Is mediocrity really the goal and standard for majority of Filipinos?

Dear Filipino,

Someone (with a PhD from Harvard and who was a Summa Cum Laude at his local Manila university) told me that he believes that part of the dynamics in terms of explaining why the Philippines is where it is today -- i.e., near or at the bottom rung of the Asian economies even after 25 years since the end of Marcos rule -- is that the majority of Filipinos (both the elite and the masa) do not subscribe to the pursuit of excellence (or a higher challenge) as a goal or as a standard to live for or to die for.  In short, mediocrity (or Pwede Na Basta't Maka Sulong) is the day-to-day mode of Filipino life. 

My question is: Is this observation accurate and correct? If it is, what is the explanation? Is it cultural? Is it an effect of colonialism? And if so, were the Spaniards a stickler for mediocrity themselves?

Johnny V.  from Stanford

Dear Johnny,

Yes, let’s blame everything on the Spaniards! After all, most former Spanish colonies are practically in the same rut we are in. Heck, you can even argue that Spain is in worse shape than most of its former colonies including the Philippines – what with its 20% unemployment rate right now and near bankrupt banks.

But on second thought, let’s not do that. The Spaniards have been gone a long time and it’s time to take ownership of our state of affairs. But in investigating your main question, I will steer clear of the discussion of culture also because many experts have already done that in the past and, frankly, I’m tired of hearing those experts pontificate about our culture.

So, let’s talk about you instead. ;-)

Actually, I think the question could not have come from a more appropriate questioner. Why do I think so? Because Stanford, regularly ranked today as the “dream college” by both parents and students, has become synonymous with excellence in higher education. In fact, according to the Times Higher Education (THE) World University Rankings, in 2010, Stanford is ranked among the top 5 in the world in the fields of engineering & technology, life sciences, health sciences, physical sciences, social sciences, and arts & humanities. This achievement is truly remarkable because no other university placed in the top 5 across all these broad disciplines. (And what these rankings always overlook is the fact that Stanford is also an incredible powerhouse in collegiate athletics!)


The Stanford University campus.
(Source: Stanford.edu)

It is even more remarkable that Stanford made it this big despite its relative youth when compared to Harvard, Oxford or Cambridge – its present “peers”. In fact, after its founding by the railroad tycoon and politician Leland Stanford and his wife Jane in 1891, the fledgling university almost went under because of problems involving its finances following the death of Leland in 1893.

However, determined to keep the university in operation, Jane personally took charge of administrative and financial matters at the university from 1893 to 1905, and she ran it like a housewife would a household because that was the only way she really knew how to run anything. She’s said to have paid salaries out of her own funds, even pawning her jewelry just to keep the university going.

It is common knowledge, though, that what really brought Stanford to its current perch is Silicon Valley, one of the biggest engines of the US economy, and that Silicon Valley, in turn, is what it is today because of Stanford. You cannot divorce the success of one from the other and you definitely cannot understand the rise of one without understanding the rise of the other.

But what was the original tie that bound the two together?

The answer, according to Professor Stephen B. Adams of Salisbury University who wrote about the topic in an Oxford Journal, is a sense of mission and regional solidarity. He explains thusly:

From the early years of Stanford University, the university's leaders saw its mission as service to the West and shaped the school accordingly. At the same time, the perceived exploitation of the West at the hands of eastern interests fueled booster‐like attempts to build self‐sufficient indigenous local industry. Thus, regionalism helped align Stanford's interests with those of the area's high‐tech firms for the first fifty years of Silicon Valley's development.

We know now that this sense of mission and regionalism would give rise to the likes of Hewlett Packard, Intel, Cisco, Apple, Oracle, Yahoo, Google and thousands of other less well-known but equally excellent and cutting-edge companies, staffed by the best and the brightest who were attracted by the lure not only of wealth and glory but also the exciting prospect and pressure of competing, co-creating and/or cooperating with like-minded souls who are in pursuit of excellence.

Now, distilling the lessons from the success of Stanford and Silicon Valley, I humbly submit to you here that the key ingredients to enable a group of people to achieve excellence are (1) a sense of mission by those in leadership roles; (2) a “regionalistic” environment which produces a sense of solidarity; and (3) peer pressure of the positive kind. Take away any one of these ingredients and you’ll likely get mediocrity at best (or outright failure at worst).

Personally, I think many Filipinos subscribe to the pursuit of excellence in their own individual fields, and I don’t think I need to detain you any further here by giving you specific examples. Suffice it to say that the “someone” you mentioned appears to be one of them; otherwise, he wouldn’t have bothered getting his PhD from Harvard. (In fact, like him, many Filipinos leave the Philippines not just to earn a better living but also to seek the best in their respective fields, advance as globally as possible professionally and thereby pursue world-class excellence in their craft.)

But then, you are probably thinking that if enough Filipinos are pursuing excellence individually, then the country should not be where it is today. To a certain extent that may be true, but I don’t buy that line of thinking completely. And, here, I’ll point to India as my counter-example.

You see, India has a lot of excellent and super-successful individuals who have thrived particularly well in countries like the US and the UK. But despite significant personal achievements of these expat Indians and the considerable economic progress of the country, India still has a significant portion of its population mired in extreme poverty. Why? I’ll give you three reasons: (1) Because the elite Brahmin class does not really exhibit a true sense of mission to help members of their lowest class, the Dalits or the untouchables; (2) because India’s still pervasive and rigid caste system produces a low-trust culture and therefore a weak sense of solidarity among its people; and (3) because there is not enough peer pressure among the powerful and rich Indians to do the right thing.

Case in point: India’s richest person, Mukesh Ambani, just built the most expensive, most ostentatious personal residence in the world. According to Forbes, it is a billion-dollar, 60-story palatial building in Mumbai, which, depressingly enough, is actually home to the largest population of slum dwellers in India. It’s weird saying this because I might come across as just envious (and to a certain extent, I am), but I honestly almost feel sorry for this Ambani guy – for obviously, he has some demons he’s dealing with.

Do you get my drift here?

In any case, I think your question actually involves generalities. In other words, you’re really asking whether Filipinos, as a group, are pursuing or are capable of pursuing something large-scale, something grander for themselves: i.e., an excellent and advanced economy undergirding an equitable and just society. In other words, something like what the Singaporeans or the Koreans or the Taiwanese have, to a large extent, achieved.

So, applying the Stanford/Silicon Valley model of success I discussed above, I have to ask: Do Filipinos in power generally have a sense of mission?

Well, by its very definition, the word “mission” -- which is often seen as a companion word to “vision” – is suffused with idealism and therefore connotes lofty ideals and aspirations which transcend one’s selfish interests. And I doubt, honestly, whether the past and present leaders of the country (with the exception of a handful) had or have them, or even if they did or do, that they took or are taking them seriously enough.

The in-your-face corruption, the giving and accepting of bribes, the brazen system of patronage and vote-buying, the unbelievable violence – all these belie a sense of mission among the people at the top of the public pyramid. And when even the country’s privately wealthy make their money not really through invention and production of high value-added goods and services but through sale of imported consumer products to a local populace getting subsidies in the form of remittances from their OFW relatives, through passive collection of rents, through relentless milking of precious and limited land which inevitably leads to its eventual destruction and depletion, or through their connections to the people in power, you also realize that the country’s elite are just, mission-wise at least, as bankrupt.

(I remember a “game” I once played with a friend who belonged to one of the country’s most prominent families and who is very knowledgeable about the Philippine society’s elite. Highly self-aware of the nature of his own family’s membership in the group, he said to me: “Name any rich family in the Philippines and I will tell you how they arrived at their wealth through their connection to, help or blessing of a former or present President.” Not that there are no families who made their wealth more impressively, but during our exchange, I failed to stump my friend.)

But surely, we cannot lay the blame solely on the feet of the elite. We all have our fair share in everything wrong with the Philippines, of course, and we rightfully cannot get a free pass especially because there’s more than enough blame to go around. So what about the rest of us, the masses?

Sadly, the Filipino masses (where, for the sake of expediency, I would lump the middle class) have been fickle, feeble and feckless too. Collectively, we, too, seem to have no sense of mission. For instance, we kicked out the Marcoses from power but we allowed them back in without asking them to commensurately pay for their sins first. We elevated Cory to the presidency (and near-sainthood) but we did practically nothing to support her administration. We are supposedly educated but we put up with – and actually enrich! – the likes of Willie Revillame who bring out and institutionalize the worst in us, not to mention elect his ilk to positions of power. (Quite honestly, that last example is not just being mediocre – it is macabre!)

As for having a regionalistic environment which produces a sense of solidarity, with over 7,000 islands and dozens of languages, Filipinos are supposedly already “regionalistic”, so there has to be a checkmark here in our favor, right?

Unfortunately, it appears to many from outside, or even to many among us, that our regionalism does not quite extend beyond the superficial. Indeed, Filipino solidarity is often seen as merely skin-deep, quite myopic and frail, if not totally non-existent. Why? Because the sense of mission, as discussed above, is also merely skin-deep, quite myopic and frail, if not totally non-existent!

The regionalistic environment referred to by Prof. Adams is the ethos which says, “We, in this region, are in this mission together.” It’s the “us against the world” mentality which fuels a spirit of solid camaraderie and unity strong enough to overcome self-doubt, systemic problems and external attacks.

(Source: Korea Times.)

Here, I am reminded of how ordinary South Koreans rallied to save their country from complete collapse during the Asian currency crisis of 1997 by lining up in droves to donate their own personal gold -- their family heirlooms and trinkets and jewelry – in order to refill their emptied national treasury and repay the country’s loans to the International Monetary Fund. To say it was remarkable is to understate things: According to Michael Breen of Korea Times, even “couples handed over wedding rings” and “old ladies contributed treasured possessions” such that “the international price of gold dropped to the lowest in 18 years”!

When people are lining up in droves, driven by a conviction that they’re doing something noble for the greater good, you’ll get an atmosphere that produces peer pressure. And as already mentioned above, of course, I’m talking of pressure of the positive kind: the kind which puts the onus on the skeptics, the doubters, the apathetic, and even the selfish, to put on a public face at least and for once do the right thing in a crisis situation.

But even in a non-crisis situation, positive pressure inspires the intrinsically driven, the ambitious, and the idealistic to sustain their efforts to achieve even more – for themselves and for the larger group to which they belong. This positive pressure does not repel others; to the contrary, it attracts the right and the bright people, thereby enhancing the elements which further benefit the group.

In his work on how nations achieve competitive advantage, Michael E. Porter of Harvard Business School introduced the concept of clusters which, like in Silicon Valley and Hollywood, are critical masses or “groups of interconnected firms, suppliers, related industries and specialised institutions in particular fields that are present in particular locations.”

According to Porter’s Cluster Theory, clusters enjoy unusual competitive success in a particular field because they affect competition: “first, by increasing the productivity of companies based in the area; second, by driving the direction and pace of innovation; and third, by stimulating the formation of new businesses within the cluster.”  In other words, Porter is just basically saying, in management consulting lingo of course, that success is infectious, that success begets success.

I mention Porter at this juncture because this infectious dynamic is what’s needed in the Philippines right now. Indeed, the Philippines really needs to achieve a critical mass of sorts, a cluster of like-minded institutions and souls who will pressure each other positively to create a spirit and atmosphere of genuine desire for reform and succeed socio-politically and economically. If it can’t, the country will continue to be stuck in the morass of mediocrity.

So I guess, that last sentence answers your question: We are not pursuing excellence as a group. In most economic development studies, we are mediocre -- i.e., stuck in the middle of the pack, or worse (however, to say we are at the bottom is also overstating things and quite erroneous). [Edit 03/07/11.] And I'm sure you didn't need me to answer this for you -- your Harvard PhD buddy already concluded so.

But if you haven’t noticed, one thing about many Filipinos – including this Filipino despite his decision to immigrate to the US – is that they will not give up on the Philippines. And because these Filipinos will not give up on the country, the country will not run out of chances to get better either.

And here, I offer as an example the experience of the Naguenos as a group.

Naga, as late as 1988, was a poor, sleepy, third-class city in the poverty-stricken region of Bicol until an enlightened young mayor, Jesse Robredo, took over the reins of the lcal government. As soon as he did, change was almost instantaneous and the pace of progress thereafter was furious, so much so that just a decade later, in 1999, Asiaweek dubbed Naga as one of Asia’s Best Cities and its Most Improved.

(Source: PlanetNaga.)

Today, Naga is the country’s most awarded city and is the model of good governance, having won around 150 relevant international awards.  It has also been attracting new residents, investors and tourists alike.

How did Robredo do it? You bet! By leading with a sense of mission and by promoting regional solidarity!

Specifically, he instituted transparency in city affairs and finances, among others. Then, he rallied, cajoled and convinced many others in the community to join him in his ambitious mission to lift the city by its own bootstraps. In the process, he got, among others, the local Rotary Club to feed the poor children and expectant mothers; the local schools and universities to participate in more aggressive community building not just traditional education; and even the Catholic Church to sell land to the city at below-market rates for squatter housing. He also reached out to the leaders of surrounding towns and municipalities to push for the development of "Metro Naga" and discuss ways to share burdens and resources to improve everyone's lot.  Most impressively, believing citizens have to have a direct stake in government affairs, he also shepherded the passage of an Empowerment Ordinance to allow non-government groups to form a People's Council which chooses representatives to the city government's committees.

By all accounts, Robredo and the people who rallied around him were so successful that officials from other cities, perhaps feeling the “peer pressure,” started trooping to Naga to learn the city’s model of governance, which led to the establishment of the Naga City Governance Institute (NCGI). At the launching of NCGI in 2009, World Bank country director Bert Hofman was effusive in his praise, remarking that the city “is one of the shining lights of good governance in the country today.”

If you visit the website of Naga (http://www.naga.gov.ph/) today, you’ll appreciate why Hofman said that. Despite the small size and limited budget of the city, its website, I think, can hold its own, in terms of aesthetics and substance, against the websites of much bigger, much richer cities all over the world. The website, which captures the welcoming, progressive and hopeful zeitgeist of the city, is inviting the Internet surfer to see/meet/ invest/live/experience/study in the city – the city that “SMILES to the World.”

The challenge for P-Noy and the people around him is how they can ignite the spark which will replicate on a national level what Naga has accomplished on a city/regional level. It will be difficult, sure, but man -- God knows how much many people like myself are just dying for that to happen!

Got a question for The Filipino?  Email him now at askthepinoy@gmail.com.

Shouldn't the Philippines repeal the "60/40 Law" (and change its Constitution) to encourage investments?

Dear Filipino,

The Philippines cornered the least amount of foreign direct investments among seven selected economies in Southeast Asia in 2009, according to the International Monetary Fund (IMF) in its first global survey on FDIs. On a global scale, the Philippines ranked 60th out of 72 countries included in the Coordinated Direct Investment Survey.

Question: Considering that investments are needed to bolster economic growth -- e.g., $10B for infrastructure alone -- how should the Philippines become more investor friendly? How about repealing the 60/40 Law? This is one scuttlebutt that is impeding investors from coming in!

Mike T.

Dear Mike,

What prompted a guy like you with a “harvard.edu” email handle to ask a lowly blogger like me? Aren’t you guys supposed to hail from the “Know-it-all Capital of the Universe”?

Just a little good-natured ribbing there, of course. ;-)

Anyway, thanks for your question, but the “60/40 Law” you’re asking about is actually part of a HUGE issue that I really want to talk about with more breadth here. [For readers looking for more depth on a particular legal sub-issue, I recommend approaching knowledgeable legal professionals practicing in the Philippines.]

First, some Philippine constitutional background.

Under the heading “National Economy and Patrimony,” Section 1 of Article XII of the Philippine Constitution provides:

The goals of the national economy are a more equitable distribution of opportunities, income, and wealth; a sustained increase in the amount of goods and services produced by the nation for the benefit of the people; and an expanding productivity as the key to raising the quality of life for all, especially the underprivileged.

The State shall promote industrialization and full employment based on sound agricultural development and agrarian reform, through industries that make full and efficient use of human and natural resources, and which are competitive in both domestic and foreign markets. However, the State shall protect Filipino enterprises against unfair foreign competition and trade practices.

In the pursuit of these goals, all sectors of the economy and all regions of the country shall be given optimum opportunity to develop. Private enterprises, including corporations, cooperatives, and similar collective organizations, shall be encouraged to broaden the base of their ownership.

I added the italicization in the indented paragraphs above because I found those blurbs very admirable and impressive-sounding. And if the drafters of the Constitution really meant what they wrote, let’s give them some credit. Unfortunately however, when it comes to formulating laws in accordance with lofty stated policies, negative unintended consequences always pose a risk; in the Philippines, this problem becomes even more compounded by problems stemming from implementation.

So let’s talk about the main implementing law behind the constitutionally sanctioned policy of protecting local industry from “unfair foreign competition”: The Foreign Investments Act (FIA) of 1991 (as amended).

The FIA requires “the formulation of a regular Foreign Investment Negative List [FINL] covering investment areas/activities which may be opened to foreign investors and/or reserved to Filipino nationals.”

If you’re a “former Filipino” and now a citizen of another country and you haven’t yet gotten your dual citizenship or reclaimed your Filipino citizenship, you may want to pay particular attention to this “FINL.” This “negative list” is really a list of occupations, trades and investments where foreign participation is either limited or off-limits altogether. So if you are harboring any dream of someday going back to the Philippines to practice your trade, set up a sari-sari store or other small business, or invest, this list is very important to you.

Subject to all sorts of exceptions and asterisks which I won’t discuss here, the latest “negative list” under Executive Order No. 858 signed in 2010 includes the following:

I.  No Foreign Equity Allowed: Mass media (except recording); practice of all professions (engineering, medicine and allied professions, accountancy, architecture, criminology, chemistry, customs brokerage, environmental planning, forestry, geology, interior design, landscape architecture, law, librarianship marine deck/engine officers, master plumbing, sugar technology, social work, teaching, agriculture, fisheries, and guidance counseling); retail trade enterprises with paid-up capital of less than US$2.5M; cooperatives; private security agencies; small-scale mining; utilization of marine resources; ownership, operation and management of cockpits; manufacture, repair, stockpiling and/or distribution of nuclear weapons; manufacture, repair, stockpiling and/or distribution of biological, chemical and radiological weapons and anti-personnel mines; and manufacture of firecrackers and other pyrotechnic devices.

II.  Up to 20% Foreign Equity Allowed: Private radio communications.

III.  Up to 25% Foreign Equity Allowed: Private recruitment, whether for local or overseas employment; contracts for the construction and repair of locally-funded public works; contracts for the construction of defense-related structures.

IV.  Up to 30% Foreign Equity Allowed: Advertising.

Now, here’s where the term “60/40 Law” got coined:

V.  Up to 40% Foreign Equity Allowed: Exploration, development and utilization of natural resources; ownership of private lands; operation and management of public utilities; ownership, establishment and administration of educational institutions; culture, production, milling, processing, trading excepting retailing, of rice and corn and the by-products thereof; contracts for the supply of materials, goods and commodities to government-owned or controlled corporation, agency or municipal corporation; project proponent and facility operator of a BOT project requiring a public utilities franchise; operation of deep sea commercial fishing vessels; adjustment companies; ownership of condominium units; manufacture, repair, storage, and/or distribution of products and/or ingredients requiring Philippine National Police (PNP) or Department of National Defense (DND) clearance; manufacture and distribution of dangerous drugs; sauna and steam bathhouses, massage clinics and other like activities; all forms of gambling; domestic market enterprises with paid-in equity capital of less than the equivalent of US$200,000; domestic market enterprises which involve advanced technology or employ at least fifty (50) direct employees with paid-in-equity capital of less than the equivalent of US$100,000.

VI. Up to Sixty Percent (60%) Foreign Equity Allowed: Financing companies and investment houses regulated by the SEC.

Quite understandably, the restrictions are based on the premise that it is in the country’s best interests for these areas of concern to remain under the control of Filipino citizens and/or Filipino corporations.

And I for one think the premise makes some sense. A lot of countries, even the most advanced ones, also have some very restrictive laws about who can own what in order to protect their national interests. That’s why you have members of the US Congress intervening and threatening legislative action whenever a Chinese company is rumored to acquire a key American company. That’s why Scandinavian countries have very strong key local industries largely protected from foreign competitors.

When I was living in London in the middle of the last decade, a common refrain from locals, whether homeowner or renter, was the cost of housing. Why? Because wealthy foreigners from Arab states, among others, were gobbling up properties left and right, thereby driving up prices to levels completely out of reach for the locals.

We don't want that to happen in the Philippines, of course. But the problem with the Philippine situation, as you can see, is that the “negative list” is pretty broad-based and leaves little room for foreign professionals and investors to actively participate in the Philippine economy -- the kind of participation which may be necessary to globalize the country’s industries and spur economic growth.

This inevitably brings up the question of whether the law is indeed serving the country and its citizens as intended.

In one study about competitiveness of countries in attracting foreign investments, the Philippines did not only rank at the bottom – 6th out of the ASEAN-6 – in having a favorable regulatory regime, its score is not even close to its nearest competitor, Indonesia:

(Source: InvestPhilippines)

So while I am not in favor of completely doing away with the whole list, what I’m in favor of is a systematic, intensive but expeditious review of the list to see which areas have restrictions that need to be maintained and which areas can and should be fully liberalized, and thereafter a quick governmental action to effect the necessary changes. Although politically messy, this “action” will need to come in the form of Charter Change – there appears to be no getting around to it – if we must revamp the current law.

And revamp it we really must.

Why? Now, I know this is serious stuff but in honor of a favorite comedian, David Letterman, whose show, Late Night with David Letterman, officially debuted on February 1, 1982, let me present to you my...

Top 10 Reasons to Revamp the Philippines’ Foreign Investments Act:

[10] Lack of control over their investment understandably discourages foreign investors.

The restrictions mentioned above are the biggest barriers to foreign investments in the Philippine economy. It’s a fairly simple calculus really: When foreign investors are faced with a choice to put their money in two countries where risks are almost identical but where one country requires majority control to be in the hands of the locals, investors would naturally choose the other country which allows them to determine what happens exactly with their funds.

[9] The amount of available local capital is insufficient to meet the national demand for it.

It is no secret that many of the infrastructure-related projects needed by the country require billions of dollars in funding and that the available free capital among the local investors is simply not sufficient to meet the demand. In fact, it is impossible to meet the demand if the country will just rely on local capital, period.

How can it be possible? As of end-2010, the total stock market capitalization of the entire Philippine Stock Exchange (which means all the companies listed in the country’s stock market) is only PHP 8.87 trillion. This figure translates to just about US $200B, a sum not even 65% of the present market capitalization of one US company, Apple, Inc.  Put another way, the owners of Apple can swap the company with all the companies listed in the Philippine stock market and still have about $100B left.

[8] There is a shortage of actual companies/individuals who can partner with foreigners willing to invest.

Not only is the actual amount of local capital insufficient, but the list of actual Philippine companies and/or individuals who may have the wherewithal to partner with willing foreign investors is also short. Who among the locals can pony up the required 60% in big capital-intensive projects to allow them to serve as joint venture partners of foreign investors willing to enter the Philippine market? Thus, because of the current law, the legal ability of a foreign investor to fund a project is limited by the amount raised by his local partner.

To illustrate, let’s say a restricted project costs $100. Even if a foreign investor can put up the maximum allowed by law – i.e., $40 -- the law still requires his Filipino partner to come up with the other $60. If the Filipino can only raise $30, the maximum the investor can bring in is $20, not $70, leading to the collapse of the joint venture, or the project altogether. Where the project survives, the shortcuts taken to comply with the funding requirements naturally affect the quality of the finished project.

[7] The current law allows the local oligarchs to have their choicest pickings because of limited competition.

In her book 2003 book "World on Fire" (excerpted in a Prospect Magazine essay entitled "Vengeful Majorities"), Prof. Amy Chua wrote: “When foreign investors do business in the Philippines, they deal almost exclusively with Chinese” because “[a]part from a handful of corrupt politicians and a few aristocratic Spanish mestizo families, all of the Philippines’ billionaires are of Chinese descent.”

It’s true: If you’re a Chinese Filipino oligarch in the Philippines, the deals are literally walking to your doorsteps and lining up for your review. But the main reason for that is this 60/40 Law, whose provenance, interestingly enough, can be traced back to American Commonwealth times. Because the Chinese Filipino oligarchs who dominate the Philippine economy are the ones with the funds who can put up the required “Filipino” capital investment, naturally, foreign investors who want to come in are forced to approach them first for partnership possibilities, or the foreigners can’t come in at all.

This dynamic allows these oligarchs to have first crack at studying investment options as to where they can put their money. And with the limited competition, they are almost assured of hefty returns, thereby further concentrating wealth among the handful of them. In fact, in some situations where there is virtually no competition, it is easy to imagine how foreign investors and their local oligarch partners can even practically hold the Philippine government hostage and make it agree to concessions and guarantees that virtually eliminate risk for the investors.

[6] Inflexibility of equity-sharing encourages corruption and other law-breaking (e.g., use of “dummies,” etc.).

In an environment already rife with political corruption, the restrictions placed on foreign investors and their Filipino partners which limit allowable equity structures further stoke law-breaking, bribery and corruption.

A common tactic to get around the restrictions on equity participation is the use of “dummy” Filipino partners. Here, the local partners (often, the oligarchs mentioned above) “own” 60% of the entire venture on paper but the project is, in actuality, mostly (if not fully) funded, operated and managed by the foreigners despite their being just “minority” partners. This type of situation leaves projects vulnerable to extortion from regulators who learn about these arrangements, abuse by one partner over the other just to maintain the front of a legally compliant partnership, or worse, the collapse of the project altogether and ugly lawsuits thereafter.

There is an “Anti-Dummy Law” to counter the use of dummies, but because of inconsistent and/or lack of adequate supervision and enforcement, it appears to an outside observer to be often largely ignored.

[5] Cumbersome compliance issues lead to legal maneurings which may not be compliant with the spirit of the law and just add friction to what can otherwise be a smooth transaction.

The law has led to all sorts of legal squabbles including the most basic: What does “Filipino” mean? In areas reserved to Filipino citizens or domestic corporations whose capital is at least 60% owned by Filipinos, the “Filipino” classification is critical, as shown by the PIATCo-Fraport AG airport controversy where one of the main issues is whether there were violations of the Anti-Dummy Law.

The Philippine Department of Justice has adopted the “control test” in establishing the nationality of corporate stockholders covered by the law: If at least 60% of the corporate capital is owned by Philippine citizens, all the corporate shares, including those owned by foreigners, are considered Filipino. But if the percentage of Filipino ownership goes below 60%, only the number of shares that corresponds to that percentage is treated as Filipino. In other words, if one can show that at least 60% of the capital is owned by Filipinos, no further inquiries are made on the nationality of the owners of the remaining 40%. This means that when this ownership-restricted corporation invests in another ownership-restricted corporation, the investing corporation is treated as a “Filipino” investor.

Now, compare this test from the “grandfather rule,” which is still followed in some instances. Under this rule, the nationality of the individual stockholders or the owner of the stocks of the corporate shareholder affects the status of the restricted corporation in which the investment was made.

How to make sense of the two rules? According to SEC Commissioner Raul J. Palabrica, the current rule seems to be this: The "control test" is the main standard to determine the nationality of corporations but the "grandfather rule" will be applied if there are questions about compliance with Filipino ownership requirements.

One creative strategy to circumvent the ownership restrictions is the use of “global depository receipts” or GDRs in which investee companies would sell to foreign investors interest-bearing “depository receipts” using the stocks of the restricted investee companies as collateral.

Technically, the nationality rule is not violated because the stocks remain in the company’s name but the investors are assured of hefty returns on their investment without breaching the nationality rule. But it should be obvious that GDRs are, for all intents and purposes, “foreign investments” which should be covered under the nationality rule if the government is indeed serious about cracking down on these types of legal maneuvers which may be compliant with the letter of the law but not its spirit. Additionally, GDRs only increase the friction in business transactions for the companies trying to raise funds, adding unnecessary cost in terms of time and money to what would otherwise be simple transactions.

[4] Revamp of the law can increase the competitiveness of local industries and create jobs.

Foreigners are not only reluctant to invest their money if they do not have control, they are also concerned about intellectual theft if they are to divulge their corporate secrets to Filipino partners in a partnership where they are in the minority. This often entails their dialing back of their investment of intellectual capital in the form of industrial/product design, technology and market knowhow.

Allowing these profit-seeking foreigners to own their local subsidiaries outright 100% can translate to increased competitiveness for the local industries affected because the oligarchs who presently rule their industries will be forced to up their game. With increased competition, the affected industries will modernize, grow and, in the process, create jobs for locals.

[3] Revamp of the law can increase the country’s exports.

The current law is really anti-trade, and here’s why.

One way for the country to grow its export-oriented manufacturing industries is to enter into bilateral trade agreements (BTAs) with the right countries, especially with those whom the Philippines already enjoys robust trading. But the current law poses a hindrance to signing of BTAs because the Philippines’ counterparties will definitely demand preferential terms and more openness on the part of the country to allow investors from their countries to come in unencumbered by restrictive investment laws.

[2] The current law discourages even “former” Filipinos from investing or returning to the Philippines to set up their businesses or practice their professions.

While there is now a dual citizenship law which allows Filipinos who became naturalized citizens of other countries to reclaim their lost Filipino citizenship, many of them choose not to do so for various reasons. But because they are considered foreigners under the law, they are therefore prevented from setting up small businesses (e.g., retail trade enterprises less then $2.5M in capital; see the list above) under their own name and/or practice their professions in the Philippines. This is unfortunate considering these “former” Filipino professionals have much to share with the land of their birth, having learned immensely from their exposure in globalized and highly competitive industries all over the world.

[1] To retain the current law is to maintain the status quo.

‘Nuff said.

Got a question for The Filipino?  Email him now at askthepinoy@gmail.com.

Does Prof. Amy Chua have any other "connection" to the Philippines?

Prof. Amy Chua, author of the new book entitled "Battle Hymn of the Tiger Mother," is probably one of the most talked about persons in the world right now because of a purported "essay," which is actually a collage of sentences and paragraphs from her book taken out of context and probably put together by some people working for the Journal or the book's publisher to create a sensation. New revelations show the book is much more nuanced and thoughtfully written.

In 2003, Prof. Chua had also written a thoughtful book entitled "World on Fire," which "explores the ethnic conflict caused in many societies by disproportionate economic and political influence of 'market dominant minorities' and the resulting resentment in the less affluent majority."  In the book, she relates a very personal and engrossing story involving her extended family in the Philippines.  The following paragraphs are excerpts from the book:

One morning in September 1994, I received a call from my mother in California. In a hushed voice, she told me that my Aunt Leona, my father’s twin sister, had been murdered in her home in the Philippines, her throat slit by her chauffeur. My mother broke the news to me in our Hokkien Chinese dialect. But the word “murder” she said in English, as if to wall off the act from the family through language.

The murder of a relative is horrible for anyone, anywhere. My father’s grief was impenetrable; to this day, he has not broken his silence on the subject. For the rest of the family, though, there was an added element of disgrace. For the Chinese, luck is a moral attribute, and a lucky person would never be murdered. Like having a birth defect, or marrying a Filipino, being murdered is shameful.

My three younger sisters and I were very fond of my Aunt Leona, who was petite and quirky and had never married. Like many wealthy Filipino Chinese she had multiple bank accounts, in Honolulu, San Francisco and Chicago. She visited us in the US regularly. Having no children of her own, she doted on her nieces and showered us with trinkets. As we grew older, the trinkets became treasures. On my tenth birthday she gave me ten small diamonds, wrapped in toilet paper. My aunt loved diamonds and bought them by the dozen, concealing them in empty Elizabeth Arden moisturiser jars. She liked accumulating things. When we ate at McDonald’s, she stuffed her Gucci purse with free packets of ketchup.

According to the police report, my Aunt Leona, “a 58-year-old single woman,” was killed in her living room with a “butcher’s knife” at 8pm on 12th September 1994. Two of her maids were questioned, and they confessed that Nilo Abique, my aunt’s chauffeur, had planned and executed the murder with their assistance. But Abique, the report went on to say, had “disappeared.” The two maids were later released.

My relatives arranged a funeral for my aunt in the prestigious Chinese cemetery in Manila where many of my ancestors are buried. After the funeral, I asked one of my uncles whether there had been any developments in the murder investigation. He replied tersely that the killer had not been found. His wife added that the police had essentially closed the case.

I could not understand my relatives’ almost indifferent attitude. Why were they not more shocked that my aunt had been killed by people who worked for her, lived with her, saw her every day? Why were they not outraged that the maids had been released? When I pressed my uncle, he was short with me. “That’s the way things are here,” he said.

My uncle was not simply being callous. My aunt’s death was part of a common pattern. Hundreds of Chinese are kidnapped or murdered every year by ethnic Filipinos. Nor is it unusual that my aunt’s killer was never apprehended. The police in the Philippines, all poor ethnic Filipinos themselves, are notoriously unmotivated in these cases.

My family is part of the Philippines’ tiny but economically powerful Chinese minority. Although they constitute 1 per cent of the population, Chinese Filipinos control about 60 per cent of the private economy, including the country’s four airlines and almost all of the banks, hotels, shopping malls, and big conglomerates. My own family runs a plastics conglomerate and owns swathes of prime real estate – and they are only “third-tier” Chinese tycoons. They also have safe deposit boxes full of gold bars, each one the size of a chocolate bar. I myself have such a gold bar. My Aunt Leona sent it to me as a law school graduation present a few years before she died.

Since my aunt’s murder, one childhood memory keeps haunting me. I was eight, staying at my family’s splendid hacienda-style house in Manila. It was before dawn, still dark. Wide awake, I decided to get a drink from the kitchen. I must have gone down an extra flight of stairs, because I stumbled on to six male bodies. I had found the male servants’ quarters, where my family’s houseboys, gardeners, and chauffeurs – I sometimes imagine that Nilo Abique was among them – were sleeping on mats on a dirt floor. The place stank of sweat and urine. I was horrified.

I mentioned the incident to my Aunt Leona, who laughed affectionately and explained that the Filipino servants were fortunate to be working for our family. If not for their positions, they would be living among rats and open sewers. A Filipino maid then walked in; she had a bowl of food for my aunt’s Pekingese. My aunt took the bowl but kept talking as if the maid were not there. The Filipinos, she continued – in Chinese, but not caring whether the maid understood or not – were lazy and unintelligent. If they didn’t like working for us, they were free to leave.

Nearly two thirds of the roughly 80m ethnic Filipinos in the Philippines live on less than $2 a day. But poverty by itself does not make people kill. To poverty must be added indignity, hopelessness and grievance. In the Philippines, millions of Filipinos work for Chinese; almost no Chinese work for Filipinos. The Chinese dominate industry and commerce at every level of society. Global markets intensify this dominance: When foreign investors do business in the Philippines, they deal almost exclusively with Chinese. Apart from a handful of corrupt politicians and a few aristocratic Spanish mestizo families, all of the Philippines’ billionaires are of Chinese descent. My relatives live literally walled off from the Filipino masses, in a luxurious, all-Chinese residential enclave, on streets named Harvard and Princeton. The entry points are manned by armed guards.

Each time I think of Nilo Abique – he was nearly six feet tall and my aunt was 4’11″ – I find myself welling up with a hatred and revulsion so intense it is actually consoling. But over time I have also had glimpses of how the vast majority of Filipinos, especially someone like Abique, must see the Chinese: as exploiters, foreign intruders, their wealth inexplicable, their superiority intolerable. I will never forget the entry in the police report for Abique’s “motive for murder.” The motive given was not robbery, despite the fact that jewels and money were taken. Instead there was just one word – “revenge.”

My aunt’s killing was just a pinprick in a violent world. But there is a connection between her murder and the Serbian concentration camps of the early 1990s, the murder of 800,000 Tutsis by ordinary Hutus in Rwanda in 1994, the mobs in Indonesia in 1998 which looted hundreds of Chinese properties leaving nearly 2,000 dead and even the terror attacks of 11th September. The connection lies in the relationship among the three most powerful forces operating in the world today: markets, democracy and ethnic hatred. There exists today a phenomenon – pervasive outside the west yet rarely acknowledged, indeed often viewed as taboo – that turns free market democracy into an engine of ethnic conflagration. I am speaking of the phenomenon of market-dominant minorities: ethnic minorities who, for varying reasons, tend under market conditions to dominate economically, often to a startling extent, the indigenous majorities.

Market-dominant minorities can be found in every part of the world. The Chinese are a market-dominant minority throughout southeast Asia. In 1998, Chinese Indonesians, only 3 per cent of the population, controlled roughly 70 per cent of the private economy, including all of the big conglomerates. In Myanmar, the Chinese dominate the economies of Mandalay and Rangoon. Whites are a market-dominant minority in South Africa – and, in a more complex sense, in Brazil, Ecuador, Guatemala and much of Latin America. Indians have historically been a market-dominant minority in east Africa, the Lebanese in west Africa and the Ibo in Nigeria. Croats were a market-dominant minority in Yugoslavia, as Jews are in post-communist Russia (six of the seven biggest “oligarchs” are of Jewish origin). India has no market-dominant minority at the national level but plenty at the state level.

Market-dominant minorities are the Achilles heel of free market democracy. In societies with such a minority, markets and democracy favour not just different people or different classes but different ethnic groups. Markets concentrate wealth, often spectacular wealth, in the hands of the market-dominant minority, while democracy increases the political power of the impoverished majority. In these circumstances, the pursuit of free market democracy becomes an engine of potentially catastrophic ethnonationalism, pitting a frustrated indigenous majority, easily aroused by opportunistic politicians, against a resented, wealthy ethnic minority. This conflict is playing out in country after country today, from Bolivia to Sierra Leone, from Indonesia to Zimbabwe, from Russia to the middle east.

Since 11th September, the conflict has been brought home to the US. Americans are not an ethnic minority. But Americans are perceived as the world’s market-dominant minority, wielding disproportionate economic power. As a result, they have become the object of the same kind of popular resentment that afflicts the Chinese of southeast Asia, the whites of Zimbabwe, and the Jews of Russia....

Click here to read the remainder of the essay in Prospect Magazine.

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Feature Post: Is the Philippines really a Somalia in the making?

This will probably not endear me to some readers who've sent me some pointed questions and have been waiting for me to answer them, but since (1) I'm the "editor-in-chief" of this blog, (2) I'm not getting paid to do this anyway, and (3) I really want to do my own little bit of cheerleading for the Philippines before the year 2010 is up, I'm going to go ahead and ignore the questions waiting to be answered and write a little bit about why I think -- despite all the seemingly nonstop negative press the Philippines has been getting lately (thanks in no small measure to the Philippine Supreme Court!) -- things are actually looking up for the country.

I also want this post to serve as my counter-argument to prognostications that the Philippines is well on its way to becoming the "Somalia of Asia," as warned by University of California's Malcolm Potts and GlobalBalita's Perry Diaz.  The two, among others, have identified population explosion, environmental problems, warlordism and paramilitarism as their main causes of concern.  While these are certainly serious issues that need to be addressed and addressed soon and addressed seriously (along with other structural and systemic problems they did not even mention), I wish to point out here nonetheless that, these problems notwithstanding, the country appears on track for a better future ahead. 

The Philippines: A Somalia in the making or a good investment bet?

The ascendance of Benigno Simeon "Noynoy" Aquino III (P-Noy) to the Philippine presidency after the last May elections ignited a lot of optimism among Filipinos in the Philippines and worldwide.  Finally, many people thought, here's clearly a decent guy from a nonpareil political couple who had given so much for the Filipino people.  His candidacy inspired hope; his election garnered widespread support; and his inauguration promised a major change from the unpopular administration of his predecessor. 

Over the course of six months following his inaugural speech, however, people witnessed the blunders, bad calls, and outright failures of leadership.  Many thereafter became disillusioned, even disgusted.  The coming final verdict, it seems, is that the country is poised to have another failure of a leader, another missed opportunity for the country to advance.  Or worse.

I'm going to go out on a limb here and predict that, when the final tally is made years from now, he's going to prove many of the dire predictors wrong even if he ends up less popular among those Filipinos who were originally hoping for a messiah in him.

For me, the reason is simple:  The Philippines actually has several things going for it right now economically, which, along with its innate strengths, mean that it does not really require much from its leaders except an abundance of honesty -- and to get out of progress' way.  Put another way, if P-Noy, who comes across as an honest (albeit also flawed) politician turns out only half as effective a leader as former President Fidel Ramos (who ably led the country in the 1990s), the country is going to outrun many of its problems and be in a better shape down the road.

I.  Review of Economic Fundamentals

A short review of the country's economic statistics at the moment supports my thesis.  Consider: 

(1)  According to the latest Country Report Philippines produced by the Economic Intelligence Unit, the economy grew by a decent 7.5% year-on-year in the first three quarters of 2010, as measured by real GDP (or Gross Domestic Product, which means the total market value of goods and services produced locally);

If -- and it's a big IF but definitely doable --the country can maintain this rate, the Philippine economy will double in less than 10 years.  But if it grows at China's rate (approx. 10% p.a.), the economy will quadruple in about 14 years -- which translates to just a little over two presidential terms (at 6 years per).  When you think about it, this means the country only really needs P-Noy and his next two successors to do well enough in order to elevate the game of the Philippines and place it in a higher league.

(2) Interest rates -- specifically, lending rates -- are at single digits, hovering less than 8%.  This figure may appear high to folks in the West, but for a country whose people are used to borrowing even at annualized rates exceeding 60% through what are known as 5-6 loans, an 8% loan is a godsend.

(3) Official unemployment rate is also at single digits, averaging about 7.5%.  Note that this is actually lower than the US figure which is near 10% and substantially less than the figures from hard-hit states like California.

(4)  The peso-dollar exchange rate has been relatively stable, lately trading at a narrow range of PHP44 to 47 per USD.  This stability is going to be good for exporters and importers alike because it lessens transaction costs and currency exchange risks.

(5) Consumer prices are also stable.  The inflation rate has averaged about 4% this year and core inflation (which takes out the more volatile food and energy items in the calculation) is even lower.

(6) Meanwhile, exports grew by a whopping 38.5% in the first three quarters of 2010, the fastest pace since records began.  The main reason?  High-tech electronics, which accounted for over 60% of the $38.3 billion total.

(7)  The central bank's foreign exchange reserves has more than tripled in the past four years, successively hitting all-time highs this year and ending last month at over $61 billion.  This rise reflects the influx of foreign money coming in and gives investors the confidence that the country can meet its foreign obligations, which is a major statement to make considering the PIGS -- countries of Portugal, Ireland, Greece and Spain -- have needed or will need help in this department in order to stay afloat and not default on their loans.

(8) The country's stock market also hit record territories this year, growing by over 45% year-on-year last month before correcting a bit this month.

Bottomline, ladies and gentlemen:  These are NOT the economic figures of a Somalia in the making! 

II.  The Country's Inherent Strengths

But I mentioned that the Philippines has innate strengths which, paired with a strong economic foundation, will pay dividends for the country.  What are they?

(1) Geography 

Fortunately for the country, it is located in the world's most commercially busy region nowadays.  No other region in the world even comes close.  Forget about Japan for now: China, India, Korea, Taiwan, Vietnam and Indonesia, among others, make for a giant economic neighborhood whose rising prosperity is bound to spill over to the Philippines in a fashion much more tangible than if a similar prosperity boom is happening in the "far-flung" regions of United States and Europe. 

This rising prosperity will substantially impact intra-regional tourism, trade and investments.  That's why the Chinese and Koreans are increasingly becoming regular visitors to the country's golf courses and beach resorts; more Philippine companies like the SM Group and Jollibee have dared to expand in China and build shopping malls and fastfood restaurants; and Indian technology companies have expanded operations in Manila.  These types of activities are only bound to increase.

(2) Natural resources

If there's a time when the country can really take advantage of its natural resources, this is it.  The giants China and India are in a global struggle with the developed countries of the West for cheap sources of raw materials, and the Philippines has them.  Metals like nickel and copper are abundant.  And because the country has lots of arable lands and littoral towns and coastlines, harnessing agri- and aqua-cultural resources for healthier commercial profits should start happening soon. 

Investments in resource-related commercial projects would translate to more commercial activity and job growth in provincial cities and towns outside the National Capital Region.  This is more than just a welcome development, if ever -- it's actually badly needed because NCR is, to put it mildly, bursting already at the seams: one of its major cities, Manila, has the world's highest population density.

(3) Local population

While not as populous as India and China, most people overlook the fact that the Philippines is a potentially big market too.  Population-wise, it's the size of Germany and all Scandinavian countries -- Denmark, Sweden, Norway, Iceland and even Finland -- combined.

And because it's a former colony of the United States, a distinguishing characteristic of the population is its proficiency with the language of global business: English.  This is an asset that will redound to the country's benefit if paired sensibly with other advantages. 

One advantage was revealed to me during a conversation I had with a top executive of a company in the top 10 of Fortune 500 companies.  I found out that one major reason the Philippines has now overtaken India in the business process outsourcing (BPO) services is because of the fact that Filipinos not only speak English with an accent better understood by Americans, we also can chit-chat with ease with American customers about the latest on, say, Kobe Bryant's exploits on the hardcourt.  This cultural affinity is not negligible:  After all, we also sing the same songs, watch the same movies and TV shows, and patronize the same pop trends. 

And despite all the negativity which the global media fixates on especially if the news relates to Muslim Mindanao, because an overwhelming majority of the populace is Christian, the country is really not prone to toxic religious divisions, extremism, and violent riots which sporadically erupt in other countries.  Moreover, unlike China which is bound to soon feel the impact of its long-running one-child policy, and Korea and Japan with their graying populations, most of the country are also young and have decades of productive lives left to allow them to contribute immensely to the economy. 

(4) The global Filipino diaspora

The Philippine national football team, nicknamed The Azkals, just showed the country a formula for winning: by harnessing the strengths of the global Filipino diaspora and hiring the right people who can get the job done.

Recruiting high-caliber half-Filipino international players from the UK, US, Holland and Iceland, the football team played great team football, shocked the defending champion Vietnam in the ASEAN Football Federation's Suzuki Cup, and advanced for the first time to the tournament's Final Four.  While footballing nations may pooh-pooh it, the team's performance was really so incredible that Sports Illustrated rated it one of the "Top 10 soccer stories of 2010," right up there with the story about Spain's winning of this year's World Cup.

There is no reason why the country cannot replicate the Azkals feat in other fields.  With an estimated 10 million overseas Filipinos scattered all over the world regularly remitting about $2 billion each month, the country actually has produced experts in all sorts of fields and industries, many of whom are just waiting to be tapped and/or encouraged to come home and help in nation-building, as former President Bill Clinton himself suggested in a talk in Manila recently.  

China and India have both made this "reverse brain drain" a conscious policy and have actively sought to get their nationals who have achieved international acclaim and expertise to move back.  The Philippines has to do the same. 

In any case, ladies and gentlemen, these innate Philippine strengths, Somalia does NOT have! 

III.  Other Miscellaneous Considerations + A Movie Trailer

Largely due to its domestic orientation and limited exposure to international capital markets, the banking sector is sound and has generally escaped the withering impact of the global financial crisis.  According to the Bangko Sentral, the industry's non-performing loans (NPL) ratio is remarkably low: below 4%.  This should encourage local banks to increase lending and grow their balance sheets.  Moreover, according to CB Richard Ellis, the conditions in the real estate industry are also positive across ALL commercial sectors -- be it office, retail and hotel, or residential property.

If you need further proof that confidence in the future of the Philippines is high and getting higher, consider also (1) Asia's first Versace-branded condominium building is being planned to be built soon in Manila's Century City; and (2) a Maserati dealership in Makati, the country's premiere buisiness district, was just launched last June.  Now, I'm one of those who find these developments a bit on the obscene side given the still-pervasive poverty in the country, but objectively speaking, these still tell us something about investor and consumer sentiment.

But if there is one thing that convinces me that the Philippines is far from being a Somalia in the making, it is a movie.  Specifically, I am talking about a 3D animated film released just this month in time for the 2010 Metro Manila Film Festival: Metanoia.

Honestly, the film made my jaw drop.  It made me really realize that, with technology and knowhow, the world is indeed now flat!

I've read that the movie's character development leaves much to be desired, but humor me and watch the movie's trailer below. Then, tell me after watching it -- if you're one of those who subscribe to the alarmist prognostications about the Philippines, of course -- if you still believe the Philippines is on track towards becoming another Somalia.



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Will Filipinos ever be considered a "model" group?

Dear Filipino,

I am a second-generation Fil-Am who attended a reputable college, and I went to school with really smart folks (I didn't think I was any less smart by the way :-p).  I must admit though that I sort of felt "jealous" of the Indians, the Koreans, and the Chinese who many other students (including fellow Filipinos) and teachers considered the smartest and the "model" students.  Now, here's a somewhat "racist" question: Do you think that, as a group, we will ever belong in their ranks?

Chippy-shouldered Pinoy

Dear Chippy-shouldered,

I totally dig your question (it's not "racist" just race-related), but I'm kinda disappointed with it too.  Here's why: Coming from someone like you who supposedly went to a "reputable" college already, does this mean that many other Filipinos "below" your educational stature carry the same "baggage" -- i.e., "jealousy," or maybe, from the very premise of your question, even a sense of "inferiority" perhaps?

But first, let's give credit where credit is due.  I think the reason why US-based Asian Indians, Chinese and Koreans have seemingly outsized rates of representation in Ivy League colleges is because their cultures (at least, from what I can tell from my interactions with them in the US) value education more. Plus, of course, in the case of China and India, they are very populous countries so that naturally, they tend to send more people to US universities for higher education.  And not to diminish their smarts, they shine because, as they say, in China, even if you're one in a million, there's at least a thousand just like you. 

Additionally, the US-based Chinese/Korean/Indian parents, many of whom are recent immigrants and recruited to work in high-tech, push their kids to not be content with just complying with school curricula, so many of their kids also attend after-school tutorial classes, academic camps and what-not.  Yes, they probably know the US educational system is falling behind, so the kids are being asked to aim higher -- which, I think, is the right way to go.  They are also attuned to what's happening back in their own home countries (by this I'm referring to the intense competition to succeed in booming India, China and South Korea); thus, peer pressure among them to excel academically is likewise intense.  This dynamic has its obvious rewards, but like anything, also has its costs. (We don't have to go into this now because that is not part of your question.)

So if we want more academic achievers, we have to do more as a community.  We have to glorify academic achievement with even just a tenth of the passion we employ to glorify Manny Pacquiao's exploits or Charice Pempengco's.  We have to lessen the invidious impact of pop culture by shutting off TVs and monitoring our kids' Internet and cell phone use.  Our kids must be told to prioritize homework before hiphop, cellular chemistry before cellular phones, math book before Facebook.

I do have some US Census stats to make you a little prouder of our community (and which should tell you that we may be underrated as a group).  Here's one about educational attainment (note: click on the images to enlarge):

As you can see, we do fairly well, compared to the other Asian groups in education.  Our college graduation rate is almost double the national rate, and that's admirable. 

And it's important to impart the value of education because there really is a high correlation between education and income, and education and unemployment rate.  Here's one graphical proof:
 


(Source: American Century Blog)

 
And though less clearly shown, here's another proof:

Now, here's the BIG CAVEAT: The data in the immediately preceding graph is old and getting older; newer figures are available on Wikipedia and I'm glad we're faring even better.  But the data actually does not explain other factors affecting household incomes.  For instance, Filipinos are probably making more than the other Asian groups because we are heavily represented in the higher-paying health industry and because we, like Indians, have a better grasp of the English language, which give us an advantage over other Asian immigrants when it comes to landing jobs. (So a quick note to policy-makers in the Philippines: Do NOT water down English instruction in favor of Tagalization under the guise of "nationalism," without regard to the fact that the Philippines has more native non-Tagalog speakers than there are Tagalog speakers.)

But here's one graphic which I think shows that the "model minority theory" is in fact a myth and can be counterproductive and harmful:

As you can see, almost counter-intuitively, the Chinese and the Koreans (and, to a lesser degree, the Asian Indians) have higher levels of poverty compared to national rates -- and about double ours.  And this is why your question  reveals some ignorance or is at least inartful, because, by this measure at least, we, as a community, are not doing too badly even if there's much more need and room for improvement.  Heck, we can even stake a legitimate claim to being a "model group" in this regard.

And these graphs, collectively, is one reason why I don't believe in traditional notions of affirmative action anymore -- the one based on race, national origin or sex.  We are now heading into the second decade of the 21st century, and well past the era of pernicious discrimination and even race-related riots.  Sure, there should be affirmative action, but it should be based on membership in society's lowest economic strata, which unfortunately have been ballooning in size lately in America.  You and I must help to reverse this unwelcome trend, not just for the Filipino-American community but, more importantly, for the country which has benefited us greatly and which we now call home.

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Why does the Philippines suck?

Dear Filipino,

I am a second-generation Filipino American born and raised in the US, and while I’m proud of what the Filipinos in the US have accomplished as a group in America (I read somewhere that we’re one of the most affluent minority groups according to the US Census), I keep wondering: Why does the Philippines suck? I mean, I’ve visited Manila and the provinces a couple of times in my life, and while the country does have some beautiful vistas, for an outsider looking in, it’s really, overall, a f--king sh-thole. Seriously, dude! And yet, why do those rich-looking Filipinos seem so f--king smug and arrogant and apathetic about the whole thing? And as a concerned Filipino, what can I really do?

Thanks,

Ilonglocano (Ilonggo- Ilocano)

Dear Ilonglocano,

Wow. I felt like you just hit me in the solar plexus. So let me catch my breath first…

There. Now, I should be fine…

Frankly, your questions are so loaded and will probably require many experts to even come close to answering with any sense of justice. I will give you my two cents, though, based on what I’ve learned (in the bookish and the real worlds) and my own limited understanding of things. Of course, my answer will in no way be exhaustive because I just don’t think anyone is capable of doing that.

But first, I want to thank you for being “a concerned Filipino.” Despite the language you used, I can sense the anguish in it, the pain, even the anger, because if you’re a typical Filipino American who grew up trying to find your own place in the world, you probably felt a bit lost and insecure and groping for your own identity and pride in belonging to a group – any group – that has reasons to be proud in a massive and rich Western country with no shortage of overly proud, even noxiously boastful, people.

Now, let me try to tackle your two main questions:

(1) Why does the Philippines suck?

I have many arguments to claim that the very premise of your question is wrong because, in many respects, the Philippines is, in fact, a really cool place! The people are generally nice and a lot of foreigners have fallen in love with the country for good reasons. You won’t appreciate their arguments, of course, unless, after stuffing yourself with great seafood, you’ve lazed around in a gorgeous beach with a buko juice within reach while the sun is setting.

Having said that, I will admit that I’m with you on this IF by “suck,” you’re referring to the pervasive, all-enveloping sense of poverty, filth, and disorder that characterize most of Metro Manila and, to a much lesser extent, even the provinces – characteristics which are all too visible to anyone from the developed countries. I also presume you’ve seen the richer and nicer enclaves in Makati, Bonifacio Global City, Alabang, etc., but felt they were too few, too overwhelmed, and too negligible compared to the more common ramshackle housing of the middle class, or worse, the tin-and-cardboard housing in the slums of the lower classes. If you’re like some of my friends, the impression you had was probably like: My God, how can so many people in the Philippines live like that? How did this level of abject poverty come to pass? And how do those rich folks living in mansions in those few enclaves stomach that kind of inequality anyway?

The short answer is: You have the “Filipino culture,” as shaped by geography and history, to blame.

Notice that I put Filipino culture in quotation marks. I did so for two reasons: (1) because “Filipino” is actually a fairly new concept, probably not even more than 150 years old; and (2) because that “culture” performs noticeably more differently in another context, as you yourself have noticed when you pointed out that Filipino-Americans comprise one of the most affluent minority groups in the U.S. and are collectively estimated as having a higher “GDP” than the Philippines itself.

But let’s tackle the impact of geography first on the Filipino culture because it’s the less thorny one.

The country is an archipelago of over 7,000 islands (to be more precise, 7,107 during high tide and 7,108 during low tide, says one beauty contestant), with the South China Sea on the west, the Philippine Sea on the east and the Celebes Sea on the south. With one of the longest coastlines in the world, the islands are (or used to be) mostly covered in tropical rainforests (hence, lots of trees and one of the most diverse collections of flora and fauna). And because these islands were formed over time by active seismic and volcanic activity, minerals are abundant – e.g., gold, copper, and nickel, to name a few.

With fertile lands and abundant water and water-based resources, it’s easy to imagine that the pre-Hispanic Filipinos did not really want for much in the food department. It’s also easy to imagine that, because the islands’ biological characteristics did not really change much from island to island, and with no harsh winters to contend with, there was not a lot of trading necessary among the different tribes which populated the islands. Maybe, as a consequence, there was probably not a lot of fighting either – thus, foreign colonizers, when they came, were quick to note that the natives appeared peaceful, fun-loving, and, yes, even “docile.”

And foreigners did come, attracted by the richness of the islands. And yes, those minerals, of course!

As mentioned impliedly above, the first to colonize the islands were the Spaniards, and that was the time when the misery of the indigenous population started in earnest. Ostensibly in the name of Christianity, the conquering Spaniards claimed the islands for the Spanish throne, baptizing their new territory “Las Islas Filipinas.” And through ruthlessness, tricks, treats, and the Church, the Spaniards were able to brainwash and pummel the natives into submission or otherwise negotiate some semblance of peace with local leaders in order for them to solidify their rule and milk the islands for their selfish commercial pursuits.

What’s really remarkable is the fact that the Spaniards were able to this with very limited head count. For all intents and purposes, they just had small garrisons scattered across the archipelago. Why did they face very little opposition during their conquest and their centuries-long domination? Well, because the natives didn’t have a common language (your parents, an Illonggo and an Ilocano, can't even converse without a third language like Tagalog or English!) and were primarily tribal and clannish, so they also didn’t share a common political structure (can you blame them?). And the Spaniards realized they couldn’t let go of this inherently beneficial advantage: thus, they decided to administer the islands using the locals’ ethnic languages, not using the Spanish language; after all, Spanish was the language of the ruling class and they didn't want the natives to learn it. They also relentlessly and tirelessly made sure the locals knew their “proper place”: by constantly hammering to the brown natives that the latter were inferior in all respects to the white Spaniards, and they must therefore always be submissive to the Church and their authority.  Thus, by the end of Spain's corrupt, inept and heavy-handed, patronage-politics rule, only a very small percentage knew Spanish with some facility: the elite five or so percent.

These local elites were for the most part comprised of the "mestizos." They were the progenies of the "cross-pollinating" wealthy locals and the conquering class and erring friars, and many of them were sent by their parents to study in Europe. They were beneficiaries of the largesse of their Spanish patrons, and invariably these largesses meant grants of vast tracts of land – which easily translated to substantial passive but non-creative, non-entrepreneurial income. They knew they were the elite and they, of course, had elitist tendencies as well. Interestingly, however, while they were known as the “ilustrados” or the “enlightened ones,” they actually referred to themselves as “Filipinos” even when the term was meant to refer only to Spanish creoles, those who were pure Spaniards but were born in the Philippines. The national hero, Jose Rizal, was one of these ilustrados, and he was also the one who really popularized this heretofore alien concept called “nationalism.” However, because these mestizos were sentimentally far removed from the “indios” (the ethnic local masses), it would actually take a poor artisan from Manila who spoke Tagalog named Andres Bonifacio and his Katipuneros to really begin the armed revolution against Spain.

And what Bonifacio started, the young general Emilio Aguinaldo finished, culminating in an “official” proclamation of an independent “Republic of the Philippines” in 1899 in Cavite. However, it was a fragile “republic” (which was mostly comprised of the Tagalogs really) because it had practically no purchase whatsoever, or very little support if at all, in the vast southern regions of the country or even in the non-Tagalog regions up north, which had their own peasant-led mini-revolts. And to make things worse for the leaders of the new republic, the world powers didn’t care about them really.  Because when the Spaniards realized they were going to eventually lose Cuba and the Asian archipelago they'd ruled for so long, and with the Americans declaring war on them in 1898 and subsequently destroying their fleet in Manila Bay, they decided to negotiate not with the locals but with the Americans, who agreed to purchase the islands in late 1898. The revolutionaries would rise up against the Americans too, but through merciless campaigns, superior firepower and a disorganized opposition with no common language, the Americans would easily prevail and would later turn the country into an experiment of their own version of “benevolent” imperialism.

Aside from imposing English as the common national language to be learned by everyone, one thing the Americans did that differentiated them from the Spaniards was to somehow politically “unify” the islands by putting up, for the first time in the archipelago's history, a “national congress” for the Filipinos. Naturally, the wealthy elites saw this as a great way to extend their power not only in their respective provinces, where they had their own personal fiefdoms because they already had solidified their control at the local level, but also nationally. So what power and wealth the elites had during the Spanish period, they in fact increased dramatically during the American period. And the American administrators, generally hands-off in the nitty-gritty of administration and uninterested in upsetting the local social structure or in making Philippine society more egalitarian, were only too willing to become friends with the country’s national elites.

Unfortunately, this socio-political structure did not change after the Japanese invasion because the elites were the first to become collaborators, or even after Filipinos and Americans, fighting side by side, ousted the Japanese from the country after the Second World War. Unlike the ultra-successful American project of busting the old elitist socio-political structure of Japan which turned the country into one with a more equal distribution of wealth and power, in the Philippines, which was a "friend" becuase it was part of the American Commonwealth, the order of the day was to restore the country to the status quo before the Japanese arrived. Thus, the wealthy and highly connected national elites were the ones ultimately rewarded by the Americans with more power and lucrative contracts for rebuilding the ravaged and war-torn country. The poor indios’ plight remained practically the same.

And this little excursion into history is my roundabout way of explaining why it is hard for the indios, the typical Filipinos, to feel “nationalistic.” How can you be nationalistic when other Filipinos speak a language different than you? How can you be nationalistic when you see your national leaders getting richer as you get poorer? How can you be nationalistic when options are limited because you are not of the mestizo class? How can you be nationalistic when you lose or can't get a government job because you don’t have a relative, a friend, a patron in power?  How can you offer your loyalty to a nation whose government is way too corrupt?  How can you be nationalistic when your stomach is growling, or worse yet, when your kids are whimpering in agony for the same reason?  Chances are, you would also think of survival first before nationalism, right?

In his 1987 article, “The Damaged Culture,” James Fallows discussed this “failure of nationalism” at length. He concluded: “Nationalism can of course be divisive, when it sets people of one country against another. But its absence can be even worse, if that leaves people in the grip of loyalties that are even narrower and more fragmented. When a country with extreme geographic, tribal, and social-class differences, like the Philippines, has only a weak offsetting sense of national unity, its public life does become the war of every man against every man.”

Ilonglocano, I think your feelings when you visited the Philippines were in fact shared by Fallows over 20 years ago because he wrote:

“Most of the time I spent in the Philippines, I walked around feeling angry--angry at myself when I brushed off the latest platoon of child beggars, angry at the beggars when I did give in, angry at the rich Filipinos for living behind high walls and guardhouses in the fortified Makati compounds euphemistically called villages, angry as I picked my way among piles of human feces left by homeless families living near the Philippine Navy headquarters on Roxas Boulevard, angry at a society that had degenerated into a war of every man against every man.”

Many Filipinos hated Fallows for this lurid, ugly portrait of the Philippines he saw then, but I liked Fallows’ analysis because  he was also very lucid in his criticism of the American role in the stagnation and decay of Philippine society.  In his essay, he said: “In its brief fling with running a colony, America undeniably brought some material benefits to the Philippines: schools, hospitals, laws, and courts. Many older Filipinos still speak with fondness about the orderly old colonial days. But American rule seemed only to intensify the Filipino sense of dependence. The United States quickly earned or bought the loyalty of the ilustrados, the educated upper class, making them into what we would call collaborationists if the Germans or Japanese had received their favors. It rammed through a number of laws insisting on free ‘competition’ between American and Philippine industries, at a time when Philippine industries were in no position to compete with anyone. The countries that have most successfully rebuilt their economies, including Japan and Korea, went through extremely protectionist infant-industry phases, with America's blessing; the United States never permitted the Philippines such a period. The Japanese and Koreans now believe they can take on anybody; the confidence of Filipino industrialists seems to have been permanently destroyed.”

That’s why if there’s one thing I envy about The Korean, aside from his more robust, more engaging blog, it is the fact that his former home country is in much better shape than mine.

(2) What can you do as a concerned Filipino?

If you feel helpless and hopeless at times, know that The Filipino completely understands you. Sometimes in fact, I feel the Philippines should just break up into smaller countries. Why not? Belgium is close to breaking up, and it has a population almost just a tenth of the Philippines. Yugoslavia, which only had a total of 23 million at its height, was broken up into six countries. The Philippines, on the other hand, now has about 100 million.

But is this the solution? Probably not. The solution is for concerned Filipinos, whether inside or outside the Philippines, to show its concern by pushing for good governance and reform, becoming more active in politics, supporting well-run charities, following the rules – even the most mundane ones like traffic rules and what-not. Do not litter, do not spit everywhere. And show some – for lack of a better term – love.

Actually, come to think of it, it is probably the best term. You and I need to show more love, and not just curse the situation. Many Filipinos lack the most basic: sanitation, clean water, decent housing, even food. They are very, very poor.

The country doesn’t suck. It's those morally and intellectually effete elite who care only about themselves, who are afraid to speak up, who manipulate the system, who are in cahoots with each other to rape the country -- they're the ones who suck.  It’s those Filipino people – rich or poor, man or woman, based locally or abroad – who don’t care about helping the Philippines and about doing something even just one tiny bit about the present Philippine situation (and I can imagine they sometimes include you and I) – they, sir, are the ones who suck!

Got a question for The Filipino?  Email him now at askthepinoy@gmail.com.