Tag Archives: Philippines

The Philippine Experience in Transition

Dr. Estanislao speaks at a conference in Yemen. (Photo: Staff)

“A transition is a tremendous undertaking but it is a greater challenge to make that transition work.” Dr. Jesus Estanislao was a leader at the time of the “people power revolution” in 1986, served in the administration of President Corazon Aquino, and has continued building governance in the Philippines to this day. His experience as a pioneer in government and civil society brings valuable perspectives on different dimensions of democratic transition: from crisis management to long-term institution building; from economic to political and social decision making; and across all levels of society.

Dr. Estanislao generously shared his advice with civic and business leaders across the Middle East at CIPE workshops in March 2012. These Arab leaders found the Philippine experience to be remarkably relevant and compelling, so we captured Dr. Estanislao’s contribution for CIPE’s Economic Reform Feature Service. Key lessons include the need for a long-term vision, the importance of institution building, and anunderstanding of democratic governance as a process of citizen participation and responsible citizenship.

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Building Institutions that Make Property Markets Work

Property rights scorecard

Hernando de Soto famously asked: although cities across the developing world are teeming with entrepreneurs, why do those countries seem unable to become prosperous market economies? The answer, he argues, is that they hold “resources in defective forms: houses built on land whose ownership rights are not adequately recorded, unincorporated businesses with undefined liability, industries located where financiers and investors cannot see them.”

CIPE and partners Association for Foreign Investment and Cooperation in Armenia, Unirule Institute of Economics in China, Institute of Economic Affairs in Kenya, Institute for Solidarity in Asia in the Philippines, and Saratov Chamber of Commerce and Industry in Russia set out to explore this crucial question in more detail, identifying the barriers small entrepreneurs face in urban property markets using the International Property Markets Scorecard.

The Scorecard provides a methodology for property market system analysis to investigate the six core elements necessary for sustainable market development: property rights laws and enforcement, access to credit by small businesses, efficiency of governance, rational dispute resolution, financial transparency, and appropriate regulations. This approach not only illustrates the linkages between property market elements but also helps identify gaps and advocacy priorities where some of those important institutions remain weak, either due to a lack of proper legal and regulatory framework or its weak implementation.

Following an in-depth analysis of the available secondary data such as international indices and national statistics, CIPE partners conducted fieldwork in two select cities to localize the results. This work was tailored in each country through a mix of focus groups and interviews to obtain the most accurate snapshot of the conditions entrepreneurs face in dealing with the government, banks, and professional services providers in the property sector. These views from small businesses have a unique power to illustrate key problem areas because of the real, personal experiences they reflect.

Property markets are multi-dimensional institutional frameworks that touch upon issues key for all citizens but particularly vital for small businesses. As such, property markets are a microcosm reflecting the state of a country’s institutions that build democracies and market economies alike.

This Feature Service article summarizes key findings – both shared and country specific – as well as reform recommendations for the next advocacy-oriented stage of our efforts. You can also read full country reports here (China coming soon): Armenia, Kenya, and the Philippines.

Article at a Glance

  • Understanding of property rights often remains limited to property titles, without deeper appreciation of the underlying and interconnected institutions that make property rights meaningful and allow property markets to function.
  • Although private property rights are legally protected in most countries, that protection varies greatly in practice because the implementing regulations and institutions that build property markets remain weak.
  • The development of competitive and transparent property markets for small businesses requires not only legally protected rights but also strengthening of the broader institutions of good governance and market economy.

Beaten to the punch

Participants at the Manila expert roundtable (Photo: CIPE)

A controversy over property rights has captivated Philippine news media with the drama that unfolded earlier this month in Davao on the southern island of Mindanao. The city suffered from flooding that in particular affected people living in informal settlements. In an untimely intervention on July 1, as the city was struggling with the impact of the flood, the police went ahead with executing a demolition court order that would forcibly resettle around 300 families living in the 3,143 square meter shantytown. Enraged inhabitants resisted and Davao mayor Sara Duterte Carpio requested a two-hour stay in the demolition because an appeal against it was underway. When a court sheriff Abe Andres refused to stop, Ms. Duterte repeatedly hit him in the face becoming an unlikely hero of the poor. The incident was caught on tape and quickly became an online sensation.

The mayor maintains that the mandatory provisions governing demolition policies were not followed and the sheriff has not yet filed a formal complaint against her so the legal outcome of the scuffle remains to be determined. But there is a broader significance to the problem that this case highlighted: the pervasiveness of informal property in the Philippines. People who live on untitled plots, or who squat on privately owned land, face resettlements and thus have little incentive and ability to invest in the land they live on.

RA 7279, or Urban Development and Housing Act of 1992, and the so-called Lina Law outline the bases for community consultation as well as the steps and rules of relocation. Yet, the laws fail to address the root causes of informal settlements and – while in theory are meant to protect the settlers – in practice they create “professional” squatters. At the same time, the practice of illegal settlements undermines legal property ownership, leading to confrontations such as the one in Davao.

As a part of the international property markets scorecard project, CIPE and the Institute for Solidarity in Asia (ISA), discussed this and other problems affecting urban property markets in the Philippines during July 12 expert roundtable held in Manila. Participants included banking, real estate, and SME experts as well as policymakers and representatives of relevant government agencies. The discussion was based on the international property markets scorecard approach and focused on challenges faced by small businesses in urban commercial markets and opportunities for reform. The challenge for the country is to look beyond the punching incident and think more broadly and systematically about property markets reform that would empower the poor, many of whom are SME owners, to gain secure land ownership to end the vicious cycle of demolitions and resettlements with no better job or life prospects.

Sara Duterte Carpio is now dubbed “The Puncher.” But reforming property markets requires more than punching your way through problems. Reforms need a systematic approach that examines which elements of those markets are not functioning well and how they can be improved.

The Philippines is one of the four countries where CIPE is working on this project with local partners, along with Armenia, Kenya, and China (roundtable upcoming).

Investors Love Companies That Follow Good Corporate Governance

Good corporate governance undeniably brings resilience in companies, improves values, and attracts cheap capital. A recent study by the Philippine Institute of Corporate Directors (ICD) suggests that corporate governance practices in the country have improved over the last five years, and that new scores have led to significant change in the valuation of firms. The study determined the co-relationship between share prices and corporate governance in China, Hong Kong, Indonesia, the Philippines and Thailand. Jesus P. Estanislao, Chairman of the ICD, said that:

    “The question as to whether in fact corporate governance makes a difference in the valuation of the firms in the stock exchanges, and in all five economies, the answer is very clearly so, and the result is that relationship is robust.”

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What do Lebanon, Algeria, and the Philippines have in common?

CG TrendsThey’re all making strides in corporate governance. In the recent issue of Corporate Governance Trends, a quarterly CIPE publication, you’ll read about new tools for family-owned businesses in Lebanon to implement corporate governance, a private sector-driven initiative to create the Corporate Governance Code in Algeria, and a successful program in the Philippines using scorecards to rank companies’ corporate governance performance. Even in these uncertain times, CIPE partners continue to move forward in their efforts to create better business environments and promote good governance. With the global downturn on everyone’s mind, we’ve also included an interview with CIPE Executive Director John D. Sullivan about the importance of good governance as a response to the economic crisis. The publication is available in Arabic, French, and English.