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Challenges
By Michael Alan Hamlin
March 12, 2001
Two challenges, among a number of
others, to the new administration of president Gloria Macapagal-Arroyo
occurred last week with particular relevance to business and international
investors. They also have serious country marketing implications.
The first challenge is the response of reappointed secretary of
the Department of Trade & Industry Manuel A. Roxas II to a proposed
free-trade pact between the Philippines and the United States. The
second challenge was the barricade of Subic Bay Metropolitan Authority
gates by employees aligned with secretary of the Department of Tourism
Richard Gordon.
In the first instance, Mr. Roxas is reported to have
said in response to a proposal by the USASEAN Business Council to
consider a free-trade agreement between the Philippines and the
U.S. that, "We are not ready. While in general, globalizing
or liberalization is positive for fair trade development and incomes
we need to respond to it on our own pace and our own way."
The problem with this reasoning, if indeed this is
what Mr. Roxas said, is that countries that delay liberalization
and globalization never get ready. Instead, local industries are
protected from competition, eliminating pressure to manage firms
on par with global competitors, and to increase efficiency and productivity.
The beneficiaries are an extremely small group of wealthy industrialists.
The losers are all consumers.
And that’s an historic fact. Late last year respected
businessman and SGV founder Washington SyCip said in public remarks
that the Philippines’ tiny elite has failed despite repeated
promises to contribute in a meaningful way to raising the standard
of living of the poor. They fail to create enough jobs, or to even
pay taxes on profits. And they have been protected from competition
for a variety of excuses for better than half a century. So just
how long do they need protection before things change?
It’s hard to understand why Mr. Roxas responded
in the way he did, given his support for liberalization and globalization
in the past. It may be that he was quoted out of context. On the
other hand, it may be that influential sectors, flush from their
role as "catalysts" in the peaceful but abrupt transition
in governments, have been twisting his ear. Either way, the perception
of the Philippines as a country unsure of its commitment to liberalization
and globalization is hardly the message investors are likely to
respond to.
That’s especially true in the context of collapsed
investment last year into Southeast Asia, and particularly Asean.
As Mr. Roxas himself said last week, there is a great sucking sound
in the region, and it is the sound of investment dollars flowing
into mainland China. And incidentally, mainland China is rushing
to liberalize a broad range of industrial and service sectors as
it removes impediments to entry into the World Trade Organization.
Meanwhile, the country is growing better than twice as fast as the
Philippines, despite the huge disparity in populations.
Sure, China has it’s own set of problems. The
principal difference between China and the Philippines, however,
is that China is actually doing something about its problems despite
its own cumbersome, graft-ridden bureaucracy. As one journalist
asked me the afternoon I was writing this column, "we’re
about half-way through the first 100 days of the (Arroyo) administration
and what have we got as a (development) plan?" My response:
a blank sheet of paper.
While the image of the country as a waffler on liberalization
and globalization commitments is truly unfortunate, the message
Mr. Gordon’s minions broadcast last week is downright dreadful.
Mr. Gordon, the SBMA’s first chairman and long-time political
foe of current chairman Felicito Payumo, is clearly still smarting
over his unceremonious ouster from the former U.S. military base
by now disgraced former president Joseph Estrada.
Like many observers, I was, despite the appalling behavior
of Mr. Gordon when he lost the SBMA job to Mr. Payumo, delighted
to learn of his appointment as secretary of tourism. Despite his
frequently adolescent behavior, Mr. Gordon is an unbelievably effective
cheerleader. I’ve never seen Mr. Gordon give a speech in which
he wasn’t crying as he wound up his remarks. Ordinarily, that
would make me highly skeptical, and with Mr. Gordon, I’ve tried
to be. But somehow the charismatic former mayor pulls a credible
job off, convincing followers and investors alike to take his advice,
whether that means working for free or making a financial commitment
to SBMA.
And despite his poor management skills — most
politicians and entrepreneurial thinkers are, after all, lousy managers
— I believed like many others that if Mr. Gordon applied the
same skills to boosting interest in the beleaguered Philippine tourism
sector that he did in boosting investor interest in SBMA, we’d
at long last see sector growth that’s not pitifully embarrassing
compared to neighbors like Malaysia and Thailand.
Instead, he’s engaging in a political vendetta
that is damaging to himself and the country, and apparently doing
it for purely self-serving reasons (although under the guise of
helping disgruntled and allegedly ill-treated SBMA workers). As
Mr. Payumo and a hundred or so Japanese executives and investors
prepared to formally launch a US$20 million investment by Junken
Sangyo last Thursday, Mr. Gordon’s allies blocked entrances.
As a result, maximum media coverage was assured when some investors
and guests couldn’t gain entrance.
Fortunately, Mr. Payumo remained characteristically
calm — an amazing feat for a politician under any circumstances
— and aside from noting that the demonstration was an obviously
carefully timed political ploy, limited his remarks to praise for
the investment by the Japanese wood processing company. The investment
is the first new investment in SBMA this year.
By contrast, Mr. Gordon’s actions say two very
unfortunate things about the new government. First is that there
is a very low level of emotional and political maturity among its
officials. While that may be unfair to other officials, Mr. Gordon’s
acts rub off on everyone in the cabinet. He is, in effect, negatively
branding the cabinet and the administration.
That brings us to the second negative, and that is
the perception that Ms. Arroyo doesn’t have her cabinet members
under control. Worse, that they will act in a way that negatively
impacts the country for personal reasons. And I believe that’s
exactly the reason the former administration was just thrown out
in January. For investors eyeing the Philippines, more of the same
is not an encouraging message.
Both Mr. Roxas and Mr. Gordon are hugely talented individuals
who have much promise for this country. Hopefully, they will concentrate
on fulfilling that promise and moving the country forward, rather
than subverting public policy to long-vested interests, or ignoring
the best interests of the Philippines in favor of personal animosities.
The country certainly deserves their best.
(Mr. Hamlin is managing director of the consultancy
TeamAsia and the author of two books on Asian economies and managing
in Asia. His latest book is The New Asian Corporation: Managing
for the Future in Post-Crisis Asia. His e-mail address is mahamlin@teamasia.com.ph.)
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