Philippine economy: Full deregulation or government control?
By Gina Mission

A meeting of the minds: Jaime Augusto Zobel , Fidel V. Ramos,
Gloria Arroyo and Roberto de Ocampo.
Photo collage by CyberDyaryo

eregulation or government control?

___This was the guide question with which the organizers of the recent Asia Society’s 11th Annual Conference, entitled Asia’s Choice: Open Markets or Government Control? first thought of proceeding. Held at the Shangri-La Hotel in Makati, the conference gathered hundreds of delegates from different countries.

___The answer, however, turned out to be more complicated than a categorical "one or the other." As former President Fidel Ramos said in his keynote address: "In public policy, in our time, the question is seldom posed as starkly as that. In real life – in the lives of the Asian states and the Asian peoples – the choice is often not ‘either-or’ but ‘more or less’ and ‘some of both’."

___How much government control should there be in this age of globalization? should have been the more accurate and responsive question, speakers said. They agreed that state and market are symbiotic. One needs the other to carry out its purpose. Quoting American economist Robert Heilbroner, Ramos said: "The realm of capital cannot perform its accumulative task without the complementary support of the State."

___Jaime Augusto Zobel de Ayala, President of the Ayala Group of Companies, who spoke on Restructuring Industries and Corporate Governance, said that the Asian crisis has brought the region to an era when businesses can no longer afford to be "parochial" in their operations.

___"Whereas in the past one could just rely on one's own way of doing things… we have entered a period where capital is scarce, bank financing is stringent, resource allocation requires strict justification and our widening stakeholder base will be increasingly demanding," Zobel said.

___Consequently, restructuring Asian industries and companies, according to him, is more than just a process of cost-cutting, debt restructuring or consolidation. It involves as well systemic changes and tougher regulations in the way companies are governed and managed.

___But Asian crisis or no Asian crisis, Vice President Gloria Macapagal-Arroyo, said, the long-term challenge for the Philippines is the eradication of poverty.

___The socio-economic challenge of eradicating poverty, she added, was further compounded by the Asian currency crisis and by the incidence of droughts and floods caused by the El Niņo and La Niņa phenomena which have affected several agricultural areas outside the National Capital Region. "The growth of the Philippine economy significantly slowed down due to the combined assault of these financial and meteorological crises," she said.

___As a result, Arroyo said, there were dislocations in various sectors, bringing about unemployment, lower wages and less real incomes, less food on the table, less funds for education and health care and more limited access to the basic necessities of life. The number of establishments and workers affected by closures and retrenchments increased and the financial crisis resulted in a constrained fiscal environment leading to substantial budget reductions for social services.

___"Of the establishments that resorted to closure due to the Asian crisis, the service sector was dealt the heaviest blow. It accounted for 55 percent of the closures, followed by the manufacturing sector which accounted for 35 percent. A majority of these firms were small enterprises employing less than 20 workers," Arroyo added.

___For the government, Arroyo said that the Asian slump has meant less resources, less revenues and a reduced capacity to deliver vital social services. In response to the crisis, growth targets were scaled down and belt-tightening measures were adopted. "The Asian crisis is expected to continue to influence the social expenditure program, first, through the inflationary pressures and peso devaluation, tending to lower the purchasing power of social sector budgets and increase the costs of social services; and second, through budget cuts. The cuts in government expenditures and the delays in their releases have affected the social service sector," she added.

___In her conclusion, Arroyo said: "What has become increasingly clear is that those of us in the government sector must join hands with the private sector to ensure social progress."

___But just how should one sector, in joining hands with the other, come in the broader picture of a country’s economy?

___Going by the premise that no country can do away with globalization, former Finance Secretary Roberto de Ocampo said that the government’s role should be to provide for the business sector an environment that is conducive to "development." Other speakers joined him, claiming that for an economy to compete in the global market, it should open itself with liberal investment and business policies.

___Speaking on The Philippine Response: Deregulation, Liberalization, Privatization, Rep. Manuel Roxas II, said that it is for the same reason that he filed or co-authored bills which seek to liberalize certain industries. Among these are the liberalization of the National Power Corporation, the retail trade sector, the manufacturing and service sectors, real estate, the airline industry, telecommunications, water, banking, the oil industry, infrastructure, financial sector, agriculture, as well as the sale of government assets.

___Amidst the increasing public clamor against government’s liberalization policies, Roxas categorically said that he is totally for trade liberalization as it is "the only way to survive" in the global market. Claiming that the Asian financial crisis is over, he said that majority of the Filipinos are in the rural areas who don’t engage in peso-dollar transactions and are therefore not affected by the crisis.

___Critics, however, said that Roxas’ remark is "so myopic, if not totally inaccurate." "Everybody knows that most industry players will be gobbled up by foreign competition once we open up all these industries," said Jimmy Regalado, Secretary General of Katapat, a membership organization of retail trade operators, in an interview with Cyberdyaryo. "But instead of the government protecting us, its people, what’s happening is that they are protecting foreign interests," Regalado added.

___While Regalado and his group are not entirely against the "symbiotic relationship" of government and the business sector, they also expressed frustration that the former’s role should be limited to repealing its protective policies only. Government’s role, according to anti-liberalization activists, should be to see to it that Filipino entrepreneurs and businesses will survive in the market. As Regalado said: "Government should make sure that there is capital inflow, that there is a harmonious relationship among business operations, and that there is no monopoly."

___Yes, the question shouldn’t be whether the economy should be liberalized or be totally controlled, but how the "balancing act" between these two extremes can be achieved for the benefit of the people. As President Ramos said: "Like open markets, democracy will thus also be part of the spirit of the new age – as ordinary people claim their right to take part in and benefit from the economic and political life of national society."

CyberDyaryo | 1999.03.11