Consistency in policy

DEMAND AND SUPPLY – Boo Chanco (The Philippine Star) – January 28, 2019 – 12:00am

“Restoring business confidence and opening up to foreign investments need consistency in policy environment… Restoring business confidence, ensuring consistent policies needed to further boost growth; We hope the whole government will be on the same page to address concerns…”

Guess who said those words? No, not the leaders of the local or foreign chambers of commerce… No, not the usual suspects in that cabal calling themselves the Foundation for Economic Freedom… No, definitely not, some folks in the opposition.

Those words, or rather plea, came from Economic Planning Secretary Ernie Pernia. Ernie is almost totally transparent. Sometimes he tries to speak like Martin Andanar. I suspect he does that only to reassure his Cabinet colleagues he is still one of them.

After more than two years on the job, I guess Ernie is starting to be more open about his frustrations. The President’s economic team is a good one, headed by Finance Secretary Sonny Dominguez, Ernie and yes, even Ben Diokno. Now and then they have to show they are playing the game but, as in the case of Diokno, with disastrous consequences.

If the economic team just remained true to what they believe in and fight even more vigorously against the forces of darkness within the administration, the President may be convinced to totally support them. Even if the President says he supports them, the body language indicates some reluctance. Duterte doesn’t understand economics and the populist demands of Cabinet members like the one in agriculture are more easily digested.

I watched a portion of Pernia’s press conference when he explained the GDP figures for last year. It is easy to note a significant degree of disappointment not because the figure is lower than expected, but more because it could have been a lot better if the President went with the economic team all the way.

Secretary Pernia complained about lack of policy consistency. That’s true. The economic team makes public statements on policy directions, but it takes too much time for any of those to become policy, if at all. Even pruning the negative list for foreign investments took over half a year from submission to Malacanang to final release.

It was so unfair of the President to send the economic team on missions abroad to attract foreign investments without signing that new negative list first. It had been difficult for the economic team to explain why it is taking the President that long to do what the team said is as good as policy.

Of course, we all know that the delay was caused by last minute lobbying by vested economic interests who do not want to face real competition from abroad. But this protectionist approach had been proven detrimental to our economic growth and we all pay a higher price for goods and services due to lack of competition.

We are being left behind because our misguided protectionist sentiments give no incentive for local businesses to improve efficiencies and upgrade technology and, thus, reduce consumer cost.

Take that LTFRB attitude towards tech-based transport services. There was a strong lobby against a new competitor to our broken taxi system. And when Uber and Grab merged, LTFRB refused to give Grab real competition.

LTFRB officials claim Grab has competition in a handful of Filipino attempts to mimic the Uber-Grab concept. An LTFRB official even said they want to protect Filipino businesses and that’s why they are rejecting the application of Go-Jek, an Indonesian competitor to Grab.

The result is a virtual monopoly of Grab that enables them to abuse both the riders and the drivers. Riders have to pay more and the drivers have to pay Grab a higher rate. Go-Jek’s entry, because it has financial heft, will make Grab behave. The so called Filipino competitors of Grab are not big enough, nor do they have enough access to technology to compete effectively with Grab.

The policy consistency Sec. Pernia is calling for is nothing more than implementing what President Duterte himself had been saying about attracting foreign investors. I guess the frustration showing in Sec. Pernia’s face during last week’s press conference is because getting the President’s word into practice is like pulling teeth.

The result of this presidential ambivalence about investment policies is slower economic growth. Investors leaving China because of Trump’s trade policies or because of rising Chinese labor costs are flocking to Vietnam and other Asean countries. We are missing the boat, again.

Another frustration of Sec. Pernia is the big drop in agriculture growth. Indeed, the figure can hardly be called growth. Standstill, is a better description and that’s being kind. Sec. Pernia’s worry is that agriculture was the biggest drag to the economy last year, the main cause of high inflation.

The question now rises… does the current agriculture secretary have what it takes to meet the challenge? He isn’t trained for the job… he is at best depending on his gut instincts as a weekend farmer. Surely, President Duterte cannot risk the economy’s health on an amateur when the stakes for real performance are high.

Again, we can learn from the example of Vietnam in agriculture. It is now an important sector of the economy that not only feeds the Vietnamese people, but also earns foreign exchange through agricultural exports.

Agri-business expert Rolly Dy of the University of Asia and the Pacific sent me an article about how much Vietnam has accomplished in agriculture. Last year, Vietnam’s agricultural export turnover rose strongly to a record of over $40 billion. That’s about $10 billion more than our OFW remittances and the Vietnamese farmers stayed home and didn’t have to suffer abuse in the Middle East.

This record accomplishment, according the article Dy sent, confirms that the restructuring of Vietnam’s agricultural sector is on the right track. Domestic and foreign investments in the agricultural sector increased three fold in 2018 alone.  They have also invested in industrial processing enterprises for agro-forestry and fishery products.

Of course, they have a communist dictatorship leading Vietnam. But at least these communists are not afraid of foreign investors. They are also bolder in adopting changes. That sped up the rehabilitation of the Vietnamese economy to the point of overtaking us.

No, I do not believe a more dictatorial Duterte will make much of a difference based on what we have seen so far. What is more important is the intelligence and an open mind to fast track change which I am sorry to say, the President has not yet shown. He is too detached from a typical President’s job to produce positive results.
Source: https://www.philstar.com/business/2019/01/28/1888621/consistency-policy