Never waste a crisis

My friends at the Foundation for Economic Freedom (FEF) are hopeless “incrementalists”. We endlessly talk about this reform or another and often rejoice if one pet reform appears to be on the verge of being realized.

We also believe we should never waste a crisis. When a crisis strikes, we think it may make our reform agenda possible.

From the way our Viber group had been brimming with ideas on how to recover, I would say my FEF friends are really eager to make sure this coronavirus disease 2019 or COVID-19 crisis is not wasted. It is an opportunity for the country to reset the economy. Restarting can best happen by going back to basics.

My FEF friends had two Zoom discussions on a wide range of topics from finance to logistics to agriculture to transportation and anything else that could help us get going again. I only have space to focus on Balik Probinsya. It is an all-encompassing proposal that’s not new, but covers a number of reform areas.

The Balik Probinsya Program proposed by Sen. Bong Go had been tried before and failed. People just got the relocation money, had a vacation for a few weeks in their hometowns and returned to Metro Manila.

But yes, something like it makes sense in the light of what the lockdown taught us. Congestion in Metro Manila makes the NCR a big petri dish for pathogens causing pandemics like this Wuhan virus. We need to spread out, have more open spaces.

Metro Manila needed to be decongested even before the virus locked it down. We long needed to disperse economic opportunities and make the metropolis livable. But only Transport Secretary Art Tugade took the proposition seriously by moving the DOTr head office to Clark.

Government must start the movement out of Manila. But the Supreme Court and the Senate are building new expensive headquarters in BGC. How is that for setting the example!

Actually, other than major departments and agencies moving out of Metro Manila, a good Balik Probinsya program must provide incentives for businesses to relocate out of Mega Manila. Without the jobs investors create, the program will again fail as it always did.

Probinsyanos crowd Metro Manila because the jobs are here. Sen Go cannot just throw money at the informal settlers to make them go back to the provinces. We need a good plan aside from the big bucks to make this program fly.

There is a long-term plan that should be dusted off. The Philippine Development Plan prepared by NEDA has for a long time incorporated a spatial development strategy framework. The principle is to avoid extreme clustering in very few metropolitan areas.

In the proposal, there will still be centers like Manila, Cebu, but there should be a hierarchy of local clusters (intermediate cities) that will lead the development of their areas. Development is spread out in space as we re-examine geographic structure.

As part of the decongestion strategy, there was a suggestion to look at the model of development in the Batangas-Cavite Corridor and organize similar groups to form other urban clusters. We must reduce the reliance on a handful of large developers to do urban planning.

To encourage investments in rural development, the government must first provide the necessary infrastructure to encourage more private firms to move out of the traditional growth centers like Metro Manila, Metro Cebu, Metro Davao.

At present, a large portion of the budget for infrastructure projects are concentrated in NCR, and Regions 3, 4, and 5 since 60 percent of the economic activity is in NCR and nearby regions. NEDA needs to change its criteria to redistribute investment in infrastructure across the country beyond the traditional growth centers.

Here are some proposals that came out in the Zoom session:

Promote one PEZA zone per province/region. Also consider looking at the Subic-Clark corridor in Central Luzon which is underdeveloped in terms of manufacturing compared to Batangas. Yet this region has Clark Airport, Subic Port and proximity to labor surplus (NCR).

Incentivize locators in agri-business and agro-processing [in provinces] especially if supply chains are not developed. Ensure downstream processing to absorb agriculture products and reduce wastage. The key here is still amending CARL to allow large scale farming as processing industries need security of supply of raw materials.

Improve the quality of education/skills and healthcare in order to raise the quality of human resources in the countryside. There would be more investors in new growth centers if investors see that the quality and supply of labor in those areas is already comparable with NCR and other urban areas.

Digital technology could be the great equalizer. If our telcos are able to provide same quality service, BPOs and other businesses will be encouraged to locate away from NCR. Congress must pass the Open Access bill to create effective competition to the telcos for broadband access.

Denying investment perks in Mega Manila may start the ball rolling in a viable Balik Probinsya program.

But regional development councils must make sure they have better planned communities ready to absorb new businesses and industries. Otherwise, we may end up replicating the problems of haphazard growth we now have in NCR and other mega urban centers.

Now more than ever, we need foreign investments to develop our countryside. Japanese companies are being encouraged by their government to move out of China, but we are not likely to attract any of them with our current investment climate.

This is why there is urgency in liberalizing ownership restrictions in various industries. We also need to show a stable and predictable regulatory environment. Political risk is pretty high for us now and that must change.

Reforms we should have done before COVID make even more sense now as we try to recover from the pandemic. Never waste a good crisis. Use it to get reforms done. COVID is giving us a chance to start fresh.

Boo Chanco’s e-mail address is [email protected]. Follow him on Twitter @boochanco