Failed

The SWS reports a significant drop in President Noynoy Aquino’s satisfaction ratings.

The drop in ratings should not be surprising. What is surprising is that anyone should be satisfied at all. I will have to ask SWS how their respondents understand the word “satisfaction.”

In this age of developmental governance, regimes ought to be measures by only a single yardstick: their effectiveness in reducing poverty. That entails reducing the magnitudes of social misery and the dispersion of economic opportunity.

By that yardstick, the Aquino II administration failed miserably. The President’s propensity for boasting is contradicted by the numbers.

After reading the report on the latest SWS satisfaction ratings, I went through Yen Makabenta’s column at the Manila Times last Thursday. The numbers he quotes there are distressing but not surprising.

All the other ASEAN economies, although enjoying lower headline GDP growth than we, were able to reduce poverty by between 15 percent and 40 percent. Our headline GDP growth rate is fattened by large OFW remittances that drive consumption demand. For that reason, our growth is consumption- rather than investment-driven.

All our regional neighbors stoked their growth with investments. We have the lowest share of investment flows among comparable economies in the region. For all the administration’s rhetoric about reform, nothing has been done to actually improve the ease of doing business in our economy.

On the contrary, the protectionist policies and the abnormally high tax rates are clear disincentives to investments. They remain intact even as our own businessmen are fleeing to invest elsewhere, in places with better business environments.

The most distressing numbers quoted in Yen’s column concern economic polarization: the steeper concentration of wealth that happened over the past five years.

To wit: in 2009, the top 10 oligarchs were worth $11.1 billion. By 2014, they were worth $50.6 billion. Notwithstanding, the taxes paid by the top ten oligarchs remained constant at $2 billion from 2009 to 2014. Only half of the top 50 oligarchs are listed among the top 500 taxpayers.

The wealth of the oligarchs as a percentage of the country’s GDP is even more startling. In the Philippines, the wealth of the top 10 oligarchs accounts for 17 percent of GDP (up sharply from 15 percent in 2012).

Compare that with Saudi Arabia, a monarchy, where the wealth of the ten richest families accounts for only 6.9 percent of that country’s GDP. In Australia and South Korea, the comparable share is only three percent of GDP.

Wealth distribution in our economy has been skewed for decades. But in the last 5 years, economic polarization worsened incredibly.

Severe income inequality prevents poverty alleviation despite expansion of the GDP. Yen uses the economic concept of Growth Elasticity of Poverty (GEP) to explain why poverty worsens even as the national economy expands. The Philippines has the worst GEP in Asia and one of the worst in the world according to the study Yen quotes.

Economic growth in the Philippines is obviously deformed. The deformity worsened during the last five years under the do-nothing leadership of Noynoy Aquino (who was last heard proclaiming he has surpassed expectations).

If the central mission of government in a developing society is to bring down poverty levels, reduce social misery and equalize economic opportunities, then this administration is a gross failure.

I do not know how Mar Roxas, who insists on having studied at the Wharton School of Business while acquiring his basic bachelors in economics from the University of Pennsylvania, could actually proclaim his patron Aquino the best president this forlorn republic ever had.

His mind, like his patron’s mind, must be residing in another universe.

Hardy

Even as the general environment for business remained inhospitable, there are a few hardy domestic companies that actually thrived during the last two decades. That required exemplary management skills and outstanding business sense.

Last week, the Philippine Council of Management Research Institute Inc. handed cigarette manufacturer Mighty Corporation the 2015 Outstanding Corporation of the Year Award. The company drew attention the past few years as it rapidly grew its share of the local cigarette market and challenged what was once a near-monopoly.

Mighty Corporation is the successor company of what was previously known as the La Campana Fabrica de Tabacos Inc. (subsequently renamed Tobacco Industries of the Philippines). It was founded by Wong Chu King, a tough businessman and generous philanthropist who came to the country a penniless immigrant from Amoy, China.

When Wong Chu King’s sons took over management from their father in the nineties, the company was in difficult financial straits. They managed to pay down debt and expand manufacturing capacity by working out viable supply arrangements for their raw materials, engaging in contract production for other brands and diversifying their own product line to better fit our domestic consumer profile.

The company actually thrived rather than perished when excise taxes for so-called “sin products” were raised steeply a few years ago. The new management turned an otherwise adverse excise tax situation into an advantage by expanding their lower-priced product lines.

As Mighty gained market share, the company invested in new equipment. Today, the Mighty plant has enough capacity to supply half the domestic demand for cigarettes.

Growing a tobacco company is not an easy feat, obviously. Our health and tax policies aim to bring down cigarette demand. The sharp increase in excise tax intends to make prices punitive for consumers.

Yet this hardy company defied the odds. It prospered where conventional wisdom says it should fail.

Regardless of one’s opinion about smoking, one must admire the management skills that enabled to company to thrive in the face of adversity.