It is always possible to improve, to do things better or more efficiently or more fairly. Whilst the Philippines has many attributes there are also many areas in which improvement can be made, not least under the heading of “the ways in which business is done in the Philippines.”
The development of business in the Philippines is the near exclusive preserve of the local powerful vested interests. The oligarchy. Thus the development of the economy of the nation and the creation of jobs is within their gift and if government is not directly investing itself in job creation other than in positions which just generate miles and miles of red tape, then everybody is beholden to the whims and caprices of these powerful interest parties.
These groups have all the bases covered: the political influence, the banks and the money, links to the justice system, the military and even to the Church. Over time they just grow bigger, wealthier and more powerful.
Many ordinary Filipinos have aspirations to make their own business. Many do not have the skills to do this. Thus organizations such as TESDA have been established, running short courses for budding entrepreneurs. But these aspirations, by those possessing knowledge and skill or even after specialist training, are rarely achieved even when there is some seed capital available.
The bureaucratic demands of the system just stifle the enthusiasm of the new business developer and quickly exhaust the little precious capital that a very few have managed to accumulate. In the rare cases, where an individual or small group has the staying power to work their way through the morass of bureaucratic barriers, they will next find it impossible to borrow loan capital or to get and maintain let alone grow any market share. The vested interests want all the markets that there are to themselves.
In Singapore the government encourages entrepreneurship. They even have schemes in which the government provides 85 percent of the startup capital, leaving the entrepreneur to come up with the balance of 15 percent. Needless to say the banks are also encouraged by government to lend to entrepreneurial ventures, and they do. There is little in the way of monopolistic market capture.
Angel Co, an investor in new business web site, records 1,437 new business start ups in Singapore creating 426 new jobs. The same site shows 473 new business starts in the Philippines creating 30 new jobs. But in Singapore the rules are clear and easy to follow and there is a high level of transparency.
An opportunity missed, it seems to me, not only for the Philippines but also the other less developed nations in the region would have been supported by the multilaterals in the development of new businesses. But they don’t generally seem to do that. They provide money for those who cannot help themselves to provide them with local infrastructure [farm-to-market roads for example] that they would never be able to develop without such external finance. And while this may facilitate some very limited economic activity, it is far from being transformative.
The multilaterals are an odd sort of lot. They take money contributed by the developed world on the pretext of using that money to lift people in underdeveloped nations out of poverty and to improve living conditions, to stimulate economic and social development. It seems to cost an awful lot of the money made available to them in order to find useful things to do with it.
They look after themselves very well and they do travel a lot—always staying at the best hotels, driving through shanty towns in hired limousines and eating at upmarket restaurants. But of course, the defense to this criticism is, “but we have to give our people good working conditions otherwise we wouldn’t be able to attract the best brains.”
I’m not sure what the “best brains” that they should be attracting should be. Wouldn’t it be rather more worldly and practical – yet with educated backgrounds—and more useful in lifting people out of poverty than the academic sort of recruitment criteria they are so proud of? Many of the world’s most successful businesses have been developed by college drop outs.
There is no doubt that in the Philippines multilateral support is mostly available to those who don’t really need it – the powerful vested interests. The multilateral decision makers will say it’s better that way, as we are protecting the money entrusted to us by the developed nations.
But you cannot make a difference in underdeveloped economies on the basis of guaranteed returns. And for the multilaterals to give their aid money to local banks to administer is totally self defeating as it then becomes subject to normal Philippine banking requirements.
The Philippines would benefit greatly from a national business development fund that is totally unrelated to the banking system, immune from political interference and without any mindless bureaucracy, to provide finance and guidance to new startup ventures to sustain their financial needs until they are capable of supporting themselves and creating real decent jobs.
If the oligarchs wanted to clearly show their support to more inclusive national development, they could contribute to the fund which would also use much of the overseas development assistance provided by the multilaterals.
To access the fund would not require months of detailed analysis by expensive consultants and massive bureaucracy, as is the case with multilateral funding now. Rather, the applications would be subject to simple and clear screening by worldly, wise and honest individuals and an acceptance by the donors that there would be many failed investments. For how can you remove risk when making progress?
The only problem is that such a fund would require an amount of trust in order to operate as well as immunity from mischievous legal complaints!
Mike can be reach via email@example.com.