Aquinomics: Hopes up, infra down

One year into the Aquino administration, much improvement is needed to support investor confidence like speeding up public-private partnership (PPP) projects and achieve government targets, economists said.

The Aquino administration inspired business confidence, resulting in increased private investment, according to five economists interviewed separately by the Inquirer.

But the economists said public spending and timely interventions must support business confidence or it would not translate into widespread economic gains.

Cielito F. Habito, a former socioeconomic planning secretary, said on the sidelines of a recent Inquirer forum that “Aquinomics” seemed good enough in the first three months of 2011 using an annualized quarter-on-quarter gross domestic product (GDP) growth as yardstick.

GDP rose 1.9 percent in the first three months of the year from 0.5 percent and 0.3 percent in the two preceding quarters.

An annualized quarter-on-quarter comparison takes away the so-called base effect from the first quarter of 2010, which Habito said was “warped” by election spending.

Using a year-on-year comparison, the first quarter GDP growth, however, slowed to 4.9 percent from 8.4 percent in the first quarter of 2010.

Habito attributed the good quarter-on-quarter GDP performance to aggressive private investment, which he said was fueled by investor confidence in Mr. Aquino and his administration’s drive for corruption-free and inclusive growth.

Slow-moving PPP

Yet, despite the gains, one particularly sticky issue is that PPP projects, a cornerstone of the administration’s strategy, are perceived to be moving slowly, Habito said.

For investor interest to be sustained, he said, the government must also invest in infrastructure even as it continues to push further reforms to curb red tape and corruption.

Gilbert M. Llanto, an economist with the Philippine Institute for Development Studies, a government think-tank, said the administration “needs a lot of improvement in performing the task of market coordination.”

Concrete interventions

The challenge lies in translating good ideas in the Philippine Development Plan into concrete interventions and measurable outputs, such as tax policy and industrial policy, Llanto said.

Cid Terosa, an economist from the University of Asia and the Pacific, said it was too early to tell if the country was better off than a year ago.

Terosa said the economy and economic management had been “good” so far, but from a scale of 1 to 10, he gave the Aquino administration a score of 7.

“A big letdown would be the seeming lack of authoritative actions on government officials who have not performed up to par. Also the slow realization of PPP projects is a letdown,” Terosa said. “Yes, I am optimistic but governance has to be stronger and more decisive.”

Arsenio M. Balisacan, dean of the University of the Philippines School of Economics (UPSE), said the economy was not doing too badly despite major challenges.

Balisacan said the administration sometimes seemed “distracted” with trying to clean up controversial deals and projects that came about in the previous administration.

However, this cannot be helped as the Aquino administration wants to drive home its anticorruption crusade, he said.

As for the seemingly slow pace of PPPs, Balisacan said it was understandable for the Aquino administration to be careful.

Sin taxes

Balisacan said Mr. Aquino should seriously consider raising taxes or focus on revenue measures like sin taxes that do not really hurt the poor.

The revenue raised should be promptly spent on infrastructure, rural health and education.

The UPSE dean said incentives for companies must be rationalized so that growth areas such as Mindanao, where political and security risks need balancing, would benefit instead of established growth areas like Metro Manila.

“Incentives are not serving their purpose if we’re giving them to companies that would otherwise invest or expand, anyway, such as BPO (business process outsourcing) firms. We should give incentives in industries that are just starting out, or as growth boosters in areas with high risk, such as Mindanao,” Balisacan said.

He said companies like La Frutera Inc. of Senen Bacani, which invested in the Autonomous Region in Muslim Mindanao, must be encouraged because they improve the livelihood and confidence of residents in the region.

“We don’t need to give incentives for companies putting up more high-rise buildings in Metro Manila under the label of ‘economic zones,’” Balisacan said.

Joblessness serious

The appropriate rating for the Aquino administration at this time is “NI (needs improvement),” said Benjamin E. Diokno, an economist with the University of the Philippines, in an e-mail.

“After a year in office, the economy is slowing, joblessness remains serious, and poverty continues to deepen. Of course, it is unfair to expect him to solve these decade-long problems within a year. But after a year in office, Mr. Aquino has yet to unveil his vision and concrete road map of how he will solve these problems,” Diokno said.

He said that while the budget was approved on time, the administration failed to spend efficiently and speedily to perk up the economy.

Diokno said he was not optimistic that Mr. Aquino would meet the target of an average 7 to 8 percent economic growth during his entire term.

The economist noted that the expansion of the pork barrel system was inconsistent with the Aquino administration’s anticorruption crusade.