Philippine economic history through the perspective of ‘institutions’

Philippine economic history through the perspective of ‘institutions’

Notes on Regional Decentralization

NOTES ON THE FEDERAL STRUCTURE FOR THE PHILIPPINES*

By Gonzalo M. Jurado, PhD

Vice-President for Finance and Development and Professor of Economics

Kalayaan College

We’ve heard of the pros and cons of a federal structure of government for our country from various authorities in the last several years**, perhaps even taking sides in the debate. My own thoughts on the matter have been formed from my long association with Dr. Abueva who as a scholar has long advocated the federal structure of government for our country. Though I am apprehensive that a federal structure of government might unleash latent forces of separatism in our country, I am persuaded that it might just be the structure that will ensure that decisions and actions taken at higher levels of political authority, which in our current unitary structure seldom affect people on the ground, impact positively on the lives of our countrymen. This should accelerate the development of our economy and speed up the enhancement of the welfare of the Filipino people.

I am in general agreement with Dr. Abueva on the points he has raised in his paper for which reason I shall not anymore comment on them. What I shall do is to cite three propositions in economics suggesting that a federal structure of government compared to a unitary one will be better for our country, more responsive to our individual and common aspirations.

One. The federal structure of government will reduce the negative and increase the positive impact of location on our political subdivisions. Location theory says that the nearer you are to the center the more likely you are to benefit from the advantages of the center; the opposite is also true, the farther you are from the center the more likely you are to suffer from the disadvantages of distance.

No matter what we do, we can never obliterate the consequences of distance. Everything else being equal, it will always take longer to travel over a longer distance than over a shorter distance. It will always take longer to come to Manila from Batanes than from Bulacan. It will always be more costly to deliver a product to distant South Cotabato than to nearby Cavite. Those closer to the kitchen will receive more culinary attention and service than those farther from it.

This explains why Mindanao and the Visayas, both physically distant from Manila, the center of our current unitary structure of government, suffer from inadequate infrastructure and poor political, social and economic services, while provinces neighboring Manila, including Manila itself, suffer from a surfeit of these facilities and services -- notwithstanding commitments regularly made by Luzon political leaders to direct more attention and more resources to Mindanao and the Visayas or lessen the concentration of resources in Luzon or Manila.

A federal structure of government will enable our provinces to maximize their benefits (or minimize their costs, which is the same thing) from distance. That is because each federal unit will have its own capital which, naturally, will be located somewhere in the federal state. With its own center, the federal unit will have no compelling reason to defer to the unitary center. Provinces, towns and communities within the federal unit will now be referring to a center nearby rather than to any capital situated hundreds of kilometers away. People from Batanes will not have to come to Manila when they can settle their problem in Basco. The high transport cost of a product coming from Luzon to South Cotabato can be avoided if the product can be sourced from Koronadal. Why bother about distance to the kitchen when the kitchen has relocated to your immediate neighborhood?

Two. The federal structure of government will attract the forces of agglomeration to the federal units and thus accelerate the federal units’ development. From agglomeration theory we know that people and resources tend to concentrate in places where there are already large concentrations of people and investments. People are attracted to people; investments attract further investments. The opposite is also true: people and resources tend to be “repelled” by empty space.

As matters currently stand people and investments tend to agglomerate in Manila, the center of our unitary structure of government. Despite strenuous demands for decongestion and dispersion frequently voiced by city officials and urban planners, people from the provinces gravitate to Manila; businesses large and small come to settle in Manila. The reason is simple, here is where jobs are located, here is where incomes and profits are earned.

As the various federal units work for their development, they will attract agglomeration forces to themselves. New or refurbished federal capitals will function as magnets to people and resources in the federal state. Responding to perceived needs of civil servants in the various departments of the new federal state and the relocated departments of the unitary government, businessmen can be expected to make investments in housing, restaurants, and personal services. In due time, these investments will draw further investments in hotels, education and medical facilities. Before long industrial, commercial, and cultural agglomerations will have risen in the federal capital and its environs, dynamizing the whole federal state.

And three. The federal structure will promote friendly competition among the federal units, accelerating their growth and development. Economics abhors monopolies for the simple reason that monopolies are inefficient, selling poor quality products at prohibitive prices, to the detriment of the interest of the communities they serve. In contrast, entities operating in competitive markets are constrained to deliver the “best” products at the most reasonable price to customers in order to keep their share of the market. The government in a unitary system is the most glaring example of a monopoly, unchallenged in its collection of exceedingly high taxes from the citizens and delivery of unspeakably poor services to them.

The federal structure of government will give vastly expanded autonomy to federal units.  In the exercise of this autonomy federal units will be obliged to rely upon themselves. They will have to plan out and implement the development of their areas of responsibility on the basis of their own vision and resources.

One virtue of the federal structure is that it will enable the federal units to benefit not just from their own genius and resources but also from developmental stimuli coming from outside. That is because sooner than later they will find themselves in friendly competition with their neighbors. Competition will enable them to replicate the successes and avoid the failures of their neighbors, even as their neighbors will also benefit from their successes and failures.

This friendly competition will be a most welcome development. For, operationally, it can only result in the improvement and expansion of the economic, social, political, cultural, educational, and other social overhead, not just of one federal unit but of all of them, to the benefit of the country as a whole.

These are economic reasons supportive of the political arguments put forward by Dr. Abueva, suggesting that the federal structure of government is superior to the unitary structure in the acceleration of the development of our economy and the more speedy enhancement of the welfare of the Filipino people. 

*Delivered at 4^th Round Table Discussion on Structural Reform: Forms of Regional Decentralization, sponsored by the University of Asia and the Pacific, Ortigas Center, Pasig City, on September 10, 2012, in reaction to “Federal Form of Decentralization” by Jose V. Abueva.

**For a comprehensive discussion of federalism, see, among other sources, the Stanford Encyclopedia of Philosophy, with Internet Link: plato.stanford.edu/entries/federalism/.

Milton Friedman - Monopoly

Domestic industry: Philippine-owned industries follow a 'narrow' nationalist path

CROSSROADS (Toward Philippine Economic and Social Progress)
By Gerardo P. Sicat
(The Philippine Star) Updated October 31, 2012 12:00 AM


(Last week’s column dealt with the failure to exploit unique opportunities for industrialization during early independence. Today, I touch on some points affecting the Philippine experience during this period of industrialization.)

The early outcome of the nationalistic program of industrialization appeared triumphant. It could not otherwise be, coming as the country was from the destruction of the war. It was brought on by a wide range of displacements of imported consumer goods by new domestic industries.

“Industrial protection, government paternalism and limited domestic market growth.” The installation of import and exchange controls made possible the stoppage of competing imports and the dominance of the newly created domestic goods assembled locally. Further rise in tariffs assured that the import supplies would become high priced but detrimental to the low income pockets of Filipino consumers at home, thereby assuring good returns for the new local industrialists.

The heavy presence of government discretion in these policies created a political framework of dependence between the businesses seeking protection, support and financing, on government decision-makers and those in charge of the political process.

The system was faulty.

(1) Instead of creating competitive pressures for the new industrialists, they became the main suppliers for the local market, essentially making them monopolies, promoted by paternalistic support of the government.

(2) These new industries did not earn any foreign exchange but they continually ate up the dollar earnings of export industries in order to continue producing.

(3) Many business proponents had inadequate capital and depended highly on government loans.

(4) Because of domestic market limitations, the new industries benefited only those laborers that they could employ. Thus unemployment of the growing labor force in the formal sector continued to enlarge in absolute terms.

“The Board of Investment and the nationalist agenda.” As the era of exchange and import controls essentially ended with their dismantling, the nationalist agenda for industrialization continued. By this time, the industrial interests were already well in place in the country’s growing industrial sector.

On the eve of the expiring investment promotion laws on industrialization and the near expiration of the Laurel-Langley Agreement (the end of parity for American investors), a new investment law had to be written to pave the way for the continued growth of industry. The new law was steered in Congress by Senator Jose Diokno, the inheritor of Claro Recto’s brand of economic nationalism, who headed the Economic Affairs Committee of the Upper Chamber.

The concepts, the incentives and the main thrusts of this law encouraged Filipino capital to invest in industry. This would have been perfect if it also included the same provisions to allow foreign investments in industrial ventures.

But as regards FDIs, the provisions were full of stops and regulations that limited their role in the economy. It promoted joint ventures only with Filipino control following the 60-40 equity restrictions. Figuratively, the BOI investment incentives represented the canonization of the restrictive economic provisions in terms of promoting Filipino industrialization.

Thus, the BOI investment promotions tended to be exclusive to Filipino enterprise and less inclusive to participation of FDI which was allowed mainly in a minority position. The industrial priorities plans were geared for Filipino-owned enterprises or as defined, joint ventures controlled by them.

There was provision for the possibility of fully owned FDI in industry. These were confined to “pioneer” industries which were intended to attract foreign capital in new technological and capital intensive ventures. But the law provided that in due time these FDI would be required to divest part of their ownership.

Efforts were undertaken by the government during the Marcos years to improve on the BOI law. But in general, the tight restrictions and confinement of major provisions for domestic Filipino owned enterprises under the joint venture arrangements continued to be the heart of the law. Despite the fact that the specific constitutional provisions on foreign investments limited the 60-40 Filipino-foreign equity rule only to public utilities and corporations dealing with land and natural resources, in the various applications of the incentives, the same policy was promoted as a desirable objective.

Until the government was able to direct its attention to inviting fully owned FDI to engage in export processing within the export processing zones, the country could not attract FDI except those that were mainly serving the domestic market and no more (as described in last week’s essay). In the meantime, most of the Filipino-owned industries were relatively small and medium scale enterprises, designed as they were to meet a small market. Thus, domestic industries tended to be limited in size and grew only from that start.

Most of the BOI-registered enterprises were Filipino- majority-owned enterprises and had little foreign equity contributions in them. The earlier provisions on pioneer industries that allowed for FDI to divest in due time contained much regulatory restrictions on what they could do that the provisions became barriers toward attraction.

Although the government was able to attract wholly owned foreign direct investments to engage in export processing for manufacturing under the export processing laws, it had limitations. Some access to the domestic market was critical for some types of industries in order for them to raise their stakes in the economy. The restrictions in the BOI law prevented this.

This explains why the performance of the BOI as an investment attraction agency has fallen badly behind the accomplishments of the PEZA. It has also fallen far behind similar agencies in other ASEAN countries, for instance those in Thailand and Malaysia. To use a term now well used in development economics, BOI policies were exclusive in favor of Filipino enterprises. The PEZA policies had an inclusive posture in inviting foreign enterprises that contribute to the country’s economic development.

Thus, most of the successes in manufacturing exports in the country have come from enterprises registered under the PEZA law and the earlier laws governing export processing zones that it succeeded.

In fact, the BOI law has been the principal stumbling block in creating a larger internal integration of the export manufacturing sector based in the PEZA, with domestic industries. The PEZA encourages the imports of raw materials of all the locators because their sources of supplies come from enterprises outside the country. The BOI promotion of industry was supposed to enlarge the domestic industrial sector.

On the other hand, few FDI and local Filipino-owned enterprises have the facilities to manufacture the raw material needs of the PEZA locators. There are too many rules and restrictions that prevent the setting up of compatible industries because of, again, the inability of BOI to invite sufficiently wide-ranged foreign direct investors under the investment incentives laws except under the “pioneer” registration setup.

Domestic industry: how nationalism with blinders failed us

CROSSROADS (Toward Philippine Economic and Social Progress)
By Gerardo P. Sicat
(The Philippine Star)
Updated October 24, 2012 12:00 AM


More than any country at the beginning of political independence in 1946, the Philippines was poised to become one of the most likely economic success stories in East Asia. Although it suffered immensely from World War II, no country had an instant economic recovery program readily available under sound financing.


Moreover, the Philippines had a highly educated labor force among the colonized regions in the East, the legacy of a program of universal free elementary education and a generous public health policy enforced during the colonial government. Most Filipinos had gone to elementary school at least and a large proportion of the labor force had gone to high school and beyond. Perhaps compared with any other new country, there were proportionately more literate citizens than anywhere.

“Poised for rapid recovery from war damage on the road to development.” The traditional exports of sugar and coconut oil products were assured a rich market, even though at quantitative but sizable quotas. These had been the mainstays of the nation’s export revenues before the war. Moreover, a preferential tariff access to the most economically powerful country at the beginning of the postwar period for 25 years assured the Philippines a window of growth for new exports.

What a gift in terms of market access that was! Even though this was a bilateral preferential trade agreement (meaning, American exports to the Philippines also enjoyed preferences), this arrangement was unique. No other country had that ready access to a highly industrial and economically powerful country market at the time.

It could be said that that agreement was earned at the cost of giving American citizens the same rights as Filipinos under the “restrictive economic provisions” against foreign capital in the Philippine Constitution during the 25-year adjustment period. In addition, that quid pro quo also brought in a war damage compensation program of $620 million, which was a very large sum then. (We have to multiply this by 15 to scale up to the US dollar of today.)

In addition to these, the expenditures of the US military lingered for decades in the country with the presence of military bases employing a large labor segment and procuring local goods from the Philippine economy. The initial outlays at the end of the war were sizable, adding further dollar inflows into the economy.

“We deny ourselves the golden ‘gift’.” As a new nation, our policy actions deflected us from taking advantage of the unique situation that was our great edge. We focused industrial and economic policies that distanced us from exploiting the golden ‘gift’. The measure of that denial can be assessed by looking at what our neighbors did.

They catered to the US market even without the advantages that we had in the cusp of our hands. Hong Kong, South Korea, Taiwan and Singapore did not enjoy preferential trade benefits yet they progressed by producing goods for the American market. Hong Kong and Singapore simply had free trade policy as their weapon, while South Korea and Taiwan used economic controls to favor mainly industries that exported their produce.

We could have done the same ourselves. In fact, we had a great headstart over them which we denied ourselves through a difference in outlook. We installed import and exchange controls to promote industrialization. We devised policies to promote domestic industries producing only for the home market.

What we chose was a “narrow” path of favoring our citizens and limiting the role of foreigners. Instead of allowing foreigners as partners in enterprise, our leaders enacted rules and laws that expanded our rights while denying them the same.

The rules of exchange and import controls typified these measures. They extended the grant of investment incentives in the creation of industrial enterprises mainly to citizens. The law on retail trade nationalization that Filipinized retail trade distribution is another example. That law closed the door toward the role of foreign companies in the retail distributive trades.

“American investments decline at home.” American investments under these circumstances continued to come to the country but these were the firms that simply sold their wares to foreigners. Eventually, we would lose out in attracting more American companies with technological edge and which sought production sites for their world-wide markets that brought them cost advantages.

We encouraged mainly those American industries that produced for our own domestic market needs. Thus, we mainly had the same industries that operated in the country before the war. The country got American brands – although under much more limited means – to establish in the Philippine market.

So came in assembly industries that met domestic demand – for cars and trucks, for household appliances like refrigerators and air-conditioners, for processed foods, for personal grooming and cleaning, for medicines, and for sundry consumer items that we were used to. We continued to enjoy, through licensing arrangements, consumer goods like Coke, Pepsi, bubble gum, pop songs and others. We even imitated them to produce our own substitutes. The petroleum refining industries built the required domestic needs, but no more. We remained steadfast in clinging to American products. Hollywood continued to mesmerize us.

In return for our inward looking policies, foreign investors ceded the domestic market for Philippine enterprises to cater to and no more. Thus, the restrictions we imposed on foreign enterprises at home were matched by severe market restrictions that they gave to Philippine enterprises through licenses.

These arrangements made some Filipino industrialists rich and comfortable. They had monopoly over a wide range of the industrial market. They derived continuing profits from their licensing agreements with American enterprises. But the limited opportunities that these brought to American enterprises also made them lose interest in the limited Philippine market. They simply maintained a contented presence as the domestic economy slowly expanded.

“Our East Asian neighbors get American investments instead.” What we failed to capitalize on was what our neighbors – engaged in their own development efforts – seized upon. They had enormous labor available at low cost. They used their strengths and attracted US foreign investors to come to them.

American companies sought investment sites with low production costs and found these in South Korea, Taiwan, Hong Kong and Singapore. Later, these American companies sold or transferred their factories to reliable local sub-contractors. This was a great technological and business learning experience for these Asian neighbors.

This was how the East Asian factories produced the garments and textiles, household comforts in the home like radios, televisions, and refrigerators and kitchen utensils for the American home.

As a country, the Philippines could have exploited its advantaged position early enough. But did not through default if not neglect.

The link between economic growth and FDI inflows

CROSSROADS (Toward Philippine Economic and Social Progress) By Gerardo P. Sicat
(The Philippine Star) Updated August 15, 2012 12:00 AM


President Benigno Aquino wants more evidence before supporting the Enrile-Belmonte initiative to amend the restrictive economic provisions of the Constitution. In several columns, I have presented the case for these amendments.

This time I will emphasize mainly country evidence, starting first from the simplest to the more complex. [Space limitations prevent elaboration on the references from the technical economic literature.]

1. Hong Kong is the best example of a country with very few economic barriers to economic activity. Starting out as a poor territory, but with its seven million people today, its GDP is larger than ours and its per capita GDP is $36,160 or 16 times greater than ours.

2. Singapore, Thailand, Malaysia, and Indonesia regulate FDIs but this is done by their laws and regulations passed by legislation, not by “constitutional” provisions. They also allow FDIs greater role in their economies than we do.

3. Singapore, like Hong Kong, is a bastion of liberal economic policies even though the state plays a strong role in a few limited sectors. Its four million people enjoy standards of per capita GDP that is 21 times ours at $42,930.

4. Thailand started its economic development program initially compared to ours, but today it has achieved a per capita GDP which is twice as ours. Its growth was fueled by open embrace of foreign direct investments in almost all areas of economic activity. Inflows of FDI have strengthened not only its foreign trade but also its domestic economy and benefited many Thai businesses.

5. Malaysia’s industrialization program started one generation later than ours and welcomed FDIs. Today, Malaysia’s industrialization program is more sophisticated than ours. Its GDP per capita is almost four times ours.

6. Indonesia’s industrial and economic policies were more restrictive than ours for several decades after independence. In 1987, the government adopted bold liberalization policies necessitated by political and economic crises. Even during its earlier years, some of Indonesia’s resource-based policies admitted more foreign investment participation. Its per capita GDP surpassed ours in the last decade.

7. South Korea and Taiwan started with the same import substitution policies like us. In the 1960s and 1970s, their policies became market oriented as they opened their country to more FDIs. These FDIs fueled the expansion of these countries’ export booms of the 1970s which enabled them to further integrate their domestic economies with their export sectors.

8. Vietnam’s recent economic resurgence is due mainly to the inflow of FDIs. The suddenness of the levels of inflows in Vietnam has burdened that country’s absorptive capacity for such change. The changes began exceeding Philippine performance in trade. Some FDIs to Vietnam were reflows of FDIs coming from the Philippines! Vietnam has no economic restrictions in its constitution to detract it from attracting FDIs but has local laws to define their FDI policies.

9. China was an economic basket case under communism (although Mao consolidated political power over its wide and complex territory). Then, its new leader Deng Hsiao-Peng instituted reforms in the communist system in agriculture and, later, in industry which allowed market forces to dominate economic decisions. As China was opened to FDIs, first the Chinese ethnic investors (Hong Kong and Taiwan) came and then Japanese, US and European. The industrial resurgence of China from the 1980s was fueled by a very liberal and well-directed approach to use FDIs as a means of lifting China out of its long years of economic instability and uncertainty. It has succeeded.

10. Before the 1990s, India had complicated regulations and policies that discouraged FDIs. Then it undertook macroeconomic reforms followed by liberalizing policies toward FDIs. It is still held back by many traditional restrictions, protection and political hindrances. But India’s steps to open its economy progressively toward FDIs have helped to invigorate its economy and add greater strength to its industrial sector. (India’s problems and solutions remind me a lot about the problems we have in the Philippines!)

11. Faced with competition from Japan in the US market, many US manufacturing companies migrated to East Asian countries. GE established TV plants in 1968, followed by RCA and Zenith, Fairchild, Texas Instruments, National Semiconductor and Motorola through to 1973. Once these sites were integrated to serve world markets, the US firms upgraded their Asian subsidiaries while introducing new technology and upgrading output toward more complex systems, including design.

12. Actually, Fairchild, Texas Instruments, Intel, and National Semiconductor came to the Philippines! Although we have retained some of these companies in the electronic sectors, they are all confined to the PEZA-zone and have essentially not fully integrated with many domestic economy firms. Philippine industrial problems are traceable to the restrictive economic provisions of BOI incentives which favor mainly local joint ventures.

13. The FDI-related auto industry in Mexico used to have sub-scale plants catering only to their domestic market. Once GM made a decision to use Mexico as a production base for exporting car engines, other major foreign car and auto parts companies followed suit. Within five years, 320 domestic suppliers for car parts and accessories had sprung to serve the FDI-related exporters. Local suppliers and foreign investors introduced best practice and technical assistance so that six out of the largest 10 auto parts manufacturers were locally owned.

14. Does the above remind us more about the success of Thailand compared to the relatively modest Philippine success in auto manufacturing?

15. The link between FDIs and local firms in Malaysia in the machine tool industry are illustrative. At first, FDIs sub-contracted their simple needs to local firms, such as machining and stamping. Soon, such procurement relations moved on to precision tooling and parts fabrication. Of the nine Malaysian companies that were studied, seven firm owners were former FDI employees where they learned their production niche; and 10 percent of workers employed in the domestic firms were similarly former employees of FDIs.

16. In South Korea and Taiwan, many domestic owners of electronic and other industries bought up the manufacturing operations were their former FDI firms as the FDIs decided to move up to the marketing and distribution end of the these industries. The process started first with sub-contracting to the local firms, the to manufacturing operations. Hence the ownership of FDIs changed hands to domestic entrepreneurs.

(From this point on, the examples become more complex and only summarizations are made.).

17. “Spillovers” is the terms used to describe these progressive activities that FDIs bring to domestic firms, institutions and factors. Spillovers are high and desirable because they raise total domestic output and improve technical and competitive abilities of domestic factors.

18. FDIs have large impact on economic growth when host countries are in the same development stage. When countries with unique host country factors inhibit the inflow of FDIs or distort their contributions, the outcomes on growth are less definitive.

19. An example of the uniquely different conditions that hamper such outcomes is the presence of the restrictive economic provisions in the Philippine Constitution that block salutary gains arising from FDIs.

20. In general, who gains from reforms? When economic liberalization reforms became the issue in Taiwan, South Korea and Turkey, the biggest opposition was domestic industry. When the reforms took their effects, the biggest winners were the business interests then who were afraid to adopt the reforms.

More skewed growth

More skewed growth

In defense of Charter change

In defense of Charter change

Charter change focuses on economics

Charter change focuses on economics

Understanding the Charter change issue

Understanding the Charter change issue

Do you want to defeat poverty or not?

Do you want to defeat poverty or not?

Let’s talk about economic patriotism

Let’s talk about economic patriotism

Constraints leave RP behind in ASEAN investment schemeintegrated | The Manila Bulletin Newspaper Online

Constraints leave RP behind in ASEAN investment schemeintegrated | The Manila Bulletin Newspaper Online

Kabayan, may pag-asa pa ba tayong magbago?

RP-style democracy breeds mediocre leaders - Mahathir

The Daily Tribune

06/12/2012

Too much democracy has as trade off slow progress and a mediocre leadership.

This was how former Malaysian Prime Minister Tun Dr. Mahathir Mohamad described the pitfalls of the style of democracy being practiced in the Philippines in a speech delivered yesterday at the University of Santo Tomas (UST).

Mahathir led Malaysia for 22 years from 1981 to 2003 to turn his country into one of the Asian tigers under a leadership which some describe as a benign dictatorship.

For the Philippine-style democracy to work, the government must have a leader who “in particular must be incorruptible,” Mahathir said in his keynote lecture at a special convocation at the UST yesterday.

“His being (incorruptible) will lessen the level of corruption among those under him. There will still be corruption but the degree would be less…, he added.

“In every country there are great people who should lead, but seeing the filth in politics and the fears of those who come into power and who are unwilling to take risks and so very often the leaders are mediocre people at best,” Mahathir said.

“A leader is as good as the ideas that he has. To bring prosperity to the country, he must know what policies to adopt and what strategies to employ,” he added.

Evidently referring to the electoral process in the country and in neighboring Thailand, Mahathir said “no sooner is a government elected when the losers would hold demonstrations and general strikes, accusing the government of malpractices.”

“The government has to deal with these disruptions and neglect the work of governing and development that it is expected to carry out. The disruption could be so serious as to force the government to resign,” he said.

“Really the countries of Southeast Asia have great potential for growth, prosperity and empowerment. All we need are people and leaders who love their country and people more than they love themselves,” he said.

Mahathir indicated that democracy only works when the people understand its limitations. He said democracy would not bring the goodness that it promised when people think only of the freedoms of democracy and know nothing of the implied responsibilities.

“Instead, it will result only in instability, and instability will not permit development to take place and the people to enjoy the benefits of freedom and the rights that democracy promises,” he said.

Mahathir was conferred with an honorary professorship by UST, which is bestowed on distinguished foreign individuals who have achieved exceptional distinction in their respective fields of expertise.

“No doubt democracy is being practised by this country. But is it really what democracy is all about? Is democracy the end or the means? If we think that democracy is the end, then well and good. But why did we change from autocracy to democracy? Wasn’t it because autocracy had failed to deliver the good life that we wanted? We believed that since it is the people who disapproved of autocracy, then if the people were to rule the country, then surely they would rule themselves well,” Mahathir said.

He said the rule of the majority does not always produce the best results for a nation. “We cannot assume majority of the people must be intelligent. In many instances, majority is not intelligent and the minority refuses to be involved because they think politics is dirty. If you don’t manage democracy well it is not going to pay dividends,“ he said.

“We are living in a tumultuous world, in a world of political turmoil, in a world of economic turmoil, in a world of social turmoil. We are seeing the collapse of moral values and of beliefs. All the things that we used to value are being questioned, scrutinized and in many cases rejected, to be replaced by what is called freedom, freedom which is enjoyed by some at the expense of others, often at the expense of the community as a whole,” he added.

Mahathir also had something to say about technological advances being abused to undermine governments.

“We are seeing advances in technology, advances which bring great benefits but which are also open to abuses, negating much of the benefits. Privacy is being invaded. Secrets, including sensitive military secrets are being leaked in the name of freedom of information. The whistle-blowers are hailed as heroes. Nothing is sacred any more,” he said.

Mahathir said that while democracy was the best system of governance ever devised by man, it only works when people understand its limitations.

Noting that Malaysia was not a liberal democracy, he said democracy was viewed principally as providing an “easy way” to change governments.

“No revolution, no civil wars, no Arab spring. Just vote and the government will be brought down or re-elected according to the wishes of the people,” Mahathir said.

He said in Malaysia’s election process, candidates from opposition parties could win and they had indeed captured a number of state governments.

On leadership, Dr Mahathir said it must not be corrupt and need vision about the development of the country.

“A leader is as good as the ideas that he has. To bring prosperity to the country, he must know what policies to adopt and what strategies to employ,” he said.

Turning to the economy, Dr Mahathir, who has been courted by Yemen to be its special economic advisor, said he believed that in this troubled economic climate, Asean should co-operate more productively and make use of its market of half a billion people.

The Malaysian Foreign Ministry said Dr Mahathir and his wife, Tun Dr Siti Hasmah Mohd Ali, were received on arrival in Manila yesterday by the Malaysian envoy to the Philippines, Datuk Seri Dr Ibrahim Saad, and other embassy officials.

Dr Mahathir attended a gathering with the Malaysian community as well as delivered a keynote speech on “Nation Building and Economic Development” at a dinner organised by the Asia Society at a leading hotel there.

3rd RTD on Structural Reforms

Here's a link to the Third Round Table Discussions on Structural Reforms at the UAP/CRC on 07 March 2012. The discussions were focused on unicameral parliamentarism.

http://uap.asia/crc/index.php/2012/04/stabilizing-the-economy-through-reform-of-political-institutions/

2nd RTD on Structural Reforms

Here's a link to the Second Round Table Discussions on Structural Reform at the UAP/CRC on 12 October 2011. The discussions focused further on the liberalization of foreign investments.

http://uap.asia/crc/index.php/2011/10/economic-provisions-in-the-constitution-2nd-round-table-discussion/

1st RTD on Structural Reform

Here's a link to the First Round Table Discussions on Structural Reforms at the UAP/CRC on 01 July 2011. Discussions are focused on the liberalization of foreign investments.

http://uap.asia/crc/index.php/2011/07/structural-reform-1st-round-table-discussion/