economic growth

Jammed

Does public infrastructure represent the best use of private investment?

It seems that our corporate titans have nothing better to do with their excess cash than to pour it into the growing public utilities and infrastructure sector. Whether it is San Miguel the beverage giant which went heavily into power or the Metro Pacific group a major player in telecoms which operates the NLEX-SCTEX road networks, there does not seem to be anything which competes for their attention than this sector.

About one-and-a-half trillion pesos is sitting in Special Drawing Accounts with the BSP deposited by banks which are unable or unwilling to lend them out. With a country as underdeveloped as ours, one would think that such excess savings could be put to better use. Why for instance isn’t San Miguel investing to develop coco juice exports which it has the capital and expertise to do?

Since our lost decade in the 1980s when a banking crisis followed by a political upheaval reduced our economy to tatters, manufacturing has never really recovered from the heights it once achieved by the end of the 70s and early 80s (see chart). Meanwhile, our ASEAN neighbors Indonesia, Malaysia and Thailand overtook us in moving their economies towards industry. Our gross capital formation as a percentage of GDP is the weakest in the region as a result.

Vietnam, a relative latecomer in the game has seen its manufacturing sector grow by leaps and bounds, while Singapore cannot be held up as an example for us to follow since it is a city-state with a tiny population and workforce. It can afford to de-industrialize its economy, while we can’t. While some would argue the high value services sector is nothing to sneeze at, it still cannot be relied on to provide the kind of jobs that match the skills held by our bulging population. The answer lies with manufacturing.

The Philippine Development Plan identifies infrastructure as the “binding constraint” to speedier growth. The reason it claims Philippine goods remain uncompetitive is our inability to bring them to market efficiently. Apart from that there is the implicit “tax” that comes by way of corruption which increases the cost of doing business and the unfair competition from smuggled or pirated goods that discourages domestic manufactures, the result of weak rule of law.

With its low tax collection rate and chronic fiscal deficits, partly to do with an aggressive liberalization policy pursued since the 1990s, the government was more than willing to let the private sector fill the breach in public infrastructure.

Since private business seems so gung-ho about providing public goods, it seems the identification of infrastructural bottlenecks was the correct diagnosis of the problem of underdevelopment. One wonders, however, if these firms are moving into such projects because there is no attractive alternative in other sectors, or is it because of higher returns now currently on offer from public-private partnerships?

Also, if indeed there are “bottlenecks” causing the cost of doing business and cost of living to skyrocket, then one would expect the public would be willing to absorb the fees charged by private operators under existing PPP arrangements. That is not what has been observed though (think MRT and LRT). One would then have to conclude that either the private operators have negotiated prices above the market-clearing level or that the demand for such infrastructure was not sufficient to begin with.

Investing in public goods by their very nature would often produce a private return lower than the commercial rate of return. That is why it is often financed in capital scarce countries through “concessionary loans” from foreign governments and multilateral institutions. If private operators borrow at prevailing market rates, then they cannot possibly make a profit unless the government provides a subsidy to pay for the spread between the “risk free” government borrowing rate and the commercial lending rate.

Turnaround

The sudden flash of insight Sec Mar Roxas used to interject into the president’s faltering public-private partnerships roll-out was that it would be better for the government to borrow at the risk-free rate and contract out the construction phase of some projects in effect passing on the cheap cost of capital to contractors. It could then auction off the operations and maintenance contract separately minimizing the need to subsidize fees charged to customers.

The question then is can government afford to borrow more in order to finance its infrastructure roll-out? It could if it chooses take-up the BSP’s offer to borrow against the country’s excess international reserves that accumulate each year. The state would effectively be borrowing against itself. Given the total cost for the original projects of about one hundred billion pesos, the surplus of reserves flowing into the country each year of four to five billion dollars is enough to cover these projects twice over.

If the public sector is then able to deal with the cost of providing infrastructure, how can it stimulate complementary investments needed in the private sector? If the lack of domestic capital and skilled labor are not responsible for the observed underinvestment, neither are low rates of return (low taxes and labor market flexibility are found in special economic zones), then what else could it be?

There are a number of candidates. Government failures which include corruption or weak property rights and rule of law are one option. A second possible candidate is market failure due to inabilities to coordinate investments in complementary upstream and downstream sectors or to internalize the benefits of innovation and experimentation.

The first has been identified by the National Competitiveness Council and the government as an area of concern. The decline of the Philippines ranking in the latest Ease of Doing Business survey by the World Bank reflects the country’s inability to address government failure. On the other hand, if these are the causes for underinvestment, why is it that manufacturing has suffered a decline relative to services in terms of investment and output? Shouldn’t they all be suffering the same fate?

This leads me to identify the problem of market failures as well. The systematic break that occurred in the mid-80s when the country turned away from industry policy and underwent an aggressive reduction of tariffs unilaterally ahead of WTO commitments left our manufacturing sectors at a disadvantage vis-à-vis our ASEAN neighbors. This is perhaps the reason services have oustripped manufacturing since it represents non-tradables which can only be provided domestically. Think retail, housing, commercial property and yes, utilities. Mining is a similar story. How then could the government begin to stimulate activity within the tradable industries? The following five measures would represent the most important steps.

  1. Partially rollback tariffs to within acceptable levels still within WTO commitments targeting in particular greenfields. Sustainable technology is one example of greenfields. To partly offset the modest rise of inflation that would come with this, tax cuts and (conditional cash) transfers should be directed to low income families.
  2. Finalize the list of investment priorities to signal the areas that government wants growth to occur in. Government must consult with business groups in compiling this list, but it must also exert some independence and take the lead in some areas and not simply take a market follower approach.
  3. Rationalize fiscal incentives and gradually fine-tune the selectivity of sectors for promotion. This has already been initiated by the BOI, but follow through and institutional capacity building needs to occur, which leads to the next item.
  4. Strengthen the economic bureaucracy to solve investment coordination problems across related sectors. Improve the ability of state agencies like the BOI, PEZA, DTI and other government agencies to undertake a consultative and promotional role.
  5. Create a research and innovation fund jointly run by public and private enterprise to encourage commercialization of ideas. Given the excess foreign reserves cited earlier, the state can also afford to undertake this strategy in partnership with academe and the business community.

Compared to the strong-arm tactics being employed by Argentina and Brazil which like us bought into the liberal free trade argument in the 1990s and have like us seen their manufacturing sectors stagnate (see chart), these measures would be considered rather tame.

From 1949 to 1959, the Philippines used heavy handed trade and industry policies similar to what LatAm countries pursued from the 1930s to the 1980s. This led to the fastest growth ever sustained in our history (and theirs). Unfortunately, it did not last long enough for investments to expand beyond light industries as Paul D Hutchcroft notes. The direpute to which import-substitution subsequently fell was the result of the Filipino First policy instituted in 1958 towards the end of the decade of growth, an over-reach of the “elite” nationalists. The poor administration and outright corruption that the policy bred stymied it and led to the liberal policies of the 1960s supported by the landed agricultural exporters.

Pres Marcos tried to weaken the landed aristocracy and revive our nascent industry sector in the 1970s, but the lack of checks to the predatory nature of his regime led to its collapse. The Philippines has been following the liberalization paradigm ever since. The stagnancy of our manufacturing and overall weak economic performance is hard to explain given the structural reforms undertaken from the late-80s. The Philippines since the early 2000s has become a net saving country due to overseas remittances and is rapidly accumulating foreign reserves (it has more than enough to pay off all our external debts). With some tweaking, we can unlock this capital and put it to better use.

So far from encouraging private investors to get into public utilities, the government should actually follow Sec Roxas’s advice to break-up build, operate and transfer contracts to lower their cost to the public. Finally, the government must look to revive investments in the industry sector (which includes high value agricultural and services too) through pragmatic policies. It must create as much policy space within existing WTO arrangements to maximize the benefits of industrialization. Without this its vision for a rapid, sustained and inclusive pace of development might simply come to naught.

How Sri Lanka Overtook the Philippines

It is a continuing expression of the financial market’s faith in the story of poor countries catching up with richer ones propelled by economically liberal policies. Read more

Forum cites development tasks

Forum cites development tasks
BusinessWorld Online

ASIA is now increasingly the focus of growth in the world, but individual economies like the Philippines and similarly less developed markets have to identify sectors that need support in order to boost their competitiveness, experts said at a forum yesterday in the Asian Institute of Management in Makati City.

In her presentation, Suzanne Rosselet, deputy director of the International Institute for Management Development World Competitiveness Center, noted that Asia’s population will hit 5.26 billion by 2050, compared to Africa’s 1.77 billion, the European Union’s 628 million and the United States’ 447 million.

“This pretty much sums up where the long-term growth will be. [It] will be in Asia,” she said.

In the Philippines, she said, the government needs to focus on supporting small- and medium-scale enterprises (SMEs) and services, which have been an engine of growth.

She added that “there has to be job creation for young people moving into the workforce.”

David Jay Green, a fellow of the Asian Development Bank-Asian Institute of Management Knowledge Hub for Trade and Investment, noted that within the Association of Southeast Asian Nations (ASEAN) are pockets of less developed clusters like that of the otherwise resource-rich sub-region grouped into the Brunei Darussalam-Indonesia-Malaysia-Philippines-East ASEAN Growth Area (BIMP-EAGA).

He noted this group, which was formally established in 1984, was formed precisely to enable the less developed component areas to pool resources and efforts to help them catch up with more developed urban areas in the same countries. The Philippine components of BIMP-EAGA are Palawan and Mindanao.

Experts have prescribed increasing trade and other economic ties within Asia, as demand recovery in the US and Europe remains sluggish.

But Mr. Green stressed the need to further streamline trade processes within BIMP-EAGA if it is to live up to expectations as a driver of growth in Southeast Asia.

This, in turn, requires more efficient government operations, better infrastructure and “connectivity policies” — all of which will facilitate the transport of goods and trade in services.

“It’s a whole series of things that has to be done to encourage the business environment, trading environment and the ability of people to invest in their own country,” Mr. Green said.

Sought for comment, Augusto B. Santos, deputy director general of the National Economic and Development Authority, said the government has been finding ways to provide cheap loans to SMEs, help localities focus on a few products and services they can excel in, and is poised to embark on an infrastructure buildup under public-private partnerships in order to lay the groundwork for sustained, faster growth. — JJAC

The 2nd ASEAN-U.S. Summit: What’s on the Menu in Manhattan?

The 2nd ASEAN-U.S. Summit: What’s on the Menu in Manhattan?
By Ernest Bower, Director, South East Asia Program-CSIS
ABS-CBN News

Summary

President Barack Obama will host 8 of the 10 leaders from the Association of Southeast Asian Nations (ASEAN)—Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar (Burma), the Philippines, Singapore, Thailand, and Vietnam—in New York City on Friday, September 24, at the second U.S.-ASEAN Summit. The meeting underlines renewed U.S. policy energy being invested in Southeast Asia. Headlines from the discussion will likely focus on three areas:

1. Security alignment—including restatement of a common position on the South China Sea;

2. Economic growth and trade—particularly ASEAN’s leaders are seeking an update from Obama on the health of the U.S. economy and a read on whether the mid-term U.S. congressional elections might be an inflection point after which the United States can return to a proactive posture on trade; and

3. Burma—specifically exploring how the United States and ASEAN can encourage Burma’s leaders to create political space in the November elections and beyond.

The fact that the meeting is taking place in September in the United States is important in that it institutionalizes renewed U.S. engagement in ASEAN ahead of key steps forward in creating new regional security and trade architecture in Asia.

On the other hand, the fact that the summit is taking place in New York, not Washington, and without the leader of ASEAN’s largest country and economy, Indonesia, underlines the fact that while the policy intent is clearly substantive engagement, there is still much work to be done to align the United States and ASEAN.

Despite the best intentions of the principals, the meeting will certainly be viewed through the prism of perceived increased tension between China and its Asian neighbors, particularly related to disputed maritime territories.

Q1: Who is meeting and what is the agenda?

A1: President Obama will host the summit over lunch at a hotel in New York City from 12 noon to 2:30 p.m. on Friday, September 24. Eight of the 10 ASEAN leaders are confirmed to join him, except for President Susilio Bambang Yudhoyono of Indonesia and Prime Minister Thein Sein of Burma. The ASEAN secretary general, Dr. Surin Pitsuwan, will also join the meeting. The only surprise is Yudhoyono’s absence, and that is significant (see below). The Burmese were not expected to send their head of state due to poor relations with the United States and the sanctions regime currently in place. Indonesia’s President Yudhoyono will be represented by Vice President Boediono, and Burma’s Prime Minister Thein Sein will be represented by Foreign Minister U Nyan Win. The leaders will be accompanied in most cases by their ministers of foreign affairs, ambassadors to the United States and/or the United Nations, and other senior officials.

Q2: Why isn’t President Yudhoyono attending, and what are the implications of his absence?

A2: President Yudhuyono notified the White House that he could not accept President Obama’s invitation to come to New York due to domestic issues in Jakarta. Insiders confirm that Yudhoyono decided he could not come to New York because of a confluence of issues—including the fact that Obama has had to postpone planned travel to Indonesia three times since taking office and the short notice given by the White House (not quite a month in advance of the meeting). Had the summit been held in Washington, D.C., and in early October, so Yudhoyono and the other ASEAN leaders could have come on either side of their long planned visit to Brussels for the Asia-Europe Summit, the Indonesian leader would probably have come.

Yudhoyono’s absence sends a strong signal that although the U.S.-ASEAN relationship is moving in the right direction, there is work still to be done to improve alignment. Indonesia is ASEAN’s largest country and has the largest economy, both more than twice the size of the next member. It is also ASEAN’s incoming chairman for 2011. It is likely that the United States and ASEAN will get back on track next year when Indonesia hosts the third U.S.-ASEAN Summit, and after President Obama finally is able to make his long-awaited visit to Indonesia. There are quiet plans for him to visit Jakarta during his Asia trip after U.S. mid-term elections in November. That trip would include India, Indonesia, Korea for the G-20 Summit, and Japan for the APEC Leaders Summit. In sum, Yudhoyono’s absence doesn’t fully diminish the importance of the meeting in New York on Friday, but it lays down the marker that the U.S.-ASEAN relationship is trending well, but remains a work in progress. (I explore the gap between U.S. policy intentions toward ASEAN and the realities of domestic politics revealed by Yudhoyono’s absence from New York on the CSIS Southeast Asia policy blog. Click here for the article.)

Q3: What is the on the security agenda and will the South China Sea be a focus?

A3: The United States and ASEAN are working with other countries, including Australia, China, India, Japan, Korea, New Zealand, and Russia, to create new regional security architecture in Asia. To this end, the United States and Russia will be invited to join the East Asia Summit (EAS) this October during its meeting in Hanoi. Secretary of State Hillary Clinton will represent the United States at the meeting and accept the invitation. The United States will then ideally be represented by President Obama at the next EAS hosted by Indonesia in 2011 (it is likely that the U.S.-ASEAN Summit will be held in proximity). As part of its calculus in deciding to join the EAS, the United States recognized that it must strengthen its security and political ties with ASEAN and invest in supporting ASEAN’s self-defined goals to firm up its foundation through economic, political, and socioeconomic integration, as outlined in the ASEAN Charter. To this end, the United States has been moving to normalize military ties with Indonesia and to enhance military relations with Vietnam, as well as committing to join the ASEAN Defense Minister Meeting + 8 (which includes the same countries listed above who are/will be members of the EAS).

In this context, one of the existential challenges for Asia is to create structures and use diplomacy to encourage China’s peaceful rise as a major world power. The South China Sea represents a major challenge in this process. China has been very effective in its “charm offensive,” begun during the Asian financial crisis in the late 1990s, writing a script as an engaged and committed neighbor promising economic dynamism through expanded trade and investment and regional economic integration. However, China’s geopolitical interests are the other side of that coin. China’s definition of its “indisputable sovereignty” over the South China Sea, in response to Secretary of State Clinton’s reiteration of long-standing U.S. goals for maritime dispute resolution and freedom of navigation in the area based on international law and a multilateral approach, has uncovered atavistic anxieties about China’s intentions among the Southeast Asian countries. Therefore, ASEAN has welcomed a strong U.S. voice on security concerns in the South China Sea, and this has come at a time—ahead of a Chinese political cycle that will identify the country’s next generation of leaders in 2012—of heightened nationalism in China.

Neither the United States nor ASEAN wants to provoke Chinese nationalists, but both recognize the importance of being firm and sustaining a commitment to a multilateral approach to dispute resolution. Therefore, it is likely that the summit in New York will result in a joint statement that addresses the issue by reiterating the intent and direction of Secretary Clinton’s remarks at the ASEAN Regional Forum (ARF) in Hanoi with a focus on China.

Q4: How about economic growth and trade?

A4: ASEAN is concerned about the health and direction of the U.S. economy and hopes that President Obama can assure them that a recovery is underway and that he will be able to move the United States toward a more proactive posture on trade after the U.S. mid-term elections in November. These issues are fundamentally important to ASEAN because the United States is its largest overseas market (particularly when you consider the fact that many ASEAN exports go through China as part of a supply chain that ends up with products delivered to the United States), and because the United States remains one of the top and qualitatively most valuable sources of investment and technology for the region. ASEAN is collectively the most trade dependent formal grouping of nations in the world, with trade accounting for nearly 100 percent of aggregate gross domestic product. So if trade stagnates, ASEAN is the global canary in the coal mine and it suffers first and most significantly.

ASEAN will be watching the U.S.-Korea Free Trade Agreement closely as the benchmark indicator for whether Obama will use the political chits necessary to kick-start trade and make the case to Americans that long-term recovery is dependent on U.S. engagement in ASEAN, Asia, and the world. ASEAN is the United States’ fourth-largest overseas market and one that promises high-level growth for the coming years. ASEAN wants to know if the mid-term elections will be an inflection point for the U.S. stance on global trade. (Read more on the disconnect between policy and politics on trade with ASEAN in cogitASIA )

Q5: What about Burma?

A5: With Burmese elections coming up on November 7, Burma is sure to be high on the summit agenda—at least for the Unites States. While ASEAN would prefer not to have to carry the weight of Burma’s cloistered and intransigent military junta, it recognizes that having made the commitment to bring Burma into its membership it must work with the United States and others to try to encourage the creation of political space there. The Obama administration deserves credit for its courage and foresight in espousing an engagement strategy toward Burma that allowed it to reengage with ASEAN and hold meetings such as this summit. While the engagement has not produced results in Burma, the United States has changed its paradigm with ASEAN. The administration can and likely will tighten sanctions on Burma by focusing on its leaders, their families, and companies they are associated with—measures outlined in the Lantos Act. ASEAN needs to do its part and increase its normative focus on Burma to pressure the regime to create more political openness so it can truly engage in the core elements of integration defined in the ASEAN Charter. If ASEAN begins to focus on Burma, pressure may increase on China and India to refocus their current mercantilist and military policies that enable the hard-line domestic political stance of the junta and to play a role as responsible stakeholders encouraging positive change in the country.

Q6: What next?

A6: ASEAN hopes that President Obama will announce his candidate as the first U.S. ambassador to ASEAN to be resident in Jakarta. A candidate’s name is reportedly pending review and due diligence, though it is not likely that name can be announced on Friday. Additionally, the United States and ASEAN are expecting to name an Eminent Persons Group (EPG) to provide guidance and leadership for the relationship. These names have also not been announced yet.

After the New York summit, Secretary of State Hillary Clinton will be in visiting Hanoi for the EAS, and Secretary of Defense Robert Gates will visit Vietnam for the ASEAN Defense Ministers Meeting + 8. President Obama is planning to visit Indonesia in November as mentioned above.

——————————————————————————–

Ernest Bower is a senior adviser and director of the Southeast Asia Program at the Center for Strategic and International Studies in Washington, D.C.

Critical Questions is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).

ADB, UNICEF agree to help countries achieve MDG goals

ADB, UNICEF agree to help countries achieve MDG goals
GMA News

The Asian Development Bank (ADB) and the United Nations Children’s Fund (UNICEF) signed an agreement to help some countries in Asia and the Pacific region, including the Philippines, to reduce poverty and inequalities and improve child welfare.
The agreement was signed with five years remaining until the 2015 deadline for the world to achieve the Millennium Development Goals (MDGs), the Manila-based bank said in a statement released to media on Thursday.

The ADB said the two agencies will look for opportunities to work together to accelerate the achievement of the MDGs, including reducing infant and maternal mortality rates, improving the quality and relevance of basic education, promoting investments in water and hygiene, strengthening child protection systems, and combating HIV/AIDS.

They will also look at opportunities to cooperate on public-private partnerships and enable the poor to participate in and benefit from economic growth, the bank said.

The ADB said the agreement will run for five years from the date of the signing of the agreement, and it may be extended by mutual consent.

Apart from the Philippines, priority areas for the project include Armenia, Bangladesh, Cambodia, Georgia, Indonesia, Lao People’s Democratic Republic, Mongolia, Nepal, Pakistan, Papua New Guinea, Timor Leste, Uzbekistan, and Vietnam, the bank said. —JE/VS, GMANews.TV

A Philippines that Works: Economic Vision and Platform

Speech by Senator Benigno S. “Noynoy” Aquino III delivered on January 21, 2010 before the members of the Makati Business Club at the Peninsula Manila Hotel, Makati City

Four-part video of the speech, courtesy of NoyTV on YouTube:

[youtube]http://www.youtube.com/watch?v=oAFlybsqCjc&feature=player_embedded[/youtube]

[youtube]http://www.youtube.com/watch?v=NV-Uyoe_eso&feature=player_embedded[/youtube]

[youtube]http://www.youtube.com/watch?v=DnM2qrEpEes&feature=player_embedded[/youtube]

[youtube]http://www.youtube.com/watch?v=Andlyzn6f1A&feature=player_embedded[/youtube]

A Philippines That Works Economic Vision and Platform

Officers and members of the Makati Business Club, Your Excellencies of the diplomatic corps, ladies and gentlemen, my friends and countrymen.

Thank you very much for giving me the opportunity to address you. I trust your asking me first is not based on alphabetical order, or based on age, but perhaps, based on who you think will most likely win the coming election.

As managers, you recognize that one of the necessary skills of an effective manager is time management. Is it possible that you have invited me to determine if there is still a necessity to spend time with the others?

Baka naman inuna niyo ako upang malaman kung sapat na ako at hindi na kailangang pansinin yung iba?

I think we are all aware of the problems facing our country. We share the same statistics. We probably even share the same conclusions about the need for better governance. To rehash all of these problems at this forum would be a waste of your time. But what we have now is an opportunity for you to get to know me, to find out the advocacies that I champion, the perspective and philosophies I bring to the equation and some of my proposed solutions to give an insight into my inner persona.

Levity aside, the political exercise that we will engage in this May is a crucial one. It will be, as it is for every fledgling democracy, a test of the strength of our political institutions. The peaceful transition of power has become a symbol of political maturity across the world, with many still failing to achieve the credibility that is the cornerstone of a genuine political mandate. With the electoral scandals that have stalled our democratic progress as of late, it is not a test that we can afford to fail.

We have an administration whose mandate is clouded in doubt and overshadowed by allegations of fraud because it refused every opportunity to clear the air and be held to account. Its choices have limited its decision-making to seeking ways to ensure day-to-day political survival and self-interest. We must now become a government committed to accountability. A government that works with the people in achieving long-term change.

We must make the shift from bare economic survival to robust economic growth. We must make the change from treading water to keep afloat, to reaching that promised shore where we can all stand tall as healthy, happy, educated and responsible fellow citizens.

But why does transformation seem like such an impossible dream?

Isa sa mga tema ng ating kalaban, yung “ang pagbabago, madaling sabihin yan pero mahirap gawin,” is probably echoed by a lot of Filipinos. The oft-repeated question is, why can’t we advance? Why can’t we progress? What is it in us that limits or prohibits our growth as a people and as a country?

All of you are aware that most of the contenders have had years, possibly even decades, of preparation for this electoral exercise. I had no such ambitions to run in the 2010 elections but I responded to the people’s clamor. I am but the face of what we believe is the overwhelming demand of our people to repudiate everything wrong in the current administration.

Given that I only announced my decision to seek the presidency on September 9, and I only came to that decision the day before, I have not had material time comparable to our opponents. What is perplexing is that viewing the same problems, and having access to the same data for the most part, we believe the solutions have been there all along, and necessitate only clear political will to execute. But most of our opponents seem to indicate the contrary opinion that there is very little that we can do to change the situation. One has to wonder: did they overstudy the problem, or are they committed to preserving the status quo?

If the leader is not convinced that change is not only necessary, but extremely possible, how does he lead us to the promised land?

What is it that we want to change?

We want to repair the damage that has been wrought on our democratic institutions by those who have sought to manipulate them for their own selfish ends.

We want to improve the situation of our people, who have suffered years of neglect because of a self-absorbed leadership obsessed with political survival.

They are poor. Many of them are homeless. Each year, we add some 2.5 million mouths to feed to our already hungry population. Of these new additions, one third were the result of unplanned pregnancies. We have a growing underclass that statistics tell us have given up looking for work. A permanent underclass that includes the five million of our countrymen that are illiterate, which means their opportunities in life will always be limited to living hand-to-mouth.

We want to give our young the opportunity and means to improve their lot in life.

It can only begin if our children and their parents are assured that money spent on education is money well spent. Unfortunately, students are at the mercy of our decrepit education system that allows double shifting, erroneous textbooks and substandard nursing schools to exist. No less than DepEd officials admitted that students in Grade 1 take three subjects in one class period. We have a procurement program so heedless of the need for excellence that it doesn’t care if it produces a textbook series riddled with 500 factual errors. For every hundred kids that start grade school with the hope of achieving their dreams, only fourteen will graduate from college and possess a tangible means to materially improve their lives.

To my mind, the crucial, lacking element in all these is a government committed to a transformation: from a society overwhelmingly poor to one overwhelmingly middle class. In every developed, progressive, prosperous democracy, it is the middle class that is the biggest class. Government, for one, has failed to make the conceptual leap from patronage to development. Efforts at feeding the hungry, clothing the naked, providing basic care to the sick, and offering a quality education aren’t only the people’s rights; they are the essential tools for individual self-improvement.

In 1998, when I first campaigned for office, one lady bluntly told me that regardless of who is elected, things would remain the same for her.

What did she mean?

That she was poor to begin with; that she would remain poor, and in fact, she would be lucky if she didn’t end up poorer, after the candidates leave office.

This brings up the question at the forefront of the minds of our countrymen still undecided on whom to vote for, and pursued by my critics. If this is a time that calls for national transformation, am I qualified to be that transformative leader? Having answered the call of duty, can I ask you or anyone to entrust me with your vote, on faith alone? Never having sought the presidency, I preferred to do my duty and not seek the limelight. Now that I have been thrust in the limelight, it is only fair to answer the question: before you tell us what we can do, what have you done?

I have always believed that the job of an effective legislator goes beyond merely proposing laws, for what are laws but written agreements entered into by members of society on how to harmonize their mutual relations? In fact, I do not believe that we suffer from the problem of too few laws. One of my proposed measures was the recodification of laws, in response to an appeal from the legal community to put some order into our laws, their amendments and those that have been repealed, because even our lawyers are at times confused.

Consider the recent controversy over who gets to appoint the next Chief Justice. We maintain that there are no ifs and buts in Article 7 Section 15 of the Constitution where it states that the current President cannot appoint anybody within two months prior to a presidential election up to the end of her term. An exemption exists, but it applies only for positions in the Executive Department. Yet you have two retired justices arguing exactly the opposite. How can former justices of the Supreme Court be so seemingly confused, when the fact is that the provision regarding presidential appointments is stated clearly in the law?

Our problem is the lack of political will to faithfully implement the many world-class laws that our legislature has passed. A preference for ambiguity even when times call for clarity, leads to artificial controversies. Insecure or overly ambitious leaders need to create a climate of doubt, because it’s in the grey areas that its ambitions thrive.

It is in addressing this problem that I focused on the fiscalizing aspect of a legislator’s job – on Congress’ oversight and investigative functions.

Consider intelligence funds. In the proposed 2010 budget, a total of 1.4 billion was allocated to confidential and intelligence funds.

Woodrow Wilson once wrote that oversight is always preferable to investigation, which is like putting out a fire instead of preventing one. We proposed that if the Executive wants orderly transactions, at least a few members of Congress should be privy to all of the details to determine if they were spent properly. However, this proposal was dismissed out of hand without even a single hearing for the reason that they undermined the Executive’s privileges.

And yes, the investigations were a vital part of my functions, too. I don’t think anyone will begrudge me my efforts in this regard. From Hello Garci and the impeachments, to NBN-ZTE and the fertilizer scam, I did my duty at the forefront of these issues.

The original design of the NBN-ZTE project required a BOT agreement between government and the supplier, not a government loan. But during the NBN-ZTE hearings, we learned that the project was entered into through a government loan despite instructions to the contrary from no less than the President herself. The cost of the intended government loan was P40 billion, (in which P16 billion was for the backbone and P24 billion was for the CyberEd project.) Jun Lozada belied this when he cited P5 billion as the actual cost of the entire project. Ito yung sinasabi niyang kalakaran ng gobyerno, kung saan sa sobrang laki ng patong, bubukol na.

SCTEx took around 8 years to construct before it finally opened. Projects of this scale normally require two years to complete. Furthermore, when SCTEx finally became operational, it was found that the central hub, which was Clark, did not have an exit, excluding Clark from the Subic Clark Tarlac expressway itself. How can one justify these kinds of delays where opportunities are lost, costs have escalated and the people’s burdens, instead of being reduced, end up being compounded?

My active role in these congressional hearings has put me at odds with the administration. In 2005, it cost me my post as Deputy Speaker. It continues to put me at odds with the coalition of self-interest that currently holds power. It puts me at odds with other candidates for the presidency.

To lead transformation, you cannot be part of the problem. As I said when I accepted the people’s draft, the job of chief executive is about the efficient allocation of resources. If you have hogged those resources for yourself, if you have lied, cheated, and stolen to gain power, how can you be trusted to lead the transformation our country needs?

Going back on the issue of appointing a Chief Justice prior to the forthcoming elections. If we are to transform the country, it begins with doing what we can, now, to limit the damage and give our people a fighting chance to rebuild our damaged institutions. The Constitution imposes a blanket prohibition with few exceptions concerning midnight appointments. A candidate cannot ask for the people’s mandate, pledging to improve the situation tomorrow, if he becomes complicit in worsening the situation today.

Hindi naman mahirap gawin ang tama. Alam naman ng lahat yan eh. Wala namang magic, wala namang sikreto. Pero bakit pilit pa ring ginagawa ang mali?

There is a widespread perception that success in the business milieu can almost be directly correlated to your closeness to the powers-that-be. Because of this, some players in the industry are forced to focus their activities on maintaining relationships in order to retain the favors that they receive in exchange for cultivating that relationship. This has fostered the wrong kind of competitiveness. While it may work, locally, for now, it has not enabled these players to become competitive in the world market, where the rules of the game do not take special relationships into consideration.

We will encourage free and fair competition in a level playing field. One not need be a crony in order to succeed in the field of business. More importantly, government will not compete with business. Nor will government use its regulatory powers to extort, intimidate and harass.

We will transform our systems to foster service to the public instead of making citizens jump through hoops. We will streamline the approval process, not only for setting up new businesses but also in the regular day-to-day transactions with government, such as the payment of taxes. We will do this on a national as well as the local level.

In 2010, our next President will inherit a continually bloating deficit. As of November 2009, the deficit of the national government already reached P272.5 billion, or 4.1% of GDP.

In addressing the looming fiscal crisis, good governance and the drive against corruption are critical components in our strategy. We will refrain from imposing new taxes or increasing tax rates.

I strongly believe that we can collect more taxes at the BIR and higher duties at Customs if we become more serious in curbing and punishing tax evasion and smuggling. The BIR’s collection dropped by 5.5%, while that of Customs declined by 16.6%. This is the first time in recent history that absolute revenues have actually declined.

Our initial focus then will be to capture a good part of the revenue leaks caused by smuggling and evasion. In this effort, we will not be starting from zero. Be assured that those smugglers and evaders are not faceless and unknown entities. The ideas to improve tax administration and to control smuggling have been there for some time and some programs have been initiated in the past. One of these successful programs was the RATE or Run After Tax Evaders. In fact, some of the people at the Department of Finance and the BIR who have tried to implement reforms before are with us now, and together with reform-minded career executives, we intend to put their commitment and talents to good use under my administration.

My vision is to transform our country into one where we have lower tax rates enjoyed by all, rather than have some enjoy absolute tax exemptions while we burden the rest of the economy with very high tax rates. I believe that markets are better than government in spotting where the growth opportunities are, and, with universal low tax rates, we will encourage entrepreneurs and enterprises to invest and create jobs in any industry. We will, therefore, pursue the rationalization of fiscal incentives early in my administration.

There is a lot of room for our revenue base to grow. Our tax effort has gone down from 17% at its peak to a worrisome 13% today. If we can only bring this back even to just the 15% level, that will translate to P150 billion in additional revenues, which would make a significant dent in cutting our deficit.

My budget team estimates that for 2009 alone, around P280 billion of our national budget was lost to corruption. If we take the years 2002 to 2009 the total estimates exceed one trillion. Estimates vary, but everyone agrees that the numbers are huge.

If we agree that change is necessary, how can a Presidential aspirant, whose own financial and political ethics are questionable, be effective in leading transformation as the head of the bureaucracy? How can a leader, who is benefiting from the status quo, be able to restore a civic sense and pride in our citizenry? The leader, who has used public office for private gain, will always be the most committed enemy of change.

Rich or poor alike, we have a tangible experience of the sorry state of public infrastructure at present: traffic, which eats up time, which as the saying goes, is money. Railways are built at bloated cost; urban transport is constructed, but not enough trains are on track. Our people are the first to experience the effect of something that works and conversely, something that is badly done because bad intentions handicapped the project from the start.

It is time that our infrastructure agencies and LGUs transform into cooperative ventures with the private sector by bringing forth an agreed public infrastructure program, based on a cohesive plan that optimizes the value of the entire network. In our conversations with members of the private sector, there has been a lot of positive feedback about possibly working with government on this endeavor.

To transform infrastructure projects from sources of waste and scandal into examples of cooperation and efficiency, we will set objective criteria for different types of projects and develop a scorecard that will assess various projects against benchmarks transparent to the public.

Initially we want our infrastructure program to transform from being the means to enrich a few, to being labor-intensive and biased for employment as a means to pump-prime the economy.

When I read about countries that have invested in their agriculture sectors and succeeded, it always pains me to find that these countries – Vietnam and Thailand, to name just a couple – had started by sending their experts to be educated in the Philippines. It seems that we cannot implement among ourselves the lessons we successfully imparted to experts from elsewhere. This will have to change. We must be able to harness our homegrown talent in order to further our local industries.

When we change administrations, there must be a complete review of all the programs in the Department of Agriculture. We can do a lot for our farmers given the present budget of the Department if we eliminate the leaks and focus on the efficient use of resources. For example, we must stop eating up millions in mere administrative costs as in the case of NABCOR, which charged our government P60 million because it served as a useless conduit to regional offices. We will also support efforts such as supply chain management that minimizes losses, creates jobs, consults with stakeholders, and capitalizes on our competitive advantage.

Our core belief is that the current approach to governance and power must change. That is why our terms of reference always begin with the present government, what it has done, and how different our institutions and our nation must be six years from June 30, 2010.

In a small-scale operation it is easy for everyone involved to visualize that entity as the combination of their collective efforts. As opposed to, say, when you are a bigger firm, and there is the management side and there is the labor side. In Tagalog, it’s even more dramatic. Kayo at kami, sa halip na tayo.

We must find a unity that transcends the divisions of today, based on a shared commitment to transforming our country into one that works: One where traffic flows well, garbage is collected efficiently, crimes are solved, justice is served, and our kids are educated properly. It works in the sense that you do not have to flee the country to move up in the world, improve your lot in life, and rise to the highest level your personal merits can achieve.

We are a nation of sacrifice, of diligence, dedication and, idealism, because we are a people imbued with compassion even when we have officials who lie, cheat, and steal. Our faith teaches us that we are our brother’s keeper. Our logic should tell us that in taking care of others, their growth equals our own.

In the movie “Invictus,” Nelson Mandela says, “In order to rebuild our nation, we must exceed our own expectations.” It requires us to insist, always, that we are not a nation of crooks, of thieves, of murderers who get off scot-free and where justice is won by the highest bidder.

In May, you will be asked to make a choice. Will you choose transformation and change or will you choose to uphold the status quo?

We have already made our choice. Ours is a journey towards transformation. I ask you today to join us in this journey now.

Thank you.

[Archived from the official campaign web site of President Benigno S. “Noynoy” Aquino III]

BSAIII action plan on the economy

Economy: Walang Maiiwan!

Action Plan on the Economy

Underlying all the problems and weaknesses of the country and the economy is corruption and the weakening of our democratic institutions. We will restore trust in government by emphasizing good governance and anti-corruption to increase investment, regain people’s trust to pay proper taxes and ensure that the people’s money is well spent.

  • We will uphold the people’s right to information on matters of public concern and vigorously support the enactment of the Freedom of Information Bill in Congress
  • We will ensure transparency and citizen’s participation in crafting and implementing laws, rules and regulations and in monitoring the programs, projects and transactions of government
  • We will put into place a “zero-based” budgeting system to enhance transparency and improve efficiency.
  • Budget allocations for the different agencies of government will be shaped by their performance and their compliance with the reports of the Commission on Audit (COA)
  • Qualification standards, especially on eligibility, will be strictly followed, and at least half of the positions of Undersecretaries and Assistant Secretaries will be filled by honest and competent career civil servants to ensure continuity and sustainability of effective policies and programs
  • Performances of government agencies and civil servants will be evaluated rationally and systematically through an effective and measurable performance management system to be approved by the Civil Service Commission (CSC).

We will have broad based and inclusive economic growth through increased incomes by generating quality jobs and attracting more investments.

  • We will have a government that is not corrupt and is business-friendly, thus lowering the cost of doing business and production in the country.
  • We will reduce red tape, reducing the number of processes required to do business in the country.
  • We will improve infrastructure in transportation and housing, which will generate jobs and also support investments.
  • We will directly target industries with the greatest potential for growth and where the Philippines has a competitive advantage, industries that have already been identified by domestic and foreign business groups and include agribusiness, business process outsourcing, creative industries, infrastructure, manufacturing and logistics, socially responsible mining and tourism and retirement.
  • In the immediate short term, we will take care of the most vulnerable and marginalized sectors of society through programs such as conditional cash transfers dedicated, among others, to keeping healthy young children in school.
  • We will promote entrepreneurship that provides employment, helping small and medium firms with access to credit and diffusion of technologies and skills.
  • We will focus investment expenditure in the very urgent need to invest in education (especially in early childhood education) and in health.
  • We will promote technical/vocational schools to strengthen the labor supply and better match the needs of enterprises.

A clean government will facilitate macroeconomic stability, reigning in the record level deficits of the current administration, and bringing down the debt-to-GDP ratio.

  • We will plug revenue leakages by having competent and trustworthy tax collectors, broadening the tax base.
  • We will instruct DBM to lead an internal government review of all its costs and present a plan to reduce government overhead within six months.
  • We will review policies and programs to enhance productivity and modernize the agricultural sector.

[Archived from the official campaign web site of President Benigno S. “Noynoy” Aquino III]

Presidential campaign platform of Benigno S. "Noynoy" Aquino III

A Social Contract with the Filipino People: The Platform of Senator Benigno S. “Noynoy” Aquino III

A Social Contract with the Filipino People: The platform of Senator Benigno S. “Noynoy” Aquino III

Transformational Leadership

  • From a President who tolerates corruption… to a President who is the nation’s first and most determined fighter of corruption.
  • From a government that merely conjures economic growth statistics that our people know to be unreal… to a government that prioritizes jobs that empower the people and provide them with opportunities to rise above poverty.
  • From relegating education to just one of many concerns… to making education the central strategy for investing in our people, reducing poverty and building national competitiveness.
  • From treating health as just another area for political patronage… to recognizing the advancement and protection of public health, which includes responsible parenthood, as key measures of good governance.
  • From justice that money and connections can buy… to a truly impartial system of institutions that deliver equal justice to rich or poor.

Economy

  • From government policies influenced by well-connected private interests… to a leadership that executes all the laws of the land with impartiality and decisiveness.
  • From treating the rural economy as just a source of problems… to recognizing farms and rural enterprises as vital to achieving food security and more equitable economic growth, worthy of re-investment for sustained productivity.
  • From government anti-poverty programs that instill a dole-out mentality… to well-considered programs that build capacity and create opportunity among the poor and the marginalized in the country.
  • From a government that dampens private initiative and enterprise… to a government that creates conditions conducive to the growth and competitiveness of private businesses, big, medium and small.
  • From a government that treats its people as an export commodity and a means to earn foreign exchange, disregarding the social cost to Filipino families… to a government that creates jobs at home, so that working abroad will be a choice rather than a necessity; and when its citizens do choose to become OFWs, their welfare and protection will still be the government’s priority.

Government Service

  • From Presidential appointees chosen mainly out of political accommodation… to discerning selection based on integrity, competence and performance in serving the public good.
  • From demoralized but dedicated civil servants, military and police personnel destined for failure and frustration due to inadequate operational support… to professional, motivated and energized bureaucracies with adequate means to perform their public service missions.

Gender Equality

  • From a lack of concern for gender disparities and shortfalls… to the promotion of equal gender opportunity in all spheres of public policies and programs.

Peace and Order

  • From a disjointed, short-sighted Mindanao policy that merely reacts to events and incidents… to one that seeks a broadly-supported just peace and will redress decades of neglect of the Moro and other peoples of Mindanao.

Environment

  • From allowing environmental blight to spoil our cities, where both the rich and the poor bear with congestion and urban decay… to planning alternative, inclusive urban developments where people of varying income levels are integrated in productive, healthy and safe communities.
  • From a government obsessed with exploiting the country for immediate gains to the detriment of its environment… to a government that will encourage sustainable use of resources.

[Archived from the official campaign web site of President Benigno S. “Noynoy” Aquino III]

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