Archive for category Economy/Industry

Free Tertiary Education

Gearbox (Autocar Handbook, 13th ed, 1935) HUis a milestone for the Philippines – something I did not expect. Kudos to Senator Bam Aquino. Thanks to the others who had the sense not to torpedo it. Inspite of Aquino. The Philippine educational system may soon be able to produce the right kind of people for every level, thanks to having K-12 as well. You don’t only need the high-level theoreticians and academics. They are needed, but you need the other levels to distill the theory into useful practice – engineers, managers – and skilled workers.

Different skill levels are needed

K-12 was luckily not grounded by President Duterte, neither was K-12+ which is the special pilot project in cooperation with Germany. Yes, it produces skilled workers for German firms in the Philippines. Leftists, please protest. Call them exploiters. Do you prefer to have people in sweatshop jobs, begging for houses like Kadamay? Even the Russians knew how to build an industrial landscape within just a generation. The Chinese needed two, but Filipino leftists are for the most part I think too stupid for that.

Bavaria where I live has Fachhochschulen or Polytechnic Universities in unlikely places like Deggendorf, Rosenheim or Regensburg. I know some excellent IT people from these polytechnics, people of relatively humble peasant origins. Bavaria was a mainly agricultural state back in 1945. One level “below” engineers you have technicians. On the job training, the German dual system called Lehre – or the K-12 TVET or K-12+ which are similar – makes for highly skilled workers. Industries need these people.

Examples of tropical countries that excel

Or what would BMW in Munich be without all the levels of people in it? Or MBB in Hamburg, which had Indonesia’s Dr. Habibie in a leading position (link)? Finally, it was Habibie who was among those who got companies like Indonesian Aerospace (link) off the ground. Off course they geared up essential skills by building planes in license for MBB and the Spanish CASA which also once started off subcontracting for German firms – and is now part of Airbus Military, building the A-400M (link).

Of course the capability to build airplanes is a test of how an economy is able to get people to work together productively – something Filipinos still need to learn – FAST. Even Brazil has its own airplane manufacturer – Embraer – and I can attest to their planes being good. Or add to Indonesia and Brazil the space program of India to show that mastery of own complex industries is not something people in tropical zones cannot do. It is not just Europeans, North Americans and North Asians who can excel.

Working with the right partners

Will China ever help the Philippines jump-start anything industrially the way the German MBB and Spanish Casa, both Airbus now, did for Indonesia Aerospace? First of all, the country has to have the will to get started, nobody will spoon feed you. Filipino old-school leftists, stop complaining about exploitation, that is an old story. Second, the senior partner has to respect you. Germany respected Dr. Habibie, a former MBB VP. And Chinese often look down on brown Southeast Asians, that is well known.

Japan has been a good partner to the Philippines after the war. I even believe that neighbors like Indonesia and Vietnam would work together well with Filipinos. All that Filipinos have to do is shed their notorious prima donna mentality at all levels – with one another and especially towards fellow Asians. I do not really wonder why Rizal placed the Biblical quote “vanity, all is vanity” on the cover of El Fili. Modesty, and decades of quiet work bring results. Not jumping for Beijing loans and flattery.

Irineo B. R. Salazar
München, 5. August 2017

Tags: ,

60 poor families

Oliver Pelton - Benjamin Franklin - Poor Richard's Almanac Illustratedwill be involved in building their own houses in a resettlement site supported by the German government in Dasmariñas, Cavite (link) – and the Gawad Kalinga village will have a kindergarten and a public school, plus access to affordable healthcare facilities. The principle of German charity which involves activating self-help instead of encouraging mendicancy, subservience and helplessness – and of course the principle of developing healthy and educated communities. What a far cry from Kadamay!

Work always had worth in Germany. There were indeed areas like Prussia which had serfs until 1794 – a legacy of the conquest of the East. Other major parts of the country had a lot of independent farmers, tilling their own soil. And craftsmen in cities whose work had a high level of quality. Indeed one of the critiques Karl Marx had regarding capital and industrialization was Entfremdung or alienation of the worker from the product of his work, unlike the craftsman who could be proud of his own product.

Countries where serfdom and oppression caused the rich to keep getting richer and the poor to stay poor often have a different work ethic. In Romania there is a saying, said somewhat jokingly, that those who work hard are either stupid or have never used their heads. Imelda Marcos allegedly once said “some are smarter than others”. There are places in Romania where gypsy clan heads have large houses while everybody else is poor – yet they are worshipped. Sounds like some Filipino politicians.

Sometimes one looks at the Philippines and wonders whether those who work hard are indeed suckers and others are smarter. The drug lords, the gambling lords, the politicians that protect one or the other or even are into criminal ventures that can also include human trafficking, cybersex dens and prostitution. The oligopolies that can charge premium rates yet pay “endo”. Corrupt officials and different forms of extortion: kotong/hulidap cops, NPA “revolutionary tax” and Abu Sayyaf kidnappings.

Corruption and crime are both Filipino middle-class concerns. Politics so far may have addressed symptoms first, not root causes. The root cause of both may be exactly the mentality that those who work hard are suckers and those who get rich quickly and easily are somehow “smart”. How can one change that kind of attitude? Probably only by showing most people that there is another way. That work and honesty pays off. The other side is making sure crime and corruption does not pay, of course.

Irineo B. R. Salazar, Labor Day 2017, München

 

Tags:

The Philippines Inc.?

INNOVATION 6243The business of America is business, someone once said. Germany used to be called Deutschland AG or Germany Incorporated. Business is not a bad thing. We all want to make a living. When I was young and angry at the Marcos regime I was a leftist. At the very latest the failure of communism in Eastern Europe showed me that this was not the right way of thinking.

Filipinos and business

In the Philippines business has a bad connotation. Well it has often meant monkey business in reality. Or rent-seeking business of the oligarchic or crony type. Miguel Syjuco highlights the distribution of wealth in the Philippines in his article Beating Dickheads (link). Obviously the country is not yet a truly modern economy:

A recent study by economist Cielito Habito said that the forty richest Filipinos account for three-quarters of the country’s GDP growth – the highest in Asia. As the Philippine Daily Inquirer reported, this contrasts with Thailand, whose swankiest forty are behind a third of GDP growth. Malaysia’s fattest forty account for just 5.6 per cent, while Japan’s drive a mere 2.8 per cent. Meanwhile, the top two Filipinos on Forbes magazine’s rich list account for around $18.8 billion – 6 per cent of my country’s wealth. This was contrasted with the bottom quarter of Filipinos, who live on hardly a dollar a day. That’s twenty-five million people, more than the population of Australia, living on less than a buck. This ratio, the Inquirer reported, ‘was little changed from a decade earlier’.

He does mention that progress has happened:

The Philippines is no longer the sick man of Asia. Our middle class is expanding. Our workers are prized all over the world. The country is politically stable compared to our neighbours. The administration of our current president, Benigno ‘Noynoy’ Aquino III, has cracked down on corruption, most notably on a scandalous pork-barrel scam implicating a dozen powerful senators and more than a score of congressmen. And, best of all, the Philippine economy is booming.

But that also there are a lot of things to be improved:

But the same families maintain a stranglehold on power while the gap between rich and poor widens. Monopolies, nepotism, tax evasion, protectionism, erratic regulation (too little where it’s needed, too much where it’s not) and personal relationships between business and policy makers continue to bloat the wealth of the political and non-political elite alike.

This is of course not surprising in a country where traditionally wealth was gained by extractive monopolies. From the time of the galleon trade onwards.

How others developed

America also had its robber baron period in the late 19th century (link). Much development was made possible by these ruthless men. Germany also had big industrialists like Krupp.

  • anti-trust regulations developed to prevent monopolies from getting too powerful. One of the biggest anti-trust actions was the break-up of AT&T (link).
  • sophisticated stock markets developed with insider trading rules (link) in order to give small shareholders a chance and not just be potential suckers.
  • highly regulated banks and pension funds became major investors in developed economies – the former in Japan and Germany, the latter in the USA.
  • small and medium-sized enterprises were protected, municipalities given a tax share. Germany’s SMEs employ over 60% of the workforce (link).
  • strong social democratic or labor parties especially in Europe made sure that workers were given a fair share of their contribution to productivity.

Works councils in Germany (link) make sure that workers and corporations work as a team and not against each other. Much of postwar Germany’s success is also due to them. But also:

  • Most modern countries have real political parties that recruit members from all walks of life, similar to trade unions. Party finances are highly regulated (link).
  • Different interest groups exist in any country. Nothing wrong about taking care of common interests. Nearly every industry, profession, group has that in Germany.
  • Corporations, political parties, lobby groups all breed their leaders internally with some degree of meritocracy and some game-playing. Nearly no dynasties as a result.

Countries with that degree of professionalization and institutionalization are of course in a totally different league than Saudi Arabia, Dubai or the Philippines.

Gettings things there

There are indeed a few initiatives that may move the Philippines in the right direction if implemented properly. They all bear the signature of Senator Bam Aquino:

  • The Philippine Competition Act is now not only promulgated but implemented, with former NEDA Director-General Balicasan heading the Philippine Competition Commission
  • The Go Negosyo Act (link) and the Negosyo Centers implemented as a result (link) give opportunities for SMEs. What I have heard so far is that they are the real deal even for OFWs.
  • Latest initiatives on innovation, pushing for the internet infrastructure to be improved, consumer protection are all further initiatives that are quietly being pushed by the Senator.

An article from the Philippines Free Press of August 29, 1970 “The Ruling Money – Anatomy of the Republic as a plutocracy.” (link). It identifies the sources of the wealth in those days, and the man who clearly names the sources of that wealth is Senator Aquino – not Bam but Ninoy Aquino. He also makes a clear statement about the dangers of such a concentration of wealth:

Senator Aquino sees one great danger: the Filipino who becomes master in Juan’s house may not be Juan de la Cruz himself. Juan may find that the foreign exploiter he kicked out has been replaced by a native one. “The Spanish exile, Salvador de Madariaga, warned that a country can become the colony of its own people.” And the hurt is that it’s Juan’s money that will be used to make him poorer and his master richer.

So it does seem that Bam Aquino is living the same spirit as Ninoy Aquino then, and even implementing measures that will change things.  To paraphrase Michael Syjuco’s article – Bam Aquino is for sure NOT a dickhead. I am not so sure about President Benigno Aquino III sometimes, or about Manuel Roxas II. Could it be a generational thing? More stuff like that of Bam Aquino please.

Irineo B. R. Salazar, München, 16. March 2016

Tags:

Philippine Economic Growth

The Philippine economy has been growing fast in the past years.

  • The GDP per capita is around three times what it was 15 years ago.
  • Not just business process outsourcing, but also industries such as shipbuilding and repair, automotive, aerospace and electronics form the backbone of growth.
  • Mining and agriculture also play a major role, the Philippines having plenty of natural resources and fertile lands.
  • It is not an Asian Tiger yet, but is already considered a Tiger Cub and is moving forward very quickly.
  • However, there are two questions about this growth: its sustainability and its inclusiveness.

Much of the growth is due to offshore production and outsourcing. A lot of revenue from overseas foreign workers contributes to local consumption. So far the local big players are mainly retailers as well as homegrown hamburger chain Jolibee and mall developers, all with some multinational presence. Outsourcing and offshore production can move elsewhere if the Philippines gets to be too expensive or other countries improve their conditions. Overseas foreign workers can be sent home if their is an economic crisis in the host countries. There is also evidence of a growing middle class in the Philippines. However, it is not yet clear whether economic growth is going to alleviate massive poverty that still exists and whether this new middle class has a stable base. Sustainable growth also depends on a broad middle class, both as a stable consumer base and as a breeding ground for small and medium-sized enterprises (SMEs) doing all types of business.


Aside from this there are many other challenges, these are but a few:

  • Corruption has apparently gone down and many people do not see it as something “normal” anymore. But it does still seem to play a major role.
  • The ease of doing business has improved, but the perception is that the bureacracy is still very stifling. A ranking of 108th out of 183 countries is still lower middle ranks.
  • In terms of Human Development, the Philippines ranks 117th out of 187. Literacy which used to be very high, has gone up again after having gone way down in the past decades.

Furthermore, the high Population density especially on Luzon is an ecological time bomb, not just for the quality of life. Manila is barely above sea levels which are rising anyway, overpopulation may cause the Groundwater to sink and endanger the city’s future in the long term. The economic costs of major floods that happen with increasing frequency are immense.


It might be important to decentralize the focus of the Philippine economy to decongest Metro Manila and spread the wealth to other parts of the country. It is already partly happening.

But many more questions remain about what must be done to keep up the momentum of growth and make it something lasting. More foreign investment, open the gates to full foreign ownership? Pursue a government-funded industrial development program? What are the major barriers to growth that need removing? What needs to be promoted more? What needs to be consolidated?

Irineo B.R. Salazar- München, May 4th 2015

DISCLAIMER: opinions expressed in linked articles or sources are not necessarily mine.

Tags: ,