[OPINION] Faster than average

SKETCHES By Ana Marie Pamintuan (The Philippine Star) | Updated October 11, 2017 – 12:00am

The actual numbers are still high: 67 percent satisfied, and 73 percent with “much trust” in President Duterte.

Since pollster Social Weather Stations (SWS) started taking surveys when Corazon Aquino was in power, all presidents have seen their ratings slide, with the initial high score never regained.

So Duterte need not be overly concerned. The fall in his satisfaction and trust ratings was just a matter of time.

What should bother him is the sharpness of the fall. The satisfaction rating plunged from 78 percent in the second quarter to 67 percent in the next three months, and trust from 82 to 73 percent – a decline that SWS president Mahar Mangahas described as “a little faster than average.”

The fall is steeper in net figures, or the number of satisfied against the dissatisfied: 48 percent, down from 66. The net trust rating also fell sharply, from 75 percent to 60. If Duterte continues to suffer a double-digit drop in every quarterly survey, his numbers could fall below zero in less than two years.

As Mangahas pointed out, Noynoy Aquino enjoyed the longest “honeymoon period” among the post-EDSA presidents, enjoying good ratings for over three years, with the numbers falling only after the slaughter in Mamasapano, Maguindanao. Corazon Aquino and Fidel Ramos also did better than Duterte but Joseph Estrada fared worse.

Mangahas said Gloria Macapagal Arroyo did not enjoy a honeymoon period. This should be reassuring for Duterte and his supporters; GMA has been the longest serving president of the republic since Ferdinand Marcos.

Echoing the reactions of previous presidents, Palace aides said Duterte is not engaged in a popularity contest. Asked if the honeymoon is over, presidential spokesman Ernesto Abella said, “The love is still there.”

Mangahas said presidents should expect respect rather than love, and should give “satisfactory service.”

* * *

I don’t know if you can call it respect, but lawmakers’ support for the Malacañang occupant tends to be influenced by popularity as reflected in survey ratings. Congressional support can of course be swayed by Malacañang’s clever utilization of public funds, including the crude but timely distribution of cash gifts in brown paper bags during crisis situations. But high popularity is the easier, cheaper way for a president to keep a super majority intact in Congress.

When there’s a precipitous drop in a president’s survey ratings, the political butterflies smell blood. There can be greater resistance to a president’s legislative agenda.

A steep drop in popularity this early in a six-year term also weakens a president’s endorsement power, which is critical for his allies in the mid-term elections less than two years from now.

If alliances, tenuous to begin with, begin fraying, even Duterte’s top priority, his war on illegal drugs, can suffer. There will be greater resistance to his brutal methods, and more cooperation with the individuals now documenting abuses that could bolster accusations of state-sponsored summary executions of drug suspects.

* * *

The other major pollster, Pulse Asia, is expected to come out with the results of its third quarter survey shortly. The two pollsters usually have similar results, so the SWS findings will likely be affirmed in the Pulse Asia survey.

Without waiting for the affirmation, the administration can start assessing what can be done to stop or even reverse the slide in the President’s ratings.

The steep fall indicates growing impatience for results in several areas. Since the President failed to deliver on his self-imposed deadline of six months to eliminate the drug menace, as he claims he did in his home city of Davao, he should deliver solid results in other areas.

He can jettison some of the incompetent members of his team, whose appointments are clearly just for political accommodation. Public services are suffering, the incompetents are wasting people’s money, and it’s the President’s image that’s taking a hit. After a year and a half, amateur hour and the period for repaying political debts should be over. The public can be spared from these NPAs or non-performing asses (that’s right, the donkey).

The President can address some of the sources of disaffection during the previous administration, which contributed to his dramatic rise to power. For example, I still don’t have my driver’s license card a year after I was given a provisional license, and my car still doesn’t have license plates. These are common complaints.

Last week the Philippine Chamber of Commerce and Industry and Employers Confederation of the Philippines expressed exasperation over the political bickering and the weak focus on project implementation. They’re “sick and tired” of the political noise, one business leader lamented. The Joint Foreign Chambers of the Philippines also recently released its assessment of progress on the President’s 10-point socioeconomic agenda.

No one expects Duterte to stop his war on drugs because of his slipping ratings. But the sharp fall should tell him that the means to his end could use a recalibration. His ratings plummeted during a survey period that covered public dismay over the killings of teenagers and other abuses related to the campaign against the drug menace and criminality.

The campaign has also suffered from perceptions of being selective, with Duterte supporters shielded from Tokhang and Double Barrel. He has accused Ombudsman Conchita Carpio-Morales, not entirely without basis, of selective justice, so he should also avoid selectiveness in his own causes. Whether in fighting the drug menace or corruption, he must be an equal opportunity tormentor. Admittedly, this may be a pipe dream in our society.

Duterte’s avowed abhorrence of corruption, shaken by accusations against him and his family, can still be burnished if he launches an anti-graft campaign with the same zeal that he has applied in going after notorious drug dealers.

Much can be achieved by a popular president, and there are many world leaders who can only dream of having satisfaction and trust ratings in the 60s and 70s.

Popularity is a precious commodity that must not be squandered.

Source: http://www.philstar.com/opinion/2017/10/11/1747575/faster-average

[OPINION] Strong democracies

 

Two strong democracies celebrated their National Day yesterday, although their embassy receptions in Manila are always held on different dates. Last night was the reception of South Korea; today is the reception for German Unification.

The two countries are good examples of functioning democracies that sprung from wars including fratricidal armed conflict. Germany has overcome the challenges of unification to become Europe’s strongest economy.

All countries have problems, but both nations have worked to ensure that the elements needed for democracy to work are in place, starting with the rule of law, which is one of the foundations of free rather than anarchic societies.

 
 

Germany is now promoting not merely justice for its people but “global justice” and “strength of the law” as foundations for “global governance.” We’ll be happy with justice for ordinary Pinoys, and not just for those who can afford expensive lawyers and accountants.

Several expats from advanced economies have told me that perhaps the only thing that can end our intractable problems – patronage politics, the stranglehold of a miniscule fraction of the population on power and wealth, the shameless rent-seeking, corruption and tribalism – is a war as blood-drenched as their civil wars and revolutions. There should be so much blood in the streets, the expats said, that people would be sickened by the violence and vow to work together to prevent further bloodshed.

Our bloodless people power revolt, they acknowledged, restored democracy – a feat so impressive it truly seemed like a miracle. But structural weaknesses and social injustice remained in place. And those behind the world-class looting and gross human rights violations during the dictatorship have never been punished.

Modern South Korean society emerged after a civil war that divided the Korean Peninsula. The war was brutal and drenched the country in blood, but Koreans told me that it had an unintended upside: it became a social equalizer. A Korean who was a young boy at the time of the war remembered everyone becoming impoverished, scrounging for food, and then uniting to rise from the ashes of death and destruction.

Today South Korea is one of the few countries that can boast of economic growth that is generally inclusive. Graft and crony capitalism became problems after the war, but the country saw to it that anti-corruption laws were applied to all, sending to prison two presidents and crooked heads of the chaebolsor business conglomerates that are mostly family-owned.

The country remains technically at war with its increasingly belligerent northern neighbor, which could account for the South’s competitive spirit.

How does one succeed in competition? By capacity-building. Like other top Asian economies, South Korea has invested heavily in every nation’s most precious resource, its people – through quality education and constant skills upgrading, through programs encouraging innovation and creativity. It has also invested in decent public health care.

Like other prosperous, inclusive economies, the Koreans also strengthened institutions particularly the justice system so that the rule of law would prevail and leveling the playing field would not be mere political rhetoric.

From the results of Oplan Tokhang and Double Barrel, we can see the limitations of killing. By learning from others’ experiences, we can skip the bloodshed proposed by the desperate and get serious about implementing long-needed reforms.

* * *

Many proposals that don’t call for bloodshed have been offered by the business community. I’m going over the “Arangkada Philippines and the Ten-Point Socio-Economic Agenda of the Duterte Administration” – a publication of The Arangkada Philippines Project, with American Chamber of Commerce of the Philippines Inc. senior advisor John Forbes as the principal author. TAPP was launched by the Joint Foreign Chambers six years ago to encourage faster economic acceleration of the country.

I’m still in Chapter 2, but several suggestions on increasing competitiveness and ease of doing business are worth presenting here. One notable observation, from the Management Association of the Philippines (MAP), is that the 1987 Constitution has an inherent flaw: “the integration of economic policies into its provisions.”

“While a Constitution embodies the fundamental law of the land and lays down principles and general guidelines, economic policy must be more specific, changeable, and consist of programs that cater to the changing needs and challenges of market fluctuations,” MAP declared in a position paper.

Amending the Constitution remains iffy at this point, but there are other proposals in the Arangkada report that are doable.

One is for the President to just issue executive orders for key reforms, instead of waiting for the necessary legislation. Congress can later pass the laws to formalize the measures in the EOs.

There’s a snag here, which we saw when Duterte issued an EO on the reproductive health law: the Supreme Court effectively stopped the EO implementation. Du30 might yet get his revenge on the SC and its chief.

Other sound proposals in the Arangkada, but which the notoriously self-absorbed congressional super majority will surely reject, are the strengthening of the Anti-Money Laundering Act, and the amendment of the law on the secrecy of bank deposits, so that all government officials, whether elected or appointed, can’t invoke the secrecy privilege.

Apart from several much-amplified proposals for improving the justice system, Arangkada suggests limiting the cases handled by the SC to national issues to reduce its workload and speed up the final resolution of cases.

Another is to strengthen “economic justice” by setting up special courts to handle specific matters such as contract enforcement and land dispute settlement. There can be courts dedicated to infrastructure cases, commercial issues, cybercrime and the environment.

Also suggested is the greater use of alternative dispute resolution and arbitration for out-of-court settlement of civil disputes.

The Arangkada calls for increasing the pay of members of the judiciary, boosting scientific investigation capabilities, hiring more judges and strengthening the Office of the Ombudsman.

We should also push for an improvement in the appointment and promotion system in the justice sector so that it becomes much less politicized. The flawed system is one of the biggest reasons for corruption, incompetence and inefficiency in the justice system.

The Arangkada report includes tables showing the Philippines lagging behind ASEAN’s top six economies in several areas including police efficiency.

We’re still a long way from achieving the levels of development of Germany and South Korea. But we’re aware of our problems and there are suggestions from various sectors on what can be done. Many of the suggestions, however, will put an end to rent-seeking and the monopolistic perks enjoyed by political clans and the nation’s wealthiest.

If the political leadership sits on the suggestions, it renders proposals born of desperation attractive.

[OPINION] Judicial Issues and Corruption

 

During the very well attended Arangkada Forum on September 14, there was much focus on sectors with substantial growth potential—including agriculture, creative industries, information and communications technology, manufacturing, mining, logistics and tourism. But—not surprisingly—the cost of doing business, judicial issues and corruption were raised in many panel discussions.

In building a competitive business environment, judicial and anticorruption policies are very important to attract and to keep investors. Reforms in the administration of justice are ongoing, but their implementation should be continuously intensified.

Some of the problematic factors in the WEF competitiveness ranking pertained to the judicial and security problems that afflict the Philippines. According to the WEF ratings, investors also identified corruption (16.9 percent), policy instability (7 percent) and crime and theft (3 percent). The Supreme Court and the judicial system it administers face major challenges, such as case backlog, using modern technology and obtaining more funding. These are factors that investors very much consider before they invest in a particular country and comprises of what makes a country competitive.

Clogged courts have long been an issue in the Philippine judiciary system. It often takes numerous years to have a case decided and, as new cases come every year, caseloads have piled up. Major reforms have been introduced under the leadership of Chief Justice Maria Lourdes A. Sereno, including computerization of decisions, court records and continuous trials.

Corruption has long been a major concern for doing business in the country. Only in recent years has it moved down from first to third place in the WEF assessment to be slightly below red tape and poor infrastructure. In the Transparency International annual Corruption Perception Index the Philippines improved from 134th in 2010 to 101st in 2016, yet is still ranked in the bottom 50 percent, along with Indonesia, Thailand  and Vietnam.

The Arangkada Team has listed 26 recommendations; I have taken the liberty to reduce the recommendations a bit:

  1. Continue to increase judicial salaries and hire more judges, encouraging new judges to reduce the case backlog more. Steadily raise the budget for the judicial branch.
  2. Make greater use of alternative dispute resolution and arbitration to resolve civil disputes outside of courts, which should reduce the backlog of cases and hasten justice.
  3. Reduce the caseload of the Supreme Court by limiting acceptance of cases largely to cases involving national issues.
  4. The Ombudsman should improve its capability to investigate and prosecute allegations of corruption against public officials. The Sandiganbayan should reduce its backlog of cases and increase it conviction rate.
  5. Pass amendments to the Ombudsman Act to Strengthen the Ombudsman as an Institution, Upgrading of Ombudsman Employee Skills, Augmenting Compensation and Benefits, and Enhancing Fiscal Autonomy.
  6. The government must demonstrate through consistent example that it has the political will to greatly reduce corruption. Investigating, bringing charges against and successfully prosecuting government officials and private-sector persons and corporations guilty of not paying proper taxes, bribery and other major corrupt acts must be sustained.
  7. Public officials and private persons found guilty of major corrupt activities should, after a fair trial, be punished with heavy sentences, including imprisonment and seizure of assets.
  8. Strengthen the anticorruption legal framework by passing: a) anti-Graft and Corrupt Practices Act amendments; b) Witness Protection Act; and c) Whistleblowers Protection Act.
  9. Pass laws to exempt BIR and BOC employees from the Salary Standardization Act (or, better, privatize the activities of both government organizations).
  10. Appropriate resources should be provided to the justice- sector actors to support the fair administration of justice.
  11. Strengthen economic justice. Establish and enhance special courts that will address specific cases and pursue contract enforcement. For instance, infrastructure courts, commercial courts, cybercrime courts and environmental courts.
  12. Streamline rules on the disposition of land cases. The Supreme Court should study the need to designate special courts on land- dispute settlement.
  13. Raise scientific-investigation capabilities and strengthen witness and whistleblower
    protection.
  14. Reinforce alternative ADR mechanisms so that courts can refer cases for ADR and help in the speedy disposition of cases.
  15. Information and communication technology should be used sector-wide to help address fragmentation in the justice system and greatly enhance the information management of the whole justice sector.

There is no doubt that good intensions by the government and the private sector are not enough; judicial reform and anticorruption initiatives are needed to successfully implement the 10-point socioeconomic agenda of the Duterte administration.

Image Credits: Skypixel | Dreamstime

Source: https://businessmirror.com.ph/judicial-issues-and-corruption/

[OPINION] Agribusiness

By Henry J. Schumacher | 

During the Arangkada Forum on September 14, there was much focus on sectors with substantial growth potential—including agriculture, creative industries, information and communications technology, manufacturing, mining, logistics and tourism.

Although the Philippines is becoming a majority urbanized country at a fast rate, close to half of its citizens still live in rural areas. Significantly from the vantage of development and inclusive growth, 73 percent of the poor are rural residents. Over 12 million Filipinos, close to one-third of the total work force, rely on agriculture for their livelihood.

Despite its size and importance to the economy, the overall agriculture sector contributed less than 10 percent to GDP in 2016; the last year in which it produced more than 20 percent of GDP was 1969.

Among the main challenges to agriculture growth:  (1) ability to utilize overseas market access; (2) poor logistics and supply chain; (3) poor access to finance; (4) inadequate crop insurance; (5) land market inefficiencies; and (6) poor extension services.

Philippine agricultural exports are the lowest of the Asean-6 and below 5 percent of the total from the region. A country, such as Vietnam—with a population size close to the Philippines but with less land available for agriculture—exports four times that of the Philippines. Exports of agricultural goods from the Philippines were $6.9 billion in 2014, while imports were $8.7 billion. Vietnam—at $26 billion—has become a leading exporter of rice, coffee, fish, fruits and nuts. Top actual and potential Philippine exports include banana, cacao, coconut products, coffee, mango, marine products, pineapple and sugar.

Quite a number of recommendations were made at the Arangkada Forum to drive agribusiness (I selected a few):

  1. There is a need to review government programs that distort market competition for land and that potentially affect small farmers’ access to credit and preclude their ability to benefit from economies of scale;
  2. Create an irrigation master plan to set the direction for irrigation development;
  3. New agriculture, forestry and fisheries enterprises should be developed, while existing ones will be encouraged to increase production and to go beyond producing merely raw materials through increased value adding of products with higher market value.
  4. Facilitate the use of appropriate farm and fishery machinery and equipment;
  5. Strengthen the extension system through the engagement of a pool of professional extension workers that will provide technical and business advisory services;
  6. Diversify into commodities with high value adding and market potential. Commodities that can be developed based on vulnerability, suitability, and value-chain analyses of the Department of Agriculture (DA) include mango for coffee, dairy cattle, abaca, rubber, banana and cacao;
  7. Expand agribusiness enterprises through new and innovative production and marketing schemes. New forms of linkages, such as contract farming and corporate farming, that will connect farms to markets and other upstream services should be established;
  8. Farm-to-market roads, bridges, and railways should be constructed to connect small farmers to the agricultural value chain. Interisland water transport (e.g., roll-on roll-off nautical highway);
  9. Raise investments in research and development for production and postharvest technologies;
  10. Pursue bold initiatives on crop insurance that reaches a large swath of an underserved market segment;
  11. Improve market information, technology transfer, marketing, export promotion and broader trade facilitation measures.
  12. Give priority to high-value, export-winner crops, such as avocado, banana, cacao, coffee, mango, marine products, mongo beans, peanuts, pineapple, red hot chilli, squash and tobacco.
  13. Integrate small farmers into larger enterprises, such as cooperatives; and
  14. Improve agricultural support infrastructure and services, such as farm-to-market roads, cold storage and irrigation, to facilitate the distribution of agricultural products and increase farmer income.

In other words, we need to deliver support services to farmers and fishermen, such as financing, incentives, technology, irrigation, postharvest facilities, farm-to-market roads, improved logistics and integration in the supply chain to fully develop the potential of the agricultural industry to develop rural areas and the countryside.

What would justify a heavy budget allocation for agricultural productivity and profit? There will be more investments in agriculture, farmers will get easier access to finance, there will be lower unemployment  and supply/value chains will be created. As a consequence, some 20 million rural Filipinos can be lifted out of poverty. And the children of farmers will stop moving from rural areas to urban centers, or become overseas Filipino workers. Isn’t this what the 10-point socioeconomic agenda of the Duterte administration had in mind? Fighting poverty in agriculture? If the DA budget allocation is properly implemented, millions can be given dignified lives.

Source: https://businessmirror.com.ph/agribusiness/

[OPINION] Improving the investment climate

By:  – @inquirerdotnet  |  / 05:08 AM September 23, 2017

 

The National Competitiveness Council has been tracking the Philippines’ progress across various global indices since 2010, and by most indicators it has gone up the rankings over this period. It’s a remarkable achievement for the country, which has struggled to improve the relative attractiveness of its business environment to international investors. But despite these improvements, it would be premature to pronounce Philippine competitiveness a success. As we discussed in the recent Arangkada business forum, there is still a lot of room for the country to introduce reforms and institutionalize the practices behind our improvements.

The Joint Foreign Chambers (JFC), in a daylong forum dubbed “Arangkada: Implementing the Ten-Point Agenda,” gathered an audience of stakeholders to discuss the specific areas for reform and the potential measures that could be undertaken by the government. The conference provided insights on how the investor community views the Philippine market and how the government intends to address some of the investor concerns. The Arangkada publication has several recommendations. Here are the first three:

The Philippines should continue aggressive efforts to improve its rankings. The government and the private sector should select areas of competitiveness which are the most important to investors and where the Philippines can move up the most and the fastest, and focus resources on improving these.

The Philippines should equal or exceed Indonesia and Vietnam in the next few years and Thailand in the medium term in terms of rankings in major global competitiveness indices.

A review of potentially anticompetitive legislation and policies that may substantially prevent, restrict, or lessen competition is in order.

One specific area is the foreign investment negative list. The government is currently reviewing the list, which was last updated in 2015. The list outlines the sectors where the government has decided to exclude foreign participation. But under this administration, officials have spoken of ensuring the highest possible easing of foreign restrictions to date.

The commitment to ease restrictions is a positive development. However, the list itself is only one part of the broader restrictions that the Philippines has imposed on foreign participation. Foreigners hoping to invest in some sectors, like the practice of some professions or the media, will still have to wait for legislation or even constitutional amendments before they can participate. Even then, fostering a good business environment goes beyond liberalizing the economy on paper. A more attractive economy will be the result of several factors, including a stable macroeconomic environment, adequate infrastructure, lessened red tape, and low incidences of crime and corruption.

Unlike his predecessor, who convened the Legislative-Executive Advisory Council only twice during his term, President Duterte has decided to convene it regularly. This ensures better coordination among the leaders of the government branches to discuss the legislation needed to achieve the administration’s socioeconomic agenda. So far, the council is prioritizing these proposed pieces of legislation: the Ease of Doing Business Act to cut red tape, the Rightsizing the National Government Act to streamline the bureaucracy, Comprehensive Tax Reform, the National Transport Act to address the transport crisis, and the amendment to the Public Services Act to liberalize the telecommunications, transport and power industries.

Alongside these legislative measures, the government should incorporate automation into its processes. For example, it could use automation to streamline the business permitting and licensing system, cut bottlenecks in land titling, and interconnect various agencies. These measures would reduce opportunities for corruption.

Foreign investments have been increasing in the last few years. Last June it surged by 182.7 percent—a vote of confidence in the country’s prospects. We cannot lose this momentum. Economies worldwide are also increasing in competitiveness. We must work doubly hard lest we get left behind.

Source: http://opinion.inquirer.net/107343/improving-investment-climate

[OPINION] The investment and infrastructure challenges in implementing the 10-Point Agenda

Thinking Beyond Politics by Victor C. Manhit | September 20, 2017

In the medium term, the government is aiming to reach an annual GDP growth of between 7% and 8%. These rates are higher than we’ve seen in recent years, but our officials are optimistic. At the sidelines of the recent Arangkada business forum, Socioeconomic Planning Secretary Ernesto Pernia assured us that these rates are achievable, particularly when the current restrictions on foreign investments are lifted. While listening to the presentations, it seemed as though all our economic officials are similarly bullish for what they can accomplish.

NEW DYNAMISM IN THE INVESTMENT ENVIRONMENT?
At present, the government is reviewing the foreign investment negative list (FINL), which is the official list of sectors where foreign participation in excluded. Revised every two years, this round is the first time that the administration will have a hand in deciding where foreign investment is welcome.

By all accounts, this government is taking a more liberal approach than its predecessors.

At a different event, Secretary Pernia even shared that he had sent the initial draft of the 11th FINL back to the drawing board — deeming the first round of proposed changes too “puny.” This aggressive push is more than welcome for our economy, and Secretary Pernia’s statements are certainly an encouraging development.

The new list is expected to be released sometime in the next quarter, as the next draft will still have to be presented to the NEDA board for approval. According to Secretary Pernia, the sectors that he aims to open for foreign inclusion are: retail trade, professions, public utilities, and contractors. Some of these sectors are also expected to liberalize in line with the rest of the region as part of the ASEAN Economic Community.

As important as it is, liberalizing the investment environment is only one step to attracting more investment in the country. Deeper reforms are needed if we are to propel our economy to greater heights. Which reforms are necessary to improve our country’s competitiveness and foster an even more dynamic investment climate? These were the questions tackled during a recently held forum organized by the Joint Foreign Chambers, called “Arangkada Philippines: Implementing the 10-Point Agenda.”

Arangkada is a Tagalog word that translates to “accelerate,” a term that aptly captures the pace of our economy’s expansion over the last few years. While the previous administration made significant strides in fueling our economy, it fell short in achieving some of its growth and development targets. President Duterte and his team are capitalizing on these shortcomings.

Even before Duterte gave his oath of office, his economic team had already laid out its 10-point socioeconomic agenda. The speed with which it had declared its objectives reflected the administration’s obvious commitment to bringing about swift and impactful reforms — reforms that have to be implemented if we are to turn our ambitious targets into reality.

For those who were not able to make it, the Joint Chambers have published their lists of recommendations, covering macro-economic reforms, competition, infrastructure, rural development, human capital, poverty alleviation, and science, technology and the arts, in the conference proceedings.

BRIDGING THE INFRASTRUCTURE GAP?
The decrepit state of the country’s infrastructure is often cited as the Achilles heel of our economic potential. Thankfully, with the launch of the Build, Build, Build campaign earlier this year, there is no discounting that infrastructure is a centerpiece project of our current leadership. As a result, there has been renewed interest in the infrastructure sector and in how the administration will accomplish its targets.

For its part, the Duterte administration has announced a list of priority infrastructure projects.

During the forum, it was encouraging to listen to our government officials talking about the big-ticket projects that they intend to break ground on or even complete during this term. These projects include the Japan-funded Mega Manila Subway and 13 bridges across the Pasig River, two of which will be built with Chinese grants. Given the state of our traffic situation today in Manila, all of these projects will be watched and waited for with great anticipation.

Yet, several of these projects are reboots from the previous administration — a sobering reminder that they had failed to advance despite years of gestation. As always, the devil is in the execution, not the planning.

While the government has promised to increase infrastructure spending, this should also be complemented with institutional and policy reforms. The approval of the National Transport Policy this year is a good step towards unifying all transport projects. The administration’s push to right-size the bureaucracy is also a welcome measure to address the fragmented institutional setup of various transport agencies. Over the long term, a mechanism should be in place to ensure policy continuity every time a new administration steps into office.

FISCAL SPACE
With great anticipation also comes great apprehension about whether the Duterte administration will be able to see its commitments through to the end and achieve them as planned. Thankfully, it has everything going for it: years of sound fiscal policy have afforded the government a wide-enough fiscal space to make these necessary investments. It would be a waste to let the best opportunity that we have had in decades slip between our fingers.

Source: http://bworldonline.com/investment-infrastructure-challenges-implementing-10-point-agenda/

Spend, spend, spend

Corporate Watch by Amelia H.C. Ylagan | September 18, 2017

Diokno
Budget Secretary Benjamin Diokno reveals the means on how the government can source funds for the different infrastructure projects under the “Build! Build! Build!” program during the DuterteNomics Forum at Conrad Manila in Pasay City on April 18, 2017. Also in the photo are Presidential Spokesperson Ernesto Abella, Transportation Secretary Arthur Tugade, and Executive Secretary Salvador Medialdea. — PRESIDENTIAL COMMUNICATIONS

Budget Secretary Benjamin Diokno and National Economic Development Authority (NEDA) Secretary Ernesto Pernia keynoted the Arangkada 2017 Forum on Sept. 14, when the Joint Foreign Chambers of Commerce and Filipino partners in business listened to economic opportunities in the near-, medium- and long-term.

“The Duterte administration will be different. We envision that by the time we step down in 2022, we would have ushered in the Golden Age of Infrastructure in the Philippines, an era that Filipinos will look back with affection as one that laid the necessary foundations for robust and equitable growth in the long-term,” Diokno said.

Sec. Diokno lamented the opportunities lost in the less than 2% of GDP of infrastructure spending from 1986 to 2016, which he said “reflected decades of neglect and misallocation of public resources.” He noted that “the suggested ratio for infrastructure spending as a share of GDP is 5% for developing countries.” Loud and clear, the “Build, build, build” program will reverse previous alleged “inaction” to high-gear “Spend, spend, spend” to stimulate economic development.

Sec. Pernia acknowledged past administrations’ accomplishments: “GDP growth has been on a sharp monotonic uptrend over the last three and a half decades. With a 6.9% GDP growth in 2016 — high end of the government’s target of 6% to 7% — the Philippines is poised to be one of the fastest rising economies in Asia over the medium-term.” Regarding the relative slowdown in the first two quarters of 2017 under Duterte, Pernia pointed out that this phenomenon seems normal, reflecting post-election-year effect on growth.

“The economy is also undergoing structural transformation — growth is increasingly being driven by investments vis-à-vis consumption, and is led by the industry sector relative to the service sector. In other words, sources of economic growth have broadened. Total factor productivity growth of the economy in recent years has been the fastest among ASEAN-6 countries at 3.3% for the period 2010-2014, and the highest in the group at 1.48% over the period 2010-2016” Pernia objectively said of the economic situation prior to “Dutertenomics.”

Pernia is confident that the economy is robust and sustainable, but he laments the inequality across households and regions, and the chronic poverty that persists amidst the glowing GDP numbers. “The country’s GDP remains concentrated in the Mega Urban-Industrial Region comprising the National Capital Region (Metro Manila), Calabarzon (Region 4A), and the Central Luzon Region (Region 3), which collectively accounted for nearly two-thirds of total GDP for the period. But the per capita income of NCR is almost triple the national average of P78,712 for 2016, while ARMM’s per capita income is now only 1/4 of the national average and 1/13th of NCR’s,” Pernia said.

“This is why we have identified infrastructure development as a priority of the Duterte administration,” Diokno emphasized. “We have to close the infrastructure gap soon if we are to realize our development objectives of becoming an upper-middle income economy by 2022 and reducing poverty rate to 14%. DBM is targeting at least 5% of GDP for infrastructure financing in the medium term; 5.4% for 2017; and 6.3% for 2018. In nominal terms, these figures translate to P858 billion and P1.1 trillion for FY 2017 and 2018, respectively.”

Diokno plans to finance this through an expansionary fiscal policy that first, increases the planned deficit from 2% to 3% of GDP. Second are the assumed increased revenues from the Tax Reform program. Combining the two expansionary measures, the government would generate an additional fiscal space amounting to P309 billion in 2018 and rising up to P524 billion in 2022, Diokno assumes.

But what if Diokno’s assumptions on revenue inflows do not actually happen? Would the brave swing to “Spend, spend, spend” from past “inaction” dent the “monotonic (boring?) uptrend of GDP” — the close to 7% GDP growth — acknowledged by Pernia?

The government will have to borrow more, that’s what it means.

Hopefully, the shortfall from unrealized revenues will not drive up long-term debt for future generations to pay for — we are still paying, until 2025, for the debts in Marcos’s martial law: “During the Marcos regime… many ‘successes’ were built on ‘debt-driven growth.’ While it is true that the regime embarked on an infrastructure spending spree, this was pursued largely to justify its existence and at the exorbitant cost of the ballooning of the country’s external debt (Rappler, 03.25.2016).”

And the spending of Marcos did not translate to higher GDP growth for him to brag about. “The economic setback due to the Marcos regime cemented our title as the ‘sick man of Asia’ for the good part of the past 3 decades, and prevented us from partaking of the so-called ‘East Asian miracle’ where by the time we recovered in 2003 the incomes of our neighbors had grown 2-4 times their 1982 levels (Ibid.).”

Many economists have warned that increased government spending does not necessarily stimulate GDP growth, and that the Keynesian recipe of “Spend, Spend, spend” (originally for the post-war economic rehabilitation) has lost flavor in the recent unpredictable, anti-cyclical booms and busts of financial and economic crises. Some even say that increased government spending can hamper economic growth, for the “crowding out” of the private sector, and for the politics that murk the decision factors for government intervention in economic planning.

Professor Emeritus of Law at George Mason University Gordon Tullock suggests that politicians and bureaucrats try to gain control of as much of the economy as possible. Demand for government resources by the private sector leads to misallocation of resources through “rent seeking” — the process by which industries and individuals lobby the government for money. Rather than spend money where it is most needed, legislators instead allocate money to favored groups. Though this may yield a high political return for incumbents seeking reelection, this process does not favor economic growth (mercatus.org, 06.10.2010).

A note to our present leaders and economic planners: Yes, we need roads and bridges, and other infrastructure. But when and if you decide to (over)spend on the “Build, build, build” hybrid PPP program, please be careful to study recent abundant analyses on the advantages and disadvantages of government spending as a stimulus to that much-desired GDP growth figure — make sure there is something to brag about in the end, as our economic history writes itself.

Amelia H. C. Ylagan is a Doctor of Business Administration from the University of the Philippines.

Source: http://bworldonline.com/spend-spend-spend/