By Rene Ofreneo – November 22, 2018
The above is the title of a paper on the changing nature of capitalism in the Philippines written by Dr. Antoinette Raquiza of the UP Asian Center (Philippine Political Science Journal, 2014). It is an inquiry on where the 10 richest Filipinos, all named in the Forbes’ billionaire list, are making money and how they are shaping the directions of Philippine capitalism in the 21st century.
In the process, Dr. Raquiza’s research is able to document the answers to two puzzling developments in Philippine economic development: 1) high growth being posted by the country in recent years, and 2) sustained growth despite stagnant industrialization and collapsing agricultural sector.
Past studies on the economic elite were overwhelmingly focused on the following: the feudalistic landed elite, who built their wealth out of the labor of the landless sacada’s and casama’s who toiled in the elite’s haciendas and plantations; the post-war industrial elite, who were labeled by the neo-liberals as “rent-seekers” for they were able to prosper behind high protectionist walls; and the political dynastic elite, who use their positions in government to enrich their families and cronies. The last types are derisively called by the street activists as “bureaucrat capitalists”; and by other researchers, as “booty capitalists”.
As the economic data show, the Philippines has become a service-led economy without going through an industrial revolution/transformation and agricultural modernization. This is the common experience of the developed countries such as the United States, Japan and those in Western Europe. This is the path of development that is being followed by a surging China.
The answers to the two puzzles above were amply answered by Dr. Raquiza’s research. The dramatic increase in OFW remittances, from the turn of the millennium to the present, has enabled the economy to keep growing despite the inability of the real sectors of the economy – industry and agriculture – to develop and expand. The economy has become “consumption-led”. In the 1970s, the number of OFWs, called then as “overseas contract workers”, numbered less than a hundred thousand. Today, the total is estimated at 10 million to 11 million, or roughly 10 percent of the 106 million Philippine population and about one-fourth of the 43 million labor force reported by the Philippine Statistics Authority.
According to Dr. Raquiza, the total foreign direct investments is equivalent to the monthly total remitted by the OFWs. These remittances, now estimated by the Central Bank at around $30 billion a year, are supplemented by the earnings generated by the call center/BPO sector, which has become the second leg of the economy.
Now, where do the new elite make money? The answer is on the service industries catering to the consumption needs of OFWs and their families. Foremost among these is the banking industry. Thus, Henry Sy has BDO, while Lucio Tan, PNB, and the Ayalas, BPI. They even have remittance business shops set up in countries with large concentration of OFWs. Then there are the malls and supermarkets that are built one after the other by the Sys, Gokongweis, Gaisanos, Cos and so on.
Of course, one cannot fail to see the booming real estate, condominium business and property development in major cities. One of the original visionaries who realized that huge profits could be made out of homes purchased by the OFWs is Camella Home magnate Manny Villar.
Other service industries include aviation, telecom, tourism, logistics, leisure and entertainment, education, car distribution, hospital operation, etc. All the above-named taipans — together with Ramon Ang, Manny Pangilinan, Enrique Razon, George Ty, Andrew Tan, David Consunji and the Aboitiz family — are somehow involved in these varied businesses. This is the reason why most of these taipans have formed their respective holding companies, for better coordination of different business outfits, which have their own respective management teams.
On top of their investments in service industries that are fueled by OFW remittances, the taipans are competing with one another in bidding for the various big-ticket infrastructure projects lined up by the government in its Build-Build-Build program. Earlier, under the BOT/EPIRA law and the PPP program, the government allowed the big business conglomerates to participate in power generation and distribution, water distribution business, MRT/LRT operation and building of schools and other infrastructures.
Based on the foregoing, it is abundantly clear that Philippine capitalist development has indeed deviated from the pattern of industrial transformation and agricultural modernization first before an economy, after reaching a certain level of growth, becomes a services-led one. This happened because of the OFW phenomenon.
The strange thing is that the above development pattern was not the one envisioned by those who formulated the “structural adjustment program” (SAP) in the 1980s. And yet, the SAP program is doggedly and continuously being pursued by the economic technocrats, from Corazon Aquino to Rodrigo Duterte, without any major deviations. SAP is based on the triad programs of trade/investment liberalization, economic deregulation and privatization.
The trouble is that the SAP, in its failure to deliver industrial and agricultural dynamism and job-creating structural adjustment in the economy, has not been able to reduce or even alleviate the unemployment and poverty affecting many Filipino families, especially those families with no OFW lifesavers. On the other hand, the emergence of a service sector dominated by a dozen or so Filipino conglomerates has also not been able to ease these twin problems of mass unemployment and mass poverty. Unchanged, the above pattern of economic development can lead to chronic or persistent social and economic inequality in the country.
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