Skip to main content

Using Vietnam to Justify No to Economic Reform is Rooted on ECONOMIC IGNORANCE

VNUA

Some time ago, I remember the now-defunct Philippine Anti-Fascist League Facebook page. One of its administrators (and I heard that it's actually run by a group of Gen-Z brats) berated the CoRRECT Movement. I'll put a screenshot of that statement made by one of the administrators (and I heard one of them was just a 13-year-old brat at that time).


For the sake of non-Tagalog speakers (although the Philippines is my default target readers), I will translate what this prick of an administrator wrote on their now-defunct Facebook page. Although it's already been taken down, I believe the need to continue refuting their past arguments along with other similar pages. Refute them using common sense and research data from economists from first-world countries! The translation goes like this:
Vietnam won the revolution, and they had a national industrialization and agrarian reform. What Vietnam's "Open FDI" means that the koriktor (a mockery of Corrector) actually means is that, those are finished products that are sold in the world market.

Meanwhile, in the Philippines, we don't have industries meaning that if it's open FDI here in the Philippines, our raw materials will be consumed by the greedy foreigners. 

This is just one argument. I've read other arguments that still believe Vietnam is a protectionist state. They may say, "Look at Vietnam! It's a protectionist command economy state! Why is it doing better than the Philippines?" I believe this argument comes from people with distorted views of what FDI means. Since when did a foreign investment involve sexual relations with foreigners (read here), borrowing money from another country (read here), or selling the country to foreigners? A simple definition of foreign investment shoots down such ridiculous thinking! 

However, knowing the history of Doi Moi, orchestrated by the late Nguyen Duy Cong aka Do Muoi, one can say that Vietnam actually accepted foreign investment, while it was still growing. Do Muoi struck up an interesting conversation with another great leader, the late Lee Kuan Yew. LKY even wrote this in From Third World to First after he saw Vietnam rise:

In fact, the Vietnamese had made progress. As a result of more contacts with foreigners and greater information on the market economy, ministers and officials had better understanding of the workings of the free market. Greater street activity, more shops, foreign businesspeople, hotels--these were all signs of prosperity in Ho Chi Minh City and Hanoi.  

Vietnam went in a different direction compared to the supposedly more democratic Philippines! The Vietnam Briefing mentions this one, a far cry from the overly restrictive policies as stated by the Official Gazette of the Philippines. 

Investors from ASEAN, the United States and Europeand countries are increasingly moving capital into projects in Vietnam, because of its highly attractive environment, and strategic business location.

Vietnam allows 100% foreign ownership in most of its sectors, including trading, manufacturing, IT, education sectors and more. For this reason, the country is viewed as being relatively wide open for foreign investors to enter the market and setup an LLC or other type of business entity.

However, a small number of business fields are limited for foreign-investment, and require that a foreign investor form a joint-venture with a local partner. These include:

  • Advertising services;
  • Agriculture, hunting, and forestry related services;
  • Telecommunication services;
  • Travel agencies; Tour operator services; Entertainment services;
  • Electronic gaming businesses;
  • Container handling; Customs clearance services; Auxiliary transport services;
  • Internal waterways transport, rail and road transport services.

That "negative list" in Vietnam is a lot shorter than the negative list of the Philippines! Even more, Vietnam's law on foreign investment also says that these businesses need a minimum entry of 30% but they can own more than 30%. Pretty much, doing agricultural business in Vietnam where one can own more than 30% is more feasible than going to a country that refuses to be flexible with equity restrictions. It's really not feasible to do business with someone who demands a huge slice of the profits from you, now is it? 

Even more, to say that certain industries have restrictions for "security reasons" is stupid (read here). It's not as if regulatory laws such as data privacy, environmental laws, and employment laws can't be used. All investors, whether Filipino or foreign, are required to follow laws. FDIs will still be required to pay taxes to continue doing business. That's why I throw the mocking question, "Why aren't people from ASEAN visiting Hilario Davide Jr.? Why are they visiting Kishore Mahbubani of Singapore instead?" Another mocking question I ask is, "If it's true that Carlos P. Garcia made us a tiger economy, where's the memoir to back it up?" LKY didn't only say things but he also proved things. Mahbubani didn't only talk but also walked the talk better than Davide. Davide's statements that the 1987 Constitution of the Philippines is the "best in the world" fall flat in the face of the National University of Singapore (NUS). I could even imagine if Mahbubani had a vacation in Cebu City, ran into Davide (and I believe the two know each other since they were both diplomats), and said, "Man, you're outdated Hilario! You should've joined the World Economic Forum!" Davide might answer, "You know what Kishore, I pity you, Singapore is now a colony of foreign investors!" Mahbubani might even said, "Wrong! You are so dead wrong Hilario!" 

The Philippines already has an edge over Vietnam, that is the Philippines is run under democratic principles. However, having a democracy without economic substance is dangerous (read here). The Philippines may have more freedom than Vietnam since the latter is still considered a Communist state. Communism often paints pictures of guns and tanks. However, the Philippines needs to resolve its economic policies. Economic restrictions should be removed from the constitution and placed more into legislation. That would make it easier to restrain and relax at certain times. Israel has a restrictive economy but it's all about financial activities (read here)--not the 60-40 type of policy. I believe the Philippines can do better in Vietnam. However, the extreme restrictions with equity ownership for FDIs really hold it back. It should be considered questionable how a Communist state is outperforming a country that boasts of being a bastion of democracy. 

Labels:

Popular posts from this blog

The Good Old Days when Gasoline was Cheaper Under the Late Noynoy Aquino

Millennials' Voice I would like to clarify first and foremost that this post isn't an attempt to say that the late Benigno Simeon C. Aquino III's legacy was all bad. Some good things happened. However, let me be clear that it's stupid to say, " We don't need economic cha-cha because of the late Noynoy. " However, let me clear that I decided to write this because of a Facebook post called Millennials' Voice , which wrote this: Did you know that during President Noynoy Aquino's time, the price of oil in the world market was high, between $100 and $110 per barrel. But even with those high prices, gasoline and diesel at local pumps in the country were still relatively affordable.  Under President Duterte, world oil prices went up and down, from a low of $41 to a high of $101 per barrel. The big jump to $101 in 2022 happened because of the war between Russia and Ukraine.   Now, under the current president, world oil prices have gone up again to around $...
Read more

The Myth of "Invading" Other Countries Through Foreign Investors and Overseas Filipino Workers

BoardGameGeek Years ago, I could remember how "Filipino pride" seems to be required by the DECS. Some songs in the Filipino subject (or called Tagalog) tend to glorify it. One of the songs was called "Ako'y Isang Pinoy" (or "I'm Pinoy") feels ironic since it was played on an imported music player. We had discussions for years about how Overseas Filipino Workers (OFWs) are often the unsung heroes or the new heroes. The mentality kept going on with how people desired to take a particular course not because they wanted to--it's because they wanted to go abroad. Why I wanted to take Bachelor of Science in Information Technology (BSIT) was not just to impress people but also to go abroad . However, more people shifted away from BSIT either because they were eliminated (common cause) or because it was too hard for them. Some of them flat out admitted that they took BSIT in hopes of going abroad. Some were taking nursing in hopes of again-- going abro...
Read more

Learning from the Late Lee Kuan Yew's Proving Protectionist-Driven Economists Wrong About Multinational Corporations

Reading the book From Third World to First is really a must. The late Lee Kuan Yew was faced with the mentality of the development economists of his day. Here's an excerpt from "Chapter 4--Surviving Without a Hinterland" which I'd like to share from 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 reg...
Read more

You're Complaining About PHP Devaluation But Do You Know Some Asian Powerhouses Have WEAKER Currency?

  Social media comments can be very toxic, aren't they? Sure, I didn't vote for Philippine President Ferdinand R. Marcos Jr. However, I can't blame him for anything beyond his control. The late former Philippine president, Benigno Simeon C. Aquino III, had nothing to do with the prices of gasoline being lower. Neither does former Philippine president, Rodrigo R. Duterte, have anything to do with the prices of gasoline. We find that the US Dollar (USD) is definitely getting stronger in proportion to the Philippine peso (PHP). Yes, it could reach up to PHP 60.00 or even higher. I remembered experiencing this during the time of former Philippine president, Joseph M. Ejercito aka Joseph Estrada . I really blamed Estrada back then for it even when it wasn't his fault either.  People can start panicking over the devaluation of the PHP. There are plenty of crude comments on Facebook I wouldn't bother screenshotting them all. Instead, I decided to finally write this economi...
Read more

"Will #SahodItaasPresyoIbaba Economics Lower Philippine Gas Prices?

Inquirer Gasoline prices have increased again, haven't they?  A few days ago, I wrote  why #SahodItaasPresyoIbaba's view of gas prices is questionable . Today, I feel like writing this after several complaints on Facebook. I would like to create a follow-up post. People are complaining too much without understanding the real reason why some countries have lower prices of gasoline. Real talk. We need to talk about economic policies,  and  of course, please do a study on supply-demand analysis  on supply chain management . Let's examine the complaints made by Bulatlat Bulatlat Here's a chart from Bulatlat that compares the increase in prices of gasoline between the Philippines, Thailand, and Malaysia. It's always problematic when people ignore simple economics. It's funny, but Bulatlat mentions this on their website: Note also how expensive our diesel and gasoline products are compared to those of our ASEAN neighbors. The estimated common price today of diesel in...
Read more