6 U.P. Newsletter
September 2012
Collective action failures behind low PH investment rate, says Andre Encarnacion National Scientist Fabella
Photo by Bong Arboleda
“Why has the Philippine investment rate remained so low?” asked Economics professor and National Scientist Raul Fabella in his lecture “Deconstructing the Philippine Investment Puzzle: The Role of Collective Action Failures” last September 7 at the UP School of Economics, UP Diliman. Fabella’s lecture, the 4th UP President Edgardo J. Angara (UPPEJA) Fellowship Paper Presentation, highlighted how “collective action failures” have contributed to Philippine underinvestment. Fabella credited the term “collective action failure” or CAF to political scientist Mancur
Olson. He defined CAF as “the result of the incapacity of a collective to transform collective action opportunities into collective surplus.” Fabella mentioned the four conventional explanations for the country’s visible lack of public and private investment: resource deficit, policy deficit, institution deficit and culture deficit. To these, he added the layer of CAFs, which according to him has Game Theory for its language. For his primary example he mentioned two contrasting collective action outcomes: the successful Three Gorges Dam project in China and NAIA Terminal 3, which he labeled “a resounding CAF.” Fa b e l l a c a l l e d t h e Three Gorges Dam the “embodiment of actualized opportunity and superior e c o n o m i c o u t c o m e.” Terminal 3, on the other hand, in addition to the San Roque Multi-purpose Dam and the still unintegrated MRT and LRT, are examples in which the pursuit of immediate individual gains has led to inferior social outcomes for the whole. What accounts for the difference? Fabella argued that the state is “the most important human artifact for the address of collective action problems.” A perfect state according to Fabella would easily sort out any public goods or market failure. An imperfect one, on the other hand, breeds inter ventions that can
Fabella describes the current state of society as one of “fragmented trust” where trust has “retreated to smaller and smaller trust groups…” and where the state itself is distrusted.
UPD, Korean institutions promote regional prosperity Two city mayors—Herbert Bautista of Quezon City and Hong-Chul Yum of Deajeon Metropolitan City (DMC) of South Korea—led participants in an international conference on “The Role of Local Governments, Industries and Universities in the Promotion of Regional Prosperity” held last August 16 at the National Engineering Center, UP Diliman. In his keynote speech, Yum said the conference seeks “to encourage international cooperation and sharing of scientific and technical knowledge by establishing a partnership between Chungnam University and Hannam University of Korea and the UPD,” which will be “mutually beneficial to everyone involved.” In addition to the city mayors, the conference also featured officials from Chungnam University, led by its president Prof. Sang-Chul Jung; Hannam University represented by its president Prof. Hyung-Tae Kim; UP Vice-President for Public Affairs J. Prospero de Vera III; UPD Chancellor Caesar Saloma, and faculty members of several UPD colleges. The event was sponsored by the World Technopolis Association (WTA). Yum noted the role of universities in regional development, stressing that “capable human resource is now the center of social capital, universities should take the responsibility to make capable of
playing a pivotal role in the city’s industries, services and administration.” Yum is also the president of WTA. Bautista, on the other hand, noted the significance of the conference. “This collaboration between prestigious universities plays an important role in the advancement of science and technology and local development by promoting exchanges infor mation and human resources. International cooperation among universities, research institutes and local governments encourage the sharing of knowledge and technology thereby enhancing competitiveness,” he said. According to Bautista, Quezon City is one of the fastest-growing cities in Metro Manila and “is geared towards the same direction as DMC.” Quezon City is recognized by the national government and the business sector as the ICT (information and communications technology) Capital of the country because of concentration of ICT companies in the city. Daejeon is South Korea’s fifth largest city and the provincial capital of Chungnam. It is also the hub of science, technology, transportation, government and education in Korea. Saloma opened the conference by welcoming the participants. Setting the tone for the activity, he noted the role of universities in such an undertaking. “Universities are a nation’s premier generator of knowledge, which is essential
become “government failures – purveyors of waste and venality.” Thus, taming the state so it can pursue inclusiveness, said Fabella, is “the biggest collective action challenge of our time.” Government failures, he said, arise “due to either non-benevolence or incompetence or both on the part of the state.” In the case of public goods failure, the state’s action according to Fabella may be either ineffective (non-payment of taxes) or inefficient (procuring goods at enormous cost, etc.). He noted the importance of creating a regulatory environment that protects property rights and enforces contracts in hastening investment and growth. Weak states are incapable of punishing perpetrators; they instead outlaw policy instruments as an easy way out, as was the case in integrated power companies and larger than 5-hectare land ownership. These states can only push political settlements of least resistance rather than making credible commitments. Strong states on the other hand are able to mediate “inter-temporal, inter-class and inter-regional conflicts of interest.” He described the current state of society as one of “fragmented trust” where trust has “retreated to smaller and smaller trust groups which people think can nurture their aspirations,” and where the state itself is distrusted. “Competing groups want their share “now” because the state cannot guarantee fair redistribution later.” To halt and reverse fecklessness in government, Fabella recommended a strategic retreat from its most egregious failures. Weak states are “as a rule overloaded with many commitments far in excess of the number it has financial and/or expertise/ integrity/resources to implement well.” He believes that states must do “fewer, more fundamental things better, based on competitive advantage.” This is a pragmatic, not an ideological position – “the size of the state does not matter as long as it is efficient!” The second step, he says, is adopting
to technological innovation and economic progress and must therefore interact with various institutions for research and public service,” he said. Jung and Kim also spoke briefly at the opening ceremonies. Jung spoke of the WTA, which he described as “a multilateral international organization created with the purpose of connecting the advancement of science and technology with local development in order to achieve shared development through cooperation and exchanges among cities.” Meanwhile, Kim spoke of Hannam University’s linkages with 168 universities in 40 countries, with UPD as one of these universities. “We have maintained a close bond with UPD over the past two decades, based on an agreement signed in 1989. Their unwavering devotion to academic excellence is always a source of inspiration to our academic community.” Among the conference speakers were four UPD professors: School of Labor and Industrial Relations (SOLAIR) Dean Jonathan Sale; National College of Public Administration and Governance (NCPAG) Dean Edna Estifania Co; Dr. Rene Ofreneo of SOLAIR and Dr. Remigio Ocenar of NCPAG’s Center for Local and Regional Governance . (Chi A. Ibay, UPDate
Online)
simpler modalities to accomplish the same ends, such as the conditional cash transfer (CCT), and public-private partnerships (PPP) where the market can do things better. “With a pared down agenda, each commitment will be done better, what with larger budgets, higher salaries, and more focused attention.” Fabella believes that trust in the political center will return when the state is seen as the nemesis, not the breeder, of betrayal. He cites the removal of Renato Corona as an “immense conjuncture” and stresses the need to return the judiciary to its mandate of enforcing accountability. “Perhaps we are witnessing the birthing of a positive perception cascade when the flapping of butterfly wings can become a gale,” he says. “This has the making of a singular collective opportunity. Would that we all join the flapping of the wings!” In his opening message, UP President Alfredo Pascual praised Fabella’s insightful diagnosis of the country’s ills. He cited in particular Fabella’s idea of “squandered collective action” in describing underdevelopment and the State’s regular failure “to provide a ‘benevolent and competent Visible Hand’ to a positive solution to a collective action problem.” Pascual described the scenario as a failure to ensure the effective provision of public goods and infrastructure for the country’s benefit. “Instead, what we have is a series of ‘collective action failures’ where the members of a community or a country choose to dodge the responsibility of helping provide for or contribute to the good of all.” Pascual also congratulated Fabella not only for the multidisciplinary nature of his work, but also for his perspective on the “problem of healing” – improving government’s efficiency and competence, in addition to restoring the people’s lack of trust. By using a multidisciplinary approach, Pascual added that scholars can better answer the question “what’s wrong with the country?” and its corollary question: “what must we do to make it right?”
UPLB professor emeritus is Ramon Magsaysay awardee Continued from page 1
decide on their own what best agricultural practices can be done in their farms using scientific methods and through enhanced values in partnership with local stakeholders. Davide is also recognized for developing BIOACT, the trade name of the first commercial biological nematicide for the control of plant parasitic nematodes that attack economic crops. BIOACT is an effective, safe to use, non-toxic, non-chemical and environment-friendly biological control for fruits and vegetables. The Magsaysay Award is given annually to persons or organizations in Asia who “manifest the same sense of selfless service that ruled the life of the late and beloved Filipino leader” to perpetuate former Philippine President Ramon Magsaysay’s example of integrity in government, courageous service to the people, and pragmatic idealism within a democratic society. The awardees received a certificate, a medallion, and a cash prize during presentation ceremonies at the Philippine International Convention Center (PICC) last August 31. (From www.uplb.edu.ph)