Tomorrow is what's commonly referred to as Philippine Independence Day (although the Philippines really became independent on July 4, 1948) which falls on a Sunday. Granted, some people will either be in church (or at least online church) so I decided to write this article a day before tomorrow. I feel like writing this article because some people want to achieve "economic independence". I feel this article is badly needed. I may no longer be taking my MBA classes (since I graduated last October 2014) but I feel like writing these essays after recovering (in part) from the disaster known as Typhoon Odette).
I read some stupid people on Facebook have said that the Philippines may become richer without foreign investments. I read the posts of protectionist thought leaders of people from Bayan Muna, IBON Foundation (which claims itself to be an economic think-tank), Kabataan Partylist, League of Filipino Students, and the like. It even made me laugh to see how one of the League of Filipino Students' members, Carwyn Candila, condemned (and ironically, on Facebook of all places) the passage of the Public Services Act of 2022. Members of the Kabataan Partylist are still promoting it as a travesty that will cause the nation to sink into poverty. IBON Foundation has even said (even before the pandemic) that economic charter change will lead the Philippines into decline. Such statements are made either out of ignorance or self-convenience.
Has Pinoy Pride Economics ever worked?
The ”Filipino First” policy of this administration received a resounding popular indorsement in the last election. Politically we became independent since 1946, but economically we are still semi-colonial. This is especially true in our foreign trade. This policy is therefore designed to regain economic independence. It is a national effort to the end that Filipinos obtain major and dominant participation in their own national economy. This we will achieve with malice towards none and with fairness to all. We will accomplish this with full understanding of our international obligations towards our friends of the Free World. We will carry this out within the framework of our special relations with the United States to whose citizens we granted until 1974, by Constitutional provision, equal rights as Filipinos in the exploitation of our natural resources and public utilities, and to whom we also granted trading parity rights under the Laurel-Langley Agreement. Under this policy we will welcome friendly and understanding foreign capital willing to collaborate with us in the exploitation of our vast natural resources preferably on joint venture basis.
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.
Once again, Casino tries to talk about "the gains after EDSA". What gains after EDSA? It's true that now I can blog and criticize anyone without getting arrested immediately. However, I still fear that the cybercrime law's libel clause needs to be deleted permanently. Nobody should go to jail simply for sharing, liking, or being wrong. I still think that libel needs to be decriminalized to a certain extent unless such offense was done by mass media entities or people of high reputation. However, after EDSA, I'd still like to ask Casino or people who support them if we have truly become number one in Asia or even the world. I wonder if Casino has even considered debating with Mahbubani on that issue. Mahbubani from Singapore has contradicted what Casino said about the history of Singapore's rise from a third-world country to a first-world country.
Here's something that ThoughtCo. would also share regarding the pros and cons of protectionism:
Protectionism Pros and Cons
In poor or emerging countries, strict protectionist policies like high tariffs and embargoes on imports can help their new industries grow by protecting them from foreign competition.
Protectionist policies also help create new jobs for local workers. Protected by tariffs and quotas, and bolstered by government subsidies, domestic industries are able to hire locally. However, the effect is typically temporary, actually reducing employment as other countries retaliate by imposing their own protectionist trade barriers.
On the negative side, the reality that protectionism hurts the economies of countries that employ it dates back to Adam Smith’s The Wealth of Nations, published in 1776. Eventually, protectionism weakens domestic industries. With no foreign competition, industries see no need for innovation. Their products soon decline in quality, while becoming more expensive than higher quality foreign alternatives.
In order to succeed, strict protectionism demands the unrealistic expectation that the protectionist country will be able to produce everything its people need or want. In this sense, protectionism is in direct opposition to the reality that a country’s economy will prosper only when its workers are free to specialize at what they do best rather than trying to make the country self-sufficient.
"Pinoy Pride economics" and the OFW phenomenon
Because of "Pinoy Pride economics"--the next move is to support the Overseas Filipino Worker (OFW) program. This reminds me of an article I wrote here that discussed refuting the myth of "invading" other countries through investments and workers. If Filipinos get jobs in other countries--they're bound to the labor laws of other countries. In short, Filipino workers abroad must now bow down before a foreign government. Getting the jobs means getting the boss--not conquering the country. If somebody invests in the Philippines--the investor must bow down before the Philippine government. I really find the talks of OFWs invading other countries and foreign investors invading the Philippines stupid. The nurse Ed Mundsell Bello thought he was conquering Singapore. However, Singapore conquered him leading to his loss of his work license. How's that for "conquering other countries" through OFWs?
Besides, the big problem is also with relying on OFW remittance. Masigan in his criticism of outgoing Philippine President Rodrigo R. Duterte's priorities also wrote:
As usual, the dollar inflows from OFW remittances and service exports (IT-BPO industry) save us from financial ruin. Between 2016 and 2020, OFW remittances pumped-in an average of $32 billion a year while our service exports contributed an average of $36.5 billion a year.
Have OFW remittances and service exports been enough to cover our deficits? No. There is a still a gap and it is funded by debt.
Have the years of OFW remittances really helped? There's some help but can it truly still be that feasible? Masigan may be suggesting that while the OFW program is helpful--it's not a feasible long-term solution. The OFW phenomenon was even noted by Lee Kuan Yew in his book From Third World to First. Lee Kuan Yew even mentioned this on Pages 304-305:
... Millions of Filipino men and women had to leave their country for jobs abroad beneath their level of education. Filipino professionals, whom we recruited to work in Singapore are good as our own. Indeed, their architects, artists, and musicians are more artistics and creative than ours. Hundreds and thousands of them have left for Hawaii and for the American mainland. It is a problem the soltuion to which has not been made easier by the workers of a Philippine version of the American constitution.
Is this truly a gain after EDSA? Lee Kuan Yew specified in his book what was wrong not only during the Marcos Years. Lee Kuan Yew also spelled that was wrong the country after the Marcos Years. Many Filipinos still have to leave their country hoping to find jobs in greener pastures. They would go to Singapore, Japan, or even Western countries for employment. No, these people weren't "conquering" those nations as some economic simpletons would think or say it to be. Instead, they had very little to no choice. All the talks of separation aren't drama. Some people still rely on that one "new hero" to support the rest. Some are even getting estranged from their OFW relatives.
The supply-demand gap is hardly met as a consequence
At the moment, his main advocacy is the lowering of prices of electricity, oil and water as well as regulation in the price of education, healthcare, mobile communications, toll fees and other basic utilities and services. Toward this end, he has filed bills on the removal of VAT on power (HB 2719), oil (HB 1630) and toll fees (HB 5303) as well as the regulation of oil prices (HB 4355), mobile phone services (HB 5653), tuition fees (HB 1961) and interest rates (HB 4917). He has consistently opposed the budget cuts in our state colleges and universities as well as the privatization of our public hospitals and water districts.
I don't care what laws Casino has passed if they aren't effective. Casino's obviously anti-free market mindset. I can't say for sure if he's a part of the New People's Army (NPA) but he certainly is an anti-free market. The removal of VAT on certain areas will not work. It's because of one thing--the problem of supply and demand. Either Casino knows he's lying or he believes such lies. I want to believe Casino knows he's lying so he will look relevant. His statements would really make the likes of Mahbubani dizzy. As an MBA graduate, his statements make me dizzy. Then again, I don't think I'll need my MBA either to go dizzy reading this statement because simple economics is based on supply and demand.
If we want better services then amending the Public Services Act is the answer. I also wrote about how the Public Services Act of 2022 will help the Philippines. Masigan didn't only give constructive criticism to Duterte. Masigan also called it long overdue. I think it should've been signed before 2022 or even during 2020. I can't be sure of what led to it. Was it poor priorities on the part of the president or on the part of the legislative? Either way, the Public Services Act of 2022 is badly needed to help recover the economy. It's because more public services (whether Filipino or foreign) will fill the supply gap. The bottleneck is all about supply and demand. If there were more utility providers then there would be more supplies. If there were more power suppliers and telecommunication providers then local companies would be forced to improve their services. Local companies will also be able to improve their local services because the supply and demand gap will not be that wide. Electricity and telecommunications companies will be better and more affordable because of fewer constraints and higher supplies.
Part of this supply and demand gap also includes employment. Massive unemployment becomes a problem because lawmakers tend to be slow in passing economic reforms. Yet, the likes of the IBON Foundation and other economic simpletons have a tendency to blame foreign investments. Some even say that foreign investment is foreign debt. On the contrary, I wrote a rebuttal to that statement. Debt and investment are two related words but they're different. If a person invests money then they're basically building something. A person may or may not have debt during the time of the investment. Foreign debt is borrowing money from another country. Foreign investment is letting an investor from another country do business in yours. The foreign investor establishes a business in the country. This business will generate employment and taxes for the country. The profits they take are defined as revenues less all expenses which includes income taxes. However, they will end up depositing money in banks located in the Philippines. They will have to deposit some money in the Philippines in relation to operations management. Why would a foreign investor withdraw money from abroad to pay employees, suppliers, creditors, and taxes? It would be in their best interest to make a bank account in the Philippines. They would want to employ locals first where they go because that's the first and most immediate source of labor.
That's why I also wrote that it's stupid to say foreign investors don't develop work for locals. It can be observed over limited foreign investments in the Philippines. Grab is from Singapore and Foodpanda is from Germany. I order food or avail of their services from time to time. The last time I ordered from Grab--I had a Filipino driver. The last time I ordered from Foodpanda--it was also a Filipino driver. The last time I had some food from Jolly Bubble--the crew was Filipino. The bosses may be foreign but they hired Filipinos in the Philippine branch. If Bo's Coffee Club opens in Taiwan (hopefully) then they will hire Taiwanese. Jollibee hires locals all around the world. It's because any good entrepreneur will want to get what's readily available whether it'd be human resources or raw materials. Instead, foreign investment ends up filling in the supply-demand gap not just for goods but also for jobs.
That's why it's time to discard Pinoy Pride Economics. It's been decades and the Philippines is still left behind in ASEAN. Sure, we're not yet in the same place as North Korea or Venezuela. Let it persist and maybe we'll experience it like that. Just take note that Mao Zedong's Chinese Pride Economics ruined China. Deng Xiaoping's open-mindedness made China a powerful nation. As Deng says, "It doesn't matter if the cat is black or white. What matters is that it catches mice."
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