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Overall, the President's State of the
Nation Address (SONA) was good. More statesman-like, less combative. He
mentioned several liberal and free market-leaning policies, which is good and
consistent with his party affiliation. But there was also an overall hangover
belief that government can do and will do almost everything for the people.
Some liberal and free market reforms that
the President mentioned in his address are the following:
1. More airline competition as a result of
ICAO, European Union (EU) and US Federal Aviation Authority (FAA) upgrade of
Philippine aviation security. Thus, more flights between Manila on the one
hand, and Europe and the US on the other can be expected
2. More labor conciliation via Department
of Labor’s Single entry Approach (SEnA), resulting in less strikes and
industrial conflict, which will help attract investors.
3. More competition and less monopolization
in Department of Public Works and Highways (DPWH) project contracts after the
removal of letter of intent in public works bidding.
4. More competition in PPP projects like
the Mactan-Cebu International Airport (MCIA) and NAIA Expressway. Winning
bidders paid government a premium amounting to P14 billion and P11 billion,
respectively.
5. Various infrastructure projects that
will be undertaken by private developers at little or no cost to the
government, such as (a) Tarlac-Pangasinan-La Union Expressway (TPLEX), (b)
Metro Manila Skyway 3, (c) Kaliwa Dam, (d)
Laguna Lakeshore Expressway Dike, (e) LRT South and East extensions, (f)
Busuanga Airport, and so on.
The President though made this opening
statement which set the tone for the rest of his address: "It is as if you
are watching two hundred TV channels at the same time. You need to understand
not just what is unfolding before you—you also need to know what happened
before, and where it could all lead.… you must have a response for every
question, suggestion, and criticism—and you must have all the answers even
before the questions are asked."
This is not so comfortable to hear because
the President or the government is implying that they are playing God who knows
everything and can provide answers to everything. It can be an invitation to
central planning. I have no intention of attacking the President but would
rather that he mentioned in his SONA, or in future speeches, things like the
following.
1. More jobs were created by the private
sector as the government has reduced business taxes and bureaucracies and other
difficult/complicated requirements.
2. The projected power crisis starting next
year can be addressed by DOE and other agencies stepping back from too many
requirements and allowing more private power developers to come in with minimum
restrictions and permits to submit.
3. Rice prices can go down by (a)
deregulating rice importation and allowing more competition among legitimate
importers and (b) reducing or removing the rice import tax of around 40 percent
(previously 50 percent). The President mentioned that even rice importation,
which should have been left to the private sector in a competitive environment,
must remain: "This February, the NFA Council approved the importation of
an additional 800,000 metric tons, in fulfilment of our buffer stocking
requirement… This July as well, we approved the immediate importation of
500,000 metric tons of rice through open bidding. The NFA also has the standby
authority to import an additional 500,000 metric tons to prepare for the
effects of calamities on harvests and rice prices."
Government monopoly or full control of rice
importation is so 80s or even early 90s, before the World Trade Organization
(WTO) was created in 1996. We are stuck in a Jurassic philosophy that
government must continue its rice importation monopoly. The protected groups in
the government, both at NFA-DA and their accredited private importers, are the
beneficiaries of this faulty policy. Rice should be as cheap as possible. If
cheap rice should come from Vietnam, Thailand, Cambodia or India, so be it.
Government should reduce or abolish the high import tax and abolish the NFA
monopoly. The NFA can continue as a regulator but not as player and proprietor
at the same time.
4. No need for a supplemental budget for
2014 to evade the DAP controversy. Additional budget request looks
questionable. The total budget in 2013 was P1.88 trillion. This year, it is
P2.41 trillion (P 1.61 trillion new appropriations + P 0.80 trillion automatic
appropriation), or P530 B higher than last year's budget. This is not enough?
Half a trillion peso increase in just one year and not yet enough?
Table 1. Outstanding Debt, Interest Payment
and Total Expenditures (in billion pesos)
Sources: (1) Bureau of Treasury (BTr), http://www.treasury.gov.ph/statdata/yearly/yr_outstandingdebt.pdf.
(3) and (4) BTr, http://www.treasury.gov.ph/statdata/yearly/yr_cor_expenditures.pdf
* DBM, General Appropriations Act (GAA)
2014 http://www.dbm.gov.ph/wp-content/uploads/GAA/GAA2014/Summary.pdf
** New appropriations P1,608.503 billion +
automatic appropriations P796.029 billion.
It is true that the government’s interest
payment burden has been declining. However, a P353-billion interest payment
this year is no laughing matter. The public is angry at the reported P10
billion Janet Napoles plunder in over 10 years or so, but is indifferent to the
P353 billion interest payment in just one year -- a big transfer of money from
average taxpayers to rich institutions like private banks and bondholders, as
well as huge government financial institutions like the SSS and GSIS.
5. Expanding the AFP’s pool of battle
ships, navy cutters, jet fighters, combat choppers and other armaments, the
huge resources to finance them should not come largely or entirely from
additional taxes or huge borrowings, but from long-term lease or privatization
of certain AFP/DND assets and properties.
6. Reforming the Bureau of Customs (BOC)
and appointing officials who have more integrity is a good move. But as the
ASEAN Economic Community (AEC) comes closer (more than one year to go) plus
various bilateral and regional free trade agreements, the power of BOC to
collect high import taxes and impose non-tariff measures that effectively
discourage more international trade should be limited and restricted.
7. Extension of the no-timetable Agrarian
Reform (AR) program or forced redistribution of certain private lands does not
encourage early and big investments in agri-business and corporate farming. A
Congressional bill of extended notice of coverage -- effectively an extended AR
program -- should not prosper.
The President is a Liberal, not a socialist
like Bayan Muna or Akbayan, nor a populist like the other political parties.
Let us expect more liberal and market-oriented policies from him and his team
in his remaining year.
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See also:
Fat-Free Econ 17: SONA, the Budget and Debt, July 22, 2012
Fat Free Econ 51: Ten Things About the Meralco Rate Hike, December 28, 2013
Fat Free Econ 52: Optimism in 2014, January 02, 2014
Fat Free Econ 53: WESM, Myths and Realities, January 22, 2014
Fat Free Econ 54: WEF and East Asia Growth Story, May 20, 2014
The President's SONA, 2010, July 26, 2010
The President's SONA 2011, July 24, 2011
The President's SONA 2011, part 2, July 26, 2011
The President's SONA 2011, July 24, 2011
The President's SONA 2011, part 2, July 26, 2011
The President's SONA 2012, July 23, 2012
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