Additional holiday every week

Last Monday, it was the Ninoy Aquino holiday. Ninoy Aquino was killed in 1985 when he returned to the Philippines as an opposition leader to Ferdinand Marcos, the dictator of the Philippines at that time. This Monday was declared National Heroes Day. I thought the Philippines already had holidays for many national heroes, such as Rizal, Bonifacio, and Ninoy Aquino. Now they need another holiday to remember them. But when I searched for the background of this holiday, I came across an article that explains this holiday galore rationally:

Holiday economics now a law

Inquirer

Posted date: July 25, 2007

MANILA, Philippines -- Holiday economics, or the practice of shifting holiday observances, is now official government policy after President Gloria Macapagal-Arroyo signed Republic Act 9492 into law. The law, “an act rationalizing the celebration of holidays,” mandates that most holidays, except those with religious significance, will be shifted to the nearest Monday, said Executive Secretary Eduardo Ermita who announced the new law Wednesday. Thus, next month, Ninoy Aquino Day, which celebrates the martyred anti-Marcos opposition leader, normally celebrated on August 21, a Tuesday, will shift to the preceding Monday, August 20. National Heroes’ Day, celebrated on August 31, will be observed every last Monday of August, which this year falls on August 27. “Therefore, we have two long weekends for the month of August,” said Ermita. The “moveable days” are Bataan Day (April 9), Labor Day (1 May), Independence Day (June 12), National Heroes Day (August 31), Bonifacio Day (November 30) and Rizal Day (December 30). Thus, if Independence Day, June 12, falls on a weekend, it will be celebrated on the following Monday. The same principle applies if June 12 falls on any day except Monday. Exempted from holiday economics -- that is, holidays that will be observed on the date on which they fall -- are Christmas Day (December 25), New Year’s Eve (December 31), New Year’s Day (January 1), Holy Thursday, Good Friday, Easter Sunday, Eid’l Fitre (October 13) and All Saints Day (November 1). “Good Friday, you cannot move it to Saturday. Christmas Day, December 25, how can you change the birthday of Jesus Christ? Christmas is Christmas,” said Ermita. The President, who coined the term holiday economics, introduced the policy in 2001 to reduce disruption to business and production schedules, encourage domestic tourism and give employees long weekends. Critics questioned the soundness of the policy, saying it would result in lower output and affect economic productivity. Others deplored it as presidential tinkering with history via executive fiat. But National Statistical Coordination Board figures showed that if tourism businesses and related industries increased by 10 percent as a result of the long weekends, the economy would actually experience a 3.5-percent growth in gross domestic product. Under the country’s labor laws, employers must pay 200 percent of the daily rate to those employees who report for work on legal holidays -- January 1, April 9, May 1, Maundy Thursday, Good Friday, June 12, National Heroes Day, Eid’l Fitre, November 30, Christmas Day and December 30. On special holidays, employers must pay 30 percent over the regular rate. These are Ninoy Aquino Day, November 1, election day, November 30, Black Saturday and holidays that may be declared from time to time by the President.

So you see, they figure that more holiday means higher economic growth! hurray! I am skeptical, but who am I to say that the National Statistics Coordination Board is wrong? They must have asked the question: if companies had to either pay higher wages to keep working on those holidays, or not conducting their businesses, what impact would this have on economic growth? My naive answer is neither option would be good for business, and thus economic growth. Of course, if the Philippines does not intend to compete with other countries, but rely solely on remittance and its ensuing retail spending, then it is correct that they do not need to care about the impact of such policy on businesses other than retail businesses.

Now, if someone can explain to me why this year's National Heroes Day fell on 7 September.....

Mismanagement and corruption

Because of some family matters, I was required to obtain clearances from many government agencies in the past twelve months. These agencies include the NBI, local police, a unit in the Department of Social Welfare and Development, and the Department of Foreign Affairs. I can draw two conclusions from the experience. The officer-in-charge of a unit is often the person who comes in latest every day. This happened in the unit of Mandaluyong City police station responsible for issuing police clearance, as well as the DSWD unit. One hour late is the norm. So even though the other junior officials had completed your paper work, you have to wait for the boss to come to work. This is the most obvious sign of mismanagement. If the senior official does not show concern for his work, would his staff do? We are not even talking about competence here.

Second conclusion : the lower down from the headquarters, the more corrupted an office is likely to be. While applying for NBI clearance was cumbersome, having to go to many windows, all steps were clearly displayed, and options explained in large print to the public. No fixers were seen there, and each step was completed quite fast. A tip: if you go there in the late morning, the eager-beaver applicants would have been gone, and the lines would be shorter.

When I went to the city police station to get a police clearance, even though some steps were laid out in a piece of paper glued to one of the windows, it was not clear to me what I was supposed to do. I enquired with the officials inside, and showed them an expired police clearance that I obtained with the help of someone last time. All of a sudden, I was sat down in a corner inside the station. A clerk pulled out a blank certificate, and started typing on it. When he finished, he went over to an other officer, and obtained a signature from that officer. He came back, handed me the certificate and asked for three hundred pesos. I was happy to have the certificate done so fast, so I gave him the money and left. Before I left, I noticed that the office actually had computers for printing the certificates, and another clerk in the office was inputing data from application forms into the computer. Then it dawned on me that I got an official fake police clearance.

Another day while I was waiting in line to talk to some officials in DFA, I read on their bulletin board that the government had recently introduced anti-red tape guidelines, asking all offices to have and display clear procedures for considering applications from citizens, and that the number of signatures required for completing an application be set at no more than five. In addition, it also prescribed time limit for completing the procedures. This measure by the central government should be applauded. At least it shows that the leadership has some intention of improving governance. However, how sincere they are in doing it will be reflected in the implementation of the guidelines. If nobody watches the officials, then of course who would be bothered to remove some colleagues' chance of making extra dough, or exert more effort to get things done faster for the applicants.

Procedures for Opening a Business

This web file contains a new report on the business environment in the Philippines. It contains a detailed list of the procedures needed to start a business in each of the major cities in the Philippines. For example, page 54 lists out the procedures to be taken for registering a business in Pasig City. It only takes 22 procedures before an entrepreneur can start a business there. The fewest number of procedures for a city is 17. I guess the government is saying, if you don't have enough stamina, you may as well save your money and don't bother with starting a business. After starting a business, you will need even more stamina as each month you, or your staff, must make numerous filings and payments to satisfy the government's demand.

This other web site, also by the World Bank, gives an overall picture of doing business in the Philippines, including tables that show a comparison with the performance in other countries. It also includes a list of analytical studies done on the subject, as well as a list of all the local legislation that is relevant to doing business in the Philippines. The latest study on the list attempts to explain why the growth rate of the Philippines is so low. It speculates that one reason is that the public sector does not have enough money to invest, and the other is that the private sector does not need to invest in order to become profitable. While I can see how the second factor is valid, I think the first may be too kind to the authorities. Rather than lack of resources, I think the public sector has a lot of resources but simply squanders them away.

One-sided Deal

On 27 May 2008, the Joint Foreign Chambers of Commerce wrote to the Philippine President, complaining about the government's move to roll back the privatization of the country's dominant power producer. On 6 June, the Philippine senate blasted the joint chambers for 'interferring' in its decision-making. On 12 June, Ms. Arroyo, Philippines' President, expressed appreciation of the contributions that foreign investors made to the country in a barely publicized conference. This week, Ms. Arroyo is visiting the USA, trying to woo investors.

Today, the Asian edition of the Wall Street Journal runs an article with this caption : "Powering Down the Philippine Economy". The article reveals that several European ambassadors were preparing to file a diplomatic protest over the dressing down of the joint chambers a few days before Ms. Arroyo's expression of 'appreciation' on 12 June. The article also points out that the senators who lashed out at the foreign joint chambers were Arroyo's allies/minions, and that Arroyo even brought one of them with her to the USA.

A few days ago, a columnist of the Philippine Star, a popular local newspaper, argued in his article that the Philippines does not need foreign capital. It only needs better policies. I guess if you have better policies and a more business friendly bureaucracy, more local capital would be put to use, resulting in more jobs. You do not need foreign capital to survive. However, if you have foreign capital, you can grow faster. I do not see how anybody can argue with that. China closed its doors to foreigners in the nineteenth century. Since thirty years ago, it has learned to use foreign skills and capital to grow itself, without the fear of being taken for a ride.

Businesses that Foreigners can Operate

The restrictions on foreigners operating business in the Philippines are mostly prescribed in a document called Foreign Investment Negative List. The list is further divided into List A and List B. Accompanying the list are various legislation and executive orders, such as Republican Act No. 8179 enacted in March 1996, and Executive Order 139 issued in 2002.

In essence, under the latest Negative List (5th), foreigners are not allowed to invest in the media, professional services (medical, engineering and so on), retail trade with paid-in capital of less than US$2.5 million, manufacturing of weapons and pyrotechnic devices. They may own up to 25% of companies that undertake publicly funded construction contract works. Foreigners may own up to 40% of businesses involved in mining or public utilities, and also businesses that supply the national police and the military, gambling operations or domestic enterprises with paid-in capital of less than US$200,000 (i.e. if the paid-in capital is above this amount, 100% foreign ownership is allowed provided the business is not in List B).

Foreigners may own upto 60% of financing companies or investment houses, provided they meet certain requirements.

Self Interest and/or/versus Public interest

The Philippine senator who blasted the Joint Foreign Chambers of Commerce (JFC) for writing to the President regarding the country's power sector policy accused the foreign investors for caring only for their self interest, at the expense of the Philippine people.

For those not blinded by nationalistic feelings, you can read about the points made by the JFC in these press releases :
European Chamber of Commerce
US Chamber of Commerce

Yes, the foreigners may be after their own interest. They do not want the cost of energy to be too high for their factories in the Philippines. They may also want to buy the privatising assets for cheap. I guess if the Philippine government is being forced to sell assets for cheap, then there is valid reason for getting upset. At the same time, we must know what 'cheap' means. Some assets appreciate over time, like land. Others depreciate in value, by wear and tear. Some 'assets' can be operating at a loss, because of bad management and/or inadequate investment. If a badly managed power plant can be sold, and then managed properly and becomes profitable in the future, is there any victim here?

Investing in the distressed assets of a foreign country is always tricky. When the asset is in distress, the owner begs to sell. Yet the buyer will bear the risk of nationalistic sentiment when the situation improves. The foreign owner will be accused of exploitation, even though he took up a tremendous amount of risk by betting on a distressed asset, and invested in its turnaround. Examples are South Korean banks sold during the 1997 financial crisis to foreigners.

What is a good public policy regarding distressed/dilapidated public assets, when you do not have money to continue subsidizing or renew it?

Expect Unpredictability

Businessmen from developed countries are used to knowing a country's holidays before a new year starts. In the Philippines, expect holidays to be changed a few days before the previously announced day. Philippines' Independence Day is on 12 June. On 28 May, the government announced that the holiday for Independence Day would be 9 June, while celebrations will be held on 12 June. The government made a proclamation earlier in the year that allows the President to move the observance of national holidays that fall within the middle of the week to the nearest Monday. Only May 1, Labor Day, is not covered by this law. However, exactly WHEN the President makes the decision is not prescribed. For all we know, she can declare it one day before the new holiday. Go plan your meetings, your schedules for shipping, your staff deployment, and then forget about them.