A Year-End Personal Reflection on Christmas

Judge wisely, live spiritually --

The year 2016 has been one of tremendous upheaval for most people, but for me it has been a year of unremitting triumph. First (perhaps a little selfishly), I finally finished graduate school after thirteen years of bad planning and worse execution. Second, this year also quite literally saw the birth of our son, which means that for better or for worse at long last someone looks like me. Third and finally, there is that little work that I need not expound upon here. 

But in the greater scheme of things, 2016 -- in unadorned words -- has made the impossible, possible. In May, in our own beloved Philippines, the long-shot candidacy of Rodrigo Duterte turned out to be a movement of the downtrodden masses, a portent that those who used to suffer for want of leadership will suffer no more. Next, in June, was Great Britain, where--contrary to all polls and betting markets--the people chose not to sacrifice freedom, but to embrace it. Brexit meant, perhaps most of all, "that the life of man may not be offered at any altar of man's own making." Third and finally, the populist movement came full circle in the United States, when the most improbable presidential candidate in history won the election. Donald Trump is the most signal repudiation of the economic and intellectual elite that long looked down on ordinary people and attacked their values and traditions. Put up a monkey (for The Donald is said to be one), and make him promise the right ideas, and he will win. That is the lesson of 2016.

All these mean that on both the personal and the political, I enjoyed all of this year's triumphs and shared none of its tragedies. I favored Brexit, and I voted for Duterte. I am not necessarily a Trump supporter, but I would have been devastated by a Clinton win. I would choose the lesser evil there. 

Why is Mr Trump preferable to Mrs Clinton? Why do I count myself among those who celebrate the year as a win and rather than those who lament it as a loss? I believe that the line separating the two is defined by the value that each group attaches to words.

I find it amazing that my Facebook friends who are working full time in demanding roles both in the academe and the private sector manage to find the time to troll the words of Duterte and Trump, click their tongues, shake their heads, say "Tsk, tsk", and then proceed to share the offending utterance. Other "netizens" pounce on the link, it spreads "virally", and it becomes news. And this cycle happens for EVERY word that comes out of the presidential mouth, and EVERYwhere that foul mouth goes. 

I do not presume to know the visceral feeling of playing gotcha with somebody, of tracking every word coming out of another person's mouth, mocking him when he says something dreadful and rejoicing when he says something good. There must be some interior reward, but it reminds me of Lyndon Johnson's saying (about making a speech on economics): "[It] is a bit like pissing down your leg. It seems hot to you but never to anyone else."

That is how it looks to me: words are cheap. Anybody can say them, and in this day and age, they can be spun to mean anything. And yet, everyday, some controversy erupts over something Duterte said, or something Trump tweeted. How about something they did?

Prominent conservative critics of Mrs Clinton's, those working as columnists in major newspapers in the United States such as George Will and Charles Krauthammer of The Washington Post, Ross Douthat of The New York Times, and Megan McArdle of Bloomberg, would never vote for Mrs Clinton but could not bring themselves to vote for Mr Trump because of what he said about Mexicans, women, gays, blacks, or pick any minority or special-interest group. But did they once pause to think what he could do or promise to do? What was in his platform, versus his opponent's policy proposals? I've read their columns, and I can confidently say that there was nothing about policies (proposed actions) but everything about tweets, speeches or interviews. 

It turns out that, to mention just three items, Mr Trump pledged to support pro-life proposals and appoint pro-life Supreme Court justices; cut taxes; and reduce climate-change regulation. Whether or not you agree with their "goodness", all of these things are the stuff of which conservative dreams are made. By contrast, what did Mrs Clinton pledge to do? According to one analyst, her campaign amounted to -- "It's my turn, damn it!"

In the U.K., quote after quote spewed out of the Remain campaign warning of the dangers of Brexit, sourced from various luminaries' eloquently phrased words. After three months, the country's economy grew so much faster than expected, driven by domestic consumption--all despite the plunge in the pound. How do those eminent words sound now?

And finally in our country, the Philippines. I suppose it is not just words that constitute  the case against Duterte. His murdering of drug suspects is immoral and wrong. But in general, "critics are responding not to [his] deeds, but to his words; not to his actions, but to his appearance. They are judging not his actual achievements, but his reputation. They condemn his sense of humor, but not his cool ability in government for the past three decades. The critics are taken from the class of people who decry personality-driven politics, but they are the first to criticize Mr Duterte on the basis of his personality, not his accomplishments."

In this holiday season, we would do well to use wisely the time off our work or school. (As for me, I made this wreath using my limited artistic ability.) We spend the time with family and friends, and create the moments and share the memories that make us, in word and deed, in thought and action, species of one special community. And what we have in common is the Christmas gift of limitless love, unceasing mercy, and heedless sacrifice, to be triggered merely by our own honest repentance. 

May we allow the spirit of this kind of Christmas to guide us to make the right judgment. Let us judge other people based on their deeds, not their words. Allow them to show us what they can do, not just what they can say. For freedom -- the freedom won by the man born on Christmas Day -- shows up in action, never just in words. 

May 2017 be better indeed, for the losers as with the winners of 2016.

All about the Dollar

On the day after the elections, the Philippine stock market and currency rebounded from volatility-led lows, apparently because of the peaceful, orderly, and credible conduct by the COMELEC. It was extraordinary to see who the next president was going to be by the time the evening news programs came on Election Day itself. But beyond anecdotes, what do the data say about the drivers of the value of the peso and the market perception of Philippine-related risk?

The volatility in the PHP lasted for about three weeks, starting from the time that Mayor Duterte’s rape joke led the news (April 18), to Election Day itself (May 9). But extending the time period to more than one month, what drives the variability of the Philippine peso? If election-related jitters are too short-lived, what are the relatively long-lived factors that contribute to changes in the peso’s dollar value?

The international oil price can have an important impact on the currencies all over the world. Oil-importer India will see its currency depreciate with a high oil price; Malaysia will experience the reverse. It is interesting to point out, however, that both oil and the Philippine peso are valued in US dollars. A strong dollar should therefore make the oil price fall, all other things being equal. The same relationship should be observed regarding the peso.

The data for the past six years bear this out: a strong dollar correlates well with a weak oil price. However, given that global oil prices collapsed starting in mid-June 2014, it is important to examine any effect this regime change had in the relationship. Looking only at data from June 2014 up to May 2016, the correlation holds, with R² increasing to 0.65 from 0.58.

However, the relationship between the sovereign Philippine 5-year CDS, which is denominated in US dollars, is inverted. The CDS price has a negative relationship with Brent crude for the past two years (and none for the past six years). Oil is becoming more correlated with Philippine credit, as R² increases from nothing to about 0.46. This means that as the dollar strengthens, oil price falls, and so does the peso and the Philippines’ creditworthiness.

It is, in short, all about the dollar. 

NOTE: Peso values are presented as the inverse of USDPHP. Example: if the exchange rate is 46, the value used is (1/46)*1000 = 21.7391.

Letter to Mar Roxas from a Constituent

10th May 2016

Dear Mar,

I have done my best to undermine your claim to the Presidency. I will not say sorry for doing the right thing. Doing the right thing is like love; what we do in its name, we should not apologize for it.

But as Shakespeare might have put it, nothing in your campaign “became [you] like the leaving of it”. As you spoke, you were a few shades darker and far more notches humbler. I saw a beaten face, by the elements and the circumstances; you never looked more human in all your years of public service. I believe if you had only shown this side of yours during the height of the PNoy Administration, you would have stood a stronger chance in the waning days of it.

                                  Link: https://www.youtube.com/watch?v=7_ROYtF4-s8

You and the other presidential contenders have shown extraordinary graciousness in defeat, matched only by the magnanimity in victory of the new President. On my own behalf I accept your concession, and I wish you good luck in all your future endeavors.

Yours in public service,

Juan de la Cruz

Filipino

Attacks on Duterte's anti-crime record are "mythological"

Mr. Duterte’s record on crime has been attacked as a “myth” by Mr. Roxas, who uses the statistics reported by the Philippine National Police to undermine Mr. Duterte’s crime-fighting. In the PNP report, which are not broken down by year or between index (actual) crimes and non-index, Davao leads with the most number of murders among five major cities, at 1,032 (table below). Source is Rappler.

However, it is simply common sense that that places with higher the population experience more crimes. What is more important is therefore the crime rate, or the number of crimes committed per thousand population, not the raw number of crimes. After adjusting for population, Davao never ranks first in any crime category. It is tied with Quezon City in the most number of “5s”, particularly in important categories of homicide, robbery and carnapping; it is number-2 in murder rates.

But the crime statistics themselves should be taken with caution because Mr. Roxas is the former Secretary of the Interior and Local Government, with authority over the police. When Mr. Roxas uses these crime statistics to attack his political opponent, he is really using the statistics prepared by people under his control to attack his political opponents. The fact that Mr. Roxas’s DILG presented a special award to Mr. Duterte for achievements in peace and order in 2015, just for Mr. Roxas to attack Mr. Duterte’s anti-crime record six months later, is enough evidence that Mr. Roxas’s words and actions are just politics—nothing personal, neither true.

Duterte plans to use Joma Sison to call for end to NPA struggle

But what about the willingness to negotiate with China over the latter’s claims in the South China Sea? Is Mr. Duterte really going to sever ties with the US and Australia? It turns out that his attitude to China reflects his attitude to the Communist New People’s Army.

“I will not waste the lives of Filipino soldiers and policement,” Mr. Duterte declares (Inquirer). Instead, he says in a televised debate, “We must establish the legitimacy of our claim,” through a favorable decision from international arbitration tribunals currently hearing the Philippine case. In an interview (Rappler), he proposes a joint exploration of the area under the South China Sea, rather than war, but China must “not insist on its supposed ‘ownership’ of the disputed areas”.

Where other see bravado, this blog instead sees a mature and realistic way of dealing with problems. The same can be said of his attitude to the NPA. There is no doubt that Mr. Duterte has Communist sympathies, that he has declared “I will be the first Left President of the Philippines,” and that he has more than once stated his willingness to establish a “revolutionary” government that includes communist rebels. There is also no doubt that this blog is violently opposed to Communism and rejects Marxism root-and-branch. But there is no denying that the Marxist insurgency has been going on in the Philippines since 1968. Fifty years of proletarian struggle is too long, even for die-hard opponents on both sides. A way must be found to lead the struggle to a satisfying end, in a manner both mature and realistic.

Mr. Duterte was one of the first students of Communist Party founder Jose Ma. Sison under the Kabataang Makabayan, and Mr. Sison has now promised to return from exile if Mr. Duterte wins. Critics warn that there will be violence instead, and a victory of sorts for the Communists when they join the Duterte Cabinet. But what is true instead is that President Cory Aquino’s government released Mr. Sison from prison in 1986 for the sake of “national reconciliation”, which is one of the reason why military leaders subsequently felt little loyalty to Mrs. Aquino. The fact is that Mr. Sison was released then without condition, but it is clear to this blog that Mr. Duterte plans to welcome Mr. Sison back to the Philippines in order to ask him to give a call to end the violence.

Is that a sinister plan, or mature and realistic? The problem is there, rebels are operating throughout the country, as they have been for nearly fifty years. They have been both opposed and used by politicians of all stripes.[1] Mr. Duterte simply wants to end the violence.

TheEconomizer is willing to give Mr. Duterte the benefit of the doubt, as a Duterte supporter. If Roxas supporters are not as willing, both sides should remind themselves that the proof of the pudding is in the eating. Despite his Leftist sympathies, Mr. Duterte does not allow the NPA to extort money from Davao businessmen. That should be enough.

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[1] For instance, Senator Ninoy Aquino brokered a 1969 meeting between Commander Dante (Bernabe Buscayno) of ex-HukBaLaHap and Mr. Sison to form the CPP-NPA. Sen. Aquino of course had socialist sympathies, but he really wanted a base on which to launch his candidacy for president in 1972. He upheld his side of the bargain: when his Communist connections told him of Mr. Sison’s plan to bomb the Liberal Party’s senatorial proclamation rally in August 1971, he kept the secret and held back, keeping himself late for the rally. The deaths or serious injuries to prominent LP politicians in the Plaza Miranda bombing was blamed on President Marcos, which only boosted Sen. Aquino’s stock in the opinion polls. 

Defending Digong

The previous post was about Mar Roxas and his empty claims to the Presidency. This post is related to that, but focuses on Mayor Rodrigo Duterte. Specifically, it addresses the questions that arise regarding his personality, his attitude, and his style in government. These questions highlight various dimensions of Mr. Duterte’s fitness for office, or the lack of it, and they will be considered as a whole.

Mr. Duterte infamously cursed the Pope on television, although he later asked and received forgiveness. He made a distasteful joke on being the first in line in raping a woman missionary from Australia who had been held hostage in Davao. In reaction to objections by the ambassadors of the US and Australia, he said, “It would do well for the American ambassador and the Australian ambassador to shut their mouths”; asked what he would do if those countries sever their diplomatic relationship with the Philippines because of his remark, “go ahead and sever it,” he said.

He is separated from his wife (his marriage has been annulled), although she is apparently campaigning for him and they remain “friends”. He is living with a woman who is not his wife, with whom he has a young daughter. His adult children are colorful personalities; literally with their tattooed bodies, figuratively and famously in former Mayor (and currently Davao mayoral candidate) “Inday” Sara Duterte being engaged in a boxing match with an erring court sheriff a few years ago. This is what the Catholic Bishops Conference of the Philippines refers to when it says that Mr. Duterte’s lifestyle “does not reflect the teachings of the Church.”

During this election campaign, Mr. Duterte has called Mr. Roxas “bayot”, which in the context in which he said it does not literally mean “gay” but “weak”. Back in late-2015 near the start of the campaign, the two were engaged in “sampalan” and “suntukan” over the issue of Mr. Roxas’s status as a “graduate” of the University of Pennsylvania’s Wharton School of Business.[1]

Most seriously, Mr. Duterte’s critics say he will be a dictator, an authoritarian who has no respect for the rule of law, and who said he would abolish the Congress if it tried to impeach him. He has boasted about killing criminals as his way of restoring peace and order to his city, and really his reputation is that of a strongman, “the Punisher”, “Duterte Harry”, and the “Mad Max” of Davao. “If I become President, it will be bloody,” warns Mr. Duterte in a televised debate.

As a result, it has been very easy for Mr. Duterte’s political opponents, in particular Mr. Roxas, to paint him as an extremist. When Mr. Roxas’s supporters say that Mr. Duterte’s reign will be bloody, one knows where they got the word “blood”. When they say he does not respect human rights, he said so himself. When they say he does not respect women, it comes directly from the horse’s mouth. When they say he will be an embarrassment to the Philippines in front of the entire world, a ruffian without manners and a diplomat without tact, the world already saw the whole thing.

But it is also clear that the whole thing has nothing to do with the Mayor’s track record in government. No one can deny that he has brought peace and order to his city; that Davao is featured as a leading city in BPOs as one of the “Next Wave Cities”; that its seaport in Sasa (developed by the city government) is a model for others; that city services have more than enough ambulances and fire trucks with the most up-to-date model; that Davao is the only city in the Philippines with a working 911-service; that the police CCTV cameras work; that the Mayor’s government—in general—works.

Critics are responding not to the Mayor’s deeds, but to his words; not to his actions, but to his appearance. They are judging not his actual achievements, but his reputation. They condemn his sense of humor, but not his cool ability in government for the past three decades. The critics are taken from the class of people who decry personality-driven politics, but they are the first to criticize Mr. Duterte on the basis of his personality, not his accomplishments.

Is it true that people in Davao do not have the freedom to choose their mayor, that he is a dictator who controls the outcome of elections there? If so, why does he remain popular with Davaoeños?

Is it true that he is an authoritarian in Davao? Maybe, but has the Mayor ever killed someone who criticized him on the radio or in print? Didn't Mr. Duterte's critics know that he only “warned of a revolutionary government should Congress not scrap the pork barrel fund of lawmakers” and that he would close down Congress only if it impeached him after abolishing the PDAF? This quote is from the Philippine Star. 

Is it true that he has no respect for women? Why is Davao the only city in the Philippines with a magna carta for women?

Does blood really run on the streets of Davao, shed by suspected criminals executed without trial? Or does blood run on the same streets, committed by those criminals?

In a Bloomberg poll, analysts selected Senator Grace Poe and Mr. Roxas as the most competent economic managers among the presidential candidates, without mentioning any relevant experience by Sen. Poe. But is Davao among the poorest cities in the Philippines, or the richest?

Mr. Roxas often boasts that he is the candidate with the longest service in national politics, but in all of those years he has demonstrated neither leadership nor ability. His answer in a televised debate was telling. He said he knew the answer to the “laglag-bala” scandal, but all he did was ask for an investigation. Doesn’t one expect that Mr. Duterte would do more?  

All these are rhetorical questions; one knows the answer to them. That all the answers are favorable to Mr. Duterte is the main reason why he is leading in pre-election polls.

Duterte supporters do not take him at his word; they have his track record as evidence. For instance, when Mr. Duterte claimed that he will clean the country up in 3-6 months, critics immediately pounced on it as being unrealistic. But that claim is not the reason why his supporters believe in him; they have his track record in government to back up their vote. The same cannot be said of Mr. Roxas, or the other presidential candidates.

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[1] Since Mr. Roxas took his Bachelor’s degree in Economics at Wharton but did not take an MBA there, Mr. Duterte took issue with his use of the word Wharton “graduate”. Mr. Roxas responded that he was nevertheless graduated from the same school and so should be entitled to say he is a graduate of Wharton. Although a Wharton alumnus later said that Bachelor’s degree holders are referred to as graduates of UPenn, not Wharton, social media in general gave the “victory” to Mr. Roxas, who actually could prove his Bachelor’s degree. However, in the US and elsewhere, when one says “Wharton graduate” one assumes right away a Wharton MBA graduate, not a UPenn undergrad. If Mr. Roxas pretended to be more than he really was, it would not be the first time—just see the previous post.

Evaluating Mar Roxas on his Own Merits

Today, just a few days from the 2016 Philippine presidential elections, the candidates’ identities have crystallized and become widely known. Grace Poe has the most nebulous platform with the most mysterious persona: nobody has any idea why she is running or what for, other than both (i) to continue the Daang Matuwid of the Aquino Administration and (ii) to discontinue the policies adopted by the same Administration. That this comically schizophrenic platform has not collapsed of its own weight is due solely to the limitless wealth of her famous (or infamous) benefactor. She is not worthy of further discussion. Jejomar Binay has been universally acknowledged to be just a corrupt thief out to sauté the illiterate masses in their own lard, and has accordingly fallen far behind in surveys and in the esteem of his peers. He is now a nonentity. The election is therefore now down to Mar Roxas, former Senator and former Secretary of the Interior and Local Government, and Rodrigo Duterte, incumbent Mayor and former Congressman of Davao.

Because of all the muckraking, it is rewarding to make an attempt to elucidate what distinguishes the two presidential candidates. Supporters of Mr. Roxas try to shout down the supporters of Mr. Duterte by a two-pronged strategy. The first prong is expressed in the positive: Mar Roxas is “good” for the country. The second prong is the negative message: Duterte is bad. By contrast, supporters of Mr. Duterte cry out for change—in Filipino, “tunay na pagbabago.” By fleshing out their arguments, the nature of each candidate emerges independently of the identity that each one professes—and so does a modicum of truth: whom should Filipinos vote for?

A.    Roxas is Good for the Philippines

Before examining the positive message of Mr. Roxas being good for the Philippines, a word of caution should be said. Typhoon Yolanda (international name: Haiyan) hit the central Philippines on 8 November 2013 and Tacloban City, Leyte, was hit the hardest. Tens of thousands of people died. Mar Roxas was there before, during, and after the typhoon made landfall, but that made no difference: he was, and is currently being, blamed for the government’s perceived inefficiency in delivering aid to the victims. (Mr. Duterte went to Tacloban to deliver help from his city—his current term as Mayor started on 1 July 2013 and will end on 30 June 2016. His comment on Mr. Roxas’s leadership: “puro meeting”.) TheEconomizer defers to other people’s judgment on Mr. Roxas regarding Yolanda—the food aid rotting in warehouses, the billions of pesos in financial aid that went missing, etc.—because TheEconomizer was not there. Other people, maybe including Mr. Duterte, who know a thing or two about what the Government achieved or failed to achieve in the aftermath of the typhoon, will be able to give a better assessment of Mr. Roxas’s ability in a time of severe stress. This blog post, therefore, will omit mention of Mr. Roxas’s performance as regards Yolanda.

Instead, Mr. Roxas will be evaluated only on his own merits. His positive message comprises six areas, and each of these are examined here in turn.

1.      The Aquino Administration, of which Mr. Roxas is an influential member and is the standard-bearer, adopted sound financial policies which led to the macroeconomic stability that the Philippines currently enjoys. A Roxas Presidency will continue this good fortune.

2.    Mar Roxas as Secretary of Trade and Industry launched “Make I.T. Philippines,” which aimed to attract IT and call-center companies to the country. As a result, Mr. Roxas is deemed the “Father of the BPO Industry” in the Philippines.

3.    The Aquino Administration launched the Daang Matuwid, espoused good governance, and represents clean and honest government. Mr. Roxas will continue this policy.

4.    Mar Roxas as Secretary of the Interior and Local Government, with authority over the Philippine National Police, initiated and implemented Oplan Lambat-Sibat—which resulted in the capture of the most wanted criminals. From 900 most wanted criminals, only 350 remain at large due to this program.

5.    Mar Roxas as Senator authored the Cheaper Medicines Law, which led to the creation of the generic medicines market in the Philippines, affording less-expensive but critical drugs to the poor.

6.    Mar Roxas is the “disente” candidate, or “decent” in the sense of being well-spoken and dignified, in contrast to the earthy and rough personality of the Mayor of Davao. The Philippines would be proud to present him to other countries as its President.

A1. Macroeconomic Stability

The macroeconomic stability here refers to the low volatility in price levels and the US dollar – Philippine peso exchange rate—in other words, when speaking of ‘macroeconomic stability’, one refers to low inflation and stable exchange rate. Unfortunately for the Roxas campaign, macroeconomic stability in the Philippines traces its roots to 2005.

Below is a graph of the USD/PHP exchange rate. One sees the tremendous and sustained appreciation of the peso’s value starting from January 2005 until January 2008, from PhP56 to the dollar to almost just PhP40 to the dollar—an increase of almost 40 per cent. The exchange rate started to move up from March 2008 until settles in mid-to-high 40’s in November that year. It does not move away from that band until 2012, when it started falling again to the levels of 2007 (five years before). Finally, from 2013, the exchange rate has started to rise again to mid-to-high 40’s.

The absolute low reached by the USD/PHP was on 27 February 2008, when it touched 40.27. It did not reach that low again until 30 March 2013, when it was 40.555. The fall of the Peso in 2008 was due to the rise in global oil prices, when a barrel of oil reached $147 at the peak. Despite this, however, and despite the Great Recession started by the collapse of Lehman Brothers in September 2008, the Peso never broke the PhP50-to-the-dollar barrier. What explains the resilience of the Peso?

Strength gained by the peso is one of the positive effects of Republic Act No. 9337 or most commonly known as the Expanded Value-Added Tax law (EVAT/RVAT Law). EVAT Law raised the VAT rate from 10% - 12% for goods and services previously exempted from VAT – to name a few, domestic transport of passenger by air and sea, generation and transmission of electricity and petroleum products  were now subjected to VAT. In addition, the law increase corporate income tax from 32% to 35% but later reduced to 30%.

As a result of this measure, government revenue jumped 20% in 2006 vs 2005, narrowing the fiscal deficit to 1.0% of GDP from 5.3% in 2002.[1]

Chart A-1. Philippine Government Fiscal Balance[2]

 

Because of the government’s improved fiscal position, it was able to borrow less, and most importantly, change the borrowing mix from foreign to domestic. In Chart A-2, we see that total government debt leveled off starting in 2005 and it was the reduction in foreign debt that was driving the shift.

This resulted in lower interest rates, as the supply of bonds dried up. At the same time, lower interest rates increased the present value of bonds and stocks, making them attractive to foreign investors. This led to increased foreign portfolio investment (Chart A-3), which was ultimately responsible for the fall in the exchange rate (and the appreciation of the Peso).

Chart A-2. Philippine National Government Debt[3]

    

At the same time as the foreign portfolio investments were coming in, remittances from OFWs also started to boom in 2004. Significantly, a third significant source of foreign exchange started to show itself: the business-process outsourcing (BPO) industry.

Chart A-3. Foreign Inflows and OFW Remittances

 

The emergence of the BPO industry also played an important role in the peso appreciation. In 2000, the industry only accounted for 0.075% of GDP, but the sector’s contribution jumped to 2.4% and 5.4% through 2005 and 2006 respectively. The BPO industry has been a key employment generating sector which has employed approximately 163,000 workers by end-2005 (Magtibay-Ramos et al. 2007). Revenues grew by 46% a year between 2004 and 2006, capturing 5% of the global market in 2006.[4] The total BPO investment projects registered under the Philippine Board of Investment and the Philippine Economic Zone Authority reached Php 43.2 billion or 420 projects. Government expressed support through investing more on IT programs, spending on infrastructure, and reforming policies to improve, maintain and develop our competitive edge against other leading and emerging BPO providers. It is also interesting to note that the sector offers above-average salaries.

All these allowed the BSP’s gross international reserves to balloon (Chart A-4), thus sustaining the strength of the Peso throughout these past 10 years.

Chart A-4. BOP and Forex Reserves at the BSP

Of course, some would say that this was due mostly to the low interest rates in the developed economies. But if the Philippines were a basket case, that yield-seeking money would not be aiming for the country. There are Indonesia, Thailand, the BRICS countries, and others, who would have been worthier targets. The fact is that investors flocked to the Philippines for the mixture of high yield and appreciating currency, which could only have been sustained by a healthy public fisc. 

As a result, the Philippines' international credit rating has been upgraded several times, from junk to investment-grade. Since “Fitch Ratings and Standard & Poor’s conferred investment grade status (BBB-) to the country on March 27, 2013 and May 2, 2013, respectively,” and not before 2010, the Aquino Administration has claimed this success as its own. Unfortunately for this claim, these upgrades were just a continuation of what Moody's did on 23 July 2009, when it first upgraded the Philippines to Ba3 from B1, with a stable outlook. It was the first credit rating upgrade for the country in twelve years, and it came in the middle of a world recession. THAT was an achievement.

By contrast, what is the equivalent achievement of the Aquino Administration? Is there a counterpart to the EVAT law that was pushed for, and signed, by PNoy? The President knows how to campaign for a law he likes: witness the bitter battles over the Reproductive Health Law. He carried the fight to the bitter end, and won. The fight over the Sin Tax Law was less bitter, but … did it raise the same amount?

The Sin Tax Reform Act of 2012 stipulated that 85% of the additional revenue raised will be allocated to health programs (Department of Health). The table below shows that PHP 44.72 billion was allocated in 2013 and PHP 42.86 billion in 2014 (ibid.). This means that, dividing each number by 85%, additional revenue raised was about PHP 52.6 billion in 2013 and PHP 50.4 billion in 2014.

By contrast, the eVAT law raised hundreds of billions of pesos in additional revenue, such that VAT collections jumped to 30% of total tax revenue in 2006 from only 22% in 2005 (NTRC Tax Research Journal).

The Sin Tax Reform Act simply did not have the same effect on the currency as the earlier VAT law.

Can we trace therefore the Philippines’ macroeconomic stability to the Aquino Administration? By not plundering the national coffers, by not exhausting the Treasury on pro-poor programs that benefit only the incumbent administration, PNoy can at least claim to continue the virtuous path of the previous Administration.

But it is a very different claim from being the men and women responsible for the stability in the first place. Supposing the extra revenue had not been resistant to “exhaustion”, suppose that the previous administration had not enacted the EVAT law, or suppose that the opponents of the law (and there were very many and powerful) had succeeded in blocking it—what would the Aquino Administration continue?

Above all, since the topic is the elections, what role did Mar Roxas play in passing the Sin Tax Reform Law?

A2. Fatherhood of the BPO Industry

As seen in the previous section, the BPO Industry is one of the two legs supporting the Peso and the general fiscal position of the Philippines. Since Mr. Roxas claims to be the father of the BPO Industry, he will have a direct hand in restructuring the country’s external financial position. It would be one of his signal achievements.

Unfortunately, this achievement rests on a slogan. Mr. Roxas, when he was Secretary of Trade and Industry, was responsible for launching the “Make I.T. Philippines”, a campaign that ranged from “trade missions to outsourcing exhibitions” (Digital Filipino) to attract a larger share of the outsourcing market in the U.S., Europe, and other neighboring countries such as India. The campaign “packaged the country as ‘E-Services Hub of Asia’” (ibid.).

If that were all it took for the BPO revenues to skyrocket, Mr. Roxas’s claim of Fatherhood of the BPO Industry would be credible. In the year 2000, when Mr. Roxas first headed the DTI, “the BPO industry accounted for 0.075% of the country’s GDP” (Rappler). In 2001 and 2003, the last year Mr. Roxas was Secretary, the historical timeline of the BPO industry can be contained in two sentences from the Inquirer and Rappler:

2001 – PeopleSupport, a US-Based outsourcing center, restructured their business, and moved their operations to the Philippines, providing 8,400 jobs

2003 – The Convergys Corp. opened up two call centres in the Philippines. The Philippines, along with India, was chosen by then president of the company, Jack Freker, as part of the company’s global expansion and revenue generation plan

It looks like Mr. Roxas did indeed succeed in getting PeopleSupport and Convergys to set up shop in the Philippines during his time as Secretary. However, a study published in 2014 by the Lee Kuan Yew School of Public Policy noted that the first-ever call centre in the Philippines was set up in 1997 when “Sykes Enterprises acquired Scotland-based McQueen Group” (LKY). Perhaps Mr. Roxas meant animation outsourcing? This was started by SPi Global “in the 1980s” (ibid.). In fact, “1988 saw the establishment of Fil-Cartoons, a fully-owned subsidiary of Hanna Barbera” (ibid.). How about the specifically IT-based outsourcing industry? Here is the study again: “Andersen Consulting (now Accenture) established the first captive centre in the Philippines in 1985” (ibid.).

Does all this make him the “Father of the BPO Industry”?

But Mr. Roxas’s assertions should be taken seriously in another sense: he may just be responsible for the phenomenal growth of the BPO industry in the 2000s, after he left the DOTC to become Senator. In other words, his actions in the DOTC, the programs he institutionalized, and the policies he implemented may account for the growth of the BPO industry. Do they?

It seems that Mr. Roxas is an absentee father, if he indeed sired the BPO industry. The real reason the BPO industry took off is the policy package enacted by the Arroyo Administration to develop and promote the IT and BPO sectors. This package included the following, but there may be more:

a.    Commission on Information and Communications Technology (CICT) – Created on 12 January 2004 through Executive Order No. 269, “was the primary policy, planning, coordinating, implementing, regulating, and administrative entity of the executive branch of the Philippine Government that would promote, develop, and regulate integrated and strategic information and communications technology (ICT) systems and reliable and cost-efficient communication facilities and services” (Wikipedia). The Arroyo Administration pushed for the creation of a Department of ICT (DICT) to replace the CICT, but the bill died in the Senate after being approved by the Committee on Science and Technology in August 2008. Did Senator Roxas support this bill? There is no record.

b.    Establishment of the Philippine Cyber Corridor – This was “a virtual ICT channel stretching over 600 miles from Baguio City to Davao City designed to provide a variety of Business Processing at par with global standards, supported by a $20 billion high band width fiber back bone digital network. . . . In December 2007, the National Outsourcing Association (NOA) of the United Kingdom awarded ‘Best Offshoring Destination of the Year’ to the Philippines” (source). This particular program “provided an ICT belt across the country and reduced bandwidth costs by 85%” (DLSU). This Cyber Corridor was established, along with other “super regions”, by Executive Order No. 561 signed in 2006 by President Gloria Macapagal Arroyo (Official Gazette).

c.     Strong industry associations – Although the Contact Center Association of the Philippines (CCAP) was founded in 2001, it was the Business Processing Association of the Philippines (BPAP, now ITBPAP), which in 2006 established a “Roadmap 2010” to plan the growth of the industry and to professionalize it. “In 2009, ITBPAP launched its Next Wave Cities ranking, promoting and assessing second- and third-tier cities as potential industry locations” (LKY). And this ranking and awards system is still continuing: on 30 March 2016, for example, Baguio made it to the country’s Top Ten Next Wave Cities list (Baguio Midland Courier). The BPAP was founded with support from the Arroyo Administration.

d.    Government support – Featured in the case study by the LKY School of Public Policy is Davao. It is worthwhile to quote at length from this 2014 study:

“The government has played a major role in attracting BPO firms, to add to its existing agriculture and tourism sectors. The Duterte family’s political dynasty in the city ensures a level of continuity in policy, with Mayor Rodrigo Duterte and his daughter Sara Duterte alternating in office since the early 2000s. Mayor Duterte has kept a strong and firm hand on the city of Davao, not being afraid to use strong-arm tactics to keep drug smugglers and other social problems at bay. The foundation of peace and stability over more than a decade has led to a unique combination of low political risk in an otherwise highly volatile province, complemented by relatively low wages in Davao compared to Manila and a young, educated population eager to learn” (ibid.).

e.    Training with TESDA – The study should speak for itself:

“In 2006, President Gloria Macapagal Arroyo’s initiative launched the Industry-based Training for Work Scholarship (I-TWSP) managed by the Technical Education and Skills Development Authority (TESDA). The program invested P1.3 billion (USD 30.6 million) by 2014, and trained 65,000 BPO “near hires”, 70.7% of whom are now employed in the industry” (ibid.).

Did or did not the Aquino Administration have a hand in the BPO industry? Yes—in a reprehensible way. On 23 June 2011, President Aquino dissolved the CICT through Executive Order No. 47, moving all its functions and attached agencies to the Department of Science and Technology. Unfortunately, two days before, the President had already appointed a CICT Chairman, Oliver Chato, son of former Internal Revenue Commissioner Liwayway Vinzons Chato. As a news report put it, “Aquino appointed the new commissioner and then abolished the post 48 hours later” (GMA News).

In summary, not only did the Aquino Administration not help the BPO industry at all, it worked deliberately to undermine the government agencies working in support of it. There is no record of Senator Roxas supporting the bill to create the DICT, as he was a member of the Senate Committee on Trade and Commerce—not of the Committee on Science and Technology, which approved it. The Executive Order abolishing the CICT looked to be done out of spite at the former Administration to belittle its most significant achievement. By claiming the title “Father of the BPO Industry” on the strength of the “Make IT Philippines” slogan, Mr. Roxas is simply being ridiculous, deceiving the people of the Philippines on how they got their “oversized lattes” (Carlos Celdran).

A3. Daang Matuwid

The central claim to fame of the Aquino Administration is “Daang Matuwid”, or “Straight Path”. This is a pledge that the government under President Aquino is a clean government, not corrupt, and unforgiving to the corrupt. Mr. Roxas has promised to continue this clean government, and it behooves us to examine it whether it is really clean.

The Napoles scandal showed that corruption did not stop in 2010. On this score, the Aquino Administration already has failed to stop corruption despite its pledge. But is it clean itself?

Mr. Roxas was the Secretary of Transport and Communications until 18 October 2012 (Wikipedia), but

“THE TRANSPORTATION department on Friday named a temporary maintenance service provider for Metro Rail Transit Line 3 (MRT-3), replacing Sumitomo Corp., whose 12-year contract ended on Oct. 19” (BusinessWorld, 19 October 2012).

“Friday”, in BusinessWorld’s news article, means 19 October 2012. Mr. Roxas did not sign the said contract; instead, it was his successor, Joseph Emilio Aguinaldo Abaya, who executed it as his first official act as Secretary. If the MRT’s trains subsequently failed, who is to blame?

In December 2015, the Sandiganbayan found probable cause to indict ex-MRT General Manager Al Vitangcol and executives of PH Trams for the anomalous 2012 contract (BusinessWorld). PH Trams is the company that was granted the temporary maintenance contract, as the partner of CB&T, which is already the maintenance contractor of LRT Line 1. PH Trams is interesting because its controlling shareholder is Marlo de la Cruz, a Liberal Party fund-raiser based in Tarlac (Tiglao).

This is enough to illustrate the cleanliness of Daang Matuwid.

A4. Oplan Lambat Sibat

This is a brainchild of Mr. Roxas, and any success this program encounters will be legitimately his. Unfortunately, it will also be of the police officers who are currently implementing it. Reliable data are not readily available, but the Chief of the Philippine National Police, General Magalong, admits in a Senate hearing in August 2015 that crime statistics are routinely faked to give the impression of lower crime volume, in response to pressure from the authorities (InterAksyon). Therefore, any claim to success in crime prevention or solution from the Secretary of the Interior and Local Government does not rest on any reliable “scientific” data. Here is the quote from Gen. Magalong:

“Magalong acknowledged that certain instances of inaccuracy of the crime volume statistics report in particular precincts may be attributed to ‘under-reporting, doctored reports and most of the time, no reporting at all.’“‘This was reported by our red teams sent at random to different police stations to check the accuracy of their blotter-based crime report, against the statistics submitted at the provincial and regional levels,’ Magalong said.“Magalong said the institution of OPLAN Lambat-Sibat, initiated by the Department of Interior and Local Government (DILG) in Metro Manila and now cascading to Regions 3 and 4.“Magalong disclosed that, among the modus operandi carried out by local police stations are: non recording of complaints, refusal to investigate reports and doctored statistics in precinct levels where they have two separate blotter books, one for the true volumes and another for altered recordings.“‘We have seen that ... instances of cheating or playing fast,’ Magalong said, in Filipino.”  

A5. Cheaper Medicines Law

The Cheaper Medicines Act of 2008 is one of the accomplishments of Senator Roxas as Chairman of the Senate Committee on Trade and Commerce. But he was not the original proponent—that honor belongs to Iloilo Representative Ferjenel Biron. In fact, wrangling between the two, Messrs. Biron and Roxas, was the chief cause why the Act took so long to pass (The Daily Guardian).

Mr. Biron’s version in the House of Representatives pushed for mandatory drug price regulation, but Mr. Roxas advocated parallel importation, creating competition between generic and patented drugs to bring down their prices. This is what President Arroyo refers to in her last SONA, when she said:

“I supported the tough version of the House of the Cheaper Medicine Law. I supported it over the weak version of my critics. The result: the drug companies volunteered to bring down drug prices, slashing by half the prices of 16 drugs. Thank you, Congressman Cua, Alvarez, Biron and Locsin.”

But the more interesting development is revealed by Wikileaks. Cables from the US Embassy stated that Mr. Roxas discussed the status of the legislation with various US Government officials, who lobbied for the economic interests of US drug firms. The cables do not say that Mr. Roxas opposed the American policy proposals, but it is clear that Mr. Biron does not like the end-result.

Mr. Roxas several times is quoted in the cables as fighting for the side of the ordinary Filipino, but it is also clear that US interests on data protection, particularly “data exclusivity”, were upheld under his auspices. In fact, the only reasonable conclusion from the cables is that Mr. Roxas was the vehicle through which the US Government conducted its lobbying efforts as regards generic drugs in the Philippines--and what a cooperative vehicle he was.

A6. Public Decency

Mr. Roxas says that he is the decent alternative to Mayor Duterte, who speaks foul language and curses the Pope. But on 12 December 2008, he infamously uttered “P.I.” in public, cursing President Gloria Macapagal Arroyo during a political rally. A video of that can be found on YouTube.

To say that he is more decent on account of Mr. Duterte’s foul mouth is just simply hypocritical. 

To sum up this very long post, these are the conclusions that can be drawn from Mr. Roxas’s positive claims:

A1. Macroeconomic Stability – due to Arroyo Administration

A2. Fatherhood of the BPO Industry – BPOs in the Philippines started in 1980s, call center in 1997; success due to Arroyo Administration

A3. Daang Matuwid – disproved by PH Trams and MRT3

A4. Oplan Lambat Sibat – unreliable data

A5. Cheaper Medicines Law – not the original proponent, conduit for US lobbying

A6. Public Decency - hypocritical

Therefore, Mr. Roxas has no claim to be a good candidate, having merely appropriated the achievements of others as his own or having unreliable data to back up his claims; and because of this, he does not earn the Presidency on his own merits.  

(Note: The next post will be about Duterte's alleged unsuitability to be President.)

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[1] Asian Development Bank, 2008. Asian Development Outlook 2008. Manila, Philippines. Graphs are also sourced from the Asian Development Outlook series.

[2] Asian Development Bank, 2008. Asian Development Outlook 2008, p. 217. Manila, Philippines.

[3] Asian Development Bank, 2007. Asian Development Outlook 2007, p. 227. Manila, Philippines.

[4] Asian Development Bank, 2008. Asian Development Outlook 2008, p. 218. Manila, Philippines.