Manufacturing can be a key to Filipinos enjoying a free and healthy life

Former Secretary General of the United Nations, Kofi Annan defined a developed country as: “… one that allows all its citizens to enjoy a free and healthy life in a safe environment”.

In theory, his statement is simple enough to understand but quite complicated to put into practice. Annan wasn’t specific about which country or countries he considers “developed”. He could have been talking about a small islands society with its inhabitants living simply in an idealic seaside village with the men catching or picking up the meal of the day while the women and children bask in the sun free from any worries — no fear of tyranny from within nor threats from outside. Then again, Annan could have been talking about most industrialized nations in which most of its inhabitants have high standards of living, enjoy the finest infrastructure and the latest technology. By today’s standards, a “developed” country tends to be seen to be the latter.

Most countries follow the Western model of economic development. To gauge the level of development of a country, analysts use statistics to evaluate income per capita, life expectancy, rate of literacy, etcetera. However, financial and other man-made crises prove that even in a so-called “developed country”, not all its citizens can enjoy “a free and healthy life in a safe environment.” It all depends on the type of policies a government adopts. Of course, for the most part, citizens of well-developed countries enjoy relative peace and stability but they also face constant threats of violence and are subject to insecurities of their own making, which can make them a bit paranoid. An example of a product of such paranoia is former US President George W Bush’s “War on Terror” — a policy supposedly intended to rid the world of murderous extremists but is instead creating tensions among people in societies involved in it.

One of the main reasons why wars throughout history were initiated was because of the desire (not the need) by industrialized nations to expand their territories. Expansion meant gaining possession or control of other lands inhabited by long-established native people. It was said that nations that possessed colonies were the ones who advanced or developed dramatically because they accumulated wealth faster by reaping profits coming from the trade in products produced from the raw materials of these colonies. Some of these products were even manufactured or processed using cheap labor — the natives. Africans and Indians were victims of such exploitation by their Western colonizers in the past. Fast forward to today, capitalists call it a new name: outsourcing.

Western countries that built their empires through industrialization using colonies now outsource much of their manufacturing to countries where labor is still cheap. This comes at a price though. Not only is outsourcing taking jobs away from their local citizens, it is creating underclasses elsewhere. Some laborers in factories in China, for example, probably get just a few cents for every pair of $200 Nike shoes they stitch together. And even though China has become the second wealthiest nation in the world, not everyone there can enjoy “a free and healthy life in a safe environment”. For one thing, freedom of speech is still suppressed and the Chinese government can take away an individual’s liberty very easily. Furthermore, the speed with which China accelerates growth in its manufacturing industries leaves little chance for the havoc it wreaks to their environment to be managed properly.

Manufacturing provides jobs even for low-skilled workers.

Speaking of China, their unprecedented rate of growth, which propelled them to the slot of the second largest economy in the world, is giving them enough confidence to be a little bolder in claiming ownership of lands where sovereignty is still disputed. The Scarborough Shoal, part of the group of islands located in the west of the Philippine Sea, is where China is positioning its vessels in what is reportedly an effort on the part of the Chinese government to claim ownership over the area. Their hunger for raw materials and energy sources is what is driving them to go further out of their main territory. It remains to be seen if the Philippines, which also claims ownership over the islands there can use diplomacy to solve this standoff. If tact fails, our military is said to be gearing up for battle to protect what they say is ours.

The military standoff between China and the Philippines is forcing some to realize that we may not be ready for a full-on war with anybody without the help of the US military. Not everybody is happy with this arrangement though. Filipinos from leftist groups are protesting the increasing presence of the US military in what is said to be a joint exercise between theirs and our own military. But whether some Filipinos like it or not, our situation practically dictates our dependence on the military strength of the US in dealing with such a crisis situation.

Our armed forces seem to be incapable of protecting our safety from internal and external threats at the moment. If we want to be more independent, we need to upgrade our military capability — the strength of our navy, most obvious among others. We can only afford to upgrade our military if we allocate enough budget for it and to have enough budget means working on growth in our economy.

This brings us to an important question: What kind of life do Filipinos want to live? Our growing population is obviously outpacing its ability to lead a quiet seaside village lifestyle. And while most Filipinos today aspire for a Western lifestyle, many still apply that same traditional laid-back approach. Many others still struggle with a very backward existence. They have no electricity and very little or no access to information technology. You can find some such folk even just a few minutes away from the central business district of Manila. The Philippines cannot afford to feed its enormous population for various reasons, one of which is the lack of an efficient mechanized agriculture sector. The amount of arable land is also limited for the size of its people. It doesn’t help that the country’s population growth, which is said to be at a steady rate of at least 2% annually tends to knock out any sudden burst of economic growth achieved through government and consumer spending.

If Filipinos want to achieve First World status, the country can do it either by curbing its population growth to a rate proportionate to the feeding or holding capacity of its land and economy or by speeding up its industrialization. There are people like me who do not want more factories in the Philippines because of the damage it can cause to our environment. But if we are to remain relevant in today’s world, we need to build a strong manufacturing base in the country. Manufacturing can provide jobs even for low-skilled workers. It is mainly through this that the status of the country’s poor can improve. At present, our service-based industry is only providing jobs for highly skilled workers, which means that economic growth is not inclusive of the lower class. But how do we start an industrial revolution? Let’s look at how the some countries do it.

Countries like China and Singapore have adopted government industrial policies to stay competitive. Their policy includes providing the funds for the set-up factories to attract foreign investors. Fareed Zakaria’s article in TIME magazine outlined how they implement their policy:

In 2009, when Bridgelux, a light-emitting-chip manufacturer, was searching for a new factory site, the company considered the cost of building in the U.S. or elsewhere. The government of Singapore offered to pay half the setup cost of the plant.

Andrew Liveris, CEO of Dow Chemical Co., has also been arguing for a national policy (in the US) aimed at reviving manufacturing. Companies cannot compete with countries, he notes in his book, Make It in America.

Liveris argues that not only would a manufacturing policy produce good long-term jobs, it would also upgrade the work skills that are crucial to keeping innovation alive. “Innovation doesn’t just happen in laboratories by researchers,” he told me. “It happens on the factory floor. The process of making stuff helps you experiment and produce new products. If everything is made in China, people there will gain the skills, knowledge and experience to innovate. And we will be left behind.” He worries that with tablets like the iPad and Kindle being made mostly in Asia, the next generation of these products could well be imagined there.

It does make sense to assume that the people who manufacture the products will eventually retain the knowledge and skill acquired and use these to help themselves come up with a much-improved version or a spin-off of the product. This is exactly how the Japanese and the South Koreans did it 40-odd years ago. There was a time when “Made in Japan” or “Made in Korea” meant “shoddy” workmanship. Now it is “Made in China” that has the same reputation. But there will come a time when their reputation will eventually become synonymous with quality and excellence.

Sadly, not much has changed with the state of the manufacturing industry in the country today even after Marcos have left. James Fallows summed it up quite succinctly in an article written in 1987:

Manufacturing? “There were not many viable sectors to begin with, and most of them were taken over by cronies. The industrial sector is used to guarantee monopoly and high-tariff protection. It’s inward-looking, believes it cannot compete. People are used to paying a lot for goods that are okay-to-shoddy in quality. Labor costs are actually quite high for a country at this stage of development. They should be like Sri Lanka’s but they’re like Korea’s, because union organizing has run far ahead of productivity. It’s a poor country–but an expensive place in which to produce. American and Japanese firms have set up some electronics assembly plants, but they’re only buying labor, not building subsidiary industries or anything that adds real value.’

Our public servants must understand the complicated problem hindering the development of our manufacturing industry and eliminate them if we are to succeed in a competitive environment or we will forever be the laggard of Asia. Even the Asian Development Bank (ADB) says that the Philippines needs to develop its industrial sector for our growing labor force:

To achieve inclusive growth, the Philippines needs to develop a stronger industrial sector to create productive job opportunities for the growing labor force. However, as the growing literature in industrial development illustrates, industrial upgrading and diversification are unlikely to take place without public intervention due to failures require public policy response or support specific to each product. The government needs to play an active role to help entrepreneurs take advantage of market opportunities.

A first step toward effective industrial development is to undertake broad-based reforms necessary to address the long-standing challenges such as tight fiscal position and weak business and investment climate. Fiscal consolidation is urgently needed to increase spending on infrastructure, since public investment has been constrained by weak revenue performance and poor expenditure management. The business community has been concerned about cumbersome business procedures and over-regulation, weak contract enforcement and property rights, and rigid labor market regulations. While significant progress has been made both in fiscal consolidation and business environment, experience in the country shows that broad-based public sector interventions are not enough to effectively develop the industry sector.

The ADB also provided a list of products that the Philippines can manufacture. They are basically doing all the thinking for us Filipinos. They are already handing the solution on a silver platter. It is all up to our government if they are up to the challenge of even looking into the development bank’s proposal. The incumbent President cannot delude himself any longer into thinking that our economy is recovering just because someone told him that TIME magazine said “The laggard of Asia is recovering the dynamism it had in the 1960’s.” Our country’s problems cannot be solved by consumer and government spending alone. There are deep-rooted problems he needs to address. This should start with a clean up of his cabinet members who also serve as his drinking and shooting buddies. If he does not act on this now, one can be forgiven for thinking that he does not want to allow all Filipinos to enjoy a free and healthy life.

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Post Author: Ilda

In life, things are not always what they seem.