“It’s an indictment of the Aquino administration.”
So declared professor emeritus Ernesto Pernia of the University of the Philippines School of Economics, about the landslide victory of Davao Mayor Rodrigo Duterte.
President Benigno Aquino 3rd promised to slash poverty by eradicating corruption. In fact, the country’s economic expansion hardly dented poverty, unlike similar growth in neighboring countries. And lawlessness in the streets, the ports, and the corridors of power escalated, with crime, smuggling and pork barrel trebled under Aquino.
Now, after drafting Duterte’s economic program last December, Prof. Pernia is to be the incoming Chief Executive’s chief economist. The University of California Berkeley-educated former Asian Development Bank lead economist will head the National Economic and Development Authority, the country’s socio-economic planning body.
Much of Duterte’s eight-point governance program announced two weeks ago was proposed by Pernia, whose sister is married to a close cousin of the presumptive president-elect. Speaking to this writer soon after the elections, the economist, who was with the ADB in 1986-2003, at with UP afterward, highlighted key thrusts for 2016-22.
Rebalancing the economy
As many development economists have urged, including those in the ADB, Pernia’s blueprint for the economy aims to undertake several rebalancing shifts:
• From Manila-centered to greater regional and rural development• From consumption-driven to investment- and export-driven growth• From services-dominated output to more agriculture and manufacturing.
Federalism is, of course, the paramount mechanism to spread power and resources from the capital to the countryside. Pernia also envisions more agricultural development initiatives, including farm-to-market roads opening up new areas for cultivation.
Agriculture programs, he added, would seek to boost farm productivity, in addition to the current thrust focused on agribusiness. In addition, reducing red tape and restrictions in land titling and use — part of the 8-point agenda — would further facilitate agricultural ventures and expand the flow of credit to farm enterprises.
Pernia also said the government, working with farmers and enterprises, would target crops and other agriculture subsectors based on comparative advantage. Thus, various areas would be encouraged and assisted to undertake cultivation, animal husbandry, aquaculture or mariculture for which their land and water endowments are best suited. This kind of crop competitiveness strategy would be something few farmers and even agribusiness firms may not know how or care to do.
A further priority Pernia wants to see is greater support for research and development. He notes that the Philippines devotes a mere 0.15 percent of GDP to R&D, compared with nearly 1 percent average in the Association of Southeast Asian Nations. This would boost industry and agriculture, not to mention information technology-based sectors, health services, and even disaster readiness and response.
The need to build
Accelerated infrastructure development is another priority, to achieve the long-elusive target of spending 5 percent of gross domestic product on transport, power, water, and other facilities needed for business growth and social progress.
Despite record annual budgets running into trillions of pesos, the Aquino administration still lagged in infrastructure. In 2011, public works spending halved in the first semester, something that’s never happened, as Aquino sought to slash the budget deficit.
Being averse to frequent Cabinet meetings, Aquino also failed to lend presidential impetus to infrastructure, leading to delays. Even his public-private partnership program, which he extolled in his first State of the Nation Address soon after assuming power, could bid out only a fraction of the many PPP projects on the wishlist.
That lack of Palace drive would not afflict the Duterte regime. In addition, Pernia explained, restrictions on foreign ownership of Philippine enterprises would be eased to attract more capital and technology into infrastructure as well as other sectors.
Greater stakes for international investors would lure enterprises reluctant to undertake the electricity, transport, telecoms and other infrastructure ventures without majority ownership and management control.
The entry of more foreign capital and knowhow would increase competition, drive down prices, and expand and improve facilities. That means more power to address electricity shortages, more road, rail, shipping and aviation to carry passengers and cargo; and higher-capacity and higher-tech telecoms, including broadband.
Spreading Davao’s business formula
Reducing investment restrictions would be familiar to businesses attracted by Duterte’s business-friendly policies in Davao City. In his two decades running the province-sized, he has slashed red tape, kept local taxes down, and made the streets safer for both shops and shoppers.
When he goes from local executive to Chief Executive, Duterte will also bring his town and country business success formula nationwide.
Sure to be a hit with enterprises are Davao City’s fast processing times. It ranks second among the country’s metropolitan areas in business registration, as rated by the World Bank’s Ease of Doing Business report (first: General Santos). And fastest in issuing construction permits.
Pernia talks of tax reforms lowering the Philippines’ top income and corporate tax rates from 30 percent closer to the 25 percent prevalent in major ASEAN economies. That should help in competing for more investment, especially as trade integration intensifies rivalry in the region.
The next government, Pernia adds, also aims to increase credit resources for business, and expand access to loans for micro, small and medium enterprises.
As for fighting crime access graft, Pernia rightly stresses that peace and order will attract enterprises and jobs to places now shunned due to lawlessness, corruption and insurgency.
To counter crime and drugs, Duterte also plans to impose nationwide his local government’s curfew for minors and midnight bam on alcohol.
Addressing the Davao City business chamber in 2014, the mayor admitted that the nighttime restrictions have made night life boring. But he said the overall business climate has gained from law and order.
Now our next leader hopes to take his Davao policies and style to three ready of the archipelago. And the end result, Prof. Pernia sums up, is “harnessing capital for self-sustaining inclusive development.”
The nation wants nothing less.