Being cluey about foreign capital

One of the key aspects of the Constitutional Reform agenda revolves around the proposal to open the Philippines to full foreign ownership of business assets and private property. It is a worthwhile option to explore as it has been known for quite some time how inept Filipinos are with creating capital indigenously and at keeping a productive chunk of it within its borders. Nonetheless, there is still a need to remain vigilant as to the nature of the capital we allow Filipinos unfettered access to, specifically: We want capital coming in that expands capacity for sustained gains in productivity and equity creation.

The priority at the moment is the immediate need to alleviate the wretched lives of millions of impoverished Filipinos. This provides a strong case for a free-for-all fire sale of domestic assets and business franchises to foreign capitalists. The thinking there is that jobs will be created and consumption stimulated, as soon as (1) a fresh wind of business ventures blows through, (2) formerly idle land and property get snapped up and used productively, and (3) increased competition puts downward pressure on prices as more options are made available to Filipinos.

No argument there. Increased consumption as a result of more options, more competition and therefore reduced costs provide short-term job creation and cost-of-living mitigation. But in looking out for the longer-term sustainability of economic growth, measures need to be seriously considered to ensure that a good chunk of the aggregate freed-up cash resulting from consumers benefiting from lower prices (and gaining more employment) gets re-channeled into investment (or back into the financial system) rather than get pissed away on non-added-value consumption (e.g. celphone trinkets, beer, mistresses and motels, borloloy on onher-type jeeps, etc.)

In short there needs to be either or both (1) an increase in savings rate and (2) increased predisposition to invest. In either case, free cash is conserved (capitalised) instead of pissed away (expensed). At the very least, depositing cash in a savings account, puts that cash in circulation in the financial system which, in principle, is most efficient at channelling it to who needs it the most in the industrial community. But spend that cash on celphone load, and what could’ve been capitalised dissolves into digital oblivion in a single conversation with one’s girlfriend.

Get that ethic rolling, and dependence on foreign capital gets steadily petered down over the years as domestic capital (and the capacity to create it indigenously) ramps up.

Further relaxing restrictions to foreign capital is therefore not the silver bullet that will see us instantly enjoying a bonanza of jobs and bustling commerce and trade. There are many challenges ahead, and as such, we need to be careful about not getting into a complacent if-you-open-it-they-will-enter appeal. Indeed, as I stated in my article “Throwing our doors open to foreign investment when we can’t even get tourists to visit“:

If your house looks and smells like shit, even burglars won’t enter it.

And it is a bit of a no-brainer to behold the way the Philippines assaults the senses of a would-be investor the way a neglected public crapper does. Manila’s international airport and its immediate surroundings, for one, provides very revealing first impressions. But there are many other subtle things about Filipinos that begin to hit the sensibilities of the average business explorer as he gets to know the society. Rules are recommendations, yes means no (and vice versa), being on time is to be grossly un-Filipino, and words without contracts are for the most part empty. To the Western industrialist who considers one’s word and handshake golden, and to a Japanese executive who comes from a society where “there are very few lawyers and the codes are mostly unwritten, but […] are binding, nonetheless” (Greg Sheridan, Asian Values, Western Dreams), the Filipino Way can come across as infuriating.

In short:

We need to clean our house first before we throw open our doors and lay out the Welcome mat.

As we can see, all roads lead back to the way Da Pinoy mind is wired. Indeed, Constitutional Reform can either be the overarching program to facilitate change in our sad society or a key pillar in an even more broadly encompassing change program defined by a handful of Vital Few Initiatives. The important thing is to stay focused on the whole point of these exercises by tethering ourselves to it, even as we get deep into the detail of the actions we mount — and remain cognisant of the Truth about Filipinos: that our society in the form it takes today is a massive outcome of too many actions underpinned by very little thinking.

About benign0

benign0 is the Web master of GetRealPhilippines.com
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74 Responses to Being cluey about foreign capital

  1. Hyden Toro says:

    A nation that is in deep of Feudalism, will never Industrialize. U.S. Gen. MacArthur was right in promulgating the Land Reform Program of Japan; when he was the Virtual Ruler…The Japanese landowners were responsible for dragging Japan to war, in World War II. Same as other Asian countries…most got out of Feudalism already…So, it is useless to talk about Industrialization, without full Land Reform. We are just wasting our time…

  2. Subliminal Messenger aka Renato Pacifico says:

    Designer constitutional couture is useless without LAW ENFORCEMENT.  Who will see to it Laws are unbiasedly enforced by Law Enforcer?  The Senators?  The Congressmen?  The West-Pointing PMAyers?  These three monkeys cannot even enforce the laws.  WHO WILL?  Rewriting the constitution cannot do character change of these three monkeys, definitely.  WHO WILL ENFORCE THE LAW?  United Nations Combat Troops?   That is a $64,000,000 question.  
    Freeing up 60% and 100% of idiot peryodiko would be futile if there is no Law Enforcement.  Who will enforce the laws?  As simple as wang-wang policy cannot even be enforced; Bawal Umihi dito is ignored; Bawal magtapon ng basura seems like a foreign language that cannot be understood.
    WHO WILL ENFORCE THE LAWS?    

    • Cy says:

      Hoy, James Thurber, baguhin mo na pangalan mo! Parang pangalan ng banda! Yo! Like I did with my childish nickname – I turned it into a club-style sounding screen name worthy of the limelights. Yo!

  3. GabbyD says:

    do you have any specific recommendations to address the problems you feel are holding back investment?

  4. GabbyD says:

    How do you know that the problems you cite are in fact, THE problems holding back investment?

    • Miriam Quiamco says:

      Gabby D, Gabby D, you sound like a child with a mind of a tabula rasa, sorry for the personal insults in the other comment thread.  Innocence must be bliss in your nook of the wood.

      • GabbyD says:

        haha… i luv the ‘sorry for the insults, but let me insult you here’ shtick. hehehe.. ur so funny. 🙂

        so, any evidence miriam?

    • Cy says:

      DIGRESSIONS by DJ Cy

      GabbyD naman, I repeat my straight answer in another thread: we don’t know everything, we’re just speculating, based on our conceptions of “investment”, “value systems”, etc. To strictly know with a reliable certainty, we’ll have to survey many of the foreign investors themselves in order to get evidence. That takes long, but I have a whiff of hope in my tongue. Sige, no country grammar muna for you GabbyD, contemporary grammar muna…. Peace. Yo!

      • GabbyD says:

        wow, cy. thats quite honest of you. i appreciate that. however, i doubt that B0 shares your opinion. i wanna hear it from him, himself.

      • Cy says:

        Yo! DJ Cy returning in THE RED ZONE! Yo! Anyway, I would like it if we have evidence coming from primary sources, then statistically interpreted. However, as that takes long, we will have to use the logical resources bequeathed to us by the great logicians. Yo! And with millions of Filipinos jobless already, with many substandard industries abounding here (debatable pt.) something quick must be done, and to find out what it is, we could use the evidence we are talking about, but as it takes long to gather evidence (and baka yung mga Pilipino ay naglulupasay na kapag makuha man natin yun), our policy can still be directed by deductive and inductive reasoning, as long as it is cogent, which is what I think benign0 has done. Yo! Philosophy is long, life is short, yo!

        It’s an old problem, by the way. Yo! How come I knew it’s a bit old? Here:

        “…the Philippine enconomy stagnated because Filipinos never grow out of import substituting strategies.”

        “…the Philippines does not take off is not because the Filipino managers and the Filipino workers are not proficient, competent, and motivated but because the Philippines insists on overprotecting, pampering, subsidizing inefficient industries. Subsidizing inefficient industry is protecting the inefficient.”

        Excerpt from “Understanding FIlipino Values: A Management Approach” (1981) by Tomas D. Andres

        Yo! Peace, punk, anarchy still. Yours truly.

      • ChinoF says:

        Hey, Tomas Andres had a good idea there. I have his Do’s and Don’ts with Filipinos Workers pamphlet. A lot of what was described about Filipinos could be described as Filipinos’ wrong values.

      • Cy says:

        Ay, oo nga pala, page 132. Peace!

      • Cy says:

        I have three of his books. And I admit that the book I named above is my all-time favorite, above anything I have read. Nabuksan ang isip ko. I have read it since Grade 5. My old copy (my dad’s) became tattered, then I bought a new one recently. =)

        Anyway, I don’t have the pamphlet (where can we buy one) but here’s ChinoF’s article about it: http://antipinoy.com/culture-helps-corruption/ Enjoy, as I did. Yo!

      • Artemio says:

        Gabby,

        If you are looking for something that resembles a geometric proof in which you expect to see a relation of strict logical (“air-tight”) necessity between a set of initial premises and their conclusions, then you may find it neither here nor anywhere. Even in the most exacting of sciences, which is physics, there is always room for theoretical refinements and is never air-tight. This is the nature of the ‘sciences’ –i.e. empirical science–They are not strictly deductive but make heavy use of inductive inference.

        You even seem so nit-picky that you could even argue over trivialities such as semantics. If you are looking for material with all the diagrams, minutae, or the full story of whatever thesis is being published here in a condensed mere blog/article form, perhaps you should start paying the author for his or her time in order to break their material down even further to A-B-C for you.

        Unless you can propose a better and more plausible approach to cure ‘da pinoy malady’, many of the assertions or ideas proposed here in AP, such as those by benign0, still stand.

      • GabbyD says:

        geometric proof? sobra naman. i have in mind evidence like how Cy proposed. some studies, surveys… you see, anyone can look and concoct a theory. doesnt mean that its correct. or even useful. 

        the author is OFFERING his ideas. i’m asking him to fill in the blanks. arent u curious? How DOES he KNOW (if he in fact does KNOW) that the problems hes citing ARE in fact the problems holding back investment? he seems to be certain — certainly implies hes got some evidence, surely.

        or maybe not — some people are sure without knowing anything. 

      • Cy says:

        Yo! DJ Cy returning to THE RED ZONE, with GabbyD! Hey! Check these out:

        www3.pids.gov.ph/ris/taps/tapspp9815.pdf

        http://www.adb.org/statistics/ics/pdf/PHI-Full-Report.pdf

        http://www.ijeb.com/Issues/data/June07_2_FDIandEconomicGrowth.doc

        http://unpan1.un.org/intradoc/groups/public/documents/APCITY/UNPAN005115.pdf.

        Ay, oo nga pala, this is in blog form, tulad ng sinabi ni Artemio (welcome, Artemio, to THE RED ZONE, by the way!) yo, not in journal or book form, tulad ng mga links na ito, yo, so sabihin na nating summary yung post. Yo!

      • GabbyD says:

        fantastic cy! 

        if ANY ONE OF THOSE studies mentioned ANY of the factors named by b0, that would really, really help his case. 

      • Cy says:

        TELLING TIME by DJ Cy

        Yo! GabbyD, what if ikaw ang magresearch ng ganoong bagay? Hey! Gawa ka ng isang fail-safe questionnaire tapos magpasurvey ka. Yo! Sisikat ka. Pero if you don’t feel like it and you would rather introspect, one way is to think of the question below: “If you are a foreign investor in any country, what problems in that country would suffice for you to pull back investment?”

        See, I told you, I have a whiff of hope in my tongue. Peace.

        Anyway, getting confused?

        Past = FLASHBACK
        Present = THE RED ZONE; THE RED ZONE Sunday Edition; DIGRESSIONS
        Future = TELLING TIME
        Eternity = NEEDLEPOINT

        Peace. =)

    • Cy says:

      NEEDLEPOINT by DJ Cy

      Let us rephrase your question: If you are a foreign investor in any country, what problems in that country would suffice for you to pull back investment?

  5. Pingback: Being cluey about foreign capital – Anti-Pinoy | Pnoy Talks

  6. Miriam Quiamco says:

    test

  7. Miriam Quiamco says:

    strange, rewrote a long post and got lost again, am I banned to post a long one here/

    • benign0 says:

      I tried looking in the Spam queue and the Trash, but couldn’t find anything. Maybe it’s a glitch. I recommend a safety precaution I observe: type your comment on Notepad first then copy and paste it into the comment field when you are ready to submit. That way, if the site f*cks up, you still have your text intact.

      • Miriam Quiamco says:

        might have posted it on the blog of Miss Pedrosa, the one on police decentralization.

      • Hyden Toro says:

        Some Yellow Horde Nazi Hackers, paid by the Hacienda Luisita Mafia, are playing with this Blog Site…Just keep on Posting….if you don’t get in the first try…try and try again….

  8. ici says:

    while we are on this subject, maybe something can be done on monopolies on basic needs like meralco.  oppressive would be the word for them.

  9. Marques says:

    I don’t fully agree in we have to clean this first then put a welcome mat.

    We have to lay a foundation for foreign investment to come in. Change the provision in the constitution first on foreign investments. Then the other things like improvement on security follows.

    Look at this this way, “If your house smells like shit, if there’s money to be made People will still enter.”

    China in the cultural revolution was a messy place, they didn’t say improve ourselves first before they welcomed foreigners. Red tape was probably worse then in China compared to ours now.

    WHY? If we insist on improving ourselves first nothing would happen, its everyman for him self. You cant expect people to change for the society/to be their top priority. When people have got sufficient needs for themselves then would the initiative for improvement in society come. (being realistic)

    I’m giving facts on how other countries changed not based on assumptions.

    • The Lazzo says:

      China in the cultural revolution was a messy place, they didn’t say improve ourselves first before they welcomed foreigners. Red tape was probably worse then in China compared to ours now.

      Richard Nixon visiting Mao was more Cold War strategy than anything. China was apparently falling out with their Soviet communist allies and America opening relations with them was all to stick it to Brezhnev.

      Open diplomacy, of course, is different from an open economy and an open society. By opening the special economic zones and introducing market reforms, Deng Xiaoping and his CCP allies were doing the self-improvement themselves before really welcoming foreign investment in. While their society hasn’t exactly been more ‘open,’ what we are seeing now is at least an improvement in their work ethic (although some still go for the easy money e.g. melamine scandal.)

      • Marques says:

        opps my fault, I was referring to the red tape when China opened up (Deng Xiao Pings era)

        and yes there was the political side to it, but focus on the economics first and how they did it. they didn’t say ah lets improve the PLA and their police force and the peoples attitude and so on before they opened up. opening up was the first crucial step then the others followed

        remember at this time DXP still had lots of enimies inside the party. when money started to come in thats when improvement started. People had better living standards and money helped in the development of the society.

      • Marques says:

        Chinese in China and political party members were convinced when they saw the changes.

        and to others reading this
        Don’t argue that bec. Chinese are known to be industrious and the lot, they are but we are currently talking about Foreign investors. and That I’m referring to foreign business owners that opened companies in China.

      • ChinoF says:

        It seem more like, fixing the problems is easier when you have the money to implement solutions with.

  10. The Lazzo says:

    We need to clean our house first before we throw open our doors and lay out the Welcome mat.

    I am particularly worried about what is pretty much a culture of “failure for the nihilistic sake of humor” especially when it’s something I can say I can heavily relate to. I am saving like mad just to make sure I don’t have to depend on welfare when I finally move back to the States.

    Unfortunately, my little brother, also in college, seems to not give a shit about his minor subjects and is constantly shuttled to and from ‘gigs’ where he is making some half-assed attempt to become an OPM star. And with my parents openly admitting to a lack of financial planning, they’re borrowing everything I saved past their maxed out credit to keep the family from starving (they have to pay for him to retake, and our family makes just enough that we’re too “rich” for scholarships), to the point where I have to actually save just to pay service charges on my bank account.

    I might have mentioned designing a tricycle replacement for an auto design contest on GRP. I ‘lost’ but won a consolation prize which my parents still have not paid back.

    In effect, whatever ‘success’ I can achieve is merely to pay for failure. And because this will eventually stifle my own career opportunities to the point where I will have to borrow from my own children, I can totally see how deep-rooted such a problem is in our society.

    • benign0 says:

      In a sense, looking to foreign capital as a source of salvation is more akin to depending on one’s bonus to pay for the mis-use of one’s base pay. The issue in this example is that one’s lifestyle should have been based on what one’s base pay could fund, whilst bonuses (which may or may not come) should be just that – bonuses. Bonuses are something to enjoy when it comes and something that is ideally not missed when it doesn’t. In the case of the Philippines, the root issue is the use of indigenous resources and how a failure to do so wisely now necessitates our dependence onforeign resources. Given that the skill to use indigenous resources productively was absent to begin with, what then makes us think that we will be any more cluier with using what comes from foreign sources?

      • Orion says:

        Hi benign0,

        “Foreign Capital as Salvation” was precisely what caused several countries to become the big wigs they are today. 
        Singapore’s strategy of poverty alleviation and the eradication (or drastic reduction) of unemployment (as first suggested by the UNDP economic development consultant assigned to Singapore – Dr. Albert Winsemius)  was totally dependent on Foreign Investment. 

        Saudi Arabia, a large number of oil-and-gas rich gulf nations, as well as Brunei became the wealthy countries they are as a result of the entry of Foreign Capital. Saudi Arabia became what it is because of American oil companies including Standard Oil and a few others, and in fact, job-creation wasn’t even the main strategy and instead it was all about the Al-Saud family giving permission to the American oil companies to drill for oil in the barren and “useless” Najd dessert in exchange for generous royalties. Only later on, after the Al-Sauds accumulated lots of royalty money did they decide to buy out the American companies’ local holdings in Arabia and later formed Aramco (Arab-American Company).

        With Brunei, the Bolkiah family hasn’t even thought of buying out Royal Dutch Shell of the operations they do which is responsible for Brunei’s wealth.
        Another fact is that the boom of both China and India is precisely a result of massive foreign capital influx due to shifts in policy. In the late 1970’s, Deng Xiaoping dropped the Communist Centrally-planned “closed” economy model that previously prevailed and allowed foreign capital to flow into China. 

        As for India, it was the change in policies in the 1990’s under Prime Minister Narasimha Rao with the direct assistance of then Finance Minister Dr. Manmohan Singh where a previously sluggish protectionist pro-small scale economy was changed into an investment-friendly economy that welcomes foreign capital with open arms that facilitated India’s BPO boom which created millions of new opportunities for Indians, giving former employees of these foreign-owned BPO companies ideas that turned them into entrepreneurs who later set up their own BPO companies.

        A really good book you should take time to read is called “The Elephant and the Dragon” by Robyn Meredith which painstakingly details the economic policy changes that caused the booms of both countries and the obvious benefits that allowed both to ride on globalization as their ticket towards ever-increasing prosperity.

        Instead of thinking that the Philippines first needs to “use indigenous resources to begin with”, perhaps it helps to realize that the ability to more effectively handle finances and other resources is a skill that emerges as a result of training or “handling finances” to begin with.

        There is also the undeniable fact that very often, the only way to gain work ethic is to work. 

        It doesn’t really mean that just because millions of Pinoys are not good at handling money (most of which is money they did not earn but instead receive as remittances from relatives/family members abroad) does not mean that those same Pinoys will never learn to handle money. Singapore actually had a problem with many of its people – including its majority Chinese  – in terms of how many people had gambling addictions and did not save. But because of Lee Kuan Yew’s and the People’s Action Party’s policies, the Central Provident Fund was created to serve as a forced-savigns scheme (not a social pension system) which automatically captured roughly 20% of a person’s monthly income and was matched by the company (which was then deductible from taxes). Immediately, something as simple that changed their habits and turned them into a very frugal people with high savings.

        Many years later, Malaysia under Mahathir copied the same scheme and immediately, Malaysia – including its majority Malays who – just like Pinoys – originally had the same cultural dysfuntions as far as misusing money and spendthrift attitudes were concerned – ended up enjoying a similarly high savings rate.

        That being said, good economic policies (like allowing foreign capital to come in) also need to be complemented by high quality leadership because as tax revenues increase due to the increased economic activity and tax collection (due to the expansion of the taxpayer base) which is where a superior form of government that more easily allows higher quality leaders to emerge comes in.
        That’s why CoRRECT™ has a Three Point Agenda whose individual points are not to be separated from the others. Each point in the Three Point Agenda (1. Eco-Lib; 2. Regional Decentralization; 3. Shift to Parliamentary System) requires the other two in order to act as major “enabling step” that would allow the Philippines to get its act together. It’s not a silver bullet, it’s not a panacea, it’s not the “end goal.” 

        CoRRECT™  is merely a starting point. It’s an “enabling step.” After CoRRECT™ gets done, the job of fixing the country will have just begun.

      • The Lazzo says:

        Singapore actually had a problem with many of its people – including its majority Chinese – in terms of how many people had gambling addictions and did not save. But because of Lee Kuan Yew’s and the People’s Action Party’s policies, the Central Provident Fund was created to serve as a forced-savigns scheme (not a social pension system) which automatically captured roughly 20% of a person’s monthly income and was matched by the company (which was then deductible from taxes)

        I thought it was enforcing the public caning and the whole Singapore Is A Fine City™ rules. 😀 But good enforcement of rules does help.

        Saudi Arabia seems to have been much more reactive than the pro-active Singapore/Malaysian examples you describe, and much of that wealth ended up funding Al-Qaeda. I’m concerned that sort of thing could happen here, with foreign corporations paying our political elites generous royalties while the money ends up funding local warlords (and of course the Abus).

        India’s growth seems to be primarily spearheaded by proactive conglomerates, i.e. Tata taking advantage of the opening. Meanwhile, they also have their own overseas contract worker problems as well (according to the BBC, just as bad if not worse in the ME for OIWs than OFWs!)

        And speaking of helping, I disagree that CoRRECT™ is specifically the enabling step. That enabling step – and the mortar that holds the bricks of your ©oRRECT reform together – should be culture change. As seems to have been implied in this article, no amount of reform will save a culture that is inclined to fritter away its benefits rather than save them and think that aforementioned savings plan is FACSIM!* It’ll be especially harder since the previous attempt at “strong authority” went horribly, horribly wrong compared to the first shots with Mahathir and LKY.

        The only way to gain work ethic is to work. But first they need to be arsed to get off their arses (pun intended?) and make the initiative to do it.

        *typo intended 😀

      • Orion says:

        Lazzo,

        The thing about Saudi Arabia long ago was that they didn’t have people who were equipped to work for the oil companies to begin with. They were originally an almost purely pastoralist people into shepherding and goatherding and did not have the technical or educational backgrounds that would have allowed them to work for said oil companies. Moreover, even when they started becoming more and more prosperous due to the petrodollars they earned, most of their people – while being educated with the petrodollars – were still concentrating heavily on esoteric pursuits such as Islamic Theology and Jurisprudence, and other similar studies. That’s why they needed to import lots of Filipinos, Indians, and others to provide technical grunt-work as pipe-layers, brick-layers, engineers, etc. Westerners, and the two most educated groups from the Arab world (Palestinians and Lebanese – yes, I’m proud of my part-Leb heritage) served as the administrators  and managers.

        As for India, just please do the necessary research to learn that the dynamism of India’s economic boom as well as the rise of indigenous conglomerates like Tata was precisely a result of the economic reforms spearheaded by both Narasimha Rao and Manmohan  Singh.

        When you do your research, you will  find out that  India used to have so many weird laws that discouraged businesses from growing big because they used to have a Gandhian “minimalist” philosophy behind their previously backward economic policies. Yes, they still do have their overseas workers, and for the  longest time, that was all thanks to those backward policies. India’s economic reforms – which were done as a result of a looming crisis – were what forced the government to shift paradigms.

        Thanks to that shift, India is now experiencing a boom that was initially fueled by the Foreign Investments riding on globalization trend of business process outsourcing and call centers and was  then followed by the rise of local Indian conglomerates  that learned from the foreign  businesses and likewise were no longer fettered by the old backward “small-is-better” policies that preferred “village cottage industries” and “homespun cloth” to industrial-grade production.

         * * *

        By the way, I am one of the original Get Real Philippines co-founders together with Benign0 which means that we all recognize the need for Culture Change.

        However, my intense research on “how to change culture” has led me to acknowledge that culture will NOT CHANGE BY ITSELF just because you say it should.

        That’s why you should take my advice from the other article about Lee Kuan Yew: Buy the book and read it twice.

        Culture Change can only happen through social engineering and behavioral modification. You need to create an environment  for the people that will FORCE THEM to change their culture and behavior. Do you think it is fair to just say that “culture change” must happen first without even thinking (or doing the kind of intense research several of us have done) about how to change culture? Easier said than done, Lazzo!

        Culture changes only when  forced to by a change in environment or system

        How do you reinvigorate a company whose people have grown complacent due to a system that allows people to laze around, tolerates mediocrity, and rewards  people based on how good their relationships are with their bosses and peers, and not based on how they perform?

        Simple! Change the system of rewards and punishment! 

        Come up with a strict system that penalizes idleness, punishes mediocrity, hires only competent people, fires lazy and incompetent people, promotes only those who perform their jobs well, etc, etc, etc. That’s how you change culture, Lazzo! You change the environment (aka  “system”) because it is the environment that often causes people to behave in a particular way.

        Have you read Montesquieu’s “L’esprit des lois?” It talks about how certain “eco-systems” or “environments” can shape the cultures  and behaviors of different people, and how it is that  based on the culture of the people, the types of laws, system of government, and “manner of governance” should reflect those factors.

        Montesquieu showed that,  ceteris paribus, people from Colder Countries tend to have more self-disciplined  cultures so that due to  this self-discipline, it is alright to have a manner of governance that is libertarian and non-intrusive. Why? Because they are already self-disciplined, and thus their innate discipline emanating from the influence of the cold climate allows them to self-regulate and still be successful even with minimal government supervision.

        But on the other hand, Montesquieu also  showed that Warmer  countries tend to have more emotional and by default, less disciplined cultures among people. He thus said that for societies in warm countries  to be successful, their  governments must be more autocratic or at least “disciplinarian” in order to impose discipline among people who are normally NOT disciplined.

        Try doing research on Montesquieu and reading up on his masterpiece. It’s a  classic.

        Now…

        If the Philippines, coming from the tropical areas, has a culture that is predisposed towards being frivolous, happy-go-lucky, emo, and undisciplined, how then can the Philippines succeed if we are using a paradigm of governance that is roughly borrowed from the liberal and freedom-based paradigm of a Cold Country (the USA) whose people generally have more initiative  and self-discipline which is why their paradigm works?

        Let’s test the Montesquieu Climate Theory… Singapore, the most successful country in the tropics – is practically on the equator! 

        And yet Singapore is indeed one of the top and most competitive economies in the World on a per-capita basis that is.

        Why? Because Lee Kuan Yew was consistent with Montesquieu‘s premise… If you’re going to be in a hot country, people are going to tend  to be lazier UNLESS you create an artificial system that forces people to be competitive, self-disciplined, hard working, etc.  

        That’s why Singapore was big on social engineering and behavioral modification. That’s why Malaysia also followed suit. And that,  unfortunately, is why the Philippines is Asia’s Basketcase of Wasted Democrazy.

        We are a tropical country. Our cultural tendencies are towards complacency and laziness. We naturally tend to be undisciplined. And that’s why if we had paid heed to Montesquieu, then we should have come up with a system similar to Singapore’s because that is exactly what Montesquieu postulated as his theory: That  societies in warmer climates should set up disciplinarian and strict paradigms of governance to force people to work harder and follow rules because the lax natural environment of not having four seasons nor winter tends to make people lazy.  

        Now, how can we even end up with a system of government similar to Singapore’s  if we can’t even get LKY-type people elected because our current American-based system (America = COLD COUNTRY) and our misguided “Freedom-centric” paradigm makes us choose winnable candidates instead of the most capable ones?

        Gotcha!

        That’s why we need CoRRECT™!!

        It is the ENABLING STEP that will allow us to have the kinds of visionary leaders who can help us to change our culture. 

        Do you really think that the current Presidential System as it is which easily allows incompetents and lazies to get to the top is the kind of system that can allow us to change our culture?

        Think again!

        Leaders must be heads  and shoulders above their people for them to be able to come up with policies that would totally reform not just how the economy is run but also how the people behave to turn them into disciplined and hard-working people who can easily compete with the best in world. We need to shift to a system that can more easily allow us to get the best and most qualified leaders to reach the top of foodchain so that they can create the right policies  that will feed our people, improve our lives…

        …and change our culture for the better!

        That, Lazzo, is why CoRRECT™ is the enabling step that all “cultural reform” advocates – including my esteemed colleague and co-founder who unfortunately has not yet read Montesquieu (that was one of the required readings I recommended to my Get Real colleagues long ago) and authored the article featured here – all need to recognize. 

        System Change brings about Culture Change. No system change, no culture change. No ifs, no buts, there’s really nothing to argue because that is how the world is. 

        That’s why we all need to support CoRRECT™. 

      • The Lazzo says:

        The thing about Saudi Arabia long ago was that they didn’t have people who were equipped to work for the oil companies to begin with. They were originally an almost purely pastoralist people into shepherding and goatherding and did not have the technical or educational backgrounds that would have allowed them to work for said oil companies. Moreover, even when they started becoming more and more prosperous due to the petrodollars they earned, most of their people – while being educated with the petrodollars – were still concentrating heavily on esoteric pursuits such as Islamic Theology and Jurisprudence, and other similar studies. That’s why they needed to import lots of Filipinos, Indians, and others to provide technical grunt-work as pipe-layers, brick-layers, engineers, etc. Westerners, and the two most educated groups from the Arab world (Palestinians and Lebanese – yes, I’m proud of my part-Leb heritage) served as the administrators and managers.

        So, in essence, their change of system to allow foreign ownership – far from actually causing them to modernize – has effectively led to them reinforcing their own feudal culture (with imported labor as their serfs) rather than changing it. So much for system change leading to culture change, huh?

        We are a tropical country. Our cultural tendencies are towards complacency and laziness. We naturally tend to be undisciplined. And that’s why if we had paid heed to Montesquieu, then we should have come up with a system similar to Singapore’s because that is exactly what Montesquieu postulated as his theory: That societies in warmer climates should set up disciplinarian and strict paradigms of governance to force people to work harder and follow rules because the lax natural environment of not having four seasons nor winter tends to make people lazy.

        Now, how can we even end up with a system of government similar to Singapore’s if we can’t even get LKY-type people elected because our current American-based system (America = COLD COUNTRY) and our misguided “Freedom-centric” paradigm makes us choose winnable candidates instead of the most capable ones?

        Do you really think that the current Presidential System as it is which easily allows incompetents and lazies to get to the top is the kind of system that can allow us to change our culture?

        Think again!

        I don’t, and you seem to enjoy pulling straw men when it comes to that.

        In fact, I’m surprised you still think the switch to a parliamentary system is part of that enabling step. As you might have missed my comment in a previous thread, we’ll still have the oligarchy immediately after we switch to a parliamentary system. We’ll still have our personality-based politics. And the oligarchy, knowing how to manipulate that, may object openly…though it will probably be more of a screen while they just find a way to fuck around with the new system by buying the parties or MPs key to that coalition.

        Far from finding a strong leader, we’ll probably go through numerous PMs from the get-go, each falling prey to the masa’s fickle damnatio memoriae mentality where each leader is a savior one moment, and the devil in the next. Especially with the oligarchy still controlling the media which, I might add, is severely restricted – if only slightly less than ours – when it comes to foreign ownership even in places like Singapore, or our parliamentary counterpart Thailand.

        http://iab.worldbank.org/Data/Explore%20Topics/Investing-across-sectors/Media

        Singapore was forced to pick LKY for its own survival after it was booted out of Malaysia. It had to start from scratch, and they were fortunate that LKY was able to guide them to prosperity rather than some dictatorship. However, the Philippines is not Singapore.

        Our culture is not just one of mere tropical complacency and laziness. Compared to that, our culture has since degenerated in the 246 years since Montesqieu died into one that actively seeks failure just for laughs. It’s like how we had fireworks called “Ampatuan” after the Maguindanao massacre. Or the hostage crisis. The cops could have plucked Mendoza with a single sniper’s bullet or yanked him out of the bus when he stepped into that doorway. But not only did they do everything wrong, it ended up at the point where the Bad Taste Nurses/Cops from afterward got photoshopped by Filipino jokesters into lots of different tragedy photos.

        How can a system change that supposedly enables a greater chance at success, save a culture that outwardly seeks failure?

        You know what though? You’re right. After all, you said yourself that culture change happens when there is an environment change as well as a system change. Saudi Arabia is still a burning desert as it always has been. But here, that environment change is happening as we speak. Instead of Montesquieu winters (like it did anything for Russia, 160 years after Montesqieu died!), we’re getting La Niña’s typhoons and global warming. Culture change shouldn’t happen because I say it should. It should happen because people need to realize where their mindset will lead them. And perhaps having the country pushed to that brink will finally force it into their heads that actively seeking failure will give them exactly what they wish for.

      • Orion says:

        Lazzo, 

        Here are my responses to your responses:

        So, in essence, their change of system to allow foreign ownership – far from actually causing them to modernize – has effectively led to them reinforcing their own feudal culture (with imported labor as their serfs) rather than changing it. So much for system change leading to culture change, huh?

        Lazzo, the Saudis didn’t even need to “change their system to allow foreign ownership” in order to bring in the Standard Oil Company of California to invest in Oil Exploration activities in the barren Najd Dessert. That’s because the Constitution of the Saudis does not even have any economic restrictions to begin with. In fact, most other countries in the world have Constitutions that do not have economic restrictions because other countries in the world decided to keep their Constitutions simple and general, so that specifics (including economic restrictions) would be dealt with through  specific legislation and could be repealed and  replaced through legislation and not  through Constitutional Amendments. The Philippines, FYI, is one of the few countries in the  world to make specific references to explicit economic restrictions in the Constitution. Other countries are easily able to turn on or off their ability to bring in or shut out foreign investments at a flick of a “legislative switch.” Not so with the Philippines which “hard-coded” such economic restrictions into the 1987 Constitution.

        But I digress… Instead of needing to “change their system to allow foreign investment”, Standard Oil merely signed a simple concessionary agreement with the Saudi Government that fully authorized Standard Oil to do exploratory drilling in what was essentially unused and unwanted dessert land. All that Standard Oil needed to do was pay the Saudi Government generous royalties once they started selling the oil they drilled.

        It would be optimal if you actually decided to go out of your way to do your own research on Saudi and Saudi  Aramco instead of asking me all these questions. It’s very easy to do Google searches, Lazzo. Time for you to do your own research instead of asking me to spoonfeed you all the time.

        * * *

        Do you really think that the current Presidential System as it is which easily allows incompetents and lazies to get to the top is the kind of system that can allow us to change our culture?
        Think again!

        Lazzo, a more meritocratic system like the Parliamentary System where prime ministers automatically come from the top leadership echelons of parties or coalitions that gain a majority of seats (simply because party leaders emerge from among the better qualified and more competent party members) has a much higher chance of producing competent and intellectually superior leaders of the country who can think out of the box and come up with policies that will improve the culture. 

        Does it mean that having a parliamentary system automatically will create leaders who will come up with culture-modification programs? No. We’re not talking about deterministic causality here. Instead, we’re  talking about probabilistic causality and that means that there is a higher chance of happening, but not a 100% certainty that it will.

        That being said, merely increasing the chances of having leaders who will find ways to reform the culture of Pinoys is much better than not even having such a chance simply because the leader who emerged was a lazy incompetent who only got elected as top leader simply because he had the surname or the celebrity status.

        I don’t, and you seem to enjoy pulling straw men when it comes to that.

        I don’t pull straw men at all, Lazzo. The  fact is, the empirical and historical evidence is there for all to see. You just need to do your research. The internet is wide open. And Google is there to help you find the info you need.

        In fact, I’m surprised you still think the switch to a parliamentary system is part of that enabling step. As you might have missed my comment in a previous thread, we’ll still have the oligarchy immediately after we switch to a parliamentary system. We’ll still have our personality-based politics. And the oligarchy, knowing how to manipulate that, may object openly…though it will probably be more of a screen while they just find a way to **** around with the new system by buying the parties or MPs key to that coalition.

        Lazzo, the enabling step is the entire CoRRECT™ Agenda. That is the comprehensive Three Point CoRRECT™  Agenda, not just one, not just two, but all points in the agenda.

        If you did a bit of extra analysis, you’d realize that number 1 on the Three Point CoRRECT™ Agenda is Economic Liberalization. What does that do? It creates massive numbers of jobs for locally-based Filipinos that hitherto would not have existed in the same huge numbers if the 60/40 provisions and other restrictions continued on. Those people who now get gainfully employed become less dependent on the lazy oligarchy for employment and even favors/largesse. The oligarchy also gets forced to compete with foreign companies not just in terms of selling products and services to customers but also in hiring people. 

        Remember, the oligarchs are also very often the same people who become members of political dynasties, especially in small locales dominated by a few families. Economic Liberalization forces them to shape up and usually, with more economic opportunities created (and  thus a bigger pool of “rich people” gets created), there will now be a bigger pool of possible competition to go against the existing oligarchs.

        So who’s doing the strawman? Obviously not me.

        Because shifting to the Parliamentary by itself  is not going to solve the oligarchy problem. It’s the economic liberalization part of the agenda that largely takes care of the oligarchy.

        As for the issue of personality-based politics, you need to once again do much more reading and research. If you had read the book of Dr. Yuko Kasuya titled “Presidential Bandwagon: Parties and Party Systems in the Philippines”, the highly personality-based politics in the Philippines is described by Dr. Kasuya to be a direct result of  the features of the Philippine Presidential System. She mentioned that tweaking certain features of the system decreases the personality-emphasis and  shifts it to the party.  If you read that book, you’ll find out that by reversing the settings of each and every feature that contributes to personality politics in the Philippine Presidential System, the system you come up with is actually a Parliamentary System.

        If you took time to read Dr. Juan Linz’s book  “The Failure of Presidential Democracy”, you’ll read this:

        ‎’Political engineers, like engineers who build bridges, should plan for the most unfavorable conditions, although we might hope they will never materialize. Doing so maybe considered wasteful when the additional costs are counted, which in the case of political institution building are the costs of the innovation, of challenging tradition.As the builders of bridges can never assure that the bridges will not collapse under some extreme circumstances, no constitution maker can assure that the institutions he creates will survive all challenges and dangers and assure a consolidated democracy. However, the accumulated evidence of the past in presidential systems, particularly in Latin America and Asia, and the success of contemporary parliamentary democracies in Western Europe show odds that seem to favor parliamentary institutions.

        Innovation is not necessarily good, but to cling to the institutions of the past when they have failed too often and to choose not to innovate is to miss a historical opportunity… I think that the intelligent use of historical opportunity after many failures and dictatorships is evidence that innovation is possible and can be successful. No one in Spain between 1975 and 1978 could have been sure that the experiment would be successful. However, the experience of Spain and other European democracies, particularly the German Republic, shows that innovative leadership and thoughtful constitution making can greatly help to generate the conditions for a stable democracy…

        Institutions lead the same actors to behave differently; they provide incentives and disincentives for certain behavioral patterns.My assumptions is that parliamentarism would impose on parties and leaders patterns encouraging greater responsibility for governance, greater accountability, and at the same time the need to cooperate and compromise (except when one party gains an absolute majority). Parliamentarism also allows changes in leadership without a regime crisis and continuity without the fears associated with ‘continuismo’ in presidential systems.

        In parliamentary system governments can demand from parties (either their own if it had majority or those in a coalition) support in votes of confidence, threatening them otherwise with resignation in the case of lack of support and ultimately with the dissolution of the legislature. The rule of each party and even of each deputy would be clear to the voters, who are unlikely to sanction destructive sanctions by parties. The party that fails to support its prime minister would have to pay a price. In the Spanish experience in recent years, an undisciplined, faction-ridden party (the UCD) was severely punished by the electorate. In fact, one of the main reasons for the UCD’s and the Communists’ loss of support in 1982 was the internal squabbling perceived by the electorate…”

        You can also read Butch Abad’s essay  “Should the Philippines Turn Parliamentary” to find out the research proving that by simply shifting over from Presidential to Parliamentary, the Philippines’ style of politics immediately shifts from the current Personality-oriented system of the Presidential System to the more Platform, Program, and Party-based system of the Parliamentary System.  

        Read Abad’s essay here: http://antipinoy.com/should-the-philippines-turn-parliamentary-by-rep-florencio-b-abad/

      • Orion says:

        (Continuation)

        Singapore was forced to pick LKY for its own survival after it was booted out of Malaysia. It had to start from scratch, and they were fortunate that LKY was able to guide them to prosperity rather than some dictatorship. However, the Philippines is not Singapore.

        Sorry, Lazzo, but you got your facts wrong. 

        Singapore already had Lee Kuan Yew as its Prime Minister way back in 1959 when Singapore was a self-governing British Colony. It was only in 1963 that Singapore – after declaring Independence from Britain – merged with Malaysia. And at that time, Lee Kuan Yew was still Prime Minister of the “Malaysian State of Singapore.” By the time Malaysia expelled Singapore, Lee Kuan Yew was again still the Prime Minister of Singapore, this time, he was  now the Prime Minister of an Independent and Sovereign  Republic of Singapore.”
        So what are you talking about when you say that “Singapore was forced to pick LKY for its own survival after it was booted out of Malaysia?” 

        Lazzo, please do your research. Please. This is the age of the Internet and it is so easy to get hold of all the relevant facts. You were factually-mistaken in so many areas, and it is these factual errors which explain exactly why your conclusions and opinions are in error as well.

        How can a system change that supposedly enables a greater chance at success, save a culture that outwardly seeks failure?
        The system isn’t so  much one that outwardly seeks failure. It’s just that the system in place in the Philippines is one that is not meritocratic. We have a society whose system exalts people who are not competent and instead gives the places of honor to those who have  the connections, the close friendships or blood ties, or those who have the popularity. 

        As such, because we do not honor and reward the truly competent  people, most of our people do not seek to become competent because those who are competent to begin with are not given the chance to rise up to the top as they should. What do many of our people try to be? Instead of being competent, they seek to be well-connected. What do our many poor women seek to be in order to get out of poverty? Well, many of them don’t see studying hard as the way out. But dancing the “ocho-ocho” or the “spaghetti song” as sexily as they can, developing their sexiness and learning to put on make-up to look like sluts might land them a lucrative career as one of the dancing giling-giling girls of those noontime shows or Willing Willie. In short, the role models of Pinoy Society aren’t based on pure competence. Prosperity (or clawing one’s self out of poverty) in the Philippines as it is publicly seen is often based on connections, popularity, sluttiness, or some other “non competence-based” trait.

        As long as the Philippines continues to have a system of rewarding mediocrity all because that mediocre person has connections or popularity, then competent people won’t ever become the real leaders of the country and most of our positions of responsibility will go to people who simply cannot deliver. That is why we see a lot of failure everywhere. It’s because the people who are put in high positions of responsibility are simply incapable of succeeding because they’re simply incompetent. The result? Failure.

        The Parliamentary System is an inherently more meritocratic system as the electoral system does not rely as much on national winnability of whoever is in the running to become Prime Minister. Instead, it is a contest between parties: which party has the most relevant platform as well as the highest chance of delivering on the platform that they promised on. Within the party, the most qualified and most competent  makes it to the top, while the next ones are his deputies and ministers.

        Have you read this article already? http://antipinoy.com/philippineprogress

        * * * *

        Ultimately you  are  right, though, when you say this:

        “Culture change shouldn’t happen because I say it should. It should happen because people need to realize where their mindset will lead them. And perhaps having the country pushed to that brink will finally force it into their heads that actively seeking failure will give them exactly what they wish for.”

        I totally agree with you there. I just hope we’re not at the “kapit sa patalim” situation so that there is so little room to maneuver when the realization that “we need to do the right thing” finally happens.

      • The Lazzo says:

        Orion:

        In the time since we last talked, Hezbollah – whom I recall you saying wasn’t really that strong of a force, essentially took over your country of heritage by having their pick for Prime Minister nominated. Their “platform” was their reaction to the tribunal that is very likely to indict them for assassinating a previous Prime Minister.

        In a sense, I have no doubt that the oligarchy will react negatively to the institution of your ©oRREcT plan. Let’s assume they lose the competition to foreign rivals. Wouldn’t that just lead to a more import-dependent society especially given that the public has essentially given the lion’s share of the resources to the oligarchy?

        I’ve also mentioned before that I’ve met members of influential families that welcome more foreign ownership. That said, it isn’t hard to imagine the influential families taking advantage of federalism to compete for investment strictly within their own spheres of influence…and then concentrating the wealth from that into domestic improvements only they decide is necessary. If the development works, that’s more reinforcement for the family. If not, the family can just kick ’em out.

        You claim Thailand’s successful tourism program is due to its allotment of foreign ownership. In reality, foreigners are only allowed to invest in 66% of the tourism industry. A majority, to be sure, but not the 100% you were looking for. And in success stories like Singapore, Japan and Korea, media ownership is still strictly controlled if you would click the World Bank link. Sure, it’s legislated instead of “hard-coded” like the Constitution. But it isn’t hard to imagine nationalistic politicians easily re-legislating such restrictions back in, even if it is easy to take them out.

        Having read your aforementioned article, I continue to doubt that the Parliamentary system will actually create strong non-populist parties or weaken oligarchy control despite your assertions.

        1) Removing term limits still opens up the possibility of prolonged oligarchy control. We see this in our Senate now, which does have term limits, and people that have served their consecutive terms as senator simply have someone else stand in for them before they come back in the election after next e.g. Drilon. The oligarchy can simply hold on to key positions within their respective parties, and nobody can advance except through them.

        2) Oligarchy-run parties will maximize the use of the vertical axis of competition. It will narrow the flow of money to within a party. As for the horizontal axis, Malaysia has a bevy of regional and ethnic parties forming its current National Front. Ostensibly, these parties would represent the interests of the regions. So what would prevent regional controlling families from starting their own “regional interest parties,” claiming to represent these parties in a coalition? They could simply use their money to push a ‘who’s more populist’ platform, and the public is none the wiser.

      • ChinoF says:

        In my words, foreign investment is not a magic bullet, but it allows you to buy the bullet.

      • The Lazzo says:

        And shoot someone else with it. 😀

  11. Orion says:

    Hi benign0:

    Perhaps a look into a few relationships and interrelationships of different phenomena may help in understanding how the comprehensive Three Point CoRRECT™ Agenda (or “Full Agenda” of Constitutional Reform – a. Economic Liberalization; b. Evolving Regional Decentralization; c. Shift to Parliamentary System) as it is actually a full and comprehensive programme with interlocking and interrelated modules that are not independent silos, but instead all complement each other.

    (1) Constitutional Reform’s Economic Liberalization sub-component does indeed seek tocreate massive employment in order to address the massive unemployment that currently exists. More employment means more taxpayers. More taxpayers means more government funds.
    It is worth realizing that bringing in foreign capital in order to create massive employment will increase the taxpayer base as more and more employed Filipinos translates into higher tax revenue and therefore an increased ability of the State to invest in better education. This investment in education can in fact be geared not only towards   learning skills, but can also be geared towards molding a more “sustainable” economy by instilling the values of frugality and long-term thinking in the future generations who will later join the workforce as the next generation.
    Indeed, part of the problem is with the default “Pinoy” culture that exists. But that is something that education as well as actual work/employment are precisely meant to address. It does not mean that just because “Pinoy Culture” is currently dysfunctional and more likely to waste money on non-essentials, it should necessarily stay that way. Well-funded, well-developed Quality Education and behavioral modification through activities such as actual work/employment goes a long way into instilling the right values. Education that can change behavior indeed costs money to develop and improve, and drastically increased tax revenues resulting from a highly expanded taxpayer base will go a long way towards improving Filipino culture. If Singapore (and to an extent Malaysia) were able to do it, why can’t we?

    (2) It is important to acknowledge the undeniable fact that the spendthrift attitudes of Pinoy families who receive OFW Remittances from one or two parents working abroad (where money goes into non-essential expenses, not investments) are direct results of the OFW phenomenon where the breadwinner (s) are absent and unable to directly determine how the money they earned is spent. Local Employment, on the other hand, DOES NOT create the same phenomenon, as the breadwinner (s) tend(s) to be able to exercise direct control on how the money gets spent.

    Rather than assuming that because families sustained by OFW earnings are more often than not unable to plow the OFW money they gain from abroad into tangibly self-sustaining investments, it works well if one realizes that the reason why this happens in the first place is that the primary money-earner is absent and unable to be strict with how said money should be spent.
    In other words, while OFW-family set-ups often lead to a sense of entitlement where the family or children left behind expect the “monthly windfall” to  come to them without fail, the family set-up where the entire family is together because one parent or both parents work locally are able to directly supervise how their hard-earned salary income gets spent. It makes a big difference when a family does not earn its keep and instead just receives a “windfall” every month. With an influx of foreign capital creating massive local employment, on the other hand, the breadwinner(s) is/are around to emphasize to the family that “money does not grow on trees.” 

    That unfortunately does not happen in OFW families, where the breadwinner is away and the family is unable to see exactly the type of stress and/or struggle that the breadwinner has to go through just to produce the cash. With OFW-families, quite often, the situation is “out of sight, out of mind.”

    (3) Parliamentary Systems have higher probabilities of allowing competent, high quality leaders to emerge on top. High Quality Leadership means higher probabilities of coming up with high quality policies and decisions.

    These are the findings of world renowned Ivy League political scientists and economists. (Linz, Lijphart, Thacker, Gerring, Loayza, Lederman, Soares, Riggs, etc) However, many people who end up enamored by Nassim Nicholas Taleb’s theories of randomness and uncertainty, such as theories found in his bestseller “The Black Swan”, have the tendency to want  to disregard or at least significantly downplay statistical studies and correlations. People who get swayed by his views (or at least don’t put his views in their proper context) tend to disregard the importance of how government leaders  (and their policies) can actually determine – to an extent – the individual lives of ordinary citizens living in their societies.

    While I have much admiration for Nassim Nicholas Taleb, a fellow Greek Orthodox Leb (my great-grandfather was also Greek Orthodox Lebanese), I consider his work to be a rather controversial, contrarian and alternative philosophical view of the world is-à-vis randomness and uncertainty. There is value in his view that government leadership does  not determine the fates of individuals: From a purely individual perspective, that is.

    Highly development-oriented leaders like Lee Kuan Yew, for instance may actually create all sorts of massive employment opportunities for so many Singaporeans, but if you zero in on the life of one particular person who is unashamedly lazy and lacking in initiative, of course the Talebian view holds totally true. That lazy man, unless he decides to take the initiative of finding himself a job, will never improve his life even if Lee Kuan Yew or his successors created a highly job-rich environment. That man, after all, still needs to go get a job. If he continues to laze around despite the jobs all around or those  knocking on his door, nothing will happen to improve his standing.

    Truth be told, far too many examples actually do prove that the quality of leadership within a society does indeed improve the lives of many people within that society. Lee Kuan Yew, for instance pursued the right economic and social-engineering policies that created a job-rich and friendly-to-business environment that made sure that Singaporeans who were actively seeking jobs would easily get jobs.

    The same happened under Mahathir bin Mohamad. We can also see how the late Deng Xiaoping and his pro-business pragmatism improved the lives of hundreds of millions of Mainland Chinese in contrast to how thecharismatic revolutionary but failed economic administrator Mao Zedong impoverished and caused the suffering of hundreds of millions of Chinese under his failed economic policies.It is simply misguided to misinterpret my fellow “Leb” Nick Taleb’s theories which never meant to supplant statistical trending analysis as well as the empirical evidence that countries like Singapore, Malaysia, China, and many more actually provide.

    We can always look at the dichotomies between countries that have the same culture but used different economic systems due to differences in policy-directions that their leaders took.
    The formerly divided West and East Germany were populated by ethnic Germans: paragons of hard work, precision, and efficiency, yet due to the politico-economic divergences in their systems and in the policies each undertook, West Germany was always so many steps ahead of the relatively impoverished East Germany. And this was all due to the differences in “quality of leadership” leading to  differences in the “quality and effectiveness of policies.”

    The same goes with North and South Korea. Both have the same hard-working, highly-disciplined, extremely focused people of the same Korean ethnicity. Yet South Korea’s use of the capitalist free-market system has brought it prosperity, while North Korea’s use of Communism has given it mass poverty, starvation, and millions of North Koreans reduced to eating tree bark during winter just to survive.

    * * *

    As with the issue on Philippine Tourism’s dismal numbers, it needs to be remembered that the reason they do not come to the Philippines in droves is the low quality of resorts and facilities for tourists when compared to the quality of resorts and facilities for tourists found in other countries.

    Lo and behold, Phuket in Thailand is able to easily attract millions of First World tourists to their shores simply because an extremely huge number of hotels, resorts, and tourist facilities there are in fact foreign-owned, managed, and maintained, and thus present high quality standards which international tourists look for. Contrast that to the mostly shabby, poorly-maintained, low-quality, low-class, locally-owned and operated resorts and facilities found in the Philippines.

    Had the Philippines actually removed 60/40 provisions for foreign business ownership long ago and invited thousands of foreign investors to come in, many of them would have easily come to the Philippines to become 100% or at least majority owners (with minority Filipino partners) of high-end, high-quality resorts, hotels, and facilities, that would have raised the general quality of the tourism industry which in turn would have significantly attracted so many more tourists to come over.

    In short, it pays well to actually go beyond the initial surface-based doubt and look deeper and imagine how the  phenomenon works 10 or more steps in advance (pref. hundreds of steps). Just as in chess, the winning side is the one  that can see many more steps in advance. The losing side is the one that only looks at the chess pieces one-step-per-turn.
    Constitutional Reform is a winning initiative because it was carefully conceptualized by planners and strategists who thoroughly analyzed the comprehensive implications of its Three Point CoRRECT™ Agenda hundreds of steps in advance, while most people (and this is a Pinoy problem) are unfortunately too lazy so that if they do analyze at all, they merely analyze things from a superficial or surface-based one-step-per-turn perspective.      

    Grandmasters do not play chess one-step-per-turn.

    * * * * * *

    (This is a  repost of my comment  yesterday which got corrupted due to a server issue  )

    Certainly,  Marques totally gets the point about Constitutional Reform: You do not  need to clean up the Philippines first before you bring in the Foreign Investors.

    As it is, there are many would-be foreign investors from First World countries who would like to come to the Philippines regardless of the “lousy road infrastructure” because many of them are software development houses or business outsource processing outfits who only need to have fast internet connections (which nowadays are becoming easier to get hold of) and ready access to English-speaking trained professionals.

    The only show stopper for a huge number of them who end up going to other countries is none other than the 1987 Constitution’s protectionist provisions. This  goes especially for small or mideium-sized companies who  do not make the grade to qualify for special 100% ownership status often granted to “mega-investors” – companies who pledge  to invest a certain extremely huge amount of money during their first year. (these are the result of pro-business legislation that FVR and GMA pushed for as a  means to circumvent the anti-foreign investor provisions of the Constitution.

    Indeed, when China first opened up in the late 1970’s, they hadn’t yet cleaned up their act. Yet thousands of companies and investors started pouring in purely to take advantage of the extremely cheap labor.

    In the case of the Philippines, our advantage is the “low cost English-speaking  professional class” which is incidentally also the same advantage that gets thousands of investors pouring into India despite India’s even worse physical infrastructure as well as the even worse hygiene issues in some areas. (Delhi and Bombay have major trash problems)

    What needs to be remembered is that as more investors come in and as more jobs are created, the taxpayer base increases drastically, thus causing tax revenue to increase. This rise in tax revenue can be used to improve on physical infrastructure as well as imrprove educational standards,  and both these investments resulting from increased tax revenue collection in turn make the Philippines more  and more attractive to even more foreign investors.

    This “Virtuous Cycle” then  becomes the fuel for real growth as well as society’s improvement as more people with jobs means that more people become busier and more used to handling money that they earned.

    They learn to become more and more responsible with money  (unlike in an OFW -family where the absent breadwinner is not around to strictly supervise how the money is spent)  and the fiscal culture improves. People learn to become more frugal and savings-oriented. Moreover, being busy with work also gets them acting as more responsible parents. This responsible parenthood that is associated with simply holding a job also translates into a lower birthrate even without the need for an RH Bill. (Of course, the RH Bill is still necessary. It’s just that when more and more Filipinos start to have well-paying jobs, you won’t even need to have government  funding for reproductive health because individual Filipino parents will more likely be able to afford reproductive health themselves.

    In the end, developing  the economy and creating massive amounts of jobs and economic opportunities is close to being the “real silver bullet”, if ever  there was such a thing.

    And that is why it is always right to say: “It’s the Economy, Stupid!”

    • Renato Pacifico says:

      Despite China, South Korea, Vietnam, Thailand has no “low cost English-speaking  professional class”  INvestors still pours money on them.  The snobbery of english is a myth.  They need hard-working, dynamic, thinking people instead of back-stabbing squabbling english speaking professionals.

      • Miriam Quiamco says:

        Of course, foreign investors in the countries you mentioned hire only bilingual people, those proficient in English.  And that is why many South Koreans, Thais, Vietnamese and Chinese study English seriously, spending even their own hard earned money to go to the Philippines or to other native English speaking countries to learn English.  Orion is right, given a more fair foreign investment climate in the Philippines, we will surpass these countries in enticing foreign investors to invest in our country.

      • The Lazzo says:

        No, they’re just hiring us to go over there and teach them English.

  12. ChinoF says:

    “If your house looks and smells like shit, even burglars won’t enter it.”

    From my point of view now, even if the house looks and smells like shit, the burglars are still here. Perhaps it’s because the burglars themselves were the inhabitants, or even the lords of the house, from the start.

    Let me also repost a comment which was a reply to the guy who posted something saying that our economic index was still high in a certain study index:

    “The fallacy here is that ALL investors are assumed to be put off by the bad state of the country. Actually, there have been a lot investors who want to come in despite how bad the country’s condition may be. I hear Israeli investors have been wanting to come here because of our English skills and more, but they have been forced to opt for Vietnam because of a real hindrance here: foreign ownership limits.

    What really puts them off is that they have to find a local partner to take up the other ownership part, thanks to 60/40. That actually opens up the risk of corruption, because the local partner can do some kalokohan, such as actually causing the foreign partner to do ALL the investment (and thus causing a violation of the up to 40% foreign rule), but the local partners pocket some money and do nothing. All they did was to “secure the deal,” which usually goes on without bidding. For example, I’m sure that it’s the local partner that hoodwinked Fraport and not the other way around. As a result, the government still has to pay for the project, but instead of the proper funding, the gov’t either loans or raises taxes – passing the buck to the citizens. SLEX is a good example. So our investment limits actually help corruption.

    Granted, we need to clean up other things aside from the investment limits. But once we do clean it up and then find out that the Investment limits are holding things back.. then what? So we do nothing about the limit? What about the use of investment itself to clean up the country?

    By the way, here’s someone who said that our country is one of the worst for foreign investors.

    Using the analogy of a guy going for a prettier girl than a smelly, ugly girl, in another situaiton, a man may go for a much less pretty girl if he finds out that the hot girl is ripping him off. The man may even take the pains to train and beautify the ugly girl, and if she listens, they may do just fine.”

    • The Lazzo says:

      From your article:
      The Philippines was lumped along with Ethiopia and Thailand with an indicator score of 0 for several sectors.

      Ironically, Thailand was more surprising than Ethiopia. Seriously? I understand how the turmoil turned people off, but I was under the impression that (tourist traps aside, hinthint) it was some kind of shining golden Buddhist paradise for investment.

  13. kickapoo says:

    Philippines couldve been a backpacker’s paradise. Beautiful obscure beaches, exciting mountains to assault, friendly locals, diverse culture, amazing climate. With mysterious lore in each province to boot. Englesh-spokening-dollars pa ang mga Pinoy.

    Tourism is a billion dollar industry in Mexico, a country much similar to ours.

    Instead of a booming tourism industry, all I see are malls popping out everywhere. Parang mga catch-basin where OFW money are being siphoned and into the pockets of rich businessmen. Nice, Pilipinas kay ganda…or to quote an Ewok ” Yan ang maganda…”

    • P-Noy says:

      @kickapoo, berry goot observation.  Never thoughted of that.  I like that “Malls … catch-basin … (of) OFW money”  So, kickapoo, you are now posting and talking like Benign0.  Sure I do like that “catch-basin” thingie.

    • Jay says:

      @kickapoo

      The country IS a tourism paper-tiger! Imagine all the good and revolutionary things set up for tourism in other countries and how they are reaping those benefits in many ways. Imagine that in the country and the benefits reaped not only for the government looking to hog more money, but for logistics overall. But that IS also the problem! Sure its much harder given the geography of the Philippines, but even that can be given a positive spin meant for some form of profit and even establishing markets that exclusively exists in Manila, the supposed hub of the country.

      Hell, the country never even built an Ewoks amusement park and built on its surprising origin linked to the language of the country.

  14. GabbyD says:

    “But I digress… Instead of needing to “change their system to allow foreign investment”, Standard Oil merely signed a simple concessionary agreement with the Saudi Government that fully authorized Standard Oil to do exploratory drilling in what was essentially unused and unwanted dessert land. All that Standard Oil needed to do was pay the Saudi Government generous royalties once they started selling the oil they drilled.”

    this is EXACTLY what is happening NOW in the philippines.

    what MORE do you want and why?

  15. J_ag says:

    Memo to my other favorite delusional economist and others….

    1. Is there a constitutional bar to any foreign corporation to enter the Philippines and own (100% equity) and operate businesses involved in the more strategic and systemically important productive sectors and sub-sectors of the Philippine economy (i.e, agriculture, manufacturing, mining, energy development, software development, finance, wholesale & retailing)?

    If you answer yes, then it is obvious you do not know what your are talking about. It is more ignorance than stupidity. No one will hold it against you.

    Let us not talk about the non-productive sectors which is the service sector (except wholesale, retail & finance)

    2. Define foreign capital…..

    [Reply]

    • benign0 says:

      Mr J_ag,

      Re (1) perhaps you are referring to clever and creative ways “foreign investors” get around legal “restrictions” on ownership of domestic assets? Last I heard, that’s what CFO’s are paid the big bucks for… 😉

      Re (2) Good question. How about this wireframe definition for starters (let me know if it suits you):

      “Foreign capital” can be any of the following:

      (2.a) Funds moved from one country to the subject country for the purpose of acquiring assets situated within said subject country.

      (2.b) Knowledge, expertise, and technology originated and owned by one country, nationals of or that country, and/or business entities based in that country imparted (read transferred) to nationals or business entities based or situated in the subject country.

      (2.c) Physical equipment and/or logical/digital assets (e.g. software or data) moved to or (in the case of the latter) made available to nationals or business entities based or situated in the subject country.

      • GabbyD says:

        what are these clever ways? if its legal, is that a problem?

        further, for the industries that jag has mentioned, if u look at the Negative FDI list, u’ll find that these industries arent constrained.

      • Cy says:

        Yo! See last two sentences. Meanwhile, savor your imagination. Peace. This is one example.

        “Although foreign investors were forbidden by the Philippine constitution to either own or lease public agricultural lands, there were 124 transnational agribusiness firms operating in the Philippines in 1985, of which 58 were directly engaged in the cultivation of cash crops on the southern island of Mindanao. As early as the 1920s, Del Monte Corporation had established a pineapple plantation in Bukidnon in northern Mindanao. B.F. Goodrich and Goodyear Tire Corporation came in the 1950s, and Castle and Cooke entered in the 1960s, setting up a pineapple plantation in South Cotabato Province. The Philippine government facilitated investment of foreign enterprises in plantations through the government-owned National Development Corporation, which acquired land and leased it to the investors. Foreign-owned firms also were able to get around leasing prohibitions by entering into growers’ agreements with landowners and subsequently changing the agreement to allow direct cultivation of the land. Such arrangements have generated considerable controversy. ”

        From: http://countrystudies.us/philippines/76.htm

      • J_ag says:

        You did not answer the question but reverted to a convoluted answer on the definition of capital. The more important productive sectors of the Philippine economy i.e. are open to 100% foreign equity including finance, wholesale and retail. Where have you been living? In a cave?

        Foreign finance capital used to buy exiting domestic assets do not create an economic investment. Are funds actually transferred from one country to another or are credits transferred. You obviously do not have a clue above moving funds from one country to another. No need to strain your intellect.

        Do you know of any foreign corporation that owns patents to have transferred this to local Filipino companies. Technologies are the techniques and/or scientific process that creates the physical machinery or mechanism’s to enhance productivity of labor. Name one country that owns patents or copyrights. Chinas iron rule for foreign investors into China is to share their patents and copyrights as a price for entering their domestic markets.

        Have you every seen any foreign corporation give up its copyrights or patents for free? Are the machines and software the capital or the patents and copyrights?

        Are any companies in the Dow Jones Index disallowed from coming to the Philippines and starting their own business here and owning 100% of the equity? The Retail Trade Liberalization Act was fashioned to allow only big retailers to come in and invest and own and control 100% equity. Why hasn’t Walmart and Carrefour come in?

        Shell and Chevron Texaco own 90% of the company that extracts natural gas in Malampaya. The government own 10%.

        In todays globalized world transnationals outsource everything and simply own the patents and copyrights and have become fiance companies. Now what is the present days definition of capital and money?

        GE has become GE Capital. GM has its own GM Finance.

      • benign0 says:

        Actually I answered your question. I defined foreign capital. Here, you now merely show (1) why you think this definition isn’t correct, and (2) what you think I don’t know. But see, dude, what sets apart the men from the little squirts is the ability to come up with either (a) a counter-thesis to the idea presented and/or (b) augment the tabled idea with additional input into it.

        All you do here is grandstand your quaint textbook knowledge and merely substract from the collective intellect. 😀

  16. Marques says:

    J_ag,

    (original msg:”1. Is there a constitutional bar to any foreign corporation to enter the Philippines and own (100% equity) and operate businesses involved in the more strategic and systemically important productive sectors and sub-sectors of the Philippine economy (i.e, agriculture, manufacturing, mining, energy development, software development, finance, wholesale & retailing)?

    If you answer yes, then it is obvious you do not know what your are talking about. It is more ignorance than stupidity. No one will hold it against you.”)

    it is very clear na by law you can’t have 100% equity by foreigners in general ( though there are some cases na in-allow ng gov’t probably influenced by gov’t to gov’t relations/trade deals.)

    isipin mo nalang why so many foreign companies tie up with locals? open your eyes naman. Please tell me how could a foreign company come here with 100% foreign ownership. kasi clearly states sa law na 60 40. and you have the guts to call people stupid?

    I don’t agree always agree with articles in this site but at least they try go get their facts as accurate as possible. (halata naman na may research) yung sinabi mo baseless eh.

    and I agree with Benigno’s last comment.

    “Chinas iron rule for foreign investors into China is to share their patents and copyrights as a price for entering their domestic markets. ”

    China want foreign investor to register their patents in their own database. There’s a good and bad side to it. to better protect their rights and some what forced technology transfer BUT not to give it for free.

    in simple words, they get the Gov’ts protection for their patents but they have to share the technology and they get paid for sharing it.

    Please get your facts straight.

    “In todays globalized world transnationals outsource everything and simply own the patents and copyrights and have become fiance companies. Now what is the present days definition of capital and money?

    GE has become GE Capital. GM has its own GM Finance.”

    With respect to your opinion, please research more why those companies have sub/sister finance company.

    ginawa mo you connected patents to finance whereas it really should be sales to finance.

    • J_ag says:

      Stick to the facts not your opinions. There is no bar to foreign companies (100%) here to be involved in agriculture and manufacturing.

      Sharing technology means they get it for free. China is now offering their own version of bullet trains cheaper and will be offering Chinese made aircraft in much bigger scale.

      GE produces jet engines and also owns one of largest jet leasing companies in the world. They also are involved in selling mortgages. GE came to be because of the patents of Thomas Edison. They expanded into producing turbines for electric power plants. Then they went into jet engines. Does one go into trying to invent a new jet engine or does one simply buy the patent from GE.

      The Russians bought rolls royce jet engines form the British and they created their own by reversed engineering them to produce their MIGs. What is capital in an economic sense. The machine or the process behind the machine. In business capital is the machine. In economics it is the process behind the machines.

      Now if Marques can inform everyone if in economic history financial capitalism came before industrial capitalism? The world is living in age of financial capitalism. The financial markets are dominating the world. That is why James Cargill wants to come back as the bond market.

      Your post Marques unfortunately is stupid.

      • Marques says:

        clear na hindi mo masagot yung question ko,

        Post here where in our contitution/law does it allow any foreign company to set up business here

        “Sharing technology means they get it for free. China is now offering their own version of bullet trains cheaper and will be offering Chinese made aircraft in much bigger scale. ”

        they will pay royalty etc. research.

        Now if Marques can inform everyone if in economic history financial capitalism came before industrial capitalism?

        I was saying how pointless you connected patents to financial companies, when it was really created to earn more money with financial instruments.

        parang toyota prefer nila installment bec. this earns them more money. its not like toyota would have a finance company bec of their patents that is ridiculous. Kaya nga din may GE money bank.

        (My reply wasn’t even specifically referring to this and your reply came half way around the world) dinala mo sa industrial revolition ang layo!

        Every time some ask you a question you never seem to be able to give an answer and revert to counter questions. Pathetic mga sagot mo.

        and if you think you have got all the answer, then think so. I’ll let you have it and be stupid for the rest of your life.

      • GabbyD says:

        please see the FDI liberalization law, the 2 negative lists. 

  17. J_ag says:

    “WE NEED TO OUT-INNOVATE, OUT EDUCATE AND OUT BUILD THE REST OF THE WORLD.”
    Barack Obama, in case one is clueless is President of the U.S.

    The history of economics in the U.S. is one of guided intelligent design by the government of the U.S. Protectionist policies are one side of the mercantilist coin. The other side which is proactive protectionism is industrial policy.

    “This history is worth reviewing because America is poised for another debate over whether its economy evolves or is designed, with President Barack Obama’s opponents claiming that whatever is good in America’s economy has always evolved with no guidance, and that whatever is bad has been designed by government.”

    “This claim is, of course, ludicrous. American governments will continue to plan and design the development of the economy, as they always have in the past. The question is how, and whether the design will be in any sense wise.”

    http://www.project-syndicate.org/commentary/delong110/English

  18. J_ag says:

    The history of economic evolution is one of a complex system of processes that change. Karl Marx and later Schumpeter pointed out the fatal flaw in Capitalism. Old ways being changed by new ways of doing things.

    How can disparate businesses manage the changes within domestic concerns much more across national boundaries? The ignorance level in this blog is actually very high. One can have his own opinions but one cannot have delusional facts as a basis.

    Human intellect can observe, innovate and invent. Money is a technological tool. It too has undergone changes.

    “This evolutionary character…..is not merely due to the fact that economic life goes on in a social and natural environment which changes and by its changes alter the data of economic action; this fact is important and these changes (wars, revolutions and so on) often condition industrial change, but they are not its prime movers. Nor is the evolutionary character due to the quasi-autonomic increase in population and capital or to the vagaries of monetary systems of which exactly the same thing holds true. The fundamental impulse that sets and keeps the capitalist engine in motion comes from the new consumer goods, the new methods of production or transportation, the new markets, the new industrial organization that capitalist enterprise creates….The opening of new markets, foreign or domestic, and the organizational development from the craft shop and factory to such concerns as US Steel illustrate the state process of industrial mutation – if I may use the biological term – that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one. This process of Creative destruction is the essential fact about capitalism.”
    Joseph Schumpeter, Capitalism, Socialism and Democracy.

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