THE Senate Blue Ribbon subcommittee hearings on the allegedly corrupt practices of Vice President Jejomar C. Binay are interesting not only for their political implications, but also for their economic impact, particularly on Philippine agriculture. One of the allegations tackled during the hearings concerns the existence of a 350-hectare estate in Rosario town, Batangas province that is tagged “Hacienda Binay” by former Vice Mayor Ernesto Mercado of Makati City, a former ally and now foe of the Vice President.
According to reports, the property was initially owned by Agrifortuna Inc., a company founded by Binay and a number of his associates. This was later sold to Sunchamp Real Estate Development Corp. and its owner, Antonio Tiu. However, Tiu seems hard-pressed to come up with the necessary and official documents to prove his ownership of the land, producing only an unnotarized and unregistered one-page memorandum of agreement between him and a previous owner. Because of this, the senators in the subcommittee think that Tiu cannot be considered the owner of that land.
While the veracity of the allegations still needs to be established, the failure to determine the real owners of the land itself indicates how weak our institutions and the rule of law are. Given that there are existing laws and legal procedures governing land ownership, this inability to establish property rights has three implications. First, the people themselves will not feel secure in the possession of their property or properties, because the basic laws, such as on agrarian reform, can be conveniently set aside. Second, the faith of contracts is not protected by law, as even the flimsiest of documents can be considered acceptable by those in power. And third, the authority of the state is apparently not respected in enforcing the proper systems over land ownership.
In an apparent attempt to skirt away from large taxes and other obligations, land titles were reportedly given to many people close to Binay (like Mercado) without their knowledge. Overall, the failure of the rule of law only benefits the powerful, and perpetuates their continued dominance. If the aim of the law is to promote justice and equity, then the absence of the rule of law results in social injustice.
The irony is that, in these hearings, Tiu and his lawyers pass off this lack of any formal agreement and procedure as normal practice in agriculture, rather than the exception. If so, then this explains all that is wrong in Philippine agriculture. The growth in Philippine agricultural production has been quite dismal over the years. In the nine months to September this year, according to the Philippine Statistics Authority (PSA), production slowed to 0.3 percent year-on-year to P565.4 billion (at constant prices). This was worse than the 1.1-percent growth recorded in the same period of 2013.
While past and present administrations often blame weather and other disasters for the poor performance of agriculture, the main culprit seems to be the utter disobedience of the rule of law by powerful groups. Unless one is part of the corruption, it is inconceivable for any person to innovate and consider long-term investments in such shady arrangements. Without legal support, there is simply no assurance of returns from such ventures. Thus, in the case of the hacienda, through some undisclosed capital infusion, instead of producing crops that can benefit the majority, what we have are expansive mansions, kitschy Kew gardens, air-conditioned piggeries, ostentatious flower plots and rare bird sanctuaries—all signs of a deluded sense of grandeur.
It was once held that the best way for the country to grow is to “get its policies” on, for instance, budgets, inflation and exchange rates. However, the continued occurrence of financial crises, such as the 1997 Asian crisis, has shaken the confidence of economists that the right set of policies can be, in fact, implemented correctly. Most of the economic policies had, in fact, failed because of the institutional context, especially the weak rule of law. If the rules of justice can be messed up, no amount of sophisticated macroeconomic policy will produce the desired results.
To paraphrase Adam Smith in his book The Wealth of Nations, no economic undertaking can flourish long in a state that does not enjoy a regular administration of justice, and in which there is not a certain degree of confidence in the justice of the government. Certainly, the investigations of the Senate Blue Ribbon subcommittee should continue. We need to know the people behind these properties. More important, we need to create stronger measures to enforce the rule of law.
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Leonardo A. Lanzona Jr., PhD, is the director of the Ateneo de Manila University’s Ateneo Center for Economic Research and Development, and a senior fellow of Eagle Watch, the school’s macroeconomic research and forecasting unit.