It’s still a Soft Republic, one year after

This afternoon, Ate Glo will deliver her last State of the Nation address, assuming she keeps her word and stays away from next year’s election. As a valedictory of sorts, it would have been really nice if she could strike some hopeful notes.

No one expects her to produce the miracles she promised to do last year. There just isn’t enough money, for instance, to build all those schoolhouses and low cost homes. But then again, I am not sure we expected all the man-made catastrophes in the past year either.

In the two general areas of concern, the economy and security, you have to be a rabid Ate Glo fan to see developments in the past year that could make you want to sing her hosannas this afternoon. Exports are down. The BSP governor is warning the DOF about potential depletion of our forex reserves if we continue paying for our foreign debts out of local borrowings. That’s probably a reason why the exchange rate is falling. International ratings agencies have been downbeat on us. Investor confidence surveys put us at the bottom of desirable countries in our region.

True, we still register positive GDP growth of three to four percent. But if we believe the pronouncements of Neda Chief Romy Neri before he joined the Cabinet, we need at least seven-percent growth to make a dent in the war against poverty. True, inflation is down, but that’s because there is little buying power among the masa. True, interest rates are down, but that’s because there is little appetite among entrepreneurs to borrow and invest.

Our economy is still driven largely by OFW remittances. We still have to break up Filipino families for them to be able to afford a decent living. Outside of telecoms, there is really no other sector of the economy that is enjoying robust growth. But all those text messages powering telecoms today are largely for entertainment rather than to facilitate business processes. It would be a stretch if Ate Glo claims this afternoon she has achieved one of her SONA goals last year to regain enough investor confidence to create new jobs.

The linchpin, Ate Glo said in her SONA last year, was to control our fiscal deficit. To be fair, her team has performed as well as they could in this area, but still not nearly enough to be able to say that the problem is under control. In this regard, I want to quote from an e-mail sent to me by a reader, to emphasize the urgency of the fiscal deficit problem.

I am glad that finally, Sec. Camacho has spoken of the national debt problem and has alluded to a potential explosion but he does not go far enough. Boo, it is serious and anyway one looks at the situation, we can rant and rave and talk about additional taxation (always unpopular to the public and whichever sector is affected) but unless the government is willing also to tighten its belt, we can have a debt explosion sometime in 2006 or 2007.

Our budget deficit is at 4.7 percent of GDP. To balance this budget, we must reduce the deficit by .7 percent of GDP annually for the next six or more years. We can no longer afford to borrow much more than the $54 billion or so foreign debt that we have. Even if most of the maturities are well spread, we are facing an overhang of a significant portion of the foreign debt coming to maturity over the next 12-18 months.

These are debts incurred during the 1994-1995 era of FVR with eight-to 10-year maturities and the shorter term debt (three to five years) incurred during Erap’s time. With Fitch down grading our sovereign debt, while we may possibly be able to refinance the maturities over the next three to six months, such debt will cost us a lot more money.

For the present, the BSP has been using both domestic interest rates and the exchange rate to offset the negative effects of our runaway deficit. But, unless government is willing to take on a serious austerity program in this election year, we may well see the exchange rate at what I fondly call Lucio Tanish levels. (Mr. Tan once predicted the exchange rate to top P120 to the dollar in a few years.)

There are many ways to reduce government spending and a major area is the expenditure for manpower and nobody is looking at this area. What is being done to shame appointees into performing overlooks the fact that the greater improvement will come from somehow making government more efficient while cutting down the cost of providing efficient service. Sounds like a conundrum or oxymoron but it is not.

On peace and order, well... we just lost all international credibility with the escape of Indonesian terrorist Al-Ghozi. Even if the PNP dramatically produces Al-Ghozi in time for Ate Glo’s SONA, the damage has been done. Worse, people will wonder if it is all a telenovela designed to make money from the terrorists without really losing the terrorist, i.e., a dangerous double cross on the Jemaah Islamiah and bin Laden’s al-Qaeda. As Time magazine puts it, who’s going to trust anything with Filipinos now in the war against terrorism?

On day-to-day security concerns, petty crime is on the rise such that riding public vehicles like jeepneys and buses carries the risk of losing valuables or even your life. Organized crime, notably in relation to dangerous drugs, is far from controlled. Other than sporadic media blitzes about them, the peace and order effort must yet produce real results. We have yet to see sustained effort over a year or even a few months.

Finally, I want to bring up a favorite topic of mine – affordable prescription drugs. Ate Glo and Mar Roxas have been talking a lot about this and have put in place a token program to bring the price of vital prescription drugs to at least the levels of our neighbors in the region. For some reason the foreign drug cartel has chosen to punish us with atrocious prices.

This is what Ate Glo said in last year’s SONA on the matter.

"Sad to say, except for Unilab, the wider distribution network of commercial drugstores – under pressure from the multinational drug companies will not sell our cheaper medicines. We are studying punitive measures to correct this unfair, unjust and heartless situation."

That was Ate Glo, the President of our Strong Republic speaking before Congress last year, confessing helplessness to push through her cheap medicines program because according to her, commercial drugstores (Mercury Drug?) refuse to cooperate under pressure from multinational drug firms.

One year after, is the situation any different? Has Ate Glo found a way to compel Mercury Drug to cooperate? The few times I tried to buy United’s Rite Med generics from Mercury, they are out of stock. It is hard to believe that Ate Glo’s Strong Republic is so helpless and unable to muster enough of the state’s powers to get a vital program through.

Of course the problems in education, national defense and social services that can be traced to limited resources cannot be solved overnight. Neither can these problems be solved unless our economy takes off, somewhat. This is why it is unfair to expect anything significant to happen in those areas in a year. But on the one program that seems small enough to be "doable" like the cheap drugs initiative of Ate Glo and Mar Roxas, a Strong Republic shouldn’t be so damn helpless.

As far as I am concerned, everything else we hear this afternoon is just so much talk. Lucky for us, talk is cheap. Otherwise, our fiscal deficit problem would be worse off after Ate Glo’s usual hour long SONA.

Truisms

An old friend, Rey Marquez e-mailed some truisms we can apply to our brand of politics.

To succeed in politics, it is often necessary to rise above your principles.

If you must choose between two evils, pick the one you’ve never tried before.

Boo Chanco’s e-mail address is [email protected]