President Aquino’s term is still winding down; but offhand I’d say he could have easily done worse. Despite the pork-barrel horrors in the Senate, exemplified by the Napoles scams, no scandal has ever been attached to his office. He has kept up the growth of the formal economy that began, off and on, in the 1990s; he has apparently even raised our country’s global competitiveness to a modest degree.
Amid the continuing dysfunction of the political departments, his technocrats have kept the finance and foreign-trade ministries running professionally. The experts agree the economy’s short-term outlook is good, though its basic problems persist.
Setting off key reforms
So that our need is as grave as ever for what Gen. ‘JoeAl’ Almonte calls “enabling reforms”—restructuring that would set off further restructuring, until it has transformed key aspects of our national condition.
An iconic example of such far-reaching transformation dismantled the PLDT monopoly in 1995. It set off the telecoms revolution that has now made our country the largest business-process-outsourcing (BPO) center in the world.
The election of a new administration is always a good time to try out basic reforms. These are best attempted when things are going relatively well, and people are most receptive to change.
Raising state capacity
What aspects of national life do we need to transform? So many of the Philippine state’s features need reforming, one hardly knows where to begin.
But in my view we can no longer put off serious efforts to raise state capacity. Public administration is failing. Corruption is matter-of-fact, and civil servants are apathetic, where they’re not themselves venal.
Despite successive years of high growth, poverty remains stubbornly high; and inequality—the worst in East Asia—should be a national embarrassment.
As the SWS surveys reveal, far too many families still suffer episodes of hunger. Rural poverty is put at five times that of Malaysia, and almost thrice that of Indonesia and Thailand.
Yet, as the economist Harry Oshima had noted, we also have Southeast Asia’s richest—and most profligate—elite. The luxury-cars Bentley and Ferrari have opened Metro-Manila showrooms; and a Hermes outlet sells Birkin handbags—for half a million pesos minimum, and a waiting list a full year long.
Our basic problem of a weak state trying to govern what the Makati elder, Washington Sycip, calls a “premature democracy” is left over from colonial times.
Until now, our fragmented political system hampers our ability to focus on national purposes and shared social goals. Government still is unable even to enforce all its writs, control crime and guarantee the civil liberties.
We continue to be led not by principled parties but by self-interested factions. So that every time a presidential term ends and a new one begins, we must start from scratch.
Virtually alone among our neighbor states, we’ve not even completed agrarian reform. (Thailand, too, still has tenure problems: one reason for its periodic coups.) We took 15 years to raise “sin taxes” and 18 years to pass a reproductive health law.
The tax effort remains below the Asean average and government’s own target. But the state apparently also gives away “unnecessary” business incentives worth P100 billion a year. And though the Aquino administration since it took office has filed more than 200 cases against tax cheats, it has yet to win a single conviction.
Perhaps the next administration should look to Brazil’s “pockets of efficiency” model. These are task forces created outside the civil service and accountable to the executive. They oversee specific development projects—such as the prosecution of tax cases—on higher compensation schemes but without acquiring tenure.
Between rival powers
Once our island isolation had secured us from the contagions of East Asia. But now our foreign-policy commitments have enmeshed us in a conflict over the China Sea between a hegemonic America and a rising China.
Like the other coastal states involved, we’ve let the US use our military bases for surveillance flights and “show-the-flag” sailings off the disputed islets. One can only hope our policymakers have thought this up-front posture through.
In recent weeks, the Chinese have deployed missiles on the Paracels off Vietnam—raising the likelihood of a flash conflict. Over the foreseeable future, we must expect this big-power game to ebb and flow—since it’s really about long-term influence over East Asia and the West Pacific.
Growth is never enough
We can do little to soften the impact on our security of a US-China confrontation on the South China Sea. But we can begin to face up to the scale and immensity of our country’s poverty.
As we should have realized by now, growth by itself is never enough. If it is to spread sufficiently, it must be accompanied by redistributive policies, such as agrarian reform; and social safety nets, such as an effective minimum wage. Our lack of these instruments has restricted the poverty-reducing effects of economic growth on the national welfare.
We need to soften the hard edges of our kind of capitalism. Since we have an army of the unemployed, workers on their own have no bargaining power. Special interests have such a lock on public policy that already people fear the reforms Aquino has managed may be eased away by his successor.
Even Aquino’s key anti-poverty program—the Conditional Cash Transfers (CCTs)—is legalized only by an administrative order, and not institutionalized by law, so that conceivably his successor can just let it fade away.
Both state and corporate intervention has favored the regions clustered close to the largest cities. So that while these favored areas may be generating “spread effects” in nearby regions, those communities more distant are suffering “backwash”—as the formal economy sucks away both their stores of capital and their most entrepreneurial inhabitants.
To counter this backward-flowing current, government must begin to practice time-bound “positive discrimination” on behalf of ethnic minorities and the poorest portions of our people. Some 12 million of our country’s 50 million self-identified poor are concentrated in only four regions—the ARMM, Caraga, Bicol, and Samar-Leyte.
Over these next 7-10 years, we should increase social spending disproportionately in their favor—until their levels of health, education, and infrastructure equal those of the average region.
Funding shouldn’t be a major problem. Just by rolling back the fiscal incentives Congress has granted lavishly to special interests, the state could regain billions in yearly revenue it should then return to its neediest constituencies.