DURING his first 10 months in office, President Rodrigo Duterte has signaled a clear break and a change of tone from the administration of President Benigno Aquino 3rd – on both the domestic and foreign policy fronts.
Nowhere has the change been more pronounced and significant than in the area of economic policy.
Through its economic management team, the Duterte administration has now unfurled the length and breadth of its economic policy agenda. It carries the unimposing title, “Dutertenomics.” But it will have an impact that will reach far into the future, and up to the end of DU30’s term in 2022.
Dutertenomics does not bear as many stretchmarks as “Aquinomics,” which the Aquino 3rd administration assiduously tried to promote, but dropped hastily when it did not fly. (Ateneo economist Cielito Habito was Aquinomics’ loudest promoter in the opinion page of the Inquirer. Aquino’s finance secretary, Cesar Purisima, was its drumbeater of inflated achievements.)
Reaganomics bankrupts Soviet Union
The plain fact, of course, is that both Dutertenomics and Aquinomics are pallid imitations of Reaganomics.
Reaganomics, a neologism that conflates Reagan and economics in one word, refers to the economic policies promoted by President Reagan during the 1980s. These policies are commonly associated with supply-side economics, which is often referred to as trickle-down economics or as voodoo economics by political opponents, and billed as free-market economics by political advocates.
The four pillars of Reagan’s economic policy were: to reduce the growth of government spending, reduce the federal income tax and capital gains tax, reduce government regulation, and tighten the money supply in order to reduce inflation.
Reaganomics was so effective in promoting US prosperity, Reagan triggered the Soviet Union’s collapse and bankruptcy.
Aquinomics, DAP, underspending
Aquinomics preceded the rise of fake news and alternative truth. Noynoy Aquino himself never appeared to know what Aquinomics was all about. He lost his first economic planning secretary and Neda director-general (Catalino Paderanga) within the first few months of his presidency. Purisima turned out to be no economist at all (he just had funds to pay the ratings agencies, and he tried to foist the Philippines as the new darling of Asia or new Asian economic miracle).
Aquino and Purisima concocted the dishonest scheme of selling Aquino’s economic policy agenda by disparaging his predecessor, Gloria Macapagal-Arroyo‘s policies, which had been successful in recording over 40 quarters of positive growth by the Philippine economy. They set their sights on obtaining investment-grade ratings for the economy from the ratings agencies. Aquino relentlessly portrayed the Arroyo administration as corrupt and the Arroyo years as “the lost decade.”
In discharging the role of economic manager, chief executives are expected to meet popular and elite expectations that their actions will result in a prosperous economy. Presidents must develop policies and develop support by the public.
Aquino had a contrarian view of presidential economic leadership. In a sharp departure from John Maynard Keynes’ dictum on the role of government spending in the economy, Aquino espoused underspending. He hoarded substantial chunks of what Congress appropriated in the annual budget. When Aquino left office in 2016, he and his managers boasted that they were leaving behind a trillion pesos in unspent budget. He literally starved the economy of public funds.
Policies of Dutertenomics
With the flag-raising of Dutertenomics, the hollow ring of Aquinomics is manifest.
With no pretense to being an economist and with a good team of economic managers, President Duterte is emerging as a more effective and able economic leader than Aquino.
Dutertenomics was unveiled on Tuesday, April 18, in a forum at the new Conrad hotel in the SM Mall of Asia.
Nominally, Dutertenomics sounds like a lot of hype and spin. It provokes skepticism from Filipinos who are sick to death of Tuwid na Daan (Straight Path), which turned out to be more crooked than sin.
Dutertenomics, I am relieved to say, appears to have plenty of substance It has a coherent and clear-eyed view of the economy. Its policies and proposals lead directly to programs. As explained by our economic managers, the following policies embody the essence of the economic agenda:
1. A golden age of infrastructure. The Philippines will create nothing less than a “golden age of infrastructure” if it is to do away with structural poverty and become a middle-income nation in one generation. Infrastructure will knit our islands closer together and bring investment, trade and tourism to our most rural provinces as well as our most crowed cities.
Economic Planning Secretary Ernie Pernia of the National Economic and Development Board and Budget Secretary Ben Diokno announced at the forum that the administration plans to spend a whopping P8.4 trillion over the next six years on infrastructure.
2. We can do this ourselves. Instead of the PPP formula of Aquino, which relies on the private sector to do the heavy lifting, the government under President Duterte will plan, build, and finance the infrastructure itself.
The country has been awash in dollar-based liquidity from OFW and BPO earnings. Global interest rates and inflation are still low (though slowly rising), and the peso recently posted its strongest rally in over two years.
3. “We will go into debt at home to pay for our infrastructure.” Budget Secretary Diokno plans to run an annual budget deficit of 3 percent of GDP starting next year in order to finance these projects. It is possible for him to do this now, with stable public finances and low debt ever since the tax reforms initiated under both Arroyo and Aquino 3rd.
4. “We will go into deficit abroad to pay for our infrastructure.” For the first time in many years, our current account last quarter swung from surplus to deficit. But this can be managed in light of our foreign exchange reserves and a strengthening peso, which allows us to import infrastructure components for less money.
5. “We will reform our tax system in order to ‘pay as you go.” The comprehensive tax reform package (CTRP) now pending in Congress is the best way for the Philippines to raise the additional taxes needed to pay for infrastructure out of pocket.
Key infrastructure projects
The infrastructure program is designed for the whole country, but it will impact especially Metro Manila and its weary residents, who will see nothing less than the transformation and modernization of the metropolitan capital within the next five years.
The notable projects are the following:
1. NLEX Harbor Link—A partnership between the Department of Public Works and Highways headed by Mark Villar, with Manny Pangilinan’s Metro Pacific. Already halfway finished, this elevated roadway will transport cargo from the Manila ports to NLEX for points north, expediting logistics and keeping big container trucks out of Manila’s busiest streets.
2. Luzon Spine Expressway—Intended to cut travel time between La Union and Bicol to less than 12 hours. This web of road projects includes the North-South Connector Road, also already being built by Metro Pacific, that will let travelers between NLEX and SLEX bypass Metro Manila streets altogether.
3. PNR North and South Rails —The northbound link spans 100 kilometers from Tutuban to Clark, while the southbound link will connect first to Calamba and Los Baños, then to the Bicol region.
4. Metro Manila Subway—Transportation Secretary Arthur Tugade expects the President and Japanese Prime Minister Abe to sign the contract for the subway by November. The first phase will comprise 13 subway stations, from Mindanao Avenue in Quezon City to the FTI and NAIA in Taguig.
To summarize, the Dutertenomics forum presented an impressive showcase. It showed beyond doubt that there‘s more to the Duterte administration than the drug war.
On the economic policy front, Filipinos have a fully working and resolute government.
Where there is political will, there is clearly a way.