• CHANGE IS COMING ­– JUST NOT FOR THE ECONOMY

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    Ben D. Kritz

    Ben D. Kritz

    ON Thursday, former agriculture secretary Carlos Dominguez, who is evidently serving as economic adviser to President-elect Rodrigo Duterte, laid out the new Administration’s eight-point economic plan. In a sign that President Duterte is most likely going to enjoy a very accommodating “honeymoon period,” the policy outline was largely greeted with euphoria by the market.

    There is not much reason why it should have been, and in fact, although it is not all bad, it probably should cause some concern.

    To be fair, not everyone was enthralled; left-leaning think tank Ibon Foundation immediately dubbed the platform “dutertenomics,” and condemned it as nothing more than a continuation of BS Aquino’s neoliberal, anti-poor, pro-business program.

    That’s laying it on a little thick; the plan is nowhere near being unique or innovative enough to warrant the eponym. And at this point in Aquino’s reign, the best he could do for an economic plan was, “Kung walang korap, walang mahirap, something something inclusive growth.” So perhaps Ibon should at least give the Duterte team a little credit for trying a bit harder than their predecessors.

    But only a little; most praise should be reserved for outcomes, not intentions. And Ibon did hit the nail on the head in describing “Dutertenomics” as being thoroughly conventional.

    In one sense, conventional is comforting. The business sector, for the most part, is not hoping for radical changes from the new Administration, but rather attention to some lingering issues; after all, the chief concern of major analysts —the big ratings agencies and multinational banks—prior to the elections was that Duterte might pursue policies that would undermine the basic stability of the economy. His uninspiring economic laundry list presented this week was a clear signal that won’t happen, and that will certainly ease some fears.

    On the other hand, those with a more populist orientation like Ibon Foundation do have a point; macroeconomic stability has not been enough to pull the country out of the rut of persistent poverty and unemployment, and it certainly has not helped close the huge income gap in the Philippines.

    The million-dollar question, of course, regardless of whether one is more concerned with social or business aspects of the economy is, “Will Duterte’s economic program actually improve anything?”

    Unfortunately, there is nothing in the plan that indicates a clear answer to that one way or the other, because it has the tone of an idea that was cobbled together quickly by someone who has generally good intentions but was really not expecting to have to come up with an economic program. There is just not much to parse, but for the sake of discussion—and perhaps contributing a little to improving the plan— we can try, anyway.

    The major points in the program were revisions of the income tax structure; ramping up infrastructure investment; investing in education to bring it more into line with actual labor market demand; easing foreign investment restrictions in some fashion; cleaning up the bureaucracy to improve performance and eliminate bottlenecks; fixing land reform to reduce or eliminate land ownership complications; extending the conditional cash transfer program; and improving customs administration to eliminate smuggling and other kinds of revenue leakage.

    Revising the tax structure has been a key demand of both business and the general public for some time, and is long overdue; BS Aquino refused to act on it, and so if it can be accomplished under the Duterte Administration, that would be clear progress. Boosting infrastructure investment to 5 percent of GDP—this is the one clear number that was shared by Dominguez in the entire discussion on Thursday—would also be seen as progress, even though it would only represent what is considered an administrative norm; because of the Aquino Administration’s endless fiddling (for ill-intentioned purposes, most believe) with government expenditures, it never accomplished even this basic standard.

    Education investment is another area that Duterte’s predecessor gave much lip service to but accomplished very little, with the singular and very noteworthy exception of the implementation of the K-to-12 system; Duterte’s assertion that he will address the apparent problem of “skills mismatch” is thus nothing new, and can only be judged according to actual results sometime in the future. By contrast, the promise to ease foreign investment restrictions—and the tacit admission that something short of amending the Constitution might be the most expedient way to do that—is a bit of fresh air, given that Aquino refused to entertain any suggestion that would lead to lowering investment barriers.

    The other points—land reform, the CCT, improving the bureaucracy, and addressing the chronic smuggling problem—are virtually boilerplate ideas that every President or would-be President of the Philippines has in his or her repertoire, and are only worth discussing in depth if some dramatic change for better or worse occurs.

    Overall, the “economic plan” of the President-elect is in equal measure reassuring and disappointing. Duterte’s apparent inclination to drop the firebrand act for the most part and approach the actual work of the presidency with a little caution, at least as far as the economy is concerned, is reassuring; there appears to be little reason to fear that reckless changes will be made. What is disappointing, however, is the lack of depth—the Duterte team evidently hasn’t transitioned beyond the campaign mode yet—and the critical issues that have yet to be mentioned, such as addressing the country’s need for energy, undoing the disaster of Aquino’s abortive attempt to develop a mining policy, and putting a stop to the drive to “rationalize” fiscal incentives, at least in the shallow form of the legislation currently working its way through Congress. Clearly, everyone is willing to give Duterte the benefit of the doubt for now, even his previously vicious critics (present company included); but that goodwill is not limitless. He and his team should make the most of it while it lasts, and work quickly toward developing a more substantial economic program.

    ben.kritz@manilatimes.net.

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    6 Comments

    1. Mark Torres on

      Please make a representation with the Duterte government to suspend K-12 this year, and let those who finished fourth year high school to graduate.

      The main reason for the implementation is for graduates to be able to work immediately after finishing 12th grade.

      The problem is: There are no schools offering skills strands like vocational, sports and arts where students really need these strands. If they will be forced to get academic strand, they are just wasting 2 unproductive years. On the other hand, those getting academic strand, should be taking college courses this coming school year.

      Therefore, suspend K-12 this coming school year. Department of Education is not ready.

    2. All plans by past presidents are good. The biggest obstacle is ENFORCEMENT. The first item in Dutertes plan is curfew of minors without guardians 10:00 PM onwards. That by itself is a monumental project or what I call MISSION IMPOSSIBLE. In my area alone , there are dozens of children sleeping in the streets and sideworks. It is even worst in the metro Manila area where thousands of minors are sleeping in the sidewalks. Checkout Terminal 1 , children sleeping in the overpass going to the airport. If you Duterte can solve this, I will salute you as the greatest president in my country. Why ? Because no president was able to solve this problem. Even the great genius Marcos was not able to solve this.

    3. The writer’s analysis and critique may be largely true under the present unitarian form of government. But once federalism has taken place the points raised by the writer will take on a different perspective because budgetary and political orientation will be entirely different. For me, if President Duterte achieves Federalism and Parliamentary form of government, that is already a major accomplishment. Any other achievement beyond this would be a bonus. I hope Mr. Kritz can write something about how the economy will be like under federalism. That would really be a forward-looking article with a new dimension.

      • Dick S. o'Rosary on

        This guy has been writing economics articles for years and years. Its his job. You, on the other hand, contribute nothing.

    4. Your dead wrong. Duterte economic plans make sense and more intelligent approach by streamlining the bureaucracy, improve and structly enfirce tax collection and develioment if rural areas and agriculture. Finally changing to federalusm under parliamentary system. Now thats a big change isnt.