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Asian godfathers
By mlq3 Posted in Daily Dose on August 6, 2007 89 Comments 6 min read
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I received a text from someone I know who flew by chopper to Baguio and back over the weekend. The person said “there is so much water in the fields of Central Luzon, especially the irrigation lines that feed off San Roque Dam. It’s like they’re releasing water. emergency powers?”

Emergency powers -first primarily meant to address a power crisis, now primarily aimed to address water problems- is precisely the headline today: House bill seeks ‘limited emergency powers’ for Arroyo:

La Union Representative Thomas “Butch” Dumpit Jr. said he would file the measure “on a limited scope” to address the problem, especially in areas mostly affected by the dry spell like La Union, Central Luzon, Metro Manila, Cagayan, and Ilocos region.

Dumpit noted that the entire provinces of La Union, Isabela, and Cagayan had been declared under a state of calamity by the President.

Now Dumpit makes certain claims that ideally, as he says, shouldn’t become a political football -if the claims are verifiable and come from an objective authority. This is where media, ideally, should enter the picture. Besides reporting, say, Dumpit’s proposal, and the opposition that will arise, media can clarify whether Dumpit’s claims have a basis in fact or not.

Which isn’t to say it will be easy, a hell of a lot of legwork from a hell of a lot of people will be required. Do the executive issuances Dumpit mentioned exist? Who recommended them? Is the extent of the drought as Dumpit says it is? Says who? Are the number of workers he claims as displaced, based on his own count or a credible count? And what of the recent rains?

Who has been tracking what’s going on in the management of water from San Roque Dam? An enterprising reporter would go and sniff around to see if water’s being released according to a plan, or, perish the thought, to lower the dam level and justify claims of an emergency.

I hope some of the more scientific-oriented readers of this blog might be able to help identify sources to help answer these questions.
I recently got a copy of “Asian Godfathers: Money and Power in Hong Kong and Southeast Asia” (Joe Studwell), as provocative a book as one can hope to read. I haven’t really started on it, though.

However, in Newsweek magazine, the author has an essay, Ties That Bind: Crony capitalism is stunting southeast Asia, where the author basically explains the argument of his book, which is that crony capitalism is stunting growth in Southeast Asia. His indictment is severe, and region-wide:

Despite now bullish stock markets in the region, the billionaires – with their lousy corporate governance and manipulation of local banks to provide cheap and easy alternative sources of credit – also have contributed to the worst long-term emerging-market-equity performance in the world. From 1993 – when the first significant international portfolio investments came into Southeast Asian bourses – to the end of 2006, total dollar returns with dividends reinvested in Thailand and the Philippines were actually negative. Returns in Indonesia and Malaysia were worse than leaving money in a London bank account. Singapore produced less than half the gain of the London or New York markets, with which only Hong Kong was comparable. It is a brave investor who thinks long-term equity returns will improve in the absence of structural economic change.

His particular axe to grind involves the ties between big businessmen, usually Chinese, and regional politicians:

When independence came, in the 1940s and 1950s, the region’s new leaders built on a system in which politics rules the economy. In Thailand, military leaders demanded substantial equity positions and a board presence in ethnic Chinese-run companies; the Malay political elite made its financial expectations of Chinese businessmen very clear, in what became known locally as “the bargain.” While the Thai and Malay elites stuck with established Chinese trader families, the two great Southeast Asian dictators of the postwar era – Suharto in Indonesia and Ferdinand Marcos in the Philippines – turned to unknown small-timers of whose absolute loyalty they could be sure. They were men like Liem Sioe Liong, a trader who in a few years became Indonesia’s top tycoon, and Lucio Tan, a man who once worked as a janitor but ended up as a Marcos billionaire.

I don’t know whether it’s refreshing or depressing to see a regional perspective marked by such a scathing indictment of regional billionaires and the politicians they’re cozy with.

I believe this article will make for a very interesting, and perhaps, constructive, discussion. One point Studwell makes, can be connected to the next I want to raise.

Studwell writes,

Most obviously, it is clear today that South Korea and Taiwan take political systems seriously as drivers of development. In 1997, Kim Dae Jung, a longtime democracy and human-rights activist, was elected South Korean president and set in motion the most effective reform process to have occurred in the main crisis countries. Reporting and compliance requirements in the Seoul stock market are now stricter than in Southeast Asia, and the judiciary has shown far greater independence and resolve in pursuing those whose actions contributed to the crisis. The families behind Korea’s chaebol are today much weaker than their peers in Southeast Asia.

The sort-of-related point I want to raise is in my column for today, Gerrymandering. In it, I refer to an old column by Juan Mercado titled Lilliputian Provinces, Pygmy Governors. In my column, No problem, I’d praised Cebuanos for deciding to keep their province whole. And I’ve been following Sonny Pulgar’s opposition to dividing his home province, something that seems to have become a kind of fait accompli.

For my column, I found the Administrative Divisions of Countries (“Statoids”) website invaluable. Look at the entry on the Philippines, and then compare it to our neighbors, such as Thailand, then Malaysia, and Indonesia, and even countries like India. They have been far less promiscuous at province- even city-making, than we have. This mania for gerrymandering has provincial residents like arnel cadelina asking tough questions.

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  1. one of the more telling quotes of that newsweek article is the following:

    “Where Southeast Asian states stuck with modified colonial rentier systems after the second world war, South Korea and Taiwan took a different course. They successfully implemented land reform — in stark contrast to countries like the Philippines, where political elites have ensured the continuance of a landed ascendancy — and thereby ensured a bottom-up development process. Their governments made a commitment to social equity, reflected in far lower levels of inequality than are present in Southeast Asia, and the existence of independent organized labor.”

  2. “I don’t know whether it’s refreshing or depressing to see a regional perspective marked by such a scathing indictment of regional billionaires and the politicians they’re cozy with.”

    Better that it came from a foreigner than a fellow Filipino, right? We’re plagued by a land-grabbing old rich and nouveau riche cronies. Manolo, having business and political leaders who came to their position in immoral and unethical ways must have an effect in the overall culture, right?

  3. Takot lang mga tao i criticize mga Lopezes, Cojuanngcos, Araneta, etc. Baka tawagin silang commie.

    The injustice we’re suffering now is a carry over from the Spanis regimes. Spanish inherit all land from their forefathers, the Chinese get the best left-overs because they are more “reliable” than the indios. By more reliable, they probably mean the Chinese won’t rebel and get back their birth right? Yeah, whose birth right is the Philippine islands?

  4. “The billionaires avoid export manufacturing and its requirement for global competitiveness. Instead they prosper from concessions, monopolies and cartels in local service economies that define things like port handling, real estate, telecommunications and gaming.”

    Now when it comes from the mouth of a foreigner, everyone’s listening.

  5. “there are no regional or global brand-name corporations with the capacity to originate new services and technologies. There are simply local billionaires, lionized by domestic media, but running businesses whose productivity is regularly shown by economists to lag both that of Southeast Asian manufacturing and global enterprise in general.”

    People, read the article. These are my points exactly, only worded in more expressive, poetic, apropos, and decidedly educated language than what I’m capable of when expressing my hatred for this country’s rich and powerful.

  6. “Today, it seems all too possible that the region’s coddled political and economic elites will allow their states to slide into a Latin American morass, as they continue to live high on the hog while the dreams of ordinary people go down the tubes.”

    Doesn’t this strike a chord. The rich already live elsewhere. They’ve invested on their foreign nest eggs heavily and all that’s left is find someone to blame in case the economy goes to mangy dogs… Hey, it’s not their fault, they were educated in Harvard.

  7. which is why future for the Phils is growing more bleak as we speak. politician’s greed can’t be reined in, and those who are fighting it, are either lone voices (like Juan Mercados’) or too weak to generate much support. i’ve given this suggestion before, and will reiterate it again. creating chartered cities and provinces are all well and good, after all, if done correctly, they are engines for growth. but done capriciously, it places a great strain on our national budget, not to mention it creates more batugan politicians, who think IRA is theirs as a given right, and not something one should work for. the reason for gerrymandering of course, is that as dynasties grow, elective positions to divide up between family members remain the same. so they either have to fight it out bitterly, or eureka, jz create new electoral cities and provinces where they could run for election more freely. perhaps there will come a time that provinces would become as big as mere villages or barrios of today. just imagine.

    the solution is simple. creation of new provinces and cities are allowed, but stricter requirements must be asked of those applying for it. likewise, those that are poor economic performers, must be integrated to neighboring cities/provinces that are performing well enough, and able to absorb them into its economic growth. new cities and provinces that are created must also not be given IRAs immediately. the new politicians that will govern these new cities/provinces must be allowed to leave their respective offices and a new official replace them before IRAs can be released. and not before these cities and provinces have shown a certain percentage of economic growth. (say, if they will be receiving % of IRA, their respective cities/provinces must have half that amount in capital. this is just a wild guess at percentages, but im sure people more knowledgeable abt these things than me can compute better) and also, more imptly, cities and provinces whose economies fail and are integrated into better economically managed cities/provinces will have all their elective offices abolished.

    the ff will be effects of this move: one, elected officials will be driven to manage their cities/provinces to growth or they will be out of office. batugans will be driven out of office, and only those who are good economic managers will remain. cities/provinces at the mercy of lousy economic managers will be given over to officials who can turn their cities/provinces around with the same policies he/she has instituted in his/her successful city/province. officials will realize the rewards of successfully managing their respective economies. a growing constituency, and more powers as his jurisdiction grows larger. this can only translate into the ultimate prize. with a bigger constituency, pleased at your performance, you have more chances at (yes) the presidency.

  8. by which I mean, mayors enter parliament, when they have ended their terms fully, and have overseen their cities grow economically. oh, and yes, this is in conjunction with my suggestion above abt the solution to gerrymandering.

  9. brian, i knew the article would delight you. from what i’ve flipped through in the book, his arguments are even more devastating. with regards to your pointing out you’ve been saying pretty much the same thing, the value of this article and the book, lies in the information he provides, not only country-by-country, but from a regional perspective.

    paseoblur has also been saying pretty similar things, so there’s a kindred spirit for you, too.

  10. “Now when it comes from the mouth of a foreigner, everyone’s listening.”

    Ah well, that’s life BrianB. But then again, anything that would get the point across would be good as well.

    Anyway, thanks Manolo for this piece.

  11. thanks manolo for the special mention. I understand you’ll be in Lucena in 2 weeks time. pls let me know when.
    Aug 19 is Quezon Day.

    the present governor appears no longer keen in the division of Quezon, and that looks like a welcome development. actually it was some sort of insurance from the congressmen who sponsored the bill. that in case they lose in the provincial election, they have a fall back. the proposal was really not that serious, though, just an ego trip by the local leaders who regrettably have their hands on the steering wheel.

  12. Folks,
    what can emergency powrs do to solve power crisis and the water crisis,hire more foreign consultants???

    I remember some genius sugested nuclear power,but do we have the man power to even run one, what will we do, out source from India?
    As to water?
    what do we do hire the experts from Israel who solved their water crisis decades back?

    WTF (Sorry)

  13. “the solution is simple. creation of new provinces and cities are allowed, but stricter requirements must be asked of those applying for it. likewise, those that are poor economic performers, must be integrated to neighboring cities/provinces that are performing well enough, and able to absorb them into its economic growth. new cities and provinces that are created must also not be given IRAs immediately. the new politicians that will govern these new cities/provinces must be allowed to leave their respective offices and a new official replace them before IRAs can be released”

    Sounds good…but is not integration better?I know it is part of your proposal but adding new cities,new politicians and new what not’s really does not add anything new.

    And is not Metro Manila a good case study for your proposal?

  14. “adding new cities,new politicians and new what not’s really does not add anything new.”

    KG, that is not the bulk of my proposal, and was merely an aside (i said creation of new cities/provinces is still allowed, after all, done rightly, it really can be an engine for growth. a good example would be Naga City, which when made a chartered city, took off, and left the rest of it’s neighbors in the dust)

    And good idea. Metro Mla is indeed a good case study. QC can annex all its neighbor cities, and Makati can do the same.

  15. Creating another level of government between the national and the provincial governments might reverse the atomization of the Philippines. Allow provinces and cities to consolidate into an Autonomous Province with jurisdiction over police, education, and personal income tax collection. Give them a franchise to operate toll roads, seaports and airports. The new Auto-Province must have a minimum land area of 20,000 sq. km.

  16. “And good idea. Metro Mla is indeed a good case study. QC can annex all its neighbor cities, and Makati can do the same.”

    Impossible without incentives.

  17. I think Studwell’s point on how crony capitalism stunts economic growth highlights a key benefit of the Communist Revolutions in China and Vietnam. With no cronies to start with, their economies were better able to go on the fast track once market reforms were introduced. You can contrast that with the situation in the Philippines where the political-economic elite has put a lid on economic growth for almost fifty years.

    If we manage to emulate democratic South Korea where the influence of the Chaebol-billionaires were clipped once they outlived their usefulness, then well and good. Otherwise, we may have to consider going the way of China or Vietnam so our society can do some transitional spring cleaning as a prerequisite for economic takeoff.

  18. “spring cleaning as a prerequisite for economic takeoff.”

    The National government can let go of the SSS. Sell it to the members. It can then be some sort of private equity firm.

  19. Supremo, actually i think we need to go the opposite direction. I think government went too far with privatization (starting with the Asset Privatization Trust led by Washington Sycip) which is why it is now experiencing a fiscal crisis. If government cannot get revenue via taxes (since Filipino businessmen avoid paying taxes) they might as well take over their businesses.

    In China, for example, they had to go through a phase (from 1978 to the late 1990’s) where they had companies that were owned by the local government (i.e. their ‘township village enterprises’) which captured revenue for the government. For one thing, i think all agriculture (especially ethanol-related agriculture) should be nationalized and the land contracted out to land reform beneficiaries.

  20. “so our society can do some transitional spring cleaning as a prerequisite for economic takeoff.”

    well then, we have to spring-clean a lot of influential families. wonder if they’ll take that lying down?

  21. “well then, we have to spring-clean a lot of influential families. wonder if they’ll take that lying down?”

    I advise a little bit of racial discrimination a la Malaysia.

  22. Devilsadvc8, of course not. That’s why many of them want to shift to a parliamentary system to prevent a Hugo Chavez from being elected by the people.

  23. BrianB, that would not be an optimal move as (unlike Malaysia) our society is not cleanly divided along racial and religious lines. In Malaysia, it’s easy to identify a Malay because he is also a Muslim. Unless of course you mean giving preferential treatment to Filipino Muslims, which i think is worth a look since they are the poorest among the poor in the Philippines. Over here, it’s more efficient to focus on the top 300 (or so) families as there are fewer of them.

  24. No more crap like the CARP. Land should become a 50 year lease from the state once sold or inherited.

  25. BrianB,

    “I advise a little bit of racial discrimination a la Malaysia.”

    Call it Affirmative Action.

  26. all we gotta wait for is that Bastille moment then. and then, a new elite from the revolutionaries should start the vicious cycle once again…
    i think its a mind-set. some people just do not realize that life would be easier if wealth is spread more evenly. but then again, that could just be plain greed.

  27. Communism is not the solution, has never been. Fascism is closer to it. Unless you want to be creative and posit a genuine mass “struggle” (more like mass empowerment) where belief in religion and family is preserved.

  28. “all we gotta wait for is that Bastille moment then. and then, a new elite from the revolutionaries should start the vicious cycle once again…”

    Pare, France is a great place to live in because of the Terror. Besides, we have smarter people than Danton and Robespierre. People who know how to blog and look at their email.

  29. “Ah well, that’s life BrianB. But then again, anything that would get the point across would be good as well.”

    Jemy, it’s a Filipino disease. The conditioning of 450 years of Spanish and semi-Spanish rule.

  30. BrianB,

    Benito Mussolini said that “Fascism should more appropriately be called corporatism because it is the merger of state and corporate power.“. If you favor fascism, then why are you against crony capitalism?

    And if communism is not the [part of] the solution, how do you explain China and Vietnam? As i commented before in this blog, I believe that the two stage strategy of achieving social equality and then introducing market reforms as implemented in China and Vietnam (as well as South Korea and Taiwan) has a lot going for it in terms of track record.

  31. CVJ,

    Of course, you need to replace current corporate owners with some of the many brilliant brown-skinned people we have lying around picking up garbage or working in the haciendas. No market reforms necessary. Just replace the business and political elite with real Filipinos. It’s got nothing to do with economic models. We could have an Arabic economic model and still make it with the right people in important positions.

  32. Brianb, of course market reforms are part of the solution. China took off after Deng introduced market reforms in 1978. Same with Vietnam. India’s growth accelerated in the 1990’s after its own round of market reforms. We have to be mindful of the counterexample of Zimbabwe where Mugabe’s expropriation of the white farmer’s land has set off economic collapse. BTW, even non-browned skinned people can be real Filipinos and vice-versa.

  33. Karl,

    “Folks,
    what can emergency powrs do to solve power crisis and the water crisis,hire more foreign consultants???
    I remember some genius sugested nuclear power,but do we have the man power to even run one, what will we do, out source from India?
    As to water?
    what do we do hire the experts from Israel who solved their water crisis decades back?
    WTF (Sorry)”

    Rain dance dude. Rain daince,

  34. The market can be reformed at will; people cannot. At least not an entire class of people. Replace, replace, replace. No forgiveness, no understanding, no sympathy. Sympathy is for the poor and the helpless.

    One weakness o Filipinos is that we sympathize more with the rich and powerful, giving them every benefit of the doubt that we can afford (mangungutang pa tayo nang doubt para lang mabibigay natin ang benefit sa kanila). I think this is rooted from the way Filipinos handle fear and the way they deal with people they fear. Minamahal natin ang kinatatakutan natin.

  35. “Besides, we have smarter people than Danton and Robespierre. People who know how to blog and look at their email.”

    You’ll be surprised at how many “smart” people revert back to being barbaric when surrounded by evil. I believe Winnie Monsod called it Lucifer Effect (or something) That’s what happened to the French revolution. anger got out of hand, and fellow revolutionaries who showed a hint of sympathy with the enemies, were hanged along with them. it’s like the NPA purges. anything less than blind obedience (or great acting) would be branded as a betrayal of the cause. (and God have mercy on us, if people like Ellenites lead that revolution)

    and btw, if this were to happen (an Bastille-like event), you think those who blog and email will be the ones leading it or the ones being dragged out into the streets? use your imagination man.

  36. “preferential treatment to Filipino Muslims, which i think is worth a look since they are the poorest among the poor in the Philippines.”

    Filipino Muslims are not poor. They are stupid. Stupid because they listen to their Sultanga who wants to go back to the “golden days” of the Sultanate of Sulu. Will their Sultanga give them some crumbs from the multi-billion US dollar Sabah proprietary claim? I don’t think so.

  37. it seems we always find someone to blame for the problems we face as a nation other than ourselves collectively. in the days of rizal, it was the organized clergy, with its irresistible influence on the secular government, that impeded our progress intellectually, economically and politically. then it was the americans who “foisted” upon us independence, for which we were not prepared, and virtually ensure a mendicant culture among us that kept us tied to its purse strings. after that came our homegrown politicians who preferred a government “run like hell” by them than one “run like heaven” by the americans. then came the new oligarchs emerging from the rubbles of ww ii, with wealth and massive landholdings inherited from the masters of yesteryears (by hook or by crook). then as now, power goes where the money is, and these oligarchs made sure they monopolized the seats of power by keeping them within their own family as virtual chattels subject of heriditary succession. now, we have “big business” supposedly in some sort of unholy symbiotic arrangement with “regional politicians”.

    considering that, in our system of government, political power emanates collectively from the people, shouldn’t we each examine ourselves and wake up to the reality that we own the blame afterall?

  38. So rain dance is the solution…

    outsourcing pa din yun…

    OUTSOURCING NG AMERICAN INDIANS.

    (Joke)

    Nice discussion Devilsadvoc8,et al

    di na ako sumali,you seem to have it all set…..

  39. Bencard…….was that you?

    OK, I will meditate and reflect and reexamine myself,if that is what you suggest.

    Then,what’s next, OBI WAN?

  40. Bencard,

    When you say we…is that inclusive?

    You even gave an enumeration,of whom to blame,so I guess it is inclusive.

  41. yes, karl, its me in the flesh. after putting the blame on where it should be – us, we should make a solemn promise to ourselves that we will refrain from electing to office those proven to be non-performers, malperformers and under-performers; of questionable personal integrity; mentally incompetent; and those who are loyal only to themselves, their families and and their cronies. then “we ask what we can do” to help our government, rather than ask how it can help us; and strive to become builders, not destroyers, productive, not just argumentative, self-reliant rather than dependent, informed rather than ignorant, comfortable ‘elite’ rather than miserable ‘masa’. let these be a lifetime, ongoing, pre-occupation for each one of us.

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