View topic - The Philippines Facing a New Century

ShyPNoy637 · Site Admin

To those who feel the Philippines is being left behind by everyone in Asia, here's a speech by Washington Sycip that will serve as a wake up call-- most especially to us who are privileged and educated, as well as to the politicians, businessmen, and professionals.

Please forward this to your friends so that hopefully, we can make a small dent in the attitudes and thinking of Filipinos that are in a position to "make a difference". (And that includes ourselves and our friends).

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The Philippines Facing a New Century

Washington Sycip's Speech at the Foreign Correspondents' Association of the Philippines, 13 January 2000

As your president Gaby Tabunar knows, it is seldom that I dare address an audience, particularly one that is much better informed than I am on Philippine and regional issues. My reluctance may partly be due to 50 years of complying with professional ethics rules where you listen, quietly advise, and keep everything in confidence.

During the first fifteen years of my professional life, I was out to prove that the Filipino professional could successfully compete with long established foreign firms. After our success here, we worked with Asians in neighboring countries for the next 15 years and showed that other Asians, cooperating with Filipino professionals and benefiting from the lessons we learned here, could be leaders of their professions in their own countries.

But during these frequent visits to our neighbors, I was really bothered by what I saw through the years. While the Philippines had a head start in education and in literacy rates, we gradually fell behind in per capita incomes and we were notoriously unsuccessful in improving the economic well-being of the "bottom group."

While our average per capita income figures were bad enough, worse was the fact that for the past 50 years, the wide gap between the poor and the rich has not narrowed. As the Business World stated in its excellent "year-end report":

"If we look at the distribution of the income over the years, evidently no improvement has been made for the past half a century. The rich have become richer while the poor remain to be "impoverished."

After World War II, Japan, Taiwan, South Korea, Malaysia, Thailand and Indonesia concentrated development efforts on the rural areas first. The city-states, Hong Kong and Singapore, directed their efforts to providing decent housing for their urban low income families. For 50 years, we, with the majority of our people in rural areas, were not able to do much to assist them.

In facing the new century, we are not going to solve our problems by blaming Marcos, Aquino, Ramos or Estrada. Clearly, we have a situation where no government has been able to significantly improve the standard of living of the bottom group.

Yearly, we have the same problems and complaints----deteriorating educational standards, uncollected garbage, floods, potholes in streets, traffic jams, high food prices, unemployment, crime and corruption. Yet, our neighbors have been able to deliver, slowly but surely, agricultural productivity to their rural areas, housing and affordable urban transport and food prices to the urban poor.

In comparing our situation with other developing nations in the region, I have come to the sad conclusion that the process of arriving at legislation or decisions on economic matters and the implementation of well-intentioned programs has to change if we want to achieve better growth rates. And for such growth to be sustainable the benefits should first go to the bottom group.

The nation can move ahead only when we have better governance and when we seriously try to improve and update our domestic institutions. At present, the cards are stacked against the bottom group. Let me give you some illustrations:

1. Education is the most effective equalizer.

Very few of the present leadership in business, in the profession or in politics are products of the public schools--- I am one of the exceptions. However, I did not send my children to the public schools as the quality of education has greatly deteriorated. A survey a few years ago indicated that none of the children of the 24 senators went to government grade or high schools.

Senator Angara quite correctly advocated spending education funds on basic education to help the bottom group. Are you aware that parents who can afford to pay the higher tuition fees in private high schools spend less on tuition fees at the government-supported University of the Philippines?

Why should tax money be used to subsidize upper income groups who can afford to pay the full cost of education?

But worse than that, we a poor country, actually subsidize wealthy countries when our doctors, engineers and software people mostly from upper income groups---permanently settle abroad. It is the remittances of our overseas workers from the bottom group of our society that have helped our foreign exchange problem.

2. Population growth.

Poor rural families are not informed about family planning and have larger families than the wealthy urban families who practice family planning. The meager resources of the poor are therefore divided among more children while the rich, with fewer children, pass on more wealth to each child. This further widens income gaps.

3. Democracy, freedom and politics.

The countries of East Asia that had economic freedom ahead of political freedom had faster growth rates. The Philippines and India had a large measure of political freedom even prior to independence. But the slums of India are much worse than those of China and our slums are much worse than any ASEAN country.

For developing nations, should national economic problems that are affected by rapid developments in a global economy be dependent upon decisions made by a slow-moving legislative body? It may be difficult to have legislation that favors the bottom group when elected officials are dependent on campaign funds from the rich.

Considering Philippine social and cultural values, should we not try to increase spending on basic education by a graduated property tax? Or maybe an increase in travel tax, car tax or a road usage tax where the proceeds will be used for rural infrastructure? Or a tax on food imports that will be used to increase agricultural productivity?

In the case of budgets and taxation, I envy the effectiveness of the British system where new tax laws take effect a few days after parliament is convened.

4. Corruption.

The recent report of the World Bank on corruption states:

"Our analysis so far reveals a broad consensus in government, non-government, and international circles that corruption in the public and private sectors in the Philippines is pervasive and deep-rooted, touching even the judiciary and the media".

Corruption has made it difficult for our tax collection organizations to
raise the much needed revenues for government services. For the upper income group, we rely on an income tax, which assumes that we have the Anglo-Saxon mentality of declaring our own income honestly.

But we have the Latin temperament of southern Europe and South America where paying taxes is a game. A more effective and equitable system would be to tax evidences of wealth as is done in Southern European countries.

Singapore and Hong Kong have shown that with fair and swift implementation of justice, corruption in Asia can be greatly reduced. At the same time, however, civil servants would have to receive adequate incomes.

5. Tourism.

We all agree that an English-speaking and friendly work force is one of our greatest assets. We agree that the benefits of tourism spending when spread around the country can provide jobs in the countryside. Our present tourism figure is only about 2 million a year while the neighboring countries have 4 million and up! But while we all talk about the benefits of tourism, we are the only East Asian country without a decent international airport and a express highway from the airport to Metro Manila.

We want regional headquarters located here but we cannot even tell how long it will take from the business districts to the airport!

As we start the new century, isn't it possible to have better coordination between government bureaucrats and between government and the private sector?

6. Services to the 'bottom group".

I want to emphasize again that in the last century---and in the next
century---the critical needs of the bottom groups are basic education, agricultural productivity for the rural areas and housing for the urban centers. Why is Metro Manila the only East Asian capital city that cannot collect its garbage? Why are Bangkok and Jakarta more effective in solving the urban problem of slums and squatters?

Traveling time and transport costs of employees to workplaces are higher here than in neighboring cities. With an inefficient agriculture sector, food costs are higher for the bottom group. The well-known International Rice Research Institute is in Los Banos. However, our research on coconuts and sugar cannot match Malaysia's research on palm oil and rubber.

7. The "Upper Class".

While there is much that the businessmen can complain about, we have to be realistic about what we face in the next century.

Whether we like it or not, globalization will continue its trend in the next century. Freedom of movement of goods, services and capital should logically be followed, as Europe has shown, by freedom of movement of people. Developing nations should therefore try their best to reduce immigration barriers. This will benefit our bottom group.

Whether we like it or not, English will be the most important language in the next century. As the largest English-speaking country in the world, the U.S. will therefore dominate media and even lifestyles.

With English as a second language in all countries of Asia, we must maintain this comparative advantage for our work force.

Whether we like it or not, in the first 20 or 30 years of the next century, the U.S. will be the major military, economic and technological power. Having the best graduate schools in the world, the U. S. will influence the thinking of the brightest young people from Asia. For every 5 Asians attending universities in the U. S. only 1 is in Europe!

In the international setting ASEAN and APEC will play a greater role in the next century. But the businessman here has his daily problems. He has a right to complain about smuggling and we seem to have more than our share of this. Loss of jobs and tax revenues are bad enough---but worse is when this is combined with drug smuggling.

However, the businessman should not justify his own evasion of taxes by blaming dishonest tax examiners or waste in government spending. Maybe the Central Bank should not permit credit to be extended by financial institutions based on "unofficial records."

With all the faults and weaknesses of government in any administration, I am still old-fashioned enough to believe that those who have benefited more from the country should give back more to the country. Compared to our neighbors--- are the "rich" contributing their share towards economic development and creation of more jobs? Are they complying with tax and other laws to the same extent as their employees whose much lower incomes are
subject to withholding taxes?

It is difficult to answer these questions and different people will have
different opinions. If we compare tax collections to GDP, we cannot help but conclude that there is more evasion here than in the> neighboring countries. This is probably confirmed by the wide income gaps that have continued through all the post World War II years.

However, what is probably lacking the most among the upper income group are entrepreneurs who are willing to invest in their own country and to take risks. Compared to other well-off groups in the region, there may be too much of a tendency to blame government for their own lack of action.

The export section of our economy - electronic items, pineapples, bananas, garments, software, teleports, etc. - have been mostly developed by foreigners.

Our sugar industry has been overtaken by Thailand, and Malaysia's palm oil industry has progressed far beyond our coconut industry. Indonesia's mining industry is way ahead of ours although many geologists say that we have world-class mineral deposits.

Given the fact that foreigners praise the productivity of our work force, why do local businessmen complain of the inability to compete?

The much- needed drive for productivity has to start with management and this cannot be achieved on golf courses!

Our excellent doctors have not tried to make the Philippines the medical center of Southeast Asia. Instead, they have migrated to the U.S. after a subsidized education in the Philippines. Wealthy Filipinos travel to the U.S. to be operated on by Filipino doctors there who comply with U. S. tax laws more religiously than their colleagues do in their own country.

In contrast, Singapore has quickly established modern and well managed hospitals serving the region!

Our interest rates are one of the highest in the region. Our small micro finance companies are serving less than 100,000 borrowers whereas Bangladesh has several million borrowers from the bottom group receiving small loans at affordable interest rates.

Again, the cost of credit to the poor has not been a concern of the rich!

Through the last 30 years, our neighboring businessmen and professionals have also complained about government bureaucracy, favoritism, corruption, foreign competition, smuggling, etc. but somehow they have managed to move their economies forward, reduce illiteracy and poverty levels and significantly increase per capital incomes. Why have we failed to keep up?

I do not claim to have a solution for our problems to make the next century a better one for the bottom group. ..but the first step is to recognize that what we have tried to do in the past has been a failure.

We must radically change our economic political process so that we can deliver the basic services that can bring the bottom third of our population up the economic ladder. Both Senator Ople and Senator Drilon have pointed to the need for a massive reorganization of the bureaucracy. When 80-85% of the budget goes for personal services and salaries, there is not much left for infrastructure.

There is a saying that the rich and upper income groups can take care of themselves. Maybe the voice of the Makati Business Club should be balanced by that of the Philippine Business for Social Progress whose experiences in projects to help the bottom group may be of more use to the government in the next century!

We should have a dedicated committee composed of economists, educators, experts in rural and urban poor problems, (PRRM, PBSP), concerned citizens and honest government technocrats that could be tasked to identify specific, practical and workable suggestions on how we can step by step level the playing field for the economically disadvantaged in our society. We should tilt the field in their favor in the next century to make up for many years
of neglect!

Many practical suggestions can be implemented immediately. Others may require legislation that hopefully will be pushed by the administration and politicians who may want to be statesmen!

Such a committee can also act as a watchdog to ensure that the effort to narrow the income gap not by bringing down the honest rich but by moving up the honest poor---is a continuous one.

Is it too much to ask politicians not to recommend unqualified proteges for government positions? And can we appeal to lawyers not to delay vital government projects? In all developing nations, media --- both domestic and foreign-must be made more aware of medium and long term objectives. How much easier it was for Taiwan and South Korea to achieve their spectacular growth rates before they had "western democracy"!

Above all, the people, the media, and the upper class particularly, must demand more transparency and must stop blaming everyone but themselves. We must passionately want to improve the lives of the bottom group and we must be united in our efforts to achieve this goal.

All the nations of East Asia have been successful by doing this--- we can do no less--- let politics and rhetoric be replaced by efficient implementation and productivity. Only by doing so, can we improve the lives of all our children and grandchildren in the new century!