Today, The Philippines looks to China for much needed inward investment and many OFWs (overseas Filipino workers) seek job opportunities in China. At present, over 12,000 OFWs work in Mainland China and over 140,000 work in Hong Kong. But in the 1950s, things were very different. At that time, the Chinese economy was devastated by decades of occupation, World War and Civil War, while an agrarian driven command economy shunned modern industrialisation initiatives.
Although The Philippines also experienced a brutal Japanese occupation and the overall effects of the Second World War in an extreme manner, normalcy was restored to The Philippines in a comparatively rapid fashion. In 1946, the US formally granted The Philippines independence, but US private sector investment continued to pour into the country nevertheless. For a time after the Second World War, Manila became the most modern city in Asia, ahead of a Japan that was still rebuilding itself after its loss in the Second World War and ahead of Hong Kong whose great leap into modernity was still a very early work in progress. It was in this halcyon post-war/post-colonial period that in 1958, a man from Fujian known as Henry Sy arrived in Manila where he opened a small shoe store.
Between 1958 and 1985, a lot had changed in The Philippines and by the 1990s, what was once the so-called Queen of The Pacific had fallen far behind Hong Kong, much of mainland China, Singapore and Malaysia. In terms of growth and productivity, by the end of the 1990s, The Philippines was even lagging behind a Vietnam that embraced the post-Cold War era with a large scale modernisation drive.
But one large engine that continued to remain powerful in The Philippine economy was that which was sprung form a single cylinder forged in 1958. Henry Sy’s company SM Prime Holdings gradually expanded from a humble shoe shop to the chain Shoemart and by the 1970s, Sy was building and operating large department stores, supermarkets and a number of top retail shops with associated bands throughout The Philippines.
Perhaps Sy’s most memorable contribution to both the physical and retail landscape in Asia was the first of his SM Supermalls – SM City North EDSA. Today, a constantly evolving SM City North EDSA remains the sixth largest shopping mall in the world, while upon its consecration in 1985, it served as the model for the growth of mega-shopping malls throughout Asia.
By the time Sy retired from running his business empire in 2017, he was the richest man in The Philippines and one who was emblematic of a self-made success story – one that was proudly made in The Philippines. But while the China born Sy became a Philippine success story because of the economic opportunities afforded to him by a modern nation in the 1950s, today it is Filipinos who continue to go abroad in search of the kinds of opportunities that Sy once found in Manila.
The sad reality is that whilst in the mid 20th century, the Philippine economy was modern and worked hand-in-hand with investment partners from the world’s richest economy, decades of increased restrictions on foreign direct investment, both overt and stealth restrictions on open and free trade, an inflationary borrowing spiral, the entrenchment of a class of corrupt oligarchs who thrive in managed rather than free market conditions and an education system that fell behind its neighbours even though it was once far ahead – have all contributed to the decline of economic vitality in The Philippines.
And yet today, as many Filipinos and others mourn the loss of Henry Sy, it is helpful to remember that Sy was still working after President Rodrigo Duterte won the 2016 election on a reformist platform which sought to liberate the economy from the ills that have plagued The Philippines for decades.
Here, it is helpful to remember that while SM Prime Holdings remained successful after Sy’s retirement and will almost certainly continue to be an economic success story after its founder’s death, this is largely due to the fact that as Sy’s businesses expanded, he created a clear business model and operational structure that underpinned his business empire. Sy’s business model helped his company to function beyond that which even the most talented and hard working individual could accomplish alone.
Thus, while Sy began as a one man band, he soon realised that a thriving business must eventually become reliant more a system than on an individual. One of the problems of governance in The Philippines is that in spite of a bloated bureaucracy, a needlessly and at times mind-boggling complicated political system, at the end of the day, the country is dependent on the abilities of a single individual and his or her relationship with the political and bureaucratic forces that act like a ball and chain around such a person’s proverbial leg. One could scarcely invent a worse system if one tried.
Today, The Philippines is run by a man who is by most accounts the best leader that the country has ever had in its modern history. But President Duterte does not have a political system nor a constitution that does for him what SM Prime Holdings did for Henry Sy and will continue to do for others even after his death at the age of 94.
Because of this, while there is little real danger of SM Prime Holders falling into decline, the same cannot be said of The Philippine government. Unlike Sy who successfully headed his company for decades, Rodrigo Duterte will be forced out of his job by artificial term limits in 2022, just as his predecessor was artificially kept in his job in spite of failure after embarrassing failure. But beyond this, while Sy commanded the confidence and loyalty of business mangers, thousands of other employees and millions of customers, in The Philippine political system, even the most dynamic and patriotic leaders like Duterte are surrounded not by those who can help them to run the country, but are instead surrounded by those who are either too incompetent to run anything (let alone a country) or otherwise, by those trying to consciously obstruct reform.
This is why a federal-parliamentary system of governance along with a pro-foreign direct investment and pro-free trade constitution is required to turn The Philippines into a modern and vibrant place to live and do business. A parliamentary system is like a business insofar as a leader is only as strong as his or her parliamentary supporters who effectively act like shareholders in a company. If the shareholders don’t like a party leader, the leader can be fired and a new one elected.
Likewise, parliamentary elections are not contests based on vanity and personal popularity but are more akin to the experience of an informed consumer shopping for an expensive but necessary product. An informed consumer looking for a new car will hardly ever consider how physically attractive or friendly the salesman is, but will instead see how easy the car is to drive, how powerful its engine is, how comfortable its suspension is, how much room there is for passengers and cargo, etc. Likewise, when voting in a parliamentary election, one must consider a party manifesto in the same way and then ask questions including: which party will insure sustainable economic growth, which party will create more jobs, which party will keep the streets free from crime, etc. After one considers these options, an informed choice is made.
In respect of federalism, a large country like The Philippines operating on a unitary model would be like Henry Sy trying to cram all of the merchandise sold at SM City North EDSA into his old shoe store from 1958. Such a thing would be impossible. And yet, the overpopulation in Metro Manila is a result of just that. Because the most economic opportunities in a country as large and as geographically expansive as The Philippines are in Metro Manila, the region is crowded with those trying to make the best life for themselves.
By contrast, a federal system in a large nation serves the same function as a chain of shopping malls and department stores. Just every area has its own mall, department stores and outlets of major chain shops, federal systems provide for regionalism economic spaces throughout a vast and diverse country. Imagine if in a federal republic like Germany, everyone had to go to Berlin to buy a pair of shoes? It sounds ridiculous but hardly more ridiculous as people from a country far larger than Germany all going to Metro Manila for work and business opportunities.
Politics is not about reinventing the wheel but about attaching existing wheels to the best vehicle. This is what Henry Sy did. He did not invent commerce and he did not invent the shoe. But from his humble beginnings of trying to sell shoes in the best possible environment, he helped to modernise commerce in The Philippines and his success clearly speaks for itself.
A federal-parliamentary system in addition to a foreign direct investment and trade friendly constitution could do for The Philippines what Henry Sy did for his employees and customers. What’s more is that with such reforms, instead of Filipinos looking abroad for opportunity, others would once again look to The Philippines as a place in which to invest and create jobs.
Today should therefore be a day to remember Henry Sy, a man who started with nothing and worked hard in order to end his life with everything. The Philippines deserves more than to be remembered as the Asian tiger economy (before the term was even coined) that lost its bite. The Philippines deserves better and there is a clear model to follow which will allow the country to become the shopping mall for the world. One would hope that Henry Sy might be proud of such an analogy.
RIP Henry Sy 1924-2019