No Free Lunch

Political will, political capital

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I often point out that some of the most critical policy reforms for achieving broad-based and widely beneficial (i.e., inclusive) economic growth have long been known and well understood. Our policymakers have simply failed consistently to get them done through the years. I have seen too many policy prescriptions widely acknowledged for decades to be crucial, yet continuing to remain just that: as prescriptions that never become actual policies. This is because the key policymakers in both the legislative and executive branches of government simply could not muster the political will to go against the enemies of reform, who have vested interests to protect. In many instances, the policymakers are co-opted by the same vested interests, in a political and electoral system wherein the golden rule (“he who holds the gold makes the rules”) prevails.

Some of my readers, knowing that I was once upon a time the country’s chief economic planner, fault me for supposedly not having done many of the things I write about now. Alas, planners hardly control policy, especially where populist or rent-seeking politicians can readily thwart evidence-based policy directions set by studious technocrats. Indeed, it is not uncommon for us to hear that we have some of the best-laid plans, but it is in their implementation that we fall apart. A former colleague in government once told me that we should be happy enough to take one step backward if we can take two steps forward. In my experience and observation, though, we have taken far too many backward steps that were not matched by offsetting forward steps.

Many of the long-recognized but unheeded reforms are well known. One such reform long called for is the easing or repeal of the age-old Cabotage Law, which prohibits foreign shipping lines from ferrying goods between two domestic ports. For decades, we have been lamenting how it is much more costly to ship goods between Mindanao and Manila than between Bangkok or Singapore and Manila. Even more appalling is the fact that it is more expensive to transport goods directly between two domestic ports than between the same two domestic ports via an international port. For example, a 2010 study documented that it costs US$1,860 to transport goods in a 40-foot container directly from Manila to Cagayan de Oro. But transporting it first via Kaohsiung in Taiwan would reduce the shipping costs to only US$1,144, or US$716 less! The clear implication is that domestic shippers are charging much more than what would prevail if international shippers could compete directly with them on domestic routes. Inasmuch as transport and logistics costs comprise from 24 to 44 percent of the wholesale price of commodities, the higher cost of domestic shipping due to lack of competition penalizes most of us Filipinos. And yet we have allowed this situation to persist for decades, in the name of protecting our domestic shipping industry—never mind how inefficient and costly it might have been. Nationalism is hardly the word for this; I’d call it masochistic xenophobia. The same self-injuring attitude is at work as we continue refusing to open our skies more freely to foreign airlines, in the name of “reciprocity” for our domestic carriers. In effect, we are depriving ourselves of millions of likely additional foreign tourists, and a corresponding number of tourism-related jobs—even as we have over 3 million jobless Filipinos, and many more with inadequate jobs—to protect the interests of a few. And I always thought that good policymaking meant seeking the greatest good for the greatest number.

There has been much discussion lately about the long-debated need to ease the constitutional restrictions on foreign ownership in certain key industries including education, mass media and public utilities. Such restrictions have not only restricted foreign firms from bringing in job-creating investments. They have also prevented them from contesting tightly controlled markets traditionally cornered by domestic oligopolists, thereby restricting competition that could otherwise spur higher quality and lower prices. Such foreign ownership restrictions have long been abandoned by most of our progressive neighbors and economic peers, which now have high employment rates and more equitable and broadly based economies to show for it. As we work for a long-needed competition policy law to promote healthy competition within the economy, we need to complete the picture by also enabling competition from without.

President Aquino’s great political capital gives him a unique opportunity to push desired constitutional amendments (and resist undesirable ones) with the least resistance. Ironically, he argues that constitutional amendments are not essential to achieving high rates of economic growth, citing our recent growth record. But he is just as bothered that the benefits of brisk growth are largely reaped by the wealthy few, and fail to reach the wide masses of Filipinos. Granting that easing foreign ownership restrictions may not be essential to rapid economic growth, the more relevant question could well be: Is more inclusive growth likely without it? Barriers to entry in key sectors of the economy, whether from within or without, have perpetuated what analysts call “elite capture” and the persistent failure of the benefits of growth to trickle down to ordinary Filipinos.

President Quezon once declared that he’d rather have our country “run like hell” by Filipinos (than run like heaven by foreigners). But in the economy, his rationale (“we can always change them”) doesn’t quite hold: the dominant players cannot simply be voted out.

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E-mail: cielito.habito@gmail.com

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  • parengtony

    Its the simple truth.

  • usizero

    This present inutile and autistic president in malacanang prides himself/herself for being a graduate of Economics “kuno” from Ateneo but it seems he/she doesn’t understand the benefits of letting foreign business to wholly own and operate vital industries in the country and break the monopoly of entrenched influenced peddling oligarch in this nation of which he/she also belongs. Hence, he boasts of economic growth in which the main beneficiaries are the aforesaid oligarchs, and the masses whom he/she said are his/her boss are given pittance through his/her conditional cash transfer program.

  • pepito gwaps

    In Singapore, the rich foreigners keep on buying properties so the properties become very expensive that the ordinary locals cannot afford to buy anymore …

  • buninay1

    The drift of this column is simply that an anti-charter change President is being asked to certify this move as urgent for the sake of moving this country forward. Indeed, President Aquino has to reconsider his position as regards constitutional updating if he wants to see this country to grow economically by leaps and bounds.

    For so long, the country has tried to do business within the limits imposed by our present constitution. Its protectionist nature of course allows for some industries to thrive but it is not the intent of the constitution to treat the growth of those industries as an end but only as means to the larger goal of achieving comprehensive and inclusive economic development for the whole country. As it stands now, the charter looms large over the life and direction of this country’s almost hundred million inhabitants, trapping them, holding them hostage to its unresponsive economic provisions which are becoming increasingly superfluous in the advent of globalized way of doing business.

    Change is inevitable even with our constitution. Our President is paralyzed by inaction before the challenge to update it in order to allow fresh air to come into an otherwise tight place our country has occupied to grow up to bonsai scale we are currently enjoying now. What bothers him most is the shenanigans that may attend the process of changing the magna carta. Before the country knows it, the President rightly fears, it will be embroiled in another round of political turmoil because apparently the framers of the proposed new constitution will have been tempted to tinker with the political provisions as well.

    It will indeed be a bitter pill to swallow to accept the fact the framers may look at the political apple with extreme covetousness because the political question such as form of govt etc. can not be avoided if the framers will exploit to the hilt their mandate to craft a seamless, well-coordinated and organic fundamental law of the land. Everybody will agree that if someone enters a salon to get a makeover, he or she does not leave any stone unturned or else he or she will come out of the salon the worse for having saved his or her hair from the invasive touch of the beautician.

    The same is true with cha-cha where the President should not expect the framers to limit themselves to economic matters of the constitution. If we are to change it, let us root out and weed out those in the constitution that make it overweight and sluggish and inject into it the ideas that are relevant to our perpetual needs and are attuned to the constant demands of time once and for all. The country can no longer subsist under a constricting constitution that, judging from the economic mess the country is now wallowing in, cares only for the rich few at the expense of the underprivileged many.

  • Boy_Paco

    Cha-cha is only for greedy businessmen conniving with crooked politicians. It is just but right for this administration to focus more on electoral, judicial reform and all other governance reforms. Three remaining years are not enough to straighten out the system, rather push the legislative to pass FOI bill, abolish SK, and get done with so many other important things in this major turnaround. Anyway three years is way too short than previous nine years of waiting, so let the next administration deal with cha-cha if still necessary

    • symonwho

      Reduce corruption to marginal levels and investments will follow. Equal playing field, no rent seeking, easier to transact busineess, clear and consistent rules etc. Many investors, given the chance of optimum profits they can repatriate, negative control in boards will come in despite the constitutional restrictions.

  • WeAry_Bat

    Yesterday, I read about Singapore and how FDI sent it up towards prosperity. Ironically, Malaysia, the country for whom that country built its military as deterrent, is the second biggest Asian FDI. Europe is the first. This was in a 1995-2005 report.

    Can we beggars be choosers? Because in the present world economy conditions, the most likely FDI we have will be from China. Will it be ‘they who mines our nickel and take our islands’?

    Second,if Philippine policies have a way of having the best intentions but providing hell to the wallets, say Epira yr 2001 and our current electrical rates, how much more difficult it will be if it is epoxied into the constitution itself?

    I find the siren song of FDI quite appealing. But maybe some assurances is needed?

  • prong_00

    Power elite have greater social and political capital than anyone here in the country. They continue to reproduce their created reality, through different means like mass media and education. The people from the grassroots must be empowered in terms of understanding the norm that is prevailing. They must be empowered in terms of contemplating and looking on different social reproduction occurs in the society. Who will initiate them in this endeavor? Themselves. Who will start this? Us.

  • http://www.yahoo.com JOSE RIZAL

    Don’t “kid glove” Noynoy by saying he posses that “great political capital”, because he is a “zero man” made “hero” by the oligarchs. The same oligarchs who enticed Cory of privitizations of the basic services (that the government should provide to its people).
    “Asa ka pa” (in vernacular).

  • http://www.yahoo.com JOSE RIZAL

    The oligarchs made Noynoy a hero (from zero)…and you stated he has that “great political capital”…?
    Hahahahahaha!

  • Noel Noel Munro

    Pres. Quezon doesnt mean that we can be dumb and be happy. What he wanted to say was “We can be great ourselves” and we can be self reliant if we will work hard together for the greater good of our people. It is a metaphor and should not be taken literally.

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