True or false?

Did you play True or False as a kid? The State-of-the-Nation Address reminded me of this game.

Interestingly, this was the first Sona that didn’t make promises: There were no plans laid out, goals to be achieved, targets met—except the President said she would be stepping down on June 30, 2010. At least I think that’s what she said. So let’s look at her 2001 Sona, what she did promise when she had an empty slate and eight years in which to do something. She promised an economic policy of free enterprise with social conscience. I’m not too sure what the latter meant and how it was supposed to be measured, but certainly the controls imposed in one way or another on power, water rates, transport fares, telecoms and now, pharmaceuticals do not indicate a government committed to free enterprise. Rather it is a government that is prepared to step in and control when it seems politically expedient. You don’t grow an economy, create jobs and eliminate poverty that way.

Arroyo’s assessment this year was seen through rose-colored glasses with her critics, whom she aggressively complained about, saw through the glass darkly. I’d like to think I see it all through clear glass, and hope the glass doesn’t shatter.

For instance, there were facts and figures mentioned that just didn’t tally with what I’d learned. Foreign investments increased 15-fold. Where on earth did that come from? My figures—from the central bank—say that under President Ramos FDI averaged $860 million a year, while in GMA’s term it was $890 million when adjusted to real value (i.e. the same dollars as the Ramos time) as you must do if you’re to make a fair comparison. In the six years of Ramos, US$9.5 billion flowed in. For the eight years of Arroyo it was $12.1 billion. If you pro-rata that to six years it becomes $9.1 billion. If you convert it all to 1992 dollars, Ramos attracted $6.7 billion, Arroyo $3.4 billion pro-rated. I don’t see any 15 times anything in that.

In 2001 she said that “the way to fight poverty is to create jobs”. To do that, the promise was to attract investment. In the eight years since then, US$12.1 billion has flowed into investments here from abroad. But $38.5 billion went to Vietnam, $37.5 billion to Thailand, and $35 billion to Malaysia. That doesn’t sound like much of an attraction to me. Yet that’s the comparison you must make. You shouldn’t compare to numbers from previous administrations. We are in competition to attract investment, so what our competitors achieve is what is the real measure of success or otherwise. Not 15 times some unspecified base.

Then there’s poverty and employment which I think we’d all agree are THE most essential issues to address. She too said so, that the welfare of the people was first on her agenda, and claimed success because GNP per capita had risen from $967 in 2000 to $2,051 by 2008. But there are two things wrong with that; 1) That’s nominal numbers—deflated to the same dollar the $2051 reduces to only $1,323. That’s an annual real growth of only 4 percent. That’s the real number. But even the $2,051 she proudly declared pales in comparison to Singapore’s $40,427, Malaysia’s $7,662 and Thailand’s $4,074. Yet the Philippines and Thailand were pretty much the same 30 years ago. I’d be ashamed, not proud of those numbers and wondering what I’d done wrong so I could fix it.

Number two is that this is a grossly unequal society so few get that average, it’s no measure of poverty. The real measure is how many Filipinos live on less than $2 per day. In 2000, 34.4 million did, last year, the number had risen to 40.1 million. The poverty situation has worsened, almost six million, yes six million more desperately poor people living in conditions you and I would consider sub-human.

It’s the same with employment: Arroyo claimed eight million new jobs were created, yet the National Statistics Office figures say it’s only 4.9 million. Also, 36 percent or about 1.8 million of those were self-employed (mostly sidewalk/market vendors) while 12 percent or roughly 588,000 were unpaid family workers (mostly on farms). You can’t consider them gainfully employed. In her 2001 Sona, the President quoted that unemployment stood at four million in 2000, the implications being that she would reduce it. Well, based on the official government figure that was correct, she did, as in 2008 it was 2.7 million, but that was under a changed definition. Using the 2001 definition, there were 4.1 million without a job last year. We estimate there are 600,000 more people unemployed today than in 2000. We didn’t change the definition to gloss over the figures.

These two factors alone are a serious indictment of the presidency. They are two of the most important, by far, measures of a nation. In both, the President has failed. Higher growth rates mean nothing if they don’t improve the lot of the people. The ones she wanted to transfer power to.

She believes she’s built a strong, resilient economy insulated because from the vagaries of the world. Her critics and most analysts see it as an economy that because of its weaknesses is not sufficiently allied to the world. One of the more important things to do to create a strong economy is to build infrastructure for business to develop, for the economy to grow. She understood this and started off in 2001 with the following promise: “In providing infrastructure, we will harness the private sector via the build-operate-and-transfer law. Our priorities include telecommunications facilities for high-speed connectivity at low cost, roads to target tourist destinations, infrastructure for the modernization of agriculture, light rail mass transit to address the traffic problem in the National Capital Region, and computer and transport systems toward Subic-Clark and Calabarzon to decongest Manila. We will minimize bottlenecks to productivity, such as the high cost of power, deterrents to investments in agriculture, overly confrontational labor-management relations, and corruption and red tape at the national and local government levels.”

Telecom got done by Globe, Smart and Sun under Ramos’s deregulation of the industry. Arroyo added nothing to it. Only a few major tourist roads were built and some rural roads. There’s no new LRT/MRT systems although LRT-7 has been approved. Manila has certainly not been decongested, as promised, although the expressways—north and south—are complete or on the way to being so. But a high-speed rail to Clark (essential to making it the main airport) isn’t even a glimmer in the eye of anybody.

But it’s all been too little and the Philippines now ranks last (57 out of 57 countries) in the world on basic infrastructure according to the World Competitiveness Yearbook. Power costs remain high, investment in agriculture is desultory thanks to CARP, but labor-management relations are much improved. Corruption and red tape are ever with us. Worse, according to Transparency International.

Where she has done well is in the services sector where, as she correctly points out, tourism is up (Secretary Durano has done a good job here) and BPO is growing by leaps and bounds. The Philippines is number two these days, close to India.

And the one idea I thoroughly agree with her on is the creation of a Department of ICT, long, long overdue (I first raised it three months after she took office at a conference I held for her). Eight long years and the most important sector for the Philippines’ future is not properly represented and supported at the Cabinet level where it needs to be. I hope the two houses of Congress were listening and would act smartly.

I also agree to a dramatic reform of the sin taxes to remove the obvious distortions and raise the rate to deter a habit (cigarets, not wine) that has been proven harmful. Every other country has done it, the Philippines can do no less. It’s the socially and financially responsible thing to do.

The President was proud to announce that pharmaceutical companies had voluntarily agreed to reduce prices of many medicines by half. “Voluntary” must be a Tagalog word I don’t know. The President implied, almost stated, that she’d not violated the basic free market policy of government because the pharmaceutical companies had “voluntary” offered price reductions. There was nothing voluntary about it whatsoever, the companies were threatened if they did not bring down their prices.

Yet she said in her Sona: “The market grows economies”. In a free market, generics are available at a fraction of the price, you don’t need to manipulate the market. This wasn’t tough decision-making but populism-pandering.

Her claims on education seemed to be out of kilter with what our research shows. She claims improvement; we record further deterioration. The Philippine education system remains a laggard in Asia. One reason is that the country spends $100 per student today, compared to the Asian average of $1,500. Now there’s a “15 times” number—the wrong way for the Philippines. These Asian countries already have excellent education systems, yet they continue to pour in that much to education. Today, out of 100 Filipino kids who enter school, only 60 get to finish primary. Back in 1998, 70 got to finish; while only 35 finish high school compared to 54 who did in 1998. How can that be an improvement?

I could go on challenging many of the figures President Arroyo quoted and facts she stated but I think the above is enough to show some overwhelming doubt to much of what was said.

Sadly, I really think she thinks she’s done well, and there are some things that are better, but overall it’s not the case as all the impartial evidence shows . This is her greatest weakness, an inability to accept reality and then do something about it.

More people are poor today, more people don’t have a job. Fewer kids finish high school. That’s not what I’d want to be remembered for. She’s got about six months to do something about it. I wonder if she will. –Peter Wallace, Manila Standard Today

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