Regulation vs development

Put regulatory and developmental functions together in the same government entity, and chances are it will focus on the former and neglect the latter. This has been our experience over decades with the Philippine government. The heavy hand of government has held back our economy and led it to fall further and further behind since the 1960s when we were the envy of our neighbors and second only to Japan in the level of economic development. Worse, government often directly competes with the private sector in things the latter can do much better.

Nowhere is this observation starker than in our perennially troubled agriculture sector. I wrote recently about how National Scientist Dr. Emil Q. Javier noted that our best performers in agriculture are those where government largely keeps its hands off (like export crops pineapple, bananas, and mangoes). But the most backward and problematic—and where the rural poor mostly are—are where government involvement is heaviest, namely rice, coconut, and sugar. It’s hard not to conclude that government has been more a hindrance than a help to those who could otherwise drive economic activity as they produce goods and services and create jobs and livelihoods that uplift people’s lives.

Agencies that combine developmental and regulatory functions are all over our government. The Department of Agriculture (DA) is full of them: the Bureau of Plant Industry, Bureau of Animal Industry, Bureau of Fisheries and Aquatic Resources, National Food Authority, Philippine Coconut Authority, Sugar Regulatory Administration, Philippine Fiber Industry Development Authority, and more. Beyond DA, we have the Cooperatives Development Authority under the Department of Trade and Industry, the Laguna Lake Development Authority under the Department of Environment and Natural Resources, Philippine Ports Authority and Maritime Industry Authority under the Department of Transportation, Local Water Utilities Administration, Commission on Higher Education, Technical Education and Skills Development Authority, and many more.

It has been a recurring recommendation for many years to consolidate into one entity the regulatory functions for various commodities scattered across bureaus and agencies within the DA, so they could focus on their developmental functions. I had a direct role in providing that advice in 2010, as head of a team engaged by the World Bank to help the DA plan its future directions. There are two reasons for the recommendation, and they apply to all other entities outside of DA that have both developmental and regulatory roles. First, there’s an inherent contradiction between the two, because regulation (which involves restraint) and development work (which entails promotion) run at odds with one another. Agencies that do both face an identity crisis, even conflict of interest, trying to reconcile and balance the two. To this date, the advice remains largely unheeded.

Second, and as a result of the first, there’s a natural tendency for agencies and their personnel to gravitate toward regulatory functions, to the neglect of their developmental role that is key to fostering economic growth. The reasons may be either pecuniary at worst, or psychological at best. On one hand, bureaucrats may be attracted by the opportunities for corruption that come with any regulatory setup that endows them with authority and discretion. But even if honest, the bureaucrats may simply be “power tripping,” or manifesting the seemingly all-too-common bureaucratic mindset that nothing should come easy (and the more requirements to comply with, the better they think they are doing their jobs).

The Anti-Red Tape Authority that Republic Act No. 11032 or the Ease of Doing Business and Efficient Government Service Delivery Act of 2018 created must champion this aim of separating regulatory and developmental functions wherever they come together. As it does, it must reinvigorate the former National Competitiveness Council’s “Project Repeal” that pursued the mission of reviewing and repealing outdated rules in laws and issuances that are irrelevant, burdensome, duplicating, or overlapping across agencies—and there remain many.

Canada, the United Kingdom, and Australia are worthy models in the war against red tape. Canada legislated a cap on regulation in 2015 through a Red Tape Reduction Act, requiring the federal government to eliminate at least one regulation for every new one introduced. The UK more aggressively requires “one in, three out,” repealing three regulations for every new one introduced. Australia declares a “Repeal Day” twice a year when government announces dozens of repealed regulations across various ministries and offices, which are moved to outdo one another on how many they can scrap. There must be hundreds in our own government. In the end, the less government needlessly pokes its nose into everyone’s business, the stronger and better our economy will be.

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