Are restrictions to FDI in the 1987 charter passé?

I was invited by Senator Sonny Angara, Chair of the Senate Subcommittee on Constitutional Amendments and Revision of Codes to provide our position on Senate Resolution of Both Houses, RBH No. 6. This is a resolution that seeks to amend Article XII, Section 11 (Public Utilities).

The following slides were used in my statement to the Senate Subcommittee on Monday, 12 February 2024. 

A video montage of my statement and responses at the Q&A can be viewed below:

My closing statement can be viewed below and here.

Policy brief 2022-02: Providing Rooftop Solar and Storage for Public Housing Estates, Schools and Hospitals

This policy brief lays down the case for installing commercial photovoltaic (PV) solar on the rooftops of public houses, schools and hospitals. 

 

Dilawan: Rise and Fall of the EDSA Regime - Another Aquino

“I have fought the good fight, I have finished the race, I have kept the faith.”

Those were the words of Pres. Noynoy Aquino at his valedictory State of the Nation Address to Congress in July of 2015 where he summed up his administration’s achievements and looked forward to “a new dawn of justice and opportunity” forged by “freedom from corruption” as he claimed, and I quote

My one and only interest is the well-being of my Bosses. I did all I could to forge a nation that is more just and more progressive—one that enjoys the fruits of meaningful change. I will let history decide.

And within 12 months of uttering those words, the era of the EDSA regime would draw to a close, with the rejection of Aquino’s hand-picked successor and the election of Rodrigo Duterte, whose approach to criminal justice was anathema to what the regime had stood for.

In this fourth part to the Rise and Fall of the EDSA Regime, we will look at the second Aquino presidency, its ambition, achievements and follies, and while five years is too short a time frame to have gained enough “distance” from those events, we will try to explain what led to the collapse in confidence in the yellow movement, which triggered their losses at the ballot in 2016 and since, and as to why it is unlikely that it will return any time soon. 

Dilawan: Rise and Fall of the EDSA Regime - Uno, Dos Tres

"I am the Market and thou shalt have no other models before me."

That is the first commandment of neoliberalism, an ideology that took root in the Philippines after the February 1986 people power revolt at EDSA.

In this series on the Rise and Fall of the EDSA Regime, we’ve been looking at the origins of the yellow movement and its impact on Philippine society. 

Dilawan: Rise and Fall of the EDSA Regime - Part 1

PART 1: ORIGIN STORY

From 1986 to 2016, the worldview of the yellow forces in our country dominated the thinking and actions of most Filipinos.

Yellowism or dilawan ideology is a system of moral, political and economic beliefs with normative prescriptions and modalities for regulating and regenerating Philippine society.

It provided a narrative, around which the life of the nation was structured. 

A whole new generation of young Filipinos has been brought up with this belief system.

In 2016, an epoch-making shift took place with the election of Pres. Rody Duterte. To many, this marked the end of the yellow orthodoxy.

In this episode of The Cusp, I’m gonna try to explain what happened. What led to the rise and collapse of the yellow doctrine and the ongoing search for something to replace it.

Videos referred to on the pitfalls of Marcos:
1. Lust for power https://www.youtube.com/watch?v=uW4vigtWp08
2-3 Greed and hubris https://www.youtube.com/watch?v=WxdvmHDV9cA
4. Might makes right https://www.youtube.com/watch?v=XwHLWWGGry8
5. Debt-driven growth strategy https://www.youtube.com/watch?v=IbB3DyfFOVg&t=22s

Episode: 27: Leni's Drug Report - Success or Epic Fail?

Is it true that the government's anti-drug campaign is a massive failure, as per what VP Leni Robredo stated in her report as Co-Chair of the Inter-agency Committee for the Anti-illegal Drugs?

Links referred to:
Co-Chair's Report: https://issuu.com/inquirerdotnet/docs/2034815782856108625376143966175767021
UN Office for Drugs and Crime stats: https://dataunodc.un.org/drugs
Manila Bulletin article quoted in report: https://news.mb.com.ph/2019/11/28/ph-consumes-at-least-3-tons-of-shabu-every-week-pnp/
Philippine Statistical Authority's population projections: https://psa.gov.ph/sites/default/files/attachments/hsd/pressrelease/Table4_9.pdf
Policy brief: https://cusp-ph.blogspot.com/2018/10/policy-brief-using-evidence-in.html
Social Weather Stations: https://www.sws.org.ph/swsmain/artcldisppage/?artcsyscode=ART-20191016152026

Episode 22: Is Federalism fizzling out...or just getting started?

Following the resounding victory of his coalition at the midterm polls, the enigmatic Pres. Rodrigo Duterte seemed to back away from his campaign pledge to push for federalism. But are his statements to be taken at face value, or are they simply a way for him to spark a debate on the issue and incite those in favour of charter change to come out in support of it?

Recall that when he was considering a run for the presidency, he declined to be drafted several times. Was it a way for him to gauge the public’s sentiment in support of his candidacy? We know he eventually decided to run, and many said he had already made up his mind long before then. Is he working off the same playbook here? Is he gauging the public’s appetite once again, this time in favour of federalism?

Hi, I’m Doy Santos, and on this edition of The Cusp, we’re going to look at the push for federalism, and answer the question, Is Federalism fizzling out, or is it just getting started?

Episode 18: The senate race is like an episode of Celebrity Apprentice

The Senate race has gone to new depths. From a Spratlys Island jet skiing by Otso Diretso to penis size comparisons between the president and Jim Paredes, and shirt stripping by SAP Bong Go to prove he has no tattoos in his back, and not a member of a drug gang. We’re no longer talking about the issues. It has gotten ugly really quickly.

We’ve forgotten what this election is meant to be about. As in every election we are meant to be discussing the key question: what should the role of government be in our lives?

In our last episode, we looked at the senate race of 2019, and saw how much of it was driven by personality and not principles. We said that a general trend in all senate races since 1987 was the popularity contest that it has become. This is evidenced by the growing number of celebrities or celebrity-related candidates that are present in the senate. So how do we make our senate more representative, instead of mimicking an episode of Celebrity Apprentice?

Show notes available here.

Episode 17: Otso Diretso, MaBaGoKoTo, Hugpong, atbp.

The countdown to election day begins.

We are now about 30 days away from the 2019 midterms. In this episode we’ll be looking at the senate race, and how that has been unfolding. We compare the competing candidates' platforms, namely Otso Diretso's campaign platform and PDP-Laban's.

When you put the two parties’ positions side-by-side there is a clear contrast between them, both in terms of their overarching philosophies and approach to governance and development. Those who say that this election isn’t about ideas are wrong. There are clear battle lines here, and they are not just personality-driven.

Get the transcripts of the show from here.

Erratum: in counting the number of senators that became VP, I mistakenly included Mar Roxas in the list.

A plutarchy with populist tendencies

The title of this piece is inspired by Prof. Yuen Yuen Ang’s take on how China escaped the poverty trap. Ang argues that despite one party rule, China was able to forge merit-based mechanisms of accountability that led to its development. She describes it as an “autocracy with democratic characteristics”.

The Beijing Consensus refers to the political economy instituted by the People’s Republic under Deng Xiaoping, after Mao’s death in 1976. It is an alternate path to development, sitting in contrast to the failed Russian Soviet experiment with a command economy and all its inherent inefficiency, unwieldiness and poor incentives.

Under the China model, Beijing sets national economic policy through its five year plans. It then assigns to regional counterparts the task of meeting these targets through a “franchise-like” system. Each local government uses its own connections (“guanxi”) to attract investment to contribute to the the national goal under a process of “directed improvisation”.

Promotion within Communist party is based on performing well against official targets, relative to peers. Individuals rising to the highest policy-making body, the Politburo standing committee, prove themselves in towns and villages first, then at cities and regional levels.

The central government, in giving agency to regional executives, is able to keep its “distance” from local politics and avoid blame when their administration fails, due to ineptitude or corruption. It can overrule or interfere with local affairs, if public outcry reaches the capital. This is what gives the autocratic state some form of democratic accountability.

Beijing adapted local customs to mimic Western institutions that foster open competition within a marketplace of ideas. Instead of inter-party competition, the Chinese have created internal tournaments within the ruling party. They follow through on long-range plans, without disruption from corruptible, short-term election cycles that occur in developing states.

The Philippines has been characterised as a cacique democracy, from its inception in the 1890s with local and national politics dominated by a small set of wealthy, well-connected families. Even with American “tutelage” in democracy, participation in politics was largely confined to those with political pedigree and deep pockets.

A lack of policy consensus after independence from the 1950s to 1970s ensued leading to boom and bust cycles. Since EDSA ‘86, multiparty democracy is seen as chaotic, with limited participation and increasing concentration of power even within the partylist system.

But there has been considerable policy continuity in economic affairs since EDSA. This has led to increased rates of economic growth with greater capacity to handle internal contradictions of a market-based system, namely the disparity by which its spoils are shared.

Developmental spending enables political families to retain legitimacy. They are slowly moving away from direct forms of patronage to programmatic, institutional responses to poverty and other challenges. The evidence? … Free college, universal health care coverage and public school feeding programs, cash transfers to poor families, senior citizen benefits, among others.

Rivalry among political families has created conditions that mimic democratic accountability, stealing the thunder from progressive movements. Chief executives act as family figures making government seem near and personal.

Apo Marcos, Tita Cory, Steady Eddie, Pareng Erap, Ate Glo, PNoy and Tatay Digong were personages meant to instill a sense of filial piety in the nation through pakikisama and bayanihan, the illusion that we are all part of an “imagined community” despite our regional, ethnic differences.

The Philippines may thus be regarded as a plutarchy with populist tendencies. The adoption of democratic forms of governance without the institutions performing their function, has given rise to political dynasties. Through local customs, the Philippines has begun to develop a consensus for economic growth and development under a market-based system.

This has led to increased concentration of economic and political capital. To retain legitimacy, actors voluntarily initiate populist programs that increasingly rely on fiscal space afforded by growth to fund them, sustainably. This constitutes an alternate path to development, which might be dubbed the Manila Consensus. 

Episode 16: Mahathir's Malaysia and the virtues of a parliamentary system

Malaysian PM Dr Mahathir bin Mohamad's visit to Manila in March 2019 has inevitably led some people to draw comparisons between the two nations. Malaysia follows a federal parliamentary system while the Philippines is unitary and presidential. They have reached a level of economic progress that the Philippines can only aspire to. How did they do it?

In this podcast we look at key differences between the two systems, and try to answer the question, would a shift to a parliamentary system benefit the Philippines. We avoid the chicken-and-egg question of what should come first: culture change or structural change? We do this by differentiating the incentives under either system and show how that shapes behavior and eventually the culture.

Read the transcripts of the show here.

From New Society to post-EDSA reality

The vision of the New Society under Pres. Marcos was to usher in a new order from the decaying old republic. The era of the Commonwealth in the Philippines was a gilded age that offered few avenues for upward mobility. Political bosses delivered the votes at national elections, and oligarchs fuelled party machineries to get out the vote.  

It naturally bred social unrest, which came to a boil in both the Huk rebellion and Marxist CPP insurgency. Marcos’ solution was to instigate a revolution from the center, to save the system from itself. Out of the chaos where both elites and mass movements conspired to rob the state of its capacity to govern, the New Society would bring such destructive forces to heel.

Marcos defied them by adopting a long-range vision and introducing modern methods in implementing that vision. He allowed technocrats to perform these functions. And while the president busied himself with economic matters, his wife took up the cudgels for art and culture.

State-run media controlled the narrative. The Philippines would be “great again” as Marcos pledged at his first inaugural.

The only plot hole in this arc was that it all depended on one individual. Marcos had arogated all power to himself. This lack of accountability tempted him, his wife and cronies to amass great wealth.This, in turn made them feel invincible. Thinking he could hold on to power indefinitely, Marcos failed to groom a successor.

When his regime finally fell, it left a massive hole, which took decades to fill. The EDSA ‘people power’ revolt that toppled him simply revived the old republic, with certain protections to prevent the state from interfering in the way individuals chose to live. Many of the New Society’s projects were abandoned. From one grand vision, it became, to each his own.

If the New Society sought to transform the individual through order and discipline, the EDSA regime sought to transform society by empowering people with individual freedoms. There was no obligation to serve a nobler cause. The individual was at the center of this universe. Everything else was meant to fulfill its desires.

The only problem was that over time, as the population grew rapidly, following the dismantling of Marcos’ population program, the enjoyment of one individual’s personal freedoms seemed to ‘crowd out’ that of others. These ‘negative externalities’ as economists like to call them, began to erode the quality of life for all, rich and poor alike.

The old republic survived thirty years from 1935 to Marcos’s election in 1964. His reign lasted twenty years from 1965 to 1985. The EDSA regime began in 1986. Thirty years later in 2016, the election of Pres. Duterte brought it to an end.

As the first post-EDSA president to enunciate a grand vision for society, Duterte’s war on drugs, corruption and criminality, his massive infrastructure program, and ambitious clean-up of Boracay and Manila Bay have sought to reimpose the welfare of society over the rights of the individual.

Duterte is doing this while supporting programs aimed at empowering people with economic freedoms. Under his watch, universal access to quality tertiary education, healthcare, school feeding programs, and the expansion of maternity leave and senior citizen benefits are occurring.

Is this a synthesis of the New Society and EDSA narratives? A golden mean between the welfare of society and the rights of individuals?

What happens after Duterte leaves? Will his successors hew strictly to one of these narratives? Or will they express them both in multiple ways.

The French philosopher Gilles Deleuze illustrated, that the same word unités, stands for both unity and unit. Neither one precludes the other. The same applies to grand narratives involving society and the individual. There is no preordained hierarchy, no predestined point at which history concludes.

If politics is the art of the possible, then instead of posing the question, how must one govern, or what is to be done? The question might instead become, how could one govern, or how might things be done?

Policy brief: Using Evidence in the Philippine War on Drugs

This policy brief provides a considered approach to the war on drugs in the Philippines. It uses cross-country analysis to determine if harsh penalties for drug trafficking and drug use serve as a deterrent. It also looks at the recent history of the Philippines under Pres. Rodrigo Duterte in waging this war and canvasses other possible solutions to the drug problem, based on empirical evidence from other countries to arrive at a clear set of policy directives that may be applied in the Philippines.

Full text: Draft Federal Constitution prepared by the Consultative Committee

On Monday, July 9, 2018, the Consultative Committee appointed to review the Philippine Constitution of 1987 submitted their proposed Federal Constitution to Pres. Rodrigo Duterte in Malacanang Palace. Here is a copy of the full text of their submission.

Episode 14: Twelve constitutional fixes needed for the Philippines

There are things within our present charter that need fixing. Twelve to be exact. These revisions won’t require any term extensions or postponement of elections. This episode will be devoted to discussing each of them. Hopefully the need to fix them will be self-evident, and may result in some kind of consensus, across party-lines [image credit: filipiknow.net]. 

Transcripts to the show available here.

Episode 1: What's wrong with the Philippines

Introducing The Cusp podcast! Our first episode is ready for viewing.

Episode 1: What's wrong with the Philippines

There are so many problems for the country right now. Among them are poverty, corruption, criminality, terrorism, and territorial disputes. One in particular is affecting our nation’s ability to grapple with each of the fundamental challenges it faces. On this first edition of the podcast, we tackle the Philippine "culture wars" or the growing polarization within our society being deepened by social media.

Technology and Reform: Two Steps Forward, One Step Back

Technology may be aiding reforms in a couple of ways, but it may be holding it back in another.

Today’s developing and emerging economies don’t need to spend so much time catching-up by re-inventing the wheel, so to speak. They are already standing on the shoulders of those that have come before them.  The spread and use of technology, according to some economists is all that is required for poor countries to get richer in this world of global trade, transport and communication. That point is debatable, based on the specific circumstances involved.

I would like to offer two broad areas in which I believe this holds true, and one in which it is probably less true today than it was a few decades ago.

A Step Forward

The first has to do with modern medicine in improving the health of nations. Using The Gapminder, developed by Hans Rosling, a health economist from Sweden, or even the public data explorer available on Google, we can test the assumption that modern medicine has improved the lives of millions in the developing world.

In the clip below, Rosling demonstrates just how vividly the stats stack up to prove it. Sticking to a few important indicators such as life expectancy and child mortality, he reveals that at the start of this century, most of the developing world has achieved similar levels compared to what their Western counterparts did at the some point in the last century. Modern science has allowed this gap between rich and poor to be narrowed significantly.

In the case of modern medicine, poor countries got healthy before getting wealthy. The modern public health system led to a rapid rise in life expectancy across the globe chiefly through a reduction in child mortality. Only in Sub-Saharan Africa has the yawning gap between rich and poor remained. The growth of the world’s overall population which is expected to peak at nine billion by the middle of the century owes much to this modern miracle.

And Another

The second step forward, I admit, is a little bit iffy because it is based on some demonstration cases at this point than any systematic cross country analysis. It has to do with modern devices for bringing about good governance and anti-corruption involving the Philippines and Indonesia.

In the past, the only way to guarantee that public officials didn’t behave badly was to pay them well. Lord Clive, the one responsible for establishing the East Indies Company, the global trading arm of the British Empire, was once quoted as saying that it was “absurd to give men power, and to require them to live in penury”.

With the implementation of the salary standardisation law mark two (a law which came about during the Arroyo administration), the pay packets of Philippine public officials are being raised to levels that would allow them to escape a life of penury. It cannot be denied however that a large incentive still exists for crookedness particularly in agencies that raise revenues for the government, enter contracts and issue franchises, licenses and permits, and adjudicate cases and elections.

Because of this incentive gap, it becomes necessary to equip anti-corruption agencies with the powers and resources to use modern devices to wield the proverbial stick when the carrot doesn’t work to keep erring officials in check. Indonesia’s version of the Philippine Ombudsman, the KPK (stands for Corruption Eradication Commission), has demonstrated to some degree what can be achieved when this happens. Their near-perfect conviction rate on a significant number of senior public officials is what I refer to.

In the 2010 elections, the successful use of automated voting and counting machines which many had projected to be an abject failure led to what I would regard as a watershed moment in Philippine history. Up until then, many doubted the capacity of a poor country to oversee and manage such a large scale system and deal with the inevitable bugs and prevent electoral fraud. To the credit of the officials who designed the process and the media that shone a light on it, the system worked relatively well in comparison to the doomsday scenarios being touted by conspiracy theorists.

In the second case of electronic computing technology, poorer countries are now able to gain more transparency and fight corruption in a manner they were not able to before. What prevents them from applying such tools could be a lack of political will and a bunch of laws that serve the interests of those who benefit from corruption, namely the politicians. If citizen’s groups clamoured for better methods of enforcement, the results could be as dramatic as in the case of modern medicine. Governments would be able to counteract the cancer of corruption more effectively.

Now Take a Step Back

The final backward step that I would like to highlight ironically was the one proven to be so potent in the last half-century for lifting millions out of poverty. I am referring to modern manufacturing technology which unlike the two cases I have just cited has evolved today to become less efficient or effective in spreading its benefits to the poor.

In the new growth theory developed by Stanford Professor Paul Romer from 1986-90, an economy’s output was driven not only by the productivity of labour and physical capital, but also by the diffusion of knowledge in the form of human capital and new technology. In fact the latter two made the former two even more productive. A positive feedback loop to the stock of existing knowledge amplified the growth emanating from new discoveries, and a perpetual cycle of growth would occur.

This meant the end of business cycles. It was this mistaken belief that we had entered into a “new economy” which was what fed the dot-com boom and bust of 2001. It was also part of the justification that the US Congress and Federal authorities gave for deregulating their banking system (to pave the way for “financial innovation” but led instead to corruption) which in turn led to the Enron scandal and the subprime mortgage meltdown of the late-2000s.

In his book, The Great Stagnation, Tyler Cowen talks about how the rate of technological innovation has actually slowed, not sped up since the 1970s. He says that unlike the invention of modern conveniences early in the last century, items like electricity, running water, vaccines, modern medicine in general, mass public school systems, and the car, which transformed life as we knew it and enhanced productivity tremendously, today’s inventions pale by comparison.

In terms of how this affects middle income countries such as the Philippines, there is what is known as the technology or development trap. Previously, it was observed that with the spread of new ideas, poorer societies diversified their economies as they grew wealthier. The quick catch-up that East Asia exhibited in the last half of the last century demonstrated the fact that countries by borrowing the innovations developed in the West could forego the costs associated with research and development and give birth to new industries and export opportunities.

Only once they had caught up to the West would they then need to focus on innovating themselves. Around the ten thousand dollars per capita mark was when this happened. Around this point countries had to begin specializing in certain sectors to remain competitive. The problem is that today, countries like the Philippines seem to be specializing much too early in the catch-up process, before they even reach a decent level of income per capita. This has led to pockets of industry surrounded by a sea of poverty.

The “jobless recovery” phenomenon that was observed in the country throughout the 2000s is being observed in the United States today, with weak jobs growth coinciding with successive quarters of economic growth. This has led many analysts to say that a structural shift has taken place in the economy. I have commented on this development highlighting the fact that too much innovation rather than too little of it could be what is driving down industry’s demand for workers. But regardless of what the cause is, what is true is that developing countries today have a much tougher time catching-up than they had half a century ago (and we haven’t even tackled the problem of climate change).

The Takeaway Message

There are potentially three points we can take from the preceding discussion on technological breakthroughs and their impacts on reform-minded governments:

• If with the help of modern medicine, poorer countries like the Philippines are able to achieve better health and well-being, then this could compensate them for the lack of growth somehow. Perhaps the king of Bhutan got it right, we ought to be focusing more on boosting gross national happiness instead of gross national product,
• If with modern computing, poorer countries can restore a sense of fairness and a sense of public trust in public institutions and govern themselves more effectively, then that would strengthen social cohesion and a sense of civic responsibility, things which have been eroded in the past in their quest for modernity, and
• If we are indeed on the cusp of a new technological frontier, one in which less inputs from manual labour will be required to produce things, then this means that nations will have to exert greater effort to locate industries within their borders, more than ever before. This will be the only way to finance the entitlement programs on which their citizens depend.

Indeed many things can derail countries on the straight and narrow paths (emphasis on the plural, there is more than just the one path) to wealth and well-being. To avoid falling even further behind, they will have to employ new ideas and ways of doing things more intelligently and effectively to reach their final destination.

The Happy Prince

I wrote “The Happy Prince” when I was 8. It is a fable depicting life under Martial Law in the Philippines (although I did not realize this then). At the time it was written in 1978, my father, a promising lawyer and banker, turned his back on his wedding sponsor, then First Lady Imelda Marcos to join the late Sen Benigno Aquino, Jr in his fight to win seats in parliament. It was he who took it upon himself to publish the book in 1980. This year marks the 30th anniversary of its release by the mosquito press. It also marks the year in which Benigno III became elected president of the Philippines, making him in a way the happy prince foretold in the story.

Chapter I: The Orphan

Once there was a king who died in bed, not in battle, for he was a peace-loving ruler. He had only one son. Before his breath faded out, he gave his friend, Merham, the Wizard, his last wish.

“Merham,” he said, “raise my son as if he were your own.” 

“I can’t do that, your Majesty,” Merham replied.

The dying king was insistent. “Do you want my son to be lonely?” he asked.

“No!” Merham exclaimed. “But it is foolish for me to take care of the Prince.”

“I don’t have much time to live,” the king said. “You are to raise him to become a noble and great king.”

After saying his last words, the king died with a smile. Thus the King’s son became an orphan.

Chapter II: The Strange Ruler

After the funeral and burial of the king, Merham took the young King Matrahan II to the kingdom of the old king’s friend. On the way, Merham asked some villagers, “Pray, tell me, where is the palace of King Merchian?”

The villagers looked puzzled. “We have not heard of a King Merchian?”

“Then who is your ruler?” Merham asked.

“King Herdaka. He is our only ruler, and he will be our only ruler!”

Everywhere the pictures of King Herdaka were painted on the walls. “Even if he dies, it seems he will live on. With those ugly pictures, he will seem to be always alive and present in the kingdom.”

“Who is this strange ruler called King Herdaka?” The people merely turned away and kept their silence.

Chapter III: The Different King

As days went by, the young prince became known as King Matrahan II. He was a different king. He had no servants to attend to his personal needs. No slaves. No guards to protect his person and property. He loved his people and treated everyone as his friend.

Everybody loved him.

King Matrahan II was good of course. But he was sad because the villagers were unhappy. King Matrahan II wanted to know why and do something about it. He knew what he wanted for his people, but either day or night, the villagers were always unhappy.

Chapter IV: The Told Secrets

As time passed, the villagers became gloomier and gloomier. Until one day, King Matrahan asked them why they were so unhappy.

“Why are you always unhappy,” King Matrahan asked. “Is it because you hate me?”

“No,” replied a peasant called Canto. “It is because of King Herdaka, our ruler.”

“What?” exclaimed King Matrahan. “I thought I am your king!” 

Then Canto continued, “I’m sorry King Matrahan. We pretended you were our king.” He then proceeded to talk of the cruelty of their mean king Herdaka.

Afterwards, Merham suddenly spoke, “Matrahan, I am sorry. I am not your real father.”

“What?” cried King Matrahan.

“It is true. Your real father died when you were an infant. But before he died, he told me to bring you here to this city to find your father’s best friend, King Merchian.”

Then Canto interrupted. “Merham, remember when you did that years ago? My father was the one who told you there was no such king called Merchian here.”

An old man stood up and said, “Yes, but I do recall what an old gypsy once told me. He said that there were two brothers—two princes. They were having a contest, an election, on who was to be king. He told me one of the princes was called Herdaka. He also said that the other prince won.”

“Then the other prince should have been King Merchian,” said Canto.

“That is a possibility,” said King Matrahan II.

“It is a distinct possibility,” agreed Merham. “Why do you think your father told me to go to King Merchian?”

“Then where is he?”

“In the dungeon of the palace of King Herdaka, probably,” answered the old man.

Chapter V: The Victory

King Matrahan gathered his men. They rode to the palace of King Herdaka. They stormed the walls. After days of fighting, King Matrahan’s men finally broke through. They defeated the army of King Herdaka.

King Matrahan captured King Herdaka who was forced to lead them to the dungeon where King Merchian was imprisoned. The stairway was dark, for the dungeon was deep under the palace. King Matrahan freed King Merchian. The people were happy.

King Herdaka was punished for his crimes. He was ordered imprisoned in the dungeon. The survivors of his army were all banished. The gypsy, a spy for King Merchian, was rewarded with a place in the King’s court.

King Merchian adopted King Matrahan and gave him a kingdom in the East. Merham, the Wizard, became a minister of King Merchian.

After many years, King Matrahan died. But his people still remember him as the happy prince. 

A New Social Contract for the Philippines

At the start of his campaign for president, Benigno Aquino stated in an advertisement that he was not a thief and that he would not steal using a play on the filipino word "magnanakaw" which means both "thief" and "to steal". A similar statement was issued by his late mother, ex-president Corazon Aquino twenty five years earlier when she ran against Ferdinand Marcos.

So ingrained and apparent was the greed that motivated candidates to pursue public office that it had been assumed to be the case among all of them. With the installation of president-elect Aquino at 12 noon on June 30 2010, there are a few assumptions regarding the state and its role in society that also need to be challenged.

In a paternalistic society such as the Philippines, it is the role of the state to dole out benefits to the connected, by that I mean both the wealthy and the needy. The state is captured from both above by the wealthy who seek regulations that favor their commercial interests and from below by the incessant demands of constituents whose need for support drives their elected representatives to capture "rents" from government transactions to provide personal help and thus perpetuate their electability.

This it would seem is the existing social contract as it stands - it is one based on personal dealings between (1) Big Business and the power brokers of the state and (2) the disenfranchised and their political bosses. A society based on personal kinship and relations does not reward individuals who want to strike out on their own, away from the established networks. It is one where one cannot get ahead simply by working hard and relying on fair play. That is why so many have sought to pursue their fortunes outside the country.

Many commentators have seized on the potential for transformation under a new Aquino presidency based on its reputation for probity. In order for it to be transformational, it would have to restructure the "rules of the game" or negotiate a new social contract between the state and its stakeholders. The new arrangement will have to resource the state appropriately to lessen the need for its constituents to rely on personal interventions by their representatives.

It will have to ensure that the wealthy contribute a fairer share of their profits to the state. The productive sectors in turn would expect a predictable regulatory environment and a skilled laborforce enabling them to take advantage of new opportunities. For this to happen, a series of reforms are needed in areas such as social welfare, human capital, regulation and taxation which are discussed here.

1. Social Welfare Reform. This includes the re-alignment of poorly targeted, improperly designed and ineffective programs towards those with greater impact. The rice subsidy program is one example of a program which has suffered a leakage of 71%, whose coverage of intended recipients is a mere 18%, and is costly to administer. It cost the government about Php40 billion in 2008 alone. Other similar programs that provided rebates on electricity suffered similar flaws, but were hurriedly engineered during the height of the global financial crisis and are non-recurring. The grains program on the other hand represents a recurring expense for the government. Manasan of the government think tank PIDS suggests that the same expenditure if it were spent on the more effective conditional cash transfer program or 4Ps targeting public school children would have a greater impact in terms of alleviating poverty by providing support to poorer households while improving school participation and completion rates (see her slideshow below). They are also proven to be less costly to administer and have a reduced level of leakage. At the same time preventive programs like child immunization and maternal health connected with the 4P's program would help reduce the cost burden of treating diseases and supporting larger families. 
Social Welfare Programs and Social Safety Nets in the Philippines: In Times of Crisis and Beyond
2. Education and Skills Reform. The next step would be to undertake reforms that would improve the stock of human capital through educational and health reform. As school children improve their participation and completion rates, it becomes necessary to strengthen the content of their education to ensure they are equipped with necessary skills and knowledge needed in the workplace both here and abroad.  Part of the solution lies in extending the years of schooling from 10 to 12 years with the option of leaving school after year 10. The senior years of high school should offer students the option of either college preparation or vocational education and training (VET). There is a need to address the imbalance between college and VET that is leading to the strange anomaly of skills shortages alongside high unemployment. Work-based apprenticeships and traineeships in partnership with industry can also be introduced. The "adopt a school" program can be leveraged in order to provide such a partnership. Metropolitan and provincial polytechnics could also be tapped to provide instructors and facilities for such training. A voucher or entitlement system that would allow public school students to take up a place in a technical college can be designed to allow the funding to move with the student to any local technical college or institution to complete the equivalent of years 11 and 12. It is also important for such VET courses to feed into the higher education system in a seamless manner. The lack of vertical integration currently is a disincentive to pursue technical training.
3. Health and social insurance reform. The Philippines has a health system akin to the US, where a mixture of public and private hospitals abound and the state funds them through what amounts to a health insurance program called PhilHealth, the key challenge here as it is in the US would be to increase the coverage of the program. This cannot be done without mandates and concurrent subsidies to firms that employ people to increase contributions. Part of the reform process also involves looking at the funding rate of various treatments. Chronic diseases are on the rise in developing countries. While the Philippines does not have an ageing population, there is a high dependency ratio. This means the problem confronted by households at-risk of slipping into poverty due to lost income of primary breadwinners has to be addressed through a combination of social and health insurance improvements.
4. Regulatory Reform. The cost of doing business in the country has to be lowered through regulatory reform. This entails opening up many sectors including aviation, ports, power and transportation to greater competition. It also involves red-tape reduction and strengthening the property rights of investors. A comprehensive review and consultation process needs to take place to give direction to many of the reforms in these areas. A mix of policy tools could potentially solve many of the bottlenecks in the process of business registration and licensing. Stakeholder consultation would shed light on which tools to use.
5. Tax Reform. From the mid-90s to the mid-noughties the tax collection effort measured in terms of collection to GDP ratio deteriorated from 17 percent to 12 percent. It recovered slightly with the hike of the VAT rate from 10-12%, but leakages such as the granting of fiscal incentives for the country's freeports and special economic zones and the non-indexation of sin taxes have offset much of the improvements in tax collection. The redundancy and inefficacy of many fiscal incentives have been extensively documented (see for instance the article by Dr Reside below). Meanwhile corporate and personal income taxes in the country remain higher than elsewhere in the region. The current deficit amounting to 4% of GDP or roughly Php300B has to be brought down to a sustainable level, say 1-2%. A mixture of improved collection efficiency, fiscal rationalization, indexation of sin taxes along with budget neutral adjustments to the tax system to lessen distortions and improve the country's competitiveness are all justifiable and in keeping with the spirit of Mr Aquino's campaign pledge of no immediate new taxes.
Fiscal Incentives and Investment in the Philippines

The first step of any reform process is for the leader to be honest and committed to it. Mr Aquino satisfies this  condition with his probity and policy seriousness. During this period of transition, his first task involves assembling a competent team to help him in this effort. They should focus on assembling a coherent package of reforms with the help of partners and stakeholders in the community aimed at restructuring incentives in the Philippines that would transform the current set of assumptions about the state and its role in it.

Moving from a padrino society that depends on personal transactions based on kinship and wardship to one where citizens are empowered with greater access to improved services requires a new social contract between the state, market and society. It will be necessary to move towards the new mold in the next six years. 

The state needs to be equipped with the resources necessary to improve the incentives towards human capital acquisition and productive activities. It requires reforms in social welfare, education, health as well as regulation and taxation. At the end of his six year term, if Mr Aquino is able to say that he brought the country forward in these areas, he would have done it a great service worthy of the term transformational.

Institutionalising People Power through an Ideas Summit

The challenge for him (Mr Aquino) will be to consolidate the movement ... "to ensure that the pattern of his mother’s administration – a non-corrupt president surrounded by a host of sometimes dodgy relatives and advisers – is not repeated."

For the soon to be proclaimed presidential frontrunner Sen Benigno "Noynoy" Aquino III of the Philippines whose ambition only began 9 months ago with the passing away of his mother, democracy icon Corazon C Aquino, the problem now is consolidating the different messages of his campaign into a coherent narrative to govern his administration over the coming six years.

Many political analysts including Paul D Hutchcroft of the Australian National University have said that the election of Mr Aquino was a "vote for change". Manolo Quezon blogs in the Daily Dose that "The Philippines is OK" after its successfully held elections. With the settling of the political environment, the prospects for future economic growth seem sound. The country posted a 7.3% growth in the first quarter, leading many analysts to believe a recovery from the global recession is on its way.

It is under such auspicious conditions that Senator Aquino is poised to take charge of a country of 90 million filipinos. The challenge for him will be to consolidate the movement that ushered him into the "limelight" as Hutchcroft calls it "to ensure that the pattern of his mother’s administration – a non-corrupt president surrounded by a host of sometimes dodgy relatives and advisers – is not repeated."

It will be quite easy for Mr Aquino to slip into the malaise of incumbency where the true voice of the people that he promised to champion seldon gets passed through the cordon of protocol.

Already there are numerous rumours circulating of infighting within his inner circle. Several unofficial cabinet line ups have been leaked. Amando Doronilla opines that rather than change, the supposed appointments signal more of the same and "bode ill" for the incoming administration. Alongside these developments are the midnight appointments of the outgoing president Gloria Arroyo which include the Chief Justice and Ombudsman. Her coalition also retains the largest number of seats in the lower house of Congress. These represent serious obstacles to Mr Aquino's pledge of prosecuting her for the many scandals that plagued her administration and to run an anti-corruption drive.

Pieces of unsolicited advice keep hugging the headlines which include everything from fulfilling his promise to quit smoking to imposing a permanent gun ban, to surrendering the lands of the Cojuangco-Aquino sugar estate to land distribution. Having had only 90 days to prepare his platform of government which was conducted by an inner circle of seasoned policy advisors behind closed doors, Aquino runs the risk of overinterpreting his mandate for change. The media driven campaign and the numerous debates with eight different candidates did not provide a proper platform for the discussion of serious policy challenges in detail.

In the Philippines, such a tradition of participative consultative coalition building is vigorously espoused by non-governmental sector organisations that have comprised the "parliament of the streets" since the days of the Marcos dictatorship.

It will be quite easy for Mr Aquino to slip into the malaise of incumbency where the true voice of the people that he promised to champion seldon gets passed through the cordon of protocol. In order to arrest such a slide, as a way of institutionalising "people power" that brand of democracy his family legacy made famous, it might serve his administration well to call for a people's summit to consult with various stakeholders and create a bottom-up approach to his governance style.

Such an attempt to frame a policy agenda for an incoming administration was made in Australia by the Federal Labor government of PM Kevin Rudd back in 2008. It drew from the ideas of 1 000 participants hailing from different sectors of society. Participants to the 2020 Summit as it was dubbed were selected by a 10 man steering committee. The summit was co-chaired by the prime minister and a leading policy expert from Melbourne University.

In the Philippines, such a tradition of participative consultative coalition building is vigorously espoused by non-governmental sector organisations that have comprised the "parliament of the streets" since the days of the Marcos dictatorship. Such a summit early in his administration could help keep Mr Aquino's change credentials healthy and provide a more rational systematic approach to dealing with the disparate ideas that are floating around.