August 29, 2022 | 6:13
Intropective By Romeo L. Bernardo
I am pleased to share with readers the
political section of our quarterly economic report to Globalsource Partners (globalsourcepartners.com) subscribers titled “So far, so good (Aug.
25). Globalsource Partners is a New York-based network of independent analysts
in emerging markets. Christine Tang and I are their Philippine advisers.
Ferdinand “Bongbong” Marcos, Jr. (BBM) has
comported himself well in the first month and half of his presidency.
First, he chose good men, based on competence and integrity rather than
personal ties, to lead key cabinet posts. Then, he lent credibility to his
economic team, opening his first policy speech to congress with their growth
and development goals and, importantly for credit markets, the medium-term
fiscal consolidation program, and then said all the right things in the rest of
the speech.
Likewise, perhaps to signal that he is neither
populist nor beholden to anyone, he exercised the presidential veto and sent
back to congress three notable bills, two of which benefited business groups
that were reputedly major sponsors in his campaign and another favoring the
teachers serving in elections through the grant of impractical tax exemptions.
His continuing silence on the popular policies he espoused on the campaign
trail, notably P20 rice and an oil price stabilization fund, as well as his and
the economic managers’ active engagement with the business sector further
bolstered beliefs that the economic team has his ear.
So far so good.
Not quite. His administration’s recent flipflopping
on whether to import sugar, where prices rose 36% year on year and 13% month on
month in July, is testing the President’s leadership mettle. To recall, the
President appointed himself agriculture secretary in June, which we said was
either a bold move or an ill-advised one.
The issue of sugar imports, a source of largesse
for the politically well-connected, is not new. Volumes are decided by a
government-owned corporation, the Sugar Regulatory Administration (SRA), which
is administered by a board chaired by the agriculture secretary with members
representing politically powerful planters and millers. The SRA not only
controls domestic supply through imports but decides how much of local
production will be allocated to meeting US quotas and how much for domestic
consumption. This central planning system, coupled with the sector’s relatively
poorer productivity, has translated into comparatively high domestic sugar
prices, as much as twice the world market price in the past 10 years.
The latest controversy involves an order to import
300,000 metric tons of sugar signed by members of the SRA Board earlier this
month. An agriculture undersecretary, who was designated ex-officio chair
representing the President, signed the order on behalf of the President. Many
thought that what transpired soon after was tantamount to the President and his
Palace team throwing a highly regarded technocrat under the bus.
First, through his spokesperson, the President
disavowed knowledge of the importation order, calling it “illegal.” Then, his
executive secretary, who issued the memorandum that gave the undersecretary
authorization to sign, told a senate hearing that while he had the importation
order drafted, he had expected the undersecretary to get the President’s
approval first before signing. In the meantime, inspection teams have been sent
to warehouses to show the public that there is no shortage of sugar locally.
What happened behind the scenes is the subject of
plentiful speculations. Whatever the inside story, the President has since
agreed to importing sugar but at half the original volume and at a later date.
The question is, is this decision based on sound economics or political
accommodations? So far retail prices of sugar are unchanged despite reports of
large supermarkets having been persuaded to sell the product at a discount.
Another worrying sign is the suspension of operation in some plants of a large
multinational beverage manufacturer reportedly due to lack of sugar.
We are not quite sure what this seeming first
major misstep means, but it is being closely watched as a possible canary in
the coal mine.
Throughout our Presidential history, including the
Marcos Sr. administration, there have been tugs of war between economic
technocrats and the more politically oriented advisers, driven by short term
popularity, power consolidation, or fund-raising agenda. How this
administration, and thus our economy, fares over its entire term, amidst all
the daunting economic challenges, may well depend on who the President listens
to.
Romeo L. Bernardo was finance undersecretary from
1990-96. He is a trustee/director of the Foundation for Economic Freedom,
Management Association of the Philippines, and FINEX Foundation. He is
Philippines principal adviser to Globalsource Partners
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