DAP

What Mar Roxas, et al can learn from Jojo Binay

He must get under their skin. A lot. By them I mean the good governance (GG) club comprised of Mar Roxas, the Liberal Party (LP) headed by Senate President Frank Drilon and Budget Secretary Butch Abad, civil society and Big Business. As to why, after four years under an honest leader like President Noynoy Aquino (PNoy), who has been pushing for institutional reforms in the bureaucracy with some modest gains, the Filipinos seem set to throw their lot with someone in 2016 who does not come from their flock?

By ‘someone’ I mean Vice President Jejomar Binay, whom they regard as an apostate to their gospel of GG. He has the highest approval rating of any public official in the land including that of PNoy. The latest nationwide poll conducted by the reputable Pulse Asia shows him way ahead of rival contenders for the presidency. Even if you grouped together the support for Grace Poe, Mar Roxas, Allan Peter Cayetano, et al, Binay would still come out on top.

And nothing seems to be able to slow him down from claiming the presidency in two years’ time. Not the revival of old corruption charges against his wife, the former mayor Dr. Elenita Binay, nor allegations of misuse of PDAF by his daughter who is in Congress, not even allegations of overspending on a public car park by his son, the current mayor of Makati, seem to break his stride. To top it all off, the three siblings of PNoy have all but come out in support of Binay’s candidacy.

Talks of a merger between the LP and Binay’s party UNA as well as possibly extending PNoy’s term are all aimed at one thing: ensuring the survival of the Liberal Party as a fighting force into the next presidential cycle. But these demonstrate just how desperate the GG crowd is at the moment with elections in 2016 on the horizon.

It’s one big conundrum that bedevils them. If PNoy has proven that the GG works, why do/es his heir/s apparent appear/s to be languishing at the bottom of the presidential derby? And corollary to that, why is Mar Roxas, his partner in arms, not able to gain the support of more people?

It is no secret that Big Business supports the candidacy of ABB (Anyone But Binay). They are represented by Bill Luz, the former executive director of the Makati Business Club, who now heads the National Competitiveness Council, which is geared to lift the country’s competitiveness in the World Bank league tables, by reducing redtape as measured in the Doing Business Survey.

It is Big Business, also going by the moniker “civil society” that have been trying to oust the Binays from their perch as rulers of the Central Business District of Makati since the people power revolution ensconced them in city hall back in 1986. It is no secret that it is this group that Secretary Mar Roxas associates with, given his own family’s commercial background as owners of the Araneta Centre in Cubao.

Ironically, the way the Binays have fought off the pressure from the business community has been through an inclusive growth and development agenda in the city, something that the GG club have yet to implement elsewhere. The Binays have made sure that the business community paid their fair dues in the form of city and real property taxes to ensure that the lower income classes benefited from the growth of the city.

The problem for the GG crowd is that the Binays, despite being considered ‘stationary bandits’, have proven to be benign autocrats of Makati, fostering an effective program of human development among the poorest in the city that has become the envy of the rest of the nation, without sacrificing the growth and competitiveness of the city.

Indeed, in Bill Luz’s most recent competitiveness rankings for cities and municipalities in the country, Makati has come out on top. Now how can a city which is supposedly run by a corrupt, dynastic, autocratic family remain on top of competitiveness surveys and produce human development indicators that are the ‘best in class’?

The answer is not good governance, but ‘good enough’ governance.

Wait. Hold-on, you might say. The economic vibrancy of Makati comes from its business community. They are the ones who make Makati great. You would only be half right in thinking that. What makes a city competitive is the regime of taxes and regulations, as well as the quality of services offered to residents and businesses. The economic vibrancy of a city can be attributed to the business sector, and for that Makati only comes in second in Luz’s study.

At the national level, we have seen the limits of GG in formulating what Chalmers Johnson called a “plan rational” for the country to govern and expand the economic spheres of activity through robust, coherent policy and regulation.

If you look at the national economic agencies of government, they are in total disarray. The country is heading for, or perhaps already is in, an energy crisis, with rotating brownouts now a reality in several parts of the country (coming to your neighborhood soon, unless PNoy invokes emergency powers, says Energy Secretary Petilla). Power rates are the highest in the region and yet regular power outages may be in the offing in Metro Manila next year. This will severely impact the country’s competitiveness.

Then there is the so-called “ports crisis” as the logistics industry is up in arms with cargo unable to leave Manila’s ports due to no integrated master plan for Manila and the surrounding regions. The LTFRB has been in conflict with the MMDA, unable to process applications for truckers on time, which has led to the prevalence of unlicensed operators. Provincial buses are another cause of paralysis.

We turn to rail policy and here, it was not too long ago the manager in charge of maintaining the Metro Rail Transit came under fire for favoring bidders with close relations to his family. Frequent breakdowns and accidents have resulted causing the riding public to suffer delays and lower productivity due to inefficient public transport.

The PPPs that came into effect this year were improperly co-ordinated causing great aggravation to the motoring public as roads and elevated skyway projects have simultaneous commenced, almost in a mad rush to leave a physical legacy after PNoy steps down from office.

The airports have notoriously been a source of shame for the country being labelled the worst in the world. With the NAIA-3 becoming fully operational, some of the congestion will be eased, but only slightly. To cope up with increased demand, another runway at Sangley Point needs to be rushed. It took a decade to get NAIA-3 finally running, how long will it take for Sangley to come on stream?

Shifting to telecommunications and internet policy, we have one of the slowest, if not the slowest internet speeds in the region. Congestion experienced by networks has been the subject of much investigation in the senate as complaints of bad service permeate. It seems that the regulatory body in charge has failed to set the proper framework to ensure that services offered by private providers was adequate to meet the needs of an increasingly technology-connected population. The high cost and poor quality of service again affects our global competitiveness.

Transportation, information technology, communications, and energy policies all play a significant part in expanding the economic activity of a nation and are a major input to the cost of basic goods. Without robust regulatory agencies staffed with people who have not worked for the big players or are in cahoots with them, supported by a good attraction and retention policy, the result is what we see.

Secretary Mar Roxas was in charge of the Department of Transport and Communication for a good period of time. The policy frameworks in the areas of air, port, rail, logistics, information and communication were within the scope of his portfolio. The current secretary was apparently hand-picked by him. The GG agenda seems to have stalled if not utterly failed to set the right framework for future growth. Electricity, transport and communications policies are all in shambles.

Yet, PNoy’s presidency has almost solely been devoted to improving the expenditure side of government through reforms in the Department of Budget and Management. For an administration to be so focused on the efficiency of government expenditure means it concerns itself with only one fifth of our economy (which is what the national budget represents). The economic regulations, however, affect the whole economy because of their impact on both the public and private sectors.

The reason why PNoy was so focused on reforming the budget process? He wanted to prove that his GG mantra works. And yet, all that happened was a slowdown of expenditure in the first two years of his presidency, leading to a halving of economic growth. His budget department tried to fix this with the Disbursement Acceleration Program, which has now gone down in flames.

The LP through Sec Abad is now pushing for bottom-up or participatory budgeting through local government units with Mar Roxas, now secretary for the interior and local government in charge of handing out grants to them. Can the GG club redeem itself, following the DAP debacle in the lead up to the elections?

The problem with this scheme is that expenditure is only one side of local government success. You need a proper taxation regime in place. When Jejomar Binay spoke before the influential Centre for Strategic and International Studies in Washington, D. C., he narrated the challenge he faced when he first became mayor of Makati. The city’s finances were in disarray, experiencing chronic deficits. He needed to fix it through proper revenue measures to improve the quality and availability of services.

PNoy entered Malacanang Palace with a “no new taxes” pledge, which has resulted in no new revenue measures being passed except for the sin tax law, which Frank Drilon championed in the senate. Unfortunately, this pledge has limited his ability to fulfill his social contract with the Filipino people.

Meanwhile his acolytes in the senate keep proposing measures to erode the tax base by increasing exemptions, or reducing tax rates. They also want to increase the salaries and benefits of government employees, en masse, thereby putting upward pressure on spending. These senators, who have not had a day of executive experience in their political lives, would not know how to balance a budget if they were to succeed PNoy in 2016. And yet each of them would vie for the mantle of GG.

The social contract came with the age of enlightenment in Europe. The covenant entered into by the state and industry was one whereby taxes would be imposed on businesses; and in return, the state would provide basic public education and sanitation to provide a healthy, literate workforce for the factories being built during the Industrial Revolution. Here we are in the 21st Century and the proponents of our social contract do not understand the essential bargain required to educate masses with the skills needed for the Information/Digital Age.

The GG club’s approach to higher education is to shut down erring schools. PNoy said he charged CHED Chair Licuanan with closing the nursing schools who were producing graduates that did not pass the nursing board exams. She then proceeded to form “commandos” to do just that. Three years later, and according to the government’s own statistical report card, the proportion of board passers has actually declined, not risen. What happened here? Did they really go after erring schools, or just the ones that posed a threat to the big universities?

Meanwhile there is still not an adequate level of financing for higher education in place that would make tertiary education an entitlement, and lift the quality of the sector. Our universities continue to slide down the global league tables.

In each of these policy spheres, the responsible agencies have been susceptible, if not downright captured by large industry players whom they were meant to regulate. Policies are not being developed by independent agencies. As a result, the needs of clients and the nation at large have not been looked after. There is no long-term view to policy. In addition, the technical and leadership capacities of people running these agencies is severely hampered by a lack of proper resourcing.

For the economy to expand rapidly, it requires rational players in economic agencies who come from the best and brightest. These individuals need to be selected on the basis of merit. They need to have the resources to be able to fulfill their mandate. Our competitiveness and future economic vibrancy depend on that happening.

Coming back to Jojo Binay. If you look at the performance of his own housing portfolio through the government’s own statistical scorecard, his agencies look like they are hitting their targets. This is again another feather in his cap—unlike the GG scorecard, which shows PNoy’s government failing in all but one indicator of the World Governance Indicators, the one for political stability, which has come about through his popularity and taking care of the military and police through the budget.

As we come to the final third of PNoy’s presidency, it does not look like the GG goals are going to be met, nor do we find a rational set of policies being laid down to govern the economy’s expansion. For investments and jobs to be created, we need to have a high performing economic bureaucracy taking charge of all these policy areas. Unfortunately, so far we have not built that capacity and the results speak for themselves.

What Mar Roxas, et al from the GG club can learn from Jojo Binay is the following:

  1. Governance is in the doing, not the talking.
  2. Governance is about developing rational, long range policy, independent of vested interests, i.e. the major players in industry.
  3. Governance needs to be felt on the ground for it to be sustainable.

The Binays represent a formula of benign, “good enough” governance that has worked at the local level for over two decades. For Mar and the rest to offer a viable alternative to him, they will need to provide us with concrete evidence that their formula for GG has done what Binay and Makati has been able to achieve. Sans that documentary proof, they might as well throw in the towel.

Our experience with PNoy has exposed the limits of GG. The thesis that kung walap corrupt, walang mahirap. Binay on the other hand has proven the success of “good enough” governance. It has proven to be more appropriate given our stage in development to be content with setting the framework for business to thrive and expand, while ensuring that they pay their fair share to make this growth inclusive.

It doesn’t matter that he has acted like a “stationary bandit” preying on the rich to give to the poor, while ensuring that the rich still get to keep their wealth and build their empires. It doesn’t matter that the Binays have amassed wealth in the process and have turned into a formidable political dynasty. This has allowed them to take a long-term view of development and govern the city without being beholden to the big end of town.

If the GG club want leaders who are honest, yet able to win elections without becoming beholden to vested interests, they need to initiate campaign finance reform and provide state funding for political parties. The only other option is what the Binays are doing in Makati.

Economic agencies are a rich source of campaign finance through the licenses, franchises and policies they craft that can easily be made to favor the big players. The reason they are weak in a developing and emerging country context is precisely to allow political bosses to use them as a source of campaign donations. You see the system is not dysfunctional. It is purposefully built to serve their needs. The only way to fix corruption and incompetence in these agencies is to finance political parties so that they do not have to depend on them as a source of funding. Then invest in their capacity and upkeep.

If we don’t fix this, then we should not complain that our choices come election time are so limited.

Good (or Good Enough?) Governance

Chastised, toned down, hurt, and exhausted:

These are all words used to describe the mood and sentiments expressed by President Aquino (PNoy) during his fifth State of the Nation Address to Congress. Reeling from the effects of impeachment complaints filed against him on the back of the Supreme Court ruling declaring certain aspects of his controversial Disbursement Acceleration Program (DAP) as unconstitutional, the president nearly broke down as he recounted the sacrifices his parents made to restore democracy.

Suggestions that he was acting like a dictator in usurping Congress’s power over the purse and in initially defying the Supreme Court must have cut him deep. The only intention he had in pursuing the DAP was to hasten the progress of his reforms aimed at addressing the needs of the country, PNoy opined.

Despite this momentary setback, PNoy indicated his willingness to keep fighting for the nation and also suggested that even without him these reforms would continue through the people’s (whom he referred to as his boss’) initiative. This in effect was an acknowledgement that the work of repairing the nation’s institutions and implementing good governance would not be completed by the time he steps down in 2016.

He admonished the nation to look for someone who would continue the effort. He continued to affirm that the path he has chosen (Daang Matuwid) was the right path, and that despite the support of the people to move his agenda forward, there continued to be forces at work to undermine him.

At a forum hosted by the ABS-CBN News Channel (ANC) in cooperation with the National Economic Development Agency, the man at the center of the DAP controversy, Sec Butch Abad cited the glowing words issued by the World Bank president in his recent visit on the progress made by PNoy’s government in pursuing an anti-corruption and good governance agenda.

And yet, by the governments own scorecard (which by the way is based on the World Governance Indicators produced by the World Bank), the government is failing in all but one measure of good governance.

An alternative SONA

As one analyst from the IBON Foundation pointed out, four years is a sufficiently long-time to assess whether PNoy’s time in office so far has been spent well. Based on the evidence, it seems poverty continues to remain high. Despite the lowering of the poverty incidence by some percentage points, it was pointed out that the poverty line was simply based on 54 pesos a day or about US$1.25. Perhaps the more accurate thing to say about that is that the severity of poverty has been eased, but poverty overall still remains high (at about a quarter of the population of 100 million).

Another crucial statistic is that the unemployment and underemployment rates remain the highest in the region. This is what accounts for the high poverty incidence. As pointed out by Sec Almendras and NEDA Director General Balisacan at the PHDevt Forum on ANC, this is mostly due to the low productivity of the agrarian sector of the economy, which is due to poor infrastructure, and low human capital investments, which the administration has been trying fix.

Despite forging a social contract with the Filipino people at the 2010 elections, the ruling Liberal Party spent the first two years of the Aquino presidency going after its predecessor, Gloria Arroyo and her appointees in key positions of government, including Ombudsman Gutierrez and the Chief Justice Corona. Though it was successful in jailing Mrs Arroyo, getting Gutierrez to step down and removing Corona from office, this came at a cost.

The slow rate of its expenditures on infrastructure put a drag on GDP growth, and other items in the social contract were derailed by PNoy’s earlier commitment not to raise taxes and to re-examine every item in the budget to exorcise any vestige of corruption allegedly left behind by the previous administration.

When the economy slowed down the next two years were spent trying to recover through the DAP. The economy did rebound, but then the PDAF and DAP controversies blew up in their face. In its last two years, PNoy’s government will seek to pursue its social contract for accelerating inclusive development while working within the bounds set by the constitution. DAP was an aberration that could have been avoided if it had simply prioritized the social contract to begin with.

Evading the traps

The challenge of any government is always two-fold: to expand the spheres of productive activity in the economy, while increasing the social safety nets of those who slip between the cracks. What separates the “convergence club” of nations that are catching up with the rich nations with the “divergence club” that are falling behind, is the integrity and continuity of economic governance. This is “good enough” governance as opposed to good governance as espoused by the World Bank.

When using good governance as the benchmark, both converging and diverging economies fare poorly. There is no significant difference between the average governance scores of converging countries from their poorer counterparts. What is different is their ability to pursue economic reforms, which expand investments and produce jobs.

In a developing country where wealth is concentrated within a few powerful groups, this task is not easy, especially as the ability of government to generate resources to maintain its autonomy from such vested interests towards crafting independent, coherent, and strategic economic policy is very limited.

When the tax to GDP ratio of a country is 10-20% (ours is hovering between 17-19%), the revenues just aren’t sufficient to enforce contracts, property rights and maintain transparent, accountable government (i.e. good governance). An estimate of how much it costs in the West to enforce a rules based system range from 40 to 60 per cent of the economy. In a developing or even emerging country context, that simply is not feasible given the low tax to GDP ratio.

Added to that are the costs associated with patronage to “payoff” vested interests to give way to reforms or to maintain political stability and security (think of business groups, rebels and the military), and you have a situation where the government’s ability to maneuver is significantly diminished.

When the whole purpose of running for political office is to capture the “off-budget” items such as franchises, licenses and monopolies the congress issues or creates, or to protect business interests by controlling appointments into regulatory agencies or by influencing key policies through legislation crafted in congress, it is hard for a government to pursue reform without sufficient “sweeteners”.

In an emerging country like the Philippines where the productive sectors of the economy are expanding and governments are able to raise more money for social safety nets, the challenge is in maintaining the momentum, while seeking a sustainable path to development (given the environmental and social costs associated with development).

More importantly, escaping the “poverty trap” of low or underemployment, intergenerational poverty in an atmosphere of expanding opportunity for some may lead to a “middle income” trap where development takes place within a narrow segment of the economy and fails to “trickle down” to the base of the social pyramid. It is within this context that PNoy finds himself with severely diminished political capital, in the last two years of his presidency.

Foreign chambers will challenge him to lift restrictions to expand investment opportunities in the economy, encourage greater competition and improve infrastructure. The marginalized sectors of society will press him to complete social reforms and expand the system of safety nets.

SONAw what?

PNoy will have to pick his battles from now on. Will he continue to pursue his ambitious good governance agenda, or will he be content with achieving “good enough” governance, the definition of which is to eliminate the worst forms of corruption (i.e. the most extractive) that do not facilitate the expansion of productive sectors and lock people into a path of dependency while maintaining the integrity of economic policy making and governance?

Coherent economic policy does not necessarily equate to liberalization. The power sector is a good example. For a long time we were told that the key to lower energy bills was to “leave it to the market”. This was accomplished through the EPIRA. Now we are seeing that this regulatory framework will not prevent a power shortage and higher energy bills. Calls for emergency powers to allow government intervention to correct a ‘market failure’ are getting louder.

This problem is not just confined to the power sector. In transportation, education, telecommunications, and internet policy, the independence of regulatory bodies and their capacity in formulating policy is hampered either by an incestuous relationship with the very industries they are meant to regulate or corruption.

Deregulation may simply lead to a glut of operators (as in the case with buses in the metro) or having global monopolistic capital capturing regulation as opposed to local monopolists, leading to the same market failures. What is required is a significant improvement in the integrity and capacity of regulatory bodies overseeing strategic sectors of the economy to help expand economic activity.

Success won’t be measured by how liberalized the sectors are but by how efficiently they operate, how low the prices they charge, how available and reliable are the services they offer. To monitor and track all that and wield the carrot and stick effectively to produce desired outcomes requires strong, well-resourced government agencies.

You might have guessed by now that the priorities of a “good enough” governance agenda are very different and more direct to the point than the good governance agenda, per se.

The next item in the agenda would have to be increasing the tax collection effort. Despite his claims that the sin tax indexation reforms did not constitute a new tax, the net effect is that it imposed a higher tax on tobacco and alcohol producers. The template for achieving this reform is just as we outlined above. Affected farmers were compensated with the revenues generated by the tax. The improvements in tax collection were earmarked to improve social safety nets through health expenditure.

This is a template the administration can use to expand the tax base. Forming a social contract requires sacrifice from some taxpayers, in exchange for greater investments in social and human capital. That lies at the core. One proposal would be to have a one percent property tax that would be invested in public and social housing to eliminate the problem of informal settlers.

A minerals and resource rent tax imposed in exchange for liberalizing the mining sector, with proceeds invested in a future fund to provide loans and scholarships to tertiary students would be another example. Whether this administration likes it or not, tax policy is an important lever for achieving its social contract. But to legislate and enforce a minerals and resource rent tax requires a beefing up of the economic bureaucracy. Again, “good enough” governance will get you there.

Ticking clock

As the PNoy administration tries to beat the clock in the remaining year and ten months that it has in office, priorities matter. Will it continue to pursue its good governance agenda, or will it focus on “good enough” governance? As shown here, the priorities are very different based on which agenda he uses. If he wants to pursue inclusive growth and development and fulfill his social contract with the Filipino people, he needs to follow “good enough” governance by improving the capacity of economic agencies within the bureaucracy.

This will make the strategic sectors of our economy perform more effectively and efficiently. It will allow him to generate additional resources, beyond just what the present tax code affords him, even with an intensive collection drive. He will need to look at generating additional sources of revenue by following the sin tax indexation template his government has developed.

Two years may not be enough to complete the good governance agenda, but it is sufficient to achieve “good enough” governance, which is more achievable and will be more direct in following the elusive quest for inclusive development. If he chooses the latter, he will be able to step down in 2016 having a more lasting legacy.

Actions, not words

On 30 December 2013 President Noynoy Aquino declared: “we are destroying the last bastions of corruption.” And in other news, Malacañang Palace clears the re-alignment of Senator Jinggoy Estrada’s PDAF to his father’s fiefdom, making LGUs the new NGOs through which state largesse is dispensed or diverted back to the political sponsor’s pockets.

It is not words we need from you, Mr. President, it is action. Actions speak louder than words. It is perfectly obvious that a conflict of interest exists here when the sponsor and recipient of spending measures are related. Any ordinary person can see it, why can’t you and your officials? Unless of course you are deliberately turning a blind eye.

This is how the PDAF and DAP scams began, with the executive’s tacit approval. We know what will happen here. The vast majority of congressmen have a father, son, wife, sister or some other blood relative occupying a local government post. With this precedent set, the floodgates will once again be open to abuse as political dynasties milk the system for all it’s worth.

Is this how you intend to spend the “last two minutes” of your administration? Waiting for another scandal to blow up in your face? “There is definitely something wrong in the state of Denmark,” Mr. President. Stop deluding us that you are conquering corruption, and do something about this.

By the way, I am not a critic. I have been accused of licking your ass by trolls whenever I say something positive about your administration. I am speaking here as your boss. If you fail to act, then you will have earned the tag of #noynoying. So for the sake of preserving your legacy, intervene at this crucial moment, before it comes back to bite you as DAP did.

Seeds of undoing

greek-tragedy-and-comedy-masks

An essential element of Greek tragedy according to Aristotle is for protagonists to carry with them the seeds of their own undoing. Often it comes in the form of “hubris”, man’s feeling of invincibility, which makes him tempt fate, or contest the will of the gods.

The same sense of mortality that comes at the end of each plot seemed to creep in last week as results of internal polling commissioned by the administration and leaked by a Palace insider showed the president’s popularity taking a nosedive as a result of his response to the controversy involving the release of impounded government savings without congressional approval.

DAP or the disbursement acceleration program was hatched by budget secretary Butch Abad, the chief ideologue of the Liberal Party to deal with the embarrassingly sluggish pace at which the economy was crawling at the time, dragged down by fiscal contraction. This was the result of the administration’s own deliberate attempts at house cleaning by scrutinising projects and contracts which were entered into by its predecessor.

The irony is that in a bid to rid the government of the ghost of Mrs Arroyo, the Aquino administration wound up committing the very same act that it accused her of, namely re-aligning budget items out of expediency. During Mrs Arroyo’s presidency, the opposition blocked passage of her proposed general appropriations for a number of fiscal cycles forcing a re-enactment of the previous year’s budget. This enabled her to reallocate spending across departments at will for budgeted projects that had already been completed the previous year.

Mr Aquino faced an entirely different situation but ended up with the same outcome. He had no problem getting congressional sign-off on his proposed annual expenditures, which sailed through in record time. His problem was getting the approved amounts spent. Having applied the fiscal brakes too harshly in a bid to present a clean break with the past, he wound up revisiting it.

The Department of Budget and Management explains how much was spent under DAP and for what purpose, as follows

For 2011-2012, a total of P142.23 Billion was released for programs and projects identified through the DAP, of which P83.53 Billion is for 2011 and 58.70 Billion is for 2012. In 2011, the amount was used to provide additional funds for programs/projects such as healthcare, public works, housing and resettlement, and agriculture, among others. While in 2012, these were used to augment tourism road infrastructure, school infrastructure, rehabilitation and extension of light rail transit systems, and sitio electrification, among others. […]
Of the total DAP approved by OP (Office of the President) for 2011-2012 amounting to a total of P142.23 Billion only 9 percent was released to programs and projects identified by legislators. These were not released directly to legislators but to implementing agencies.

The sad thing about DAP is that even though less than a tenth of it was directed at legislators, the whole program has become tainted as a result of the scandal that broke out involving the funneling of some of this money into bogus NGOs identified by them.

Not only that, but its release coincided with the impeachment of the Arroyo-appointed chief justice, which the Palace had openly campaigned for. It carried the hint of political back scratching. Add to that the contestable basis on which one branch of government allocated its savings to another (from executive to legislative), and you have the appearance of a government that disregarded the rules in pursuit of its political agenda.

To top it all off, the president appeared on national television denouncing his critics, denying the label “king of pork” that grated his good government sensibilities, claiming that he was “not a thief” in a fashion reminiscent of US president Richard Nixon who left office in disgrace. It is truly tragic that, after cruising at an astronomically high altitude in opinion polls, stratospheric compared to his predecessors, he should come plummeting back to earth and be forced to distinguish himself from common criminals in this manner.

To think that this all happened when the government seemed to be getting into its stride. The past year has been particularly productive with the enactment of several reform measures like reproductive health, sin taxes, and universal health care. In addition, there was the uplift in the country’s credit ratings and ranking in the Doing Business Survey, the resurgence of manufacturing investments, and the signing of the peace deal with Muslim rebels. The growth figures for the first half of the year seemed appealing to most outside investors, as well.

With legal challenges left, right and centre seeking to undermine its legitimacy, the government now appears besieged. Previously, one would have been forgiven for thinking that with its recent string of successes, the regime may be able to manage an orderly succession to its hand-picked nominee. But with the Liberal Party’s important figures, Senate President Frank Drilon and Budget Secretary Butch Abad, in the hot seat for their involvement in the DAP, the party seems like a spent force, having lost its moral authority.

Elite bargain

When Senator Jinggoy Estrada angrily accused the administration of hypocrisy for what he claimed was an unfair targeting of the opposition, I expressed doubts that his tirade would inflict any serious damage on the teflon presidency of Mr Aquino. With hindsight, it now appears to have been an effective ploy. Estrada’s complaint was that there seemed to be “no honor among thieves”, that cosy symbiotic relationship among complicit individuals.

What he was referring to was the political bargain that occurs in multiparty democracies within developing states, in which power is alternately shared among various groups of elites. Corruption is tacitly tolerated because it is assumed that each group will commit it once it is their turn to rule. Allowing a group of oppositionists to be singled out for prosecution, to ruin their political careers, is in effect, reneging on this grand bargain. Mr Estrada’s retaliatory response did nothing to protect him from prosecution, but it nevertheless inflicted damage on the administration for its “unfair” actions.

Time will tell if the damage inflicted is merely a flesh cut, or a mortal wound, but from the perspective of the reformers within the administration, it is a bad omen. Not only has the focus on PDAF and DAP abuse detracted from its policy agenda, it is going to make it difficult to secure votes for what could be unpopular pieces of legislation, particularly in the lead up to the next election when political turncoats will begin sniffing the political winds in search of their new padrino.

The reform constituency often claims that in order to make our political and economic systems more inclusive, we need to eliminate all forms of rent from society. That is we need to generate a clean, accountable and transparent system of governance, and that there will be no trade-offs between pursuing this agenda and pro-poor economic growth. This is in part the fault of the international donor community that has peddled this idea for over a decade on nations with very different institutional foundations.

Reality runs contrary to this notion, particularly if you look at the development experience of the “tiger” economies of East Asia and the “lion” economies of Africa, which are the fastest growing in the world. The tragedy of Daang Matuwid, the good governance agenda of the Aquino administration was that it failed to acknowledge this. It took the economy for granted while hastily conducting a highly charged political prosecution of its predecessor regime.

When the economy started slipping into second gear, it unlocked the floodgates of spending and applied less stringent controls on congressional pork barrel projects than it enforced on its own administrative agencies. It committed an act of “hubris” in thinking that it had succeeded in transforming the political culture of the country. It now finds itself defending a system of rent distribution that its constituents consider anathema to its own brand of government.

It is for this reason that many honest, reform-minded governments get eaten up by the system they seek to change. They often set goals that are too lofty, such as the elimination of corruption within one term of office, or the removal of patronage in favour of a system that observes the rule of law and democratic accountability. In the pursuit of good governance, the perfect often becomes the adversary of the good.

At the end of such a trail is “reform-fatigue”, with a disillusioned electorate turning to corrupt leaders who are able to distribute rents in ways that cater to their local needs. Such leaders are seen to be more competent and effective. This scenario could eventuate in 2016, with many in the reform constituency distrusting the LP and seeking an alternative candidate with a fresh face. This will split their votes and allow a pragmatic populist to gain power.

The scandals that have bedevilled congress and engulfed the president have served only to discourage certain contenders from the opposition to seek higher office, clearing the way for the vice president to consolidate its forces behind him. This means that their votes are less likely to be split along factional lines. And with the vice president’s popularity remaining intact, his lead will simply be unassailable.

The only way for the ruling LP to avoid electoral defeat is for it to deliver rapid, pro-poor growth within the remainder of its term. That won’t be easy, particularly since its formula for producing it, the good governance agenda (captured in its mantra: kung walang kurap, walang mahirap) has already been discredited in different parts of the world where it has been faithfully applied.

Developmental patrimonialism? The Philippine preference for pork, part 2

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Filipinos have a preference for pork. They expect their elected representatives to provide private or club goods, such as money, roads, community halls, rather than public goods like legislative scrutiny, economic policy, and the like. Yet this has not prevented their economy to grow at the same time. In this sense the Philippines might be considered a developmental patrimonial state. The following is how Tim Kelsall explains the concept based on the findings of his research

 Africa may have some of the world’s fastest-growing economies, but investment and incomes still lag far behind other regions. Conventional development wisdom lays the blame on a governance syndrome known as neo-patrimonialism, a system of personal rule held together by the distribution of economic rents to clients or cronies. But recent research … shows that neo-patrimonialism is not always as economically damaging as the development community believes…(It) may even help, the climate for business and investment (and) can be compatible with rapid, pro-poor, economic growth (emphasis added).

To paraphrase Kelsall, neo-patrimonialism comes from Max Weber’s concept of “patrimonialism”, an “ideal-type” of traditional rule in which authority is founded on ties of personal loyalty between leader/patron and subordinates/clients. The system is maintained through the distribution of perks or rents. These benefits are distributed among clients with no distinction between private and public property.

Neo-patrimonialism is a political economy in which patrimonialism is overlayed with elements of modern governance and rational-legal systems that differentiate between private and public domains on paper, but where informal practices still trump formal rules. Developmental patrimonial states according to Kelsall have exhibited these characteristics, but were also capable of long term vision and able to

distribute economic rents in a way that balanced the demands of political stability and economic growth, while facilitating investment through …‘relationship-based’ governance.

The rents being talked about here, are not just monopolistic, the sort that takes welfare from consumers and transfers it to producers. They also involve Schumpeterian rents, associated with entrepreneurial ventures and wealth creating innovation. Developmental states are able to  train resources at both kinds of rent-creation and make them serve a national development agenda. The motives behind this need not be altruistic, as higher long-run growth provides better rewards for those at the top of the patron-client network.

The findings of Kelsall are similar to the conclusions of Solon, Fabella and Capuno (2009). When they looked at the spending behaviour of provincial governors in the Philippines, they found a kind of competitive developmentalism at work along patrimonial lines as political clans sought to outdo each other to win local elections. Where rival clans have been present, the consolidation of power has not led to complacency. Instead of simply plundering all of their discretionary funds, patrons have had to ensure that a significant portion of it ends up serving their local constituents for them to survive in the political jungle.

The Philippines has been described as a patrimonial state by Hutchcroft (1998). He attributes this to the capture by local elites of the levers of the state under the American commonwealth period and beyond. The Martial Law regime centralised rent-creating and distributing capacity, an important pre-requisite for becoming a developmental patrimonial state based on Kelsall’s findings.

Although the post-EDSA era has decentralised power to local elites by restoring congress, it has kept the power of the purse with the executive branch as demonstrated by its ability to impound and re-align government spending without congressional authority. This centralisation as some have pointed out covers large lump-sums in the budget, effectively giving the office of the president immense powers to dispense patronage with minimal oversight from a complicit congress with which it shares some of the spoils through pork barrel.

But despite the opportunity for this sort of patrimonialism, and the fact that the countries’ ratings in traditional indicators of good governance have not improved much over the past decade, the Philippine economy has experienced a relatively stable and sustained period of economic growth for over a decade. It has been the fastest growing economy in the region over the last two quarters.

Becoming developmental?

Since the third quarter of 1998, the country has had 60 consecutive quarters of growth averaging 4.9 per cent year-on-year. It created about 11 million net new jobs during this period. Since 1999 the country’s capital formation has outstripped investments making it a net saving rather than a net borrowing nation, largely on the back of foreign remittances. Macroeconomic stability, that eluded the country in the 1970s to the 1990s was restored. 

On the fiscal side, the government was able to tame its budget deficits. From 2001 to 2011, the government’s net borrowing averaged a mere 1.98 per cent of GDP per annum based on IMF figures. Debt as a percentage of GDP fell from a peak of 68% in 2003 to 42% in 2011, and it is projected to fall to 33% by 2018. The orderly transition from Arroyo to Aquino, and the continuity of policies have, despite the political recriminations and legal prosecutions that followed, made this sustained performance possible.

Fiscal consolidation and resilient growth has led the three most prominent credit rating agencies to upgrade the country to investment status. This has given the Aquino administration fiscal space to focus on social and economic programs. These include expanding the conditional cash transfers program, which began under its predecessor. In 2014, the government will boost funding for this to Php 40 billion covering in full the four million estimated poorest households nationwide.

In the past, such a large program would have presented opportunities for waste, political interference and corruption, resulting in policy failure. That has not been the case here. A recent impact evaluation of the program conducted by the World Bank has concluded that it has been effective in fulfilling its desired outcomes–school enrollments and attendance rates are up, while malnourishment is down among children of households that are participating.

Between 2012 and 2013, social and economic services received the lion’s share of increased fiscal spending growing from a combined total of P1.05 trillion to P1.2 trillion. The 2014 budget increases this to P1.4 trillion. Included in this is the closing of the school building deficit and increased public works expenditures. The government aims to spend 5% of GDP on public infrastructure by the end of its term in 2016.

Increased spending on education and health to develop human capabilities will be an important determinant of future growth in a world where human capital counts more than physical capital, as Peter Evans suggests. The 21st developmental state will need to develop the kind of institutions that foster this kind of investment.It will require a political consensus to support it in a sustained manner. In a country with large social disparities, that can only be achieved through some sort of rent management.

What PDAF and DAP represent

PDAF and DAP have caught the ire of the middle and upper classes in urban centres who regard these as pork barrel. To them this type of spending represents patrimonial plunder and a hindrance to development. PDAF has accounted for 1.2-1.3% of the General Appropriations in the last three years. DAP amounted to 5.3% of the budget in 2011 and 3.2% in 2012, of which only 9% went to projects identified by members of congress. In 2013, about 0.8% of the budget has been approved under the program.

What PDAF and DAP represent from a neopatrimonialist point of view is an investment in political stability. Compensating powerful elements of society with such rents, buys support for inclusive development spending to provide a social safety net for the marginalised sectors of society. Without such an “investment” the country would have slipt into political chaos during the Arroyo administration. This would have disrupted economic growth and hindered the country’s fiscal capacity for investing in social development as what happened in the 1980s following the assassination of Benigno Aquino, Jr.

The question now is whether such a set-up needs to continue beyond the present administration’s term of office. As Kelsall points out,

Developmental patrimonialism has a limited shelf life and will not be appropriate everywhere.

What the recent Pulse Asia survey on the pork barrel reveals is that people are still unwilling to change things dramatically. They will still allow for clientelist side payments to be made, with some caveats or none at all, to facilitate local development spending.

As the Philippines enters middle-income country status where the pace of growth is providing increased fiscal capacity to deal with the requirements of social and economic development, it is possible for the illegal practices associated with pork barrel to be legitimised through some new formal compensation and benefits arrangements for elected officials and other mechanisms such as state-subsidised political party campaigns, or a combination of both.

Whether this happens or not depends on the political pulse of the country, and what the ruling elite perceive is in their best interest. Other factors may come into play, such as the Supreme Court ruling on the constitutionality of PDAF and DAP, the actions of prominent leaders and mobilisation by civil society groups.

Given the public approval for the president’s handling of the situation (as borne out by the Pulse Asia survey), much will also depends on what the administration perceives it can and should change, and the capacity it retains after all the dust has settled to set the agenda for the remainder of its term.

Regardless of what happens though, it is important for the policies that foster growth and social equity to be preserved as President Aquino hands over the reins to his successor in 2016. Only sustained growth holds the possibility for improved governance down the track.

Disappointed

The President stepped on the podium last Wednesday with a message. He talked about the PDAF and the DAP, and how the conversation has switched to how some people think he has stolen. The words, “Pork Barrel King” come to mind. This is a turn of phrase used by the militant left, and by the opposition. Well, at least, that’s the underlying message. The change in conversation orchestrated by what passes as the opposition is a well thought of character assassination. Hit the President where he is most vulnerable, and so Jinggoy Estarda was the B-29 that dropped the Little Boy poop.

For weeks the conversation shifted from theft— corruption at the hands of Estrada into this manufactured one. These days you don’t need actual proof, just the idea— and boom, thas the news. And so the President thought to fight back against this character assassination, going so far as interrupting the teleseryes people enjoy to give his piece.

What the President said was nothing new. Much of it, mentioned in this blog weeks ago as things you should know. The President’s explanation was a dumbed down version of the things Secretary Butch Abad had always mentioned in his press releases, press conferences, and interviews carried also by cable news. The ProPinoy piece was based on those press conference, and nothing that couldn’t be googled.

It shouldn’t really come as a surprise, reading my timeline through much of the President’s speech was a running commentary from the public. One would assume to wait for the entire speech to conclude, but we hear what we want to hear and react accordingly. It was pretty much broken along party lines. No surprise there— the militant left hate anyone in power— so true enough they did what we expect them to do.

If you believe the President before, and believe in his campaign to rid corruption, then you would be satisfied with the President’s explanation of what DAP is— or was. If you never liked the President before you have no cause to change your mind with his latest speech.

For many weeks now, I have grown… disappointed, and frustrated at the state of things, particularly the state of the conversation, and morose at the lack of intelligence in our national life. I’ve come to understand why our nation is such as it is today. Our elders— those who pass as our leaders have no idea what they want to do. Just so there is no ambivalence to this. I particularly look at the opposition. It really isn’t love of country that drives them. It isn’t really a sense of building something much better, but rather a sense of “what’s in it for me”. Then there are some personalities— driven out by the administration— who have naturally sought to ally themselves with the opposition. Driven by anger, by bitterness they have no idea of the world they want to build, no thought as to its shape and structure and no grounding of what’s real and possible. So they would rather shoot the nation in its foot.

So nothing gets done. Nothing is accomplished.

For three months we have had this supposed conversation on pork barrel and PDAF. We seem to have started to miss the point. For some, they have started to drown with too much information. Taking time to process this information so they drown at it. It is a case of if you look too deeply into the abyss, it starts to look back at you, and you are gripped with inaction because of the depth and scope of the problem.

So we miss the point. As the President said, it is about the thief and it is about the thieves.

Much of our nation’s problem isn’t about the lack of law. So a lot of people believe it is the system that’s flawed. Anyone who has read the COA report on the PDAF can read the heart of the problem. We have laws, the COA wrote but those laws were not executed. So this mess happened.

The problem is a multi-layered one. For the simplest of it— isn’t so much as fixing the system or adding more layers of law— but the solution to the problem, first and foremost is to execute the law. The thieves— or in this case, the alleged thieves need to face justice.

Many argue the government isn’t doing, or doing very little. Building a case isn’t easy. Building a case that doesn’t get thrown out in court isn’t easy. Is it enough what this government has done? At the very least, it is a good start.

That’s what many people fail to grasp. This is a start. The Aquino administration is a start. Not the death and be all, and end all of fighting corruption or “fixing the system”, it is the start to doing that.

Is it a perfect start? No. It is riddled with problems, and riddled with missteps. It is often seen as moving too slow, but it is a start. It is a beginning. The importance of that can not be stressed enough. In building a business for example, the most important step is getting off your butt and starting. Starting.

What most people fail to grasp is the understanding that the granular detail is less important than the general direction. So for corruption, the general direction is throw those who made a mistake to jail. To set an example. To mean business.

The President once gave the analogy that the Philippines is like a rundown house. Roof leaking. Doors, broken, etc. It is easy enough to fix such a house when you have all the monies in the world, but the reality is that the Philippines doesn’t. So sometimes it is patch work. Leaks plugged, and patched. Sometimes it is an industrial strength fix. That’s what should get done today.

Right now, we have a case building around three key people: Senators Enrile, Estrada, and Revilla. Focus on that. Get them to jail. If down the road the President’s allies happen to have cases built against them, then go for it. That’s what people raving about the DAP can’t seem to focus on, except, “Bakit kami lang? Bakit sila lang?”

If we focus on “Bakit kami lang? Bakit sila lang?” Then we will have a nation that can’t do anything except sit still and make kuwento like bums in the street corner. We will have a nation that shoot itself in the foot. That’s a shame, wouldn’t it?

This is why I am so disappointed.

A preference for pork: The Philippine neopatrimonial state

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Filipinos have a high tolerance for corruption, which they see as a necessary evil in the delivery of local programs and projects.

This is the only conclusion one can arrive at based on the results of Pulse Asia’s latest survey on the pork barrel, conducted during the last two weeks of September and released over the past fortnight (see part 1 here and part 2 here). For those who might have missed it, here is a quick round-up of results:

  • Awareness of PDAF or pork barrel was at 90%, up from 66% a decade ago.
  • Ability to identify a local project funded by PDAF over the past six years was only 39% nationwide down from 52% in 2004.
  • On what to do with the PDAF 45% were for its outright removal and for implementation to be left to line agencies, up from 30% a decade ago. The balance was split among those who wanted to keep PDAF in some shape or form, including 45% wanting some changes to the system to be made and 10% who don’t want any changes made at all.
  • On the use and management of PDAF about 8 out of every 10 Filipinos saw it as being undertaken for questionable motives such as electioneering, kickbacks and as inducements to support the executive’s legislative agenda.
  • On the proportion of PDAF going to corruption nearly 8 out of 10 Filipinos think that more than half of the pork allocation is being plundered.
  • On what legislators should prioritise in their work only about a third wanted them to focus on lawmaking, while 42% said they ought to focus on having projects and programs, i.e. pork barreling. The remainder was split between investigating scandals and other issues (14%) and reviewing and passing the budget (12%).
  • On the president’s handling of PDAF about two thirds believe that the misuse of pork has continued under his administration and the same amount approve of his handling of it (the Palace announced the suspension of PDAF but allowed congressional insertions or pork barrel projects in line agency budgets with more stringent requirements).

Despite a supermajority holding the view that PDAF is not being undertaken for its specified or intended use and that more than half of the money is being wasted or stolen, a plain majority are still in favour of keeping it in some shape or form. This explains the strong approval of the president’s actions in the wake of the PDAF scandal. Even among the educated, wealthier classes (ABC), where 9 out of 10 believe that half or more than half of the PDAF budget is being stolen, only 47% want pork abolished.

Support for the abolition of pork reaches a majority only in the NCR with 56% behind it. Mindanao is where support is weakest at 38%. The rest of the country hovers around the mean at 45-47%. There is little variability among classes ABC and D on the issue with 47-48% supporting abolition. It is Class E that diverges from the national mean at 38%. The median voter appears to sit somewhere in between the lower middle and poor classes of D and E.

Only about 38-39% of class D and E respondents could identify projects financed by PDAF in their community over the past six years, down from 53% a decade ago. There was hardly any change recorded for class ABC during this period with 46% indicating that they knew of such projects. People in Metro Manila were less conscious at 30%, down from 50%, and Mindanao had the highest level of awareness at 48% down from 60%. The rest of Luzon and the Vizayas hovered around the national mean at 37-38%, down from 51% and 54%, respectively.

Given the continued operation of PDAF, the lower levels of consciousness regarding projects benefiting the local community could be due to their being less conspicuous, which in turn could be because more money went to “soft” projects, that appear to be more prone to the “ghost” phenomenon. The suspicion that most of their pork goes to corruption has not deterred most Filipinos from supporting its retention.

PDAF was a way for the political elite to formalise their patrimonial activity by giving them access to public funds to distribute rents among their constituents, but it failed to address their need to finance campaign spending at elections and to provide an adequate level of compensation commensurate to the power and authority that they wield over the vast resources of government. As a result, it is no surprise that they did what they did.

Filipinos have always known and provided tacit approval for this. Just like traditional housewives from the 1950s who tolerated their spouses’ flings outside their marriage for so long as they were discreet about it and continued to be good providers of their households, the Filipino public was willing to accept a certain level of corruption by their padrino-politicians, for so long as they “brought home the bacon.”

Now that the game has been exposed, and the scale of their infidelity has been rubbed in their faces, the public has understandably become unsettled. But despite all this, what a majority of Filipinos still want is a return to the way things were. They appear half-hearted at best about doing away with a system of patronage that they believe has served them well.

Their inclination is to give it another chance, perhaps with some minor adjustments. Even if this means divorcing the set of politicos who have let them down and been found out, they would just as eagerly fall into the arms of another set who will offer them the same sort of pandering as the previous batch.

To be concluded…

 

Gridlock or greed – a rejoinder

Randy David in his weekly op-ed column for the Inquirer wrote an entry called Between Gridlock and Greed. In it, he constructs a dichotomy between dysfunctional idealism and perverse pragmatism. He writes:

It is difficult to say which is preferable: a party-based politics that sometimes results in governmental gridlock, or a money-based politics that runs smoothly on pork barrel privileges.  America today illustrates the deep-rooted dysfunctions of the former, while the Philippines showcases the perverse pragmatism of the latter.

Prof David’s thesis is that although the gridlock of the US is the price that it has to pay for being a mature democracy, it is still preferable to our situation where the costs of greed in the form of bad policy exceeds the benefits it generates by way of smooth working relationships.

In my view this a false dichotomy. The opposition between gridlock versus greed is in my view not only flawed on the grounds that the United States is a poor example of the former, it is flawed because it assumes that greed or self-interest does not lead to gridlock.

The dysfunctional party-based politics Prof David refers to is the ongoing fight on Capitol Hill over what to do with the government’s fiscal debt and deficits. Tea Party conservatives who comprise the budget hawks, were unyielding to both Democrats and fellow Republicans and forced a temporary shutdown of services by the US government.

In the weeks leading up to the government shutdown, Speaker Boehner was put in an embarrassing position by this minority bloc. What occurred was a breakdown of party discipline, with recalcitrant members refusing to abide by the decision of their leaders. This does not just occur in the Republican Party alone–some members of the Democratic Party, the so-called “Reagan democrats” have on occasion crossed the aisle to side with their conservative counterparts on social issues like gun control.

If this is what Prof David meant by party-based politics, I am afraid that the example does not hold up well. Contrast that with party-based politics in the Westminster system, where there is strict adherence to platforms and positions within parties. Does such strict adherence to party discipline lead to gridlock?

I would use as an example the Gillard Labor government in Australia which was in power from 2010-13. It led a minority government, meaning the ruling the Labor party forged an agreement with the party of the Greens and a few independents to form government.

Some said that this would lead to gridlock. In fact the government of PM Julia Gillard has been shown to be the most productive, passing nearly all of its proposed bills including three budgets on time. I am afraid the problem is more nuanced and complex than the way Prof David poses it in his dichotomy.

The US example actually proves that greed can create gridlock. The wishy-washy Republican house leadership was due to Speaker Boehner wanting to keep his position. He was compelled to pander to the whims of the minority tea party caucus out of self-interest, which trumped the national interest.

In the Philippines, the spending program in the first semester of 2011 was not disbursed on time because the government was afraid that much of it would go to waste. For this reason, growth was held ransom to gridlock. If in the US one tenth of one percent of GDP is the projected cost of a temporary shutdown, in the Philippines, GDP halved from 7 to 3.5 per cent due to fiscal contraction. DAP was the solution, which pandered to self-interest and greed..

In Prof David’s analysis, there is a continuum from feudalism to modernity, and progress proceeds along a linear path from one end of the spectrum to the other. The Weberian state (named after Max Weber) is held up as the ideal against which all others must be measured.

Rather than a dichotomy, I would prefer a typology of development along the lines of Paul Hutchcroft, where you have state strength on one continuum and society’s prime motives on the other. The US is an example of a laissez-faire, regulatory state in which the state is weak compared to business groups whose prime motive is to seek profits under a rational-legal system. Gridlock as one conservative commentator George F Will points out, is not just a feature of its system, it is built in to it.

typology of states

The Philippines on the other hand is a patrimonial, booty capitalist state where the government is susceptible to capture by the elite, who operate on the basis of monopolistic rent capitalism and patronage. To complete this typology, we could consider China, Japan from the 1920s-70s, South Korea, Taiwan and Singapore, developmental states able to co-opt the business elite to serve their nation building agenda, as well as Malaysia, Indonesia and Thailand, bureaucratic states able to withstand pressure from society, but relatively more patrimonial.

Rather than defining progress in terms of a linear path to modernity, I would rather we look at where the Philippines can position itself in the future. The problem is that there is hardly any leader or party at the moment who is thinking in these terms. They either operate on the basis of survival, or seek to shape the Philippines in the image of its former colonial masters in one go.

Often, reformers realise that because they can’t attain that lofty goal, it is better to use patronage to further their agenda. This is where David’s dilemma comes into play. Is it alright to keep that system of patronage in place, to use it for good, when the next government could undo whatever advances are made using that same system?

What is missing is a coherent plan and cohesive party which mobilises a constituency behind that agenda. If Philippine politics had this, it wouldn’t matter if some forms of patronage still remained in some quarters. They would be minimised by virtue of the fact that everyone was on board. The plan, the constituency and party discipline would keep them in check.

 

If people want pork, should we let them have it?

The jury is literally still out, but the poll results are in, and they look ominous for those who want to abolish pork.

As the Supreme Court deliberates on the legalities surrounding the Priority Development Assistance Fund, a people’s initiative was being organised to propose the scrapping of pork outright. The protest movement swiftly adopted the idea posed by an ex-Supreme Court Chief Justice, and began calling for volunteers to collect the required number of signatures to put their proposal to a referendum.

Meanwhile Pulse Asia released the results of a nationwide poll conducted from September 24-27. Apparently, despite 90 per cent of respondents saying they were aware of PDAF (up from 66 per cent a decade ago) with news of wholesale plunder of such funds allegedly funnelled to ghost NGOs percolating in the media, a clear majority or 55 per cent still want to retain pork as it is, or with stricter guidelines or in a diminished form. Only 45 per cent wanted to do away with the practice altogether.

This is unwelcome news for the Scrap Pork Network behind the Million People March. It means that they have their job cut out for them. Not only will they have to collect millions of signatures from a minimum of 10 per cent of registered voters nationwide and at least 3 per cent from each electoral district, in accordance with the law on people’s initiatives, they will now have to convince a large chunk of voters to change their mind and support their proposition. If the wretched conduct of congress over the PDAF scam has not convinced them to support the scrapping of pork, it is hard to imagine what will.

It is clear that in a country with a culture of patronage, people want their pork. The question now is whether we should let them have it.

From a strictly moral sense, some idealists might argue along the lines (to quote the scriptures) “if your hand causes you to sin, cut it off.” Applying this to the situation, if pork causes our politicians to steal, shouldn’t we cut it off from them? That’s the basic rationale of abolitionists.

It is clear that a majority of Filipinos don’t see things this way. For them, there might be competing moral standards at play. To use a passage from Joel Migdal’s book State in Society: Studying How States and Societies Transform and Constitute One Another:

What may be easily labeled as corruption or criminality, such as nepotism or smuggling, can also be looked at, for instance, as a morality favoring kinship ties over meritocracy or one expressing the right of movement of people and goods across the boundaries arbitrarily imposed by state law.

Given the deep-seated attitudes of Filipinos favoring the pork barrel system, and their penchant to rely on personal ties based on kinship to get the resources that they need and want at the local level, legislating new moral codes won’t necessarily lead to behaviour change.

What is needed is a more systemic way of dealing with the structural bottlenecks in government that allow politicians to use pork barrel as a way to address unmet needs in the community, at large, and profit from it along the way, both politically and economically. To use an analogy from the drug enforcement field, the only way to lower the people’s addiction to pork, would be to address both supply and demand channels. What are these channels and how do we address them?

Allow me to propose six ways to deal with the demand and supply of pork. These are outlined below:

Reducing the supply of pork

When talking about the supply of pork, I am talking about where pork comes from, or how it gets doled out. I am talking about the budget process, and how both congressional and presidential pork get inserted into the general appropriations or retro-fitted into national expenditure accounts. So the question here is, how do we reduce the supply of pork at its sources? The following measures should therefore be considered:

  1. Pass a Budget Impoundment Control Act (BICA). To prevent the president from impounding budget savings and using them for unauthorised expenditures.
  2. Invest all GOCC profits, including the proceeds of PCSO and PAGCOR into a Sovereign Wealth Fund (SWF). To be governed by a board of directors and staffed with professional managers. The principal of the fund is to remain untouched, and only returns from investing it in safe, risk free assets are to be used for development purposes. This is to prevent profits from being used for political purposes. Incidentally, this is how the Malampaya Fund should operate as well.
  3. Pass Freedom of Information (FOI) and Whistleblower Protection (WBP) legislation. This would allow the sunshine principle to come into play that would increase the likelihood of scams to be caught and reduce the risk of pork abuse by legislators and the president.

Reducing the demand for pork

It is not sufficient to reduce the supply of pork, we also need to address the needs of the people in a more systemic way, to lessen their dependence on pork. As a start to this exercise, we need to ask, what were the most common uses and abuses of pork in the past? We have seen that the most abused element of pork has been the ‘soft’ projects, consisting of services such as livelihood training, medical kits and agricultural aid, as opposed to the ‘hard’ projects which are attended to by the government’s public works department. The following are some remedies to the demand for “soft” pork:

  1. Use the earnings from the Sovereign Wealth Fund (no. 2 above) to:
    • provide scholarships and income contingent loans to tertiary students and out of school youths. This would eliminate the need for congressmen and senators to fund scholarships through pork
    • invest in the Philippine Health Insurance Fund. This would support universal healthcare for indigent patients.
    • invest in social welfare projects. To expand the coverage of the conditional cash transfers and other community based projects.
    • invest in agriculture and agrarian reform projects. To fund the CARPeR and modernisation of our agricultural sector.
  2. Adopt recommendations by the Philippine Institute for Development Studies endorsed by the Leagues of Provincial Governors and Mayors to reform the Local Government Code to allow LGUs to raise revenues on their own by about an estimated third of their existing funds reducing their dependence on internal revenue allotments from the national government and on congress for aid. This will allow local governments to have fiscal capacity to address local needs.
  3. Provide state funds to political parties. To lower the demand for pork from politicians who need it to get re-elected.

If we could pass these measures, their combined effect would be to channel more resources to systemic and programmatic approaches to tackle poverty and underdevelopment and have less resources available for patronage based approaches. This is not to say that pork will be legislated out of existence, but what it will do is lower the incentives in the system that drive it. There will be less avenues for patronage and better safeguards to limit the abuse of privilege.

I know this is not the policy solution that abolitionists want. They would rather have what seems to be a more direct route to their goal. The problem is that by seeking to legislate against certain behaviour, without addressing the incentive matrix that fosters it, they are really conjuring up a whole heap of unintended consequences. Illicit drugs do not disappear simply because we have made them illegal, or because we catch a few drug dealers and send them to prison.

Rather than expending all that effort in finding a silver bullet through a people’s initiative, the reform movement should actually be putting its weight behind a reform agenda that would wean both patrons and clients off of pork, so that they may find healthier ways of conducting their business. The answer to the question, should we let the people have pork, if that is what they want, ultimately lies in changing the tastes and habits of both the public and those in power, through shoves and nudges rather than mandating them to change their “wayward ways”.

Pork is the new GMA

The organizers of the Million People March know what they are doing.

They know that for their protest movement to attract the broadest base of support and have the greatest impact, it would have to limit its concerns to as few as possible. This basic insight into the inner workings of interest groups was first highlighted in the Logic of Collective Action, a book by Mancur Olson. Although his findings from the 1960s have recently been weakened by more recent studies, the core of the thesis still holds.

Why do groups like the NRA (National Rifle Association) and the Tea Party movement in the US wield so much power and influence over governments in driving policy debates? It is all due to the specific nature of the issues they have in mind. For the NRA it is the freedom to own guns, for the tea party it is to lower government debt and deficit. The greater the level of specificity, the greater the potency.

Having too long a laundry list of demands and positions would simply cause their adherents to splinter and their message to get diluted or hijacked. This is perhaps what happened to the Occupy movement. While it raged on for a while, the inchoate nature of the protest action and the wide disparity of calls among its adherents eventually caused its energy to dissipate.

That is clearly something that the MPM wants to avoid.For this reason their emphasis on unity and limiting the number of demands to just three–to abolish pork, account for pork, and prosecute pork abusers–is important. That’s it. Just scrap pork. Anything else beyond that is a distraction, as far as they are concerned.

It is not that they don’t see other policy prescriptions as valid. Their statement acknowledges the need for a broader conversation later down the track to determine what would replace pork, but for the time being, people’s attention and energy have to be focused on the single task at hand, which is to rid the national government’s budget of different forms of lump sum, discretionary spending, which is how they have defined pork.

But even with the three points that they have outlined, there apparently was still room for confusion. Shortly after releasing their unity statement, the MPM organisers had to issue a clarification that they were not supporting calls for the president to resign or be impeached over the release of the DAP (Disbursement Acceleration Program), a stimulus package initiated in late-2011, which the Palace had put together from its underspent budgetary allotments earlier in the year.

Because legal and fiscal luminaries had claimed that the DAP had violated provisions of the constitution over how savings could be re-aligned and spent, and because some of it had been channeled to legislators as Priority Development Assistance Funds (aka pork), many had construed the MPM’s earlier remarks as potentially supporting calls for impeaching the president. To prevent its message from being hijacked, the Scrap Pork network had to make it clear that they were not going to use their rally in Makati as a staging ground for ousting Mr Aquino.

The president for his part has tried to lay the blame back on Mrs Arroyo claiming she had raided the Malampaya Fund to the tune of close to one trillion pesos and had directed some of that amount to Ms Janet Napoles, who is now facing charges of plunder for her role in the whole conspiracy. This staggering amount that was allegedly misappropriated, only serves to remind protesters of the potential for fraud and plunder in the future.

This is why the MPM and Scrap Pork Network cannot fathom why the Palace insists on the appropriateness of the DAP and of maintaining budget rules around off-budget funds like that of Malampaya. While the president keeps acting like it is 2005 when the anti-Gloria movement raged, he has to recognise the fact that pork is the new GMA, and that people have moved on and are tired of him blaming her all the time.

If he does not do so, then he risks alienating protesters and losing legitimacy and public trust in his administration. He will be increasingly seen as part of the problem rather than part of the solution. At the moment, the MPM and Scrap Pork network haven’t turned on him, but they could easily do so, especially if new revelations emerge of other questionable dealings. Already, his aunt, Tingting Cojuangco has alleged poll fraud in 2013 that involved military and palace officials with his tacit approval.

Though President Aquino may be trying to draw lines of distinction between him and his predecessor, such allegations are slowly blurring those lines. Though they may later be proven to be unfounded, allegations of fraud have a way of unsettling voters and investors. Just as the country has gained the trifecta of investment status upgrades from the three major credit rating agencies, and when the need to drive deeper reforms is becoming urgent in the final years of his presidency, Malacañang cannot afford to have such destabilising forces at play.

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