Gloria Arroyo

Pork is the new GMA

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

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

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

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

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

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

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

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

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

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

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

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

From Erap’s Playbook

Jinggoy

Jinggoy is no stranger to controversy. More than a decade ago, he and his father were jailed for participating in the Jueteng scandal exposed by whistleblower Chavit Singson. He was later released on bail by the Sandiganbayan and acquitted. His father Joseph Erap Estrada however was not so lucky. He was found guilty and sentenced to life imprisonment, although later pardoned by the woman who deposed and prosecuted him, Mrs Arroyo.

The fact that Mr Estrada today enjoys his freedom and greater popularity than Mrs Arroyo is nothing short of a stunning turn of events. It should be recalled that in the lead up to his impeachment, Erap’s popularity was plummeting. He had always denied any involvement in the Jueteng scandal, maintained his innocence throughout the judicial proceedings, refused to recognise the legitimacy of the trial and its verdict, and likened his predicament to that of many famous dissidents like Ninoy Aquino and Nelson Mandela.

In 2010, the rehabilitation of the Estradas was complete as Erap overtook Manny Villar to claim second spot after Noynoy Aquino in the presidential derby. His ability to knock off Alfredo Lim in 2013 to become Manila mayor is testament to the success of his strategy to regain the people’s trust despite having been convicted of a high crime by claiming himself a victim of political persecution by someone he presented as a usurper of his office. The fact that Mrs Arroyo damaged her own credibility by subsequent events fed into this narrative.

But now his son, who has been tagged by whistleblowers to be a principal in the Janet Napoles P10 billion pork barrel scam, is seeking to lift a page from the father’s playbook. In a privilege speech before the Senate, the younger Estrada claimed he was a victim of trial by publicity, of political persecution and of demonisation by his colleagues. He decried the fact that despite the COA’s identification of anomalous transactions by his colleagues, he and two other opposition bloc senators have been singled out by the Senate Blue Ribbon committee investigations.

In an attempt to undermine the legitimacy of proceedings at the senate, he accused its president Sen Franklin Drilon of offering a gratuitous amount of P50 million to reward him and his colleagues for voting to convict Chief Justice Corona with the imprimatur of Budget Secretary Butch Abad. After accusing his fellow senators of dragging his name through the mud, he then proceeded to name a number of them as well and question why the spotlight hasn’t been focused on them.

There are several reason why this ploy by Jinggoy may not work effectively against the current administration as it did against its predecessor. One is the fact that President Aquino enjoys the public’s trust and confidence, maintaining his net satisfaction rating at high levels three years into his presidency, something unheard of since data has been collected on this. Two is the fact that Jinggoy has not denied receiving and using his PDAF allotments. Third is the unpopularity of pork barrel, in the light of the ostentatious display of wealth by one of its fixers Ms Janet Napoles.

Just give it to the Ombudsman

My unsolicited advice to a couple of friends – one who works in the Palace and another who writes a popular column – was for them to recommend to the President to turn over the whole Puno event to the Ombudsman. That way the President will not be accused of a whitewash if an internal investigation finds groundless the allegations against former DILG undersecretary Rico Puno. Anyway, they think I’m nuts to begin with so they dismissed my suggestion outright. Hopefully, you won’t.

In the US, a Special Prosecutor is named whenever there is an issue that requires independent investigation. That was done in Nixon’s Watergate and several other gates. Neat, right? Except that in the US, the appointment of a special prosecutor is a highly politicized weapon used by both political parties against each other. Normally, it is the party out of the White House that calls for special prosecutors to investigate allegations against members of the Executive. It is rare when there is a bi-partisan call for one.

We don’t have that problem in this country. The framers of our constitution were wise enough to create an independent constitutional office, the Office of the Ombudsman, with the following powers, functions, and duties:

Article XI Sec. 13 of the Constitution:

The Office of the Ombudsman shall have the following powers, functions, and duties:

1. Investigate on its own, or on complaint by any person, any act or omission of any public official, employee, office or agency, when such act or omission appears to be illegal, unjust, improper, or inefficient.
2. Direct, upon complaint or at its own instance, any public official or employee of the Government, or any subdivision, agency or instrumentality thereof, as well as of any government-owned or controlled corporation with original charter, to perform and expedite any act or duty required by law, or to stop, prevent, and correct any abuse or impropriety in the performance of duties.
3. Direct the officer concerned to take appropriate action against a public official or employee at fault, and recommend his removal, suspension, demotion, fine, censure, or prosecution, and ensure compliance therewith.
4. Direct the officer concerned, in any appropriate case, and subject to such limitations as may be provided by law, to furnish it with copies of documents relating to contracts or transactions entered into by his office involving the disbursement or use of public funds or properties, and report any irregularity to the Commission on Audit for appropriate action.
5. Request any government agency for assistance and information necessary in the discharge of its responsibilities, and to examine, if necessary, pertinent records and documents.
6. Publicize matters covered by its investigation when circumstances so warrant and with due prudence.
7. Determine the causes of inefficiency, red tape, mismanagement, fraud, and corruption in the Government and make recommendations for their elimination and the observance of high standards of ethics and efficiency.
8. Promulgate its rules of procedure and exercise such other powers or perform such functions or duties as may be provided by law.
If we have a credible Ombudsman, like the one we have now, then the sort of congressional probe that Sen. Miriam Santiago held last Friday will be seen for what it is: nothing more than epal, the slang for self-promotion by politicians at taxpayer’s expense.

Here’s Miriam doing some self-promotion in a Tweet several days before her hearing:

“There will be a lot of sound and fury. There will be a lot of sound from Mr. Puno and maybe a lot of fury from me.” (http://t.co/HDgSSQFe) Was she promoting the Bourne Legacy? Dispensing viagra to our sensationalist media?

Here is more of her teasing in a press interview: “Maybe the president is not defending Mr. Puno, but is just trying to assuage or protect the backers of Usec. Puno.” Asked to name the backers, she replied, “Now, I can’t because I may be accused of unfair allegations without any evidence.” More viagra for reporters and politicians who are always looking for someone to screw.

Previous presidents, Fidel Ramos and Gloria Arroyo, appointed controversial ombudsmen. Their appointees were seen as their personal bodyguards against prosecution. Consequently, the public did not give any credibility to their work.

But that’s not the case with Ombudsman Conchita Carpio-Morales. She proved her independence as an associate justice of the Supreme Court. Her legal acumen plus her independence are beyond reproach. She is nobody’s protector. She ain’t nobody’s fool. That’s why on July 11, 2011 the Daan Matuwid president appointed her to serve as Ombudsman. She will serve until 2018, two years after he steps down from office, enough time for her to go after him if he commits any crime during his incumbency. That proves the president had no self-interest in mind when he appointed her.

Consequently, Ombudsman Carpio-Morales is the right person to look into the allegations against Puno, any member of the Cabinet, and anyone else perceived to have close personal ties to the president, not only because that’s her constitutional mandate but more importantly because she has the credibility to do it.

The President could have saved himself a lot of flak from politicians and media if he had simply announced, “I’ve turned the papers over to the Ombudsman. I await her findings and will respect whatever action she may decide to take. If you have any questions, go see her. Now let me get back to work.”

Trust me on this one, Mr. President.

Our Romney Moment

When Mitt Romney went to Israel and wondered out loud about the role of “culture” in explaining the income disparities that exist between the Jews and Palestinians, he was branded a racist. But his intent was not to court the Jewish community back home who almost always vote Democrat, but to engender support from the evangelical Christians who constitute one major wing of the Republican Party.

He followed this up by attacking President Obama for winding back welfare-to-work reforms introduced by the Clinton-Gingrich consensus in the 1990s. These claims were roundly criticised for being untrue, but yet again, the point was not to be accurate, but to create clear points of distinction between himself and the president due to his inability to do so over Obamacare, the single most reviled policy by the GOP.

What is going on in American politics is a battle for the very soul of the nation. Americans due to their history are a nation that believes in self-reliance. Any attempt to improve the welfare of citizens through the government is frowned upon. So fundamental is this principle sewn into the fabric of the nation’s psyche that the centrepiece program of the Obama presidency was challenged all the way to the Supreme Court. Its constitutionality was affirmed on a mere legal technicality.

Every country develops a kind of cognitive bias, it seems, which gets woven into its collective identity. Call it culture; call it institutions, but I believe the general point Romney was trying to make, albeit callously undiplomatic, is essentially true.

In Australia, for instance, the idea of “the fair go”, that each individual should be given equal footing to pursue his or her dreams and aspirations, is part of the social contract that binds the citizenry to each other and their government. This is why when PM Gillard introduced a carbon tax, the struggling blue collar heartland of her Labor Party base could not understand why as it posed a risk to their ability to have a fair go.

The same can be said about the Philippines and its devout adherence to Catholic beliefs in considering the passage of a reproductive health bill. The fact that the nation is still divided over this issue demonstrates Filipino aversion towards any form of state intervention in what is considered a private affair.

If the RH bill is passed, and it most likely will be, at least in the lower house, then you can be sure that the campaign to unseat those who support it will be vicious in the 2013 congressional elections. This is why while some legislators will in private support the measure, publicly they will tend to stand with the opposite side.

That is why a bi-partisan coalition, which is what existed when then minority leader Edcel Lagman who co-authored the bill locked arms with the administration, is so essential. During the prime ministership of Kevin Rudd, Ms Gillard’s predecessor, support for an emissions trading scheme had the backing of then opposition leader Malcolm Turnbull.

Unfortunately, both these bi-partisan agreements were put asunder in the lead up to the vote. Both Messrs Lagman and Turnbull were dismissed by their respective party-mates and replaced by people who chose to use the issue to wedge the voters and the government. In Australia, Tony Abbott, a former seminarian took the helm of the conservatives, while in the Philippines, Gloria Arroyo, a devout Catholic pulled the strings to have her nominee replace Lagman.

As she fights for her political life and personal exoneration, it is clear that she intends to harness anti-RH sentiments in the community to rally to her cause as she awaits trial for various high crimes. If the clergy who have been quite obliging to her in the past stand shoulder to shoulder with her on this issue, they might mobilise formidable resources to oppose the government in the courts and in the congressional races. Already, the Liberal Party faces stiff opposition in the senatorial derby from the UNA Coalition whose leader in the upper house is staunchly opposed to the RH bill.

What this means is that if the bill is defeated before this congress adjourns, it will have a harder time when it reconvenes after the elections. Those who support this bill should not be disheartened, because the struggle to promote their cause is not a matter of merely changing the law of the land, but of fundamentally altering the psyche of the nation.

Those peering from the outside will always wonder, what is so reprehensible about offering universal health care to Americans? Or why is putting a price on carbon so revolting to Australians? The same could be asked about Filipinos as to why they are still so divided over the issue of reproductive health.

As floods ravage the country causing mudslides, floods and misery all around, the question is how will it manage the deadly cocktail of grinding poverty, population growth and environmental degradation without a reproductive health law and program?

To outsiders, it would seem like a matter of good common sense and prudential risk management to have such policies and programs in place. To those that belong to such cultures, however, nothing could be farther from the truth.

Pseudo-trial

What happens when social media takesover the justice system?

As per the Julian Assange case in Britain where the WikiLeaks founder may find out about his fate through the social networking site, could the same thing be envisaged here? Could the use of social media be the same as serving notice to the parties to a trial?

Imagine what would have happened in the case involving Gloria Arroyo’s hold departure order if that had happened? The government’s excuse that it had not received a copy of the decision would not have been available if the decision had been uploaded immediately and tweeted to the court’s “followers” within minutes.

The trial of Chief Justice Corona too could be determined by the media (including Facebook and Twitter). Once cannot discount the possibility of an Arab Spring-like uprising taking place in the aftermath of the trial. Since the prosecution seems to be facing strong headwinds, the conduct of a separate trial by citizen’s groups and netizens in the public arena including the blogosphere seems to be suffering no setbacks.

Forget about establishing the “facts” of the case in the formal court, this is all about shaping the minds of the jurors in the court of public opinion. Call it forum shopping if you like, but parties to this impeachment trial do not feel compelled to abide by the “rules of the game”… so much for strengthening the “rule of law” and “institution-building”.

All this wouldn’t sit too well with senator-judges who are hoping to make an impartial decision based on evidence. What we are witnessing is the mirroring of the justice system in the trial by the senate, where poor evidence gathering, poor homework lays a poor foundation for the prosecution, which inevitably leads to a poor conviction rate.

Except that in this case it is a trial by jury, and the jurors, unlike a proper court, are not restricted from reading (and discussing) the news related to their case. As such, their decision will ultimately reflect the biases formed in the gallery. In a proper court, this would be grounds for a mistrial, but in this pseudo version of Law and Order, the rabble run the show.

Like a Thief in the Night

image of Michaelangelo's Last Judgement from freepublic.com

That is not how the government acted in seeking to put Mrs Gloria Arroyo behind bars. Rather than keep the former president guessing as to the date when formal charges against her would be laid, President Aquino announced back in September what the timetable for it would be. Here is how he phrased it,

We will start filing the cases before the end of this year and with a little cooperation from the judiciary, maybe we can put some of these people in jail next year.

This signalled to Mrs Arroyo that she had to make travel plans as soon as possible, which then forced Justice Secretary Leila De Lima to take it upon herself to place the congresswoman under a departure watch list to keep her in the country even before preliminary investigations were concluded. This according to one justice meant that De Lima was now “more powerful than the court which can only do the same “after the filing of the information and the issuance of an arrest warrant“.

With a little cooperation from the judiciary”: those words of P-Noy now seem ominously prescient of events as they unfolded because straight after thwarting an attempt by the former president to leave by disregarding an injunction from the high court on the watch list order, the government then turned to a joint panel between the Comelec and the DOJ set up to look into electoral fraud to file a case before a regional trial court against Mrs Arroyo. This timeline shows that within the space of a few hours upon receiving their case files which numbered several thick ring binders, a judge issued an arrest warrant.

Had this judge not been so “cooperative”, Mrs Arroyo might have successfully fled the scene since the Supreme Court had by then thrown out the government’s appeal to have its injunction on their watch list order lifted. And so despite the fact that it had foolishly forewarned the former president of its intended moves, the government somehow managed to keep her in the country long enough for an arrest warrant to be served.

In the process of doing so, however, the government may have committed a few grave mistakes. These might come back to haunt its case. Certainly if it is found that it acted inappropriately, the president needs to own up to it because it was he who set the wheels in motion that eventually landed the government in a whole heap of trouble. Particularly with respect to his campaign promise to uphold the rule of law, P-Noy will be ultimately responsible if it is determined that his government usurped judicial powers or acted in contempt of court.

At the moment, the president is assailing the Supreme Court for the speed in which it issued its injunction on the government’s watch list order as he spoke before his “home court” the Makati Business Club, saying

(O)ur lawyers all know that it takes the Supreme Court 10 days, normally, to attend to motions, and it decides to issue a TRO for Mrs. Arroyo in three, who can avoid wondering what she did to merit such speedy relief?

And yet the president doesn’t see the irony of his position because the government was quite happy to get a lower court judge to issue an arrest warrant on his adversary in a matter of hours, which was a far more difficult decision to make. Certainly, when it comes to fostering the rule of law, what this government has in mind is something quite different from the standard.

Like a thief in the night–that is how the Hacienda Luisita decision was handed down by the high court in the midst of all this. Oral arguments had been heard and the judgement of the court had been pending. No one knew the day or time when it would materialize. Suddenly either by coincidence or by design the justices rendered a unanimous vote in favour of the farm worker beneficiaries to have the Aquino-Cojuangco estate title transferred directly to them.

Having justified its bold and decisive actions against the court’s injunctions because of the ensuing confusion surrounding it, the government through its spokesman immediately informed the public that it would respect this particular decision as public support had been mounting in favour of it. The only caveat was for the determination of ‘just compensation’ for the president’s relatives and other issues that the court still has to settle.

The initial action by the Arroyo government to revoke the stock distribution option taken by the Cojuangcos in complying with the agrarian reform law was suspect according to US officials based on confidential diplomatic cables as a form of retaliation by Mrs Arroyo on the matriarch of the Cojuangco clan for supporting calls for her ouster back in 2005. What the Supreme Court ruling now does is open up the possibility for a counter-retaliatory move on the part of Mr Aquino against the Macapagal-Arroyo clans who also own sugar plantations.

This tantalizing opportunity could reverse the destructive pattern of competition by ruling elite factions to accumulate wealth through landholdings using the weak system of property rights in the country in order to consolidate power. Now in a bid to weaken each other, these same ruling elites might now work to dismantle each other’s landholdings. Given that one faction controls the executive and another holds the sympathies of the judiciary, this feud might actually produce something positive for the country.

Like a thief in the night—that is not how events overtook this government on the economic front. For one, the debt crisis in Europe was unravelling like a train wreck in slow motion for several years now. The seeds of this crisis were actually sown during the last one when governments pumped liquidity into their banking systems and engaged in stimulatory fiscal spending. It was only a matter of time before bond holders began to raise the cost of public debt.

The government had ample time to prepare the nation for this crisis, to bullet proof it by sustaining demand through public construction and investment. The early warning signs that its fiscal consolidation was going too far and actually dampening growth in demand were quite evident during the end of last year. The government had ample opportunity to correct its course and make the necessary adjustments. It may turn out in the end that a transition to a new government may have caused unnecessary disruptions to patron-client networks in the bureaucracy. Reconfiguring these networks took too much time.

Finance officials might have taken this as a welcome blessing as the slow spend rate allowed them to limit the fiscal deficit while sticking to the president’s no new taxes pledge. Meanwhile,with the fiscal space it had from fiscal consolidation, it cut tariffs on certain industries. It balanced this decision by removing power subsidies to exporters in special economic zones. These could threaten the growth of some industries and lead to the closure of others at a time when global demand for our exports is already weakening or restructuring as some economists have noted.

The biblical phrase “like a thief in the night” comes from the parable of the ten virgins found in the canonical gospels of the New Testament. It is also known as the parable of the wise and the foolish virgins. The five virgins who were prepared for the bride-groom came to his wedding feast, while the other five who weren’t were excluded. It has an eschatological message: to be prepared for the day of judgement. The final reckoning.

With the second coming of the Aquino dynasty, will the country be prepared to pass the test? Or will it simply slip into oblivion? The day of judgement is nearly at hand!

The halo effect

image courtesy of listverse.com

The halo effect is a cognitive bias first studied by Edward Thorndike in 1920 whereby the perception of one trait (i.e. a characteristic of a person or object) is influenced by the perception of another trait (or several traits) of that person or object. An example would be judging a good-looking person as more intelligent or believing a politician’s policies are good, just because the person appears good.

In the case of President Aquino and his high public satisfaction ratings, there seems to be a substantial amount of this effect taking place. The general impression of P-Noy is that he is honest. This comes from being who he is, the only son of two national heroes. This has translated into very positive sentiment towards the actions taken by the government under his watch.

Part of this has to do with the anti-GMA sentiment or the reverse halo effect. So pursuing cases against his predecessor is seen to be the legitimate thing to do, and rightly so, given the shenanigans that her administration was accused of. It also ties in with the president’s retraction and review of contracts and projects already approved for fear that they would somehow benefit her proxies within certain departments and sub-contracting firms.

But if you look at the outcome of these actions, it becomes immediately apparent, leaving our cognitive biases aside, that the positive evaluations given to P-Noy by the public are probably unjustified.

First of all, with respect to the way in which his justice department has gone after Mrs Arroyo, certain questionable legal manoeuvres have actually undermined the rule of law rather than upheld it. And secondly, with regards to the handling of the economy, the third quarter GDP figures clearly show that the overly cautious due diligence performed on public contracts undermined economic growth rather than encouraged it.

On the first point, I am referring to the use of a joint panel composed of the Department of Justice and the Commission on Elections that investigated allegations of vote rigging in the 2007 elections. This is said to have been anomalous in that a supposedly independent constitutional body such as the COMELEC is not meant to be seen as partial or collaborating with the administration in any way. Also, when their joint findings were published, it took a judge a few hours to read their eight ring-binder document and issue an indictment on Mrs Arroyo.

The undue haste with which such decisions were reached coming on the back of a temporary restraining order issued by the Supreme Court on the hold departure order issued by the DOJ on Mrs Arroyo that was “in effect” despite the dissenting opinion of some justices makes it highly likely that politics rather than due process was observed. This TRO was issued because the legality of the DOJ’s hold order was questionable to begin with.

Had these actions been undertaken by Mrs Arroyo while she was running the country, the protests from civil society regarding the “creeping authoritarian” nature of her government would have occupied public discourse. But because it was attempted by the meek and mild administration of the “benign one” there does not seem to be the same level of public indignation, although the result is the same—if upheld, it would grant vast powers to the state to curtail individual freedoms.

If we turn to the second point, on economic governance, the promised economic take-off billed as a public-private partnership by the president did not take place. Instead the economic deceleration has been rather remarkable in a region that is seeing quite robust growth despite the downturn in Europe and the US. The government which was prepared to take the credit for positive growth in agricultural output in the first half when early rains produced a bumper crop is now shifting the blame for poor production on storms both natural and man-made.

Public construction continued to show weakness despite the government’s promise to fast-track the roll-out of resources in response to the slump in the first half. Even with the announcement of a “stimulus” to deal with the effects of the EU debt crisis, there still appears to be little traction on this front. All hopes are pinned on the fourth quarter, but as the country’s chief statistician has pointed out, to attain even the lower end of the government’s modest growth target range for the full year, the economy would have to expand at a pace rarely seen.

In attributing the weak economic performance registered this year, there are certain factors that lie outside the government’s control (storms and financial crises overseas) which have to be acknowledged, but a portion of it definitely lies within its sphere of influence (public construction spending). It is clear that external factors did dampen growth, but the government’s action or inactions dampened it even further.

Again, had this occurred under Mrs Arroyo, the government would have been pummelled. Hounded by questions of legitimacy, it was her economic credentials that proved her only saving grace. Now that the government is run by someone whose electoral mandate is unquestioned, his now sullied economic credentials don’t seem to be much of a problem.

To counter the cognitive bias associated with the halo effect on the part of an evaluator, “blind-fold” tests or blind experiments are often administered where the person rates a product based on its actual attributes or performance, not on the subject’s perceived reputation. Respondents are often surprised with the results when they remove their blindfolds. I wonder what would happen if a poll was conducted that used the same principle in evaluating the performance of our presidents.

If faced only with the indicators of success and not the name of the person being rated, what marks would be given this president? What the government under him did this year countered its aims of fostering good government, rule of law and economic growth, but somehow its acts of commission and omission get glossed over and given a positive spin. Not only that, but the public by and large is willing to accept the message given them that all is well. So it seems the halo effect can cover a multitude of sins.

A Quarter of the Way

image courtesy of 123rf.com

That is how much of P-Noy’s term of office would have expired by the end of next month. It usually marks the end of the window of opportunity for introducing major reforms. In the case of the US presidency, the current occupant of the White House President Obama was able to introduce his stimulus program, banking reform and of course, the once in a lifetime reform of the healthcare system within his first eighteen months in office.

At the end of that period, the tea party movement rebelled against the direction he was taking the nation and voted the Democrats out of their majority in the lower house of congress. The new Republican-led house’s intransigence over the deficit has blocked any further reforms (witness the failure of the super committee over the weekend), and it will probably take another election to allow the grid-lock to be broken.

As we approach the quarter mark of P-Noy’s presidency, it is worth reflecting on his accomplishments or lack thereof and the conditions under which he has had to govern that may or may not have enabled him to achieve what he promised during his campaign. More than anything, I believe that these first eighteen months have highlighted the inconsistencies in his promises and the inevitable tensions that come about from pursuing them.

Firstly, let me tackle his social contract and the plugging of the fiscal deficit. Due to his pledge of no new taxes, the finance and budget departments have had to rely on better tax compliance and program savings in order to bridge the government’s fiscal gap while attending to social and economic infrastructure programs. This is in a country of very wealthy elites who are averse to paying their fair share of taxes.

Despite my distaste for the government’s attempts at “fiscal consolidation” a euphemism for austerity measures I dubbed the “surplus fetish”, one benefit that I now see with the way in which they have gone about things is that it has exposed the inability of tax agencies even under the best efforts of honest officials to raise enough revenue to meet the government’s social compact obligations.

This is why Secretary Purisima, in a bid to shore up enough revenues down the track has flagged a few revenue measures to congress including the rationalization of fiscal incentives, the indexation of sin taxes, and as recently as this week the raising of a minerals tax similar in vein to the Australian resource rent scheme. These three taken alongside the stricter enforcement of the tax code on self-employed entrepreneurs and professionals could yield an estimated four hundred billion pesos, enough to close the fiscal gap and then some.

Enacting these revenue measures would lift the tax collection effort to a more sustainable nineteen percent of GDP, a position last held in the late-90s when the country eked out a surplus. The reform of the tax and incentives system would allow a more progressive and equitable fiscal expenditure program. One reason why the growth of the last decade was not felt by the broad masses of people was that the growth went largely to big business in the form of profits. Benefits through the tax system could not be shared with the less fortunate as the tax collection rate continued to decline despite the growth.

The absence of a successful asset reform program to tackle landlessness in the rural sector led to continued urban migration and growth of informal labor markets. This normally would lead to greater social insurance spending by the state, but this has only been recently addressed with the conditional cash trasnfers program. By next year, the government believes it will cover two of the four million poorest households. The funding comes from the scaling down of the grains importation program, a low lying fruit. To cover the remainder would require doubling the current thirty billion pesos spent on the program. This can only be accomodated through new taxes.

Secondly, given the new-found consensus around new revenue measures, getting them adopted will entail the exertion of executive will and the full cooperation from the congressional leadership. The legislative record of the government has been rather dismal with only 3.25 of its thirty three priority measures passed this year.

These include the reform of government-owned and controlled corporations, changes to labor regulations covering night shifts for women and the synchronization of the elections in the autonomous region of Muslim Mindanao with the rest of the country. The passage of an ammendment to the Electric Power Industry Reform Act that contained one fourth of the recommended changes of the administration accounts for a quarter-measure (hence 3.25 out of 33 measures).

At this rate, it will take a little over ten years to get all of the priority bills passed, including the reproductive health bill which has been seized on by the local Occupy movement. The actual tally of bills passed was seven, three of them not flagged as urgent including one that granted Philippine citizenship to a certain Marcus Eugene Douthit. The country spends about a hundred and ten billion pesos a year for both houses of congress. This is about sixteen billion pesos per measure, which represents very low value for money.

Contrast that with the performance of the Gillard government in Australia which passed two hundred and fifty measures this year including a highly contentious carbon tax and emissions trading scheme. This is quite impressive considering that it has had to seek an alliance with the Greens and a few independents to see these bills through both the lower and upper house.

In the Philippines, the majority in the lower chamber is always loyal to the president, which makes the Senate the only real check on executive power. But the senators unlike in the past are not particularly hostile to P-Noy, which represents a window of opportunity. Unfortunately, much of the upper chamber’s attention has been devoted to controversies involving the former regime which is perhaps why it has had little time to devote to other matters.

Thirdly, the pursuit of the rule of law and anti-corruption under the rubric of Daang Matuwid (Righteous Path) and the prosecution of the former president have come into conflict with each other. It is clear that P-Noy does not want a repeat of the ongoing saga with the Marcoses. This is perhaps the reason why he sought to bring Mrs Arroyo to justice by sending her to jail before Christmas this year.

The lady he has put to the task, his justice secretary, might have skirted a few legal formalities in order to make that happen. This is the conclusion arrived at by a few dispassionate observers including legal luminary Fr Joaquin Bernas, SJ, dean emeritus of the Ateneo Law School from where a number of the president’s men have been trained.

During the campaign, it seemed that the rule of law was intertwined with bringing Mrs Arroyo to justice for misdeeds done while in office. Now, given the situation where the high court is stacked with her appointees, certain exigencies have to be dispensed with in going after her. Indeed it would be preferable from Mrs Arroyo’s point of view for these cases to be tried immediately while she still enjoys some legal cache with those on the Corona bench.

In pursuing the case against her, P-Noy runs the risk of succumbing to the “dark side” by employing extra-legal or extra-constitutional tactics as she did during her presidency. Rather than lifting the country out of the mud, what could happen is that his presidency could get dragged through it with her. The impending release of the Supreme Court’s order to distribute his family’s hacienda to its poor tenants can be seen as a form of retribution. It distorts the narrative of “light vs darkness” by laying the blame for social inequity and injustice squarely on the president.

At any rate, what economists and foreign investors mean when they refer to the rule of law has nothing to do with prosecuting former incumbents but with the securing of ownership and property rights and the efficient enforcement of contracts. And here once again, the pursuit of daang matuwid has led to the scrapping of a few contracts involving foreign donors and their suppliers for the simple reason that they were signed by the former president. This has if anything maintained the image of the Philippines as a country with a high sovereign risk attached to it.

In conclusion, it is worth reflecting on how the shadow and specter of Mrs Arroyo’s administration has haunted her successor. In the first instance, an absence of public trust in government has cemented the idea in P-Noy’s head that he could only fund his social contract by improving tax collection rather than new taxes. This has been shown to be a false economy of sorts. Secondly, investigations into anomalies committed by her have distracted congress from pursuing his legislative agenda. Thirdly, prosecuting her at all costs has compromised his pursuit of the rule of law, property rights and good governance.

At some point, P-Noy will have to pivot from correcting the errors of the past to ensuring a brighter future for all. To do that, he will have to wrestle with the internal inconsistencies of his reform agenda and exert executive will to get his measures passed as well as restraint when required to show an even hand in prosecuting Mrs Arroyo.

In the end, he would want to avoid a problem known to economists as the winner’s curse. This situation could arise if he becomes overly-invested in the hunt for personal vindication against Mrs Arroyo and her minions. In seeking to settle a few scores with her, he might eventually get side-tracked into a very personal and passionate fight. This could detract him from pursuing a much broader reform agenda for the country. In this manner, he could easily squander the remaining time he has in office and wind up with very little to show for it.

Whither the Philippines in 2020?

As America “pivots” towards Asia where the future economic centre of gravity of the world will be, how big or small a role will the Philippines play in this the Pacific Century?

Source of image: taiwandocuments.org

Jim O’Neill the man from Goldman Sachs responsible for the acronym BRICs (which stands for Brazil, Russia, India and China) in a forthcoming book feels all the more convinced as ever of the accuracy of his predictions ten years ago when he first coined it to describe the growth potential of emerging markets. His sense of vindication for what he now characterises as his “conservative” estimates comes from the fact that in his words,

The world economy has doubled in size since 2001, and a third of that growth has come from the BRICs. Their combined GDP increase was more than twice that of the United States and it was equivalent to the creation of another new Japan plus one Germany, or five United Kingdoms, in the space of a single decade.

At this rate, China will be on track to surpass the United States as the world’s biggest economy by 2027, according to O’Neill, beating the earlier estimate of 2035. Predicting when this will happen has become an interesting past-time of analysts of late, which is why The Economist whose own projections for a 2019 year of reckoning made available the following interactive chart where you can play around with the assumptions and do-it-yourself  by entering them in the assigned fields (see below).

As Secretary Clinton has put it

The Asia-Pacific has become a key driver of global politics. Stretching from the Indian subcontinent to the western shores of the Americas, the region spans two oceans — the Pacific and the Indian — that are increasingly linked by shipping and strategy. It boasts almost half the world’s population. It includes many of the key engines of the global economy, as well as the largest emitters of greenhouse gases. It is home to several of our key allies and important emerging powers like China, India, and Indonesia.

In his address to the Australian parliament, President Obama welcomed the rise of a peaceful China stating that

Together, I believe we can address shared challenges, such as (nuclear) proliferation and maritime security, including cooperation in the South China Sea.
Meanwhile, the United States will continue our effort to build a cooperative relationship with China.
…We will do this, even as we continue to speak candidly to Beijing about the importance of upholding international norms and respecting the universal human rights of the Chinese people.
A secure and peaceful Asia is the foundation for the second area in which America is leading again – and that’s advancing our shared prosperity.

A constant theme in that speech which effectively marked the “pivot point” to the East was America’s adherence to the rule of law to govern international relations in security and economic terms, as well as its championing of open democracies and free markets in the region. In both cases, Obama was at his professorial best when he promoted the concept of rules based trading in commerce and politics.

His speech writers could be said to channel F.A. Hayek the founder of contemporary libertarianism who said that, “Only the existence of common rules makes the peaceful existence of individuals in society possible.

This is consistent with America’s constitutional belief in universal principles. Prof Obama was also acting like Dr King, in that he was delivering a sermon. He may have seemed in Australia to be “preaching to the choir” but his real intended audience was not in Canberra, but Beijing. In Bali, he got to exchange a few constructive words with his Chinese counterpart. Much to the Philippine delegation’s dismay, the US defence posture in the region is not meant to intimidate the rising power of China into submission over the South China Sea issue.

Back home, President Aquino had another axe of sorts to grind with the placing of his predecessor Gloria Arroyo under hospital detention following her indictment for election fraud. This followed a week of controversy involving her attempted departure from the country to seek medical treatment following a Supreme Court decision to temporarily lift the Department of Justice’s hold departure order on her, a decision that was not accepted by the said department.

All of this puts into context, the question of where will the Philippines be in 2020? Will the Philippines be a prosperous democratic country governed by the rule of law? Or will it still be struggling to achieve this ideal that the US president spoke of so eloquently?

Today, the hot topic in Manila among political commentators is whether the action taken by the Aquino government to prevent Mrs Arroyo from leaving was in accordance with the rule of law. On the side of those who say yes is Randy David who believes what we have now is a “rule of justices” not a bona fide rule of law thanks to the lady at the centre of the controversy. On the side of naysayers is Solita Monsod who believes the speed with which the investigation was conducted points once again to the politicisation of the process. Both make reasoned arguments in support of their views.

The president convinced of the justness of his actions and mindful of his constituents exhorted his countrymen to “not waver.” He said that

We are all working for a new Philippines, one where there is equality, where whoever does wrong, whatever his status in life may be, is punished, a country where justice rules.

Whatever the position either camp holds in this debate, all will agree that prosecuting the Arroyos has been quite a messy undertaking, much like the way President Joseph Estrada was deposed from office. The legality of it will be questioned and the merits of it will be argued for years to come in the court of public opinion.

Incidentally, 2011 is also the tenth year since Estrada’s ouster. Back in 2001, Mr Estrada will argue, the country’s elites conspired to bring a sitting and democratically elected president down by extra-constitutional means. Today, it has been argued that one faction of the elite has manipulated the legal system to jail the head of another.

In all this time, has the country progressed towards becoming a stable more prosperous country? To the analysts, the country’s growth rate over the last ten years has proven their rosy forecasts right. They will say that we are on track both demographically and economically to be a force to reckon with by 2020 and beyond.

To the “insiders” the same old problems of social inequity still prevails. One set of rules still seems to apply to one class of people, and another applies to the rest. To the administration and its followers, the Arroyos have become totemic of this system. To them successfully prosecuting and sending her swiftly to jail would prove once and for all that only one system of justice prevails in the country.

To the realists, the application of justice over the course of the next ten years will largely depend on who sits in power. By 2020, a certain boxer-legislator who happened to be one of GMA’s strongest endorsers believes he will be a strong contender for the Palace in 2022. By then he would have tucked a few billion pesos under his belt and followed a path set before by the populist Erap Estrada.

Should the reforms espoused by the current seat warmers of Malacañang not take route in the next five years the political pendulum could swing the other way and a revival of patronage-based populism with a new face could rise to replace the torch-bearers of our current elite democracy.

Similarly, China could match the US pound-for-pound in their rivalry for regional dominance. The Beijing Consensus might by then trump the Washington version. A different model for prosperity might be in play making the need for establishing common rules seem rather (how shall we put it?…) academic.

Where’s the beef? On the missing “spoils” from P-Noy’s second US trip

Does good governance mean good economics?

In an earlier piece last week meant more to mark the 39th anniversary of martial law in the Philippines, I tried to downplay expectations regarding the “spoils” that P-Noy’s US trip would bring describing the situation there as dire and nearly on the boil.

As P-Noy was to deliver a report to the World Bank, Mr Olivier Blanchard, Chief Economist of the IMF gave an uncharacteristically downbeat outlook for the world economy saying that the global recovery had stalled, revising forecasts of growth down to 4 from 5% (a more significant slowdown for advanced economies with growth prospects halved from 3 to 1.6% and less drastic cuts for emerging economies whose growth prospects decline slightly to 6.1 from 6.4%–the Philippines has seen its growth prospects slashed from 6-7% down to 4-5%).

Sure enough, on the day he arrived back from the US, the Dow Jones plunged nearly 400 basis points undoing the Federal Reserve’s measured response to prop up confidence. This was in reaction to what has been going on in Europe where Italy, the third largest economy received a credit downgrade from S&P and where a Greek default on sovereign debt looms. Meanwhile the Washington elite remained at odds over how to keep the government running with a measure to keep the lights on until November 18 passed literally at the eleventh hour.

With that as an unfitting backdrop, the president remained upbeat upon planting his feet back on home soil. Unlike his more recent trip to China which was expected to yield 2-7 billion dollars worth of investment of which 1.3 billion dollars was realized in firm commitments and cost the Filipino taxpayer 25 million pesos (a return of 52 dollars worth of investment for every peso spent), there were no numbers to be quoted this time around.

The president instead spoke of the keen interest and enthusiasm of US investors who were “lining-up” to come to the Philippines. Strange that the president did not even mention the figure of $15 million over the next four years the only firm commitment to come from Pepsi to be invested in developing a coconut juice processing facility.

That after all would be good news for the struggling farmers the intended beneficiaries of the Marcos era’s coco levy fund which was meant to provide them support in exporting their crop, but instead went to a bank which then lent to the fund’s manager, P-Noy’s once estranged uncle, who because of that now owns a controlling stake in San Miguel the food and beverage giant thanks to the high court’s ruling earlier this year.

So why the omission, which is so uncharacteristic of arrival statements; could it be because the spoils of this trip are so meager when compared to the nearly 25 million pesos spent on it? It would depict it as representing less value for money by producing a mere 6o cents for every peso spent.

This should not detract from the overall mission of the trip which according to the president was fulfilled by him reporting to the World Bank the advances of his administration this past year and greeting the Filipino community there. There was also the side trip to credit agencies to try and convince them to boost the ratings of the country. After all, the budget deficit no longer seems to be a problem with a surplus reported in August bringing the cumulative deficit for the year to be 85% below its ceiling, right?

This is what the president trumpeted as a success in his drive to stamp out corruption. In the spirit of transparency and openess, which were the themes of the Open Government Partnership that P-Noy inaugurated at the Waldorf Astoria (which incidentally means more foreign trips in the near future to Brazil, Chile, UK, Tanzania and Latvia), the Palace should have at least acknowledged that perhaps the Americans were in no position given the state of their economy to be exporting their capital and jobs to countries like the Philippines.

Never gonna happen

That transparent recognition of the state of affairs of course was never going to happen, for the simple fact that doing so would expose the president to accusations of junketing which given the nature of his presidency is something his entourage wants to avoid. For if the question were really to be asked, what would be the real urgency of making this trip to the US a second time in a row within the space of a year, what would be the answer?

His remarks at the World Bank was like that of a star pupil performing a didactic exercise of parroting his tutor. His visit to Fordham University was a sentimental journey mirroring his mother’s footsteps (similar to his visiting an ancestral hometown in China). His co-inaugural of the OGP lent legitimacy to an initiative sponsored by the World Bank which has struggled to make itself relevant.

Finally, his trip to the IMF was unnecessary given that the Philippines exited their program right before he entered office. The only point of this trip it seems was to highlight the advances of his young presidency in proving that “good governance is good economics”.

Unfortunately, the jury is still out on that. For one, the US haul was a pittance compared to the Chinese catch. And China has not really been deterred from investing because of perceived corruption or lack of openness. In fact, China’s development spending in emerging countries devoid of any concerns about corruption in the recipient nation is the main reason why western aid agencies have been struggling to maintain their relevance.

That and the fact that their anti-poverty programs have proven to be inconsequential. So much so that they have jumped on the bandwagon in supporting ideas developed independently by their clients. Programs such as Bolsa Familia which is now called “conditional cash transfers”. Yet as shown in an earlier post, the Philippines could have funded its own variant of this scheme without resorting to multilateral financing.

Second, the “interest” from US companies to invest was sparked not because of a greater sense of openness but from the relative advantages the Philippines has in a couple of areas. One is in the form of coconut plantation; and, two is in the form of a call center industry that has grown from strength to strength even during the period in which corruption supposedly reigned.

Now before you start arguing that the austerity exhibited by P-Noy in his travels is in stark contrast to the “impunity” demonstrated by his predecessor, let me say first of all that this habit of constantly bringing up ex-president Gloria Arroyo as the benchmark for this president’s conduct in office is not really very useful (although I am sure her supporters would be happy to have that conversation). I would prefer to think he should set the bar much higher.

The proper benchmark

Before questions of efficiency and effectiveness are raised, it is important to cross the threshold of appropriateness. How appropriate was it to make the trip at all? If as the president says it was important to send a message about the reforms undertaken by his country, then perhaps it would be pertinent to look at Indonesia’s example. The president of Indonesia the only other Asian country in the steering group of the OGP has trodden the path that P-Noy has just embarked on.

After the anti-corruption campaign started under Susilo Bambang Yudhoyono’s first administration, Indonesia has clearly effected a change in its image abroad. It is sometimes accorded “BRIC” status with  gross capital formation as a ratio of GDP about double and foreign direct investments several multiples of that in the Philippines in recent years. This was another successfully home grown program not driven by donors, the main reason it went from being seen as a basket case after the fall of Suharto to joining the Group of 20 nations.

Yet after accomplishing all this, its president felt no compelling reason to preach the virtues of his nearly decade long administration to other world leaders choosing instead to send a “trusted aid” to the event. Our president on the other hand felt so convinced that his administration after just over a year in office was performing sufficiently well that he saw the need to share his country’s “success story” with people abroad.

Unlike the case of Indonesia where the anti-corruption campaign supported growth, the Philippine government’s attempts to rein in corruption seem to have detracted from that growth as the latest four quarters of GDP reporting have shown (ironically it is in the area of growth where the Philippines over the last decade has not performed too badly against its southern neighbor–but never mind that, lest this statement of fact be interpreted as me giving “props” to the previous dispensation).

While it is understandable for the president acting as Salesperson-in-Chief to present a positive image abroad of our country and his administration, it is equally important for that image to be translated into tangible results over a sustained period of time. Only then will the image correspond to reality. Until then, we can only keep asking, “Mr, Presidentwhere’s the beef?*

*Fresh from his US trip, the president rushed off to Japan for four days. The contrast between the East Asian and North Atlantic nations could not be more stark with one billion dollars expected to be signed off with a taxpayer’s bill amounting to 20 million pesos.