Low-Lying Fruit

The president, by postponing many of the hard reforms needed for later, has possibly revealed an unflattering feature in his character.

In a bid to stem the slide in his net approval ratings, the president this week sought to go on the offensive. Claiming that he has been a victim of unfair and sensational treatment by the press (a notion seriously challenged by Amando Doronila), he sought to brandish his reform credentials by citing some of his achievements in the face of stiff opposition from certain quarters. The kind of reforms he has introduced however can be characterized as low-lying fruit, the kind that is easy to achieve with the least amount of risk.

Speaking at the Iloilo provincial capitol, President Aquino took a swipe at his critics saying, “It is noticeable that those against our budget proposal for the CCT (conditional cash transfers) were the same ones who blocked the impeachment complaint against Ombudsman Merceditas Gutierrez. We are not surprised that they are the same ones who frequently criticize us.” This statement was aimed at both a national audience and a local one. The individuals being alluded to were not just opposed to his policies in Congress but have been competing with his provincial allies.

The expansion of the conditional cash grants to poor indigent families was only made possible by the grains reform. Winding down the rice importation and subsidy functions of the National Food Authority was long advocated by international multilateral agencies because the program not only benefited unintended recipients, it was a source of much manipulation and corruption. The populist overreach by the previous administration practically sealed its fate in the current one by exposing the wasteful use of public resources for little public benefit.

This is the first of the low-lying fruit because funds were already previously allocated. All that was needed was to re-channel them away from an ineffective program to one that had a greater chance of success in meeting roughly the same goal. In his first year, the president will be remembered for accelerating the growth of conditional cash grants to 21 billion from 12 billion pesos in the previous budget cycle.

This near doubling of the program’s allocation will bring relief to about half of the 4.6 million families that are the poorest in our society. To cover the other half would presumably cost another 21 billion pesos. Escalating the program to that level will be a much bigger challenge in the coming years given that he plans to address the classroom shortage as a prelude to extending basic education to twelve years and adopt universal health coverage at the same time.

The second set of low-lying fruit will be appointing people with integrity to the Office of the Ombudsman and Commission on Audit by replacing allies of the previous regime. Whether or not the Senate trial of the current ombudsman results in her conviction is immaterial as her term has or is about to run out anyway. This means she will have to step down one way or another. Her deputy has already been fired as a result of the Luneta hostage taking incident that resulted in eight deaths.

The appointment of the former COA auditor Heidi Mendoza, the whistleblower who exposed corruption in the military as commissioner of the agency and the recent replacement of the chairman will help the administration in straightening things out there. It seems that just getting the right people in these important posts is a big enough challenge these days. The larger challenge will be influencing events on the ground when it comes to exposing and prosecuting corrupt officials.

The third set of low lying fruit consists of improvements to tax collection pursued by the Department of Finance through various schemes against tax evaders, smugglers and corrupt revenue officials. These efforts have already netted some results in the form of higher than targeted collections in the first two months of the year, a few convictions and more cases filed. The larger task involves reforming the tax system to make it simpler and easier to administer and one that encourages greater investment and employment participation.

There are other bits of low lying fruit that are on their way, but have not yet been delivered, for instance the rationalizing of fiscal incentives (delayed because Finance and Trade officials cannot seem to agree on the terms having conflicting policy goals to contend with) as well as the standardizing (possible capping) of salaries and benefits for officers and directors of government owned and controlled companies.

We can call these low lying fruit because they are hardly unpopular bits of reform. Giving money to poor families so that they can send their kids to school and complete their immunization can hardly be controversial. Those who opposed it tended to do so against the grain of public opinion and on grounds that were quite valid (e.g. the capacity of agencies to absorb increased responsibilities).

They are also low-lying because the pain of reform has tended to focus on a few groups and individuals seen to be undesirable to begin with: tax cheats, smugglers, corrupt officials. If anything, these efforts would tend to lift the president’s approval rating rather than drag it down. Perhaps of all the changes instituted, the ones that were most painful for a wider set of the voting public involved reducing subsidies to commuters (lifting rates on MRT and tollways), yet even these were justifiable because it made no sense for provincial taxpayers to be subsidizing urban commuters in Manila.

If anything, the sudden drop in the president’s rating was not due to his forging ahead with some painful  but necessary reform but directly attributable to his inaction on a variety of things, such as: (1) his unwillingness to prosecute those close to him that were deemed liable for the botched rescue attempt of foreign hostages, (2) his failure to disclose fully the details of how he came to own a Porsche (was it a sale or a “donation”?), (3) his inability to stare down the Catholic clergy on the issue of responsible parenthood and reproductive health, and (4) his unwillingness to endorse the freedom of information bill as part of his legislative agenda.

In fact the most painful but probably most essential bit of reform required if the president is to be able to provide investor certainty and government capacity to pursue his social compact involves tax reform that he has put off until next year. This seems to be a conscious attempt on his part to make good on his electoral promise to avoid raising tax rates. Contracting expenses in the near term due to uncertainty over revenues has seemed to raise more doubts as to whether the forecast decline of fiscal deficits is attainable or not.

The political cycle means that getting new tax meaures passed through Congress in an election year will probably result in greater distortions and greater compromises with vested interests and vocal ratepayers than if such legislation had been contemplated in the opening months of a fresh administration. (Witness for instance the proposals being “seriously considered” to deal with the increased price of oil. Rather than having an automatic cap on the excise value on fuel whenever the price per barrel reaches a certain amount, the government is looking at extending fuel subsidies and lowering the VAT rate on oil.)

Failure to get the tax settings right will put his social reform agenda in serious jeopardy. By targeting the low lying fruit, the president has allowed himself to be seen as being either too lazy or unambitious with what he hopes to accomplish.

This is the folly of relying on the low lying fruit.


***

Explaining the term low-lying or low hanging fruit: “We have Mother Nature to thank for the expression low hanging fruit. A fruit-bearing tree often contains some branches low enough for animals and humans to reach without much effort. The fruit contained on these lower branches may be not be as ripe or attractive as the fruit on higher limbs, but it is usually more abundant and easier to harvest. From this we get the popular expression “low hanging fruit”, which generally means selecting the easiest targets with the least amount of effort.

In business, the term low hanging fruit is often associated with the sale of consumer products or services. Sales professionals, especially those who are just entering the field, are encouraged to seek out the easiest customers first, which sales managers may call “low hangingfruit.” Competitors may spend more of their time seeking out the higher commission sales of higher “customer branches”, leaving the lowhanging fruit behind for others to claim. Parents seeking low-cost insurance for school-age children, for example, may be considered lowhanging fruit by insurance companies.

Another use of the expression low hanging fruit can be found in the political arena. A politician may set a number of easily attainable goals, essentially low hanging fruit, and accomplish them with minimal effort. The voters may perceive the politician’s actions as proof of his strong work ethic, but in reality he only reached for the political benefits of low hanging fruit. Critics often use the expression low hanging fruit to describe someone who chooses a sure thing over a more difficult but more rewarding pursuit.

The idea of low hanging fruit can be viewed as both a positive and a negative. On the one hand, low hanging fruit is usually plentiful and often ignored by those looking for more attractive offerings. But low hanging fruit can also be seen as a negative, since the picker understands howlow the quality of the fruit can be and picks it anyway. Someone who consistently chooses the immediate gratification of low hanging fruitcould be seen by others as lazy or unambitious.

Critics of the low hanging fruit business model point to the examples of real fruit harvesters. Orchard workers routinely begin picking at the highest point of a tree, where the fruit has been exposed to the most sunlight and is usually the ripest. It makes sense to pick the low hangingfruit last, since it requires more time to ripen. In a business or social sense, it also makes sense to avoid low hanging fruit if a little more effort and time would result in a much better payoff.”

-From Wisegeek.com

(Note: The figures for the conditional cash grants program that originally appeared in this article have been updated)

Doy Santos aka The Cusp

Doy Santos is an international development consultant who shuttles between Australia and the Philippines. He maintains a blog called The Cusp: A discussion of new thinking, new schools of thought and fresh ideas on public policy (www.thecusponline.org) and tweets as @thecusponline. He holds a Master in Development Economics from the University of the Philippines and an MS in Public Policy from Carnegie Mellon University.

  • UP nn grad

    But this news is good news!!
    ————-
    BIR files P73.85-million tax evasion raps vs. Mikey, wife
    SOPHIA DEDACE, GMA News
    04/07/2011 | 11:44 AM
    ————-

    File court-case, submit evidence, convict. Red Lamborhini, you are next!

  • UP nn grad

    Maybe Persidente Noynoy so believed
    “the Constitution will bend to his 52% mandate!!!” and his “GMA Talsik Diyan Campaign!!!” that he expended all in one showy basket — Truth Commission 2010 — instead of focusing on FOIA while letting old-fashioned PCGG-type investigations find court-admissible evidence. There is also the management style and the management team — I remember a 4-month debate among the Yellow Army leadership if they need any assistance and if they will sit down with the outgoing administration to facilitate the transfer of governance from outgoing-to-incoming.