Bernardo M. Villegas
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Philippine Economy In Good Hands (Part 1)

             Having been involved in advising Presidents and other government officials since 1986, I can make the bold statement that the Philippine economy has never been in better hands than in the incoming Administration of President Ferdinand (Bongbong) R. Marcos, Jr.  As many leaders in the business sector and civil society have publicly declared, even among those who supported other candidates in the last presidential elections,  the appointments made by the President to key positions of economic leadership like the Department of Finance, Central Bank Governor, NEDA Director General, Secretary of the Budget, Secretary of Trade and Industry, Department of Public Works and BIR Commissioner, among others, have been based on professional competence, integrity and long years of experience in government service, with no signs of political patronage.  I would especially highlight the last characteristic,  i.e. experience in government service.  Secretary of Finance Benjamin Diokno, Governor of the Central Bank Felipe Medalla, Secretary of the Budget Amenah Pangandaman, and BIR Commissioner Lilia Guillermo not only have decades of experience in their special fields working for the government.  They also have been working with one another already for years and can carry out their respective functions in very close cooperation  and coordination with one another.

            At this point, let me quell once and for all the rumor circulating after the elections that I was part of the transition team of then President-elect Ferdinand M. Marcos Jr.  I was not.   The truth was that I convinced some colleagues of mine in the academe, business and media to help whoever would be elected President last May 9 to choose from the best and brightest in appointing members of his or her Cabinet.  This effort of mine was based on the evidence that I have gathered over the last thirty years that the Philippines was able to transition from being the “sick man of Asia” to one of the most promising emerging markets in the world, as recently attested by many independent think tanks and  international development institutions, because every President since the time of Cory Aquino—whatever were his or her personal strengths and weaknesses as a political leader—always appointed the best and brightest to the various departments that had to do directly with the economy.   For this reason, I wanted to make sure that whoever would be elected to lead the country from 2022 to 2028 would be helped in the choice of his or her economic team.

            In crafting a list of the best and the brightest who could be appointed to the different positions of the Cabinet, a group of economists, political scientists and management experts assembled by the School of Law and Governance of the University of Asia and the Pacific a few months before the May 9, 2022 elections, gave a great deal of importance to actual experiences in public service, in addition to honesty and professional competence.    We realized that even the most brilliant economist or banker well known for honesty can fail to perform in a Cabinet position if he or she has little experience with government bureaucracy and the ability to deal with and manage civil servants under his or her supervision.  I personally remember the case of a very honest and competent professional in finance who was appointed as Secretary of Public Works and Highways in  a past Administration.  When he realized that the corruption in the Department went all the way down to the Regional Directors, he realized he did not know how to cope with such a  management problem.  He decided to freeze all expenditures in public works and as a result the economy stagnated. The list of potential Cabinet members  that we prepared was to be submitted to whoever would win the presidential election.  Needless to say, that list is now in the hands of the elected President.

I am glad to note that some of those actually appointed by President Marcos Jr. appeared in our list.  It was beyond our imagination, however, that Vice President Sara Duterte would be appointed Secretary of Education and the President himself would assume the role of Secretary of Agriculture.  Whatever reservations some may still have about such unorthodox moves, I personally see some benefits to having the Vice President as Secretary of Education and the President as Secretary of Agriculture.  As some business executives and educators belonging to the Philippine Business for Education (PBEd) have been insisting, nothing much can be achieved in improving the quality of education if the budget spent by the Government on education remains to be the measly 3 % of GDP, as compared to the average in the ASEAN region of 6 to 8 %.  Having the Vice President to head the Department of Education and Culture will give her greater clout to insist on such an increase.  She can always be assisted by the best educational and management experts who will be appointed as undersecretaries and assistant secretaries of education.  We had a very long list in our recommendation for these positions in the Department of Education and Culture, most of whom are really career officials and should just be reappointed.

            I can say the same thing about the decision of the President to take for himself the portfolio of Secretary of Agriculture.  With a looming food crisis that may even lead to mass starvation by the end of this year, given the observations of international military experts that the war in Ukraine may last for several years, only the Chief Executive of the country can have the powers to strongly coordinate the various government agencies that have to work very closely together to look for emergency measures to address the problem of food shortages.  As someone used to coordinating and managing different executive bodies because of his nine years as Governor of Ilocos Norte, President Marcos already has made direct reference to the importance of being able to coordinate the work of various government agencies.  As quoted by Kyle Atienza in an article in the Business World ( June 21, 2022), President Marcos said that it was important for the President to take over the Department of Agriculture so that “things can move quickly” in response to global developments:  “We have to plan in a more thorough fashion instead of just responding.  I have asked DTI, NEDA, DoF and DBM to start to make economic forecasts on what it is we think we have to face for the rest of this year so we can prepare… There may be some emergency situation especially in regard to food supply.” 

Over the medium term, an even greater need for coordination has to do with some of the possibly conflicting policies followed by different executive departments that have to do with food supply.  For example, as clearly contained in the long-term plan for increasing agricultural productivity crafted by outgoing Secretary of Agriculture William Dar and his team, farm consolidation is of utmost importance if we are to reach the economies of scale needed in most high-value agricultural products into which we have to diversify out of rice and corn if we want to obtain the highest returns from our agricultural lands.  Unfortunately, the leadership up to now in the Department of Agrarian Reform seems to be oblivious of the fact that the Comprehensive Agrarian Reform Program (CARP) law expired in 2014.  There are continuing counterproductive efforts to fragment more land.  What is now needed, as had been done along ago in countries like Thailand, Malaysia and Vietnam, is to reconsolidate small farm units so that  the needed economies of scale can be attained in the production of high-value products from coconut, palm oil, all types of fruit trees like mangoes, avocado, durian, coffee, cacao, etc.  It will have to take the President to resolve some of these conflicting measures being proposed by the different agencies that have to do with agriculture.  Another example of possible conflict is between the Department of Agriculture and Department of Environment and Natural Resources.  The DA may be recommending the planting of fruit trees in the denuded forests of Mindanao.  DENR, however, may not consider fruit trees as appropriate for forest cover.  This issue has to be resolved because of the increasing interest of the private sector, such as the DMCI group, to convert our denuded forests into palm oil, rubber, or coffee plantations.  The Philippines can follow the example of Malaysia and Indonesia of becoming a major producer of palm oil for both domestic consumption and export.  Malaysia has run out of workers and Indonesia is being blacklisted by international buyers of palm oil for cutting down virgin forests to plant palm oil.  We can be the next major supplier of palm oil to the world.

As some groups of farmers have also remarked, having the President as Secretary of Agriculture will also facilitate a substantial increase in the budget for farm-to-market roads, irrigation systems, post-harvest facilities, fertilizers, pesticides and other inputs needed by small farmers to increase their incomes.  As recently pointed out by former NEDA Director General Cielito Habito, in commenting on a speech delivered by Albay Rep. Joey Salceda at the University of the Philippines Los Banos on “a new framework for food security and agricultural development,” we have been wrongly supporting our farmers with counterproductive measures like market price support, budgetary payments, and cost of revenue foregone, such as from tax exemptions.  These types of support just encouraged the farmers to continue being unproductive and not to be competitive with farmers from countries such as Vietnam, Indonesia and Thailand.  As Dr. Habito suggests, we should assist the farmers by “nurturing” rather than by shielding.  Nurturing precisely means providing them with the infrastructures and inputs that they need to be competitive with farmers from our neighboring countries.  As happened to manufacturing in our industrial history in the last century, excessive protectionism resulted in our manufacturing sector being left behind by our East Asian neighbors.  Hopefully, our very able Secretary of DTI in the new Administration, Fred Pascual, will be able to undo the harm done by previous erroneous industrial policies.

I can vouch for the fact that President Marcos Jr. is more than competent to understand and balance the conflicting views expressed by the various stakeholders in the food and agribusiness sector. When he was Governor of Ilocos Norte, a group of economists from the Center for Research and Communication worked with him and his provincial staff in crafting a medium-term plan for the regional development of Northern Ilocos.  Contrary to false news circulated during the election period, we saw him as both an intelligent and decisive leader who knew how to govern by consensus.  He knew how to delegate functions to his subordinates.  It was during his watch of nine years as Governor of the province that Ilocos Norte acquired the necessary institutions to attain one of the highest Human Development Indices (HDI) among the seventy-two provinces in the Philippines.  According to the Philippine Statistical Authority (PSA), in 2019 Ilocos Norte had the sixth highest HDI among Philippine provinces, surpassed only by Benguet, Metro Manila, Rizal, Iloilo and Batanes in that order and equal to Cavite.  The HDI is a composite index which includes not only per capita income but also life expectancy and educational achievement of the population.   Indeed, the Philippine economy is in good hands, not only because the best and the brightest are at the helm of the top economic agencies but because  their Chief Executive has demonstrated his leadership qualities as a Governor of Ilocos Norte. To be continued.