The Philippine economy: After the first year of the Aquino administration

The administration… is most of all about aggressively pushing corporate interests, especially by big foreign investors, over the economy’s or the people’s development needs.

“From a President who tolerates corruption to a President who is the nation’s first and most determined fighter of corruption; From a government that merely conjures economic growth statistics that our people know to be unreal to a government that prioritizes jobs that empower the people and provide them with opportunities to rise above poverty.” – A Social Contract With the Filipino People, Benigno S. Aquino III

IBON Features— No one would hold that one year is enough time to resolve social and economic problems accumulated over many decades, arguably even over centuries. Yet a year is certainly long enough to set strategic directions for the Philippine economy that are firmly biased for the poor majority and, indeed, also long enough to take the first determined steps towards these. None of this has taken place in the first year of the Aquino administration.

In his inauguration speech a year ago Pres. Benigno “Noynoy” Aquino, III trumpeted that, under his wing, the Filipino people can dream again. This raised hopes among many Filipinos aspiring for decent living in a society where a few prosper while the majority remain desperately poor. The Aquino administration however finishes its first year in office with little to show in terms of new socioeconomic policies to distribute land, create long-term jobs, raise incomes, improve social services, develop the rural economy and build domestic industry.

The images painting the Philippine economy are familiar and are likely to persist in the remaining five years of this administration absent in real changes in economic policies: demolitions of urban poor communities; unrest in haciendas nationwide; workers pressing for a Php125-across-the-board wage increase; abuses of overseas Filipino workers and their return home to poor jobs prospects; increasing oil and food prices; power, toll and fare rate hikes; rising costs of schooling, health and housing; land-grabbing and mineral plunder; and growing poverty amid rising corporate profits.

Economic growth is slowing under the Aquino administration. The government reported 4.9% growth in real gross domestic product (GDP) in the first quarter of 2011 which was markedly slower than the 8.4% rate in the same period last year. Consecutive quarters are not strictly comparable but it can still be noted that the first three quarters of the Aquino administration has seen progressively slower growth year-on-year – from 8.9% in the second quarter of 2010, 7.3% in the third quarter, and 6.1% in the fourth quarter, followed by the 4.9% in the first quarter of this year.

According to the national income accounts, compensation of overseas Filipino workers has been stagnant (measured at current prices) or even declining (by 3.9%, measured at constant prices). The compensation inflow item net under net factor income from abroad – now called net primary income – refers to total earnings of overseas Filipino workers and not, as is commonly misunderstood, to their remittances.

The government attributed the economic slowdown to short-term factors such as public underspending, weaker global trade and the absence of election-related stimulus rather than basic internal economic weaknesses.

The country’s jobs crisis continues with no meaningful improvement in the employment situation. The government officially reports the unemployment rate falling to 7.2% in April 2011 from 8.0% in the same period last year – although IBON estimates that the real number of unemployed is higher at some 4.5 million. There are also indications that the quality of jobs remains poor. The underemployment rate rose to 19.4% in April 2011 from 17.8% the year before which implies a very large 827,000 increase in the number of Filipinos not earning enough from their jobs and seeking additional work (now standing at 7.1 million).

Being educated is also apparently no longer enough and two out of five jobless Filipinos have college degrees or at least reached college level. But even as it is, from 2006-2009, poor economic conditions of families mean that only 14 out of every 100 children get to go to college.

There are still 16.5 million Filipinos in poor quality work – unpaid family workers (4.2 million) and own-account or informal sector workers (12.3 million) – aside from 1.9 million working as generally poorly paid household helpers. Joblessness also continues to force more and more Filipinos to work abroad and some 4,080 Filipinos left the country every day for most of 2010, up from 3,850 leaving per day in 2009.

Wages remain pegged at meager amounts. This makes it consistently difficult for Filipinos to cope not only with rising food and oil prices and increasing utility rates but also with more expensive education, health and housing. The mandated minimum wage of Php426 upon the mere Php22 wage increase last May is still far from the some Php1,000 needed for a family of six in NCR to cover its basic expenses. The real wage under the Aquino administration so far is even less than the most that was granted under the previous Arroyo administration in February 2002.

Debt service and the public debt stock have continued to rise. It paid Php634 billion in debt service between July 2010 and April 2011 which is Php8 billion more than in the equivalent previous period under the Arroyo administration. These payments over its first ten months also already exceed payments for the whole year of 2007, 2008 and 2009 respectively (and of the first two years combined of the Arroyo administration). Yet the national government debt stock has continued to rise from Php4,582 billion in end-June 2010 to Php4,706 billion in March 2011.

Fiscal problems persist. The small Php61 million fiscal surplus reported for the first four months of 2011 was also primarily due to a Php60.5 billion or 11.6% cutback in government spending in this period compared to the year before rather than any significant increase in revenue collection. The Aquino administration actually continues the distorted fiscal priorities of the Arroyo administration. It keeps relying on the regressive 12% value-added tax while refusing to increase taxes on the rich, to roll back revenue-losing trade liberalization, to lessen fiscal incentives for foreign investors, and to cut back on military spending (up by Php4.2B at Php77.5B) and huge debt service (up by Php80.4B to Php823.3B).

The government itself also does not even appear to believe that its “Kung walang korap, walang mahirap” anti-corruption drive will significantly increase revenues. For instance, the 2011 revenue program submitted with the budget last year did not project significantly higher revenues this year (though it remains to be seen if this will be different in the 2012 budget). A year into its term, the government does not yet appear to have successfully prosecuted even one big-time culprit of the phenomenon which it blames so much of the country’s economic woes on. Similarly, big corporations like Shell and Chevron which have supposedly not been paying Malampaya taxes properly are not being confronted.

The Aquino administration is cutting back on social services. The administration’s first budget, for 2011, still gives more priority to debt service than to social services. The budget for total debt service, interest and principal, increased by Php80 billion to Php823 billion – while the education budget increased by just Php31 billion (to Php272 billion) and housing by Php273 million (to Php5.7 billion), with the health budget even reduced by Php1.4 billion (to Php39 billion).

The budget for state universities and colleges was cut by Php364 million, for 67 public hospitals nationwide used mainly by the poor by Php368 million, for five specialty hospitals by Php971 million, and for subsidies to indigent patients by Php20 million. As it is, the average cost of confinement in a public hospital is already equivalent to 60 days worth of daily wages and in a private hospital 87 days. Housing services meanwhile remain poor even as public-private partnership (PPP) projects have displaced tens of thousands of Filipinos – such as in the North and East Triangle for the Php22-billion Quezon City Business District.

Most alarmingly, the economic policies adopted are the same ones that have caused low growth, joblessness, falling incomes and increasing poverty. The administration’s economic thrust as contained in its Philippine Development Plan (PDP) 2011-2016 is essentially the same as that of the previous Arroyo administration: stick to the globalization policies implemented over the last decades – but deepen and broaden privatization through public-private partnership programs (PPPs) – and selectively implement social protection programs especially conditional cash transfers (CCTs).

The administration’s centerpiece PPP program makes clear its bias for big profit-seeking players and foreign investors over building a domestic economy that provides for its constituents’ needs. The program plays up the role of profit-seeking private and foreign parties in infrastructure building and providing public goods and services. Instead of putting an end to the ills of privatization and other `free market’ measures, the Aquino government is further opening up the economy for big businesses and profits at the expense of the people. More expensive public facilities will aggravate Filipinos’ already serious problem with making ends meet. There are 12 priority rail, road and airport projects lined up this year worth Php157 billion although it is still unclear how much of these have already been successfully bid out, much less started.

The Aquino administration also clearly seeks to build on previous globalization policies and extend these to as many areas of the economy as possible. The leadership of the Senate and the House of Representatives have already expressed their willingness to push for charter change particularly towards opening up the economy to greater foreign investment. The government has also already launched a national campaign to promote free trade agreements (FTAs) as well as declared its intent to enter into a second FTA this time with the European Union (EU). All these indicate how the Aquino administration is relying mainly on foreign investments and foreign markets for economic development, rather than the painstaking but more sustainable and equitable approach of focusing on the domestic economy.

Cash dole-outs are being used as a temporary smokescreen for further globalization. The administration has greatly expanded the conditional cash transfer (CCT) program initiated by the Arroyo government with a Php22 billion budget just for 2011 – even borrowing US$805 million from the World Bank and the Asian Development Bank (ADB) for this. This multi-billion peso expansion was done without benefit of a comprehensive assessment of previous CCT implementation especially regarding distribution and effectiveness.

This debt-driven and unsustainable social protection program provides temporary relief but cannot replace the long-term benefit of stable jobs and decent incomes. The targeted 4.3 million beneficiaries are few compared to the some 65 million poor Filipinos. Meanwhile the government is paying Php1 for every Php4 in cash given out, and is paying US$5 for every US$4 in foreign loans taken out. These CCTs are unsustainable, expensive and relief without reform.

Land reform is not a priority and landlessness remains widespread. The Aquino administration has relegated land reform to an Asset Reform sub-section in the Social Development chapter of its PDP 2011-2016, aside from continues with CARPer which merely extends the failed Comprehensive Agrarian Reform Program (CARP).

Landowners continue to evade land distribution so having their own land to till remains elusive for farmers and farmworkers of various haciendas nationwide including those in Bulacan, Tarlac, Batangas, Laguna, Bicol and Negros. Pres. Aquino meanwhile remains silent over the Hacienda Luisita controversy while the Supreme Court has repeatedly postponed deciding over the affirmation of the PARC’s revocation of the stock distribution option and over its constitutionality.

Meanwhile agricultural lands remain up for grabs in land deals with businesses and foreign companies, threatening local food security and undermining peasants’ centuries-old struggle for land. For instance, six million hectares of `idle lands’ have been allocated for the production of sugarcane, coconut, cassava, jatropha, oil palm and other cash crops and two million hectares for agribusiness development. At the same time, corruption and anomalies in the National Food Authority (NFA) are being hyped to justify its privatization – portending a hike in rice prices.

The Aquino administration is failing to consider the people’s long-term well-being – in terms of jobs, higher incomes, land distribution, progressive taxes, delivery of efficient and accessible services, and sovereign trade and investment policy. Like its predecessors, it has resorted to giving a positive spin to any and all economic indicators while avoiding taking doable and lasting measures to actually improve the lives of the people. It recently claimed that economic growth features a stronger manufacturing sector and rebounding agriculture. Yet there has not been any policy move to reverse the steady decline in manufacturing and agriculture over the last four decades.

The administration persists in refusing to depart from the `free market’ dictates of globalization to boost local agriculture and build domestic industries. It is most of all about aggressively pushing corporate interests, especially by big foreign investors, over the economy’s or the people’s development needs. These discredited policies will only aggravate the people’s situation.

The government needs to be one that does not place elite or bureaucratic self-interest over that of the people. The remaining five years of the administration should not be more of the same if the country is to find solutions to its decades-old travails. IBON Features

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