Campaign a cakewalk compared with tasks winner Aquino must face

THE presidential election campaign of 2010 was absurdly easy, compared with the magnitude and complexity of the tasks the winner must now take up. President Gloria Arroyo leaves us a country with an opaque and incompetent government; rising poverty and inequality; and falling global competitiveness. Where does President-elect Benigno “Noynoy” Aquino 3rd begin?

GMA to the dock?

From the quality of his Cabinet appointments, people will judge how seriously he intends to deal with endemic corruption, bureaucratic demoralization and incoherent public policies.

Immediately Aquino faces a tough choice. Moderate allies such as former Speaker Jose de Venecia urge on him a “government of national unity” similar to that which facilitated the Ramos structural reforms of the middle 1990s. But partisans like the “Hyatt 10” demand a commission to call President Arroyo to account on charges of corruption, plunder and human rights violations.

Either way, Aquino will stir up early dissension. France’s General de Gaulle famously complained about having to govern a country with 246 varieties of cheese. President Aquino will have to deal with 162 separate “parties.”

As the sociologist Father John Carroll SJ, has noted, this anarchic factionalism of our politics “reinforces individualism and impedes the acceptance of common social goals for the nation.”

Still protectionist

In our still highly regulated economy, falling competitiveness is the basic problem. The high costs of doing business—because of political instability, corruption, high energy costs and poor infrastructure—have driven away national as well as foreign investors.

Protectionist policies dating back 70 years—they still have popular support—complicate the task of economic opening. Yet it must be accomplished, if we are to begin easing low growth, joblessness and poverty.

If we are to keep pace with our neighbors in the world’s fastest-growing region, we must shed our inward-looking economic orientation, dismantle our cartels and monopolies, and free key industries from regulatory capture.

Growing hunger

Socially, hunger has apparently begun to stalk the poorest of our poor. The survey group Social Weather Stations says hunger among Filipino families has multiplied four times in the last six years: from 5 percent in 2003 to 20 percent in 2009.

Despite episodes of high growth in recent years, poverty continues to rise. According to official data, the poor increased from 30 percent in 2003 to 33 percent in 2006. In November 2009, University of the Philippines academics estimated that 35 percent of Filipinos—32.27 million people—lived below the poverty line.

Out of every 100 Filipinos, roughly 15 are what the World Bank classifies as “absolutely poor.” In East Asia, only Laos and Cambodia have proportionally more absolutely poor people than we do.

No trickle down

Because growth is so narrowly urban-based, and because income inequality is so high, development doesn’t trickle down to the rural poor. Metro Manila and its satellites, Central Luzon and Southern Tagalog, produce 65 to 70 percent of domestic output and income. The richest 10 percent among us may be as much as 23 times richer than our poorest 10 percent.

In the mid-2000s, our average incomes were much higher than in Vietnam and Indonesia. But even then absolute poverty among us was much higher than in either of them, according to the University of the Philippines (UP) economist Arsenio Balisacan.

Meanwhile our middle class is shrinking. In 2006, the middle class made up 19.1 percent of all Filipinos—down from 22.7 percent in 2000 and 23 percent in 1997. Because of the global recession, the 2009 figures are likely to be even lower.

Why we can’t grow faster

If we are to lift up the lives of our poor, the UP economists say, we must raise gross domestic product (GDP) growth to 6 percent yearly at least until 2020. To do this, we must raise the investment rate from today’s 15 percent to 25 percent. Indonesia is already hitting 25 percent and Thailand 28 percent. Vietnam invests a phenomenal 38 percent of its GDP.

But our low tax take and the generally weak financial system prevent government from even investing adequately in primary health care, basic education and rural infrastructure.

Thailand spends six times more than we do on every public-school child. Singapore invests 13 times more. Our school dropout rates are East Asia’s highest. Nationwide, only six out of 10 pupils finish Grade 6—and, in our poorest provinces, as many as a quarter of all the people may be functionally illiterate.

Weakest tax effort

Our tax effort is the weakest among comparative East Asian economies. In 2009, it was 12.4 percent, down from its peak of more than 17 percent in 1997. The budget deficit hit P290 billion, raising fears of debt service crowding out social investment in future years.

For infrastructure, over these last 10 years, we’ve been spending some 3 percent of GDP—compared with over 7 percent by Thailand, Vietnam and China.

We need badly to raise tax and customs revenues. But tax evasion is rampant, and smuggling has so worsened that more than a third of all our petroleum comes into the country duty-free.

These ills are compounded by our prodigal legislature. The 14th Congress neglected to pass bills that eliminate tax privileges enjoyed by favored businesses, and bills to index “sin” taxes on tobacco and alcohol. Yet it approved new populist tax exemptions worth over P72 billion.

High population growth

The UP economists suggest that the new president simplify administration by eliminating superfluous offices such as the Board of Investments and the wasteful National Food Authority, raise the value-added tax (VAT) to 15 percent, and begin collecting the real property tax diligently.

They also reiterate their call for a clear population policy backed by strong government support. They note that “the Philippines pays a high price for its unchecked high population growth” for much of the past 25 years.

National purpose

Our president-elect must do more than preside over the further unfolding of our democracy of faction. He must point us toward an overriding national purpose. He must set out for us a series of national goals grand enough to engage our civic spirit.

—Building state capacity. To moderate the influence of special interests on public policy, we must strengthen our electoral system, our political parties and the civil service, as well as the checks and balances that protect the independence and integrity of the three branches of government.

Aquino can get civil service modernization going if he gives up his power to appoint officials down to the assistant-bureau-director level.

Reform of our political parties must await a repeal of the 1987 Charter’s “free and open party system” model.

—No child left out of school. The correlation between the lack of schooling and the degree of poverty is so strong that ensuring no child is left out of school should be a key objective of any anti-poverty program.

Certainly Aquino shouldn’t give up—as the Arroyo Administration has already done—on ensuring that all children of the right age are enrolled by 2015—the target date for universal schooling worldwide set by the United Nation’s Millennium Development Goals.

Closing the poverty gap

Anti-poverty programs we must focus on the poorest of the poor. Diffused programs are easily captured by the nonpoor. And because two-thirds of our poor are rural people, such programs must aim for long-term “industrialization” of agricultural systems as well as on quick social fixes.

Despite its constant avowals of concern for the poor, the Philippine state has never essayed significant social reform. Yet preferential options for the poor are becoming standard social practice in many poor countries.

Certainly our poorest regions can reasonably claim preferential treatment in budget allocations for infrastructure, health care and education.

A time-bound ‘affirmative action’ program to bring up access to these social services for people in these poorest regions to the level of the average administrative region within (say) 10 to 15 years will justify government’s expansion of the e-VAT—and more militant prosecution of its miserable tax effort. –JUAN T. GATBONTON EDITORIAL CONSULTANT, Manila Times