When governance trumps future planning

Who was it who said that it is difficult to predict especially the future? Talk to an economist and before he does a forecast, he would need a plethora of data points, facts, and information about the past, the present, and the future. And, yes, it is not a walk in the park. The economist’s value added is his empirical tools to put all those data points together and extract a valid relationship that can be replicated and tested for significance.

Economic perspective is crucial but looking at the future also requires contributions from the other sciences.

International organizations such as the European Commission, European Parliament, the North Atlantic Treaty Organization or NATO, and the Organization for Economic Co-operation and Development (better known as the OECD) have found it strategic to task multidisciplinary groups to think about the future based on current trends, risks, and challenges as well as on how to manage the transition. Likewise, the governments of Canada, Finland, France, Germany, the United Kingdom, and Singapore have long been worrying about the next few decades about issues that could impose unnecessary social burdens if their societies are not properly tuned to what may likely occur.

A quick search of academic publications shows that foresight studies, together with strategic planning activities, have evolved into a new public management paradigm that has its origin in some European countries with the aim of what Chile’s Paola Acituno Olivares described as “flexibilizing and reorganizing public management in general, yet also offering greater political control and better results.”* The motivation is imperative — that is to find ways to achieve higher modernization of the State through the design of appropriate public policy.

It is obvious that we badly need this in the Philippines where, admittedly, some planning for the future was undertaken in the past up to today but which hardly advanced to gain the critical mass to make a difference.

Segue to Chile which, in 2014, established a non-profit institution called the Chilean Foresight and Strategy Council that brought together specialists in foresight studies, strategies, and future studies from both government and the private sector. This is the highlight of many years of foresight studies in conjunction with planning theory and other recent innovations in public management. As Olivares observed, planning initiatives in Chile date back to the 1950s originating mostly from production activities, and later, institutionalized planning. The resulting output covered such broad areas as economic globalization in the 1970s, geopolitics in the 1980s and 1990s, research methodologies in the 1980s, technology development and innovation in the 1990s, and energy policy in the 2000s.

Are we seeing this and similar exercises elsewhere in our part of the world?

Writing this piece benefitted enormously from our quarterly engagement last month with the Advisory Panel of the ASEAN+3 Macroeconomic Research Office (AMRO), based in Singapore, and its leadership. AMRO’s assessment of the region and its forecasts of the next two years were quite optimistic, with sufficient recognition of both the short-term and long-term risks. Most important, as this will also be covered in next week’s presentation of the ASEAN+3 Regional Economic Outlook (AREO) by its chief economist, my friend Dr. Hoe Eeh Khor, the AREO is properly risk-based and cognizant of the future.

Beyond saying that the ASEAN+3 economic growth is expected to remain generally resilient due to strong domestic demand, improving exports, and moderating inflation, AMRO prescribed the rebuilding of fiscal buffers and anchoring inflation expectations. Such a prescription was anchored on short-term risks identified by AMRO as the spike in global commodity prices, a weaker Chinese economy, adverse spillovers from a possible Trump 2.0 presidency, and a sharp slowdown in both the US and Europe.

Long-term risks were also listed down including geo-economic confrontation and policy uncertainty, climate change, cyber risks, weak public health facilities, and demographic issues.

Our panel commended AMRO for covering three major future issues: population aging, global trade reconfiguration, and rapid technological change. Significant demographic shifts are projected to happen in less than 10 years when the working-age population begins to taper off. We cannot overemphasize its implications on labor, productivity, public finance, and, ultimately, economic growth.

This future issue, which has actually begun to fan out, would make the determination of the potential areas for strategic public and private investments extremely urgent. Investment can be optimal in ensuring productive and healthy aging, high-level services trade, and infra development. It would be painful to see a whole generation potentially aging without reaching a higher level of prosperity because poverty and income inequality remain prevalent.

On global trade, regional free trade agreements and further expansion in cross-border trade in services could mitigate the impact of geo-economic fragmentation. This is so because export strategies in the region are challenged, and market concentration of global trade has in fact increased. Fortifying the region’s growth and resilience should rank high on the agenda for the future.

Finally, on super-fast global technological advances, a wild card is the infrastructure gap which remains wide in many economies in the region. This is quite urgent if technology is to be harnessed to drive and sustain productivity gains across the ASEAN+3 economies. Given that the appropriate technology could be helpful in managing the demographic transition and trade reconfiguration, AMRO was indeed strategic in drawing up the potential dynamics of these long-term future issues and optimal policy mix.

Back to the Philippines where, in August 2019, the National Economic and Development Authority (NEDA) celebrated 84th year of development planning after it was concluded that the NEDA Board actually originated from the National Economic Council or NEC. It was President Manuel L. Quezon who rolled out to Congress the proposal to create the NEC and established development planning in December 1935. Clearly, Quezon was ahead of President Marcos Sr. — who created the NEDA by PD No. 7 in 1973 — by 38 long years.

In short, development planning in the Philippines predates those in many jurisdictions around the world.

The country’s current long-term development plan is the AmBisyon Natin 2040; no doubt, “a picture of the future, a set of life goals for the country.” On involving various disciplines and skills sets, this long-term plan resulted from a long-term visioning process that started in 2015. Over 300 citizens participated in various focus group discussions and, based on the NEDA information, some 10,000 respondents participated in the national survey. Technical studies were conducted to pinpoint strategic options to reach the national vision. We could not ask for more; it was a whole-of-society exercise.

Reading through this inspiring visionary document, we are convinced by its infographics, one of which is the catchy “’yung feeling na may chance pala tayo.” AmBisyon 2040 correctly identified as an overarching priority the upgrade of public administration in order to achieve the lofty goals of AmBisyon 2040. In addition, addressing child malnutrition, climate change and disaster threats are Priority 1; peacebuilding and closing the learning gap are Priority 2; building quality infrastructure and opening the economy to competition are Priority 3. If we could show a substantial fraction of progress in the overarching and three priority areas, the Filipino people should be more optimistic.

Obviously, this would be difficult if we are to consider the latest macroeconomic developments and the people’s perception.

The NEDA yesterday announced the downgrade of the growth target for both 2024 and 2025, that inflation has been on an uptrend in the last three months, that the current account was not doing very well in the beginning of this year, and that public finance in terms of both the deficit and debt is quite shaky. If these persist, they are weak foundations for the future.

The people’s perception is not very encouraging either. Pulse Asia’s survey in December 2023 showed that the public continues to consider as being of urgent national concern the control of inflation, the increase in workers’ pay, job creation, and poverty reduction. Our international scores in corruption perception, ease of doing business, education, competitiveness, and rule of law, among others, can still be improved many times over.

Five years after launching AmBisyon Natin 2040, we may consider ourselves fortunate if we are closer to the lofty goals of our long-term plan.

So what happened to future studies and strategic plans?

Olivares’ conclusion of her study is more than true to the Philippines. She argued that “the absence of binding policies, the force of some global transformations that have a local impact, the political climate, the diversion triggered by personal agendas given the authority turnover, centralism, lack of resources of advanced human capital, and the difficulty to generate indicators that monitor the progress… are problems that impede a good performance of the policy.”

Isn’t it that Ambisyon Natin 2040 identified as its overarching priority the restructuring of public administration?

*Paola Acituno Olivares, “Foresight studies and their assessment in the public policy of two Chilean regional development strategies,” in University of Del Valle’s Cuadernos de Administración, 2020

Diwa C. Guinigundo is the former deputy governor for the Monetary and Economics Sector, the Bangko Sentral ng Pilipinas (BSP). He served the BSP for 41 years. In 2001-2003, he was alternate executive director at the International Monetary Fund in Washington, DC. He is the senior pastor of the Fullness of Christ International Ministries in Mandaluyong.