Posts Tagged Business

Entitlement and Helplessness

The native farmer and his faithful servant (from "The history and conquest of the Philippines and our other island possessions; embracing our war with the Filipinos in 1899")For all progress, the Philippines often remains a country of entitled “señoritos” and helpless “alila”. Something which many describe as feudal, although I would use the word entitled, as European feudalism was different from the basic structure of Philippine society. My summary of its worst aspects that Dean Michael Tan mentions (link) in this article (link) is:

  • In a system of learned helplessness, the poor are grateful to the powerful who are nice to them, even if they are not good people. They are “mabait” (nice) – even convicted rapist Jalosjos.
  • In a system of elite entitlement, the entitled feel they can do anything. Tan mentions some his own UP students who just leave garbage everywhere, saying what are janitors for.
  • I add to this that the culture of subservience and power Joe America has described is part of this social dynamic.

Yet even the entitled are helpless because they depend too much on those who serve them. Any Filipino who grew up with maids and went to developed countries or even worked there has a learning curve becoming truly independent.

Roots of Entitlement

The roots of entitlement go back for centuries from the formation of the Philippines under Spanish rule:

  • native chiefs were incorporated into the system as caciques or principalia (link)
  • the Church got to have a major role and large lands as part of the system
  • encomenderos initially got a role in controlling assigned portions of the land (link)

Historically there were a lot of movements but the basic structure stayed the same:

  • encomenderos were feudal lords with duties and privileges from 1570 onwards (link)
  • there was a conflict between Church and encomenderos who were often abusive (link)
  • 98 encomiendas in 1570, 241 in 1650, only 11 left 200 years later (link in Wikipilipinas)

Then you have the aspects of Spanish trade which were under colonial control:

  • The galleon trade with Mexico up to the early 19th century and involved Chinese merchants in Manila, their settlement (Parian, present-day Binondo) within reach of Spanish cannons.
  • The tobacco monopoly from 1782-1882 which involved most of the Ilocos region and established tobacco as a cash crop there. (link in Wikipilipinas)
  • Spanish mining of gold in Paracale (Bikol) which Manong Sonny told me involved a royal garrison there.

Then you had modern trade which started in the late 18th century and was booming by the late 19th century:

In Latin America many natives tried to escape encomiendas by having mestizo children with European settlers, as mestizos were not covered – could this be one reason for around 1/8 of the population at that time being mestizo in the Philippines? According to some accounts today the percentage of Filipinos with some European blood is only 5% at the most meaning 1/20, which shows that the more “native” population has grown faster. Chinese were expelled for siding with the British in 1762, but the Sangley (Chinese) mestizos remained – more on them later on.

Commercialization, Legalization, Impunity

Old Supreme Court Justice House in BaguioThe first legalization came with the Spanish civil and penal codes in the 19th century. Many aspects of these codes are still part of Philippine law until today. Rizal already described the Penal Code of 1884 (the new Criminal Code of 2014 which is supposed to finally modernize things is still stuck somewhere in Congress) as a “colonial jest” in The Philippines, A Century Hence. Not much difference today in fact, since except for a few courts which have started using Filipino as a pilot, commoners have to deal with a foreign language (English not Spanish anymore) and legalese.

America further systematized the official titling of lands started in the late Spanish period. During this period (link to the relevant passages here) claims were legalized with for example young lawyers like Araneta securing the Spanish-era claim of the Tuasons to what is mostly now Quezon City and those with money could buy friar lands sold by the USA. American-style democracy also benefitted those who already had money (link here) and concentrated the power of those who had land in the provinces in Manila where they started to form a national elite.

Government contracts during the Quezon era benefitted a few like the Madrigals, the modern banking system allowed the sugar business to modernize, the inclusion of the Philippines within the tariff wall of the USA from 1909 onwards kept sugar profitable. A lot of mining companies as well as some plantations (Del Monte in Mindanao) were established in the American period as well. While there had been small waves of settlement in Spanish times, a really major wave of Christian Filipino settlement came to Mindanao in the 1920s after it was turned over to Philippine rule.

After WW2 and the end of direct American supervision, two factors entered the equation: the Hukbalahap and warlords. Benedict Anderson states that warlordism became a fixture of politics starting in the late 1940s, with the Lacsons of Negros among the most vicious. The Duranos of Cebu are also mentioned as very violent by Prof. Alfred McCoy in his book “An Anarchy of Families”. Another famous warlord was allegedly Floro Singson Crisologo of Ilocos Sur, gunned down in Vigan Cathedral in 1970 (link) and with alleged connections to tobacco interests (link).

Forbes Park was established in the late 1940s. I have also been told the first slum settlers came to ruined Manila just after World War 2. Could it be that both rich and poor were fleeing the countryside due to the rebellion of the Huks (emboldened by their anti-Japanese experience) and the warlord impunity there? Magsaysay did bring peace and the 1960s were prosperous. Many former Hukbalahaps were enticed to settle in Mindanao, a solution which would lead to civil war from the late 1960s onward in connection with the Sabah claim and Jabidah massacre.

Kleptocracy, Restoration, Crookery

Marcos came into power with an anti-oligarchic promise but created his own system of cronyism, with technocrats supporting him according to Benedict Anderson, while social science graduates like Nur Misuari and Jose Maria Sison became the new rebels while over one million middle class people, mostly professionals, left for the USA until the mid-1980s. Obviously the February 1986 revolution which started as a failed military coup with common people flocking to EDSA eventually merged with the movement of the remaining middle class grieving for Ninoy.

While the 1987 Constitution democratized things on paper, there was also a certain restoration – with former cronies of Marcos having joined the mix, and new enterpreneurs of Chinese origin displacing the formerly dominant Spanish mestizo families. Marcos had both forced Chinese schools to teach Filipino and according to historian Prof. Michael Chua mass naturalized in 1975. Recent enterpreneurs like Lucio Tan and Henry Sy are another type of Chinoys or Filipinos of Chinese origin than Roberto Ongpin whose family dates back to Spanish times.

Some of “native” origin like Napoles and Binay (the evidence against him is overwhelming even if not yet officially proven in court, just like the what has been proven against the Marcoses in international courts is clear enough) tried to get a piece of the action (mob terminology for a share of the spoils) in this “take what you can, give nothing back” (Pirates of the Carribean) situation. Those who come from below and move up in a system like that can be the greediest – Marcos who was from a provincial political family another example of this phenomenon.

POEA was founded in 1975. There had been Filipinos (nearly all Ilokano) who had worked on Hawaiian plantations in the 1920s, and Filipinos in California as well until the 1930s race riots. There had been Filipinos on galleons, and Filipinos in Mexico during Spanish times with religious processions of their own according to Charles Mann in his book 1493. Overseas Filipino workers really got started during the Marcos period, and this never stopped until the present day as official POEA statistics will show, migration by marriage also boomed from the 1980s onwards I observed.

In Marcos times Filipinos overseas had to remit money at a fixed exchange rate, while the black market exchange rate gave more pesos for dollars, reflecting the true value of the peso. Taxation of overseas Filipinos – issuance of passports coupled to proving BIR payments based on foreign-earned salaries – was only abolished way after Marcos had left, after many permanent migrants had changed citizenship to avoid it, overseas suffrage and the possibility of dual citizenship came later. My sources here are mainly anecdotal so any correction or addition is highly appreciated.

The Extractive Tradition

Even today monopolies or oligopolies in the area of utilities and retail are cash cows for a few, protected by laws against foreign ownership that date back to the time of President Carlos Garcia. With no relation to this blog’s and Joe America’s major contributor Karl Garcia aka Bart Simpson, who is NOT Ian Karl Garcia, son of scandal-ridden military comptroller General Carlos Garcia. Scandals like that of General Garcia, ZTE broadband, fertilizer funds and the bank secrecy laws dating back to 1955, enhanced in Marcos times, improved under FTFA pressure show one thing.

The extractive tradition still survives. It dates back to the encomenderos of old, was continued by Church and principalia, followed by planters and politicians who played democracy for the American rulers that broke down into rebellion and warlordism after the war, was replaced by a kleptocratic dictatorship followed by a democracy which was too weak to prevent rent-seeking and “crookery”. Quezon and Magsaysay were sincere for sure, Daang Matuwid has tried to rein in corruption, Senator Bam Aquino’s Philippine Competition Act is a first step against rent-seeking.

Why Nations Fail by Daron Acemoglu and James Robinson is a book and a blog (link). From what I have read so far, it sees the main reasons for national failure in rent-seeking elites that do not want competition and thereby stifle innovation, and in weak national institutions that make the state a captive of power groups. The Philippines unfortunately fulfills BOTH criteria.

Value-Added and Win-Win

WinWin bus in BangkokThe present administration’s main players come from one of the oldest oligarchies in the Philippines – the sugar barons. Yet they are reformist in their approach:

  • the 4Ps are to break the cycle of poverty and learned helplessness by giving money to the poor but inculcating better habits (regular checkups) and forcing them to send kids to school
  • the reform of the Philippine National Police and the unfortunately lost-in-Congress Criminal Code reform (link to article that mentions both) are to better institutionalize order and justice.
  • The K-12 reform is more than just two years more in school. It is about improving thinking capabilities from the beginning and I have seen that it intends to break with rote learning (link)

There are more reforms like budgeting and Bangko Sentral which Joe America has mentioned. Institutions are being built from above, by descendants of some of the first extractive monopolists. The old wealth seems to have realized their responsibility for the country which after all got started (link) in the time their ancestors started getting rich.

The most progressive among them, Senator Bam Aquino, has authored the Philippine Competition Act, is pushing for SME development with the Go Negosyo Act and Negosyo Centers that are already starting to show fruits, and is pushing for more internet connectivity which levels the playing field. He is thereby following in the footsteps of Ninoy Aquino, who already had reformist ideas back then (link). While Kris Aquino who apparently supported Binay shows more of a “Cojuangco”, and the present President I think at rare times is a “Cojuangco”.

  • Mar Roxas has the LP behind him which I see as a mixed bag of reformists and rent-seekers. He has shown similarities to Bam Aquino in supporting SMEs and was instrumental in getting BPO into the country and thereby stopping the bleeding – meaning the migration of Filipinos to work abroad which now has 1/10 of the population overseas. The total population grew from around 20 million when Magsaysay died to more than 5 times as much today, which is why I see President Aquino’s RH laws against Church opposition as a significant reform as well.
  • Grace Poe obviously has the interests of Danding Cojuangco in mind. Thinking Pinoy (which I do see as favoring Duterte most of the time) does an excellent dissection of this (link). Their conclusion is quite clear: It isn’t accurate to say that a Poe Presidency will be a “Gobyernong may Puso”. Instead, it should be a “Gobyernong may Puso basta OK kay Danding Cojuangco.” Aside from the fact that her programs are in my point of view not as complete even if she has good advisers like Dean Tony La Viña and Dado Banatao – I consider Chiz Escudero suspect.
  • Rodrigo Duterte SEEMS to be the best bet for the people at first glance, which I why I also considered him at first. His wanting to abolish algebra I consider very stupid (link). His wanting to go for frontier justice instead of strengthening institutions that are already being consolidated also short-sighted (link). AND his programs show a Stalinist/Chinese mindset regarding industrialization (link), his ideas about how to deal with China and his NPA links point to him being a possible Manchurian candidate of China and not a bonafide people’s candidate.

The choices are really hard for the Filipino people. Each choice a gamble with different probabilities. But Duterte is the biggest gamble of all. Artemio Ricarte was also popular in the early 20th century. He was Heneral Luna’s predecessor but Aguinaldo replaced him. He was VERY popular among tough guys as well. He was anti-American, pro-Japanese – returning with them and with an instrumental role in the formation of the MAKAPILI (link) who were feared for denouncing Filipino guerillas. Possibly Chinese-backed Dutertistas? Better not. And it is NOT true that developed nations are hypocrites – that is also an argument one heard from China. Germany is going for the Energiewende to move to natural sources as much as possible. There is a roadmap for Munich to be fully powered by non-polluting energy sources within 15 years. Germany and the EU are helping the Philippines develop solar power. Duterte often speaks lacking information.

Finally the way out is composed of two aspects: value-added and win-win. Both natural and human resources (link) should be enhanced not just extracted, and competition should be harnessed. K-12 is a start in enhancing human resources, TESDA and the German-assisted K-12+ (link) as well. German factories (Stihl and Continental are recent examples) are coming, Japanese factories also which are slowly leaving China. Whoever wins should NOT backtrack to the extractive economy but continue to modernize, democracy correct whatever mistakes remain. This is what I see.

Irineo B. R. Salazar, München, 28 March 2016

P.S. I do not make any pretensions of being an expert… this is a big picture pieced together from what I have seen so far… please feel welcome to correct or add details as necessary. 🙂

P.P.S. The racial classification in Latin America was called casta, echoing caste. The classification in the Philippines was peninsulares (peninsular Spaniards), insulares (island Spaniards also called Filipinos), mestizos (with Spanish father, only half-Spaniards counted), mestizo Sangley (part-Chinese), chino, Indio, negrito – 19th century documents confirm this. Indios who were members of the principalia were called Don and Doña to give them somewhat higher status, they often were the local officials, while at provincial level you usually had insulares or “Filipinos” from what I have gathered so far. The mestizos (both Spanish and Chinese in origin) and some principalia who became wealthy in the 19th century gave rise to the ilustrados or educated ones. Much of the still-present emphasis on wealth, education and/or color as well as the crabbing from those who have less of it is due to this history of entitlement and new groups rising up against old ones.

 

 

 

 

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Kaharian ng Kababalaghan

Animals in action; studies and stories of beasts, birds and reptiles; their habits, their homes and their peculiarities (1901) (14568732509)o misteryo yata ang Pilipinas. Tignan ang nangyaring magic tungkol sa Bangko Sentral ng Bangladesh. May napakagaling na artikulo ang isang taga-Singapore tungkol dito (link – basahin sana!) – Pero hindi lang iyon.

  • Napakahigpit ng Bank Secrecy sa Pilipinas mula pa noong 1955 tapos mula pa noong 1974 hindi puwedeng tignan ang mga foreign currency accounts (link – Atty. Laserna).
  • Noong 1990, nagkaroon ng FATF – Financial Action Task Force sa Paris. Na-blacklist ang Pilipinas noong 2000 (link), nagkaroon ng anti money-laundering act (AMLA) noong 2001 (link ulit).
  • Unti-unti itong hinigpitan dahil alanganin pa rin ang katayuan ng Pilipinas noong 2003, tapos noong 2012 ulit – kaya natanggal ang Pilipinas sa “dark gray” list ng FATF (katunayang link).
  • Gusto ng FATF na kasali ang mga casino sa batas, pero ayaw daw ito ng mga casino at ng PAGCOR (link)
  • Iyong pag-alis ng sekreto sa bangko ayaw daw ng iilan sa Kongreso (link na madetalye).

Sa malabong tubig, hindi madaling makita ang mga buwaya. Saan maaring nanggaling ang mga ito?

Paano kaya nagkaganito?

Sa huli kong artikulo (link – basahin sana) nabanggit na kakaunti lang ang humahawak sa kayamanan ng Pilipinas – kahit na marami na ring naging middle class sa mga nakaraang taon.

Sa isang lumang artikulo mula pa noong 1970 (link), maliwanag mag-explain si Senador Ninoy Aquino kung paano nagkaganito, at kung paano ito maaring maging mapanganib para sa bayan:

“When the Americans came, a group of young lawyers started titling lands: this was the beginning of the big estates. Gregorio Araneta, for example, became the lawyer of the Tuason family that claimed this tremendous tract of land from Sampaloc to the Marikina Valley. The original source of the Philippine fortunes was, therefore, land—either Spanish grants, like the Ayala estate, or the acquisitions titled during the 1900s.

“The second generation of Filipino wealth came from government connections.  In the 1920s when Quezon was financing his independence missions, certain people got choice contracts from the government, like the Teodoros of Ang Tibay, the Madrigals of the shipping line.

“Then we have a third generation of millionaires: those who got concessions from government financing institutions, like the sugar barons. The Philippine National Bank was set up and it financed practically the entire sugar-mill construction of the period.  The movement was from Negros Occidental to Iloilo and the sugar barons—the Lopezes, the Javellanas, the Aranetas—started taking over virgin forest.”…

But 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. As the taxes that Juan pays to the government too often are used merely to enrich a few politicians, so, in the banking system, the money of the depositors, of the people, may be used merely to capitalize the owners of the banks.

Senator Aquino says that this is already happening.

Kapakanan ng iilang mga may pera at kapangyarihan siguro ang dahilan ng sobrang pagkasekreto ng banking system ng Pilipinas. Huwag naman sana lahat sa kanila, kundi todas na talaga.

Mga epekto nito

Alam na sa abroad na ginagamit na yata ang mga casino at bangko sa Pilipinas para sa kung anu-anong kalokohan. Heto ang sabi raw ng isang report ng US State Department (link ng artikulo):

“Transnational drug trafficking organizations based in East Asia use the existing banking system, casinos, and commercial enterprises to transfer drug proceeds from the Philippines to offshore accounts”

Apektado ang normal na tao rito:

  • baka mapahirap o maging mas mahal ang pag-remit ng pera mula sa abroad kung sakaling ma-blacklist ulit ang Pilipinas
  • baka mahirapang makakuha ng trabaho sa bangko o kung saan ang iilang mga Pilipino gawa ng mabaho nang reputasyon ng bansa

Bukod pa sa bagyo, lindol at hirap sa Pilipinas na alam ng marami, baka maituring pa tayong mga magnanakaw at manloloko sa iilang parte ng mundo. Tama na, nakakahiya na talaga.

Meron bang magagawa?

Maraming imbestigasyon tungkol sa katiwalian na napahamak na ng bank secrecy. Kung legal naman ang kinita kong pera, hindi ako matatakot na malaman ng isang korte ang nasa account ko.

Makakatulong din sa mga imbestigasyon at pagkolekta ng BIR ang pagluwag sa bank secrecy dahil mahihirapan na ang paglusot. Baka maibaba pa ang tax ng mga normal na tao sa bandang huli.

Hindi mawawala ang mga buwaya kung hindi maging maliwanag ang tubig para makita sila. Hindi na siguro dapat iboto sa Senado at Kongreso ang mga dumedepensa pa sa sobrang bank secrecy.

Irineo B. R. Salazar, München, 20 March 2016

 

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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

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