Presidential economic legacies

WITH ONLY eight months left of his presidency, one may begin assessing President Aquino’s most critical legacies in terms of reforms that can be aptly termed “game changers.” I will focus here only on economic legacies and while at it, we might as well do the same with his predecessors, starting from his mother, President Cory Aquino. (I will not bother with her infamous predecessor, who left our economy pillaged and in a huge mess, anyway; as for the rest, I was either too young to have direct recall, or not yet born.)

President Cory is credited with having embarked on critical (though then unpopular) game-changing economic reforms that set the stage for our economy’s current state: a “breakout” economy predicted by outside analysts to become a significant force in the world economy by the middle of this century. She introduced the value-added tax, and started the process of instilling inherent competitiveness in our domestic producers by opening the economy to greater external competition. Notwithstanding her 1987 Constitution now seen as overly protective and inward looking, she in fact made a dramatic departure from the cronyism that marked the Marcos rule, when favored big business interests swayed official policy in their favor to dominate and shield their markets.

Cory Aquino liberalized trade by removing most quantitative trade restraints and replaced them with more transparent import tariffs. With Executive Order No. 470, she dramatically simplified and lowered our import duties to only four levels: 3, 10, 20 and 30 percent, replacing a highly unwieldy and fraud-prone tariff structure. It was also under her watch that Congress passed the landmark Foreign Investments Act (FIA) of 1991, opening all activities to foreign investments other than those in a “negative list” reserved for Filipino control, including those restricted by the Constitution. It was a dramatic shift that ushered a rapid influx of foreign investments, especially during the subsequent Ramos administration. It is to these path-breaking Cory Aquino reforms that we owe much of our economy’s resilience today.

President Fidel V. Ramos was the real reformer, a view stressed by fellow Inquirer columnist Peter Wallace in a report “Credit Where Credit Is Due,” citing how he truly changed the economic environment with a good number of game-changing reforms none of his successors could match.

Wallace notes how “he liberalized the telecoms and banking industries; deregulated oil; opened up and decartelized interisland shipping; and privatized water, power generation, transmission and distribution.” Among Ramos’ earliest game changers whose repercussions continue to be widely enjoyed today were the removal of foreign exchange controls and breaking the telecoms monopoly then held by PLDT. That was when Singapore President Lee Kuan Yew had half-jokingly described the Philippines as a country where “95 percent of the population has no telephone, while the remaining 5 percent are waiting for a dial tone.” It was also a time when for most, 24-hour water was a dream, and domestic air travel was a luxury.

Ramos moved us toward open skies, starting with domestic air transport where the current dynamism we all see traces to his move to open competition therein. He intensified trade liberalization with further tariff phasedowns, and joined the Asean Free Trade Agreement, the Asia-Pacific Economic Cooperation, and the World Trade Organization. He opened the tightly held banking sector to greater dynamism by allowing the entry of more foreign banks and restructuring the central bank. And he built major infrastructure facilities like the Edsa MRT, C-5, Mindanao arterial road system, and major multipurpose irrigation systems around the country, among many others.

As for Ramos’ successor, Wallace holds that “President Estrada did nothing.” That may be a bit too harsh, as Estrada’s two-year rule did yield a number of good moves, though perhaps not of a game-changing magnitude, such as the rationalization of government credit programs. Dr. William Dar, Estrada’s first agriculture secretary, also cites that we achieved the fastest average growth in that sector during Estrada’s brief leadership.

Of President Gloria Arroyo’s 10-year term, Wallace notes: “[S]he only increased VAT to 12 percent, introduced Roll-On, Roll-Off (RoRo) to domestic shipping, and launched the conditional cash transfer (CCT) program.” Much of her presidency, especially the latter part, was marked by a struggle for political legitimacy, which drew her focus away from major economic reform, and led her to populist moves that economists even considered to be backward steps.

For his part, incumbent President Aquino has reformed the Sin Tax Law, and enacted the Philippine Competition Act, first proposed under his mother’s presidency 27 years ago. While not economic reforms per se, the laws on K-to-12 and reproductive health have profound implications for the economy. All of us hope that we need not write off his last eight months to yield any further major reforms. But election campaign season is already upon us, three months too early. Meanwhile, further game-changing legacies could include the Customs Modernization and Tariff Act (hopefully coming soon); laws on a Department of Information and Communication Technology, National Land Use, and Freedom of Information; and the easing up of constitutional restrictions on foreign investments.

Perhaps P-Noy and the 16th Congress can yet make a legacy out of defying the widely held view that a “lame duck” government can no longer come up with more game-changing reforms in its final months.

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