Q&A: Washington SyCip

03.21.2016
Politics Society Economy

Washington SyCip speaks to us about the economy, the Philippines' business environment, and his hopes for the next administration.

Washington "Wash" SyCip is a long-time Filipino accountant and businessman. He is the founder of the Asian Institute of Management (AIM) and the accounting firm SGV & Company.

*The views expressed by Mr. SyCip are his own and do not necessarily reflect the views of PAMPUBLIKO.

Sam Ramos-Jones: Much has been made about the current administration’s economic performance. Over the last six years the Philippines has averaged just over 6% GDP growth per year, and our credit rating has improved to investment-grade. What do you attribute those macroeconomic gains to?

Wash SyCip: First of all, we have an honest president; which we haven’t had for a long time.

Sam Ramos-Jones: Nevertheless, critics have claimed that these macroeconomic gains have not ‘trickled down.’ Do you think this is a fair criticism?

Wash SyCip: It’s a normal process of the economy. You have to have an honest head of state to enable legitimate businessmen to want to move. But, the trickling down takes time in any economy. So, it’s not surprising.

Sam Ramos-Jones: Do you believe that that trickling down will naturally happen over time, or do you think that there are certain policies or reforms that need to be enacted to help that along?

Wash SyCip: Well, the fact is that we must have better tax collection. First you to encourage the big businessmen to move, and second, if they make money, you have to collect the taxes. But, that does not happen overnight.

Sam Ramos-Jones: Despite those growth figures, it is also true the poverty rate has increased by a few percentage points during the last few years. What would you attribute that to?

Wash SyCip: Well, I think it’s basically because of too many children.

Sam Ramos-Jones: Do you higher growth that’s been captured by the top and an increase in poverty, or are these two phenomena simply coincidental?

Wash SyCip: Again, first of all you must have an honest president to motivate business to move. But, it’s not overnight that – sure you have jobs created as we have now with the outsourcing industry – that’s a very critical job creator. So that’s good for the economy, but if you have people having so many children then it’s very hard for the bottom group to move up.

Sam Ramos-Jones: Aside from the issues we’ve just touched upon: corruption and population, are there other factors in the structure of the economy that may be holding us back from being globally competitive, or, for that matter, competitive vis-à-vis our ASEAN neighbors?

Wash SyCip: Well, right now as I see the situation here, the president is honest. No one can tell me that, as they have done with other presidents, no one can tell me that they have seen the president and given him some money to approve a project. At least, is that has taken place, then I’m not aware of it. So that part is important: that we don’t have those kinds of things taking place. But, of course when you have such a fast population growth, it’s hard for the bottom group to move up as much as you would like.

Sam Ramos-Jones: So in your view, the key factor is getting the population under control?

Wash SyCip: Yes, and that we have democracy.

Sam Ramos-Jones: Are there any economic policies or reforms that you would like to see the next administration pursue?

Wash SyCip: Oh, of course, there are many! I’d like faster government decisions. I mean, on all these infrastructure projects, we are all so far behind. All of the good projects in progress should have been finished already.

Sam Ramos-Jones: You’ve been in business in the Philippines for so long and seen many transitions – both in governance but also with respect to the economy – looking to the future what do you think are going to be the key drivers of the Philippine economy as we proceed through the 21st Century?

Wash SyCip: A lot depends on who is elected next; whether he or she is honest and who are appointed to the Cabinet.

Sam Ramos-Jones: According to the World Bank Group, out of 189 countries ranked, the Philippines is rated as 103rd for ease of doing business, and more concerning, 165th for ease of starting a business. What do you think accounts for these poor rankings?

Wash SyCip: The key factor in the Philippines, and where our neighbors have passed us, is agriculture. That was the foolishness of that land reform. Land reform was supposed to apply to rice, but the applied it to everything. But for the poor, in any emerging market, agriculture is critical and a lot of agriculture projects went to our neighboring countries.

"The key factor in the Philippines, and where our neighbors have passed us, is agriculture." -Wash SyCip

Sam Ramos-Jones: What is your view of the regulatory environment in the Philippines?

Wash SyCip: The slowness…whether it is over-regulated or not, some regulations are necessary but they should be applied faster. You want regulations so that the structure is there to prevent abuse, but you don’t want it to be applied so slowly that it hampers businesses.

Sam Ramos-Jones: Are there any pieces of legislation that the next congress should pursue to improve the business environment? A lot of people have discussed lifting restrictions on foreign ownership and making our business environment more attractive and accessible for FDI.

Wash SyCip: I’ll give you one example: Colgate left here; now they want to come back. When they left here, there was a company that was supplying them with all the tubes for Colgate toothpaste and all of the packaging and all Colgate did was to supply the cream (toothpaste). So, when they left the country, that company was stuck with nothing to do but their investment was already there. So, they in turn went into making toothpaste, called Hapee, and they are doing very well and now Colgate wants to buy into them and they turned it down. Now Colgate is saying: “oh we like the Philippine investment climate and we would like to come back.” Should you let them come back or not? Just because they are foreign, doesn’t mean that they are superior. Many of the items that were imported before are now made here. So you don’t have a change overnight, but we also need more aggressive businessmen here.

Sam Ramos-Jones: What do you mean by more aggressive?

Wash SyCip: More hardworking! I work Saturdays here. I don’t see many of the businessmen here working on Saturdays. If you take the Forbes Park businessmen, let’s say the top ten or eleven, I know all of them. I can tell you who are working on weekends and evenings and who are not. Some are just wasting their money on their children.

Sam Ramos-Jones: During our last conversation here, we talked a little bit about this issue of a lack of a cohesive national identity – that people identify with their family and locality before the national Filipino identity – what do you think the effects of that are in our economic and political environments?

Wash SyCip: I any emerging market, or any country really, you have people who are willing to sacrifice their golf games and work and others who are not. In fact, I’m not quietly looking at all of the major business groups to see what kind of people they have for succession. How are the children doing? Are they taking life easy? Are they just taking trips abroad? I’m trying to identify which business groups will be there for another thirty years. But you can tell easily. In our profession, I was very happy to learn, after I retired, I don’t have to look over the shoulders of the current management. All they tell me is where they can get good people and how the firm is doing. They never tell me whether they are making money or not. I don’t ask. But then when I see the numbers – in the last seven or eight CPA exams, I see from the papers that the top ten are all with SGV. Then I ask the managing partners: “how do you manage it?” and they tell me how they go about recruiting and how they start identifying leadership way ahead of graduation. When the other firms complain that it’s so hard to get good people, well it’s just because they don’t try.

Sam Ramos-Jones: How do you identify good leaders?

Wash SyCip: Well it’s always about people. What is quite clear to me is that the average company here is still looking at Ateneo, La Salle, and Metro Manila. Yet, I see from the records that many of the top-notchers of the CPA exam are from Visayas and Mindanao. But most average companies are too lazy to go down to other areas. So, in the end, you can judge where a firm will be based on its policies on recruitment.

Sam Ramos-Jones: Last time I was here, we also discussed the idea of individualist vs. collectivist societies – I believe we were talking about Singapore as a comparison. Do you think that in the Philippines is more of an individualist or collectivist society?

Wash SyCip: We are individualist in terms of family – we are too family-oriented. Generally, I would say that I prefer that we become broader in thinking. There are companies here that if you have the wrong surname, you will never become number one. Now, if you are big enough you can get good people. But if you are a medium-sized company – if I were a bright person I would not think of joining them because you know that management positions will be reserved for the owner’s family.

Sam Ramos-Jones: What role do you think the church plays in this country? How pervasive and how positive or negative is that role?

Wash SyCip: Historically, too negative. The present cardinal is starting to change things. The role of the church is very important in the Philippines. The previous corrupt leadership of the church has been negative – very negative. But it’s a case where when you have good leadership, like the current leadership, you have a change. But, before Cardinal Tagle, the church could have been greatly improved.

Sam Ramos-Jones: How do you see the state of education in this country?

Wash SyCip: Well, just by chance we were discussing what kind of policies the private sector business should adopt with respect to education. None o them mentioned decreasing illiteracy. So I said, whatever you decide, we should start by saying that the policy should be to reduce illiteracy and then you can have other reforms on top of that. But, to my mind, to reduce illiteracy is the most important thing.

Sam Ramos-Jones: Relative to some of our ASEAN neighbors, our private education system is underdeveloped. We have some very elite private schools, but across the rest of the socio-economic ladder, the burden for education really falls on the state. Do you think the private sector should be more of a partner in education?

Wash SyCip: Of course! And sometimes, the policy of the state is not what I would agree with. First of all, a loan policy for the poor would be much better than what the government is doing, which is a handout. A loan policy enables you to reach more people. With a handout, the money is gone; with a loan policy, the money is recycled.

Sam Ramos-Jones: A few weeks ago, we celebrated the 30th anniversary of the EDSA revolution. It was somewhat controversial. Some people say that we’re no better off, some say that we’re actually worse off, and others say that we are in fact much better off. What changes (if any) have you seen in the economic and business, cultural, and political landscape since that time?

Wash SyCip: Well there has been no consistent policy. It depends upon each president. For example, you had Arroyo with a PhD. Her policy of frequent changes of the Secretary of Education has been criticized – she had four of them. Now, how can you have any kind of success with that kind of turnover? Since EDSA, the political landscape has certainly changed in that the current President, at least officially, does not tolerate corruption. But I wish that he could enforce good policies more quickly.

Sam Ramos-Jones: Certainly it has not been a smooth transition back to democracy. What do you think have been the biggest missteps in the post-Marcos era?

Wash SyCip: Not changing the political system. Having cabinet members that are politicians instead of technocrats. If I were president and I had a free hand I would have an Economic Czar backed up by three or four members of a council that are honest people and competent people and for them to have the freedom to carry out meaningful reforms.

Sam Ramos-Jones: Would you have supported the charter change proposition to transform into a parliamentary system?

Wash SyCip: Well, I would favor a system that does not have a concentration of powers in the capital city, because I have seen it fail. 

"I would favor a system that does not have a concentration of powers in the capital city, because I have seen it fail." -Wash SyCip

Sam Ramos-Jones: So, perhaps a federalist system?

Wash SyCip: Well, I would say that anything would be better than what we have now.

Sam Ramos-Jones: A common criticism of our political system is that it is dominated by a small group of elite families. Do you think that that is necessarily problematic?

Wash SyCip: No, in the sense that if all of these families were all technocrats and honest people. But many of them are not. There have been companies that have been successful through so many generations so it’s possible for dynasties to not necessarily be negative. I would favor a system where the government concentrates on agriculture favorably because that affects the bottom group of society.

Sam Ramos-Jones: During our last conversation, we talked at length about your view that democracy has not worked in the Philippines and you suggested that perhaps we would have benefited from a benevolent-dictator type like Singapore’ Lee Kuan Yew – could you please elaborate on that view?

Wash SyCip: When Lee Kuan Yew died, I went to the Singaporean embassy and I was the first one to sign the book and I wrote that he has proven that democracy is not necessarily good for an emerging market. From my viewpoint, the key remains agriculture for the bottom groups of our society. But the legislators made that impossible. They blocked out everything that so-called land reform was meant to achieve. So, all the other agriculture reforms that benefited our neighbors bypassed us because they could not be carried out. So agricultural development was basically blocked by this land reform.

Sam Ramos-Jones: Thank you so much for taking the time to speak with me today Mr. SyCip. It’s always a pleasure speaking with you.

Wash SyCip: Good.

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