Civic 101

my Trade Tripper column in the 15-16 October 2015 issue of BusinessWorld:

First off, we don’t do kings.

It says so right in the Constitution.

There’s no tribal elder or wise old man. There is no “father of the nation” benignly looking over us helpless children. We are a government of self-rule, embodying our will in a specific constitutional system.

This is what it means when we declare that we are a government of, by, and for the people. The people made government and government exists for the people (not the other way around).

The public servants we appointed (or elected) are servants in a peculiar way: their service is to make or implement rules over us. Their ability to “rule,” however, is not unrestrained, kinglike, or godlike. It is very narrow, timebound and limited.

The last means that public servants cannot exercise powers they do not have. Their powers are restricted to that stated in the Constitution or legislative enactments. That’s also why we broke up the major functions of government to three (and this is the important part) “equal” branches.

We did this so that not one person has greater power over the people. Final say and responsibility is always with the people.

What’s the measure by which pubic servants must comply? Aside from the expressed functions in the Constitution and laws, there’s also the overall standard of the “common good.”

The “common good” is that peculiar phrase found in the Constitution’s preamble. It means the flourishing of each and every human being towards a purpose and within an environment that the members of the society laid out or created by themselves.

How do we know this? Because we recognized each human being as a rational creature; i.e., blessed with an intellect. Also, because we recognize that all human beings are created equal, and imbued with dignity and rights. These are in the Constitution. Being so, a citizen must not be dictated upon and should be trusted to figure out for himself/herself what is good for him/her personally.

There is a further limit to the powers of government and that’s the concept of “subsidiarity.” This simply means that issues and problems that can be handled by the smallest political unit (i.e., the individual) should be handled by that individual; if unable, then the family, then the neighborhood, then the town, then the province; and only if such is unable, should the national government step in.

How do we know this? Because the dignity and rights of every single human being are to be respected in our Constitution; that our Constitution recognizes the family as a “basic autonomous social institution,” and that our Constitution encourages local governments towards “local autonomy.”

In practice, this means that with regard to education, formation of beliefs (including religion and values), health, welfare, employment, housing, commerce, and so on, the main responsibility lies with the parents and the family (specially), then the neighborhood parish, civic organizations, the businessman down the street.

The actual main job of government is to serve and protect the people, which include maintaining peace and order, and securing life, liberty, and property. All others are secondary and only as assistant to the people. This is in the Constitution.

The rationale behind it is that if the people abdicate their responsibilities and prefer government stepping in, the latter’s tendency is to want more power: soon, it will be telling people what to eat, work, buy, believe, travel, who to be with. Which requires more government personnel/resources, which demands a bigger budget, hence more taxes. Hence, lesser autonomy for the people: less money in the wallet, less choices, less exercise of free will. Thus, more dependency. And on and on.

People complain about democracy (and the rule of law) because it’s messy and slow. Here’s a shocker: it’s supposed to be messy and slow! The system is designed to protect us from our passing passions and the temptation of quick fixes.

It encourages people to study, debate, and ponder, and eventually come up with a deliberate solution for the common good because of the (wise) assumption that the government does not and cannot know and solve everything.

Our dignity and self-respect demand that we govern and rule ourselves.

When we say Philippines and common good, we’re not only talking of the 100 million living in our country right now. We also mean those that died before us, that fought and built this country they believed in (and its values and culture). We the living have a responsibility that they not die in vain.

The Philippines includes also those yet to be born, deserving to flourish as human beings, and thus our responsibility to bequeath to them a decent country they’d be proud of, to work for (and die for, if necessary) because they know that it stands for something bigger than the merely passing.

This is the Philippines embodied in our Constitution. It was a great idea. Too bad, it hasn’t been implemented.


Why federalism? Why indeed.

my Trade Tripper column in the 8-9 October 2016 issue of BusinessWorld:

A phrase we need to remember: “one cannot have one’s cake and eat it too.” Taken literally, that saying (like “more or less”) actually makes no sense. After all, why have a cake if in the end you can’t eat it? But what it really means is that you can’t have an existing cake if you’ve already eaten it. In short: you can’t have it both ways. You can’t have it all.

Something to keep in mind whenever we speak of federalism.

Normally, federal forms of government are what we think of when we see the United States (with a land area of 9.8 million square kilometers), Brazil (8.5 million sq. km.), Australia (7.7 million sq. km.), Canada (10 million sq. km.), and Mexico (2 million sq. km).

A far cry from the Philippines 300,000 sq. km.

Of course, there is Germany (357,021 sq. km.) or even Austria (84,000 sq. km). But one can always find an exception for anything. Such as Indonesia, which has 1.9 million sq. km. and yet retains a unitary government.

There is also, however, history and culture. Particularly the United States, which had a vibrant “13 colonies” already existing, with years of experience in constitutional government, before they were assembled as the US.

The point is: through the years, despite deeply specific varying local traditions and quirks, there was already a strong preexisting common set of values and beliefs that unified those federal countries as a whole.

Unless, therefore, one has a level of comfort regarding the strength of that unity, then, as the Institute for Development and Electoral Assistance puts it (see Federalism, 2015), federalism offers disadvantages. It can “exacerbate existing differences, sometimes leading to deeper conflicts or state failure.” Also, “federalism is a complicated, often legalistic, form of government, which can be expensive and can hinder the coherent development and application of policies.”

There is also the misconception about federalism being merely a division of governmental functions: essentially one layer but of two levels. Not true. That’s what we have right now with the present Constitution and the Local Government Code. It can be mostly top-down or bottom-up depending on how Congress formulates implementing legislation.

Federalism actually creates two layers of government. Or to be more precise: two parallel authorities each equally exercising power over the citizenry.

Each “State” (i.e., province or region) is left to its own devices to generate income and must provide all the basic governmental services. It has the capacity to make its own laws, as well as judicial and law enforcement. Business permit or driver’s license requirements, for example, would be different in Makati from Davao. Any legal document could only be recognized by the issuing “State” unless reciprocity arrangements are made with other “States.”

The national (or, to use US terminology, the “federal”) government then focuses on foreign affairs and national defense. It necessarily has its own set of laws cutting across the different “States” and must generate its own income.

By right, citizens are free to leave poorly managed “States” and transfer to those providing a better way of life: lower business taxes and less government regulation, as well as better health care or education. Incidentally, the national (or Federal) government cannot logically be obliged to help failing States.

Frankly, that would be good for reasons of subsidiarity and to have a free market competition going on between the different local government units (LGUs), as well as to rid some provinces of their dependency on the Internal Revenue Allocation.

Otherwise, what is the point of creating a federal form of government?

But if the issues really just boil down to funds control and capability to have a faster government response, then we don’t need to amend the Constitution nor shift to federalism for that.

Except for military, police, and judicial services, the rest (i.e., welfare, health, education, tourism, infrastructure) can constitutionally be made the prime responsibility of the LGUs. Hence, Article X: “The Congress shall enact a local government code which shall provide for a more responsive and accountable local government structure.” Furthermore, each LGU “shall have the power to create its own sources of revenues and to levy taxes,” which “shall accrue exclusively” to the LGU.

Furthermore, proceeds from the utilization of natural resources within an LGU’s area can be legislated such that “equitable share” (Article X.7) from the income thereof means 100% goes to the LGU, in turn logically justifying IRA share (i.e., “just share,” Article X.6) in the remaining national fund to “zero.”

If LGUs think that’s extreme, then to push for federalism truly becomes nonsensical.

It’s like asking for more power sans the responsibility.

Put another way: if local governments really are eager to make it on their own, without imperial Manila breathing down their necks, the same can all be done through congressional legislative action, without amending the Constitution or changing our unitary form of government.

You can’t have your cake and eat it too.

Bloomberg interview on Philippine foreign policy

Interview 25 October 2016

Rice is what we make of it

my Trade Tripper column in this 1-2 October 2016 issue of BusinessWorld:

If there is ever a product that most profoundly shaped Philippine politics, economic policy, and international trade, rice (along with sugar) would have to be it. Yet most policy initiatives dealing with rice are sadly defensive. Such, despite the fact, that most Filipinos implicitly profess heavy emotional investment in that little grain.

The Philippine Rice Research Institute, for one, considers “zero rice importation or self-sufficiency has always been the elusive goal of Philippine agriculture policies regardless of political dispensation. Any inferior goal is unpatriotic and criticized as a failure of the government and the nation as a whole.”

Strong stuff.

Pons Intal and Marissa Garcia (in a 2005 PIDS study) discussed the magnitude of rice’s political clout in this way: “the price of rice has been a significant determinant in election results since the 1950s.” That includes the Martial Law years. A possible exception is Estrada’s 1998 popular runaway election.

The problem is basic: we only have around 4.7 million hectares of land suitable for rice. Compare that with 7.8, 10.8, and 13.8 million hectares of Vietnam, Thailand, and Indonesia respectively. Those millions of hectares are irrigated well and fully by natural large river systems.

The Philippines does not have an equivalent inherent irrigation source and the man-made ones are poorly maintained. Ironically, the modern rice breeds we use (same with Vietnam, Thailand, and Indonesia) for greater yields and to survive require heavy amounts of water. Unfortunately, our incoming water flow is almost appallingly nil compared to the aforementioned three countries.

Thus, rice yields are at 5.75 tons per hectare (t/ha)., 3.1 t/ha., and 5.13 t/ha. for Vietnam, Thailand, and Indonesia, respectively. The Philippines does have a respectable 4 t/ha. but for an area less than half of its competitors.

Add the fact that Vietnam (land area of 332,698 sq. km.) has a population of roughly 92 million. Thailand 513,120 sq. km., for a 67 million population. Indonesia 1,904,569 sq. km., for a 255 million population.

The Philippines (area 300,000 sq. km.) needs to feed a population of 100 plus million. Rice consumption, incidentally, means not only as food but also as seed, animal feed, or other non-food uses.

The population increase also relates to the need to convert arable land for residential, commercial, or industrial purposes.

And yet, to add to the fundamental disadvantages that the Philippines has regarding rice production, is the inability of the rice industry to accept and adjust to the same: “farmer interest in rice farming has diminished through the years due to the increasing cost of rice cultivation brought about by the rising opportunity cost of labor and land and the availability of lower priced imported rice, which further dampened incentives for rice production.” Then, also “the lack of proper maintenance of irrigation facilities has meant the deterioration of these systems and the reduction in the effective life of these investments and area coverage.” (Intal and Garcia)

The issue of rice protection has cropped up (pun intended) as a decision is being made to lift WTO quantitative restrictions. When that happens, cursing and gnashing of teeth will be predictably heaped on the WTO, the multilateral trade system, globalization, and the free market.

But then: while protected industries welcome quantitative restrictions or high tariffs, the un-talked about logical unwelcome offshoot is smuggling.

So, despite the Philippines being among the world’s top importers of rice, we still had a rice smuggling problem amounting to almost 50,000 metric tons weekly (as reported by The Diplomat in 2014).

The problem is not the WTO nor smuggling; it’s the inability to feed the huge demand. An inability existing even before the Republic was born.

We’ve practically been a net importer of rice since the 1870s. Except for a small window in the early 1970s, we’ve never achieved rice self-sufficiency. And our insistence in becoming so only resulted in rice prices amongst the most expensive in Asia. Place that within the context of a poverty rate of around 25%.

The Foundation for Economic Freedom’s position calling for the removal of the quantitative restrictions is, I think, the right one: it will “lower rice prices, reduction in hunger, and lower inflation”. In the end, the poor benefits.

And food security should be better defined as managing our food stocks rather than insisting on production self-sufficiency.

Finally, we need to explore other options aside from mere restrictions, importation, and greater budgetary outlay.

One way of thinking about it: do we view local rice production as a means of feeding our citizenry or can it be shifted for cultural, social, tourism, and heritage purposes?

In short, retain the lands most suited for rice, employ willing and able farmers, yet without the pressure of rice production as the source of staple for the whole country.

By reframing rice’s importance, not necessarily now but thinking long term, we can then limit and put focus regarding people, land, money, and effort (including training and regulation) to a rice production that is doable and reasonable.

Reboot: The Philippines as strategic global player

my Trade Tripper column in the 24-25 September 2016 issue of BusinessWorld:

From the looks of it, indeed the Philippines seems like a gateway or staging point depending on how one views the map. Yet, the thinking seems based on the idea of transport vis-à-vis military mobility, of the need for air and naval bases. Unfortunately, technology seemingly diminished that aspect of the Philippines, what with missiles moving warfare away from the traditional kind and hence not necessarily tied to a location.

And yet the Philippines retains options that could keep it relevant. And interestingly, location has nothing much to do with them.

We presently have around 2 to 2.4 million Filipinos working abroad as OFW’s in various locations around the world. And while indeed, the same represents around P1.2 trillion annually in remittances, nevertheless the huge potential of OFWs remain untapped.

As a marketing avenue, political lobby force, and information network, the OFW population represents an opportunity to push the Philippines forward strategically. Not only do they represent a huge diaspora, the same is virtually a cost-cutting resource in terms of people and equipment that can be relied upon whenever the Philippine government or businesses has a need to move around in or know about other countries.

Another unexploited avenue that could elevate the Philippines’ importance is its peculiar history and culture. This was something that Singapore unfortunately took away from us. But the Philippines -- with its English speaking population and quite remarkably cosmopolitan outlook -- should have been the natural gateway of the West to Asia and vice versa.

And I’m not talking here merely of tourism but rather in terms of political and foreign relations clout. Had we played it right, we could have served as the deciding vote in any international gathering, and the natural guide and partner whenever a Western country is seeking trade, security, or international agreement with a (at the least) Southeast Asian country.

Then, there is trade.

Looking at 2015 figures, one sees the following: Japan, China, the US, Singapore, and Hong Kong (in that order) remain our top trading partners. They account for more than half (53.8%) of our trade. If one also considers the rest of the top ten partners, including the EU, South Korea, ASEAN, the level of trade would reach 78.5%.

If that doesn’t give a clear enough picture, the top ten exports account for 83.5%, while the top ten imports 74%. They revolve around electronics and other manufactured goods, transport, furniture, wiring sets, chemicals, apparel, and mineral and metal components.

A narrow bench on trade if there ever was one.

And while increase in FDI for the past few years has been lauded, the same is still lower than the major ASEAN countries and, ironically, lower than that of the 1980’s and 1990’s (OECD Investment Policy Review: Philippines, 2016)

The huge missed opportunity was the inability to transform the Philippines into an air transport and maritime hub, particularly after 9/11 and definitely during the first decade of 2000.

The Philippines could have made itself a vital and necessary player in the Asian supply chain, particularly as our islands constitute natural (and suitably secure) processing zones.

Another should have been the bulking up of the workforce of the Department of Trade and Industry, as well as Customs, as preparation for the various necessary free trade agreements that the Philippines could have contemplated joining in.

Longtime readers of this column are quite familiar already with the wary stance we take regarding FTAs (free-trade agreement).

But that wariness rests on three things: the resources with which brings the ability to negotiate a trade deal beneficial to the Philippines (and not merely wishing that merely opening up of industries will magically transform the Philippine economy), the resources with which to execute the agreement (including the bureaucracy to catch violations of the rules of origin), and third was the hope that the World Trade Organization could still finagle a deal revitalizing the multilateral trading system (an eventuality that now appears to need considerable time to happen).

Fast-forward a decade later and we still haven’t moved beyond those three factors. And yet, we now are faced with around 11 FTAs that are already effective, signed but awaiting implementation, or to be negotiated (i.e., ASEAN-Hong Kong, China FTA, Philippines-EU FTA, Regional Comprehensive Economic Partnership, Philippines-European FTA, ASEAN FTA, ASEAN-Australia and New Zealand FTA, ASEAN-India Comprehensive Economic Cooperation Agreement, ASEAN-Japan Comprehensive Economic Partnership, ASEAN-People’s Republic of China Comprehensive Economic Cooperation Agreement, ASEAN-[Republic of] Korea Comprehensive Economic Cooperation Agreement, Japan-Philippines Economic Partnership Agreement).

And the forgoing doesn’t even yet include the massive Trans-Pacific Partnership.

Compare our attitude, flexibility, and sophistication on this matter with China, which currently is the top trade partner of around 120 countries. And we wonder why we have difficulty in getting traction on our West Philippine claim!

To paraphrase one foreign affairs thinker: the Philippines should mentally rearrange the world and determine its own place in it, rather than obediently see the world as international law tells it to.

Too many lawyers

my Trade Tripper column in this 17-18 September 2016 issue of BusinessWorld:

“The first thing we do, is to kill all the lawyers.”

Popular in cocktail parties and reliably worth a chuckle or two, and almost always intended at the lawyers’ expense, the phrase seemingly connotes weariness of the legal profession’s annoyingly unwelcome omnipresence in people’s lives.

In truth, the line is actually an unintended compliment to lawyers.

Uttered by the murderous villain Dick the Butcher in Shakespeare’s Henry VI, Part 2, the setting involved a group of no-gooders out to foment chaos in England and seize power. And the best way to achieve that, they conclude, to ensure that anarchy happens, is, you guessed it: “to kill all the lawyers.”

Which leads me to another so-called “fact”: the Philippines has too many lawyers. A complaint of businessmen constrained by regulations, policy makers bothered by constitutional parameters, and academics outraged that their discipline is perceived as a steppingstone to law.

The lament is usually accompanied by the wish for more scientists, doctors, engineers -- anything involving the “hard sciences.”

Just not more lawyers.

Of course, humanities and arts feel the same: we need more philosophers and artists. Business schools meanwhile trumpet the need for more managers or (even better) entrepreneurial-minded youth.

But do we really have too many lawyers?

One way of addressing that query is too see how people generally feel about legal costs or the variety of legal counsels they can choose from.

Because if there are indeed too many lawyers, then the law of supply and demand should take care of that, by dragging the fees down. An eventuality, I believe, most are not inclined to admit is happening.

The fact is, we currently have on roster around 40,000 living lawyers. And people have to understand that most of those will not be engaged in traditional law practice.

Many will work in corporations, either as counsel or as part of management. Still many more will be engaged in private business, politics, or the academe.

The actual number of lawyers that people can choose from to handle their litigation or legal requirements is therefore understandably far lesser than what most people think.

Furthermore, the recent development of top corporate positions being increasingly offered to those with law degrees further speaks of the demand for lawyers and against the notion of the latter’s oversupply.

Ah... but surely lawyers are disproportionately too many compared to the other disciplines, particularly within the context of the overall Filipino population?

Again, not true.

Assuming a 100-million Filipino population, that would make a lawyer density of .4 lawyers for every 1,000 Filipinos (or 1 lawyer serving 2,500 Filipinos). And again remember, not all registered lawyers are engaged in traditional law firm work, so the proportion would be far smaller in reality.

Compare that with the United States, which has 1.3 million lawyers for a population of around 300 million. That makes it 4 lawyers for every 1,000 Americans or 1 lawyer for every 250 US citizens.

But don’t we need more scientists or doctors? Sure we do.

But consider: the number of practicing doctors is already nearly twice that of registered lawyers. Reportedly, in 2014, there are around 130,000 registered doctors, with perhaps 75,000 practicing. That makes it 1 doctor for every 1,333 citizens. Although, apparently, the medical profession thinks the optimum doctor-population ratio should be 1:100, which seems to mean that they’re aiming for almost 1 million more doctors!

Perhaps such is possible.

In 2015, there were 2,491 new doctors (a board passing rate of 85%). The year before, 2,218 (81% passing rate).

In 2016, we also had 2,245 new civil engineers (a board exam passing rate of 38%), 2,967 new accountants (43%), and 6,183 new nurses (44%).

Every year, the legal profession just has a little over a thousand new lawyers, with Bar exam passing rates meandering at 18-22% (the most recently released result, 2015, had a higher than normal rate of 26%).

Even looking at student numbers belie the myth of too many lawyers: for example, the 2013 University of the Philippines Statistics show that only 1.1% of its student population are law students, with science and engineering and social sciences accounting for 64%, arts and letters, 15.1%, and management 11.5%.

Now perhaps lawyers are disproportionately represented in high profile or influential positions vis-a-vis other professions or academic disciplines. But one can’t blame lawyers for that.

But it does lead to questions of why.

The Philippines gives too much prestige to lawyers? If true, why? The Philippines is too litigious? If so, why? Why do scientists, engineers, philosophers, etc. not exert a bigger influence in the country?

This article is emphatically not saying that the legal profession is better than others. The only point here is that to say we have too many lawyers is untrue.

In any event, if Filipinos really want to get rid of lawyers or make them irrelevant, then they should just stop lying, stealing, cheating, or hurting one another.

A multifaceted long view of China

my Trade Tripper column in the 10-11 September 2016 issue of BusinessWorld:

Disappointing, of course, was the previous administration’s act of arbitral initiation against China but not bothering to develop a coordinated diplomatic, media, political, and legal strategy in case of victory. Then and now, even without the benefit of hindsight, the case was a forgone conclusion considering the inherent strength of the Philippines’ legal position, an outcome all the more certain once the jurisdictional hurdles were overcome.

Even assuming a follow-through strategy was indeed formulated, since it was not presented to the Filipino people’s evaluation (or at least their elected representatives) then it just doesn’t exist.

There was effectively no preparation done beyond the short-term gratification of seeing China beaten. Realizing this, commentary following the victory was diverted to pointing out that the rule of law was upheld and of the ruling’s long-term significance to international law, whatever that means.

In the meantime, while the legality of the Philippine claim was indeed solidified (as if it needed more solidifying), China’s belligerent construction in the disputed islands remained unabated, reinforcing their possession of those areas.

At most, wishful thinking focused on the strategy (if one can call it that) of “name and shame”; or the hope that other countries would file similar arbitral cases; or (as a variation of the first two) that the ruling would soften China’s will, with ensuing popular support for the Philippines rendering China pliant.

Unfortunately, those desired scenarios are still searching for clear footing: both the Philippines and China (depending on which source one reads) substantially having equal quality of support.

But for the most significant area for the Philippines, South-east Asia, the level of support unfortunately remains ambiguous.

One reason is China’s continuing economic importance. In China’s Economic Ties with ASEAN (Association of Southeast Asian Nations) : A Country-by-Country Analysis (prepared by the staff of the US-China Economic and Security Review Commission, March 2015), the Philippines’ erstwhile adversary “consistently appears among the top five trade partners for ASEAN members.”

And China as a source of economic opportunity apparently seems far from being tapped out: “although its outbound direct investment has been rising rapidly, China is still marginal to ASEAN’s overall FDI (Foreign Direct Investment) receipts.” Still, “even allowing for the possibility that MOFCOM [Ministry of Commerce] may be undercounting actual flows (for example, by not factoring in investment originating in Hong Kong), the fact remains China is not yet a major investor in ASEAN.”

What is even more interesting is this: “the degree of dependence on China as a source of exports, imports, or both varies. Where wealthier ASEAN countries have a diverse set of trading partners, poorer ASEAN countries depend heavily on China, especially as a source of imports. Vietnam’s share of Chinese export and import flows with ASEAN has increased substantially, while Singapore’s share has dropped.”

Now that is worth pondering upon as it jives with other research seemingly revealing of Chinese thinking regarding foreign relationships and the response of other countries: “previous studies confirmed that only the rich natural resources and the weak institutions countries attracted China’s OFDI (Outward Foreign Direct Investment). However, we found out that, in recent years, not only weak institutions but also good institutions with rich natural resources countries attracted China’s OFDI.” (Chinese Outward Foreign Direct Investment: Is ASEAN a New Destination?, Nguyen Thi Tuong Anh and Doan Quang Hung, May 2016, SECO/WTI Academic Cooperation Project Working Paper Series, June 2016)

The Philippines generally hasn’t felt this down to the psychological because of the continuing level of comfort we have regarding our concentrated trade with Japan and the US, and considering that China’s FDI to the Philippines remains relatively conservative.

It’s also gratifying for those taking the more hawkish position that though “Philippine balance of trade with China deteriorated in 2013, going from a decade of surplus to a $1.6-billion deficit,” standing in stark contrast to “the country’s surplus with the Asia region as a whole,” such has not been apparently disastrous for the Philippines.

Nevertheless, even though the aforementioned 2015 paper acknowledges that the Philippines “is more important to China in the political than the economic realm” and that while “Chinese FDI in the Philippines totaled only $692 million in 2012... individual deals suggest far more investment is actually flowing into the country.” And furthermore, “the Philippines has actually made investments in mainland China. The investors include the snack food company Oishi, the San Miguel brewery, and real estate businesses like Ding Feng Real Estate Co., which specializes in mixed-use developments such as condominiums, shopping malls, and hotels.”

The key, commonsensically and strategically, now, today, at this present time, is to find common ground.

First step is to re-acknowledge that there are two decades worth of agreements that the Philippines entered into with China, covering the economic to military cooperation, which the last administration seems to have short-sightedly scrapped.

It’s also important for the two countries to tune out all nondiplomatic noise and allow each side to have the space to find a mutually beneficial solution in the future.