There is another challenge President Rodrigo R. Duterte must now confront, other than crime and drugs—the Philippine economy. The latest survey among some 200 investors from the European Union says that the Philippines is trailing its South East Asian neighbors in terms of competitiveness. Vietnam and Cambodia have become the destination of choice for investors simply because there is greater ease of doing business there. The Philippines received the lowest ratings.
This is sad because the same survey showed that the Philippines was rated at the top in terms of availability of skilled workers at competitive compensation levels. What did the investors say were the reasons they avoided the Philippines then? They ranked the country lowest in terms of incentives for business and in the stability of government and political systems. They also cited the poor quality of infrastructure, less-than-friendly regulatory regime and customs procedures, and the administrative costs for business. Setting up businesses in the Philippines is indeed daunting. An investor has to contend first with restrictions in foreign ownership as embodied in the Philippine Constitution itself. The daring ones venture with Philippine partners giving the Filipino partners the bigger share in equity even if the foreign partners were the ones who poured in the company’s entire capitalization. Next, they have to grapple with more number of stages in setting up a company, eating up months, compared to other countries in the Asean where it only takes days to start up a company.
What is even more unfortunate is that in the 1960s, the Philippines was one of the most progressive countries in Asia. It was next only to Japan. Foreign students would come here to study and job seekers from our Asian neighbors such as China and India would come here to work or start a business. A paper by Romulo Virola, Candido Astrologo and Patricia Anne Rivera titled “Disturbing Statistics: Philippines compared to our Asean neighbors” said that based on estimates by the World Bank and the United Nations, the Philippines flourished in the 1960s but declined steadily due to a devastating confluence of factors ravaging the core of our national strength. The paper dealt with statistics but did not specify the causes for the decline of the Philippine economy.
In my mind, the primary cause is our political system which makes way for instability and corruption, turning away potential investors. Our too-centralized presidential-unitary system of government has hindered inclusive national development. The poverty level in the Philippines has hovered between 25 and 27 percent in the last two decades. We have earned the notoriety of being the only country in Asia which has failed to cut in half its poverty level in the last 25 years, that is, from 1990 to 2015.
Take a look the following empirical data: The 15 most prosperous nations in the world are Norway, Switzerland, Denmark, Sweden, Canada, Australia, Netherlands, Finland, Ireland, the USA, Iceland, Luxembourg, Germany and the United Kingdom. What do they have in common? They are either in a federal-parliamentary system of government or unitary-parliamentary. The least corrupt countries of the world are basically the same, namely: Norway, Sweden, Finland, Denmark, Netherlands, Germany, Singapore, Canada and New Zealand. These countries, again, are either in a federal-parliamentary form or unitary-parliamentary form of government.
The Philippine system, on the other hand, is unitary-presidential, characterized by an overly centralized form of government. Power and financial resources are concentrated in the central government while barely anything is given to the local government units. Thus, the regions outside of Metro Manila have failed to develop, create jobs and provide economic and social services to their constituents.
It was President Duterte’s promise in his first State of the Nation Address that the processing of government permits and licenses will be shortened. He also said that he wants to shift the system of government to a federal form to ensure inclusive growth. A hard look at the antiquated economic provisions of the Constitution must be done too to make us competitive. The track of economic and political reforms via constitutional change must be pursued alongside the elimination of crime and drugs. If Mr. Duterte succeeds in both, he could claim a place in Philippine history never before achieved by any Philippine president.
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