Business World, 18 December 2012


By a decisive vote, the House of Representatives and the Senate approved, separately, on Monday evening the long-awaited Reproductive Health (RH) bill. The two versions of the bill will then go to the Third Chamber where their disagreeing provisions will be ironed out. I expect the reconciliation process to be short and sweet. And the two chambers might be ready to vote, as early as Wednesday, on the reconciled version of the RH bill.

As in most landmark legislation, timing was crucial. The RH bill has to be passed before Congress goes on a Christmas break. The failure to do so would have fatally derailed the bill’s passage into law. The year 2013 is an election year, and politicians who are wary of displeasing the Catholic hierarchy, would have stalled the passage of the bill for the nth time.

But then came the lucky break. Finally, President Aquino mustered enough courage to use his political capital. He assembled his political allies in the House and gave them clear instructions on what to do with the RH bill. And after a close vote in the House, he certified the bill as urgent, hence cutting the mandatory three-day period between the second and third readings.

Once the RH bill reaches the presidential desk, there’s no doubt that Mr. Aquino will sign it into law. And after it is signed into law, what then?

Managing expectations

First, expectations have to be managed. The RH law is not a silver bullet that can slay everything that ails Philippine society. While I expect that it will be game changer, it’s impact won’t be instant. It’s short-term impact maybe imperceptible, but it has the potential of improving sharply the country’s economic and social future.

Second, this administration and the succeeding ones should commit to adequately fund and implement vigorously the RH law. The program will costs the government a few billion pesos annually. But that money will be well spent. Higher returns can be expected in terms of reduced incidence of deaths of children and mothers, an improved life for those who have prevented unwanted pregnancies, and a better future for all.

The alternative, meaning the failure to pass the RH bill, is economically and socially costlier. It means deepening poverty, more serious unemployment, and higher incidence of hunger for many Filipinos.

Close to two million Filipinos are born every year. That’s horrible. Since more children are born from poor families than rich ones, this creates a cycle of deepening poverty. Tip-toeing around the high population growth issue, debating about things that don’t matter much in the overall scheme of things, is like rearranging chairs on the deck of the Titanic.

Two million people is more than the population of small countries. Yet, some insist that high population is good; for them, it means a bigger market, higher consumer spending and higher growth. What they don’t see is the downside of a rising population: a rising army of uneducated, sickly and jobless people which could mean endless years of personal suffering and social tension.

The failure to pass the RH bill means more public funds will go to social overhead (education, health care, and cash grants) and less for public capital formation. It could also mean unsustainable budget deficits in the future.

As a nation, the Philippines has been under-investing in public infrastructure. With an increasing part of the budget is going to investment in human capital and poverty alleviation, very little is left for public investment.

Given its past neglect, inadequate public infrastructure has always been cited by foreign investors as one of the country’s biggest turn-offs. And in order to catch up with its ASEAN-5 neighbors, the Philippines has to allocate — and complete — about 5% of its gross domestic product (GDP) for public infrastructure. That’s much less than what China and its other Asian neighbors spend for public infrastructure during their take-off years.

Public infrastructure spending in recent years was dismal. It was 1.49% of GDP in 2006, 1.92% in 2007, 1.90% in 2008, 2.24% in 2009, and 1.83% in 2010. In 2011, Mr. Aquino’s first full year in office, it edged down further to a record low of 1.49%.

How can the Philippine economy grow at 7% to 8% steadily in the next decade, with such a feeble investment in public infrastructure?

I know that the government’s failure to invest in “hard infrastructure” projects which would increase the capacity of the economy goes beyond lack of resources. But precisely, scarce budget resources may be freed up for public infrastructure if only the government has to spend less for education, and health and conditional cash transfers.

I know that in addition to poor budget prioritization, there is a problem with Executive Department’s poor ‘absorptive capacity’ (a.k.a. incompetence). I know that public-private partnership (PPP) initiatives have not moved because of deeper and more complicated problems, such as restrictive constitutional provisions which discourage foreign direct investments, lack of credibility, policy inconsistency, and failure to honor contracts.

Opportunity for catching up

The opportunity for catching up is now, while Europe, the US and the rest of the world are busy addressing their own internal economic woes and political uncertainty. With the cost of borrowing historically low, financing of an ambitious catch-up plan should not be a problem. The Philippine economy awash with dollars and pesos.

The passage of the much awaited RH bill is great, but it is only the beginning. There are other serious game-changing reforms, such as, for example, the freedom of information, fundamental tax reform, electoral reforms, budget impoundment and control, and amendments of the 1987 Constitution that require close executive-legislative coordination and cooperation.

On a positive note, the passage of the RH bill provides a glimmer of hope that the people’s representatives can be called upon to make the right decisions on issues than affect this country’s future. The ball, right now, is in the Executive Department’s court.