Remarks on the 20th Anniversary of the FEF, October 19, Manila Golf.

Ideas give birth  to a diners club,  then a CSO

I was with the DOF  in the early 90's. Francis Varela was chief of staff of Secretary Ramon del Rosario. Ernest was a fellow Usec, later our boss. As was Chil. Alan O was Usec/ head BOT now PPP Center. Dondon was NEDA Sec, and Dante Canlas and Popo Lotilla  Usecs.

Our big struggle,  the Estanislao later Leung levy ( P 1 per liter of gasoline) .   We in Finance, could not understand why such a sensible thing which was so needed to stabilize the country's finances was literally violently opposed by everyone. And when I say everyone I meant everyone-- the leftist militants, the FDC led by Leling Briones and Men Sta Ana,  grandstanding Congressmen, of course, but also the rightist  putschists, the Bishops, the Federation of Phl Industries, you name it.

The only support came from a few opinion leaders who were intellectually convinced on their own that oil taxes-- highly  progressive, green and administratively easy  to collect--made a lot of sense.

These were column writers/opinion leaders   and members of the academe who were writing and opining on the issues, pretty much on their own.   We thought to reach out  to thank and encourage them.

Among those were columnists Alex Magno who I had not seen since college days, Mahar Mangahas who I assiduously avoided in college as  a  “terror” who gave low grades,  and Toti Chikiamco who I did not even  know until then.  From the academe, foremost was Dean Philip Medalla and Dr Fabella. And from the private sector, Bong Montes, Simon Paterno.  We would get together KKB at restaurants and each other's homes to compare notes.

When I left government in July 1996,  some of us thought we should formally organize-  I volunteered to try and raise money from private donors. The  first P 1 M was raised by Francis V, a donation from our  boss Ramon del Rosario who saw the need for such an organization who can in a disinterested way help educate the public and decision makers on issues of national importance affecting the economy,  speak out for good economic governance and market friendly reforms, and support reformers in government.  Especially on "orphaned issues” .

Thanks to DOF technical people, particularly  then Director Lea de Leon and Usec  Chil,  and  with the blessings of Sec De Ocampo, we were able to get financial support from a couple of  development partners.

We incorporated in October  1997, at that time without a Corporate Secretary--  Tony Abad and Ferdi Tolentino would come  later. 

Our incorporators who would later serve as our first Board of Directors were: Toti Chikiamco, Ed Coronel, Alex Magno, Mahar Mangahas, Bong Montes, Lani Nanagas, Alan Ortiz, Dondon Paderanga, Simon Paterno , Francis Varela and me.

 Our Founding Chairman was Dondon Paderanga, Founding President Alex Magno.  Dondon would be succeeded by Mahar, Toti, Philip and now Bobby. Alex by Francis Varela and now Toti.

“Economic Freedom” what is that?

The name Foundation for Economic Freedom was suggested by Mahar Mangahas—perhaps a  true University of Chicago alumnus and Friedman disciple. There was immediate unanimous agreement. Indeed economic freedom, defined broadly, encompassed what we all thought the new foundation should be all about. ( Even if it sometimes got confused with Freedom from Debt Coalition!  The difference, I would tell the unsure,  is that they are better funded. Just like the NDF. )

I had to go back to my college books to fully appreciate the appropriateness of the name—to the writings of Adam Smith,   Hayek, Friedman—much tied to the liberal traditions of free market economics.  And to some extent defined by the economic paradigm  of those days driven by the resounding restructuring and  privatization successes of  Prime Minister Thatcher and some Latin American economies that were the first to bounce back from their debt crisis--- the unleashing of private sector energies for development.

These ideas actually go back here in our country to the advocacies within government of PM Virata and Dr. Sicat for greater economic openness and improved economic governance. Or the advocacies of  Gen Almonte, who was here earlier.  Incidentally, the publisher of JoeAl’s book “We Must Level the  Playing Field” 2007,  was FEF.

Over the years, I can’t recall whether  “economic freedom” was something we   tried to explicitly define, rather than something we gave meaning to in Philippine context in the course of our many advocacies.  It would seem to me that the  meaning we gave it has gone beyond the traditional indexes of economic freedom tracked by international economic freedom networks .

 For example, they would normally use low tax to GDP ratios as a positive indicator of economic freedom— but based on our advocacies we did not quite see it that way. Rather, that low revenue mobilization has become a limitation on government in providing  needed basic public services, including those  that make markets work well. This went hand in hand with our  stress on  developing institutions.

On this point, our  current Executive Director, Atty Grace Gamez recently  quoted for me the definition of Prof Schafer of “economic freedom", I thought a good one from a legal perspective.

“Economic freedom consists in the legal framework for markets and the absence of unnecessary regulatory burdens. The first cause of economic growth is legalizing economic freedom—that is, creating effective property, contract, and corporate law, and repealing unnecessary regulations.”

Raging Incrementalists

We have styled ourselves,  half in jest by Philip and me I think,  as  "raging incrementalists”.  Toti has elaborated on this—“ believing in pushing reform one step at a time.  Raging because we are passionate about the reforms we believe in; "incrementalists" because Rome wasn't built in a day.  While we are idealistic, we are realistic enough to know that reform takes small steps over a long period. However, that doesn't daunt us into shirking from what we believe is our civic duty:  to make the Philippines a better place.

While we espouse economic liberty, we aren't market fundamentalists.  We believe in institutions and good governance.  We believe markets work best when institutions function and a rule of law prevails. Moreover, our  advocacies are supported by research and evidence. We aren't ideologues.”

Advocacies over the years

 Over the course of our history we have adopted many issues, orphaned and otherwise--  sometimes by ourselves, often with others (a number where we led the way ).

  I would give us a passing grade in having contributed to the advancement of economic freedom in our country. Both  as an organization,  and in our own ways individually, whether in or out of government. 

 The notable successes have been in the areas of widening the  sphere for private, market based approaches in  solving efficiency and welfare problems. For example, privatization now called PPP--  much earlier a much resisted and poorly understood  notion, is  now accepted as part  of the nation’s tool kit for providing infra and other public services. (One close to my heart is water privatization where a number of us here have been involved either on the government side or the private side or as advisers or funders.  )

 Another area of success has been in speaking out to get government out of the business of administering oil prices-- which has historically been not only a fiscal drain but politically burdensome and distracting,  a source of macroeconomic and political risks for the country.

  (We have not been as successful in other areas-- but we never surrender, say the three decade issues on the  NFA close to the hearts of  many of us here ( Arsi, Monching, Philip, and others) -- but we labor on like true "raging incrementalists".)

We have also been most active in contributing  to fixing our fiscal house-- historically a pain point.  It is a subject close to the hearts of many here—all the former Finance Secretaries—PM Virata, Secretaries Ernest, Gary.

 And did our share in lobbying for the passage of key legislations-- notably the reformed VAT in 2004  and the sin taxes reform a decade later. 

Later Fellow columnists Boo Chanco, Peter Wallace, Gerry Sicat,  and at an earlier period Gary Olivar,  have been valuable voices through their columns. Others working through partner organizations like Joint Chambers (notably John Forbes) , MAP ( Perry Pe) , MBC, ADRI ( Dindo Manhit).

(Many of us  have have  lobbied directly as resource persons in the executive and Congress.  I have a particularly vivid picture of one Senate hearing chaired by Senator Angara and co-chaired by Sen Serge Osmena right after the 2004 elections. Three of us individually and as FEF, none supporters of the just won  Presidential candidate, went to bat for the EVAT bill of the administration.    Philip, who was economic adviser of Presidential candidate Lacson,  Gary O, who was adviser to candidate Roco, and I who was then with FPJ.  I thought we were persuasive, not the least because we were not seen to be cheerleaders of the administration. )

 We have,  both as an organization and as individuals,   weighed in on important issues not always successfully, but always with reason and with passion. ( As we like to say, soft hearts but hard heads. )

 Eg. just top of mind issues like  opening up the country to foreign investments, a more competitive exchange rate,  the retail trade law, the Bangsa Moro bill, competition commission, EPIRA, setting up a centralized oil procurement by government, CARP extension, the setting up of a National Revenue Agency, land property rights, overly generous Feed in Tariffs for renewable energy, land and property rights, now at this forum educating the public about what ending “endo” means for inclusive growth.

Partners

In all of these, we have partners sometimes with formal agreements, often just finding ourselves in the same  trench.   Many of whom are with us tonight, again in no particular order, USAID, AusAid/DFAT, World Bank, Omidyar Network,  Philippine Council for Islam and Democracy, Philippine Constructors Association. Agencies in government we have worked with include the Department of Finance, DENR, PPP Center, UP Law Center, and many others. We have also been supported by private organizations and firms including the ones who supported this event today.

Working in government

Over the years, a  number of us have been in out of public services, doing our share directly.

I think this reached its apex in PGMA 1 where I could count  at least a dozen in cabinet or subcabinet posts:  the late  Emy Boncodin ( DBM Sec), Dante Canlas ( NEDA Sec), Ernest Leung ( DBP Chair), Gloria Tan Climaco ( Cabinet Secretary for Flagship projects ) ,  Rene Banez ( BIR Commissioner),  Lani Nanangas ( SSS Chair), Popo Lotilla ( PSALM Pres) , Alan Ortiz ( TransCo Pres), Tony Abad ( NFA Administrator ), Simon Paterno ( DBP President), Dondon Paderanga ( Monetary Board Member ), Alex Magno ( DBP Board), Me in PIDS Board.

  Right now, the ones in government include--  Arsi Balisacan ( PCC Chair),  Philip Medalla ( Monetary Board Member),  Gilbert Llanto ( PIDS President), Popo Lotilla ( PIDS Board Trustee), and some eagerly  outgoing ones--- Berti Lim, Bong Montes, Bern Sy. 

 Few of us are in government now,  a function of age or maybe we have have learned our lessons, or maybe Presidencies have learned theirs. 

 Allow me to turn over to our President who has injected new life into FEF since he took over as CEO five years ago, moving us from advocacy to ground level development work, partnering with DENR and Local Governments to facilitate the issuance of residential free patents.

Rude Language and Awakening

Posted on October 03, 2016

Business World Introspective Romeo L Bernardo

Judgment, it seems, came early for President Rodrigo Duterte.

Not yet 100 days in office, the local currency hit a seven-year low of P48.25:$1, depreciating 3.5% since the start of the month while the main stock index retreated 3.1% over the same period, both worse than most regional peers.

 

Critics are quick to blame the President’s drug war, with over 3000 body count to date, and his penchant to lash out willy-nilly at challenges to his authority, especially at perceived interference from foreigners, be they the international press, human rights activists, the United Nations, or the President of the United States. His expletive-laden rhetoric disturbs and confuses many -- most recently telling the credit rater S&P, which issued a warning about policy unpredictability, to “leave us” -- and his apparent partiality to China and even Russia unnerves free marketers.

Yet just like the President, his apologists remain unapologetic.

They disdain the critics’ judgment as either moralistic, narrow-minded obsession with extrajudicial killings, or ivory tower westerners ignorant of local conditions. They argue that the death toll is a necessary evil to disrupt the drug trade and root out corrupt public officials engaged in the drug business, which evidence supposedly points to elected and appointed officials -- from the lowly barangay to national level offices, from the executive to the legislative and judicial branches of government. They firmly believe that the President’s heart is in the right place and that he should be given the opportunity, a proper honeymoon period of not less than six months, to show results. Meanwhile, financial market losses have nothing to do with local politics but with global market conditions and relative valuation adjustments.

To be sure, some of the non-political reasons advanced for the local markets’ recent retreat are plausible. Externally, apart from recurring speculations of an impending US rate hike, the prospect of a Trump presidency has directed market attention to possible changes in US immigration and outsourcing policies that some fear, may affect the remittance and BPO-reliant Philippine economy. This concern comes at a time of ballooning trade gap that may see the country’s more than a decade-old current account surplus reversing into a deficit. This in turn, while by itself would not threaten the country’s external resilience, would probably deter speculative plays based on an appreciating local currency and thus, lead to hot money outflows, something that the BSP should in fact welcome.

Yet, the timing of the Philippine market sell-off (with disproportionately larger price impact vs. peers) coincides too closely with heightened foreign press coverage of the President and his drug war (as well as S&P’s commentary on the policy risk) for us to dismiss outright the role of political factors. The question in most analysts’ minds now is whether or not local support for the President remains intact.

While official survey results on presidential trust scores and voter support for his drug war are due in about two weeks’ time yet, anecdotally, we gather that there remains broad support still for the President on the ground and people in general are willing to give him room to do what he thinks needs to be done. Economic watchers on the other hand, seem less concerned with the rising body count and more with the uncertainty created by the President’s unpredictable off-the-cuff remarks that come across as unorthodox policy statements, including on foreign relations. The fear is that this uncertainty, arising as well from the President’s rebuff of well-meaning external advice about the futility of violent drug wars and his declaration of an indefinite state of national emergency that allows the military to assume police functions, may cost the economy valuable growth points if it ends up quelling investor appetites.

At this time, foreign investors who have spoken out against human rights violations (European and American chambers of commerce) can be expected to be watching; and waiting. Smaller local businesses appear optimistic enough but the conglomerates are seen to be much more cautious. After all, looking beyond the body count and the President’s coarse language would require less talk of action and more actionable business propositions, including clarity in labor contracting and mining permits, ease of doing business, removing infrastructure constraints, and more PPP auctions.

While we are getting initial positive reviews of administrative improvements in frontline agencies, including the tax bureau, we think that the President’s men would have to move even faster on their deliverables to win the perception game, currently dominated by images of drug-related killings and Venezuelan-style failed governance.

The silver lining for this administration is that, notwithstanding the maverick image that President Duterte has projected of himself to the world, when it comes to economic matters, he will listen to his empowered economic team led by his close supporter and friend since primary school, Finance Secretary Carlos Dominguez III. This is true of macroeconomic management, reforms in taxation, rice and labor policies, spending priorities especially the need to fast-track infrastructure buildup, and other items listed in the administration’s 10-point agenda. And the 10-point agenda is nothing but orthodox.

(This was excerpted from a GlobalSource market brief dated Sept 29, 2016 by Ms. Christine Tang (globalsourcepartners.com) and this columnist.)

Romeo L. Bernardo is a Board Director of the Institute for Development and Econometric Analysis. He was Undersecretary of Finance during Corazon Aquino and Fidel Ramos administrations.