DOTC

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.

Use your coconut: Of investment gaps and how to fill them (conclusion)

The Philippines has been trying to crack open the investment nut by lifting its competitiveness for such a long time but has not been getting very far. Here’s why.

Continuing on from the first part where we looked at the country’s investment gap of over half a trillion pesos a year, we now turn to the problem of how to fill it and bring unemployment down. The imperative to boost competitiveness is based on the notion that low social returns on investment are due to a lack of opportunities to invest due to poor governance, inadequate infrastructure, and bad local finance.

Government failures caused by macro risks like poor fiscal, monetary and financial policies along with micro-risks including corruption, high taxes and weak property rights lead to a lack of incentives for investing in new ideas. These failures block the supply of innovation and investment. While this forms conceivably part of the problem, it does not necessarily explain the entire puzzle.

A missing piece is the demand not forthcoming from entrepreneurs for existing technology and capital even when it is available due to market failures. Dani Rodrik and Ricardo Hausmann talk about how this comes about when there are significant hidden costs associated with information and coordination. I will try to explain these failures using the coconut analogy.

Imagine that several decades after Robinson Crusoe left the island of Despair, a number of coconut plantations were established. The owners of these plantations were competing for a shrinking share of the coconut trade that existed between several islands in the vicinity. To improve their earnings, they each could find different ways of using the coconut. The process of discovering what types of products could be made comes with a cost caused by free-riders.

The evidence shows that low income countries actually develop first by diversifying their exports. The degree of specialization follows a U-shaped curve with income (diversifying more until reaching about the same level of income as Ireland before specializing). They do this by imitating technology already developed in rich countries. Instead of competing by creating new technology, they find cheaper ways of using existing modes of production in diverse sectors.

This process of “self-discovery” as Rodrik termed it often comes at a cost to the first-mover within a country, a cost which imitators do not incur. This creates a market failure because no one is willing to invest in this process since the information generated by it (“which goods can be produced more cheaply at home”) usually cannot be protected by patents.

This random process of discovery is why such countries as Pakistan and Bangladesh with similar levels of development and competitiveness produce very different products (the former produces soccer balls while the other produces hats). Korea and Taiwan also offer the same lesson (one produces microwave ovens and hardly any bicycles unlike the other). For the entrepreneurs who first ventured into these markets and were protected from the free-riding copycats, huge profits were on offer.

Bailey Klinger and Daniel Lederman have shown that their measure of export diversification, the frequency a country introduces new products into its export mix, is directly related to the height of entry barriers. This is a stunning result since it goes against the prevailing consensus on efficient and well-functioning markets.

Rather than the Global Competitiveness Index cited in the first part of this piece, which is based on subjective surveys, Klinger and Lederman used the World Bank’s Doing Business indicators for measuring barriers to entry which are based on objective measures like the number of days for starting and closing a business. They found that the higher the cost, the greater the returns to innovation from self-discovery.

The barriers in effect performed the role of greenhouses, protecting fragile innovative start-ups from the harsh winds of the free market. This counter-intuitive conclusion robustly supported by the evidence is consistent with the market failure argument. It violates the prevailing theory that increased specialization for poor countries and lowering costs of doing business is the way they should attract investments.

This is also borne out by the development experience of Japan which used “administrative guidance” to encourage many players within emerging industries to consolidate into oligopolies, Korea which offered loan guarantees as a way to subsidize the discovery costs of large diversified business conglomerates, India with its licensing raj which allowed a few pioneering software companies to gain economies of scale without the fear of new entrants, and Brazil which sponsored competitions for innovation with significant exclusive licenses going to the winner.

Klinger and Lederman state that this does not imply that there are no negative effects due to protection. What their study shows is that the positive effects swamp them. This means that rather than justifying protectionism, what it does is build a case for state support for emerging industries. I will have more to say regarding this in a moment.

Moving on to the second form of market failure which is due to coordination costs, picture the island once again. To transport various coconut products to other parts of the area, investments in seafaring ships and the training of sailors are necessary. These complementary investments are needed for an expansion of production to occur. Unfortunately, no one is willing to coordinate with the other inhabitants who live near the shore who could profit from such activities, so nothing happens.

Taiwan’s experience with the orchid industry is illustrative. When the world price of sugar declined, the state figured that shifting farm production to this high end product would prove beneficial. This required coordinated investments in things like greenhouses and storage facilities which the state encouraged and subsidized. The same type of intervention was performed by Fundacion Chile a partly state-owned enterprise which gave rise to a new salmon exporting sector.

The faltering seaweed industry located mostly in the Autonomous Region of Muslim Mindanao and the nascent industry of coco juice seem to be suffering a combination of the market failure problems discussed above. Our electronics industry which is highly specialized in “screwdriver” assembly operations as South Korea once was could be expanded likewise to incorporate more value adding steps in the manufacturing process.

The usual ways by which governments address these market failures is by offering subsidies to defray the costs of “self-discovery” (by sponsoring contests which award a prize to the best solutions for example), financing high risk ventures at the pre-commercialization phase and coordinating complementary investments in specific areas such as research and development, infrastructure and general training.

Think of it this way: instead of borrowing from foreign governments to pay their suppliers to develop our infrastructure (think broadband and high-speed rail) we should be licensing their technologies and awarding these to local firms which can prove they can use it cost effectively to build what we need. This should also apply to contracts awarded to private firms partnered with foreign companies. They should be conditioned on meeting certain local content requirements. Defense contracts should increasingly source local producers as well.

The Department of Transportation and Communication is already on the right track by seeking to borrow to pay for the build while privatizing the operations and maintenance of certain projects like light railways. In time we could be exporting some of these products and services if we create local expertise. South Korea did this with its ship building industry in the 1970s with Hyundai Heavy Industries becoming the world’s leading exporter within a decade. It did this even as global demand for ships declined.

Where will the government get the money to do all this? From itself, by using the savings remitted by overseas Filipinos and stored with the central bank in the form of foreign currency reserves–an unorthodox view that even the “humbled” former dean of the UP Economics School holds! If the government were to set aside a third of the currency surplus flowing in each year (see previous posts on this) amounting to around fifteen billion dollars to fund these activities and assuming a one-for-one investment multiplier, a total of four hundred and fifty billion pesos worth of spending could be generated annually (adding 4.5% points to GDP growth!). This would fill up to eighty percent of the investment gap.

The need to diversify our exports is already apparent with an inordinately high specialization in electronics posing a huge risk to future growth in the face of uncertainty of demand from advanced economies. It is also clear that despite very benign inflation and low real interest rates, private firms fail to undertake investments that would lift the productivity of their idle capital. This underinvestment problem is why such a large proportion of our workforce remains unemployed or underutilized.

Stimulating demand for innovation and investment by addressing market failures should be the priority. The biggest barrier for the Philippines to adopting such a strategy will not be an inadequate bureaucracy as many of our top bureaucrats are well-informed and educated; it won’t be for lack of funds as a substantial amount of national savings remain untapped; it won’t be for lack of ideas as there is a wide gap between domestic and foreign technology that can be filled.

The biggest barrier will be attitudinal as it would mean countering the development mindset that has dominated for such a long time which is largely donor-driven. Having drunk the policy “cocktail” put together according to their orthodoxies to no avail, giving us the title of being “the sick man of Asia”, it is about time we developed our own recipes for stimulating economic dynamism in line with local conditions. I now leave you with a song about the coconut which should punctuate this final thought.

Of buses that kill and untrammeled markets

Just as we auction out public utilities, why not apportion bus routes to the most professional and competent bidders?

With the release last week by the LFTRB of the Top 10 Killer bus companies, a very unsavory picture of the road transport sector seems to emerge. A total of 163 accidents were tallied in the course of a year. Topping the list was NOVA Auto Transport, the same bus line that was involved in the road accident which claimed the life of UP Professor Chit Estella-Simbulan.

That particular incident highlighted the public safety risk that buses posed not just in the provincial bus routes but in the metro as well. Upon issuing three lists of top ten offenders (distinguished in terms of number of accidents, number of fatalities and accidents resulting in damage to property), the partylist group 1-UTAK cried fowl declaring that officials from the bureau could be subjected to criminal and administrative prosecution for releasing such information to the public.

After originally announcing that recidivist bus operators would have their franchises cancelled, the LTFRB was put on the back foot defending their release of such lists as not a form of “blacklisting”. Such a feeble response to the overt threats posed on it is quite typical of a government that is not autonomous from private sector interests. Such a hapless state of affairs persists in which the public regulator lacks the teeth to discipline erring providers of public transport.

It is worth retracing our steps to see how we got here.

After 1986, in an averse reaction to the monopolistic crony capitalism fostered under the Marcos dictatorship, the new regime sought to strip any visible vestiges of the former dispensation. This included privatizing the bus routes in Manila which was previously the domain of the Metro Manila Transit Corp under Imelda Marcos’s Metro Manila Commission.

The plying of bus routes was then liberalized and the importation of second hand buses was encouraged through tariff reduction or customs exemption. Echoing the policy consensus en vogue in Washington, Manila’s elite sought to introduce the “magic of the market” in areas that had been dominated by a state owned enterprise.

The role of the government was revised to simply set the rules, lower the cost of entry into the industry, stand back, and let the market rip. Even now, if one visits the LTFRB website, one will find that the cost of entering the market are quite low with a bank balance of 30,000 pesos the only capital requirement needed from a prospective franchisee.

Fast-forward to the present, with the advent of mass transit light rail systems that offer quicker, cheaper trips around the metro, there is now a glut of bus operators vying for a more limited number of bus patrons. With their fares being regulated, the only way for them to maximize profits versus their competitors plying the same route is literally to jostle on the streets of Manila for them.

Under the pre-existing policy, the goals of attaining a free and open competitive market with many small operators unable to distinguish themselves on the basis of product or price and where the customer is king has been achieved. With diminishing profitability, bus operators and their employees have increasingly taken to very risky practices to shore up their market share by snaking through our roads picking up passengers indiscriminately from any particular point on their route.

The response of the government has been to promise a rationalization of bus operators (to reduce the number of buses) through an attrition program scheduled to take effect in the medium term and to rely on stricter traffic monitoring and enforcement by the Metro Manila Development Authority to catch unlicensed and erring bus operators. Meanwhile, life threatening practices and accidents continue to happen on our roads.

Changing Course

With the benefit of hindsight, it is clear what the policy stance of the government should have been. The government should have planned and managed the issuance of licenses to ensure that operators had a reasonable let alone a sustainable level of profit expectation. Instead of leaving it to the market to determine the number of operators, the state should have studied the transport capacity of the city and acted accordingly.

One study by two engineering undergraduate students has shown that the market on EDSA is currently 75% overcapacity or over-serviced compared to the DOTC’s own computation of 60%. This would tend to imply that quite drastic cuts are needed if for every bus that is required, there is another one to two buses competing for the same set of passengers. That would tend to mean a loss for both operators who would be running on less than half their normal capacity, thus leading to slimmer margins.

If correct, the study shows that the reduction through natural attrition cannot be relied on to achieve the required number of buses in the near term. What if the better behaving operators have their franchises cancelled simply because these are due to expire earlier than the worst offenders? There is nothing rational about a natural attrition policy.

What the government should do is simultaneously revoke or cancel all licenses for the same over-supplied routes at some future date and auction them out in the same way it intends to bid out projects under the PPP program for public transport.

This implies that the government needs to intervene in the market. Instead of relying on Adam Smith’s “invisible hand” to intensify competition which creates cut-throat business practices that puts the motoring public at risk, the government needs to show its “visible boot” and kick the industry back into shape.

To do that, it needs to parcel out bus routes and auction them out to the best bidder. This will tend to favor fewer numbers and much larger bus operators resulting in an oligopoly with a credible threat of cancelling and re-auctioning routes for poorly performing ones. Small operators will need to either form consortia or cooperatives to compete with large operators in terms of scale.

Among the criteria used to approve and renew bus licenses should be the safety record of bus liners, their compliance to traffic rules, their capacity for adequate repair and maintenance and their ability to service their routes well. Technocrats should be hired to determine a reasonable auction price range for specific routes that would still allow for an acceptable return to prevent a “rigged” auction.

With monopolies over certain bus routes, the operators will no longer need to engage in dangerous driving practices. Passengers should only be allowed to board and alight from buses at designated stops. Operators would be assured of sustainable passenger volume along their routes and would find it in their interest to schedule the deployment of buses along their routes. Traffic congestion would ease, and enforcement could be made much simpler to monitor and track.

The government should also embark on a training programs to educate drivers on safe driving practices by benchmarking with other jurisdictions. With a greater assurance of profits, bus operators should be made to provide decent work hours as well as comply with occupational health and safety standards.

Transitioning arrangements

With this new arrangement in place, the question remains what to do with the remaining operators and their assets. The cancellation of their franchise would result in lost income and livelihood for them. Wouldn’t the government have to compensate them for this?

On the loss of livelihood, the damage caused the industry may not be as big as one would imagine. To achieve sufficient scale, winning bidders might need to purchase or lease buses from unsuccessful companies. Secondly, the cost of compensating the remaining bus operators could be partially offset with the revenue earned from auctioning bus routes. Thirdly, the government could require metro and provincial operators to maintain excess buses for use during peak periods during the day or peak seasons during the year. A pool of reserve buses could be established to accommodate this. The remaining assets could potentially be used for chartered services to the tourist industry.

If need be, the LTFRB should be given “legal cover” to undertake this drastic policy shift by our legislators. It should be allowed to invoke “public safety” as a criterion for re-structuring the industry. It also needs to be granted the authority to auction out routes under the PPP arrangement found in other mass transit systems.

On the way to market

The chaos on our streets is emblematic of the state’s governance in our country as a whole. The ideology of the free market was adopted as a way to expand service at a time when the public sector was strapped for cash. On our way to achieving that ideal state of open market competition, we allowed the industry to become unwieldy. No forward planning was conducted when the mass rail transit system was constructed to determine whether bus routes would continue to be viable. As a result, the untrammeled market created perverse incentives for operators to put the public’s safety at risk with the burden of monitoring and enforcing traffic safety placed on toothless regulators.

After a period of stepping back and letting markets rip, it is now time for the public sector to govern the market to bring it back to a sustainable level. In a similar fashion, the government needs to identify strategic sectors in the economy that could do with similar industry structural adjustments and develop a plan for deepening and broadening their scope of activity.

It is quite ironic that the economic planner who coined the phrase “narrow, shallow and hollow” as a way to describe the Philippines and its industrial base was the same person at the proverbial wheel when tariffs were being indiscriminately lowered ahead of external commitments under WTO. “Asleep at the wheel” is probably the phrase we can use to describe this strategy.

Like our streets, untrammeled markets could simply foster cut-throat competition or lead to investments in unproductive sectors of the economy and impede investments in more productive ones. This could literally spell life or death for those that rely on them for a living.

Has the “Bromance” Ended?

Has the DOTC become a wedge for the bromantic couple of Noynoy and Mar?

At the pressconference announcing his appointment as DOTC secretary replacing Jose “Ping” De Jesus whose exit was the subject of much controversy, Mar Roxas the official running mate of PNoy in the 2010 elections could have fooled everyone by appearing happy and in his words “excited” over his new designation.

But he couldn’t help but present the press corps a Freudian slip in his supposedly cheerful remarks when he sang that Burt Bacharach tune, “Trains, Boats and Planes.” Upon haltingly intonting the opening bar whose lyrics are identical to the title of the track, he immediately segued into prose.

If he had sung the entire first verse of the song, it would have conveyed a totally different message: one of deep regret and disappointment (see below):

Trains and boats and planes are passing by
They mean a trip to Paris or Rome
To someone else but not for me
The trains and boats and planes
Took you away, away from me.

Mar simply didn’t decide to sing this song impromptu, but had consciously decided on it the morning of the press con as he woke up. He says he skimmed through his CD collection and landed on this one. The subtext is irresistably poignant, with the artist claiming that trains, boats and planes took her lover away leaving her stranded and pining after him.

The analogy here is that the DOTC will take Mar away from the nerve center of the action. The more painful imagery for Mar would be that his bromance with PNoy will be interrupted as “someone else” occupies his time, namely the Executive Secretary Pacquito Ochoa, and members of the rival faction supporting his nemesis Vice President Jojo Binay.

Accepting the appointment was like a poison chalice for Mr Roxas having previously been promised the more central chief of staff post. He could not disguise his disappointment as he spoke of his “surprise” at the sudden shift in the President’s preferences. Like the proverbial rug being pulled out from under him, Mar now faces the gauntlet of straightening out the maze of contracts and lawsuits involving the country’s PPP projects both past and future.

So will the DOTC act as a wedge between this bromantic couple? Or will it as the song goes bring them back together again someday…

Trains and boats and planes took you a way
But every time I see them I pray
And if my prayers can cross the sea
The trains and the boats and planes
Will bring you back, back home to me

 

DPWH chief ‘appoints’ self to head MWSS

DPWH chief ‘appoints’ self to head MWSS
By Gil C. Cabacungan Jr., Kristine L. Alave
Philippine Daily Inquirer

MANILA, Philippines—It appears that Public Works Secretary Rogelio Singson could not wait for his boss to appoint him to head the body that regulates the private water concessionaire that he used to manage.

On his own, Singson, the former president and chief executive officer of Maynilad Water Services Inc., wrote a letter wherein he claimed that President Benigno Aquino III wanted him to head the Metropolitan Waterworks and Sewerage System (MWSS).

But the President seems unaware of Singson’s self-appointment. “Will check on that,” he said in a text message, responding to the question of whether he knew that Singson had appointed himself MWSS chair.

In a letter dated July 6 and addressed to MWSS Chair Gabriel Claudio, Singson said: “We wish to inform you that it is the desire of His Excellency, President Benigno C. Aquino III, that the secretary of public works and highways immediately assume the position as ex-officio chairman of the board of trustees of the [MWSS] pursuant to Section 4 of Republic Act No. 6234 as amended.”

Singson, also a former director of Metro Pacific Investments Corp., took over Claudio’s post on July 7, when the MWSS had its first scheduled board meeting for the month.

But Singson Thursday said he “cleared” his move with Executive Secretary Paquito Ochoa before going to the MWSS.

“I cleared it with the ES in a letter. I wouldn’t have done it without their signal,” he said.

Conflict of interest?

Reached by phone, Claudio, a top political adviser of then President Gloria Macapagal-Arroyo, said that under the rules, the public works secretary served as chair of the MWSS unless the President appointed another person.

He refused to comment on the purported conflict of interest inherent in Singson’s takeover of the MWSS.

Maynilad was formed by the Lopez group 15 years ago to bid for Metro Manila’s huge concession area, which the administration of President Fidel Ramos had divided into two zones to engender competition and protect consumer interest.

Maynilad won the west zone, and Ayala-owned Manila Water Company Inc. won the east zone.

Because of Maynilad’s debt problems, the Lopez group’s allies—Metro Pacific Investment Corp. run by Manuel V. Pangilinan and construction and property giant DMCI Holdings—took over the water firm three years ago.

Singson, however, said there was no conflict of interest when he accepted the public works portfolio after working with Maynilad.

“What conflict of interest? We are both protecting the consumers,” he told the Inquirer over the phone.

He said that in order for this kind of talk to die down, he would sell his shares in the companies he used to head.

“I am selling my shares. I have 30 days to do that,” he said, adding in jest that he would be on the losing end. “Lugi pa nga ako.”

Ties to big business

The deep ties of Singson and other Cabinet officials to big business interests have elicited questions from lawmakers about the “disturbing pattern” of Mr. Aquino’s appointments.

Speculations have swirled about such appointments as Transportation and Communications Secretary Jose de Jesus (a former president of Manila Electric Co., which is jointly run by the Lopez group and Metro Pacific, and a former executive vice president of Philippine Long Distance Telephone Co.) and Energy Secretary Jose Rene Almendras (a former president of Manila Water and Cebu Holdings Inc., both owned by the Ayala group, and a former treasurer of the Aboitiz group).

In an interview, Bayan Muna party-list Rep. Teodoro Casiño said Congress would keep a close watch on appointees with known connections to utility firms and other powerful business interests, “to make sure that they do not unduly favor the monopoly interests of their patrons.”

Casiño said that during the confirmation and budget hearings, lawmakers would demand from these appointees their firm commitment to prioritize public interest over the interest of their former business associates.

“We are calling on the public to serve as a check to any potential conflict-of-interest situations brought about by such appointments. This is crucial given that oil, water, power and telecommunications firms are itching to raise their prices and profits,” he said.

’Nothing new’

But according to Singson, the MWSS charter states that its ex-officio chair is the public works chief.

“It’s always the DPWH secretary [who chairs the MWSS board]. There’s nothing new there,” he said.

Singson said his decision to chair the MWSS had raised eyebrows because “some people wanted to stay” in the agency.

He also said the Arroyo administration did not follow the charter and gave the posts to political appointees.

AFP on red alert in preparation for May 10 polls

AFP on red alert in preparation for May 10 polls
By Alexis Romero
The Philippine Star

MANILA, Philippines – The military will be placed on red alert starting today as part of security preparations for the May 10 elections.

Col. Ricardo Nepomuceno, spokesman for the Armed Forces of the Philippines (AFP)–Task Force HOPE (Honest, Orderly and Peaceful Elections), said the red alert status will be implemented until May 20 to allow the military to monitor the security situation in the field.

“The red alert will start at 8 a.m. It will be nationwide. We will start the manning of our (HOPE) operations center and that is the signal for us to start implementing our security operations,” Nepomuceno said.

A red alert means that all the military personnel should be readily available for deployment anytime. Such alert level would also entail the cancellation of all leaves to ensure adequate manpower.

Nepomuceno said the Parish Pastoral Council for Responsible Voting (PPCRV), the citizen arm of the Commission on Elections (Comelec), would send representatives to the HOPE operations center to enhance the gathering of poll-related updates.

He said the agreement with the PPCRV would allow HOPE to get feedback on the security issues on the precinct level.

The HOPE operation center would be located at the AFP general headquarters in Camp Aguinaldo in Quezon City and will be open to the media.

The PPCRV, as the Comelec’s deputized citizen arm, has been authorized to monitor the results of the May 10 elections. This is intended to promote transparency and accountability in the conduct of the polls.

The AFP is not allowed to engage in partisan politics but has been tasked to provide security during the transport of precinct count optical scan (PCOS) machines to polling precincts nationwide.

In fact, heavily armed police and military forces were already deployed in strategic areas of Metro Manila yesterday to ensure the safe delivery of the PCOS machines.

Joint elements of the National Capital Regional Police Office (NCRPO) and the AFP’s National Capital Region Command (NCRCom) in full battle gear were seen securing vehicles transporting 7,555 PCOS machines, 6.13 million ballots and ballot boxes and election paraphernalia to 743 precincts in Metro Manila.

NCRPO chief Director Roberto Rosales said the police and NCRCom vehicles securing the delivery trucks had global positioning system (GPS) devices for monitoring purposes.

The central hub is being secured by eight NCRPO and 15 NCRCom personnel who barred police officials and journalists who cannot produce access cards issued by Smartmatic from entering.

PNP chief Director General Jesus Verzosa, on the other hand, said that agencies like the Department of Transportation and Communications (DOTC), Department of Education (DepEd), Department of Energy (DOE), Philippine Information Agency (PIA) and the local government units (LGU) help in the implementation of safety measures during the polls.

“All other government agencies cannot afford to be mere bystanders in this historic and very important national exercise. Everyone has a moral obligation and duty to choose a new set of national and local leaders in an honest and orderly manner,” said Verzosa.

Because of this overwhelming effort by the AFP and the PNP, Malacañang expressed confidence that their respective members would remain professional and not allow themselves to be influenced by partisan groups.

Presidential spokesman Ricardo Saludo said the soldiers and policemen would remain true to their oath to defend democracy.

“Let us remember even in election time despite attacks on the integrity of certain individuals, the fact is the AFP and the police have performed their jobs in securing the elections and affirming our democratic exercises even beyond the call of duty,” Saludo told a news briefing.

He said the Armed Forces and the PNP play a key role in ensuring the success of the elections.

Old generals support Noynoy

Meanwhile, a group of retired military and police officers yesterday expressed support for the candidacy of Liberal Party standard-bearer Sen. Benigno “Noynoy” Aquino III and vowed to guard against cheating in the upcoming May 10 polls.

In a statement, the group claiming to be EDSA 1986 veterans said Aquino can implement genuine reforms in the government and provide solutions to the problems plaguing the county.

“Many of us in recent years followed our ailing President Cory Aquino in her crusade to change a more oppressive, corrupt regime and unite the Filipino people in a fight for true reforms in ourselves, in our institutions and in our national character,” the statement read.

“Our beloved President Cory is now in the heavens but the torch of this crusade is now passed to her son, Senator “Noynoy” Aquino, who is seeking the presidency in 2010 to effect the reforms that all Filipinos are longing for,” it added.

“We would like to inform our people that we are now prepared to protect the votes of every Filipino and to ensure that these votes will be counted. We will see to it that the PNP and armed forces will do their duty,” he said.

Montaño said they will also remind those in active service to be faithful to their duties and to remain non-partisan.

He said they have learned their lesson in 2004 when they backed the candidacy of the late actor Fernando Poe Jr., the closest rival of President Arroyo in the presidential race.

“If we know how we were cheated last time, we know how to counter it,” Montaño said. – Non Alquitran, Cecille Suerte Felipe, Paolo Romero

NP claims Noynoy forming a 'GMA Cabinet'

NP claims Noynoy forming a ‘GMA Cabinet’
abs-cbnNEWS.com

MANILA, Philippines – The Nacionalista Party (NP) on Saturday scored Liberal Party standard-bearer Benigno “Noynoy” Aquino Jr. for allegedly forming a Cabinet way ahead of the May 10 automated elections.

“Aquino is clearly jumping too soon,” the NP said in a statement, hinting that Aquino is being overconfident that he will win the presidential race.

Aquino has slowly regained his wide lead over the NP standard-bearer Sen. Manuel “Manny” Villar Jr. in the presidential survey. The latest Pulse Asia survey showed Aquino gaining a double-digit margin from his closest rival.

“This is proof that Aquino is already thinking of holding the highest position in the land when the election is still a month away. How can he do this when he has yet to prove that he will win the election?” the NP said. “And worst is that the Aquino presidency will be a virtual Arroyo administration with a GMA rehash Cabinet.”

Without naming its source, the NP said that among the future appointees of Aquino is Department of Transportation and Communications (DOTC) Undersecretary Thomson Lantion.

It said Lantion, a former police official who is close to President Arroyo’s current executive secretary, Leandro Mendoza, will be appointed by Aquino as DOTC secretary.

The NP claimed that the other future Aquino appointees are re-electionist Alaminos City Mayor Hernani Braganza as head of the Department of Agrarian Reform; North Cotabato Vice Gov. Emmanuel Piñol as secretary the Department of Energy; Avelino “Nonong” Cruz as National Defense chief; former Education Secretary Florencio “Butch” Abad as Secretary of the Department of Public Works and Highways; former Social Welfare and Development Secretary Dinky Soliman as Department of Environment and Natural Resources head; Ed Gana as Department of agriculture chief;

Former Economic Planning Secretary Ralph Recto, now running for senator under the Liberal Party as head of the Department of Finance; Makati Business Club’s Ramon del Rosario as Secretary of the Department of the Interior and Local Government; Leah Navarro of the Black and White Movement as Presidential Management Staff chief; and former Pangasinan governor Victor Agbayani as secretary of the Department of Trade and Industry.

The NP predicted that if Aquino wins, they expect him to appoint relatives and friends to his future Cabinet.

GMA replacing officials en masse

GMA replacing officials en masse
By Paolo Romero and Pia Lee-Brago
The Philippine Star

MANILA, Philippines – After getting the green light from the Supreme Court (SC) to appoint the next chief justice, President Arroyo has apparently gone on an appointing spree, naming an ambassador, several officials of government agencies, and replacing the entire boards of two cultural institutions with barely three months left in her term and despite the constitutional ban on midnight appointments.

In what some quarters are calling a pre-election “massacre,” the entire boards as well as the heads of the National Museum and the National Historical Institute (NHI), both agencies under the Office of the President, were changed, with most of them not even knowing they had been replaced.

The President also appointed business tycoon Alfonso Yuchengco, 86, as ambassador to Germany, with current Ambassador Delia Domingo-Albert learning about it only when she went to Malacañang last Friday to receive an award from a women’s business group.

Sources said Mrs. Arroyo told Albert, a career diplomat and former secretary of foreign affairs, that she had appointed Yuchengco as the new envoy to Germany when Abert sought confirmation of rumors she had heard. Albert is set to retire from the foreign service in June.

“We have learned of Yuchengco’s appointment but we have not received official copy of his appointment. Ambassador Albert stays so far,” a ranking official of the Department of Foreign Affairs (DFA) told The STAR.

The same official pointed out Mrs. Arroyo clearly violated the ban on appointments during the election period.

Article VII Sec. 15 of the Constitution says, “Two months before the next presidential elections and up to the end of his term, a President or Acting President shall not make appointments, except temporary appointments to executive positions when continued vacancies therein will prejudice public service or endanger public safety.”

Retired journalist Larry Henares assumed the chairmanship of the National Museum, replacing businessman Antonio Cojuangco, who was not told that he had been replaced. The new National Museum board reportedly met at the Palace yesterday afternoon and elected Malacañang Museum director Jeremy Barns as the new museum director, replacing Cora Alvina.

The other members of the board were not identified, but Senate and House representatives to the museum board, Sen. Manuel Roxas II and Marikina Rep. Del de Guzman, were reportedly not informed of or invited to the board meeting.

The board members and executive director of the NHI were also reportedly replaced, but the names of the new appointees were not revealed. It was not clear whether NHI chairman Ambeth Ocampo was also replaced.

Last December, Mrs. Arroyo appointed Cebu Rep. Antonio Cuenco and businessman Francisco Benedicto as ambassadors to Italy and China, respectively.

The appointments raised a howl among career officials who pointed out that Cuenco and Benedicto would only serve as envoys for less than six months, co-terminus with the remaining term of office of President Arroyo until June 30.

The Union of Foreign Service Officers (Unifors) also reminded the President that Benedicto is already 65 years old, and his appointment would violate Section 23 of the Foreign Service Act.

Mrs. Arroyo also appointed Assistant Secretary Rommel Garcia, deputy director for operations, to replace Clarence Paul Oaminal as vice chairman of the Dangerous Drug Board (DDB).

Oaminal, for his part, said he was surprised by the appointment but stressed he is not contesting his sudden removal on the orders of the President.

“I know that if the late (Press) Secretary (Cerge) Remonde were alive today, I would not have been replaced the way it was done,” Oaminal lamented.

He said he was so busy going after illegal drugs and drug lords, “I forgot to watch my back.”

Oaminal said he could not explain why he was suddenly replaced. He also learned that upon receiving the letter from Galvante, his removal from DBB was retroactive to March 5, which he said, was before the election ban on appointments that started March 10.

Mrs. Arroyo yesterday also appointed retired Court of Appeals Associate Justice Perlita Tria-Tirona to head the newly formed independent committee that will review all major tax evasion and smuggling cases dismissed by the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC).

Other members of the Review Committee that were appointed include Kapisanan ng mga Brodkaster ng Pilipinas (KBP) vice chairman Butch Canoy, Publishers’ Association of the Philippines Inc. president Juan Dayang, Federation of Filipino-Chinese Chambers of Commerce and Industry Inc. president Alfonso Uygongco, and Philippine Exporters Confederation Inc. representative Oscar Barrera.

Mrs. Arroyo has also promoted Land Transportation Office (LTO) chief Arturo Lomibao as Undersecretary in the Department of Transportation and Communications (DOTC).

Executive Secretary Leandro Mendoza said on Wednesday that Land Transportation Franchising and Regulatory Board (LTFRB) chairman Alberto Suansing was appointed to replace Lomibao at the LTO.

LTO insiders said they were expecting the turnover of office between Lomibao and Suansing to be held yesterday.

Lomibao, however, appeared and immediately presided over a meeting of top officials of the agency.

Lomibao was said to have been able to prevail on the President to reverse the appointment but there were no officials who could confirm the report.

It was not yet clear who would replace Suansing at the LTFRB.

Earlier, former presidential political affairs adviser Gabriel Claudio was named chairman of the Metropolitan Waterworks and Sewerage System, replacing Oscar Garcia, who still retains his board seat.

The President also appointed retired Sandiganbayan justice Raoul Victorino as chief presidential legal counsel, replacing Natividad Dizon, who had held the post for only two weeks. Dizon was moved to the Board of Pardons and Parole.

Another short-lived appointment was that of Rogelio Peyuan, who was replaced as director general of the Technical Education and Skills Authority (TESDA) only a few days after he assumed office. He was moved to the Office of the Press Secretary. Former TESDA deputy director general for operations Pastor Guiao took over as director general.

Another controversial issue involved Undersecretary Ariston de los Reyes, who was relieved as Defense undersecretary, allegedly because his appointment as presidential assistant had lapsed.

Other appointments include veteran broadcast journalist Mario Garcia as member of the board of the Subic Bay Metropolitan Authority (SBMA) and Civil Service Commission head Francisco Duque III as member of the board of the Pag-IBIG Fund, although there was no vacancy in the Pag-IBIG board. With Jerry Botial