Duterte’s coming reality check

Introspective – Calixto V. Chikiamco | Posted on June 13, 2016 10:26:00 PM

I’m not perturbed at the stream of consciousness rants of President-elect Duterte against the Catholic hierarchy, media, the judiciary, the BIR, Customs, government officials on the take from drug lords, and most everything else. To my mind, he’s only venting the people’s frustrations at our weak institutions.

The question, however, is how does he intend to solve the weakness of these institutions and the dysfunctions of government?

Between politicians and Leftists in his cabinet, the incoming Duterte administration seems to think that government is the answer: No nonsense, activist, disciplinarian government.

Take, for example, the food affordability problem. Judging from the announcements of his incoming Secretary of Agriculture, Manny Piñol, the administration will recentralize all rice imports under the National Food Authority and will target to be rice self-sufficient in 3 years.

The National Food Authority has had a rice importation monopoly for more than fifty years and rice, instead of becoming cheaper, has become more expensive. Thanks to this monopoly, Filipino rice consumers pay twice for their rice as their counterparts in Vietnam.

How the incoming Duterte administration will make more food affordable without liberalizing rice imports escapes me. If the Duterte administration thinks that it will solve the food affordability problem by launching another rice self-sufficiency program similar to what Secretary Prospero Alcala’s Agriculture Department launched, they have another think coming. It will be another failure, like Alcala’s program because years after it was launched, we still import close to 2 million tons of rice a year. By the way, the Aquino administration can claim some success in making supply to equal demand: it raised prices by restricting imports, thereby reducing demand. A cruel, but effective, measure.

I also don’t know how the incoming administration will stop rice smuggling since the incentive to smuggle is high because of the huge difference between the landed price of imported rice and domestic prices. Therefore, rice smuggling is very, very profitable. Will shooting rice smugglers stop smuggling? Or will Customs and law enforcers look the other way for a few pieces of silver, Duterte’s cursing and threats notwithstanding?

The coming reality check for President-elect Duterte is that the Philippine state is weak, inefficient, and ineffective. He better craft policy solutions along that line, rather than assume that he can bend government institutions and society’s problems to his will.

For example, President-elect Duterte talks about stopping contractualization, or the practice of giving out five (5) month contracts to casual laborers to prevent them from becoming permanent employees. He seems to think that if the government says stop, the practice will stop.

The practice of giving out what are called 5-5-5 contracts is already illegal under DoLE Order 18-A issued in 2011. Legitimate labor contractors are required by law to meet certain capitalization requirements and to pay all mandatory benefits. So what will the Duterte administration stop what is already illegal?

If President-elect Duterte means outlawing the practice of outsourcing certain labor-intensive operations to outside contractors, he will be going against the worldwide trend of outsourcing since companies want to focus on core competencies and outsource the rest. For example, an electronics company would want to focus on doing hardware and software and not be distracted by managing janitorial or merchandising services. An order banning contractualization may end up discouraging investments and employment.

The way to reduce contractualization is to reduce the incentive of employers to terminate casual workers before the end of six months: amend the Labor Code to extend the probationary period from six months to at least two years, enough time for workers to learn skills and employers to decide if they deserve to have security of tenure.

Better yet, President-elect Duterte should build on his previous idea of leasing out islands or enclaves for private, and even foreign investors, to manage. Let those economic zones experiment with more market-friendly employment policies and let its performance be contrasted with the rest of the nation in terms of employment and labor welfare. After all, the whole idea of federalism is “letting a hundred flowers bloom.” Let autonomous zones experiment and let the nation see which vision — the statist one perpetuated by the politicians and the Left or a more market-friendly government, succeed.

It can be argued that the Philippine state can be made to be more efficient, effective, and strong. History argues otherwise: name it — PNR, Napocor, MWSS, NAIA, MRT, NFA etc. — and anything the government manages, turns into a corrupt piece of crap insensitive to the public welfare, irrespective of who’s in power.

There are many reasons for the weakness of the Philippine state: a highly politicized bureaucracy; a political system dominated by dynasties whose loyalty is to family rather than the nation; an inward-looking, rent-seeking economy dominated by oligarchs in non-tradable regulated industries — power, telecommunications, banking, ports, shipping, etc. — whose interest is “regulatory capture” or penetrating the state for the benefit of their regulated industries.

The Duterte team seems to be afflicted with hubris and with a sense that it can do everything. Here’s a cautionary tale: there was this former mayor of a non-capital city in Southeast Asia who was elected president of his nation with popular acclaim. He had humble ways and the press even wrote about how his family would just take the economy class on plane trips. He promised to build infrastructure projects quickly and lift the economy. He projected himself tough on drugs, ordering the execution of suspected foreign drug dealers and risking international condemnation.

However, after just one year, his popularity fell precipitously. He failed to lift the economy. His infrastructure projects didn’t take off. His anti-drug executions left his country diplomatically isolated. His clean image suffered with appointments of officials with a history of corruption from a previous administration.

His name? Indonesia’s President Joko “Jokowi” Widodo. Filipinos know him because of Mary Jane Veloso, a Filipina convicted of smuggling heroin in Indonesia and scheduled to be executed under Jokowi’s tough anti-drug campaign. Filipino authorities pleaded with Jokowi to spare her.

Although there are similarities, Duterte is no Jokowi. However, to avoid Jokowi’s fate, Duterte should not overestimate the capacity of the Philippine state. Instead, he should harness the forces of the market and the private sector to quickly deliver on his promise of inclusive growth.

Source: www.bworldonline.com