Like Taiwan, the Philippines Can Beat China Economically But It Must Swallow "Filipino First", First!
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| Taiwan Economic and Cultural Office in the Philippines |
Taiwan’s economic freedom score is 80.1, making its economy the 6th freest in the 2022 Index. Taiwan is ranked 3rd among 39 countries in the Asia–Pacific region, and its overall score is above the regional and world averages.Taiwan is one of the few countries in the world to have experienced continuous economic growth during the past five years. Economic freedom has increased significantly during that period as well. With strong scores across the board boosted by increases in judicial effectiveness and labor freedom, Taiwan has recorded a 3.6-point overall gain of economic freedom since 2017 and has made it over the threshold into the top, “Free” Index category for the first time. Additional improvements in business freedom and financial freedom would propel economic freedom even higher.
Why am I bringing Taiwan up? Taiwan is often called the other China. I'm pro-Taiwan because I side with the plight of the average Chinese citizen. I want the Philippines to learn from Taiwan. Before anybody can say, "When can you get it into your head? The Philippines isn't Taiwan!" Taiwan used to be poor but learning new policies helped it. That would be very stupid because China and Vietnam, which are both not Singapore, learned from Singapore. Singapore learned from India and the prices of their local onions there are much cheaper than in the Philippines. It's a question of supply and demand. What's the excuse, anyway, of the Philippines, to justify economic protectionism, which is a huge cause of economic failure in the Philippines?
Let's compare the economic policies of both Taiwan and the Philippines
The big difference between Taiwan and the Philippines is the economic freedom scale. The Heritage Foundation also reveals the Philippines' lower rank in economic freedom:
The Philippines’ economic freedom score is 61.1, making its economy the 80th freest in the 2022 Index. The Philippines is ranked 15th among 39 countries in the Asia–Pacific region, and its overall score is above the regional and world averages.
Economic growth in the Philippines slowed from 2017 through 2019, turned negative in 2020, and rebounded in 2021. Over the same five-year period, economic freedom has slipped. Dragged down by decreased scores for fiscal health and monetary freedom, the Philippines has recorded a 4.5-point overall loss of economic freedom since 2017 and has fallen to the bottom ranks of the “Moderately Free” countries. The tax burden is not heavy, and trade freedom is a bright spot, but judicial effectiveness and government integrity exhibit weaknesses.
Sure, the Philippines could talk about how Xi Jinping's reign isn't in the Philippines. However, we can't just say that to justify economic protectionism. I remembered writing my post about how the 60-40 law is nothing more than overpriced rental. The arrangement that FDIs can only own 40% of their shares means they can only keep 40% of their net profits. Who in their right mind would want to rent a space if the agreement is this. You can rent a space but your lessor owns 60% of that branch, the lessor gets 60% of the net profits, and the owner only keeps 40%. It's very much unlike if the lessee owns 100% shares of the space while they're required to pay the monthly rentals. In the case of FDI, the FDI can continue to invest owning 100% of their shares while they're required to pay bills, rentals, registration fees, and taxes. Yes, FDIs will still be bound to pay taxes because they're required to register before they can even legitimately start a business!
Taiwan has had no such policy of 60-40 up to recently. Meanwhile, the Philippines had the stupid policy of Carlos P. Garcia. Whether we want to admit it or not, there's really no place for Filipino First Policy if you want the Philippines to catch up with ASEAN and the rest of the world. Garcia's Filipino First Policy only led the Philippines to failure. The Philippines may have not reached the same scale as Mao did during the Great Leap Forward. However, it's not an excuse for the Philippines to stick to the Filipino First Policy where Garcia aimed for the majority of economic holders should be locals. I can compare Garcia to a landlord who is giving overpriced rent in what he's doing, in regard to FDI.
Anthony B. Kim of the Heritage Foundation wrote about Taiwan's free and vibrant economy. I'd like to share an excerpt from which the Philippines can learn:
Also notable is that Taiwan recently ranked as the eighth most vibrant democracy in the world, according to the Economist Intelligence Unit’s latest Democracy Index, which is based on five key metrics: electoral process and pluralism, functioning of government, political participation, political culture, and civil liberties. In 2020, Taiwan, along with Japan and South Korea, moved up a category from “flawed democracies” to “full democracies.”
Indeed, Taiwan’s proven track record of being a free, vibrant member of free market democracy is not only remarkable, but also should be further enhanced through pragmatic, strategic partnerships with the United States and other like-minded, willing countries around the world.
Taiwan’s economic and political transformations are far more than domestic successes. They have fundamentally altered Taipei’s relationship with Beijing, with Washington, and with the world. Unambiguously, Taiwan’s embrace of a free market democracy shows a better path for all the Chinese people.
Taiwan has demonstrated to the world that freedom is a stabilizing force, that free enterprise, free association, and free speech lead to entrepreneurship, prosperity, and security. That is precisely why Taiwan matters to the world more than ever. As former Secretary of State Mike Pompeo underscored, Taiwan is “a democratic success story, a reliable partner, and a force for good in the world.”
The Philippines may have had its freedom restored on February 25, 1986, that's after the EDSA Revolution. However, the bigger problem has been the implementation of the R.A. 7042 – Foreign Investments Act of 1991 which has this very ridiculous policy:
a) the term “Philippine National” shall mean a citizen of the Philippines or a domestic partnership or association wholly owned by citizens of the Philippines; or a corporation organized under the laws of the Philippines of which at least sixty percent (60%) of the capital stock outstanding and entitled to vote is owned and held by citizens of the Philippines or a corporation organized abroad and registered as doing business in the Philippine under the Corporation Code of which one hundred percent (100%) of the capital stock outstanding and entitled to vote is wholly owned by Filipinos or a trustee of funds for pension or other employee retirement or separation benefits, where the trustee is a Philippine national and at least sixty percent (60%) of the fund will accrue to the benefit of Philippine nationals: Provided, That where a corporation and its non-Filipino stockholders own stocks in a Securities and Exchange Commission (SEC) registered enterprise, at least sixty percent (60%) of the capital stock outstanding and entitled to vote of each of both corporations must be owned and held by citizens of the Philippines and at least sixty percent (60%) of the members of the Board of Directors of each of both corporations must be citizens of the Philippines, in order that the corporation shall be considered a Philippine national; (as amended by R.A. 8179).
Some have wrongfully even said nothing is wrong with the 60-40 policy because of the influx during the reign of the late Benigno Simeon C. Aquino III aka Noynoy Aquino. However, Aquino III was known to have amended certain sectors which allowed better inflow than retaining 60-40. The Negative List of the Philippines has been amended many times. I believe the amendments done during the reigns of Aquino III and former Philippine president, Rodrigo R. Duterte, allowed the economic freedom score to hit 61.1% in contrast to Venezuela and North Korea. Later, Duterte signed the Public Services Act of 2022 which some fools renounced as "imperialism".
The Philippines has its advantages. The Philippines is a democracy. Ironically, I wrote about how Communist Vietnam may become a better-rising tiger. It also reminded me of how I wrote about Vietnam becoming the next Lego factory outlet instead of the democratic Philippines. It can be understood, at face value, that investors would choose Taiwan over China. However, the Philippines sadly lost in investments against Communist-dominated Vietnam.
The Philippines has had its opportunities. According to the Korea Times, Lotte pulled out of China. That's why I wrote about why that opportunity must be grabbed further by the Philippines. Instead, the Philippines' restrictions made it lose to Communist Vietnam aside from democratic Taiwan. The Philippines may be a democracy but it still lacks economic freedom. Vietnam may be gaining more economic freedom in spite of being a Communist country. Just think of the wasted opportunity that the Philippines had! Just think about the irony that FDIs moved away from China to Vietnam (both Communist countries) but not to the Philippines!
The Philippines doesn't need to go to a literal war with China. Instead, it must learn from Taiwan's open economic policy. Taiwan learned to use FDI to its advantage. They did have some protectionist measures before only to see free trade has been better. The Philippines can beat China economically by getting rid of all excessive restrictions regarding FDI equity ownership. The Marcos Jr. Administration must work double time on that. Philippine President Ferdinand R. Marcos Jr. aka Bongbong Marcos should urge the legislative to get rid of the ridiculous restrictions. That way, the Philippines can really, like Taiwan, beat China economically.