The Philippine economy has grown consistently for 83 consecutive quarters or nearly 21 years. From all indications, it will continue to grow in the foreseeable future.
It has not always been this way. In the past, Philippine growth so famously followed a boom-and-bust cycle. It would grow in spurts and then enter into episodes of contraction. This pattern discouraged long-term investments and attracted carpetbaggers who would loot the economy in good times and flee when the going gets rough.
In the early nineties, everything that could possibly go wrong in an economy afflicted ours. We had acute power shortages. We labored under the crushing weight of a large debt overhang. Militant trade unions were driving labor-intensive industries away, resulting in mounting unemployment and widespread poverty. Our politics was unstable. Inflation ran rampant. Monopolies ruled an uneven business playing field.
This was the time we were called The Sick Man of Asia. While our neighbors surged, our economy sputtered. We seemed destined to stagger from one crisis to the next.
Then reforms were introduced, often painfully. The economy was liberalized. Key sections were privatized. Fiscal stability was restored. Growth gained more solid footing.
As economic sanity was restored, growth became more sustainable. Every piece of reform, however, had to be fought for in the arena of public debate. The bearers of dead ideologies resisted reform every step of the way.
Where winning the public debate to get our policies right required that our economists occupy the frontline in public deliberations. Economic literacy needed to thrive against ideological folly and wishful thinking. The problems that hounded our society had to be thought through in the disciplined manner of economics.
After over two decades of hard reforms and sustained growth, there is reason for economists to be cheerful. Modernity is being won inch by inch. The “dismal science” is increasingly becoming the popular mode by which we arrive at the right policies.
The cheerfulness among economists is reflected in the title of a new book to be launched tomorrow. Momentum: Economic Reforms for Sustaining Growth collects in a single volume some of the best essays written for popular consumption by some of our most thoughtful economic thinkers.
Momentum is a selection of newspaper columns written by Romeo Bernardo, Calixto Chikiamco, Emmanuel de Dios, Raul Fabella and the late Cayetano Paderangga Jr. Edited by veteran business journalist Roel Landingin, it features a foreword by Felipe Medalla.
The book is published by the Foundation for Economic Freedom (FEF), a group of policy reformers that came together in the nineties to take up the challenge of public advocacy. With excellently written essays, the book serves as useful reader on the policy issues of the day as well as the disciplined thinking needed to get those policies right.
The book will be launched 5 pm tomorrow at the Fairmont Hotel.
Unclear thinking
The Supreme Court, I am sure, needs a good dose of hard economic thinking in framing its rulings.
Last August, for instance, the Court ruled that the two water concession companies had violated Section 8 of the Clean Water Act requiring them to install sewerage systems in their concession areas. For this, the Court imposed a fine of P921 million on each of the two companies. In addition, they were levied a fine of P322,102 for each day the installation of sewerage systems remains incomplete.
In order to comply with the ruling, however, the two concessionaires need to dig up over 1,000 kilometers of road in the Metro Manila area. Should they begin doing that in any substantial manner, the already congested roads will be even more clogged. Should they try to do the task all at once, we might as well close down the metropolitan area and accept all the economic losses this entailed.
Furthermore, the two concessionaires need to raise hundreds of billions to fund the massive construction activities associated with installing sewerage lines. The banks will lend them that money only if they are assured the debts could be repaid by charging consumers more. This will cause a surge in water tariffs by several thousand percent. Not only will consumers be unhappy with this, it will cause a substantial redirection of disposable income with severe effects on our economic performance.
In a word, the Court has handed the concessionaires an impossible mission with grave economic consequences. At the moment, the more urgent task is for the concessionaires to develop new raw water sources. Last week, water levels at the Angat Dam began declining again. That means we will face an even more severe shortage at the start of next year.
The concessionaires have appealed the said ruling, pointing out that in 2011 the Court already ruled on the same Section 8 of the Clean Water Act. In that ruling, the Court gave the concessionaires up to 2037 to complete full sewerage connection in their service areas.
The first ruling was a vastly more reasonable one. After all, the responsibility of building a modern sewerage system does not rest on the concessionaires alone. The DPWH must come up with an over-all plan for building the sewerage system and the local governments need to provide the land for new water treatment facilities. In the meantime, the concessionaires are working on interconnecting homes and buildings with existing sewerage lines.
The fines, too, seem grossly inappropriate. The concessionaires were working well within the 2011 Court ruling that seems to have been overlooked in the August 2019 ruling.
The Court needs to rule within the parameters of what is doable.