coconut levy fund

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.

"Closure"

After more than twenty-five years after the first People Power uprising that sent Ferdinand Marcos and his cronies into exile, the pursuit of justice has ended with the full restoration of the families of the former dictator and his allies.

The aging solon and former street parliamentarian Sen Joker Arroyo was like a lonely voice crying out in the wilderness upon hearing the flacid “lukewarm” remarks of President Aquino in reaction to the Supreme Court ruling favoring his formerly estranged uncle over the government in the case involving about twenty billion pesos (nearly half a billion dollars) worth of shares in San Miguel Corporation one of the country’s biggest conglomerates that he purchased during the dictatorial regime under dubious circumstances.

As often is the case when dealing with ill-gotten wealth of crooks in government who operate in a lawyerly fashion, the labyrinth of transactions make it difficult to pin down the accused. Hiding as they do behind the corporate veil, their ability to weave through the legal system in order to extract wealth from the collective pot contributed by the lowliest in society allows them to go unpunished and even be vindicated by the legal system.

And so as in the case of Eduardo “Danding” Cojuangco, Jr. former czar of the coconut industry under Mr Marcos, it appears that the scales of justice have finally tipped in his favor. Having previously lost his case in the anti-graft court the Sandiganbayan, he has won on appeal to the Supreme Court. Not all justices voted to clear him though. The senior ranking dissenter pronounced the majority decision the biggest joke of the century to be visited upon our countrymen.

Indeed. And as for the Marcoses their restoration was cemented in the last election with Ferdinand “Bongbong” Marcos, Jr. winning a seat in the upper house from where he probably intends to stage a presidential bid in 2016. A hero’s burial for his father’s remains has been winning support in the lower house. This probably reflects the mood in the wider body politic to forgive the former dictator for his failings. President Aquino himself put this possibility on the agenda by commissioning the vice president to look into it.

During his election campaign, President Aquino said that he wanted to bring some final resolution to the remains of the EDSA I struggle. It appears now what that closure he spoke of means for the victims of the Martial Law and the perpetrators of the injustices under it. Incidentally, it will be interesting to see how the case of Hacienda Luisita Incorporated owned and run by the Aquino-Cojuangco clans but subjected to agrarian reform will be handled by this Supreme Court. Will the final ruling there bring about “closure” to that case as it has in this instance? Would that be the final form of appeasement between the rivaling factions that have governed our country for so long (and will continue to in the foreseeable future)?

For those who joined the struggle to restore democracy to the nation like Sen Joker Arroyo, it will grate them to see the very liberties and freedoms they fought and paid for with their blood, sweat and tears being adroitly used by those who formerly suppressed them to frustrate the cause of those who suffered under their foul treatment, to have history re-written, to find the same legal minds that defended their tormentors receiving honor and prestige, occupying positions of power and authority, and for their countrymen to look on indifferently.

Unfortunately, this is probably how the cause of freedom will end: not with a bang, but a whimper.

The joke is on us!

The Supreme Court ruling favoring former Marcos crony Eduardo “Danding” Cojuangco, Jr. demonstrates that kleptocracy is alive and well in the country.

As economist Cielito Habito will tell you, coconut farmers not rice farmers constitute the poorest of the poor in the Philippines. They also account for a larger bulk of the farming sector (whether you account for this on the basis of land area cultivated or number of individuals engaged in it). Improving their lot in life therefore should be on top of any poverty alleviation agenda.

Under Martial Law between 1972 and 1982, coconut farmers were burdened with a levy that was meant to be used for upgrading common facilities and infrastructure that would ultimately benefit the sector. The man in charge of what essentially could be regarded a monopoly was businessman Danding Cojuangco, an estranged cousin of the jailed opposition leader’s Benigno Aquino, Jr’s wife (mother of the current president who incidentally reconciled with his uncle prior to his election).

What did Mr Cojuangco do with the immense powers and resources entrusted to him? Well, he claims to have “borrowed” the funds from the United Coconut Planters Bank, an entity bought using the coco levy funds, to purchase a 20% stake in San Miguel Corporation, one of the biggest conglomerates in the country. So rather than going to the poorest of the poor, the funds were allocated to benefit the corporate and financial ambitions of the man whose responsibility it was to look out for their welfare.

Did he violate his duties not just as a public official in charge of the stewardship of their funds but as a corporate officer of the bank from where he had sourced his “loan”? The Supreme Court in a split decision seems to believe that he didn’t. This is despite the financial regulations that we have regarding banks lending a substantial amount of their funds to directors, officers, stakeholders and related interests.

Under normal circumstances, such an inequitable and imprudent decision by a public and corporate official would not have been condoned. Such a blatant disregard for the interests of those whose toil produced the resources would have only been possible under a dictatorship. It is that action that the Supreme Court has legitimized with its ruling.

Although the decision is still subject to a possible motion for reconsideration, if it were to stand, it would probably be one of the biggest transfers of wealth from the poorest and lowliest members of society to one of the wealthiest. It would be proof positive that kleptocracy is alive and well in a nation that has produced two among the top ten most corrupt leaders in modern history.

As Senior Associate Justice Conchita Carpio-Morales (who administered the oath of office to the current president) states in her dissenting opinion,

The argument that Cojuangco was not a subordinate or close associate of the Marcoses is the biggest joke to hit the century.

If that is so, then the joke is well and truly on us!