Wednesday, 10 August 2011

What is different about the Philippines?

Business Mirror

There is a term, provincial thinking, for someone whose attitude and opinion, is supposedly limited and unsophisticated, not really aware of the big “real world” outside his own little space.

I think there should be a term opposite to that which describes someone whose attitude and opinion is so oriented to the outside that he does not connect to his environment.

How a country like the Philippines can avoid financial disaster and even prosper during the difficult past few years when the West is collapsing is obvious to me, confusing to others. The government would like to believe it is because of its sound economic sense. Others might say it is because businesses here in the Philippines are more financially prudent. Another might contend that it is only the grace of heaven that we have overseas workers and call centers.

All those might play a role but it is simply that Filipinos manage their personal finances differently than in the West. That is what has saved this economy; not the government, not the private sector, and not divine intervention.

Around 1995 or ’96, a bar opened on the “poor” end of Makati Avenue near J. P. Rizal Street called “Planet Beer.” It was one of the first places I remember that had a huge list of imported beers from all over the world. Prices were very high. But the few times I visited, drinking my SanMig Pale Pilsen, the joint was full of young office workers, probably spending at least a couple of hundred pesos for a bottle of exotic beer.

When 1997 came and the peso exchange rate dropped so much, it did not take long for “Planet Beer” to go out of business.

If this situation had been in the US, they would have opened 400 branches, and then declared bankruptcy 30 years later during a bad economy, leaving $1.3 billion in unpaid liabilities. In fact, that just happened with the US company, Borders bookstores.

You might think paying P350 for a bottle of imported Mexican Dos Equis beer is sort of foolish but not if it is done Filipino style. You see, virtually all of Planet Beer’s customers were paying for their beer from their last paycheck, not their next. Buying from your next paycheck is using borrowed money and can be unlimited. Buying from your last paycheck is a part of prudent personal finance. Splurging with earned money is acceptable; with borrowed money it is unforgivable. And ruins the economy.

Because its customers were not borrowing to buy, then Planet Beer also would not borrow to increase business, following a complete business model based on debt. Like in the US.

That’s the reason we survived 1997 and why we are more than surviving in 2011. Why is it so difficult to understand how the Philippines is different?

A man you might have heard of, Randall Tiongson, sent out a Tweet the other day. Mr. Tiongson is a devout man of God and an honest expert on personal finance as well as director of the Registered Financial Planner Institute Philippines.

He wrote, “Headlines-US: Looming debt crisis. Europe: Deep economic woes. UK: Street Riots. Phils: Furor over an art exhibit. Hm, something wrong eh?”

In one sense, he is absolutely correct. With the rest of the world seemingly in ruins, we are caught up in a social issue that might seem unimportant by comparison. But the reason we can take time for the art issue, unlike perhaps the way we would have a decade ago, is now we can afford to.

A group of specialized call-center employees was out for Friday night beer and pulutan talking about how ordering sashimi from blue-fin tuna is bad. Overfishing and all that.

Worrying about the blue-fin tuna as well as the art exhibit is a luxury we can now pay for. If the “tuna worriers” were out looking for a job, worrying about their employment, the poor tuna would be a very low priority and only a tasty meal.

There is more to be done. However, the bottom line is that the Philippines has endured for the last 25 years to achieve some positive measure of success that gives the nation the opportunity to engage in activities beyond daily life struggles. Most important and what makes this country stand above so many others, the accomplishments were built on hard work, not borrowing.

Appreciate the fact that this is not the Philippines of 1987. The country has come a long way and can now afford to worry about tuna and art exhibits.

On a personal note, you can follow me on Twitter @mangunonmarkets.

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