The Way Forward: The Path to Inclusive Growth

Toti Chikiamco is an economist who passionately loves this country. He is also a businessman who competes and has to survive in the real world. This rare combination makes his essays very compelling reading for me. I find his observations and suggestions realistic and practical. Many times I learn new ideas. This book has gems of wisdom.

– Gloria Tan-Climaco, presently chairman of the Excom of San Carlos Bioenergy Inc. and independent director of Philippine institutions

Toti Chikiamco pulls no punches in voicing his considered views on various dimensions of the development challenge in the Philippines, throwing the solid weight of economic analysis behind them. In this collection of essays unfolds an instructive pattern of timeless thoughts underlying commentaries with the urgency of the here and now.

– Atty. Raphael Lotilla, former Secretary of Energy

"As one of our handful of public intellectuals, Calixto ‘Toti’ Chikiamco stands alone in his insightful and rigorous analysis of the Philippine political economy, property rights, institutional economics, technological change, and development entrepreneurship. That he finds time for this, despite his day job as a successful entrepreneur, is a testament to his intelligence and social conscience.

He and the publisher do his readers a favor by publishing his essays, thematically well organized. In addition to counting myself as among his faithful readers, I feel privileged to be his fellow columnist in Introspective as co-Trustee in the Institute for Development and Econometric Analysis, and his fellow Fellow in the Foundation for Economic Freedom (FEF). FEF is our band of ‘raging incrementalists’ for market-friendly reforms and good governance. We are grateful he has agreed to be our president to lend his talents and passion to our various advocacies which are well aired in his essays."

– Romeo Bernardo, former Finance Undersecretary and Co-Founder, Bernardo, Lazaro, Tiu and Associates Inc.

"Toti Chikiamco is that rare economist who is grounded in both the academic and practical sides of the dismal science. He is also the kind of person who will go all out to prove what he believes in by doing something in the real world. His advocacy of property rights, for example, made him devote long hours in the field training and convincing bureaucrats that giving the common man a title to the land his house stands on is a good way of unleashing dormant wealth.

Toti’s constant battles against rent-seeking oligarchs and captive government regulators are worthy of more widespread support. The best thing about Toti is that he is a technocrat with his heart in the right place and knows when it is time to stand up and expose the usual suspects who have been draining the lifeblood of our nation’s economy for generations now.

This collection of essays captures the essential Toti Chikiamco, his battles, his frustrations, and his joys. If only we had more of him among our so-called intelligentsia, the continuing sellout of the nation’s interest would simply stop."

– Boo Chanco, business columnist of Philippine Star

"Toti Chikiamco’s incisive articles not only contribute to the strengthening of the country’s economy but also to the nation’s governance. He was right in emphasizing sound and stable political institutions and the quality of public governance as cornerstones for economic growth and development. If only those who have the power to institute change would listen to, and do what Toti has been saying, then we would be on the road to sustainable and inclusive economic growth and development and, more importantly, have a better country to live in."

– Dr. Benjamin Espiritu, former dean of the FEU College of Business and former governor, Oriental Mindoro

For those interested in Philippine political and economic development, Toti Chikiamco’s book is a must read. His strategic and historical perspective combined with sharp political insights and clear writing style make the book a joy to read.

– Jaime Faustino, manager for Economic Growth, The Asia Foundation

After going through Toti’s topic list, I thought I already knew the whole book by heart. I then realized I had been brainwashed to the point of being Toti’s mental clone, a result of having regularly read Toti’s newspaper columns and my conversations with him over the past twenty years. If only our ‘irresponsible elite’ could be similarly brainwashed, our country would be a much better place, especially for the downtrodden.

– Romulo Neri, former Socioeconomic Planning Secretary

"‘It’s therefore politics, and not economics, which is a strong predictor of economic performance.’ This book offers a bracing perspective on how the Aquino administration’s political agenda and political reforms, interlinked with its economic reforms, have shaped Philippine economic performance. He stresses how the lack of such reforms has held back the country’s path to economic development. Mr. Chikiamco has been persistent in his call to address principal binding constraints—from economic amendments to the Constitution, openness to foreign investments to agricultural productivity—and how sound policy and regulatory frameworks addressing these constraints would facilitate sustained and inclusive economic growth in the country.

This book encapsulates a discursive and timely analysis of Philippine political economic development as we enter the final year of the Aquino administration and toward the 2016 presidential elections."

– Victor Andres Manhit, founder and CEO, Stratbase, an Advisory and Consultancy Group

The book is a must read for Philippine policymakers and students of development and public policy. There is much to learn from it. This collection of Calixto Chikiamco’s essays deals with issues that are critically important for Philippine development and poverty reduction. His critique of current policies are razor sharp, while his policy reform proposals are well grounded on economics, political science, and practical knowledge.

– Dr. Vic Paqueo, former World Bank Human Development Lead Economist and University of the Philippines School of Economics professor

"It’s been a long time since I’ve read a book of fiction and after reading Toti’s book I still haven’t. Toti gets to the heart of things, he’s able to discern the nugget that defines the issue in a way few can. And to write about it in a succinct way that even fewer are able to. He picks up points others miss.

This is a book of discernment, an easy read on complex issues. And what comes through is that Toti cares, cares about people, cares about his country, cares about its welfare. I think the key to his thinking is in the subtitle ‘sustainable, inclusive growth.’ This is what has eluded administration after administration as wealth gets concentrated more and more on a favored few and less and less on the many.

Leaders need to read this book to bring wealth to that many. It’s a must read by anyone who wants to know not what might happen, but what should happen."

– Peter Wallace, founder and CEO, Wallace Business Forum

As somebody who eagerly awaits the arrival of the columns written by Toti Chikiamco, I welcome this book of collection of his essays. Toti’s essays are always topical and strategic, practical and theoretically grounded, and always presented concisely and lucidly.

– Dr. Victor S. Limlingan, managing director, DMCI Holdings Inc.

"In an earlier book, Why We Are Who We Are, Toti Chikiamco showed us how we had come to where we are now. In that volume, based on columns that he had written over a few years, he analyzed the underlying political economic reasons the Philippines has remained underdeveloped. Going beyond—or, ahem, below—the observable and ordinary forces and variables, he identified the main reasons that decisions undertaken for non-obvious reasons were ultimately responsible for keeping the country from attaining development, as serious observers had expected.

In this book, Toti goes a step beyond analysis and observation. He points out and hazards what to him would be the critical policies and actions that would spell the difference between attaining our expected development or remaining in stagnation. From advocating constitutional amendments and advocating land ownership rights to warning against lengthy and complicated procedures and opaqueness in the government, he has not shirked from calling out powerful and influential people and institutions. A careful reading of this volume will provide a crusading reformer or potential candidate for national office key actions to propose in a well-thought out platform. I recommend this volume for reading by people thinking of putting themselves forward for public office in 2016."

– Dr. Cayetano Paderanga Jr., former Socioeconomic Planning Secretary

"There are some who may think of economists as theoretical and obscure. Others may view them as simultaneously argumentative and detached. Not so economist Calixto ‘Toti’ Chikiamco. Anyone who reads his book compiling his numerous articles and opinion pieces will probably think instead of adjectives like engaging, committed, courageous, and patriotic yet also global.

I have known and observed Toti through the years, most recently even more closely in his capacity as president of the Foundation for Economic Freedom. The relationship has been a most beneficial learning experience for me as I believe it would be for anyone who reads his book. Toti’s subject matters range from the local to the global and touch, in both an analytically and fearless manner, upon issues that matter in every key sector of the country’s economy as well they should be for an economist like Toti. He is clearly committed to contributing as best as he can toward the continuing challenge of bringing the Philippines and its people to a state of well-being that the country and its people deserve. Not one to beat around the bush, Toti does not aspire for popularity or political correctness for its own sake but calls a spade a spade, thereby challenging the reader to be equally objective and transparent. Often, one can feel his frustration at the country’s seeming inability to rise above mediocrity brought about in no small way by political leadership that is self-serving, myopic, small minded, and hypocritical, not to mention of course corrupt and bereft of vision or conscience. But still, one can equally sense his undying hope that a better day will inevitably come. One may not agree with everything he says but it would be hard to disagree that entering his mind through this book would be a truly rewarding experience."

– Roberto de Ocampo, OBE (Order of the British Empire), Chairman, Foundation for Economic Freedom and former Secretary of Finance

"The essays by Calixto Chikiamco in this collection are keen and valuable commentaries on current economic affairs and policies. They call to mind economic policies that need change if, as a country, we are to sustain economic growth at a high and efficient level of performance. When they deal with economic policies, the essays try to disentangle them so as to expose what is wrong and to propose solutions at their fine roots. Thus, unlike some commentaries that criticize policies, he also offers the way out of the problems.

The author writes with conviction and dagger-like sharpness. His opinions show that he is a widely-read writer. He imbibes the work of serious development thinkers. On the whole, after perusing this volume, the reader with an open mind will improve his understanding of the economic issues of the day.

For instance, a problem like food policy or the price of food turns out to be a difficulty involving corrupt institutions, wrong incentives for production that incentivize non-productive agents and rent-seekers. These are the observations we find—high prices, relatively poor output, low productivity. Surely, the sector needs a good deal of reform. It exposes to us some of the political issues related to economic problems of production and incentives for farmers and traders. It leads us to observe happenings such as corrupt practices, high prices, a host of worms, like smuggling. Poor economic results are just one way of saying a host of good opportunities are being missed. To adopt reforms, however, inevitably leads us to the political process. Economic issues in the end go through a filter of political feasibilities.

Thus, economic problems involve the political process in order to correct them. This is one reason why some of the essays carry on a political tone. Solutions require convincing government and the men who compose and make decisions. The topics range from politics and economics in the large, to development issues in the small—constitutional change, entrepreneurship, national security, wages, income and social inequality, poverty, land rights, property rights."

– Dr. Gerardo P. Sicat, former Socioeconomic Planning Secretary and National Economic and Development Authority Director-General

The Way Forward: The Path to Inclusive Growth

By Calixto V. Chikiamco

Copyright to this digital edition © 2015 by

Calixto V. Chikiamco

All rights reserved. No part of this book may be reproduced in

any form or by any means without the written permission of the copyright

owner and publisher.

Published and exclusively distributed by

ANVIL PUBLISHING, INC.

7th Floor Quad Alpha Centrum

125 Pioneer Street, Mandaluyong City

1550 Philippines

Trunk Lines: (+632) 477-4752, 477-4755 to 57

Sales and Marketing: sales@anvilpublishing.com

Fax No.: (+632) 747-1622

www.anvilpublishing.com

Book design by R. Jordan P. Santos (cover) and Joshene Bersales (interior)

ISBN 9789712731822 (e-book)

For Pia, Clarissa, and Norma

and

for the raging incrementalists

of the Foundation for Economic Freedom

Contents

Foreword

Preface

Acknowledgments

I. Binding Constraints

Binding Constraints

The Other Binding Constraints

The Four + 1 Binding Constraints to Growth

A. Charter Change

The Investment Conundrum

Let’s ChaCha

Lessons of History for President Aquino

ChaCha and National Security

Who’s Afraid of ChaCha?

B. Labor

Minimum Wages: Job Killer

C. Competitive Exchange Rate

Currency War

GMA’s Other Crime

China’s Most Potent Weapon

A Financial Tsunami

D. Agriculture, Land and Property Rights

Coase and Land Reform

Why Agriculture?

The Residential Free Patent Act

Another Failed Policy

Free The Land Market!

II. Politics and Economics

The Mother of All Reforms

The Collective Action Problem

I’m Confused

Modernize Our Politics

Political, Not Just Economic Reform

Our Incompetent Political Class

Aquino’s Biggest Failure

III. Rent Seeking

The Incentive Problem

Incentive Problem 2

Incentive Problem 3

Rent-seeking

IV. Law and Economics

Law and Economics

Fight Crime with Economics

The Economic Analysis of Law

Law and Development

Law: A Catalyst to Development

V. Technology and Society

The New Civil Right

Disruption!

Our Skynet Future?

VI. Geopolitics and the Philippine Economy

A Geopolitical Golden Moment

Geopolitics, Politics, Markets

VII. Inequality, Environment and Property Rights, and Other Issues

Environment and Property Rights

Against Common Sense

The Elephant in the Room

Don’t Follow Manila

VIII. The Way Forward: Paths to Change

Development Entrepreneurship

Paths To Change

Bottom-up Change

Foreword

C alixto Toti Chikiamco and I go back a long way. In 1994 during the National Economic Summit under President Fidel V. Ramos, Toti, Benjamin Diokno, Cayetano Paderanga, Emmanuel de Dios and I advocated an aggressive cheap peso policy following the footsteps of the People’s Republic of China which, months before, devalued the yuan forty percent. Then Senate President Edgardo Angara embraced the move in the first plenary session of the summit. Immediately, the guns of the opposition subjected us to a withering volley of epithets and insults including the now famous jukebox economists. The subtext was that fateful jukebox coins were supplied by the WB and IMF. Strange reading since those two institutions, as if by mantra, favored a market-determined exchange