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BUSINESS AND CULTURE IN THE PHILIPPINES: A STORY OF GRADUAL PROGRESS by Alejo José G. Sison I. On the Genesis of the Philippine Nation and Filipino Identity

Würfel (1988) establishes the following periodization of Philippine history: 1.) the pre-Spanish era, 2.) the Spanish era, 3.) the revolutionary period, 4.) the American period, 5.) the Japanese period and 6.) the post World War II period. I shall make use of this periodization in an attempt to organize the different value influences that have shaped economic life and business practice in the Philippines.

The pre-Spanish era

The first evidences of human habitation in the Islands may be found in the Tabon caves in Palawan. The artefacts recovered from the site date back to 22,000 B.C. The Banawe rice terraces in the Cordillera mountain range on the island of Luzon were built by the Ifugaos in the year 1 B.C., approximately. In 960 A.D. substantial amounts of Chinese goods began to flow into the Archipelago, and around 1100, the first Chinese colonies were founded along coastal areas. In the 1200s, Islam was introduced in the southern island of Mindanao. In the 1300s, a group of 10 "datus" or chieftains from Borneo settled with their kin in Panay Island, in the central region of the Visayas.

When the first Europeans arrived, different communities of mixed Negroid, Malay, Chinese and Arab ethnicities were already inhabiting and flourishing in the Islands. Each of these groups had its own dialect as well as its distinct cultural and character traits: the sturdy and frugal Ilocanos, the industrious Tagalogs and the musically-gifted and entrepreneurial Cebuanos, to name a few. Nevertheless, one could already detect certain common characteristics among them: the spirit of "bayanihan" (from the Tagalog word "bayani" or "hero"), loosely translated as "camaraderie", and the presence of very closely-knit family structures. "Bayanihan" is supposed to have come from the Malays and is best exemplified in the organized effort of the menfolk who transfer their neighbor's nipa hut from one location to another by carrying it on their shoulders atop a grid of bamboo poles. "Bayanihan" has come to signify unremunerated community work for whoever may be in need among one's neighbors. These activities range from the building of rudimentary dikes to protect homesteads, orchards and cultivated fields from floods during the rainy season, to voluntary cash collections to help defray the burial expenses incurred upon a neighbor's death.

On the other hand, the very close family relations have purportedly come from the Chinese, although in a somewhat watered-down form. Filipinos, as a rule, leave more maneuvering room for the development of an individual's identity. They do not force one to conform to the role assigned by the family. Just the same, kinship ties greatly affect one's economic, professional and political pursuits, often causing the success or failure of these.

The Spanish era

In 1521 Ferdinand Magellan, in search of a new route to the Spice Islands, serendipitously reached the archipelago and claimed it in the name of Philip II of Spain. Colonization, however, did not commence until 1571, when Miguel López de Legazpi took possession of Manila and made it the capital of the newly-christened "Philippines". Between 1600 and 1617 several attempts by the Dutch to conquer the Philippines occured, but these were all successfully repulsed by the Spanish armada. During a brief interlude from 1762-1764 the British occupied Manila. In 1834 Manila was opened to world trade and economic development became a concern. Until then, international commerce was practically limited to the yearly galleon trips between Manila and Acapulco in Mexico.

There is a virtual consensus among historians that the main purpose of the Spanish colonization of the Philippines was religious, the evangelization of its peoples, rather than economic, the exploitation of its natural resources. By this standard, Spanish colonization is to be judged highly

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successful, because even today, close to 90% of the population is Roman Catholic. (Islam is the other major religion and its adherents could be found in southern Mindanao.) There were never more than a few thousand Spaniards living in the Philippines at any given moment. These Spanish nationals confined themselves to a handful of large towns or cities (Vigan in the north, Manila towards the center, and Naga in the south of Luzon, Cebu and Iloilo in the Visayas, Zamboanga in Mindanao) that served as centers of civil government and as diocesan sees. Understandably, the majority of the Spaniards were clerics or religious, soldiers and petty bureaucrats. Granted that the Spanish-sponsored state acknowledged its limited role as the necessary support structure for evangelization, native Filipino socioeconomic and cultural institutions were preserved, as long as these were not contrary to Christian beliefs and practices. As with other Spanish colonies, economic life in the Philippines then could be characterized as centrally planned, monopolistic and mercantilist.

The revolutionary period

There were several detonators in the Philippine Revolution against Spain: the execution of the 3 Filipino martyr-priests, Gómez, Burgos and Zamora (1872), the publishing of José Rizal's novel exposing the abuses committed by Spaniards in the Philippines, the "Noli Me Tangere" (1887), and the founding by Andrés Bonifacio of the "Katipunan" (1892), a secret society aiming for the separation of the Philippines from Spain. In April, 1898, the U.S. Congress declared war against Spain, and this paved the way for Gen. Emilio Aguinaldo, taking advantage of the political instability, to proclaim Philippine Independence on June 12 of that same year. The effectiveness or validity of such a proclamation however was short-lived, for in the Treaty of Paris signed in December, 1898, Spain reliquished its sovereignty over the Philippines, Cuba and Puerto Rico to the United States.

Originally, the term "Filipino" referred to an "insular", a person born to Spanish parents on Philippine soil. The natives were collectively known as "indios", or by some other name designating their regional provenance and cultural-linguistic group, such as "Ilocano", "Tagalog", "Cebuano", etc. In this regard, the revolution against Spain served as a forge of "Filipino" identity, an opportunity for the natives, at long last, to look beyond their narrow group interests and to commit themselves to the common future which, for the first time, they had the chance to determine for themselves.

The American period

Almost immediately after the provisions of the Treaty of Paris took effect, the Philippine-American War broke out. In 1901, the first President of the Philippine Republic, Emilio Aguinaldo, was captured and soon, Filipino armed resistance against the Americans ended. Decades of peace and relative progress then ensued, culminating in the inauguration of an American-sponsored Commonwealth Government with Manuel Quezon as President in 1935.

It is said that Pres. McKinley decided in favor of the colonization of the Philippines moved by the lofty purpose of "christianizing" its inhabitants. Regardless of whether he truly ignored that Filipinos had already been Catholics for almost 350 years, the fact was that the Americans were reluctant colonial masters. Perhaps the best justification of the American colonization was the strengthening of the cause of education, particularly in democratic values and government and the widening of its scope. Among the first Americans to reach Philippine shores were school-teachers, the "Thomasites", so-called after the ship that ferried them from across the Pacific. Part of their legacy was the public school system, comprising the primary, secondary and tertiary levels, and the widespread use of English as the medium of instruction, and the language of commerce and of government. It was only later -even decades after Philippine independence from American rule- that the country's potential as a source of raw materials and as a market for finished consumer and industrial products were realized. The Philippines likewise generated interest as an important geo-political and ideological outpost during the Korean War, the Vietnam War and all throughout the Cold War. The country hosted the largest military bases outside of U.S. territory, such as Subic Naval Base and Clark Air Field, among others. After spending 350 years in a "convent" (a figure of the Spanish colonization), the Philippines began its almost 50-year stay in "Hollywood" (a reference to the American colonization).

The Japanese period

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Towards the end of 1941 Japanese bombers attacked the Philippines. Organized resistance ended with the Fall of Bataan and Corregidor in April, 1942. A Japanese-sponsored Philippine Republic was established under Pres. José P. Laurel in 1943. In October, 1944, Gen. Douglas MacArthur landed in Leyte Island, making good his promise to return. The liberation of the Philippines from the Japanese was completed in 1945.

The Japanese occupation of the Philippines and its forced inclusion in the "Greater East Asia Co-Prosperity Sphere", a contrivance of Japanese imperialism, served nonetheless to remind Filipinos of their inescapable Asian identity. Filipinos were generally loyal to the Americans and were thus perceived by the Japanese to be traitors to the Asian cause. For such misplaced loyalty, Filipinos were made to pay dearly. This negative experience under Japanese domination exacerbated the Filipino's disdain for things local or Asian, and reinforced his preference for things imported from the West, giving way to the so-called "colonial mentality". This attitude has developed to such an extent that not only do Filipinos strive to mimic Western lifestyles, but they also have allowed their self-confidence to be undermined, succumbing to some sort of "inferiority complex" towards Westerners.

The post World War II period

This last period may be further subdivided into the times covered: 1.) from Philippine independence from American rule (July 4, 1946) to the declaration of Martial Law by Pres. Ferdinand E. Marcos (September 21, 1972); 2.) from the declaration of Martial Law to the EDSA People Power Revolution (February 22-23, 1986); 3.) the post-EDSA Revolution, i.e., the mandates of Pres. Corazón C. Aquino, Pres. Fidel V. Ramos, and the incumbent, Pres. Joseph E. Estrada.

During the first 20 years of its existence as an independent republic after World War II, the Philippines found itself caught in the midst of a struggle between the Cold War forces for global domination. Filipinos feared that by allowing foreign powers access to their country's natural resources, these nations could find an excuse to meddle in their domestic concerns and undermine their political sovereignty. Borne out of this desire to safeguard the country's political independence, the nationalist, protectionist, import-substitutionist and inward-looking "Filipino First" economic policy was formulated.

Pres. Carlos P. García explained its tenets in a speech which he delivered before the 6th National Convention of Filipino Businessmen organized by the Chamber of Commerce of the Philippines (Baguio City, January 3, 1960):

The Filipino First movement which you are spearheading is of tremendous significance to our life as a people. Led as it is by citizens like you who belong to the middle and entrepreneur classes of our society, it is militant, dedicated and inspired. Our people have embraced it and are already afire with the desire to help push it [through] to its logical goal, which is nothing short of economic freedom. By compleat economic freedom, we, of course, mean freedom to chart a course for the development of our economy with reasonable assurance that the fruits of such growth would spread from the top of the business and social pyramid down to its base among the rural population in our countryside. We mean the right to pursue such a course of action and implementation whatever policies would insure the exploitation and development of our God-given resources and manpower, preserve and further enrich our national patrimony which we shall bequeath to our children and our children's children to the end of time.

This economic independence is the most cherished prerogative of the young, developing nations of the world which, like the Philippines, emerged politically independent after World War II. To achieve this independence at the shortest possible time, it is imperative that we draw inspiration from the nationalistic tradition of our race from whose womb strode forth such great nationalists as Lapu-Lapu, Dagohoy, Rizal, Aguinaldo, and many other stars in the great constellation of Filipino nationalism. Great causes call for great leaders and God who has not failed other nations will not fail us. From among you He will anoint the leader who will guide you to the Promised Land of Economic Independence. The upsurge of nationalism throughout Asia and Africa is a movement global in proportion which will irrevocably roll on until its cycle is completed. Only God can measure the cosmic creativeness of this nationalistic saga.

This common desire finds expression in the various political and social ideologies that are

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identified in Asian society today. They range from the democratic precepts to socialism and communism. But the goal is the same. It is to shake off the yoke of alien domination in business, trade and commerce, and industry. We are fortunate in the Philippines that the nationalistic movement so forceful today is being pursued within the framework of a democratic society, unlike in other places where the fight of the common people for economic survival is being exploited by the enemies of democracy for their own selfish ends. That is why I have every confidence that friends of democracy will understand the true meaning and direction of the Filipino First participation of Filipinos in our own national economy within the framework of our democratic tradition. It is directed against no alien group. It is inspired by the great principle of social justice on the international plane. The Filipino First movement cannot and must not be equated with any ideology that works against the accepted tenets of democracy. It is, as some sympathetic visitors in our shores have understood, aimed at securing for a greater number of our fellow citizens the blessings of our rich natural resources and our democratic way of life. It is not exclusivistic; on the contrary, it bears the stamp of Filipino hospitality.

Given the prevailing conditionsof that time, the "Filipino First" formula for economic development served the country well. Until the early '60s, the Philippines was among the best performing Asian countries economy-wise, second only to Japan. This was so despite interventionist and highly regulatory policies actively pursued by the government in both commerce and industry.

During his second and last constitutionally-allowable term in 1972, under threats from various destabilizing forces, foremost of which was a communist-led insurgency, and with the tacit approval of the government of the United States, Pres. Ferdinand E. Marcos proclaimed Martial Law in the country. Even in the probable hypothesis that there were valid reasons for the suspension of political freedoms and democratic processes, the President's assumption of autocratic powers seemed to have gone far beyond the limits that a transitory emergency situation would warrant and legitimize. He was finally deposed in February, 1986, after almost 14 years of authoritatian rule. During his mandate, he did not only have a strangle-hold on government, the military, and politics, but on the economy as well. He oversaw the distribution of highly lucrative virtual monopolies (trade in sugar, coconut, banana and tobacco), sensitive, government-protected industries (electricity, water, telecommunications, air transport) and infrastructure projects to his relatives and friends (many of whom were in the military as well), in a system later called "crony capitalism" (Cueto, Philippine Daily Inquirer, Nov. 19, 1998; Herrera, Philippine Daily Inquirer, Oct. 30, 31, 1998). As a result in 1984 and 1985, the final years of the Marcos administration, the national economy had contracted by 9% and 7.2% respectively.

Although the country had experienced its highest GNP growth during the Aquino administration (7.2% in 1989), foreign direct investments were sluggish. This was due mainly to the political uncertainty created by the seven abortive military-sponsored coups d'etat. During Ramos' tenure growth rates were lower, but foreign investments came in a steady stream, attracted by greater political stability and a more market-friendly -i.e., liberalized, deregulated and privatized- environment. Nonetheless, it was not until late into Ramos' term that the country's per capita income returned to its 1983 levels. By then the Philippines, the "basket-case of development", the "sick man of Asia", had already lagged behind its neighbors for more than a decade.

In the mid 90's the Philippines started to be called Asia‘s newest "tiger cub" (International Herald Tribune, Sept. 27, 1995; University of Asia & the Pacific, 1995, 1996; The Economist, May 11, 1996). Infrastructure projects -many of which were undertaken with foreign partners through the "build-operate-transfer" (BOT) scheme- mushroomed in Metropolitan Manila and in the country‘s other key growth centers like the "Calabarzon" (comprising of the provinces of Cavite, Laguna, Batangas, Rizal and Quezon), Metro Cebu, Davao, Cagayan de Oro and Gen. Santos City. Several export-processing zones for foreign manufacturers wishing to avail of low labor costs were established. GNP growth peaked at 6.9% in 1996.

Filipinos at last began to benefit from a greater availability of consumer goods. There were even initiatives to further relax retail trade laws so as to convert Metro-Manila into "Asias newest shopping capital". With the proliferation of shopping malls in the capital region, one could say that consumerism had become part of the lifestyle of a growing segment of the population. Import liberalization propitiated by membership in the BIMP-EAGA (Brunei-Indonesia-Malaysia-Philippines East Asian Growth Area), ASEAN (Association of South East Asian Nations), APEC (Asia Pacific Economic Cooperation) and of course, WTO (World Trade Organization) allowed many products from neighboring countries to enter the domestic market, pushing local manufacturers to be more

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competitive in terms of quality and cost. Conversely, local manufacturers likewise benefited from their increased access to export markets.

Although GNP had constantly increased since 1991, then Pres. Fidel V. Ramos himself acknowledged, that "[growth] means little if not translated into real changes in the quality of life of the majority of our people." Two failures in the "quality of life" indices were particularly relevant. First was the continuing lack of equity in income. Despite the fact that figures from the National Economic and Development Authority had indicated a nearly five percent decrease in the number of poor families from 1991 to 1994, there were still more than a third of Filipino households below the poverty line. Second was the widespread irresponsible treatment of the environment that put the country's sustainable development in jeopardy. Furthermore, certain business-related peace and order problems, such as bank heists and the kidnapping of wealthy industrialists and members of their families, particularly those of Chinese descent, became alarmingly frequent. During those years, the ethnic Chinese contributed approximately 40% to the total business output of the local economy, despite the fact that they represented less than 1% of the population, or less than 700,000 in absolute numbers (Roman and Sebastian, 1996).

The desire for competitiveness drove many Filipino entrepreneurs to unfair labor practices and corruption. Low wages, unsafe and unhealthy working conditions, and precarious contracts characterized the fate of many in the manufacturing and basic services sectors. Furthermore, the country has always ranked high in the surveys of most corrupt nations conducted by Transparency International and the Merchant International Group (Larner, 1996).

In July, 1997 the baht collapsed, the Bangkok stock market plunged, and the Thai economy took a free fall (Asiaweek, July 17, 1998). These events triggered a crisis in the other Asian countries and economies, including the Philippines. Pres. Ramos finally abandoned his bid for re-election, something which would have been possible only through a constitutional amendment. In June, 1998, right in the midst of the centennial celebrations of the country's independence and the Asian crisis, Joseph E. Estrada took his oath as President.

II. Social Capital Formation in the Philippines

Traditional microeconomic models considered several distinct factors contributing to the production process: land, labor and capital. As technology, corporate ownership and governance, and societal models themselves evolved, however, the differences among these factors have diminished and their importance relative to each other has changed. In an agricultural society, land was the most important factor; in an industrial society, it became capital goods or machines; in a post-industrial society, it has become labor, albeit labor of a very sophisticated kind. In the advanced economies of today, it would be more accurate to simply distinguish between "natural capital" or a country's God-given resource endowments and its "human capital", or what its population by itself is able to produce through its work in the primary (agriculture, fishing, mining, etc.), secondary (industry and manufacturing) or tertiary (services) sectors.

Over the decades, there have been some very significant developments in the notion of labor or human resources. Before, labor meant "manpower", which was the human equivalent of "horsepower", the measure used in Physics for energy or the capacity to do work. Nowadays, "manpower" refers almost exclusively to the abundant, low-skilled and poorly-remunerated labor found in developing countries. Paradoxically termed as an economic "advantage", its precariousness comes to fore when one considers the trends of deregulation, liberalization and globalization of markets, not only for goods, services and currencies, but for labor as well. As protective borders around nation states fall, the easier and quicker it will be for wages to achieve their "equilibrium", that is, their lowest cost in the countries occupying the bottom rung of economic ladder at the moment. Such is the unforgiving promise of market efficiency.

His oft-contested assumptions of maximizing behavior, stable preferences and market equilibrium notwithstanding, Gary Becker's notion of "human capital" (1975) indeed signals a breakthrough in the understanding of human resources. Becker begins with a standard textbook definition of "capital" as whatever yields income and other useful outputs over long periods of time. Later on, he explains how schooling, computer training, medical care, lectures on virtues such as punctuality and honesty, etc. should be considered as capital, inasmuch as these improve a person's health, raise his earnings and heighten his appreciation of the arts, transforming his life into something more satisfying or fulfilling.

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The notion of "human capital" reconciles two historically clashing factors: labor and ownership or capital. Only when human resources are conceived as capital does it begin to make sense to invest not only in their maintenance, but also in their improvement. Expenditures on items such as education, training, medical care, etc. are no longer viewed as wasteful spending, unavoidable sunk costs, or luxuries that only a well-heeled and altruistic management could afford, but rather, as necessary investments for the corporation.

Furthermore, "human capital" entails an appreciation for the differential characteristics of sex, age, training and experience among people formerly regarded in a uniform manner as "labor commodities". What distinguishes human capital from the other forms of physical or financial capital is, of course, that one cannot separate a person's knowledge, skills, health or values from the person himself. Human capital admits no other proprietorship than that of the individual and concrete person himself.

With Becker's pioneering research as foundation, human resource experts have later formulated the concept of "intellectual capital" (Stewart, 1994, 1997), which includes and emphasizes the intangibles such as expertise, knowledge and information. Larry Prusak defines it as the "intellectual material that has been formalized, captured and leveraged to produce a higher-value asset." Attempts have been made to quantify "intellectual capital" -together with other non-traditional non-financial measures of corporate performance- transforming it into an accounting item capable of being reflected on financial statements. Implicit is the belief that a corporation's "intellectual capital", as its research and development efforts and services, occupies a prominent place in its assets portfolio.

There is a growing awareness among accountants that the old system, with its entries of cost of material and labor, has become obsolete, and consequently, a novel, more creative, flexible and realistic solution is required. This attitude is evident, for example, in the subsector of information technology and management. A consensus exists on the higher value of patented software over that of the hardware or the physical support systems. This explains the fierce battle for the recognition and protection of "intellectual property rights" (IPRs) presently being waged in a world-wide scale. As a more general observation, London Business School fellow, Charles Handy (1995), estimates that in any given corporation, intellectual assets are worth three to four times their tangible book value. That is to say, markets have begun to appreciate a company's intellectual property -its copyrights, patents, trademarks, brands, research, networks, experience, goodwill- more than the tangible assets.

In more sophisticated versions, intellectual capital is understood to arise from the interplay of human capital (the skills of the employees as the ultimate source of innovation and growth, although these are not assets which the company could strictly speaking own), structural capital (the firm's organizational capabilities to which shareholders may stake a claim) and customer capital (a corporation's franchise or market). Once the knowledge assets of a company have been identified, management could then implement processes that describe, measure and enhance them, to the benefit of the firm's financial performance. Such tasks do not call for a run-of-the-mill personnel manager, nor even for an ordinary human resources director, but for an intellectual assets manager or a director of intellectual capital. The job of this new breed of manager would consist in defining the role of knowledge in one's organization, assessing the knowledge assets and strategies of competitors, classifying one's own skills portfolio, evaluating such a portfolio vis-a-vis the market, and finally, reassembling and investing on one's knowledge assets to make them more productive and profitable. If knowledge were the genome of a corporation, the intellectual capital director would then be the genetical engineer responsible for crafting an ever more efficient version of that genome. The underlying supposition is that after all, it is on brains or intellectual capital that businesses run and create profits.

Perhaps it was Carl Menger, the "Father" of the Austrian School in economics, the first one who, in the late nineteenth century, already drew our attention to knowledge as the most crucial element and the main contribution of the entrepreneur to business and economic life. In the decade of the sixties, Fritz Machlup (1962), a third-generation member of the Austrian School, coined the term "knowledge-industries", to designate the emerging protagonists in the creation of wealth and value in the economy. It was left to Peter Drucker (1978), however, to herald the birth not only of "knowledge-based industries or economies", but that of an entire "knowledge-based society". In this regard, the call made in the nineties by Robert Reich (1992) for more "symbolic analysts", the

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equivalent to Drucker's "knowledge workers". A premium was placed on the creation of more "symbolic analyst" jobs such as those of scientists, consultant-academics, managers, businessmen and creatives, whose expertise lie in identifying the most crucial problems present in the environment and in proposing bright and effective solutions to these.

In recent years, several milestones stand out in the evolution of the concept of "human resources". The first one is the concept of "cultural capital", as explained by Thomas Sowell (1994; Huntington, 1996). By this term he understands that set of productive capacities or "skills" and cultural values (for example, work habits and dispositions, propensity to save money, attitudes towards education, entrepreneurial spirit, etc.), inasmuch as these provide an explanation for the level and degree of development of specific countries, races, and civilizations. On account of their distinctive cultural capital, for example, overseas Chinese succeed in their business ventures, be it in the Philippines or in Thailand, in Los Angeles or in Vancouver. Variations in cultural capital also partly explain how one and the same character trait may be perceived differently by peoples: for example, the virtue of frugality among the Chinese is readily assessed as a manifestation of the vice of miserliness by their Malay neighbors.

In arguing for the economic significance of "cultural capital" Sowell however avoids falling into the trap of cultural relativism. Books are better than papyri as reading matter, Arabic numbers are better than Roman numerals for mathematical computations, and rifles and pistols more effective war weapons than bows and arrows. In a similar fashion we may also say that cultures which invented the former (books, Arabic numbers, rifles and pistols) are better than those which invented the latter (papyri, Roman numerals, bows and arrows), at least in the specific areas considered.

Furthermore, most enlightening are the contributing factors which Sowell cites leading to cultural capital "bankruptcy": a resistance towards contractual obligations, a rather plastic sense of truth, a hypersensitivity to social distinctions making cooperation in the workplace difficult, an endemic lack of initiative and sense of responsibility, a disregard for accuracy and a blurred vision of the cause-effect relationship. A combination of these factors in a culture would inevitably stunt its progress, development and growth. Finally, Sowell rightfully points out to the ambivalent effect of education on cultural capital. Contrary to what is often believed, education could sometimes reduce productivity, through the expectations and aversions it creates, as when universities produce "couch intellectuals" with a particular fear of physical, mechanical or "servile" jobs and an unhealthy penchant for dissent and instability. (Consider the contrast between the Arab Gulf states which are teeming with and are heavily dependent on immigrant labor, and the labor system in Japan, where even street-sweepers are Japanese nationals).

The economic significance of "cultural capital" has also been the topic of debate on the "Asian values" and their role in the ascent of the East Asian economies, vis a vis the enlightened individualism and democratic tradition of the West (World Bank, 1993; Kapur, 1994). Some authors praise the Asian ideal of family socialization, which promotes sobriety, education, skills, diligence, devotion to the group rather than to individual interests, unconditional respect for hierarchy and emphasis on non-confrontational approaches towards human relations (Government of Singapore, 1991; Ibrahim, 1996; Mahathir, 1996; Mahbubani, 1995, 1998; Koh, 1998; Zakaria, 1994). Others consider these cultural values to be mere excuses or instruments for perpetuating authoritarian-capitalist and phobocratic regimes, which indulge in the criminalization of politics (i.e., the tinging with criminality of all acts by opposition politicians and critics) and the politicization of crime (i.e., the manipulation of the public perception of crime in order to serve one's own political agenda), the commercialization of politics (i.e., the involvement of political parties in commerce) and the politicization of commerce (i.e., the limiting of access to commercial opportunities to one's own cronies) (Lingle, 1996; Krugman, 1994; Ong, 1996; Patten, 1996, 1998).

Another reference point in the development of "human resources" is the notion of "social capital" as conceived by Francis Fukuyama (1995). "Social capital" may be defined as "the ability of people to work together for common purposes in groups and organizations" or "the ability to associate with each other" which in turn depends on "the degree to which a community shares norms and values and subordinates individual interests to those of larger groups". In the absence of trust and cross-cultural understanding, a borderless economy, as the one described by Ohmae (1990), would necessarily bring with it spiraling insurance, legal and litigational costs. Earlier, Ronald Coase (1960) had called our attention to these "transaction" or "social" costs. He

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expressed the paradox according to which the more opportunistic people become with their "bounded economic rationality", the less trustworthy they are. In lieu of trust, bureaucracy and corruption are bound to flourish. On the contrary, a corporate culture wherein one's word is one's bond, a business environment where every agent delivers on his promises, oblivious almost to the sanctions for doing otherwise, could almost have guaranteed success....

Fukuyama's particular contribution lies in isolating trust or "social capital" as the key factor for the success of business and the economy. The higher the trust level of an organization, the more successful one could expect it to become, however "success" may be defined. Secondly, Fukuyama understands trust as a cultural trait (thus allowing linkage with Sowell's "cultural capital"); that is, the trust level is more or less constant in a specific sociocultural group. Undeniably, "culture", "ethnicity" or "race" are contested terms in scientific language; all the more so, to suppose a homogenous culture for any group, given the state of communication technology and the permeability of life worlds. Still, these contentions are not enough to invalidate the proposition that the trust level in a cultural group is homogeneous, at least to the same extent that culture itself is acknowledged to be homogenous, in the group considered.

Major Determinants of Philippine Social Capital

How does the Philippines fare in this expanded understanding of human, intellectual, cultural and social capital? Despite the absence of any convincing and scientifically established account in defense of a distinctively Filipino philosopher or of a distinctively Filipino philosophical school, it would be erroneous to infer that no distinctively Filipino "political culture" -in the broad sense of one which identifies the Filipino people, and transitively, the Filipino nation- exists (Corpuz, 1969; Canieso-Doronila, 1992; Doronila, 1995). By "political culture" we understand a host of attitudes, orientations, views, and on a more stable plane, feelings, beliefs, knowledge, symbols, values and other attachments or loyalties, which integrate a "system" or an ordered "realm" (Pye & Verba, 1965; Berger & Luckmann, 1966; Almond & Powell, 1966). A political culture is objective, insofar as it is constituted by these elements, and subjective, inasmuch as it is shared by several individuals, members of a body politic. Moreover, a political culture is never just a static or atemporal object of study; rather, it is always dynamic, inherently directed towards action (praxis), and subject to continuous interpretation as part of a historical identity.

What do we mean by positing a political culture as distinctively "Filipino"? First of all, we should forewarn that its elements need not be exclusive to Filipinos nor be shared as a matter of fact by all of them. Philippine society is characterized by a rich spatial (rural and urban, multiplicity of regional and ethnic groups, etc.) and temporal or historical diversity. The plurality of languages (111 in all including dialects), ethnicities (Malay stock with a sprinkling of Chinese, Spanish and American blood), and religions (the majority of the population is Roman Catholic, followed by Moslems, members of Christian Protestant sects, Buddhism and traditional beliefs) together with its geographic fragmentation (7,107 islands) and its relatively short experience as a sovereign nation (100 years in 1998) all account for the constitution of quite a peculiar political culture. We shall endeavor to underscore, nonetheless, what we take to be the key factors for explaning or interpreting the Filipinos' political and social behavior. Within such political or social behavior we shall focus on the economic, business and commercial activities.

Timberman (1991) enumerates the following hallmarks of contemporary Philippine political culture: the primacy of kinship ties, the importance of reciprocity and patron-client relationships, the emphasis on smooth interpersonal relationships and a pervasive poverty.

The primacy of kinship ties

As a traditional agrarian society, the extended family is the most important social and economic unit in the Philippines. Kinship is bilateral, that is, traced through both the father's and the mother's ancestral lines. Such a network is further broadened by "fictive" (insofar as beyond the ties of blood and marriage) and "ritual" (issuing from sponsorships in weddings, baptisms and confirmations) kinships. This notion of "family" or "kamag-anak" is the primary source of social and economic or financial support, the foundation of political organizations and the chief claimant to the loyalty of its members. Such is the case among Filipino-Malays.

Among the traditional Filipino-Chinese, the family plays an even greater role as an absolute: the individual owes himself entirely to his family, and without his family, he is a nobody

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(Chiongpian-Pérez, Philippine Daily Inquirer, Apr. 8, 1996; Narisma, Philippine Daily Inquirer, Apr. 8, 1996; Espina, Philippine Daily Inquirer, Apr. 9, 1996; Quimpo-Espino & Debuque, Philippine Daily Inquirer, Apr. 10, 1996; Quimpo-Espino, Philippine Daily Inquirer, Apr. 11, 1996; Cabacungan & Villadiego, Philippine Daily Inquirer, Apr. 12, 1996; Debuque, Philippine Daily Inquirer, Apr.13, 1996). That is why family relations between parents and children and among siblings demand a complete dedication or an unconditional devotion on the part of the individual. One's good cannot be conceived of as anything other than the good of the entire family, as it has been determined by the family patriarch. The duties which arise from family relations are over and above what the law or strict justice may dictate. The family is the archetype of all social groups and society cannot but be conceived as some form of "extended family". Therefore, the Chinese or Confucian ethic -which hardly knows of rights- is one based on obligations or filial duties towards parents, and by extension, towards teachers and civil rulers as the emperor (Bond, 1991). This deferential attitude towards teachers and superiors as agents of parental authority largely explains the apparently subservient behavior not only of Filipino-Chinese, but also of Chinese and Asians in general in Western institutions.

In recent years, Fukuyama has called our attention towards the importance of social capital or trust formation for economic prosperity. He has argued that the most significant criteria in gauging the degree of trust present in a cultural group are its family structures, the strength of associationism, and the extent of government or state intervention in business. Among these three, only associationism registers a direct proportion with a society's trust level; while family structures and state intervention seem to have an ambivalent effect. Nonetheless, a particular society's family structure is the strongest net conditioning factor of its stock of social capital, insofar as it determines the degree and type of associationism and ultimately, the configuration of civil society.

How does the family facilitate trust or social capital formation? The family represents the most effective and universal institution for socializing individuals; it cannot be replaced by either community groups or government programs. It is the prime vehicle for the transmission of both intellectual and cultural capital, as parents educate children, and senior members instruct younger ones. Furthermore, it constitutes the elementary unit of economic organization, not only on the side of consumption, but on the side of production as well. A family enterprise can thrive in the absence of a stable structure of property rights and of commercial and contract law because its cohesion is based on the moral, cultural and emotional bonds of a social group prior to civil society or the state (Lee-Chua, 1997).

On the other hand, ever since Max Weber (1951), the idea that "familism" is detrimental to economic development has come into circulation. According to the German sociologist, overly restrictive family bonds constrain the development of universal values and impersonal social ties necessary for modern business organizations. Family ties have to weaken before economic progress occurs: from the extended families of agricultural societies to the nuclear families of industrial societies, and further on to the single-parent families of post-industrial welfare societies. For this reason, "familistic" societies as those of China and the Philippines are considered to be low-trust: They have difficulties in creating large organizations beyond the family; and consequently, the state has had to intervene to promote durable, globally competitive firms. In this regard, a sharp contrast may be drawn with high-trust societies, such as Japan and Germany, capable of spawning large-scale firms not based on kinship ties (i.e., professionally managed).

The challenges to family business and to "familistic" societies are therefore "spatial" -growing from scope to scale- and "temporal" -the issue of generational succession-. There are at least three different ways in which a business may outgrow the familial organization. Firstly, with regard to management: no single family, no matter how large nor how capable and well-educated its members may be, could alone and by itself oversee a rapidly expanding and ramifying business concern. Secondly, in an enterprise's drive to raise debt and equity, family ownership is diluted through bank-borrowing and public offerings in the stock market. And last but not the least, through the incompetence of, or the jealousy and squabbling among, the different family members.

The nineties mark the long, hard climb on which the Philippine economy and nation has had to embark to full-fledged membership in the global arena. Much of the effort and the credit rests upon Filipino family enterprises, specifically, on those headed by the new billionaires, the Aboitiz, the Cojuancos, the Concepcions, and "taipans", John Gokongwei, Andrew Gotianun Sr., Henry Sy,

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Lucio Tan, George S.K. Ty, Tan Yu and Alfonso Yuchengco. Their history however is still all too recent to be written. The Zóbel de Ayalas and the Sorianos, who represent continuing sagas of business leadership aside, there already existed since the beginning of the century a group known as "Manila's old rich" which has now quietly faded into the background: the Palanca, Elizalde, Ysmael and Puyat families. This particular characteristic has made them a more suitable object of study regarding the idiosyncrasies of Filipino family business (Debuque & Cabacungan, Philippine Daily Inquirer, Oct. 23, 1995).

Among these families, the Palancas and the Puyats are of Chinese extraction, whereas the Elizaldes and the Ysmaels have Spanish roots. Carlos Palanca (whose forebears come from Fookien, China) started building his business empire with La Tonde±a Incorporada, founded 1902, which became the country's premier liquor maker and distributor. In 1924 he purchased the Destilería Ayala, manufacturers of Ginebra San Miguel, a drink popular among Filipinos since 1834. He was also a co-founder of the China Banking Corporation, one of the country's top banks. In 1950 he was succeeded by his son, Carlos Palanca, Jr. who was responsible for the family's diversification into mining, hotel, textile, sugar, food, pulp & paper, cement and lumber industries. Carlos Palanca, Jr. relinquished control of these concerns to his sons, Carlos III and Miguel Carlos, in the mid-80's, a specially turbulent period marked by the Aquino assassination, the EDSA revolution and the Marcos ouster, and the coup-plagued government headed by Aquino's widow, Corazón.

Gonzalo Puyat laid the foundations for the "House of Puyat" in 1918, when he began manufacturing award-winning billiard tables. Soon after, he entered into the production of all sorts of furniture and construction materials, as well as the exploitation of timber concessions. One of his sons, Gil, became a senator; and this branch of the family later acquired the financial and insurance concerns (The Manila Bankers Corporation) through a "stock swap" in 1976. The remaining third-generation family members, José Puyat Jr. and Edgardo Puyat Reyes, now manage the flagship company "Gonzalo Puyat & Sons" which is into steel, flour milling, construction, agri-business and real estate. The decline of the Puyats from the 30th slot in the country's top corporations to outside of the 200 list is traced to a family decision to divide its businesses twenty years ago (Villadiego, Philippine Daily Inquirer, Oct. 26, 1995).

The Elizaldes started business as traders in the early 1900s. From among their ranks have later on emerged patriots, diplomats, philanthropists, politicians, sportsmen and artists. Manuel was the one principally responsible for the consolidation of the Elizalde Empire which, at its height during the 50s and the 70s, was involved in sugar, rope-making, insurance, steel manufacturing, floor wax, beverage, and radio and television. He was famous for his strongly paternalistic style of management. He had two male heirs, Manda and Fred. Manda was the older one; and for this reason, despite the fact that his interests were more cultural and anthropological, having served as head of the government agency for minorities (PANAMIN), he ended up inheriting and later divesting himself of the family's better companies. Fred retained the Manila Broadcasting Company, which presently runs 50 radio stations nationwide (Espina & Espino, Philippine Daily Inquirer, Oct. 24, 1995).

Juan Ysmael was a Spanish national of Lebanese descent who, in the 1890s, together with his wife Magdalena, started a retail business and acquired large tracts of land. Soon afterwards, they put up Ysmael Steel, in an attempt to produce basic home, kitchen and office fixtures. In 1951, the clan matriarch ventured into home appliance manufacturing, and theirs became the country's leading brands ("Ultra Cold" and "Admiral", from an American license). The second generation of Ysmaels was practically bypassed, with management being transmitted from Magdalena herself to her grandchildren, Carlos Ysmael Sr. and Felipe Ysmael Jr. In the early 1970s and in the wake of the declaration of Martial Law, the Ysmael heirs decided to sell out their business concerns and migrate to Australia (Narisma, Philippine Daily Inquirer, Oct. 25, 1995).

In accordance with the parameters established by Fukuyama and after a careful examination of the histories of the above-mentioned family corporations, one may identify Philippine society as a low-trust society, akin to a hybrid between Chinese and Latin models. For this reason, the troubles that beset Filipino family businesses with the change of generations are not at all unlike those of other low-trust societies (Debuque, Philippine Daily Inquirer, Oct. 27, 1995). Thus, the development of Filipino family businesses typically goes through three distinct stages:

The first stage consists in the foundation of the business by an entrepreneur, usually a strong

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patriarch, who places his relatives in key management positions, and lays down the rules for the running of the company, almost in an authoritarian manner. There is no formal division of labor, nor a managerial hierarchy strictly speaking, which is decentralized and multidivisional. All the problems associated with a bureaucracy -unnecessary delays, weak decision centers, impersonal and irresponsible activity, etc- are therefore absent; but so are the benefits that a bureaucracy is supposed to bring, in terms of specialization and a more participative style of management. Instead, there is a highly centralized hub, the founding entrepreneur, to which all branches report directly. Management style is personalistic and charismatic. Such have been the cases of Carlos Palanca, Gonzalo Puyat, Manuel Elizalde, and the couple formed by Juan and Magdalena Ysmael-Hemady.

The second stage commences with the demise of the founding patriarch. The principle of equal inheritance among the heirs is usually followed, regardless of whether the latter display any interest or a minimum of competence in discharging organizational functions. Certain exceptions are to be found in the case of the Ysmaels, where the second generation family members or the direct heirs were completely bypassed in favor of the grandchildren. In the case of the Elizaldes, the variant introduced was that of the older brother, Manda, inheriting the lion's share of the corporations, despite the fact that he had showed a stronger inclination towards culture and the arts, and clearly manifested a less developed business acumen than his younger sibling, Fred. Although the second generation family members have a social and economic headstart in comparison to the founding patriarch-entrepreneur, practically none of them have been more successful than their forebears. The experience of Carlos Palanca, Jr. would be the only debatable issue, inasmuch as he was responsible for their family concerns' diversification.

The third stage is marked by the inevitable break-up of the business empire when its ownership and control is passed on to the third generation family members, who present an even wider disparity in age, interest and capacity than their parents. The grandchildren inevitably grow up in comfortable and affluent surroundings and tend to take their inherited wealth for granted. They are, therefore, less motivated and less self-sacrificing in their work than those who have preceded them. At this point, sometimes, the best solution lies in dividing the family businesses as amicably as possible, and each going on its own, independent way, as the Puyats had done.

The importance of reciprocity and patron-client relationships

Reciprocity means that favors or gifts received now should be returned in the future. There is no clear distinction between a gift or a personal favor and whatever one receives as due because of a legal or moral right. The patron-client relationship is a kind of reciprocity between persons of unequal socioeconomic status and it is modelled after the paterno-filial relationship. The obligations arising from the patron-client relationship are almost unilaterally determined by the patron. Thus, this relationship can very easily degenerate into an exploitative one. A most basic instance of patronage is that exercised by the landowner over his tenant farmers.

Reciprocity, and in particular, patron-client relationships, are governed by the traditional value of "utang ng loob" (literally, "inner debt" in the sense of "debt of self", or better still, a deep and practically unrepayable "debt of gratitude"). This custom is perhaps the strongest agent of vertical integration in society, outside of kinship ties. Whoever fails to honor his "utang ng loob" is considered a social outcast or "walang hiya" ("without shame, honor or credibility", public "loss of face"), which is the worst opprobium possible in Philippine society.

After the principle of kinship, the second most powerful force in the shaping of Filipino society -and of business organizations within it- is that of patronage. Patronage is the preferential treatment extended towards one's workers or the members of one's town, province or linguistic group, eliciting in return a deep sense of indebtedness (utang ng loob). Its influence is most keenly felt in the realms of government and politics. The success of a business venture in the Philippines heavily depends on having a powerful and influential patron in government. Oftentimes, government officials are favorable to a person because they have received financial support from him for their political campaigns or they somehow expect to benefit from his wealth and good business fortune. Thus patronage, which theoretically could have been exercised for altruistic ends, becomes a mode of rent-seeking and a catalyst for corruption. A person that forms part of the elected officials' "cronies", receives preferential treatment from government and his business flourishes. From the favored person's perspective, it does not really matter that the financing for the advantageous government projects comes from the public treasury. Such deeds

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will always be remembered as "personal" favors that sometime, somehow will have to be repayed. In the opposite case, when the political climate is perceived to be adverse to a prominent business person, he may very well decide to close shop, liquidate his interests and migrate elsewhere. As the Philippines evolves from an agricultural society to a more industrial one, the patronage formerly exercised by the landlords has been passed on to the state, more concretely, to government officials, be they elected, appointed or bureaucrats.

In Philippine society, the "public realm" is the exclusive concern of the state or its government, and hardly ever of private citizens (Roces & Roces, 1985). Such is the Filipino form of statism, much akin to that of Latin countries. Citizens, as a rule, retreat into their "private" lives and leave governance almost entirely in the hands of politicians. Care and maintenance for public property is virtually non-existent; if ever, public property shall be subject to use or abuse as if it were one's own, personal, familiar or private property. The scope of the "private" or the "personal" -as we had seen from the above, the "familiar"- is broadened, particularly, in the case of those who work in government. As a consequence, to help oneself to government or public property would hardly be labeled as theft; it is considered to be up for grabs, free for all, with the "strong" or "influential" (malakas) and the "smart" (matinik) as those who stand to benefit the most. Left alone to take care of the public sphere, the state becomes as enormous as it is corrupt and ineffective.

Due to its Western trappings, Philippine politics acquires relative legitimacy through democratic elections (Corpuz, 1969). But election fraud is rampant and votes are cast on the basis of popularity (media and sports personalities) and power or force ("lakas" in the vernacular). The electoral process is seen as a contest of force or "palakasan", fueled by money and wealth, rather than by knowledge, expertise and authority. In this sense, what we have in the Philippines is a "market-driven" politics.

The legislative and the judicial functions of government merge under the control of the executive. The separation of powers has never really been operational within the Philippine context, where judges and justices eventually become legislators, and as such, ambition executive posts. What could be said of judges and justices of course also applies to the military. For practical purposes, the Philippine presidency could be likened to a monarchy which, quite easily, transforms itself into a tyranny.

The bureaucracy becomes corrupt as soon as the president turned-monarch realizes his need for support from among the ranks. He gets this support first of all from his kin, because blood or "ritual" loyalty is readily available, and secondly, from his legion of clients or protegées. This practice issues in nepotism for the appointive offices and in political dynasties for the elective posts. Routine bureaucratic transactions such as applying for a license or a permit, entering a business contract, etc. are "personalized" and "particularized"; i.e., they are made to include personal favors and other unspecified obligations. No distinction is observed between government resources and private funds. When infrastructure projects are inaugurated, for example, citizens feel more indebted to their representative than to the government. Particularism takes place when political decisions are based on preserving or increasing the benefits of a small group (i.e., members of one's family or ethno-ling¹istic group) to the exclusion of others or the nation as a whole. It undermines the very notion of equality before the law. And insofar as there exists a vicious cycle between power and wealth, corruption in government adopts the form of a plutocracy, then of a kleptocracy.

During the Aquino administration, the Presidential Commission on Good Government (PCGG) was formed with the mandate of recovering the Marcoses' ill-gotten wealth for the public treasury (Esplanada, Philippine Daily Inquirer, Oct. 29, 30, 31, 1998). After more than a decade of existence and under three different presidencies and chairpersons, the results that it had produced in clarifying the ownership of sequestered assets and retrieving these for the state have been, by all standards, paltry. Instead, commissioners have had to contend with corruption charges of their own, due to alleged secret compromise agreements inimical to public interests with the Marcoses or their cronies, and because of squabbles amongst themselves over lucrative directorships in surrendered or sequestered corporations (Herrera & Cueto, Philippine Daily Inquirer, Oct. 29, 1998; Ca±ares, Philippine Daily Inquirer, Oct. 31, 1998; Cueto, Philippine Daily Inquirer, Nov. 19, 1998). More of these shady deals are expected to come to light as the government proceeds with the liquidation of the Marcos assets and as some of the country's biggest corporations -such as the Philippine Long Distance and Telephone Company (PLDT)-

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where the Marcoses and their cronies are supposed to have major stakes, are sold to foreign buyers.(Reuters, Philippine Daily Inquirer, Nov. 2, 1998).

Hardly had Pres. Estrada warmed his seat as the country's Chief Executive when he received criticism for the return of the Marcos cronies (López, Asiaweek, July 31, 1998). During the later years of the Marcos regime, Eduardo Cojuanco wrested control of San Miguel Corporation, the country's largest food and beverage manufacturing concern, from the Sorianos, its original owners. Allegedly, he was able to bring this operation to term in the early eighties with Marcos' blessings, through government funds and the infamous coconut levy. Understandably, together with his whole family, he joined the Marcoses when they fled to exile in Hawaii in 1986, after having been ousted by Corazon Aquino through the "People Power" Revolution. A little over a decade later, in July, 1998, Cojuanco barged into the San Miguel Corporation boardroom, and had himself elected as chairman and chief executive, on the basis of a contested 20% claim of ownership. Another celebrated case was that of Lucio Tan, a Marcos friend and Estrada backer with extensive interests in tobacco, banking and the airline industry (Philippine Airlines). During the Aquino administration, Tan's star waned, and for a period, his companies were sequestered and he was charged with illegal enrichment. Tan once more misplaced his bets in the presidential elections which Ramos eventually won, and during the latter's term, he was slapped with a P25.6 billion (roughly $612.4 million) tax evasion suit for the period between 1990-1992. Under the Estrada administration, Tan is expected to benefit from a purported government deal that would drop all tax charges against him if he were to pay only 1% of his net worth.

When confronted about these claims, Estrada denied ever having influenced the turn of events, and readily countered with references to supposed cronies of former president Ramos. One of these is the musician-businessman Ramon Jacinto, who borrowed P7 billion from two government banks on questionable terms for the purchase of very pricey real estate in Makati, the central business district. Furthermore, Estrada has yet to give a satisfactory explanation for the fate of another Filipino business king-pin, Manuel Villar. During the Aquino government, Villar was a low-profile developer of low-cost housing. Under the Ramos administration, when real estate boomed, Villar, who had accumulated a substantial land bank, became a US dollar billionaire. He also diversified into banking and the retailing business. Partly due to the Asian crisis which began in '97, Villar ran into financial straits and his bank was closed. Yet other entities, such as the high-end developer Ayala Land Inc., were "encouraged" to step in and save Villar, who even turned up a handsome profit from these operations. Having been an Estrada supporter all along, Villar joined the ruling political party, and was further rewarded the speakership of the House of Representatives.

Everyone seems to agree that the state is one of the major actors in a country's economic life, yet no such agreement exists as to the exact role the state or its government is expected to play. Government intervention is manifested in the number of state-owned, state-subsidized, state-protected, or state-sponsored enterprises. It is also shown in the centralization and concentration of information, power and authority over a society's organizations in government. What could be expected of the state in the build-up of a country's social capital? Some argue that when there is a deficit in social capital, the shortfall should be made good by the state, in the same way that any scarcity in human-intellectual-cultural capital is remedied by the building of more public schools and universities. Others, with no less reason and logic, claim that the need for state intervention depends very much on the particular culture and social structure of the country or society over which the state presides. At best, we are left with a peculiar version of the "chicken and egg" dilemma: Is highly-developed social (cultural, intellectual, human etc.) capital the cause of limited state involvement in the economy, or is limited state intervention the reason for exceptional endowments of social (cultural, intellectual, human etc.) capital in a given country? In the Philippines, perhaps more than in many other countries, this remains an open question, and current trends of globalization -as they necessarily modify the state's role- augur a very complicated response.

The emphasis on smooth interpersonal relationships

An almost absolute value is placed on "smooth interpersonal relationships" or "pakikisama" (literally, "getting along with the group"). A premium is given to being polite, respectful, accommodating and non-confrontational, through an ingenious use of rhetoric, no matter what the issue at stake may be. This means giving in to group or peer pressure, even at the expense of what objectively may be considered as "true" or "just" (both of which adopt a very "plastic" or

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"manipulable" nature). Never "rock the boat", never put anyone to shame or embarrassment; do whatever is necessary for yourself or for others to "save face" and maintain acceptability within the group (Talisayon, 1990). That is why it is not at all rare that deeds run counter to both the spirit and the letter of the law, leaving those with a formalistic and legalistic bent deeply puzzled. As a rule, Filipino managers have no trouble with such an arrangement, where the law points towards one direction and actions go the other, no matter how illogical and contradictory this may seem. This value of "smooth interpersonal relationships" is perhaps the most powerful horizontal bond in society. In absolute strength, it comes after family bonds and "utang ng loob". Whoever transgresses the law of "pakikisama" makes himself equally worthy of being called "walang hiya".

In recent years, this "face-saving" principle of "non-interference" in another country's domestic affairs was heavily put to test on several occasions. One was in the decision of the ASEAN (Association of South East Asian Nations) in 1996 to accept Myanmar (formerly known as Burma) among its ranks, thereby recognizing the SLORC military junta dictatorship over and against the potential government of democratically-elected Aung San Suu Kyi, despite the former's usurpation of power and tarnished human rights record (Asiaweek, Aug. 7, 1998). This was a confirmation of the conventional wisdom among people of the region that neighbors should never be criticized for whatever goes on within the confines of their walls, lest they be put to shame. (This attitude is captured in the common practice among traditional Southeast Asian communities, the Philippines included, of removing one's footwear before entering a home, in order not to dirty its floor. It reflects the exquisite respect that one should keep towards another's home, towards its dwellers and their customs.) Westerners see in the ASEAN stance towards Myanmar not a matter of courtesy but one of hypocrisy or unfaithfulness towards one's own ethical-political beliefs. Westerners particularly find this offensive to the values of openness and transparency, frankness or freedom of expression, and the democratic principles of equality and adherence of each and everyone without exception to the rule of law. On the other hand, Asians consider Westerners to be brash and too direct, rigid to a fault, unnuanced and inflexible in their notions of truth and justice, excessively individualistic in their concerns, intrusive disruptors of harmony and often, very difficult or almost impossible to work with.

Another challenge arose in the wake of the Asian crisis of '97 when it became clear how one country's policies could precipitate into a regional crisis (the "contagion" phenomenon or the "domino-effect"). This was true not only in economic matters (the devaluation of the Thai baht which triggered the collapse of the other currencies), but in political issues (the hasty Suharto exit amidst ominous corruption charges in Indonesia, Anwar's fall from grace from Mahathir's government in Malaysia), in social problems (the attacks against ethnic Chinese and the food riots in Indonesia) and in environmental negligences as well (the Indonesian forest fires which choked Singapore and Malaysia). As a Myanmar minister had remarked, being in the ASEAN is like being in a boat: passengers provoking a commotion could cause the whole boat to capsize.

During the ASEAN foreign ministers' meeting held in Manila in July, 1998, the Thai representative Surin Pitsuwan's call to revise the "non-interference" doctrine found ready support from his Filipino counterpart, Domingo Siazon, as well as from the Filipino ASEAN Secretary General, Rodolfo Severino. They rallied for an attitude of "constructive intervention", "flexible engagement" or "enhanced interaction" among member states regarding each one's internal affairs. Plainly, such expressions were mere euphemisms meant to give the "non-interference" principle a gracious exit. Straining to preserve at the same time the strong ASEAN bonds, Severino affirmed, "As the ASEAN family, we should be free to talk frankly." (Mitton, Asiaweek, July 31, 1998; The Economist, Aug. 1, 1998; Asiaweek, Aug. 7, 1998).

At first glance, an appreciation for "smooth interpersonal relationships" should favor associationism, on which trust or social capital directly depends. Associationism is synonymous with "spontaneous sociability" or the capacity to form new organizations and to cooperate within the terms of reference that those organizations establish. In a sense, it is very similar to what Durkheim (1933) called "organic solidarity", founded more on shared values rather than on stipulations of a contract. Associationism rests on cultural roots. It could only flourish in an atmosphere of regular, honest and cooperative behavior, where persons have an experience of, are committed to, and reasonably expect from others, a conduct that is both loyal and dependable. Foremost among these principles of conduct is the respect and the protection rendered to property (its ownership, use, sale, etc.). Associationism then is encouraged by the practice of the social virtues, rather than by the proliferation of laws.

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Contrary to what would be expected, however, the Filipino's very high regard for "smooth interpersonal relationships" has not at all favored the cause of associationism. Whatever beneficial effect for associationism that could be expected from his concern for "smooth interpersonal relationships" is annuled by the notorious trait called "crab mentality" (talanka). It may best be decribed as narrow-mindedness, a small-town or parochial outlook, a form of envy or resentment that comes from the progress and the inevitable distancing of members of an original group. The term for this cultural vice derives from the observation that crabs need not be tied in order to be prevented from leaving a basket in which they are kept. As soon as one crab ventures to leave, the others, with their pincers, would pull it down, keeping it with the others in the bottom of the basket.

A culture of pervasive poverty

Filipinos have continued to be a very insular people, quite incapable of looking beyond the immediate interests of their families and family-assimilated groups (barangays, town- or province-mates, etc.). Strongly influenced by a culture of endemic poverty, Filipinos tend to be short-term and self-centered in their mind-frames. Adverse climatic conditions are often perceived to play a role here. It is quite common among rural Filipinos, especially those living in the eastern provinces, facing the Pacific Ocean, to loose their homes and whatever they have of value due to severe seasonal typhoons. A fatalistic attitude ("bahala na" or "let God's will be done!") with regard to these tragedies discourage or prevent them from making long-range plans. Aside from developing a knack for improvisation, as part of their survival tool kit, they concentrate instead on the "here and now". The so-called "public sphere" (res publica) or long-term national interests hardly enter the field of the ordinary Filipino's considerations (Sison, 1995).

For example, with regard to personal and domestic hygiene, Filipinos may be considered second to none; but these very individuals will never think twice nor hesitate to throw their garbage to the streets, outside the perimeter walls of their domiciles, reasoning out that such public space does not belong to anyone in particular, giving themselves carte blanche to do with it as they please. A similar form of reasoning is adduced in order to justify what as a matter of fact are petty thefts, acts of pilferage or plain and simple wastefulness: the so-called "souvenirs" from restaurants, hotels and other service establishments that may range from free publications, stationeries and complimentary toiletries to towels, ash trays, china and cutlery. Extremely significant, in this regard, is the listing of theft and cheating in the first place, among the undesirable Filipino habits that are to be changed, according to a university-based public opinion survey (ADMU, 1988).

As a consequence of the low wages and the difficult living conditions in the country, a great number of Filipinos work abroad. Latest estimates place the figure at some 4.5 million, making the country the world's largest exporter of labor. These overseas contract workers send home $ 5 billion to 10 billion yearly, the equivalent of the nation's current foreign reserves (The Economist, Oct. 24, 1998).

Filipino males work primarily as construction workers in the Middle East or as merchant mariners deployed on ships all over the world. Filipino women abound as domestic servants and as entertainers in the richer countries of the East Asian region (Singapore, Japan, Taiwan, Hong Kong, Malaysia) and in the Gulf States, or as nurses in some countries of Europe and in the United States. Filipinos are generally sought after as middle-managers, bank tellers, computer programmers and clerical workers because of their proficiency in English and easy to get along with characters. They are a valuable source of income for the families they leave behind, and with their repatriated earnings, many small businesses have been put up.

The Philippine government has endeavored to give due recognition to the efforts and sacrifices of migrant workers. It provides them with airport fees and travel tax exemptions, express lanes at immigration and looser control at customs for their suitcases filled with "pasalubongs" or coming-home gifts during their years of service abroad. It has also organized livelihood programs for them, when they decide to return.

For the past few years, Filipino business people have endeavored to alleviate the indigence of a large part of the population and to promote a more equitable distribution of wealth through corporate social responsibility programs. Established businesses realize that they too have a role to play, and could become positive agents for the well-being of their employees, clients or

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customers, suppliers, providers of capital, local and national government units, and over society in general, in accordance with the broad lines of the "stake-holder" understanding of the firm (Goodpaster, 1991). The attitudes with which these initiatives are carried out range from a paternalistic one, as mirrored in the post of a Vice-President for Social Responsibility for the Victorias Milling Company (Talisayon, 1995), to a more enlightened and subsidiary one, as could be found in the projects brokered by Philippine Business for Social Progress (Chiongpian-Perez and Quimpo-Espino, Philippine Daily Inquirer, Oct. 7, 1996; Cabacungan, Philippine Daily Inquirer, Oct. 8, 1996; Narisma, Philippine Daily Inquirer, Oct. 9, 1996; Debuque and Villadiego, Philippine Daily Inquirer, Oct. 10, 1996). Filipino businesses have organized and financed all sorts of auxiliary programs in education (the Management Association of the Philippines through its Scholarship Committee, the Finance Executives Institute of the Philippines, the Makati Business Club through its Invest in Education Program), in nature conservation (the Philippine National Oil Corporation-Energy Development Corporation, the Makati Business Club through its Paper Exchange/ Recycling Project), and in disaster-relief (the Makati Business Club through its Corporate Network for Disaster Response). They have also pioneered in programs offering assistance to the urban poor (Philippine Business for Social Progress together with the Far East Bank Foundation, the Phinma Group, the Ayala Foundation) and to cultural minorities (Western Mining Corporation‘s assistance to the B‘laans, and the Ayala Foundation‘s service towards the Mangyans).

Corollary to this awareness of their social responsibility, business firms and professional organizations vigorously engage in the sectoral advocacy of or protest over policies concerning local and national issues. The following are a few examples of Filipino corporate "activism": the Philippine Chamber of Commerce‘s boast of an 80% batting average in terms of proposals considered over proposals submitted to government through the resolutions of the annual Philippine Business Conferences (Debuque, Philippine Daily Inquirer, Sept. 23, 1996); the Philippine Exporters Confederation‘s support for legislation regarding the protection of Intellectual Property Rights; the Finance Executives Institute and the Investment House Association‘s efforts for the conversion of the Philippine Stock Exchange into a Self-Regulatory Organization (Sy, Philippine Daily Inquirer, Oct. 22, 23, 1996). Assuming the role of an informal social guardian, the Makati Business Club even publishes periodic updates on the status of initiatives and bills in the legislature (CongressWatch Reports), on the activities of the legislators themselves (CongressWatch Profiles), and on the public perception of the performance of those in government and in the judiciary (Executive Outlook Surveys, Voter Feedback, CourtWatch).

III. Business in the Philippines: Living in a Paradox

One often hears the lament that life is full of contradictions. It is quite plain that this cannot be true. If life were really made up of contradictions, then certainly, it would not be livable. The very fact that life goes on proves the above-mentioned complaint false. What should be said, rather, is that life sometimes comes loaded with paradoxes, that is, with events void of a clear, rational explanation or solution. Or that life often consists of moving from one dilemma to another: that although all choices are limitations, in order to get ahead, one just has to decide and choose. The Filipino is one such "living paradox" and life -all the more so, business- in the Philippines means growing accustomed to living in a continuous paradox.

Meeting a Filipino means being presented to someone with a Malay face, although perhaps with a Chinese streak in his eyes; a person with a Spanish name and a Christian religion, yet with an American-but-not-quite twang in his speech; a fellow who pays glib lip service to the values that Western Liberal Democracies hold dear, and at the same time feels, hurts and reacts very much like an Asian. In none of these situations will the Filipino be "acting-out"; he'll just be exteriorizing how he truly is within.

It has been a common remark that while the East Asian economies were experiencing decades of spectacular growth, the Philippines always managed to single itself out and perform as if it were a Latin American country. And when the time came for the Latin American countries at last to grow, then the Philippines decided to reassert its Asian identity. The disputed "contagion effect" in an ever more interconnected global economy notwithstanding, perhaps the Philippines never really embraced the so-called "Asian values", nor was it meant to tread the same path as the much-touted formerly known as Asian "miracle economies" (Far Eastern Economic Review, Feb. 19, 1998; Asiaweek, July 31, 1998). As several economic policy analysts and makers such as Michel Camdessus of the International Monetary Fund, James Wolfensohn of the World Bank and

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Mitsuo Sato of the Asian Development Bank each in his own way has pointed out, the Philippines is different. It is precisely in the Philippines' ineffable "difference" where its ultimate strength lies (Reuters, Philippine Daily Inquirer, Oct. 24, 1998; Agence France Press, Philippine Daily Inquirer, Nov. 2, 1998; Villegas, 1998).

Many lessons could be learned from the growth experience of East Asian formerly known as "tiger economies" (Fischer, Asiaweek, July 17, 1998; Stiglitz, Asiaweek, July 17, 1998; The Economist, July 25, 1998). The first one concerns the insufficiency or inadequacy of the neoclassical paradigm for explaining what happened in the region, both its "success" as well as its "failure". There is a need for a new growth model, now that the principles and predictions of the neoclassical one have failed. At the very core of this growth model should be a paradigm of economic rationality that distances itself, on the one hand, from the maximization of self-interest and comes closer, on the other, to the great cultural and religious traditions of altruism and benevolence. Such an orientation would lead economic actors towards a process of self-realization and continued self-improvement. It would moderate or temper one's appetites and passions, while at the same time allowing the individual person to gain greater self-control. This self-mastery translates, in economic terms, in an improved capacity for making increasingly rational and consistent choices. This new form of economic rationality is characterized by the importance it gives to what Adam Smith used to call "shared moral sentiments", or to what Amartya Sen (1996) has recently called "shared moral values". And these "values" -or should we say "virtues"- are by no means exclusively Asian, but rather, universal. Instead of insisting on what distinguishes or separates them from the industrialized countries of the West, perhaps it would be better for Asian countries to concentrate on the "values" or "virtues" that could unite them to each other.

From a management perspective, Jaime Augusto Zóbel de Ayala, president and chief executive officer of the Ayala Group of Companies, perhaps the Philippines' largest and longest-standing conglomerate, summarizes these lessons quite accurately: "First, rules are there for a reason, annoying though they may be. Asia ignored them to its sorrow, resulting in failed financial institutions and corporate bankruptcies. Transparency is a must for recovery and growth in the future. Secondly, democracy and markets go together. The mantra of Asian values as an apology for authoritarian government has proved to be false. Third, the right government policy is important, but it is finally private enterprise that must drive government. (...) In the last analysis, it was the Asian enterprise, Asian management and Asian labor that really fueled the Asian economic miracle. And they must fire up its revival." (Zóbel, 1998; Tirona, The Philippine Star, June 5, 1998).

The Philippine economy, unlike those of the other East Asian countries at the start of the crisis in July, 1997, was by no means overheated (University of Asia & the Pacific, 1998). There were no signs of a "helter-skelter" scramble for economic growth, nor excessive, speculative borrowings that went to real estate, the stock market or industrial expansion. Furthermore, from its experience during the later stages of the Marcos years, the Philippines learned earlier than its neighbors -through "advanced credits", as it were- about the economic and social evils of crony capitalism. There is no denying that the Philippines still ranks high in the world corruption index, yet there are unmistakable signs of improved transparency in both public and private financial institutions, as recent IMF reviews suggest. Accountancy, certified public accountancy, has been a deeply rooted profession in the Philippines longer than in many other Asian countries. In this regard, it is worth noting that for a long time, the Philippines had the largest public accounting firms in the Far East.

Probably the strongest competitive advantage of the Philippines in comparison to its neighbors in the region is the political stability afforded by its vigorous democratic institutions and clear-cut, law-governed succession scenarios. This, more than any other, is the ultimate condition sine qua non for a sustainable economic and social development. Borrowing from Aesop's fable, it is obvious that the Philippines was by no means the "hare" in the race for development. The question now is, could it actually be the "turtle"?

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