Carlo's Think Pieces

Reflections of a Filipino in the Netherlands

Posts Tagged ‘capital’

Philippine Investment “Myths”

Posted by butalidnl on 24 June 2011

The Philippines needs investments in order to develop. Where should these investments come from? What do we need to do to get them? There are a number of ‘myths’ about investments in the Philippines, and these ‘myths’ either distract us from the real issues, or are even counterproductive.

National Patrimony Provision
There are many who want to amend the Constitution’s national patrimony provision, which reserves the ownership and exploitation of land and national resources to Filipinos. The idea was that if foreign ownership is allowed, foreigners will want to buy land and invest in the Philippines.

This issue is overrated. Foreign companies these days no longer really need to own land for agriculture or mining. All they have to do is to make long-term lease arrangements, or get guarantees to a steady supply of a given product. Take the pineapple plantations in Mindanao – they plant pineapple based on contractual arrangement, and end up supplying foreign companies.  But the land is owned by Filipinos. As for mining companies, the present Mining Act, with its provision for “Financial and Technical Assistance Agreements” which last 25 years allow foreign mining companies to operate in the country without having to technically “own” the land.

A danger of allowing foreigners to simply own land in the Philippines as a right – and no longer requiring them to go through all kinds of agreements and regulations is that they could use the land irresponsibly. In Africa, Chinese companies own land, they bring in their own workers and supplies, and export all production to China. The host country gains little in the process. I don’t see how this kind of foreign land ownership could benefit the Philippine economy.

Cheap Labor
This is a very old concept. Economic policymakers seem to have this idea that the Philippines is a country with cheap labor; and that keeping labor cheap is a very important part of attracting foreign investors.

I have news for these policymakers – Philippine labor is not cheap, and it hasn’t been so for a while. Instead of recognizing and adapting to this fact, the government has been implementing a cheap labor policy, to the detriment to Filipinos and the nation’s development.

If we recognize that labor is not cheap, the first thing the government should do is to prioritize the education and training of our workforce so that it could fit into the kinds of jobs that fit the level of our wages. The government should take steps to reduce other costs of doing business in the country, such as electricity, transport, taxes etc.

If anything, what the country needs is to raise the wage levels of a whole range of workers. This way, we could retain many workers who now prefer to work abroad. And a pool of skilled workers is another thing that is very good in attracting investments.

Need for Capital
One reason put forward for wanting more foreign investments is that the Philippines would otherwise not have enough capital to build its industries.  While it is true that foreign investors do bring in money, I think that the Philippines is perfectly able to raise the a substantial amount of the money domestically.

The Philippines has a lot of capital sitting at the sidelines. People invest them in things like real estate because the conditions for making investments are not too favorable. The investment climate has to improve – in things like less taxes and administration, lower power rates, better enforcement by the justice system of contracts etc – for Filipinos themselves to invest in new industries, agriculture etc. Things are so bad that the richest Filipinos, who would otherwise be pouring money into industrial investments, invest instead in building condominiums and malls, or in conspicuous consumption, or they salt their money abroad.

Local investments are a vital ingredient in attracting foreign investments. They provide a link to the local economy, and also to local policymakers and regulators. They are an assurance that the sector has a long term staying power in the country. The electronics industry has a growing number of Filipino investors, and it is booming. The BPO industry is now starting to get more Filipino investors.

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Decongesting Metro Manila

Posted by butalidnl on 7 April 2010

Manila is full! With the Metro Manila population exceeding 10 million, it seems that Manila is indeed full. Perhaps it is time to do something about it. It may result in a better quality of life if we take off a million or more people away from the city.
How could we do it?

Well, let us look at some reasons why Metro Manila is full of people. In the first place, as the capital city, it has a lot of national government offices, etc.  This also means that companies’ national headquarters are based there. The second reason will be the huge population of students that Manila has. A lot of these students come from the provinces. And lastly, Manila has lots of people because it has lots of people. The mere presence of a lot of people induces businesses to base there, in order to serve the big market – resulting in a “vicious cycle” of people servicing people.

Center of Government
There are a number of ways of lessening the impact of Metro Manila as the center of government.  For one, services from government offices could be distributed more towards the various regions. Things like GSIS or SSS benefits sometimes need to be done in Manila. Or, the processing of passports etc (this is important for people going abroad), needs to be done in Manila. Or various training programs for OFWs, especially seamen are done in Manila; often with the result that seamen’s families simply transfer to Manila.

The most radical solution to responding to Metro Manila as capital, is to simply transfer the capital somewhere else. If we transfer the capital to someplace like Panay island or something, national offices need to be set up there, and embassies will need to transfer there also, with the possibility of visa and passport processing transferring there also.

Or, the in-between-solution would be to have a federal system of government, with the functions of the national government distributed among the various federal “states” or regions. Most national government functions will then be distributed, making people go to regional capitals to process papers, instead of Manila. (Although, with this system, I think visa processing will remain in Manila.)

Concentration of Schools
Manila will have a much smaller population if schools are required to move out of the crowded University Belt and Intramuros-Taft areas. The large population of students here are what make these areas crowded. But what will we do with the families who live in the area, and whose children would have nowhere to go for college? Okay, let us just require that all schools in Central Metro Manila (defined as the area enclosed by EDSA), are required to have students mostly come from Metro Manila – in particular, that 80% of their students had gone to high school in Metro Manila.
Hopefully, this requirement will mean that schools will transfer outside the area, or transfer to the provinces. Also, that most students from the provinces would be required to study in their province.

More People Attracting People
To prevent the vicious cycle that providing services has on attracting even more people to congest Manila, I suggest that there be a ban on the setting up of malls in Central Metro Manila. Also, that all new (non-residential) buildings would be required to provide parking spaces and green areas proportional to the new building’s floor area (something like 1 parking space per 50 square meters floor space, or so). This would have two effects: first, that new buildings would be built with open spaces around them; and that open spaces would more often be utilized as parking spaces, instead of being used to build new buildings.
I think it is a good idea for provincial bus terminals to be located at the edges of Manila, instead of right in the center. These terminals attract a lot of people, and they also tie up traffic that objectively do not need to be inside Metro Manila.
If at least some of the ideas I put forward here are implemented, I think Metro Manila will be a lot less decongested, and a better place to live in.

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