Political Will in Economic Issues
Business Options 
Manila Bulletin

November 01, 2001

        Success is a team sport. JW Marriot ascribes the phenomenal growth of the Marriot Hotel group to the partnership of every single person in the organization in their winning formula. He describes the process of valuing the origination more than individual players, of marching in the same general direction, of deciding to decide.

        The public sector must learn from this formula. Policy choices are not easy to make given the pull of stakeholders from different direction. But once leadership has decided, it behooves on the players to forget turf and to move forward.

        This case is well illustrated in the SBGFC-GFSME merger, a policy direction that has been in the back burner for the past seven (7) years and which is now seeing the light of day. Almost. But as the merger nears its logical conclusion, the crab mentality of a few is working its ugly ways.

        In 1994, then President Fidel V. Ramos ordered the Department of Trade and Industry (DTI) and the Department of Finance (DOF) to study the proliferation of guarantee programs. A study was ordered on the possible consolidation of GFSME and SBGFC, but nothing came out of it.

        In early 2000, former President Joseph Estrada finally ordered the rationalization through two (2) Executive Orders. Six (6) months of painstaking preparations followed, then EO’s were reversed in November 2000 barely a week after Secretary Roxas’ resignation.

        This year, President Gloria Macapagal-Arroyo revived the rationalization plan, through two (2) EO’s. Now that the consolidation is entering its completion stage, attempts to put a monkey wrench in the process appear to being stage managed. The main weapons of oppositors are disinformation and legal nitpicking. If they succeed again, two (2) years of disruption will be the end result. What a clear waste of energy !

        Will we now see enough political will to see the rationalization through? Is the opposition sincere? Or are there crabs from within simply protecting turf?

        Let’s address some of the disinformation stories going around.

Myth No. 1: Guarantee Fund for Small and Medium Enterprise (GFSME) is an agriculture dedicated fund and therefore farmers and fisherfolks shall be disadvantaged.

Fact: By its very name, GFSME is a program for SMEs in all sectors. Its portfolio is largely manufacturing and services. Its guarantee to agriculture is a direct result of various agreements with the Department of Agriculture (DA), the funding of which shall not be covered in the consolidation. DTI is not taking away a single centavo of that portion of the GFSME managed program contracted out by DA.

Myth No. 2: The AFMA law is a legal obstacle because GFSME will have to be consolidated with Quedancor.

Fact: Section 25 of the law clearly states that only those credit guarantee schemes and funds applicable to agriculture and fishery sector shall be consolidated. The same law mandated an independent study which identified that portion of the GFSME fund for consolidation. This amount has been returned to the DA.

    Likewise, the independent study has concluded that:

GFSME has no mandate to focus on the agriculture sector
Agricultural loans guaranteed by GFSME are marginal compared to its total portfolio.
True to its mandate, GFSME’s beneficiaries were mostly small and medium companies in the manufacturing and services sector.

Myth No. 3: The President of the Republic has no authority to order the consolidation through an Executive Order.

Fact: The Presidential powers to reorganize the bureaucracy is clearly spelled out in the Administrative Code of 1987. The Supreme Court in a decision on the EIIB case in July 2001 affirmed this power. In fact, the Magna Carta for SMEs (R.A. 6977) calls for a rationalization of the credit guarantee system for SMEs and additional funding for its capitalization.

Myth No. 4: Because the GFSME is a mere guarantee program of Livecor, it cannot be merged with a Government Financial Institution (GFI).

Fact: GFSME is a separate fund and office that was merely placed under the "management" of Livecor. It is a   guarantee fund established by a Presidential directive, LOI 1308. The mandate of Livecor under its charter, E.O. 866, does not include GFSME, and is basically to operate processing centers. As proof, GFSME has its own financial statements audited separately by COA. It has a table of organization distinctly approved for it by the Department of Budget and Management (DBM).

Myth No. 5: The government shall pay large sums for the separation of employees.

Fact: When people are involuntary separated from their organization as in the case of GFSME which is being abolished, it is only right that they get paid severance packages. The decision to grant the same to SBGFC is based on a humanistic "equal treatment principle", because there is no guarantee of rehiring. The amount involved is a pittance considering today’s economic squeeze, and will be sourced out of earnings. This means no burden to the national coffers. The amount will be recovered in cost savings within a year or two. Note too that people rehired shall be considered new hirees; hence, the separation package is only an advance monetization of earned benefits.

Myth No. 6: The new structure will have more officers and staff.

Fact: The new structure represents a plantilla position reduction of 42% from the previous combined organizations. In terms of warm bodies, a 33% actual reduction is projected. The numbers speak for itself.

        Some people choose to impute malice in this reorganization plan, one that has long been an unfulfilled policy imperative. President Arroyo should instead be credited for facing this issue squarely.

        We just hope this is a simple case of the politics of the opposition taking a different perspective. However, a bigger problem looms if those who seek to derail the policy are from within the government. In such case, the bigger problem of a unified governance threatens.

        Policy debates are normal to allow full ventilation of the pros and cons of an idea. But once leadership has set its eye on a course of action, there should be common support for the decision.

        Political will must be strong enough in order that the economic reform agenda meets its objectives. And the players must stop looking out only for themselves in full support of the moves of the national leadership that has decided to decide!


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