Tuesday, July 31, 2007

In "The Explainer" with Manolo Quezon and Ciel Habito

It was my first TV appearance and that one really scared the hell out of me. I was in Manolo Quezon’s “The Explainer” six pm today (July 31) discussing the “disconnect” between government statistics on economic growth and the people’s perception of their quality of life, together with former Neda secretary Ciel Habito. Ciel was the main guest and I was there to react and comment.

I said yes to the invitation from the ANC Channel not knowing that I was to react to Dr. Habito, whom I worked with when I was still doing consulting jobs with the USAID and the World Bank. Who am I to react to an esteemed economist from Harvard? Too late for me to change my mind and I found myself with Manolo and Ciel in front of the camera feeling like an idiot. Ha ha! I really hope I did contribute something to earn the gift certificate for a book they gave me. But I felt I did badly as I tend to speak quite fast, probably a no-no when you are on TV.

Ciel of course was in his usual best and I have nothing but praises for his insights. He characterized the performance of the Philippine economy as “narrow, hollow and shallow” as it’s largely determined by external forces. I agree with him but I do feel that those growth rates are real, and a positive development—something that we could work and improve on as we continue searching for a deeper and more broad-based pattern of development.

For Manolo, a lot of thanks for that experience. And hey, a lot of thanks for plugging this blog in your TV program. Really appreciate it!

National Broadband Network: A backbone of waste and shame

"The bloated NBN (national broadband network) and the CEP (cyber-education projects) are parables whose moral cannot be reiterated enough. The only backbone the government needs today is a moral one; not fiber-optic but fibre politique."Raul Fabella and Emmanuel de Dios, economics professors from the UP School of Economics

IF the President still thinks of her legacy in the last three years of her administration, she had better heed the call of her colleagues (she is economist, remember?) from the University of the Philippines’ School of Economics.

The professors are advising her, albeit implicitly, to stop the multibillion-peso national broadband network (NBN) and the so-called cyber-education projects, for they cannot be justified on sheer economic logic. It’s a complete waste of people’s money.

We agree with the professors’ call, especially in the case of the NBN. It was apparently negotiated in utmost secrecy with the Chinese government; and, with the subsequent “loss” of the signed contracts in a hotel room in China, the hush-hush deal seems to have the makings of another scam that could push this country into another cycle of economically destructive political spasms.

Take the case of NBN. Drumbeaters for the NBN from the Department of Transportation and Communications say the government is going to save P27 billion over the 15-year span of the project and reduce telephone expense by 8 percent.

What they are not telling us is that the government is going to spend P31 billion in operations and maintenance for the network within the same period—a huge amount of money that will be collected straight from taxpayers. That’s a conservative figure, given that taxpayers are also going to pay for the interest and principal, plus the possible extra spending on delays and cost overruns. This extra cost is expected given the consistently bad record of the government in implementing infrastructure projects.

And for what? For that huge amount of money that the State will squeeze off taxpayers, we are going to have a network that is destined to be another lemon. Why? For two major reasons.

First, it’s in the nature of government, particularly the Philippine government. The NBN is going to be run by bureaucrats who have no stake in the system but just receive their monthly salaries; no discipline that could only be ensured by the need to make the business profitable, and is therefore likely to be managed inefficiently.

Remember the multibillion Telepono sa Barangay Program? We no longer hear from it, but we know taxpayers paid P10 billion for it without alleviating the rural areas’ need for communications access. And how could the government make a difference this time?
Second, it’s in the nature of technology. As explained by the two economists, technological change in the information and communications technology (ICT) sector is quick, driven by competitive market pressures.

The anecdote is that ICT technologies are obsolete even before contractors have finished setting up the cables. Private companies, therefore, keep on updating their ICT capability as a way to ensure competitiveness.

But there is no similar imperative among bureaucrats, whose primary motive is getting their monthly salaries.

That implies that the NBN could be nothing but some clunky museum relic by the time the government is done paying it with people’s blood money. And even before the government has written the last check for the Chinese after 20 years, government agencies may have completely abandoned the network for its sheer inefficiency and obsolescence.

We are talking here about the possibility that we are going to continuously pay people’s hard-earned money for a system that’s doomed to be inutile in just a few years of operation.
With such a huge cost and questionable, nay, probably even negative, social benefit, one can’t help but ask whose interest the government is trying to satisfy with its not-oh-so secret pursuit of the NBN.

If its social benefit is in doubt, one could be tempted to think some private motive is the primary consideration. It’s so tempting to think that way because the government seems to be moving heaven and earth to keep the issue hidden from public scrutiny.

We all know the project started with an unsolicited proposal from Amsterdam Holdings Inc. (AHI) for a build-operate-transfer (BOT) project amounting reportedly to about $260 million, supposedly at no cost to the government.

President Arroyo supposedly favored this approach since the government is penniless. Not to be outdone, Americans came up with their offer from Arescom for a lesser amount, reportedly about $135 million, to be financed through overseas development assistance.

Then suddenly, the Chinese-owned ZTE came into the picture, with an offer equivalent to that of AHI, plus supposedly a “superior” technology.

Suddenly, the government forgot all about Arescom and AHI, and came for ZTE. Come signing time, however, the total amount for the project rose to US$329 million, payable in 20 years to the China Export-Import Bank. Hence, from a BOT deal, it has become a supply contract with ZTE.

To top it all, the Chinese bank also offered $500-million more for an e-education project, on condition that this money is going to be spent on Chinese equipment. And of course, all the transactions are supposedly covered not by Philippine laws, but by Chinese laws.

After the signing ceremony, no less witnessed by the President, the signed documents were supposedly “stolen” in the hotel, a convenient excuse for bureaucrats to hide details of the contract. Those bureaucrats may have committed our souls to Mephistopheles, and we wouldn’t know it because someone “stole” the document! Of course, the government could have easily asked the Chinese to fax us their copy for distribution to the media and whoever is interested, in the interest of transparency, while reconstructing the Philippine copy—but it seems the government is not willing to do that. Or maybe the Chinese have lost their copies of the contract too? Strange world this is.

(Note: originally prepared as editorial for the BusinessMirror, 31 July 2007)

Saturday, July 28, 2007

Globalization, US role: the world has spoken

Each of us have different perspective on many global issues like—what else— globalization (e.g. the French hate it), climate change (“could we really do something realistic about it?”), the role of the UN (“ah, just another global lame duck institution”), US leadership (every body hates American “hegemony” but queues up the American embassy for visa), and China (“the new superpower!”). But what does the world in general thinks? The Chicago Council on Foreign Affairs and the World Public Opinion.org provides us this interesting summary:

On Globalization• Majorities around the world have a largely
positive view of globalization and believe that international trade benefits
national economies, companies, and consumers.

On Climate Change• There is widespread agreement that climate
change is a pressing problem that poses a significant threat, though views differ on whether urgent, costly measures are needed.

On the United Nations• Large majorities approve of strengthening the United Nations by giving it the power to have its own standing peacekeeping force, regulate the international arms trade and investigate human rights abuses.

On US Leadership• Publics around the world reject the idea that the United States should continue to be the preeminent world leader and prefer that it play a more cooperative role.

On China• Majorities around the world believe that the Chinese economy will someday grow to be as large as the US economy but only a minority thinks this would be negative.

What do you think?

Wednesday, July 25, 2007

Agenda for the 14th Congress

Reader, suppose you were an idiot. And suppose you were a member of Congress. But I repeat myself. —Mark Twain (1835-1910)

NOW that we have the 14th Congress, what do we do?

Certainly, there’s a lot of unfinished legislative business in the 13th Congress. But before lawmakers even start working on these unfinished bills, they should undergo a change in perspective, a “paradigm shift,” to make their work relevant to the demands of the times.

Congress should cast away its insularity, its tendency for inertia and navel-gazing, which has paralyzed economic policymaking, and look far greater into the bigger picture, this fast-integrating and globalizing world.

If there’s one thing that characterized past Congresses, it’s the pettiness of the chamber’s politics, and the total lack of ambition in its legislative agenda. Hostage to the political-survival instincts of the ruling party, the 13th Congress, for instance, was notorious for delayed passage of the budget necessary to finance development.

With a thin legislative output, most of the more important economic legislation necessary for addressing vital issues, like fiscal rationalization and land administration reform, were sidelined for reasons that the public could only speculate upon.

Insularity of outlook, a sort of small-barangay thinking among many of its members, explains this lack of energy, focus and legislative ambition. Coming largely from the landed gentry and rentier classes, many of Congress’s members view the Philippines as an isolated island, no different from their beach hideaways where they have fun and frolic, blissfully unmindful of what’s going on in the larger world.

Hence, while legislators in the rest of the Asia-Pacific region were preoccupied with sharpening their policies to maximize gains and adjust to changes brought about by the global economy, our legislators were busily haggling over pork barrel, or grandstanding on endless investigations that led to nowhere.

The Executive of course was mired in dozens of scandals (e.g. election cheating, fertilizer scams, the Bedol affair, etc.), dragging down Congress and other social institutions deeper into the mire of political paralysis and social stasis.

And while members of Congress where preoccupied with petty bickering, entrepreneurs chaffed at the difficulties of having their businesses registered because of a tangle of obsolete rules; locators in some special economic zones were panicking at the prospect of losing fiscal incentives promised them when they registered; and the general public was left wondering whether or not it would ever have better infrastructure or improved social services. These sad truths didn’t help our efforts to attract foreign investments.

The new Congress should wake up and change its ways of doing things to make it more responsive to the demands of the “brave new world.”

Unknown to many members of Congress, more than 60 percent of the country’s gross domestic product are accounted for by the globalized sectors (e.g. outsourcing, electronics, remittances and the rest of the export-oriented industries). That means most Filipinos are deriving money and livelihood from the dynamics of the globalized world. Focusing legislation on economic issues relevant to this economic transformation, therefore, should be the primary business of the new Congress.

Is the country’s business sector globally competitive? How should the country respond to the accelerating exodus of professionals and skilled people? Is the educational system producing enough graduates with the skills needed by industry? Is the country’s policy on language and the medium of instruction helping the fast-growing information technology sector? Is the policy environment conducive to interisland trade? Are we unnecessarily putting barriers to foreign investments? Are we developing our science and technology capabilities?

These are among the questions that need to be addressed by the new Congress for them to be socially relevant. And it’s encouraging that Sen. Edgardo Angara is one of those actually responsive to these issues. Recently, he called for the creation of a congressional committee on science and technology, an initiative that will surely engender a lot of soul-searching and rethinking about how we can sharpen our capability in science and technology.

Congress should go strong on initiatives like this. It’s high time it exerts its leadership in the policy arena because, based on the tone of the President’s State of the Nation Address (Sona), the ruling party is not so keen on crucial reforms anymore.

It seems like Malacañang is going to spread the grease off pork barrel around (e.g. the construction of bits and pieces of a highway here, a few bridges there, and some septic tanks somewhere).

For a presidency that was bent on bringing us the “hallmarks of modernity” by 2010, the only economically pressing economic policy reform that it has proposed is the reform of the Epira bills to promote open access and greater competition. What the Sona revealed to us is a lame-duck presidency that is just coasting along for a less bumpy transition to oblivion.

Yes, we believe that Congress could actually take the policy leadership. The 2010 elections could be a distraction, but most of the would-be presidential aspirants appear to be mavericks not likely to benefit from endorsements from the current political partisans (Arroyo and Estrada). Hence, there would be more room for independent initiative and statesmanship.

We are crossing our fingers, of course. (Note: originally written as editorial for BusinessMirror, July 26 2007)

Monday, July 23, 2007

GMA's state of the nation address: more goodies, sans reforms

WAS it a State of the Nation Address (Sona) or a planning session by Neda?

The way President Arroyo presented her Sona, it was as if all we need is the construction of more septic tanks, canals, ports, roads, airports, bridges to solve the country’s problems and usher it into the 21st century. One wishes it were as simple as that, but it seems we need more reforms to achieve progress and those things are not mentioned at all in the Sona.

First things first. We all believe in the importance of infrastructure development, and in fact pointed, in this same space, to the need to make up for all those years on underspending as policy planners obsessed themselves with simple fiscal discipline.
We sorely need good infrastructure at this time of declining competitiveness. We need to upgrade all those deteriorating roads and bridges, ports, airports and seaports if only to attract investments and create more jobs. And we need to build a lot more of them if only we could catch up with the neighbors in global competitiveness.

In the last several years, we have been growing decently, topping at 6.9 percent in the first quarter of the year. But that growth performance has not been generating enough jobs beyond the major cities because of bad infrastructure, besides the fact that these new growth drivers are basically technology-driven, implying that only the schooled ones are benefiting.

Indeed, if we want to bring the dynamics of growth to the countryside, we need more infrastructure to generate economic interaction between the urban and rural economies. But in an archipelagic country separated by bodies of water, building those roads, bridges, Internet cables, ports, and airports alone would not do the job. We need policy reforms to make the operations and the use of such infrastructure competitive and efficient, and this aspect is completely missing in the Sona.

President Arroyo mentioned Mindanao several times, promising that government agencies like DENR, DA and DAR are going to spend 30 percent of their budget on the island. That’s certainly good news. There are also lots of promises about new infrastructure projects. That’s positive, given the continuing neglect of the island.

Nevertheless, all these promised goodies would have limited socioeconomic impact given its continued isolation from the national economic mainstream. Why? Because Mindanaoans are not going to be competitive in the global marketplace unless we have a competitive inter-island shipping and port services industry. And we can achieve a competitive inter-island shipping only if we reform the policy regime that has been encouraging and nurturing oligopolistic structures in this industry.

Certainly, the focus on infrastructure development would make a lot of local executives very happy as it was clear those projects were solicited by local and regional politicians, and by congressmen—and the President took pains to attribute who pitched what project to her.

Many of those projects, therefore, are politically driven and could have doubtful economic and social impact. But if we grant that indeed those projects were planned carefully, it begs the question whether or not they are going to be implemented honestly and the funds not dissipated in graft and corruption.

This question is important because until now the government has not offered any measure or policy reform promoting transparency and openness in the bidding and implementation of these infrastructure projects.

One such possible solution is legislating a freedom of information law allowing access by citizens to important documents governing government contracts as a check-and-balance mechanism but there is no such thing in the Sona.

In fact, the Sona does not offer any significant policy reform at improving governance at all. There was faint reference to cheapening the cost of power but the statement doesn’t provide any detail at all.

The legislation she sought from Congress pertained mostly to the political, such as buttressing the witness protection program, increasing penalties against abuse by law enforcers and several other measures that, at the bottom, might very well be covered by existing statutes.

One gets the sense this was her “comfort crumbs” to those who had been nipping at her heels the past year, for allowing a virtual undeclared dirty war, involving state elements, to wreak havoc on militants and activists—including those from the media, legal, church and peasant sectors.

One gets the sense this was meant as a Palace catch-up to the widely praised Supreme Court initiative to make the judiciary a more aggressive player in stopping the steady erosion of constitutional rights, particularly the handling of petitions or appeals for habeas corpus, among others.

And yet, all she had to do, instead of “thickening the thicket of legislation,” as Makati Rep. Teodoro Locsin Jr. had put it in his paper at the judicial summit, was to act on the recommendations of her very own presidential commission, chaired by ex-Justice Jose Melo.

One of which, ironically, was to run after those who, while not directly proven to have ordered political murders and abductions, admitted to “inspiring” some uniformed men to carry them out. The poster boy of such “inspiring” figures was the man singled out in the last Sona, a certain general Jovito Palparan. Ironic, that the President praised him highly last year and now, because of Chief Justice Puno’s initiative, plays along with recommendations to curb abuses from people like him.

Rich in irony, indeed, was this Sona. Rich also in pork-barrel-type promises, strewn hither and dither, but with no firm anchor, apparently just meant to please a lot of local allies.

But then, as she says, she meant this to provide a “harvest” that her successor can gather. The question, though, is, are they the right seeds to plant?

Note: originally prepared together with our editor in chief Chuchay Fernandez as editorial for BusinessMirror, July 24 2007.

GMA's state of the nation address

Those who want to read GMA's state of the nation address, click here.

Sunday, July 22, 2007

My apologies to Raymond Santiago from Unilab

Oh my, I really would like to apologize to Raymond Santiago, corporate affairs staff of Unilab and his managers. My mistakes are two-fold: first, he is not corporate affairs manager as I mentioned in my story in Asia Times ("Filipino diaspora goes up the value chain"), but corporate affairs staff. So sorry to his manager! Second, I learned he was not authorized to release the information that I mentioned in the article. I was pressed for time and I simply quoted him off hand in my effort to finish and submit the story. I thought the information was neutral and harmless—something that’s happening in all companies and industries in the country. Most companies I interviewed admitted to the problem related to the talent war in the Philippines and the Asia-Pacific Region (e.g. high attrition rates, etc). The information of course is accurate but I should have waited for the official communications and quoted the right person.

Again, my apologies to Raymond.

Human Security Act: bill of rights for terrorists?

If you take it from Wall Street editorial today (23 July 2007), it seems like the Philippines’ Human Security Act is more concerned with the rights of the terrorists than people’s security itself. It’s even funny because when a terror suspect is acquitted, the state is mandated to pay the suspect P500,000 a day. Knowing the difficulties of proving “beyond reasonable doubt” all the time, one could assume that lots of terror suspects would go free. Isn’t that a disincentive for law enforcers and the armed forces to take the legal route?

The law also forbids the surveillance of communications between lawyers and subjects, doctors and patients, and journalists and their sources. Law enforcers could only detain terror suspects without charges for three days. “Psychological and moral torture” is also not allowed—which means law enforcers have few tools to deal with terrorists. They might as well just legislated that terror suspects be detained in a five-star hotel with full 24/7 access to TV channels.

It’s funny but I dread the possible consequences. There must be a balance somewhere.

Let’s take down the issue right down at the operational level. If you are an intelligence outfit, you know you have a job to do and yet your hands are tied to deal with the problem decisively, it would be difficult to go through the “due process” route given the disincentives, what could you really do? It seems like it would be more “efficient” to take the short cut: just shoot the terrorists right where you caught them. Kill and don’t tell.

I’m talking about how a system of incentives and disincentives could imbedded in the law might yet muddle the entire issue.

Saturday, July 21, 2007

Asia Times: Filipino diaspora goes up the value chain

“Overseas opportunities for English-fluent professionals are rising, and the lure is hitting the Philippines especially hard where the brain drain is carrying away professionals from virtually every sector of the economy. From the IT industry to health care, journalism, geosciences and the armed forces, the exodus is on.”

Please read the rest of this story of mine in Asia Times Online.

Wednesday, July 18, 2007

Doha Round's demise: implications for the Philippines

THE Doha Round of trade negotiations is dead. The greater tragedy is that not even one in this country wrote a eulogy or explained to the people what this meant. Maybe our policymakers haven’t really thought about the ramifications of Doha’s collapse yet.

But there’s going to be no bliss in ignorance. Soon we are going to realize that with the demise of what is supposed to be a “development round,” developing countries like the Philippines will feel we have jumped from the frying pan to the fire.

Indeed, a world without a successful Doha Round will be full of uncertainties, an international trading system that is prone to protectionist urges, politically driven trade blocs that will hurt the small fry like the Philippine economy, and dicey global geopolitics.

Everybody seems to believe in the virtues of free trade; that explains why everyone wanted to join the World Trade Organization (WTO), even communist—nominal or real—ones like Vietnam, Laos, China and Cuba. The irony is that negotiators, pandering to interest groups and lobbyists in their own countries, do their business like mercantilists—those greedy ones whose idea of a good trade policy is beggaring their neighbor by selling stuff while fending off the efforts of others to sell their stuff in return. Mercantilism had caused global wars, but the world just can’t seem to learn from it.

That is why a successful conclusion of such an ambitious international trade-liberalization project could only succeed when the countries that matter in global politics take the leadership.
During the Uruguay Round of trade negotiations, freeing agricultural trade, or specifically eliminating quantitative restrictions on farm trade by converting those barriers into tariffs, were among the major roadblocks. The Europeans simply resisted the inclusion of farm products in the reform agenda.

To break the deadlock, American president Bill Clinton pushed hard for the Bogor Declaration calling for free trade among members of the Asia-Pacific Economic Cooperation. Fearful that Europeans would be left behind, the Europeans relented, thus paving the way for the conclusion of the Uruguay Round and the birth of the WTO.

The same kind of global leadership by America is needed under the Doha Round, but President George Bush, lured by the siren songs of unilateralism and distracted by the daily bloodbath in Iraq, has shied away from such a role.

Pandering to the US farm lobby, the American government refused to reform its agricultural subsidy program, thus giving the Europeans the excuse not to touch their own Common Agricultural Policy.

Doha is supposedly a “development round” and it can only assume that essence when the billions of trade-distorting subsidies poured by the Americans and Europeans to their farm sector is significantly reduced. With those subsidies, the only way developing countries can compete is for them to put up their subsidies—implying the diversion of scarce resources away from social expenditures like education and health.

No dice, the negotiators from developing countries said vis-à-vis the demand from advanced countries for greater market access in manufactures and services.

So the dreams of Doha died. And all its dire implications.

With a weaker multilateral trading framework, the next best thing for countries hoping to sell stuff abroad and finance development is through free-trade agreements (FTAs) and other preferential trading arrangements. The trouble is, such an arrangement may also divert trade and could victimize third parties.

Not to mention cause confusion arising from the very real possibility that countries forging bilateral FTAs with so many others could end up making contradictory commitments.
An example of third-party victimization is the free-trade accord between Chile and Korea, which gives preferential access to Chilean copper cathodes at the expense of the Philippines that is not part of the deal. Under a multilateral deal, all the things Chile gets with its talks with the Koreans would have to accrue to the Philippines as well.

The solution, of course, is for the Philippines to sign its own FTAs with a relevant country like the US, China or Japan. In contrast to the WTO system using the principle of nondiscrimination, however, such an arrangement tends to become a relationship among unequals since the Philippines usually doesn’t have the funds to hire the best and experienced negotiators.
In most bilateral negotiations among unequal nations, the talk usually transmogrifies into horsetrading for just plain market access without due regard for the “development” considerations of a poor country. Ever wonder why under our supposed “free-trade agreement” with Japan, we are supposed to allow their dumping their garbage here?

Ever wonder why America, our traditional trading partner, has lately been signing up FTAs left and right except the Philippines? It’s because the Americans probably think we need the FTA with them more than they need it with us. So if we ever broach the idea with them, the Americans will surely demand blood—the wholesale opening of the economy for American firms—in return for a few concessions.

Certainly, service industries like banking, telecommunications, utilities, shipping, port operations and aviation need infusion of greater competition, but doing such reforms under an FTA with Uncle Sam does not seem to be politically palatable in the context of the love-hate relationship we have with a former colonial master.

The more pernicious aspect of the post-Doha world will be the dangers of greater protectionism. The demise of Doha came at a time when offshoring was becoming a political issue in the US. With a weak multilateral trading system, it would be more convenient for countries to put more constraints on trade, using all sorts of excuses, including food safety measures.

This is already happening between China and the US, which have started an apparent tit-for-tat banning of certain imports from each other, on the hard-to-dispute ground of safety. What’s to prevent other countries from applying similar measures on the Philippines? Remember how many years we’ve been hostage to that simple phrase “phytosanitary measures” in trade with Australia and Europe?So let’s fasten our seat belts for the rough flight ahead. We haven’t seen the worst of our fears happening yet, but the omen so far is not good. It’s a sad historical turn for which we have no control. All our policymakers can do right now is to develop our defenses and enhance our competitiveness to prepare ourselves for what’s in store in a post-Doha world.

Please see related posts:
1. Doha round as dead thing walking
2. Demystifying the World Trade Organization

(Note: Originally drafted as editorial for BusinessMirror, July 19 2007)

Monday, July 16, 2007

Waste management: legislation without understanding

UPSET by the rising prices of commodities, a president—or so the joke goes—at one time asked his socioeconomic planning secretary to explain the problem. The socioeconomic planning secretary told the president that more people are buying these commodities, thus outstripping supply. “A classic example of the operations of the law of supply and demand, Mr. President,” he said. The president answered: “Then, I should ask Congress to repeal that law.”

The provisions of the country’s Clean Air Act and the Solid Waste Management Act on waste management somehow mirror this kind of joke foisted upon us by well-meaning individuals blinded by their lack of understanding of the dynamics of the policy issue. That explains why, as pointed out in last week’s editorial, we are experiencing a waste-management crisis, manifested in the accumulation of untreated, unprocessed biomedical, toxic and hazardous waste in the environment.

This lack of understanding clearly manifested itself early in the day with the passage of the Clean Air Act in June 1999, which banned incineration but allowed pagsisiga or the “traditional” small-scale burning of waste, including agricultural waste.

Analysts then expressed fears that the new law actually encouraged open burning of garbage, including toxic and hazardous wastes, since the vague definition provided by Section 20 of the Clean Air Act suggested that burning waste is actually fine, provided it is done in an open, decentralized, small-scale manner—an activity that could easily fit as pagsisiga for “community and neighborhood sanitation.”

Open burning or pagsisiga is actually an environmental planner’s worst-case scenario as incomplete combustion in this process implies that cancer-causing substances are generated right smack in the community.

Indeed, people started burning their garbage right in their backyards after the closure of many dumps, as local government units either failed to secure funds for conversion of these dumps into engineered landfills or failed to get the land where landfills could be constructed. Well, they did it because the Clean Air Act actually allowed them to do so.

Realizing their mistake, “environmentalists” and legislators tried to “correct” the issue by completely banning all waste combustion under the Ecological Solid Waste Management Act of 2000. They probably hoped that legislating away the burning of waste could banish the problem. The garbage crisis got worse, however, especially after the Metro Manila Development Authority failed to get adequate landfill spaces after the closure of the Payatas dump.

And while the brouhaha over the municipal solid-waste management is brewing, companies, hospitals and processing plants generating industrial waste, biomedical waste, and toxic and hazardous waste are either storing their refuse on-site for future disposal when a proper facility is available, or outsourcing their disposal to private contractors while hoping that such private firms have what it takes to handle them.

Looking at the actions of some “environmentalists” who lorded it over the crafting and passage of the solid-waste management law, one can’t help but suspect that many of them were not doing their advocacies in good faith.

Naturally, when thermal technologies are banned, the next viable option could be engineered landfills. But when LGUs tried to look for landfill spaces, many in the same network of “civil-society” groups dabbling in environmentalism also opposed landfills, citing certain environmental risks. The only correct option, they say, is “zero waste,” as if it’s actually possible to do so.

Well, “zero-waste management” is actually possible in small, isolated villages producing a few kilograms of organic waste. But it certainly wouldn’t work in megacities producing tons of municipal, industrial, and toxic and hazardous wastes. They missed this perspective because when legislators and “environmentalists” were crafting the laws, they didn’t bother to check the markets for recyclable materials.

In fact, they didn’t know at all the characteristics of Metro Manila’s waste stream. They didn’t know how much percentage is economically viable for recycling. They didn’t know who the buyers and sellers are and how much are being transacted in these recycling markets. They simply assumed that mandating recycling and reuse would automatically solve the problem like magic. Had they known these basic facts, they would have known the enormity of the problem and acted accordingly.

And the fatal flaw is the lack of understanding value and social use of land. The Philippines is a land-scarce country. Without resorting to land-saving waste-management options offered by thermal technologies and waste-to-energy plants, Philippine cities will have to gobble up huge tracts of land for landfills and dumps, thus posing strong competition for other uses like agriculture, forestry, industry and socialized housing.

This partly explains the pervasive Nimby (not in my backyard) syndrome. Certainly, it is hard to convince communities to host a landfill or a dump, knowing that such a “special land use” would destroy land values.

That is why other countries adopt an integrated waste-management program that allows for a hierarchy of options covering waste generation (minimize, reuse, recycle); storage; collection; processing, treatment and recovery; and disposal.

For instance, if thermal facilities (assuming adequate environmental standards) were available to handle what cannot be recycled (including biomedical, industrial and other toxic and hazardous waste), Metropolitan Manila can reduce the volume of waste by 90 percent.
The residual waste, or the ashes that could be made even safer to handle through vitrification, could be disposed of in monofills.

Compared to landfills that occupy hundreds of hectares, monofills need only a few hectares, thus saving a lot of land for other more socially beneficial uses. Equipped with liners and proper engineering design, environmental risks such as leaching could be eliminated. This way, the Nimby syndrome could be avoided.This is what land-scarce countries in Europe do. This flexibility of options is not currently available to us in the Philippines because our legislators chose to craft our policy with their eyes closed. If legislators won’t undo our mistakes, we are stuck with this garbage forever.

(Originally drafted as Editorial for BusinessMirror, July 17 2007).

Thursday, July 12, 2007

Solid waste management: garbage in, garbage out

‘ENVIRONMENTALISTS” swore that incineration technologies are evil so the government should ban them under both the clean-air and solid-waste management legislations.

When pressed for alternatives, some environmentalists replied they will eat garbage, including hospital waste and toxic refuse, should Metro Manila become a mess after following their dictates. So the senators relented, and the “environmentalists” danced in triumph.

Now that we are swamped with garbage, now that hospital and toxic-waste dumps are spreading around like mushrooms as reported lately in the newspapers, Metro Manila residents should demand that the environmentalists who made that boast should now start swallowing their true nourishment.

But they won’t do that. These people are now gone and we are left with a crisis that is certainly causing a lot of health problems to many citizens—problems associated with the continuous open burning of waste, the dumping of hospital and toxic waste in canals and some quiet corners of the metropolis.

When Congress passes laws based on ideological predispositions instead of technical considerations, when these legislators allow themselves to be bamboozled by interest groups, and when such a body legislates without understanding, such laws would surely create a lot of problems. That’s happening to us right now under the clean-air and solid-waste management laws. Garbage in, garbage out.

These days, environmentalists are tossing the blame to local government units (LGUs) for failing to do their duties. That is partly correct. But the difficulties being experienced in handling municipal, biomedical and other waste stem also from a flawed law influenced by the so-called environmentalists.

Under the clean-air and solid-waste laws, all incineration technologies are banned, thus limiting the options available to government managers (mayors, governors, and barangay chairmen) in managing different types of waste.

That fatal flaw stems largely from the failure to understand the “universe of wastes.” Under the influence of lobbyists from scrap dealers and interest groups, those who crafted the laws were simply thinking about small volumes of municipal waste that lend well to purely reclamation techniques, including waste minimization, reuse and recycling.

What they failed to understand is that there are no one-size-fits-all solutions. Effective waste-management technologies, as practiced in successful countries like Singapore and Europe, differ largely depending on the types of waste and the volumes generated.

Let’s start with the basics. In waste management, experts generally define “toxicity” as “the ability to cause harm.” Hence, technically all types of waste are toxic. In reality, some types of waste present minimal risks when properly handled while others are so virulent they need special treatment and disposal procedures.

Hence, we have hazardous waste, industrial waste (from manufacturing, mining, coal, oil and gas exploration), medical waste (generated by hospitals, laboratories, universities, morgues, funeral homes, blood banks), radioactive waste (from nuclear power facilities) and municipal solid waste (MSW)—the last one we generally call garbage generated by households, offices and commercial buildings.

All these types of waste require different types of handling, processing, treatment and disposal. Reclamation techniques (waste minimization, reuse and recycle) are generally used for MSW, especially in smaller low-volume cities.

But in cases of biomedical, industrial and other hazardous waste, like polychlorinated biphenyls or PCBs, the only “best practicable environmental option,” or BPEO, are treatment and incineration and other high-temperature options like plasma and pirolysis prior to disposal. This is because the only realistic way to deal with virulent and hazardous wastes is to destroy them at very high temperatures.

As practiced, most of these approaches are not used in isolation. In fact, a state-of-the-art waste-management treatment facility has three major components: a physical- and chemical treatment-plant, an incineration or thermal facility (usually waste-to-energy plants) and a dedicated landfill for the final disposal of the residues (about 10 percent of total volume of wasted handled).

However, options like incineration and landfills usually generate a negative attitude among residents, primarily due to the not-in-my-backyard (nimby) syndrome. Thus, as practiced, these waste-management approaches are expressed as a hierarchy of options that put emphasis on “greener” methods like reclamation.

In Europe and the US, this hierarchy of options includes waste reduction at source (first priority), waste recycling and reuse (second), recovery of raw materials and energy content of the waste (third), treatment (physical, chemical, biological), thermal (incineration, pyrolysis, plasma destruction and thermal oxidation) processes to convert waste to a form that permits safe disposal, and, finally, disposal through landfilling.

To ensure that thermal or incineration plants are environmentally safe, policy makers in these countries usually require these facilities to have a 99.9999-percent destruction and removal efficiency (DRE). They also require these facilities to have adequate engineering measures, including the use of bag house filters, electrostatic precipitators and scrubbers.

A hierarchy of options is necessary to give LGUs the flexibility to use various methods, depending on the characteristics and volume of waste generated. Smaller communities usually generate MSW, thus a reclamation and disposal techniques would do.

In huge megacities like Metropolitan Manila that produce huge volumes of MSW, as well as medical and hazardous waste, however, it would make sense to allow a full hierarchy of options to give flexibility to the LGUs, in tandem with the private sector, to explore effective options. More so, because we have vibrant electronics, chemical, hospital and food industries that produce large volumes of toxic and hazardous waste.

Right now, we don’t know how these toxic and hazardous waste are disposed. Most hospitals probably just outsource the handling and processing of their waste while crossing their fingers that their contractors are doing the right thing. But right now we don’t have the facilities to handle them properly. That explains the prevailing dumping of these toxic and hazardous waste in open dumps, waterways and some “quiet corners” in the dead of night.

It’s high time legislators reviewed our waste-management laws and put in place one based on science and common sense. And while they are at it, maybe those “environmentalists” who swore to eat garbage should start fulfilling their promise.

(Note: Prepared as editorial for BusinessMirror, 12 July 2007).

Monday, July 09, 2007

An entrepreneurial generation?

I’m convinced that about half of what separates the successful entrepreneurs from the nonsuccessful ones is pure perseverance.—Steve Jobs (1955 - ), Interview, 1995

Innovation is the specific instrument of entrepreneurship... the act that endows resources with a new capacity to create wealth.—Peter Drucker (1909 - 2005), Innovation and Entrepreneurship, 1985

CONGRATULATIONS to Joyce Anne Cruz, Reynaline Tugade and Christina Limbo from the University of the Philippines for winning HSBC’s business plan competition in Hong Kong.

Their victory in this prestigious competition is important as it seems to signal the growing interest among the youth to become entrepreneurs. The Philippines needs this kind of spirit among the young. This is the only way we can generate enough jobs in the country and address poverty.

Right now, official statistics say the jobless rate in the Philippines stands at 7.4 percent and underemployment 18.9 percent. These numbers translate to 2.5 million jobless people and more than six million people who are unhappy in their jobs. These are huge numbers, considering that the Philippines has been growing quite decently in the last three or five years.

The employment outlook has actually been improving lately, but it is obvious that jobs have not grown fast enough to soak up joblessness despite rising overseas placement and the growth of services employment. This trend could largely be due to the fact that economic growth—in the Philippines as well as the rest of the Asia-Pacific region—has been technology–driven. The immediate beneficiaries of such growth, therefore, are skilled workers or people who have gone to college.

Also, it appears that the relentless search for efficiencies by the manufacturing sector in response to stiffer foreign competition is forcing them to scrimp on labor costs, thus making them a bit more conservative in their hiring decisions.

What this trend suggests is that the country needs help from our economic entrepreneurs to expand job opportunities. We need them because they are intrepid souls who start new business organizations despite adversity and difficulties. But where do we get all these entrepreneurs? From the younger generation represented by the likes of Cruz, Tugade and Limbo.

Based on anecdotal evidence, what sets the Philippines apart from the dragon economies of her neighbors is this low level of entrepreneurship—ironically, in a country where it’s often been said that small and medium enterprises (SMEs) account for 90 percent of the economy.

That’s the general impression, anyway. Historical circumstances dictate so. For so long, despite the abundance of SMEs, the Philippine business landscape has been dominated by political manipulators who do business through connections, special privileges and government incentives. This practice was common during the Marcos dictatorship when friends and relatives of cronies cornered juicy deals through state-sponsored monopolies and fiefs.

The same rent-seeking behavior, albeit manifested in other forms, pervaded all post-Edsa administrations. The result was that we have a generation or two of Filipinos who have grown to associate entrepreneurship and the profit motive with social “exploitation.”

Hence, many of the country’s population in their late thirties and older came to associate “serving the people” with going underground as revolutionaries as well as doing charity and “civil society” work; sadly, many of these ventures proved unsustainable when the funds from charities in Europe drained, especially after the collapse of the Berlin Wall.

Lacking the ethos of risk–taking and entrepreneurship, the career goals of many in these generations focused mostly on gaining employment in the corporate sector (which is narrow), the bureaucracy, academe and overseas. Some of those who came before them and didn’t have the knack for growing a business or simplistically associated pursuit of profit with selfishness just copped out: they withdrew from society as hippies who grew long hair, took fewer baths, jammed in the community band, smoked pot and played Frisbee.

Now, things appear to be changing for the better. The younger generation—sick and tired of chasing jobs that leave them unsatisfied and empty—appear to have a changing view of their options in life. If they can’t find jobs, they might as well create jobs for themselves.

There’s no statistical evidence on this trend yet, but the growing popularity of entrepreneurship seminars and events initiated by do-gooders like Joey Concepcion, the increasing circulation of publications on entrepreneurship, the rise of entrepreneurial schools (Vivien Tan’s school for entrepreneurship is an example), the continuing popularity of AIM’s entrepreneurship courses, to cite some examples, are possible proofs.

Recently, the popularity of innovative business models like that of Chikka.com, providing communication services to this text-crazy generation which combines high technology, venture capital and tech-savvy young business leaders, seems to support this trend. The faculty and students of Ateneo’s department for electronics and communications engineering lately formed Blue Chips International, providing microelectronics design and software services for global corporations—this seems to indicate a continuing spark of entrepreneurial energies among the young, lately validated by the victory of the three UP students.

Of course, the younger generations today are growing up with a changed social ethos. These are the generations who grew up idolizing Bill Gates of Microsoft, Steve Jobs of Apple, Larry Ellison of Oracle, Jerry Yang of Yahoo!, Larry Page and Sergey Brin of Google, and Chad Hurley and Steve Chen of YouTube—rebels and iconoclasts who trail-blazed the brave new world of the Information Revolution and made money for themselves beyond their wildest dreams.

Besides generating jobs, entrepreneurs are important to society for performing other socially beneficial functions. Usually, entrepreneurs are leaders and visionaries with innovative ideas that can change society. Many of them think out of the box to provide tangible solutions to real economic and social problems. Many of them eventually become effective political leaders who transform their own communities. If we could have more of them—and fast—if society (schools and business leaders) could nurture and guide more of them, entrepreneurs might yet revolutionize this country, a social transformation that could make Karl Marx blush.

(Note: Originally drafted as editorial for BusinessMirror, July 10 2007.)

Sunday, July 08, 2007

Global Peace Index's peace of the graveyard

Freedom—if there’s one thing I really care about, that’s the word. For me development is freedom—thanks to Nobel Laureate Amartya Sen—and factors like economic growth are important but secondary to it. That’s why I felt uncomfortable when the Philippines was ranked worse than many warmongering countries like Iran (yeah, their leaders do promise to wipe Israel off the map, and launched a war with Israel through its protégé Hezbollah). And I guess, it’s because Freedom is not part of the Peace Index methodology. Had they included political rights and basic freedoms in the computations, the Philippines’s score would have been a bit better.

But I feel a bit happy that some people do share my views. Says Peter Worthington of the Toronto Sun:

Not everyone will be convinced. Certainly I'm a skeptic who feels the most
significant factor of "peace" has been left out of the equation: "Freedom."

A cow lives most of its life in peace. No worries, plenty of food, a scenic environment—until the day it is taken to the slaughter house. Is that
the essence of peace? Hardly. A slave can have a peaceful life, but that's not
the goal of most of us.

North Korea (curiously excluded from the GPI assessment of countries) is arguably the world's most peaceful country, with few public protests, little crime that we know of, a docile and orderly population. But no freedom. Without the appearance of freedom, or the belief of people that they are free (even if they aren't), "peace" means little.
Oh, Peter Worthington explains it so well, and if you want to the read the rest of his analysis, please do click here.

Or you may sample his parting shot:

GPI [global peace index] likes catchy slogans, like Mahatma Gandhi's: "An eye
for an eye ends up making the whole world blind," and Ralph Waldo Emerson's
idiotic "Peace cannot be achieved through violence, it can only be achieved
through understanding." Sounds good, but that's not how "peace" was wrestled
from the Nazis, nor how China, Vietnam and Cuba achieved the high "peace" status
GPI accords them today…Those who value peace above all else should realize the
grave is peaceful, as is surrender. But it isn't freedom and doesn't guarantee

Don’t get me wrong. I do love the Peace Index! But I do want the authors to improve on the methodology. It’s because even The Economist, the sister company of the Economist Intelligence Unit that collaborated on the study, does have serious reservations about their methodology. Writes The Economist:

A country that applied the simple Roman maxim—“if you want peace, prepare for
war”—would score badly. By unconditionally endorsing low military budgets and
marking down high ones, the index may seem to give heart to freeloaders:
countries that enjoy peace precisely because others (often America) care for
their defence. Indeed, one of the ideas behind NATO and several other security
pacts is that America's protection limits the need for medium-sized powers to be
big military players in their own right.
High levels of incarceration per capita is one variable. That is why countries like the US scored badly. But isn’t it weird that countries (Oman, Singapore, Saudi Arabia, Iran, and Yemen) with high executions per capita also rank high in the Peace Index? Sounds like Peace of the Graveyard to me. So if a despot wants to have a high score next time, all he needs to do is murder all the prisoners in the dungeons—secretly, of course. Haha! I’m joking here but one couldn’t help but get that impression.

It pains me—it’s not a nice joke, I realized. But when your methodology is faulty, you get this kind of funny results.

Even the Economist Intelligence Unit—as reported by Opinio Juris— admits the study’s methodological flaws:

As with all indexes of this type, there are issues of bias and arbitrariness in
the factors that are chosen to assess peacefulness and, even more seriously, in
assigning weights to the different indicators (measured on a comparable and
meaningful scale) to produce a single synthetic measure.

Ah, arbitrariness and bias! Isn’t that what kills most well-intentioned studies? Too bad because I love the Peace Index; reforms, therefore, are in order.

Let me suggest: First, they should hire local researchers to provide them the inputs. The UN, in producing the Human Development Index, uses the same approach and there has never been any complaint against the Report even though the Philippines didn’t rank high. It’s all about the soundness of the methodology—and its presumed objectivity.

Second, they should include freedom as an important variable. How? They could input the results of the Freedom House and give them higher weight in the computations to balance out the results.

Of course, some countries might not want Freedom as a variable in the computation, as some analysts might want to suggest. Some countries, they say, don’t want democracy! Right. So I have a solution: why not change the name to Index of Pacifism. The Economist calls it that way, actually. Using pacifism, the Report would feel less subjective, realistic, less complicated, simple, and convenient. And less pretentious!

I mean, some despots and some democrats are probably "pacifist" so the name is appropriate.

Wednesday, July 04, 2007

A desolation called ‘peace index’

THE policy entrepreneurs, people who crunch statistics and conjure images and sell them to the world, are at it again.

This time, they’ve produced the “peace index,” ranking countries across the world according to their “peacefulness” or their propensity to avoid war. As usual, the Philippines is a victim, ranking 100th out of 121 countries.

Most of those criticisms have a grain of truth, but many of them are utterly false. One example is Heritage Foundation, which accused the Philippines of “corruption in the implementation of tsunami-related aid,” when, in fact, there was no tsunami aid simply because the Philippines was not affected by the disaster that brought destruction to much of Asia in December 2004.

Most of this statistical crunching is done by armchair researchers who scour the Internet and harvest data from official but second-hand reports to conjure their own version of reality without going to the country they are describing. Worse, some outfits hardly hire or consult local experts who can help them understand the nuances and the granularity of information that they need to give a balanced perspective. And voila! Before you know it, they have a cool “product” to sell to the world.

Now there’s this new project called the “peace index”—hiding behind the respectable façade of the Economist Intelligence Unit, the University of Sydney, and the names Bishop Desmond Tutu, the Dalai Lama and Jimmy Carter, who endorsed it.

Sadly, the project has the look of the same entrepreneurial venture that lacks logic, coherence and, probably, accuracy. And it’s worse for us because it’s hurting what’s left of our image abroad as a people.

The peace index ranks countries’ “peacefulness,” using indicators like measures of ongoing domestic and international conflict, social safety and security, and measures of militarization.

Top 10 countries include Norway, New Zealand, Denmark, Ireland, Japan, Finland, Sweden, Canada, Portugal and Austria. Those in the bottom 10 include Angola, Cote d’Ivoire, Lebanon, Pakistan, Colombia, Nigeria, Russia, Israel, Sudan and Iraq.

In a field of 121 countries, the outfit ranks the Philippines 100th. Are we really that warmongering as a people?

The tragedy is that not everybody in our midst is questioning the results. We seem to assume it’s accurate. Some people are even using the results as a spiked whip to beat our backs.

Since last year, enterprising groups that are regularly making rankings have painted the Philippines with a declining competitiveness, with poor infrastructure, corrupt, economically unfree and with poor environmental index together. We’re not saying all of these groups are wrong in their assessment, but there’s a lot of unverified or recklessly used information out there. Now another outfit has practically labeled us as a warmongering country.

Examples of curiosities: the ranking shows that Iran—a country accused of supplying weapons to terrorists in Iraq and Lebanon to blow up civilians, a country whose leaders have threatened to wipe Israel off the face of the earth with nukes, a country that recently initiated a shooting war with Israel through its protégé Hezbollah, whose ruling elite regularly round up intellectuals and activists, a country that is in war posture with the US—is ranked 97! That’s a low rank, yes, but higher than the Philippines!

And yes, based on the “peace index,” Yemen (ranked 95) is even more “peace-loving” than us despite the fact that this country had civil wars in 1979-1989, in 1994 and in the 2000s. A few days ago, cable news kept reporting that six tourists had died in a terrorist attack. Despite the low-intensity conflict we had, we never had violent spasms of civil strife experienced in this country.

The Yugoslav wars that killed hundreds of thousands of people and led to the breakup of the country into several states, is still fresh in the world’s collective memory. But the “peace index” is now telling us that the world should forget about it because these countries are now relatively “peaceful.” They are peaceful now and have low military spending because peacekeeping forces from the North Atlantic Treaty Organization are still there, escorting young children to schools.

According to the peace index, Bosnia and Herzegovina’s rank is 75th.

Methodology-wise, the peace index has a fatal flaw. It doesn’t consider the degree of political freedoms in the computation. Hence, it produced a weird result wherein repressive and authoritarian countries rank high: China, Algeria, Libya, Syria, Egypt, Zambia and Vietnam. The unintended message is that repression is good for as long as it creates “peace.” What kind of peace is that? It’s one that reminds us of what Roman historian Tacitus said of the Roman Army: “They created a desolation and called it peace.”

The assumption about peace is also a bit naïve and hypocritical. For instance, countries and economies like Japan, Australia, Taiwan, Singapore and Hong Kong rank high. These countries can indeed feel “peaceful” because they don’t have to build huge armed forces. Someone else—Uncle Sam—is taking care of their economic security. Their oil, including that of the new economic powerhouse China, passes through the “SOC” or sea lanes of communications (Sunda, Lombok and Malacca Straits) that is secured by the United States Pacific Command.

Actually, about 80 percent of the world’s oil passes through SOC. When your oil is safe and secure from terrorists and pirates, you would have the luxury of feeling “peaceful.” And yes, some peaceniks out there might even think that you are the most “peaceful” country on earth, thus elevating your moral standing in the community of nations.

Finally, the index is inconsistent. It ranks Israel among the least peaceful, worse even than the Philippines, and for a reason. It’s on constant war footing with its neighbors Lebanon, Syria and Iran, and the Palestinian question continues to be the main hurdle to Middle East peace. One might expect, therefore, that the peace index might also cluster Israel with its enemies. But surprise, surprise!—Syria and Iran are ranked higher. So Israel is a warmonger while the countries it exchanges lethal ordnance with are “peaceful.”

Yes, the idea of having a “peace index” is a good one. But at the very least, those doing it should ensure it doesn’t sacrifice the truth, common sense and historical facts.

(Note: originally drafted as editorial for BusineMirror, 5 July 2007.)

Tuesday, July 03, 2007

Asia Times: White-collar Asia feels outsourcing pinch

"From Australia to Singapore and Japan, upper-echelon service jobs are beginning to drift away on the rising outsourcing waves to China, Thailand, Vietnam and the Philippines. Can unions and politicians reverse the tide, or are they doomed to sink?" To answer this question, you may read my article in Asia Times.


Monday, July 02, 2007

Complacency kills!

Success leads to complacency. Complacency leads to failure. Only the paranoid survive.—Andrew S. Grove

COMPLACENCY kills. And it’s going to kill the nascent growth we have achieved if Malacañang continues to let its guard down.

A year ago, President Arroyo, in her last State of the Nation Address, told the world that reforms in revenue collection that her administration has taken have started to yield fruit. The government—she told Filipinos—now has the resources for a “social payback.”

A few weeks ago, it was clear the government had lost its momentum, marked only by the departure of revenue commissioner Jose Mario Buñag, whom the government apparently used as a scapegoat for its governance failures on a broader front.

It seems like the government was lulled into believing things were going smooth when the stock market started to perk up and the National Statistical Coordination Board told us we grew by 6.9 percent in the first quarter, only to learn later that state coffers have no more money to sustain spending beyond what it did to shore its candidates in the May elections.
Now, it has become clear that blowing hot and cold on campaigns against tax evaders and revenue improvement could backfire and initial gains made from the reformed VAT could only go so far.

When GDP numbers started improving in the last three years, the government simply lost the will and the energy to pursue further reforms that could have provided the economy stronger winds to soar higher. We refer to the continuing failure to attract investments, to address high power costs, remove the remaining vestiges of policies that encourage oligopolies and rent-seeking behavior in ports and shipping, and to mobilize sufficient money for infrastructure development.

It’s so easy to see why the government has become complacent. In the last few years, we seem to have done away with boom-and-bust cycles that characterized much of the post-Edsa Revolution economy.

Gone are the days when journalists did super-exciting work in the country. In the ’80s until the ’90s, foreign wires, international magazines, CNN, BBC and major American newspapers like The New York Times had a huge presence here. Foreign journalists were happy because they had coup attempts, mass demonstrations, Sparrow units and our general helplessness to feast on. Even local broadcast and print reporters were strutting around like rock stars. They were so popular many of them parlayed their celebrity status into viable political careers.

Things have changed a bit. We no longer get much attention from global media, unless there’s a landslide that buried thousands. But even in that department, we have to compete for the world’s attention with the wildfires in California, the drought in Sydney, or flooding in Indonesia, and we don’t always “win.” There are super typhoons occasionally, but that’s not an exclusive spectacle because these freaks of nature either go to Taiwan or Vietnam after leaving a trail of destruction in some areas in the Philippines.

We have occasional bombings and kidnappings—the Bossi kidnapping being the latest—but the world no longer cares much because there are bigger, bloodier and nastier bombings in Iraq, and occasionally India, Indonesia or Pakistan. We just had a funny midterm election, but it was not exciting enough compared to the continuing drama that followed the ousting of Thaksin Shinawatra in Thailand.

That means we could actually do our own thing and solve our own problems without the world looking over our shoulders. Conversely, we could—from complacency, backsliding, skewed policies and politicized decision-making—inflict ourselves harm and die a slow death, but it would not create much attention until, perhaps, it’s too late.

In the last four to five years, we have been growing 5 percent to 6 percent in terms of GDP. In the first quarter, we grew by 6.9 percent. These are decent growth figures. But the world has not noticed that because it’s a normal thing. The not-so-normal thing is either a miserable 3 percent or an extremely high figure of 7 percent to 11 percent that is being experienced by Vietnam, India and China.

In other words, we have a normal country with normal sets of problems. That’s good. But this is also the most dangerous—nay, critical—phase of our lives as a nation. “Normality” could lull us into complacency, and moral hazard could destroy what our entrepreneurs have built, so far, despite the odds in the last three to five years.

The stock market is soaring because foreign investors are probably testing the waters and figuring out whether or not the government could use the momentum to boost reforms and move forward. That should explain why the country’s capital formation—an indicator of whether or not business organizations are buying new machines and additional equipment, and upgrading their offices—has not really improved no matter how the country’s drumbeaters in the Board of Investments and the Philippine Export Zone Authority screamed they got billions-worth of promises from would-be investors.

If these investors fail to see that serious reforms are not forthcoming, if they don’t see a clear resolve from Malacañang, they might just lose interest and move on to the next country like Vietnam and China, where open economies and authoritarian politics provide certainty. That will surely be a tragedy for us all.

(Note: originally drafted as editorial for BusinessMirror, 3 July 2007.)