OPEN UP MARKETS

 

Erle Frayne D. Argonza

 

[Writ 23 March 2008, Quezon City, MetroManila]

 

As one can observe from my previous articles, New Nationalism supports a continuous entry of investments to the domestic market from overseas. This article articulates the specific contention about the matter.

 

Autarchy is bad policy and practice to begin with. If it worked for the Habsburg Empire for a while, it worked only because there were draconian measures employed to make them work, and that the territory of the Empire was large enough for autarchy (also autarkie). This empire is long gone, autarchy is ridiculously obsolete, but Old Nationalists abound who still tend to be autarchic in their discourse. They are among our living dinosaurs, come to think of it.

 

Just because capital investments come from the outside shouldn’t make them necessarily suspect or deleterious to the national interest. As already previously articulated, there should be ‘safety nets’ or institutional and policy mechanisms, such as fair trade –based regimes, that can mitigate the deleterious impact of globalization.

 

But before articulating on the other base mechanisms for such mitigation, it should be first accepted that overseas capital can serve the national interest. If domestic investment and savings rates are perennially low or insignificant, there should be greater reason to open up the market to external investors. As an observation, the Philippines has had a bad track record of attracting investments amid the massive opening up of the market via financial liberalization policies.

 

The same contention should hold water for other countries. The USA at this moment needs fresh funds to the amount of trillions of dollars per annum coming from overseas to be able to bring it back to macro-economic wellness. There is no way that the USA will be semi-insular, more so autarchic, when its economy had clearly crashed.

 

However, attracting foreign investments doesn’t mean a perpetuation of trade liberalization  policies pertaining to investments and cross-border monetary flows. It’s got to do more with strengthening institutions and keeping macro-economic fundamentals at their most positive levels indicative of economic health and wellness.

 

Look at Malaysia’s previous experience for instance. As a response to the devastating effects of the financial meltdown in 1997, the state immediately instituted financial, monetary and capital control policies. They worked precisely because governance institutions and macro-economic fundamentals (particularly fiscal health) made it worthy to invest in the country, as risk levels were tremendously brought down and volatility ebbed.

 

Recently the Malaysian state decided to take down altogether the capital control policies as macro-economic wellness and financial volatilities were put under control. This is a clear case for flexibility in development policies: know when to institute regulations and deregulations well, without necessarily impeding or degrading the national interest whatsoever. I salute the grand patriarch of Malaysian nationalism for the matter, the venerable Mahathir Mohammad.

 

The contention for foreign investments culled from the New Nationalism article is shown entirely below.

 

Continuously open the market to external investors.

 

National savings continue to hover at a pathetically low rate of seventeen percent (17%), which is significant but is way below the minimum of thirty percent (30%) to render it as ‘critical mass’, like that of our neighbors’. The problem cannot be addressed sufficiently than through a continuing inflow of capital from external investors. Note that in today’s global context, the term ‘foreign capital’ has already lost its meaning, as the boundary between ‘domestic’ and ‘foreign’ has been effectively erased. The cross-country partnering cum out-sourcing arrangements among diverse firms have become the norm of today’s business, rendering obsolete the previously sacrosanct notions of ‘domestic’ capital and ‘foreign’ direct investments. Not only that. Latest researches have verified that transnational corporations or TNCs now tend to create more values within their host countries and reinvest the profits locally than remit them back to their ‘home country’ (a term that has also begun to lost meaning).

 

This doesn’t mean though that such investors should be served ‘free lunch’, through very long regimes of tax havens or through spurious ‘strike-free zones’ (read: haven for wage freeze) which makes our laborers appear like wild jackals who need to be perpetually gagged. Some forms of valves (capital controls) should also be instituted, so that the capital investments and profits wouldn’t just flow out like hemorrhage the moment that the economy hits cyclical crisis. Surely, pro-active measures can be devised to let the said investors stay, more so for those that truly re-invest their ROI for their original and diversified business concerns, as well as to those that conduct dynamic R&D and truly transfer technology.

 

In today’s globalizing context, corporate ‘national champions’ have become obsolete. The  bygone era of ‘national champions’ can still be observed in the names of certain firms, such as in the names Philippine Airlines, Philippine Long Distance Telephone, or in Bank of America, American Express. Asset re-structuring is the norm, and large corporations are becoming rapidly globalized. Mergers and de-mergers are happening at rapidly ‘chaotic’ paces. The circumstances challenge investors/stockholders to quickly grasp the lesson of   ‘thriving on chaos’ or else their ventures would face bankruptcies and foreclosures as what befell many former large ventures, inclusive of former ‘national champions’.

 

The thought that “foreign capital might harm national interest” is simply passé and out-of-context, in as much as the term ‘foreign’ has lost its meaning save for the antiquarian Old Nationalists who regard foreign things as essentially dangerous (but are they not using foreign frameworks in their perceptions of foreign things?). Let the investors come in, recombine their assets with our domestic investors’, extend their stock participation beyond the forty percent (40%) constitutional limit. Note that “our very own” big corporations are participating in ‘foreign’ countries, and their levels of investment participation go beyond forty percent (40%). It is high time that we readjust our thinking about the matter.