Does public infrastructure represent the best use of private investment?

It seems that our corporate titans have nothing better to do with their excess cash than to pour it into the growing public utilities and infrastructure sector. Whether it is San Miguel the beverage giant which went heavily into power or the Metro Pacific group a major player in telecoms which operates the NLEX-SCTEX road networks, there does not seem to be anything which competes for their attention than this sector.

About one-and-a-half trillion pesos is sitting in Special Drawing Accounts with the BSP deposited by banks which are unable or unwilling to lend them out. With a country as underdeveloped as ours, one would think that such excess savings could be put to better use. Why for instance isn’t San Miguel investing to develop coco juice exports which it has the capital and expertise to do?

Since our lost decade in the 1980s when a banking crisis followed by a political upheaval reduced our economy to tatters, manufacturing has never really recovered from the heights it once achieved by the end of the 70s and early 80s (see chart). Meanwhile, our ASEAN neighbors Indonesia, Malaysia and Thailand overtook us in moving their economies towards industry. Our gross capital formation as a percentage of GDP is the weakest in the region as a result.

Vietnam, a relative latecomer in the game has seen its manufacturing sector grow by leaps and bounds, while Singapore cannot be held up as an example for us to follow since it is a city-state with a tiny population and workforce. It can afford to de-industrialize its economy, while we can’t. While some would argue the high value services sector is nothing to sneeze at, it still cannot be relied on to provide the kind of jobs that match the skills held by our bulging population. The answer lies with manufacturing.

The Philippine Development Plan identifies infrastructure as the “binding constraint” to speedier growth. The reason it claims Philippine goods remain uncompetitive is our inability to bring them to market efficiently. Apart from that there is the implicit “tax” that comes by way of corruption which increases the cost of doing business and the unfair competition from smuggled or pirated goods that discourages domestic manufactures, the result of weak rule of law.

With its low tax collection rate and chronic fiscal deficits, partly to do with an aggressive liberalization policy pursued since the 1990s, the government was more than willing to let the private sector fill the breach in public infrastructure.

Since private business seems so gung-ho about providing public goods, it seems the identification of infrastructural bottlenecks was the correct diagnosis of the problem of underdevelopment. One wonders, however, if these firms are moving into such projects because there is no attractive alternative in other sectors, or is it because of higher returns now currently on offer from public-private partnerships?

Also, if indeed there are “bottlenecks” causing the cost of doing business and cost of living to skyrocket, then one would expect the public would be willing to absorb the fees charged by private operators under existing PPP arrangements. That is not what has been observed though (think MRT and LRT). One would then have to conclude that either the private operators have negotiated prices above the market-clearing level or that the demand for such infrastructure was not sufficient to begin with.

Investing in public goods by their very nature would often produce a private return lower than the commercial rate of return. That is why it is often financed in capital scarce countries through “concessionary loans” from foreign governments and multilateral institutions. If private operators borrow at prevailing market rates, then they cannot possibly make a profit unless the government provides a subsidy to pay for the spread between the “risk free” government borrowing rate and the commercial lending rate.


The sudden flash of insight Sec Mar Roxas used to interject into the president’s faltering public-private partnerships roll-out was that it would be better for the government to borrow at the risk-free rate and contract out the construction phase of some projects in effect passing on the cheap cost of capital to contractors. It could then auction off the operations and maintenance contract separately minimizing the need to subsidize fees charged to customers.

The question then is can government afford to borrow more in order to finance its infrastructure roll-out? It could if it chooses take-up the BSP’s offer to borrow against the country’s excess international reserves that accumulate each year. The state would effectively be borrowing against itself. Given the total cost for the original projects of about one hundred billion pesos, the surplus of reserves flowing into the country each year of four to five billion dollars is enough to cover these projects twice over.

If the public sector is then able to deal with the cost of providing infrastructure, how can it stimulate complementary investments needed in the private sector? If the lack of domestic capital and skilled labor are not responsible for the observed underinvestment, neither are low rates of return (low taxes and labor market flexibility are found in special economic zones), then what else could it be?

There are a number of candidates. Government failures which include corruption or weak property rights and rule of law are one option. A second possible candidate is market failure due to inabilities to coordinate investments in complementary upstream and downstream sectors or to internalize the benefits of innovation and experimentation.

The first has been identified by the National Competitiveness Council and the government as an area of concern. The decline of the Philippines ranking in the latest Ease of Doing Business survey by the World Bank reflects the country’s inability to address government failure. On the other hand, if these are the causes for underinvestment, why is it that manufacturing has suffered a decline relative to services in terms of investment and output? Shouldn’t they all be suffering the same fate?

This leads me to identify the problem of market failures as well. The systematic break that occurred in the mid-80s when the country turned away from industry policy and underwent an aggressive reduction of tariffs unilaterally ahead of WTO commitments left our manufacturing sectors at a disadvantage vis-à-vis our ASEAN neighbors. This is perhaps the reason services have oustripped manufacturing since it represents non-tradables which can only be provided domestically. Think retail, housing, commercial property and yes, utilities. Mining is a similar story. How then could the government begin to stimulate activity within the tradable industries? The following five measures would represent the most important steps.

  1. Partially rollback tariffs to within acceptable levels still within WTO commitments targeting in particular greenfields. Sustainable technology is one example of greenfields. To partly offset the modest rise of inflation that would come with this, tax cuts and (conditional cash) transfers should be directed to low income families.
  2. Finalize the list of investment priorities to signal the areas that government wants growth to occur in. Government must consult with business groups in compiling this list, but it must also exert some independence and take the lead in some areas and not simply take a market follower approach.
  3. Rationalize fiscal incentives and gradually fine-tune the selectivity of sectors for promotion. This has already been initiated by the BOI, but follow through and institutional capacity building needs to occur, which leads to the next item.
  4. Strengthen the economic bureaucracy to solve investment coordination problems across related sectors. Improve the ability of state agencies like the BOI, PEZA, DTI and other government agencies to undertake a consultative and promotional role.
  5. Create a research and innovation fund jointly run by public and private enterprise to encourage commercialization of ideas. Given the excess foreign reserves cited earlier, the state can also afford to undertake this strategy in partnership with academe and the business community.

Compared to the strong-arm tactics being employed by Argentina and Brazil which like us bought into the liberal free trade argument in the 1990s and have like us seen their manufacturing sectors stagnate (see chart), these measures would be considered rather tame.

From 1949 to 1959, the Philippines used heavy handed trade and industry policies similar to what LatAm countries pursued from the 1930s to the 1980s. This led to the fastest growth ever sustained in our history (and theirs). Unfortunately, it did not last long enough for investments to expand beyond light industries as Paul D Hutchcroft notes. The direpute to which import-substitution subsequently fell was the result of the Filipino First policy instituted in 1958 towards the end of the decade of growth, an over-reach of the “elite” nationalists. The poor administration and outright corruption that the policy bred stymied it and led to the liberal policies of the 1960s supported by the landed agricultural exporters.

Pres Marcos tried to weaken the landed aristocracy and revive our nascent industry sector in the 1970s, but the lack of checks to the predatory nature of his regime led to its collapse. The Philippines has been following the liberalization paradigm ever since. The stagnancy of our manufacturing and overall weak economic performance is hard to explain given the structural reforms undertaken from the late-80s. The Philippines since the early 2000s has become a net saving country due to overseas remittances and is rapidly accumulating foreign reserves (it has more than enough to pay off all our external debts). With some tweaking, we can unlock this capital and put it to better use.

So far from encouraging private investors to get into public utilities, the government should actually follow Sec Roxas’s advice to break-up build, operate and transfer contracts to lower their cost to the public. Finally, the government must look to revive investments in the industry sector (which includes high value agricultural and services too) through pragmatic policies. It must create as much policy space within existing WTO arrangements to maximize the benefits of industrialization. Without this its vision for a rapid, sustained and inclusive pace of development might simply come to naught.

Doy Santos aka The Cusp

Doy Santos is an international development consultant who shuttles between Australia and the Philippines. He maintains a blog called The Cusp: A discussion of new thinking, new schools of thought and fresh ideas on public policy ( and tweets as @thecusponline. He holds a Master in Development Economics from the University of the Philippines and an MS in Public Policy from Carnegie Mellon University.

  • Anonymous

    This topic does not relate to infrastructure,  but the talk about the large pool of funds that the BSP wants to lend at 4%  brings me back to a “Corazon Aquino”-idea —  microfinancing.

    Pilipinas should grow the number of low-middle-class households.  Pilipinas has been embarassed by the banana-republics of South and Central America  in how those countries had grown the percent of population in middle-class status.

    Very simple when drawn on the back of the napkin.  Malakanyang borrows $80Million or more from BSP at 5%,  Malakanyang lends the $80Million to ASKI and various existing micro-finance institutions at 8%.  (3%-spread to cover risks)

    The Pilipnas micro-finance guys lends to many more Pinas households looking to fund their sarisari stores or put up-front money to buy fertilizer or buy the piglets.

    An income-boost by  extra PhP3,000 to P8,000-a-month to these Pilipinas entrepreneurs will  be helpful,  and the money flow will be there.

    (**Prevailing interest rates charged by micro-finance in Pilipinas — 47% to 55%-per-annum and these institution  net 0.5%-to-1.5% after the high costs of administering the micro-loans.   But the spreads and institutions are all in place already…. needed is additional capital.)

    Even helpful — loan turnover rate — 8 months to 12 months — but Malakanyang does not make “tingi”, Malakanyang would be working with 4 to 10 micro-finance institutions ( this is if Noynoy can resist increasing the list by a dozen BFF-names…. )

    Heidi authenticating that the loss is 4% or less after one year can be impetus for dozens of Photo-Ops while PresiNoynoy announces doubling the capital. A loss of 15% or more — shut it down.

    • This topic is a spinoff, but I’ll address it. You are really talking about micro enterprises rather than SMEs, which in my opinion is more about social insurance than industrial policy which is more about achieving technological progress and productivity growth. Yes, as I intimated in the piece, this could play a role potentially as a way of offsetting some of the effects of my first recommendation.

  • J_ag

    The reason why getting into infrastructure and utilities make a whole a lot of sense is because  risks are socialized and profits based on a high internal rate of return are guaranteed given the sorry state of the structure itself. Plus since these are monopolies future income can be securitized and used to leverage a small equity position with low cost debt. Government allows a rate of return of 12-15% ratio to capital. (Assets)Debt service is almost always less than half of the cost of equity which is based on the internal rate of return. 

    Just look at Pangilinan’s offer to expand, operate and maintain the MRT. He wants the government to give him a guarantee that he can move to raise rates to Php 28 gradually over a 25 year period.  (Certainty of income flows)  No populist political interference. He also can provide direct retail service of his generation plants to supply the line. (Under Open access of the energy industry) The MRT is a huge consumer of electricity. 

    The foreign suppliers backed up by their own governments export subsidy program could offer lower than market lending rates. 

    When there is a high probability of certainty of income supplied by state guarantees big business would be stupid not to get into it. 

    The LRT lines were build with government funds and guarantees and are not under private hands. The MRT was a project for and and on behalf of the Ramos boys and the big guys here. The government guaranteed a 15% rate of return on investments. The same with the IPPs, the road toll projects and off course the Malampaya gas projects. 

    Take or pay and/or guaranteed prices were the order of the day. The State guarantees the high price of natural gas to make the Malampaya project feasible. 

    Public goods or what can be construed as public goods can be delivered cheaper if it is state owned normally under an effective state. One of the best projects that illustrate this is the U.S. interstate highway system and the Tennessee Valley Authority that supplied cheap energy to certain portions of the U.S. The integrated rail system in Europe is another. 

    We in the Philippines (a third world ) do not have the kinds of economic capacity to build these on our own. 

    Putting all sorts of restrictions have narrowed the choices that capital can migrate to plus the structural adjustment programs have already destroyed what little of a manufacturing  base we had  and we adhere strictly to the ideological diktats of multilateral based macro economic policies that restricts credit to the import competing sectors and import dependent domestic manufacturing sectors. 

    Move to completely free capital inflows just like in HK and Singapore and lift all nationality restrictions on all sectors and allow for full currency convertibility. Most guys will not understand this. 

    We must end the price fixing activities of the BSP and the guaranteed price fixing regime that underlines the government privatization efforts in providing for public goods. 

    Guaranteed pricing is like supplying blood to sharks.

    After the experience of the last 30 years it took Roxas this long to see it? 

    The Philippines borrows for 25 years at over 7%.  The U.S. can borrow for 3% for 30 years.  Meanwhile the BSP through its dollar buying program has indirectly created a liquidity pool of over Php 1.5 trillion lying idle on banks books and would prefer to pay the banks interest at over 4% per anum. 

    We are strategically dependent on foreign savings and income. Why not open the economy full to take advantage of the huge amounts of foreign liquidity that is around. 

    The foreign capital itself will lead to the demand and strengthening of institutions as the contradictions of labor and capital will be allowed to seek its a quicker level of the dialectical process. 

    Allowing foreign capital in the agricultural sector would hasten the process of rural to urban migration and raise productivity levels in food production. 

    The process of economic development is hastened by moving the class contradiction forward faster. The process itself will create inequality as the time for creative destruction happens faster than people can adjust.  That in turn will force the state to strengthen itself to provide for stability. The capitalists themselves will see the need for it. 

    The more advanced economies are reeling from both technological unemployment and the entry of a large labor force into the global economy that is forcing the deflation of wages.  

    Push the envelope for opening up the economy to all comers. In the face of a very weak state it would be the only solution to creating a modern  state in the long haul. 

    This government has got four more years. The system itself is not conducive to long term thinking and solutions. Every new government its seems will always be busy undoing the screw ups of the last one. 

    • So in other words public infrastructure represents an irresistible proposition: Guaranteed high returns + Regulatory certainty = High reward, low risk. Who wouldn’t take a bite, right?

      You are proposing allowing full participation (100% owned) by foreigners in utilities to hasten the “class contradictions” and increase demand for a strong state. The problem is we have been gradually opening up different sectors to full foreign participation, and yet we haven’t witnessed that occurring with increased rapidity. There is either something anomalous about the Philippines then, or there could be something amiss with that dialectical formula.

      • J_ag

        Let us look at the power industry and the lack of open access. We allow 100% participation for generation. But distribution of both wholesale and retail are not open to foreign control.  So what happens the Henry Sy family leverages their citizenship and becomes the (front)dummy for the State Grid of China that can only own 40%. The CEO of the company is Big Boy Jr. For that privilege naturally the Sy family gets to open malls in China I am sure a lot easier than otherwise. In the future this one family will sell you indirectly electricity, your home and all its furnishings and daily needs and your entertainment. 

        Let us look at retail distribution outside the Meralco area. You will see the other big boys leverage their nationality and act as fronts for the big Japanese, Korean and Chinese mostly state owned enterprises as partners. Even Meralco today is owned by private equity funds. 

        What about the restrictions in banking?  HK does not even have a Central Bank. 
        They have a very strong and effective Monetary Board. They are a hugely successful financial center.. Why? Certainty of the rules…. Protection of property rights.  That is the essential ingredient for markets in market economies to work. 

        The tradeable sector is small while it is the non tradeable sector is huge.  Most of the restrictions are in the non-tradeable sector. 

        Open up the market and the need for the rules will follow. The rules in place are strangling the market and making it possible for only those who control the rule makers to prosper. It is a rigged game. 

        That system is called in the sophisticated world of economic parlance rent and rent seeking activities. These big boys parlay their nationality with guaranteed low cost loans but insist on private sector rates of return. 

        Why would the Sy family with the huge cash flow from controlling millions of sq feet of retail rents. 

        Capital needs the certainty of property rights to include land. The U.S. would never have had the chance to build their railroads. Titles to land that paralleled the railroads were given to the railroad companies. 

        Even in one of the freest economies in the world the small land area of HK did not prevent the government from using the leasehold system to raise funds and insure certainty in property rights. 

        You have to create the wealth first before you redistribute it.  As a close friend always used to remind his friends in the left, “You cannot socialize the distribution of tuyo… . 

        All our Asian neighbors have had a long history of political evolution of statehood. Let us look at the countries that rely almost entirely on foreign capital and know how in the M.E.  Huge deposits of oil were discovered in the early 30’s. That transformed the countries economically and now demands for political participation are being heard. 

        Even the State run economy that is China. They created a proletariat class in only 40 years from a predominantly peasant class. However drawing form their huge population means that they have the largest proletariat class on the planet existing. The Communist party is well aware of this reality and makes sure that they do not allow for this sector to become a vast army of unemployed as they could bring down the Chinese command state.

        The state has begun the massive transfer of the surplus to this class by increasing wages to counteract external weakening of demand. To increase domestic demand they are slowly building up workers incomes. 

        Please note that Marx’s analysis of the evolution of societies is dead on.  His solution on the inherent flaws of capitalism was wrong.

        His analysis of the problem was correct. The faster we move to allow unbridled capitalism to create wealth the faster will we create the gravediggers. 

        Today’s financial capitalism has already commoditized life’s functions and distorted desires into needs. 

        The choice is clear.. We muddle through or we move to pick up speed. 

        • So you are saying we ought to bypass our local merchants and hand over the “rents” from public utilities and agri land to global players who at the moment are made to partner with local elites because of our constitution? You say that this will bring about the rule of law domestically?

          I disagree because as in the case of NAIA-3, the foreign party merely appealed to the “global” court of international arbitration. Opening up to them would not enhance “domestic” rule of law, but simply outsource it. 

          Second, at least with local elites benefiting there is a bigger chance that the return from these rents would be plowed back into the country. Foreign capital has a greater risk of capital flight. I know that many elites stash some of their wealth overseas as well, but be that as it may, they represent a lower risk.

          Third, Japan and Korea discouraged joint-ventures or foreign ownership of strategic projects. They wanted local keiretsus/chaebols to import technology and learn to do it themselves. Taiwan relied heavily on state owned enterprises. China required joint ventures with state owned town and village enterprises. This ensured property rights for foreign partners even without rule of law.

          My thesis is that the Philippines simply lacks a coherent set of policies owing to a state which is not as cohesive as its East Asian counterparts. The fiscal incentives we have applied have only been working at the margins. We need a far greater active role for the state working with business to leverage domestic capital that is already sufficient to undertake industrial development.

          Opening up the remaining restricted sectors to full foreign ownership won’t solve all our problems in my view. It would simply replace one set of elites for another. I would much rather build local capability first. As I have said, there is sufficient capital in the Philippines at the moment for our needs. We simply need to harness it.

          • J_ag

            Your example of Fraport once again proves the point. They had to go through the dummy which bumped up the costs. Fraport is partly state owned. The Germans in the past had very lax rules governing bribery on getting contracts but this is fast changing with WTO rules on government procurement. The U.S. have very strict laws on corruption by their corporations overseas and their governments dealings. All over Asia except in Singapore and HK rules on corruption are lax. 

            Though it  is good to dream as you have no practical experience in business and trade the truth of the matter on the ground tells us that in the Philippines no political class exists. The mandarin technocrats have been a fixture in Japan and China for centuries. Taiwan and S. Korea benefited from this.

            As for the rest of our neighbors  the former British colonies stand out. The British trained local people to man their commercial empire. The created a bureaucracy to complement their trading empire. And from this group arose the national political class that led them to national liberation. India, Malaysia, Singapore and HK stand as sterling examples of the rise of effective bureaucracies independent of government. They run the country formulating policy. 

            In the Philippines owing to our American experience we did not get this style of governance. Americans are allergic to government bureaucracies..They only started a central planning agency after the Great Depression. That is when Kuznets was tasked to come up with a measuring standard for macro economics. 
            It was FDR Jr. that started imposing quotas in Philippine sugar. We started asking for independence and the U.S. started the process of making us dependent  on their markets for sugar. The sugar quota became the tool for capturing the elite of this country and subsequently the elites drive to capture the state to maintain
            their status. 

            Point of fact it was the British who build the railroads and sugar mills. After the Americans left we turned to the IMF/ADB /WB for the bureaucratic support for planning since we had to borrow monies for budgetary support. We do not have our local policy making body directing traffic. 

            Everything goers through the multilateral bureaucratic set up. All our economic managers go through that same mindset and the government bureaucracy is not involved. In fact because we outsource this most important function the Philippine government political class are all tied to this system. 

            The most important program that this government is touting is the WB’s CCT program. Apart from that nothing new has come out. The example of expansionary austerity based on simply not spending to narrow the deficit to please credit rating agencies is another. 

            Now when the state wishes to ramp up spending they find out that their institutional and administrative capabilities do not exist. 
             So now the IMF/WB tandem raises the call for increased spending in infrastructure and the government is caught flat footed. 

            Where is the political class that is necessary for guiding the markets in a market economy. 

            Point them out… Point out the bureaucratic agencies that are not in tune with the Washington Consensus that is embedded in our foreign political class. 

            The art of statehood is learned and practiced over time. That culture is still non existent in the country. That eventually leads to the rise of a political class that is primary for country first.  

            Today most pinoy’s would prefer to join the multilaterals and I know a few who have done well. 

            They then come back carrying the worldview of the same institutions. 


          • You seem to be putting the cart before the horse is all I want to emphasize. You want to open up the remaining restricted sectors because you say it will create the demand for good political institutions, like rule of law, bureaucratic quality, etc, and yet you cite East Asia where the they promoted growth FIRST using a set of policy instruments represented in my piece (they had of course more policy space than we do now).

            These industry policies were pushed by effective bureaucrats, it is true, but the institutions you speak of, rule of law, contract enforcement, property rights, etc only developed after these countries saw significant rise in incomes. Only then did they liberalize their trade and capital accounts, and only gradually.

            South Korea and Thailand for example saw how liberalizing the capital account before setting prudential regulations created the seeds of the Asian Financial Crisis. That proves my point, unless of course this sort of crisis is what you were envisioning when you said opening up would hasten a crisis of capitalism(?).

            As for attacking me and my experience, you ought to know that is no way to win an argument (I have significant experience in the private sector FYI). Anyways, it’s getting a little cramped here. Please start a new string if you want to reply.

      • Anonymous

         Margins on cell-phones — those are high.   Returns on public infrastructure is so-so — no one would call it high.  And Pilipinas is not low risk when you factor in the phenomenon : change of administrations and contracts get  nulled out, along with  “What!!!  Two hundred guerillas just appeared and did what to our facility!!!”.  .

        • I meant that in the context of the take or pay provisions in the power contracts with independent producers. The guaranteed level of demand and guaranteed prices under the MRT. These projects represented low risk.

  • Joe America

    Doy, another superb article. You both inform and force me to think. Thanks.

    It seems to me the Philippines is a (benign) lawless society because the mechanisms to assure healthy markets are weak. Like the courts. The trade of favors keeps the wealthy in the driver’s seat and blocks competitive enterprise. Essentially, the country is run like a giant sari sari store where businessmen don’t take investment risks because they don’t have to, as they are the only store people can get to. 

    Private enterprise in utilities or infrastructure would simply bring more of the same, as regulators are also captive to the trade of favors. Also, infrastructure spending to support inefficient business models is simply throwing good money after bad (farm to market roads supporting small family farms).

    Markets here are incredibly closed and weak, as are the dynamics of opportunity. A person who works hard and produces well ought to get promoted and paid more. But the benefits here go to the favored. The force of personal competition found in America, a nation impelled to wealth by rewards for achievement, is not very deep here.

    Until that is corrected, who cares who owns what? The output will be sloppy and weak, and benefit far too few Filipinos.

  • cocoy

    As for Coco juice… been looking at that for years.  I don’t know if it has been solved. The problem there is, it spoils.  

    Always wanted to build a Contract Irradiator facility in the Philippines. I think it is an ideal spot.  Could both help Agriculture and manufacturing plus exports, but no one would invest 20 million dollars for it.  And everyone tried to do it. 

    The government has tried to put up one.  It is a semi-commercial plant sitting at DOST’s PNRI. 

    I echo MB’s.  Pinoy businessmen, and corporate culture aren’t mavericks. 

    • Anonymous

      Coco-juice (in cans and tetrapaks)  have been in USA’s Korean, Pilipino market as well as the chains — Safeway, Vons, Giant, Krogers — for over 7 years already.   Made-in-Pilipinas???  Nada, zilch (weird your comment that Pilipinas still has to solve the spoilage problem). The coco juice are from Thailand, Indonesia, and four or five Latin-American/South-America countries.

    • The irony here of course is that Danding’s acquisition of SMC was made possible by the coco levy. This would provide an excellent opportunity to give something back to the coconut planters who made it possible. Oh well…

      As for proving the technology works and cost effective to produce in the Philippines, that is what the Innovation Fund proposed in the piece would help facilitate. It would work like a loan or grants process whereby applications are submitted and the best ones which contribute to growth, exports, new products, etc would receive funding.

  • Manuelbuencamino

    eh kasi eto ang pilipino businessman mentality – i will build the infrastructure para pumasok ang foreigner who will build the manufacturing plant. Sagot ko ang kuryente, tubig, at kalye bahala kayo sa manufacturing. plantation mentality. masyadong matrabaho kasi ang manufacturing, tapos poproblemahin mo pa ang pagbenta ng produkto. dun na ako sa kuryente, tubig, kalye, lupa, at tren. isang tayuan lang yun tapos kokolekta na lang ako ng fees habang buhay. Passive investments.

    Those who are already made will not risk their fortunes on manufacturing, developing new products, technology etc. There is a synergy between security and katamaran.

    The hope lies with those who are not yet made. There is synergy between hunger and risk. Those on the way up will be forced to use their wits to find money-making ventures outside the traditional enterprises that the big boys cornered for themselves. Active versus passive.

    • What you’re saying is that the lack of entrepreneurial risk-taking is not for lack of demand (rates of return are adequate), but is due to a lack of supply (unwillingness on the part of capitalists to risk their wealth/conservatism).

      “The hope lies with those who are not yet made.” I agree, but those who are not yet made usually have nothing to fund their ideas with, nor have access to capital at least from the commercial banking system. How about the DBP? I think your piece on the Ongpin-Pangilinan-DBP situation demonstrates the problems there.

      The Innovation Fund I proposed here would be aimed at those who have not yet made it, but have ideas and expertise that would supply the kind of entrepreneurial risk-taking that is needed.

      • Manuelbuencamino

        Innovation fund. Wouldn’t it be better to just get the DBP to do what it was supposed to do in the first place? Or was the DBP meant for small to medium sized businesses? If that’s the case then Innovation Fund it is.

  • Filipino industrialists have a problem. Their manufactured goods were of low quality selling them at the price higher than those comparable goods from other countries some of which were even of better quality in terms of workmanship, durability and aesthetics, etc. And then there’re the smuggled products which are way down cheaper.

    The consumers are wise, there are better options for them what to buy, and rightly so.

    I don’t know if Doy’s suggestions in this article will solve the problem, but feel good to me.