Pinoy Pride Won't Pay the Pending PHP 13.42 Trillion Debt
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| Inquirer |
The Duterte-Robredo tandem is already exiting any time soon. 29 more days and both Rodrigo Roa Duterte and Maria Leonor "Leni" Gerona-Robredo are going to be former president and former vice president. Can both Duterte and Robredo actually come up with more plans for their remaining days? Meanwhile, we still need to think about the PHP 13.42 Trillion debt which I believe was also caused by the COVID-19 pandemic and other related disasters. This would be a good question to ask how this debt can be paid.
Looking at the protectionist "thought leaders" on their approach to the debt
One can always talk about the need for taxes. I don't deny that taxes are needed. However, the Inquirer article also mentioned IBON Foundation. I have my dislike for the group not especially how it still doesn't see how foreign direct investment (FDI) works. In fact, one article by IBON Foundation also dares to write:
There’s been a flurry of foreign investment laws in the twilight months of the Duterte administration. The Retail Trade Liberalization (RTL), Foreign Investment Act (FIA), and Public Service Act (PSA) amendments were signed into law within weeks of each other. These all passed on the strength of a powerful argument – that the country is in desperate need of foreign investment, and more foreign investment is always a good thing.
The argument is compelling – but wrong. If anything, the foreign investment fetish is keeping Filipinos poor and the economy underdeveloped. Is foreign direct investment (FDI) the magic bullet for development that it is so often made out to be? Not really, if we look at the Philippine experience with unjaundiced eyes.
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| Malaya Business Insight |
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.
Casino even dared to write this nonsense in his own personal blog some time in 2011 which either I'm laughing or frustrated reading it:
But more than this, greater government support and protection for local industry is necessary to achieve any significant level of industrial development. Such is the case with countries as economically and politically diverse as the United States, Japan, the United Kingdom, Germany, France, China, Russia, South Korea, Thailand and Taiwan.
So much more can be achieved for the economy if Filipino enterprises are given the wide range of potential support that our people, the state and its institutions can and must provide. This includes greater and cheaper access to funding, appropriate technology, power, raw materials and infrastructure. The domestic market should be oriented towards giving greater opportunities for Filipino industry even as foreign markets are actively sought. The government should also cut bureaucratic red tape, develop tax benefits and other incentives for local producers and generally make it easier for Filipinos to do business. There should be an overhaul of reckless trade and investment liberalization policies that have worked against local industry and agriculture.
At the same time the corruption that undermines focused industrial support and breeds debilitating cronyism must be confronted head on. The push for industrial development must proceed apace with the struggle for transparency, accountability and good governance.
Finally, widespread poverty constricts the local market. A genuinely Filipino industrial program should decisively confront the problem of mass poverty and the structural imbalances that undermine any effort at development. Thus, measures such as genuine agrarian reform, environmental protection, equitable wage adjustments and massive social spending in education, health and housing are crucial.
With the neoliberal globalization model clearly in tatters, perhaps its time to reassert the importance of the basics – buying local, achieving food self-sufficiency, national industrialization, agrarian reform, good governance, social justice – as the real building blocks of modernization and sustainable development.
The way I see it, economic nationalism seems to be making sense again.
This makes me wonder how these protectionists seek to actually pay the debt. IBON Foundation even says that foreign investment is keeping Filipinos poor. Casino even says that small enterprises, workers, and farmers have to fend off themselves. Casino even dares to say that first-world countries developed through "economic nationalism". Who are they trying to fool? They say it will take two generations to pay off COVID-19 debts. Yet, these same fools don't want to open up the economy? Both Casino and IBON Foundation are spewing out blatant lies. Casino dares to mention the United States, Japan, the United Kingdom, Germany, France, China, South Korea, Thailand, and Taiwan as examples of that. I wonder where are his empirical evidence to prove that? Casino even mentions in the comments the following yet he hasn't provided empirical evidence either:
All developed economies have, at certain points, turned to economic nationalism to build local industries, nurture capital and provide for their own people. The free market works only to a certain point. You still need government to regulate, to set direction, and to intervene especially in situations of massive poverty, inequality and underdevelopment like in the Philippines. All the tiger economies (except perhaps Singapore which is a city state) built their local economies first before opening up.
I'm not saying the government isn't important. In fact, a free market needs some form of government regulation such as employee welfare, collecting taxes from income, and setting rules for the fair competition act. What I can't agree (again) with Casino is that he thinks that nations need to build up their local economies first before they opened up. Casino needs to get his empirical evidence first.
How will free-market enterprises help pay more debt?
Pages 57-58
After several years of disheartening trial and error, we concluded that Singapore's best hope lay with the American multinational corporations (MNCs). When the Taiwanese and Hong Kong entrepreneurs came in the 1960s, they brought low technology such as textile and toy manufacturing, labor-intensive but not large-scale. American MNCs brought higher technology in large-scale operations, creating many jobs. They had weight and confidence. They believed that their government was going to stay in Southeast Asia and their businesses were safe from confiscation or war loss.I gradually crystallized my thoughts and settled on a two-pronged strategy to overcome our disadvantages. The first was to leapfrog the region, as the Israelis had done. This idea sprang from a discussion I had with a UNDP expert who visited Singapore in 1962. In 1964, while on a tour of Africa, I met him again in Malawi. He described to me how the Israelis, faced with a more hostile environment than ours, had found a way around their difficulties by leaping over their Arab neighbors who boycotted them, to trade with Europe and America. Since our neighbors were out to reduce their ties with us, we had to link up with the developed world-America, Europe, and Japan-and attract their manufacturers to produce in Singapore and export their products to the developed 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.
Page 66
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.
Pages 68-69
If I have to choose one word to explain why Singapore succeeded, it is confidence. This was what made foreign investors site their factories and refineries here. Within days of the oil crisis in October 1973, I decided to give a clear signal to the oil companies that we did not claim any special privilege over the stocks of oil they held in their Singapore refineries. If we blocked export from those stocks, we would have enough oil for our own consumption for two years, but we would have shown ourselves to be completely undependable. I met the CEOs or managing directors of all the oil refineries-Shell, Mobil, Esso, Singapore Petroleum, and British Petroleum on 10 November 1973. I assured them publicly that Singapore would share in any cuts they imposed on the rest of their customers, on the principle of equal misery. Their customers were in countries as far apart as Alaska, Australia, Japan, and New Zealand, besides those in the region.
This decision increased international confidence in the Singapore government, that it knew its long-term interest depended on being a reliable place for oil and other business. As a result, the oil industry confidently expanded into petrochemicals in the late 1970s. By the 1990s, with a total refining capacity of 1.2 million barrels per day, Singapore had become the world's third largest oil-refining center after Houston and Rotterdam, the third largest oil trading center after New York and London, and the largest fuel oil bunker market in volume terms. Singapore is also a major petrochemical producer.
To overcome the natural doubts of investors from advanced countries over the quality of our workers, I had asked the Japanese, Germans, French, and Dutch to set up centers in Singapore with their own instructors to train technicians. Some centers were government-financed, others were jointly formed with such corporations as Philips, Rollei, and Tata. After 4 to 6 months of training, these workers, who were trained in a factory-like environment, became familiar with the work systems and cultures of the different nations and were desirable employees. These training institutes became useful points of reference for investors from these countries to check how our workers compared with theirs. They validated the standards of Singapore workers.
It's because of this one common fact--foreign investment is not about foreign debt or invasion. Instead, foreign investors will be subjected to local laws when they do business. They will end up using what's readily available whenever it's available. They will employ locals and buy locals so they can begin business as soon as possible. When these foreign investors start to make money--they need to issue valid receipts registered with the Bureau of Internal Revenue (BIR). Their monthly sales will translate into Value Added Tax (VAT) if they earn at a certain bracket. They will still have to pay withholding taxes on their employees, quarterly taxes, and annual income tax. They will get rich but their wealth is based on one thing--their Net Income After Taxes.
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| Image by Sabrina Jiang © Investopedia 2020 |
Foreign investments will give new ideas and smaller companies better opportunities to grow. Jollibee was born because McDonald's was there. Now, Jollibee has become a worldwide franchise. One of my favorite pizzas, Yellow Cab, was born out of foreign influence and still stands strong even while Pizza Hutt and Shakey's are there. Greenwich still survives and still serves Filipino-style pizza. Bo's Coffee Club is surviving in the midst of the milk tea craze. Hopefully, Bo's Coffee Club will become a worldwide franchise. It's because of foreign investments that new ideas enter the head of Filipino investors or give them more opportunities to grow. Foreign investors would probably get the services that are most available (like a Filipino trucking service or a Filipino raw materials supplier) to get their business working immediately. Foreign investors would be stupid if they still will import everything rather than make use of what's available. This, in turn, will allow Filipino businesses to grow if they know how to see foreign investments as necessary threats and opportunities to grow.
Let's say that a Filipino investor starts to learn new things. A Filipino investor decides to buy imported equipment, get services from Grab and Foodpanda (both imported), or offer services to foreign investors. This Filipino investor is making raw materials such as camote flour, wheat flour, rice flour, sugar, and other kitchen ingredients. This guy opens his store and starts to make deals with Grab and Foodpanda. Not satisfied, this Filipino investor hears a new foreign company is opening and decides to sell raw materials to them. The Filipino investor decides to avail of foreign services to make sure that everything arrives on time and quality is being kept. What this investor does is practice Deng's principle about black cats and white cats. It's all about getting something done. This person could care less if the supplies and equipment are local or foreign. All this person cares about is if it helps make good Filipino-made products. This kind of mentality can help Filipino investors grow. If they grow then there will be more employment, more sales, and more taxes to collect from.
If there are more investors (both local and foreign) then the debt can be paid off. It's pretty much like how a mall recovers its costs. A shopping mall takes plenty of money to build. I remembered going to SM City Cebu and it was still small. However, SM City Cebu is now bigger than ever. Ayala Center Cebu is now bigger than ever. It's not the same SM City Cebu or Ayala Center Cebu as when I was still a child. Some of my favorite establishments like Alyssa Caramelle and the Nova Fontana Toy Store are now gone. These malls lease out their spaces to tenants. Most of the malls' income comes from renting their spaces. True, there is the SM Department Store but most of the items I buy from SM City Cebu are from the tenants. Gaisano occupies a good portion of Ayala Center Cebu. Did the tenants take over the mall? The tenants can enrich themselves provided they will pay monthly rentals. Foreign investors are also in that condition.
