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Notes by EMA: Doing business in the Philippines

DOING BUSINESS IN THE PHILIPPINES

 

Why Are We Not Competitive?

 

Enrique Aboitiz Mendieta

 

June 2018

 

 

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Let me tell you a story about doing business in the Philippines.  A few years ago, discussions were being held with a Spanish company in the Philippines. The administration was that of Aquino. They promised heaven on earth and quickly.

The ports were congested. It took months to get containers out of the port. This situation lasted for a considerable amount of time.

invest ph
Image from Investopedia.com

The Secretary of Energy was asking for emergency powers because he foresaw that we would be short of power very soon. The actual result was an oversupply but that is fine, we do not expect ministers to really know what they are talking about. After all, we pick them off the streets normally and elevate them to the highest positions of the land. Father, forgive them for they know not what they are doing.

The President of the Philippines, Aquino, was calling everyone past, present, and future a crook, except himself, of course. The result was the most corrupt administration in history.  Smuggling was an all-time high; we remember Mighty cigarettes who was fined 25 billion pesos in the next administration.

This Spanish entrepreneur comes and correctly assesses the situation. I cannot get my imports through your ports. You are going to be short of energy. Everyone here is a crook. Why will I invest here?

The compolitization of an individual, a company, or a nation is of paramount importance. It enriches all and life is about enrichment personally, socially, and intellectually. Monetary enrichment is purely a resource for the former forms of enrichment.

Capital is interested in only one institution – that of Rule of Law.  Hong Kong was not democratic nor was it liberal but it had rule of law. Singapore seemed democratic but was not; nor was it liberal but it had rule of law and that protected capital.

Image from https://theday.co.uk/briefing/rule-of-law
Image from https://theday.co.uk/briefing/rule-of-law

We are wildly liberal and very democratic – the level of democracy can be seen in the level of functioning chaos. Now, our Rule of Law has much to pray for.  So, of course, you will have 10 families controlling the economy. It is not even in their interest to control a smaller economy. It is because we lack Rule of Law and no real competition comes in to compete with Philippine business. I would rather not be one of the members of one of those families in an economy that is three times the size of ours.

What does America teach us? The way for companies to do better is to increase the purchasing power of the poor. Our focus should only be to remove poverty and everyone will do better. If we do it alone without foreign investment it will take longer.  

If we grow at 7%, we double our GDP every 10 years. If we grow at 10%, it is every 7. We need to double twice to reach a trillion-dollar economy – so it is 20 years or 14.  A third tripling to 2 trillion will be 21 years or 30. Those are the simple numbers.