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Erap's
Vow
By Michael Alan Hamlin
November 08, 1999
For those who are happily engaged
in I-told-you-so gloating over the steep plunge in President Joseph
Estrada’s popularity, the last laugh hasn’t yet been had.
That’s not to suggest that vindication is inevitable for Mr.
Estrada. Indeed, the problems he faces — a good many created
by the administration itself, but not all — are profoundly
threatening. Failure to address them credibly and effectively will
undoubtedly spell the end to the president’s fledgling and
badly dented legacy.
But the all-to-easy assumption that
he won’t — or can’t — address his, and the nation’s,
problems is also a mistake. To restore his popularity, as Mr. Estrada
vows to do, two things must happen. First, he must instill a sense
of credibility and integrity in his administration. This has more
to do with Mr. Estrada’s personality than it does government
policy, and is regrettably and in all probability the more difficult
problem to solve. Old habits die hard.
Second, he must instill a similar
sense of credibility, integrity, consistency, and practicality in
public policy, and exert some confidence-building leadership. The
president’s habit of playing his advisers off against each
other, for instance, may be useful in stunting the emergence of
an omnipotent power center, but it also hobbles a government that
sorely needs to consolidate its strengths.
In other words, all the president
needs to do to restore his popularity is to do his job. To hear
the president’s men talk, he is, but the effects are not yet
apparent. Critics, on the other hand, suggest that the administration
has so far failed to put its government in order, and that once
it does, years will be required to see real impact. In truth, both
arguments have important flaws as well as strengths. Perhaps more
importantly, neither argument matters much. This was apparent in
a Management Association of the Philippines (MAP) meeting last week
that featured presentations by Socio-economic Planning Secretary
Felipe Medalla and Director-General Romulo Neri of the Congressional
Planning & Budget Office (CPBO).
This was a strange face-off, even
for this administration. Although both these gentlemen scholars
are working for the same administration, Mr. Medalla was mandated
to speak on why the government is on track and Mr. Neri why it isn’t.
Mr. Neri has been director-general of the CPBO over the course of
three administrations. In fact, he was originally appointed in large
part as a result of my recommendation to former speaker Ramon Mitra.
This was back when I was doing some consulting for the House. So
I have a personal interest in how Mr. Neri fares, and for the most
part, I have been quite proud to say that I had something to do
with his appointment. Of course, his endurance in office is the
product of the quality of his service.
I’m not sure, frankly, how much
longer Mr. Neri will last, however, and neither is he. Some of the
studies coming out of the CPBO — arguing that amending the
constitution would distract an already painfully distracted Congress,
for instance — and issued directly by Mr. Neri himself —
criticizing public policy at MAP meetings is a good example —
are obviously irritating the administration. My very limited sources
in the administration back me up on this assumption.
Interestingly, some of the same people
that pushed Mr. Neri originally for the CPBO post also pushed Mr.
Medalla for his, which made the debate last week seem even more
curious, as the two argued back and forth. Mr. Medalla had the tougher
task, by the way, trying to convince a room full of people who mostly
did not vote for his boss that the administration was performing
its job. Mr. Neri got to tell them what they wanted to hear.
Mr. Medalla’s argument is that
the economy is on track, and that the apparent strengthening of
the manufacturing sector in the third quarter will boost gross national
product 4.5 percent in the final quarter of this millennium. Mr.
Neri, on the other hand, argued that the Philippines’ chronically
low investment as a percentage of gross domestic product, low-value-added
exports, and an anemic manufacturing center were hobbling real growth.
"While it is true that we were
the least affected by the Asian financial crisis," Mr. Neri
said, "so far it also seems that we are the least affected
by the recovery."
The reason that both gentlemen were
both wrong and right is that neither of them is much concerned with
what I believe are the principal engines of growth for the new Philippine
economy. For instance, Mr. Medalla noted that the export of machinery
and transportation equipment was up sharply January to August by
45.6 percent. But then complained that transportation equipment
consisted mostly of wiring harnesses and other low-value-added exports.
What Mr. Medalla doesn’t know,
apparently, is that wiring harnesses are no longer low-value-added
exports in most instances. In fact, Japanese and U.S. firms alike
have transferred significant levels of high-value-added engineering
capacity to the Philippines, the same as many technology and other
engineering firms have. They have also graduated from wiring harnesses
to design of entire components, such as dashboards. So ironically,
Mr. Medalla was complaining about something that on paper looked
much less significant than the reality.
Mr. Neri demonstrated a similar preoccupation
with traditional mindset, complaining of low-value-added semiconductor
exports, which despite increasing prices provide little added return
to assemblers in the Philippines locked into long-term supply agreements.
As usual, the bulk of the cyclical financial benefits of semiconductor
assembly are being captured outside the Philippines.
However, that’s not the case
with exports of software and Internet-related services, for example,
which are high-value-added. While other observers argue that software
exports are still quite small compared to component exports, I suspect
that no one knows just how fast they are growing or their real value.
The same is true for other related services, such as those that
have to do with the Internet. This is because the market value of
these exports doesn’t show up in government statistics that
only measure physical bulk. And government statisticians —
in most any country — haven’t figured out how to attach
value to intellectual property.
What all this abbreviated argument
tells us is that no one — including Messrs. Medalla and Neri
— really know what’s happening, yet, to the economy, or
what sectors will principally account for growth. But it also tells
us that Mr. Estrada may actually be able to keep his vow, but through
no fault of his own. In fact, the truly startling reality to come
out of the MAP meeting is that government, and its managers, are
increasingly irrelevant in the new Philippine economy.
And that’s good news.
Copyright © 1999 The Events
& Awards Managers of Asia and
Hamlin-Iturralde Corporation. All rights reserved.
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