The Philippines: Why are we Poor By Antonio C. Abaya
One of the most viewed articles in my Web site is Why Are We Poor? (Dec. 4, 2004), which purports to show How to Become a Poor Country in Six Easy Lessons.
I discussed these Six Easy Lessons when I was guest speaker before the Philippine Finland Association last April 19, and when I was interviewed by Gemma Cruz-Araneta on her radio program last April 28. This being May Day or Labor Day, those Six Easy Lessons bear repeating.
We are constantly reminded that until the late 1960s, the Philippines enjoyed the highest standard of living in Asia, second only to Japan’s. what happened?
one. in my analysis, our problems began when congress enacted the minimum wage law in 1957 or thereabouts, fixing the minimum wage at p7 a day, which was then worth $3.50. when us companies started moving their manufacturing facilities to the far east in the 1960s, most of them chose to locate in taiwan or hong kong; relatively few chose to locate in the philippines.
this despite the facts that a) most filipino workers spoke some english and most hk chinese and taiwanese workers did not, and b) filipino managers were already famili@r with american business practices; most hk chinese and taiwanese managers were not.
so why did most us manufacturers locate in taiwan and hong kong, instead of the philippines? simple. wages there, believe it or not, were lower than here, and—more important—there was no minimum wage law in hong kong and taiwan.
two. in the 1970s, taiwan, hong kong, singapore and south korea deliberately geared their economies to the export of manufactured goods; the philippines did not, satisfied as it was manufacturing for the domestic market. in the 1980s, malaysia, thailand and indonesia followed the lead of the four original asian tigers and likewise geared their economies to the export of manufactured goods; the philippines did not.
in 1965, when asian countries were exporting commodities, the resource-rich philippines exported a total of $769 million worth, compared to only $175 million and $446 million from resource-poor south korea and taiwan, respectively.
in 2003, after almost 40 years of pursuing their respective economic strategies, the philippines’ exports totaled only $34.6 billion, compared to $201.2 billion for South Korea and $143.0 billion for Taiwan.
Three. Having missed the export bus in the 1970s and 1980s, the Philippines also missed the tourism bus in the 1990s to the present. In 1991, the Philippines and Indonesia drew in the same number of foreign tourists: one million. In 2005, the Philippines drew in only 2.6 million, Indonesia 6 million, despite the Bali bombing of 2002. Malaysia attracted 15 million tourists, Thailand 13 million.
Four. Having failed to develop a wide manufacturing base during the export boom of the 1970s and 1980s, the Philippines under President Fidel Ramos (influenced by Jesus Estanislao and Bernardo Villegas) foolishly embraced free trade and globalization even ahead of, and more enthusiastically than, much more developed South Korea and Taiwan. We naively opened our economy to the manufactured products of more aggressive countries, thus forcing the closure or retrenchment of many domestic producers and the loss of jobs of countless Filipino workers, forcing many of them to seek employment abroad.
Five. Similarly committed to free trade and globalization, President Gloria Macapagal-Arroyo has a clear bias against industrialization, preferring to concentrate on agriculture, telecom and tourism in her economic program. She seems to have accepted as immutable the de facto scratching of the Philippines as an industrial, manufacturing country and our destiny as an exporter of labor.
Six. Even as the economy failed to generate sufficient jobs in the past 45 years for the reasons outlined above, the Roman Catholic Church continues to actively oppose any and all artificial methods of birth control, stubbornly oblivious to the negative connection between a weak economy and a galloping population growth rate. In the 1960s, Thailand and the Philippines had more or less the same population. In 2006, there are 84 million Filipinos but only 64 million Thais. Commonsense says that, all things being equal, it is easier to feed, clothe, educate and find jobs for 64 million people than for 84 million.
What do these Six Easy Lessons mean for the Filipino worker? In 1957, the minimum wage was P7 a day, which was then worth $3.50. In 2006, the minimum wage in Metro Manila is P325, which at an exchange rate of P52 to $1 is worth only $6.25. So in 49 years, the minimum wage, in US dollar terms, has increased by only $2.75, or an average of only 5.6 US cents every year.
This is not a sign of avarice and greed on the part of Filipino employers. It is a sign of weak economic activity brought about by wrong choices in economic strategies by national leaders going all the way back to President Ferdinand Marcos. Principally the failure to ride the export boom in the 1970s and 1980s, and the failure to ride the tourism in the 1990s to the present, aided by the obstinate refusal of the Roman Catholic Church to accept a reduction of the population growth rate through artificial means.
Wages rise without the aid of a minimum wage law as the pool of unemployed and underemployed shrinks due to the increase and growth of enterprises encouraged by the right economic strategies chosen by the political leadership. Pushed by their own self-interest, entrepreneurs will bid higher and higher for the workers and employees that they need for their enterprises. This has been amply proven in South Korea, Taiwan, Hong Kong, Singapore, Malaysia and Thailand, and even in communist but “stinking capitalist” Vietnam and China.
Wages stay depressed, even with a minimum wage law, if the pool of unemployed and underemployed remains large due to weak economic activity brought about by poor choices in economic strategies by the political leadership, and aided negatively by a runaway population growth rate. The Philippines is the shining example of this.
Corruption has little to do with it. China and Vietnam are adjudged two of the most corrupt countries in Asia, yet they have enjoyed the fastest economic growth rates in the region in the past 10 years.
Economists tell us that every billion dollars in exports can be translated into 200,000 jobs. This means that if the Philippine’ exports were $100 billion (like malaysia’s), instead of only $34.6 billion, the extra $65.4 billion would have created 13 million additional jobs.
The Department of Tourism also tells us that in 2005, the 2.6 million tourists who came here generated 750,000 jobs. This means that if our tourist arrivals were 15 million (like Malaysia’s), instead of only 2.6 million, the extra 12.4 million tourists would have created 4.3 million additional jobs.
those 17.3 million additional jobs, in exports and tourism alone, would have mopped up the pool of unemployed and underemployed and pushed wages up several times the current rate, without any need for a minimum wage law; would have stabilized the peso-dollar exchange rate at 4-to-1 or 7-to-1 (depending on when the correct economic policies were adopted); would have allowed us to keep our best teachers, our best nurses, our best doctors, etc; would have spawned a broad-based economic prosperity and rendered joma sison and his silly maoist revolution totally irrelevant.
no offense sa mga supporters sa hyperwage...
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we missed the export era already as the article said! that sucks. but thats the reality! 
Originally Posted by foolonthehill
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