Where’s the beef? On the missing “spoils” from P-Noy’s second US trip

Does good governance mean good economics?

In an earlier piece last week meant more to mark the 39th anniversary of martial law in the Philippines, I tried to downplay expectations regarding the “spoils” that P-Noy’s US trip would bring describing the situation there as dire and nearly on the boil.

As P-Noy was to deliver a report to the World Bank, Mr Olivier Blanchard, Chief Economist of the IMF gave an uncharacteristically downbeat outlook for the world economy saying that the global recovery had stalled, revising forecasts of growth down to 4 from 5% (a more significant slowdown for advanced economies with growth prospects halved from 3 to 1.6% and less drastic cuts for emerging economies whose growth prospects decline slightly to 6.1 from 6.4%–the Philippines has seen its growth prospects slashed from 6-7% down to 4-5%).

Sure enough, on the day he arrived back from the US, the Dow Jones plunged nearly 400 basis points undoing the Federal Reserve’s measured response to prop up confidence. This was in reaction to what has been going on in Europe where Italy, the third largest economy received a credit downgrade from S&P and where a Greek default on sovereign debt looms. Meanwhile the Washington elite remained at odds over how to keep the government running with a measure to keep the lights on until November 18 passed literally at the eleventh hour.

With that as an unfitting backdrop, the president remained upbeat upon planting his feet back on home soil. Unlike his more recent trip to China which was expected to yield 2-7 billion dollars worth of investment of which 1.3 billion dollars was realized in firm commitments and cost the Filipino taxpayer 25 million pesos (a return of 52 dollars worth of investment for every peso spent), there were no numbers to be quoted this time around.

The president instead spoke of the keen interest and enthusiasm of US investors who were “lining-up” to come to the Philippines. Strange that the president did not even mention the figure of $15 million over the next four years the only firm commitment to come from Pepsi to be invested in developing a coconut juice processing facility.

That after all would be good news for the struggling farmers the intended beneficiaries of the Marcos era’s coco levy fund which was meant to provide them support in exporting their crop, but instead went to a bank which then lent to the fund’s manager, P-Noy’s once estranged uncle, who because of that now owns a controlling stake in San Miguel the food and beverage giant thanks to the high court’s ruling earlier this year.

So why the omission, which is so uncharacteristic of arrival statements; could it be because the spoils of this trip are so meager when compared to the nearly 25 million pesos spent on it? It would depict it as representing less value for money by producing a mere 6o cents for every peso spent.

This should not detract from the overall mission of the trip which according to the president was fulfilled by him reporting to the World Bank the advances of his administration this past year and greeting the Filipino community there. There was also the side trip to credit agencies to try and convince them to boost the ratings of the country. After all, the budget deficit no longer seems to be a problem with a surplus reported in August bringing the cumulative deficit for the year to be 85% below its ceiling, right?

This is what the president trumpeted as a success in his drive to stamp out corruption. In the spirit of transparency and openess, which were the themes of the Open Government Partnership that P-Noy inaugurated at the Waldorf Astoria (which incidentally means more foreign trips in the near future to Brazil, Chile, UK, Tanzania and Latvia), the Palace should have at least acknowledged that perhaps the Americans were in no position given the state of their economy to be exporting their capital and jobs to countries like the Philippines.

Never gonna happen

That transparent recognition of the state of affairs of course was never going to happen, for the simple fact that doing so would expose the president to accusations of junketing which given the nature of his presidency is something his entourage wants to avoid. For if the question were really to be asked, what would be the real urgency of making this trip to the US a second time in a row within the space of a year, what would be the answer?

His remarks at the World Bank was like that of a star pupil performing a didactic exercise of parroting his tutor. His visit to Fordham University was a sentimental journey mirroring his mother’s footsteps (similar to his visiting an ancestral hometown in China). His co-inaugural of the OGP lent legitimacy to an initiative sponsored by the World Bank which has struggled to make itself relevant.

Finally, his trip to the IMF was unnecessary given that the Philippines exited their program right before he entered office. The only point of this trip it seems was to highlight the advances of his young presidency in proving that “good governance is good economics”.

Unfortunately, the jury is still out on that. For one, the US haul was a pittance compared to the Chinese catch. And China has not really been deterred from investing because of perceived corruption or lack of openness. In fact, China’s development spending in emerging countries devoid of any concerns about corruption in the recipient nation is the main reason why western aid agencies have been struggling to maintain their relevance.

That and the fact that their anti-poverty programs have proven to be inconsequential. So much so that they have jumped on the bandwagon in supporting ideas developed independently by their clients. Programs such as Bolsa Familia which is now called “conditional cash transfers”. Yet as shown in an earlier post, the Philippines could have funded its own variant of this scheme without resorting to multilateral financing.

Second, the “interest” from US companies to invest was sparked not because of a greater sense of openness but from the relative advantages the Philippines has in a couple of areas. One is in the form of coconut plantation; and, two is in the form of a call center industry that has grown from strength to strength even during the period in which corruption supposedly reigned.

Now before you start arguing that the austerity exhibited by P-Noy in his travels is in stark contrast to the “impunity” demonstrated by his predecessor, let me say first of all that this habit of constantly bringing up ex-president Gloria Arroyo as the benchmark for this president’s conduct in office is not really very useful (although I am sure her supporters would be happy to have that conversation). I would prefer to think he should set the bar much higher.

The proper benchmark

Before questions of efficiency and effectiveness are raised, it is important to cross the threshold of appropriateness. How appropriate was it to make the trip at all? If as the president says it was important to send a message about the reforms undertaken by his country, then perhaps it would be pertinent to look at Indonesia’s example. The president of Indonesia the only other Asian country in the steering group of the OGP has trodden the path that P-Noy has just embarked on.

After the anti-corruption campaign started under Susilo Bambang Yudhoyono’s first administration, Indonesia has clearly effected a change in its image abroad. It is sometimes accorded “BRIC” status with  gross capital formation as a ratio of GDP about double and foreign direct investments several multiples of that in the Philippines in recent years. This was another successfully home grown program not driven by donors, the main reason it went from being seen as a basket case after the fall of Suharto to joining the Group of 20 nations.

Yet after accomplishing all this, its president felt no compelling reason to preach the virtues of his nearly decade long administration to other world leaders choosing instead to send a “trusted aid” to the event. Our president on the other hand felt so convinced that his administration after just over a year in office was performing sufficiently well that he saw the need to share his country’s “success story” with people abroad.

Unlike the case of Indonesia where the anti-corruption campaign supported growth, the Philippine government’s attempts to rein in corruption seem to have detracted from that growth as the latest four quarters of GDP reporting have shown (ironically it is in the area of growth where the Philippines over the last decade has not performed too badly against its southern neighbor–but never mind that, lest this statement of fact be interpreted as me giving “props” to the previous dispensation).

While it is understandable for the president acting as Salesperson-in-Chief to present a positive image abroad of our country and his administration, it is equally important for that image to be translated into tangible results over a sustained period of time. Only then will the image correspond to reality. Until then, we can only keep asking, “Mr, Presidentwhere’s the beef?*

*Fresh from his US trip, the president rushed off to Japan for four days. The contrast between the East Asian and North Atlantic nations could not be more stark with one billion dollars expected to be signed off with a taxpayer’s bill amounting to 20 million pesos.

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.

  • Anonymous

    Did you see the latest ( still on consistent theme, but the latest utterance ) from deLima.  Apparently she is one more time sure to convict guLO  ( this time on the Garcia case).  I still say investors do NOT want to hear that contracts they sign with one Pilipinas administration can be so flippantly easily up-ended by the administration that comes to replace it  (unless, of course, the investors are working on projects with payback periods of 3-years or less).

    • Joe America

      It seems to me the anti-corruption push is an anti-Arroyo agenda only in that so much corruption was taking place in her government, and is now being uprooted. Generals, judges, customs officers, judges, governors . . . all are under investigation or indictment. To argue that he should stop these anti-corruption attacks because they might shine a bad light on Ms. Arroyo is essentially telling him to stop fighting corruption. I fear you put him in a box that is sure to condemn him no matter what he does.

      If contracts are torn up because they are bad contracts, other investors will see that the Philippines is diligent, and therefore a good place to invest.

  • Joe America

    I guess we all come at things with a different perspective. I was thinking this morning (before reading your blog) how refreshing is the Aquino foreign policy activity and agenda, moving in sequence to those places that are important to the Philippines. You have essentially shut off comparisons against his predecessor by saying not to take that road in arguing with you. But I think he is active, as he should be, and purposeful, as he should be. And if simply projecting a different view about corruption in the Philippines, that is a major accomplishment, because it is what investors like to hear. I think you stride too hard to pan the trip.

    • It’s a bit self-indulgent-that’s all. Maybe we need to get our investment-incentives act together first before going full-blast with our promotions. The final list of growth areas lingers because the departments of finance and trade can’t seem to come to an agreement. Time for some executive decision-making, don’t you think?

      • Joe America

        Emmanuel, or do you prefer Doy? Yes, I agree, maybe more than a bit self-indulgent. It is a sore-armed administration from reaching over the shoulder and patting so much. Just get on with it and let the results speak for themselves. And I agree, executive decision-making is in order.

  • it was an enticement trip, for the cows to visit the country. and then the beef will be available later on, :D.

  • Manuelbuencamino

    The US trip was not an investment fishing expedition. It was for the open governance conference. That was the beef. It was for the Philippines to be recognized and be one  one of only 8 countries in the world who have taken on open governance as a cornerstone of good governance. If we are going to grade the trip then let’s  wait and see how the Aquino government will measure up to the commitments it made towards open and transparent governence.

    • Anonymous

      PresiNoy has established 2012 targets for himself.   2012 — PresiNoynoy says in 2012 his administration will have identified, tried, and sent corrupt officials to jail.   More Power!!!!   It will be good when PresiNoynoy in the next 16 months gets to convict corrupt officials to send them to jail.

      Aquino targets jailing corrupt officials by 2012

      ANDREO C. CALONZO, GMA News 09/25/2011 | 08:52 PM

      President Benigno Aquino III said on Sunday that his administration
      will soon convict and put behind bars corrupt government officials by
      next year.

      In a speech before members of the Filipino community in Japan where he
      is on a working visit, Aquino vowed to file strong cases and pursue
      charges against “abusive” government officials who used public funds for
      their personal gains.