Canary in the coal mine

I am pleased to share with readers, our post last Sept. 11 to GlobalSource Partners subscribers. GSP (globalsourcepartners.com) is a New York-based network of independent analysts in emerging market countries. Its subscribers are mostly global banks and fund managers. Christine Tang and I serve as their Philippine Advisers.

Last week, the Senate Blue Ribbon Committee investigating the controversy surrounding the Aug. 9 order of the Sugar Regulatory Administration (SRA) to import 300,000 metric tons of sugar concluded its public hearings. It recommended the filing of administrative and criminal charges against the four officials who signed the importation order, one of whom, an undersecretary in the agriculture department, is the chief of staff of the agriculture secretary, President Ferdinand Marcos, Jr. himself. The President was insulated from the heated arguments.

To recall, the controversy broke when the President, through his spokesperson, denied approving the importation order after it was issued, called it illegal, and rescinded it. The agriculture undersecretary, his chief of staff Leocado Sebastian, promptly asked to be relieved of his duties and the senate probe began soon after. During the hearings, Undersecretary Sebastian testified that he signed the order in good faith, believing that he had authority from the President based on a memorandum from the President’s executive secretary, and that the decision to import the specific volume of sugar is based on data showing the shortage at hand of raw and refined sugar in the domestic market which had been discussed in earlier meetings with the President.

Those in the agriculture community following the whole affair, who know Undersecretary Sebastian to be an honorable man, left it with a bitter taste in the mouth. The sentiment seems to be that not only was the man thrown under the bus, he was demonized, then fed to the wolves. And all for signing off on an importation order that the President himself had since said would be necessary but perhaps at only half the quantity. Seemingly belatedly, the President on Aug. 25 instructed his economic managers, i.e., the secretaries of finance, trade and industry, and socio-economic planning, as well as agriculture officials, to determine the status of domestic sugar supply and the volume of imports needed as well as to find measures to stabilize domestic sugar prices. The findings and recommendations, supposed to be completed in seven working days, have yet to be released to the public. In the meantime, latest data as of August show that the price of sugar and sugar products in consumers’ food basket has surged by 26% year on year.

For many outside observers who are inclined to take Undersecretary Sebastian at his word, the instinct is simply to conclude that cabinet appointees serve at the pleasure of the President. Presidents have multiple political and economic objectives to balance and over the course of history, not a few good men have taken a bullet for their leaders.

However, we cannot help but wonder about this canary in the coal mine, what it says about the President’s leadership/management skills and what signals it sends to the other technocrats in his team, the economic managers included.

Early on, we had warned of a looming first fumble in the President’s decision to assume the agriculture portfolio,1 and it took less than two months for it to happen. But now, with the unnecessarily shabby treatment of a seemingly well-intentioned, professional civil servant in full public view, what hope is there of the President finding a suitable candidate to head this important department?

As it is, there is the risk, pointed out by the sole dissenter in the senate’s committee report, that the treatment of Undersecretary Sebastian “discourages government officials from acting with urgency on matters that affect consumers, like tight supply, high prices and inflation,” and that agriculture “officials are now gun-shy about signing any importation documents… further exacerbating the food shortage.”2

Those with a broader outlook fear the incident’s chilling effect on other professional managers in the President’s newly formed cabinet that, at a minimum, could dampen enthusiasm and performance.

Coincidentally, a rumor appeared last week in the country’s leading newspaper of a “reluctant” finance secretary who would prefer to return to the BSP (Bangko Sentral ng Pilipinas) next year.3 True? Hard to say. But we wonder whether this is one technocrat’s way of signaling to the President that whatever difficulties political considerations bring, the professionals who are bringing much-needed credibility to his administration, deserve better treatment.

1 See GS Brief, “Bold or ill-advised?,” June 22, 2022

2 https://www.einnews.com/pr_news/589931967/statement-of-senator-risa-hontiveros-on-the-blue-ribboncommittee-report-on-sugar-fiasco

3 https://business.inquirer.net/360744/biz-buzz-reluctant-economic-manager

Romeo L. Bernardo was finance undersecretary from 1990-96. He is a trustee/director of the Foundation for Economic Freedom, Management Association of the Philippines, and FINEX Foundation.

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