Filipinos Need MORE Foreign Investments, NOT More Ayuda and Protectionism to Help Solve the Crisis
I'm simply amazed at the monkey solutions of some so-called thought leaders like the members of Bayan Muna and IBON Foundation. Reading the arguments of people like Teodoro A. Casino, Neri P. Colmenares, and various members of IBON Foundation (such as Sonny Africa) can give me a headache. I may be no economist but I'd like to share some issues. The arguments I keep getting from IBON Foundation are bordered around one thing--a deadly obsession with ayuda meaning cash handouts (read here). Such people have been using several scare tactics against foreign direct investments or FDI (read here) can be very stupid. For example, how can people even mistake foreign investments for foreign debt (read here)? Debt is borrowed money. Investments are when you spend money hoping to get something in return. Foreign investment is when foreigners are allowed to do business in one's country. Foreign debt is when a country borrows money from another country.
The latest article by IBON Foundation called "It’s an emergency: Help millions of Filipinos in crisis now" has me once again looking at their deadly obsession with ayudas or cash handouts. The ending statement made my eyes pop out figuratively. It goes like this:
Bold and urgent action is needed to address the worsening state of Filipinos. The Marcos administration needs to first of all admit this instead of repeating its narrative of strong economic fundamentals and being on the track of recovery.
The distress that millions of Filipino families are facing and their looming difficulties from even more price increases need to be addressed immediately. IBON’s proposed Php1.5-trillion expansionary fiscal policy proposal includes substantial amounts of ayuda to cover as many poor and vulnerable Filipinos as possible. A wage hike is also in order with wage subsidies to help micro and small enterprises comply.
Inflation can be moderated with tax cuts on consumer goods and services such as value-added tax (VAT) and on oil products. Steps should also already be taken to protect and strengthen domestic agricultural and industrial production.
This makes me wonder what is IBON Foundation's real motive behind their statements anyway? They say one thing then they say another. Do they really want to help Filipinos or are they just fooling people? I think IBON Foundation's stand is that countries developed through protectionism. Sadly, we have people from IBON Foundation who are highly educated yet support stupid economic policies (read here). Some of these stupid policies include protectionist measures instead of encouraging competition.
We're already buried in debt yet they demand a proposed PHP 1.5 trillion budget for ayudas? Where do they even propose to get the money? If they propose to excessively tax the rich--expect only more tax evasion. If they propose to print more money then expect inflationary risk. That's why I really wrote an article where I stand by this--ayuda isn't a long-term solution against inflation (read here).
Instead, what Filipinos need are more jobs
It's been a frequent lie that said Singapore only opened its economy after becoming a first-world country. Such a statement is very ignorant. The lie can be easily disproved (again) by the late Lee Kuan Yew's empirical data from his book From Third World to First:
Pages 57-58After 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.
Some people will say Singapore only opened up due to a lack of natural resources. Guess what? Vietnam, a Communist country that's rich in natural resources, opened its doorway to FDI and became a new rising tiger. The common school of thought was that MNCs were supposedly there to "exploit" natural resources. Yet, what do we see of Vietnam now? The Vietnam Times has proven the economists of Lee Kuan Yew's day with this statement:
Once among the poorest countries in the world, its economy is now booming and the World Bank describes it as one of the most dynamic and emerging countries in the entire East Asia region, Business said in an article published last week, calling Vietnam a “new Asian tiger.”Singapore’s DBS Group Research forecasts Vietnam's GDP growth to reach 8% in 2022, boosted by an accommodative monetary policy. The International Monetary Fund (IMF) has predicted that Vietnam will climb three spots to rank third in GDP among ASEAN member states this year, thanks to the fast-growing middle class and the rise of ultra-rich people.Knight Frank’s latest Wealth Report estimates there were about 19,500 high-net-worth individuals in Vietnam in 2020, defined as those with assets of at least $1 million, the article said. By 2025, that number is expected to grow by almost 25% to top 25,000, it added.Business Times attributed the robust growth of the economy to increasing flows of foreign investment into the country. Many Singapore companies, including CapitaLand and Keppel, have invested heavily in the country as they seize the abundant opportunities.
The scare tactics are really getting old. It's not like as if there aren't laws such as fair competition laws, environmental laws, taxation laws, privacy laws, and other similar regulations that govern all businesses. Just because an FDI wouldn't require a partner doesn't mean they aren't regulated. There are still restrictions like FDIs can't own land. Fair competition means local Filipino businesses will only have to worry about losing from being incompetent. Otherwise, a Filipino business that chooses to evolve will grow instead. If Filipino businesses see FDIs as opportunities more than threats--they will end up generating employment as much as FDIs could. Besides, you may want to check out my article on how allowing foreigners to own 100% of their shares will help develop local businesses (read here).
The proposal of IBON to protect domestic and agricultural production is stupid. It's because decades of protectionism have not truly given rise to the dream utopia they imagined. Instead, it may end up like how China (under Mao Zedong), North Korea, and Venezuela. Please, I don't want to hear that reasoning that North Korea is poor because of South Korea or that Venezuela is poor because of the USA. Both North Korea and Venezuela are poor because of their poor economic policies. Until now, I'm yet to receive imported products from North Korea or Venezuela. Until now, I still haven't seen a single Koryolink phone as a worldwide brand. Meanwhile, Huawei and Xiaomi are certainly having a global identity as what I'd love to call Communist mobile phones.
The problem with protectionism is that discourages competition. Fools say that competition will destroy quality. I remembered talking about delicious hamburgers as a result of companies facing competition. If Jollibee had no competition--do you think that they could produce their delicious hamburgers? One article I wrote regarding Jollibee is about the evolution of Chickenjoy (read here). Jollibee is now a Filipino MNC. Whoever said that Jollibee grew through protectionism doesn't know the whole story. Also, some of the late John Gokongwei's companies have become MNCs too. Meanwhile, a monopoly could hardly care about quality if people will have no other choice but to avail of their services. Not to mention, monopolies will also run out of quality because there will be too many customers to serve.
More FDIs mean filling in the supply and demand gap to help reduce inflation. Just think of the benefits of FDI brought in during the reigns of two former Philippine presidents. late Benigno Simeon C. Aquino and Rodrigo R. Duterte. Duterte later signed the Public Services Act of 2022 (read here) which I believe will benefit the economy. It's really all about supply and demand. If public services companies from abroad invest here then imagine the outcome. There will be more affordable and faster Internet. There will be better electricity rates at lower prices. It's because supply will be increased thereby decreasing demand in return. This in turn will make the Philippines more investment-friendly. Then, in turn, it will create more jobs for the locals. It's because FDIs will generate jobs, teach new skills, and bring in badly-needed capital as long as reasonable laws to regulate all businesses exist. If an FDI does well in following the country's laws then it stays. If not, the FDI will be regarded as a bad tenant. Violators are violators whether they be local investors or FDIs. FDIs will after all, still pay taxes and they only get rich based on net income after taxes (read here).
This is already a matter of real economics--not the monkey economics of so-called thought leaders. Once again, accepting FDI isn't about ignoring the local business environment. Instead, it's all about developing it. Local businesses can end up expanding with better networks to help them grow. FDIs can provide more jobs that local businesses can't. In the end, just remember Deng's statement that says, "It doesn't matter if the cat is black or white. What matters is that it catches mice."
