Underperforming
The news hit us like a wet towel in the face.
While government spokesmen entertained us with delusory talk of over 7 percent growth and great strides towards becoming a “First World country,” the Philippine Statistics Authority announced last Thursday that our economy managed a meager 5.2 percent growth rate in the first quarter of the year.
The stock market quickly turned limp, falling to its lowest level this year. The euphoria we once saw seemed to be quickly dissipating.
Our growth targets, it must be said, are not unduly high. A recent IMF report concluded our economy had much greater potential for growth if government worked a little harder at pushing its own economic programs.
Some analysts say that the economy could manage an 8 percent growth if government was more efficient in making economic investments, especially in closing our yawning infra gap. With more forward-looking economic policies and a more adept bureaucracy, we might even manage double-digit growth.
The circumstances are indeed fortuitous for rapid economic expansion. Interest rates are low. Fuel is cheaper. We accumulate huge international reserves. Investment opportunities are wide. We have a young population. The list of positive factors goes on and on.
We might be growing faster than the rest of the region. Given the circumstances and opportunities, however, we are actually underperforming.
This administration is constantly disposed to creditgrab and constantly crow about its imagined achievements. Set in proper context, however, this administration has been underachieving.
We lose opportunities with each passing day as we are fed propaganda rather than strategy.
Underspending
Analysts were quick to point out that the miserable first quarter figures were due mainly to this government’s failure to spend as budgeted. That calls up images of another calamitous year. In 2011, after the new administration began cancelling projects like mad and culling “savings” to be passed around as pork to political allies under the guise of “disbursement acceleration,” our growth rate fell to only half of what it was the year preceding.
Instead of growing at its potential of 7 percent, the economy grew at only 3.2 percent. The ranks of the poor swelled. Unemployment spiked. Opportunities passed. All because the Aquino administration could not find the competence to properly pump-prime the national economy.
Only the construction boom, the product of falling global interest rates brought about by quantitative easing programs of the large economies and long-suppressed domestic housing demand, kept our economy going.
Economic growth rests on two legs: private sector investment and public spending on the civic goods. If one leg is lame, the economy cannot run at adequate speed.
Our public spending program has been more than lame. For five years, this administration consistently failed to meet its spending goals. Even urgent spending, such as maintaining the quality of commuter train services, was not done.
To compound that, the so-called “centerpiece” PPP program of this administration has hardly moved. Save for the much-delayed and overpriced Daang-Hari connector road, none of the much-touted PPP programs will be completed by the day the incumbent will have to step down.
Nor will any of the major infra projects urgently needed for our economy to keep its growth momentum be completed by June next year. The airport upgrades were not done. The railway system was not built. The new commuter train lines, including extensions of existing lines, are still on the drawing board.
Only one thing can explain this chronic failure to execute the projects our economy so direly needs: incompetence.
The incompetence does not only afflict the person at the top. The Aquino Cabinet has never been accused of collecting the best and the brightest. The consequence of that is failure across the board: from raising agricultural productivity to attractive investments at the rate our neighbors in the region do.
There is a grave cost for the failure to sustain growth and make it inclusive.
The report on the Millennium Development Goals released this week gives us chilling numbers. Inadequate food intake caused 33.6 percent of Filipino children under five to suffer stunted development. A staggering 13.7 million Filipinos remain undernourished. 19 percent of Filipinos subsist on less than $1.25 a day.
The missed opportunities translate into very real misery for very real people.
Bureaucracy
President Aquino has yet to demonstrate grasp of the historical continuity his administration is heir to. Each episode in this long process dictates certain tasks for the state to accomplish.
The Ramos administration liberalized the economy, modernized the way we do business and prepared the economy for the age of unbridled competition among economies. This forward-looking administration was prepared to spend its political capital for breaking up the monopolies, reducing trade barriers and modernizing agriculture.
The Macapagal-Arroyo administration represented the period of fiscal consolidation. It was during this period that we finally worked down our once immense debt overhang and break out of the boom-and-bust cycle that cursed our economy for decades. That cycle discouraged long-term investments in our economy.
Despite the great political costs of doing so, the Macapagal-Arroyo administration introduced revenue reforms such as the VAT that gave predictability to public finances. These revenue reforms set the stage for the credit rating upgrades Aquino so vainly claims as his achievement.
The task of the Aquino II administration was to modernize our bureaucracy. That is a tough nut, to be sure, but the present administration began with enough political capital to get it done.
The latest global index for ease of doing business rates the Philippines very low on bureaucratic competence. Red tape is a nightmare for investors. Our bureaucracy is over-manned and under-skilled.
This administration simply did not do the single most important reform it should have done.