investments

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The coconut serves as a good analogy for our under investment problem.

The five year Philippine Development Plan (aka “the Plan”) released by the government of President Aquino earlier this year identifies a number of “structural defects” underpinning the country’s poor economic performance. Depicting the problem was easy enough. Without a significant uptick in investments, inclusive growth will remain elusive and poverty will continue to hound us, so the Plan says.

Using an analogy inspired by Robinson Crusoe to grasp this, imagine living on an island where the only resource is the coconut and inhabitants keep arriving. The only way to feed a growing population is to plant more coconut trees. “Investing” in more trees requires hiring more laborers to climb them in order to harvest the coconut. Some coconuts could be consumed, while others could be traded for products from other islands.

The Philippines has lagged behind its Asian neighbors in investing, which explains why it is so poor. Exhibit A as provided by the Philippine Development Plan is reproduced here (see below). Since peaking at 25% in 1997, the country’s investment-to-GDP ratio has been steadily declining, underperforming Indonesia, Malaysia and Thailand. A familiar story for Philippine-watchers–we have all heard or read about this before.

Chart 1. Investment-to-GDP Ratios of Selected Asian Countries: 1994-2010 (in percent)

So what is the reason for this underinvestment? The answer given to us is a lack of competitiveness. The country’s lagging infrastructure, its poor governance and inadequate skill base are increasing the cost of doing business in the country. On the island for instance, a lack of tools to harvest coconuts, a lack of laborers with the skill at converting coconuts into useful products and a lack of boats to transport them offshore is the problem. Now what? Well, according to this narrative, massive infrastructure spending, improved governance and human capital development is warranted.

So beginning next year, the government will be bidding out four initial infrastructure projects amounting to twenty five billion pesos to improve infrastructure in the country. After a year of delays, the amount is about a quarter of what was originally slated. The projects include the construction and maintenance of three airports in Cebu, Bohol and Misamis Oriental and the ticketing system for Manila’s three light railways.

The government has also been busy this year fixing the internal procurement systems within the public works, agriculture and education departments. Much of the budgeted expenditures for this year was held back (a little over half of infrastructure budget as of September has not been spent) due to these efforts, but beginning next year, we are told, they should proceed much more smoothly. The DepEd also has a plan to close the gap in school buildings within the next five years mainly through build, lease transfer agreements with the private sector.

Assuming all these projects go ahead without further delay, we should expect the nation’s problems to be fixed in five years, right? Well, not exactly. One needs to get a sense of the scale of the problem first. This is why I did some very rough back-of-the-envelope calculations to determine the overall size of the employment and investment gaps. Using our island analogy it is like asking the question, how many coconut trees need to be planted to provide enough work for its growing number of inhabitants?

Climbing the coconut tree

Using data from 2005 to 2010, I tried to compute how much additional investments would be needed in the next five years to bring unemployment down from where it is currently at 7.4% to a more manageable level of say 4%. The country has about three million unemployed workers out of a total labor force of thirty-nine million in 2010. Each year about seven hundred thousand new entrants are added to this pool, which means a workforce of about forty-three million by 2016.

So for the country to produce jobs for all of these new entrants and reduce the pool of unemployed workers down to about 1.7 million consistent with an unemployment rate of 4% by 2016, about one million net new jobs need to be created each year. This is consistent with the government’s employment target. There is nothing new there.

The reason why we haven’t seen unemployment decline is because the number of net new jobs created each year is usually slightly below the number of new entrants (see Chart 2 below). Thus, the number of those unemployed steadily rises each year in proportion to the growing work force leaving the unemployment rate relatively stable at around 7.5%. The question now is how much additional investments have to be raised to bring this down to 4%.

Chart 2. Supply and Demand of New Jobs in the Philippines: 2006 to 2010

If one compares the average investments over the past five years of about one-and-a-half trillion pesos per year  (roughly 15% of GDP as shown in Chart 1–see preceding section) with the average number of net new jobs created of about seven hundred thousand per year, one arrives at a figure of about four hundred and fifty new jobs for every one billion pesos spent.

The number of jobs created per peso invested has actually been declining. Back in 1994, a billion pesos in today’s prices would produce about four times as many new jobs. This means that part of the problem has been the increase in productivity particularly in the manufacturing sector where technological progress has reduced the amount of workers required for any given level of output to be produced. In other words, new tools have been created that make climbing the coconut tree a lot easier. As a result, fewer workers are needed.

Assuming that the ratio of new jobs created per peso invested remains steady for the next five years, the amount of investments required to bring unemployment down is about two trillion pesos per year (20-25% of GDP, roughly where we were in the mid- to late-90s). Compared with the average amount of investment spending cited above, this would mean an increase of more than half a trillion pesos (close to six hundred billion) a year or an increase of about forty percent from the current base.

Had the government stuck to its original plan and rolled out a hundred billion pesos worth of projects and assuming an investment multiplier of two (which means a one-for-one additional investment in complementary projects amounting to two hundred billion in total), we would end up filling about a third of the required level of additional investments. Given its planned roll-out is now about a quarter of the original, we will only be achieving close to ten percent of the investment gap. In short, the “solution” does not seem anywhere near the required amount.

“The coconut nut is not a nut”

Here is another problem with the Plan: the assumption that improved competitiveness will steadily increase investments seems straight-forward, but reading the Global Competitiveness Report produced by the World Economic Forum, I find a few anomalies. The chart below shows the various country rankings from 2005 since the Report first came out until 2011 (click the play button).

The Competitiveness Index is a composite score made up of twelve components. These “twelve pillars” that hold up an economy cover things like institutions, macroeconomic policy, infrastructure, health, education, innovation and regulation. The Plan says that the “structural defects” in these pillars as shown by our declining ranking is the chief cause for our declining economy as measured by our investments-to-GDP ratio.

Our ranking has declined alright, but only because of the addition of more countries in the league table in the intervening years. Our score (which you can see by hovering the cursor over the appropriate column) on the competitiveness scale actually rose from 3.71 to 4.08 out of six during the period covered just above Indonesia’s score of 4.05 back in 2005.

Refering back to the first chart, it is clear that in 2008 when our score was actually 4.09, our investment-to-GDP ratio did not climb to anywhere near the level of Indonesia back in 2005. This is like saying two students who scored the same on their tests, did not receive the same final grade. There is an anomaly here.

One might argue that it is our ranking and not our score that counts, so that relative to our neighbors, our score continued to lag and that explains the poorer investment-to-GDP ratio. Makes sense if the grading of students is not based on their absolute scores, but on their relative rankings within the class, right?

Well then, according to that argument, Malaysia which ranked first among its neighbors in terms of competitiveness should have outperformed them in terms of its investments, but the first chart actually shows it slipping steadily below Indonesia and Thailand since 2002 and coming dangerously close to parity with the Philippines. In fact, Indonesia which has consistently come in third in the ratings and rankings of the four neighbors has steadily risen to outclass the Malaysian and Thai investment ratios by 2009 and 2010.

So perhaps, achieving “global competitiveness” is not what it is all “cracked up” to be. It would seem that some other dynamic is driving investments. As one song goes, “the coconut nut is not a nut.” This should give you a lot to think about, which gives me a few days to conclude this. Until then, let me leave you with this tune to fuel your ruminations…

A Clear but Erroneous Message

In his second state of the nation address, President Aquino traded his old nuanced style in favor of a crisper, cleaner form of delivery, but was it accurate?

It was a speech aimed at the public rather than the pundits. In the past, when seeking to convey his mastery of a subject, Pres Aquino or PNoy would often get lost in the detail of the topic at hand. Whether it was in dealing with the security issues after the January bomb blast or whether it had to do with the specifics of his budget.

Not this time. It was not that his speech was short on specifics. In his nearly hour-long address, the president covered everything from our recent credit upgrades to the US State Department’s downgrading of us in their watchlist of countries involved in human-trafficking, from light monorail to mosquito larvae and coconut coils.

What distinguishes this speech from previous ones is the unifying theme that threaded the whole piece, which was the narrative concerning his crusade against corruption. The appropriately coined term “wang-wang mentality” (so called for the unauthorized use of wang-wangs or sirens symbolic of the sense of entitlement by the powerful enclaves of society) was used as a rhetorical device to sharpen the focus of his theme.

The president spoke of progress in this effort yielding tangible benefits to our economy. He noted the rise of stock prices, the reduction of our rice imports, the decline of poverty and the growth of employment. He attributed these developments to the changes he has made in the running of state agencies from the highy impervious public works department to the grandiosely caffeinated Philippine gaming corporation where he claimed wasteful spending was brought to heel.

Inconvenient Truths

Some analysts have pointed out that the improvement of rice production that led to a lower demand for imports came more as a result of better weather conditions than anything else, and that the reduction of poverty in April came after a jump in January. To this I might add, that the growth in employment is simply unremarkable given the past ten years, and that even with a slight decline in unemployment, the twin problems of high underemployment and low productivity (a result of lesser jobs being created in manufacturing) still prevails.

These of course are the nuances that I said were left out of the equation. These facts were conveniently swept away because they did not fit into the overarching narrative arc of the president’s speech, nor did it fit in with the upbeat “vibe” that he was trying to project.

If we look at the substance and purpose of the speech, which is supposedly the setting of the president’s legislative priorities, we find that in a speech of 5,989 words, the president devoted 116 of them to his proposed measures. That is about 1.9% of the text. He went through his proposals so quickly, that he even failed to give a proper justification for them or a rationale for how these priorities fit within his broad agenda.

No apologies

In a manner of speaking, this was a “no apologies” speech. The president did not report on the state of his much vaunted PPPs or public private partnerships which was the centerpiece of his first SONA, nor did he ask Congress to pursue legislation that would improve its implementation.

After pointing out that

(a)ccording to the BIR, we have around 1.7 million self-employed and professional taxpayers: lawyers, doctors, businessmen who paid a total of 9.8 billion pesos in 2010. This means that each of them paid only an average of 5,783 pesos in income tax—and if this is true, then they each must have earned only 8,500 pesos a month, which is below the minimum wage. I find this hard to believe

he then failed to announce any reforms that would ensure a greater contribution of these privileged few to the national treasury in keeping with his no new taxes pledge which the Movement for Good Governance scored him poorly for.

The president also made no apologies for the slowdown of the economy in the first quarter of the year. Instead, he stuck to his narrative contrasting his righteous way with that of his predecessor. Buoyed by the recent string of whistle-blowers and his new-found ally in the newly designated Ombudsman, he did not hesitate to talk down the opposition or to entreat everyone to praise the “good deeds” of his government.

The president adeptly avoided confrontation with two important but some would say wayward institutions. Having bruised the egos of church leaders in the RH debate as well as the PCSO “cars for clergy” scandal, he diplomatically offered an olive branch to the Catholic bishops who were in the audience. He also made sure to gain the support of the military and the police through his procurement of defense assets and provision of low-cost housing.

He clearly did not want to get side-tracked from his simple narrative that his anti-corruption drive would bring about national development. He even found a way to weave the protection of our sovereignty to his good government agenda.

The need for nuance

The sharpening of the edges around this vision of a nation free of the wang-wang mentality and the personalization of this vision as pronounced by PNoy himself was crafted to appeal to the broader sections of his audience. The president was railing against the very government he led. He spoke as an outsider, as an insurgent much like the late former US president Ronald Reagan who saw it as his task to fight the menace of “big government” or more contemporaneously of British PM David Cameron who seeks to displace it with a “big society”.

If you agree with his thesis that corruption prevents growth, then there will be much in the SONA to cheer about. If on the other hand, you consider the empirical as well as historic evidence that corruption per se is not the culprit, but rather the lack of a coherent bureaucracy around a national development project, then you will recognize the effectiveness of myth-making in public speeches.

Indeed if you believe the former, then everything is fine and dandy. But if you believe the latter, then the lack of substance or clarity on how the government intends to reverse the dangerous trend in our employment mix through some kind of industry or tax policy with the stalling of the government’s major investment strategy means that when the favorable conditions turn sour, as they most certainly will, we are in for a rude awakening somewhere down the track.

One of the best public speakers in his day was George W Bush. He was able to rally his people behind a clean, crisp message against the “evil doers”. He left the incovenient truths and nuances of intelligence out of public debate. Ten years later, we find the repercussions both strategically and economically of this form of “messaging” that have mired his country in a highly polarized debate over the national debt.

The need to speak clearly is one thing, but the need to speak more factually is another. Hopefully in the future, the president’s communications and strategy team will be able to craft a message that marries the two.

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]

BSAIII action plan on job generation

Job Generation

Action Plan on Job Generation

We will increase investments to provide quality jobs for Filipinos by lowering the costs of doing business in our country.

  • We will level the playing field for businesses. We will encourage free and fair competition in a level playing field that stresses that one need not be a crony in order to be successful in this country. We will make our bidding and procurement policies and processes more transparent, and punish those who seek to circumvent procurement laws through collusion and other illegal means.
  • We will have easier, streamlined business procedures. We will transform our systems to foster service to the public. 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.

We will strategically target assistance to small and medium enterprises, and key industries where we have a competitive advantage to maximize our potential for job generation.

  • We will support small and medium enterprises. SMEs are the main generators of jobs in the country. But they lack access to credit and finance. They also need access to markets and to technology so that they can connect to the global economy. An Aquino government will not only encourage microfinance and small business loans, which was a cause supported by former President Corazon Aquino, but will also harness the remittances of our overseas workers by creating financial instruments that can attract remittances and be channeled to the rural sector. For market and technology access, we will encourage the private sector to link up with local firms, using information exchange, by giving the private sector the appropriate incentives.
  • 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.

We will invest in our country’s top resource, our human resource, to make us more competitive and employable.

  • We will overhaul basic education by having universal pre-schooling and strengthening our basic education system to a 12-year cycle. For students who want to work after high school, we will strengthen technical-vocational education to provide them with needed skills.
  • We will solve the labor-mismatch problem by promoting better coordination between employers, academia and government, including through strengthening both public (e.g. Public Employment Service Offices -PESO) and private sector labor market information and exchange institutions, especially at the local levels.

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

BSAIII action plan on peace and development in Mindanao

Aquino-Roxas Mindanao Peace and Development Agenda

Action Plan on Peace and Development in Mindanao

Peace and Security

Transparent and consultative peace process

Workable peace is possible only if supported by a broad, active and informed peace constituency.

  • I will assume direct responsibility for the revival of the peace process with the MILF.
  • I will reconstitute the peace panel with men and women of integrity who will directly report to me. There was a time when the peace process was doing well until the Arroyo Government began to use the peace negotiation as prop to political survival. I will see counsel from peace advocates like former OPAPP Secretary Deles, Peace Panel Head Afable and former Notre Dame University President, Fr. Mercado to put back on track the credibility needed in the peace process.
  • I will ensure the participation of various Mindanao stakeholders – Muslims, Lumad, Christian settlers – in the negotiating panels and working groups;
  • I will create a niche for the participation of other Muslim “gatekeepers” particularly traditional and LGU leaders, MNLF, the Ulama, Bangsamoro civil society.
  • Request the Bishops-Ulama Conference to submit a report on the results of the consultations it conducted in the aftermath of the failed MOA-AD; likewise with all known civil society organizations and academic institutions which undertook similar consultations or researches in the past year, such as the University Network on the Mindanao Question led by the UP School of Law, the Consortium of Bangsamoro Civil Society, the Philippine Council for Islam and Democracy, and the Al Mujadilah Foundation.

The results of all these processes should be collated, with key points of agreement and contention identified for inputting into the peace mechanism, as appropriate. On this basis, a mechanism should be devised for these groups to participate in the continuing dialogue on and monitoring of their recommendations.

MNLF

  • I will immediately convene the Oversight Committee on the Organic Act on Muslim Mindanao (RA 9054) and complete a review and assessment of the implementation of the law. I will issue an Executive Order reviving/extending the function of the Oversight Committee, which was last convened before 2004 and which never completed its task, and impose a deadline for the completion of its work.
  • I will order the Department of Foreign Affairs, with the Office of the Presidential Adviser on the Peace Process (OPAPP), to give a report on the tripartite review of the GRP-MNLF Final Peace Agreement and cull the “immediate doable” measures that government can undertake.
  • I will order an inventory of the backlog on assistance to MNLF rebel returnees, as the basis for determining the requirements and timetable for addressing the gap and closing the existing program, while a new program is crafted in cooperation with concerned LGUs and approximating the international standards on DDR (Disarmament, Demobilization and Rehabilitation) of former combatants.

Indigenous People

  • We will review the recent appointment of the Commission to ensure they are in accordance with the law and rationalize the NCIP plantilla to professionalize the bureaucracy to do its mandate under the law, including the delineation of ancestral domains (AD) and support the development of the Natural Resource Management Plan (NRMP).
  • I will work with IP communities and all land and resource-management related agencies for a thorough review of all Certificates of Ancestral Domain Titles (CADTs), Certificate of Ancestral Land Titles (CALTs), and Certificates of Free Prior and Informed Consent (CFPICs) issued towards weeding out those issued defectively, fast-tracking decisions on all pending applications, and providing support for development and implementation of the ADRMP for areas covered by CADTs.
  • I will ensure basic education, health, and sanitation facilities and services for IP communities.
  • I will look into the immediate situation of security of IP communities in areas of ongoing armed conflict.

Internally Displaced Families

Families displaced by conflict will receive full support to be able to return to their communities of origin, if they so desire.

  • I will put up a compensatory fund which will provide shelter, food and livelihood assistance to enable the estimated 30,000 internally displaced families to return to their homes.

Lawless and Criminal Elements

I will dismantle private armies and take a firm hand against all forms of lawlessness

  • I will ensure the prosecution of all identified perpetrators of the Ampatuan massacre. I am aware that the families of the victims and witnesses of the crime are vulnerable to harassment as well as bribes to weaken the case. I will ensure that families of the victims and witnesses of the crime will receive adequate protection and support as they work for justice.
  • The Maguindanao massacre was not just a local Maguindanao problem. It was abetted by the national government with government policies and resources. DND should submit immediately the result of its investigation and inventory of the arms and ammunition confiscated from the Ampatuans and identify civilian and military leaders responsible for the build up of arsenal of the Ampatuans.
  • I will revoke EO546. Never again will public funds be used to support and maintain a private security force.
  • KFR incidents are national security concerns. I will commit full budgetary support to PACER in establishing and implementing an anti-kidnapping strategy in Mindanao; provide full support for the filing of charges against suspected perpetrators, including full protection for released victims and their families.
  • Under my watch, I will ensure that all security forces will be insulated from partisan politics. I will implement the Defense Reform Program started by former DND Secretary Nonong Cruz which aimed to build a professional AFP. A professional AFP along with a professional PNP committed solely to defend the constitution and uphold the law is the key to the dismantling of private armies and implementing the gun control. All forms of excuses for self-protection can be abandoned only when citizens trust state security forces.
  • We will aim to improve the ratio of security forces to our growing population.
  • All appointments in the AFP and PNP will be based on merit and performance.
  • Forces on the ground will be provided with adequate provisions, equipment and training to be able to discharge their duties effectively.

Governance

Performance Incentives

Setting National Policy: Performance- and outcome-driven over-investments in education, health, and employment interventions.

  • I will match every peso invested by 4th and 5th class LGUs in basic education, maternal and child health care and potable water and latrines.
  • Moreover, I will provide additional support to performing LGU’s so they can fast track filling the gaps in attaining targets for their education, health and sanitation programs. In education I will support LGU efforts to attain 100% basic education enrolment, lowering dropout rates and increasing completion rates.

Transparent and proper use of public funds

I will ensure that all fund releases to all LGUs will be transparent and its utilization fully accounted for.

  • I will support DBM’s effort started by former Secretary Emilia Boncodin in regularly publishing and disseminating all releases to the LGUs.
  • I commend COA for their fearless reports which exposed politically sensitive cases such as the Jocjoc Bolante fertilizer scam. I will ensure adequate support to state auditors for proper and accurate audit reports. And their reports will not end in filing cabinets. The OP will take the necessary action on irregularities in the COA reports.

Free and honest elections

I will ensure free, honest and orderly elections.

  • I will release the Mayuga Report to make public the findings on the role of the military in the controversial 2004 elections.
  • On the next ARMM election in 2011, I will install measures that will hold paramount the will of the people of ARMM. The military and the police will remain strictly politically neutral. They will ensure that the election is clean, orderly and peaceful.

Development

Infrastructure

To transform Mindanao into modern agricultural center and the nation’s food basket.

I will address infrastructure gap in farm to market roads, irrigation and post harvest facilities.

Corollary to this, to substantially reduce post-harvest losses, post-harvest facilities will be provided to Mindanao corn, coconut and rice farmers while processing facilities will be made available to coastal fishers and aquaculturists.

Additional irrigated farms will raise cropping intensity and hence productivity contributing in the process to the attainment of the goal of self-sufficiency for specific commodities and bolstering export-competitiveness for others.

  • During my term, I will improve its total road network by bringing its current paved road ratio closer to the national average. This will lower transport costs and post-harvest losses.
  • Corn driers will be priority of DA under my watch. Every 1,000 hectares of corn land will be serviced by at least 1 corn drier.
  • Irrigation coverage will be expanded. Mindanao has about 700,000 hectares of farms that need irrigation. We will expand irrigation facilities to service half of the area by the end of my term, subject to sound cost-benefit analysis.

Public Investment

In areas of Mindanao where private investors are hesitant to invest due to high risk and uncertainty, my administration will establish state enterprises that will partner with potential private investors or extend guarantees to them to spread the risks. The purpose is to generate investments in these areas as a way of jump-starting economic activities and providing employment opportunities so direly needed in these communities. This will be the government’s direct assault on breaking the vicious cycle of lack of jobs, resulting to greater poverty, in turn partly fuelling the conflict, leading to lack of investments and lack of jobs.

  • Among my priority will be government investment in the development of the Halal Industry. This, first and foremost, will answer the essential need of Filipino Muslims for access to food and non-food products that is consistent with their faith. This will also enable local producers, Muslims and non-Muslims, to partake of the multi-billion dollar world halal market.
  • I will encourage investments in our energy sector to tap more diverse sources of power and lower the cost of energy in the long term. In the short term, I will support moves to mitigate the effects of the power crisis such as:
    • Leasing power barges
    • Contracting additional generating capacity through cooperatives and private utilities
    • Allowing the National Grid Corporation of the Philippines to use ancillary services such as the contracting of back-up generating capacity
    • Promoting demand side management

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