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No Free Lunch

The problem with shotguns

After three months of immobilizing the economy to flatten the COVID-19 curve, we have nothing to show for it but a battered economy and a pandemic curve that’s anything but flat.

Perhaps thinking that lockdown was enough, crucial testing and tracing received less attention than our more successful neighbors gave.

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A reader described it as a shotgun solution that harmed too many people, when we could have used more focused rifle approaches like other countries used with far better results, and without choking their economies the way we did.

The problem with shotgun solutions is that they make governments complacent and lazy, as it’s far easier than figuring out and pursuing creative and effective rifle-focused cures. My favorite illustration had been our decades-old approach to “helping” our 2 million rice farmers, in an effort to achieve full rice self-sufficiency.

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While that’s a worthy goal, it’s how we tried to achieve it that was all wrong—through a policy that hurt 100 million consumers in the process. Many thought the way to do it was to block imports and shield domestic producers from competition. What it did was to allow domestic rice prices to rise steadily over time until it reached 2-3 times what our neighbors pay for the same staple.

We could have given focused and effective help for our rice farmers to match the productivity of their counterparts in our neighbors, what with all the superior agricultural scientists we have, who actually taught many of their scientists. But government chose to allow them to slide into inefficiency, low productivity, and high costs, the effect of tightly controlling imports that only helped farmers by raising their prices.

Thus, we got by without providing them enough credit financing, and other needed support like irrigation, farm-to-market roads, mechanization, and postharvest facilities. Thankfully, we finally came to our senses and put the deadly shotgun aside, forcing our agriculture authorities to buckle down on rifle fixes, unburdening all of us consumers in the process.

Another example has been our tax breaks and other fiscal incentives aimed to attract investments. Over the years, we gave them out rather liberally, ultimately at great cost to taxpayers’ pockets. We came up with an Investment Priorities Plan in the name of selectivity, but for many years, that list was faulted for being a virtual catch-all. UP economist Dr. Renato Reside has tracked through the years how these fiscal incentives were for many firms redundant and little more than wasted gifts that never really made a difference.

Meanwhile, government got complacent in fixing the real things that made investors elusive—poor infrastructure, bad governance, and bad taxation. The pending CREATE tax reform package will change that, with more regionally competitive tax rates, and the capability to grant more flexible, rifle-focused incentives. It has passed the House, and our senators will hopefully pass it soon as well.

Still another shotgun has to do with the decades-old cry that it’s cheaper to ship corn from Bangkok to Manila than from Mindanao to Manila, for lack of competition.

The law on cabotage that prohibits foreign ships from moving cargo within the country hurts domestic producers, especially farmers, as a feed miller in Luzon, for example, would rather bring in corn from Thailand rather than source it from Mindanao where there’s lots of it.

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Filipino consumers are also hurt by higher commodity prices that embody the higher costs incurred in moving them across our islands.

Cabotage is yet another shotgun policy that effectively sacrifices the interests of the wider majority of Filipinos as it tries to protect a few local shippers—even as there could be more rifle-focused ways to support the latter.

The amendment to the 1936-vintage Public Service Act would change that, by delisting domestic shipping as a public utility where the Constitution bars foreign competition. That’s another shotgun due to go soon.

Testing and tracing, focused support to our farmers and shippers, flexible, targeted incentives, and more—it’s time government dusted off its other rifles. They get far better results.

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