The ProPinoy Project » Sustainable Development

The halo effect

Doy Santos aka The Cusp — Tue, 29 Nov 2011 04:33:59 +0000

image courtesy of listverse.com

The halo effect is a cognitive bias first studied by Edward Thorndike in 1920 whereby the perception of one trait (i.e. a characteristic of a person or object) is influenced by the perception of another trait (or several traits) of that person or object. An example would be judging a good-looking person as more intelligent or believing a politician’s policies are good, just because the person appears good.

In the case of President Aquino and his high public satisfaction ratings, there seems to be a substantial amount of this effect taking place. The general impression of P-Noy is that he is honest. This comes from being who he is, the only son of two national heroes. This has translated into very positive sentiment towards the actions taken by the government under his watch.

Part of this has to do with the anti-GMA sentiment or the reverse halo effect. So pursuing cases against his predecessor is seen to be the legitimate thing to do, and rightly so, given the shenanigans that her administration was accused of. It also ties in with the president’s retraction and review of contracts and projects already approved for fear that they would somehow benefit her proxies within certain departments and sub-contracting firms.

But if you look at the outcome of these actions, it becomes immediately apparent, leaving our cognitive biases aside, that the positive evaluations given to P-Noy by the public are probably unjustified.

First of all, with respect to the way in which his justice department has gone after Mrs Arroyo, certain questionable legal manoeuvres have actually undermined the rule of law rather than upheld it. And secondly, with regards to the handling of the economy, the third quarter GDP figures clearly show that the overly cautious due diligence performed on public contracts undermined economic growth rather than encouraged it.

On the first point, I am referring to the use of a joint panel composed of the Department of Justice and the Commission on Elections that investigated allegations of vote rigging in the 2007 elections. This is said to have been anomalous in that a supposedly independent constitutional body such as the COMELEC is not meant to be seen as partial or collaborating with the administration in any way. Also, when their joint findings were published, it took a judge a few hours to read their eight ring-binder document and issue an indictment on Mrs Arroyo.

The undue haste with which such decisions were reached coming on the back of a temporary restraining order issued by the Supreme Court on the hold departure order issued by the DOJ on Mrs Arroyo that was “in effect” despite the dissenting opinion of some justices makes it highly likely that politics rather than due process was observed. This TRO was issued because the legality of the DOJ’s hold order was questionable to begin with.

Had these actions been undertaken by Mrs Arroyo while she was running the country, the protests from civil society regarding the “creeping authoritarian” nature of her government would have occupied public discourse. But because it was attempted by the meek and mild administration of the “benign one” there does not seem to be the same level of public indignation, although the result is the same—if upheld, it would grant vast powers to the state to curtail individual freedoms.

If we turn to the second point, on economic governance, the promised economic take-off billed as a public-private partnership by the president did not take place. Instead the economic deceleration has been rather remarkable in a region that is seeing quite robust growth despite the downturn in Europe and the US. The government which was prepared to take the credit for positive growth in agricultural output in the first half when early rains produced a bumper crop is now shifting the blame for poor production on storms both natural and man-made.

Public construction continued to show weakness despite the government’s promise to fast-track the roll-out of resources in response to the slump in the first half. Even with the announcement of a “stimulus” to deal with the effects of the EU debt crisis, there still appears to be little traction on this front. All hopes are pinned on the fourth quarter, but as the country’s chief statistician has pointed out, to attain even the lower end of the government’s modest growth target range for the full year, the economy would have to expand at a pace rarely seen.

In attributing the weak economic performance registered this year, there are certain factors that lie outside the government’s control (storms and financial crises overseas) which have to be acknowledged, but a portion of it definitely lies within its sphere of influence (public construction spending). It is clear that external factors did dampen growth, but the government’s action or inactions dampened it even further.

Again, had this occurred under Mrs Arroyo, the government would have been pummelled. Hounded by questions of legitimacy, it was her economic credentials that proved her only saving grace. Now that the government is run by someone whose electoral mandate is unquestioned, his now sullied economic credentials don’t seem to be much of a problem.

To counter the cognitive bias associated with the halo effect on the part of an evaluator, “blind-fold” tests or blind experiments are often administered where the person rates a product based on its actual attributes or performance, not on the subject’s perceived reputation. Respondents are often surprised with the results when they remove their blindfolds. I wonder what would happen if a poll was conducted that used the same principle in evaluating the performance of our presidents.

If faced only with the indicators of success and not the name of the person being rated, what marks would be given this president? What the government under him did this year countered its aims of fostering good government, rule of law and economic growth, but somehow its acts of commission and omission get glossed over and given a positive spin. Not only that, but the public by and large is willing to accept the message given them that all is well. So it seems the halo effect can cover a multitude of sins.

Towards a Strategic Development Road Map (Update)

Doy Santos aka The Cusp — Thu, 04 Aug 2011 07:00:14 +0000

The following is a matrix of the Strategies contained in the government’s Philippine Development Plan 2011-16 plotted against the five key results areas under the Cabinet Cluster system of the Aquino Cabinet.

The five themes include: 1) Good Governance and Anti-Corruption, 2) Human Development and Poverty Reduction, 3) Economic Development, 4) Security, Justice and Peace, and 5) Climate Change, Adaptation and Mitigation. This was contained in Executive Order 43: Pursuing our Social Contract with the Filipino People Through the Reorganization of the Cabinet Clusters.

The strategies under each theme were taken from the Philippine Development Plan 2011-16. In some cases, the actual targets were contained in it or some other announcement such as the renewable energy target. Some targets we are actually proposing here based on the intent of the PDP and other statements by the government. Some targets remain ambiguous or require quantification, but at least a measurement indicator is identified here.

This should form the basis for a periodic review of the government’s progress in meeting its official development plan and agenda. In the future, we will be revisiting these targets to hold this government to account. Comments on the construction of the matrix are quite welcome. Feel free to point out things that are missing or need to be revised.

Scorecard of Social Contract and Philippine Development Plan 2011-16 Targets

UPDATE:

Good governance targets

I chose to go with the World Bank’s Good Governance indicators because the government has adopted its whole philosophy of economic development from the Washington Consensus. It is only but fitting that it should benchmark itself against the indicators set by this Washington-based institution.

In setting the targets for the nation, I had to benchmark our rating with our East Asian neighbors. For instance under control of corruption, the Philippines and Indonesia were at 27.1 and 28.1 respectively, China and Vietnam were at 36.2 and 36.7, Thailand was at 51, and Malaysia was at 58.1 back in 2009. Hong Kong and Singapore were in the 90s.

It is only but fitting that we try to break into the range of Thailand and Malaysia. So I said we need to be achieving above 50%. I used a similar approach with the other indicators in this area.

Human Development and Poverty Reduction

Most of the targets found here were lifted from the government’s plan. The only target which I had to set on my own was the HDI target. To do this I simply projected the current trend from 2005 to 2010. The target of reaching a 0.65 value for HDI means we would catch up to where Thailand and Sri Lanka were back in 2010.

All the other targets dealing with poverty reduction, literacy, land reform and distribution, Pantawid Pamilya recipients, housing and reaching the MDG targets were all based on official published documents by the government.

Economic Development

Most of the targets came from official published documents by the government. The only targets where I took the liberty of setting were the fiscal spending targets, but even there I took the policy pronouncements contained in the PDP into account.

For example, the PDP stated that its Medium Term Expenditure goal was to “substantially increase productive expenditures and catch up with the accumulated deficits in these areas.” It also noted that in 2007, the average expenditure on education among our Asian neighbors was 3.9% of GDP. To “catch-up” and make up for our accumulated deficits, we would need to at least match that spending, which is reflected in the target.

Aside from education, the PDP also made mention of our infrastructure spending which is woefully inadequate when compared with that of China, Vietnam, and Thailand which spent upwards of 7, 8 and 14% of GDP over the last decade. The 5% target was based on the World Bank’s recommended level for a middle income country such as ours. In other words, it was a modest but reasonable target in light of our regional peers’ spending.

The targets for achieving higher rankings in the World Economic Forum’s Global Competitiveness and World Bank’s Ease of Doing Business reports are self-explanatory. You can see by reading their most recent editions the countries in whose proximity we would be landing if we achieved the targets.

The consumer welfare and agricultural productivity targets are yet undefined and merit further discussion.

Security, Justice and Peace

The target for achieving political stability was arrived at similar to the other good governance targets already discussed above. The defense modernization target assumes that the government has a revised plan for this and will be working towards achieving 100% of it by the end of its term. Finally, the press freedom strategy and target, I had to personally add given the silence of the PDP on it. I based this on PNoy’s policy pronouncements at an AFP conference call. I further believe the Human Rights Commission should seek to publish official statistics in the area so that we can aim to bring that figure down.

Climate Change, Adaptation and Mitigation

The targets for reducing environmental damage and casualties are yet undefined but flow directly from the strategies outlined in the PDP. The rest of the targets contained here are from official published statements by the government, including the renewable energy target.

Why the Need for a Scorecard?

It has been nearly three months since the cabinet reorganization was announced, and yet it seems no further developments were made towards fleshing out the social contract in terms of major strategies and targets, which the EO that created it envisioned.

That is the reason why we have taken this bold step towards developing this strategic development road map. Of course, nothing would please us more than to see the government announce something similar. When it does, we will be sure to revise the document to reflect it.

The Propinoy Project began as an attempt to hold the government to account for its electoral promises. Now that the government has officially laid down its official policies and plan for its term, it is but fitting that we assess its future performance against its own targets with objective baselines and independent and reliable sources.

This matrix as detailed as it is cannot capture the complexities at the implementation or operational level. We leave that to the community service organizations who are partnered with various agencies to monitor. At least at the strategic level we can look at this scorecard to assess whether the government is doing the right things (and doing them right!) at the operational level to achieve its strategic goals.

Join the Blog Action Day on June 8 to Save our Coral Reefs and Seas!

Anna Oposa — Wed, 01 Jun 2011 15:42:22 +0000

Join the Blog Action Day on June 8 to Save our Coral Reefs and Seas!

Our beautiful and diverse marine resources and wealth need your attention and your help. They are under attack.

Exploitative foreign firms, in tandem with local partners and left unchecked by irresponsible government officials, are illegally harvesting and peddling our precious coral reefs. In one case, coral reefs twice the size of Manila was destroyed, and the plunder continues.

We cannot accept this. We must act now to save what’s left of our coral reefs and to protect our seas so those beautiful and important natural resources are preserved for our and the next generations to enjoy.

We call on all Filipino bloggers, Tumblr and Posterous users, Tweeps, Plurkers and all netizens to join the June 8 International Blog Action Day to save our seas and coral reefs. Your voices, our actions are that important.

What can we do?

Tweet, Plurk, or post to spread the word about this event: Share or repost this announcement.
Use the Twitter hashtag #reefwatchPH.
Spread the savephilippineseas.com URL.
Repost and share our official campaign badge (to be posted soon so please come back!).
Most importantly, on June 8, join the Blog Action Day from your favorite social media channels (blog, Tumblr, Posterous, Twitter, Plurk, Facebook, etc.

Some ideas and suggestions

While the issue is serious, there are a lot of creative ways to send our message across on or before June 8:

An open letter to officials and companies.
A photo essay about your favorite beaches or dive spots.
Design and share mini-posters, posters and drawings.
If you grew up near a beach, tell us about your fond memories.
Post about why your (future) kids and future grandkids ought to have the chance to see and enjoy our coral reefs and seas.
Why harvesting and peddling corals is bad for the environment and is bad business.
Proposals on how to protect or clean up our seas.
If you belong to a clan, group, or organization, invite them to join the event.

Taking an extra step or two won’t harm too. You may email your senator, congressman, the Environment secretary, and even the President to demand action.

NOW is the time to act.

We can do this. Let’s make our social media work for something good. Let’s make Philippine coral reefs, seas and the need to save them the trend – to raise awareness, to inspire action, to grow our communities, and to compel government action.

by Tonyo Cruz
First posted at: http://wp.me/p1AHbC-f

Photo credit: Richard Ling, some rights reserved.

How Sri Lanka Overtook the Philippines

Doy Santos aka The Cusp — Thu, 03 Mar 2011 01:23:20 +0000

Colombo skyline

On Monday, the financial blogosphere was all aflutter with the release by Citi Investment Research and Analysis group led by their chief economist Willem Buiter of a report entitled Global Growth Generators(3G’s): Moving Beyond ‘Emerging Markets’ and ‘BRIC’. It named the Philippines as one of eleven 3G countries to watch out for in the coming years. The list also included Bangladesh, China, Egypt, India, Indonesia, Iraq, Mongolia, Nigeria, Sri Lanka and Vietnam.

It is a continuing expression of the financial market’s faith in the convergence story of poorer countries catching up with richer ones propelled by economically liberal policies and states that have “reached a threshold level of institutional quality and political stability.” It is an affirmation of the capacity of developing Asia and Africa have to generate internal demand and support global growth well into the middle of the century as the economic center of gravity gradually moves East.

This is just the latest in a growing number of forecasts. Ever since Jim O’Neill of Goldman Sachs coined the now ubiquitous term BRIC (stands for Brazil, Russia, India and China) back in 2001, the global investment world has been on the look out for the next big thing. Among the new memes introduced into investor lexicon are terms like N11 or Next 11 (consisting of mostly the same countries as the 3Gs minus China, India, Iraq and Mongolia replaced by Iran, South Korea, Mexico and Turkey), MAVINS (consisting of Mexico, Australia, Vietnam, Indonesia, Nigeria and South Africa).

Although our policymakers should be flattered by the glowing forecasts these reports make of our prospects, we ought to be mindful that the Philippines has been a perennial disappointment to experts who have made such grand projections of us in the past. In fact, our being lumped together with these relatively “backward economies” only points to the fact that we missed the boat of the last convergence club members consisting of East Asia and the Asian tiger economies.

Even within the group of 3G countries, Sri Lanka has overtaken us over the last decade or so. Yes, that is right. You would not think this was the case though if you visited Colombo which is what I did back in 2005 as part of a work assignment. The capital’s skyline and commercial district was in my opinion decades behind Manila in terms of development.

Sri Lanka has become the richest country in South Asia, even beating the “tiger cub” economy of the Philippines.

The peace and order situation at the time was a bit iffy with the army’s presence in the city a reminder of the then ongoing separatist threat of the Tamil Tigers in the northern Jaffna Peninsula which came to a conclusion in 2009. This conflict introduced the world to the phenomenon of suicide bombers. It was also less than a year after the Boxing Day Tsunami which severely impacted the island’s economy (the nation is situated off the southeastern coast of India in the Indian Ocean).

I did get to tour the interior a little bit venturing into Kandy their spiritual capital where one of the oldest Buddhist temples in the world can be found. As we traveled out of Colombo on a Monday morning, there was an endless stream of traffic headed the other way. I looked up and could barely see the sun because of all the fumes. Their road network and transport system did not seem to be as developed as ours with no skyways, light railways or underpasses to speak of. And yet, this one time British colony known for growing tea, has overtaken the Philippines in achieving greater prosperity for its people.

I think it is instructive for us to look at Sri Lanka because there are many similarities between our two countries. Both have experienced modest growth in the past fifty years. Both experienced a lengthy rebellion based on ethnic lines. Both experience natural disasters. Both were subjected to colonization (Sri Lanka formerly Ceylon attained independence in 1948). Both began as agricultural societies. Both have been constitutional democracies (except for our 14 years under Martial Law). For this reason, it is worth studying their development stories (other noteworthy comparisons are with Bangladesh and Thailand). My purpose in all this is to answer the question, how did Sri Lanka overtake the Philippines?

Slow-growth countries

Figure 1: Growth in Gross Domestic Product (in %), Philippines and Sri Lanka, 1961 to 2009 (Source: World Bank Development Indicators)

The economic growth rates of both the Philippines and Sri Lanka from 1961 to 2009 are depicted on Figure 1 to the right. You can see that both national economies moved more or less within the same slow growth band and in tandem for the most part.

The Philippines from 1983-85 experienced a very severe contraction during the international debt crisis. It also followed the US into recession in 1991 and then again in 1998 after the Asian Financial Crisis. Sri Lanka only contracted twice in the period, in 1971 during the first Oil Crisis and in 2001 following the dot com crash.

The Philippines experienced its most rapid growth in the 1970′s hitting close to 9% in 1973 and 1976. This was during the debt-driven expansion of the Martial Law regime when the nation stood as the poster child of a doting IMF. It also cratered between 1984 and 1984 contracting by about 7.3% each year when our profligate spending came home to roost.

Between the two, the Philippines has had a more uneven growth trajectory, while Sri Lanka seems to have had a more gradual growth path. Sri Lanka never achieved our highs but neither did it experience our lows. Both however could be considered slow-growth countries never attaining double digit growth figures unlike their fast-growth neighbors in Southeast Asia.

Same starting point

In 1962 both the Philippines and Sri Lanka had about the same economic standard of living with per capita incomes of about 153 (current) dollars per annum. From the 1970s until the 90s, Filipino incomes expanded more rapidly.

Figure 2: Gross domestic product (current US$), Philippines and Sri Lanka, 1960 to 2009 (Source: World Bank Development Indicators)

This was driven in the 1970s to mid-80s by the debt-driven growth of the Martial Law years. Although the debt crisis of the early-80s led to a severe correction in our growth, it was followed by a steady recovery under the liberalizing regimes of the Aquino and Ramos administrations.

In the aftermath of the Asian Financial Crisis, the country was relatively in good shape. It was however our politics that became our undoing under the short-lived administration of Estrada and the politically turbulent transition of the Arroyo years. The economy began to take-off once again by the mid-2000s and momentarily slowed down after the global financial crisis.

The total size of the Philippine economy was $6.7 billion back in 1960, while for the Sri Lankan economy it was $1.4 billion. By 2009, the Philippine economy grew to $161.2 billion, an increase of $154.5 billion, while the Sri Lankan economy grew to $42 billion, an increase of a mere $40.6 billion (see Figure 2). You would expect Filipinos to be richer than Sri Lankans at the end of five decades, but the opposite is true. Sri Lankans were more prosperous with per capita incomes of $2,068 per annum, while Filipinos earned $1,753 on average.

The difference is even larger when you take purchasing power (or the relative cost of living) into account. In pure GDP per capita dollar terms, Sri Lanka overtook the Philippines only in 2003 when both countries earned $967. Adjusting for purchasing power however shows that Sri Lanka caught up with the Philippines as early as 1993 and pulled away from it in 1997. By 2009, Sri Lankans earned about $4,720 per annum 16% more than Filipinos who made $4,060 per annum on average.

Economic fundamentals

The see saw battle between the two nations is evident when one looks at economic fundamentals. Since 1994, the Philippines has overtaken Sri Lanka in exports (as a percentage of GDP) and has consistently outperformed the latter in subsequent years. In 2000, the Philippines enjoyed a 16 percentage point margin over Sri Lanka (55% v 39%), while in 2009 suffering from the global financial crisis this went down to a 10 percentage point advantage (34% v 24%).

In terms of technology and the kind of products they export abroad, the Philippines can be considered advanced in comparison to Sri Lanka. Since the 1990s, it has moved into technologically advanced semiconductors and electronics industries. Sri Lanka on the other hand has specialized in garments as its main source of export revenue.

In terms of industry value added (as a share of GDP), the Philippines has consistently outperformed Sri Lanka although Sri Lanka in the last decade has narrowed the gap quite significantly. In 1983 at the height of the debt-driven growth, the Philippines enjoyed a 13 percentage point advantage (39% compared to 26% for Sri Lanka), but by 2009, the two nations were practically tied at 30.2% for the Philippines compared to 29.7% for Sri Lanka.

It is in the area of gross capital formation that Sri Lanka has overtaken the country in recent years. In 1976, at the height of the growth years under Martial Law, the contribution of investments in the Philippines was double that of Sri Lanka (32% v 16%). After 1977 when Sri Lanka began to shift away from a socialist orientation and began to liberalize its economy, the contribution of investments to GDP shot up so that in 1980 it overtook the Philippines hitting 33% compared to our 29% and has consistently outclassed the Philippines ever since particularly in recent years where the gap has grown. By 2009 they enjoyed a 10 percentage point advantage (24% v 14%).

Figure 3: Unemployment rates, Philippines and Sri Lanka, 1985 to 2010 (Source: IMF World Economic Outlook, October 2010)

Anecdotal evidence that I gathered suggests that since the supposed end of conflict declared by the government with the Tamil Tigers, investor interest in Sri Lanka has improved quite dramatically and business confidence has been bullish. In the Philippines, the elections of 2010 resulted in a clear winner which quieted investor fears of political instability. This has led to a very positive outlook for the country.

Unemployment in Sri Lanka has fallen from a high of 16% in 1990 to 5% in 2010 (see Figure 3). The Philippines on the other hand has seen its unemployment rate fluctuate from a low of 8% to a high of 11% depending on the business cycle from the mid-1980s to the mid-2000s.

In 2004, as the unemployment rate swung back up to previous highs, the government adopted a new method for reporting the unemployment rate which it said was creating an upward bias. As a result, subsequent years have shown declining rates of unemployment in part due to this change. The unemployment rate went down to 7.2% in 2010, still two percentage points above the rate reported for Sri Lanka however.

Demographics: The “hare and the tortoise” effect

Looking at economic fundamentals does not explain Sri Lanka’s sudden ascendancy over the Philippines. The answer lies in demographics or what I like to call the “hare and tortoise” effect. Different population growth rates provide an important distinction between the two nations. The Philippine population in 2009 grew to 3.4 times its size in 1960 from 27 million to 92 million, while the population of Sri Lanka merely doubled from 9.7 million in 1960 to about 20.3 million in 2009 (see Figure 4). Even today the population of the Philippines is growing at a faster rate of 1.79% compared to 0.73% for Sri Lanka.

Figure 4: Population Total, Philippines and Sri Lanka, 1960 to 2009 (Source: World Bank Development Indicators)

This is remarkable given our larger population base. Higher fertility rates among women of child-rearing age in the Philippines which averages 3.08 births per woman (down from 7 in 1960) is much higher than the fertility of Sri Lanka’s women at 2.33 (down from 5.5 in 1960). This is partly driven by cultural and religious norms as well as government policy.

While the effect of rising incomes on family size is evident as population growth and fertility rates for both countries have declined over time as incomes rose and a greater proportion of people moved into cities, one can also see the influence of public policy as Sri Lanka’s acceptance of contraceptives has outstripped the Philippines in every year that data was collected. Contraceptive use in Sri Lanka was 68% in 2008 compared to 51% for the Philippines.

So we find at the end of the period that the average Sri Lankan who from the 1960s to about the mid-1990s earned less than your average Filipino has since then succeeded in raising his economic living standards above the Filipino. One might say this is due to a combination of factors. The boom and bust cycles in the Philippines have allowed the steady pace of Sri Lanka’s economy to catch up with ours.

One cannot discount however the importance of population and family planning policies, the result of deliberate government efforts which began in earnest in the 1960s in Sri Lanka, experienced stops and starts as a result of electoral cycles, but finally came into its own by the mid-1980s. In fact, Sri Lanka is often cited in the literature as an example of a nation with low levels of per capita income and slow-growth, which has been able to lower its fertility rates and population growth by using sensible and deliberate population and family planning policies.

Human Capital and Social Well-being

While economic well-being is one important basis of comparison, we should also look at human and social well-being to gain a more holistic view. One criterion for the inclusion of countries in Citi’s 3G countries apart from economic growth prospects is human capital endowments. What we find is that in nearly every dimension, Sri Lanka outperforms or has overtaken the Philippines.

Figure 5: Mortality Rate, infant (per 1,000 live births), Philippines and Sri Lanka, 1960 to 2009 (Source: World Bank Development Indicators)

In terms of living longer, the average life expectancies of Sri Lankans was higher at 74.2 years in 2008 (up from 57.9 years in 1960) compared to 71.6 years for Filipinos (up from 53.2 years in 1960). In terms of caring for our young, infant mortality in the Philippines was lower in 1960 with 63 deaths per 1,000 live births compared to 73 for Sri Lanka. However in recent times Sri Lanka has lowered mortalities down to 12.7 compared to 26.2 for the Philippines (see Figure 5).

A similar story can be told for deaths among children under five where deaths in Sri Lanka number 15 for every 1,000 compared to the 33 for the Philippines. This is despite the fact that in 1960, there were more deaths recorded in Sri Lanka of 115 per 1,000 compared to 97 for the Philippines.

This is partly to do with adequate spacing of births leading to healthier babies which the Sri Lankans have been able to ensure with better family planning services. It is also the result of better attendance rates of health professionals at births (99% compared to our 62%) as well as better immunization rates of children under 2 years of age (with measles immunization used as a proxy for overall immunization rates) with their 96% comparing favorably to our 88% (in 1982 we were both at 81%). We can see from these statistics that the family planning and reproductive health services of Sri Lanka are integrated to form part of a wider set of health policies aimed at improving maternal and child care.

Finally in terms of education, the primary completion rates of Sri Lanka are higher than ours. This was not the case back in 1985 when their 83% completion rate compare unfavorably with our 88%. By 2007, the tables had turned with their completion rates hitting 105% compared to our 92% (The primary completion rate is the percentage of students completing the last year of primary school calculated by taking the total number of students in the last grade of primary school, minus the number of repeaters in that grade, divided by the total number of children of official graduation age). As an aside it is worth mentioning that Sri Lanka offers thirteen years of basic education compared to ten for the Philippines.

One can conclude from this that despite its relatively slow economic growth for most of the last four decades, Sri Lanka has been able to maintain adequate investments in human capital because it was able to contain its population growth rate. Another reason of course is that with the debt-fueled growth adopted in the 1970s, our government has a higher debt burden which has left it with less money to spend on human services.

Institutional quality and ease of doing business

In the latest 2010 report of Transparency International, Sri Lanka was ranked 91st out of 178 countries, 43 notches above the Philippines which was ranked 134th in the Corruption Perceptions Index. Sri Lanka has consistently outperformed the Philippines since 2002 when the two countries were both included in the report.

The World Governance Indicators compiled by the World Bank confirms this. In 1996 when this report first came out, the Philippines performed better in terms of control of corruption with a 53% score compared to Sri Lanka which scored 41% (on a 0-100 scale). By 2009 when the last report came out, the Philippines had a score of 27% compared to 45% for Sri Lanka.

Figure 6: Time required to start a business (days), Philippines and Sri Lanka, 2003 to 2009 (Source: World Bank Development Indicators)

In terms of ease of doing business, Sri Lanka was 46 notches above the Philippines according to the World Bank’s Doing Business report for 2011. It was ranked 102nd compared to 148th for the Philippines out of a total of 183 countries in the Ease of Doing Business Index. This gap has been maintained since 2009 more or less.

The length of time it took to open a business was relatively the same between the two countries in 2003 (61 days in the Philippines compared to 58 for Sri Lanka). In six years, Sri Lanka improved the ease of doing business by bringing down this lead time to 38 days, a 34% reduction. The Philippines on the other hand could only manage to bring its lead time down to 53 days, a mere 13% (see Figure 6).

The improved performance by Sri Lanka in taming corruption and easing regulatory red tape has allowed it to skip passed the Philippines in encouraging capital formation as was highlighted in the previous section on Economic Fundamentals. It can also be the result of better standards of living experienced by its people more recently.

Conclusions

Given the foregoing discussion, the answer to our question, how did Sri Lanka overtake the Philippines, becomes apparent. While the development stories of the two countries are quite similar, they diverge markedly in several ways.

The first finding we can make has to do with the way they managed population growth to foster a more sustained economic growth path. Not that population growth is necessarily a bad thing. Some growth is indeed helpful to foster growth in the economy. The BRICs except for Russia have large populations. Demographics is shaping the structure of the world economy as these nations with large populations begin to develop their own consumer base. However, too much growth definitely detracts from per capita incomes at some point. In the past, we were told by the experts that the Philippines needed to grow a lot faster similar to the Asian Tigers. Sri Lanka has demonstrated that you do not necessarily need that rapid growth rate if you are able to keep the growth of your population in check.
The second finding we can make has to do with reproductive health and family planning. It has been proven to reduce the population growth rate and improve women’s and child health. The case of Sri Lanka shows that with the decline in their population growth rate, their government had a greater capacity to provide general health care such as skilled health professionals at birth and immunization, as well as improve educational completion rates.
The third finding we can make is with respect to good governance. Good governance does help to spur growth in an economy. With improvements in governmental capacity, a result of not being too hard pressed to keep up with the demands of its population which was growing at a slower rate, Sri Lanka was able to lower the cost of doing business in terms of time and money. It has been able to tame corruption and reduce bureaucratic red tape. The benefits of population management seem to compound here it seems.
The final finding has to do with social equity. We have seen unemployment decline over the past decade. As a result of its investments in population, health and education systems, the country has been able to foster a more equitable distribution of opportunities. This is the true essence of promoting more inclusive growth which is that while individuals in society might not start out with the same initial endowments of wealth, they are given equal access to the means for acquiring it.

Sri Lanka was one of the poorer nations that used public policy to support a population program even before the international consensus formed around it. It has reaped the benefits of this reform becoming the richest country in South Asia and beating the “tiger cub” economy of the Philippines. The Citi 3G’s report forecasts that from 2010 to 2030, Sri Lanka will be among the top ten fastest growing economies (in terms of income per capita). The Philippines only joins this club after 2030 because of a population slated to reach 146 M by 2050 (with all the problems that accompany this). We must take to heart the lessons this case study poses. If we don’t we will continue to wonder how Sri Lanka (and possibly others) advanced ahead of us.

Sen. Kiko Pangilinan's 12 Christmas wishes for our country and our leader. What's yours?

Toni Alvarez — Mon, 20 Dec 2010 09:44:58 +0000

PNoy’s ally in the Senate, Sen. Francis “Kiko” Pangilinan, lists down yesterday, December 19, his 12 wishes for President Benigno Aquino III and for the country. First on Sen. Kiko’s list is for the peace talks in Mindanao to start, followed by a hope for a new image in the Philippine tourism industry. As what was expected, the most talked about wish among the 12 is the Senator’s 4th wish; “A girlfriend for PNoy.” Below is Sen. Kiko Pangilinan’s complete wish list this coming Christmas. Care to share yours?

1. For peace talks to start: “An end to the armed conflict around the country could lead to the emergence of cities such as General Santos, Cagayan de Oro, and Davao city.”

2. A new image for the country’s tourism industry: “We must attract tourists; not criticisms. Our people are by nature extremely friendly and hospitable. We are only doing/achieving some 3M tourist arrivals annually while our neighbors are doing four or five time more with 12 to 15 Million tourist visits annually. It has been said that other countries in the ASEAN are doing so much more with so little in terms of natural wonders and beautiful sites while we are doing so little with so much.”

3. For the CCT to be implemented ASAP: “I share the President’s fervor in lifting our countrymen out of poverty. We would like to see the CCT be implemented the soonest so we can assess right away its impact on our nation’s marginalized sector and tweak the system as necessary.”

4. A girlfriend for PNoy: “I hope all the best for our President, but more than that, I wish for him to finally find that special someone so that the media can focus their stories on the more substantiative aspects of being the leader of a nation.”

5. A united Malacanang: “We would like to see A more disciplined and cohesive team working towards achieving progress in the country. Let us be rid of the factions within. Filipinos are naturally resilient and love to laugh. But it does us no good to laugh at the follies of those who represent PNoy.”

6. Stable gasoline prices: “We make an appeal to those controlling the prices of this very important commodity: Let us give our countrymen a chance to rise above subsistence. Let us find a compromise wherein your business can still thrive without the poor suffering at the end of the consumer chain.”

7. For Filipinos to start thinking of fishing as a viable industry: “There is more to the country than agricultural farming. We have one of the longest coastlines in the world and a treasure trove of aquamarine resources. The Philippines can easily be the aquamarine resource powerhouse of the world.”

8. To be rid of garbage: “The tragedy of Ondoy should serve as a powerful lesson to us all. Cleaning up the environment also gives one a sense of pride and dignity, no matter what social class he or she belongs to.”

9. For families to be informed of their choices on family planning: “The fact remains that unless we are able to address the issue of population management, we can never realize our true potential as a nation. The government can only provide for so much of its citizen before there is chaos. An informed choice is what Filipinos need to manage the booming population.”

10. More private-public participation in worthy projects: “ The Gawad Kalinga is an exemplary example of how the synergy of government and private sector partnerships can bring about sustainable reforms for our communities and indeed, the whole nation. We all hope for a better nation, and as a people we will collectively realize these hopes only when more of us are willing to make a stand, take the risk, move out of our comfort zones and pledge to commit to doing our share in helping shape our communities and in helping move our nation towards a new direction.”

11. For smugglers to go to jail: “Smuggling affects the sustainability and profitability of our trade industry. It has been pervasive for far too long. We would like to see these unscrupulous traders finally put to jail. Smuggling is an indication of pervasive corruption in the country. We hope to stamp out all forms of corruption in the Philippines, and we need to make examples of them by punishing them.”

12. For our staple to have price stability: “Rice has been the cultural staple of Filipinos. And yet not all of our countrymen are able to afford to have them on their tables. For us to have economic stability, we will need to have food security. Addressing the gaps that affect the prices of rice will greatly improve the lives of our impoverished people. One cannot dream of prosperity after all if one has an empty stomach.”

The Quest for an Elusive Development Framework

Doy Santos aka The Cusp — Sat, 20 Nov 2010 02:22:41 +0000

After unveiling his strategy for unblocking investments in public infrastructure, the policy statement of PNoy was drawing flak from all sides. The statement concerned his proposed method for mitigating regulatory risk which was to compensate private investors for any losses caused by legal or congressional action preventing them from charging fees in accordance with their agreements with the government.

This was the statement of Rep Edcel Lagman leader of the opposition in the house:

Government contracts are not inordinately sacrosanct so as to be immune from judicial review by the Supreme Court and police power legislation by the Congress. It is beyond presidential prerogative to shield contracts from final court judgments and valid legislative enactments.

Recalling perhaps the power purchase adjustments that gave power generators the right to charge unmet demand to power users after the Asian Financial Crisis, party-list member Rafael Mariano issued this statement:

It’s hogwash … just a tweak [of the] past administration’s marketing sell-out strategy at the expense of the Filipino people.

The problem with the president’s policy statement goes even beyond these issues alone. Most of these projects have a life of between 15 to 30 years. His administration will only last for the next five and a half. Given the amount of time devoted to the pre-feasibility phase all the way to construction, most of these might still be in the pipeline when PNoy steps down. So even assuming that it is able to defy the two other branches of government, how can it guarantee protection for private investors for the remainder of these projects’ lives?

Second, since the public projects being listed for private participation is based on the principle of user pay per use, they are entirely dependent on the ability to charge an appropriate fee. The fact that many projects such as the Metro Light Rail Transit and Southern Expressway have not been able to do so puts into question the business case that justifies the investment in the first place. In other words, the market for such goods cannot clear at the prices desired by the buyers and sellers.

This puts into question the project feasibility assessment process. All sorts of regulatory and administrative risk factors have to be priced into the project cost. If the government cannot justify them in this manner then it should not put it up for investment to begin with.

On the other hand, if the government sees the need to subsidize these projects in the long run based on some notion of public benefit, then it ought to build projections of its future obligations in forward multi-year budget estimates so that they can be subjected to congressional scrutiny. Such transparency is still missing.

Third, the 10 or so projects in roads, rail, and airports being characterized as “shovel ready” to be bid out next year are in metropolitan centers. The jobs to be generated during their construction are going to be centered there. If the PPP’s are meant to be the engine for development, then it appears to be development highly skewed in favor of city residents.

The problem of joblessness in the countryside won’t be addressed, not in the immediate future at least, not with the initial list of projects. If ever, it will lead to greater migration flows from the rural places to the cities. Somehow, what gets lost in all of this is a development framework wherein the needs of public investment are prioritized based on some holistic model of sustainability.

Despite all this, investor appetite seems to be there. One cannot discount the legitimacy issue that hounded the Arroyo regime which has now been effectively dealt with by a smooth transfer of power. PNoy is right to strike when the iron is hot. Conditions in the global village do support his thrust in leveraging private investment for public use.

Perhaps instead of searching for some quixotic fix to deal with all the bottle necks to our development, we need to take a long hard look at the system as a whole. I am not advocating a shift to a parliamentary system, although that would deal with the problem of congressional oversight since the executive and legislative branches would speak as one. What I am advocating is a roots to branch rethink of our assessment process.

A framework is still lacking in the PPP program. It needs to be more clearly articulated to the public. Beyond that, a strategy for bringing more equitable public and private investments in areas where they are sorely needed, such as in innovation, regional and rural development and natural and environmental conservation, remains elusive.

As population grows, less rice is produced

propi — Mon, 11 Oct 2010 08:56:44 +0000

As population grows, less rice is produced
BY AMADO P. MACASAET
Malaya

In the past 20 years from 1990 to the first six months of the current year, the Philippines imported $8.232 billion worth of rice, equivalent to P362.208 billion.

This is equivalent to 21 per cent of the present general annual appropriation.

On the other hand, government price support for the Filipino rice producers during the period amounted to only P21.156 billion during the same period. The support is only six per cent of the total value of imports.

The clear trend, based on figures supplied by the National Food Authority is towards heavier imports in the coming years. This is borne out by the fact that the area planted to rice is hardly increasing in the face of a population that grows by two per cent or two million babies a year.

In 1991, the area planted to rice was 3.425 million hectares. By 2009, the area increased to 4.532 million hectares. But for the same period from 1990, or 19 years, 38 million people were added to the present estimated population of higher than 95 million.

The propensity to import clearly ignores the capacity of local farms to increase production as suggested by the figures supplied by the NFA.

The price of local palay, presumably with minimal government subsidy has gone down from P15.23 per kilo in January to P14.93. The average price for the 2000-2010 period is 14.67 per kilo.

The NFA official could not believe why the price of palay should go down even during a bumper harvest while importation continues to rise. What this involves is a basic question of workable agricultural policy, particularly for the staple cereal.

An official of the NFA told Business Insight that the palay price does not leave the farmers a decent profit. In a growing number of cases, he said, the farmers themselves become net consumers of imported rice.

This, he said, is the principal reason why the bulk of the population which used to be 60 per cent rural and 40 per cent urban, has been reversed.

While the area planted to rice has increased from from 3.425 million metric tons for 1991, increasing to 4.542 million MT in 2009, the yield per hectare has been erratic at best.

The figures supplied by the NFA show that in 1991 the yield per hectare was only 2.82 metric tons of palay. The increase to 3.59 million tons per hectare in 2009 was largely a result of a nominal expansion of area planted from 3.425 million hectares in 1991 to 4.532 in 2009.

The lack of government assistance to farmers does not increase palay yield although the area planted has increased.

The figures indicate that the government has failed to help Filipino farmers increase rice production by giving them not only price support but with other vital inputs such as irrigation, hand tractors and pesticides.

The other problem of increasing rice productivity is the inability of the farmers to use high-yield varieties. These are technology specific and therefore expensive.

Instead of helping the Filipino rice farmers acquire the expensive inputs, it opts to import rice from as far as Pakistan but the bulk of the cereal is largely imported from Thailand and Vietnam.

How Mr. Condom made Thailand a better place

Karen Ang — Fri, 01 Oct 2010 13:00:07 +0000

Mechai Viravaidya was recognized by The Bill & Melinda Gates Foundation today with a $1 million award for confronting “taboo subjects like sex and HIV/AIDS directly in order to save lives." Photo: AFP/Getty

I think the Philippines should take a closer look at neighboring Thailand. They used to have a 3.3% growth rate, much worse than our 2% growth annually. Mechai Viravaidya, or Mr. Condom of Thailand, shares in this TEDxChange video how Thailand was able to raise the Thai standard of living by using population control as the first step. Keep in mind that the majority of Thais are Buddhists but still, the same can be done here if we will finally separate Church from State.

Thanks to Krishna for sharing with me this video.

Asean lists down causes of failure to meet MDGs

propi — Fri, 24 Sep 2010 05:35:27 +0000

Asean lists down causes of failure to meet MDGs
Written by Estrella Torres
Business Mirror

LINGERING conflicts, fragile political situations and armed violence in Southeast Asia hamper the achievement of the Millennium Development Goals (MDGs) among the members of the Association of Southeast Asian Nations (Asean).

Dr. Surin Pits wan, Asean secretary-general raised the need to address these concerns of members, particularly developing countries like the Philippines, at the sidelines of the United Nations Review Conference of the MDGs in New York City.

Surin met with Timor Leste President Jose Ramos Horta; officials of the Mo Ibrahim Foundation and of the World Bank and the United Kingdom, to identify programs to raise the importance of peace-building and state-building in achieving the MDGs, according to a briefing statement issued by the Asean.

Indonesia, Myanmar, Laos, Cambodia and the Philippines are having difficulty complying with the MDG commitments due to the lingering conflict and fragile political conditions in those countries.

In March 2009, Asean members agreed to align to the attainment of MDGs the road map to establish a single market by 2015.

The signatories to the MDG compact signed in year 2000 also set year 2015 as the end-year for compliance with the eight goals.

The declaration “reflects Asean’s serious commitment to reducing poverty and inequality and improve the standard and quality of life of the peoples of Asean,” Surin said

The MDGs are time-bound goals that aim to halve global poverty incidence by 2015 by eradicating extreme poverty and hunger, achieving universal access to primary education, promoting gender equality and empowering women, reducing child mortality, improving maternal health, combating HIV/AIDS, malaria and other diseases, ensuring environmental sustainability and developing a global partnership for development.

Asean signed an assistance program with the European Union to develop statistical reports using the MDG indicators to support regional programs aligned to achieving the MDGs.

Infrastructure woes hinder MDGs

propi — Fri, 24 Sep 2010 05:28:35 +0000

Infrastructure woes hinder MDGs
Written by Cai U. Ordinario
Business Mirror

DESPITE the country’s efforts to increase social spending through programs like the conditional cash-transfer (CCT) program to meet the Millennium Development Goals (MDGs), the Asian Development Bank (ADB) believes that addressing infrastructure constraints will still hold the key in achieving the goals by 2015.

In a statement, ADB president Haruhiko Kuroda said developing countries like the Philippines must address basic infrastructure constraints to achieve the MDGs in five years.

Kuroda said many areas in developing countries still do not have electricity, all-weather roads and other basic infrastructure. These limit access to health care and discourage children from completing their education.

He said the region is lagging in the targets for basic sanitation, infant mortality, maternal health, hunger and environmental improvements, and reducing greenhouse-gas emissions.

“Less developed countries, or those suffering from conflicts or disaster, will need more regional help to make progress, and the Asia and Pacific region must step up cross-border cooperation in trade, investment, knowledge and technology, to help bridge gaps in resources and capacities,” the ADB added.

Addressing these concerns is National Economic and Development Authority (Neda) Director General
Dr. Cayetano Paderanga, who delivered the Philippines’ statement during the High-Level Meeting on the Millennium Development Goals in New York City.

Paderanga, who is also the Socioeconomic Planning secretary, said while the Philippines made considerable strides in meeting some of the MDGs, like cutting child mortality, and malaria and tuberculosis incidence; increasing access to sanitation and safe and potable water; and providing equal education for girls, there is still a lot to be done.

The Neda chief said the measures that will be implemented by the national government to help achieve the MDGs will be included in the Medium-Term Development Plan for 2010-2016.

He said the MTDP will make sure this growth is inclusive and can help protect the vulnerable by ensuring access of every Filipino to quality health, education and employment opportunities.

These, Paderanga said, will be done through an appropriate mix of physical and social infrastructures, and by strengthening social safety nets, like CCTs and universal health care.

“Despite the gains attained in the last decade, we need to push ourselves more to meet the MDGs, particularly where we lag behind. Moreover, the Philippine scenario is characterized by wide disparities. Our latest progress report also shows that climate change poses a threat to the achievement of our targets. The population above the poverty threshold is declining as a result of low capacities to cope with the effects of shocks leading to more ‘transient poor,’” Paderanga said in a statement.

He urged development partners to also keep their promise of sharing a portion of their gross national income (GNI) to developing countries for MDG achievement. The United Nations official development assistance target is set at 0.7 percent of GNI.

“Excellencies, as we enter the last stretch, the Philippine government is exerting all means to deliver on its promise to realize its MDGs, not just as an international commitment but because our people demand it. Let us remember that each and every one of our citizens deserves a life of quality, meaning and dignity,” Paderanga said.

For its part, the Manila-based ADB said it is targeting increased support for basic infrastructure, such as roads, power and sanitation, which are crucial for meeting MDGs.

It also intends to scale up assistance for education, and for environmental improvements, including the use of clean energy, where ADB investments have grown to more than $1 billion a year, and which are targeted to double to $2 billion by 2013.

Kuroda added that countries in the Asia and the Pacific region, which is home to three-fifths of humanity and two-thirds of the world’s poor, represent the world’s best hope for achieving the MDGs by 2015.

“With more than 500 million people having overcome poverty since 1990, the target for reducing extreme income poverty is in sight. The region is also likely to achieve near universal primary school enrollment by 2015, attain gender parity in education, meet the target on access to safe drinking water, and halt the spread of deadly diseases such as TB and HIV,” Kuroda said.

The country’s fourth progress report on the MDGs showed it had a low probability of achieving indicators—such as increase elementary education net enrollment rate, elementary education cohort survival rate, elementary education completion rate, reduce by three quarters maternal mortality, universal access to reproductive health, halt HIV prevalence among 15 year olds, and provide comprehensive correct knowledge about HIV/AIDS to 15 to 24 year olds.

The report also showed the country had a medium probability of achieving the indicators on halving the proportion of population below the poverty threshold or P15,057 per year per person, halving the prevalence of underweight children under five years old, halving the proportion of households with per capita intake below 100 percent dietary energy requirement, universal access for the proportion of the population with advanced HIV infection to antiretroviral drugs, and halve the proportion of the population with access to safe water.

The indicators also showed the Philippines had a high probability of achieving of halving the proportion of population below the food threshold or P10,025 per year per person, all the indicators of Goal 3 which pertained to gender equality and women empowerment, indicators under Goal 4 of reducing child mortality, the malaria morbidity rate, the malaria mortality rate, the tuberculosis case-detection rate, tuberculosis-cure rate, and the proportion of the population with access to sanitary toilet facilities.

The MDGs are a set of eight goals, 22 quantitative targets and more than 60 specific indicators meant to serve as a focus for international and national development policy.

The first seven goals are concerned with outcomes, identifying the progress toward certain standards of human welfare and development that should be achieved globally and nationally by 2015. The eighth goal is concerned with “global partnership for development” to support the realization of all the goals.