John Miller: WTF?! Why did you say you're not leaving?!!!

Amidst various reports of sex scandals, bullying, bankruptcies of small Pinoy entrepreneurs, beleaguered banks (from the bankruptcies), predatory pricing and anti-trust practices from different sectors regarding our favorite imperialistic trans-national corporation (TNC), Nestle, the top broadsheets have reported that according to Nestle Philippines chairman and CEO, John Miller, Nestle is here to stay.

*Insert favorite expletive here*!!!! Damn! Double Damn!!

A common defense of used by TNCs such as Nestle in spite of their highly imperialistic practices is to try to hold a developing country's balls by threatening, subtly or otherwise, that they will be stopping or withdrawing their purported investments in that particular country. Sometimes, it works; most of the time, though, it does not, most especially for our favorite TNC. In fact, these TNCs should be encouraged to leave! Here's why:

1. Nestle is one of the primary causes of inflation. Insiders in their marketing department have said that they have been encouraged by their mother company to incorporate as many price increases in their brands as possible. Look at Nescafe, a rough computation of the price index in 2001 versus 2010 reveals that the prices have grown to as much as 70% depending on the variant! Compare this to a developed country where the price increase is as low as 4% to a high 14% in the same period. Consider also the supply side of coffee. It is widely documented that in Vietnam, one of the world's largest producers (if not the largest already), farmers have even resulted to destroying some of their produce as their over supply has caused prices to drop! Supply cost has been low at most times yet price increases continue to hound our poor country. All of this, of course, is at the name of profit! Geesh! Talk about squeezing blood from a stone!!! Our poor country is a victim of this TNC's greed. Damn! Double damn!

2. Nestle's products are commodities. Coffee, milk, non-dairy creamer, chocolate are products that are easily replaceable by a competent manufacturer and there is no glut of these! San Miguel, URC, Alaska, Kopiko, Columbia, etc. can easily fill up a purported vacuum that Nestle insiders claim they will leave. The other manufacturers, I bet, were so unhappy about John Miller's announcement today.

3. The economic impact of the loss of exports are mitigated. A third of Nestle Philippines sales (est. PhP30 Billion) are exports to other countries and they are saying that leaving will have a tremendous negative impact in our economy. Hogwash! I say this for several reasons: a. They export their products ONLY to fellow subsidiaries and revenues are posted as merely accounting entries and not actual cash to the country. b. If indeed there was cash remitted to the country, it stays here for just a short while and is then traded in other markets or remitted to the mother company. The company maintains just enough working capital that it needs and places the excess cash to instruments that make more in its idle state! Guess what? The Philippines does not have high paying instruments compared to the rest of the world. So, no the loss of exports are mitigated because they were NEVER HERE IN THE FIRST PLACE.

It should now be clear why Nestle should leave. Our country will not be beholden to arrogant ASSHOLES like you, John Miller. You can fool some people all the time. You can fool all people some of the time. But you can never fool all people all the time.

Repost from Domini Torrevillas, Philippine Star 3/13/10

A lesson plan for DTI

As of the latest, and most likely last, Cabinet reshuffle, Secretary of Education Jesli Lapus will be moving to the Department of Trade and Industry (DTI) by the end of the month. I’d like to express my congratulations to Lapus for accepting the position. A three-term congressman before being named secretary of education, he previously earned his stripes as the chief executive officer of the Landbank of the Philippines, transforming it from a medium-sized development bank to the premiere state bank of its time.

Holding a doctorate in public administration, a master of business administration (MBA) from the Asian Institute of Management (AIM), and a post-graduate of Harvard University, Lapus first joined the government service in 1987 as undersecretary of the Department of the Agrarian Reform.  

Having held top executive positions in some of the largest manufacturing companies in the country, Lapus presents the most credible and capable choice for DTI head, aside from incumbent Trade Secretary Peter Favila.

Since the announcement, Lapus has been lauded by the business community, with highly-respected Philippine Chamber of Commerce and Industry Chairman Donald Dee welcoming him to the position; Executive Director Rob Sears of the American Chamber of Commerce of the Philippines (AmCham) has also given Lapus high marks for his unblemished reputation and intimate understanding of business. Hailed by Sears as being “pro-business,” the onus now lies on Lapus to inspire investors and businessmen alike to achieve greater things with our economy.

From the stands, it seems that the route of localization is the best trail if Lapus wants to make an immediate impact at the helm of DTI. Instead of following the worldwide trend of overextended economies, a logical course of action would be to turn inwards to another economic and cultural exchange, hinged on Small and Medium Enterprises (SMEs). These localization efforts entail increased attention to the tangible, the interpersonal, and the community; direct connections with SMEs and ties with businesses will surely prove useful for Lapus in the following months.

A turn to local business would necessarily move Lapus to ensure the protection of SMEs from unfair trade practices perpetuated by multinational companies that enjoy monopolies, which is a goal perfectly in line with Senate Bill No. 3099, or the Anti-Trust Act of the Philippines. As penned by Sen. Miriam Santiago-Defensor, the Act prohibits monopolies when public interest so requires it.

Presently, developed countries use anti-trust regulation to maintain healthy competition and promote an efficient working market economy; the circular flow of income between producers and consumers in these countries is, for the most part, uninterrupted by unscrupulous practices such as pressuring distributors and other SMEs to continually meet and exceed aggressive sales targets while simultaneously downsizing marketing and promotional support. In the Philippines however, there have been numerous instances of this exact behavior by multinationals forcing their distributors to close up shop, using bullying tactics and pointless mediation.

A well known multinational, for instance, makes it a habit to pass on non-performing accounts onto their distributors and insist that they deal with the problem instead. The same company has been known to cut off their in-house financing for distributors, leaving them to suddenly deal with the higher rates of a third-party bank. Combined with unreasonable quotas and the constant threat of termination, these distributors have no other recourse but to bite the bullet.

While SB 3099 and a slew of other bills on competition law are in enforcement limbo, the often-overlooked yet fully-empowered Ministry Order (MO) No. 69, Series of 1983, puts Lapus at the head of the crusade against unfair practices such as the ones described above.

MO 69 covers everything from price tags to monopolies and unfair competition. As a consumer — but a Filipino foremost — I urge Lapus to see the good he can do in his new position. He can put a stop to our SMEs being trampled under the feet of multinational giants, and maybe even spur our ailing economy to pull itself up by the bootstraps.

I for one am quite excited to see what Lapus has in store for us. If his record at the Department of Education is any indication, the DTI will become yet another feather in his very capable cap.

Repost from Ducky Paredes 3/12/10 Malaya: 10 Commandments of Fair Trade

I HAD been a distributor of San Miguel Beer and, presently, of Coca-Cola, both of which treat their distributors as true business partners. It is not always that way between multi-national companies (MNC) and their dealers.

Following is from a friend who had a bitter experience with a big, bad MNC, which continues operating and continues to mistreat and even abuse treat its business partners in the worst way. I have written about it several times. I find his contribution to this column interesting

Being familiar with the business model and the roles and expectations of both the multinational and the distributor, he wrote the following Ten Commandments of Fair Trade, as a guide to MNC on how not to treat their business partners:

Commandment One: Thou shall not use the bait of initial support. Bad MNC is notorious for promising marketing and promotional support to their distributors, as well as favorable in-house financing rates. A few months later, however, all support disappears into thin air. Furthermore, distributors are suddenly endorsed to a third-party bank for their financing (without prior notice), saddled with rates much higher than agreed upon.

Commandment Two: Thou shall not impose unreasonable quotas under the constant threat of termination. Bad MNC has been known to force distributors to sell at a loss, just to meet quotas. Is that how a "partnership" works?

Commandment Three: Thou shall not pull out thy products from the market without any explanation. One fine day, distributors of bad MNC were shocked to learn that batches of a certain milk product were being recalled. No explanation nor prior warning was given.

Commandment Four: Thou shall not instigate and fuel a price war. A near-scandal broke out among bad MNCs Central Luzon distributors when they found out that one dealer was being given ridiculously high discounts, and subsequently underselling counterpart distributors from Metro Manila. Obviously, Manila distributors were forced to lower their prices, but because the discounts were so unbelievable, many were forced to close. It turns out that the "discounts" was part of a scam perpetrated by bad MNC’s Regional Sales Manager, who has since fled with the money and gone into hiding. Oops.

Commandment Five: Thou shall share thy profit evenly. If distributors are working to the bone making the business earn, and yet are still at a net loss after five years of operation, something is wrong.

Commandment Six: Thou shall not condone tax evasion. Distributors of bad MNC pointed out that if they pay the local tax of one percent on gross sales imposed by cities, they would operate at a loss. Bad MNCs reply? Fine, don’t pay the tax.

Commandment Seven: Thou shall not deliberately delay lawful reimbursements. Bad MNC has a very effective – albeit crooked – way of dealing with the valid complaints of its distributors. They delay the reimbursements for months on end, thus crippling the distributor’s cash flow.

Commandment Eight: Thou shall not "hand over the empty bag". Whenever bad MNC has a problem account, or a buyer whose payment habits are terrible, they just pass these on to their distributors. These problem accounts suddenly become the distributor’s dilemma. Nice, right?

Commandment Nine: Thou shall not tolerate any conflict of interest cases, under any circumstances. The DTI is currently investigating a situation wherein bad MNC allowed yet another one of their regional sales managers to have an illicit affair with the managing officer of one of its distributors. Despite numerous parties repeatedly calling their attention about the matter, bad MNC took a hands-off policy. In a way, they actually encouraged the affair, since the distributor was achieving record sales. It was soon discovered that the numbers were padded, ghost deliveries were being made, and the unfaithful couple were all behind it.

Commandment Ten: Thou shall not ignore nor disrespect the proper authorities. The Department of Trade and Industry (DTI) has the power to enforce grave sanctions on a company for violating any of the commandments written above. They have full authority on the matter thanks to Ministry Order (MO) 69. MNCs cannot assume that they can get away with bullying Filipino entrepreneurs just because they are big.

The DTI does have the teeth with which to to bite the bad MNG back. Now, if only Jesli Lapus, the new DTI head, would only do something about this.