"I hope the new governor would aggressively push economic growth, promote financial inclusion, and for once, really reduce poverty."
In his 41 years in government, the economist Benjamin E. Diokno, Ph.D., has been guided by one powerful oath of citizenship—the Oath of Athenian, engraved prominently in the lobby of Maxwell Hall, the building that houses the Maxwell School Citizenship and Public Affairs of Syracuse University where Ben studied for his Ph.D.
The oath captures Ben Diokno’s own attitude when it comes to his work in government:
“We will ever strive for the ideals and sacred things of the city, both alone and with many; we will unceasingly seek to quicken the sense of public duty; we will revere and obey the city’s laws; we will transmit this city not only not less, but greater, better and more beautiful than it was transmitted to us.”
When the Palace announced that Ben Diokno is the new governor of the Bangko Sentral ng Pilipinas, my heart leapt with joy. Finally, I said to myself, here is a public servant who can change, drastically, the face of central banking, the fate of banking, and the future of the economy.
Enthused Finance Secretary Carlos “Sonny” Dominguez: “Dr. Benjamin E. Diokno brings together that elusive combination of seasoned technocrat and professional manager.”
“He knows the inner workings of government and industry, and has repeatedly demonstrated the ability to run a large, complex organization with intellectual leadership and a steady hand. All of these will contribute to his successful stewardship of the Bangko Sentral ng Pilipinas as its next governor and chairman of the Monetary Board,” added Dominguez who is instrumental in convincing President Duterte in naming Diokno head of the Philippine central monetary authority, one of the oldest central banks in Asia.
Presidential Spokesman Sal Panelo said Diokno “has competence and has integrity.” Panelo recalled that Diokno spearheaded investments in growth-enhancing infrastructure programs and innovations, inequality-reducing social services, and peace-enabling initiatives. “A job well done indeed, and expertly at that,” Panelo gushed.
I hope Ben can repurpose BSP to focus on economic production, employment and productivity and not be bogged down by the tedious minutiae of monitoring daily forex and inflation rates which is missing the forest for the trees.
Under the original central bank law, Republic Act 265 of Jan. 3,1949, the Central Bank of the Philippines had three original functions: Monetary stability, peso convertibility, and promoting a rising level of production, employment and real income.
Its focus on economic growth and employment made the central bank the best in Asia and the Philippines the second-richest country in the region, after Japan, for three decades.
From the late 1960s to the early 1970s, Philippine exports were ten times those of Taiwan, South Korea, and Hong Kong. Filipinos were the No. 1 tourists of Hong Kong. The rich Filipinos secured their maids from Hong Kong and Taiwan. The Philippine banking system became the biggest in Southeast Asia. Today, it is the smallest.
Under RA 7653 of June 1993, the third and to me the most important function which was promoting a rising level of production, employment and real income, was unhappily deleted.
Removing the third function made the BSP governors researchers and bureaucrats who set easy inflation targets like they were picking guavas from a tree—easy (because you pegged an inflation target of between 2 and 4 percent, can you imagine a target where your maneuver room is 100 percent and yet still miss it?). The BSP and spent billions defending the peso uselessly making the BSP the biggest money-losing enterprise. You know where BSP passed on its colossal losses? To us taxpayers, of course.
Another function where the Central Bank failed is balanced and sustainable growth of the economy.
Half of Filipino household consumption, especially by the poor, is food. Some 12 million are either jobless or partly employed. Building industries is still the best way to employ people.
Yet, agriculture has been neglected. Its share of GDP is 11 percent. Industry is a joke. We don’t produce anything much, except babies.
Industry’s share of the economy is 31 percent of GDP.
The biggest share is Services, 57 percent, thanks to call centers and business process outsourcing, which is basically saliva or sweat, producing dollars.
Ben Diokno comes at a critical time for BSP. There is a new central bank law.
RA 11211 gives BSP awesome powers making it superior to the Supreme Court, the Department of Justice, the Securities and Exchange Commission, and the Philippine National Police combined.
If you are a bank and the BSP doesn’t like you, the BSP can make inspections of your papers and premises without the benefit of a subpoena (the once every 12 months limit has been removed), penalize you and your officers (the fines have been increased ten-fold and imprisonment doubled) on the say-so of a whistleblower or informer (who will be paid up to P1 million), and worse, padlock or shutter your bank without due process. Unlike before, BSP is not now even obligated to pay your bank’s liabilities following closure. So you lose your bank and you lose your shirt because of loans you must pay.
If you sue BSP officials and personnel, well, the BSP is now funded and empowered to defend its people, the legal fees charged to taxpayers. It will be so difficult to convict them because the threshold of proving criminal liability has been raised so it is not even applied to hardened criminals.
And yes, BSP people can now borrow from the banks they supervise, provided they disclose this fully to the Monetary Board.
I hope Governor Ben Diokno will use his and BSP’s vast powers not to go after the banks in a power trip, but to aggressively push economic growth, promote financial inclusion, and for once, really reduce poverty.
In 2015, Asia and the rest of the world achieved their poverty reduction target of 10 percent. The Philippines did not.
Perhaps the ancient Athenian Code can provide the answer, to make the Philippines “not only, not less, but greater and more beautiful than it was transmitted to us.” For indeed, the Athenian Code mandates. “We will never bring disgrace on this our City by an act of dishonesty or cowardice.”