An attempt to good economics

The promise of a Daang Matuwid has always been a foremost priority of the Aquino government. Although noble, it exposes the vulnerability of the present administration’s effort when it comes to cultivating the economic progress of the country.

The promise of a Daang Matuwid has always been a foremost priority of the Aquino government. Although noble, it exposes the vulnerability of the present administration’s effort when it comes to cultivating the economic progress of the country. Despite recent developments including the Philippines’ upgrade to investment grade status by globally known credit ratings agencies and pronouncements like ‘good governance is good economics’, the status of inclusive growth in the country leaves a lot to be desired. With the passage of Philippine Competition Act and signing of the amendments to the Cabotage Law, the last days of President Aquino in office is beginning to look differently.

Priority bills

P-Noy, in his very first State of the Nation Address in 2010, already identified Anti-Trust Law as one of the priority bills of his administration. The law, according to him, will realize the mandate of the government to make the market a level playing field for all so as “to afford Small- and Medium-Scale Enterprises the opportunity to participate in the growth of our economy.” Four years later, Republic Act No. 10668 or Philippine Competition Act was passed into law.

On the same day, amendments to the Cabotage Law or the Foreign Ships Co-Loading Act was signed. In his SONA last 2013, the law was among bills the President see as vital. “Let us amend the Cabotage Law in order to foster greater competition and to lower the cost of transportation for our agricultural sector and other industries,” President Aquino said.

Salient features

Both bills promise to promote trade and fair competition, thereby pushing economic growth in the country. The Philippine Competition Act, for example, abolishes any unfair advantages large multinational companies might have over small- to micro-sized businesses. To put this into effect, the law mandates the creation of the Philippine Competition Commission (PCC). It shall punish any enterprise that threatens the entry of new ones through anti-competitive behaviour. The PCC is also tasked to review proposed mergers and acquisitions that might impede competition and impact the market negatively. The law likewise prohibits price fixing, controlling production which can cause detriment to consumers, and imposing, either directly or indirectly, “unfairly low purchase prices for the goods and services” of small and marginalized providers and producers.

The Cabotage Law, meanwhile, is based on the The Tariff and Customs Code of 1978 which provides tariff mechanisms on the import and export of goods. The amendment primarily seeks to lower transportation costs of foreign vessels who engage in import/export operations in our ports and allow these flag vessels to dock in more than one port in the country. In encouraging cheaper and more efficient processes in trade, the law enhances competition among shipping companies. The Foreign Ships Co-Loading Act is also seen to prevent port congesting.

Consumer-oriented also

All things considered, market competition isn’t only a matter amongst sellers. While both laws are primarily concerned on the welfare of business owners, their impact on consumers cannot be discounted.

In an anti-competitive market environment, perhaps the biggest burden consumers must endure is the expensive price of goods and services. In the existence of unfair monopolies and cartels, consumers are deprived of the opportunity to buy and choose products of best value. A properly implemented Philippine Competition Act will prevent these inequitable practices, encouraging purchasing as more options are ensured for Filipinos.

The amendments made to the Cabotage Law is just as auspicious.  Like the agriculture sector, similar challenges plague the shipping industry. Connectivity, for one, hinders efficiency and low cost. Before the amended Cabotage, foreign vessels are restricted of access of other ports in the country. Now foreign shipping lines can serve domestic routes. Aside from high cost, the absence of market competition result in lower quality. Such is the condition in the local shipping industry. In a press release published by the Philippine Institute for Development Studies (PIDS) regarding their study on the Cabotage law, they found that the state of domestic fleet of the maritime transport industry is deteriorating. This is despite the Philippines being world`s fifth largest ship building country, according to the study. With proper implementation of the Foreign Ships Co-Loading Act, consumers should be assured of low cost and high quality products as furthered by an economical and effective shipping industry.

On July 21, 2015, two landmark legislation were passed into law as President Aquino signed R.A. Nos. 10667 and 10668. The Arroyo government has criticized the misaligned priorities of Aquino’s government but the passage of these long-sought bills might signal the commitment of the present administration in pushing for sustainable economic growth. In the years to come, we will see if the balance of good governance and good economics was realized.


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