On being published

The greatest dividend that you as an author get from having been published is the probing and incisive questions that your readers ask about the ideas advanced by your book. The second greatest is the realization that the subject matter of your book is interesting enough to elicit further questions from people who have not yet read your book.

I delighted in both dividends over the past week as I kept opening my email and discovering questions on a few of the ideas in my book "Out of the Misty Sea We Must."

From my friend Tony Nievera:

Cesar,

1. What is the difference (between) a Commercial Base (and an) Export Processing Zone? and 2) What advantages/benefits will the Philippines offer?

Export processing zones, or Free trade zones, are operated by the host countries. Commercial bases in the Philippines shall be operated by the leasing foreign countries. Thus, if the United States leases a commercial base in the Philippines, U.S. laws will apply inside the commercial base. The multinationals that set up businesses in the commercial base shall be insulated from the stifling bureaucracy, the capricious judicial system, the corrupt culture, the crimes, the threat of kidnappings, etc. that may from time to time pop up in the Philippines.

Because commercial bases will be extensions of the foreign countries' territory, all manufacturing and other business activities conducted inside the commercial bases will be taxed by the foreign countries and considered as those countries' domestic production, reported as part of their GDPs. Such countries will be free to move their own citizens into the bases, providing them jobs that would otherwise go to China, India, Ireland and other countries that now benefit from the mass exodus of manufacturing and other jobs from the industrialized world, including the United States. The unemployed in the U.S. and other countries will find work in the commercial bases, thereby easing the pressure on the U.S. and local governments to provide unemployment insurance to the huge army of unemployed Americans.

For its part, the Philippines will benefit by providing jobs to its citizens. Multinationals in the commercial bases will need to employ Filipinos if they are to become competitive with manufacturers in China, India and other low-labor-cost countries. The areas around the commercial bases will see an accelerated real estate and infrastructure development. The first world business and government culture that sprouts inside the commercial bases will serve as the model for Philippine business and government, as more and more Filipinos are exposed to the efficient management and operations inside the commercial bases.

From Nelson Paguyo:

This I know. American business will set up business in any country where the business atmosphere is pro–investment and fair; and the government and people are welcoming. I am not sure the Philippines is at the present; and perhaps the reason why American businesses [and others] have avoided the Philippines.

My response to Nelson: The commercial bases, as explained earlier, will be slices of America. The bases will be run as though they were a slice of Washington, D.C., under the complete jurisdiction of the U.S. government. Philippine laws and governance will not apply inside the bases.

From my friend who signs his name "dmjj52":

it is not the people who (are) the problem, but it is the system of the government that drives away foreign investors. way back in 1994 i was sent to Keesler Air Force Base as an exchange officer. i was instructed to get my ID at the admin office. to my surprise, only ONE guy processed the form, signed it - and presto, i have my foreign military ID.

and this will NEVER happen in the Philippines. at the adjutant general, you will have to spend hours, if you are lucky! it will take a long list of personnel to have your ID issued.

and this is reality. foreign investors are not used to RED TAPES! sa atin kasi, lagayan dito at lagayan doon. try your luck at LTO, or even the Bureau of Customs!

not unless there will be a drastic change in the way our government works, then there will be a CHANGE.

My response to dmjj52: This is a perfect argument for the commercial bases. The red tape, the corruption, etc. that are found in the Philippines will not be found inside the commercial bases. The commercial bases will be operated by foreign countries under those foreign countries' laws, business climate and culture.

From my friend Jun Gomez (commenting on the obvious advantage of unemployed Americans being able to follow the jobs into the commercial bases in the Philippines):

I think that was the original idea in setting up manufacturing plants in China, unfortunately the very cheap labor abundant in China was just too tempting to pass so they hired locals instead!

My answer: The unemployed Americans who move to the commercial bases to work in American manufacturing plants there will be able to follow the jobs that would otherwise be lost forever to China, India and other countries. They will of course be paid well below what they would earn in the U.S., assuming that the jobs even exist in the U.S. Americans would be willing to take the jobs because the cost of living in the Philippines is way below that in the U.S.

It is estimated that a family of four could live on $1000 a month in the Philippines. A couple who both work in a commercial base and receiving $500 a month each would have a comfortable life there, sending their kids to American schools that would surely sprout inside the commercial bases.

From Kenn Stokes:

"Benefit" is certainly (subjective). I left the US to get away from the "Americanized" lifestyle of waste, stupid extravagance, self-centeredness, and outrageous taxes. So I have to wonder about this "benefit" thing. I know others that feel as I do so I'm not exactly the Lone Ranger in my thinking.

As for "benefits" to the economy I have to once again reflect on the lifestyle of credit that keeps the US so vulnerable and compare that to the resilience, even if defined as "impoverished" by the rest of the world, of the filipinos where the trade off is P5 in the hand or a few hundred thousand dollars in debt (you know, the mortgage on a house that manages to keep all members of the house separated, the 2 SUV's in the driveway, enough electrical appliances to choke a horse - but support the utilities contractors fantastically, the 500" television, two tons of toilet paper, kids with so many toys that they have no sense of reality, and monthly cell phone bills and daily latte budgets that would feed entire families in many parts of the world). I don't know, a few peso in the hand or debts with no light at the end of the tunnel.....hmmmmm, who's better off? Where is this "benefit"?

My answer to Kenn Stokes:

It makes sense to question the American values of excess and self-centered lifestyles. Americans have really re-defined the meaning of extravagance. But Filipinos are not at that stage where they are in a position to ask themselves: how much is enough?

Most Filipinos are dirt-poor. There are many slum dwellers in the Philippines who live on the edge of human existence. A new development in the slum areas is the "pag-pag" - dishes made from meats gathered up from rich people's and restaurants' garbage, boiled and served with spices and sold to slum dwellers for P10 (20 U.S. cents). People ransack piles of garbage, looking for items that may be salvageable and could fetch enough money for a family's next meal.

People are really living hand-to-mouth over there. They are far from the stage where most of them are asking, "what is enough?" Or "how many cars, how many houses does one really need?" Instead they are asking, where is my next meal going to come from?

From Eduardo (Danding) Gimenez:

Cesar,

It is a good idea. It’s not the best idea because once again it is about making goods for our masters while we continue to refrain to make things we need for ourselves. Let’s take just one field of endeavor. Transportation. Despite having a population almost 100 million, why is it that virtually every vehicle that plies Philippine roads is made outside the Philippines? Why is the Philippines the only in Asia that has not gone through the 2-wheeler stage?

Many of our neighbors make their own scooters, motorbikes cars, engines, trucks and buses. For decades, we’ve had a large enough population to sustain such manufacturing. In the 1980s, with a population of 17 million, Taiwan was manufacturing millions of 2-wheelers and cars. With a much smaller population Korea makes so many cars that they are completely self sufficient. Indonesia makes millions of 2-wheelers.

Our steel industry in the Philippines should have been much bigger had we gone that route. It would have forced us to create a machine tool industry, a plastic injection molding industry. Instead we are devoid of all necessary industry aimed at a better life for our people. Almost every call I see is a call to create industries and businesses to serve foreign investors. It is a continuation of the call to our best and brightest to serve everyone but the Filipino.

I hope you can see why I say it is not the best. It is a lazy idea. It is a weak idea. It says to ourselves “Let’s continue using our best and brightest to serve Americans”.

Love to all,

Danding

My response to Danding:

China's business model as a so-called awakening giant is making goods for the rest of the world, mainly the Chinese people's former "masters." If a country or a people must be criticized for being the manufacturing arm of the great industrialized countries, that criticism must be leveled at the Chinese.

The commercial bases idea does not expand the number of Philippine manufacturers whose sole function is to make products for their former "masters" - the Americans. It will be American companies, European companies, South Korean companies, Japanese companies and, yes, even Chinese companies manufacturing in Philippine commercial bases to fill orders from their home markets. They will merely do this in extensions of their territories that are situated in what is now the Philippines.

With regards to Philippine industry producing bikes and other motor vehicles for local consumption, that is an entirely separate issue. Over the decades since independence was granted the Philippines in 1946, Philippine manufacturers have had a difficult time competing with foreign manufacturers who ship their products to the Philippines. Foreign manufacturers, such as Suzuki, Toyota, Honda, Nissan, Hyundai, etc. have discouraged Filipinos from even thinking of venturing into such manufactures.

As a country we have been content with merely building the biggest and most modern malls and shopping centers where foreign-made goods are sold. That is how our economy has developed. I agree that we should do more manufacturing so that more of our locally-produced goods are sold in our mammoth shopping malls.

Maybe, if enough multinationals locate plants and factories in the commercial bases, there will be renewed interest among Filipino entrepreneurs to venture into the manufacture of bikes, cars and other durables, as more and more Filipinos become exposed to the multinationals' business culture and discover that they too are capable of engaging in the same activity at less cost.

Here's a query from a certain Michael:

Cesar:

Would Americans travel thousands of miles away from their families and friends to a hot and humid foreign country for a low paying job just to escape unemployment in the U.S.?

Why would companies import American workers to your "bases" in the Philippines? Companies are, to use your word in another posting, amoral. They are after profit, and not to solve their countries' unemployment problem.

Wouldn't it be more cost effective for them to hire local people?

And it would be good for the people in the Philippines They wouldn't have to leave their country to find work.

Go to Hong Kong and other Asian countries and you will see ten of thousands of Filipinos working as maids. Even the lower middle class families in Hong Kong have madis from the Philippines.

Wouldn't they be better workers in your "bases"?

Michael

My response to Michael: I think when Americans realize that their long-term unemployment is caused by the permanent disappearance of jobs that have gone to China, India and other low-wage countries, they will know that they have no choice on the matter. They must go where the jobs are. Ordinarily, Americans cannot go outside the U.S. to follow their lost jobs. The commercial bases will give a lie to that general rule, for they can indeed follow their jobs which may have relocated to commercial bases in the Philippines. But that's because American commercial bases in the Philippines shall in reality still be American territory.

American multinationals that establish manufacturing operations in the commercial bases shall be motivated by profit. They know that if nothing is done, the U.S. will be forced to raise tariffs against cheap imports from China, India and others and force these multinationals to manufacture again in the U.S. That would result in a global depression, as other countries raise their tariffs in response. Locating manufacturing operations in commercial bases will not require the U.S. to raise its tariff barriers and will in fact strengthen the multinationals as they navigate away from over-reliance on Chinese manufactures.

Finally, from Nel Reformina (an education specialist), commenting on my recommendation to convert most public elementary and high schools to math and science schools and to declare a moratorium on interest payments on sovereign debt:

Hi Cesar,

I have read with great interest your book.

I have always been an advocate for a drastic improvement in our public school system. In fact, I believe that the root cause of all of problems is the wide gap of education between the very small elite and the Filipino masses. Hence, I fully agree with your thoughts on education. A moratorium on the interest payments on the country’s debt is really worth pursuing as a means of financing the massive education improvement programs in the next 10 years. How do we convince our creditors that the interest savings shall be invested in education – and will not just go to the pockets of our corrupt government officials and employees?

For the moratorium to be acceptable it is important that the present administration should pursue a massive anti-corruption campaign, recover most stolen money and send to jail a number of corrupt officials to show case the sincerity of the campaign. Furthermore, in the next 10 years or so, if the pork barrel allocations of congressmen and senators cannot be removed (for political reasons), it should be mandated that at least 50% of the pork barrel be invested in the public schools of each congressman’s respective district.

If the corruption campaign succeeds and at least half of the pork barrel funds are diverted to education, I estimate that we would have enough money to double the present budget for education. We may not even need to ask for interest moratorium –even if our creditors by that time are willing to give in – and need not face the question of commercial bases which most likely will encounter a lot of resistance due to social, political and emotional issues.

By all means, we have to solve our education problem first. It is like a heavy anchor that prevents the ship from sailing to a new journey. All other issues – jury system,parliamentary system, confederation of independent states – are secondary to having a functionally literate nation.

Yes, out of the misty sea we must – sail to a new tomorrow!

Nel

My response to Nel:

We have been trying to reform our tax collection system and have been trying to rein in the abuses of our congressmen and senators for more than fifty years and have not succeeded. Our politicians merely laugh us off. But, we cannot wait any longer. If we do not put a complete halt to our slavish reliance on sovereign debts to solve our government's inadequate financing problems, we will wake up ten to fifteen years from now and discover that nearly all of our income tax collections will go to servicing our debts. At that point, we will all be working for our country's creditors.

As a country we will be forced to run our government with the remittances of our overseas workers and the VAT collections. The government will be so poor in relation to the massive need for financing social services (including and especially public health and education), infrastructure development, salaries of government workers, etc. The country will be either in an implosion or near-implosion stage by that time.

A moratorium on interest payments is essential to righting the ship of the Philippine state. Or at least the threat thereof, with the burden of finding creative alternatives on creditors' shoulders. My book, however, shows the way out of the interest moratorium nuclear option: Philippine sovereign debts can be converted to 99-year leases on Philippine territory for the purpose of setting up commercial bases. Philippine sovereign debts are wiped out, and the countries whose financial houses hold those debts will have an opportunity to stop the loss of manufacturing jobs to China, India and other low-wage countries.

Thank you for all your comments and questions, folks. I believe that we Filipinos are capable of solving our problems ourselves, freed finally from the suffocating head-lock that the IMF, the World Bank, the Paris Club and other organizations currently have on our psyche.

Of Blinders and the Blind Side

It's become hot and heavy these days on the Internet. The elections in the Philippines, the oil spill in the Gulf of Mexico, the Tea Party movement, the near-bankruptcy of Greece, the free-falling Euro, the very real prospects for a third Great Depression have hot-wired our emotions.

It's exciting times. I believe that unless we short-circuit our complacent brains and hot-wire our jagged edges, we cannot begin to transform our thought processes. And that we must do to be equal to the task. The world is falling apart before our very eyes. It's not just the Philippines and the other perennially perplexed and flummoxed societies that have seemingly insoluble problems. Countries as great as the United States, Germany, France and Britain are counting the days before that dreaded Day of Reckoning.

Some have noticed the upturned volume and the preponderance of negative thinking over the Internet. To this point, some have suggested that there be a moratorium on negativity. It was in response to this call for a moratorium that I drafted the letter below to some friends, only one of whom actually called for the moratorium.

In the letter, I focus on the problem of religiousness as a blinder. My thesis - which of course is not original - is that religion can be a blinder because it prevents government planners from seeing and considering the correct solutions which may in fact be right before their eyes, staring them in the face.

I had mentioned in my communication with my friends on the Internet that Filipinos have a blind side - whether it is the inability to see the corruption going on around them in their families, in their circle of friends. Or the inability to see that the Philippine population explosion is a major cause of the problems there. Or the inability to see the capriciousness in the judicial system. Or the inability to see the incentive-killing effects of nepotism and political dynasties.

My diatribe grew out of my concern that a misplaced trust in people such as economist Bernie Villegas - an Opus Dei founder in the Philippines - would assure that the country's economy will continue to circle the runway, unable to take off.

That is the effect of relying on people with a blind side, or who wear blinders. Most Filipinos, in my judgment, do have blind sides or permanent blinders.

July 4, 2010

Dear Carlos, Gene, Frank and others,

The historical argument is all there. Look at Europe. After the 2nd World War, the countries that completed their transition to secularism from Catholicism - France and Italy - and the countries that completed their transition to secularism from Protestantism - Germany, Great Britain, the Netherlands, the Scandinavian countries, the low countries, Austria, Switzerland, etc. - all made great economic strides. The countries that remained Catholic - Spain, Portugal, Ireland - and the countries that remained traditionally Orthodox - Greece and the near East countries - all lagged in economic development.

In the late 70s and 80s, as Spain, Portugal, Ireland, Greece and others became increasingly secular, those countries experienced an economic boom. While few French and Italians are practicing Catholics, the Spanish, Portuguese, Irish, Greeks, etc. have remained deeply religious. They however began to realize that their governments had to be secular and separate from the Church. In Spain, for example, divorce and abortion are legal and the Spaniards have learned to compartmentalize.

South America's history parallels that of Europe. As South American societies became secular - leftist in some cases - South America started to emerge from the huge shadow cast by the giant to the north until they experienced an economic miracle that rivaled the Asian miracle of the 70s and 80s.

One of the keys to economic success is secularism. I am not advocating that the Filipino people should discard their religion. What I do hope for is that the government - national, provincial and local - will someday become completely secular. There is hope in this area. President Noynoy Aquino has openly advocated family planning despite protestations from the CBCP (Catholic Bishops Conference of the Philippines).

We must tame that monster (population explosion) that we have lived with since the end of the 2nd World War, when Filipinos began to breed like rabbits. This, despite the invention of the Pill and the promotion of condom use as a defense against AIDS. Why have we not succeeded in taming that monster? Because it is protected and encouraged by the Catholic Church, which is the real and enduring power in Philippine governance.

Because of overpopulation, there is corruption in all stitches, nooks and crannies of the social fabric. People simply must be able to make ends meet, and corruption is the easiest way to a balanced budget. Because of overpopulation, there is widespread poverty, which leads to violent crimes, prostitution, jueteng, drug smuggling, murders-for-hire, etc.

Because of overpopulation, all the economic gains are eaten up literally by the ever-increasing number of mouths to feed.

Bernie Villegas, an Opus Dei founder in the Philippines, does not talk of overpopulation. He can't. He is far too invested in his extreme religiosity. He thinks that there should be more religiosity in government, not less.

Former President Arroyo, the late Cory Aquino and the de facto President Imelda Marcos either did not separate their faith from their governance or used the Catholic Church in a very cynical way, and the result was complete public subservience to the CBCP.

It was in fact during the administration of Fidel Ramos, a secular Protestant, that the country experienced real and sustained economic progress. So strong was the Philippines' growth spurt that it lasted well into the term of the plunderer Estrada - who just happened to be an irreligious jester.

I understand completely Carlos' impatience over the negativity that pervades Internet discussions about conditions in the Philippines. I think we should not criticize for the sake of criticizing. If I am coming across as that kind of a critic of the Philippines, it must be because I do not communicate my intentions as well as I should.

I must continue to emphasize that I am not an ordinary critic. I feel that I am entitled because I have devoted my retirement years to figuring out solutions to the country's myriad problems. I have even written a book (Out of the Misty Sea We Must...Blueprint for a New Philippines) that is chock-full of recommendations. I am most certainly not one who criticizes Filipinos and the Philippines for sheer enjoyment.

We cannot begin to improve our lot if we are allergic to self-examination and self-criticism. The first step on the road to improvement is a completely honest self-examination. Without that, we are just deceiving ourselves. Better to sit and wait for that miracle, or to pray until our prayers bring dividends.

I submit that people who wear blinders are incapable of honest self-examination. The Opus Dei is a blinder. That is why people like Bernie Villegas cannot be entrusted with the country's economic fate. That's just too bad, because I was once a huge fan of Bernie, who graduated summa from Harvard Business School. I was also offered a chance to win some kind of scholarship to further my studies in Economics either in the U.S. or in England and to explore that opportunity, I was scheduled to meet with Bernie, who at the time was the head of the Economics Department at La Salle. I was already in U.P. at the time, but my classmates and lifelong friends in La Salle threw my name into the mix of potential scholars.

I did not show up for the meeting with Bernie for reasons I can no longer remember. It was certainly not because of the Opus Dei thing because Bernie was not in that movement yet.

Oh, and the blinders. We all have blinders. There are very few who have absolutely no blinders. The few who wear no blinders are atheists and I often find them annoying.

Cesar L