As I am on a brief vacation, I take the liberty of using my column space to present a work of Professor Hal Hill, who is H.W. Arndt Professor of Southeast Asian Economics, Australian National University. He reviewed my book: Cesar Virata. Life and Times through Four Decades of Philippine Economic History (University of the Philippines Press, 2014).

Instead of the abridged version of the Hal Hill review as published in the column, the full review as it appeared in APEL (Asia Pacific Economic Literature, May, 2016) is reprinted below.

This 850-page intellectual blockbuster is highly unusual in several respects. The author is the distinguished living father of the Philippine economics profession. The subject, Cesar Virata, is one of the country’s most distinguished post-independence public officials. The author and subject, who are both fortunately still with us, have been highly influential figures in Philippine public life for over a half a century. They are close personal friends and their lives have been intertwined. They entered the Philippine cabinet at about the same time, 1970 in the case of Sicat, 1968 in the case of Virata.

Until around 1980, this was a hopeful period in the Philippines. In that cold war era, increasingly dominated by the Vietnam War, the country appeared to be the only robust democracy in its hemisphere apart from Japan. There were periodic macroeconomic crises, but the country’s economic progress appeared to be more or less at par with the rest of Southeast Asia. The region’s major international development agency, the Asian Development Bank, established its headquarters in Manila in 1965. Unusually in the country’s history, in 1969 Ferdinand Marcos had won a second presidential term, and he appointed some of the country’s best minds – in particular the author and subject of this book – to his cabinet. During the 1970s, the declaration of Martial Law, the increasingly corrupt and authoritarian nature of the Marcos presidency and the slowing economy all took their toll on the regime’s international reputation. But much as the so-called ‘Berkeley Mafia’ enhanced President Soeharto’s credibility, so too did these two key cabinet officials add to Marcos’s respectability, and to the sense that economic management was in good hands.

Sicat left the Marcos cabinet in 1981. However, Virata remained right through until the end, as finance minister and later as prime minister. This latter piece of history also provides an additional motivation for the biography. In much of the influential media and the political establishment, Virata was lambasted as a ‘Marcos crony’ and worse. For several years he was practically persona non grata, and for a period it appeared possible that he would be the subject of corruption investigations. In fact, Virata – like his biographer – was a man of impeccable personal integrity, and there was never a whiff of scandal in his public life. One of Sicat’s motivations in writing the book is, indirectly, to provide an account of the life and times of his friend who, he believes, has not received the public recognition he deserves.

In fact, Sicat is frank in explaining why he wrote the book. First he wanted to set the record straight on the Marcos era, the narratives about which have been dominated by ‘… those who viewed the period with disdain and loathing’. Second, he has a love of biography, and ‘Cesar Virata’s life was the perfect fit … as a great personage of the time, even though his achievements were dwarfed by his own timidity.’ (p. 729)

The book is organized along more or less chronological lines. Cesar Virata was born into a prominent though not wealthy family. His father was an early US-trained PhD, while his mother also came from a well-known family. Virata performed outstandingly during his school years, leading to a scholarship to study business at the Wharton School at the age of just 20. Returning home, he successfully combined academic and business careers, the former as dean of the country’s leading business school, at the University of the Philippines, the latter through his work with the country’s top business consulting firm SGV. As a prominent and well-regarded citizen, a career in government beckoned. In 1968, at the age of just 37, he entered the cabinet with his appointment as chairman of the newly created Board of Investments (BOI).

Virata entered a policy environment constrained by economic nationalism and patronage, complicated further by the now failing two decades of comprehensive import substitution. It is not in any way a criticism to state that Virata did not have the Sicat’s comprehensive intellectual framework and toolkit, the result of the latter’s MIT PhD. But he was a highly effective ‘doer’, and he sought to regularize and simplify the business environment. His tenure at the BOI was relatively brief, and he was unable to overturn the restrictive (maximum 40%) foreign ownership provisions in the constitution. But he was widely respected in both the political and business communities for his integrity and effective leadership.

Promotion came rapidly. In 1970 Virata was appointed to arguably the toughest position in government, as finance secretary (minister). It occurred in the wake of a balance of payments crisis, not unrelated to the presidential election of the previous year, and the forced float of the peso. He inherited a department weak in technical expertise, a weakness he was able to remedy in his long tenure in that position, the longest in the country’s history. He also embarked on a major cleanup of the Bureaus of Internal Revenues and Customs, dismissing some 5,000 officials over the years, including some politically well-connected staff. There were constant battles with corrupt officials, and Virata could not of course be expected to win all of them.

The political landscape changed dramatically with the declaration of martial law in September 1972. However, notwithstanding the erosion of democracy, Sicat’s analysis reflects the guarded optimism of the times. More professionals had been brought into government, the fractious dealings with congress disappeared, and Marcos appeared to be reformed oriented. Indeed, in the first five or so years, as Virata led the government’s economic team, important reforms were introduced.

However, by the late 1970s the optimism began to fade. The borrowing strategies in the wake of the first oil shock posed new macroeconomic risks. The economy was slowing. Political opposition was mounting. The power of the president’s wife and business cronies was rising. Marcos himself is portrayed by then as an almost hapless figure, attempting to placate his wife, Imelda, especially as salacious details of his private life were publicized. Imelda Marcos began to enter politics centre stage, including through the newly created posts of governor of Metro Manila, minister of Human Settlements, and much else. Thus began a complex and protracted tug of war between Virata and Imelda Marcos, which Ferdinand Marcos attempted to mediate with varying degrees of success. Her pet projects at home (many contentious, such as the ‘University of Life’), many off-budget and therefore out of reach of formal cabinet processes, together with her foreign policy forays such as the Tripoli agreement seeking to end the Mindanao conflict and her notorious international shopping expeditions increasingly embarrassed the president, just at a time that his health was failing.

With the relaxation of martial law in 1981, a prime minister was to be appointed. Unexpectedly perhaps, the post went to Virata, in addition to his finance responsibilities. As the regime faltered, Sicat (who had by then left the cabinet) observes that ‘… to the outside world, Virata was a major asset of the Marcos government … [who] inspired confidence in the management of the economy’ (p. 440). However, the economic and political fortunes of the administration continued to slide. With assassination of Benigno Aquino (the father of the current president) in August 1983, a full-blown economic and political crisis developed, compounded by rising debt at home, declining terms of trade, rising international interest rates and financial collapses.

As the administration began to implode, Virata offered to resign, but it was not accepted. Instead, he was forced to introduce a program of fiscal austerity, for which ironically – given that he had earlier been trying to curb the profligacy that caused the crisis – he received further domestic opprobrium. There was also a desperate search for funds from friends abroad in order to counteract the mounting capital flight, and inevitably the IMF entered centre stage. In the end, Marcos’s fall from power in February 1986 was sudden and bloodless. Virata could have deserted him in the last days, as the others did. But, ever the loyal public servant, he stayed right through to the end. In the wake of Marcos’s departure, Virata was dismissed from office and he was regarded with hostility in some quarters. In the tense days that followed, he even feared an assassination. There was petty retribution, his pension entitlements were blocked and his international travel was for a period restricted. His financial circumstances were investigated in detail, but of course nothing was found. As Sicat observes, Virata ‘… reentered private life poorer than when he left it.’ (p.674) He remained in the country, spending several years in the wilderness. But he was still a relatively youthful 56 years on leaving government, and he gradually developed a new life of international advisory and domestic business work.

Towards the end of the volume, Sicat poses the obvious question: ‘Why did Cesar Virata choose to stay with Marcos until almost the very end?’ (p. 603) The answer is surprisingly straightforward. Personal enrichment and enjoyment of the trappings of high public office were not the motives. He was apolitical, but he had a sense of public duty, a belief in the early years that reform was possible, while in the later years it was all about crisis management. As Sicat observes, ‘In the end, he decided that it would be best for him to continue to help manage the affairs of state rather than watch them fall apart.’ (p.675) Standing back, should Virata have followed Sicat out of the cabinet earlier, when the administration was veering towards crisis? Probably yes. Could Virata have done more to curb the more egregious excesses of Marcos’s wife and cronies? Perhaps. Yet it is easy to be wise with the benefit of hindsight, and in any case the counterfactuals are inherently unknowable. Remaining Inside government, there is always at least the possibility of damage limitation.

I would encourage the serious readers not to be deterred by the 850 pages but to stay the course in this immensely readable volume. Professor Sicat writes very clearly and he has done a remarkable job in sifting through a daunting amount of material. We gain a deeper analytical understanding of the reasons for the country’s troubled economic performance during the 1970s and 1980s, including the difficulties of transitioning to a more open trade and investment regime, the unproductive and risky borrowing strategy at a time when there was international pressure to recycle the petro dollars, the political economy of cronyism and patronage, and the adventurous macroeconomic policy settings. But most of all, we gain fascinating insights into the inner workings of Philippine economic policy and political life, through the prisms of arguably the country’s two most distinguished economists and civil servants of the past half-century. This is a rare treat, and this reviewer is unaware of anything comparable for any other major Asian country.