When success fails

By: Ernesto M. Pernia
Philippine Daily Inquirer

11:27 pm | Sunday, July 8th, 2012

Filipinos visiting countries inEast Asiafor the first time are invariably struck by the chasm in prosperity and living standards separating their home from the host countries. Those visiting more than once often feel more depressed to note the hare strides these Asian neighbors have made against their own country’s turtle steps. Others get angry at why their political leaders who frequently travel don’t seem to be sufficiently goaded by these stark differences to work resolutely for the development of the country they’re sworn to serve.

Looking back to the two years I lived inThailandin the mid-1980s, I can say Greater Bangkok’s situation then seemed more or less what Metro Manila’s is today. Traffic gridlock was a daily experience, motorcycles and tuktuk (their tricycles) were ubiquitous, gray smoke was emitted wantonly by buses and trucks, ambulant street vendors were a common sight, and poverty was manifested in many places. Judging by these two national capitals, thePhilippinestoday may have fallen behind by at least a generation.

Indeed, the respective gross national incomes per capita show thatThailand’s $4,150 (2010) has more than doubled thePhilippines’ $2,060, when they were about the same in the mid-1980s. Likewise, the former’s national poverty incidence has fallen to 7.8 percent, which is less than a third of the latter’s 26.5 percent.

I first visitedChinawith a group of social scientists from the University of thePhilippinesin 1980 when its economy was just opening up, followed since by four official or personal visits at 5- to 10-year intervals. It was certainly enough for me to be awed at the dramatic transformations in that country and feel sorry at how time seems to have stood still for our country—a kind of self-pity that probably also hits other Filipino visitors to China, Indonesia, Malaysia, Thailand, or even latecomer Vietnam.

What must underlie the dynamic economic progress of our neighbors is how they value time—a sense of urgency or “virtuous impatience” that seems to be scarce among our political leaders, inevitably impacting businesses and activities of ordinary people as well. One can cite several examples reflecting the lack of that sense of urgency.

What readily comes to mind is the public-private partnership projects (PPPs) that have been on the drawing board since 2010. According to the program’s latest status report (May 25, 2012), of the 22 PPPs on the list, only one (the Daang Hari-SLEX Link Road) has been “awarded” and two (the PPP for School Infrastructure Project and the LRT Line 1CaviteExtension and O&M) are just “ready for bidding.”

Other examples: the feed-in tariff (FIT) intended to promote renewable energy, which has been in the works for some time; the new mining policy that was supposed to be promulgated early this year; the no-brainer of a policy measure for social justice, women’s rights, and human development—the more-than-a-decade-old reproductive health bill that has been debated to death in Congress, the delay now deemed largely responsible for the rise in maternal mortality; and the dinosaur-like agrarian reform program that now seems increasingly unlikely to make a meaningful dent on poverty and social injustice.

The PPPs make up the kind of pivotal infrastructure that our Asian neighbors put in place years back to spur economic growth. Assuming that the rest of the PPPs in the set are successfully bid and awarded a year from now, the major ones are likely to be completed past the term of the Aquino administration, while the impact lag on economic growth may take another couple of years.

Development is elusive and can’t wait for slowpokes indefinitely. Understandably, the current administration wishes to reverse the mistakes of the past that led to institutional dysfunction and widespread corruption. It wants to cautiously review and analyze projects or policy reform measures, which is certainly in order. But, as the cliché goes, too much analysis results in paralysis. Trying to ensure corruption-free contracts seems too big a leap of faith, which further postpones sustained economic growth.

ThePhilippineshaving fallen far behind our Asian neighbors, it’s time for our leaders to be imbued with a sense of emergency vis-à-vis the catch-up game. In short, “vicious patience” must give way to “virtuous impatience” that also begets foresight.

Infrastructure requires foresight. With good planning, supply of infrastructure should precede demand for it. Which brings to mind Say’s Law: “Supply creates its own demand.” It’s a principle of classical economics (attributed to French economist Jean-Baptiste Say) that can be extended to the present context.

Unfortunately, unlike in our Asian neighbors, infrastructure supply often lags well behind demand in our country. In a sense, Say’s Law can be wed with the Keynesian principle of fiscal pump-priming. Building infrastructure creates employment and incomes leading to multiplier effects, generating demand for goods and services, further boosting economic growth, reducing poverty, and so on.

The economy has had several opportunities for takeoff. Regrettably, potential success failed to materialize because we lacked the conditions for it. Good physical and social infrastructure policies will have to be complemented by other policy reforms that foster social justice, respect for human rights, and care for the environment.

It’s more fun in thePhilippines. Indeed, with better infrastructure and less poverty!

Ernesto M. Pernia, PhD, teaches at the UP School of Economics and is a former lead economist of the Asian Development Bank.