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December 2, 2012 / emmanintheworld

Aquinomics: Good Governance is Good Economics

There is  more fun in the Philippines, especially for the Aquino administration.

Last week, the National Economic Development Authority announced that the economy grew by 7.1% during the third quarter compared to the same period last year. Driving the growth were the strong performance in private and public spending, the late surge in exports performance, and the surprising 28.5% growth of construction.

The growth in construction and government spending are important things to note because these were the same factors that were lacking in the economy last year. A decline by 7.2% in construction during the 3Q of 2011 contributed heavily in the disappointing 3.1% GDP growth in the same period, along with the slow disbursement of the national budget.

The slowing down of  government expenditures, where public construction is a major component, came from the decision of the administration’s decision to review all bidding and purchases made by the Arroyo administration. With his popular anti-corruption platform, President Aquino felt that he needed to clean up the government and start over because of all the irregularities he found. The corruption allegations thrown at key government officials, multiple bonuses to non-performing departments, screwed-up bidding and awarding ceremonies were just too much for him.

Of course, reviewing all the transactions made by the government means that many projects would be delayed and some disadvantageous agreements have to be broken off. Also, his seemingly one-track mind of removing Arroyo officials like Former Ombudsman Merceditas Guiterrez and Former Chief Justice Renato Corona drew a lot of criticism. Critics were saying that Aquino’s focus on his anti-corruption drive was harming the economy, which in 2010 grew by an impressive 7.3%.

The Aquino administration, however, described their approach to the economy as good governance-based. Their reasoning was if the fair and transparent political institutions were put in place, the improvement of the economy of the Philippines would also follow. For them, “good governance is good economics.”

And it looks like it worked.

In the recent 2012 Global Competitiveness Report released by during the World Economic Forum, the Philippines jumped 22 places to the 65th place. Although corruption and inefficient government bureaucracy are still the highest barriers to business that investors face, they are saying that the government improved greatly in these factors. Perception of corruption among investors are also declining and confidence, both for consumers and investors, are up.

Trust and approval ratings on political institutions are also high. The MMDA, a place generally seen as inefficient and corrupt; the Senate, which conducted the impeachment trial of Former Chief Justice Renato Corona; the Supreme Court, coming from a low trust rating after Corona’s management are especially getting good grades from the public.

By addressing corruption and transparency issues early, the Aquino administration took steps in changing the culture and habits of Filipinos. This is essential in achieving sustainability, which requires long-term growth coming from different and diverse bases.

The approach of the administration is also important in meeting its goals for 2016. Most of the solutions detailed in the Philippine Development Plan 2011-2016 needs efficiency and transparency in order to work. One example of this is the Conditional Cash Transfer Program (CCT) which is the flagship anti-poverty measure of the government. Because of the large amount of funds invested in this program, it is very vulnerable to bribery and fraud. The government needs to ensure that the key checks and audits are in place and that everything is operating smoothly.

It’s not yet clear if the economic performance of the country is sustainable and inclusive. What I’m sure of, however, is that the measures taken by the administration early on helped drive the growth of the country in the short-term.

Hopefully, 2012 will prove not to be a fluke and be the start of the breakout of the Philippines.


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