Unease

There could be a context for the obsessive verbal attacks mounted against the usual suspects by the President while he was abroad last week. That context could very well be a slew of adverse international reviews of our economic performance so far.

The agency tasked with overseeing our country commitments to the UN Millennium Development Goals criticized the Philippines for lagging way behind schedules in achieving the targets for improved wellbeing. The Millennium Development Goals is a program for improving indicators on such basic things as bringing down infant mortality, improving nutrition and expanding access to public health care. The global program ends 2015.

The Asian Development Bank, for its part, took the Philippine government to task for failing to address the jobs situation. Our unemployment and underemployment rates have remained largely constant. That means the so-called “inclusive economic growth” is simply not happening.

The country likewise dropped several notches more in the lowest quartile of the Ease of Doing Business Index. The Index surveys government policies and ranks all countries from the most business-friendly to the least. Singapore consistently tops this survey of about 170 countries. The Philippines, it seems, is struggling to make it to the bottom.

The Philippines and Singapore are so near to each other and yet so different from each other. Singapore, by the way, also consistently tops the Economic Freedom Index.

We have always ranked low in the Ease of Doing Business Index for a great number of reasons, some of them chronic and some of the more recent due to what appears to be an increasingly whimsical policy environment.

The Ease of Doing Business Index is an important reference for international investors. If, for instance, they are trying to decide whether to invest in the Philippines or in Kazakhstan, all things being equal, the Index will direct them towards the former Soviet republic. There they will find a helpful bureaucracy, a stable policy framework and rapidly improving infrastructure.

Kazakhstan, by the way, has harnessed its revenue windfall from oil and mining quite effectively to improve its human capital. The country is investing heavily in universities and growing its research and development capacity. It is also quickly building up its infrastructure to support industries. In a few short years, Kazakhstan will be an important economic player.

We need not look too far. Indonesia, our closest neighbor, is an economic phenomenon on its own. In a few short years, with effective presidential leadership, this archipelagic nation pulled itself up by its bootstraps. It has brought down the poverty rates dramatically, addressed the divisive ethnic issues decisively and orchestrated policies to make it one of the world’s most vigorous economies.

Unlike the Philippines, Indonesia is not exporting its labor. She is expanding her economy in a manner that keeps talent at home, productively employed. The country ranks respectably in nearly all the major indices, including the ease of doing business.

When confronted with our dropping ranking in the Ease of Doing Business Index, Palace spin masters were quick to dismiss its significance — then they pinned the blame on local governments. It was so easy for them to overlook the fact that national government makes policy.

Some of the reasons we are moving towards the bottom in this Index are long recognized.

To begin with, we are hampered by archaic constitutional restrictions on foreign ownership of businesses in the country. The only way we could free ourselves of these obsolete restrictions is to amend the Constitution — something the present administration takes no interest in.

We have not solved the infernal problem of bureaucratic red-tape. In most of the emergent economies, one could get a business registered online in a matter of minutes. One study done some years ago shows the Philippines requiring the longest time to get a business running: between six to eight months.

Streamlining bureaucratic processes does not seem to rate very high in this administration’s priorities. Reorganizing our messy bureaucracy, for that matter, was never mentioned as a reform concern.

Our infrastructure planning has always been chaotic and politically driven. The distribution of infrastructure projects passes through the prism of political patronage. It does not cohere with some strategic blueprint for supporting businesses.

Our logistical system is disaggregated. The most promising solution to overcoming the fact that we are an archipelago was the “nautical highways” — a well-planned system of roll-on, roll-off routes, driven by private investments. It was junked because it is a project associated with the previous administration.

The security of contracts is a cardinal consideration for investors. That has always been doubtful because of the unlimited powers of review granted the Supreme Court by the 1987 Charter. It has been even more doubtful now and that fact is probably the most proximate cause for our slide in the rankings.

A perfected contract to build roll-on, roll-off ports, with French government support, was arbitrarily junked ostensibly because the sensible telescopic port design that allows ships to load regardless of the tide was considered too expensive. The contract to dredge the Laguna de Bay and build a highway around it, with Belgian government support, was arbitrarily cancelled — and will likely bring us to costly international arbitration proceedings.

Most recently, the Northrail contract was abrogated. We will end up paying China for this and will have no rail system at all. All the groundwork will simply go to waste.

After the series of contract cancellations, the real surprise might have been if we rose rather than fell in the rankings. All we accomplished was strike fear in the hearts of potential investors. –Alex Magno (The Philippine Star)