Refuting the BOGUS Claim That Wage Increase Alone, Not FDI, is the Key to Long-Term National Development
This is yet another stupid claim from Kabataan (Youth) Partylist. I wonder if the organization is linked to that joke of a Facebook page called the Philippine Anti-Fascist League (PH Antifa). You have had other similar organizations such as Anakbayan (Children of the Nation), Bayan Muna (Nation First), IBON Foundation, Kilusang Mayo Uno (May 1 Movement), and the League of Filipino Students that insist on the unsustainable demand for higher salaries, lowering the prices of commodities, and handouts for everyone. The idea itself is already not feasible (read here) yet they keep demanding it. One must wonder are they a group of economic idiots or do they have ulterior motives?
Do these groups understand what FDI really means?
I noticed that people coming from like-minded groups (such as Teodoro Casiño of Bayan Muna) have their own bizarre ideas. I could still remember his Rappler article which he also wrote about FDI. If the likes of Casiño are linked with the likes of Kabataan Partylist and the League of Filipino Students then think of what he also wrote in his Rappler article:
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.
This is a very primitive idea endorsed by Casiño. According to him, giving more room for FDI would mean that the national economy will become a tabula rasa. Tabula rasa means that the Philippines becomes a blank slate. I refuse to take Casiño's ideas seriously, not especially after reading From Third World to First by the late Lee Kuan Yew. This has something to do with the idea that FDIs equal foreign invaders (read here). I guess they're all subscribed to what I call the myth of invasion through FDIs and OFWs (read here).
When I ask such like-minded people why the Philippines is still left behind, they can give ridiculous answers. One of their ridiculous answers would say it's just about corrupt politicians, Filipino voters, etc. They will continue to insist on stuff like, "There's absolutely no need to amend the 1987 Constitution because it's the best in the world." When asked, "If it's the best in the world, why are we left behind?" They will say that it's because of the politicians, the voters, etc., never mind that faulty provisions have had to be fixed before any improvement can even take place!
When I start pointing out Singapore's success through FDI, there can be various stupid (and disproven reasons once you read Lee's book) such as:
- Singapore only opened up to FDI because of its lack of natural resources.
- Singapore only opened up to FDI after it became a first-world country via protectionism.
- The dumbest reason can always link to the "martyrdom" of Flor Contemplacion.
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.
People who promote the idea that FDIs are invaders are living in a third-world mentality. That's what the likes of IBON Foundation want to promote. Ironically, Sonny Africa of IBON is a graduate of the London School of Economics. It was what people taught back then when Lee inherited a battered Singapore. Lee also stated on page 68 of From Third World to First this truth about "waiting to be industrialized before opening":
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.
The growth of Singapore became so impressive that even Communist nations like China and Vietnam learned from it. The late Nguyen Duy Cong aka Do Muoi and the late Deng Xiaoping both learned from Lee's success. Though both were Communists, they saw the power of Singapore's economic success.
How then can FDI be the key to increasing the minimum wage?
Top 20 Countries with the highest minimum wage in 2020 (US$):
- Australia - $14.54
- Luxembourg - $13.67
- New Zealand - $13.18
- Monaco - $11.88
- Ireland - $11.54
- France - $11.46
- United Kingdom $11.37
- Netherlands - $11.21
- Belgium - $11.06
- Germany - $10.68
- San Marino - $10.55
- Canada - $10.33
- South Korea - $8.99
- Israel - $8.17
- Japan - $7.52
- Spain - $7.30
- United States $7.25
- Andorra - $6.72
- Slovenia - $5.84
- Taiwan - $5.26
If they think these countries progressed by increasing wages, think again. Instead, it was because these countries are more FDI-friendly than the Philippines. The Filipino First Policy has only caused the Philippines to fail (read here). Trying to protect businesses from competition only worsened the Philippine economic atmosphere. However, countries that are more FDI-friendly can afford to pay higher wages because the economy is better.
What's needed to be emphasized is that increasing wages in a protectionist country can worsen inflation according to Economics Help:
Wage Push Inflation. If labour is able to push for higher wages, despite lower growth, then we could get a combination of rising inflation, but slow growth. This is especially a problem if a country is part of the single currency. If wages rise, they become uncompetitive leading to lower demand. Therefore there is an unwelcome combination of rising prices, but lower growth. If countries were not in a single currency, the uncompetitiveness would lead to a depreciation in the exchange rate to restore competitiveness and increase demand.
Growth must come first before a wage increase. The Philippines should focus more on growing its national income first before increasing its wage rates. That can be done by easing unreasonable FDI restrictions. One of the biggest hurdles is the 60-40 FDI shares ownership policy. Who in their right mind, anyway, will want to rent a space if they had to give up 60% of their net income to the landowner (read here)? With more investors, whether they be Filipino or foreign-owned, the national economy will have more taxable income. I've gone to several foreign-owned establishments and there's the BIR registration and a notice to please ask for receipts. The BIR will collect taxes in the form of monthly value taxes, quarterly taxes, and annual taxes. The more a business gets income then the higher the income tax will be. What's left after taxes is the basis on which an investor gets rich.
The Philippines' removal of protectionist policies can provide a badly-needed wage increase. When there's growth then wage increase can be done safely. Of course, this will result in more expensive prices of goods. Prices of goods in Singapore are more expensive than in the Philippines for that reason. However, having higher wages when there's significant growth will make any inflation, well, manageable because supply and demand gaps have been fulfilled through a more FDI-friendly market.