Foreign Aid Will Only Give Filipinos Fish, Foreign Investments Will Teach Filipinos How To Fish

Did Senator Bum Aquino ever read the Chinese proverb that's applicable to ALL CULTURES that says, "Give me a fish and I will have a meal for a day, teach me how to fish and I will have a meal for a lifetime." It's time to address the issue of rejecting foreign aid. While it's good for Bum to be wary with more taxes but it's time to address some issues that he's probably missing on purpose. As said, it's been a huge a waste of his high IQ and academic achievement if he's just going to end up like the scholars in the story of the Scholars and the Lion. I'd like to think about my response to Bum or maybe it's time to call him Boy Pagpag for saying restaurants should donate leftovers. 

Learning from African countries that get hurt by foreign aid 

Do you know foreign aid is actually hurting many countries in Africa which are worse than the Philippines? Here's what the Wall Street Journal has to say about it and I hope Bum reads it:

Yet evidence overwhelmingly demonstrates that aid to Africa has made the poor poorer, and the growth slower. The insidious aid culture has left African countries more debt-laden, more inflation-prone, more vulnerable to the vagaries of the currency markets and more unattractive to higher-quality investment. It's increased the risk of civil conflict and unrest (the fact that over 60% of sub-Saharan Africa's population is under the age of 24 with few economic prospects is a cause for worry). Aid is an unmitigated political, economic and humanitarian disaster.

Few will deny that there is a clear moral imperative for humanitarian and charity-based aid to step in when necessary, such as during the 2004 tsunami in Asia. Nevertheless, it's worth reminding ourselves what emergency and charity-based aid can and cannot do. Aid-supported scholarships have certainly helped send African girls to school (never mind that they won't be able to find a job in their own countries once they have graduated). This kind of aid can provide band-aid solutions to alleviate immediate suffering, but by its very nature cannot be the platform for long-term sustainable growth.

Whatever its strengths and weaknesses, such charity-based aid is relatively small beer when compared to the sea of money that floods Africa each year in government-to-government aid or aid from large development institutions such as the World Bank.

Over the past 60 years at least $1 trillion of development-related aid has been transferred from rich countries to Africa. Yet real per-capita income today is lower than it was in the 1970s, and more than 50% of the population -- over 350 million people -- live on less than a dollar a day, a figure that has nearly doubled in two decades.

Even after the very aggressive debt-relief campaigns in the 1990s, African countries still pay close to $20 billion in debt repayments per annum, a stark reminder that aid is not free. In order to keep the system going, debt is repaid at the expense of African education and health care. Well-meaning calls to cancel debt mean little when the cancellation is met with the fresh infusion of aid, and the vicious cycle starts up once again.In 2005, just weeks ahead of a G8 conference that had Africa at the top of its agenda, the International Monetary Fund published a report entitled "Aid Will Not Lift Growth in Africa." The report cautioned that governments, donors and campaigners should be more modest in their claims that increased aid will solve Africa's problems. Despite such comments, no serious efforts have been made to wean Africa off this debilitating drug.

The most obvious criticism of aid is its links to rampant corruption. Aid flows destined to help the average African end up supporting bloated bureaucracies in the form of the poor-country governments and donor-funded non-governmental organizations. In a hearing before the U.S. Senate Committee on Foreign Relations in May 2004, Jeffrey Winters, a professor at Northwestern University, argued that the World Bank had participated in the corruption of roughly $100 billion of its loan funds intended for development.

As recently as 2002, the African Union, an organization of African nations, estimated that corruption was costing the continent $150 billion a year, as international donors were apparently turning a blind eye to the simple fact that aid money was inadvertently fueling graft. With few or no strings attached, it has been all too easy for the funds to be used for anything, save the developmental purpose for which they were intended.

In Zaire -- known today as the Democratic Republic of Congo -- Irwin Blumenthal (whom the IMF had appointed to a post in the country's central bank) warned in 1978 that the system was so corrupt that there was "no (repeat, no) prospect for Zaire's creditors to get their money back." Still, the IMF soon gave the country the largest loan it had ever given an African nation. According to corruption watchdog agency Transparency International, Mobutu Sese Seko, Zaire's president from 1965 to 1997, is reputed to have stolen at least $5 billion from the country.

It's scarcely better today. A month ago, Malawi's former President Bakili Muluzi was charged with embezzling aid money worth $12 million. Zambia's former President Frederick Chiluba (a development darling during his 1991 to 2001 tenure) remains embroiled in a court case that has revealed millions of dollars frittered away from health, education and infrastructure toward his personal cash dispenser. Yet the aid keeps on coming.

A nascent economy needs a transparent and accountable government and an efficient civil service to help meet social needs. Its people need jobs and a belief in their country's future. A surfeit of aid has been shown to be unable to help achieve these goals.

A constant stream of "free" money is a perfect way to keep an inefficient or simply bad government in power. As aid flows in, there is nothing more for the government to do -- it doesn't need to raise taxes, and as long as it pays the army, it doesn't have to take account of its disgruntled citizens. No matter that its citizens are disenfranchised (as with no taxation there can be no representation). All the government really needs to do is to court and cater to its foreign donors to stay in power.

Stuck in an aid world of no incentives, there is no reason for governments to seek other, better, more transparent ways of raising development finance (such as accessing the bond market, despite how hard that might be). The aid system encourages poor-country governments to pick up the phone and ask the donor agencies for next capital infusion. It is no wonder that across Africa, over 70% of the public purse comes from foreign aid.


I think why President Rodrigo R. Duterte wants to reject the "free money" from EU is probably because of what was just mentioned. The words "A constant stream of "free" money is a perfect way to keep an inefficient or simply bad government in power." gets into my head. I can't forget Typhoon Yolanda and how foreign aid was being misused. What Bum may also be ignoring is that any nascent economy needs a transparent and accountable government. That's something that the Philippines and Filipinos badly need to reach out their potential for the better. What's so stupid about the Liberal Party is that they claim to fight poverty and they want economic development yet they adhere to lousy economic protectionism

The Wall Street Journal also reveals these truths that could help the common Filipino understanding why rejecting EU's aid and opening up the economy of the Philippines would be the best thing to do:

In Ethiopia, where aid constitutes more than 90% of the government budget, a mere 2% of the country's population has access to mobile phones. (The African country average is around 30%.) Might it not be preferable for the government to earn money by selling its mobile phone license, thereby generating much-needed development income and also providing its citizens with telephone service that could, in turn, spur economic activity?

Look what has happened in Ghana, a country where after decades of military rule brought about by a coup, a pro-market government has yielded encouraging developments. Farmers and fishermen now use mobile phones to communicate with their agents and customers across the country to find out where prices are most competitive. This translates into numerous opportunities for self-sustainability and income generation -- which, with encouragement, could be easily replicated across the continent.

To advance a country's economic prospects, governments need efficient civil service. But civil service is naturally prone to bureaucracy, and there is always the incipient danger of self-serving cronyism and the desire to bind citizens in endless, time-consuming red tape. What aid does is to make that danger a grim reality. This helps to explain why doing business across much of Africa is a nightmare. In Cameroon, it takes a potential investor around 426 days to perform 15 procedures to gain a business license. What entrepreneur wants to spend 119 days filling out forms to start a business in Angola? He's much more likely to consider the U.S. (40 days and 19 procedures) or South Korea (17 days and 10 procedures).


The big difference between accepting foreign aid and accepting foreign investors

It's absolutely hypocritical to claim to be "Sariling Atin" yet you're receiving foreign aid. North Korea claims to have reached the "Pambansang Industriya" yet it turns out to be heavily overly reliant on foreign aid from China. By rejecting free trade and embracing protectionism you can see how North Korea "prospered" over South Korea. If economic protectionism is so good then why is South Korea having better life conditions. Why are some North Koreans moving to South Korea? If we're going to apply the situation to the Philippines that would be why are some Filipinos desperate to leave their country for first world countries rather than protectionist states like Venezuela and North Korea? Why are some overseas Filipino workers applying for jobs in South Korea than North Korea?

Where foreign aid differs is how it gives help to the Philippines. It's not about donations but giving opportunities to Filipinos for work. When foreign investors land in any free trade related country they are subjected to that country's rules and regulations. Foreign investment is a long term cash flow. Foreign aid is not a consistent cash flow. Foreign aid is just short term cash flow. Foreign investment means foreigners teaching Filipinos how to fish and they have a meal for a lifetime. Foreign aid is foreigners giving Filipinos fish and they only have a meal for a day. Self-sufficiency doesn't mean rejecting foreign investors but accepting them in order for the country to stop relying on foreign aid. After all, foreign investors doing business in the Philippines must obey Filipino laws.

Receiving foreign aid is just short-term income compared to foreign investment. Foreign aid is just one instant fall of huge money and it can be easily misspent. Foreign investment would provide long term income for any country. When foreign investors do business in the Philippines it would mean that they are subject to Filipino laws. These firms are obliged to provide jobs to Filipinos and to pay taxes to the Philippine government. This means that there will be more taxes. One doesn't need to wait for the next typhoon, earthquake or any disaster before money comes in. Instead, it's also about getting money from the taxable net income of foreign investors so the Philippines will have money prepared just in case another disaster happens. These taxes will help prepare the Philippines to spend for repairs in case of an upcoming disaster. While accepting foreign aid can be good but don't accept it from countries who attach unfair conditions to them. Instead, accept them but don't rely on them. 

Receiving foreign investors will not cater to a culture of mendicancy or any form of welfare state. When there's going to be an influx of job opportunities then it's take it or leave it. Filipinos must take the opportunity to grab whatever vacant slot is best suited for them. That means there will be much less reasons to be involved in the drug trade industry. When there's an influx of foreign investors then local businesses must find ways to be competent through innovation and initiative. It would mean that local businesses can now seek to gain more customers and service providers when there will be more foreign investors. Competency is more guaranteed because one can have better services than get stuck with the stupidity of the oligarchy's poor services. There will be more customers because the suppliers can take advantage of their customers' competition. It will also mean banks will have more money in them and the Bureau of Internal Revenue will have more money to collect. There will be a lot more revenues because there will be more taxpayers through employees and entrepreneurs. It will also mean raising up the minimum wage. It wont' be just teaching Filipinos how to fish but giving them more fish for their hard work. 

Comments