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Last Economic
Song Syndrome
By Michael Alan Hamlin
December 24, 2002
You've probably heard of the Last
Song Syndrome. Kids in the Philippines use the term to refer to
those times when the last tune they listened to keeps running through
their minds. Frequently, they'll try to recall the lyrics, and sing
them out loud. If you were to ask me how I would characterize the
vision and economic platform of the current Philippine administration,
I would say the Last Economic Song Syndrome pretty much sums things
up.
Two weeks ago, President Gloria Macapagal-Arroyo
listened to twin presentations by then National Economic Development
Agency (NEDA) head Dante Canlas and then Congressional Budget &
Planning Office (CBPO) director general Romulo Neri. Canlas, who
has been overseeing gross domestic product (GDP) growth that will
come in around 4.2 percent for the year, presented his usual big
picture development scenario. Neri, on the other hand, presented
recommendations for micro-managing the economy. His was the last
song the president heard.
As a result, Canlas was fired and
Neri was hired. Canlas' tune went to the effect that Philippine
economic growth is among the best in Asia and inflation is low.
Neri's tune goes like this: economic growth barely covers population
growth, and inflation is low because no one is buying. Neri argues
that improving farm-to-market roads and making the shipping industry
more competitive will lower the cost of food, which is the highest
in Southeast Asia. Those are lyrics that the president - and voters
- can understand a lot easier than references to "fundamentals
that are strong."
In reality, both Neri and Canlas
are talking pretty much about the same thing, they just sing the
song differently. Canlas speaks as a dour University of the Philippines
economist and thesis adviser to presidents. Neri enthuses like a
hot-shot MBA. To critics, what the politically clueless Canlas lacked
in style he made up for in substance; conversely, Neri is a lightweight
whose silly sounding slogans are catchy and popular with politicians
but impossible to implement. Others view Neri as a breath of fresh
air in an administration that the business community appraises as
an insignificant notch above the one it replaced.
The substance of those arguments,
however, isn't what's alarming about this latest appointment. It
is, rather, that the administration appears so desperate for acceptance
that on the strength of a single Power Point presentation it will
throw out a respected, at least reasonably performing official.
What makes that decision even more bizarre is the retention of high-profile
officials who clearly haven't done their jobs.
Most obvious among them is finance
secretary Jose Isidro Camacho, who as one observer recently told
me, "is clearly out of his depth." Camacho has been controversial
from the start of his service to the government, and has grown more
so as the deficit, which is expect to increase to 4.7 percent of
GDP to P202 billion, has soared. His saving grace may be the recent
appointment of Guillermo Parayno as commissioner of the Bureau of
Internal Revenue. Parayno headed customs in the Ramos administration,
and has a reputation for getting results. Ironically, Parayno's
expected strong performance at the BIR may save his boss's job in
2003. At least something good will come out of Finance despite the
secretary that runs it.
Neri's appointment is just the latest
sign of the Last Song Syndrome as driver of public policy in the
Philippines. Trade reform has taken a back seat to entrenched oligarchy-like
interests in both manufacturing and agriculture. The Philippines'
reputation as a model for privatization was stood on its head when
Maynilad recently announced that it would return its debt-laden
concession to government. Government immediately caved after years
of intransigence and approved Maynilad's long-standing application
for a rate hike, but to no avail. Meanwhile, Camacho threatened
to take over Meralco, the principal electricity distributor for
Luzon (Maynilad and Meralco are controlled by the Lopez Group.).
Foreign investor confidence was shaken
when the administration announced that it would rescind its contract
with Philippine Air Terminals, Inc. (PIATCO), which has already
constructed a US$650 million terminal. Despite the obvious infirmities
inherent in the PIATCO agreement, and there are many, unilaterally
throwing out a valid contract suggests that any contract that government
becomes unhappy with can be erased by simply declaring it null and
void. That makes government client, judge, and executioner. Who
does that remind you of?
As in the case of the two preceding
administrations as they approached the end of term, this administration
has also begun toying with the idea of a shift to a parliamentary
system. In truth, I think this is a great idea, just as I think
the PIATCO deal sticks, but for any great strategic idea to work,
it must be implemented strategically, not frantically, and as a
result of the fear that an increasingly unpopular administration
won't be back for act two. A parliamentary system for the Philippines
has some real merits, but keeping on a figurehead president isn't
one of them.
As if the constant shifts brought
on by the Last Economic Song Syndrome weren't enough, the administration
has been severely weakened and its credibility perhaps fatally dented
by a series of high-profile allegations of corruption. Among them
are allegations that Camacho purposely arranged for his sister to
pocket P1.4 billion from a government bond sale, congressman and
U.S. fugitive-at-large Mark Jimenez's says he paid on-leave Justice
secretary Hernando Perez a US$2 million bribe, and the Public Estates
Authority is said to have overpriced a reclamation area street named
after the president's father by P600 million.
In truth, what the Philippines needs
to do is fairly straightforward. It needs to liberalize to attract
job-creating foreign investment. It needs to stick to rules that
it makes and the contracts it signs (or in the PIATCO case, follow
due process to correct infirmities). It needs to strengthen bureaucracy
and address corruption. It needs to stop resorting to knee-jerk
reactions in the face of bad news. And it needs to communicate effectively.
These things may be hard to do, but
countries all over Asia do them. Hong Kong, Malaysia, Singapore,
and Thailand, for instance, whose per capita GDP now all dwarf the
Philippines. And no excuse is good enough to explain why the Philippines
can't as well. But it is certain that as long as the conviction
behind the administration's vision and development program is no
greater than the Last Economic Song Syndrome, 2003 is going to be
every bit as wrenching as 2002.
(Michael Alan Hamlin is the managing
director of consultancy TeamAsia and the author of three books on
Asian economies and companies. His latest book is Marketing Asian
Places, of which he is a co-author (Wiley, 2001). Write him at mahamlin@teamasia.com.).
Copyright © 2002 Michael Alan
Hamlin. All Rights Reserved.
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