Bottom-dweller

In the latest global survey on the ease of doing business, the Philippines slipped dramatically down the ladder. We find ourselves in the bottom third of the rankings, grouped with countries one might be hard-pressed to imagine business even being done in them.

This is more than a disappointment. It is a disgrace.

Little wonder that we are getting such a miniscule share of investment flows in the region. Little wonder that between the large corporations and the neighborhood sari-sari store, there are very few businesses thriving in the small- and medium-range. Little wonder that our unemployment rate is chronically high and the spread of poverty incurably wide.

Unless we are able to quickly institute changes in our business environment, there will be little investments to be hoped for. We will remain uncompetitive. We will be left behind even further.

The easiest thing to do, in the face of the glaring evidence, is to indulge in partisan rant. We are sinking in the rankings like a rock. This is surely reflective of failure to improve our governance.

The harder thing to do is to figure a way out of this predicament — or forever keep our economy and society hostage to failure.

Our rapidly eroding competitiveness standing is a systemic problem. It draws from many things: a low-quality bureaucracy; the unforeseen implications of devolving power to the unready institutions of local governance; the persistence of a domestic oligarchy; a Constitution inclined to be economically restrictive; deficient economic policies and legislation; and, yes, pervasive corruption.

An inhospitable business environment has kept whatever growth we have managed to register consumption-driven rather than investment-led. The former engine of economic expansion does not create as much new jobs as the latter.

We do not have much in foreign debt, if by that we mean using the savings of other economies to capitalize ours. Much of our dollar- and peso-denominated bonds are purchased by Filipinos with some amount of savings they want to store in the safest possible financial instruments.

That money, used to cover our chronic budgetary deficits, represent a whole lot of opportunity costs for our economy. They could have been used, instead, to invest in businesses that will broaden the base of wealth-creation in our society.

The BSP now holds over $41 billion in foreign currency reserves, the highest on record. Some economic experts now believe that sum is excessive. That money, kept idle in the form of reserves, could be used to finance our growth instead.

The challenge is multifold. There is no single silver bullet to solve the problem.

We have heard all the horror stories.

Direly needed foreign donations to our provincial hospitals are trapped in our ports unless some way is found to pay “facilitation fees.” So many vital investments into our economy were withdrawn because of shakedowns from the barangay level, to the municipal and provincial councils.

In public biddings, the losing bidders invariably run to court and easily acquire restraining orders. The sanctity of contracts is never sacred, with the courts enjoying unlimited review powers over contracts that might be inimical to public interest — although nearly all the public contracts voided by court ruling appear to deserve the fate.

The high cost of getting elected in this country has its own deleterious effects on the business environment. Elected officials, for both local and national office, seek to recover their electoral investments by extorting from businesses. The devolution of power to local government units, the evidence shows, aggravated the spread of corruption. Municipal ordinances and provincial board resolutions are for sale in many parts of the country.

Bribery is the crudest form of corruption. Comprehensive reengineering is required to narrow the margin of discretion that allows bureaucrats to create pressure points for extortion. What is required is an entirely new idea of government: from gate-keeper to enabler.

Unless that idea takes root, modern government will continue to evade us. When it does, our business environment will continue to be inhospitable. Our economy will remain weak. We will continue exporting our people to economies that create more jobs than they have the population to supply.

We have never really given national competitiveness the attention it deserved — mainly because the solutions to our lack of competitiveness run against the grain of our money politics and the populist solutions that propel traditional politicians to power.

It is always fashionable to rail against corruption. But corruption is itself nothing more than a symptom of weakly structured institutions of governance. It is sexy to talk about reengineering institutions; sexier to deliver tirades against corruption.

If this outgoing administration is truly concerned about leaving a lasting legacy, it should leave us a roadmap for the hard reforms than need to be done. Our failing rankings in the ease of doing business, our declining competitiveness ranking and our eroding standing in the economic freedom indicators are things we ought to be gravely concerned about.

Those who offer to lead us into the future after the next elections must offer us a clear program for improving competitiveness and economic freedom, the ease of doing business and a higher grade bureaucracy. Some of the reforms might be unpopular. But unless they are done, the nation will continue to fail.