Why the Philippine's growth lags far behind its neighbors

Bambi Harper, Philippine Daily Inquirer/Asia News Network, Manila

Any psychiatrist will tell you that the first step to mental health is to accept that you're sick. It follows that a doctor cannot cure a patient in denial who proclaims, for example, "I'm not an addict." By the same token, there is no curing what ails the economy when we deny the existence of a crisis. And this is after we've been told that we don't just have one crisis but multiple ones.

Now that our sins have come home to roost and we're being asked to pay for others' mismanagement and the endemic corruption, I suggest we stop looking around to see whom we can blame this time and figure out how to get our act together and get out of this mess. Standard and Poor's deputy chief warns that "the Philippines is the most vulnerable among so-called emerging market economies to absorb successive increases in world interest rates."

Imagine what that will do to the amounts we have to pay with the US Federal Reserve implementing interest rate hikes. That crippling debt is not going to be solved with a business-as- usual attitude, but tell that to our traveling public officials who don't even want to admit there's a crisis.

Do we have any legislators who can propose a strong economic plan to avert a fiscal crisis or a strategy to halt the influx of foreign extremists and the radicalization of the Muslims that is threatening to turn Mindanao into a terrorist center? Unfortunately, the one true thing you can count on is that despite that daunting fiscal deficit our revered lawmakers are holding on to that pork barrel as if for dear life.

Having accepted that we're sick (also sick and tired, but that's another story) let us see whether explaining the illness will help us to get better. Sociologist Max Weber defined corruption in terms of "patrimonialism," explained as the inability of civil servants and political leaders to distinguish between their personal needs and their responsibility to the people.

Paul Hutchcroft in his book, Booty Capitalism, goes further and distinguishes between "bureaucratic patrimonialism," in which the civil servants in a strong state use state resources for their own benefit, and "oligarchic patrimonialism," in which the private oligarchs in a country with a weak state use the civil servants to turn the government's operations to their own profit. Hutchcroft noted that national progress is possible when corruption is driven by bureaucratic paternalism but not when it is marked by oligarchic patrimonialism.

The regime of Chile's corrupt and despotic Gen. Augusto Pinochet is identified as bureaucratic patrimonialism. Despite his shortcomings, he established the foundation for Chile's self- sustaining growth so that currently this country is extolled for having the strongest economy in Latin America. Moreover, Chile has a wide variety of natural resources and its climate is conducive to accelerated growth.

I give you three guesses under which heading we fall. One of our leading economists states that the Philippines is a weak nation under oligarchic rule while Indonesia is categorized as a strong nation under bureaucratic rule. For the latter, progress is possible despite corruption, but the Philippines being a weak nation under oligarchic rule has the same chances of progress as a snow flake in hell.

Of course, there's that little item that we've managed to mismanage our natural resources especially our forest reserves so severely that not much remains while Indonesia has vast, untapped natural resources. When the American occupiers came, forests covered 75 percent of the country. Now, only 17 percent of the land is covered with trees. Offshore fishing shows no improvement in the face of a rapidly growing population. Reason: The wide- scale use of dynamite and cyanide.

A good part of the blame lies in the reckless exportation of raw, unprocessed products of our forests, farms, seas and mines during the American occupation and especially during the two decades following World War II. Meanwhile, urban and industrial growth encroached on prime farming lands. We now have to import rice and even sugar!

Why will Indonesia progress much faster than the Philippines? First of all, economic growth in the Philippines is running at the rate of only 3.5 percent for the last three years, just above the rate of population growth, which is 2.35 percent annually, a rate that has remained unchanged for the past 10 years. India sustains a 6.5-percent economic growth while China has a whopping 9.0 percent. While our neighbors in Asia are getting richer, the Philippines persists in having more children and denies there is a problem.

In 2004 and in previous years, the economy was driven by consumption and not by investment. But think, who's going to invest when we can't even open a simple airport or a container port without the investors being hauled to court?

As for who are these oligarchs who rule this country? Well, there are your usual suspects, including the opportunistic politicians, but apparently there's a new star in the horizon.

A friend describes them as the ghostly and ghastly racketeering gang of smooth-tongued technical smugglers, mostly Filipino, who sneak into the country tons of onions, garlic, other vegetables, chickens, wearing apparel, footwear, raw materials for industry, cars and motorcycles, and even toys by paying severely reduced taxes or paying no tax at all. It is rumored that one out of every two BMWs entering the country is smuggled. Now what was that again about there not being a crisis?