Hard times are normal for Filipinos. Over the years, it seems that anything that can go wrong for the country does go wrong. The political leaders often look out for their own interests instead of the interests of the common man. But, the last week or so has presented some real challenges to the Philippines. It seems like a snowball affect has suddenly hit the country. Last week, I can think of three different things that happened that were bad for the Philippines:
- Downgrading of Aviation Status. The FAA in the USA downgraded the Philippines from a Class 1 Country (aviation-wise) to a Class 2. Being Class 2 means that the Philippines can not expand it’s air services to the USA. No additional US bound flights can be added by Philippine Carriers, and any Philippines Airlines that fly into the USA will receive additional scrutiny, and be closely monitored.
- Downgrade in Freedom Rating. An American organization called “Freedom House” downgraded it’s rating of the Philippines, saying that the Philippines is now only “partly free.”
- American Bank declares Filipinos Financially Illiterate. Citibank did a survey of people in the Philippines, and declared that the average Filipino had a “financial IQ” of just 48.
All of these events came to light in the space of just one week! In my opinion, some of these results were fair, others were not. Let’s have a look.
Regarding the downgrade in the Aviation rating, it would seem that the Philippines dug itself into a hole that it could not escape from. Some people have left comments on the site and also e-mailed me saying that this downgrade was because of poor security procedures in the airports (things like searches, checking luggage and such). This is not the case. This was an audit of systems in place for things like pilot training, air traffic controllers, maintenance of the aircraft and such. The FAA, during the audit found anomalies in things like the testing procedures for the maintenance people and pilots. Another big problem was inadequate training and experience of Air Traffic Controllers. For the situation with Air Traffic Controllers, the big problem is that the Philippines ATO (Air Transportation Office) trains people who apply to be Air Traffic Controllers, and then these people go work as Air Traffic Controllers abroad where they can earn much higher salaries. One thing that has really surprised me on this Aviation downgrade is that the officials in the Philippines are not blaming the USA for the problem. In the past, when something like this happened, the country who did the inspection was always blamed. This time, though, President Arroyo fired the head of the ATO, and everybody in government seems to be putting the blame on the ATO, not on the inspectors. I think this is a sign of maturity in the Philippine Government, and I also think that the Philippine Government is going to step up to the plate and get their Class 1 rating back in a relatively short time. All signs are pointing that way. I think that the downgrade was unfortunate, but I also think that it was fair, and shows that attention is needed in this area.
The next hit was the downgrading of the rating of the freedom of the Philippines. A study was done by an private group of the rating of how free the country is. Actually, this group puts out a list of ratings for each country, and the list is published every year. This year, the Philippines went from being classified as a free democracy to being classified as only “partly free.” Why? Well, there are indeed reasons. One issue that was sighted is the pardon of former President Joseph Estrada. Estrada was convicted of Plunder against the Philippines (basically meaning that he stole so much money that it jeopardized the Philippine economy), yet in short order he was given a full pardon by President Arroyo. Other factors in the downgrading included the arrest of many Press members for covering a coup attempt in November, and also the killings of journalists around the country, which is quite widespread. In my opinion, I must agree with the downgrade in this rating.
Finally, the survey of Filipinos that was done by Citibank. Citibank asked a lot of questions in a survey of Filipinos (in the Philippines) regarding financial matters. Questions asked had to do with saving money, paying off of credit card debts, finances for retirement, etc. Citibank concluded that the people of the Philippines have an average financial IQ of 48, which is extremely low. One of the conclusions was that Filipinos don’t save enough for retirement, instead relying on their children to support them in their golden years. Well, honestly, things work differently here than they do in the USA. In the States, children generally leave the home at, or around the age of 18, and head out to start their own life. The kids get loans to pay for their college education (although some help from the parents is normal). Here in the Philippines, parents support the kids until they get married, regardless of age. If the kid doesn’t get married until he/she is 35, he generally lives with his parents until then, and is supported financially by the parents. It is correct that the children generally support the parents in their retirement years. Why is that bad? It is not the same as the way it works in the States, but why is one system better or worse than the other? I don’t get that. Personally, I think that the Citibank survey is very unfair. They are basically judging people in the Philippines based on the way things work in the USA. How about if they judged Americans on how it works in the Philippines? What would the Financial IQ of Americans be? Probably pretty low. So, personally, I feel that this survey is a slap in the face to people here.
So, as you can see, last week was an eventful and bad week for the Philippines. Let’s hope that future weeks will be better!
Hi Bob . You are right what you say but things are going to get a lot harder . This is just the start.
Hi andy – Yep, I agree with that. Problem for the Philippines is that these kind of hard times have been going on for decades already! No end in sight. 🙁
Bob Sorry to here the U.S.A is giving the Philippines a bad rap.I doubt whoever formulated the I.Q.test has done much living in the P.I.Also citibank and the other banks have large problems lately.And to top it off the fed continues to drop interest rates .So save money in a bank at five percent or buy stock or maybe just live day to day as many Philippinos do.The U.S.is looking alittle like third world more and more. 🙄 🙄
This is really a good summary of this topic! On the freedom rating, I believe they also listed the deaths of NPA as part of the problem. Whenever I see that, I wonder what kind of group is doing the analysis. Is this another group that faults countries for chasing down terrorists? So often, groups like these work hand in hand with groups like the NPA, who, while damaging infrastructure and terrorizing people, cry 'foul' if anything ever happens to them.
I agree with your comments on the financial IQ. It is not right to judge things like how people are supported in their old age by American standards. But on the other hand, I do think that over all, when it comes to principles of wise money management; understanding the cost of debt, budgeting, living within your means, and having some money put by for emergencies, the Philippine population does very poorly. The culture promotes a hand to mouth life style and debt based living. The government also promotes this when they wait months to pay their teachers and other employees, forcing them to borrow money at interest just to live. Having a savings account is considered stingy and selfish by relatives who have less. Peer and family pressure to 'spread the wealth' insures that no one gets ahead. Even the wealthy Filipinos sink their money into get rich quick schemes, with no idea of how to judge such things. So, on a completely different basis, I would also give the Philippines a very low score in the area of financial IQ.
Hi James Duncan – Thanks for stopping by and commenting! Yes, financial matters i the USA are looking rather bleak right now.
Hi AmericanLola – One thing that I should clarify on the Financial IQ, thing…. the only people who were included in the survey were people who had at least one bank account and one credit card. That wipes out the vast majority of Filipinos, and it means that those surveyed were actually fairly well off. I believe that these people have a much higher financial IQ than 48.
Interesting – I do hope things get better for the Philippines , but it looks like the US and the rest of the world is teetering on the brink of a recession (if not already in one). Prolly will hit there too. Things might get a bit worse before they get better there and everywhere else. On the bright side, for every valley, there's a peak.
What exactly does the us ave against the PI? I got a note from a friend today that originated with the embassy and it warns against bringing any pirated materials into the US. Some Philippine nuring students went to the us to take the board exams and ended up being deported because their textbooks were pirated! I know the last time I went to the US I had a couple of 12n1 dvds in my computer bag… didn't even think about it but it will land you in jail if you get caught. As for financial iq, surveys say what the people financing suveys want them to say, pure and simple. The financial iq of an american must be around a 2 then because most carry around $50-80,000 in debt. Yeah I've known a few filipinos who were in debt but for the most part they live day to day. There was a time in the us when your chidren were your retirement… then the "Me" generation came along and ended all that. I do agree with the airport rating. Bad stuff and I've had some white knuckle experices flying on PAL and Air Phil. Cebu Pacific is the best and this downgrade is going to hurt them the worst because I think they were planning expansion to the US. As for freedom status… well only the TV and my wife know my views on this and I think it's best left that way 😆
Nice read herel….My personal opinion is this…I think Citi-banks IQ..must be on the very low side..{ or were they just greedy!!! } seems like a few years ago..You did not need much of a IQ to get one of those loans that are going bad all over the place here in the USA..and Citi-bank got there feet in that mess pretty good…so…they way I see it…was kinda of a unfair jungement on their part…Maybe they are just trying to cover up their own mud on their own faces a little bit here and there…….Big banks are like big Goverment…they just cover up there mess or blame some one else for it and move on and make a new mess…….
Hi Bob, I would agree on most parts of your post here:
1) As for the maturity of the Phil govt in doing the firing of the head of ATO, I think this is mostly for show. Most of the time, our govt like to showoff to media thay "they're doing their job" so to speak, but underneath they don't proceed with upgrading their procedures, training more, cleaning and doing measures to prevent such issues to occur again. Then again, I leave these to more experience political analysts in our country who can discuss more on this topic.
2) About the freedom in our country: slowly the Philippines is becoming a scary place to journalists and media who voice out strong opinions about Arroyo government. I'm not surprised… many of us Filipinos are not surprised about this. As for Estrada's freedom… heck another ploy by our government to win the hearts of the millions and millions of Estrada supporters. Wow, I'm impressed, really. We tend to "forget crimes" easily.
3) As for the last, yeah, things work differently here. I would not like to add anything about your observation on the last one.
As a commercial rated pilot I'm keenly aware of the complexity of aircraft maintanance. I book as often as I can on PAL not for thier outstanding on time status ( rofl ) but because Lufthansa has been their maintanance provider and I feel that is a huge attribute when your working on turbines. It was nice to see that Cebu Pacific has finally relegated the old DC-9 which they bought from the USA AFTER they had exceeded thier USA 20,000 useful landing cycles and purchased a few new Airbuses. I cringed the first time I saw I was boarding a plane that was older than I !! Aside from the plane part the training level of the pilots is well below USA – Europe standards. From what I have been told , they use a large number of contract pilots to keep pilot wages down. Problem is contract pilots tend to move around a fair amount, creating a constant slow revolving door. I prefer to have seasoned veterans upfront for when the proverbial goose hits the blades and all hell breaks loose its nice to have someone who has had alot of stick time in type.
The economic problems of the Philippines are self-inflicted. Hanging unto an old post colonial Constitution has put shackles to the financial well-being of the country.
The Constitution needs to be changed to allow foreign companies to own 100% of their Philippine entities. The way it is set up now is that companies that serve major industries should be majority-owned by Filipinos. The problem with this scenario is Filipnos have to wait
for Ayala, Aboitiz, Lucio Tan, Gokongwei and other taipans to raise enough money so foreign companies can partner with them industry after industry, companies after companies. In the meantime jobless Filipinos just have to wait or if lucky leave and work abroad.
Take for example the Aviation industry- open sky policy should have been the answer so foreign carriers can come in and bring tourists. Foreign tour comapnies should be allowed to operate inside the country too.
Let's face it. The Philippines are way too lacking in expertise(even if they have the money) to develop first world industries. The country needs foreigners to introduce the 'best practice'…This has been the Singapore model…hence they became a first world country in just a couple of decades.
Going back to the above downgrading of the Aviation Status…this would not happen if foreign airlines be allowed to fly and land all over the Philippines bringing with them tourists and hence more local jobs. These International Airlines will insist on no nonsense strict operating and maintenance procedures or their brand will suffer.
It's time for the Philippines to stop protecting Lucio Tan and the Gokongweis at the expense of millions of jobs for Filipinos if there was an open-sky policy.
For the same token the Constitution has not served the majority of Filipinos. Jobs should be brought in to the Philippines not Filipinos to find work by flying out of the country.
Hi RichardInSC – I agree, things are not looking good for the world right now, financially. I nervously watched last night when the NYSE opened for the day. I think it was pretty lucky that it didn't take a huge hit yesterday.
Hi Louis – I have to agree with just about everything you said! Hey, your last sentence where you said that you won't reveal your feelings…. the fact that you wouldn't say, pretty much said it all! Ha ha…. 😆
Hi Dan – I was thinking the same thing about Citibank when I wrote that article! I do wonder what their financial IQ was at the time that they gave out all those sub-prime mortgages!
Hi Jio – Regarding the maturity statement that I made, I didn't mean that the firing of the ATO chief showed maturity, what I meant was that the fact that the problems were not blamed on the auditors showed a degree of maturity.
Hi brian – Thanks for sharing your expertise on the pilot situation.
Hi Dr. Long – Thanks for sharing your views on this. Just one clarification – the current Philippine constitution was written in 1986, so it is newer than your comment implies. However, that being said…. it does read like something written just after the colonial period, doesn't it? 😆
Bob, there have been many surveys completed over the last 20 years and Americans were always found to be on the bottom of the list for saving money in 1st world countries. Grading 1st world countries against 3rd world countries is like "apples and oranges." Americans, as the entire world knows, are the worst savers in the entire world. The USA economy is driven on consumer buying and that is why the US is in trouble now. Clearly, it was a low blow to hit the Filipino that way.They should be made to apoligize for the remarks.
The downgrading by the FAA is over due but I really question the timing. It is really strange that it came after 4 years of mutual knowledge on the date of the first flights of Hawaii AIrlines flights to Manila. THe Embassy putting out the caution of flying only on US carriers is a thin veiled advertistment for the US carrier.
Lastly, I strongly agree that it is time to change the ownership rules on business and property in the PI. But with the history of Spanish, American, and Japanese occupation I, also, see a certain level of paranoria in the Filipinos that, at least in their minds, may be valid.
John
Hi John Adams – Thanks for stopping by and sharing your views! You had some interesting things to say there. I didn't realize, or think about the Hawaii Airlines thing, but I do agree that the embassy statement was almost like an Advertisement.
The problem with the old colonial constitution (1935 constitution) was that it was a carbon copy of the US constitution minus the "Bill of Rights" enabling that former dictator Marcos to tweak it and hijack the country for 20+ yrs. The Philippines is only about 60 y/o. Very young for a democracy. It will take several more generations for true democracy and progress to be attained. Europe went thru the dark ages. France a revolution. The US a civil war. The Philippines have been ruled for centuries by foreign powers and it is still in its dark ages but there light in the end of the tunnel. Maybe someday it will be truly be free.
The FAA downgrade really concers me. Being in US Navy aviation maintenance in the past. The discrepancies really scares me. Like anbsence of Technical Publication Librarian – Aircraft manufactures routinely send out technical bulletins on maintenace procedures and modifications(especially airframes and power plants). Lack of safety inspectors – who is signing off "safe for flight" on the maintenance log. I have started to fly PAL back in 2003 because they are maintained by Lufthansa. If there is no local equivalent of the FAA. Who monitors Lufthansa to ensure they are not making shortcuts to increase profit.
Regarding the Freedom rating. The Filipinos has never been fully free.
I don't agree with the Citibank survey. 90% of Filipinos are unable to save because they are not making enough income. They could not even make enough for their daily needs. The ones that do will never tell whether they have some wealth stashed in fear of the taxman. The other 10% are so busy hording wealth. Most of it kept oveseas.
Hi Bobby – You made an excellent point there, when you said that those who can make enough to cover their daily needs won't reveal stashed income to keep it hidden from the tax man. This is very true. No Filipino that has money stashed away will tell that even to a survey (which is rare here anyway). No doubt that this had an impact on the survey results!
Hi Bob and to all of you. No need for me to make a long sentence: Philippines has been downgraded ALWAYS since I came in touch with this beautiful country in 1976. I wouldn't say, I give up to keep on supporting a positive image of this country. But know it all betters including Western journalists have shaped a permanent bad image of the Philippines. It hurts. There are many more nations in the world, where we should voice out critics and keep on complaining. Great article, Bob. Great comments from your readers. We will not change the world and nobody changes my decision to stay here for good and forever…
Hi Klaus – I think it is only fair to say also that it is not only foreign journalists who have shaped the negative image of the Philippines, but even Filipino journalists too. And, not only journalists for that matter. Corrupt politicians and such have played their role too.
I agree, the comments on this particular post have been quite insightful! Thanks everybody for that! 😀
Hi Bob, unfortunately you are right regarding filipino journalists. I still have a lot of friends among them, but these friends share your and my opinion… 😥
Well there is one good thing about all this. The Peso will start devaluating (slowly I hope). 2 days ago it was trading at 39.9 on forex, as of right now it's down to 41.2. The biggest factor influencing this is the "Partly Free" status. Forex traders will now look at the peso as a risk and sell. Might bring it back to 45:$1… I can live with that, how about you all?
Hi Louis, sure we can live with it, 😆
Hi Louis and Klaus – While I would welcome a strengthening dollar, I wouldn't bet on it. Tough economic times in the States means continued interest rate cuts by the Fed. Lower interest rates mean a weaker dollar. I think that the upward trend in Peso value will continue for the foreseeable future.
Hi Bob,
Yah, my mistake there in constructing my sentence to indicate that firing the ATO head is a sign of maturity in the part of our government. Yes, I agree, it should be on not blaming it to the auditors for those problems.
Still, I am always peeved with our government (and who doesn't really among the general Filipinos) when they're trying to make quick temporary solutions without really addressing the root causes of the problems that led to the downgrading by the FAA. Corruptions and anomalies are always involved here.
Anyway…I (most likely) agree with what Bobby's comment regarding "90% of Filipinos are unable to save because they are not making enough income". Well, back at home, when I remit money to my Mom and discover from her why they're still having problems paying every debt and expenses and still has no savings, we usually have some heavy discussions about this. She would always tell me "what can I save when there is barely anything to save (from the money I give to her)"….
Hi Bob, A very interesting article. I had only read about the aviation down grade in our papers. The other two issues were new to me. Freedom here in the U.S. is not exactly what it used to be. I personally feel that we are more oppressed and governed than at any time in our nations history and I do not see that situation getting any better. The issue with Citibank is amazing. I noticed a readers comment about Citibanks intelligence level-they are a major player in the financial crisis in our country and ultimately the world-how smart does that make them? I teach 8th grade Social Studies and if I were to ask my students basic finance questions they would look at me as if I were speaking in a foreign language. I will admit that we will teach them the basic structure of our financial system over the next few years. The fact that Filipinos live day to day does not suprise me. Realize that many Americans are living pay day to pay day. Since you lived here there has been a boom in payday loan businesses. You go in write a check for your payday and they advance you the money based on your next payday. These establishments are every where 2 or 3 to a city block. Someone please tell me the difference between that and living day to day. Life is difficult all over for everyone. I only hope that leaders step forward and lead to solve the problems of our economy. Ron
Thanks for sharing this Bob! Hopefully the Philippine government officials will take the criticisms to heart and make an effort to improve things for everyone.
The financial IQ test isn't about how much one earns, saves or spends its about whether or not one understands the priciples of things like time value of money, the effect of interest rates and the reasons why budgeting is important.
It's too bad the survey didn't account for cultural differences like the Asian practice of children taking care of their parents. By the way, this behavior is not unique to Asia. It is common in many countries with lower per capita income including but not limited to Central and South America.
Hi Bob. Just for the record I am referring to both Constitution documents: the 1935 and the 1987.
If I remember right
The 1935 was for 70/30 i.e. 70% to be owned by Filipinos, 30% for foreigners.
The 1987 was 60/40 i.e. 60% Filipinos and 40% foreigners.
(context post#11 and 12)
Hi Jio – I understand what you are saying! I feel sorry for people like your mom who is trying to make ends meet, it is not an easy task! And for you too that you have to work abroad to help your family here. It is a big sacrifice.
Hi Ron LaFleur – On the freedom factor… at least in the States they won't kill you for your opinion. 😥 Yep, the Payday loan thing was already starting to rear it's ugly head when I was still living there, I am sure that it has grown a lot as you say. Getting involved in those payday loans is the first step toward spiraling into poverty!
Hi David S. – I didn't realize that in Central and South America they shared that cultural trait with the Philippines. Thanks for sharing that!
Hi Dr. Long – Hmm… 70/30 in 1935. 60/40 in the 80's. Heck, it's moving in the right direction! Maybe in 300 more years they will get to equity! 😆
I really get a kick out of the CitiBank survey and some of the comments to it. What would the average American score be is the question I would like to know? I'm a frequent watcher of 'Jaywalking' on Jay Leno's show and I'm frankly quite embarrassed by the continual parade of my fellow Americans who can't even come in out of the rain.
A big part of the current US crisis is people who rushed out to buy more house than they could afford based on the fact the banks were willing to lend them money … there must be money in our checking account, I still have checks in the checkbook, diba? I really don't think the average American's financial IQ is much higher than the average Filipinos … they are both pretty abysmal IMO (wiling to be proved wrong but not holding my breath)
Hi Dave Starr – You know what… I feel that the Citibank survey is the most embarrassing of the three issues. It's not embarrassing to the Philippines, in my opinion, it is embarrassing to me as an American! It's such a low blow!
what i don't understand with the survey is that, what is the basis of measurement of the survey? where it is compared to? isn't it the philippine is a third world country? so why use the first world country standard as the basis of measuring it?, i think citibank completely ignored how things work in the philippine, just because filipinos does not have a bank account or a credit card it does not mean we have a low IQ when it comes to banking, we are a *cash* country than a *credit* country, you may not see filipino having a bank account but you would find them owning properties.
Hi dans – I think that I pretty much said the same thing in the article. So, we seem to be in agreement on the issue of the financial survey.