Deregulation then and now
It has been a year since the death of President Fidel V. Ramos, who introduced the boldest economic reforms the country had seen during his presidency in 1992-1998. Their guiding principle was deregulation—the fourth of five Ds that summed up his development strategy for the country. For Ramos, it meant relying on the private sector for what they could do better, laying a level playing field for large and small enterprises alike, and getting government’s hands out of the way of productive business initiatives.
The most urgent concern when he took office was the acute power shortage that led to eight-hour outages, which paralyzed economic activity across the country. Having the cash-strapped government foot the bill to install new power capacity was a non-option—the same reason that kept the Cory Aquino administration from setting up new capacity to replace the junked Bataan Nuclear Power Plant. Thus began the BOT (build-operate-transfer) schemes and variants thereof, now generally called PPPs or public-private partnerships, which the Philippines pioneered with the very first legal framework to support that mode of infrastructure provision. Toward the end of Ramos’ term, we moved on to privatizing water services, and the Manila Water story has since been hailed worldwide as the unique model of water service privatization that worked.
Aggressive trade and investment liberalization started under President Cory Aquino, via Republic Act No. 7042 or the Foreign Investments Act (FIA) of 1991, which adopted a negative list approach, and Executive Order No. 413, which simplified and lowered import tariffs comprehensively. Vocal legislators resisted the latter, insisting that changing tariffs was a congressional prerogative. I was among the economic officials who worked intensively with leaders in Congress to help hammer out a law that was to promulgate Aquino’s sweeping tariff reform—only to have the politicians decide, a year later, that they’d rather have her promulgate it, upon realizing it was a political hot potato. To save face, they invoked the President’s power to issue tariff adjustments when Congress was not in session. And so, President Aquino’s EO 413 was issued as EO 470, largely unchanged except that the tariff rates were to be phased down rather than reduced immediately, as then Finance Secretary Jess Estanislao wanted it.
But President Ramos wanted to move beyond that. Inspired by Chile, which had already adopted a low uniform tariff rate across the board, he set in place further tariff phasedowns toward a uniform five percent by 2004 (which President Gloria Macapagal Arroyo not only froze, but reversed on its tracks later). The FIA negative list was still too long for Ramos, who abolished the discretionary List C, leaving only Lists A and B on investments with constitutional and legal restrictions—such as public utilities, mass media, educational institutions, advertising, and more. We acceded to the Asean Free Trade Agreement early in the Ramos presidency, and he embraced the Asia-Pacific Economic Cooperation or Apec, which culminated with our hosting of the annual gathering in 1996.
Another Ramos hallmark was oil industry deregulation, which opened the industry to competition from more players, depoliticized domestic petroleum prices, and removed the huge fiscal burden that the oil price stabilization fund deficit had become. But other game-changing moves like electric power industry reform, competition law, and taking the rice trade out of counterproductive government control happened well beyond Ramos, with the latter two taking another two decades after his deregulation thrust.
To be sure, there had been some backsliding, slow (even reluctant) implementation, and threats of reversal, but the major policy reforms to put the Philippine economy on the path of strong, sustained, and inclusive growth are mostly in place. The remaining baggage lies in a bureaucracy seemingly programmed with a regulatory mindset to throw hurdles along the way of economic initiative, and of ordinary citizens in general.
The 21st-century deregulation we need is swapping our bureaucrats’ pervasive regulatory mindsets for an enabling, developmental one.
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