The last three years
As we enter the last half of Rodrigo Duterte’s term, economic policy-makers and policy-influencers look at the prospects of what reforms can still be done.
The conventional thinking is that the hardest reforms have to be frontloaded in the first half of any administration’s term. Any newly elected president has the benefit of goodwill and enough political capital to push difficult but necessary reforms. In the final half of a one-term administration (or the last three years before new elections), the president’s political capital is diminished, making it far more difficult to assert controversial reforms.
On what to expect in the next three years, it is worth referring to two recent BusinessWorld columns: Calixto Chikiamco’s “A cornucopia of legislation ” (April 7), and Raul V. Fabella’s “The wisdom of the great unwashed” (June 10).
Mr. Chikiamco says factually that the 17th Congress had “a bountiful harvest of legislation.” He cites the following as “significant economic and socially progressive legislation”: the Rice Tariffication Act, the Bangsamoro Organic Law, the Agriculture Free Patent Act, the Ease of Doing Business Act, the Personal Property Security Act, the Energy Virtual One Stop Shop, the Revised Corporation Code, the Universal Health Care Law, the Mental Health Care Act, the National ID Law, the Number Portability Act, the Free Public Wifi Law, the Estate Tax Amnesty, and the new Social Security System law.
I add to this the most significant (and intensely debated) Tax Reform for Acceleration and Inclusion, which Mr. Chikiamco inadvertently forgot to mention in his column but which he and his organization, the Foundation for Economic Freedom, advocated. Another important piece of tax legislation is the increase in the tobacco excise tax, which went through the eye of the needle and was passed on the last session day of Congress.
Space constraint prevents me to discuss each law that Mr. Chikiamco enumerated. But it is evident that it is a “cornucopia of legislation.”
Mr. Chikiamco nevertheless points out that Duterte’s 17th Congress also passed laws that have “good intentions but unforeseen circumstances” like the 105-day Maternity Leave Law and the Free Tertiary Education Act. Technocrats frown upon such laws that encourage harmful behavior and inadvertently lead to bad outcomes. The Maternity Leave Law can lead to discriminating against women in the labor force. Free college education can benefit the well-to-do, but exclude many of the poor who cannot even finish primary school.
Yet, the socialist types in civil society and the bleeding hearts welcome these measures. Despite the incongruence of Duterte and civil society on core values, particularly on human rights, they share an affection for populism. Populism by itself is not wrong, but it has to be avoided when its opportunity costs are heavy, the required resources are unsustainable, and the unintended consequences result in further harm to society.
This brings the discussion to Mr. Fabella’s column. Mr. Fabella concedes the electorate’s overwhelming choice for Duterte’s candidates in the last elections, thus “reaffirming its faith in Duterte.” How Duterte uses this strong mandate is the question, and Mr. Fabella raises the alarm: “Beware of populist excess either from Duterte or from his zealous appointees.”
Tempering this fear is Mr. Fabella’s observation that “Dutertismo” has “gingerly” respected the market; that “Duterte has largely, if with some slips, honored his promise to leave economic policy to his economic team.”
The danger of populism rearing its ugly head is real. Lately, Duterte announced his support for increasing the salary of public school teachers by P10,000 per month. The intention is good, but the proposal is problematic on several counts.
Where will government get the resources for the salary hike? The amount needed for the increased salaries is P150 billion in the first year alone. The net revenue generated from the government’s tax reform has not even reached that amount. Reallocating resources to fund salaries means denying resources for other social and economic services. On top of this, salaries of other government employees likewise have to increase in light of the salary standardization law. And the proposal will only exacerbate the income gap between public school teachers and private school teachers. The truth is, in comparison to what those in the private sector receive, the salaries of the public school teachers are already generous.
And so, it is not a lame duck president or a president with diminished political capital that will constrain further legislative reforms. The President remains very popular; his satisfaction rating is a record high. Such popular support has been translated into an overwhelming midterm electoral victory and the control of both Houses of Congress by Duterte’s subalterns.
This is double-edged. This dominance can be used either to facilitate the passage of good, progressive reforms or to railroad measures that serve vested interests, spook markets and investments, and abet unchecked populism. One reserve that the reformers can rely on to advance the former and combat the latter is the administration’s economic team.
After all, it is this team that is principally responsible for the slew of reforms that Chikiamco enumerated in his column. It is the economic team that has defied the proposal of federalism or Charter change at this conjuncture. And it is the economic team that will prevent from what Mr. Fabella calls the “curse of the Great Unwashed” from happening.
Filomeno S. Sta. Ana III coordinates the Action for Economic Reforms.
