When coordination fails

All too often, we are faced with a situation where the left hand doesn’t know what the right hand is doing, and vice versa. It’s even worse when neither of them even cares enough to know, or even if they do know, they don’t care.

I last wrote about lack of coordination in the governance of agriculture and agribusiness in the Philippines, and how this has been a major obstacle to achieving a much more dynamic agricultural sector like our neighbors have. Agriculture cannot flourish unless we also foster agribusiness, which is where the two major economic sectors of agriculture and industry meet. But where distinct departments or ministries who find great difficulty coordinating their actions govern the two separately, it’s even less likely that private economic players can coordinate their actions to achieve outcomes of maximum benefit.

In economic theory, there’s such a thing as “coordination failure,” just as existence of “market failure” warrants government intervention to correct it. Where coordination failure exists, expectations become self-fulfilling and problems can be unnecessarily magnified. For instance, if a large firm believes that a recession is forthcoming and lays off its workers in anticipation of it, other firms could lose demand for their products because of those layoffs, and respond by firing their own workers. The snowballing effect thus indeed induces a recession.

We’ve all too often heard of cases when farmers were assisted to raise production without ensuring the markets for the crop, leading to oversupply and price drops that ultimately render it useless to even harvest the crop.

Preventing such coordination failure is an important role of government in the economy. But when government itself cannot properly coordinate actions among its various entities, then we have a real problem. The role of “oversight agencies” like the National Economic and Development Authority (Neda) is to foster such coordination, and the first step is communication. As past head of Neda, I used to see it as our task to “bump heads together” and get various government entities to talk to one another, in a government where every department is focused on a specific sector or constituency. On top of that, turf mentality coupled with an isolationist “silo culture” permeates much of the bureaucracy, posing formidable obstacles to coordinated or collaborative work.

One particular illustration of the problem was the impasse that delayed construction of both the Manila-Marikina MRT 2 commuter railway line and the C-5 circumferential road, where the latter crosses Aurora Boulevard in Katipunan in Quezon City, in the 1990s. Neither the Department of Public Works and Highways (DPWH), which was building the C-5 extension, nor the then Department of Transportation and Communication (DOTC), which was implementing the MRT 2 project, wanted their respective projects to go above the other as a flyover, as it would be much more costly than staying at ground level. Neda had to intervene to settle the dispute and get both projects to move forward after months of standstill.

I have since pointed to that incident as a prime example of why the transportation function of the then DOTC (now separate as the Department of Transportation) ought to be merged into the DPWH. Similar mergers among other departments with overlapping functions have long been recommended. But in the same way that provinces continue to be split up by politicians wishing to carve out their own “kingdoms,” movement appears to be in the opposite direction.

A reader wrote in, suggesting that lack of “extreme ownership” lies at the root of uncoordinated action, observing how in such instances, “nobody owns the program and idea, ensuring it is executed, done and finished within a defined time.” Without such clear accountability, no one takes responsibility for attaining objectives, and failures lead to finger-pointing, with no one owning up to it.

Still another reader volunteered: “It starts with appointing individuals who are technically deficient on the challenges of their jobs. How will they coordinate when they do not know its importance, or are just full of themselves?”

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