Social and Economic Reforms

TRAINInfraNotForPoor

by Audrey de Jesus

Among the hyped claims of the Department of Finance (DOF) about the government’s tax reform package is how taxes paid by the poor will go back to them in the form of infrastructure projects and social services. The reality however is that the taxes will go largely to big-ticket infrastructure projects in and around the National Capital Region (NCR) that the poor will hardly benefit from.

TRAIN: easy money for the rich

Currently undergoing Senate deliberations, the Tax Reform for Acceleration and Inclusion (TRAIN) bill is the first of five packages under the Duterte administration’s Comprehensive Tax Reform Program (CTRP). The DOF’s version of the CTRP aims to raise an additional Php157 billion in revenues per year, while the version passed by the House of Representatives (HOR) will raise Php130 billion.

Under TRAIN, there will be higher consumption taxes through the removal of value-added tax exemptions, such as on socialized and low-cost housing and power transmission; new excise taxes on fuel, sugar-sweetened beverages (SSB), and automobiles; and reduced personal income tax rates, estate taxes, and donor’s taxes.

Despite DOF claims that the poor benefit most from their tax reform program, the truth is that the poorest majority of Filipinos bear a heavier tax burden than the rich.

The poorest 60 million Filipinos will pay Php47.0 billion in additional taxes next year, or 2.3% of their combined family income of some Php2.0 trillion. Meanwhile, the highest income 40% will pay Php47.6 billion, or only 0.8% of their total family income of some Php4.1 trillion.

This means the highest income 40% who have twice as much income as the poorest 60% of Filipinos will be paying virtually the same amount in additional taxes. Measured as a share of their total income, the poorest 60% will pay three times as much as the highest income 40% including the richest Filipinos.

TRAIN to nowhere?

Aside from covering up how much the CTRP will burden the poor, the DOF claims that the poor will mainly benefit from these tax revenues, as these will be used for the government’s infrastructure program and social services.

Studying the 2018 Budget of Expenditures and Sources of Financing (BESF) that the Duterte administration submitted to Congress is revealing. The 2018 national government budget submitted to Congress presumptuously assumes that the TRAIN will be passed and implemented next year. Yet the government’s spending pattern is not consistent with the claim that TRAIN will benefit mainly the poor.

It is misleading for the DOF to say that the TRAIN is for funding infrastructure AND social services.  TRAIN is really about funding the infrastructure program, while much-needed social services continue to take a back seat, as seen in the proposed 2018 national budget.

The 2018 BESF shows that there is an exceptional 27.5% increase in infrastructure spending in 2018 to Php1.1 trillion from Php861 billion in 2017. The government reportedly needs an estimated Php8 to 9 trillion over the next five years, or Php1.6 to 1.8 trillion per year, to fund its ambitious “Build! Build! Build!” infrastructure program.  The Duterte administration is clearly counting on additional tax revenues to help fund this.

However, social services spending increases by only 5.4% including just a 5.2% increase in social welfare, a 5.8% increase in education, and a 9.2% increase in health, among others. These increases are unremarkable and follow the same trend as in previous budgets even before TRAIN.

The DOF itself also explains that government infrastructure spending will increase from 4.3% of the gross domestic product (GDP) in 2017 to 6.1% in 2022, i.e. a 1.8 percentage point increase. In contrast, over the same period, health spending will only marginally increase from 0.9% to 1.0%; social protection from 1.9% to 2.0%; and education from 4.4% to 4.9 percent. Cumulatively, spending in health, social protection and education will increase from 7.2% to 7.9%, or just a 0.7 percentage point increase.

There are actually even notable cuts to the social service budget. The housing budget will be markedly cut by 68.9 percent. Under the health budget, Department of Health (DOH) hospitals will see an average 24% cut in their maintenance and operating expenses, and many regional hospitals will see cuts of 30-40 percent. The budget for preventive health programs will be cut by Php16.7 billion or 52%, including those focusing on significant public health concerns like tuberculosis, malaria and HIV.

Infra for the poor?

The DOF claim that the much higher infrastructure spending will go primarily to the poor is also misleading.

Comparing the regional distribution of the government’s flagship infrastructure projects by value and poverty incidence by region, there is a general trend of higher infrastructure spending in regions of low poverty incidence, and of low infrastructure spending in regions of high poverty incidence.

For instance, the NCR has the lowest official poverty incidence of 3.9% but takes up the largest chunk of flagship projects at Php343 billion, while the Autonomous Region of Muslim Mindanao (ARMM) with the highest official poverty incidence of 53.7% accounts for among the least flagship projects at just Php5.4 billion. Central Luzon (CL; Region III) and part of Southern Tagalog (ST; Region IV-A), which also have low poverty incidences of 11.2% and 9.2% respectively, are also among the top recipients of the flagship projects. (See Chart)

It may be argued that infrastructure spending has to consider the nature and degree of economic activity, population density, geographic conditions, and a host of other considerations. But none of these detracts from how infrastructure spending is biased away from poor regions and, indeed, is biased away from the kind of infrastructure projects that the poor directly need and will be directly using.

The flagship projects, which are concentrated in urban areas, especially in NCR, CL and ST, will mainly benefit big foreign and local corporations. Such targeted big-ticket infrastructure like mass transit, roads and bridges, railways, seaports, airports, communication and information, will primarily serve and boost the profit-making enterprises of these corporations that contribute little to develop and strengthen domestic industries.

Tax the rich, not the poor

As much as the DOF claims otherwise, the Duterte administration’s tax reform program is ultimately anti-poor and pro-rich. The poor majority will have to fork over more of their already meager incomes to pay higher consumption taxes. Revenues generated from these taxes will go towards infrastructure projects that hardly benefit them, while funding for much-need social services will be cut or remain stagnant.

Instead of further burdening the poor, the Duterte administration should be challenged to implement a genuinely progressive tax reform program and aggressively collect taxes from the wealthy and big corporations. It can raise hundreds of billions of pesos by increasing direct income taxes on the wealthiest Filipinos and by correctly collecting taxes especially on the biggest corporations.

The revenues generated from a progressive tax system should then fund infrastructure projects spread throughout the country that will support real development of local industry and agriculture. It should also be used for much-need social services and development that will truly benefit the poor. ###

01

A man sleeps amidst rubbish under a bridge in Paranaque city, Metro Manila, Philippines May 31, 2016. REUTERS/Ezra Acayan

During the Duterte administration’s first year, there was all the hype about aiming for inclusiveness and championing the common Filipino family’s dream for a comfortable life. The President took important, some unprecedented steps including hinting nationalism, willingness to work with progressives in the cabinet and pursuit of peace negotiations. Yet the administration capitalized on bloody wars on drugs and other forces perceived to be enemies of the State, barely changed the way the economy was run and saw the nation deteriorating further.

The following are highlights of the Duterte administration’s economic direction: the context of deterioration amid growth, a short-sighted development plan, and continued implementation of discredited economic policies.

  1. Deterioration amid growth

The Duterte administration’s continued adherence to the neoliberal frame has not changed and can only worsen joblessness, poverty, inequality and decline that persisted despite high reported growth.

The Philippines was hailed as the second fastest growing economy in Asia and 10th fastest in the world. Growth in gross domestic product (GDP) at an average of 6.7% from 2012-2016, the highest in seven decades.

Yet production comprising agriculture, manufacturing, construction and mining, which steadily fell over decades of neoliberal policies, shrunk to a low 39.2% of the economy in 2016. In three decades the annual average of the combined share of agriculture and manufacturing in GDP  fell to just 32% in 2016 from 54% in the ‘50s to ‘70s. The share of agriculture in GDP dropped to 8.4% in April 2017.

IBON estimates unemployment, which averaged 5.1% in the 70’s, to be at an annual average of some 10.2% in the period 2010-2016. The official definition of ‘unemployment’ has removed millions of discouraged jobless Filipinos from the labor force. Underemployment remains on a high annual average of 18.9% from 2010-2016. The number of employed Filipinos dropped by 393,000 in April 2017. Meanwhile an average of 5,771 Filipinos left the country daily in 2016 to work abroad.

There was a concentration of economic activity in corporations, and income and wealth in a few individuals while transnational companies (TNCs) have disproportionate control of the economy.. The gross revenue of just the top 100 corporations, for instance, increased from being equivalent to 59% of GDP in 2010 to 71% in 2015. TNCs accounted for 37% of Top 1000 revenues and 63% of manufacturing by 2015. The net worth of just the 40 richest Filipinos grew from being equivalent to 14% of GDP in 2010 to 26% in 2016.

On the other hand, IBON estimates at least 56 million Filipinos as poor with a poverty line of around Php100 per person per day. These include 21.9 million Filipinos officially counted as poor by a very low poverty line of Php60 per person per day.

For the employed, wages remained insufficient for decent living. The highest mandated minimum of the NCR of P491 is only 43% of IBON-estimated family living wage at P1,130 for a family of six in June 2017.

Contractualization which is also a condition of wage repression is worsening despite government hype that it is being curbed. According to latest data available, IBON estimates that one in three rank and file workers are non-regular.

  1. Pro-business, short-sighted Dutertenomics

The Duterte administration’s Philippine Development Plan 2017-2022 is its economic blueprint for the economy which relies on external sources instead of building and strengthening the economy towards self-reliance. Its programs, which include an infrastructure boom, will benefit big business and foreign investors but not the poor majority who need social and economic  infrastructure the most.

For instance, its grand Build! Build! Build! Infrastructure program will only be a short-term stimulus to economic growth because the transport and other infrastructure proposed does not develop domestic agriculture and Filipino industry on a nationwide scale. It is a short-sighted effort that will not result in broad-based economic growth, social progress, and national development. Past administrations such as the Marcos and Aquino regimes were biased towards a similar infrastructure-heavy approach. Yet the economy remains underdeveloped; agriculture and industry backward; and the majority still poor.

The ‘Build! Build! Build!’ infrastructure program of over 4,000 projects with 75 big-ticket flagships covers big-ticket infrastructure: mass transit, roads and bridges, railways, airports, seaports, flood control, communication and information, and so-called ‘new cities’. Fifty-three of these have identified budgets cumulatively worth Php1.58 trillion but is overwhelmingly concentrated in NCR, CL and ST which account for 63.5% of the total value.

Such infrastructure program strengthens prevailing enterprises engaged in neocolonial trade especially in NCR, CL and ST. The main beneficiaries would be existing big foreign and domestic corporations in low value-added manufacturing for export, natural resource extraction, and services including selling of imported products. Commuters may benefit but rates may hinder the access of low and no-income users. The planned infrastructure does not benefit farmers in terms of more productivity, irrigation, post-harvest facilities and farm-to-market roads. Poor communities may even stand to be displaced by large infrastructure projects.

The true financial cost of the infrastructure whether under the public-private partnership (PPP) scheme or its hybrid variant also has to be put under scrutiny. Project financing is one aspect – coming from government funds, ODA (bilateral and multilateral), private capital – and the eventual rates or fees charged to the public are also relevant. The persistently regressive taxation bolstered by government’s tax reform package will also figure in exacting amounts from millions of poor Filipinos through additional value added, oil and sweetend beverages taxes to fund Build! Build! Build!.

  1. “Economy not broken”– business-biased framework upheld

The Duterte government’s economic direction built on instead of changed the failed neoliberal or business-biased framework of the past administrations.

In many words, President Duterte promised the nation a break from the woes of the past, yet saw the economy as something that was not broken and did not need fixing. He instructed his cabinet not to change existing rules and laws and to honor existing agreements between government and its foreign counterparts. The President affirmed neoliberal policies and appointed avid defenders of this market-oriented framework as his economic managers in the budget, finance, and economic planning departments—that are most decisive in running the economy.

Instead of taking nationalist and democratic measures and pushing real reforms in agriculture, social welfare, labor and education, the administration upheld measures favorable to foreign capital and domestic ruling elites. Thus trade and investment liberalization, which benefits advanced nations, continues to take its toll on the country’s resources, production sectors and the nation’s sovereignty. Public services and infrastructure development continue to be privatized for profit at the expense of the public. Removal of State regulation in various industries continues to be institutionalized to favour big businesses over consumers.

It is not too late for any government to shift gear and pursue measures that have been proven beneficial to the people in other countries’ experiences. Landlords, bureaucrats, big business and even foreign powers will expectedly oppose these. But real agrarian reform, rural development and building Filipino industries is crucial to strengthen the economy, raise incomes, create stable jobs, and provide sufficient education, health, housing, and public utilities.

From How Travel

#PeoplesSona2017/ Research group IBON attributed Metro Rail Transit Line 3’s (MRT3) more frequent breakdowns to the privatization of the rail transport. The group reminded government that passing on to corporations the State’s role to provide the people with a rail transport system, as with other basic utilities, has by experience been at the expense of the public.

The group commented on the Commission on Audit’s (CoA) annual report on the Department of Transportation (DoTr) citing an increased occurrence of glitches in the MRT3 last year. South Korean Busan Transportation Corporation took over the maintenance of the rail service in January 2016 under a four-year Php3.81-billion contract following private corporations that have all failed to maintain the line.

More than half a million of daily MRT3 commuters have had to live with the increasing incidence of rail disturbances, said IBON. The CoA observed that during the first year of the contract, passenger unloading, train pullout operations and service interruptions have increased by 164%, 20% and 26%, respectively. Busan has also been found to have lagged in the overhauling of light rail vehicles at 1/13 for the entire year of 2016. Worse, all 48 of the new coaches worth Php3.76-billion remain inoperational.

IBON added that the public continues to bear the cost of a privatized MRT3. Under a 25-year Build Lease Transfer (BLT) contract with the Sobrepeña and Manuel V Pangilinan group-owned MRT Corp. (Metro Rail), the DoTr, for instance, continues to pay rental fees that include equity rental payment guaranteeing an annual 15% return of investment and payment of Metro Rail’s US$485.5-debt to the project’s financiers.  Meanwhile, under the concession agreement, commuters are bound to suffer periodically increasing fares, of which 85% goes to servicing principal and interest payments. The MRT deal has catered to private gain from the very beginning, IBON said.

The problematic Busan case points out government’s duty to take charge of the vital transport and to ensure that the public can access, utilize and afford it, IBON said. Involvement of any profit-seeking business entity in a government program, whether it be in the form of hybrid public private partnerships (PPPs), old-style PPPs, unsolicited proposals or official development assistance-funded projects, warrants tight public scrutiny, said the group.

From ngcp.ph

In 2001, the Electric Power Industry Reform Act (EPIRA) was enacted with the promise of delivering affordable and reliable electricity to the country. Sixteen years later, electricity remains expensive and unreliable, and electric power industry monopoly has intensified, further enriching big firms. The following points elaborate on why the Duterte administration should all the more be challenged to review EPIRA and begin reversing power privatization:

  1. Privatization, deregulation drive power rates up. EPIRA or Republic Act (RA) 9136 led to the privatization and deregulation of the country’s power sector, promising that increased competition will usher cheaper and more sustainable energy supply.  However, since then, residential power rates have risen by 68% from Php5.76 per kilowatt-hour (kWh) in 2001 to Php9.68 in 2015.

A 2016 survey conducted by the International Energy Consultants showed that the Manila Electric Company or MERALCO has the third highest electricity rates in Asia after Japan and Hong Kong.  The same study reported that Meralco consumers spend 4.5% of their disposable income on electricity which is higher than the 3.9% global average.

  1. Electric power industry monopoly reaps benefits.A few big firms are controlling and greatly profiting from the electric power industry.  According to the Department of Energy (DOE)’s latest EPIRA status report, only four corporations – San Miguel Energy Corporation, Aboitiz Power, First Gen, and government privatization entity Power Assets and Liabilities Management Corporation (PSALM) – cornered 65% of market share in power generation in 2015. The same year, top ten power corporations had combined gross revenues totaling Php500.9 billion. Leading the pack was MERALCO which accounted for 50% or Php250.1 billion of this.
  1. Consumers shoulder the cost of doing business.EPIRA has also allowed profit-seeking power corporations to pass on the costs of doing business to end-consumers.  Since 2003, when EPIRA mandated the “unbundling” or reflection of various charges on electric bills, the government through PSALM has been imposing the universal charge (UC), a pass-on charge to all electricity end-consumers.

Through the UC, EPIRA has passed on costs that private corporations should shoulder to electricity consumers, such as the stranded contract costs and stranded debts of the National Power Corporation (Napocor). Stranded contract costs are those that Napocor acquired from the excess costs of electricity contracted from independent power producers (IPPs) over the actual cost of electricity in the market. Stranded debts are also from other onerous terms in Napocor’s contract with the IPPs in the 1990s.

Among the billing components, overall UC increased the highest by 298% from Php0.03 in 2003 to Php0.35 in 2015 for Meralco customers.

In the face of expensive and unstable electricity supply, the Duterte administration, as an initial positive step, should launch a comprehensive review of EPIRA and the negative impact of privatization on the electric power industry. The administration should reverse and consider alternatives to power privatization in the Philippines. A nationalized energy industry that could ensure sufficient and affordable if not free electricity for the majority of Filipinos, for example, can be made a priority in government’s infrastructure boom program alongside other public utilities and social services.

 

Photo from majovivar.blogspot.com

The recently released labor force survey figures indicate an alarming intensification of the domestic jobs crisis with the economy losing jobs despite reported economic growth, said research group IBON. Reported unemployment and underemployment in the country fell, but so did employment and the size of the labor force – all of which indicate growing distortions rather than improvements in the economy. The group said that this is only the latest sign of the untenability of the current government’s neoliberal economic policies.

The Philippine Statistics Authority (PSA) reported 5.7% unemployment and 16.1% underemployment in April 2017, both of which were lower than in the same period the year before. The number of unemployed Filipinos correspondingly declined by some 182,000 and the number of underemployed by a large 963,000. At first glance these appear to be signs of an improving jobs situation.

However, IBON noted that if the PSA-released data are correct, then the reported number of employed Filipinos actually fell by 393,000 to 40.3 million in April 2017 from 40.7 million in the same period the year before. Not only did the reported first quarter growth of 6.4% in gross domestic product (GDP) not create jobs, but the economy actually lost jobs since last year.

The biggest job losses were in the services sector which apparently shed 557,000 jobs since last year, said the group. This was mainly due to some 448,000 jobs lost in wholesale and retail trade followed by 74,000 lost in education and 65,000 in accommodation and food service activities. These are only preliminary figures because the data released by PSA is still incomplete. Though the agricultural sector saw a 125,000 increase in employment (1.2% growth) and manufacturing just a 56,000 increase (1.6% growth), these are at rates far below reported economic growth.

IBON said that the favorable unemployment and underemployment figures are only a statistical illusion. The apparent improvement is only because of the drastic fall in the labor force which is used as the base for computing unemployment and underemployment.

The labor force participation rate fell to 61.4% which is the lowest in 36 years or since the 60.1% recorded during the country’s severe economic crisis in 1982 under the Marcos dictatorship. The group said that the lower labor force participation rate means that the labor force shrunk by 575,000 in April 2017 from the year before despite the 1.4 million increase in the population 15 years old and over. Given the chronic poverty and low incomes in the country, this is most likely due to ever-growing numbers of discouraged workers dropping out of the labor force after failing to find jobs.

IBON stated that the April 2017 figures affirm the need to drastically reorient economic policies to aggressively build domestic agriculture and Filipino manufacturing to be the main drivers of domestic demand and employment. Neoliberal market-driven policies have not and will not develop the Philippine economy, said the group. ###

Photo by Marcin Gabruk

by Sonny Africa

The Duterte administration’s public launch of its PDP 2017-2022 on June 2 somewhat coincidentally happened the day after the supposed June 1 end of the fifth round of peace talks between the Philippine government’s peace talks and the National Democratic Front of the Philippines (NDFP). The cancellation of talks by the government is unfortunate because discussions on a comprehensive agreement on social and economic reforms (CASER) were meant to take up most of this fifth round. This would have been an opportunity for new thinking on the part of the government to replace the failed neoliberalism of old.  #CASERGoals

 

IBON FEATURES–While lucid the plan is still wrong and will keep the Philippines backward. Three major flaws immediately come to mind, all of which stem from the plan’s obsolete market fundamentalism.

First, the plan avoids correcting the severe asset inequities and income imbalances that keep millions of Filipinos marginalized from meaningful economic activity. This means that all the plan’s rhetoric about creating economic opportunities will really just mean greater profitable opportunities for the few who have the accumulated assets and incomes to begin with. Free market economics exalts asset accumulation as proof of efficiency and income inequality as incentivizing efficiency.

Second, the plan is blind to the urgency of industrial development. The Philippine economy has to be rebalanced away from its bloated service sector towards real domestic industry. The plan succumbs to the outdated globalization propaganda that the only industry worth developing is what the world market decides is globally ‘competitive’. The industrialized countries promote this notion to preserve their privileged industrial status and the economic and political power that comes with this. The plan also crudely believes that liberalized market forces deepen and modernize the economy, produce high growth, and reduce joblessness and poverty.

The plan does not recognize the importance of industrialization. For instance, it illogically lumps together “industry and services” with the shallow aspiration for these to be “globally competitive as the country strengthens its economic ties with other countries”. This is perplexing.

Industrial activity and services are vastly different in nature and have vastly different contributions to development. Industrialization creates more employment, raises incomes higher, stimulates greater economic activity, and drives better science and technology. This is why industry has primacy when pursuing strategic economic development. The lumping together is all the more baffling considering how ‘services’ cover a wide range of disparate activities from food to finance, health to hotels, call centers to communication, and many others.

The plan also adopts the textbook approach of trade based on comparative advantage as determining the choice of industries and services and driving development. The real world approach should instead be to adopt policies that modify and create comparative advantages that deliver more far-reaching changes and are more strategic over the long-term. In terms of industry this means steadily working towards having Filipino firms using the country’s vast natural and human resources to produce capital, intermediate and consumer goods on a large-scale.

This means national industrialization that aligns policies on foreign trade and investment, on finance, monetary and fiscal matters, on education, science and technology, and on the environment to serve strategic industrial goals. Industrial policy has to focus on building domestic industrial capacity to meet domestic needs, create domestic jobs, and raise domestic incomes. Such a focus will also involve linking up with the agricultural and service sectors.

The plan’s proposals work against this and surrender the necessary state policy instruments to industrialize the economy. It seeks to remove restrictions to foreign investment which are crucial for ensuring that foreign capital contributes to domestic development. It seeks to remove regulatory requirements and procedures which are crucial to ensure that firms operate in ways consistent with broader development goals. These and other policy tools were essential elements in the rise of all the old industrial powers as well as in the emergence of all the recent high-performing developing countries.

The plan’s agnostic market-driven approach will relegate the Philippines and Filipino producers to low value-added activities and in effect letting foreign producers get the most advantage from the country’s natural resources and labor power. There is no historical precedent of free market forces transforming any national economy to higher value-added and more diversified activities.

It is natural to be skeptical of the government’s capacity for responsible industrial intervention. The country has a long history of regulatory capture, rent-seeking, crony capitalism and the like which has resulted in wasted public resources and economic backwardness. The appropriate response however is not to glorify market forces but to improve governance. The capacity to intervene is developed by intervening and the quality of intervention can only improve in step with improvements in government transparency and accountability.

Third, the plan turns over vital social services and public utilities to profit-seeking private sector interests which will make these unaffordable and inaccessible for the majority of Filipinos. The plan continues government neglect of its responsibility to ensure that all Filipinos have the basic services so necessary for minimum standards of decent living. It does not correct the growing privatization of education, health, housing, water, electricity and transport which are more and more becoming commodities to profit from than vital services to live by.

Universal provision of these has to be ensured. Yet instead of developing public capacity in providing these, the plan calls for encouraging greater private sector participation through greater incentives and streamlined processes especially in infrastructure. This will result in more public resources supporting private profits, aside from adding a profit premium to basic services.

Forward

Undertaking social and economic reforms is certainly an arduous task. This starts with discarding market fundamentalism that glorifies profit-seeking and self-interest as resulting in economic efficiency and development. Market fundamentalism is a notion that has been justifiably criticized across ideological boundaries since the 19th century and until today – from Karl Marx to Joseph Stiglitz, from Mao Zedong to George Soros, and from rightist populist politicians to the revolutionary Left.

The Philippines’ experience with failed neoliberal policies is clear and consistent with similar failures in the rest of the world. Real changes in policies are needed to bring about real development. The PDP 2017-2022 is too consistent with its predecessors and will just be the latest in a long line of failed development plans. It simplistically assumes that making it easier to do business, attracting more foreign investment, and building more infrastructure will result in a bright future.

On the contrary, the plan’s market fundamentalism will keep the economy backward and Filipinos poor. Industrial production will continue to be foreign-dominated, our mineral and agricultural raw materials will serve foreign economies more than national development, our citizens will keep having to go overseas for work, and unemployment and poverty will remain endemic. All this while a few foreign investors, domestic conglomerates, and rich families continue to grow rich and prosper.

The Duterte administration’s public launch of its PDP 2017-2022 on June 2 somewhat coincidentally happened the day after the supposed June 1 end of the fifth round of peace talks between the Philippine government’s peace talks and the National Democratic Front of the Philippines (NDFP). The cancellation of talks by the government is unfortunate because discussions on a comprehensive agreement on social and economic reforms (CASER) were meant to take up most of this fifth round. This would have been an opportunity for new thinking on the part of the government to replace the failed neoliberalism of old. The peace talks and these discussions can still continue, however, and the country’s policies, the economy, and the people will be the better off for this.

From nationmultimedia.com

by Sonny Africa

The Duterte administration’s public launch of its PDP 2017-2022 on June 2 somewhat coincidentally happened the day after the supposed June 1 end of the fifth round of peace talks between the Philippine government’s peace talks and the National Democratic Front of the Philippines (NDFP). The cancellation of talks by the government is unfortunate because discussions on a comprehensive agreement on social and economic reforms (CASER) were meant to take up most of this fifth round. This would have been an opportunity for new thinking on the part of the government to replace the failed neoliberalism of old. #CASERGoals

 

IBON Features–The Duterte administration came to power almost a year ago on the promise of change. This presumably included changing the economic policies that keep tens of millions in poverty and transforming the economy into a developed and sustainable one. The Philippine Development Plan (PDP) 2017-2022 unfortunately recycles failed “free market” globalization policies of past administrations. The only ‘change’ is to further increase profits and wealth for a few at the expense of real development for the many – which is no change at all.

The PDP 2017-2022 acknowledges many of the features of the country’s economic backwardness such as weak agriculture, inadequate industrial development, job scarcity, continued poverty and low incomes, and stagnating social indicators. It also surpasses previous plans in the attention it gives to international trends including the protracted global economic crisis, populist and protectionist tendencies, inequality, and climate change.

However, it has a simplistic and outdated explanation of the problem with the economy. According to the plan, the main problem is that the government restrains development by being unfriendly to business. The ideological justification for this is the quasi-religious faith that capitalist profit-seeking amid as free and unregulated markets as possible will solve social and economic problems. This notion also gets self-serving support from foreign investors and domestic oligarchs who want the state to put their narrow interests above those of the nation and long-term development.

The plan will fail to transform the Philippines into the “prosperous middle-class society where no one is poor” declared by the government. This is because the plan will keep the country’s agriculture and industry backward and mere adjuncts of foreign capital. Unemployment will remain high, incomes low, and Filipinos forced overseas for work.  Growth spurts driven by debt and speculation will only become fewer and farther between. Any increase in per capita income will be mostly because of growing concentration of wealth in a few rather than higher incomes for the majority.

 Lucid

The PDP 2017-2022 says that it is anchored on the AmBisyon Natin 2040 long-term economic vision for the country and is also guided by the 0+10-point Socioeconomic Agenda of the Duterte administration. The plan begins by taking a long view of the country’s trajectory against a reading of global and regional trends and prospects.

The plan lucidly presents its approach over 435 pages. It talks about “enhancing the social fabric” by improving governance, the administration of justice, and promoting Philippine culture and values. The inclusion of a distinct chapter on culture is innovative but at the same time, because there is nowhere any mention of nationalism, alarming.

The next three sections are the sum of its economic policies. The plan is conscious of public frustration with long-standing poverty and worsening inequity and talks about “inequality-reducing transformation”. This section elaborates on expanding economic opportunities in agriculture, forestry and fisheries and in industry and services, on human capital development, on reducing vulnerability, and on building safe and secure communities. It talks about “increasing growth potential” through exploiting a so-called demographic dividend and advancing science, technology and innovation. And it asserts its free market orientation under the rhetoric of “enabling and supportive economic environment” spanning macroeconomic policy and national competition policy.

The next section highlights the Duterte administration’s supposed points of emphasis. The “foundations for sustainable development” talk about attaining a just and lasting peace, ensuring public order and safety, ensuring ecological integrity, and accelerating infrastructure development. The plan is particularly obsessed about insufficient infrastructure being a binding constraint. The final section is just about plan implementation and monitoring.

Wrong

While lucid the plan is still wrong and will keep the Philippines backward. Three major flaws immediately come to mind, all of which stem from the plan’s obsolete market fundamentalism.

First, the plan avoids correcting the severe asset inequities and income imbalances that keep millions of Filipinos marginalized from meaningful economic activity. This means that all the plan’s rhetoric about creating economic opportunities will really just mean greater profitable opportunities for the few who have the accumulated assets and incomes to begin with. Free market economics exalts asset accumulation as proof of efficiency and income inequality as incentivizing efficiency.

The plan goes on at length about increasing agricultural productivity. It correctly identifies the need to improve farm technologies spanning research and development, technology adoption, mechanization and post-harvest facilities. It also rightly points out expensive and inadequate irrigation, limited access to credit and insurance, and weak linkages to the industrial and service sectors. The measures to improve these are potentially welcome.

The problem however is that these measures will create opportunities mainly for farmers, but especially rich farmers, who already own and control the most important rural asset: land. Millions of landless peasants and farm workers on the other hand will gain peripherally, at best, or in many cases likely not at all.

The plan is unfortunately oblivious to how decades of land reform, including under the most recent Comprehensive Agrarian Reform Program (CARP) since 1987 and its later extension, have failed to genuinely distribute land to millions of farmers nor given them the means to make this productive. Persistent landlessness and monopolies on land are the greatest barriers to improving agricultural productivity.

The plan mentions agrarian reform but remains fixated on its mere administrative implementation or the paper distribution of remaining reported backlogs. A better starting point would be to explain why land ostensibly distributed has ended up re-concentrated in the hands of landlords, agribusiness corporations, and real estate developers. Merely continuing pseudo-distribution of land will not resolve rural poverty.

Having said that, the change in policy towards free land distribution to landless farmers and agricultural workers is still a significant policy shift. This is an important achievement from decades of militant struggle by the Philippine peasant movement and successfully clinched by the incursion of peasant leader Ka Paeng Mariano into government to helm the agrarian reform department. It is at least one part of correcting severe imbalances in rural power (with the other part increasing the confiscatory aspect of land transfers).

The plan is as unfriendly to workers as it is to peasants. It seeks to strengthen implementation of the two-tiered wage system whose tendency is to push down the basic floor wage while making an increasing part of it, the so-called productivity tier, merely voluntary for employers. The net result will be to further repress worker pay whose real level, or taking inflation into account, has already fallen to lower than it was fifteen years ago. Yet raising wages is among the most important instruments for making growth inclusive and benefiting millions of workers.

The plan also pushes to worsen inequity in the country by pushing for the Department of Finance’s (DOF) grossly regressive tax reform program. The DOF’s tax plan seeks to reduce income and wealth taxes paid by rich families and large corporations and off-sets this with higher consumption taxes on the country’s majority including the poorest Filipinos. This is camouflaged as “broadening the tax base” (i.e. taxing more Filipinos) and “making taxes internationally competitive” (i.e. reducing taxes paid by the rich) amid hype about greater simplicity and efficiency. Yet a progressive tax system that taxes the rich more and the poor less is a critical measure for reducing inequity in the country, aside from raising resources for government social and economic services.

From Kilab Multimedia

IBON Features – The Korean-owned Shin Sun Tropical Fruit Corp. in Brgy. San Miguel, Compostella Valley has approximately 287 agency-hired banana workers employed under ECQ Serve Human Resources for different jobs such as harvesting, fruit care, plantation, and delivering services. Most of the workers had been working for the company for two to seven years and should have been regularized already as per the Labor Code. Instead, the banana workers remained contractuals under the aforesaid labor agency. For several years, ECQ has been engaged in various forms of unfair labor practices including non-compliance with mandated benefits and the legislated minimum wage rate in Region XI.

Violation of labor rights

The legislated minimum wage rate in the Davao Region which covers Compostela Valley is Php307 but most Shin Sun workers received lower. The latest basic pay in the agency is pegged at Php291 pesos. This measly compensation diminished further through salary deductions for supplies, work tools, and mandated contributions for welfare benefits. With the total deductions, the workers actually received only Php135 daily.

Even their 13th month pay which is supposed to be given in full as mandated by law was deducted by the agency. Later on, the Shin Sun workers also found out that their agency has never remitted their contributions for SSS, PhilHealth, and Pag-ibig.

Recognizing the urgent need to end the unfair labor practices in Shin Sun, the banana workers unionized and urged the Regional Office XI of the Department of Labor and Employment (DOLE) to conduct a joint assessment both in Shin Sun and ECQ to evaluate the compliance of both parties with labor laws. The assessment was conducted on February 23, 2017 and Labor Laws Compliance Officers noted the following:

For Shin Sun:

  • Principal gives instruction to workers through ECQ;
  • Supervisors of the principal work alongside with the supervisor of ECQ
  • Principal has power to transfer assignments of workers through ECQ
  • Principal provides personal protective equipment to workers (apron, hairnet, gloves, boots); and
  • Principal provides work premises including machineries, tools, and chemicals.

For ECQ:

  • Agency workers received instructions from the principal’s supervisor;
  • Agency supervisors give schedules and assignment based on principal’s instruction;
  • Workers use principal’s equipment, tools and machineries;
  • Agency workers work alongside with the principal’s workers;
  • Agency workers are required to comply with principal’s policies, rules and regulations; and
  • Agency workers perform tasks at principal’s work premises.

This assessment exposed the illegal contracting scheme utilized by the principal company to circumvent the law on regularization and remove the venue for the banana workers to demand better wages and assert their rights. The DOLE thus declared that the ECQ Serve Human Resources was engaged in the prohibited practice of Labor-only Contracting (LOC) with respect to the workers deployed in Shin Sun. The labor department ordered the immediate absorption of the 287 workers previously employed under the agency.

On the contrary, however, the management illegally terminated the contract of 81 long-time contractual banana workers, including thirty-four 34 unionized workers who demanded for the inspection. The termination order was issued without due notice to the workers. The management only notified the workers after the retrenchment attributing it to “overmanning”. The workers, however, disproved this claim and argued that the principal actually hired new contractuals through another manpower agency Human Pros to replace the workers who have been retrenched.

Following these events, the Shin Sun farm workers went on strike last month. The retrenched thirty-four workers were organized under Shin Sun Workers’ Union-National Federation of Labor Unions-Kilusang Mayo Uno (SSWU-NAFLU-KMU). It was the first in the country since the implementation of the Labor department’s DO No. 174.

The bane that is DO 174

Workers demand to put an end to the prevalence of jobs that are insecure, low-paying, and lacking in benefits but deliver superprofits for capitalists. President Rodrigo Duterte meanwhile promised to end contractualization in his campaign when he ran for presidency during the national elections in 2016. In one of his speeches, he boldly told employers that he is not open to any compromise with them saying that the said policy is anti-people and must be repealed absolutely.

Prior to his inauguration as head of the Republic, President Duterte gave the incoming Labor secretary a marching order to work on ending contractualization. Instead, however, the department in connivance with the Employers’ Confederation of the Philippines (ECOP) and the Philippine Association of Local Service Contractors, signed and implemented a “win-win solution” branded as DO No. 174 that is merely an affirmation of the anti-worker practice of contractualization.

Similar to past guidelines issued by DOLE on permissible subcontracting, the order purportedly intends to ban labor-only contracting and ensure the regularization of workers in third-party manpower agencies. History has proven, however, that this ban is hollow as contractual labor arrangements and violation of labor rights as in the case of the banana workers still proliferate across all economic sectors in the country.

Due to lack of sufficient employment opportunities in the country, tens of millions of Filipino workers and peasants are left with no option but to enter the country’s reserve army of labor. Swelling unemployment intensifies competition for jobs within the reserve army of labor, hence contractualization thrives. This scheme deprives workers of their rights to bargain for higher wages and better terms of employment, and also forces them to accept unreasonable wages and comply with unfair contractual labor arrangements.

The latest available data from June 2014 indicates that over one out of three (34.5%) rank and file workers are employed under non-regular employment contracts. Based on the 2013/2014 Integrated Survey on Labor and Employment (ISLE), the rate of contractual employment is highest in the construction sector (59%), agriculture, forestry and fishing sector (42%), and in administrative support activities (40%).

This points to the urgency of real measures by the government to address the problem of pro-business yet anti-worker contractualization, and the absence of a long-term plan for national industrialization which is crucial in creating stable jobs for the Filipino people–IBON Features

 

#CASERGoalsIcons

To promote deeper public discussion and greater awareness on needed policy reforms for genuine development and peace in the country, IBON launched its #CASERGoals campaign today.

#CASERGoals is IBON’s attempt to involve and educate the public on these key reforms as the Duterte administration and the National Democratic Front of the Philippines (NDFP) hammer out a Comprehensive Agreement on Social and Economic Reforms (CASER). The two sides are set to negotiate for the fifth time later this month in The Netherlands to end almost five decades of insurgency in the country.

IBON aims to use #CASERGoals as its public information, education and advocacy campaign to advance progressive, pro-people, and nationalist economics as among the necessary foundations of a CASER that government and the NDFP are trying to forge.

Addressing the chronic lack of sustainable and productive jobs and livelihoods for millions of Filipinos should be one of the primary goals of a CASER, IBON stressed. This could only be achieved through building strategic local industries under national industrialization and free land distribution and state support as part of genuine agrarian reform. Reversing decades of liberalization of foreign trade and investment will also help create a favorable environment to revitalize key sectors like manufacturing and agriculture to generate economic opportunities for the people, the group said,.

Another goal should be to provide the basic economic and social services the people need to ensure their decent living and encourage their productivity, added IBON. The group said that among others, this entails rethinking the privatization of infrastructure development such as under public-private partnership (PPP).

The group also said that recent people’s actions such as the occupation by the urban poor of idle public housing units and the occupation by farmers and farmworkers of lands grabbed from them by haciendas and plantations highlight the urgency and legitimacy of demands to review established economic programs and policies and institute meaningful reforms.

The group said that the ongoing peace talks gives an opportune time to engage policy makers and the public on these urgent and long-term social and economic reforms that will finally address the underdevelopment, poverty, and injustice that feed the armed conflict. But IBON pointed out that the campaign for reforms should also be pursued beyond the peace talks through people’s struggles including constant engagement with government to influence policy making and decisions.

To kickoff its #CASERGoals campaign, IBON organized a media forum today with panels from both the Duterte administration and the NDFP negotiating teams to discuss the current proposals on a CASER. The proposed agreement would be the main agenda in the upcoming fifth round of formal peace talks on May 26 to June 2. ###

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