A Mercenary Economist of the West

The Journal Sunday, December 27, 1998

DIEHARD

By HERNAN TIU LAUREL

THERE are many serious issues to tackle, even if it is the Christmas holidays. Take the "warning" to the government on so-called cronyism, issued by discredited globalist "boomsayer" Bernie Villegas published last December 24. Readers must remember that it was Villegas, along with Bobby de Ocampo, who denied to the very last that the Philippine peso would go down the way of the Thai Baht in 1997. It was with economists like Villegas in mind that author Paul Ormerod coined the phrase, “the death of economics”- for the title of his book dealing with the failures of neo-liberal economics.

Villegas is mercenary economist of the foreign trans-nationals under the aegis of the Westem oligarchy, funded through their foundations and donations of local "compradors”- and agents, the Makati Business Club cacique class. One of Villegas' major tasks the past two decades has been the Comprehensive Task Reform Package project that was begun sometime in the first quarter of the 1980's. It proposed, among many, revisions of the Philippine tax system that opened up the economy to a deluge of imports by eliminating import tariffs. It transferred tax burdens from business to citizens through regressive indirect taxes such as VAT and the EVAT. It called for the shift from ad valorem to specific taxes which was aimed at Philippine tobacco and cigarette producers. These tax reforms were supposed to create the "globalized" economy.

In drawing up the tax reform proposals, a Hong Kong-based consultancy group involving a certain Vic Abola was engaged by foreign tobacco manufacturing companies. This name appears repeatedly with the names of Villegas' institutional research groups that worked on the CTRP. The CTRP was railroaded into a law by the Ramos administration through the "rainbow" Congress of Joe de Venecia. We have been suffering the consequences ever since: high taxes penalizing consumers and domestic producers, tariff elimination that opened the floodgates to imports and caused the severe depletion of our foreign exchange reserves.

It was no accident that Lucio Tan and his enterprises became one of the focal points of debates and controversy during the debates on the CTRP. In any economy, tobacco and cigarettes occupy a substantial share and it invariably becomes a target for takeover by Western tobacco trans-nationals, particularly American. We all know of the intense drive of American tobacco companies the past decades to penetrate foreign markets due to the pressure of health concerns back in the US. In Asia, of particular interest to US tobacco companies are Indonesia's "kretek” market, South Korea, Japan, and the Philippines' cigarette markets. But for Tan, it was not only tobacco and cigarettes, he was also into beer and liquor through Asia Brewery.

Tan had gone into beer making because he believed that he could bring good and certainly cheaper beer products to the market. He competed with the San Miguel Corporation that was then dominated by the cacique Soriano brothers who swore to eliminate the "kabise- through the reformulation of the "sin taxes" to price Tan's products out of the market. Despite the competition, Tan had captured more than 10% of the market. Meanwhile, Tan extended his entrepreneurial enthusiasm to the privatized Philippine Airlines which, because he was identified as a target of political and economic vendetta by Ramos and his globalist allies, also began to be a corporate victim of systematic economic and financial persecution.

The systematic persecution of PAL came mainly in many forms, one of which was a hostile Civil Aviation Bureau that started giving away with PAL air routes to foreign airlines over PAL's protests and without reciprocity from the other countries. The precipitate deregulation of the airline industry under Ramos, while ostensibly favoring airline commuters. also had its less constructive intentions and effects. The deterioration of safety and security standards is one possible effect of deregulation and cut-throat budget was in the industry, a concern that was particularly relevant in the aftermath of a tragic Cebu Pacific crash that was marked by roughshod government monitoring and airline maintenance. These adverse measures under Ramos added great difficulties to PAL that was already saddled with a long festering over-staffing problem.

It was in a briefing Villegas set up for Senator Miriam Santiago after the 1995 elections that I got my first idea of Villegas' visceral dislike for Tan. Having run with her, the only other candidate on her slate, Miriam wanted to bring me along. In the course of the briefing the subject of PAL and Lucio Tan was raised, and Villegas went on a long tirade of completely unfounded and preposterous charges against Tan, including a ridiculous allegation that Tan had cornered the toilet paper supply contract of the airline. An investor who personally guarantees billions worth of loans for PAL would certainly not bother about toilet paper, I thought. But Villegas spent an inordinate amount of time fuming over this. Miriam and I left unconvinced about Villegas and his economics, and certainly even less about his theories about Tan.

When Bernie Villegas and his Center for Research and Communication or his University for Asia and the Pacific speak on economic issues, or warn of “cronyism,” keep in mind their mercenary backgrounds. What Villegas was warning about last December 24, is the prospect of PAL surviving as an airline independent of the control of foreign companies. He wants PAL delivered to foreigners on a silver platter, after helping destroy it through privatization and deregulation. Government should take the warning from Villegas with a grain of salt, and then go on to the right thing: Keep it flying with whatever it takes. After the bloodletting and a little more, PAL is already a very viable airline. This is not the time to give it away.