Business World
Introspective
Think tanks seek to bridge the gap between knowledge and power. The role of think tanks is to link the two roles, that of policy maker and academic, by conducting in-depth analysis of certain issues and presenting this research in easy-to-read, condensed form for policy makers to absorb. - James G. McGann, Comparative Think Tanks, Politics and Public Policy.
This quote so very well describes what the Philippine Institute for Development Studies (PIDS), a government think tank, has been doing well over the 34 years since its inception by then Planning Secretary, economics guru, Dr. Gerry Sicat. I am privileged to serve as trustee in its board, since 2006, with such distinguished thinkers as Dr. Cayetano Paderanga, its chairman, Dr. Josef Yap its president, UP sociology professor Dr. Cynthia Banzon- Bautista, and former Science and Technology Secretary Dr. William Padolina. While it is a government institution, its fathers imbued it with some independence by giving it a corporate identity and some measure of fiscal autonomy. Additionally, its trustees are not appointed by the President, but are self-electing with staggered terms, following strict qualification and nomination guidelines defined in the charter.
PIDS research is envisioned to help government planners and policy makers in the executive and legislative branches of government. It's fellows are known experts in their areas, and over the years included not just economists of different areas of specialization, but also sociologists, public health specialists, public administration experts, demographers, statisticians, etc, who individually and collectively contribute to the body of research materials and studies required for the formulation of national development plans and policies. (You can find more about PIDS and its rich resources in www.pids.gov.ph.)
I was prompted to write about PIDS after reading its latest research publication - 2010 Economic Policy Monitor on the theme of Fiscal Space, Investment, and Poverty Alleviation, which I found particularly informative, thoughtful, and with compellingly argued recommendations. You can view the user friendly 141-page report with a four page Executive Summary in http://www2.pids.gov.ph/seminars/wp- content/uploads/2011/03/PIDS-2010-Economic-Policy-Monitor.pdf.
With the limited space, allow me to focus on a critical section of the report, Financing the Millennium Development Goal and inclusive growth in the time of fiscal consolidation, authored by Dr Rosario Manasan. The literary reference in the chapter title is appropriate, as indeed, the achievement of the MDGs and inclusive growth under the current fiscal situation can be as elusive as love in the time of cholera. That is, unless government acts swiftly and with resolve, including through legislation of new tax measures.
She introduces the dilemma of government, thusly:
1. The national government's gains in fiscal consolidation between 2002 and 2006 started to unravel in 2009 as government pursued a more expansionary expenditure policy, even as overall revenue effort contracted. There is need for fiscal consolidation now, even as it does not have the pathway to improved fiscal health since it has been underspending markedly on basic social services and infrastructure.
2. Low levels of government spending on basic education and health services have put at risk the country's attainment of the Millennium Development Goals (MDGs). This needs to be addressed as such government spending is directly linked to poverty reduction as well as economic growth.
3. Lack and poor quality of infrastructure, particularly in the roads/transport and power sectors, hold back economic growth by raising the cost of doing business, thereby inhibiting domestic and foreign private sector investment. Low growth in turn has contributed to poverty, even as lack of infra has led to inequitable access of the poor to education, health services and economic opportunities.
4. The greatest challenge in the fiscal arena today is to reduce the fiscal deficit while providing adequate budgetary support for the much- needed basic social services and infrastructure that are critical for economic growth and poverty reduction. This means that the challenge to increase revenues is doubly daunting. There is an urgent need to increase government revenues in order to achieve fiscal consolidation in the medium term; otherwise public debt levels and debt service will rise again and a vicious cycle of high fiscal deficits and expanding debt levels will be set in motion. At the same time, there is need to further increase government's revenue effort in order to sustain, if not increase, spending in MDG related interventions and infrastructure.
I will leave you to go to the full report for the detailed analysis of the current situation, alternative solutions and recommendations.
After Dr. Manasan presented her paper to the PIDS board, PIDS President Josef Yap (also a co-author of the EPM) and she were encouraged to disseminate vigorously the ideas in the paper as a way to start the process of getting decision makers in both the executive and the legislative branches to focus on the need for urgent and resolute action in the fiscal front. I suggested that they should immediately present to the Cabinet Cluster on Economic Affairs for starters. Perhaps later on to legislators and their staffs, or even to the President.
I do believe that this is the one area where PIDS needs to earnestly play its proper role in bridging the gap between knowledge and power, where there may indeed be a wide chasm.
Mr. Romeo Bernardo is a board member of The Institute for Development and Econometric Analysis, Inc. He was formerly undersecretary of Finance during the Aquino 1 and Ramos administrations. He sits as director in a number of publicly listed companies and one government think tank.
