without definite limits on foreign ownership and with no preference for Filipino citizens and corporations, the Constitutional provisions on the national economy and patrimony would become a tabula rasa. It would now be up to the Federal Assembly to determine policies on foreign equity sharing and just about anything there is about the economy and our natural resources. This, of course, creates an entirely new window for corporate lobbying, putting small, underfunded Filipino citizens and corporations at a great disadvantage.
Worse, by totally removing the State’s role in developing an industrialized, self-reliant economy, in implementing agrarian reform, in promoting and protecting Filipino enterprises and producers, and in reserving our natural resources for Filipinos, Duterte’s Cha-Cha will leave small enterprises, workers and farmers having to fend for themselves from the onslaught of even more globalization.
These amendments are the culmination of 3 decades of “economic reforms” toward a totally free market, neoliberal economy. Combined with the existing policies of economic liberalization, deregulation and privatization, the amendments remove the last impediments to the total domination, control and plunder of our economy and natural resources by foreign corporations and banks.
Three decades of economic reforms? Did it produce more work or were more Filipinos still going abroad looking for work? The whole idea of a "self-reliant" economy is really laughable. Lee had disproved that many times yet some people want to promote the lie. Foreign investment doesn't mean that the country abandons it to foreigners. Rather, it's letting them do business in the Philippines like a tenant does business in a commercial space. It's the same old lie about small enterprises. This was proven wrong when Mao's Great Leap Forward only brought disaster. Deng's economic reforms ended up making Chinese businesses grow instead. Has Casino even cited anything to justify his claims that foreign investors will leave small businesses having to fend for themselves?
Lee had proven it wrong and I could share this statement about how these statements are proven wrong in one of his many speeches:
“You got on the one hand, the Open Free Market System in America, you have on the other hand, the exact opposite, the closed, controlled, command economy of the Soviet Union, Communist Russia…
The Chinese tried the Communist model, with their own modifications, and it failed! And they have admitted that it failed, and they’re trying to pick up the same competitive spirit between workers, between different enterprises, which they noticed in Hong Kong, so they have opened a new town on the border with Hong Kong called “Shamchun” (Shenzhen in Cantonese) and they’re inducing Hong Kong entrepreneurs to go… and create employment!
Dr. Lee Siew-Choh and Mr. Jeyaratnam talk as if these things have never happened. They haven’t learned!
Deng Xiaoping is a great man… He fought a great revolution. He saw the product of that revolution turn sour. He was fortunate to live long enough and he had the courage to say “NO! WE CHANGE COURSE! LET’S LEARN! Let’s stop trying to do everything by ourselves.”
So they started importing and buying Boeing 707’s. So they bought Tridents instead of trying to manufacture their own aircraft. Eventually they will but it would take 2, maybe 3 generations.
That’s how we succeeded because we have open minds, common sense. A lot of analysis, careful weighing of the odds, make a firm decision, monitor it, implement it, modify as it goes wrong. ABANDON IF IT IS NO GOOD!
But often… And I say this more out of relief than out of pride… Often, 8 times out of 10 we have been right… We’ve made mistakes… We put money in New Port in Jurong… Second hand machinery… We were young then… We were new in the game…
They sold us second hand machinery, we didn’t know… We lost money… We wrote it off. But we learned…
Mr. Jeyaratnam says we are obsessed with profits. I said YES! That’s how Singapore survives!
We have no profit, who pays for all this?
You make profit into a dirty word, and Singapore dies.”
Page 66 of From Third World to First has proven these naysayers in the Philippines wrong:
Our job was to plan the broad economic objectives and the target periods within which to achieve them. We reviewed these plans regularly and adjusted them as new realities changed the outlook. Infrastructure and the training and education of workers to meet the needs of employers had to be planned years in advance. We did not have a group of readymade entrepreneurs such as Hong Kong gained in the Chinese industrialists and bankers who came fleeing from Shanghai, Canton, and other cities when the communists took over. Had we waited for our traders to learn to be industrialists we would have starved. It is absurd for critics to suggest in the 1990s that had we grown our own entrepreneurs, we would have been less at the mercy of the rootless MNCs. Even with the experienced talent Hong Kong received in Chinese refugees, its manufacturing technology level is not in the same class as that of the MNCs in Singapore.
Lee didn't just talk--he walked the talk with his reforms. Lee had mentioned that if they waited for their Singaporean traders to be industrialists--they would've starved. The very ideals of Filipino economists and lawmakers rooting on what Lee called "the prevailing thought of his day" haven't done much progress. Instead, Lee's book wasn't written as just mere empty text but as his own experience of Singapore's development. Singapore's development had impressed other nations such as that even Communist China and Communist Vietnam followed its economic model. Take a look at where China and Vietnam have been with their economic power. The MNCs had helped in the development of the two countries. That totally contradicts what Garcia wanted that majority of shareholders should always be Filipinos. That was proven wrong when Singapore invited FDIs to make it a first world country while it was still poor.
The very basic concept of Deng was this, "It doesn't matter if the cat is black or white. What matters is that it catches mice." It wouldn't matter if the majority of shareholders are Filipinos or foreigners. It wouldn't matter if the majority of businesses in the Philippines are owned by foreigners or Filipinos. What matters is that the business provides good employment with better pay to Filipinos, good products and services to Filipinos, and would provide good taxes for the national economy. Would the Bureau of Internal Revenue (BIR) get less money even if an FDI pays higher income tax than a Filipino investor? Instead, if an FDI can give higher taxes due to higher earnings then that matters more. In the end, FDIs in doing business will benefit the Philippines. Small businesses may end up growing instead because they get more service providers, more customers, and more competition to grow.
It makes you wonder who Filipinos should listen to. Should they listen to their thought leaders who, for more than three decades, haven't given us that much progress? Should they listen to those great leaders like Lee, Mahbubani, former Malaysian Prime Minister Mahathir Mohamad, Do Muoi, etc. who made their nations a model to follow? The empirical evidence of business and economics points strongly towards those nation-builders rather than the naysayers.
Closing words
It's already the year 2022. Some ideals can live on while some ideals die. True, some values in the past should remain such as respect for authority. However, we shouldn't adhere to extremely old-fashioned views such as elders having too much authority like in 17th Century China. Typewriters are no longer used as they're replaced by PCs whether desktop or laptop. Rotary phones are now discarded even if their old-fashioned ring survived through modern phones. We're seeing development happen that we need to be updated.
What we need is to accept the best of the old and the new. Imperialism and feudalism should be left in the past. Entrepreneurship based on honest profits and earnings should continue even in modernization. We can always insist on certain "old-fashioned" values of honesty in our digital transactions. However, to reject modernization for the sake of it without seeing the benefits is just absurd. Worldwide trade or international marketing is now the trend. The world has become a global village and no man is an island. No nation can now survive in isolation either. What's your excuse for still rejecting international marketing or global free trade?
