No Free Lunch

Policy-based evidence making?

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Fellow Inquirer columnist Winnie Monsod was quite disturbed—nay, agitated—as we discussed the advance executive summary recently submitted by the National Economic and Development Authority (Neda) to the President, of its assessment on the controversial Aurora Pacific Economic Zone and Freeport Authority (Apeco). As former heads of Neda, we were pained by the prospect that our beloved institution may have been pushed into what she termed in her Saturday column a “here’s-the-conclusion-come-up-with-the-study” situation. Others call it “policy-based evidence making,” a tongue-in-cheek play on the widely held ideal of “evidence-based policy making.” On reading the paper, I could sense the agony that must have gone into its preparation, based on the equivocation that marks the document, and on its heavily nuanced recommendations.

Such ambivalence goes farther back. Last December, when 120 Casiguran residents trekked to Manila to protest the project, I wrote of the seemingly reluctant reference to Apeco in the Regional Development Plan (RDP) for Central Luzon, the formulation of which was spearheaded by Neda’s Region 3 office. “Years have passed since the establishment of most of these economic zones,” the RDP notes, “and … there remain large tracts of lands within the proclaimed areas that remain unoccupied and undeveloped.” Truth to tell, the Regional Development Council and Neda Region 3 played no prominent role, as they normally should have had, in the conceptualization and planning of Apeco; they had to take it as a given.

This was because the special economic zone (SEZ) managed by Apeco came about via Republic Act 9490 enacted in 2007, covering 496 hectares of land in Casiguran. RA 10083, which President Aquino did not sign but lapsed into law in 2010, later expanded it more than 25-fold to 12,923 hectares by including the entire San Ildefonso Peninsula. Aimed to bring development into this erstwhile depressed area of Luzon, Apeco has had difficulty attracting major investors. Meanwhile, the latest poverty statistics released recently by the government show poverty in the province worsening by over 10 percentage points, from 20.4 percent of families in 2009 to 30.7 percent in early 2012.

There is little to be surprised about in this turn of events. From an objective business standpoint, Apeco would be far less attractive than several SEZs and freeports previously existing and still highly wanting of locators in Central and Northeastern Luzon (including Clark, Subic and Cagayan). The area it lies in is not even connected to the Luzon power grid. The province’s official website states that a “power generating plant in Casiguran provides a maximum of 20 hours of power supply for the northern municipalities of Dinalungan, Casiguran, and Dilasag.” The Neda paper cites studies “showing that the ecozone could benefit from tapping renewable energy (RE) sources. Apeco’s plan to install its own 1-megawatt solar power plant … needs revalidation. Solar energy is not necessarily the cheapest RE source of electricity. Considering investment costs, options for power such as procurement of diesel generator sets, hydropower, biomass-based power production, including connection to the grid, in the long term, may be studied further.” Neda agonizingly beats around the bush (one of several instances in the document), when the simple message is that lack of ample reliable power is a formidable constraint to the zone’s viability, thereby needing more careful study.

It’s a puzzle how Neda managed to calculate economic rates of return—to the precision of two decimal places—for the continued development of Apeco, even as it laments the absence of a master plan, normally a fundamental basis for such appraisal. The original master planner hired in 2008, Palafox Associates, is mentioned to be currently in a legal case with Apeco. But it apparently failed to consider that Felino Palafox Jr. had testified in a Senate inquiry that the Apeco site is “subject to flooding, liquefaction and storm surge,” posing severe questions on the environmental integrity of the area development, and dramatically raising required engineering costs. A second firm subsequently prepared a master plan, which Neda deems no longer applicable after Apeco shifted direction toward an agri-aqua-tourism-light-industries hub. Under such circumstances, and given uncharacteristically optimistic (“heroic,” in Winnie’s estimation) assumptions that went into the economic appraisal (for example, achievement of 100-percent investor targets within a few years, and others she raised), I’d say the advisability of pursuing Apeco remains wide open to question.

What’s clear to me is that basic road, energy, water and communication infrastructure long lacking in Aurora province must be provided without delay, if its residents’ lives are to be uplifted through expanded economic activities and better linkage to markets. Apeco’s proponents may have hoped to force the national government’s hand on these basics by “putting the cart before the horse.” What remains far from clear is whether it’s in everyone’s best interest to sink even more substantial resources into that “cart,” whose economic, social and environmental viability relative to many other similar SEZs already in place invites so much debate.

Meanwhile, the Casiguran marchers are again in town, having walked hundreds of kilometers anew to draw public attention to the continuing uncertain plight of the thousands of families they claim to represent. They had hoped Neda to be their hero. Winnie and I fear that it is reluctantly allowing itself to become their villain instead.

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E-mail: cielito.habito@gmail.com

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