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First 100 days: beyond anti-corruption, real steps to reform

In IBON Features on May 28, 2010 at 2:34 pm

Beyond an anti-corruption drive or ‘successful’ elections and a peaceful transition from the Arroyo administration, the real test of democracy in the country depends on identifying the real problems and the right set of tools to solve them.

By Sonny Africa

IBON Features | 28 May 2010 | Commentary – There is a moment of optimism in the country due to relatively ‘credible’ election results, an incoming ‘legitimate’ government, and a supposedly anti-corruption Aquino administration. The hopefulness may persist for a while unless reports of automated election irregularities and of traditional political maneuvering reach crisis proportions.

But the prospects for change depend on the real problems being identified and the right set of tools being used to solve or manage them. More than an anti-corruption drive or ‘successful’ elections and a peaceful transition from the Arroyo administration, these are the real test of political and economic democracy in the country.

The incoming administration faces long-standing challenges that have kept the Philippines poor and underdeveloped. These are even aggravated by persistent instability in the world economy due to a global economic crisis that is still unfolding.

If the populist tag line, “Kung walang corrupt, walang mahirap” is used as framework in achieving genuine reform in the country, then it is deficient. The drive against corruption is only a small part of the comprehensive and concrete platform of governance needed that decisively breaks from the failed approaches of the past.

The country’s problems are so many and varied that it makes the insistent anti-corruption rhetoric– as if these were the main cause of the country’s problems – actually dangerous.

Overemphasizing corruption?

Corruption is admittedly pervasive, long-standing and has always reached to the highest levels of government. It is also true that this drains public resources and in so many ways undermines sound economic management and stifles productive activity. But without understating the damage caused by corruption, it is important to see the deeper and greater damage from ‘free market’ policies of globalization.

Despite lamentations about corruption and even of ‘political instability’, globalization policies have still been successfully implemented over the past decades: removing trade barriers, taking away investment controls, privatization of public utilities and social services, deregulation of the economy, and continued debt payments. All together these have eroded local manufacturing and agriculture, caused record joblessness and rising poverty, and forced millions of Filipinos abroad.

Indeed the corruption mantra is being used as a smokescreen to hide the failure of globalization policies. Since the 1990s when evidence of failure of neoliberal reforms started to pile up and the legitimacy of the International Monetary Fund and World Bank was being challenged, neoliberal proponents concocted and sold the Post-Washington Consensus idea—that it was bad governance, and not ‘free market’ policies, that must be blamed for the worsening poverty and crisis in underdeveloped countries that implemented neoliberal reforms.

The economic decline is blamed on corruption rather on how ‘free market’ policies have removed state support for local producers and prematurely exposed them to foreign competition. Deteriorating public health and education services are blamed on corruption rather than on privatization amid uninterrupted debt servicing. Poor governance is blamed on corruption rather than on undemocratic elite domination of political processes and economic policy-making. Corruption has become a convenient scapegoat to cover up the serious ills of neoliberal policymaking.

Worsening unemployment due to globalization means many hundreds of billions in pesos in lost potential output every year from idle manpower, aside from the human misery that joblessness causes. Privatization and austerity measures mean a hundred billion less pesos spent annually on health, education and housing. Meanwhile unceasing debt service sees interest and principal payments steadily approaching a trillion pesos a year. The amount skimmed off public funds by corrupt officials is considerable – with some estimates placing this at up to US$2 billion a year– but nonetheless still pales in contrast to the social losses due to globalization.

The role of liberalization, privatization and deregulation policies in actually feeding large-scale and systemic corruption in the country is also important. The ‘free market’-driven surge of foreign capital and goods in the country has created rich opportunities for commissions, bribes and smuggling by politicians and bureaucrats even as vital mechanisms of public control, scrutiny and transparency have been dismantled or made inutile.

Overemphasizing corruption as the root of social and economic backwardness diverts from the basic reforms that the country needs as well as disguises the continued implementation of policies that the country can do without. Transparency and accountability in policymaking and implementation are desirable, but the lack of meaningful policies for national development– and the pervasiveness of those benefiting mainly narrow elite interests– has much farther-reaching adverse effects on people’s welfare.

The problem

The overarching development objective is to improve the economic and political well-being of the majority of Filipinos. The central economic challenge is to address distortions in the economy that keep Filipino working people from fully benefiting from their labor and the country’s natural resources, and that inhibit the nation’s economic potential.

For too long, the approach has been to rely on creating a globalized open economic policy environment desired by foreign and domestic investors. While they are only a small minority of the economically active population, it is argued that the success of their enterprises will create jobs, increase incomes and support economic progress.

There has certainly been economic growth, rising corporate profits and mounting personal wealth of a few. Yet economy-wide real joblessness has been at a record sustained high for nearly a decade and which has forced around nine million overseas to find work. Around 66 million Filipinos are poor and try to survive on P86 or much less each day—with half of the population actually struggling on just P18-54 per day.

The economy’s prospects are undermined further by problems in the sectors expected to create jobs and dynamism: local manufacturing has shrunk to as small as its share of the economy in the 1950s while agriculture is at its smallest in the country’s history. Small and medium producers across the country have been hit by waves of bankruptcies.

The approach of relying on a narrow section of big private sector interests has clearly failed. The policy priority must instead be on giving the vastly more numerous Filipino working people a greater share of the products of their labors as well as real access to land, capital and government support—likewise with any genuinely local small and medium enterprises. The excessive reliance on external sources of growth such as exports and remittances is also a failure. The focus rather must be on building domestic economic foundations to be able to gain net benefits from international trade and investment.

The immediate political challenge in turn is to arrest the worst anti-democratic and anti-nationalist tendencies of the Philippine state. The Arroyo administration and its allies controversially used the powers of government for grand-scale electoral fraud and to accumulate uncounted tens of billions of pesos in kickbacks, payoffs and ill-gotten wealth. The military, police and courts were wielded in a crackdown on the Left and progressive groups so brutal and methodical as to draw international condemnation. The Philippines– one of the largest countries in the world (ranking 13th by population)– became ever more linked to the United States (US) geopolitical agenda including being opened up to greater military intervention.

The further damage wrought to the country’s political institutions needs to be remedied. The long process for this can only begin if there is first accountability for the high-level corruption as well as the widespread human rights violations in the course of the government’s counterinsurgency programs Oplan Bantay Laya (OBL) I and II. The impunity will only end if, aside from rhetoric, there is real accountability.

The commission to investigate Pres. Gloria Macapagal-Arroyo that presidential frontrunner Aquino announced during the campaign period is a start even if there are fears that this would be undermined by Arroyo-leaning allies in the Ombudsman and Supreme Court. But also important is to take advantage of international judicial bodies such as the International Criminal Court (ICC) set up by the United Nations (UN) to try war crimes when local courts are unwilling or unable to do so.

Democratic governance in the people’s best interests has also been hampered by foreign policy being overly deferential to foreign powers, especially the US, and in contrast refusing to deal with the country’s armed groups in a principled manner. The political atmosphere for domestic development would be greatly served by an immediate assertion of national sovereignty vis-à-vis the US as well as by using the venue of peace talks to take up meaningful social, economic and political reforms that address the roots of armed conflict.

Initial solutions

The new administration has yet to be proclaimed but it is in the best interests of the people to craft and demand, as soon as possible, concrete steps towards real change, progress, prosperity and sovereignty. The Aquino administration’s ‘reformist’ credentials will depend on how far it is able to reverse the failed policies of past administrations including of the outgoing Arroyo administration.

There are policy results immediately achievable or that can be begun in the first 100 days of the new administration that can be first steps towards real reform in the country:

1.  Repeal the VAT Reform Law (RA 9377).
2.  Repeal the automatic appropriation for debt service by amending Section 31 of PD 1177 that provides for this, and also by amending Section 26, Chapter 4, Book VI of EO 292 (Administrative Code of 1987) that reiterates in toto Section 31 of PD 1177.
3.  Ensure a budget of at least P281 billion for education, P39 billion for health and P13 billion for housing in the 2011 national government budget to bring social services to their most recent respective annual peaks of education spending per school-age child (1998), health spending per capita (1997), and housing spending per capita (2000).
4.  Suspend and review the Japan-Philippines Economic Partnership Agreement (JPEPA) and the on-going negotiations with the European Union (EU) on a Partnership Cooperation Agreement (PCA).
5.  Convene a multi-stakeholder review of government negotiating strategy and of deals approved in talks as part of ASEAN (i.e. Japan, China, Korea, Australia-New Zealand, India, EU, US and the ASEAN Trade in Goods Agreement).
6.  Convene a multi-stakeholder review to identify local products that can be given increased tariff protection initially up to the simple average bound tariff already allowed under WTO rules of 25.8% (from the simple average applied tariff of only 7.1%).
7.  Cancel the Hacienda Luisita stock distribution option (SDO) scheme and distribute the land to the farmers.
8.  Implement an immediate across-the-board nationwide wage hike of P125.
9.  Investigate and prosecute Representative-elect Gloria Macapagal-Arroyo for electoral fraud and the various corruption scandals during her administration involving herself, her family and allies.
10.  Transmit the 1998 Rome Treaty of the International Criminal Court (ICC) to the Philippine Senate for ratification.
11.  Suspend and review the Visiting Forces Agreement (VFA) with the US and, in the meantime, expel all US military personnel in the country and stop all on-going or planned operations, trainings, exercises, projects and other activities involving US forces.
12.  Immediate resumption of formal peace talks with the National Democratic Front of the Philippines (NDFP) and Moro Islamic Liberation Front (MILF).

These are necessary initial key elements towards a progressive tax regime, rational debt servicing, greater state responsibility for essential social services, genuine agrarian reform, repudiation of obsolete globalization policies, repairing the damage to the country’s political institutions, giving momentum to a democratization process, and addressing the roots of armed conflict in poverty and underdevelopment.

Any new administration aiming to be ‘reformist’ has to contend with important realities: drastically weakened industry and agriculture; accumulated economic laws and policies; an entrenched bureaucracy further complicated by pressures for post-election political payback; and self-interested interlocking political and business interests (even among its own ranks). Local democratic processes are still developing and elite oligarchs still dominate. In particular the Aquino administration faces counter-maneuvering by the Arroyo, Estrada and Villar camps which each have their own bases in the Senate, Congress and local governments.

Amid such difficulties, it becomes all the more important to immediately send a strong signal of real reform and establish substantial momentum among the real forces for change in the country. In current conditions the most essential strategy for achieving these initial policy results is then to rely on the strength of progressive forces within and outside government—they are the main source of pressure for implementation and the main constituency that would support these first steps to reform. IBON Features

Mr Sonny Africa is the research head of IBON Foundation, an independent development institution established in 1978 that provides research, education, publications, information work and advocacy support on socioeconomic issues.

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