Tuesday, 9 February 2010

Challenges facing the new president

Manny Villar
The Entrepreneur
Business Mirror
http://www.businessmirror.com.ph/index.php?option=com_content&view=article&id=21567:challenges-facing-the-new-president&catid=28:opinion&Itemid=64

I AM taking temporary leave from this weekly column, in line with the policy and rules on campaigning being implemented by the Commission on Elections (Comelec). And so this will be my last piece before voters go to the polls to choose the next president of the Philippines.

I am presenting the challenges that the new Chief Executive of the land will face beginning in the second half of 2010, particularly with respect to the economy.

True, the prospects for growth for the Philippine economy are a lot brighter this year than in 2009, when it closed below 1 percent in terms of gross domestic product (GDP).

Standard & Poor’s (S&P) has projected that the Philippine economy will grow by 3.7 percent this year, a significant jump from the drowsy 0.9-percent growth last year, and higher than the government’s target of 2.6-percent to 3.6-percent growth.

S&P cites sustained growth in domestic consumption, fueled by remittances from overseas Filipinos, as one of the country’s strengths, which offset the impact of the decline in exports.

The government is now considering raising its target for GDP growth for 2010, as exports have started to recover, and remittances continue to increase. Add to that the projected recovery of the global economy.

That’s the good news, and that may help the next president in coping with what I consider as the most serious and immediate challenge facing his administration: the fiscal deficit.

Official figures have not been released, but estimates point to a deficit of more than P290 billion for 2009, a historical high, following the P210.7-billion deficit recorded in 2002.

The huge gap between revenue and spending has compelled the government to postpone its goal of balancing the budget to 2013 (the original target was 2008) under the Medium-Term Philippine Development Plan.

On the surface, the easy and quick way out of the fiscal hole is new taxes, but that approach is both narrow-minded and counterproductive and, in the end, self-defeating. And the reason is that raising taxes deters new investments and discourages economic activities, which, in turn, reduce tax revenues.

I don’t want to say categorically that there should be no new taxes. However, if I will win the presidency, I will consider raising taxes as a last resort. That is to say, I will exhaust all options to maximize collections from existing taxes before I will even consider imposing new ones. This is a commitment I know I can keep, and I will.

Another serious challenge facing the new president is increasing unemployment reported at 7.1 percent last October. The actual figure is probably higher, and I also believe that underemployment is even bigger.

I mentioned the fiscal-deficit problem first because solving it will provide the government the resources to tackle the unemployment and underemployment problem. For with more revenues the government can be more aggressive in stimulus spending—which creates jobs directly and encourages private-sector activities that also provide
employment.

While I mentioned that our growth prospects, in general, are brighter this year than last year, agriculture, which feeds majority of our people, is still reeling from the impact of last year’s disasters. Weather experts are predicting the El Niño phenomenon this year, which means water shortage in contrast to last year’s massive floods.

The next president must move fast to help farmers recover from their losses caused by typhoons Ondoy and Pepeng (in a previous column I suggested direct cash transfers to farmers who lost their crops) and to prepare for the anticipated drought. The first task should be to repair agricultural infrastructure that were damaged or destroyed, like irrigation systems (which will also build up water supplies to cope with El Niño). As much as possible, the manpower requirements for these activities should come from the rural areas, to generate income for farmers while waiting to harvest new crops.

Next, we have the elections during which we will be doing an experiment on a new system: automation. Criticisms and concerns have been raised since the start of the bidding for the company that will install the facilities for automated elections. Actually, automation is limited to counting of votes and transmittal of results, as voters will still use pens to choose their candidates from the ballot.

The latest, of course, is the reported shipment into the country of 5,000 jamming devices that could be used to prevent electronic transmittal of election results. I have heard assurances from the Comelec, the contractor for the election automation and telecom providers that they will be able to cope with this threat.

I hope they do, and that the elections will be clean, both in the national and local levels. Otherwise, it will be a big headache for the economy. Worse, it may lead to a political crisis.

Then, we have the Mindanao problem, not only the insurgency, but also the peace and order situation in southern Philippines.

Add to that a skeptical bureaucracy. Many of the officials and employees of the government will adopt a wait-and-see attitude, and will be wary of the new CEO. That’s understandable. So I believe the new president must promptly move to relay his agenda to the bureaucracy and enlist their cooperation and support toward that agenda.

Traditionally, it is said that a new administration enjoys a honeymoon before it settles down to work. This time, the honeymoon may just be a period during which businessmen give the new president the benefit of the doubt.

Considering the serious challenges and the magnitude of the tasks facing the government, I don’t think the new president will have a honeymoon. He must start working as soon as he takes his oath of office.

As I said before, there’s no time for on-the-job training. The new president must hit the ground running on Day One.

So, let’s choose our country’s CEO very well.



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