A President’s legacy

The Philippines is back on the world stage. How? There’s no question in my mind that President Aquino’s fine character, honesty and decency had much to do with it. People want to support such a leader. But the fundamental reforms that have brought us to this spot weren’t by him. He benefited from them, and some he has taken forward. He built on a good foundation.

We live today in a country that may, just may, be getting its act together. GDP growth has been strong, and is sustainable. We’ve gone from Ferdinand Marcos’ 3.5 percent average to Cory Aquino’s 4.1 percent, Fidel Ramos’ 3.8 percent, Joseph Estrada’s wilting 2.7 percent, and Gloria Arroyo’s disruptive 4.7 percentage decade to GDPs in the close-to-6-percent bracket. Pretty good. But it’s not a productive economy where investing in nonproductive real estate is more attractive and profitable than job-creating manufacturing. That’s not a healthy economy.

The major reformer was Ramos: He broke the PLDT monopoly and gave us the exciting telco world we live in today. Without the competition, which a deregulated market brought, we’d still be on land lines, and waiting for a year just to have one installed (no disrespect to today’s PLDT; it’s a totally different management). Aside from telecommunications, Ramos deregulated oil, interisland shipping, water, and banking—all leading to dramatic, positive change to society. He also privatized power generation, transmission and distribution.

He made privatization a household word, resulting in higher nontax revenues for the government. Then there’s the privatization of water distribution, considered among the most successful public-private partnership programs in the country and now being screwed up by the MWSS.

The construction of Metro Rail Transit Line 3 began under his administration; it was the subsequent leaderships that failed to maintain it, with, of late, disastrous results.

Under Ramos, trade liberalization was fulfilled by the Philippines’ membership in the Asia-Pacific Economic Cooperation and the General Agreement on Tariffs and Trade.

The Mining Act of 1995 was also enacted under Ramos. His administration realized the huge potential of the industry and paved the way for the entry of job- and revenue-generating mining investments. The sector is now at a standstill.

Under Estrada, the piggy bank was robbed. Then came Arroyo, whose education as an economist she used to get the country’s fiscal house in order. Whatever may be said of her—and there’s a lot—the financial system and conditions were strongly set. Credit must go also, of course, to Bangko Sentral Governor Amando Tetangco and Finance Secretaries Cesar Purisima and Gary Teves. These three brought stability to the system and put it on the road to recovery after the devastating Asian financial crisis of 1997.

Arroyo, together with Teves, also implemented the “tough to sell” increase of VAT from 10 percent to 12 percent. Sen. Ralph Recto lost an election because of this courageous decision. The Philippines’ credit rating was improved from negative to stable by the three international credit rating agencies.

Then there’s the implementation of a roll-on/roll-off system for domestic shipping, which greatly improved the movement of goods and people. But it is a system under threat from ships that are, quite simply, dangerous. Sulpicio Lines, now called Philippine Span Asia Carrier Corp., has killed more than 5,000 passengers, with negligible penalty. The owners are not in jail.

It was also the Arroyo administration that launched the CCT (conditional cash transfer) program. But it still needs a clear exit strategy. People can’t live on handouts forever. There’s been no effort to address this.

President Aquino inherited the gains of these measures, as well as the foundations on which growth could be built. The credit rating agencies’ moving the Philippines to investment grade is an example of this. He has taken them forward mostly well, albeit too slowly, and in some cases, not well at all. The MRT3 disaster is this administration’s making, as is the mess at the Land Transportation Office. And the debilitating and hugely costly standstill in mining—and traffic.

The PPP program was started by Cory Aquino but has finally begun to be accelerated under this administration. One could have added the Bangsamoro Basic Law, but there’s a question as to whether it’s sufficiently encompassing to really bring peace. And after the Mamasapano massacre, there’s no chance it will now get through Congress. So it’s a failure.

As to reforms initiated by Mr. Aquino, the Reproductive Health Law probably tops the list. He fought for it, and got it—something previous presidents didn’t have the courage to do. The Sin Tax Reform Act brings an additional P100 billion to government coffers, which is set aside for public health programs and assistance to tobacco farmers. The K-to-12 expanded basic education program is another reform, but the transition was not well thought out. Nonetheless, it’s an important development.

He also threw into jail some suspect major corrupters, but only from the opposition. His protection of friends is very evident. Nonetheless, there has been some success in attacking corruption, as the ranking by Transparency International indicates.

The Aquino administration also got rid of the corruption-prone system of reenacting budgets and introduced a zero-based budgeting scheme.

The country is in the best shape it’s been since Ramos left, and for this Mr. Aquino must be given some credit. He has brought stability (falling apart as Arroyo left) and improvements in honesty as well as a number of other areas. But too many reforms were not done. For that we need a focused and action-oriented leader. Let’s choose wisely in 2016.

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E-mail: [email protected]. Read my previous columns: www.wallacebusinessforum.com.