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Thursday, February 21, 2013

WAKE UP PHILIPPINES - PART 2


"Meanwhile, despite all the growth in the last decade, poverty is worse, unemployment keeps rising, and only the oligarchs who get the overwhelming share of national income generated smugly smile at their "good fortune" thanks to our constitution. Stock prices will keep going up, real estate prices will continue to rise (for now), our billionaires will start challenging the Forbes list of the wealthiest men in Asia, but surprise, Juan de la Cruz will remain totally patheic and poor until some enlightened legislators put 2 and 2 together and figure out there is a connection between our country's poverty, lack of industrialization, and the crippling poverty of our population."
 
I meant: until some enlightened legislators put 2 and 2 together and figure out there is a connection between our country's poverty, lack of industrialization, crippling poverty of our masses, and the effects of the 60/40 Law in discouraging FDIs which in Asia today are indispensable to industrialization.


 
I have a sneaking suspicion a lot of it is (1) due simply to ignorance, and (2) a lot of it is due to a conflict of interest as the Aquinos are oligarchs that have benefitted tremendously feeding from government funds, in addition to being big time hacenderos who see the issue as a zero sum game. 
 
Last year, our Wharton/Penn Club sponsored an economic forum in March at the Manila Pen, supported by other the Harvard Club and other US university alumni clubs. It was a big affair attended by the top financial institutions and their chief economists, World Bank, IMF, various investment bank analysts, top international commercial banks, and chambers of commerce of OECD nations. The keynot speaker was PNOY supported on the dais by Cesar Purisima, Mar Roxas, Tetanco, and other top RP economic leaders. It was an assemblage of very sophisticated and knowledgeable local and international financial experts.
 
1) I was picked to ask the first question by the Master of Ceremonies, questioning PNOY if he supported liberalizing the 60/40 law to help the country attract much needed FDIs for our industrialization, especially since foreign long term investors have virtually ignored the RP with pathetic almost invisible FDIs over the decades ($1.6B in 2012, $1.5B in 2011) which are about what we got per year or less for decades. In the meantime, Taiwan, Hong Kong, Korea, Singapore, and even India, have received hundreds of billions in FDIs, sophisticated manufacturing knowhow, and top technology transfers and R&D capability.
 
I fully admire and support his Daang Matuwid and acknowledge the cultural transformation he has begun to achieve, but his ill-informed, no clue answer stunned me! He replied that in the last two years, the RP has been receiving huge FDIs including 2011. As he spoke, I realized that he thought that the ephemeral, institutional "Hot Money", here today, gone tomorrow short term investments were part of FDIs, which are long term investments for capital intensive industrial projects which fund a country's industrialization and produce huge employment and technology transfers. THAT WAS A HORRIFYING REALIZATION!
 
He had no idea that we only got a pathetic $1.5 Billion in FDIs in 2011 and that we were on our way to an equally pathetic $1.6 Billion in 2012. AND WORSE, HE COMPOUNDS HIS IGNORANCE AND EMBARRASSMENT BY SAYING THAT HE DOESN'T REALLY TRUST FDIs ANYWAY SINCE WE ARE GIVING AWAY NATIONAL PATRIMONY, AND THE INVESTORS CAN EASILY PULL OUT THE FUNDS OVERNIGHT! HE SAID THIS BEFORE A VERY SOPHISTICATED AND SUPPORTIVE INTERNATIONAL AUDIENCE WHO I AM SURE WERE AS HORRIFIED AS I WAS AT THIS SCREAMING IGNORANCE. The knowledgeable Purisima, Roxas, and Tetangco I am sure were suffering in silence and collective embarrassment that their economic ward had on display such misinformation. That gave me the chills.
 
I wanted to ask the President how the FDI investor can repatriate his investments in an integrated steel mill, his independent power producing plants, his cable investments deep in the ground, his massive port investments all over the country, on an overnight basis, but I didn't want to embarrass him.    
 
2)His conflict of interest. Let's face it, he belongs to the oligarchy/ Hacendero family that has produced great wealth in large measure by  rent-seeking, and dipping from the public trough. Frankly, Hacienda Luisita was almost totally if not totally financed in 1957 from government funds, with insignificant contributions from the Cojuangco family. So even the way the rent seeking source was acquired from the people's money, with the agreement that the ownership was for ten years from 1957, ie, in 1967, it had to go to the tenants. Well, 55 years later from acquisition it is still under Cojuangco control as parts of it have been sold in lucrative deals that benefitted only the family (such as the SCTEX sale), notwithstanding the Supreme Court ruling that it be turned over immediately to the tenants!
 
This partly explains the PNOY and Cory aversion to the opening up to investments as liberalizing 60/40 will lessen the rent-seeking privileges that have enriched our elites. Feeding from the government trough and largesse is like taking crack cocaine in its addictive power.
 
Marx and Engels had a deeply flawed theoretical economic system  that has been exposed after a century of experimentation and abject failure. But what Marx got so right was that History is a constant struggle of classes where the feudal and industrial elite will forever squeeze the people and national wealth for their exclusive rent seeking interests, resuoting in perpetual impoverishment of the people and the creation of unimaginable and disproportionate share of countries' incomes.
 
This I believe deep down is what the 60/40 law protects and perpetuates, which to the cognoscenti is an open secret, except to the supposed equally ignorant "Filipino First" ultranationalists, throwbacks to the elite dominated 40s and 50s. In 2008, I had an e-chat with Cielito Habito former NEDA chief under FVR on the possibility of liberalizing 60/40.  He said that FVR's economic team was acutely aware of the FDI barrier and rent-seeking provisions of the law, particularly how the benefits of growth never seem to trickle down to the masses but is shared only by a few families protected by 60/40.
 
Habito said they tried hard  to free up our industries of this job destroying provision, and succeeded for the most part by removing its tentacles from 85-90% of the industries. But they got such a massive blow-back from the entrenched elite over the remaining ones -WHICH HAPPEN TO BE THE BIGGEST AND MOST LUCRATIVE RENT SEEKING INDUSTRIES! Banking, real estate, telecommunications, transportation, air and sea ports, electricity transmission, energy generation, insurance, Construction, highway infrastructure, Professional services (Washington Sycip is known in the American Chamber of Commerce as Mr. 60/40 himself) and so on and so on!
 
In fact, if one looks at the Forbes 40 wealthiest Filipinos (and families), you will find they all made their fortunes in 60/40 protected, rent seeking oligopolies and monopolies. Their control of these key industries retard investment, employment, raises prices to high heavens (electricity?) because of the lack of competition. To the oligarchs, they are "OUR" businesses whose high profits at the expense of the people are reserved strictly for us. And they are the ones funding our Congressmen and Senators who make these laws and ensure their privileged status is protected.
 
So unlike the successful Asian Tigers who welcomed FDIs with open arms, we are mired in debilitating and crunching poverty, immune to reports of record GDP growth of 7.1% or 6.6%. As a political wag said, to the people, 6.6 means nothing since all they know is borrowing hideously usurious 5/6 to make ends meet.
 
Ricky Sobrevinas

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