MANILA,  January 16, 2004 (STAR) BIZLINKS By Rey Gamboa - Time out today to give the floor to some of our more expressive and inspired readers. We picked out two of them, with excerpts of their letters in succeeding paragraphs, talking about various ways and means to help repair and save the economy. Here goes.

Rico Xeres of Greenhills writes: "The Philippines is one of the two nations in Asia that have stagnated during the last 30 years, the other (being) Burma (Myanmar). The Philippines was then second only to Japan as the most progressive country in Asia, with the trappings of a modern industrial state. Burma also had the makings for rapid progress.

"The other Asian countries were dirt poor at that time, (and) countries like China and India even had occasional famines where millions died. Now many Asian countries have rapidly progressed leaving the Philippines and Burma behind."

Xeres then offers a reason: "The policies undertaken by the so-called dragon economies of South Korea, Taiwan, Singapore and Hong Kong were very simple. These countries used ... whatever little taxes ... productively by concentrating them on education, infrastructure, and peace and order.

"There are many theories why the Philippines stagnated, but the main reasons are very simple: taxes were not spent on something productive ... and instead were wasted on building up a big political establishment and huge and bloated bureaucracy which is very unproductive.

"We have too many governors, mayors, councilors, etc. We also have a 1.8-million strong bureaucracy, which is one of the largest in the world today. Instead of reducing the size of our political establishment, we are still building it up with the addition of party list representatives in Congress.

Becoming A Feudal State

It is absolutely criminal that we are wasting our budget on politicians and bureaucrats to the detriment of the rest of the 80 million Filipinos. The Philippines has become a feudal state. It used to have only less than 30 provinces but the politicians keep on dividing the country .... Cotabato, which used to be one province, has been split into five provinces.

"The country with a population of 80 million has 79 provinces. (This is) the highest number of provinces (for a country) in the world, with one governor for every million people. India, with a population of 1.1 billion, has only 28 states, with one governor for every 40 million people. China, with an even bigger population of 1.3 billion, has only 23 provinces with one governor for every 56 million people.

"Furthermore, the budget of the provincial governors, mayors and congressmen do not come from taxes collected from their provinces or districts. The money for their budgets comes from the National Government, and most of these come from taxes collected from Metro Manila. Hence, (politicians) have little interest in the development of their province.

"In fact, it is to the interest of political dynasties to keep their respective provinces poor (since) a progressive province could spawn prosperous businessmen who could be their political rivals during elections.

"Provinces, cities and towns should be consolidated, (and) political offices should be cut to 10 percent of the present number of political offices. The huge bureaucracy should be trimmed and many functions of government should be privatized. A Federal government with eight states would be ideal for the Philippines."

Debt Bomb Ready To Explode

Xeres continues: "What is alarming is that we are incurring a huge budget deficit mainly financed by foreign borrowings to support the indecently huge CDF (countryside development fund) of our ... bloated bureaucracy. We have only perhaps three to four years before this debt bomb explodes and causes a total economic collapse.

"Our debt is now equivalent to 70 percent of our GDP (gross domestic product) and soon will be unsustainable. This is the highest in the world in proportion to GDP; already 30 percent of our budget goes to the payment of interest alone. We cannot sustain this indefinitely.

"Few people ... understand the implication of a total economic collapse. This means the government will be unable to pay its debts, causing many of our banks to close since a big part of their resources are invested in government Treasury bills. They will not be able to refund the money of their depositors.

"In such a case, even some of the rich will go bankrupt and the middle class could be wiped out. This has already happened in Argentina early this year when the government defaulted on its debts causing the economy to collapse. People were not able to withdraw their funds ... causing instant poverty to a big portion of the population."

Increase Taxation!

Another reader, Brian Lewis of Paranaque, has this to say: "Given the extremely poor situation regarding investment in infrastructure in the Philippines and the deteriorating level of resources devoted to education, it looks as if the Philippines should endeavor to raise taxes on those who can pay.

"... government income needs to be raised by about P300 billion to be on par with tax levels in many other countries. The right political direction might be to increase taxation every year over 10 years ....

"An increase in taxation must translate ... almost immediately to new schools, the provision of free milk and food to malnourished children, and above all on books with which to expand young imaginations. It is no good raising taxes that apparently leave no immediate identifiable mark on the daily lives of humble citizens and their children.

"So whatever the future holds for the Philippine economy, it is quite clear that more capital has to be invested in infrastructure, in schools, (and) in maintaining and improving existing structures ...the Philippine government has no real choice but to move in the direction of increasing taxation and reducing corruption – slowly and surely over the next 10 years. There is always an alternative – revolution!"

Need more be said?

How The Country Fared In 2003 On TV

"Isyung Kalakalan at Iba Pa" on IBC News (4:30 p.m. and 10:30 p.m., Monday to Friday) ends today a discussion of how the country fared in 2003. We showed why the economy did not do well during the year, and what factors forced the peso to its most dismal showing ever. The episodes also highlighted the bright side of overseas employment. Today, we air the surprisingly poignant views of the man on the street. Watch it.

‘Breaking Barriers’ With Shell’s Country Chairman

 "Breaking Barriers" on IBC-TV 13 (11 p.m. every Wednesday) will feature on Wednesday, 21st January 2004, Mr. Edgar O. Chua, newly appointed country chairman of the Shell companies in the Philippines.

What is the outlook for world crude price levels in 2004? On the domestic front, is the closure of another refinery, that of Shell in Tabangao, Batangas, imminent? What is the impact of the much-ballyhooed Malampaya natural gas in the Philippine energy sector? Watch it.

Should you wish to share any insights, write me at Link Edge, 4th Floor, 156 Valero Street, Salcedo Village, 1227 Makati City. Or e-mail me at If you wish to view the previous columns, you may visit my website at

Reported by: Sol Jose Vanzi

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