Business World, 15 May 2013


The premise that the outgoing Senate has been the overriding constraint to economic growth, and thus has to be replaced by one more friendly to Malacañang, is dead wrong. Most of the binding constraints to strong, sustained and inclusive growth — poor infrastructure, costly, unreliable power supply, government underspending and ineffectiveness to start and complete projects, policy inconsistency, and the high costs of doing business, and so on — do not require legislation. All that’s needed is policy decisiveness and executive competence.

For instance, international financial institutions, such as the International Monetary Fund, World Bank and Asian Development Bank, rating agencies, think tanks and economists know that the Philippine government has to reform its tax system in order to generate more resources to finance its rising expenditure needs. But the failure to reform the tax system was self-inflicted. “No new taxes,” was Mr. Aquino’s mantra at the start of his term; as a result, his economic men were stymied.

Also, crucial reforms did not push through because of lack of consensus and direction. For example, the rationalization of fiscal incentives, an important reform measure that expand government revenues and level the playing field, could have passed had the President and his economic men pushed it. The tug-of-war between the Trade and Industry secretary and the Finance secretary resulted in a weak version of the bill that never got acted upon by Congress.

The problem is not with Congress, it is with the Executive Department. The annual budgets are always approved on time. Yet the Executive has failed to implement the budget, as approved by Congress, on time.

The ball, so to speak, is in Malacañang’s court.

The most important policy actions needed to make the Philippines a more attractive place for foreign and domestic investors do not need legislation. The solution to the costly, inadequate and unreliable power supply does not need legislation. Yet, an affordable, reliable power supply is a significant requirement for agriculture, manufacturing, tourism and other economic sectors. Without it, strong, sustainable and inclusive growth will be constrained.

The solution to the high cost of doing business in the Philippines does not require legislation. It only requires more effective government, policy consistency, and simple and predictable rules.

The solution to the crumbling public infrastructure are: first, higher budget allocation and second, speedier implementation of the President’s Public-Private Partnership (PPP) projects. On the first, the President has to propose a bigger budget (in the neighborhood of 5% of gross domestic product) than what it has proposed thus far. Remember: Congress may decrease, but not increase, the budget as proposed by the President.

On the second, Congress has absolutely nothing to do with the stalled PPP program. Its snail-paced implementation is totally the Executive Department’s fault.

So, why does Malacañang want to control the Senate? Clearly, its political, not economic. It wants Senate control in preparation for the 2016 elections.

The composition of the incoming Senate is as unpredictable as the outgoing one. There is no clear delineation between those who are for the administration and those who are against it. Blame that to the lack of a real party system in the country.

For example, there are candidates from both President Aquino’s team and the United Nationalist Alliance who supported the RH Bill. But there are candidates from both sides who opposed the sin taxes. The policy question is who among the senators will support the Aquino reform agenda, assuming one is forthcoming, and for how long?

There’s no easy answer, because there are different groups of senators, large and small, but none dominant, and each senator thinks of himself as a separate entity. After having gone through the rigors of a demanding nationwide campaign, each senator, rightly or wrongly, feels that he is presidential, or least, vice-presidential material.

Here’s the likely groupings. First, Enrile’s seven-member bloc: Juan Ponce Enrile (PMP), Jinggoy Estrada (PMP), Gringo Honasan (UNA), Vicente Sotto III(NPC), Ramon Revilla Jr. (Lakas-Kampi), J. V. Ejercito (UNA) and Nancy Binay (UNA).

Second, the five-member Nacionalista: Alan Cayetano, Pia Cayetano, Ferdinand Marcos, Jr., Antonio Trillanes and Cynthia Villar.

Third, is the four-member Liberal Party: Frank Drilon, Teofisto Guingona III, Ralph Recto, and the only LP who was elected in the 2013 elections, Bam Aquino. Although an independent, closely supporting the President’s party is Senator Sergio Osmena III.

The rest are two independents (Grace Poe and Francis Escudero) and five coming from different political groups: Miriam Defensor Santiago (People’s Reform Party), Lito Lapid (Lakas-Kampi), Loren Legarda (NPC), Sonny Angara (LDP), and Aquilino Pimentel III (PDP-Laban).

President Aquino’s team was built on on the strength of separate alliances LP had forged with NP and NPC. The collaboration might continue for a short while, say six months, and before the presidential political season starts. The LP and the NP had an acrimonious past, and they are likely to field their own candidates for the 2016 presidential elections.

By 2014 the LP-NP alliance might disintegrate. Two years is a short time for preparing for a presidential run. UNA has been preparing for it since last year.

This suggests that the window of opportunity for Mr. Aquino to push for major policy reforms that need legislation is at most six months. The first half of Mr. Aquino’s term is over. During the second half of his term, he should get serious in streamlining government operations, fixing the crumbling public infrastructure, building new power capacities, and seeing to it that major PPP projects take off the ground.

Predictably, many government programs and projects that Mr. Aquino started will not be completed during his term. But that, sadly, is the costs of procrastination.

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