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The Two
Philippines
By Michael Alan Hamlin
September 17, 2003
Many years ago I wrote a speech
for a presidential aspirant titled The Two Philippines based on
work done by activist, reformer, and professor Ruth Callanta. A
decade later, the divisions that speech spoke of remain pretty much
as they were then. To illustrate those divisions, the speech asked
listeners to imagine a family night out for a middle income family,
and then to consider how long a typical farmer would have to save
to offer such a treat to his family.
With a per capita income of P45,500 ($827), a typical farmer might
bring home a whopping P3,541 ($64) a month. A bottle of Gato Negro
at P600 would take about 17 percent of his monthly income. A nice
dress for his wife would probably take at least a third of monthly
revenue, and that's of course being extremely conservative. A new
pair of pants for the son would set the farmer back at least the
cost of the wine. And the meal itself at a moderately priced Italian
restaurant for a family of five with soup, salad, and desert would
likely exceed the farmer's monthly income by about 11 percent.
If the farmer is really frugal and saves about 10 percent of his
monthly income a month, in 11 months he would have enough money
to pay for that Italian night out, except for the wine. He could
buy the dress, if he saved for nothing else during this period,
in about two and a half months. The wine and the pants would each
take a little less than two months each. So you get the picture,
right? This big night out is something akin to a lifetime achievement.
It's a really far away target, a real stretch goal.
Of course, no farmer making just P3,541 a month is going to take
his family to a nice Italian restaurant. In fact, no farmer making
three times that much would even dream of such a thing. And yet
farmers and other low-income individuals probably make up around
60 percent of the population, depending on whose doing the socio-economic
analysis. But even the most optimistic economist puts poverty in
the Philippines at 40 percent. The important point, I think however,
is not that few farmers eat at Italian restaurants, but that the
10 percent or so of the population that does regularly eat at Italian
restaurants never, ever thinks about those farmers.
The politician I was writing speeches for and those who supported
him dreamed that we could change all that. Now, I must admit, it's
much harder for me to dream that way. I did once sincerely think
that we could find a leader who really cared about his country enough
to step up and make the sacrifices - and force others to do the
same - to really change things. And that we could get him or her
elected. Now, I just don't see that on the horizon.
However, my purpose today is not to lament the lack of leadership
we endure in the Philippines. Rather, it's to suggest that the same
division we see between low-income earners and middle- and high-income
earners can also be seen in Philippine business. For example, small-
and medium-enterprises (SME) account for about 75 percent of all
registered enterprises in the Philippines, and about 90 percent
of employment. However, they generate less that half of total enterprise
activity. The top 10 conglomerates in the Philippines account for
over 50 percent of total purchase spend on their own.
The fact that the SME sector has never really taken off helps account
for the Philippines inability to grow at high sustainable rates.
Now, note that it's not liberalization and globalization that keeps
SMEs in their stunted state of imbalance. It's the power of large
domestic corporations and political elites that have always dominated
the Philippine economy, and continue to do so. In fact, that's why
they're so concerned about liberalization and globalization.
Because it's not the SMEs that will feel the competitive effects
of liberalization. Rather, it is the grip of large corporations
that will weaken, and as it does, so too will their control over
the economy. I don't mean to suggest that large corporations and
their chief executives are bad guys that need to be taken down a
notch. In truth, there are a good many of these behemoths that are
in fact quite well managed, even impressively so.
But just because large corporations aren't
bad guys necessarily that doesn't mean that they should be in control
of the economy. Liberalization and the effects of globalization
will create new opportunities for the SME sector as new market entrants
outsource non-core processes and develop suppliers, generate lower
prices for consumers, and produce new jobs. The net effect of these
things is a bigger economic pie for everyone. And that's what the
goal should be.
Especially for the sake of those poor fellows who don't dare to
dream of treating their families out to an Italian dinner, and if
things don't change, never will.
(Michael Alan Hamlin is the managing director of consultancy TeamAsia
and the author of three books on Asian economies and companies.
His latest book is Marketing Asian Places, of which he is
a co-author (Wiley, 2001), and he is currently at work on High
Visibility: The Making and Marketing of Asian Professionals into
Celebrities. Write him at mahamlin@teamasia.com.).
Copyright © 2003 Michael Alan
Hamlin. All Rights Reserved.
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