Doubling down on failure

Doubling down on failure | Daily Tribune

IBON Foundation executive director Sonny Africa said the Marcos administration has stuck to a development formula that has been discredited since the late 1970s.

The President made clear his faith in trade agreements, Africa said, which is 1990s thinking dressed up for 2026.

The late ‘70s solution was to open up, globalize, invite capital in, and offer nothing in the way of protection or support for Filipinos trying to compete. This equation prevented growth in the agriculture sector, which shrunk to its smallest share of the economy in the nation’s history during the Marcos administration.

Manufacturing has fallen to a low not seen since 1949, the year the country was trying to rise from the ravages of World War II. This is the model the President wants two more years of.

The biggest paradox is that a government that keeps professing its faith in free trade is closest, diplomatically, to the United States that has walked away from it.

Washington calls its own trade posture “America First,” slapping a 12.5-percent tariff on Philippine goods last week. Global trade has become a matter of naked national interest, negotiated country by country.

The numbers back up the detrimental view. World trade has sat flat at roughly 60 percent of global gross domestic product (GDP) since 2010.

Foreign investment flows have slid from about three percent of global GDP to somewhere between 1.5 and two percent. An economy that has staked its future on exports and foreign capital is betting on an engine that had stalled years ago.

The President’s speech also invoked Pax Silica. Africa is not against the idea but the shape of it that will involve a great deal of talk about investor protections and property rights for advanced technology. Again shoved aside are Filipino industries that will not benefit from the arrangement, which will merely provide an open door and an invitation for foreign capital to walk through it.

Intel operated in the Philippines for more than 35 years. Billions of dollars was invested and in exports. But when Intel packed up in 2008 and 2009, the country was left with no technology transfer, no semiconductor industry, and a couple of thousand jobless.

The much-desired foreign capital arrives, extracts, and leaves, without touching the local economy it sat inside of. Without a genuine push for technology transfer and real support for Filipino manufacturers, Pax Silica risks becoming Intel’s sequel.

The applause was loudest for the President’s promise to review and amend the Electric Power Industry Reform Act, the law governing the energy sector, and to strip out the system loss charge that is passed on to consumers.

Africa’s assessment is that the effort is too little, too late. System loss is a fraction of what makes our electricity the most expensive in Asia. The real culprits are the heavy dependence on imported fuel, expensive generation, and a market where five to nine firms control 60 to 80 percent of the power business.

Among the 11 countries of Southeast Asia, only two have highly privatized power sectors: Singapore and the Philippines.

The other nine keep transmission and distribution under state control, even where generation was opened up to private players. And the two exceptions happen to be the two countries with the most expensive power on the continent.

Trimming the system loss charge will barely reduce household bills. The standing ovation that the announcement received was not even worth it.