conditional cash transfers

Reformists and Populists

The debate over policies needed to make permanent progress achieved under President Aquino’s rubric of Daang Matuwid (the Righteous Path) has not happened yet and perhaps never will.

Reformist measures are best kept close to one’s chest, not announced until they are actually implemented. That is because these measures often involve some pain to be borne by some section of the community, which essentially leads to votes being lost rather than won. In contrast populist measures are worth shouting from the rooftops since they appeal to voters but don’t necessarily make for good policies once in office. That is the quandary facing the administration as it campaigns for its senators for the coming election.

Just cast your gaze on the Team Patay (Death) slogan foisted by the clergymen against the administration’s ticket in protest over the passage of the reproductive health bill which the government facilitated over the church’s objections. Team PNoy candidates act surprised although they could’ve seen it coming. One way for them to take the heat away from this issue however would be to focus on their plans to introduce reforms to expand insurance coverage and make health care more affordable using the taxes to be raised from the sin tax law which was another major landmark piece of legislation the government achieved.

But they have for the most part refrained from outlining a vision for the health care system, allowing other players in the UNA coalition to establish their own credentials in the area. By ceding control over the health debate, the administration is underplaying the tremendous hand it holds–it alone can credibly put forward a detailed, costed program of health reform that would lead to millions more Filipinos enjoying better benefits from its health spending.

This is particularly disadvantageous to candidates like Risa Hontiveros who is outside the winner’s circle, given her stand on the reproductive health issue. Her candidacy could be given a significant boost if she were to be identified as the future architect of health reform in the senate. Ms Hontiveros should be given the role of explaining the planned reforms to come in this area and be given a policy team to help scope out what those reforms should be. Instead, due to the lack of such assistance, her policy pronouncements in health have necessarily been vague and non-committal.

Secondly, consider the conditional cash transfers program, which the present administration considers its “cornerstone” in its fight against poverty. The World Bank recently released a report on the first stage of the program. Its findings were for the most part positive-places that were targeted by the program were found to have significantly higher levels of school participation and better health outcomes compared to similar areas that were not targeted. In fact, in areas where the program was not so successful, e.g. maintaining retention among older age groups of children, the study suggested extending the program beyond the current five years.

This would provide a solid basis for the administration to claim credit and to bat for a continued ramping up of the program, but there hasn’t been a party-wide celebration of the findings, or a vigorous endorsement of it. Instead, the stage has been vacated to departmental technocrats to extol its virtues against its critics in the UNA coalition who have maintained the old tired line that it has been nothing but a dole out.

One candidate cunningly sought to depict the government’s prioritising of the conditional cash transfers program as misplaced,  saying it could have instead spent the money on free college education and skills training–quite a clever way to wedge college student voters against the disenfranchised indigent households across the country.

Thirdly, in making the anti-corruption and transparency measures adopted by the administration more durable, the government has failed to articulate a program of action towards this end. This is partly due to the fact that its path towards greater openness has itself suffered setbacks. Its Open Budget Index score in the latest report of the International Budget Partnership fell by seven points, meaning Filipinos have been denied full access to budget information. Despite overtaking Vietnam, Bangladesh and Indonesia in Transparency International’s corruption perception rankings, it has slipped two notches in the World Bank’s Cost of Doing Business report.

The government should be arguing from a position of strength in this area given the president’s reputation as an honest leader in contrast to the scandals involving the use and abuse of pork and privilege by those opposite. Team PNoy ought to be taking a suite of reforms to the electorate, including such measures as the Freedom of Information, Whistle Blower Protection, strengthening the powers of the ombudsman, fiscal incentives rationalisation, budget sustainability and transparency reforms. Instead, its campaign has failed to create any daylight between it and the UNA coalition with regard to these issues.

Again, this is in part due to the fact that enacting such reforms runs counter to the populist mode of campaigning it is forced to undertake. Championing the cause of fiscal transparency, openness and sustainability would run counter to the many proposed pieces of legislation that candidates under the administration are espousing at the moment.

I could go on. The plans for generating employment following the release of the latest jobs figures which show fewer people finding work compared to last year ought to spur a debate around the best way to promote inclusiveness in a nation that continues to post robust GDP growth figures. Instead the debate is confined to small minded livelihood programs (despite revelations of pork going to dubious organisations connected to legislators). There really isn’t a debate over how to transform the industrial mix of the nation or on how to direct foreign remittances to productive employment generating activity.

The people within the campaign probably feel that the need to elevate the debate is unnecessary given that its candidates seem to be improving in the polls. The UNA coalition seems to have suffered a few setbacks of its own given the negative press surrounding some of its principals, the ones which I have alluded to above. Yet, recent headlines involving Sabah and the president’s handling of it might cause some damage to its ticket.

To provide its candidates with a greater edge, the administration needs to arm them with solid, well-thought out programs that would demonstrate its seriousness in cementing its reform agenda. Rather than running a race based on populist rhetoric, its candidates need to be equipped with enough detailed policy advice to articulate what these reforms mean and how they would work once enacted. Rather than the airy-fairy platitudes and motherhood statements that they currently mouth, the campaign needs to bring the exalted righteous path down to earth.

If it does this, then voters might not feel the need to hedge their bets with the opposing side; they will provide the government with the majority it needs in the upper house. After all, if the nation were truly convinced that daang matuwid works, there would be no point in undertaking it with half-measures (no pun intended). The only way to pursue it would be to go all in.

A Philippine Sovereign Wealth Fund

The Philippines is suffering from a rare form of “Dutch disease”, the negative consequences of a rapid rise in income normally associated with the export of natural reserves. In our case, the income comes from our export of labour. Overseas remittances rising every year swell our foreign currency reserves. The peso appreciates as a result. This diminishes the global competitiveness of our manufacturing sector with adverse implications for domestic employment.

Meanwhile government keeps borrowing from international markets to finance its chronic budget deficits. This contributes to the upward pressure on the domestic currency as more dollars flow in to purchase government securities. To keep its borrowing down and make credit rating agencies happy, government constrains its spending. It wants to rely on public-private partnerships (PPP) to provide infrastructure which are both time-consuming to arrange and limited in scope.

As it postpones development spending credit rating upgrades keep coming. Each time this happens, fund managers around the world increase the flow of “hot money” into the stock market, thus contributing to more upward pressure on the peso. Property developers also cash in as the value of residential and commercial assets appreciates with the rising peso, which creates even more demand for new development.

The families that receive remittances on the other hand suffer as the purchasing power of the dollar declines. And due to their dependence on these transfers, the income that families receive goes mostly to household expenditures. Very little is invested in productive activity. And when it is, the investment normally goes into retail or transport enterprises, which earn very marginal returns.

For the rest of the population, finding a job is a struggle. Life is hard as there are not enough opportunities that come by due to a dearth of fixed private capital expenditures on plant and equipment let alone research and development. Most of the inflows go to short-term investments, i.e. the stock market, or to fund property purchases, which results in very little job generation outside the construction industry which demands casual employment due to the seasonality of its activity.

This in a nutshell is the problem that confounds the Philippines.

Foreign remittances for the twelve months to January 2012 hit $20 billion according to the World Bank. Remittances for the first ten months of 2012 have already equaled that amount according to central bank figures (with the Asian Bankers Association estimating the real amount to be in the order of $27 billion). This was close to 90 per cent of the Bureau of Internal Revenue”s total tax collections for 2011, and would have been enough to finance that year’s budget deficit four times over. As of November 2012, the country’s gross international reserves (GIR) stood at $84 billion exceeding the BSP’s full year estimate of $78 billion.

This was enough to cover our imports for a full year or to settle all short-term debt obligations 12 times based on original maturity and 6.8 times based on residual maturity (that is short-term loans based on original maturity plus principal payments on medium- and long-term loans of both private and public sectors falling due in the next 12 months).

In fact back in June 2012 when the GIR stood at $76.1 billion, the country’s external debts belonging to both the public and private sectors stood at $62.5 billion. That means the BSP had enough to settle all external obligations and still have roughly $14 billion left over.

The two charts below show what has happened over the past decade. The first one shows that after a rocky first half, the country has been producing consistent balance of payments (BoP) surpluses averaging about 3.8 per cent of GDP from 2005-2011. That is the inward flow of foreign currency exceeded the outward flow by the said ratio. A quick rule of thumb is that 1 per cent of GDP is roughly $2.5 billion or Php100 billion.

So on average, the annual surplus has been about Php380 billion during the past six years. The average BoP surplus is therefore more than enough to accommodate government’s annual revenue shortfall averaging 1.11 per cent a year. The second chart shows the effect these surpluses have had on our GIR. From 2001 to 2011, it has grown on average by 16.7 per cent. Up until 2005, you can see that the line is pretty flat. Afterwards it rises steeply. This means that a tipping point in the flow of overseas remittances occurred back then which placed our BoP structurally in surplus territory from that point on.

Surpluses and deficits, in per cent of GDP

No wonder bond markets have had such confidence in the Philippines. As the saying in business goes, banks will only offer you credit when you don’t need it. The question is do we just keep accumulating these reserves knowing the problems they create for our economy? Or do we actually put the excess funds to good use by investing in the country’s development?

As the title of the piece suggests, we could set up a sovereign wealth fund (SWF) with our excess reserves. The $14 billion mentioned above, which by the end of the year will probably be $15 billion would be the seed money. That is enough to double our infrastructure spending which is currently 1.5 per cent of GDP to 3 per cent, much closer to the recommended 5 per cent, over the next four years. With that added spending, the government could easily meet its aspirational stretch target of growing the economy by 7-8 per cent a year.

Every year, depending on how well our balance of payments performs, we could just keep adding to the SWF. Assuming that the government’s new revenue measures and fiscal consolidation will mean an annual deficit of about 1 per cent of GDP and that the annual BoP surplus remains at 3 per cent of GDP, there would be enough to fund government’s deficit and set aside another 1 per cent to augment the SWF, with the remaining 1 per cent going to GIR.

But we are getting ahead of ourselves. Let us first define what is a SWF? According to the Sovereign Wealth Fund Institute, it is

a state-owned investment fund or entity that is commonly established from balance of payments surpluses, official foreign currency operations, the proceeds of privatisations, governmental transfer payments, fiscal surpluses, and/or receipts from resource exports.

The Institute cites some “interesting facts” about SWFs, namely that some of them “invest indirectly in domestic industries” and that “they tend to prefer returns over liquidity, thus they have a higher risk tolerance than traditional foreign exchange reserves. Most often SWFs receive their initial capital through “commodity exports, either taxed or owned by the government” or through “transfers of assets from official foreign exchange reserves”.

There are about US$5.1 trillion invested in SWFs globally. About three of every five dollars come from oil and gas exports, the remainder from other sources. The size of funds varies from as little as US$300 million for Indonesia to as large as US$664 billion for Norway. Of the 64 SWFs that currently exist, 39 were established since 2000.

Some have argued that the Bangko Sentral is restricted by its charter, RA 7653, the Central Bank Act, from investing in instruments other than Triple-A rated bonds of foreign governments. At the time this law was passed, the problem facing the country was chronic balance of payments deficits. More transfers out rather than in were being made.

The BSP is tasked under the law with maintaining international monetary stability in the country. Part of this according to Article II, Section 64 of the law is “to preserve the international value of the peso and to maintain its convertibility into other freely convertible currencies”.

To maintain such stability, Section 65 says that “the Bangko Sentral shall maintain international reserves adequate to meet any foreseeable net demands on the Bangko Sentral for foreign currencies”. It would have to judge for itself the adequacy of these reserves based on “prospective receipts and payments of foreign exchange by the Philippines”.

Finally, Section 66 lays out the composition of such reserves which it says “may include but shall not be limited to” gold and other assets that took the form of “documents and instruments customarily employed for the international transfer of funds; demand and time deposits in central banks, treasuries and commercial banks abroad; foreign government securities; and foreign notes and coins”.

So why did the central bank governor offer in September of 2011 to purchase Philippine treasury using its dollar reserves given that these notes are not Triple-A rated? Well, he had probably realised as I had back in November 2010 that the Bank already had an adequate supply of reserves to meet international obligations.

Given that the law says nothing about what to do if the Bank were to have more than a sufficient level of reserves we can say that the Bank is sailing in unchartered waters. If the law does not specify what it should do in such a situation, then it should be left to the discretion of its board to decide on how best to deal with it.

Currently, the return on short-term US treasury notes is between 0 and 0.25 per cent, negative in real terms, meaning that the Bank is paying the US government to borrow from its reserves. And the Fed has said that it plans to keep interest rates as low as they are for the foreseeable future until the US unemployment rate goes under 6.5 per cent (it is currently at 7.7 per cent). If the BSP lent its excess reserves to the Philippine government, it would gain a better return and preserve the value of its assets.

Now that we have cleared the financial viability and legality issues, what would be the purpose of a Philippine SWF? The nature and purpose of SWFs are varied, but in the Philippines it might be to do the following (as adapted from the SWF Institute):

  • Protect and stabilise the budget and economy from excess volatility in revenues/exports
  • Diversify our industry sector to make growth more inclusive and robust
  • Earn greater returns than on foreign exchange reserves
  • Assist monetary authorities dissipate unwanted liquidity
  • Increase savings for future generations, or
  • Fund social and economic development.

Given the need to boost productivity and improve competitiveness, addressing the infrastructure backlog would be the most obvious answer. The public-private partnership projects would be a good initial source of demand for funding as these projects are designed to earn a market rate of return for the investor. Another possibility would be for the SWF to enter into joint-ventures with mining firms for the joint-exploration and production of oil and other commodities. This would ensure that we received a larger share of the benefits from such operations.

A third possibility would be to fund innovation through government procurement, business incubators, industry clusters, and competitions aimed at the commercialisation of ideas. Government could serve as a catalyst in the germination of new activity around key areas of specialisation that the country has already exhibited proficiencies in. The expansion of our semiconductor and electronics industry into higher value adding activities could be one priority. The growth of agribusinesses into higher yield crops and again value adding processes could be another. A fourth priority could be the generation of clean technology and renewable energy.

Finally, beyond just the economic, financial, legal and commercial viability, there is the political viability of doing this. Creating a Philippine SWF would be politically astute as it would be seen as the Aquino administration’s unique contribution to the development of the country. The vice president has also expressed his support for the concept of using foreign reserves for development. This means that the measure would have the support of both leaders and their coalition partners in both houses of Congress.

Beyond that, the consensus formed by our leaders would mark the first time a remittance dependent nation’s government deliberately leveraged the income derived from its work force overseas to channel resources into highly productive activity back home. It would be a shift in the development paradigm of such countries and provide a model for them to follow. Just as conditional cash transfers were forged through a consensus among Mexico’s and Brazil’s leaders as a way to alleviate poverty, the Philippine consensus would provide a path for low income households out of poverty and into the middle class by providing jobs to people of low skills through the fruits of their countrymen’s sacrifice overseas.

If we don’t recognise the opportunity that lies before us in this regard, then when our overseas workers return home, all their hard work may come to nothing as their children will then have to go abroad because there would be no jobs left for them here. With the Aquino government’s good governance credentials, it should be able to shape the probity and prudential measures needed to ensure that the SWF is properly managed and its funds transparently and judiciously utilised for public benefit. This would prove that good governance is indeed good economics and that the righteous path can create in the Philippines opportunities not just for some but for all.

The Wrong Solution to the Right Problem

The headline read, “Poverty keeps 16% of youth aged 6 to 17 out of school” but the proposed solution was targeted at older college aged students. What’s going on?

The bill proposed by Senator Peter Cayetano seeks to provide scholarships in state universities and colleges to the top ten per cent of each high school’s graduating class. Something sounds amiss here since college students usually are aged 18 and above and the headline talks of younger students dropping out. Here is how the Senator posed the problem, according to Monday’s edition of the Manila Standard newspaper:

Cayetano, citing the Annual Poverty Indicator Survey, said 16 percent of Filipinos age six to 17 are out of school and 28.9 percent of high school graduates could not attend college because it is expensive [emphasis added].

The article seems timed for the opening of classes in the tertiary sector. It has a nice striking headline that reels you in, but reading further, you realize that it is talking about something else. The thing is there are a few factual errors in need of correction.

First off, if one goes to the website of the National Statistics Office, the source of the survey cited, one will find that in 2010 (the last year survey data has been made available) the sixteen per cent quoted by Cayetano actually refers to youth aged six to 24 (by definition, an out-of-school-youth is a family member aged 6 to 17 not attending formal school or aged 18-24 not in school, unemployed and who has not finished a post-secondary school qualification).

Second, the 28.9 per cent that say the “high cost of education” is keeping them away again refers to those aged 6-24 and not high school graduates solely. Although a higher proportion of those aged 16-24 (around 32%) say they are discouraged for this reason, that proportion is off a smaller number (4.6 million 16-24 year olds compared to 6.1 million 6-24 year olds who are OSY).

This means that there are less, about 1.45 million OSYs, who are prevented from studying due to cost, not 1.75 million as originally implied by Cayetano’s statement, and they would not all be high school graduates either or graduates of public schools for that matter as a good proportion come from the middle to upper income brackets.

If the good senator who claims to represent young Filipinos expects us to take his proposal seriously, it would do him well to get the facts straight especially since he has had time to digest them (the survey has been available at the NSO website since November of last year).

Given the inaccuracies in the interpretation of published data, I would hesitate to take the number of recipients targeted by the proposal, which is just under 25 thousand, seriously either. But suppose we were to do so, that would mean that only two per cent of the target group would be affected by the new policy, if at all given that the way the eligibility criteria is constructed, there would likely be unintended recipients receiving benefits.

Again, given the way the problem was posed, one cannot take seriously the claim that the policy will address it. It seems more like a piece of legislation aimed at gaining attention for its sponsor who is seeking re-election in May 2013 rather than a considered policy approach aimed at systematically dealing with the issue at hand.

To address the problem, one has to recognize the scale and complexity of it. First of all, in dealing with the OSY phenomenon, we need to recognize that there are other issues that may be just as important as cost. For every OSY who sees it as a barrier, there is another who disengages due to a “lack of personal interest”. Among the OSYs of primary and secondary school age, there is about a four-to-one and two-to-one ratio respectively of those who find “lack of personal interest” versus those who identify cost as the main barrier. Dealing with the cultural and social factors for this lack of interest would be just as important, if not more so, as dealing with economic factors.

Admittedly, when one goes on to the older age category, those 16 to 24 year olds, the relationship is reversed. Lack of personal interest is only 21% compared to 32% who find school too expensive. Needless to say, influencing personal tastes and preferences might be the low lying fruit that government might seek to exhaust first prior to it turning to the more vexed problem of cost.

Secondly, as cost becomes a major factor the older one gets as only one in ten OSYs aged 6-11 consider cost the main barrier to education compared to three in ten for those aged 16-24, the policy response needs to be measured in relation to the scale. Tuition, incidental and opportunity costs all increase dramatically the higher one goes up the education ladder.

If we can retain students up to Year 12, give them an alternate vocational education track that would entice those with very low personal interest in academics, provide apprenticeships in schools that make them ready for work, then they will have a fighting chance whether they pursue further education at the tertiary level or not. They will be less likely to settle for informal, low skilled, low wage employment. This is why the K-12 reform is very important.

Thirdly, as a corollary to the second point, aside from the K-12 reform, what is needed is an expansion of the coverage of CCT beyond the current band of 0-14 years of age. It is important to keep the older youth engaged in education because as our labor statistics reveal, the bulk of our unemployed are aged 15-24 years old. In 2010, there were roughly 2.9 million unemployed, and roughly 1.5 million of them or 51% were 15-24 year olds (the numbers have hardly changed since).

If these youths had been engaged in full-time study, the unemployment rate of our workforce would have halved. That is why our unemployment problem can be seen largely as a youth unemployment problem. The priority for the government is to get them engaged in full-time study if they cannot find employment.

The challenge now would be to quantify the cost associated with a youth allowance for the OSYs aged 15-24 which would be conditioned upon full-time study. I estimate there to be about five million youths in this category. Assuming that we target a third of this population (roughly the proportion of those belonging to the bottom income quintile or 1.6 million of them) and allow a more generous allowance of 750 pesos per student per month compared to 300 for primary school students (because of the increased cost of higher learning), that amounts to 15 billion pesos more to be added to the CCT budget which will be 45 billion next year. Of course, the inevitable question then becomes where to get the money. That is a topic for another conversation.

Finally, when it comes to the area of university scholarships as a part of the solution to the OSY problem, it is best to consider it within the context of tertiary education funding in general. Creating entitlements for one group of students without providing for the necessary funding inevitably means forcing institutions of higher learning to charge greater fees to the rest of their students. Would that be a fair and equitable thing to do? Again, that discussion opens a whole new can of worms, which is meant for another day.

Let me conclude this by saying that the short-sighted thing to do would be to consider further education purely a cost, without realizing that a more educated, highly skilled workforce in today’s technology driven world is an asset that pays off for society in the long-run. At least in quantifying the problem properly, we are able to see whether any proposed solution would make a dent in it; and clearly, the one put on the table by Senator Peter Cayetano misses the mark.

At last, some sen$e!

Monetary officials have finally learnt how to deal with the rising peso–something I have been advocating they do since late last year.

When I flagged the problem of an appreciating peso back in November 2010 (see What Should be Done About the Rising Peso?) and suggested some ideas on how to remedy the situation (setting up a sovereign wealth fund), I was met with more than a little bit of skepticism by readers. At that time, our foreign reserves climbed to $44 billion from $33 billion a mere eighteen months earlier.

In January this year, I pointed out the strategies of similarly situated Latin American central banks and finance ministries (see What Should be Done with a $14.4 billion BoP Surplus?). My advocacy for us to turn to methods outside the traditional toolkit of monetary policy seemed far-fetched as Bangko Sentral officials then were expressing satisfaction with the effectiveness of their interventions in the currency market. Again, my ideas were met with a bit of scorn by some readers.

And then in July this year, when our gross international reserves for the first time exceeded our external debt obligations, I made the following policy pitch in Crediting the Upgrade:

To prevent the peso from rising, what the government could do is coordinate with the BSP so that it could issue treasury notes and have the BSP purchase them (much in the same way the US Federal Reserve bought US treasury securities under Bernanke). This would lower the borrowing cost of the government given the BSP’s views that the country is actually of investment grade.

The proceeds of this could either go to funding the fiscal deficit, or as we reach a balanced budget over the next two to three years be used to set up two funds. The first could be called the Philippine Enterprise Innovation Fund or PEIF. The second could be called the Regional Philippine Infrastructure Fund or RPIF.

I had honed the idea from suggesting a sovereign wealth fund that would look at investment opportunities both domestic and overseas to more inward directed investment opportunities. The channel through which the fund would be created was to be through the BSP purchasing sovereign debt issued by the National Government (in effect becoming a creditor of the government). This would reduce our need to borrow from abroad, which would lower the pressure on the peso to appreciate.

With this last pitch, I thought I had a winner, although not much in terms of reader response occurred. Also, as the storm clouds seemed to gather on the horizon, I found the BSP’s response to be similar to the government’s–a wait and see strategy, which I felt needed to be more pro-active (see Bullet-proofing the Economy and A Full-Blown Economic Storm). The government was still banking on its credit upgrade and private partnerships to save the day.

The policy space just seemed sterile with worn out mantras and textbook formulas. Then today, I gained some level of comfort in discovering that our officials might have finally “seen the light” by reading Benjamin Diokno’s column. In it, he describes the offer made by Bangko Sentral Governor Armando Tetangco to loan the government dollars and be repaid in pesos as a “Win-win Move“!

What might have tipped the conservative monetary authorities over was the Philippines attaining its full-year gross reserves target of $75 billion in the middle of the year. Diokno highlights the precariousness of maintaining current fiscal and monetary policies by saying,

(F)or every peso appreciation, BSP stands to lose P75 billion. Isn’t that awful? Hence, Mr. Tetangco is not offering the government out of the goodness of his heart; he’s doing it because it’s the prudential thing to do. It’s a win-win solution to our economic woes: it helps BSP in its war against peso appreciation and, at the same time, it helps the government pay for its foreign debt without incurring serious foreign exchange risks….

In hindsight, it was not even necessary for the Philippine government to borrow from the World Bank and the Asian Development Bank to finance its conditional cash transfer (CCT) program. Floating five-year Treasury bonds would have been a better way of financing the program.

At last, even traditional economists are beginning to realize what a golden opportunity the Philippines was sitting on! Ah, yes! There are times when it just feels good to be right. And this is definitely one of them. Let us hope our finance officials are able to learn the “policy catch-up” game just as our monetary officials have finally learned to. It’s about time they gained some sense.

The Power of One

Assessing PNoy’s freshman year: the good, the bad and the ugly

In numerology, the number 1 bears singular importance. The first, the start, the origin of anything bears significance and meaning in the sense that it opens up possibilities, it sets the scene, and it leads the way. The level of anticipation and anxiety is always highest at the start.

The mistakes and lessons, the first impressions and achievements all have lingering effects. So it is with the first year of PNoy’s administration: the learning curve, the birthing pains and the wall of public expectation he has had to scale was close to insurmountable.

Comparisons and contrasts

In assessing his first year, the problem of finding an appropriate yardstick has been highlighted before. For those that attempt it by way of contrast, PNoy has done a remarkable job in his first year simply by not being Mrs Arroyo. Some similarities can be drawn with his mother in that she too had to sort out a lot of problems left behind by Mr Marcos and high expectations on the part of the people.

Others like me have drawn some parallels between PNoy and Estrada in the way the president went about managing factions within his cabinet. Some have questioned the president’s work ethic. ‘Do nothing’ was a constant line of attack presented by his detractors.

The question here is, had PNoy not succeeded Mrs Arroyo, how would his first year have been measured? Corollary to this is, had PNoy not been an Aquino, how would we perceive or rate him? The nation treats PNoy almost like an older brother or ‘kuya’. His being the son of ‘Tita’ or Auntie Cory makes an objective assessment difficult because of kindred ties and the ‘halo’ effect.

Factoring out the ‘noise’

Then there is the problem of events outside the evaluatee’s control, or the noise factor. The worsening global economy emanating from the Eurozone, Japan and MENA as well as from the US, have been used to explain the weakening foreign investor confidence in the Philippines.

As Ben Diokno rightly points out, our relative performance to some of our ASEAN neighbors allows us to factor out the ‘noise’ in that our peers in the region all have experienced the same global slowdown, but as the first quarter data shows, they were able to increase their levels of foreign direct investments, while we saw ours shrink.

We need to bear this in mind whenever we hear officials justifying the slowdown in our economy by citing global affairs or cyclical factors like the elections of 2010. We might be maintaining growth in an absolute sense, but in a relative sense, we might fall behind our neighbors in the region. We therefore need to determine whether this poor performance relative to them is due to some of the things the administration is doing or failing to do.

Progress made

Having said that, I would first like to focus on the positive things I believe the administration has done. This would include both its tangible and intangible achievements. I will start with the tangibles.

The introduction of universal kindergarten in public schools which studies show provide long-term learning benefits, the reduction of hunger most recently attributable to the conditional cash transfers program which is really designed to address intergenerational poverty and not fix the unemployment problem in the near term, and the reform of government corporations and debt management which have led to meaningful savings for the government are all worth a positive rating.

With regard to intangibles, the confidence engendered by the government which has led to private domestic firms releasing pent-up demand for capital goods and the greater trust or faith in government leaders are two things that this administration can be congratulated for. If the government can continue to make inroads in these areas it will have done a tremendous service to the Filipino people.

Needs improvement

On the needs improvement column, I would have to cite firstly the government’s handling of its legislative agenda. Both the scope and the pace at which it has been pursuing this have serious flaws. The absence of the FOI and RH bill among its priority measures for instance was a major failing. The fact that it took nine months for it to hammer out its agenda led to meager legislative trophies in the first year.

Secondly, our response to China’s emerging role in the region as a superpower to counterbalance the US our traditional ally has been all over the place. First, we sided with China unnecessarily in not attending the Nobel Prize conferment ceremonies for one of its leading dissidents. Then, in handling the Spratlys issue, we engaged in sabre rattling by sending out a navy vessel into disputed territory, again unnecessarily. A more considered and strategic foreign policy is required.

Thirdly, in prosecuting cases against Mrs Arroyo and her allies, many will assail the efforts of PNoy as unsatisfactory or timid, as several church and citizen’s groups have done. Personally, I would not consider this too much of a problem, but I know that many have that expectation. So what I cite as a failure by this government is its inability to manage such high expectations. More importantly, I would like to see greater safeguards and economic measures put in place to ensure that the Ombudsman and Solicitor General’s office are well resourced to perform their functions.

Sharper focus required

Finally, I would like to cite areas that deserve sharper focus by this administration. These are things that the administration needs to prioritize if it is to make a lasting impact. The first has to do with its development strategies contained in the Philippine Development Plan 2011-2016. As I have stated in a three part series, entitled the National Development Program, there are serious gaps in the Plan that need to be addressed.

Secondly, in its first year, the government has shown serious shortcomings in its budget plans and execution. Having had a head start by way of Congress’s early approval of their budget, the government should have done better at releasing its funds for infrastructure projects. The practice of forced savings due to off-target collections also has to be addressed. This cannot continue as per the ratings agencies reports if the nation is to keep to its growth trajectory.

Thirdly, in generating much needed employment, this government has to start thinking ‘outside the box’ if it is to keep up with the growing workforce. PPP’s or public-private partnerships are an existing tool already wielded by preceding governments. For it to have a successful employment program, the administration will have to develop a robust industrial policy. To do that it needs to reshape the economic bureaucracy as I have pointed out here.

Looking back, moving forward

A periodic performance appraisal is always necessary for any government to benchmark itself against the undertaking it has given to the people, to celebrate successes and take stock of where it needs to improve or devote more attention to.

The first year of any government is always the hardest. Unexpected roadblocks and landmines often litter its path. The ability of any regime to survive its first year relatively unscathed or even stronger than before usually is a good indicator of the caliber of its leaders.

We will have to say that the government despite all the sound and fury has survived relatively intact. The remaining five years will contain many twists and turns. Hopefully, the correct lessons from its first year will help inform these remaining years. For this reason, it is important for citizens to remain as engaged as they have been during this first year as we here at Propinoy are determined to be.

Predicting the coming labour shortage

When will the Philippines reach its tipping point?

Suck! That was the sound of jobs and investments being plucked out of the West and sunk into China. That was then.

As the world economy gradually recovered from the global financial crisis in 2010, there was talk of the People’s Republic finally having reached a tipping point that would see it transitioning from being a predominantly labour-surplus economy to one that suffers from labour-shortages.

Last week as the Benign One appealed to employers to give modest pay increases as a way of quieting labour groups following the May Day celebrations, authorities in China were for the first time entertaining the possibility of allowing their currency the Renminbi to appreciate to increase worker purchasing power and tamp down inflation.

Wages as a share of GDP in the People’s Republic had peaked in 1985 at 57% and then dropped to 37% in 2007 (making it one of the most capitalist big economies of the world). They are expected to rise steadily from now on. By 2020, a dramatically different picture will emerge. The words ‘cheap labour’ and ‘China’ may not hold together for very long; good news to the Western world which has been suffering enormous trade deficits with this manufacturing powerhouse from the East.

The shift from a predominantly young to an increasingly aging work force is the result of family planning policies instituted in the early-80s with the famously draconian one child policy enforced in urban centres being the most prominent among them. As the number of jobs available continues to outstrip their capacity to fill them, the Chinese communist party has increasingly allowed unions to exert their bargaining power in several sectors of the economy to prevent social unrest.

Today rising wage inflation and a demographic transition have some talking of a significant slow down in growth of the world’s second largest economy (from the 10 to 12 per cent experienced in the last decade to 7 or 8 per cent). Chinese wages are going to rise significantly over the course of the next decade. This will cause it to shift from an export driven economy to one that is mostly consumption driven.

The Philippine case for a tipping point

Because of the uneven distribution of human capital in the Philippines, comparatively higher wages and skills shortages in some areas exist alongside a substantial labour surplus. There are patches of skills shortage while large swathes of the populace are unable to find employment.

The record of job generation over the last twenty years has not been all that bad though. As I previously stated (in a piece entitled Jobless Growth: Fallacies part 2 posted last year in this space but no longer available): nearly twelve and a half million net new jobs were created compared to twenty five million in the US which has close to four times our population.

This led me about a year ago (in another piece entitled The Coming Labour Shortage posted in this space but no longer available) to predict when the country might approach a tipping point of its own. Using modest economic growth figures and a steady slowing of growth in the labour force (which have been observed over the past two decades) my optimistic forecast was for our transition to a labour shortage situation to begin as early as 2015/16.

The more realistic scenario I came up with is for the two to be in balance around 2020/21. Beyond that I predict that labour demand will outstrip supply (see graph right). Incidentally, the value of labour supply that I predicted for 2009 was off by 30 thousand from the actual growth that was recorded (it sounds big, but it represents only one tenth of one percent margin).

Had we consistently adopted a set of sound family planning policies as late as the 1990s, we would have seen a more balanced labour market. Unfortunately, reproductive health and family planning have not found traction in our country. It would be good if our leaders started focusing on the big picture rather than the daily to-ing and fro-ing over who wins in the daily 24 hour news cycle. I would much rather prefer a discussion about how to hasten the day when we no longer need to export our work force.

The good news is that even under the “do-nothing” scenario, we seem to be heading for a tipping point within a decade. The bad news is that this might lead us to think that we can sit back and literally, “do nothing.” A complacent administration might be content with maintaining current policy settings and engaging in populist rhetoric to gain short-term political wins. Unfortunately, this is too often the case.

As I mentioned last week in a three part series on the eve of the anniversary of his election into office, the presidency of the benevolent one has so far suffered from a lack of strategic focus. I laid out a case for the following:

As a result, the public that voted him into office has been experiencing what social scientists call cognitive dissonance or noise created by a deficit between what they were made to believe would come to them and what they ultimately experienced after buying into his candidacy.

The Employment Plan

The Employment Plan 2010-2016 released a few weeks ago aimed to create a net increase of one million jobs per year. It was a carbon copy of the past administration’s often missed policy goals. Unfortunately, we do not yet have a Freedom of Information Act that would allow us to scrutinize in minute detail the manner by which the government came up with this figure.

Is it plucked from thin air? Is it just one of those “stretch targets” as I suspect it is? Do they have detailed industry, occupational and regional breakdowns of these projections? If so, is there a coherent strategy for building the skills base in the right areas to avoid serious skills shortages as is already apparent in some occupations?

There is an oversupply of college educated graduates and not enough vocationally trained ones. The K-12 expansion of basic education hopes to address this imbalance by introducing school based training in the trade occupations by 2015-16. The lessons from advanced economies tell us that such training has to be continued by employers through an apprenticeship or on-the-job training program supported by the government.

Meanwhile programs to reduce school attrition like the cash payments to poor parents need to be put in place so that more and more primary students stay in school and are able to acquire enough skills to be gainfully employed. The upgrade of teachers, educational facilities and resources also requires funding. The role of former state polytechnics to provide a pathway from vocational education into higher education has to be defined.

Not enough energy has been spent explaining what these reforms would mean. Instead the president has been parrying allegations about his poor work ethic. Ten to twenty years from now, this will all seem so petty and meaningless. Today however it is on top of the agenda.

The year 2020 might seem so very far away, but it isn’t really. It is less than two presidential terms away. In the final analysis, if the Philippines were to follow in the footsteps of its East Asian counterparts in reaching a tipping point by then, it will only be because its leaders were willing to do the heavy lifting today.

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)

Round and round we go

Prof Solita Monsod in her weekly column for The BusinessWorld quotes a paper authored by Ms Rosario Manasan of the Philippine Institute for Development Studies or PIDS a government think tank which estimates that based on its current trajectory, the Philippines will meet the Millennium Development Goal (MDG) target of achieving universal primary education by (brace yourself) 2079(!) sixty four years behind the 2015 deadline.

That is unless the government changes its course and raises education expenditures in the near term. Currently there is a mere 65% completion rate of students that enter primary school. Many factors contribute to the high attrition rate, most of which we are all too familiar with: large class sizes, poor teachers, a backlog of classrooms, materials and clean drinking water, improper access for disabled and indigenous children.

To bring the current attainment rates up to 90% by 2016 (the end of President Aquino’s term) would require a near-doubling of the current education spending in the next year according to the paper. Manasan provides forward budget estimates of P382 billion (3.8% of GDP) for 2012, P308 billion for 2013 (2.3%), P325 billion for 2014 (2.8%), P341 billion for 2015 (2.7%), and P355 billion for 2016 (2.6%). The spending “surge” in 2012 includes provisions to bridge the capital spending backlog accumulated over recent years. The likelihood of this happening is very low considering the fiscal consolidation being undertaken to contain public deficits and debt.

Given its inability to raise and sustain a tax collection rate above 15% of GDP (Manasan says it should be around 18%), the government has resorted to expenditure contraction as a means of keeping its deficits in check. To raise its tax take to the prescribed level while sticking to its “no new taxes” pledge, the Aquino administration would have to pull a few policy levers at its disposal. What are these? Well, they’re the usual suspects: rationalizing tax exemptions to investors, restructuring excise taxes on sin products, and reforming the road users tax.

These are all familiar prognostications. After all the animosity the government has recently faced over reducing subsidies for commuter trains, highways and utilities, the politics of increasing rates on alchohol, tobacco and automobiles would make the enactment of two out of the three proposed measures unlikely.

Improving Retention

In this year’s budget the Aquino administration has tried to improve retention in schools via the demand-side of the equation by placing more money in the conditional cash transfers (CCT) program. This is a recognition that apart from inadequate inputs from the public sector, it is the lack of family income that drags attainment levels down. The problem of course is that once demand for education on the part of families is stimulated, supply on the part of the government will have to surge to meet it.

So round and round we go, locked in the policy/spin cycle until the year 2079…unless of course we introduce some kind of structural “break” in the process. That could come in the form of a reproductive health act that would allow parents to make informed decisions about the number and spacing of their children. By all accounts, that would mean lowering the average size of each household if the true wishes of parents were fulfilled. If this were introduced this year, its effects would be felt in the kindergarten enrollment levels of 2016. While current enrollment growth rates are already declining, the reform would slow them down even more. This would allow the government some breathing room to catch-up with the demand for schooling.

Many players on both sides of the debate do not seem to appreciate just how close their positions are.

Of course the reason why past incarnations of the RH Bill have failed to make it through Congress is the opposition faced from the powerful Catholic bishops. From watching the panel discussion on Al Jazeera TV (see video clip embedded below), the main stumbling block in this Congress has been what an abortifacient consists of. Bishop Ted Bacani seems to accede to other forms of man-made contraceptives that prevent conception. Perhaps this is in part due to the Pope’s own statement regarding the acceptability of condoms in preventing the spread of HIV and AIDS.

Many players on both sides of the debate do not seem to appreciate just how close their positions are. While the current RH Bill does not explicitly enumerate the different forms of legal and safe methods of birth control that would be offered; by the same token, it does not seek to legalize abortion either. The position of the clergy seems to be that under the bill, substances, both herbal and synthetic, that induce termination of pregnancy (abortifacients) could be construed as legal forms of contraception. An example of this the morning after pill, that in some countries has been offered to victims of rape, might form part of the mix unless explicitly prohibited.

As presidential spokesman Edwin Lacierda pointed out, that was an issue up for debate. The disengagement of the bishops from the process is the reason for the current impasse. It is quite unfortunate that Ms Beth Angsioco an advocate of the RH Bill was not asked to clarify her position on the matter. It would have been enlightening to hear it rather than the toing and froing over rights that occurred. It should be noted that even in countries where abortion is legal, the use of such morning after pills is tightly controlled. For the sake of guaranteeing its passage through Congress, it would be best for advocates of the bill to compromise and  leave the debate over whether or not to legalize abortifacients for another day.

[youtube http://www.youtube.com/watch?v=FXYo5kmc6Mo&fs=1&showinfo=1&rel=1]

 

Untangling the Complex Policy Web

Returning to the issue of how to finance education. It is quite clear that in the near term, the bridging of the education gap will be difficult particularly because the government is hoping for a credit upgrade from the various rating agencies. This would mean reducing the fiscal deficit to within 1-2% of GDP. One cannot discount the benefits a one or two notch upgrade would bring about. You cannot get there without fiscal consolidation or controlling cost pressures in the budget, improved collection by the government revenue agencies recently reported notwithstanding.

The basic source of this gap is the sheer size of our population. Reducing its growth rate even fractionally would have huge benefits down the track in terms of education, health and employment outcomes. The government may not be able to attain the MDG target by its deadline, but it can lay the groundwork towards balancing the conflicting policy goals it has to contend with at the moment.

The devil you know

In his weekly column for the Inquirer, Prof Cielito Habito highlights the opening salvo of the former president Gloria Macapagal-Arroyo as a member of the opposition in the House of Representatives. As it turns out, Mrs Arroyo has chosen the Conditional Cash Transfers scheme (or CCT) that she introduced during her term as president which is now being expanded rapidly by PNoy her successor as the issue with which to mount a critique on the priorities being set by the present administration.

Using her expertise as a former Social Welfare and Development Secretary, Mrs Arroyo claims that the cart is being put before the horse. In this case, that the capacity of the DSWD to double the scale of its CCT operations is questionable. She criticizes the sequence of spending priorities. First expand the schools and healthcare facilities or at least expand them at the same pace that you expand cash transfers to the poor conditional on their accessing these services she claims or the money will be wasted.

Mr Habito on the other hand defends the position of the current president to adopt and even expand a program begun by his predecessor

By doing so, President Benigno Aquino III and his Cabinet have departed from the familiar habit of traditional political leaders of setting aside every initiative of their predecessor, for the sake of making their own mark. It takes magnanimity and statesmanship to do that—and humility too.

This article however is not about the merits of the CCT scheme. It is about the role of a responsible opposition in a functioning democracy. By opting to confront the PNoy administration on detailed policy matters such as this, Mrs Arroyo has taken to her new role in the opposition seriously in an appropriate manner.

I know. I know. We are all so used to Arroyo bashing by now that any attempt by her to exercise prerogative in her current capacity will be brandished as a form of political opportunism and partisanship. Not so, I believe in this case (put down those clubs and pitchforks for a moment, please!). Although as Habito points out, there are reasons to downplay Mrs Arroyo’s concerns, she does raise valid policy questions as to the timing and appropriateness of the massive build-up of the program.

This is what a responsible opposition ought to do.

Despite what her critics say about her intentions for seeking a seat in the lower house, Mrs Arroyo who has been silent so far regarding so many issues during PNoy’s first 100 days that other grandstanding politicians have readily exploited, and despite the antagonism she has faced with the formation of a Truth Commission to look into allegations of corruption by her, has demonstrated restraint and a respect for the office she formerly held for nearly a decade.

Contrast that with the intelligence reports concerning renewed destabilization efforts by one anti-Aquino group called the Solidarity for Sovereignty (S4) which took out a full-page ad on Tuesday in the Inquirer declaring all elective seats in the current government vacant due to the unconstitutionality of the 2010 elections and calling on the armed forces to perform its duty under the constitution to supposedly withdraw its support to the current administration.

This group which is said to be composed of former contenders in the presidential race as well as some allies of Mrs Arroyo is seeking to sew doubts about the legitimacy of the current administration under PNoy through such means as highlighted above. These moves are basically an unwelcome throwback to the past and have to be regarded with disdain for their unwarranted accusations and baseless claims. The conduct of the elections, though seen to be faulty in some respects, was given legal and constitutional cover by several branches of government and recognized by the international community as being fair and reflective of the will of the people.

What’s good for the goose is good for the gander you might say. The move is being lifted from the playbook of the groups behind efforts to unseat Mrs Arroyo during her last five years in office. But, if the country is to move forward in developing sound institutions of democracy it has to get passed this habit of destabilization in the pursuit of power. The opposition has to act responsibly. No matter what the critics say about Mrs Arroyo, she is at least demonstrating some maturity in her new diminished role as a representative of the 2nd district of her province.

Of course, the more devious minds out there will speculate that this is all for show. That overtly, she is projecting this image of an honorable lady of the house, while covertly funding the conduct of such shady and questionable activities. I leave it to you, dear reader, to form your own opinion on that.

Image credit: Bulatlat.com