DOSRI loans

A new Philippine political architecture

Fed up with political dynasties and pork barrel scams? There is a better way for the Philippines, and it does not require a constitutional overhaul.

The political-electoral system in our country today has followed the same dynamic since the founding of our republic. At the heart of this dynamic lies the family institution or political dynasties comprised of wealthy local elites, the landed class, or caciques as Benedict Anderson put it, some of whom trace their lineage back to the late-Spanish and early American colonial periods.

In order to win at elections, they have needed to dispense patronage to their local constituents. Winning gives the elected official access to the resources of government to recoup the initial investment in political capital and continue providing patronage with abandon. In a symbiotic, co-dependent relationship, the president who needs to win cooperation from congress for his or her legislative agenda, and to gain approval for annual budgets, uses pork as the means to secure it.

The patron in this arrangement is the president; the rent-seeking clients are members of congress and local government. The clients direct pork to their pet projects through line agencies or NGOs. Despite previous attempts at tightening the system to prevent the funds from being diverted back to the project sponsor by way of commissions and kickbacks, allegations of corruption still abound.

The money siphoned off keeps the elected official in power perpetuating his or her clan in politics. Political parties are paper entities, controlled as they are by an alliance of political families, headed by the dominant patron. Term limits have not solved the problem as Pablo Querubin found, only made it necessary for dynasties to be more entrenched (they have expanded their reach and become “fatter” as Ronald Mendoza has put it in order to guarantee succession when term limits expire).

Underdevelopment can be traced back to this cycle of “patrimonial plunder” as Paul Hutchcroft put it. Jurisdictions in the country that are dominated by political clans have been found by Mendoza to suffer greater poverty and lack of development compared to those that are not. Although the caveat, as Solon, et al point out, is that some development oriented spending can occur, especially following local government devolution, when there are rival clans vying for positions, which may lead to some form of oligopolistic competition as each clan seeks to outbid the other.

This dynamic is no longer confined to local politics or the house of representatives. National elections for the upper house are dominated by dynasties as well. There will be the occasional interloper: a celebrity or media personality who might get in the game, and once in office, will begin to exhibit the same habits as the “insiders”. There will be the occasional grandstanding politician who will denounce the system, but by and large, everyone lends their tacit approval to what goes on.

Filipinos who put so much faith in personalities due to their preference for ” relational contracts” or dealing through close associates, kith and kin, often fail to see that having a few reform-minded politicians whom they trust enter a den of dynasties simply won’t cure the situation. There needs to be a more drastic overhaul.

The big “game changer” has been the revelations courtesy of a whistle blower of corruption at a grand scale allegedly involving an ever growing list of senators and congressmen complicit in fraudulent use of their congressional pork barrel. Fraudulent NGOs are supposed to have been used as fronts to certify the completion of ghost projects. This has sparked a debate over the very legitimacy of pork and calls for its abolition have been raised.

The Palace has responded by simply window dressing the situation, declaring that NGOs must seek certification with the Department of Social Welfare and Development. Benjamin Diokno has serious doubts that this solution will work. He claims the cure is worse than the disease. It is also important to note that some of the allegedly fraudulent deals involve proceeds of the Palace’s “shadowy funds” as Diokno describes them from gambling and oil revenues. So it would be unseemly for a member of the executive to be charged with essentially policing its head.

Aside from calls to abolish pork, the elections of 2013 sparked a separate debate over whether to abolish political dynasties. These seem unlikely to happen. The reason is simple: congressmen and senators for the most part won’t commit an act of political suicide, which is what the abolition of pork and dynasties will mean for them given the dynamic I have summarised above.

Others have called for constitutional change that would convert our system to a parliamentary, Westminster style democracy. This will bring about stronger political parties which they claim will spring into life simply because of the change despite the absence of a strong tradition and set of incentives supporting it. This will definitely not happen. Not under the watch of the current president, anyway, who ironically, is the only one since Cory Aquino to have the numbers in both houses of congress to do so. Such a super majority is hard to come by.

Reforming the political system will require a different set of tools that are less absolute or fundamental on the one hand, but more structural on the other than what the Palace has produced so far. In simple terms, it will involve moves that do not require constitutional amendments or absolute bans, but are more systemic than just tightening the paper trail of pork barrel audits.

What changes am I talking about?

We often think that since poverty is an economic problem it requires an economic solution. So we think that the solution in this case is to fund local projects. Pork barrel or Priority Development Assistance Funds as they are officially named is seen as essential to spread these projects equitably.

But the slow rate of poverty reduction can be empirically connected to the lack of political contestability at the local level.

It is a political problem that requires a political solution. The solution would be to strengthen political parties and decouple them from political dynasties. The policy tools required for this involve a combination of measures.The first pillar involves state funding of political parties, the second pillar involves increasing the salaries of elected officials, the third pillar involves providing equal opportunity for non-dynastic candidates to run for public office under accredited political parties. Pork barrel funds would play a significant role in providing the money to finance these reforms in a budget neutral manner.

The first pillar: funding political parties

The House passed in the 15th Congress a bill called the Political Party Reform Bill. It was a consolidated bill whose sponsors spanned the political spectrum. Had it been acted on by the Senate it would have delivered a significant reform to our political system. Given that one of its principal sponsors is now in the Senate, we should see some progress on this front.

One problem with the current bill, which the senate can refine, is that it is patterned too much after the American system in which state subsidies only become available when the party has raised counterpart funds through contributions from party members and donations from individuals and organisations. This simply is not appropriate for the Philippines at this stage of its political development.

The final bill should simply provide parties access to the pork barrel funds and direct 90-95 per cent of the Php 27 billion in the 2014 or any succeeding budget on a pro-rata basis based on the seats held in both houses. This would mean directing 95 per cent of each senator’s Php 200 million and 90 per cent of each congressperson’s Php 70 million pork barrel allotment to the political party he or she is a member of.

The parties can still engage in development assistance, outreach and projects as prescribed in the draft bill, but it will have to follow a clear set of guidelines and reporting procedures in acquitting these expenses. Centralising pork to the parties would provide an incentive to tow the party line and prevent turncoats by giving the party financial leverage over the local member.

If parties abuse their allocated funds, they can lose their accreditation and the allotments to them will cease. This makes it much easier to discipline offenders and would create a powerful incentive to maintain above board transactions.

The second pillar: increasing salaries of elected officials

The first pillar would aid political parties, but what is in it for the elected official? Why should he or she go along with it if it goes against his or her interests?

As compensation for giving up 90-95 per cent of their pork, the legislator should be given the remaining 5-10 per cent in the form of salaries and other perks. That would mean Php 10 million a year for each senator and Php 7 million for each congressman. The president should receive in my view Php15 million a year for managing a Php2.7 trillion budget.

To lend some perspective to this whole thing, let me benchmark with Australia where each MP receives AU$127,000 (Php 5.3M) a year before allowances. The Prime Minister who is the highest elected official gets AU$330,000 (Php 13.85 million) a year. Each representative also gets an additional AU$100,000 (Php 4.2 million) a year for printing costs as well as $32,000 (Php 1.3 million) in electorate allowance to handle costs incurred in relation to their constituency work.

If we want our elected leaders to walk the narrow path, we should pay them well. The scandal involving paying senators bonuses at the end of the year exposed a serious problem that can be dealt with if we simply paid our elected officials more. Public office is a public trust, but it should not involve living in penury, which then forces public officials to engage in corrupt practices simply to meet the limitless demands of their rent-seeking clients in the community and to recoup their campaign expenditures.

Third pillar: opening access to elective office

The third pillar involves opening access to elective office which means giving equal opportunity for political party members who are not members of political dynasties to be elected into office. If we simply relied on the first two pillars, we would have a weak structure because political dynasties could simply register their own party and get the pork that they would be giving up back by dominating the party with their family members.

The funding of political parties with state funds will only work if political parties are inclusive. In our banking laws and regulations, banks are limited in giving out DOSRI loans, or loans to directors, officers, staff, and related interests of the bank. DOSRI loans are capped at 20 per cent of the bank’s loan portfolio. A bank caught in violation of this rule risks losing its franchise.

We need a similar cap to prohibit spouses and relatives within the 2nd civil degree of consanguinity or affinity from occupying more than a certain ratio of a party’s officially endorsed ticket for a jurisdiction. This would still be in keeping with the Section 26, Article II of the Constitution that says, “The State shall guarantee equal access to opportunities for public service political dynasties as may be defined by law.” A dynasty under this arrangement exists when a certain cap is breached. This is different from the way it is defined under Senator Miriam Santiago’s bill which bans spouses and relatives from running alongside an incumbent.

The reason I am suggesting we impose a cap rather than an outright ban is to address the argument that we would be denying dynastic members their rights to pursue higher office and limiting choice among voters. Providing a quota or a cap allows them that right but regulates it so that political races become more contestable. In the same way that governments can regulate competition among firms and force break-ups of companies to prevent undue market power from being concentrated, this new rule on political dynasties would operate.

A new architecture for the future

With these three pillars in place, our political architecture would be better matched to a more modern, progressive society. It will lead to greater professionalism and integrity in our public institutions and elected officials, limiting nepotism, favouritism and corruption.

Through the three pillars outlined above, we can renovate our political system without resorting to drastic Constitutional reform.These reforms will work within the funding envelope that the state already sets for itself. It will reverse the dynamic that has led us to a downward spiral in our political life as dynasties have consolidated their hold on every level of elective office.

The challenge of governing our nation is not simply about the mechanics of government. By that I mean it is not simply about procuring textbooks for students, guns for policemen, equipment for weathermen, flood control systems for our cities, and the like. It is not simply about administering well and honestly, but setting the long-range plan for our nation. And that involves having a vision as well as a political and economic blueprint to build a modern Philippines. The current structure we inhabit is no longer suited to our needs. We need a new architecture for the future.

UPDATE:

The following table should make it clear why we need electoral campaign finance reform. It is a conservative estimate of the cost of fielding a national and local ticket for a general election from president down to councillor. The amount involved in running a full slate is Php 76 billion, Php 5 billion shy of the PDAF for three years of Php 81 billion. The remainder can be used for wage adjustments of national officials and for strengthening Comelec’s and COA’s monitoring systems.

elections

The next table comes courtesy of IDEA a think tank dedicated to electoral reforms. It shows the year in which various countries in Latin America have adopted some form of public funding of political parties. This should be an indication of just how behind the times we are.

Table 1
Clef two-factor authentication