Philippine conservatism

On the problem of “jobless growth” and how to fix it

The last time the Philippines experienced an economic contraction was way back in 1998 in the aftermath of the Asian financial crisis. Since then, the country has posted 57 consecutive quarters of positive growth averaging 4.7 per cent in real terms year-on-year.

That may not be as fast as the Chinas or Indias of this world, but it is still pretty respectable considering the events both domestic and foreign that have occurred during this time (which include the impeachment trial of President Joseph Estrada, EDSA Dos and Tres, September 11, the dot.com crash and Enron scandal, the Oakwood mutiny, the global financial crisis, the Great Recession, and the current EU debt crisis, to name a few).

What do we mean by jobless growth?

Over the last seven years, 5.42 million net new jobs were created or an average of about 773,000 annually. This again is no mean feat. The only problem is that the labour force has also grown by about 5.49 million averaging an increase of around 785,000 new entrants per year 76,000 more than the jobs created since 2005.

If the growth of our workforce had been half as much, then the amount of jobs created would have been sufficient for the 2.8 million unemployed workers in 2012. If not for demographics, our unemployment rate would be much lower. Jobless growth in our context can best be described as a situation where economic growth fails to produce enough jobs to reduce the absolute number of unemployed workers in a sustained manner.

In the past, the economy’s inability to bring the number of the unemployed down was assigned to the growth rate not being fast enough. Instead of growing at an average rate of around 5 per cent, we needed to be growing at 7 per cent, or more.

Over the past three quarters, that is precisely the speed at which our economy has been expanding–above 7 per cent–which makes the employment figures for the April 2013 quarter all the more disappointing. Over the year, the number of those employed actually fell!

While we should not read too much into one quarter’s report (it is best to average four quarters’ worth of jobs data for the year to get a more realistic picture), it is still worth pondering how the economy could have expanded so much and yet not have made a dent in employment terms.

Examining “jobless growth”

Perhaps, much of the growth occurred as people moved from temporary and daily wage earnings into full-time, salaried employment as the labour force survey suggests. Increased income per worker rather than an increased number of workers might be a plausible explanation.

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The other could be the increasing “financialisation” of the economy as the banking and finance sector posted one of the highest growth rates among all sectors. This means that growth came more in the form of profits, bonuses and commissions paid to the business elite and their shareholders. Financialisation has been blamed for jobless growth in the West, more recently.

Then there is technological progress. The construction industry, for instance, may have grown the fastest, but the use of new methods and materials might have made it less labour-intensive than before.

The same applies to manufacturing. Our country once specialised in garments and toy-making which were conducive to sweatshops, but we have since switched to electronics and semi-conductor production which makes use of automated processes. The rapid growth in durable equipment that occurred in the first quarter could have allowed businesses to substitute capital for labour.

How Philippine conservatism is to blame

This would all be fine if those who profited from growth gave back a proportionate amount of their earnings in the form of taxes. Unfortunately, the collection of taxes went down as a proportion of GDP in the first quarter of the year. Despite the best efforts and reassurances of the current administration to lift the tax collection effort, their ability to generate tax receipts in a manner that would keep pace with the growth of the economy, remains very much in doubt.

The unemployment situation would be even worse if not for the mobile and adaptable workers that we have. Over the past seven years, the country has on average deployed 1.3 million Filipinos each year to work abroad. If we had not done so, we would have had double digit unemployment rates during this time. There would have been greater poverty, crime and social unrest, not to mention less consumption, savings and investment.

The residential and commercial property sector as well as financial markets would not be experiencing the boom we are currently witnessing. The credit upgrades that our political elite boast of would not be possible either.

Yet, despite the extra impetus provided by ordinary Filipinos who are forced to earn their living from abroad, often under difficult conditions, separated from their loved ones, the conservative forces in our society have successfully marshalled resources to maintain the status quo or keep it from changing rapidly instead of opening up our socio-economic life to the dynamism that it requires.

First of all, the demographic burden that we have discussed above has been caused by conservative forces hindering the development of reproductive health policies for decades. As a result, the Philippines will only see its population peak sometime in the latter half of this century based on current estimates. This has created a situation where the country’s current growth rate is unable to provide a sufficient number of jobs for those entering the workforce.

Secondly, the low tax-to-GDP level in the country has been set by the oligarchic business community in complicity with dynastic political families who have been unwilling to contribute their fair share to improve our country’s physical, social and economic infrastructure, the very thing needed to boost investment. Of course that doesn’t bother them because as the big fishes in a small pond, they are able to keep their stranglehold on the nation’s resources.

As the government relies on the private sector to fund major infrastructure projects, large domestic conglomerates have successfully cornered these contracts. The tepid pace at which Public-Private Partnerships have been approved is due to the fact that interest from the global investment community has waned. This isn’t the sort of public private partnership we need. The correct form of partnership is for the business community to pay the right amount of tax for the government to do the investing, not the other way around.

Thirdly, other countries with more progressive leaders have created sovereign wealth funds from their balance of payments surpluses to invest in their nation’s development; but, the inherent conservatism among our policy elite restrains them from tapping the massive stock of foreign reserves generated primarily not through exports, nor by foreign direct investments, but by foreign remittances, to fund the infrastructure needs of the country.

This innate conservatism was on display during the last election. I did a thorough evaluation of the senatorial candidates—their policies and legislative proposals—and two of the most topical were the ones to increase “skills matching” activities and loans to micro, small and medium-size enterprises (MSMEs).

Now I have nothing against skills matching, but we know that there are skills shortages that if plugged would only solve a tiny fraction of the unemployment problem, and yet so many senatorial candidates ignored the elephant in the room, the massive, long-term unemployed in favour of the small target.

Similarly I have nothing against MSMEs, but we also know that MSMEs do not generate as much new employment, at least the kind that matters, i.e. the full-time, salaried kind. And yet they take up an inordinate amount of attention in our political discourse. The new ventures with high innovation content, the kind that generates higher incomes and greater employment were not even talked about, save for one candidate who took on board the sovereign wealth fund idea to fund them, but failed to get elected.

How do we rectify the problem

The notion of the state performing the role of investor of last resort, the source of funds for projects that are deemed too risky by private capital markets but could have massive potential, is seldom talked about. This is because our history is littered with incidents where our business elite have exploited their connections within government to fund their own pet projects. Rather than being the lender of last resort, the government has been the financier of first instance, or the source of “booty capital”.

Of course, given our innate conservatism, marked by a high tolerance for social inequality and low tolerance for risk, there is nothing that prevents us from focusing on the small target, the low hanging fruit, the necessary, but insufficient conditions for mass employment generation. We can continue focusing on providing the right “eco-system” for innovation and investment, lowering the cost of doing business and the like.

But what should happen if our overseas workers start being turned back in droves? What if that seemingly limitless source of jobs for our swelling labour force starts to run dry, whether this be due to economic nationalism (as in the case of Saudi Arabia with its policy favouring locals), border disputes (as in the case of Taiwan following the shooting by our coast guard of their fishermen), or some other unknown factor? What then?

Without this safety valve, will our conservative leaders still manage to keep an ironclad lid on our social cauldron? Even before it comes to a boil, they need to re-examine the basic framework for growth and development that has embodied their consensus for thirty odd years. In the past they have been good at socialising the cost of their projects and privatising the (super-) profits. It is time that we gear up the state to be able to fund development and innovative risk-takers and to capture a fair share of their rents for our people’s benefit.

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 (www.thecusponline.org) 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.

  • Jinky Garrido

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  • Emmanuel Doy Santos

    Does the Philippines need to reduce the size of the state? Some here would say yes. But it currently accounts for less than a fifth of the economy (18%), similar to Singapore (17%) and HK (21%). In the G7 and BRIC economies the state varies its share from 25% (China) to 57% (France) of GDP. We saw in 2011 what happens when the state restrains spending, we grew at half the rate we are now.

    Then there is the question of openness as defined by our current account (trade openness) and capital account (stocks and fixed investments). In terms of the number of tariffs faced, the Philippines performs quite well (ranked 5th by World Economic Forum). It is in the dispersion and actual levels of tariff rates that are imposed, not to mention customs administration where our trade enablers fall down.

    With respect to the capital account’s openness, the Philippines is listed along with South Korea, South Africa, Turkey, Chile, China, Thailand and Malaysia as
    transitioning from conservative (restricted) to more liberal (open) financial sector
    liberalisation. So it is not completely open, but we travel in good company.

    Can we improve our trade and capital development? Surely. That is a separate issue however from the question of whether the state should perform a critical role in partnership with the business community. Here we must follow what advanced
    countries do, not what they say. The US, EU, Japan and East Asian states all have displayed overtly or covertly some form of state backed industrial policy to develop their economies. We need to follow their example.

  • Joseph20112012

    If the Philippines wants to reach the $50-100 billion FDI
    inflow level of Singapore that is necessary to stimulate our economy
    with more job opportunities at home, the Aquino Administration should do
    this first through a constitutional amendment:

    Abolish the 60/40 equity restrictions (Article XII, Sections 2,
    10-14; Article XIV, Section 4; Article XVI, Section 11) from the 1987
    constitution against foreign individuals or corporations who wishes to
    set-up their businesses anywhere in our country and allow them to invest
    100% from their own capital and own it what they invested in order to
    lure more foreign investors to invest and stay in our country that will
    provide jobs to millions of unemployed Filipinos at home as much as
    possible without constitutional barriers.

    Foreign equity ownership by economic sector should be like this:

    Mining – 100%.
    Oil and gas – 100%.
    Agriculture – 100%.
    Forestry – 100%.
    Light manufacturing – 100%.
    Food products manufacturing – 100%.
    Pharmaceutical manufacturing – 100%.
    Publishing – 100%.
    Fixed-line infrastructure – 100%.
    Fixed-line telephony services – 100%.
    Wireless/mobile infrastructure – 100%.
    Wireless/mobile services – 100%.
    Power distribution – 100%.
    Power generation (biomass) – 100%.
    Power generation (coal) – 100%.
    Power generation (hydro) – 100%.
    Power generation (nuclear) – 100%.
    Power generation (solar) – 100%.
    Power generation (wind) – 100%.
    Power transmission – 100%.
    Banking – 100%.
    Insurance – 100%.
    Airport operation – 100%.
    Domestic air – 100%.
    International air – 100%.
    Domestic shipping – 100%.
    International shipping – 100%.
    Advertising – 100%.
    Magazine – 100%.
    Newspaper – 100%.
    Radio broadcasting – 100%.
    Television broadcasting – 100%.
    Construction – 100%.
    Retail distribution services – 100%.
    Tourism – 100%.
    Education – 100%.
    Health care – 100%.
    Waste management – 100%.

    To those who would like to say that if we allow foreigners to own
    100% of businesses they investing or owning pieces of land, we will
    become foreigners in our own land is just a fear mongering tactics by
    coward and freeloading leftists and ultra nationalists elements of our
    country.

    By using their appeal to fear, Hong Kong, Japan, Singapore, South
    Korea, and Taiwan should have been controlled economically and
    politically by the United States and the European Union but instead,
    their respective economies caught up the US or EU GDP per capita within a
    generation and therefore they became a developed economy status.

    • Emmanuel Doy Santos

      I think you need to study the history of East Asia more closely, the governments of Japan, South Korea and Taiwan heavily endorsed and supported local keiretsus and chaebols. Korea even nationalised their banks in order to do so. The Singaporean gov’t proactively took a stake in various entrepreneurial endeavors since the 1960s to push industrialisation. The US itself through agencies like DARPA, ARPA-E, NSF, NIH gave rise to many new general technologies used by their defense, electronics, energy, pharmaceutical/biotech, nanotech and green tech industries.

      We must not conflate however the two issues of foreign ownership and participation with state intervention to promote industrial diversification and structural transformation. These issues are distinct and quite separate.

      • yeah… let’s look at GDP per capita (World Bank data) of HK and SG – which allow 100% foreign equity – versus JP, SK, and Taiwan

        SG – $61K
        HK – $51K

        JP – $35K
        SK – $30K
        TW – $38K (IMF)

        ***

        SG government had a narrow tax base in the 1960s – its tax base only expanded AFTER SG opened its economy –

        the issue of foreign ownership and diversification are not separate – because it is the foreign companies which bring in goods and services which are not available in the homogenous domestic oligopolic economy

        • Emmanuel Doy Santos

          The case of Singapore highlights the fact that you can have an open economy and still have government invested in several segments of the economy where it feels unsatisfied with the way the market has performed in diversifying its economy.

          You may argue that its involvement has not improved the situation, but it nevertheless demonstrates that you can pursue industry diversification by increasing competition and at the same time performing things that the market fails to do at all.

          Corollary to that you can have heavy state involvement in a closed economy, no state involvement in a closed economy, an open economy with no state involvement. The two issues are distinct and shouldn’t be conflated.

          • There are two points to be made:

            1 – without opening the economy which lead to an expansion of its previously narrow tax base – SG will not be able to sustain its sovereign fund

            2 – just because governments can have a sovereign fund does not mean they should exercise such option given that these options do not yield a value to taxpayers and only wind up subsidizing losing businesses

          • Emmanuel Doy Santos

            Your two points are matters of contention. I’ve already provided evidence that contradicts the assertions you make in them.

  • Are you saying the FINL can ignore the constitution?

    Are you saying the FINL can supersede and defy a constitutional statute? Specifically Article 10 and 11 of Sec 12, 1987 constitution.

    What do you call a law which is unconstitutional? Does it have the force of law?

    Are you willing to say this categorically? 🙂

    • Emmanuel Doy Santos

      The FINL based on the Foreign Investment Act is completely in line with the 1987 Constitution.

      http://www.boi.gov.ph/pdf/primer.pdf

      You need to re-read your constitution or at least point out to me where that 60/40 rule which you say applies to all companies is found. Art XII Sec 10 allows Congress to impose a 60/40 rule, but it doesn’t mandate that all sectors of the economy are covered by that rule.

      • Froi Vincenton

        “Art XII Sec 10 allows Congress to impose a 60/40 rule, but it doesn’t mandate that all sectors of the economy are covered by that rule.”

        — Where did you get this idea? The 60-40 rule is a constitutional mandate. It does not allow the Congress to impose it; it mandates the Congress to follow it or abide by it. And that mandate is mandatory. The Congress has no power at all to rewrite the Constitution.

        Now will you be more honest to tell us what particular sectors (I AM ASKING SECTORS) of the economy wherein foreigners are not covered by the 60-40 rule?

        Or: did you even read the Constitution?

        • Emmanuel Doy Santos

          Read my comments below regarding the primer on foreign investments by BOI which takes into consideration the constitutional provisions and foreign investment act.

          • Froi Vincenton

            That’s not the answer. But OK. Now what are other sectors of the economy wherein foreigners are not covered by the 60-40 rule? Thanks!

          • Emmanuel Doy Santos

            For example, semiconductor manufacturing and heavy manufacturing more broadly. For example, insurance. For example call centres. For example, mining where the foreign firm enters into a financial or technical assistance agreement with the government. Are those enough examples or do you want more?

          • Froi Vincenton
          • Emmanuel Doy Santos

            China has restrictions on foreign ownership in a few sectors too. Yet over the past decade it was able to attract massive flows of FDI. Singapore has limits on foreign ownership in transport (international air -49%, port operation 5%) and media (television and broadcast 49%) and print (5%).

            As a counterfactual, Mozambique allows 100% ownership in most industries, that includes mining, agriculture, manufacturing, and most services, except telecoms (75%) and media (20%). It is more open than the Philippines and yet we don’t see it expanding more rapidly as a result of its openess. Senegal is another example. It is completely open, and yet its growing at a slightly more subdued rate.

            Openess may be a necessary condition, but it is not a sufficient one to produce rapid growth. Those who say that all the Philippines needs to do is open up the remaining sectors on which it has restrictions, are gravely mistaken.

          • Froi Vincenton

            I told one reader the following:

            “Well, many progressive countries removed their protectionist policies in the past (ever heard of the British Corn Laws in the 18th century and others?), if that’s what you call a “hands-off approach” then so be it. But it works. China went from absolute closed economy but then it gradually opened its economy since 1979. Today foreign investors are allowed 100% equity and to own lands. Japan, Singapore, and SK did the same approach.”

            and…

            “Ruelle Albert Castro but removal of protectionist policies is not, by definition, a “hands-off approach”. You can allow foreign investors but fry them with regulations and punitive tax rates once they’re in. This is what Greece did. In other words, you can allow foreign investors to own lands and control 100% of their business, BUT you can still fry or destroy them by imposing higher tax rates and regulations once they’re in. Countries that impose this economic policy barely attract investors.”

            From this post– http://vincenton.com/how-protectionism-and-oligarchic-system-cause-artificial-water-crisis-in-the-philippines/

            Also, this… http://vincenton.com/the-folly-of-the-philippines-peza-system/

          • china restricts land ownership even by its own citizens – because it is a socialist state- all property belongs to the state – in effect foreign and domestic are on equal footing – they both can’t own land they can only lease it

            you can’t say the same applies to the philippines

          • GabbyBD

            why does that matter bong? restrictions are restrictions, right? it doesnt matter that the restrictions are even (assuming they are in fact even)

          • GabbyBD:

            Imagine this:

            You open a restaurant
            – you have a lot of menus
            – you have invested in utensils and furniture

            You are in tourist spot with customers from all over the world.

            Then you put a sign – this restaurant accepts Filipinos or Filipino mestizos only.

            The other restaurants – accepts people from all nationalities.

            Guess which restaurant will have more people coming in – and of course, will be more profitable?

            The Philippines is the former restaurant – which opens its doors to Filipinos or Filipino mestizos only – it’s not just “protectionist” it’s racist.

          • GabbyBD

            huh? i mean why does it matter that it restricts to everyone, as opposed to foreigners? restrictions are bad, regardless, right, according to your theory?

            from your own analogy, if a restaurant said, i wont feed ANYONE, then it wont make any money at all, right?

          • Froi Vincenton
          • Froi Vincenton
          • have you seen the actual incorporation papers of these firms – and the equity structure in their SEC registration papers?

          • Emmanuel Doy Santos

            The SEIPI lists those members that are completely foreign owned. The WB also provides data on the Phils that backs what I’ve said. It’s in their Invest Across Borders. I have provided BOI policies. I have no reason to doubt them.

          • Have you or have you not read the Articles of Incorporation and read the equity structure of these firms?

            YES or NO?

          • Emmanuel Doy Santos

            If you quote me the provision in law or regulation that supports your 60-40 rule for all sectors I’ll tell you.

          • THE 1987 CONSTITUTION OF THE REPUBLIC OF THE PHILIPPINES, ARTICLE XII – NATIONAL ECONOMY AND PATRIMONY,

            Section 10. The Congress shall, upon recommendation of the economic and planning agency, when the national interest dictates, reserve to citizens of the Philippines or to corporations or associations at least sixty per centum of whose capital is owned by such citizens, or such higher percentage as Congress may prescribe, certain areas of investments. The Congress shall enact measures that will encourage the formation and operation of enterprises whose capital is wholly owned by Filipinos

            ***

            Does this constitutional provision provide for anything less than 60% for Filipinos?

            It provides for higher percentage for Filipinos (60% or higher than 60%) – but not lesser percentage.

            What is (100% – 60%)?

            What is (100%- higher than 60%)?

            ***

            Is a constitutional provision overruled by a legislated statute?

            What does that have to say about the constitutionality of a statute when it does not comply with the constitutional provisos?

            ***

            Let’s look at the PEZA IRR too

            PART II – REGISTRATION OF ECOZONE ENTERPRISE

            Rule III – Application and Registration

            SECTION 1. Qualification of Applicants – any person, firm, association, partnership, corporation, or any other form of business organization, regardless of nationality, control and / or ownership of the working capital thereof may apply for registration as an Export or Free Trade Enterprise within the ECOZONE in any sector of industry, international trade and commerce, except duty-free retailing and wholesale trading of imported finished products for purposes of serving the domestic market. Furthermore, if the area of investments of the said enterprises falls within Lists A and B of the Foreign Investments Act of 1991, then the applicable nationality, ownership or control requirements of the said law shall be observed.

            Applications for ECOZONE Developer / Operator, Domestic Market, Utilities, Facilities, Tourism or Service Enterprises shall comply with the applicable nationality, control and / or ownership requirements of the working capital thereof in accordance with the pertinent provisions of the Philippine Constitution, Foreign Investments Act of 1991 and other existing laws and regulations.

            However, applicants for Domestic Enterprise shall be limited to new or expanding business entities subject to the guidelines that shall be promulgated by the Board in addition to the nationality requirements under existing laws and regulations.

          • 100% ownership of the 40% allowed to foreigners isn’t 100% ownership of the business 😀

      • For short – if your “open” economy or “open” industry – does not allow foreign participation unless they partner with a pinoy AND remain a minority partner – how are you really “open” 😀
        ***

        “Section 10. The Congress shall, upon recommendation of the economic and planning agency, when the national interest dictates, reserve to citizens of the Philippines or to corporations or associations at least sixty per centum of whose capital is owned by such citizens, or such higher percentage as Congress may prescribe, certain areas of investments. The Congress shall enact measures that will encourage the formation and operation of enterprises whose capital is wholly owned by Filipinos.cralaw

        In the grant of rights, privileges, and concessions covering the national economy and patrimony, the State shall give preference to qualified Filipinos.cralaw

        The State shall regulate and exercise authority over foreign investments within its national jurisdiction and in accordance with its national goals and priorities.cralaw

        Section 11. No franchise, certificate, or any other form of authorization for the operation of a public utility shall be granted except to citizens of the Philippines or to corporations or associations organized under the laws of the Philippines, at least sixty per centum of whose capital is owned by such citizens; nor shall such franchise, certificate, or authorization be exclusive in character or for a longer period than fifty years. Neither shall any such franchise or right be granted except under the condition that it shall be subject to amendment, alteration, or repeal by the Congress when the common good so requires. The State shall encourage equity participation in public utilities by the general public. The participation of foreign investors in the governing body of any public utility enterprise shall be limited to their proportionate share in its capital, and all the executive and managing officers of such corporation or association must be citizens of the Philippines.”

  • There is nothing “conservative” about the Philippine leadership.

    They are a bunch of socialists. On one end you have populist socialists – welfare for the masa… And you have the corporatists/fascists – welfare for the Makati corporations.

    They are nationalists and protectionists – who espouse and implement a protected and controlled economy – and in the process have led to a dysfunctional market characterized by heavy regulation, high taxation, and high protectionism – to the detriment of consumers and job seekers.

    Expanding the policies (more protectionism, more public spending, more taxation) which created the negative outcomes does not and will not reverse the trend of jobless growth.

    • Emmanuel Doy Santos

      They are conservative in the sense that they want to maintain the status quo. Corporate welfare is perhaps just as wasteful. In the Philippines, instead of providing tax cuts the government simply turns a blind eye to tax cheats.

      Instead of creating special economic zones which give tax holidays to all, which has proven ineffective in drawing FDI, the government should in fact reduce the corporate tax rate and apply it to all firms. It should then use the savings from removing redundant fiscal incentives to directly fund research and innovation grants to companies that want to commercialise ideas or discover ways of applying existing technology in the Philippine setting.

      Nationalist/protectionist policies fell out of favour with the economic agencies of government since the mid-80s, but what replaced it was a state that felt that all it needed to do was open up the economy. The reason why there is resistance to further liberalisation is because many segments in society haven’t really felt the benefits of the opening up that has taken place even with the attempts of the state at providing social safety nets to the losers.

      Open markets may be a necessary condition to solving jobless growth, but it is by no means a sufficient one.

  • It’s simple really…to solve jobless growth

    1. Open the economy – free markets – remove the 60/40 – let foreign investors come in and be on equal footing as local investors – those who provide a value to consumers will be rewarded with customer loyalty and the revenue that comes with it

    2. Downsize government – eliminate DSWD, DOH, DOE, DTI, DENR, DOST, DPWH, CHED/DEPED, DOTC, DAR, DA – and convert them into bureaus of the DILG

    3 – Repeal regulations that skew the market – reduce/eliminate government intervention in markets

    4 – Eliminate the progressive tax – adopt a flat tax regime – everyone pays the same % of the taxable amount

    5 – Reduce government spending – let citizens keep more of their income – so they can spend it on their needs – and drive consumer spending – which creates more jobs

    For short – government isn’t the solution – it’s the problem!

    • Emmanuel Doy Santos

      BongV, you obviously subscribe to the Jeffersonian view that “a government that governs least, governs best”, and that government merely crowds out the private sector. We often fail to consider that since 1986, a series of liberalisation programs have in fact been implemented in the Philippines.

      The first point I would make is that the Philippines is and has been a classic small, open economy since acceding to the WTO in 1997. Under Pres Ramos, we lowered tariffs faster than was required by our international commitments. A recent UNCTAD report actually tells us that was counter-productive. Our industries have actually dwindled since then, not diversified.

      The second point is with regard to investment policy. We could open up mining, power and other utilities to full foreign ownership (other sectors have effectively been deregulated). They currently account for 3.6 per of GNP, and employ about 400 000 people out of a labor force of 37.7 million. Even if these sectors doubled in size over the next four years which I doubt they would, they still would not plug the gaps in our employment market. Mining and utilities do not have a high labor-input per value add.

      Thirdly, the experience of the EU, which is acknowledged belatedly by IMF economists is that slashing government actually produced a negative multiplier effect greater than what their neoclassical models had predicted.

      Fourthly, tax rates are not the proper benchmark to determine if we are a high taxing nation. The most appropriate one is the tax-to-GDP ratio. Our low collection effort compared to other countries is why one conservative think tank rates the Philippines highly in terms of economic liberties. And yet this has impeded our development rather than encourage it.

      Finally, with respect to innovation, while the US which is extolled as an exemplar of the free market model, because of the rhetorical statements of its politicians, it actually follows a very Hamiltonian approach of industrial policy by stealth.

      To wit, the algorithm used in Google’s search engine was financed by the NSF a Federal agency. There are 12 technologies that are integrated in the iPhone which came from publicly funded research grants. From ICT to biotech, nanotech to green tech, these industries wouldn’t have come about without the state’s intervention.

      The important thing here to bear in mind is that apart from promoting market institutions, there is a role for government in doing things that are not done at all by the private sector.

      • 1 – Accession to the WTO does not mean the Philippines is an open economy – it’s a nonsequitur. The 60/40 provisions affect all sectors of the economy – it’s a RESTRICTED economy.

        2 – Deregulation does not mean opening the economy – it has been “deregulated” for Filipinos – but foreign investors are still restricted from participating

        3 – The EU is still in a tailspin precisely because it talks austerity – but its expenses and bureaucracies have not practiced it and remain humongous – so no – EU did not slash its welfare state spending – no fat chance.

        4 – corporate tax rate of 30% is high – individual tax rates are high – the elite have tax loopholes and progressive taxation is full of holes

        5 – The current US as a free market model is flawed as US is already on the path of corporatism – instead check out Singapore and HK

        6 – Who paid for the funds of the NSF – that’s tax money from citizens – there’s a lot more of technologies that are being derailed by government than introduced – technologies which could hit the market sooner than later were it not for government obstruction

        The only role of government is to protect private property, national sovereignty, personal liberties and the rule of law – other than that – it has no business interfering in the economy – because when government interferes in markets – it does at the instigation of vested interests who will be obliterated in a competitive market economy

        Doing more of the same restrictive policies – has not, will not – solve jobless growth.Fat chance

        • Emmanuel Doy Santos

          Your response tells me that you are either completely unaware of the current situation, or you are completely inventing your own reality. Your first three points are just factually incorrect.

          The investment list in the Philippines went from positive to negative in 1986. Meaning instead of identifying the sectors that foreigners could invest in, it identified those sectors they couldn’t. This brought down restrictions both absolute and relative as a percentage of ownership dramatically, and it has been narrowed more and more ever since through legislative or administrative means to the point that only those areas constitutionally restricted remain. That is not a bad thing. I am in favour of progressively opening up different areas of the economy to foreign participation. My point is that that is not a panacea that would create the “millions of jobs” that is often promised.

          Hundreds of thousands of civil servants were laid off in Greece. Higher education funding was cut in Italy. The UK almost fell into triple dip recession because of austerity. If Mario Draghi of the ECB had not intervened to engage in monetary stimulus, it would be in a much worse situation.

          Your fourth point is moot. Who do you think accounts for a greater share of the tax base but those who belong to the formal sector? It is not just simple tax loopholes they avail of, it is tax avoidance in most cases. If the tax rate is such a problem, why are our special economic zones which offer tax holidays and exemptions from industrial labour regulations not generating higher FDI flows into the country?

          Your fifth point shows you are unaware of the fact that the Singapore government has one of the largest sovereign wealth funds in the world, which it uses to invest in various sectors of the economy. It also directs resources into sectors that it wants to promote. HK was a former British trading post. The British empire forced China to import opium in exchange for the silks and other goods from China. That’s the “free market” for you.

          The Googles, Apples of the world who used the intellectual property generated through government funding hardly pay any tax, thus diminishing the state’s capacity to fund the next round of innovations. That is socialisation of risk in the early stages and privatisation of the benefits. Yet they run to Uncle Same whenever they have a trade dispute with the Samsungs of the world. That again is not the free market at play.

          It is when governments do not have a clear vision and independent development agenda that it becomes susceptible and vulnerable to vested interest groups. Having a state that de-risks markets and engages in patient finance to take risks, to go where the private sector dare not tread, is a proper role for it. I dare say both sides of politics, both Republican and Democrat have supported it. The same goes for Australia.

          • The investment list cannot negate the 60/40 provision.

            What you get is 100% ownership of the 40% share in the joint venture – that’s not equivalent to 100% ownership of a business – you gotta be kidding me.

            The layoff of public non-productive government employees is a good start – but that’s not enough – they ought to learn from the Scandinavian welfare state debacle of the 1990s – which meant massive cuts in public spending.

            Google and Apple are in a corporatist economy – all controlled by government – that’s NOT a FREE MARKET.

            Singapore is able to generate and maintain a sovereign fund because it has a wide tax base courtesy of FREE and OPEN markets. Without its open markets – it will just be another Philippine-like economy subsisting on aid, grants, remittances.

            There is a reason why the private sector does not engage in unproductive ventures – it causes WASTE.

            And you want government to WASTE more – at taxpayer’s expense pa? Dang, taxpayers should keep their money and waste it themselves – sulit pa.

          • Emmanuel Doy Santos

            FYI here is the BOI’s negative list A&B…

            http://www.chanrobles.com/default3.htm#.UdQjKPk3DTo

            The rest of the economy’s sectors not part of these lists are open to full foreign participation.

            Secondly, did you know that France has a lower tax-to-GDP ratio than Sweden? The Nordic model includes a heavy investment by the state in industry clusters. Northern Europe, which includes Germany has a different model from the Anglo-American version of capitalism. The last time I checked, they were doing much better than the UK or the US in terms of quality of life, human development, the ultimate goal of economic growth.

            Thirdly, I invite you to get familiar with Temasek Holdings, Singapore’s second largest Sovereign wealth fund worth $157 billion:

            http://www.swfinstitute.org/swfs/temasek-holdings/

            In the 1960s the government took a “proactive entrepreneurial role” in the economy as part of its industrialisation drive taking stakes in areas as diverse as manufacturing,shipping, finance, trading and services.

            These were originally financed by its Development Bank with the Ministry of Finance and Temasek acting as managing arm. It then evolved into a Sovereign Wealth Fund from the profits produced by its holdings. Government linked companies they are called.

            The Singapore government had a clear vision and independent agenda from the private sector. It used and directed resources to productive sectors of the economy. It used the profits from these investment to drive further innovation and technology upgrading. It is still engaged in this and is an exemplar of this model.

          • A – FINL

            The FINL just codifies the statutes which spell out the restrictions.

            The rest of the economy’s sectors not part of these lists are subject to – the constitution which stipulates 60/40.

            B – France

            France is in the midst of the biggest crisis of the Fifth Republic. It feels as if the French model had reached an end stage, not just in terms of the economy, but also in politics and society. A country that long dismissed its problems is going through a painful process of adjustment to reality and, as was the case last week, can now expect to be issued warnings by the European Commission and prompted to implement reforms.

            France’s plight was initially apparent in the economy, which has been stagnating for five years, because French state capitalism no longer works.
            The French economy has been in gradual decline for years, without any president or administration having done anything decisive about it. But now, ignoring the problems is no longer an option. The economy hasn’t grown in five years and will even contract slightly this year. A record 3.26 million Frenchmen are unemployed, youth unemployment is at 26.5 percent, consumer purchasing power has declined, and consumption, which drives the French economy, is beginning to slow down, as well.

            But the French welfare state costs money, a lot of money. The country has neglected to make decisions on how much its individual achievements are worth, and how certain luxurious aspects of life it has come to appreciate could be modified to conform to not-so-luxurious realities, including the 35-hour workweek, a retirement age of 60 for some workers and unemployment benefits of up to €6,200 ($8,122) a month. As a result, there is a sense of gridlock, and a sour public mood is following on the heels of bad economic news.

            C – Temasek

            The Temasek Sovereign Wealth Fund is a big waste of money as it uses tax money to buy undervalued assets – which are actually investment losses.

            this pattern of the Singapore government providing or selling Temasek significantly undervalued assets continues to this day. There are two recent and obvious examples of how this behavior is used to pad Temasek returns and harm the taxpayer. First, the Singapore government is paying $1.1 billion SGD to purchase buses for the SMRT. The problem with this arrangement is that SMRT is a publicly listed, private company owned by Temasek that declared a $120 million SGD annual profit for the year ending March 31, 2012. The government of Singapore is obviously subsidizing the profits of a Temasek company by transferring public assets to a private company incurring a tax payer loss. To put this arrangement in perspective, if SMRT had to pay a 10 year bond with annual payment at a 4% interest rate on the $1.1 billion SGD in buses: it would pay $136 million SGD in principal and interest costs making its yearly profit disappear. Given this information, it seems highly unlikely SMRT would have a $2 billion SGD market capitalization if the Singapore government was not subsidizing Temasek profits by billing the taxpayer for the capital used by a private company.

            Second, as was pointed out by Steve Wu on TR Emeritus, Temasek with the help of a $3.2 billion SGD capital injection from the Singapore Ministry of Finance paid $3.2 SGD billion to acquire Changi airport. This transaction is notable for a few reasons. For instance, according to one document from Changi Airport, the government since the late 1970’s has invested approximately $5.68 billion SGD. This implies that in pure dollar terms, the Singapore taxpayer lost approximately $2.5 billion SGD. If we however assume, a purely hypothetical return on these airport investments by the government of 5% or 17%, the Singapore tax payer would have had an asset worth $13.3 billion or $202 billion respectively. If the airport “investment” by the government earned a low yielding 5%, the Singapore taxpayer would have lost $10.1 billion SGD and if it earned the Temasek rate of return an astounding $198.8 billion loss.

            Furthermore, by numerous valuation methods, it appears that the Changi Airport was significantly undervalued. For instance, in its first full year of operation, the Changi Airport group earned $337 million SGD. That is a 10.5% rate of return an incredible return for an airport. Its profits ending 2012 was $553 million a 17% cash flow rate of return while the taxpayer incurred a $2.5 billion SGD loss. Temasek obviously received a sweetheart deal in acquiring Changi Airport at the expense of the taxpayer.

          • Emmanuel Doy Santos

            Bong do you understand that this is a negative list? Meaning what is in this list is restricted to foreigners by graduated scale with the first part containing the Philippine consti’s restricted industries. What is not negated by this list is completely open.

            If France which has a 21 per cent tax-to-GDP ratio as of 2011 has a bloated government, then Norway with its 28 per cent or Denmark with its 33 per cent tax take should be worse. If big government is bad then Nordic countries should be less well-off, but that is not the case. http://www.google.com.au/publicdata/explore?ds=d5bncppjof8f9_&ctype=l&strail=false&bcs=d&nselm=h&met_y=gc_tax_totl_gd_zs&scale_y=lin&ind_y=false&rdim=region&idim=country:FRA:SWE:NOR:DNK&ifdim=region&ind=false

            Between Singapore’s SMRT and its Changi Airport which has greater government participation and control and the Philippine MRT and NAIA-3 which was constructed through BOT and PPP, I would prefer the former given it is better run, efficient and provides greater public benefits.

          • Do you understand the constitutional restrictions – 60/40.

            Are you saying the FINL can ignore the constitution? Are you willing to say this categorically? 🙂

            What makes you think the Scandinavian welfare states are well off? 🙂

            You mean – you would rather have your taxes ripped off by Singapore than PHL? A rip off is a rip off.

          • Emmanuel Doy Santos

            See my comments above.

          • Cite the industries where foreigners are allowed to own 100%

            – Are foreigners allowed to own 100% of telecomm businesses?

            – Are foreigners allowed to own 100% of energy businesses?

            – Are foreigners allowed to own 100% of waste management businesses?

            – Are foreigners allowed to own 100% of medical care
            businesses?

            – Are foreigners allowed to own 100% of retail
            businesses?

            – Are foreigners allowed to own 100% of education providers?

            – Are foreigners allowed to own 100% of media businesses?

            Foreigners owning 100% of 40% minority equity – means pinoys still own 100% of the 60% majority shares 😀

            “Section 10. The Congress shall, upon recommendation of the economic and planning agency, when the national interest dictates, reserve to citizens of the Philippines or to corporations or associations at least sixty per centum of whose capital is owned by such citizens, or such higher percentage as Congress may prescribe, certain areas of investments. The Congress shall enact measures that will encourage the formation and operation of enterprises whose capital is wholly owned by Filipinos.cralaw

            In the grant of rights, privileges, and concessions covering the national economy and patrimony, the State shall give preference to qualified Filipinos.cralaw

            The State shall regulate and exercise authority over foreign investments within its national jurisdiction and in accordance with its national goals and priorities.cralaw

            Section 11. No franchise, certificate, or any other form of authorization for the operation of a public utility shall be granted except to citizens of the Philippines or to corporations or associations organized under the laws of the Philippines, at least sixty per centum of whose capital is owned by such citizens; nor shall such franchise, certificate, or authorization be exclusive in character or for a longer period than fifty years. Neither shall any such franchise or right be granted except under the condition that it shall be subject to amendment, alteration, or repeal by the Congress when the common good so requires. The State shall encourage equity participation in public utilities by the general public. The participation of foreign investors in the governing body of any public utility enterprise shall be limited to their proportionate share in its capital, and all the executive and managing officers of such corporation or association must be citizens of the Philippines.cralaw”

          • Froi Vincenton

            “The rest of the economy’s sectors not part of these lists are open to full foreign participation.”

            — You seriously need to study our laws, Mr. Policy Analyst. That’s worse than context-dropping. You remind me of a Facebook dummy named “Eusebio Seballus”.

            From this post— http://vincenton.com/my-hilarious-debate-with-a-filipino-freethinker-dimwit-on-ph-protectionism/

            When asked what he meant by “open economy,” this Jesse Bersamina replied: “open economy means an economy that is a member of WTO.”

            Isn’t that hilarious?

            I replied: “So as long as a country is WTO member but maintains protectionist laws, it’s an open economy? Is that your freefarter logic? The issue is not whether .0001% of companies here is fully owned by foreigners. The issue is whether that actually helps our economy. The issue is whether they can compete with the country’s oligarchs and cronies. Whether they can join our power sector and telecom sector. That’s the issue, moron. You don’t even know that the WTO is powerless to compel members to be “open economies”. It’s just a multilateral agreement. Even socialist countries like China may join. Idiot indeed.”

            This guy is utterly clueless. He’s reading links he couldn’t understand. That he doesn’t have enough brain power to understand legal provisions and to see the clear– or at least, basic– legal picture of our economic policy.

            So, what I did is that I put his empty brain to the test. I’ve evaluated him this way:

            He’s just googling things without really understanding them.

            When he read an online info that says, ‘Yes, foreign investors may own up to 100%’, he then concluded that foreign investors may invest 100% of their capital in any business, venture or economic undertaking.

            He’s totally clueless.

            To test whether my hypotheses were true, I asked him the following question:

            It is possible under PEZA and free econ zone law under ALMOST IMPOSSIBLE circumstances and restrictions. Give me the “nature of business” that allows 100% foreign ownership.

            But first, know the difference between business-for-export, license, and franchise.

            Now, let this freefarting MORON answer this question: Can Walmart or TESCO fully own retail stores or malls in the Philippines?

          • Emmanuel Doy Santos

            You just need to read the following:

            http://www.boi.gov.ph/pdf/primer.pdf

          • Froi Vincenton

            Linking is no proper substitute for argument. But I am not going to let you off the hook.

            Cite the actual RP industries wherein foreigners are allowed 100% equity.

          • Emmanuel Doy Santos

            I don’t need to argue with you, my friend. I just need to point the way. Cheers!

          • Froi Vincenton

            Well, here’s my friendly advice for you, my friend: you seriously need to read our laws. You can’t afford to post blogs that are riddled with legal inaccuracies (which are very easy to attack or debunk) and logical fallacies. Cheers!

            But does that mean you cannot cite actual RP industries wherein foreigners are allowed 100% equity?

          • Emmanuel Doy Santos

            My advice to you is to learn English. You fail to realise that I do agree with your statement that there are restrictions in place for foreign participation in the mining industry due to the high court’s rulings.

          • Froi Vincenton

            Thanks for that advice, but I definitely don’t need it. However please, learn to use the English language objectively. Words ought to have exact meaning.

            Now help me understand what you’re trying to say. Are you saying there are industries (e.g., telecom, transportation, banking, mining, etc.) wherein foreigners can invest up 100% equity? If your answer is yes, what are these industries? Why can’t you answer this very simple, easy question? Thanks!

      • Let’s discuss the EU “austerity” some more:

        At the same time, the rest of Europe was hardly “dismantling” the welfare state, as the Washington Post’s Eugene Robinson claims. Of course, given that the average EU government consumes more than half of a country’s GDP, a bit of dismantling might be in order. But so far, European governments haven’t even been willing to take a penknife to the welfare state, let alone an axe.

        In France, for example, the so-called austerity largely consisted of raising taxes. There was a 3 percent surtax on incomes above €500,000, an increase of one percentage point in the top marginal tax rate (from 40 to 41 percent), and an end to the automatic indexation of tax brackets for inheritance, wealth, and income taxes. There was also a 5 percent hike in the corporate income tax on businesses with revenue of more than €250 million, as well as a hike in the capital-gains tax, and closure of several corporate tax breaks. And even though most of these tax hikes were aimed at the wealthy, the middle class did not get off free. There was an increase in the Value Added Tax (VAT) and the excise taxes on tobacco and alcohol.

        That’s an agenda that should gladden the heart of any tax-increase zealot — or even Paul Krugman.

        True, there were some entitlement reforms and spending reductions. But they haven’t actually occurred yet. For example, France will raise its retirement age from 60 to 62, but not until 2017! A cap would also be put on government health-care spending, starting next year. It is a little hard, therefore, to discern whether it is budget cuts that may or may not happen some day in the future, rather than tax increases today, that have slowed French economic growth.

        Or take Britain, where the Tory-Liberal coalition recently suffered a drubbing in local elections, in part as a reaction to so-called austerity measures. Among the Cameron government’s first “austerity” measures was to hike the personal income tax to 50 percent for those earning more than £150,000 a year. That measure managed to actually decrease income-tax revenues by £509 million. The U.K. did trim government payrolls and cut back on some government programs, but British government spending still consumes more than 49 percent of GDP. Government spending actually increased by £59.2 billion from 2009 to 2011.

        Other European countries have taken the same approach: tax hikes today (especially) on the rich and promises of tiny benefit cuts in the dim and distant future. Spain imposed a “wealth tax” on citizens with €700,000 of assets, and a 7 percent income tax on those earning more than €300,000 per year; capital-gains taxes were also hiked. Italy imposed a “Solidarity Tax” of 3 percent on all taxpayers who earn more than €300,000. Greece increased taxes by nearly twice as much as it cut spending, including a 5 percent surtax on the wealthy. VATs were hiked nearly everywhere. And fuel, alcohol, and tobacco were also prime tax targets.

        It should come as no surprise that all those new taxes, combined with a lack of spending restraint, has threatened to throw Europe back into a double-dip recession. Is it any wonder that French, Greek, and British voters were anxious to “throw the bums out”?

        Wait, this sounds familiar. Tax hikes on the rich accompanied by vague promises of future spending restraint, while refusing to restructure entitlement programs. That sounds a lot like… Barack Obama. 🙂

      • Froi Vincenton

        The scribbler said: ” We could open up mining, power and other utilities to full foreign ownership (other sectors have effectively been deregulated).”

        — Where did he get this pure babble? Obviously he doesn’t know what he’s talking about. The Supreme Court asserted in La Bugal-B’laan v. DENR the authority of the Regalian Doctrine enshrined in Article XII Section 2 of the 1987 Constitution and declared that RA 7942 or the Philippine Mining Act of 1995 is unconstitutional for allowing fully foreign owned corporations to exploit Philippine natural resources. Unlike the 1935 and 1973 Constitutions that authorized the State to grant licenses, concessions, or leases for the exploration, exploitation, development or utilization of natural resources, the 1987 Constitution merely permits foreign owned corporations to provide technical or financial assistance to the State for large scale exploration, development and utilization of minerals, petroleum and other mineral oils. —–>>>http://vincenton.com/regalian-doctrine-versus-rps-mining-industry-and-economic-progress/

        With respect to mining, foreigners are allowed only to provide technical and financial assistance.

        The entire premise upon which his arguments and his understanding of the law is built is utterly fallacious and erroneous. That’s why he doesn’t know what he’s talking about. That particular quotation is enough to prove the scribbler is totally clueless and knows very little our laws and constitution.

        • Emmanuel Doy Santos

          I was conceding the point in that hypothetical argument that even if we lifted the constitutional restrictions (meaning I was perfectly aware that these restrictions currently hold) there still would not be sufficient jobs produced by these sectors to reduce unemployment. Thus your entire line of attack is incorrect.

          • Froi Vincenton

            That’s your interpretation. When Singapore, SK and other Asian countries lifted their protectionist policies in the past, they all experienced economic take-off.

          • Emmanuel Doy Santos

            You are conflating protectionism with state directed development. The noted scholars in the field have pointed to a critical role the developmental state played in East Asia prior to progressive liberalisation in their trade account. In fact when capital account liberalisation was undertaken, the Asian financial crisis followed.

          • Froi Vincenton

            First, I commented on this statement you made: “we could open up mining, power and other utilities to full foreign ownership.”

            I said you’re FLAT-OUT WRONG. Period! You wanna argue against my assertion? Go ahead.

            You said: “You are conflating protectionism with state directed development.”

            I don’t remember talking about what you call “state directed development”.

            That logical fallacy is what they call “strawman argument”. I don’t exactly know what you’re trying to attack.

            Define your terms.

            1. What is this “state directed development” you’re talking about?

            2. What’s your understanding of protectionism?

            3.Kindly give me examples of the two (state-directed development and protectionism).

            This is to know whether you understanding what you’re talking about. Thanks!

          • Emmanuel Doy Santos

            When I said “we could open up mining…” I meant we could open it by amending the relevant constitutional provisions, thereby addressing the high court’s decision. It was a hypothetical statement which assumed that the status quo restricts foreign participation in it. My response re conflation is relevant to your comment immediately preceding.

          • Froi Vincenton

            This is what you said: “The second point is with regard to investment policy. We could open up mining, power and other utilities to full foreign ownership (other sectors have effectively been deregulated).”

            Nice cop-out though.Cheers!

          • Emmanuel Doy Santos

            “Could” past participle of can. May refer to past, present or future. In the statement which you quoted, I was referring to the future, not the present.

            And with respect to the landmark case which you cited, the SC initially nullified the mining act of 1995 in January 27 2004, but it reversed this ruling in December of that year, thus affirming its constitutionality. There is currently another challenge to the law being heard by the court but as of now that second ruling still stands.

            Nevertheless for argument’s sake, I assumed that we could in the future amend the actual 40% limit or modify the Mining Act to remove all objections regarding royalty and excise levels.

          • Froi Vincenton

            “And with respect to the landmark case which you cited, the SC initially nullified the mining act of 1995 in January 27 2004, but it reversed this ruling in December of that year, thus affirming its constitutionality.”

            Hahahaha! Are you saying the SC reversed the landmark and controlling La Bugal B’laan case? Do you understand what you’re talking about?

            It’s funny every time you reply you show how confused you are. Seriously.

            You said: “We could open up mining, power and other utilities to full foreign ownership (other sectors have effectively been deregulated).”

            What a hilarious cop-out. Are you saying that since other sectors (WHAT PARTICULAR SECTORS???) “have already effectively been deregulated”, we could then “open up mining, power and other utilities to full foreign ownership”?

          • Emmanuel Doy Santos

            The following timeline should confirm what I said regarding SC decision reversal which upheld constitutionality of the mining act of 1995:

            http://www.rappler.com/business/special-report/whymining/infographics/15910-timeline-philippine-mining-laws-and-policies

            The BOI primer I provided in the link above states that the Foreign Investment Act opened the domestic market to 100% foreign ownership except for those in the FINL (the negative list).

          • Froi Vincenton

            I know that. The exception pertains only to financial and technical assistance like I stated above. What I posted is just an excerpt from my blog.

            Now my question is as follows: are you saying that since other sectors (WHAT PARTICULAR SECTORS???) “have effectively been deregulated”, we could then “open up mining, power and other utilities to full foreign ownership”?

            I understand that the SC applied the “living constitution” theory to our mining laws. How about power sectors and public utilities? Thanks.

          • GabbyBD

            “are you saying that since other sectors (WHAT PARTICULAR SECTORS???) “have effectively been deregulated”,”

            no, he was giving you a hypothetical… geez, even i could understand whats going on, and i just read the thread!

          • GabbyBD

            “The exception pertains only to financial and technical assistance like I stated above. ”

            because that is the relevant portion to foreign investment in mining… that is, relevant to our discussion here.

          • GabbyBD

            “I don’t remember talking about what you call “state directed development”.”

            you dont remember it coz you didnt about it/deny its existence.

          • the state directed development of the Philippines – protects Filipino businesses at the expense of Filipino consumers and taxpayers

            The Asian crisis was caused by macroeconomic policies that distorted information which in turn created the volatility that attracted speculators.

            What some have called “herd mentality” was merely the result of speculators behaving rationally, noting the currency policies (the government defending the fixed exchange rate) which speculators assumed could not be sustained.

            Such economists believe that this crisis was the result of unsustainable macroeconomic/protectionist policies which create the very “market” imperfections they were originally designed to correct.

          • GabbyBD

            ” When Singapore, SK and other Asian countries lifted their protectionist policies in the past, they all experienced economic take-off.”

            no ones says that this is the reason for the take-off.

            name one serious researcher that argues/finds evidence for this.

  • ricelander

    This should have been the focus of debate a long time ago.

  • manuelbuencamino

    Doy,

    I think everybody wants the kind of growth you envision. The rich specially because those at the top always benefit most from economic growth. So the question is why have the rich not gone into lucrative businesses that bring about real economic growth? I think it’s because they don’t know how to run those types of businesses. They know they can make more money if they venture into them but they also know they risk losing more if they go into something they are unfamiliar with. So they stay safe with what they know and what they are used to – financial services, real estate, mining, and a little component manufacturing here and there. So in addition to ignorance or lack of exposure if you will you have to contend with the mentality of why take a long three pointer when you are safer with a dunk? My question then is how do you get them out of this rut?

    • Emmanuel Doy Santos

      The private sector in the Philippines is highly risk averse as you say, or does not have the expertise. In that situation the state has to set a vision and engage with them to make it happen by putting its money where its mouth is.

      It’s only when the state does not have an economic vision, when it fails to develop strong agencies that can plan and coordinate economic agents, creating links between disparate players that it becomes susceptible to the agenda of vested interests.

      • Manuel buencamino

        That’s the problem Doy. Where do you think economic policy makers come from?

        • Emmanuel Doy Santos

          I wasn’t necessarily talking about economic policy makers like…(don’t want to mention names here)…You have scientists who run the DOST programs that provide assistance to firms wanting to upgrade their technology, agronomists, industry specialists, and the like.

          Much of industrial policy that takes place in the US for instance happens by stealth through little known agencies like the NSF, DARPA, ARAPA-E, NIH, and the like who are staffed by leading experts in their field.

          Much of the iconic firms like Google and Apple received early stage funding from these agencies when no venture capitalist would oblige that allowed them to make discoveries that then earned them billions. A little celebrated fact, given the American aversion to big government and picking winners.

          • manuelbuencamino

            Doy,

            I’m not arguing. I’m just looking for a way out of the rut. Conservatism is apt in that it is a fear to venture into something unfamiliar. I guess what I’m looking for is how do we break the spell of fear.

          • Emmanuel Doy Santos

            Yes, and so my response is the state has to lead. We need to develop a new consensus on what produces growth.

          • manuelbuencamino

            thanks

          • state will lead?

            state itself caused the restrictions – which benefit its cronies…

            you bet it will lead – it will lead the plunder on taxpayers and consumers with predatory taxation, predatory regulation – pagpag ala carte anyone?