Our Dysfunctional Education

“For there is always light, if only we’re brave enough to see it, if only we’re brave enough to be it.” – Amanda Gorman, Poet

Our education is in an existential crisis.

It is unclear when the rot started. In 2017 a study among 79 countries ranked the Philippines last or second to last in science, math and reading among 15 year olds. This means the decay predated when these kids entered primary, before the turn of the century. Since then as a result of failure of vision, policy, execution and governance the quality and real wages of teachers have declined, 7,000 classrooms are in disrepair and over 20,000 thousand backlogged.

COVID highlighted and accelerated the crisis. Our distance learning has been a disaster with some 3 million children missing class and 20 million essentially missing an education. The economic hardship has decimated enrollments in the 1,710  higher education institutions (HEIs) swelling the 237 already overcrowded state schools. Top private schools are reporting overdue tuitions of up to 60%.

Where, how and when do we address the problem?

Our education problems are structural, economic, management and ethical at the first level. Further down is nutritional in the very young.

On the structural we have a two-tier model with a few good schools catering to the rich, the powerful and a small number of remarkable students on scholarship from the lower middle class and the poor. On the other side we have everybody else.

In the last decade many corporates – the Ayalas, SM, Phinma, STI, the Yuchengcos among others – have diversified into education as a core business. Whether from altruism or capitalism they established new platforms or bought up existing schools. Business and education are in some fundamental ways conflicting. Elsewhere for-profit-schools have generally produced lower quality outcomes. All the best universities worldwide are non-profits. In a 2017 world ranking of 1012 HEIs, only UP made it (39th).

Pre-COVID private HEIs had profit margins of upto 56%, a luxury for most businesses. They pay no property taxes and an income tax rate of 10% (versus 30% for everybody else). Their tuitions are essentially unregulated and have climbed by 5-7% compounded annually. HEIs can be cash cows: In 2019 the four listed HEIs -FEU, Mapua, STI and CEU – reported cumulative cash holdings of P4.1 billion. The business model is based on scarcity which allows for higher tuition.

Financially, our Constitution mandates that the Dept. of Education always be allocated the biggest share of the National Budget. That we are where we are means either the Budget is insufficient, we are spending money in the wrong way or a lot of it goes to waste and corruption.

Turning our educational system around is a generational endeavor which requires both short term improvements and longer term quantum changes. We need to think broader, deeper, and smarter.

In the immediate we need to introduce new management in the DepEd that has vision, energy and the ability to execute. Organizationally the DepEd should be divided into its educational, its operations, and its infrastructure components. The first will deal with learning and quality control, the second with human resources, money, administration and technology and the third with building the facilities.

The educational part should be headed by an educator. Operations should be run by a professional manager with business experience. Infrastructure should have a doer who can roll out the classrooms. The latter is currently outsourced to the DPWH which has its own big ticket priorities. As a result outlying areas never get the facilities they deserve.

Historically our DepEd Secretaries have invariably come from the education sector. Yet most of the problems are in management, finance and capacity building which educators are arguably the least qualified to do. The DepEd Secretary should be responsible for vision, leadership, governance and relationships with stakeholders. He must have a 30,000 feet view and experience that goes beyond learning. He needs to understand strategy and the holistic way financial needs of teachers and students, curriculum, human capital, technology, infrastructure, and organizational processes come together in a seamless way.

When people talk of education they generally reference higher learning when in fact good education starts at the primary level. Today poorly taught, under nourished children are pushed up a frayed educational ladder resulting in our 15 year-olds ranking the worst in the world. We are feeding unprepared students into HEIs resulting in garbage in, garbage out. Multinationals report that the intellectual capacity and maturity of Philippine graduates they interview are at least 3 years behind those in India.

We have Private-Public Partnerships (PPP) in infrastructure, why not in education which is soft infra that is at least as productive and as vital as roads and bridges?

There is currently a huge divide between most private and public schools. That gap will only widen through time as the latter work with the lowest common denominator in classrooms. Even as we improve our public schools we need a PPP model that will blend the skill sets and resources of the private sector with the needs of the public system using quick-deploying modalities. For example we might establish Charter-like schools between LGUs and the private sector that can fast track the better students or offer technical, vocational or custom designed curriculum for specific communities and industries. With the Supreme Court decision on bigger Internal Revenue Allocations for LGUs the latter will have more money for local initiatives in education and elsewhere. Property taxes should be raised to help fund the program since property values correlate positively with educational excellence in the community.

On the demand side, Government should look at a viable student loan program. The endeavor will admittedly have high defaults but if structured properly – repayment based on ability to pay, direct collection from employers, etc. – is no less wasteful and certainly more productive than other Government subsidies. The Agriculture Reform Program where loans were given to farmers to buy their land has default rates of some 50% but the program was implemented nonetheless. Student loans will mean higher education and opportunity for our young, less stress on state universities, more employment and better pay for teachers, more investment in facilities, a lifeboat for the 1,700 tier-two schools experiencing a mass exodus in enrollment, and narrower economic and social inequality. 

The private sector must do its part. Private schools and corporates must be willing to share their processes, money and thinking with the public system. To start they could undertake continuing education for public school teachers leveraging their faculty and infrastructure in the off-season and off days. They could expand their virtual classrooms using technology. Private schools currently enjoy various privileges so they should give back to the community. They also have an interest in doing so for the alternative might be mandated scholarship quotas for indigents similar to what banks have for agri-agra loans.

There are some points of light. I currently support a school for indigents, Mano Amiga, which is reaching for the stars. We believe the underprivileged can and should aspire not only to be call-center agents but doctors, lawyers and professionals. Its principal medium of instruction is English with teachers, an enhanced curriculum and students that pound for pound match Ateneo and Xavier. For more go to https://manoamiga.org.ph.

Education is and will be the single largest cause of social and economic inequality in this country. It is an existential threat that will define who we are as a nation. The extension of K-12 was a good initiative but more is required. We must attain the escape velocity we need to compete in the new world of knowledge. The alternative is unthinkable and unacceptable, a surrender to mediocrity, a nation at the bottom of the world intellectual chain, 109 million hardly educated Filipinos serving the one million elite of this country.

That is not only unjust, it is socially, politically and economically untenable. The privileged  must step up because they will not be protected from the disruption that will ensue.

Words Matter

Joe Biden was just inaugurated as the 46th President of the United States. As a child Mr. Biden stuttered. He would stumble with words, called himself a “gaffe machine”, which for a politician would have been the death of him. But he persevered and after almost half a century finally reached the crest of his chosen mountain.

This awkwardness with words was nowhere to be found in his Inaugural Address. 

Biden spoke of “renewal and resolve through a crucible of the ages”.

He spoke “not of the celebration of a candidate but the celebration of a cause, the cause of democracy”.

He spoke of a future that depended “not on any of us, not on some of us, but on all of us, on we the people who seek a perfect union”.

He spoke of children in safe schools, of good jobs with fair wages, of care for the weak.

He spoke of  of dignity and respect, of the need “to hear one another, see one another”, where disagreement is not cause for outrage, nor violence nor, so important, fear. He spoke of “the common objects of our love”.

He spoke of opportunity, security, liberty and truth, to “open our soul instead of hardening our hearts, to think not of power but of possibilities”.

He spoke “of the sacred oath of office”.

He spoke of unity, without which “there is no peace, no progress, no nation”. He spoke of “one nation, under God, indivisible, a nation we can be and must be”.

In sixteen months our country will be going through a transition of power and the election of a leader as happened in the U.S. It will come at a time of national pain and suffering, of economic hardship, of lives mourned over COVID. The vaccine, at least a worthy one, will not be universally available except to the rich and the powerful and those employed by them. 

The economy will not have recovered to the pre-pandemic level and, God forbid, may even experience  a second leg down as businesses on the threshold of despair finally succumb in a death spiral. Nissan, the Japanese automaker, just announced it will finally close its Laguna operations after over 25 years in operation. This follows the closure of the Honda plant last year. The luxury Makati Shangrila hotel is shutting its doors Feb. 1.

The social amelioration funds have long been consumed. Retrenched workers will soon go through whatever retirement monies they received and savings they really never had. The unemployed will become unemployable. The Treasury is holding fast even as Governments the world over are on their next round of fiscal stimulus. They are shelving national debt and fiscal deficit concerns to address what is increasingly recognized as a humanitarian crisis, not an economic one. Even fiscal hawks are accepting that record low interest rates justify additional spending without unduly threatening debt/GDP and deficit/GDP ratios.

Top educational institutions are struggling with only 40% collection of enrollment.

Essential industries that have been promised a Government lifeline are awaiting approvals on long-submitted loan applications. Non-essential businesses especially in retail, service and hospitality are seeing their bank loans called in. The shutdown is in broad swipes, by sector, with even previously good clients being denied. The carnage is brutal.

The SMEs who are the foundation of employment are running down their inventories, downsizing workers and pivoting as best they can to online and delivery services. The one bright spot is in Mindanao where businesses are reporting healthy sales thanks presumably to politically-favored infrastructure spending.

Hospitals are struggling to collect from a depleted Philheath which is upping its premiums further burdening an already beleaguered private sector. The SSS is raising contributions which could have the effect of reducing the overall take as businesses opt out of the system.

And then of course there is the corruption.

The May 2022 elections will come at a time of extreme national pain. To deflect from the crisis the incumbents will seek to distract us by polarizing the populace and demonizing those with alternative prescriptions be they red or yellow however valid, fair or of goodwill. They will present bogeymen who will snatch our children in the dead of night and otherwise bring us to ruin.

The elections will be marked by vitriol, repression, cheating, violence, personal insults and corruption because that is the nature of our political system and culture and those who vie to represent us.

Those in power will  run on the politics of exclusiveness and divisiveness even as what we need is unity and not division, light and not darkness, hope and not fear, dignity and not humiliation, dialogue and not violence, truth and not false promises or, worse, lies.

Children want their parents to get along. Filipinos want their representatives to get along. Why can not our leaders come together in unison and common purpose, in peace and not in strife? Why does it have to be us versus them? Why does it have to be always about color?

We should not accept that things cannot change because they can but it can only start when we recognize the humanity in others, when we have kindness, empathy and compassion as the core of who we are, when we each become accountable not only to ourselves and our families but to our neighbors.

It can only start when our leaders start to preach and practice a politics of decency, of community and of inclusiveness.

We might do well to listen to a young boy who grew up uncomfortable with words but now speaks as the leader of the free world.

The Great Vaccine Robbery?

On Nov. 27 2020 the National Task Force Against Covid (NTF) on behalf of the Philippine Government signed a Tripartite Agreement among itself, Astra Zeneca, the UK vaccine provider, and various private corporations for the provision of vaccines to the country. The terms of the agreement are:

1. Astra will supply 2,558,300 doses of AZD1222 vaccine to the private companies. At two doses per person, this will cover about 1.3 million people.
2. The vaccines will be sold at Astra’s cost of around five dollars per dose for a total of USD12.8 million or PHP 614 million.
3. The private sector will donate all the vaccine to the NTF through the DOH. The latter will oversee the program.
4. The DOH will determine who gets 50% of the vaccine following its priority allocation to frontliners and essential workers. The DOH will identify the recipients for the balance of 50% in consultation with the private companies “provided such distribution is within the allocation framework and priority guidelines that will be developed by the DOH after careful study and consultation with the relevant stakeholders”. Translation: The private companies can expect but are not assured an allocation in exchange for funding the program.
5. The DOH will designate the hospitals and private inoculation centers which will administer the roll-out.
6. The NTF – but technically not the DOH – has committed to provide the vaccines for free.
7. The parties to the agreement will appoint a Project Manager to administer the program. The Agreement does not specify the composition, governance nor oversight on the Project Manager.

Some private companies who did not participate in the program see the arrangement as extortion: They are not allowed to procure vaccines for their employees unless they pay up or “donate” at least 50% of their vaccine to Government without assurance as to where, how and when their employees will be inoculated. They view the 50% “donation” as ransom for protecting their employees.

Many Senators have accused the NTF and DOH of playing God. They believe the private sector should be free to buy directly from vaccine suppliers to expedite the roll out.

I favor the Government arrangement at least for the first batch of vaccines:

1. The vaccine is a vital but scarce resource that should follow national priorities for distribution. If the private sector wants to get in the line it should pay a premium for this privilege understanding that the companies’ allocation must not take away from the most critical segments of the population.
2. Given the scarcity of supply, allowing the free market to decide who gets the vaccine and at what price could mean frontliners and essential workers may not get the protection they deserve at an affordable cost to Government. The private sector collectively has more resources than Government and will outbid them for the vaccine.
3. With its production limited, Astra Zeneca will allegedly only deal with a Government sponsored program, not with individual companies. If companies want access to the vaccine they should pay Government a levy to participate.
4. The Government has finite resources: It is hoping to raise PHP 70-80 billion for vaccines but currently only has PHP 12.5 billion which depending on the blended cost of all vaccines will cover far less than the 60-75  million targeted. The private sector should help by donating some of their vaccination budgets to Government.

Having said this I have concerns:

1. For the public optics, the NTF under Gen. Galvez (and not the DOH under Sec. Duque) signed the Agreement but the DOH is the implementing arm. Here is where our problems start.
2. The DOH is the natural agency to administer the program but its senior management is so inept or dishonest it is like putting a fox in a chicken pen. We have not learnt from Philhealth, the PPE procurement anomalies and others. Correction: We have learnt from these scams but choose to ignore them.
3. Corrupt DOH officials will hijack much of the vaccine to the black market for their personal gain. It will happen before our eyes but like watching a magician we do not know where or how is the trickery.
4. Corrupt DOH officials will designate their favored hospitals and inoculation centers to administer the vaccine for a kickback. We have seen this in the Philhealth scam where advances were made to private hospitals for ghost COVID cases. The vaccine may be free but the costs of storage, distribution and inoculation are not which is where the padding happens.
5. Corrupt DOH officials will control or connive with the Project Manager. There will be little accountability and transparency. Neither Astra nor the private companies will have the inclination nor ability to oversee the Project Manager.
6. The logistics of the roll-out is complicated especially for the Pfizer vaccine which requires delicate handling and extreme cold storage. Much of the vaccines could well go to waste or be ineffective.
7. The FDA has still to approve the Pfizer/Moderna/Astra vaccines even as developed countries with greater expertise have done so. FDA head Eric Domingo said the current vaccines cannot be commercialized because they still have not met the standards for “safety and effectivity”. Is the delay in the FDA approval an excuse to limit the vaccine supply and prevent its mass procurement for black market profit?
8. The Philippines has a terrible history when it comes to cornering vital commodities on arguments of efficiency: There were the sugar and coconut monopolies under Marcos and the rice cartel under subsequent Administrations all of which became cess pools of corruption. The proposed vaccine arrangements will not be different especially with the backdrop of the 2022 election.
9. The diversion of vaccine supplies to the black market could turn off vaccine suppliers. Why will they supply the Philippines at cost only to see their vaccines sold for enormous profit by corrupt Government officials? Going forward they will price their vaccines at commercial rates which will make it financially prohibitive to inoculate the 60-75 million we need to achieve herd immunity.

As a nation we have the unenviable reputation of trying things on our own with disappointing results. There is our education system with the poorest reading, writing, math, and science outcomes; our urban policies with the worse traffic, our war on drugs with the most unaccountable deaths, our health protocols with the longest record of lockup, our economic programs with the most dire prospect of recovery; and now our vaccine program. 

Corruption and not COVID will be the death of this country. We are being primed to believe that various vaccines are on the way – Astra Zeneca, Pfizer/Moderna, Johnson & Johnson, Gamelaya Research Institute of Russia, Novavax from India, Sinovac from China – but if our authorities cannot even sign off on vaccines that have already been approved elsewhere like Pfizer and Astra; there is little prospect of immediate relief. The credibility of our health officials is so low two-third of Filipinos do not agree to be vaccinated.

Corrupt Government officials have an incentive to limit the sources and channels of distribution of the vaccine to maximize their black market profit. We saw it in the resistance to rapid testing, in how the Pfizer ball was dropped by who else – our 10 million allocation was immediately picked by Singapore -, in the delay in FDA approvals for recognized antidotes, and now in the opaque program for Astra Zeneca. A consortium of Ayala, Unilab and Zuellig had reportedly offered Government some PHP 20 million in free Pfizer vaccines last year only to be rejected by the powers at be. 

These elements are holding our country hostage to potentially the biggest criminal heist in our history and nothing is being done about it. We can only watch as we are taken to the cleaners.

2021: Out Of Breath And Hoping Against Hope

Economists have predicted ten of the last seven recessions. With this this in mind let’s look at what is in store for the New Year.

As Netflix said, TwentyTwenty was such a bad year it is repeated twice.

The Philippines will still not be a happy place in 2021. GDP will be up but that is coming from a low base. After a fall of about 10% even an upside of 7% this year and next will mathematically only return us to pre-pandemic levels in Q2 2022. And even then the landscape will be significantly different than when we started.

After 10 months of pain, many businesses are on their last legs. A number will permanently disappear and those that survive will be loaded with debt. There will be unused capacity in manufacturing, commerce and real estate. On-line platforms will increasingly leave capital-heavy businesses with stranded assets. Some well known corporate names could stumble.

Many unemployed will be permanently so. The official unemployment rate of 7-8% masks the large under-employment of people working less than 40 hours a week and low paying, low skilled work with few benefits. Their ranks will swell with new entrants who are educationally and technically unqualified for the new skill sets required by the knowledge industries that emerge.

International tourism will be a stretch.

The vaccine will arrive in mass only in 2022. Our FDA has still to approve the Pfizer antidote even as the WHO, U.S., Europe and most developed nations have done so. Do our scientists know something that everybody else does not?

The medical logistics will be challenging. Corruption and incompetence will delay the roll-out. There will be a black market in the vaccine with the rich and powerful getting ahead of the line. The economic and health gap will widen. The current controversy about who got what vaccine, when and how is a hint of things to come. Actually, who cares? The President has still to be inoculated for reasons of safety but his security reportedly has. This speaks to who is expendable.

Schools will possibly suffer another year of distance learning setting our young back from an already dismal situation.

The PSEI lost 9% in 2020 when the S&P 500 was up 16%. With the popularity of emerging markets, a vaccine and low valuations the stock market could end the year higher but this is irrelevant to ordinary Filipinos.

The peso should continue to be strongish which will weigh on exports, tourism and OFW remittances. The currency should return to its mean when the economy recovers.

The official inflation rate will be 3-5% but will disguise the higher prices of food. Many people are living on a PHP20/meal of rice, mongo for protein and a few toppings.

In the slow environment interest rates could go lower.

There will be a lot of money circulating but little to where it is needed. The BSP will continue to expand liquidity with lower reserve requirements and regulatory easing which will do little to expand lending.

Banks will see the reality of their defaults with the expiry of forbearances. They will further tighten lending despite BSP pleas to the contrary. Hardest hit will be consumers and COVID affected businesses. There is no systemic risk to the financial system but a slew of big name defaults could change that.

The commercial and residential rental market will remain soft. E-commerce and work-from-home are replacing physical space, the POGOs are in flight and many expatriates are working from their native countries. Malls will still subsidize tenants.

Businesses and projects that are in transition will see delays in realization and if leveraged will be in trouble. There could be a pile of uncompleted developments. 

Foreign investors will be deterred by our health protocols preferring countries like Vietnam which are further ahead in the curve.

 The Government will not any unveil any strategic and structural initiatives to address the damage to the economy. Like Marawi and Yolanda, there will be much talk about rehabilitation but little else. Macro economic policy will remain focused on marginal improvements rather than quantum changes commensurate to the scale of the crisis. There is Sen. Bong’s Balik Probinsya but there is no plan, funding or deep dive into the challenges to decongest cities, solve urban poverty and rebalance the economy. 

Fiscally the Government is hinting at higher taxes to repay the COVID-induced debt. Corporate income taxes were just lowered and NOLCOs extended so it is unclear what gives. Higher taxes or a sniff thereof will deter consumption and investment.

Despite a really poor season and a tired Government there will few management changes from the 2016 starting line-up absent deaths in the aging Cabinet and resignations from members running for 2022 public office. The last recruits were the NEDA and Tourism heads but despite being the best looking in the lot they are not part of the first team.

Our country has gone from an economic depression to a humanitarian crisis. How do we save millions of Filipinos from starving while we slog through COVID? That should be the focus of economic policy. With 15 and 30 year bond maturities there will be time enough to work through the budget deficits and debt levels. The human suffering should be included in the calculations but will not. Other countries have gone all in.

The key to recovery is a financial bridge over the next 12-18 months to boost aggregate demand.. This can only come from Government with its fiscal firepower and balance sheet. The Treasury is unlikely to prime the economy beyond the nominal 9% increase in the 2021 Budget which analysts agree is too little and possibly too late. The Government is relying heavily on infrastructure spending to take up the slack but if the NAIA rigodon is anything to go by, we are in for a very long wait. Funds in Bayanihan 2 which were approved in September have apparently still  to be fully released.

Corruption is the big obstacle to a massive fiscal rescue. Our economic managers do not control that agenda. Despite a threat to run amok at the first hint of malfeasance, nothing of significance has or will happen except for the usual investigations and administrative dismissals that serve only to feed the news cycle.

This year will be the start of the election season and all the shenanigans that go with it. The biggest cess pools will be in the big budget departments like Public Works, Health and DWSD and in the lowest lying fruit, the vaccine budget. 

Our GDP is predicted to grow by about 7% which is arguably priced to perfection. What are the upside/downside risks to this scenario?

1. A resurgence of the pandemic from mutations in the virus or transmission.
2. Delays in the vaccine due to supply chain, corruption, logistics or mismanagement.  An increase in the number of approved vaccine providers will be positive.
3. The President’s health – This would be a game changer.
4. Social unrest – The economic stress on the ground is under reported in media for fear of reprisal but does not mean it is not there. What is the breaking point? We will only know when it happens.
5. Natural disasters.
6. Geo-political tensions from trade and military brinksmanship among the super-powers and rogue nations.
7. Extraordinary spending from pent-up demand and savings in the higher income groups which were less affected by COVID; could accelerate a return to normalcy. World economies could also recover faster than expected which will be good for trade, tourism and our OFWs.
8. A fiscal change of heart – A turbo-charged Bayanihan 3 could boost the economy. With elections in May 2022 politicians could be pushing for this over the bodies of our economic managers.

For many 2021 could represent the death blow to their businesses and a disenchantment for the future of their kids. We need a major fiscal stimulus; new people, new energy and new ideas in Government; a vision of hope rather than motherhood and false promises; a real war on corruption; and an economically engaged President to reinstall confidence in investors, consumers, businessmen, visitors and the public at large.

More of the same, I am afraid, will not be enough.