Filipino First Isn't Glocalization Friendly

Philippine Information Agency

Buwan Ng Wika or Buwan ng Kasaysayan may be over. With September, one can always think of the late Ferdinand E. Marcos Sr., and his use of the Filipino First Policy to nearly, its fullest. The late Carlos P. Garcia, was the enabler. People tend to argue how "great" and how "good" the Filipino First Policy is. Garcia was the first to be buried at the Libingan Ng Mga Bayani. It's effortless to say that Filipino First has no place in the Rising Asian Century (read here). After writing that piece back in 2024, I'm going to write about glocalization. It's a concept that was introduced to me back in college, but I've revisited the term for this article.

Investopedia gives this basic definition of what glocalization is:

What Is Glocalization?

Glocalization merges globalization and localization, allowing products and services to be tailored to local markets while maintaining a global presence. This strategy adapts global offerings to meet local regulations, cultural preferences, and consumer needs, making them more appealing to diverse audiences across different regions.

A common example would be cars that are sold worldwide but adjusted to meet local criteria, such as emissions standards or what side the steering wheel is located. It could also focus on more cultural aspects, such as a global fast-food chain offering geographically specific menu items that cater to local tastes.

What's the big deal with the Filipino First Policy?

Back when I was in elementary to first year high school, under the K+10 policy, one of the many thigns praised was Garcia's Filipino First Policy. This is a definition from the Official Gazette of the Philippines:

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.

The Filipino First Policy isn't against FDI per se. However, the belief that Filipinos should be the major and dominant participant in the national economy is severely flawed. This is the reality that in theory, it sounds good. However, the years of practicing Filipino First Policy revealed its ugly head. The IBON Foundation can keep talking about Marcos as a "neoliberal presisdent", which is far from it. Marcos practiced crony capitalism, which is capitalism in the hands of a few. It built the oligarch, which in practice, is pretty much how Communist leaders are running their country. Real Communism is inachievable. To have a moneyless, stateless society where everyone is equal, is unrealistic. Instead, Communist leaders tend to have all the power, while the rest suffers. 

However, in a more pragmatic reality, we need to ask these questions in the quest to have an economy, where Filipinos are the major and dominant participants:

1. How many Filipinos in the Philippines, are in fact, business savvy?
   
2. How many Filipino businesses can actually be an oligarch enough, to work into the 60-40 policy?
   
3. Do we really know the meaning of the word profit and differentiate it from revenue (read here)?
4. Will any MNC company be willing, in their right mind, have a 60-40 split with an oligarch (read here)? 

The source of rampant corruption examined 

As I would like to emphasize that while corruption is indeed a problem, the bigger issue is the 60-40 model, actually helps foster corruption than worsen it. To say that FDI will only benefit corrupt officials, or that corruption will automatically discourage FDI. If we're to define corruption, Transparency International writes it as:

We define corruption as the abuse of entrusted power for private gain.

If we think about it, there are different types of corruption. However, those who were using the International Monetary Fund to defend the late Benigno Simeon "Noynoy" C. Aquino III, as if he was some miracle worker, may want to see the cause-effect scenario. The IMF writes these to be the causes of corruption, which in turn can also worsen more FDI incentives, which one of them might shock people or not, but I'm not too shocked!

Since much public corruption can be traced to government intervention in the economy, policies aimed at liberalization, stabilization, deregulation, and privatization can sharply reduce the opportunities for rent-seeking behavior and corruption. Where government regulations are pervasive, however, and government officials have discretion in applying them, individuals are often willing to offer bribes to officials to circumvent the rules and, sad to relate, officials are occasionally tempted to accept these bribes. Identifying such policy-related sources of corruption is obviously helpful in bringing it under control. The following sources have for some time been well known.

* Trade restrictions are the prime example of a government-induced source of rents. If importing a certain good is subject to quantitative restriction (for example, only so many foreign automobiles can be imported each year), the necessary import licenses become very valuable and importers will consider bribing the officials who control their issue. More generally, protecting a home industry (such as plywood manufacturing) from foreign competition through tariffs creates a semi-monopoly for the local industry. Local manufacturers will lobby for the establishment and maintenance of these tariffs and some may be willing to corrupt influential politicians to keep the monopoly going. Studies have shown that a very open economy is significantly associated with lower corruption. In other words, countries tend to be less corrupt when their trade is relatively free of government restrictions that corrupt officials can abuse.

* Government subsidies can constitute a source of rents. Studies show corruption can thrive under industrial policies that allow poorly targeted subsidies to be appropriated by firms for which they are not intended. The more such subsidies are available to industries, the higher the corruption index.

* Price controls, whose purpose is to lower the price of some good below its market value (usually for social or political reasons), are also a source of rents and of ensuing rent-seeking behavior. Price controls create incentives for individuals or groups to bribe officials to maintain the flow of such goods or to acquire an unfair share at the below-market price.

* Multiple exchange rate practices and foreign exchange allocation schemes lead to rents. Some countries have several exchange rates--one for importers, one for tourists, one for investors, for example. Differentials among these rates can lead to attempts to obtain the most advantageous rate, although this rate might not apply to the intended use of the exchange. Multiple exchange rate systems are often associated with anti-competitive banking systems in which a key bank with government ties can make huge profits by arbitraging between markets. Some countries have little foreign currency and distribute what they have through various schemes, with varying degrees of transparency. If, for example, state-owned commercial banks ration scarce foreign exchange by allocating it according to priorities established by government officials, interested parties may be willing to bribe these officials to obtain more than their fair share.

* Low wages in the civil service relative to wages in the private sector are a source of low-level corruption. When civil service pay is too low, civil servants may be obliged to use their positions to collect bribes as a way of making ends meet, particularly when the expected cost of being caught is low.

In addition to government regulations as an occasion for corruption, other reasons for corruption have been identified.

* Natural resource endowments (oil, gold, exotic lumber) constitute a textbook example of a source of rents, since they can typically be sold at a price that far exceeds their cost of extraction and their sale is usually subject to stringent government regulation, to which corrupt officials can turn a blind eye. Resource-rich economies may be more likely to be subject to extreme rent-seeking behavior than are resource-poor countries.

* Sociological factors may contribute to rent-seeking behavior. An index of ethnolinguistic fractionalization (societal divisions along ethnic and linguistic lines) has been found to be correlated with corruption. Also, public officials are more likely to do favors for their relatives in societies where family ties are strong.

If one must analyze it, the Filipino First Policy, we have the problem of government intervention in the economy. The Filipino First Policy and the economic restrictions in the "holy" 1987 Constitution of the Philippines, have been the cause of the corruption. In short, one can say that the corruption from within the system, enables the corruption done by politicians, seldom in the most subtle of ways!

The 1987 Constitution of the Philippines may have rules against corruption, but they're often rendered moot by the corruption within it!

How Filipino First actually doesn't fit into the glocal model?

After discussiing corruption and why systemic corruption is the bigger problem. It's because this corruption I'm talking about, in context, isn't corruption in the sense where public officials abuse their power for personal gain. Instead, what I'm talking about is "a departure from the original or from what is pure or correct", according to the Merriam Webster Dictionary. If we're to think about it, while government corruption is indeed the problem, we need to the root cause as to why. In fact, I would like to say that the Filipino First Policy, enshrined in the 1987 Constitution of the Philippines, is in itself a corruption in the constitution. It's like a corruption within a file, which makes it either buggy or unusable. A bug in the software program, can still be considered a corruption, because it makes the program unable to run.

If we're to really talk, Andrew James Masigan's words from the Philippine Star should still ring true today:

I would never undervalue the 1987 Constitution. It dismantled the legal framework of a repressive regime and established the democratic institutions we enjoy today. For this, I am grateful.

The 1987 Constitution was crafted with the best of intentions. It sought to put the Filipino first in all aspects of governance and to level the playing field amongst sectors and peoples. But it is far from perfect. It failed to consider the importance of foreign capital and technologies and the stiff competition we would have to face to obtain them. In short, its economic provisions were short-sighted.

So despite the Constitution’s patriotic bravado, reserving certain industries exclusively for Filipinos (or a Filipino majority) worked to our peril. It deprived the nation of valuable foreign investments, technology transfers, tax revenues, export earnings and jobs.

The Constitution’s restrictive economic provisions stunted our development for 36 years. From 1987 to the close of the century, Singapore, Malaysia and Thailand leapfrogged in development on the back of a deluge of foreign direct investments (FDIs). During that period, the Philippines’ share of regional FDIs lagged at a pitiful 3 percent in good years and 2 percent in normal years.

From the year 2000 up to the present, Vietnam and Indonesia took their fair share of FDIs, leaving the Philippines further behind. The country’s intake of foreign investments is less than half of what Vietnam and Indonesia realize. No surprise, our exports have also been the lowest among our peers. The lack of investments in manufacturing capacities have left us no choice but to export our own people.

Imbedded in the Constitution are industries in which foreigners are precluded. These include agriculture, public utilities, transportation, retail, construction, media, education, among others. Further, the Constitution limits foreigners from owning more than 40 percent equity in corporations. Foreigners are barred from owning land too. These provisions caused us to lose out on many investments which would have generated jobs, exports and taxes. Not too long ago, we lost a multibillion-dollar investment from an American auto manufacturing company that chose to invest in Thailand instead. We lost a multi-billion smartphone plant by Samsung, who located in Vietnam.

Sure, the Public Service, Foreign Investment and Trade Liberalization Acts were recently amended, allowing foreigners to participate in a wider berth of industries with less rigid conditions. But it is still not enough. The Philippines remains the least preferred investment destination among our peers.

Our flawed economic laws are the reason why our agricultural sector has not industrialized and why food security eludes us. It is also why our manufacturing sector has not fully developed. It is why we lost the opportunity to be Asia’s entertainment capital despite our Americanized culture (Netflix located its Asian headquarters in Singapore, Disney in Malaysia, MTV in Hong Kong and Paramount Studios in Taiwan). It is why our education standards are among the lowest in the world. It is why many industries are oligopolies owned by only a handful of families.

As for the form of government, I am willing to give the federal system a chance. Let’s face it, the current presidential system fails to provide the checks and balances for which it was intended. Senators and congressmen still vote according to party lines, albeit in a much slower legislative process. So yes, I am willing to try a new form of government because 36 years of insisting on a flawed system is insanity.

The world has changed since 1987. Our Constitution must keep up with these changes if we are to be competitive. This is why I support Charter change, except in the extension of term limits of public officials.

The 1987 Constitution had good intentions. However, the corruption frm within, in the context of a serious mistake, was to enshrine the Filipino First Policy into it. It's a major systemic error that prevented the Philippines from truly entering the glocalized scene. It failed to see the following of what could be done even if Filipinos weren't the majority of shareholders. It's because:

1. 100% FDI ownership has always been about corporate shares ownership. They would still need to be registered properly, and aren't above the law.
2. FDI can be harmful if there are no proper regulations. The environmental degradation in the Philippines is a result of a lack of enforcement of proper environmental laws, not FDI. So sayin FDI ruined Nigeria, is a non sequitur.
3. Just because the MNC will have 100% shares doesn't mean:
• They don't have to pay taxes. Everyone who does business in the Philippines must pay taxes.
• They don't have to follow relevant business laws, like enviromental and labor.
• They don't have to pay rent to the respective lessors and other people they owe money to.
4. MNCs profit is always based on net income after taxes.

If we think abou it, we need to stop living in the paranoia of the Filipino First Policy. We need to move protectionist polices away from the constitution, and only apply them in legislation. That means the default is free trade. Protectionist measures should just be temporary. 100% FDI corporate shares ownership, along with other reasonable restrictions, can be a huge game changer!