The big bad wolf

People who like to blast multinationals might want to take stock of their daily lives. Did you brush your teeth this morning? Colgate produced the first toothpaste in a tube. Did you (men only) shave? Gillette invented the safety razor. Did you get to work with reasonable facility? Benz invented the modern automobile.

And so on. Our world today is the miracle it is and we live the decent life we do (we’d have all been serfs in an earlier time subjected to the most inhumane treatment) because of the research, production and marketing by multinational corporations that other companies then followed. I wonder how many of my readers would have died from a heart attack had it not been for antihypertensive drugs discovered by Squibb.

I’ve been moderately successful in business because of what I learned in 16 years of working for these multinationals. I was paid well and treated well by these companies.

Many of my Filipino friends who work for multinationals are successful. They are able to send their kids to good schools, they own nice houses and cars, they have food on the table every day and look forward to a decent pension when they retire. They have an exciting job where they could be promoted if they do well.

Denying fellow Filipinos the chance to have all these… is that what these people attacking multinationals want to achieve?

It started with Cory, was continued strongly with Ramos, not understood by Estrada and now seems to be in the process of being destroyed by President Arroyo. And that’s opening up the economy, removing restrictions, getting government out of involvement, providing an open, fair market where commercial competition dictates what is best. It has worked very well throughout the world (try South Korea vs. North if you think controlling and restricting markets is a better way to go) and was working well here—until populist politics got thoughtlessly involved.

The one I find most incredible, and the one I’ve raised several times, is the “voluntary” reduction of drug prices by 50 percent. Please show me any company in any business that will halve its prices voluntarily except as a temporary promo deal of some sort. It was not voluntary, it was forced by a government wanting to score pogi points without caring about the wider impact. I can assure you you won’t be getting any foreign investments (pharmaceutical, specifically) in this country during this interventionist regime. The paltry level of investment that is coming in is mostly for acquisition of existing businesses. Kirin brought in around US$300 million to buy SMC shares, for example. Sounds good, but that created no new business, no new product, no new jobs. Not even any new taxes. It did nothing.

It’s the same in the oil industry. Chevron must decide (perhaps Petron, too, now that it has been privatized) if it’s worth upgrading and expanding its refinery, or just closing it down and importing like Shell now does. Newspaper articles have recently reported that Ashmore of the UK is fed up with all the bashing that’s going on and would like to sell out. Will we be relegated to importing finished fuel without adding any benefit to the local economy at all?

There’s now a suggestion to re-regulate the oil industry to stop its “overpricing.” And doing so without bothering about facts. I’ve covered in an earlier column some of those facts. Let me try again. Number 1, oil prices in the Philippines are the lowest in Asia outside of subsidized countries; Number 2, the oil companies averaged 3 percent net profit margin from 2003 to 2007, one company even lost money from 2003-2005. They could have bought T-bills instead and got 7 percent on their money. I’ll bet they wish they had. Number 3, an independent study concluded that prices would have been higher, not lower if oil had been regulated in that period. As to buying forward, you’d need to have the ear of God. The airline companies tried it when oil shot through the roof, and they lost their shirts when prices fell instead of going up more.

Have we forgotten so easily the disaster that the Oil Price Stabilization Fund was? Since when did government ever do a better job of handling commercial activity (which is what selling oil is) than the private sector? Or even controlling it? Wherever they’ve tried, it’s been a disaster.

Look at the mess the OPSF got into. The OPSF was created in response to the oil crisis of 1973-74 to protect consumers from high and volatile oil prices by subsidizing lower-than-market prices during periods of sharply rising world oil prices, with the subsidy coming from funds collected from oil companies from higher-than-market prices during periods of low world oil prices. But the OPSF was politically controlled so that it was in such serious deficit at the time it was abolished in 1997. It contributed to a debilitating weakening of government finances.

Now there are some who want to repeat this disaster.

NPC is in the hole to the tune of around $6 billion in debt because it still can’t get back its costs. Where do these people who insist on government interference think that subsidy comes from? It comes from us, it’s taxpayers’ money. So even if you don’t use much electricity but do pay taxes, you’ll be supporting big users of power. Where’s the sense in that?

Then there’s to be a tax on texting without passing on the cost. Something the Supreme Court insisted on for Meralco too. It’s an unheard-of accounting concept. Tax is a cost to business which, like every other cost, must be included in the pricing of the product or service that the customer pays.

The 60-40 rule is another inhibitor to business with government and is one (there are many others) of the reasons why infrastructure is so far behind here. Admittedly this is a constitutional mandate so you can’t blame this government, but there are valid reasons why it can be exempted for projects where local expertise or technology is not available. Yet it’s rarely done.

It’s time the President put her foot down and stopped this nonsense. She’s an economist, her term is ending, she can’t get much more unpopular than she already is, so bring her supporters in Congress into line. Get them to face facts, to face reality. The price of oil products in the Philippines is LOW. The oil companies aren’t making excessive profits. But their statements and actions are certainly adding to the lack of investor interest. And throw the bill on taxing texting into the wastepaper basket where it belongs. Then put drug prices back on the market at market prices. You can buy cheap generic alternatives, encourage that.

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I do not believe in giving money for nothing. Cash handouts to the poor just encourage mendicancy; beggars remain beggars. If you give money, expect work in return, there’s plenty of things to do.

Farm-to-market roads that can be built with a pick and shovel. Forests to be grown by planting seedlings. Deep wells to be dug (by hand) to provide fresh water. Schools to be built where local labor would help much.

There’s plenty to do. You want to stimulate the economy, this will do it. Give them money in return for work.

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I wish the government could be like the DMCI group. Complain to government about need for change, nothing happens. Complain about the horrendous traffic mess DMCI construction was causing on SLEX, and it responds. There’s been a noticeable improvement—though a few—thoughtful changes and introduction of active management of traffic. The delays are now at an acceptable level, a convenience we can live with given the huge benefit we’ll later get.

And boy, are they moving fast. They told me they’d finish the pylons by Valentine’s Day (as a nice present) and could give us back all our lanes. I’ve little doubt they’ll meet that date.

Now why can’t government do that? The Management Association of the Philippines has been asking the government various questions on issues of import every week for the past two years. Not once has government bothered to respond. Yet MAP is an organization of almost 1,000 of the country’s top businessmen, wouldn’t you think a responsible government would care what they think and do something when they question or complain? Well not this one that proudly proclaims it is pro-business and dedicated to creating a fair, open economy—then does the very opposite. No wonder almost no one invests. –Manila Standard Today

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