What is to be done (Part 2)

By Benjamin R. Punongbayan

WE NEED to look long-term — beyond the six-year presidential term. There are a number of things we need to do and carry over the long term.

Substantial reduction of poverty. We have to deal with the reduction of poverty head on and not simply view such a reduction as a consequence of high economic growth. Practically all the succeeding views in this commentary also relate to poverty reduction, but there is one item that deserves to be highlighted — the government should provide housing, practically free, to the teeming poor over a period of time.

Free housing may take a mix of structural forms. These could be stand-alone house-and-lot, linked houses, and apartment units in low-storey buildings. The latter two forms may be viewed as condominium units. These dwellings should be provided practically free, because the poor simply cannot afford anything with a value of tens of thousands of pesos. But there should be a purchase price of a nominal amount to be paid over a period of time, to give the poor owner a stake in ownership that will enable them to treasure their dwelling. There should also be a time restriction in the event of disposal of the property.

A wild idea? I do not think so. It is doable if we want to do it. First of all, this necessary assistance can be viewed as a restitution to the descendants of our ancestors — our ancestors who were dispossessed of their use of the land where they were born when the Spaniards came and stayed for 300 years.

Using the official statistics for the number of families who are considered living in poverty in 2018 of 3 million families, to provide each of them a dwelling will cost a total of P1.5 trillion at P500,000 per dwelling unit. This cost per unit is a reasonable amount that approximates the cost of a housing unit for a low-income family as shown in a cost analysis of the Housing and Urban Development Coordinating Council (HUDCC) in its website. This cost analysis includes the cost of P402,000 for an apartment unit in a five-storey housing. Note that the HUDCC units are either for rent or for sale. If the housing units for the poor are planned and designed to be given free, the housing structural forms presented in the cost analysis for a low-income family may change and the cost may even go down.

The estimated total cost of P1.5 trillion translates to P150 billion (covering 300,000 families) per year over 10 years, or P75 billion (150,000 families) per year over 20 years. Such fund allocation from the national budget is a reasonable and affordable amount indeed, especially considering its intended purpose.

We can start with families living on sidewalks, under bridges, and along the banks of waterways. Then proceed to those living in slums. Of course, we need to get them to adjust to their new environment by teaching them to maintain cleanliness in their household and surroundings and practice good personal hygiene, among other things. I am sure that an existing government agency can handle those chores.

Improving agricultural productivity. We already know all the solutions to the identified problems in agriculture. All we need to do is to bring a strong resolve to execute them by providing management expertise and allocating the necessary funds required by these solutions.

However, there is one effective solution that appears to have not surfaced yet. My observation and inquiries indicate that much of our agricultural lands are owned by absentee landlords, many of whom are now residents in foreign countries. As far as I know, there has been no survey made yet to determine the extent of this absentee ownership. We, therefore, urgently need to make a survey all over the country to determine the actual extent. This condition of absentee farm ownership is a big factor in the lagging productivity in agriculture. There is no owner present to drive a higher yield from the farmlands. If absentee landlords themselves are no longer interested in farming, the government must buy these farmlands and distribute them at an affordable rate to those tilling the lands. We must adopt a public policy requiring that farmland of a few hectarage (as opposed to a big plantation) must be owned by the person doing the actual farming. I am sure this policy will redound to much improved productivity.

I anticipate that many will object to such a policy on the basis that a farmland of a few hectares is too small to get more productivity from its exploitation — the same argument made by those who were against land reform. However, it is very important that we solve first the social problem with land ownership. Subsequently, we can put in place the appropriate structure that may provide higher agriculture productivity. In any case, transferring the farmlands from absentee owners to farmers actually tilling the soil will already translate to a noticeably higher productivity in the first round.

Adding more economic drivers. Our present economic drivers — OFWs, offshoring work, and electronics products assembly — are either transitory or do not provide us with much economic value. We need to identify and develop activities that will provide us with longer-term and greater economic benefits. Tourism is an excellent activity, but we need to be more serious and deliberate about developing it by pouring more investments in it by building and improving the necessary infrastructure leading to identified tourist destinations. We have to develop a long-term plan for this purpose.

Research and development, shipbuilding, of which we already have a nucleus (very suitable for a country consisting of thousands of islands), higher-stage electronics manufacturing, and a vibrant regional financial market center are possible economic drivers.

This is just a short list. An intensive search and evaluation may identify additional viable economic drivers. The idea is to make an exhaustive search and thorough evaluation of these potentials.

To pursue and develop these potential additional economic drivers, we need to extensively overhaul our education system. We need to vastly improve the public elementary and secondary education systems, including developing a much more effective teaching profession. At the university level, we have to strongly encourage the sciences — engineering, mathematics, physics, biology, and the like — and high-level computer technology. We have to discourage law, accounting, business management, hotel and restaurant management, and the like. We have too many people in these segments already, and most of their graduates are not presently earning well.

To ensure that we capture the right college entrants, the government must impose a minimum score level for admission to all universities and colleges, public and private. All those falling below this cutoff score have to go for alternative education, such as more extensive vocational education and training. We simply do not need bookkeepers, clerks, legal assistants, hotel and restaurant personnel, draftsmen, electricians, and similar workers to be college graduates, especially with our present K to 12 education system. Such a policy may lead to higher compensation levels for non-college graduates as it does in Germany and other European countries.

Connecting the islands. The whole Philippine geographical area is not contiguous, but this should not stop us from connecting all the right places with bridges, undersea tunnels, and ferries. These places must be identified and given development timelines. We are now giving good attention to highways, airports, and railways. We must do the same for seaports and other connectors between islands. These infrastructure developments will certainly lead to significantly reduced cost of doing business and may lead to continuously increasing investments.

To drive these infrastructure activities forward, we need to draw up a country-wide long-term plan. In this regard, I have read recently about proposals to connect by bridge Sorsogon with Samar and Panay with Negros. I anticipate that there are similar big islands that can be similarly connected. These should all be identified and included in the plan.

For entry points having good economic potential, but which cannot be connected by bridge, let us connect them by building modern and fast ferry systems and road or rail undersea tunnels.

We used to have an operating railway on Panay Island. This should be reactivated, modernized and, perhaps, be extended to Negros.

(To be continued next Friday.)

Benjamin R. Punongbayan is the founder of Punongbayan & Araullo, one of the Philippines’ leading auditing firms.

As published in BusinessWorld, dated 06 March 2020