Thursday, 4 March 2010

The Philippine free-market economy

John Mangun
Outside the Box
Business Mirror

For all the glowing history and analysis about Asia and its 4 billion people living on 30 percent of the earth’s land mass, its accomplishments over the centuries are not very impressive in comparison to the West.

It was Western ships that sailed the oceans and colonized Asia; not the other way around. It was the Spanish that made the financial killing on the Manila Galleon trade to Mexico, not China. The West entered the 20th century electing governments by a vote of the people, not Asian countries.

Europe gave the world the Industrial Revolution; China offered the Cultural Revolution 200 years later. Inventions that bought mankind a higher standard of living through the last millennia came from the West, not the East.

From the printing press to the steam engine and the airplane to the computer, all these things that make the modern world modern came from the West. An Italian invented the process for geothermal energy. A German invented the telescope. The Egyptians invented the water clock to measure small increments of time and also created the first daily solar calendar made of up 365 days. A Brazilian Catholic priest built the first hot-air balloon even though the Chinese first flew the kite.

Nonetheless, glass, the mirror, probably the wheel and the plow, paper, ink, soap, the compass and the toothbrush all came from Asian ingenuity. But the scale (also invented by the Egyptians) of practical accomplishment of design must weigh in favor of the West.

The last two generations of Asian accomplishment have not been much different from the previous two thousand years. Post-World War II Asian countries built modern and vibrant economies. But these were built feeding off the advances of the West. While the Japanese did not use electric appliances in their homes, they built factories to manufacture appliances for the West. Asia copied and fabricated and improved upon ideas that came out of the laboratories and industrial facilities of the West. So many of those everyday things we use in the 21st century that are identified as coming from Asia, from the cell-phone to the athletic shoe, started in the West. None of this is meant to denigrate or diminish the originality, creativity, industriousness or competency of Asia and Asians. But all of this is a fact. The question then is why would there be this great disparity of this particular kind of achievement of which I speak, between East and West?

Why even in the last 50 years when information and education were nearly limitless and borderless the trend of limited innovation continued?

One quality that distinguishes the Philippines from its Asian neighbors is that the Philippines embodies the entrepreneur spirit that seems to burn in the West. I believe that at the core of this entrepreneurship that makes for business innovation and greater market flexibility is the spirit of competition. Without vigorous competition, there cannot be the benefits and accomplishments of entrepreneurship, and we have it in the Philippines.

I was caught by an article in one of the local newspapers about San Miguel Corp. embarking to build the North Luzon East Expressway (NLEEx) from Quezon City to as far north as Tuguegarao City in Cagayan. The NLEEx will directly compete with the North Luzon Expressway (Nlex), which is owned and operated by Metro Pacific Investments Corp. The NLEEx project may cost as much as P9.3 billion but may also cut by half the traffic volume on the Nlex.

Two giant local companies in cut-throat business competition, and it is the public, whose travel time to the North will be reduced and who will find more economic opportunities in that part of Luzon, will profit.

Globe and Smart and now others fighting tooth-and-nail for your text-message peso. Philippine Airlines, Cebu Pacific, Air Philippines, Seair and Zest Airways competing fiercely for your travel peso. Want a wireless landline? Call any of several different companies in the morning and a representative from each will be there with your phone by afternoon.

This is unique to the Philippines. More than half the cell-phone service in Japan is controlled by NTT; seven other companies share the rest of the market.

Traditionally, Asian companies in any one country have divided the economic pie, rarely competing the way companies do in the Philippines. One Korean chaebol controls shipping. Another controls telecoms. In fact the word chaebol means “business family” or “monopoly.” Hong Kong has its taipans and Japan its keiretsu and its zaibatsu, all allowing each other’s firms to operate without business rivalry.

In the Philippines, our property, banking, telecoms, transportation, retail store, food and media tycoons would enjoy every moment of putting the others out of business and taking over the market share.

It is not just on the mega scale where this kind of business struggle among companies in the Philippines exists. Mercury Drug only seems to be a monopoly. Ask Generika Drugstore, The Generics Pharmacy, online My Botika and Watsons what they think.

While in the West, governments now do everything they can through regulation to stifle and kill corporate competition, and in other parts of Asia business “tradition” does the same, the Philippines is still a stronghold of free enterprise and very free markets.

We consumers are the winners when companies fight each other for our business. Of course, there are some sectors that are much less free; cable television and fuel comes to mind. But those are a result of an economy of scale for cable and the fact that the oil companies basically buy at the same price from the same suppliers.

However, overall, Filipino consumers have more choice and better pricing because of the greater number of sources for goods and services. Free-market capitalism isn’t all that bad.

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1 comment:

  1. Some people ask can this free market economy deliver affordable health care to everyone?
    And if the free market can't succeed in doing it, then who is left to perform so critical a function?