OPINION: The vicious circle of rent-seeking in the Philippines

Edmund Tayao

Posted at Dec 09 2019 03:38 PM | Updated as of Dec 13 2019 05:59 PM

We always complain about governance, about rent-seeking, of the disgusting service we get despite paying good money in practically every service in the country, but we don’t go beyond complaining. There may be attempts to understand the situation, but for some reason, none of these attempts have led to any vigorous purposeful effort to change the situation. There are efforts to change the situation, but the efforts always seem to end before it could even start. Then there are efforts to change but the changes being pursued are just on the surface or palliatives, or worst, more of retrogression or a masquerade of a reform.

It's not that we haven’t pursued any needed reform at all but none of these reforms seem to have worked. The 1987 Constitution itself is a remarkable reform act itself with the many radical provisions introduced if only to prevent another dictatorship. That’s all there is to it, however. The age-old, colonial political and economic structure was retained and so none of the provisions were implemented in the way they should be implemented.

While we continue to bemoan the state of politics and governance in the country, there had actually been several notable political reforms already undertaken since. Most notable of these are the 1991 Decentralization law or Local Government Code and the Party-list System Act passed in 1995. I have written so much on decentralization and the LGC, all of which argue that so much were accomplished as a result of decentralization, with so many local government units (LGUs) proving that the principle of subsidiarity is indeed true, that it is right to have them responsible for their own development. Still, so much remain wanting, due largely to the vacillating support to decentralization plus the sustained wrenching effect of clientelistic politics.

Then there is this unique invention of party-list representation we have. If we review the deliberations in the 1986 Constitutional Commission, the proposal was to expand representation and allow “sectoral” representation through a Proportional System of Representation (PR System). Just to emphasize, sectoral representation is the objective but the means or mechanism to achieve it is through a PR system. Of course, this was interpreted to be literally “sectoral” representation and the needed mechanism to realize this, the PR system, supposedly the subject of the legislation, was lost in translation.

The difficulty of legislating a PR System is understandable as it is technical and requires deliberate thorough understanding. I remember the Consultative Committee spending so much time making sense of it with several lectures and discussions inviting experts to help us understand it carefully, and therefore a lot of sessions before we could get into drafting and voting on the provisions; but that is precisely why we have “experts” in electoral law and politics who could be asked to assist in coming up with the right legislation. Those who drafted the party-list law could have done the same but then again, the rest is history. And now, it is a feature in our political system that is difficult to undo or reform.

And there are more reforms that were put forward. And I quote a part of my chapter in a book recently published:

“More than these largely political reforms, there were industry-directed reforms. Reforms were also introduced to open up the telecommunications industry, ending the monopoly of PLDT, allowing the entry of other players in as early as 1989, the signing of E.O. No. 59 in 1993 that prescribed policy guidelines for Compulsory Interconnection of Authorized Public Telecommunications Carriers. This culminated with the enactment of R.A. 7925 or the Public Telecommunications Policy Act of the Philippines intended to provide a “healthy and competitive environment… while maintaining affordable rates” (Art. II, Sec. 4f). Another reform measure worth noting is R.A. 9136 or the Electric Power Industry Reform Act (EPIRA) of 2001 intended to achieve reliable and competitively priced electricity. Most recently, with what essentially could complete the 2 previous economic and industry reform measures, Congress passed R.A. 10667 or the Philippine Competition Act aimed at achieving efficiency of market competition.”

Just like in telecommunications and electricity, we also face the same problem of unreliable and ripped-off price in water services, an issue that’s been hugging the headlines recently. R.A. 8041, “An Act to Address the National Water Crisis and For Other Purposes” in 1995 and R.A. 9275, “An Act Providing for a Comprehensive Water Quality Management and For Other Purposes” in 2004 were enacted. Both laws, as rightly titled, are supposed to address the recurring water crisis and therefore provide for better service to the public. Needless to say, we still face the same problem of poor and remarkably more expensive service in water, the same story as far as all of the above-mentioned public utilities. We have crafted so many good laws but we always fail in implementation.

There are two reasons why implementation has always been a weak spot. The first is the most obvious: “reform” laws are either watered-down, requiring considerable interpretation to be implemented appropriately or too circumscribed that (whether intended or not) fails to consider its systemic significance. The second is the problem of administration, or the capacity of government to implement these reform legislations. Reform laws, especially on public utilities or industry-directed reforms ultimately depend on the capacity of the state to regulate. Without doubt of course, this is where it is most wanting.

Politics is the culprit, the system of representation and administration that we have which has remained since the colonial period. The same political and economic interests are in place that no matter what measure is undertaken, it is bound to fail. It is so well-entrenched that while we are convinced what is needed is a system change, we still insist on piecemeal reforms. There is now a growing feeling of exasperation that many, rightly or wrongly, have started to call for a “revolution”.

The Philippines is not the only country that had to contend with this colonial relic of clientelism and rent-seeking. Among the many studies undertaken, Joe Studwell’s book “Asian Godfathers” is most notable as it explains how Hong Kong and most of Southeast Asia share the same story of oligarchs benefitting from a weak State diverting so much wealth for the benefit of the few. Business arrangements are remnants of colonial history, the Dutch in Indonesia, and the British in Malaysia, Hong Kong and Singapore. The difference between these countries and us is that they have since strengthened their public institutions, perhaps amounting to freeing their state from particular interests. Sadly, we have yet to do just that.

Basically, we can learn from the book that the State is a creation of the colonial regime and thus designed only to extract resources not to bring about development. Only a few benefit from this arrangement as these few, familial interests served as agents of the colonial government. With the colonial master out of the picture, these few have come to be the masters themselves. Unless we do away with this colonial, political and administrative structure, we can never expect to transcend the vicious circle of underdevelopment.

This is what makes President Duterte a better leader than many of our previous presidents. Even before he officially cast his lot in the last presidential elections, he was already talking about the need for systemic reforms. A number of times, he described the debilitating system in government. A number of times, he blustered about the disappointing state of public utilities. Most recently, of course, he pointed to the water concessionaires scathingly, that their deal with the government is onerous. These are steps in the right direction but they have to be sustained and systemic.

As the foregoing has outlined, there had already been countless attempts to deal with the problems with public utilities, the theme of governments since the end of the dictatorship or close to 34 years now. It has been a dismal failure as each President, well-meaning as they are, could not act on the tough call on their own. And this is where the rub is: what the President wants done may not be as how it will turn out to be as it will then depend on other people as he could not do it by himself. 

So we are back to square one as it is in a vicious circle, unless reforms are sustained and systemic. There is still time but we have to act fast. If we don’t, the question we have to ask and answer is: what happens after he is no longer President? Will we have better chances at systemic and sustained reforms? I’m sure, of course, there will be a bevy of chorus groups on either side yelling yes and no. Our tragedy is, despite the supposed difference, they are all the same in acting only to preserve the status quo.

(The author is the Executive Director of the Local Government Development Foundation and a professor of Modern Local Governance at the Ateneo School of Government.)

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