Duterte said that algebra is useless. Filipinos should learn business math. I think he is wrong. King Mongkut of Siam, of the famous “The King and I” starring Yul Brynner, was a dictatorial man in real life and on screen. But there is a scene where the English teacher tells him of the importance of algebra and he orders everybody to learn it. Could that be the reason why Thailand is quite prosperous?
But Duterte also has a point somehow. Maybe we – and I include myself as a Pinoy – don’t know how to use what we learned properly. I have done advanced mathematics in school, but often failed to manage my money properly, until I learned by doing. So I did not REALLY learn my business math – which in the end is just addition, subtraction, multiplication and division – and occasionally percentages. Because there are five steps to learning:
- understanding how something is supposed to work
- understanding how to be able to do it
- actually being able to do it
- applying it in reality
- mastering it
Mastering something means you apply it well. During a bad phase in my business I had to juggle my money, and first started by making notes, then a simple excel sheet and finally a cashflow sheet with expenses and income forecasts. Now I really know why I am doing it and how to avoid the danger zone. The classic Filipino educational system is a lot about theory and not about applicability and effects. The BBL draft I think shows this weakness. Back to money.
Talking about Money
“Mukhang pera” is a bad word in Filipino. It means money-faced. Some Filipinos say “pera lang iyan”. It’s just money. In the original abundance of the islands I guess it may not have mattered. But now where many people do not live in the barrio anymore, it does. Many Filipinos have debt issues. Some are gamblers. Many LGUs are in debt. There often have been budgeting issues.
It has dawned on me that many discussions in Philippine politics nowadays are about money. Here are some interesting articles from Joe America’s blog:
- On a clear day you can see MRT is about the MRT, its contracts and the flow of money related to them
- The SSS in the Philippines is about the SSS, its funding and the reason why many things went wrong
- Banking in the Philippines Part I and Part II are about banks in the Philippines, strengths and weaknesses
- National Budget as cake is an amusing introduction to budgeting – the first time I looked at any national budget
- On Monetary Sovereignty and Government Spending is a very interesting take on the basics of the people’s money
Money for Nothing
What surprises me is how many people believe that Jejomar Binay can give everybody in the Philippines the benefits he has given to Makati residents. It is clear that Makati is rich. The Philippines probably would go broke if he did what he plans to do. OK the national budget is 3 trillion pesos. Sounds like a lot of money. But divide 3 trillion by around 100 million Filipinos – keep things simple. Makes around 30 thousand pesos per Filipino a year. That is around 600 Euro only. According to statistics government spending is around 16% of GDP. Not really much.
If one looks at other countries, the USA spends around 25% of its GDP for government, Australia around 35%, Switzerland around 30%. So you need to have the money first to be able to spend it. Common sense. There is I think a lot to be learned in these matters. There are those who think the government can print money. But it can only do so, very generally speaking, in proportion to the goods and services produced locally.
Otherwise you have inflation and your money loses value against other currencies. That is bad if you are importing a lot and/or have a lot of debt to other countries. Common sense I would say makes it logical that countries that produce more goods and services by themselves are more stable. One just has to look at prosperous countries like Japan, Korea, Switzerland, Australia, Canada to see that they have a lot of their own internal economy.
Moving to another topic. It is well known that it can be hard to collect debts from some Filipinos. That many who earn salaries are dependent on loansharks for one reason or the other. But this is quite astounding:
- That the BIR had a steep uphill fight in the last few years to improve collection efficiency
- That the SSS has a lot of money uncollected according to the SSS article and others
- That the money from the sale of Fort Bonifacio allegedly just vanished in thin air
On the distribution side, Pantawid Pamilya gives families ATM cards so that they can get their benefits from what I have gathered. But recently someone with 4Ps money was robbed in Albay – obviously it is paid out in cash also. Cash is of course always dangerous. It is not always traceable.
So there are a number of things that should be looked at to understand the money and the numbers better when it comes to the Philippines:
- how much money is coming in (collections), being spent internally (costs) and being distributed like SSS and 4Ps?
- how many taxpayers, how many SSS and GSIS members, how many beneficiaries of SSS, GSIS, 4Ps?
- how much money is uncollected? BIR and SSS? How much money is not disbursed or liquidated?
In case of real freedom of information or FOI, these could be the first questions to be looked at. The details derive from the broader questions.
Just some observations as food for further thought:
- In Germany, a lot is done via bank transfer. Tax offices demand quarterly advance payments, one fourth of expected annual income tax, from businesses. Businesses with employees have to submit electronic lists, I think to tax and social security offices – I am self-employed so I am not sure about this. As a former employee, I know that social security, health insurance and withholding tax are deducted from the gross monthly income, only the net income is paid out. Employers must transfer these contributions very quickly to the right institutions or risk a fine.
- As for social security, unemployment pay or pension payments, everybody has a bank account and gets his money via bank transfer and then ATM card. There is a law that forces banks to give even poor people at least a basic bank account. Usually the very poor have a postal bank account or one at the local savings bank or rural bank. No cash and no cheques as far as I know.
- One the personal money side, the Hanns-Seidel Foundation of Munich is helping the Philippines in the area of micro-finance and micro-enterprise development. This is good to make people depend less on loansharks and build their own existence, hopefully getting them out of poverty. Very many sari-sari stores close quickly because money is not properly managed from what I have heard so far. How financial literacy can generally be improved is a very significant question, especially among adults. Are there any DSWD programs for this? Does K-12 address it?
There is in my opinion not only much potential for leakage and inefficiency in the present Philippine system. But obviously a lot more for fraud and corruption, and persistent poverty.
Irineo B. R. Salazar, München, 1. February 2016