Updated: Sun, 03 Mar 2013 03:40:05 GMT | By Agence France-Presse

Philippines' elite swallow country's new wealth

Optimism is soaring that the Philippines is finally becoming an Asian tiger economy, but critics caution a tiny elite that has long dominated is amassing most of the new wealth while the poor miss out.


President Benigno Aquino has overseen some of the highest growth rates in the region since he took office in 2010, while the stock market has hovered in record territory, credit ratings have improved and debt ratios have dropped.

"The Philippines is no longer the sick man of East Asia, but the rising tiger," World Bank country director Motoo Konishi told a forum attended by many of Aquino's economic planning chiefs recently.

However economists say that, despite genuine efforts from Aquino's team to create inclusive growth, little progress has been made in changing a structure that for decades has allowed one of Asia's worst rich-poor divides to develop.

"I think it's obvious to everyone that something is structurally wrong. The oligarchy has too much control of the country's resources," Cielito Habito, a respected former economic planning minister, told AFP.

He presented data to the same economic forum at which Konishi spoke, showing that in 2011 the 40 richest families on the Forbes wealth list accounted for 76 percent of the country's gross domestic product (GDP) growth.

This was the highest in Asia, compared with Thailand where the top 40 accounted for 33.7 percent of wealth growth, 5.6 percent for Malaysia and just 2.8 percent for Japan, according to Habito.

According to the Forbes 2012 annual rich list, the two wealthiest people in the Philippines, ethnic Chinese magnates Henry Sy and Lucio Tan, were worth a combined $13.6 billion.

This equated to six percent of the entire Philippine economy.

In contrast, about 25 million people, or one quarter of the population, lived on $1 a day or less in 2009, which was little changed from a decade earlier, according to the government's most recent data.

Some of the elite families have dominated since the Spanish colonial era that ended in the late 1800s.

Prominent Spanish names, such as Ayala and Aboitiz, continue to control large chunks of the economy and members of the families are consistent high placers on Forbes' annual top-40 wealth list.

Their business interests range from utilities to property development to banking, telecommunications and the booming business process outsourcing industry.

Many of the ethnic Chinese tycoons, such as Sy and Tan, got their start soon after the country gained post-World War II independence from the United States.

The tendency for the same names to dominate major industries can be partly attributed to government regulations that continue to allow near monopolies and protections for key players.

For decades after independence from the United States in 1946, important sectors such as air transport and telecommunications were under monopoly control, according to a Philippine Institute for Development Studies paper.

Despite wide-ranging reforms since 1981, big chunks of the market remain effective oligopolies or cartels, it said.

Habito said the path to riches for the few is also helped by a political culture that allows personal connections to easily open doors.

The Aquino government's mantra since succeeding graft-tainted Gloria Arroyo's administration has been good governance and inclusive growth, and their efforts have been applauded by the international community.

The government is spending more than $1 billion this year on one of its signature programmes to bridge the rich-poor divide.

The conditional cash transfers programme will see 15 million of the nation's poorest people receive money directly in exchange for going to school and getting proper health care.

However Louie Montemar, a political science professor at Manila's De La Salle University, said little had been done at the top end to impact on the dominance of the elite.

"There's some sense to the argument that we've never had a real democracy because only a few have controlled economic power," Montemar told AFP.

"The country dances to the tune of the tiny elite."

Nevertheless, the government and economists say there are many other reforms that can be taken to bring about inclusive growth.

Analysts said the most direct path out of poverty was improving worker skills, using higher tax revenues to boost spending on infrastructure, and rebuilding the country's manufacturing sector.

To this end, many economists endorse the Aquino government's cash transfer programme as well as reforms to the education system, which include extending the primary and high school system from 10 to 13 years.

But for people such as mother-of-five Remy del Rosario, who earns about 1,500 pesos ($36) a week selling cigarettes on a Manila roadside, talk of structural reform and inclusive growth mean little.

With her bus driver husband out of work, the family has no savings and her income is barely enough to cover food, bus fare, and prescription medicines.

"Other people may be better off now, but we see no improvement in our lives," she said.

15Comments
Mar 3, 2013 1:14AM
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I watch Bloomberg and other business news shows specially Asia-centric ones. I'm always amazed at the new entrepreneurs and new multi-millionaires/billionaires that the rising e****my of Asia produces. BBC has this show ****ut the new wealthy and interviews them. Individuals that have made it big in the new e****mic climate their respective countries have achieved. They've interviewed Chinese, Thai, Malay, Indian etc....all ordinary individuals rising from the ranks through their own hard work. But when it comes to interviewing Filipinos. Surprise, they have to interview persons like from the families of Ayala or heavy hitting persons from the upper management of blue chip corporations or national banks. Very rarely do you see a commoner success story unless it's from the world of design or artistry. Truth is, it's hard to do business in the Philippines. Imagine the taxes alone is really, really, really high! I've tried to report my taxes honestly and I ended up in the red. There is very little support for SME's in truth. The DTI may say sweet words of encouragement all the time but the city/municipality rules, fees and taxes will kill you.
Mar 3, 2013 12:20PM
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corruption is big business,the poor will stay poor and the rich will get richer,it's law of the land here.

i wish i never retired here.i lost everything to the BOC, i was taxed so high that i lost my jeep and personal effects inside the jeep.

i even asked to "see the book" to show me how they came up with the tax,well,they could not show me,,it was "we know".well,that's was a bunch of crap i ever heard.in fact,the BOC will not wait till i get my 13A visa so i can get my personal effects tax free.one way or another,the BOC is going to make you pay.

now,another note;where are all the millions that come to the philippines as aide go to?

i have read over $245 million has been donated just from the USA,where did all that money go?

where is the millions that were donated for the ppl on mindanao when the last typhoon hit ?

Mar 3, 2013 12:16AM
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This report is  absolutely  true for decades and  the main  reason is greed - non-distribution of wealth.
Mar 3, 2013 10:30PM
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When corrupt criminals like Marcos Junio, his motherr and Enrile are elected again and again, that is a huge part of the problem.
Mar 4, 2013 12:13AM
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Just all of you. Please read the business pages or business newspapers. Specially during the turn of the year and see who posted profits. Almost all blue chip corporations, mining etc....post record profits every year, specially energy. So you know corporations and old rich families gained a lot. Job creation? Where is it? Now all that profit? Why is the BIR continuing to run sh****f their own expectations? BIR - among the most corrupt ins****utions of the government. If they can't admit to being corrupt then they should at least admit to being inept in this case.


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The Spaniards ruined the Phils with their social caste system, and the Filipino people remained mired in that rut. I don't think the Phils will be much changed over the next century.
Mar 3, 2013 6:37PM
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What is more important, bring in foreign investment or raise the value of the peso to make it cheaper to import?
China keeps the yuan low so it can increase foreign investment and make their "cheap" goods for export.
What ****ut all the Filipinos who work out of the country? The money they send home is now worth less than 10 years ago. 20% less to be exact.
If you really want to rebuild the country's manufacturing sector the peso must be devalued.  
Let the provincial governments build roads, highways and railways and create more jobs in doing so.
Why not block some of the loopholes for the rich to evade taxes? This would bring the playing field a little more even, wouldn'****?
It is no surprise that the more money you have, the more money you can make. 
Mar 3, 2013 3:32AM
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life's not fair but at least everyone has the same opportunity to grow but once you start to compare yourself to others who manage their wealth very well through generations, you will definitely be frustrated. these men started like all o****s but they steadily improve though the years be it luck which they don't believe anyway or just pure talent. Whatever, everybody should work their way to the top, the government just make it sure to level the playing field...good school, less corruption, fair taxes, good governance in short. the rest is up to every Filipino. Stop blaiming the government for your misery and start working your way to the top with less complaints and confident that our children will be better off than what we have now.
Mar 3, 2013 7:45PM
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These may help proper  distribution of wealth in the Philippines.

1.  Revision of Cons****ution,Change the electoral and e****mic policies.

2. Election Campaign should be ****nded by the Goverment so that the Loyalty of politicians is for the country.

3. One Family should owned one type of industry only, unlike now one family, owned power ,water telecom, real estate, banks ,transportation etc.

4. All Business and with income per year of 500T per year should be taxed excepted.

5. Governmnet should lend money to small business enterprises P50T  with 5 % interest per year.

6. Government should hire more people to enforce taxed collection

7. DECS should Change the Education System from Employee oriented into Business , we need more business entreprise to solve unemployment.

8 Government should Initiate heavy industry and turn over it to private corporation with equal share to all stock holders.

9. Corporation with with multiple business should be disintegrate in order to give way to small business to rise.

Governement should be the major employer .

Mar 4, 2013 12:00AM
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There is no way wealth distribution can succeed if graft and corruption remains at the current level where it is ins****utionalize and widespread not only on the key government officer level but most especially at the lower level of bureaucracy where a starting businessman files multiple do****ents for a simple basic business..It is estimated that hundreds of billions in vital e****mic resources are lost in graft and corruption when this should have been made available to the larger population. Corruption makes doing business in the Philippines very costly...Some suggestions to cut GRAFT & CORRUPTION are:

    1. Make the rules and laws simple.

    2. Make it transparent for all to understand and see and not open to double interpretation.

    3. Computerized or automate the system.

    4. Vigilance or active involvement of the citizenry..."people power" the Graft Corruption.\

    5. Complete overhaul of the Judiciary system where laws can be interpreted and applied

        consistently.

    6. Allocate a large part of the conditional cash transfer program for tax re****nd not only as a

        means of wealth distribution to the taxpayer but also to encourage filing of taxes. Computerize

        tax filing especially for the fixed income sector.

 

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