Washington Sycip and The Rise of the Technocrats: A Reality Check

The Senate hearing featuring Jun Lozada has brought home the flaws of Washington Sycip's proposed technocrat-led government. A few weeks ago, Manolo Quezon pointed to Sycip's vision:

"...Although [Sycip] was cut short of advising that the government should do away with the elections as this will curtail the rights of the people to vote, Sycip said legislators should be stripped off the powers concerning the economic matters of the country.

This would mean the rise of the technocrats, who should be insulated from the politicians. [emphasis mine] These select people will run the country’s economy and will have the necessary powers to immediately effect change or react in cases of emergency, such as the recent move of the US Federal Reserve to cut its interest rates by three quarters of a percentage point.

Sycip, 87, said these technocrats should be given powers like those of the Bangko Sentral’s, that can either raise or ease interest rates immediately without getting the nod of Congress or consulting the President."

The above is a restatement of an earlier speech he gave to the Management Association of the Philippines where he pondered:

"Should we have an Asian model of democracy where economic and education matters are delegated to a group of technocrats that are insulated from politics? Can we expect an elected congress of politicians to respond to the rapid economic changes taking place in a flat world? After all an independent central bank, with little interference from politicians, seems to work quite well for our banking system."

The inspiration for the above model is of course Singapore where Lee Kuan Yew and his elite cadre have propelled that city-state to economic success.

The predicament of Jun Lozada shows us why a technocrat-led model may not be the right one for the Philippines. While technocrats like him may be competent enough to formulate and implement policies and programs in their given areas of expertise, they would still need to operate in an institutional environment where their competence can be channeled towards the good of the majority. Unfortunately, this is hardly the case. For one thing, Lozada pointed out that the Philippine government has a dysfunctional procurement system.

"The procurement system doesn’t really work. The process of procurement is tailoring the process to the supplier. We don’t look for the best supplier. It should be needs-driven, but now it is supply-driven. Also, there’s no check and balance."

Being the results-oriented technocrat that he is, Lozada then tried to reconcile himself to working with the system by personally deciding on a permissible zone of corruption, which is expressed as a certain percentage of the contract price. Outside this would be the forbidden zone. (I've heard this kind of rationalization a long time back from others, usually from my fellow professional types.) However, as is bound to happen, someone comes along to test the boundaries. If that person is influential enough, then the permissible zone continues to grow often at the expense of the technocrat(s) who originally set such boundaries, and who will then be replaced or overriden by other technocrats who possess larger permissible zones.

This brings us to another one of Sycip's misdirected, or at best incomplete, areas of concern. As seen from the first quote above, Sycip worries about legislative interference, but Lozada's testimony points to another source of interference coming from within the Executive Branch itself. This came in the form of rent-seeking behavior by Abalos who requested Lozada to 'protect' 130 million USD of the contract price and insisted in changing the nature of transaction from a Build-Operate-Transfer (BOT) scheme to a Loan Arrangement. In his model, Sycip does not adquately address interference coming from this direction. His model also fails to acknowledge situation where the legislature (i.e. the Senate) is the institution that saves the people's money from corruption as in the case of the Senate investigations that led to the cancellation of the NBN/ZTE deal.

Lastly, while Sycip muses about having an "overdose" of democracy, it was actually the Media that saved technocrat Lozada's from his abductors (just as it saved Trillanes from a potential rub-out a few months ago).

In a nutshell, Jun Lozada's experience provides a lesson on how technocrats (or any 'select' group) would be forced to operate in an environment where the leadership is not accountable to the people. In such a situation, anyone who manages to survive a joyride with military-types would be coopted by the very politicians from whom they are supposed to be insulated.

Update Feb-09-2008 8:19PM: Solita Monsod (a former government technocrat herself), reserves her bitterest criticism towards Romulo Neri:

"I reserve my bitterest criticism for Neri. If Mike Arroyo will forever be associated with 'Back off!' Neri will be forever associated with 'Moderate their greed,' if not with the instructions to accommodate projects with powerful “political sponsors.” How could the chief of the National Economic and Development Authority (NEDA) put his imprimatur on what he knew from the beginning were flawed, overpriced projects, simply because they had powerful political sponsors? Where was his (and the NEDA’s) obligation to make sure that only projects with the highest economic rates of return would be undertaken? And, despite what he knew about the overpricing, how did he manage to calculate a rate of return of 27 percent? Some kind of abracadabra had to be used, because if I remember correctly, the project’s rate of return was originally below the threshold 15 percent level. That really means the NEDA evaluation process has been prostituted."