Economic development: What we do well and what we don’t
CROSSROADS (Toward Philippine Economic and Social Progress) - Gerardo P. Sicat (The Philippine Star) - December 26, 2018 - 12:00am

Much of economic development is an accumulation of improving ways of doing things. Dramatic improvements in the development process often result when we learn how to plan and execute properly.

Another way of describing development is that it is a process of rising per capita output and income characterized by spreading and improving economic welfare for a country’s citizens and residents. It is, one could say, a quiet revolution in the way a nation’s institutions and practices transform and evolve over time for the good, to serve the people and to empower them to do better.

Some things we do well. Those of us who have visited the malls during the Christmas season and at any time of the year will take for granted that the elevators and escalators in such places are functioning very well, that the premises are spic and span, and overall, services of convenience to shoppers are available.

In general, we also find that elevators in private sector-owned buildings work well. This tells us much about our ability to operate equipment and maintain them.

This tells us further that the private sector – for malls are owned by private business – can maintain capital assets they acquire and make them produce a good return for them as a result.

(Don’t we also observe that owner-occupied housing and personally owned vehicles are more often maintained better than those rented or operated for others?)

We also see that there is great variety of offerings to satisfy our needs, including that of finding a place to eat inexpensively or within any budget, with plenty of choices to be made. This tells us much about the spirit of Philippine enterprise and competition. When the opportunities abound, there is a response by a willing entrepreneur.

The spirit of enterprise is found not only in the malls. Go down the ladder of income shoppers. In Divisoria and other open trading places all over the country, there are a lot of people working hard for a day’s earning – putting up capital or even losing it, if they make the wrong choice.

In fact, whenever opportunities abound, there are those who take advantage of them. This is as much true when the opportunities are within the bounds of the law or outside of it.

I do emphatically observe that even though it is despicable and unbecoming behavior, the following happen not infrequently in our nation or in our history.

When laws or regulations are strict or maybe unreasonable, there are people and enterprises that abound to fill in an illegal niche of activity. (We have all heard of rampant smuggling, corruption, the black market.)

These are participated in by the illegal traders, the knowing or willing and innocent violators of prohibited undertakings. There are also purveyors of facilitation – those who fix things for a price, the corruptors and the corrupted who, in some ways, run an illegal business.

What we don’t do well. There are many things that we do not do well. For instance, we fail to use the power of eminent domain effectively and quickly to enable the country to speed up the acquisition of rights-of-way for infrastructure and government construction projects. This has delayed economic growth enormously.

The examples of escalators and elevators are foremost in my mind because of observations close to the experience of common citizens using these facilities. For instance, some escalators of the MRT (Manila Metro Rail Transport System) have not been functioning for long periods now and they appear to have been abandoned. Why? Ask also, where are the trains?

The elevators of publicly owned buildings perform poorly in general. Only well-funded government offices that own their buildings and government offices renting space in privately-owned buildings have good, well-performing elevators.

The example of the MRT escalators and elevators are just indicative of the level of management and ability to perform the functions of rendering a service for the general public directly for a fee.

All government corporations are state enterprises created to perform a specific service. Initially, they perform their work well because often, they are funded by publicly-provided capital. Over time, they experience decline.

Political interference. Interference in their work, either through the appointment process of their personnel or in their management operations, often have toxic impact on their long term performance. Political accommodations lead to poor professionalism in qualified personnel.

Interference in management hamper performance. Over time, this results in high costs or bankruptcy, leading to refinancing of capital, reorganization, abolition, or privatization of the service.

Reform and improvement: water service. The crises they bring sometimes lead to reform.

The improvement of the water service in the country was achieved through the privatization of the management of the assets of the public sector. This is an example of how public enterprises might improve without fully privatizing the service, in the presence of a disruptive management through political influences.

Few today complain about the water service in Metro Manila. In fact, the private companies given the charge to manage parts of the water service area have expanded and improved the service since privatization some 20 years ago. Losses from leaking pipes, stolen water and other inefficiencies have been reduced substantially. The quality and the stability of the water service provision to the general public has improved immensely.

Before the privatization of the MWSS (Manila Metropolitan Water District and Sewerage System) was undertaken to two competing providers, the premises of the system were filled daily with bystanders and freeloaders, making the area clogged with people either seeking employment or awaiting transactions. These days, this unsightly view has disappeared.

Moreover, the model of water service provision and management has spread over to other water districts throughout the country, with encouragement by both local governments and the LWUA (Local Water Utility Administration). The private water companies (which were formed in partnership between local groups and foreign investment partners) have branched out to other countries to undertake concession, advice and investment work.

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To all my readers and partners in socio-economic reform, a Merry Christmas and a Happy New Year! May the next years improve the things we do well and enable us to eliminate the obstacles that prevent us from doing well!

My email is: gpsicat@gmail.com. For archives of previous Crossroads essays, go to: https://www.philstar.com/authors/1336383/gerardo-p-sicat. Visit this site for more information, feedback and commentary: http://econ.upd.edu.ph/gpsicat/

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