Fight for reforms, fight for Lim

The author is Coordinator of Action for Economic Reforms. This piece was published in the Yellow Pad column of Business World, 22 March 2004 edition.

A news item buried in an inside page of this paper’s issue on March 16,
2004 reported that “Alberto Lim, the controversial member of the Civil
Aeronautics Board or CAB, was reportedly relieved recently after
Malacanang appointed his replacement.” Kudos to BusinessWorld for
reporting this crucial issue, but it should have been headline news, as
other newspapers did not publish this controversy.

Mr. Lim has confirmed the news that Gloria Macapagal Arroyo (GMA) has
removed him from CAB. The news circulating is that Mr. Lim has been
replaced by lawyer Binky Herrera, from a big law firm that is known to
represent multinational corporations, including foreign air carriers.

Nevertheless, to quote BusinessWorld, Mr. Lim’s removal from CAB is
still unofficial “because nothing has been put in writing.” We can only
surmise that Ms. Arroyo has become extra cautious in handling the Lim
controversy in light of the angry reaction of nongovernmental
organizations, public interest groups, and respected personalities in
business and in the academe. She may have belatedly realized that her
decision to remove Mr. Lim is causing political damage that could hurt
her campaign to win the presidential election. But she has calculated
that she gains more by accommodating the vested interests who want her
to oust Mr. Lim.
Hence, to prevent a public backlash and do damage control, Ms. Arroyo
deals with the controversy in a non-transparent, surreptitious way. No
formal announcement and no press coverage of Mr. Lim’s ouster. And
through her emissaries and apologists – the likes of Cabinet member
Dinky Soliman – Ms. Arroyo wants to appease Mr. Lim’s supporters by
asking them for their candidate to replace Mr. Lim. So she wants the
allies of Mr. Lim – for that matter, Mr. Lim himself – to be an
accomplice in his sacking. (If indeed Ms. Arroyo is looking for other
candidates, what happens to Binky Herrera’s appointment? Will she do
unto Herrera what she did to Minita Chico Nazario? And will Mr. Herrera
be willing to go through the travails of Ms. Nazario?)

Notwithstanding the absence of an official document on Mr. Lim’s
removal and replacement, the damage has been done, to the glee and
benefit of narrow interests. Mr. Lim is now in limbo. He has been
effectively neutralized by enemies who want to control CAB.

For those who want good governance and a progressive aviation policy,
the only issue – the bottom line – is the retention of Alberto Lim. To
support and defend Mr. Lim is to safeguard and assert the gains from
the aviation policy that promotes competition and rejects monopoly.

This progressive policy is embodied in two landmark documents:
Executive Order (EO) 219, which was signed in 1995 and the Implementing
Rules and Regulations (IRR) of Executive Orders 219 and 32,
Establishing the Domestic and International Civil Aviation
Liberalization Policy, which was approved in September 2001.

The CAB is bound to uphold the national interests in its enforcement of
the EOs and IRR. Both EO 219 and the IRR state that the determination
of the national interest “shall consider the promotion of international
trade, foreign investments and tourism, national security, users of air
services, the status of bilateral relations, the development and
viability of civil aviation in the country and other political or
diplomatic considerations.”

Before the signing of EO 219 in 1995, a one-airline policy dominated,
which thus assured Philippine Airlines (PAL) a monopoly of the air
transport industry. The inefficiency arising from the monopoly was
encapsulated in the familiar joke that PAL stood for “PAL, Always Late.”

EO 219 then paved the way for creating the favorable conditions to
foster competition and competitiveness in the air transport industry.
Those who benefit most from this policy of promoting competition and
rejecting monopoly are among the vital sectors in the Philippine
economy – labor (particularly the millions of overseas Filipino workers
and their families), tourism, and trade, not to mention the many other
users of air services. Migrant labor, tourism and trade account for
more than 6.5 million jobs in the country and overseas. In the tourism
industry alone, one average tourist’s spending is equivalent to
sustaining one Filipino job for a year. The welfare of these Filipino
workers depends significantly on their access to air carriers or the
expansion of entry, frequency, and capacity of air carriers.

The policy of progressive aviation liberalization has served the public
interest. The evidence is clear cut. The policy of competition has led
to the entry of Cebu Pacific and other domestic carriers. Access to
domestic air service has grown tremendously, from 6.4 million seats in
1995 to 10.6 million seats in 2001. The new carriers have also
introduced flights to so-called missionary routes, which have turned
out to be financially viable. Moreover, air fares have significantly
gone down. In some domestic flights, especially in Mindanao routes,
real savings from reduced air fare arising from competition amount to
more than 40%.

The benefits also extend to international air service. New carriers and
new routes are operating, which mostly benefit overseas Filipino
workers. Further, between 1992 and 1997, tourism arrivals and receipts
shot up, increasing by 120% and 70%, respectively. Air fares have
significantly gone down. Cebu Pacific, for example, can offer a fare
for a round-trip ticket to Hong Kong and Manila that is significantly
lower than Cathay Pacific’s price. The entry of Qatar Airways has made
trips to the Middle East and even Europe much cheaper – another
blessing for overseas Filipino workers.

Despite these solid gains, the full potential of a progressive air
liberalization policy is far from being realized. The demand for more
flights, frequencies and capacities has yet to be met. The
implementation of some key reforms has been stalled because of strong
objections from Philippine Airlines, which have strong influence in the

The disappointment with CAB is again manifested in recent statements
issued by elected officials and by investors, entrepreneurs and workers
in Pampanga. The City Council of Angeles, Pampanga unanimously approved
a resolution on March 2, 2004, “strongly urging President Arroyo to
replace ranking officials of Civil Aviation Board (CAB), including
acting CAB Chair Edward Harun V. Pagusan for blatantly violating the
intent of Executive Order 253 that would expand air services at
Diosdado Macapagal International Airport and Subic Bay International
Airport.” Meanwhile, multi-sectoral groups and business leaders in
Pampanga have come out with an open letter of appeal for the actual
implementation of EO 253, which vested interests are blocking through
their allies in CAB. In a word, CAB is a captured agency. For vested
interests to consolidate control over CAB, they have to remove Alberto
Lim. Mr. Lim is a tough and independent regulator, and he has
consistently fought for policies and measures in CAB that uphold the
public interest. For this, he has incurred the ire of special interest
groups, which have even smeared his name by calling him a traitor.

Mr. Lim’s removal has serious ramifications other than losing a good
regulator in CAB. His removal sends a signal to other reformers or to
those who join government to pursue reforms – that the good and
competent people are not only denied any reward but also punished for
their deeds.

His removal also bolsters the view, a favorite theme of Economic
Planning Secretary Romulo Neri, that the Philippine state is “booty
capitalist.” That is, particularistic interests overwhelm public
policy. The danger, as this controversy of Mr. Lim’s removal has shown,
is that the option of changing government from within is getting less
and less effective. In addition, it provides a bad lesson: that it is
more effective for investors to pour their resources into rent seeking
than to use them productively.

Mr. Lim’s ouster also validates the accusation that GMA has no scruples
in undermining policies and institutions to secure her ambition. At
present, the main source of policy unpredictability – the bane of
investors – is GMA’s opportunism and lust for power.

To reiterate, to defend the gains from progressive liberalization of
aviation, we must support Alberto Lim and expose the scheme of vested
interests, in cahoots with GMA, to oust him from CAB.

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