‘Comfortable life for all’
SKETCHES - Ana Marie Pamintuan (The Philippine Star) - July 23, 2017 - 4:00pm

In the theme for President Duterte’s second State of the Nation Address – “a comfortable life for all” – the operative word must be “all.”

Those belonging to the nation’s .001 percent live comfortably enough, while those in the lowest 40 percent (as estimated by development agencies) wallow in utmost discomfort. Those in between may slide down to poverty, or catch crumbs of economic benefits from the .001 percent while grinning and bearing the ordeals of everyday life, or else leave the country for better opportunities overseas.

Inclusive growth has eluded the nation. Rodrigo Duterte, although from a political clan, is no member of the old rich and has projected himself as a simple probinsiyano. He has offered a quick fix to the complex problem of criminality particularly the drug menace. Now he is also expected to provide quick fixes to more intractable problems such as social inequities and endemic corruption.

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Consider this story: a middle-class woman from one of the wealthiest Asian economies, where growth has been generally equitable, started a family with a Filipino and settled down in the Philippines. The couple wanted to start a micro enterprise so they tried securing financing from a private bank.

They were dismayed to find out that a loan even for a small startup carried a 10 percent annual interest. They also learned that in this country, banks collect interest monthly based on the original amount borrowed, unless one asks that the interest be computed based on a diminishing amount as the loan is repaid.

In the woman’s native land, where middle-income tax rates are only about half of those in the Philippines, a micro enterprise can obtain bank financing for up to 80 percent of its capital requirement, with seven years to pay, at only three percent annual interest. The government subsidizes any interest higher than three percent.

No wonder the woman’s native land is a manufacturing center and major exporter of goods and services, with robust investments in research and development and technological innovations.

Israel is the same, offering impressive technological, R&D, financial and marketing support to its budding innovators and entrepreneurs.

The bank interest rates prompted the woman to point out an observation I have heard often from expats from many countries: why are owners of Philippine banks allowed to operate all types of businesses big and small? It gives them undue advantage in access to financing and gives smaller players unfair competition.

This cannot happen, the foreign observers point out, in their countries where there are strong anti-trust laws and strict enforcement of rules against bank lending to its own DOSRI (Directors, Officers, Stockholders and their Related Interests).

In fact we have DOSRI laws and a Philippine Competition Act or Republic Act 10667 that was enacted in 2015 after about three decades of debates and powerful lobbying by affected business interests. RA 10667 prohibits anti-competitive mergers, acquisitions and agreements as well as the abuse of dominant position.

Regulators, however, don’t even bother pretending to enforce the laws. And instead of strengthening the enforcement of DOSRI laws, the rules were relaxed ostensibly to allow big players to participate in development projects.

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While pondering bank lending rates, the husband of the foreign woman also recalled the hell his family had gone through some years ago when they ventured into small-scale importing. At every step of the way at the Bureau of Customs, he said, there was someone extorting grease money.

These days people who deal regularly with the Bureau of Customs have a similar horror story. Every time President Duterte promises to eradicate corruption, there must be laughter in the BOC.

The woman and her husband also remembered how another micro business he had started folded up because all the earnings were simply swallowed up by the rent. So they have given up and the woman has since landed a 9-to-5 job in Manila.

The couple also considered securing housing and car loans. In the woman’s native land, young couples applying for a loan for a first house are entitled to 30-year repayment at annual interest rates floating between 1.44 and 1.74 percent. Interest on a car loan can be as low as 2.75 percent depending on the financial means of the borrower.

You can, of course, take mass transportation in the Philippines. Then you’re spared from paying steep road tolls wherever you turn plus unconscionable parking fees everywhere including the dirty, smelly streets of Divisoria. Everything is designed to bleed the middle class dry in this country.

But then you would have to endure daily commutes of two to three hours one way. While the light railway services are traffic-free, they keep breaking down, and the lines during rush hour are unbearably long.

Such issues guarantee that entrepreneurship will not take off in this country. As the woman and her sister-in-law observed, the Philippines does not like small players to flourish. There is no level playing field for fair competition.

If it’s any consolation to prospective micro entrepreneurs, even foreign big players can run smack into rules designed to favor local big businesses. It’s even written into our precious Constitution: foreigners must find a local partner, ceding a controlling stake of at least 60 percent, if they want to do business in this country. Even communist China and Vietnam do not have such a rule.

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The fortunes of many of our moneyed elite are often intertwined with politics. In their own turfs, the family businesses are naturally spared from red tape and extortion and even shielded from competition from better rivals. This is another form of unfair competition. They also prefer captive markets. This eliminates any incentive for such family businesses to become globally competitive and expand overseas.

Can Rodrigo Duterte produce any “real change” in the system?

Because of his background and the circumstances of his ascent to power, people are pinning their hopes on Duterte to make a dent against long entrenched problems.

Duterte moved quickly to address some of the problems such as the Islamic separatist and communist insurgencies. The process, unfortunately, looks like it has been overtaken by time. Younger rebels are refusing to heed orders and honor commitments made by their founding chieftains to the government. I hesitate to call the older rebels “leaders.” If you can’t control your members on the ground, you’re no leader; you’re just an old fogey whose bones are aching for retirement.

As for the other challenges, such as making growth inclusive, if he can provide a comfortable life for all, Rodrigo Duterte can be president for life.

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