• Opening up business opportunity

    Mike Wootton

    Mike Wootton

    This is about dysfunctionalities in the way the Philippines business system operates. Most people have known for a long time that making new business in the Philippines is not easy for most people, but it is only recently that they have started to actually speak out—it is another area requiring more drastic action than the current administration is probably capable of taking, if the Philippines is ever to grow to achieve a real investment grade business environment, as opposed to the much hyped and facile prognostications of the rating agencies.

    Philippines business operates on the basis of money (preferably lots of it) and connections. Scant value is given to professionalism or thoroughness, and even less to intellect. It’s the ability to get as much as you can in exchange for as little inconvenience as possible that has been so admired, and to a point still is outside the “thinking classes.” No wonder that a top foreign investment target is the gambling sector, which in my interpretation includes “hot money” in the stock market.

    It is said and I forget where I have seen it, that whatever an investor does—foreign investor that is—at all costs avoid dealing with government. Government dysfunctionality spawned the Anti-Red Tape Law which was supposed to address this at least in part; letters to government departments had to be replied to within 15 days, etc. For a time, they were and the reply within 15 days would be “thank you for your enquiry it has been referred to so and so.” Once again, playing games with the intent of the law. But now, it is unusual to even get any reply at all, letters just vanish as if by magic into some black hole, and nothing is heard because in most cases they are opened and distributed by clerks without ever having been seen by the addressee—management in action! If you are extremely lucky, you may just get a reply four or five months later, subject to the letter being fortunate enough to be one of the small proportion that Philpost actually manages to deliver to their intended destination.

    An application for a small loan funded by official development assistance, or ODA, money given to the Department of Energy has been floating around being considered, questioned and evaluated in a government finance institution, or GFI, now for one and a half years, and this for work that is meant to be completed within two years!

    But business activities vacillate between the sublime and the ridiculous in both private and public sectors. Credit card companies will call anything up to 10 times a day if the monthly payment is one day overdue, the Philippine Long Distance Telephone Co. (PLDT) and the mobile phone carriers will just cut you off if your payment is a bit late, Sky phone people at home on a Sunday lunchtime with “reminders” that payment was due on that day. The chasing is much faster than their ability to sort out their payment “postings,” thus people are frequently harassed for payment even when they have already paid!

    It really is a most peculiar situation, the insane drive by big organizations who employ call center services to harass customers to get payments made compared to the total indifference shown by government departments and others further up the Philippines “power tree” to honoring their obligations in any sort of timely way. If DSL falls over which as everybody knows it frequently does, PLDT will “send a technician” who will turn up without warning several weeks after the complaint is made, and may or may not manage to fix the problem.

    Such a lack of a customer-focused service approach.

    I have to smile to myself when I see signs saying: “We accept” bookings, or repairs, or whatever.” It may just be an odd use of English, but taken literally it clearly indicates who is thought to be doing whom a service—it is the customer who is obligated to the service provider who is offering to give the customer something that the service provider seems to think the customer may find hard to get. Businesses in an unconstrained market depends on customers and their goodwill, if the service or the quality is no good the customers (the market) will go to another provider—in theory at least!

    But business in the Philippines (unsurprisingly) mirrors the socioeconomic structure. At the top of the heap there are the oligarchs with their land, franchises, banks and construction companies; next there is government after which there is a fairly small sector of small and medium enterprises, and then a great raft of tindahans, car mechanics, small restaurants, bicycle and umbrella repairers and other service provision type establishments most of which don’t seem to have very long lives.

    The inefficiency of government is widely acknowledged, and there is a naive assumption that transfer of responsibilities to the private sector will solve that problem and improve efficiency, parroting the latest developed economy policy thinking. But that just doesn’t work in the Philippines, where it is only the oligarchs who have the capacity to take over services provided by government. To bid out National Power Corp.’s assets under the Electric Power Industry Reform Act or to bid out public-private partnership schemes may look like following developed policy thinking, but it is just a mechanism for transferring economic activity from government up the tree to the rent-seeking hands of the oligarchs. Other than foreign investors against whom the playing field is canted at an angle of at least 45 degrees, there is no hope whatsoever of any but elite-backed organizations even qualifying to bid let alone win one of these “biddings” and once in the grasp of the elite, the regulator is the only protection for the user market, and they being appointed, thanks to political patronage, are far from immune from influence. All that said similarly unacceptable privatization patterns repeat in the developed economies, big organizations (particularly in areas like financial services, water and power provision) get bigger and more powerful, and thus can be less customer focused when they are fed by privatization initiatives, but at least there is wider and more open and transparent competition, big business is subject to greater shareholder influence (because lots more people can afford to own shares in public companies than they can here in the Philippines), and regulators work in most cases (other perhaps than those that are ‘too big to fail’) outside the influence of big business and politics.

    So here you can take basically whatever developed model you may choose, and outsiders will think how advanced is the Philippines, but they will be wrong for the simple reason that the politico business system operates in such a way as to stifle inclusive economic development. The elite held monopolies, and that includes the ownership of land and banking, have to be broken up in order to make a 100-million market accessible to everybody, only then will there be real competition and as a result of that an opportunity for inclusive economic development. Against this new order, the best role for government in this economy can be identified and put into place, thereby exposing it to real performance evaluation untainted by either oligarch power and influence or ethically challenged legislators (on the rather remote assumption that the many pork barrels would really be removed!).

    Mike can be contacted at mawootton@gmail.com


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    1 Comment

    1. I agree wholeheartedly with your article. And just to add my 2-cents to it: what I get from this country 9 times out of 10 is ‘really crappy’ customer service. And the reason I believe is that here in Metro Manila, you have really, wall-to-wall people. So if you don’t like the service you get from a business establishment and walk away, they don’t really give a hoot–because 5 minutes later another less-discerning customer will walk up and buy what you didn’t. And most Filipinos have gotten so used to crappy service that they hardly even notice it any more. Government regulators should step in but, well…you know how that goes.