Critics Divided On Administration's Fiscal Policies One Year On

My latest project for the Philippine Public Transparency Reporting Project (PPTRP): Fragile but improving: Critics say the government needs to move faster so the economy will move forward and the people, especially the poor, would feel that things are getting better. JES AZNAR (www.jesaznar.com) When Secretary Cesar Purisima took over the helm of the Department of Finance (DOF) in July last year, he conceded right away that it would not be an easy task. It was like stepping on a treadmill, he said during his first days in office. Now, one year on, the country’s fiscal health remains fragile –but improving. Yet Purisima believes that the positive rating actions received by the Aquino administration are strong testament to the government’s accomplishments. Over the past 11 months, global debt watchers have given the Philippines' credit rating – a measure of the country’s credit worthiness – an upgrade. This typically translates to lower borrowing costs for governments since it means less risk for investors. The latest upgrade for the Philippines came from London-based Fitch Ratings which upgraded the country’s sovereign rating by one level to "BB+" from "BB." By contrast, some governments –including the United States– are being threatened by suggested moves to downgrade their credit worthiness. “The actions of the major rating agencies mean that we are [moving] in the right direction,” Purisima says. Similarly, the head of the Bureau of Internal Revenue (BIR), the government’s main revenue agency, believes it has accomplished a good deal over the past 12 months. “The biggest accomplishment is making clear to everyone that we are serious in implementing the law because we know what the law is,” BIR Commissioner Kim Henares told the Philippine Public Transparency Reporting Project (PPTRP). Henares said the task is not easy given that the BIR is a big agency that is more than 100 years old. “It's hard to change 106 years of bad habits: The biggest challenge is making people understand we are serious,” Henares said. According to the latest DOF data, the national government has registered a fiscal surplus of PhP 61 million (USD 1.4 million) from January to April this year. This is because revenue collections reached PhP 461.413 billion (USD 10.73 billion) from January to April, of which the BIR accounted for PhP 302.942 billion (USD 7.04 billion) during the period. The Bureau of Customs (BOC) meanwhile has collected PhP 85.058 billion (USD 1.98 billion). These BIR collections show an increase of 14.29 percent over a year ago. The BOC’s collections meantime show an improvement of 2.04 percent. ‘No projects, no corruption’ Some experts say however that the Aquino administration needs to do even more. University of the Philippines Economics Professor Benjamin Diokno believes the fiscal improvement is actually “illusory” and is more a result of an underspending more than any improvement in economic generation. He told PPTRP that the government’s “no new tax” policy until 2013 will not work. “[The President’s] ability to fulfill his election promises and achieve a balanced budget by 2016 is not possible with the present tax system,” Diokno argues. And while Diokno says it is clear President Noynoy Aquino “is clean and incorruptible,” – he says it is too early to say whether he can keep “his other men and women's hands clean”. “To date, he's talking of corruption in GMA's (Gloria Macapagal Arroyo) projects. There is no corruption in Aquino's projects because there are no projects yet implemented. I recall that during President Cory's early months in office, she had a very 'clean' and incorruptible Department of Public Works and Highways Secretary. But what happened? No projects were approved -- no projects, no corruption,” Diokno says. He told PPTRP he believes the government needs to move faster in implementing projects so the economy will move forward. “One year is too long to review projects done by the previous administration. I do not accept the proposition that projects are not moving because the administration is still reviewing projects. The projects that are in the 2011 budget are his projects,” Diokno says. Political analyst Ramon Casiple adds there is widespread perception that President Aquino has not addressed job insecurity because the government does not have enough fiscal resources to tackle it. Inflation, he notes, also remains high. Inflation rose to a 13-month high of 4.5 percent in May from 4.3 percent in April. And yet inflation is substantially up in many countries around the world. “From the high inflation rate, job insecurity and perils of the overseas Filipino workers, and local job creation to urgent political reforms, there is developing unease on how this administration tackles them,” he told PPTRP. He believes the government has been too busy “vindictively” going after its political enemies. Sonny Africa, executive director of the non-government think tank IBON Foundation meanwhile believes the government should go after high profile tax evaders to prove its fight against corruption. And yet Henares points out the filing of a tax evasion case against former presidential son Juan Miguel “Mikey” Arroyo before the Department of Justice (DOJ). Last April, the BIR filed a tax evasion case against Arroyo who is now representative of Ang Galing Pinoy party-list. Henares told PPTRP that the Arroyo couple failed to file income tax returns from 2004 to 2009. “Based on our investigation there’s a deficiency income tax of PhP 73.8 million (USD 1.7 million). Mikey did not file his income tax returns for 2004, 2008 and 2009,” Henares said when she filed the case in April. She claims Arroyo and his wife Angela failed to pay the commensurate taxes on the properties they declared in their Statements of Assets, Liabilities and Net Worth (SALN) from 2004 to 2009. This year, the BIR is tasked to collect PhP 940 billion (USD 22 billion): This is an increase over last year’s target of PhP 860 billion (USD 20 billion). The Customs bureau, on the other hand, has been given a target to raise PhP 320 billion (USD 7.44 billion) this year above the PhP 280 billion (USD 6.51 billion) required last year. Raising sin taxes It should also consider raising taxes on tobacco and alcohol instead of succumbing to pressure. JES AZNAR (www.jesaznar.com) Another expert, Filomeno Sta. Ana, executive director of the non-government Action for Economic Reforms (AER) says that improving tax administration efforts can only go so far. “We all know that President Aquino has resisted from having new taxes for the first year of his term. This is a serious handicap in raising revenues,” Sta. Ana told PPTRP. He says that while efforts to improve tax collection are commendable, they are not enough. “Part of addressing the leakage is reforming tax policy,” Sta. Ana says. Sta. Ana noted for instance that the government should seriously consider raising taxes on alcohol and cigarettes instead of succumbing to the lobbying of tobacco industry players. And he further believes that the Executive has not made known what it really wants to do in relation to tax reforms. As a result, he said, representatives of vested interests are exploiting the situation to propose weak and compromised legislation. “For example, the Ways and Means Committee of the Lower House is attempting to rush a consolidated bill on sin taxes that favors the tobacco industry,” Sta. Ana says. According to government estimates, the sin tax measure, which remains pending in Congress, could raise as much as PhP 19 billion to PhP 20 billion (USD 442 million to 465 million) in the first year of implementation; PhP 30 billion to PhP 40 billion (USD 698 million to 930 million) in the second year; PhP 40 to P50 billion (USD 930 million to 1.16 billion) in the third year; and PhP 60 to PhP 70 billion (USD 1.40 billon to 1.63 billion) in the fourth year. The Finance department says the current tax structure is inequitable because products having the same current net retail price can be taxed differently if one was introduced before January 1997 and other one after 1997. Almost every administration has attempted to raise sin taxes but was unable to do so because of the strong lobbying of tobacco players such as Lucio Tan’s Fortune Tobacco and the American brand Philip Morris. The two tobacco giants have merged and now control 90 percent of the tobacco market here. Tan, one of the richest Filipinos, is known as a big campaign contributor during elections and a staunch lobbyist in Congress against measures that would raise sin taxes. Against this backdrop, the Aquino administration needs to work in different areas to show it is serious and able to fix the government’s revenue stream. Philippine Public Transparency Reporting Project

Power, Character and Leadership by Jun Lozada

From the Philippine Public Transparency Reporting Project (PPTRP)

A look at leadership: Dr. Jose Rizal's century-old question "Are we like this because we simply have not been blessed with an enlightened leadership?" remains in the hearts of Filipinos today as they pin hopes on newly elected leaders like President Benigno Aquino III and his young administration. JES AZNAR (www.jesaznar.com)

“Tayo bang mga Filipino ay sadyang nilikha ng Panginoon na mangmang, dukha at api? O kaya lang tayo ganito ay dahil hindi pa lamang tayo nabibiyayaan ng isang mabuting pamumuno? (Are we Filipinos created by God as ignorant, wretched and oppressed? Or are we like this because we simply have not been blessed with an enlightened leadership?)”

So our national hero, Dr. Jose Rizal once asked his brother Paciano.

Up until now, I still reflect on that question when I see millions of my country men and women mired in inhuman conditions of poverty, wallowing in mindless chatter, contented with ignorant bliss, numbed to abuse by local and foreign masters. “Along with a growing minority, I refuse to hang my head in shame. I refuse to accept our situation with the resignation of an invalid,” as Rizal put it.

Why have we not been blessed with an enlightened leader who does not betray the people? Why have we not been blessed with leaders who put the people’s interest above their own personal interest? Why is it that we always appear to elect a saint but end up with the devil? Why is it that we elect people who seem to possess the genes of leaders, but end up with leaders who are thieves? Why is it that seemingly kind persons turn into selfish opportunists once given the reins of their respective group? Why is it that the young idealistic activist turns out to be one of the biggest crooks?

This observation cuts across a broad spectrum of Philippine society from the halls of Congress to the pulpit of the different churches; from the classroom to the boardroom; from barracks to newsrooms; from barangays up to the presidential palace by the Pasig River. What could possibly be the reason for this curse like phenomena in our country?

Failed leadership: is it cultural?

I have been pondering on this issue of failed leadership from two perspectives: culture and character. One of the strongest bonds found in the Filipino culture is the intra-generational bond of a Filipino family. It is accepted as a matter of moral obligation of a family member to take care of their relations including extended clan members. This particular cultural trait is easily observed in the overseas Filipino workers (OFW) community, where millions of Filipinos endure lonely separation away from their loved ones laboring in foreign countries just to support their families.

It is not uncommon in the Filipino culture to see young adults giving up greater opportunities for personal growth for the sake of taking care of their old parents or their young children. It is one of the most noble and admirable traits that characterize the Filipino.

But this very strong “familism” has a terrible effect on society and the country as a whole when it crosses the moral boundary of that obligation, as postulated by Francis Fukuyama in his book “Trust”.

Let us try to illustrate this moral crossing in a typical scenario of a Filipino who is put in a position of influence either in private or public office because of their talent. We may assume this person is of good character: Yet when the situation arises -- as will invariably happen -- that this person is approached by a family member, a relative or a close friend for a favor, particularly one that involves pecuniary interest, this person will be culturally obliged to acquiesce to the request, even if it means breaking the law. Some will agonize more than others, yet many will succumb to the cultural pressure of “familism” even if it means crossing or breaking the law and compromising one’s principles.

In our culture, the worst names a family member can be called are: “Ingrate” (“walang utang na loob”) or “indifferent” (“walang malasakit’) to your own family. This cultural reality is one of the biggest contributing factors in the failure of our country’s leaders so far to curb corruption. For this result in a leadership that caters to the special interest of a few and not for the welfare of the general public. There are many examples of this leadership defect from Marcos to Arroyo, where family members and cronies became the vanguards of corruption under the sponsorship of the Chief Executive of the Republic. It is a state-sponsored family enterprise at the expense of the citizens. There are religious leaders who treat church collection as a personal, or worse as family funds. There are low-level officials who treat their position as a family franchise to be endowed to their children and next of kin.

Failed leadership: is it character?

Learning to say no to influences of families and close friends -- something for which former president Gloria Macapagal Arroyo and past presidents have been criticized for -- is essential to a leader. JES AZNAR (www.jesaznar.com)

Having gone through one of the most difficult experiences of my life from the hands of the leaders of one of the worst administrations of the Philippine Republic, and based on my readings of past presidencies of our youngish republic, I can draw the conclusion that the failures of our leadership have not been down to a lack of talent or ability nor are they due to a lack of a brilliant mind and vision, but more because of a simple lack of character.

I have often wondered what happens to people with such heroic potential, who when handed power turn into heels. This curiosity has led me to scour literatures on humanities, philosophy, theology and other relevant literature.

Power magnifies character. History is replete with figures who inspire awe and others who are guilty of despicable deeds. If there is one factor that allowed these personalities their place in history, it is being given the power to rule: As Saint Augustine, one of the greatest Saints of the Christian faith once said:

“An honest leadership is a blessing upon the people, while a dishonest leadership is like a curse upon its people.”

Why would power magnify the leaders’ strength and weakness?

Let us again imagine an upright person with good character and intellectual ability. Left to his or her own device, that person may do well within the small circle of family, friends and acquaintances that have been blessed with his presence. But give this enlightened leader the political power and you magnify his/her enlightenment beyond the immediate circle of family and friends.

It is a natural consequence that the virtuous leader’s enlightened character shall bring forth a great good over the land and the people who live in it. Such leader is truly a blessing to his people.

Similarly, the weakness of such a leader may well be confined within his or her immediate circle of family and friends. But once this leader is handed political power over a country and its resources, this harmful weakness is likewise magnified in a magnitude beyond the limited scope of this leader’s small circle of friends and family. It is again a natural consequence that this leader’s vices will bring forth great evil and suffering upon the land, making such a leader a curse on his people.

A character perspective of a leader. Why put such emphasis on the character of a leader? Because a leader will be confronted with countless situations with different conflicting interests where his grasp of reality will be required; because a leader will be faced with tempting situations from friends and family where his moral ethics will be severely tested; because a leader will be looked upon by the people to inspire them with a vision of a world they cannot even dream of; because a leader will be besieged by enemies and betrayed by friends putting his courage to the test.

A leader’s ability to weigh and balance naturally opposing tendencies such as fear of failure and the courage to pursue a vision is a rare gift that will bring progress to society: A leader’s ability to hold on to an unbending ethics with fidelity in the face of an all-out assault of sensual and material inducements will surely bring a just rule in the land.

I agree with the idea that character is a constant state of finding the balance between the four polarities: a transformative vision, courage to pursue the vision, a firm grasp of reality and an unbending ethics in the midst of worldly reality.

A simple illustration of this idea is the traditional table with four legs. The legs represent transformative vision, courage, a firm grasp of reality and unbending ethics. Take away one leg. The table may still stand balanced on three legs. But the real test happens once a heavy load is put on top: It will collapse from the weight.

Take away vision. You end up with a set of ethical, knowledgeable and courageous people not knowing where to go.

Take away courage. You end up with a set of ethical, knowledgeable and visionary people but afraid to venture out of their comfort zones.

Take away a firm grasp of reality. You end up with a set of ethical, courageous and visionary people not knowing how to do the right things.

Take away unbending ethics. You end up with a set of knowledgeable, courageous and visionary set of people whose primary interest is to amass wealth and ensure their family’s political fortunes to the damnation of the rest of the citizenry.

The value of pain in building character

The author, in this file photo taken in 2008 at the height of the NBN-ZTE scandal: Why have we not been blessed with an enlightened leader who does not betray the people? JES AZNAR (www.jesaznar.com)

Our discussion about character, especially of those who aspire to lead, will not be complete without including pain in the discourse. I sincerely believe that character is molded in the furnace of suffering of a person’s life. Many people will be subjected to different forms of pain, but not all people will respond to pain in similar fashion. How a person responds to adversity brings forth the true character of a person, particularly those in leadership position. Crisis will provide them an opportunity to seize their moment of glory or expose their embarrassing weakness in pretentious blabber of excuses or bitterly passing the blame to others.

The experience of brokenness can be best illustrated by the lives of renowned leaders such as Rizal, Mandela, Mother Teresa, Lincoln, Lee Kwan Yew, Aung San Suu Kyi, Ninoy Aquino and many more. Juxtaposing these leaders with their contemporaries who dared not endure the pain identifies a historical figure that overshadows the rest. Not all these leaders are intellectual gurus, military geniuses, political masters or economic giants. Rather they are people who experienced severe tests and responded with grace that made them inspirational to others.

Are we going to be blessed with a philosopher king, a benevolent dictator or an enlightened leader who will finally build a nation out of the diverse, familistic, regionalistic Filipino people? I leave it to time and to providence to provide us the answer.

Conclusion

It is the hope of that we may develop a new perspective in looking at leadership especially in the context of the failure of numerous Filipino leaders in delivering on the promise of much needed reforms to their respective organizations and progress to the nation.

We need to acknowledge and break out of our own amoral familistic tendencies. We need to learn to say ‘no’ to our family, relatives and close friends when saying ‘yes’ means betraying our oath of duty to our community. May it strengthen us to decline offers of bribes when accepting them means shattering the promise of our youth.

Aspiring leaders among us need to evaluate themselves as they grow in their own journey of service and leadership: They must be the blessing that drives away the curse of failed and corrupt leadership from our land. Philippine Public Transparency Reporting Project

(The author is an engineer who briefly worked in government and has paid dearly for upholding the truth.)