A surprising SONA

Fears of a sell-out to China and a return to crony capitalism were allayed in President Marcos’ first State of the Nation Address. Based on the President’s intended programs and legislative agenda, it seems we can expect stable governance moving forward, without drastic changes in the form or style of governance.

As overall impressions go, I found   the President to be well-appraised on prevailing issues and purpose-driven in his reform agenda. I appreciated the fact that his speech tackled most aspects of governance before capping it off with 19 priority bills. His train of thought was easy to understand. As for his demeanor, he was dignified and businesslike – a refreshing change from his brash and vulgar predecessor. At last, we now have a Chief Executive who represents the Filipino people with dignity.

The economic agenda was well-considered as it was underpinned by prudent fiscal management. I agree that raising revenues through tax reforms should be made a priority, given the country’s debt load and budget deficit. Taxing the digital economy, simplifying tax procedures and eliminating under-declaration of taxable values are a good start. This, coupled with rationalizing government expenditures through right-sizing and prioritization of expenses, should improve our fiscal position. Unfortunately, this will not be enough and measures to augment revenues will have to be implemented soon.

The President’s economic projections were generally realistic except for the value of the currency. His forecasts were off since he assumed the peso to be 51 to 53 to the dollar today, while it is already trading at 56.

One thing that disturbed me, however, was how the President seems to be resigned to exports growing at   only 6 to 7 percent while imports gallops at 18 percent all the way until 2028. I think there is a lot of room to improve on these numbers. We must fight to export more and substitute imports with locally manufactured goods. A manufacturing resurgence is a must considering our severe import dependence. Although the President spoke fleetingly about leveraging on the amendments to the Public Service Act and the Foreign Investment Act to attract more investments, he failed to stress its importance nor did he challenge the DTI to level-up its FDI and export performance.

FDI’s provide the fast track to wealth generation. They increase exports revenues and tax intakes, which eases budgetary pressures and allow government to better cope with its debts. That said, ease in doing business and lowering cost of manufacturing must be high priority areas. We should also put teeth to the Inter-Agency Investment Promotional and Coordination Committee to focus on outward investment promotions.

I laud the commitment to infrastructure development and the intention to sustain spending at five to six percent of GDP. I am also pleased that Public Private Partnerships are back in play.

On agrarian reform, I can accept the plan to grant a one-year moratorium on amortization so farmers can channel their funds to production.  But I struggle with the condonation of unpaid amortization owed by agrarian reform beneficiaries that will cost P58.12 billion. Not only is this unfair to those who broke their back to pay their obligations, more importantly, this is not the time to be foregoing revenues. Every cent counts given the burden of our national debt and the public investments we must make. Populist policies like these can bite us in the back as it did President Gotabaya Rajapaska of Sri Lanka.

I hoped for a more comprehensive package of agricultural reforms since the President is personally handling this portfolio. The plan to buy farm inputs in bulk and sell them to farmers at cheaper prices is good but this will not solve the root problem.

Agriculture is underperforming mainly because of small farm sizes (average farm size is less than 1 hectare). The absence of economics of scale does not justify mechanization nor modernization. Neither does it justify the infusion of capital.

To this, I offer a recommendation based on the insight provided by Dr. Carlos Primo David. There must be a confluence of five elements for agriculture to flourish in a sustainable manner. Sizable land. Adoption of industrial farming methods. Integration of small farmers to achieve inclusivity. Integration of post harvest processing plants to achieve higher value added products. And the presence of a research and development arm by way of an agriculture-based college or university.

Select state universities and colleges can be transformed into self-contained agricultural production hubs (Agri Hubs). There are approximately 112 state university and colleges, not counting their 421 satellite campuses.  Each campus is endowed with 50 to 650 hectares of land, the majority of which are idle. The Department of Agriculture can build Agri Hubs in as many campuses as possible. Each will specialize in crops that are most suitable for their climate. The goal is for these Agri Hubs to produce specialized crops at the lowest cost and at a scale sufficient to meet local demand.

Being part of a college or university allows Agri Hubs to adopt science-based farming. Students benefit too from on-site learning and hands-on research.

On other reforms, I give three cheers for the plan to rationalize the EPIRA Law, enact the National Land Use Act and update the National Defense Act. These laws are long overdue and much needed. It does not go past us that such laws go against the interest of the President’s closest allies. It is refreshing to see the greater good prevail over vested interests.

On foreign policy, we can all sleep better knowing that we now have president who has the courage and resolve to defend Philippine sovereignty. We are one with him when he said: “I will not precede over any process that will abandon even one square inch of territory of the Republic of the Philippines.”

I didn’t expect President Marcos’ first SONA to as comprehensive and well-considered as it was. I was surprised in a good way. My skepticism is now replaced with guarded optimism.

Andrew Masigan’s e-mail address is [email protected]. Follow him on Twitter @aj_masigan