Technocracy

So far, so good.

There has been almost universal praise for the Cabinet President Bongbong Marcos assembled. It is a Cabinet of veteran policymakers, respected professionals and acknowledged experts.

In a word, the new President put together a team of technocrats pretty much like his father did over half a century ago. Marcos Sr. assiduously assembled the best and the brightest in every field and empowered them to craft policy. It was a team intended to accomplish nation building by modernizing the state apparatus.

The first wave of Cabinet appointments included those who now form the economic team: Diokno, Medalla, Balisacan and Pascual. All from UP, these four Cabinet officials anchor the new administration’s effort to pull our ravaged economy up from the damage caused by the pandemic. The other agencies will take their cue from them.

Marcos Jr. decided to handle the Agriculture portfolio in the meantime. This agency requires the President’s political clout to quickly undertake reorganization and radically transform the policy framework. Agriculture has long been our economy’s underperformer. In the face of possible shortages in the world’s food supply in the coming months, reforms in our agriculture must happen quickly and decisively.

Vice President Sara Duterte was handed the Education portfolio. Like our agriculture, the educational system is a disaster zone. It has failed to prepare young Filipinos to be globally competitive as comparative studies glaringly indicate. The pandemic added to the woes of our educational system. This department needs the unique clout of the Vice President to shake things up.

The appointments of Bautista to the DOTr and Bonoan to the DPWH assure everyone there will be competent management of our great effort to bring up our infrastructure to match those of our neighbors. Both are highly respected in the private sector.

The appointment of Popo Lotilla to Energy brings expert hands to make things happen in our dismal power sector. Toni Loyzaga, possibly our foremost climate change expert, lifts expectation we would finally begin moving decisively in building resiliency.

Laguesma is an experienced hand in labor issues. Susan Ople, with her lifelong work among our migrant workers on top of an illustrious name, is the best possible choice for the new Department of Migrant Workers. In Ivan Uy, we finally have a technology expert heading up the DICT.

In Budget Secretary Amenah Pangandaman, BIR Commissioner Lilia Guillermo and DFA Secretary Ricky Manalo, we have career government executives highly respected in their respective areas. We are still awaiting appointment of the DOH and DOST secretaries. If the other appointments provide guidance, we will likely see people of established reputation heading up these agencies.

With a highly competent Cabinet to assist him, President Marcos Jr. should have an easier time tackling the complex problems the nation faces. He must excel as fine conductor to an orchestra of highly skilled musicians.

In a way, this is a war Cabinet. We face a hostile world on the brink of recession with an economy seriously damaged by the pandemic. We need to act quickly to revive our agriculture, lift our educational system to global standards and meet the grave challenges posed by climate change with no time to lose.

Expensive

President Marcos ordered the renegotiation of Chinese financing for a number of major infrastructure projects now in danger of being scrapped. It turns out China wants an interest rate of 3 percent for these ODA projects. Our government thinks the financing Beijing offers is too expensive.

China managed to dazzle former president Rodrigo Duterte with promises of large financing packages for projects we need to complete modernization of our infra. For a while it seemed Duterte was willing to break our long-standing alliance with the US, ignore bullying in the West Philippine Sea and accept joint venture oil and gas exploration with Chinese companies in order to access the dazzling loan packages.

In his last week in office, Duterte dramatically shifted policy against joint venture arrangements. The old talk about scrapping the VFA was abandoned. It is now clear, the financing arrangements with China for key infra projects are on hold indefinitely.

A 3 percent interest charge might seem a bargain when compared with private sector loans or with the new 3.25 percent policy rate the BSP mandated last week. But it is high compared to the less-than-1 percent rates charged by Japan for ODA projects such as the huge subway system now under construction.

The foreign exchange risks of borrowing in yen are much lower than borrowing in yuan. China’s currency is more volatile than the Japanese currency. This adds to the attractiveness of borrowing from Japan – or from South Korea for that matter.

I doubt if Beijing will yield to our demand to renegotiate the interest rate they prefer. The world has now moved out of the regime of cheap money. Interest rates have been hiked everywhere. The opportunity cost will simply be too high for China if they agree to reduce interest charges.

We should have closed the deals when the prevailing ODA interest rate hovered at about 2 percent. But at that time, people thought 2 percent was too high compared to the near-zero interest charges Japan offered, especially when the late Shinzo Abe was prime minister. That is now spilt milk.

When the global interest rate regime was lower, Beijing attached little urgency to closing our ODA deals. Abe, by contrast, appointed a special representative to see through our ODA deals with Tokyo.

Renegotiating with China might have to wait for global recession to take hold.