Guest Post: The Balancing Act That Will Have To Be Noynoy’s Economic Agenda

23 Jul

Editor’s note: This article appeared on Sanggu’s Bantay Presidente 100 last July 19, 2010 and was co-authored by Angela Poe (BS ME ’13) and Carlo Roman (AB EC-H, ’12) , AVP for Externals of AEA.

Since the beginning of his campaign, “Noynoy” Aquino has made bold claims regarding the loose ends left by the previous administration; now, the nation stands rapt as its new president attempts to turn his promises into realities. Although the man has laid down sensible plans to answer the whos, whys, and what nows of our nation’s economic development, the gargantuan task that faces him leads us to wonder where and how he will actually begin.

Dismembering and reassembly

The 19 days since his inauguration have shown us that setting the tone is just as good a first step as any. Although the notion that loss of corruption causes the total demise of poverty may be idealistic and even slightly misleading, Noynoy’s trademark culture has already begun to challenge, in a very real sense, the longstanding norms within Philippine politics and society as a whole—and it doesn’t stop at the wangwangs.

With so much conviction from up top and an admirably selective process for screening appointees to key positions in government, past barriers to national progress may find little room to flourish. In four words, “Kayo ang boss ko,” Noynoy set the standard that might finally rewire our public offices to focus on the service and accountability required of effective governance. As difficult as this renewed bond to the social contract may be to carry out (recent headlines show that Aquino is struggling to fill the top 5,000 posts), the consistency it promises is exactly what we need to kick-start improvements in the economy.

In addressing certain issues identified by the Aquino administration as urgent, (i.e. the budget deficit, rampant smuggling, and abuse of loopholes in investment and business policies) it has been suggested that policy change will take a back seat. The Aquino administration intends to first review existing protocols and practices, identify the loopholes that encourage red tape and graft, and remedy the processes that are either inefficient or illegal. The new secretary of finance, Cesar Purisima, justifies this approach pragmatically when he says there is “no sense to put in more tax when the leak is there.”

As such, comprehensive audits are in order for government institutions whose operations many have come to accept as “necessarily dirty”—the Bureaus of Internal Revenue and Customs, to name a few—and promising projects, once buried for lack of political will, are scheduled for resurrection. Such projects include the Run After Tax Evaders (RATE), Revenue Integrity Protection (RIP), and Run After The Smugglers (RATS) programs, under the BIR, Department of Finance, and BOC, respectively.

To plug some gaping holes

Interestingly, the offices most under fire at the moment are some of the most essential for the state to run properly. Because the BIR and BOC are the government’s biggest revenue generators, the administration is in a precarious situation that requires it to both rein in these offices and allow them to do their work. It is now necessary to find alternative means of generating funds and acquiring them on Aquino’s terms.

Trade Secretary Gregory Domingo has shifted the spotlight onto the issue of unnecessary tax incentives, which have sapped the government of much-needed funds for years. While tax cuts reserved for development projects and foreign investors have gone unquestioned, equally rewarding exemptions for big corporations that cater mostly to domestic markets (and not exports) have rightfully raised eyebrows.

Since the first Aquino administration, the Board of Investments (BOI) has given tax holidays to keep big businesses spending on our soil; but clearly, as a 2006 study by the Philippine Center for Investigative Journalism (PCIJ) shows, such incentives should make little difference to domestic producers. A brief excerpt from their report “Incentives for the Rich Harm the Poor” paints a picture of the situation:

IT TAKES the tax bureau’s southern Makati district office, housed at the Atrium building along Makati Avenue, about a year to collect P13 billion in taxes. Just a few blocks away, another government agency, the Board of Investments (BOI), took just 14 working days to decide to grant the same amount in tax exemptions to two of the country’s most profitable companies — Globe Telecom Inc. and Smart Communications Inc.

In other words, the government could definitely preserve its coffers by denying incentives to entities that do just fine without them. Thankfully, the 2010 Investment Priorities Plan (IPP) approved by the BOI last January has reduced the list of incentive-eligible sectors to those that can ably take advantage of the global economic rebound, as well as efforts in medicine, renewable energy, and disaster preparedness. However, beyond sifting through industries deserving of exemptions is the need to monitor the incentives that are approved. Since these tax cuts are legitimate government expenses, the DTI would do well to employ a more stringent attitude in distributing these incentives and evaluating their usefulness.

While Domingo’s resolve to tighten the screws around the seemingly whimsical distribution of tax cuts will not go down smooth for big businesses, capitalists will have to remember that they rise with the nation—that nation building is a job for the governed as much as the government. (Besides, Smart and Globe were prepared to implement their multi-billion peso projects even before their tax breaks were granted; why bleed government resources more than they need to be, especially with the current optimism that these resources will be put to better use than ever before?)

Within government jurisdiction

Other issues that Noynoy’s economic team will have to worry about have little to do with numbers and everything to do with Filipino culture.

If hundreds were enraged when the television show Desperate Housewives mocked “Recto-fied” medical certificates, how many will balk at the recent decision to ban Filipino physical therapists from taking the US licensure exam? For once, there is no one to blame but the Filipino students and review centers that cheated—yes, the government is only liable in that it has permitted the crime and not committed it—but it is still the government’s responsibility to take care of the 800-900 fresh graduates who have lost their chance to apply for work abroad, at least for this year.

The Catholic Bishops Conference of the Philippines (CBCP) has also cashed in on their democratic privileges, calling on President Aquino to scrap a mining law that allows foreign investors to fully own local mining ventures. Not surprisingly, CBCP’s stance is that the law will disenfranchise Filipino companies and wipe out smaller players, while Aquino’s team believes foreign ownership will “develop the mining industry in a sustainable manner and allow extractive industries to contribute to poverty alleviation”.

Additionally, although the CBCP has made no comment on this yet, there is the possibility of backlash regarding Aquino’s intention to privatize the casino industry (for obvious reasons). As counter as the entire nature of gambling is to traditional Christian values, which influence 80-90% of the population, Aquino has been quite vocal in his aims for the industry—which actually make a lot of sense and attractively combine different motivations: profitability and culture. While Aquino wants to make the industry grow in order to boost tourism and spur spending, he has clear boundaries, evident in that he would not condone the proliferation of gaming establishment in places where there are fewer tourists such as Cavite and Tarlac.

Conclusion

Aquino’s approach to the casino issue is actually an excellent example of the way he will have to handle most of his presidency: (1) assess the situation, (2) make informed and open decisions, (3) balance his plans with public opinion and need—and often make compromises, (4) be firm, decisive, and run with what he believes to be best for the country. It will be a challenge, certainly, especially because he needs to create change not only within the government but among the citizenry as well.

For the administration to continue to generate revenue without resorting to burdening Filipinos with steeper taxes, the need for the more accountable money-handling and more honest business becomes imperative, and the wiser disbursement of government subsidies will go a long way toward patching up the current leaks in our tank. Along with streamlining tax collection procedures and ridding departments of internal misfits prone to fraud and inefficiency, the main hope is that the Aquino movement trickles down the government hierarchy and effects change where it has long been deemed foolish. Early as it is in the game, we believe his current tactics will allow him to simultaneously work with what he has and improve it, garnering the support of the public and becoming a more effective leader in the process.

What the President asks is reasonable, if not outright simple: that money be used the right way, by the right people, and for things that the Filipino can genuinely benefit from—this is admittedly a breath of fresh air. Will the distrust in government finally dissipate enough to push our economy forward? Maybe… Hopefully. Idealistic as it may seem, Aquino is selling not just an agenda but a lifestyle; and buying into it just might give us a chance at revival.

One Response to “Guest Post: The Balancing Act That Will Have To Be Noynoy’s Economic Agenda”

  1. M July 25, 2010 at 11:25 pm #

    Great post. Keep it up

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