Nationalist industrialization hurts the poor

I am still optimistic that well-informed people like Speaker Sonny Belmonte can convince the next administration that removing the restrictive economic provisions in the Constitution will promote the common good of future generations of Filipinos.

Let us start with the Catholic bishops’ timely reminder that “the social encyclicals of the Church bear witness to the fact that the Church has always considered social justice an area of her competence and solicitude.” All of us should be grateful for this reminder about the Church’s social doctrine as the source of “the principles for reflection, the criteria for judgment and directives for action which are the starting point for the promotion of an integral and solidary humanism.”

One of the most important directives for action to be found in the Church’s social doctrine is the preferential option for the poor. We should gently remind the bishops that the misguided nationalism enshrined in the Constitution has been partly responsible for the continuing poverty of millions of Filipinos, especially in the rural areas. By advocating the questionable “Filipino First” policy, the Constitution and the laws deriving from it have given to the Filipino elite the monopolistic or oligopolistic control of vital industries, especially in the public utilities sector. The poor never benefit from “Filipino First” policies because they obviously do not have the capital to develop our resources. They benefit from the employment generated by those who can invest risk capital, whatever the nationality. With their good intentions, those who are afraid that our natural resources and domestic markets may be “exploited” by foreigners have actually encouraged some local entrepreneurs to inflict their poor quality of services or goods at higher prices on tens of millions of hapless Filipinos.

Paradoxically, socialist countries like China and Vietnam have been more open to foreign direct investments (as can be seen in their FDI figures, compared to our measly levels). These countries’ leaders realize that the active participation of foreign investors in their markets forces the local elite to shape up and be competitive.

In my last trip to Vietnam, I learned that by this month, foreigners will have been allowed to actually own land in that emerging market that is giving the Philippines real competition in attracting investors that are moving out of China and other Northeast Asian economies. The Vietnamese government benefits from greater flexibility in adapting policies to changing global, regional and local circumstances. In contrast, the hands of the Philippine government are tied by an inflexible Constitution. The phrase “as may be provided by law,” which is the very essence of Charter change, will give the Philippine government the flexibility that our neighboring countries enjoy.

The historical facts speak for themselves: “Nationalist industrialization” policies were responsible for the inward-looking, protectionist and capital-intensive economic strategies that dragged the Philippines from its status as one of the most developed countries in East Asia in the 1950s and 1960s down to being the “sick man of Asia” by the end of the last century and the beginning of the new millennium.

The concentration of poverty in the rural areas is the unintended result of this obsession with industrialization that became blind to the farm-to-market roads, irrigation systems, postharvest facilities, etc. that small farmers needed to make a decent living. There were even leaders during this “nationalist industrialization” binge who considered it treason to focus on agriculture because, according to their mistaken view, agriculture would just keep Filipinos as “hewers of wood and drawers of water.”

The sustainable development of our natural resources can actually be achieved if we allow more equity participation of responsible foreign investors. Filipino capitalists are still quite risk-averse, so that even if our financial system is extremely liquid, our investment-to-GDP ratio is still abysmally low at less than 20 percent. (Our East Asian peers have averages of 25-30 percent; China has close to 50 percent.)

To make matters worse, the Philippine government is having difficulty contributing to capital formation by constantly underspending on public works. Just witness the very poor performance of government capital spending in the first quarter of 2015. By making it more possible for foreigners to invest in the development of our natural resources and the ownership and operation of public utilities, such as in transport and communication, we can significantly increase our investment-to-GDP ratio, making it possible for the economy to grow at the rate of 8-10 percent annually in the next decade or so.

We need these growth rates to address the intractable problem of mass poverty.

For example, responsible mining companies from such countries as Australia, Canada and Chile have enough of a track record in sustainable mining so that we need not be afraid of environmental disasters. In fact, the ones who practice irresponsible mining are Filipino small-scale miners, who operate in connivance with corrupt and greedy Filipino politicians.

Our moral leaders should recognize the fact that with proper selection, there are foreigners from all over the world who can be more protective of the Philippine common good than many Filipinos who are benefiting from our obsolete “Filipino First” policy. This policy has turned out to actually be “Rich Filipino First,” never mind the poor!

Bernardo M. Villegas (bernardo.villegas@uap.asia) is senior vice president of the University of Asia and the Pacific.