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Copycat
By Michael Alan Hamlin
December 16, 2002
U.S. president George W. Bush whacked
his economic team last week - Treasury secretary Paul O'Neill and
National Economic Council (NEC) Lawrence Lindsey - after a CNN,
USA Today, Gallup poll showed that disapproval of his handling of
the economy had jumped from 39 percent to 47 percent. Apparently,
Philippines president Gloria Macapagal-Arroyo took that as a cue,
and sacked her secretary of the National Economic & Development
Authority (NEDA), Dante Canlas, after a Pulse Asia survey revealed
that Filipinos are likewise unhappy with their economy.
Like Lindsey, Canlas is a dour economist
without much political savvy. Unlike Lindsey, Canlas hasn't really
been a target of the administration's critics. But that, according
to some, was the problem. Canlas has basically been an invisible
man, and therefore hasn't helped the administration increase confidence
in its economic management. In the meantime, of course, there has
been a steady stream of mind-numbing political, economic, and administrative
bad news, mostly directed at everybody but Canlas. Someone had to
notice.
Some will wonder why Ms. Arroyo didn't
do the two-step like Bush, and cut loose her secretary of finance,
Jose Isidro Camacho, too. On the surface, the reasons she wouldn't
do that seem pretty clear. O'Neill became an economic caricature,
publicly complaining that the Treasury secretary can't do anything
about the economy anyway, and wondering out loud about the worthiness
of the administration's efforts to stimulate a recovery, essentially
through tax cuts.
Camacho, on the other hand, is an
urbane, cultured professional. He looks good. He talks good. He
walks good. But he has his own problems with taxes. In Camacho's
case, the problem is collecting them. He gets away with it despite
a dramatically ballooning deficit because rating agency analysts
like the guy. They like him so much that when they ought to be lowering
the nation's sovereign credit rating, they're holding it steady.
If they could get away with it, they'd probably raise it.
Camacho has had his own brush with
notoriety, most conspicuously that government bond sale that earned
his sister a tidy P1.4 billion. And since he's had trouble collecting
taxes, to manage the deficit Camacho has gone out and done what
investment bankers do, which is to raise cash. Unfortunately, it's
not the investment kind of cash, but the debt kind that requires
interest payments and therefore actually contributes to growing
the deficit. Especially since the peso is slipping at the same time
and the debt is foreign denominated.
To address the tax shortfall, Camacho
recently talked his boss into hiring former customs chief Guillermo
Parayno to head the Bureau of Internal Revenue. Parayno's supposed
to work the magic there that he did in customs under former Finance
chief Bobby de Ocampo, this time by going after big-time tax cheats
and the collectors that shake them down. No one knows for sure yet,
but the Parayno appointment may be the smartest one this government's
made.
Whether it is or not, the appointment
has bought Camacho some time. But he is clearly a target of the
administration's critics who don't hold rich investment bankers
in awe. In fact, when Camacho was appointed, his career in investment
banking was considered a big plus. Clinton administration Treasury
secretary Robert Rubin was among the most admired economic managers
of all time. Camacho seemed to come from that same mold.
However, that was before the Enron
accounting debacle and closer scrutiny of the technology stock bubble
in the U.S., which have badly tarnished the investment banking profession.
Even Rubin's reputation has taken a hit. As chairman of Citigroup's
executive committee, he's associated with allegations that that
the world's "financial supermarket" helped Enron hide
losses and pressured former Salomon star analyst Jack Grubman to
raise his forecast on WorldCom even as it was heading toward becoming
the biggest bankruptcy in history.
As a result of these and countless
other tales of greed, financial debauchery, and downright dishonesty,
investment banking isn't quite the institution it was in the high-flying
1990s. Investment bankers aren't just human, they're not particularly
admirable humans anymore, and that's a far kinder characterization
than you'll find in most reports in the business media these days.
The bottom line for Camacho is that he may have the president's
ear now, but substance must follow style.
How will the new appointments be
received? The new NEC head in the U.S., Stephen Friedman, is supposed
to be a Republican Rubin. They once co-chaired Goldman Sachs. But
the knives are already out. Fortune editor-at-large Andrew Serwer
wrote this week that in a 1994 article entitled "Stamina,"
Friedman was used "as an example of someone who had lost it.
We wrote that he fell asleep at a client meeting in Germany, and
that's what led him to leave Goldman!"
The new NEDA chief is Romulo Neri,
who is a Berkeley MBA, has served as director general of the Congressional
Planning & Budget Office over the course of three administrations.
I originally recommended Neri for that position, so won't comment
on his prospects other than to say that so far, he's certainly demonstrated
that he has staying power in challenging political environments.
Whether that will hold once he starts sparring with Camacaho will
be interesting to see.
But however these appointments play
out, we shouldn't lose sight of the fact that ultimately it is top
management that determines economic policy, and it is the secretaries
that are supposed to make it happen. Getting the policy right, and
getting the right people to implement it is what top management
gets paid for. And what it will get fired for if shareholders -
voters - run out of patience.
(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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