ReInventing Philippines Inc.,

A report by the Business Software Alliance (BSA) in a study in the Philippines reported that software companies lost US $202 million in 2008 and US 147 million in 2007 due to piracy.

In the 21st century economy where wealth and market value of companies is defined in terms of intellectual property and human capital owned, the protection of intellectual property and patents like in drugs, software, film, engineering inventions, design, and music has been touted as a very important factor in enabling companies and individuals to encourage them to invest in new research and innovations, and critical for countries to improve their standard of living and income.

“Who would want to write a book, compose a song, create film, and develop software if anybody can just copy the without paying licenses or royalties?”  and indeed, I agree.  The person who made the investments in innovation and creation need to be properly compensated.

However, we can relate this question to another perpetual question on why the Philippines is poor – and I believe it is because its intellectual property rights has not been protected, and has been stolen in the billions, and ironically, we are happy and proud about it.

Consider this. Between 1980 and 2010 (today), the Philippines increased its population by over 50 million by producing and raising over 60 million babies ( over 10 million people died during this period).  In the last 3 decades, we just had too many people, and the bulk of everybody’s income, and the government’s budget has simply been going to feed and educate and provide the basic needs of these people such that we have none leftover to invest in infrastructure and other endeavors, as well as so called finer things in life.

Now consider that over 10 million of our people have moved overseas to find work or to look for greener pastures because we could not provide them decent jobs or the standard of living that they deserved.

The typical person who moves out is age 25, above average education, with above average abilities.  Now, let us do a little bit of math.

Most of these countries are gaining these bonanza – they get certified nurses, professionals, programmers, welders, therapists,  without having to pay for the cost of raising or educating them on their first 25 years.  The moment that they land, they start contributing to the economy with ready skills – and of course, the Philippines receive nothing in compensation, and is happy with the remittances that they sent, and perpetually crows about the billions we receive each year.

Let’s say that on average, each of this person are earning USD24,000 a year in their country of choice.  He probably pays about USD4,000 in taxes benefitting his host country, and he probably spends the other USD 19,000 helping that country’s economy either by paying for rent, gas, food, and the like.  He saves about USD 2,000 which he sends back to support some of his relatives behind. ( which should be about it – if our overseas workers are sending approximately 18 billion dollars back home, and there are 10 million of them, then it stands to reason that each sends an average of close to USD2,000 per year).

However, think that they don’t pay taxes to the Philippines government, so that is our taxes lost.  And think that mostly, OFWs send the most money during their first few years of overseas work.  This is the time when their siblings or children need to finish education, and therefore needs the money.  But after a few years, they will stop when their siblings can fend on their own, their parents have passed away, or they have been able to earn enough to get them to move overseas with them.

If the Philippines move forward, and improve our standard of living, and income, and have better quality of life, some of them will come back, and that will be our gain.  But the longer we delay our own development, the more people we will lose to the foreign country forever.

How much did Philippines Inc., invest in raising the over 10 million people abroad?  For 25 years, just consider that it is USD1,000 a year.  That would be an investment of USD25,000 per person till he is 25, and if you are looking at 10 million OFWs, then that is a USD250 billion investment.  In business parlance, you make an investment to lose money on their first 25 years, so that they will pay back on their next 35 years – which should be the peak of their working and earning power.  Did we get paid for doing this by the foreign governments who are absorbing our people?  None, nada, and we even thank them for it.

In the businesss world, the fastest growing and most profitable companies gain their edge by their ability to attract and retain talent and human capital which forms part of their intellectual property.  Ditto for countries.  It is no secret that many countries like Singapore, Hong Kong, United States, Australia, Canada and others have made it their policy to continue to be competitive by being able to draw the best immigrants from developing countries.  The United States, for instance, benefits a lot because most students who go there for advanced studies gets offered to stay, and ends up working for America Inc., And yet, we are making a policy to send out our own best people out!

Let us try to do the math another way. Let us supposed that these 10 million have chosen to stay in the Philippines because we have the environment to attract investments which gives jobs.  Not as good paying as overseas, but many would choose to stay if the difference is not as yawning big as it is now.  And we can probably save millions of families from being broken up.  Again, most of these would probably be our top quartile in terms of talent and abilities.  Let us say that they end up earning USD 5,000 per year.  Multiply that by 10 million, and assuming each pays 20% of their salary in taxes.

That’s 50 billion dollars in additional national income  per year, and that’s an additional 40 billion dollars that is most likely spent here for food, education and the like.  And that’s 10 billion of income taxes to the government, SSS, and Philhealth contributions, and another 6 billion in Value added taxes because the whole amount was spent here.

It is not only more, but is more likely to grow every year, unlike the remittances which if we stop sending OFWs abroad could well be diminishing.

Let us provide investment opportunities so that the people who need jobs can get it here.  And that will enable us to benefit from our intellectual property and human capital.  The nurses will take care of our people, and the entrepreneurs will create businesses that will hire our people as well.  There is no future for this country if year in and year out, we lose our best people.

Tags: human capital, intellectual property theft, OFWs, Overseas Filipino Workers, Philippines Inc.

This entry was posted on Wednesday, June 2nd, 2010 at 10:22 am and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.