Shortcomings and gaps: Philippine economy and Aquino presidency, 2010-2016

After presenting the macroeconomic aspects of the economy during the Aquino years, I will now focus on the shortcomings and gaps.

This leads us to a closer look at the quality and depth of the development process, to the exposition of problems lurking ahead.

Not ‘inclusive’ enough. In the usual analysis of the main problems of the Philippine economy, the following are often cited as the most pressing: lack of employment opportunities, the low levels of income and productivity, and the reduction of poverty.

As people participate and benefit from economic growth, the more they advance out of poverty. This is essentially what “inclusive” growth means.

Though the Aquino administration has made inclusive growth a major goal, the fact remains it is an elusive goal because some existing policy problems remain unresolved.

A most common criticism often cited is the lag the country suffers in attracting foreign direct investments. Large flows of foreign private capital that have caused rapid prosperity elsewhere have eluded the country.

The reason behind this is an inherent restraint that is imbedded in foreign investment policy.

Restrictive provisions in foreign investment attraction. In fact, President Aquino has been the stumbling block toward amending the restrictive economic provisions of the Constitution.

Despite the efforts in the Congress and Senate to deal with this policy problem, he has thrown cold water on such a move. Moreover, his administration has widened the negative list that excludes foreign direct investment participation in the economy.

Recent developments (such as rising wage costs in China) tend to help change the flow of foreign direct investments into the country. The factors that determine these flows emanate from outside conditions, not active policies pursued at home.

In addition, the government needs to respond positively to issues often raised by various private chambers of commerce to handle outstanding investment concerns. A proper response requires consistency in the treatment of contracts and more speed in implementation of investment decisions.

Slow implementation of investment projects. The highly touted public-private partnership (PPP) projects had taken too long to come off the pipeline, with much delay on the finalization of contracts and their implementation.

Despite high fanfare, few infrastructure construction under the PPP have been realized. The result is that none of the major PPP projects are likely to be completed by the end of the Aquino administration.

It is also noted that the contracting parties for most of the PPPs are confined to a very few of big, local companies. There is minimal participation of foreign direct investment in many PPPs.

In general, there is desirability in bringing in foreign capital participation, in part to attract more risk capital being put in this area and to access foreign financing of these investments.

The long delays in approval of PPP investment projects pipeline demonstrates the government’s lack of focus and sense of emergency in the building public infrastructure.

The Philippine economy requires an investment-driven growth. But what the Aquino government has achieved is a consumption-led growth.

Need: an investment-led economic growth. A consumption-driven process is most helpful in restoring output demand when there is a large excess capacity in the economy. That is a characteristic of advanced economies.

In the Philippines, the stark need for development demands an increase in public infrastructure investments as a complement to other investment needs within the broader productive economy.

In order to raise the capacity to produce food and to broaden the economy’s industrial reach, a wide range of investment undertakings in both the public sector and the private economy is required.

The continuing bounty of OFW remittances and the presence of strong industries that continue to earn export revenues for the country (bounties inherited from past administrations) have only encouraged the Aquino administration to adopt a cavalier approach toward implementing a rapid investment growth.

The result – consumption-led growth – has contributed to a laid-back attitude, explaining the lack of strong initiatives in deepening reforms to attract investments.

Poverty reduction record needs to accelerate. The government has reasonably tackled poverty reduction, but it could have done much more.

The Aquino administration expanded the conditional cash transfer program (CCT) significantly – both in volume and monetary allocation. More of the country’s very poor have received cash transfers as a condition for keeping their children in school.

Where the government has failed is in absorbing unemployed and underemployed labor in an expanding formal economic sector of the economy. This yet represents another image of the failure to undertake and speed up large investments – both public and private – to perk up employment creation.

Anti-corruption drive needs absolute sincerity.  The Aquino administration has gotten praise in its anti-corruption program by putting in jail or neutralizing a big haul of high officials accused of plunder and corruption: a former president, three senators, and the impeachment of a chief justice.

Such measures have raised the government’s international profile and its perceived accomplishments even though no convictions have yet been realized.

While this might have scored well internationally, in the home front, the program has been highly criticized as being directed mainly against political enemies. It has been seen as a ruthlessly partial and one-sided partisan campaign.

Tolerating misgovernance is a high negative. There are many examples of misgovernance and failed leaderships that reduce economic performance. The case of the Department of Transportation and Communications has sunk the government very badly in the public perception of the Aquino administration.

This department and its leadership have provided a classic case of misgovernance and incompetence. Its transgressions against the public welfare have been amply demonstrated: missing or long delayed delivery of car plate numbers even as higher fees were imposed; mishandled computerization of the bureau contract; run-down maintenance of the urban rail public transport system; mishandling of the country’s administration of the country’s main international airport of entry, the NAIA.

It is amazing that in almost six years, the government, through the intransigence of this department has not made any decision on the construction or relocation of the country’s main international port of entry! 

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