good enough governance

When Good Governance Isn’t “Good Enough”

MRTaccident

Four years under an honest, sincere leader like President Noynoy Aquino (PNoy), and the mood of the nation has palpably shifted, from one of hope and optimism that greeted his election in 2010, to one of fear and loathing at the prospects in 2016 when he is supposed to step down (talks of lifting his term limit notwithstanding).

Four years is a sufficiently long time to take stock of how far down the path of good governance (daang matuwid) PNoy has taken the nation. The opinion polls suggest that while an absolute majority still are satisfied with his performance, fewer and fewer people think he is succeeding or doing a good job. If this trend continues, the people who rate him poorly may become the majority.

In his last State of the Nation Address, PNoy acknowledged that the task of reforming institutions in the country will not be completed by the end of his term. By the government’s own scorecard, the administration is failing in all but one of the Worldwide Governance Indicators of the World Bank, the global benchmark for good governance, nor is it expecting to achieve its governance goals by the end of PNoy’s term in office.

When it comes to achieving inclusive growth and development, regarded by many as the holy grail of good governance, for which it is just a means (kung walang corrupt, walang mahirap), slow progress indicates the intransigence of the situation. Poverty incidence and unemployment rates remain stubbornly high, despite the uptick of our GDP growth figures for over a decade now.

In this context, where does blame lie? Were the actions taken by the administration towards implementing good governance the right ones? To answer these questions, we will need to retrace its steps. But before that, let us first lay the foundation for the analysis.

The role of any government is always two-fold: to expand the productive sectors of its economy, and to invest in human capital while providing social and environmental safety nets for those who slip between the cracks.

A government cannot raise enough revenue to perform the latter, unless it performs the former really well. Inclusive development is premised on rapid, robust, and sustained growth taking place. The benefits of growth are often distributed unevenly though, so governments often need to step in to spread them more equitably across society.

Some minimum standards of competence and probity need to exist for a government to perform these functions well. In developing and emerging economies, these tasks are made more complicated due to the limited nature of available resources, weak organizational capacity and poor institutional integrity. But as demonstrated by East Asia in the last century and now by Sub-Saharan Africa in the early part of this century, governments need not be whiter than the falling snow to perform these functions well enough.

Retracing steps

Early in his administration, the president was concerned about changing the atmospherics to promote good governance, which was what he rightly perceived as his mandate from the Filipino people. He sought to achieve this by:

–          Replacing Mrs. Arroyo’s appointees and going after his predecessor through the courts. This was achieved with a series of executive orders, impeachment complaints and charges being filed. When the PDAF and DAP controversies broke, this extended to filing cases against incumbent legislators, such as senators Juan Ponce Enrile, Jinggoy Estrada and Ramon ‘Bong’ Revilla.

–          Improving the integrity, efficiency and effectiveness of the government’s expenditure program through reforms in the Department of Public Works and Highways and Department of Budget and Management. Corollary to this was making the budget process, the bidding and awarding of contracts, more transparent and accountable.

–          Improving the collection efficiency of revenue agencies such as the Bureau of Internal Revenue, Bureau of Customs, and government owned and controlled corporations by going after tax cheats and smugglers, reforming the governance of corporate boards and initiating a performance based bonus system.

In all this, the administration has actually been quite successful in getting what it wanted. Mrs. Arroyo is under hospital arrest; the Chief Justice appointed by her was impeached and convicted; her Ombudsman resigned; and, the three senators mentioned have been suspended and are in detention. New budget and procurement procedures are now in place. Collections and dividends from revenue generating agencies and corporations are up, meaning to say their performance is improving.

So what has the administration done wrong? Why are its approval ratings going down now despite its many accomplishments in the area of good governance? I would like to go beyond just the immediate causes to offer three fundamental problems. Three things, which I believe the administration is guilty of—they are:

  1. Focusing too much on reforming the government’s budget and expenditure processes and not enough on a whole-of-economy policy agenda.
  2. Focusing too much on the process of good governance and not enough on the ultimate, end-goals or outcomes of good governance.
  3. Not being bold, or forward-looking enough in its plans and vision for the country.

Let us tackle these one-by-one.

On the first point, the administration, by focusing on the efficiency of the government’s expenditures, limited itself to influencing a mere 20% of GDP that the annual budget represents. Economic policies, which affect 100% of the economy, on the other hand, have been neglected, to say the least. Just consider the following:

–          We are facing an imminent energy shortage, despite paying some of the highest electricity rates in the region. Some parts of the country are already experiencing regular, rotating blackouts.

–          We are facing a logistics and ports crisis, with freight landing but remaining inside Manila’s container port due to regulatory bottlenecks at the national level, which have led to unlicensed trucks being apprehended by the city of Manila. This crisis in Manila is going on despite the excess capacity that exists in Batangas and Subic Bay ports.

–          Our urban roads are congested limiting the flow of people and goods around the city, impacting on our productivity and the cost of delivering basic goods and services.

–          The metropolis suffers from a lack of urban planning, co-ordination and integration with surrounding regions.

–          We are paying some of the highest rates for internet and telecommunications services, and suffering from one of the slowest internet bandwidth speeds and poor connectivity in the region.

–          The NAIA, our most important gateway to the world, is considered one of the worst airports. Even the opening of an extra runway in Sangley Point a few years from now will simply ease congestion slightly.

–          The MRT and LRT systems are hampered frequently with accidents and breakdowns.

–          Our public transport system is not safe for the riding public or motorists.

–          Pollution is choking the city, leading to health risks and higher health bills.

–          Our higher educational institutions continue to slide down global league tables and a lower proportion of their graduates succeed in passing their professional licensure exams.

–          The sleeper issue is water. Will there be enough of it with all the growth happening in our urban centers?

Now energy, ports, communications, transport, roads, clean air and water, education and skills all affect the efficiency and productive capacity of our economy. If regulatory and line agencies lack the capability to independently plan, manage, monitor and guide the players that operate in these sectors in line with national development goals, then the future growth of the economy will be significantly constricted.

‘Plan rational’ missing

If a government cannot develop what the late-Chalmers Johnson called a “plan rational” for growing productive sectors in the economy and use its economic agencies to effectively line up the players in their respective spheres of influence to attain the targets of this plan, then it won’t achieve the kind of growth that results in massive improvements in its people’s quality of life.

The administration has identified the business process outsourcing, electronics, semiconductor, logistics, tourism, manufacturing and agro-industrial sectors for growth, and yet if you look at the basic infrastructure needed to power them forward, which includes human capital and skills, the policy frameworks are not providing a conducive environment for this to be a sustainable future.

Over-processed, under-performing

On the second point, the administration has focused too much on the process of good governance, not enough on the outcome. PNoy has focused on cleaning up the bureaucracy of corruption, institutionalizing right procedures of governance, and improving transparency and accountability.

Those are noble things, worth pursuing no doubt. However, in seeking to improve the processes by which the state governs society and the economy, it should not neglect to forge effective tools with which to improve the outcomes of processes without having to clean up the system, entirely.

As the only entity in society with the right to grant licenses, franchises, monopolies and provide public goods, the government actually has some clout to shape the economic landscape if it wanted to. It can direct state resources, finances and act as guarantor to projects that it sees as strategic in nature.

During East Asia’s rapid rise to prosperity, bureaucrats would grant loans at concessionary rates and issue licenses to operate in strategic sectors of the economy to favored companies. In return, they or their political masters would often receive commissions for facilitating these transactions that would go to their political machineries. They were, in this respect, no different from our own bureaucrats.

The only distinction lies in the fact that the recipients of such cheap loans and coveted licenses were obligated to produce results in line with national development targets. If they failed to achieve these performance standards, bureaucrats would wield the stick to rein them in, i.e. loans would be retracted or they would be forced to consolidate or be threatened with the entry of new players. The economic agencies had the tools and acted cohesively to do this.

In the Philippines, we have neglected to develop such tools and organizational cohesiveness. If we had a national policy to increase the average speed of our internet service, for instance, and the current providers were not meeting this target, then our regulators should have the power and authority to slap hefty fines and penalties on them, threaten to suspend their licenses or bring in new players from abroad. The targets should be easy to measure and verify, clearly defined and pre-agreed.

The same should apply elsewhere. Of course, the constitution might stand in the way of some policy tools, such as liberalizing foreign ownership in certain sectors. The problem with full liberalization for its own sake though is that if you continue to have weak agencies without the tools to shape the behavior of players in the market, we could simply end up with foreign players behaving just as badly as local ones. Having said that, all options must be on the table.

The government through its budget process has started to initiate performance based budgeting, which is focused not just on how much gets spent or what outputs are produced, but the outcomes it achieves. This is a positive step. The next logical one would be to empower agencies with the right policy tools to achieve the desired outcomes.

Bolder vision, action-oriented focus needed

On the third and final point, if the government is not bold or forward-looking enough in its plans and vision for the country, then it follows that the agencies which develop policies and regulations for the economy will not be ambitious or strategic enough in wielding the tools for shaping its future. Without a national agenda, agencies will be more susceptible to being ‘captured’ by narrow, vested interests.

Of course the government has developed targets in the Philippine Development Plan. The question here is whether these are the right targets needed to develop a grand vision and narrative for where the country should be heading. Are they bold and forward-looking enough? Are they outcomes-based as opposed to being outputs- or even process-based?

In my view, many of the targets in the Plan remain output-oriented. What matters to the broader public is not how many passengers go through Ninoy Aquino International Airport, for instance, but how comfortable and easy it is for them to do so. There ought to be measures that monitor and track this. There could be 40 million passengers going through NAIA by 2016 as per the plan’s target, but they could all be unsatisfied and disgruntled with the service.

A more visionary target would have been to open a new airport by 2016 to service the expected inflow of passengers into Metro Manila. If the government had come into office with this as a bold target, then agencies and investors would have known what to do and where to invest their resources. The same could have occurred in power.

If the government came in and said we needed to produce X additional megawatts by 2016 and to lower the average cost by Y per cent, while reducing greenhouse gases by Z tons, and empowered responsible agencies with the mandate, resources and tools to get it done, we could have avoided the current situation. I believe dissatisfaction among many citizens stems from the impression, rightly or wrongly, that government just does not have a plan to solve their everyday problems.

When President John F. Kennedy in 1961 set a bold, long-range vision and asked for extra appropriations from the US Congress to put a man on the moon by the end of the decade, no one at that point knew how it could be achieved. There were no feasibility studies. The technology was not even available. NASA had to learn by doing, taking action that brought them closer to that vision through experimentation and adapting their plans and organization accordingly.

The many challenges facing our country are adaptive in nature. Intergenerational poverty, climate change and conflict ridden communities: the solutions to these problems are not known in advance. Even experts are confounded when they apply their current state of the art tools. But that should not deter our leaders from framing a bold and inspiring vision for the future, and to set the scene for government, clients and stakeholders to collaborate in finding a unique way forward.

Good (or “good enough”) governance?

As PNoy enters the final third of his time in office, the clock seems to be ticking much faster. People have 2016 on their minds. What he needs to do now is race to the finish line. As he contemplates the legacy that his government will leave behind, he may need to re-think his agenda thoroughly.

While pursuing anti-corruption and good governance is a laudable goal, admittedly it takes several presidential terms, decades even, before this can be fully accomplished. His government has taken many positive steps down this path, and should be commended for it, but as he himself acknowledged in his penultimate state of the nation address, the journey will not end when he steps down.

Given that good governance in its strictest sense will not be achieved during the life-time of his administration, what steps can he take now to achieve better outcomes in many policy areas that directly impact the lives of residents and ratepayers, and will affect the future growth potential of the country?

These steps, when taken, would constitute “good enough” governance, because the process for achieving outcomes may not be perfect, but at least they will allow the government to perform its primary role of expanding the economic base, and with it the capacity to address social disadvantage and environmental damage.

Once the economy has expanded sufficiently, government will be able to raise more revenue, and shall have more resources, which will allow it to continue down the road of good governance and inclusive development.

If the government fails to lift the standard of our economic infrastructure, then growth could stall, and many of the positive steps this government has taken so far might falter as well. When that happens disillusionment might set in, and many of the reforms initiated by PNoy might be wound back.

Finally, the citizenry, for its part, cannot wait decades (or even another term for that matter) before the promise of good governance is achieved, nor should they be made to wait. Four years under PNoy may have already taught them that the path of good governance is just too long and arduous. Their growing dissatisfaction with the results is a sure and telling sign that, as far as they are concerned, good governance simply isn’t good enough.