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.)


Anonymous said...

'SHOW ME THE MONEY' should be the Philippines lament about their politicians and leaders who one after the other, from history since WWII, have all failed to deliver to their citizens.

Philippine political leaders are only very good in two departments: glibness and the sleight-of-hand. How many Philippine leaders have enthralled with the promises of 'greatness' for the country to desentisize the hunger of their masses.

Attracting investors, foreign investors especially, is the common sense solution to raise the living standards of the Philippine nation. Why leaders after leaders fail 'to attract' the foreign investors to the shores of the Philippines, and thus cause the Philippines to so visibly trail Thailand and Malaysia economically behind is not a riddle but a malaise that needs some serious explaining.

Dave Llorito said...

right now its not realistic to expect huge inflows of FDI to the Philippines given the rapid rise of China. in fairness, we are actually attracting some and its increasing but its not yet at the scale of say thailand or vietnam. that is why we need to maintain the growth momentum by continuing public investments in infrastructure where we are lacking. the other is we need to put a freedom of information act to deter corruption in BOT contracts. that's one way to attract investments.