Duterte’s Dilemma : Pursuing Philippine Industrialization in an Era of Limited Carbon Budgets

Elpidio V. Peria
4 December 2016


CAGAYAN DE ORO. President Rodrigo Duterte leads the ceremonial switch on to signal the opening of the FDC’s Misamis Oriental Power Plant, Thursday, Sept. 22. 2016 Joey P. Nacalaban), from http://www.sunstar.com.ph/cagayan-de-oro/local-news/2016/09/23/405-megawatt-coal-fired-power-plant-fully-operational-499381, 4Dec 2016


Now that the recent 22nd Conference of the Parties (COP) to the UNFCCC to the UNFCCC has concluded, talk should shift to whether the Philippines would now ratify the Paris Agreement but perhaps before environmentalists would pounce on this issue onwards, it may be worthwhile to look closely at the nature of the challenge faced by the President based on his statements on this issue and it is this : since he promised that he will take steps to industrialize the country, then his advisers should also connect it with the grim reality that we should be taking into account in our development plans the fact that the earth only has a limited carbon budget on which countries like us may be able to develop, as what we have mentioned in the immediately preceding blog post.

Industrial policies have a bad reputation among economists in developed countries, as it gives the notion of government picking winners and losers and failing badly in that task. The review section of the November/December 2016 issue of MIT’s Technology Review magazine which talked about industrial policy points to the Concorde, among others, as an example of a high-profile industrial policy outcome that illustrates the folly of this effort.

Dani Rodrik of Harvard University is aware of the challenges and limitations of industrial policy but in his paper Green Industrial Policy (Oxford Review of Economic Policy, vol. 30, no. 3, 2014, pp. 469-491) he sees the potential of industrial policy to promote green growth, which to him requires green technologies: production techniques that economize on exhaustible resources and emit fewer greenhouse gases. The challenge for countries is how should one pursue industrial policy to promote green growth or to paraphrase the challenge for President Duterte, how then should he pursue Philippine industrialization in an era of limited carbon budgets?

The first thing he needs to do is to articulate the vision of industrialization that he wants the Philippines to achieve, within a given time-frame, say, 2040, which incidentally is also the end-date of his Ambisyon Natin 2040, a long-term vision that he articulated in Executive Order No. 5 as a guide for the country’s development planning for the next 25 years. The vision is good, but the challenge is in putting in the details in between this year up to 2040 as the Duterte Administration will only have at most six years within which to pursue its goals. It has to ensure that its goals and the policies pursued to implement these goals will continue even to the next government that will come in in 2022.

What kind of industrialization does President Duterte want the Philipines to achieve? There are many possibilities for this, either it may be agro-based, high-technology-based, or internet-based, or how about biodiversity-based, given that the Philippines possesses a wealth of biodiversity with many low-hanging fruits in terms of biochemical and/or natural products research leads that only needs a dedicated set of funding to go into further product development, like there’s a pending 12-year program Wealth Creation from Philippine Biological Resources Program conceptualized by the DENR with UNDP which aims to generate export-winners made out of biochemical compounds from identified Philippine biological resources.

Once a vision and a clear notion of industries to push are clarified, then the work begins to identify how much energy would these industrial initiatives need, and here a country-wide and industry-wide energy planning exercise may have to be done so that the government and the private sector and other participants to the industrialization process will know how much more energy would be needed to provide for the industrialization of these sectors .

A related question here is – do we have the necessary technologies to pursue this industrialization path both for the energy requirements of these industries and the industries themselves ? Answering this question may very well result in the country finally articulating its technology action plan, part of which may be sourced from mechanisms under the UNFCCC or through existing commercial arrangements of the private sector or through government channels.

Once we know how much energy we will need and checking it with our existing energy mix and capacities then perhaps we may be able to craft a sustainability transition program that identifies the kinds of shifts that we need to have in the way we source our energy requirements taking into account how much carbon we would be able to emit at what time frame. Once we have these time-frames, we may then be able to pinpoint the peak year of our emissions, which may also be the period when we will have a clear indication that we are achieving our industrialization goals. Once these things are clear to us as a country, then that may be the time that we can have a more realistic number in terms of our GHG emissions cuts in our nationally determined commitments to the Paris Agreement, which hopefully, we should have ratified even before we have launched this goal towards industrialization.

There are lessons from previous industrial policies undertaken by developed and developing countries that Dani Rodrik points to in his paper that President Duterte’s key people may want to learn from and these are 1) the need for strategic collaboration and coordination between the private sector and the government with the aim of learning where the most significant bottlenecks are and how best to pursue the opportunities that this interaction reveals; 2) the need for discipline such that firms and industries that receive help from the government must know that they cannot game the system, and that underperformance will result in the removal of assistance; and 3) there must be public accountability such that public agencies must explain what they are doing and how they are doing it, and they must be as transparent about their failures as their successes. Accountability not only keeps public agencies honest, it also helps legitimize their activities.


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