Monday, September 18, 2006

It's governance, stupid!

ONCE again, the World Bank has released another study which should clearly tell the government where to look if we really want to go forward economically.

Titled “Governance Matters, 2006: Worldwide Governance Indicators,” the study clearly shows that countries high in the ranking on six governance indicators are also the ones enjoying better economic growth, which should also mean higher standards of living for their people.

These variables include voice and accountability measuring political, civil and human rights; political stability measuring likelihood of violence; government effectiveness measuring the competence of the bureaucracy and the quality of public service; regulatory quality measuring the incidence of market-unfriendly policies; rule of law measuring the quality of contract enforcement, the police, the courts and incidence of crime; and control of corruption measuring the abuse of power for private gain including petty and grand theft and the capture of the state by elites.

In terms of voice and accountability, top-ranked in Asia-Pacific are Taiwan, South Korea, Mongolia. The bottom dwellers are Myanmar, North Korea and China. The Philippines is at the middle.

In terms of political stability, those with the highest percentile rank in the Asia-Pacific are Hong Kong, Singapore, Taiwan and Malaysia. The bottom dwellers are the Philippines, Indonesia and Myanmar.

In terms of government effectiveness, the top ones are Singapore, Hong Kong and Taiwan. Among the bottom dwellers are Myanmar, Laos and East Timor. The Philippines is in the middle.
In regulatory quality, the top performers are Hong Kong, Singapore, Taiwan. Those at the bottom are North Korea, Myanmar, Laos. The Philippines again is at the middle.
In rule of law, the top performers are Hong Kong, Singapore and Taiwan. Among the poorest performers are Myanmar, North Korea and Cambodia. The Philippines is somewhere at the middle—but lower than China.

And finally, in terms of control of corruption, the top performers are also Singapore, Hong Kong and Taiwan. The bottom dwellers are Myanmar, North Korea and Cambodia. The Philippines once again is somewhere at the middle.
What do these rankings suggest?

Countries at the top of the ranking are those that have achieved a high level of sustained economic growth for several decades. These countries have advanced and high-tech economies and their peoples are richer, enjoying better quality lives. Those near the bottom are usually poorer and their peoples live miserable lives.

The message therefore is very clear. If we want to improve our lives as a people, we should have better governance. That means we should have better government officials.

In simpler terms, we should have national and local leaders who are accountable and who don’t kill dissenters. The practice of extrajudicial killings, especially of activists and journalists, should stop. The government should have a clear program to address this once and for all.

We should have political stability. And what better way to achieve this than addressing the continuing legitimacy questions? In May next year, the Philippines will have a midterm election. Is the Comelec credible enough to preside over a clean and honest one? And, until we see the real thing, talk in government about computerizing the next election will be considered just that—talk.

Government effectiveness certainly plays a great role in economic growth and development. Sad to say, the government, even if it preaches the need to rejuvenate the countryside through massive spending on “super regions,” doesn’t actually have the energy and the ingenuity to put those plans on the ground. This year alone government boasts it actually has P30 billion to spend for crucial infrastructure projects and programs.

The latest information from the National Economic and Development Authority, however, shows that government has only spent P2 billion.

Oh, some bureaucrats must be living fantastic lives looking at their navels, biting their nails, and enjoying their weekly spas while the farmers and the entrepreneurs have to struggle with poor roads, bridges, crowded ports, sluggish public service!

And yet, in the midst of such underspending on crucial socioeconomic services, some geniuses in government could actually get the President to do some spending in the wrong area: how? By repealing her successor’s executive order, which rightly limited the task of providing microcredit to government financial institutions (GFIs), thus encouraging the private sector to provide financing for small and medium enterprises, and correcting a decades-old setup that drained the coffers of government nonfinancial agencies and government-owned and controlled corporations. The repeal, through EO 558, has stirred a hornet’s nest in the private sector, and worried sick our finance and monetary officials who wish to avoid the fiscal nightmares of the past.

On Sunday Finance Secretary Gary Teves who complained about the EO “clarified” that it was a “location-specific order,” after all, one covering only the 47 poorest towns that won’t be serviced by the private sector anyway. But people wait and watch.

A few weeks ago, the World Bank released its report comparing the ease of doing business across countries worldwide. As usual, the Philippines was among the least conducive places. Imagine having to go through a gauntlet of 11 procedures within 48 days just to register a shop selling porridge? This is the main source of corruption in this country and the government had better do something about it before we slip further into the gutter.

And if there’s one factor that really riles investors, it’s the utter lack of palabra de honor among government people, the constant flip-flopping and the unpredictable change of policies midstream. This has become such an international issue among Europeans that no less than the President herself had to “explain” everything to Angela Merkel, the German Chancellor. Well, talk is cheap and investors have yet to see a clear signal on the government going straight on the issue.

Nevertheless, Filipinos are great entrepreneurs. In the last 10 quarters, the Philippine economy has been growing within the 5 percent to 6 percent gross domestic product growth range, courtesy of those dogged entrepreneurs and farmers who simply have not given up despite all the odds. But we could do better than this if only the government shapes up. And soon!


Anonymous said...

perhaps eo 558 is a reaction to those lazy bankers. government intervention by creating competition in lending activities to accelerate economic growth. but without a clear guidelines on eo 558, it is understandable there is strong resistance citing failures of past programs. the government lost bigtime ie masagana 99. but perhaps it is not a total loss. there were lessons learned why we failed. and learning from mistakes, we can improve and achieve better results. if not, then they have no right to govern.

Dave Llorito said...

im not sure really about government intervening in credit. its better that we open up the banking industry to competition.