Rhetoric vs. Reality: Has governance improved under PNoy?

The administration of Pres. Aquino claims to have transformed the Philippines through good governance. On 2 October 2015, Deputy Spokesperson Abigail Valte released a press statement saying that

Along with the World Economic Forum (WEF) Global Competitiveness Report 2015-2016, the latest World Bank Worldwide Governance Indicators (WGI) survey again affirms the extent of our country’s transformation under Daang Matuwid. Scores for our country show improvements in all six indicators since 2010.

I downloaded the latest World Bank Country Data Report on the Philippines to see if this statement was well-founded. Below is the country’s performance across the six governance indicators in four year intervals from 1998 to 2014.

Source: World Bank
Source: World Bank

The year 1998 represents the “high water mark” for all except one indicator. It was the last year of the Ramos administration, which produced the biggest drop in poverty incidence in the post-EDSA 1 era from 30.1% of households in 1991 to 20.5% in 1997.

Using 2010 as its baseline, the Aquino administration can rightly claim to have improved governance across all six indicators since taking office and to have recovered much of the ground lost since Mr. Ramos stepped down in 1998. The following comments may be made:

  • Voice and Accountability. From 48.3% in 2010, the country increased its score to 52.7% in 2014, statistically equal to its score of 52.4% in 2002, but below the 1998 score of 60.1%.
  • Political Stability and Absence of Violence/Terrorism. From 5.2% in 2010, the nation improved to 22.8% in 2014, below the 1998 score of 32.7%.
  • Government Effectiveness. From 55.5% in 2010, the nation has increased its score to 61.5%, better than its score of 57.1% in 1998.
  • Regulatory Quality. From 45% in 2010, the country has ended with a score of 51.9% in 2014, but remains below its score of 62.8% in 1998.
  • Rule of Law. The nation improved from 2010 when it scored 33.7% to reach 43.3% in 2014, but is still below its score of 44% in 2006 and 52.2% in 1998.
  • Control of Corruption. From 22.4% registered in 2010, the country has improved to 39.9%, but this is only marginally better than its score in 2002 (39%) and well below its score in 1998 (55.1%).

Compared to other Lower Middle Income countries, the Philippines sits above the average of its class in 2014 for all but two indicators. For Political Stability and Absence of Violence/Terrorism, it was significantly below the 37% average, while for Control of Corruption, it was not stastistically different from the average of 37% (given the associated confidence intervals of each score).

If we use an absolute benchmark of 50%, the nation continued to struggle with Political Stability and Absence of Violence/Terrorism (22.8%), Rule of Law (43.3%) and Control of Corruption (39.9%). The Philippines had scored above 50% in 1998 with respect to the last two, and Control of Corruption was the only indicator that saw a decline from a year ago.

What does this analysis tell us?

First of all, governance in the country has indeed improved since the Aquino administration took office in 2010, but it has not improved on the previous record of the Ramos administration with the possible exception of Government Effectiveness (I will come back to this in a while).

Second, the record shows that the administration was weakest in establishing Political Stability and Absence of Violence/Terrorism, Rule of Law and Control of Corruption.

These are often considered by the administration as its strongest suit because of the impeachment and anti-corruption cases it filed against high ranking officials and its modernisation of the Armed Forces and Philippine National Police.

While these efforts may have lifted its score, much still remains for it to regain its position in 1998. This can hardly be considered a game changing transformation.

Third, while the above findings might be a cause of discouragement for the administration, it should take heart, because of its record under Government Effectiveness. In an article entitled Fighting Corruption Won’t End Poverty, Harvard economist Ricardo Hausmann wrote

The CCI (Control of Corruption Indicator) shows that while rich countries tend to be less corrupt than poor ones, countries that are relatively less corrupt, for their level of development, such as Ghana, Costa Rica, or Denmark, do not grow any faster than others.

Nor do countries that improve in their CCI score, such as Zambia, Macedonia, Uruguay, or New Zealand, grow faster. By contrast, the World Bank’s Government Effectiveness Indicator suggests that countries that, given their income level, have relatively effective governments or improve their performance, do tend to grow faster.

The Philippine case would support Hausmann’s findings. The improvement in Government Effectiveness over the five year period from 2010 to 2014 has coincided with the fastest economic growth the country has seen since the 1950s (note that the country has always punched above its weight in terms of Government Effectiveness since 1998). The problem that confronts the Philippines is how to make growth not only rapid, but inclusive.

The Aquino administration has lowered poverty incidence marginally from 20.5% of households in 2009 to 20% in 2014.

The challenge for the succeeding administration is to reduce poverty much faster than the current rate. While improved governance helps to lift economic growth, something else will be needed to make it inclusive. I have discussed briefly in a previous post the sort of governance capabilities that are required (outside the World Bank’s indicators), but let me leave you with another quote from Hausmann who argues the same point

Sometimes switching from the “bad” to the corresponding “good” is simply a matter of semantics: to fight against racism is to fight for nondiscrimination. But, in the case of corruption, which is a bad that is caused by the absence of a good, attacking the bad is very different from creating the good.

The good is a capable state: a bureaucracy that can protect the country and its people, keep the peace, enforce rules and contracts, provide infrastructure and social services, regulate economic activity, credibly enter into inter-temporal obligations, and tax society to pay for it all. It is the absence of a capable state that causes corruption (the inability to prevent public officials, often in collusion with other members of society, from subverting decision-making for private gain), as well as poverty and backwardness [emphasis added].