All posts by Filomeno S. Sta Ana III

Sta. Ana coordinates Action for Economic Reforms (www.aer.ph)

Business Perception on Corruption: Bothersome?

Should we be bothered over the result of the Social Weather Stations’ Survey of Enterprises on Corruption? The survey showed that 56 percent of respondents among executives in Metro Manila and other major urban centers believe that “a lot” of corruption is happening in the public sector. Further, this was an increase of 16 percentage points (or an increase of 30 percent) from the 2012 survey.

Undoubtedly this is disturbing. And some, especially those who are opposed to the B.S. Aquino (or PNoy) administration. will use this to argue that Daang Matuwid is failing.

I nevertheless maintain that it would be rash—and insufficient—to conclude that Daang Matuwid has become a disappointment on the basis of the perception survey.

As in any other complex issue, context matters.

First, the rise in perception of corruption in 2013 was to be expected, in light of the explosion of the brazen and revolting pork barrel scam that smeared not only individuals like Pogi, Sexy and Tanda but the whole government apparatus. The height of the scam happened under the administration of Gloria Arroyo. True, the practice continued under the present administration, but the scale and intensity of corruption have abated.

Daang Matuwid did not breed the Napoles scandal. In fact, the Napoles scandal waylaid Daang Matuwid, when for some unfortunate reason, the issue shifted from the embezzlement or the illegal use of the pork barrel funds to the legality of the pork barrel funding itself (which ex-ante was in accordance with law).

Second, Daang Matuwid is a recognition that corruption was a binding constraint on growth and development at the time of Aquino’s accession to the presidency. Halfway through the term, corruption remains, but it is no longer a binding constraint. The significant improvement of the Philippine ranking on various indices of corruption, transparency and competitiveness attests to this.

The binding constraints on growth and investments still include infrastructure and electricity. But corruption is not an overriding obstacle. It has not been eradicated, but it has been greatly reduced. It is the high magnitude and unpredictability of corruption (think of the Marcos, Estrada and Arroyo periods) that make corruption unbearable.

Which brings us to the third point. Corruption happens everywhere, even in the most advanced economies and the most democratic countries. The realistic goal is to reduce corruption to a low level. Also, as part of a second-best approach, the corruption that cannot easily be stamped out can be made predictable. Businessmen are willing to pay a little bribe, but the outcome must be certain. There are times that predictable corruption can “grease the wheels of economic growth.”

Corruption, as economists are wont to say, can be an endogenous problem. In the context of many developing countries, reducing corruption is necessary to greater prosperity. But the reverse causation is also valid—the achievement of higher standards of living results in reduced corruption. Context thus matters, to repeat.

This is not to condone corruption. The steps taken by the PNoy administration to combat corruption have been with high approval. The survey respondents recognize this. Of those interviewed in 2013, 76 percent of the executives had high or excellent business expectations, and 70 percent recognized that the government is providing a good business climate.

But much such still has to be done to reduce corruption to a minimum. To illustrate, the number of survey respondents who said that said that government’s anti-corruption measures were effective dropped from 78 percent in 2012 to 73 percent in 2013.

This suggests that the PNoy administration has to refine existing measures and introduce new tools to fight corruption. The administration has recently launched Open Data Philippines. To quote Secretary Butch Abad, the Open Data program “is a resounding affirmation of the administration’s continuing commitment to transparency, accountability, and openness in government.” The Open Data program can then be a springboard for further transparency reforms.

Worth mentioning is the support of the overwhelming majority of the executives for a law on freedom of information (FOI)—88 percent of the 2013 respondents said that FOI would have reduced corruption. The number of respondents who support FOI is a considerable increase from the 2012 survey wherein 78 percent of the respondents believed that FOI was an effective tool against corruption.

We are hoping PNoy can take the cue from the business executives.

Reconstruction

My colleague Manuel Buencamino calls it the biggest reconstruction project in the Philippines after World War II. President Noy Aquino (PNoy) calls it a “comprehensive rehabilitation program.”

Typhoon Yolanda has brought incalculable, terrible costs. Two weeks after the most powerful storm in more than a century ripped central Philippines, more than 5200 people have died, more than a thousand are still missing, and scores of thousands are recuperating from physical injury and emotional trauma.

The calculation of economic losses brought about by Typhoon Yolanda’s devastation varies widely. The International Business Times (UK edition) provides some information on the economic impact:

CEDIM Forensic Disaster, based in Germany estimates that losses will range between US$8 billion and US$19 billion.
Another group, Kinetic Analysis Corp. places the economic costs at between US12 billion and US15 billion.
Economic Planning Secretary Arsenio Balisacan estimates that the reconstruction costs can reach US$5.8 billion.

In short, the amount for rehabilitation is staggering. But as I will explain later, the resources can be mobilized without necessarily overburdening the economy. The important point is this: The rehabilitation program is an opportunity to lay the foundation for post-Yolanda all-round, sustainable development.

In this context of recovering from the devastation brought about by the super typhoon, we can apply loosely (even literally!) Joseph Schumpeter’s “gale of creative destruction.” Yolanda destroyed the old, and it is up to us as a people, not only the policymakers, to create a new one. We hope that what we rebuild, to quote Schumpeter again, will “revolutionize the economic structure” and bring in “the new methods of production or transportation, the new markets, the new forms of industrial organization.”

The PNoy administration has created a “task group” for the comprehensive rehabilitation program, composed of Cabinet members and coordinated by Energy Secretary Carlos Jericho Petilla. The priority programs consist of shelter and reconstruction, power restoration, livelihood and employment, resettlement and psychosocial care, environmental protection, and resource generation and allocation. In the same vein, the National Economic and Development Authority (NEDA) is tasked to prepare a unified plan, which will integrate the rehabilitation programs and projects of different agencies.

From the description above, we can observe that the “task group” is basically made up of the whole Cabinet. That is, the Aquino administration for the remainder of its term will focus its energy and attention on the post-disaster program.

The administration has correctly identified the core programs. Of course. they are general categories that are part of any template on recovery and rehabilitation. And any program cannot offer sure-fire solutions,

Allow me, nonetheless, to identify and emphasize some areas, which are essential for the success of the rehabilitation plan.

First, the plan is an opportunity not only to rehabilitate and rebuild the provinces that were hard hit by Typhoon Yolanda. The reconstruction plan must be a national one. To repeat, now is the moment to “revolutionize the economic structure.”

In addition, tens of thousands of victims have left their homes and have become internal refugees, evacuating to urban centers to start life all over again. This suggests that the scope of the plan cannot be limited to the damaged areas.

In another area, the restoration of power is not a quick fix. The power shortage extends to many parts of the archipelago. Further, we cannot discount a national energy crisis in the medium term. This entails hard decisions that will address the market failure in the energy sector.

Second, jobs have to be created. In the near term, giving cash to victims to do relief and rehabilitation work is a good step. The massive infrastructure rebuilding will also result in creating jobs, skilled and unskilled. But why stop there? After all, the administration is committed to inclusive growth, in which the creation of quality jobs is the cornerstone.

Third, employment generation—creating jobs of higher productivity and expanding the number of wage-workers—is linked to industrial and technology policy. The government through the Department of Trade and Industry has a program on expanding and diversifying manufacturing through new forms of industrial policy. This program, however, remains low key. It is high time we placed prominently on the national agenda industrial and technology policy, which is tied to job creation. In this regard, we welcome the technical assistance of multilateral organizations and donor countries,especially those in East Asia, towards doing industrial policy right.

Fourth, industrial and technology policy has new substance and forms. It is not just about picking winners; it is also about putting in place the disciplining mechanisms to prevent abuse of discretion. It is also about collaboration between government and the private sector to jointly diagnose problems, coordinate actions, and discover new ways of doing things.

Moreover, industrial and technology policy must adapt to an unfortunate reality in the Philippines—that we will continue facing horrible natural disasters. In this sense, developing local green technology to address disaster reduction and management and climate change can be the lynchpin of such policy. The advantages of indigenous green technology include its labor intensiveness and its dynamic comparative advantage (given that the technology is relatively new, even to advanced countries).

Last but not least, the rehabilitation plan will obviously entail huge resources. This can strain the government’s fiscal capacity, but this problem is not a binding one. The Department of Finance and the Bureau of Internal Revenue have performed well in steadily increasing the tax effort. The combination of Kim Henares’s tax administration reforms and the passage of the sin tax reforms symbolizes confidence in government’s revenue performance.

To be sure, more revenue measures have to be put in place, all the more made pronounced by the expenditure demand for rehabilitation. It is thus an imperative for Congress to pass the bill on reforming mineral taxation and another bill on rationalizing fiscal incentives. On top of this, depending on PNoy’s political capital, he may ask Congress to reform the specific tax on petroleum, which has been eroded through the years because of non-aadjustment to inflation.

Notwithstanding the increase in tax effort and the proposed tax reforms, government cannot avoid borrowing to finance the rehabilitation program. A word of caution though: It is better to borrow domestically than externally. A heavy inflow of foreign loans leads to a currency appreciation, which in turn weakens the real sector and thereby undermines the goal of inclusive growth.

We have heard it many times, but it has been recently articulated by Kim Henares, that slow development in the Philippines is attributed to our weak sense of nationhood. Typhoon Yolanda has moved the Filipinos, rich and poor, to act as one. Let us seize this moment to sustain national action. Let us turn disasters like Yolanda into a “gale of creative destruction.”

What ought to be

Some of us are dismayed over the behavior of blaming and bitching government for the slow, disorganized, or powerless response to the Typhoon Yolanda devastation.

Here’s a sample of Facebook comments that I liked:

Please, if you are not doing anything to help, just shut up. We are all hurting, especially those in the affected areas. Let us unite in helping in any way we can. Criticizing, spreading false stories, predicting failure and all that negative stuff have got to stop.
I hope all those know-it-all critics of the typhoon relief efforts sit down together and produce a magic master plan for the survivors. I’ve been waiting days for them to stop bitching and to come up with an alternative to what the government is doing.
The damage from Yolanda is incalculable. The worst is psychical. The aftermath has made bitching a national pastime.

Don’t get me or us wrong.

First, everyone is not faultless. Even PNoy.  Recall that he criticized the local government of Tacloban, expressing doubts over its preparedness. In times of great distress and disaster, emotional outbursts are difficult to control.  In fact, they are better released.

Second, criticisms are necessary. Government is not omniscient. Criticisms make government awake and responsive.

But the type of criticism we have to avoid is one that weakens the collective effort to provide relief and rehabilitation to the suffering millions.

Some criticisms or complaints stem from the thinking of what ought to be. Government must or should do this or do that.  Dapat ganito, dapat ganyan.

What ought to be is the best situation; it is the ideal.  But the ideal is not the real world. We face too many constraints to achieve our objectives. Apply this to the response to the devastation caused by Typhoon Yolanda:  The information and logistics failure overwhelm the people on the ground. Without information, infrastructure, and logistics, we can expect chaos.

Thus, attributing the absence of government’s presence as a cause of the worsening situation is misplaced. Government’s invisibility in some areas is but the effect of an objective problem—information and infrastructure facilities having been knocked off, leading to inefficiency and miscoordination.

It is also true that in remote areas, government cannot be found. But this has been the case since time immemorial. It is thus a constraint in the context of the ongoing relief and rehabilitation.

Another example of the “what-ought-to-be syndrome” is the tendency of some, particularly the foreign commentators, to compare the Philippines’ poor response to that of advanced countries like Japan. In other words, we ought to be doing what Japan is doing. Again, that is the ideal, but far from real. How can we become a Japan that soon?

This reminds me of the weakness of the most incisive analysis of Douglass North on the role of institutions, which earned him the Nobel laureate. North and his colleagues distinguish between countries (developing ones) that have limit access orders—characterized by corruption, rent-seeking and oligarchic rule—and countries (the advanced market economies) that have open access orders.  So what ought to be for developing countries is to achieve open access orders. But North et al. so far cannot provide the concrete answers how to get there.

When next time, we say government must do this and must do that, we better exercise prudence and caution. Let us be sensitive to the constraints. Let us also acknowledge our own constraint that we ourselves do not have enough information that will be the basis of the most appropriate response.

But below is one example where our commentary can be most helpful to the relief and rehabilitation effort.  Note that the writer EJ Galang, a young, internationally awarded creative professional, avoids saying we must do this or must do that.

To my friends in government, I know it’s a tall order, but can we expect a transparency report, an accounting of the donations that are meant for relief. I know it’s a hard task but this recent expose made the people lose its confidence on how the government keeps track of the people’s money. It will do the government good if you can restore a little bit of that trust.

Love or Confusion

My heart burns with feeling, but,
My mind, it’s cold and reeling
Is this love baby..
Or is it just confusion?
You tell me baby, is this
Love or confusion?

Mama, we must get together and find out
Exactly what we we’re tryin’ to do.

Jimi Hendrix

The President is facing his administration’s biggest challenge. The issue is supposed to be straightforward—the investigation and conviction of politicians and fixers who embezzled their allocation of the Priority Development Assistance Fund (PDAF) and the Disbursement Acceleration Program (DAP). The administration is committed to doing this.

The people do not want a repeat of the egregious pork barrel misallocation. Hence the demands go beyond investigation and subsequent conviction of the culprits.

The well-intentioned and the idealistic, those who belong to the million people march, have raised the stakes for change by making other demands.

Consequently, a hodgepodge of demands has emerged. And the central demand now revolves around the abolition of the so-called pork barrel.

To be sure, the corrupt, especially those implicated in the pork barrel scam, and the assorted political opportunists, have exploited the opportunity. They now ride on the crest of the popular wave.

The motivations or the objectives are different, but the do-gooders and the unscrupulous have the same call: Abolish the pork barrel, abolish PDAF.

Despite their disagreements on the pork barrel and the President’s fiscal powers (exemplified by DAP), the administration on the one hand and the do-gooders under the banner of the one million march, have a common interest in fighting corruption and effecting good governance. Indeed many of those who joined the one million march voted for PNoy and want his reforms to succeed.

But the turn of events has led to disappointment on both sides. Worse,
the polarization of the two only benefits the bad and the unscrupulous, the likes of tanda, pogi, and sexy.

Thus on the part of the administration, it is wise to distinguish between the criticisms of the do-gooders and the tirades of the self-seeking. Surely, some of the demands of the do-gooders, those that have to do with transparency and accountability, are grounded and thus deserve recognition.

On the part of the do-gooders, they likewise have to take stock and sort out the nuances or complexities of the issues. They embrace ideals and pursue them in a straight and quick way. But oftentimes, changes are slow and incremental.

Government reformers, because of the many political constraints and tradeoffs, become pragmatists and realize that what works is the second-best.

To illustrate, the million people march and government reformers have a common disdain for patronage politics. But patronage politics cannot just be wished away.

This reminds me of Marx, who said that the emergence of a classless society can only happen once the state is abolished, but to achieve this, he argued that the state first had to be strengthened through the rule of the proletariat. In the same manner, the elimination of patronage politics can be seen as an ultimate goal, but in the transition, reformers have to deal with patronage and even use it as an instrument to achieve other major reforms.

There lies the confusion. The do-gooders, who otherwise like or love PNoy, are disappointed with him for not doing enough to abolish patronage politics. On the other hand, PNoy and his nucleus realize the constraints; that the road to reforms is full of zigzags.

Confusion gets abetted when concepts about the pork barrel and the president’s public spending are unclear or ill-defined. Worse, the opportunists spread duplicitous propaganda.

For example, the faultfinders claim that PNoy has the biggest pork barrel of them all, thus earning the moniker “pork barrel king.” The problem is how they define pork barrel—anything that is lump sum and discretionary is called pork barrel. That is wrong.

Everyone has his definition of pork barrel, to include the one above. In a paper titled Politicization of Philippine Budget System: Institutional and Economic Analysis on ”Pork Barrel” (2011), Japanese academic Kohei Noda observes that “the concept of ‘pork barrel’ has never been made clear, and thus the definition of the term is heavily dependent on the speakers.

Let us then stick to the dictionary or academic definition of pork barrel. The Free Online Dictionary defines pork barrel as “a government project or appropriation that yields jobs or benefits to a specific locale and patronage opportunities to its political representative.”

Noda (2011) defines the pork barrel, as “the budgetary spending intended to benefit limited groups of constituents in return for their political support.”

In Greasing the Wheels (2004), the political scientist Dian Evans writes that the term pork barrel “was used in Congress as early as the 1870s to describe legislation containing projects for members’ districts.”

In short, lump sum and discretionary funds do not automatically make pork barrel spending. And in its strictest sense, pork barrel refers to the spending of legislators for their districts although the role of the Executive in the interaction with the legislators is relevant.

Further, lump sum and discretionary appropriations by themselves are not bad, as explained by my colleague Mario Galang in previous BusinessWorld columns. Some lump sum and discretionary funds are necessary to have flexibility and address unanticipated or uncontrollable events, starkly exemplified this year by the series of killer typhoons, the Bohol earthquake, and the Zamboanga siege.

Moreover, pork barrel funds have benefits. They are funds at the margin that respond to the specific needs of district constituents that otherwise are missed by the central plan. And as painstakingly discussed by Evans (2004), the pork barrel is an instrument to form majority coalitions to pass public interest legislation.

Another issue that confuses pertains to the constitutionality of the administration’s DAP. Anyone is entitled to an opinion that DAP is unconstitutional in the same manner that others are entitled to assert that it is perfectly legal.

The argument in favor of DAP’s constitutionality, as articulated by Mel Sta. Maria, the resident legal analyst of TV 5, is solid and convincing. The key provision is found in Article 6, Section 25 (5) of the 1987 Constitution. It says that the President “may, by law, be authorized to augment any item in the general appropriations law for their respective offices from savings in other items of their respective appropriations.”

On this basis, to quote Sta. Maria, “the President is authorized to augment any item from the savings coming from another item. Since the constitution does not specifically limit or narrow down the type of augmentations resulting from transfers of saved-funds, the President may do any of the following: a. Transfer of savings from an item listed in the Programmed Appropriation to augment an item listed in the Unprogrammed Appropriation. b. Transfer of savings from an item listed in the Unprogrammed Appropriation to an item listed in the Programmed Appropriation.”

In addition, says Sta. Maria, the constitutional authority for the President to augment any item in the general appropriations is enabled through the 1987 Administrative Code.

The point is, there should be no confusion that the DAP at present is constitutional. That it is now being questioned in a now politicized and finicky Supreme Court is another matter altogether.

The confusion arising from differing perspectives must be addressed through honest dialogue. The civil society do-gooders and the reformers in government must dispel any perception that there is no love lost between them. Happily, they will be work together to pursue common reforms and a common dream.

To return to Marx, I recall what he wrote in Revolutionary Spain (1854): “On a closer analysis, then, of the Constitution of 1812, we arrive at the conclusion that, so far from being a servile copy of the French Constitution of 1791, it was a genuine and original offspring of Spanish intellectual life, regenerating the ancient and national institutions, introducing the measures of reform loudly demanded by the most celebrated authors and statesmen of the eighteenth century, making inevitable concessions to popular prejudice.”

What caught my attention was the phrase “making inevitable concessions to popular prejudice.” An example of such concessions: “The religion of the Spanish nation is and shall be perpetually Catholic, Apostolic, and Roman, the only true religion.”

Which leads me to this question: Will PNoy, with respect to the pork barrel and the President’s fiscal powers, make “inevitable concessions to popular prejudice?”

In fact, PNoy has given one concession to popular prejudice–the abolition of PDAF. The next step is to institute the rational reforms on transparency and accountability–the citizens’ access to public information, for instance.

These reforms have an immediate and direct impact on checking corruption related to budget appropriations. These reforms will reduce the noise and confusion. And hopefully, they will result in regaining the love between the government reformers led by PNoy and the uninitiated do-gooders.

Smuggling and Sin Tax

Lucio Tan or his holding firm LT Group, Inc. is again in the news. The media quoted LT Group President Michael G. Tan, son of Lucio, that the company’s tobacco sales dropped by 40 percent in the first quarter of 2013.

This is the narrative of the Tan group, as reported by BusinessMirror (19 June 2013):

“The tobacco business of tycoon Lucio Tan under PMFTC Inc. took a heavy beating at the start of the year as a result of rampant smuggling of cigarettes into the country.

“The company said the smuggling of tobacco products worsened after the government imposed higher excise taxes on the so-called sin products.

“Michael Tan, president of LT Group Inc., said sales of PMFTC, maker of brands such as Marlboro, Fortune and Philip Morris, dropped by 40 percent.

“If the trend continues, Tan said, the government would also suffer as it stands to lose about P8 billion in taxes by the end of the year.”

The LT group is the co-owner of PMFTC, a merger of Philip Morris, Inc. and Fortune Tobacco Corporation. Since the merger, and in light of the most favorable treatment it got from the old law, PMFTC has become the most dominant tobacco manufacture, having more than 90 percent of the market share.

The message of the Lucio Tan group to the government and the public is: “We told you so.” During the intense debate on the sin tax, PMFTC led the assault to weaken the bill’s provisions, arguing, inter alia, that the increase in the tax rates would result in widespread smuggling, which in turn would reduce tax collection.

The LT Group and PMFTC are using the specter of smuggling to spook us, but their objective is to discredit the sin tax law.

But another tobacco manufacturer, PMFTC’s rival British American Tobacco (BAT), which surely would not countenance a rise in smuggling, dismisses Mr. Tan’s argument. BusinessMirror cites BAT that “the prices of cigarettes in the Philippines [are] still lower, compared to those in other countries even with the increase.”

Before the sin tax took effect, the direction of smuggling was actually outward—from the Philippines to other countries. The prices of Philippine tobacco products were significantly lower compared to the rest of the world or the rest of Southeast Asia.

The increase in tax rates, averaging 209 percent in the first year, has brought retail prices of Philippine tobacco products to the median level, as compared to the prices in other countries. Even then, comparing prices of cigarettes in the Southeast Asian countries (to strengthen the argument, we compare between the retail prices in the Philippines and the factoryprices in other Southeast Asian countries), we observe that the price differentials are small and hence do not translate into a serious smuggling threat.

The retail price of a Marlboro produced in the Philippines is double the price of the factory price of a Marlboro in Indonesia. But smuggling involves huge costs—the transport costs, the storage and distribution costs, the crime network costs, the bargaining or bribery costs and other transaction costs. Such costs, plus the risks, wipe out the price differential. Only when the price differential is so big does incoming smuggling become menacing. The World Bank gives the example of Brazil and Paraguay, where the price differential was about 900 percent.

In fine, despite the new high tax rates, which PMFTC calls “disruptive,” the incentive for inward smuggling is weak. The argument about the rise in smuggling does not convince.

That the incentive to smuggle inward is limited is not an excuse for the Philippine authorities to sidestep the issue. To its credit, the government is taking steps to counter illicit trade, including the use of a unique identification marking on cigarette packs. An advanced system, which we hope government will eventually adopt, is tracking and tracing. This system or technology monitors production (the tax is imposed on the volume of production) and follows the movement of the tobacco products throughout the supply chain—from the factory, to the distribution chain, and to the point of retail sale.

Replying to Mr. Tan, Internal Revenue Commissioner Kim Henares said that the LT Group sales went down by 40 percent “but it’s not because of smuggling, it’s because some other companies have taken up their market share” (BusinessWorld, 21 June 2013).

The new sin tax law has removed the protection given to the legacy brands by removing the price classification freeze, in which the old brands were taxed based on their 1996 prices. The move to a unitary tax also translates into a level playing field at the same time that it discourages consumers from shifting to a higher-taxed brand to a lower-taxed product.

That sales have dropped precisely serves the objective of the sin tax. Time and again, the government has affirmed the principality of the health objective, by reducing consumption of sin products. The drop in sales by 40 percent is thus welcome news. This more or less validates what different models have predicted—a reduction of cigarette demand of up to 50 percent in the medium term.

Take note, too, that despite the sharp decrease in demand, tax collection has “already significantly increased,” according to Commissioner Henares. (She has yes to disclose the latest revenue figures from the sin tax.)

This is obviously bad news for the LT Group. Gone are the days when the Lucio Tan group boomed because of low taxes. It seems “LT” stands not for Lucio Tan but for “low taxes.”

Who are PNoy’s Reliable Candidates?

Manila Bulletin is not the first choice for a Philippine newspaper. It can be boring, and it suffers from its image of being associated with the pro-martial law brand of journalism. But being a humdrum paper also has an advantage: It reports without sensationalism, which the leading dailies are prone to. It thus pays to buy the Bulletin occasionally, particularly its Saturday edition, which includes a supplement of the erudite New York Times International Weekly.

The Bulletin’s 27 April 2013 edition has a well-written inside-page story written by Genalyn Kabiling titled “PNoy Seeks Reform Allies, Assistance.”

I like the writing style, which grabs the reader’s attention. Take the lead sentence: “He is not a superhero; he is human and needs all the help he can get.”

The non-superhero is PNoy. Indeed, PNoy cannot be compared to Iron Man although he and Tony Stark share the same traits of being drawn to attractive women and being moved to fight evil.

Good writing and a good story are anchored on the subject. The writer quotes PNoy lengthily:

“Hindi naman tayo superhero, at kahit kayod marino, wala [nang] tulog, wala pang kain at wala na rin bakasyon maski ano po ang gawin kung nag-iisa kukulangin ang lakas ko upang tugunan ang lahat ng minana nating problema, pati na ang dumarating pang mga pagsubok.”

And spicing his comment with humor, PNoy says: “Pakiusap ko lang ho huwag naman ninyo ipapasan sa akin mag-isa, at baka naman ho dumating ang panahon magkita tayo hindi na ninyo ako makilala dahil baka pareho na kami ni Bembol Roco. Idolo ko po iyon sa acting pero hindi sa hairstyle.”

Thus, PNoy asks the electorate to vote the Team PNoy candidates. PNoy needs more allies to advance and speed up the reforms fordaang matuwid. The observation is that the second half of the administration is a difficult period for the Executive to have Congress pass controversial but necessary legislative reforms. The politicians in Congress tend to dismiss the presidency as already lame duck (a consequence of a weak party system and the prohibition of a second-term presidency). An antidote is to have an expanded and solid group of allies in Congress.

The surveys indicate that Team PNoy will win decisively. That’s good news. But here’s the rub: We are not sure that some of the winners from Team PNoy will become reliable allies for reforms.

The case of the passage of the sin tax law illustrates the predicament that PNoy faces. The sin tax is a good example of a hard reform that has long-term impact on the economy and on institutions. It can thus be a proxy of how politicians will behave when faced with a similar reform in the next Congress.

The Senate was able to ratify the bicameral conference bill on the sin tax, but only by eking out a one-vote majority. The sin tax reform was nearly lost because several senators who are considered PNoy’s allies did not show up for the vote or worse, opposed the bill.

Senators Alan Peter Cayetano and Loren Legarda (Team PNoy candidates who will surely win), Manuel Villar (the husband of Team PNoy candidate Cynthia Villar, who will likewise win) and TG Guingona (a Liberal Party stalwart) were absent during the crucial vote. And Senator Francis Escudero (another popular Team PNoy candidate) voted against the bill.

At the same time, the anti-reformers (again, using the sin tax as a representation) like Gringo Honasan and the son of Juan Ponce Enrile are threatening to barge into the winning column.

In short, PNoy’s fear that his “hair style” will completely become a Bembol Roco is real. To prevent that from happening, the voters must reject the likes of Honasan, Enrile, and Zubiri, and vote the most reliable reformers in Team PNoy. Further, the candidates belonging to Team PNoy who have a spotty record must show a pre-commitment that should literally tie them to PNoy’s reform agenda.

In Greek mythology, Ulysses made a pre-commitment by asking his crew to fill their ears with wax to make them deaf and bind him to the ship’s mast once they reached the land of the beautiful sirens. If not for this pre-commitment, Ulysses and company would have succumbed to the sirens’ naked beauty and alluring voices, but leading them to their decay and death.

Among criminals, having a tattoo of Sige-Sige or Oxo is a pre-commitment that they will stay forever with the gang.

PNoy can make a reasonable request to his former “crush,” Loren Legarda, to allow her foot to be chained in the Senate session hall whenever a crucial vote occurs, thus preventing a disappearing act. PNoy can also ask his friend Chiz to have one of his cheeks tattooed, with the lettering: “I luv Heart and PNoy.”

What is worrisome is that the most reliable allies of PNoy are trailing. They are Jun Magsaysay, Risa Hontiveros, and Jamby Madrigal.

Not only is Jun Magsaysay the real Magsaysay (not Mitos who is merely married to a Magsaysay and not necessarily a good Magsaysay) but more importantly, he has a solid track record as a politician in championing economic and political reforms. He is a friend of the farmers, a champion of agriculture. He was the key in exposing and condemning the fertilizer scam during the Gloria Arroyo regime.

Risa Hontiveros is the most progressive among the candidates. Her presence in the Senate will threaten its trapo culture.

And even though some might ridicule Jamby Madrigal as another Miriam Santiago, the fact is PNoy needs another Miriam Santiago type of politician who will be resolute and outspoken in fighting for the hard bills. And let it be known that Jamby, despite being a Madrigal is as left wing as Risa. She takes pride in having the DNA of her lolo, Pedro Abad Santos, the founder of the Philippine Socialist Party.

And so, if we want to help PNoy save his hairline, let us get a pre-commitment from some of his not-so-reliable candidates, vote for the consistent ones who are trailing, and reject the incorrigibles like Honasan, Enrile, and Zubiri.

UNA and LP: Political Bandits

This Toby Tiangco, the campaign manager of UNA, has a keen political sense.

For one thing, he takes the threats UNA faces seriously. In one press interview, Tiangco was frank enough to express his fear about Senator Serge Osmeña’s involvement in the electoral campaign. Osmeña is giving advice to several candidates of the Liberal Party (LP) coalition, namely Jun Magsaysay, Grace Poe, and Risa Hontiveros.

Osmeña is the Pinoy equivalent of Barack Obama’s David Axelrod. Our senator may not be as politically progressive as Obama’s campaign adviser. But it is insulting to compare Osmeña to the arrogant Karl Rove, who exposed himself to be a bad clairvoyant after predicting Mitt Romney’s victory in the swing state.

Osmeña’s choice of candidates is right but demanding. Magsaysay (not Mitos), Poe and Hontiveros are among the honest politicians and reliable reformers in the LP slate. They, along with the likes of Jamby Madrigal, Koko Pimentel, and Sonny Angara, deserve to win. (The politically correct might object to Angara’s dynasty. But nothing is wrong as long as the dynasty eschews guns, goons, gold and Garci).

But Osmeña’s candidates are not frontrunners. Fortunately, what Tiangco calls the “Serge factor” is a boost for their campaign.

For another thing, Tiangco delivers stinging propaganda that hits the nail on the head. In another interview, Tiangco turns the tables on the LP coalition by accusing the ruling party of accommodating “political butterflies.” Indeed, many of the former Gloria rabble-rousers jumped ship and moved to PNoy’s party. Aray! What is LP’s rejoinder?

Still, the LP coalition has charged UNA of pretending to be daang matuwid. That is very correct, for UNA has a surfeit of candidates who oppose daang matuwid. For that matter, UNA’s candidates are unfit to symbolize daang maganda.

What is maganda about Mitos Magsayasay, Gloria’s henchwoman, who blocks every major reform of the PNoy administration? What is matuwid about Gringo Honasan whose claim to fame is his being a serial coup plotter during the democratic transition? What ismaganda about Jackie Enrile, the absentee congressman, who nevertheless has name recall, being the son of Marcos’s martial law executioner and Gringo’s godfather? What ismatuwid about Miguel Zubiri becoming senator, thanks to the vote manipulation engineered by Gloria’s servants like Abalos and the Ampatuans? And what is magandaabout Manong Ernie Maceda, the typical trapo, despite his makeup? To top it all, the UNA triumvirate of Binay, Erap, and JPE is a gang of bandits.

But wait, we cannot be judgmental about political bandits, as propounded by Mancur Olson. Olson distinguishes the stationary bandits from the roving bandits (foreign aggressors, for example). The stationary ones need the legitimacy or the votes to extend their terms, and they hence have the incentive to deliver the public goods.

Think Binay. In Makati, he is a strongman, a maton. Yet, thanks to the huge resources at this disposal, he has made Makati a modern and “socialist” town. And through his delivery of the public goods, he and his family get elected and re-elected. In turn, this performance in Makati propelled him to become Vice President and has become the launching pad for his ambition to be the next President.

Let’s face it: Both UNA and LP have political bandits. But that’s where the similarity ends.

UNA has obnoxious bandits. And even though the LP accommodates bandits (after all, politics is addition), its core consists of decent politicians and reformers—led by PNoy himself; progressives like the Abads, Tañadas, Jun Abaya, TG Guingona, Jamby Madrigal, Neric Acosta, Sid Ungab, Niel Tupas, Jocelyn Limkaichong; veterans like Frank Drilon, Mar Roxas, Jun Magsaysay, and Serge Osmeña. This is the party of reform—the party of Ninoy Aquino, Jovito Salonga, and Jesse Robredo.

As the party of reform, it should be the party of the future. The lesson from contemporary political economy, especially in East Asia, is that a predictor of prosperity or sustained growth is the endurance of a reformist and visionary political party. Never mind if it is has stationary bandits.

LP in deep shit

Hoping that the rude title has caught the reader’s attention, I can now moderate my statement. The LP or Liberal Party faces a serious problem. Among its noticeable members are politicians who break discipline and who go against PNoy’s reform program.

In an article titled “Team PNoy expected to toe the line” (Philippine Daily Inquirer, 3 February 2013), Norman Bordadora made this report: “Sen. Frank Drilon, campaign manager of the Liberal Party-led slate, said there was no party discipline among President Aquino’s allies in the Senate, making it difficult to pass the administration’s priority measures such as the recently enacted Sin Tax Reform Law and the Reproductive Health law.”

Sen. Drilon, the most senior LP politician and the champion of the sin tax reform that barely passed the Senate, did not mince words about the LP’s predicament:

“There is no party discipline. Even administration measures are opposed by a certain number of the majority; that’s why it’s difficult.”

In relation to the sin tax reform, those who opposed the bicameral conference bill were Senate President Juan Ponce Enrile, Senate President Pro-Tempore Jinggoy Estrada, Majority Leader Tito Sotto, Bongbong Marcos, Gringo Honasan, Bong Revilla, Joker Arroyo, Chiz Escudero and Ralph Recto.

Surprisingly,those who did not show up for the vote to ratify the bicameral conference bill on the sin tax reform were Loren Legarda, Manny Villar, Alan Peter Cayetano and TG Guingona. Actually, Legarda and Villar were present for that session, but vanished during the voting.

Thus, the thin win (10-9) in the Senate for the sin tax reform. This narrow win is a cause for alarm. The Enrile faction is supposed to be supportive of PNoy’s legislative agenda. Escudero (who voted no), Alan Peter Cayetano, Legarda, and Villar (who did a Houdini act) are supposed to be part of the PNoy coalition. Recto, labeled“Recto Morris for being the champion of Philip Morris,”is supposed to be a stalwart of the LP.

In this light, Sen. Drilon ‘s statement is worth pondering:

“The President has asked that those in the Senate should be in support of his programs. If our people are convinced that the programs of the President are working, then we shall vote for the President’s choice.

“My point is Team PNoy must be committed to PNoy’s program, as they are committed that all legislation geared toward these programs should be supported.”

So Sen. Drilon is concerned whether everybody in Team PNoy will support PNoy’s reform agenda. The next Congress has to contend with tough measures that have to be passed to consolidate the economic and political reforms—rationalization of fiscal incentives, mineral taxation, amendment to the Anti-Money Laundering Act, freedom of information, electoral rules, to name some. This requires the support of each and every member of Team PNoy.

The Enrile faction makes the passage of reforms more difficult. But Enrile and his faction have exposed themselves as anti-reform. That they are with UNA also exposes the true character of Jojo Binay’s party. Enrile, Estrada, Honasan , along with Migz Zubiri and Mitos Magsaysay, are the faces of UNA. Are they the pleasant faces of reform? Their faces remind us of martial law, coups d’etat, Erap, Gloria Arroyo, election cheating, and Gigi.

But what is more dangerous is the enemy within. Within LP and team PNoy are unreliable, opportunistic politicians who at any moment can defect to UNA.

How reliable is Escudero, when he nonchalantly voted against a very crucial piece of legislation that PNoy certified urgent? What is our assurance that Legarda will not re-enact the scene of “The Lady Vanishes,” when she is called for another crucial vote on a controversial measure? Should we be thus sad that Escudero and Legarda are among the leading candidates in the 2013 elections?

That the likes of Escudero and Legarda have gotten away with their act of defection would only embolden them in the future to defect again. Incidentally, it is not only some of the LP candidates for senator who are undependable. A number of the Team PNoy or LP candidates for the House of Representative are uncooperative, if not downright treacherous. (See my BusinessWorld column titled JPE and Gigi, SB and Boyet, 28 January 2013.)

So what can the LP and Senator Drilon do? It’s easy to say “punish them by expelling them from the LP.” But Escudero, Recto, Boyet Gonzales, Ben Evardone and others were not punished before for betrayal or non-cooperation. So the threat is not credible. Besides, I wouldn’t be surprised that their species can easily transfer and adapt to UNA.

I have a piece of unsolicited advice for Senator Drilon. Why not ask the unreliable ones in Team PNoy to publicly express a pre-commitment that will prevent them from subverting PNoy and his reforms? What form of pre-commitment? How about making them scoop the poo, using their bare hands, of UNA personalities?

Sta Ana is coordinator of Action for Economic Reforms (www.aer.ph).

JPE and Gigi, SB and Boyet

Riveting. Nail biting. Spine-tingling. Titillating. The Senate gossip starring Juan Ponce Enrile or JPE and Gigi Reyes, his chief of staff, grabs our attention.

That the Philippine media have made it headline news is okay. After all, public interest is at stake. Gigi Reyes has been accused of being an unelected senator.

But the media and their audience are more interested about the alleged romance, not the public interest implications. Well, we are not alone. The US media brought out Monica Lewinsky, Bill Clinton and his cigar. The French press highlighted the ménage a trois that involved the French President Francois Hollande, his current lover, Valerie Trierweiler, and his ex-wife, Segolene Royal.

But let’s be politically correct for a moment. What happens in bed involving our high-level officials is none of our business. Only when public interest is screwed up can we citizens get involved.

The JPE-Gigi Reyes affair that should bother us is not the private one. What concerns us is whether their influence and actions have a bearing on public interest. The issue that involves public interest is not even about Gigi Reyes’s attendance in exclusive meetings of the Senate. Nor is it about her authority to sign checks or write memos to Senators.

The close relationship between JPE and Gigi Reyes is common knowledge in the Senate. But what has not surfaced, an open secret in the Senate, is the alleged connection of Gigi Reyes with a powerful lobbyist, which is Philip Morris. The tobacco industry, with Philip Morris having a market share of close to 95 percent, is said to be the most powerful tobacco lobby in Asia.

It is high time Gigi Reyes disclosed her relationship with Philip Morris.

The fact: JPE and his Senate faction voted against the sin tax reform that substantially increased tobacco excise taxes and that stripped the rules that gave Philip Morris and legacy brands unfair advantage over new entrants. Yet, back in 2004, JPE supported the essential reforms that are now found in the new sin tax law (which he opposed). The difference? At that time, Philip Morris and Fortune Tobacco were mortal enemies, and the rules discriminated against the former. Thereafter, Philip Morris played a new game—by merging with Fortune Tobacco and having management control over the merger.

Philip Morris has far-reaching tentacles. In the Lower House, its allies are found in the so-called Northern Alliance, composed of Representatives from the tobacco-growing districts. More importantly, Philip Morris’s influence extends to the House leadership.

The information that leaked out from the bicameral conference meetings on the tobacco and alcohol excise taxes was that Speaker Sonny Belmonte (SB) and Majority Floor Leader Boyet Gonzales wanted to re-open the negotiations after the bicameral conference had agreed upon the essential reforms, including the high tax rates for tobacco and the adoption of a unitary tax for tobacco and beer.

Boyet Gonzales himself must make a disclosure. His law firm Gonzales Batiller David Leabres Reyes & Associates is said to serve Philip Morris.

The re-opening of the talks to water down the tax rates was pre-empted by two developments. First, Senator Frank Drilon had a press conference where he announced the reforms that the bicameral conference meeting sealed. Second, Representative Isidro Ungab, the reform-oriented Chair of the House’s Ways and Means Committee, told the Speaker and the Majority Floor Leader that he would resign as Chair of the Ways and Means and as member of the bicameral conference if any further compromises were made.

What then am I driving at? Let’s not deal with the alleged tryst between JPE and Gigi. The real issue is that JPE and Gigi are anti-reform, and they have something in common with SB and Boyet. JPE, Gigi, SB and Boyet are supposed to be allies of the Aquino administration; yet they block the Aquino administration’s reform agenda.

The sin tax law is the best proxy for the Aquino reform agenda. It addresses both economic and political reforms, and the struggle to have it passed pitted public interest against powerful vested interests. That JPE and Gigi opposed the sin tax and that SB and Boyet tried to undermine its passage should be enough indication that they cannot be trusted in pursuing other critical daang-matuwid reforms.

Indeed, in the Lower House, we again are witness to the non-cooperation of SB and Boyet. They are trying to kill in a soft and subtle way the bill on freedom of information (FOI). What are they afraid of?

The President and his spokespersons have spoken: Malacañang has given its inputs and amendments to the bill; the President wants the House to have plenary debates on the bill. Yet, SB and Boyet have ignored this. They are using all the tricks to delay the plenary deliberations on the FOI. And with less than a week of working sessions in the House, such delaying tactics have rendered the FOI bill dead in the water. Only the intervention of Malacañang can revive the bill.

But as PNoy himself said, “nothing is impossible.” A new coalition of the Executive, the reformers in the legislature, and civil society must be built to make JPE and Gigi and SB and Boyet inutile.

Who’s blocking Freedom of Information?

Some quarters, including the media, are blaming President Noynoy Aquino or PNoy for the long delay in the passage of the Freedom of Information (FOI) bill. They say the FOI’s main obstruction is P-Noy’s fear, uneasiness, reluctance, or passivity.

Some politicians in the House of Representatives then use this as an excuse not to act on FOI, killing it softly, ostensibly to protect the President and gain his favor.

Take this story from Interaksyon,com (16 January 2013), which reinforces the above perception. The title is: “With time running out, PNoy remains passive on FOI.” Really? Read the article; the author of the story, Dexter San Pedro, quotes PNoy’s remarks:

“’Well, tatanungin nga natin, ilang araw na lang natitira sa session ng Kongreso pagpasok. ‘Di ba, proseso nila ‘yan. Naibigay na namin ang inputs namin sa FOI. Ang pagkaintindi ko’y matatanggap ’yung mga amendments na minungkahi namin so hinihintay na namin ‘yung finished na output [There are only a few session days left for Congress. But that is their process, right? We have already given our inputs on the FOI. Our understanding is that they have accepted the amendments that we have proposed so we are waiting for the finished output].”’

PNoy’s statement above should by now dispel any doubt about his desire to have the FOI passed. FOI was his election campaign promise. The FOI is a crucial element of the administration’s open government program (OGP).

The expression of Malacañang commitment to FOI is found in its inputs and amendments to the Congress bill. In fact these have been incorporated into the House’s FOI bill, sponsored by Representative Erin Tañada and others. The House bill reflects and upholds the Malacañang view on FOI. The House bill is essentially the Malacañang bill.

The perception that PNoy is passive about FOI or even resistant to it is thus dead wrong. Yes, he has concerns about the misuse of government information (understandable in light of attempts of vested interests to use any means to undermine the credibility of his reforms) and the threat to national security (understandable in light of the tense maritime disputes between the Philippines and China). But the FOI bill approved by the Senate and the bill pending in the House have amply addressed these concerns.

PNoy is now signaling Congress to act on FOI. To repeat and paraphrase what PNoy said: Malacañang is done with the amendments and inputs for FOI and have submitted them to Congress. Congress has accepted accepted them. We are waiting for Congress to make the final output, which is the passage of the bill. So to the House leadership, just do it!

Yet what has the House leadership done? The opposite of what PNoy wants it to do. It has not calendared the FOI, which has been approved by the House’s Public Information Committee, for the plenary debate.

Each session day is critical. Only nine sessions days remain before Congress adjourns, and by then everyone will be attending to the elections.

Not calendaring the FOI for discussion means only one thing: The House leadership is sabotaging the FOI. It cannot even accommodate a debate on the FOI.

We anticipate the leadership’s excuse. Speaker Sonny Belmonte and Majority Floor Leader Boyet Gonzales will tell the FOI champions in Congress that they are doing PNoy a favor by not having FOI passed. They will announce to everyone that they are trying their best to pass FOI, but there’s not enough time to have it passed.

All this is BS. Speaker Belmonte, also known as SB, will be made accountable for the non-passage of the FOI in this Congress. SB cannot use as an excuse the lack of time because he and Boyet Gonzales have used all the tricks to delay its passage. Moreover, it will be ugly and awful for SB and his followers to use PNoy as the excuse for failing to pass FOI.

We applauded SB before, for despite the intense pressure from his peers in Congress, he facilitated the impeachment of former Chief Justice Corona and the approval of important controversial bills, namely the sin tax reform and reproductive health (or responsible parenthood).

But it will be a great tragedy for SB if it turns out that he is the main obstacle to FOI. Let not his record be stained; let it not be him who causes embarrassment to PNoy, Malacañang and Congress. Ultimately, SB must act to move forward the FOI and prevent this disaster from happening.

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