Politics key to Arroyo’s choice of economic team
By Lala Rimando, abs-cbnNEWS.com/Newsbreak | 07/26/2009 1:28 AM
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The Philippine economy could not have asked for a better leader than an economist during the boom and bust in the past almost 9 years. President Arroyo, however, put on her politician hat more often, setting aside several economic reforms and promised results during her reign.
Her choice of economic lieutenants highlighted this.
She started well. When she assumed power in 2001, the members of her economic team are sober men with international reputations. Led by Harvard-trained investment banker Jose Camacho as her first finance secretary, the Arroyo economic team scoured the world to charm investors to pour money into the Philippines. They started with themselves. They projected a cohesive team who were pulling the rope in the same direction.
Fast forward to 2009. The economic team is transparent about how they are far from being united.
As the impact of the global economic recession unravels, fiscal targets have been adjusted 3 times since the start of the year. Each time, economic planning secretary Ralph Recto and budget secretary Rolando Andaya contradicted the optimistic goals that Teves announced.
Outsiders cannot help but notice. A risk analyst from the US who was trying to make sense of the Philippines’ true economic picture for his foreign clients, emailed an online report about Andaya saying deficit would likely hit 4% of the domestic economy this year. He asked, “Is Andaya serious or he’s just thinking aloud?” Last time he checked, Teves announced that deficit would only be at 3.2%.
At another end, the monetary officials are out in the open rebuking their fiscal and budget counterparts for not ‘frontloading’ the economic stimulus budget as earlier promised. After aggressively cutting interest rates to record lows to encourage economic activity at home, they said the government’s delay in spending for social safety nets and infrastructure skews a supposedly coordinated effort of the economic team to cushion the local economy from the global crisis.
Ivy leagues to politicians
Unity is one factor that makes the economic team achieve goals. But qualifications for the job are another.
The different economic units of the executive branch—finance, trade and industry, budget, socio-economic planning, tax and customs collectors, the central bank, and the different units regulating investments, industries, and managing pension funds—should be led by individuals who have the technical skills, could see the big and small picture, and, most importantly, are “of unquestionable integrity,” according to several members of various sectors.
Yet, the late Bangko Sentral ng Pilipinas governor Rafael Buenaventura hit it on the head when he said in a previous interview, “Anyone can hack it if he has the needed support to push for reforms.” He was referring to the elusive element of political will from Malacañang.
Camacho often tried to push his recommendations through the Palace bureaucracy regardless of whom he came up against. His successor, Juanita Amatong tended to hesitate when she felt she was going against someone “with more powerful backers,” a finance department insider once said.
Tapping people to join the economic team had become a difficult task It took a 3-hour one-on-one meeting between President Arroyo and Cesar Purisima to agree to replace Amatong in early 2005. Purisima said President Arroyo assured him he’ll have a freehand in economic and financial issues. He said she did not intervene when a high profile effort to go after tax evaders included an entity linked to Arthur Yap, an Arroyo supporter.
However, Purisima who was then shepherding a key tax reform law, eventually had to face a reluctant Malacañang when there was a need to reply to a Supreme Court-issued restraining order on the tax law’s implementation. As finance secretaries, the 3 should have led the government’s drive to reverse the country’s chronic budget shortfalls by pushing for sorely needed tax reforms.
Currently, Teves is faced with a widening budget gap as the global and local economy slows down. Yet, key tax reform laws—the sin tax amendment and rationalization of fiscal incentives—that are supposed to help substantially plug the budget gap remain to be in the drawing board.
Two milestones
There was frequent changing of the guards. About 3 years into President Arroyo’s reign, Ivy Leaguers (like Camacho) were replaced by professional CEOs (like Purisima). In 2005, former politicians took over.
The shift in composition of economic team was the result of 2 milestones in the Arroyo administration: the Hyatt-10 and the ZTE-NBN scandal.
Hyatt-10 refers to the mass resignation of 8 Cabinet members and 2 bureau directors on July 8, 2005 due to disenchantment over the “Hello Garci” scandal hounding the Arroyo administration.
Since then, the overarching premise in choosing economic managers is loyalty. It showed in the appointments. Former politicians, including those who lost in previous elections, clinched the post.
Margarito Teves, a former congressman from Negros and head of state-owned development bank, became finance secretary. Rolando Andaya, a former Camarines Sur representative and chair of the House appropriations committee that approved the 2006 national budget, took over the budget department. Recto, a former senator who shepherded the expanded VAT law and who lost in his re-election bid in 2007, now heads the National Economic Development Agency (NEDA).
The ‘loyalty’ theme filtered to the appointment of key agencies that affect the nation’s economic health. Yap became agriculture secretary, and the tax evasion charges filed during Purisima’s time was dropped.
Zenaida Ducut, who hails from the same province as Arroyo and who also lost in her re-election bid as representative of Pampanga’s 2nd district, was installed as chief of the Energy Regulatory Commission. The agency’s decisions impact on the prices of electricity, which is a major factor in inflation rates.
The recent economic managers have to tow the line. In 2005, when the Teves-led economic team has not yet warmed their seats after the Hyatt-10 resignations, they had to lobby to be left out of an impending Cabinet revamp. At that time, typical measures of their performance–smooth implementation of the expanded value added tax and the sharp reduction in the budget deficit, despite the political turmoil and high oil prices—were not the priority.
Resilient
Of all her appointees, Winston Garcia has been the most resilient. President Arroyo appointed him as president and general manager of pension fund Government Service Insurance System (GSIS) way back in 2001.
Despite the many issues thrown at him—controversial purchase of Juan Luna and Amorsolo paintings, questionable expenses, ill-fated attempt of former finance secretary Camacho to unseat him, and even if President Arroyo has berated him on several occasions—he has stayed on. The Garcia clan is well entrenched in the politics of Cebu, which incidentally is one of the areas that delivered over 1 million votes to Arroyo during the 2004 presidential elections.
Then Garcia came out of his clan’s shadows and established himself as his own man. Supposedly in behalf of the government employees who are beneficiaries of the GSIS fund, he led a boardroom battle—twice.
In 2005, he fought the Sys who then wanted to buy into Equitable PCI Bank, where state-owned pension funds had a stake. In 2008, he fought the Lopezes in Meralco in a widely considered effort to rattle the family’s media arm, which has been reporting on the scandals that rocked the Arroyo administration.
In both boardroom battles, Garcia cited corporate governance and transparency as his battlecry. For all his public advocacies, he was able to sell the pension fund’s stakes at premium prices.
Then the $329-million ZTE-NBN telecommunications scandal with Chinese suppliers that dragged the Arroyo couple happened.
Emasculated NEDA
For caving in to political pressure during the NBN-ZTE scandal in 2007, former NEDA chief Romulo Neri turned from hero to scorned man.
During the senate hearing, he testified that he had told President Arroyo of the P200 million bribe offer for him to approve the contract. He was expected to spill the beans on who from the powers-that-be nagged him to sign the papers that allowed the onerous project to proceed.
For keeping mum, he kept his government post. He was shuffled around—from budget department, to Commission on Higher Education, to pension fund Social Security System. But the NBN-ZTE scandal cost him. Employees of these agencies were initially wary of him, issuing statements of hesitation about his appointment. In the board of Philex Mining Corp, where SSS has a stake, the directors even came to a point that they voted to kick him out.
Former NEDA chiefs chided him for allowing the agency to be a ‘rubber stamp’ institution, instead of continuing to be the country’s ‘economic gatekeeper’ by making sure that all the infrastructure projects contribute to achieve the economic targets.
Former NEDA chief Solita Monsod even added that the agency’s head has the duty to tell President Arroyo the truth. “It is not your role to tell her what she wants to hear.”
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