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Photo from Reuters / Romeo Ranoco

Research group IBON said that government’s continued implementation of the Tax Reform for Acceleration and Inclusion (TRAIN) means that TRAIN’s taxes will keep raising prices next year and make inflation higher than it should be. The group said that lifting the fuel excise tax suspension shows the Duterte administration’s insincerity and insensitivity in addressing the inflationary impact of the tax reform program, particularly on poor Filipino households.

The administration’s interagency Development Budget Coordination Committee (DBCC) recently announced its plan to recommend that the second tranche of fuel excise tax be implemented, backpedaling on its previous suspension proposal. The DBCC cited the lowering of Dubai crude oil prices and consideration of possible foregone revenues as reasons for its latest recommendation.

IBON however said that not going through with the suspension means new inflationary pressure next year from the second round of oil excise taxes in January 2019 on top of the now built-in additional prices from the first round in January 2018.

The liquid petroleum gas (LPG) excise tax of Php1.00 per kilogram (kg) in 2018 increases to Php2.00/kg in 2019, and Php3.00/kg in 2020. Diesel excise tax of Php2.50/liter in 2018 increases to Php4.50/liter in 2019, and Php6.00/liter in 2020. Kerosene excise tax of Php3.00/liter in 2018 increases to Php4.00/liter in 2019 and Php5.00/liter in 2020. The gasoline excise tax meanwhile is set to increase from Php7.00/liter in 2018 to Php9.00/liter in 2019 and Php10.00/liter in 2020.

IBON said that another fuel excise tax hike further increases costs of production. This will create a domino effect that will sustain the high prices of goods and services that many Filipinos, especially the poor, suffered this past year. IBON estimates that the poorest 60 million Filipinos have already endured real income losses of anywhere between Php2,500 to Php6,800 due to worsening inflation since the onset of 2018.

The group added that it is premature to think that oil prices are going to stay low or that the peso will not continue to depreciate. Oil prices remain volatile and could still increase next year with US sanctions on Iran gaining traction, possible Organization of Petroleum Exporting Countries (OPEC) production cuts, and untoward geopolitical events. IBON insisted that the administration can do much to moderate inflation by suspending the inflationary taxes of TRAIN package 1.

IBON said that government should stop imposing higher consumption taxes such as the fuel excise which burdens the majority of poor Filipinos who can ill afford this amid low wages and growing joblessness. Instead, the government should improve revenue collection by cracking down on tax evaders and corruption in the Bureau of Internal Revenue (BIR) and Bureau of Customs (BOC). It should also build a tax system that raises revenues more from higher income, wealth and property taxes on the rich.###

Photo from Bloomberg, GRP

The Duterte administration is set to make the country’s tax system even more regressive and inequitable with the looming passage into law of Tax Reform for Acceleration and Inclusion (TRAIN) Package 1B which is yet another tax amnesty package for the rich. Research group IBON said that TRAIN-1B rewards tax delinquents for bad behavior and encourages continued tax evasion at the expense of the poorest Filipinos.

The Senate and the House of Representatives last week passed their respective versions of TRAIN-1B or the proposed Tax Amnesty Law pushed by the administration’s economic managers – Senate Bill No. 2059 on November 19 and House Bill No. 8554 on November 20. The bills are now due to be taken up for reconciliation at the bicameral conference committee level.

The general amnesty covers “all national internal revenue taxes” which are defined by the Tax Code of 1994 to include: income taxes; estate and donor’s taxes; value-added tax; excise taxes; documentary stamp taxes; other percentage taxes; and other such taxes collected by the Bureau of Internal Revenue (BIR). Individuals and corporations can avail of the amnesty.

IBON executive director Sonny Africa remarked that the two versions differ on some details but have the same essential content: “Thousands of delinquent taxpayers will be able to settle their unpaid tax liabilities at a discount and be freed of any civil, criminal and administrative liabilities,” he said.

“The tax amnesty worsens the inequity of the country’s tax system,” Africa said. “Repeatedly lessening the tax burden of mostly well-off tax evaders reinforces how rules are different for the rich and powerful,” he continued. According to Africa, allowing tax evaders to pay less than they should in effect means that taxpayers who paid the correct amounts on time are being penalized for their diligence. This is also in stark contrast to how the poor are unable to avoid the consumption taxes which the Department of Finance (DOF) increasingly prefers over more progressive direct taxes.

“The tax amnesty ironically even encourages tax evasion and corruption,” said Africa. Tax amnesties happen regularly and, if passed into law, this most recent one will be the 18th since 1972 after the last one in 2007 during then president and now House Speaker Gloria Macapagal-Arroyo’s time. Regular tax amnesties incentivize repeat tax evaders, Africa said, and actually facilitate corruption by periodically erasing evidence of pervasive non-collection by revenue authorities.

The Duterte administration is taking huge steps to make the country’s tax system even more regressive, pro-rich and anti-poor with its flagship TRAIN tax reforms, said Africa: TRAIN-1 reduced income, estate and donor’s taxes on the rich while increasing the consumption tax burden on the poor; TRAIN-2 will reduce corporate income taxes; and TRAIN-1B’s tax amnesties reduce the tax burden on the rich even more.

The DOF reportedly estimates the tax amnesty to generate as much as Php26 billion. Africa however said that this is only a superficially impressive short-term gain because the amnesty reinforces non-compliance and non-enforcement.

“Sustainable long-term gains can only come from fearless collection of higher direct taxes on income, wealth, and property taxes on the rich,” Africa said. “Letting tax evaders off the hook is not a solution – the government should instead ensure compliance and enforcement as well as address corruption in revenue collection agencies,” he concluded. ###

Photo from Manila Livewire

Introduksyon

Bagamat Japan at US ang may pinakamalaking lagak na pamumuhunan (foreign direct investments o FDI stock) sa bansa at pang-walo lang ang China sa halaga ng approved FDI sa unang semestre ng 2018, lumalaki ang daloy ng pamumuhuhan (FDI inflows) ng China sa Pilipinas. Umabot ito sa US$1.043 bilyon sa ilalim ng dalawang taon lamang (July 2016-July 2018) ng administrasyong Duterte kumpara sa US$1.231 bilyon sa kabuuan ng termino ni Aquino at US$825 milyon ni Arroyo. Sa unang semestre ng 2018, nilampasan ng US$175 milyong FDI ng China ang US$154 milyong FDI ng Japan at US$84 milyong FDI ng US.

Sa larangan ng official development assistance (ODA), mahigit sa kalahati ng ODA sa bansa ay mula pa rin sa Japan (US$5.3 bilyon) at sa pinangungunahang bangko nito, ang Asian Development Bank (ADB) (US$2.3 bilyon), at sa US (US$730 milyon). Gayunman, lumobo ang ODA mula sa China mula US$1.5 milyon lamang noong 2016 tungong US$63.5 milyon noong 2017.

Sa kalakalan, sinasabing ang China na ang pangunahing trading partner ng Pilipinas, isang penomenon na maoobserbahan mula pa 2010. Nitong Setyembre, inungusan ng China ang US bilang destinasyon ng exports ng Pilipinas na nagkakahalaga ng US$1.545 bilyon kumpara sa US$966.35 milyon lang papuntang US. China na rin ang pangunahing pinagmumulan ng imports ng Pilipinas: 19% (US$1.8 bilyon) ito ng kabuuang imports.

Nakatatlong bisita na rin sa China si Duterte kasama ang malaking entourage ng mga negosyante at opisyal ng gobyerno sa loob lamang ng dalawang taon. Ang huli ay nagbunga ng 24 kasunduan, kasama ang US$15 bilyon-halagang mga memorandum of agreement (MOA) at US$9 bilyon na utang.

Marami tuloy ang nagtatanong kung ano ang implikasyon nito sa atrasadong ekonomiya ng Pilipinas at sa analisis na US ang dominanteng imperyalistang bansa na kumukubabaw dito. Binabasa rin ng marami kung ano ang tunguhin ng gobyernong Duterte sa relasyon sa China at US at nagkaroon ng ganitong penomenal na paglago.

China na ba, sa halip na US?

Mahalagang linawin na ang kapital ng US at ang kanyang junior partner, ang Japan, ang siya pa ring dominante sa bansa. Mahalagang datos ang FDI stock dahil ito ang napapaikot sa ekonomiya at may konsiderableng impluwensya, maging sa pang-akit ng ibang FDI o pagbunsod ng capital flight. Sa usapin na lang ng portfolio investment o hot money, 43% pa rin ang bahagi ng US, habang 6% lang sa mainland China at 3% sa Hong Kong. Kayang-kaya pa ring yanigin ng US ang kanyang mala-kolonya.

Sa ODA, maliit lang ang komitment mula sa China kumpara sa US at Japan. Mahalaga ring banggitin na ang kasalukuyang suporta mula sa US ay mas malawak ang saklaw, hindi lang dahil ito ay military at security aid, kundi nakapaloob pa rito ang masaklaw na mga policy dictates ng Partnership for Growth (PFG).

Sa kalakalan, katulad ng nabanggit, mahalaga ang papel ng China bilang nangungunang kontraktor sa Factory Asia. Mahalagang aralin din ang FDI mismo sa China at kung paano ito makakaapekto sa sarili nyang kalalakan.

Sa kalakalan ng Pilipinas, electronic products pa rin ang nangunguna. Sa diwa pa ito ng papel ng Pilipinas sa global value chains (GVC) ng mga transnational corporations (TNC) na dumadaan din sa China. Sa imports naman, nagsisilbing lokasyon ang Pilipinas sa manupaktura ng mga TNCs. Mapapansin din ang paglaki ng importasyon ng mga kagamitan para sa konstruksyon sa panahon ni Duterte kaugnay ng Build, Build, Build (BBB). Samakatuwid, ang mga Chinese exporters sa Pilipinas ay mga nangungunang kontraktor para sa GVC. Samantala, ang mga Chinese firms na nasa bansa na nag-iimport ng kailangang materyales para sa konstruksyon ay maaaring siya rin mismong kontraktor ng mga imprastraktura o sila ay nagbibigay serbisyo lamang para sa konstruksyon. Anupaman, katulad ng nabanggit, ang approved FDI na inuulat ng mga EPZs ay kalakhan mula sa Japan at US pa rin. Mataas pa nga ang galing sa ASEAN katulad ng Indonesia at Malaysia. Ang kahulugan nito, mistulang lokasyon pa rin ang Pilipinas ng pamumuhunan ng mga TNCs para sa kalakalan habang ang China ay nagsisilbing traffic o daluyan ng GVC.

Ang katangian ng kapital mula sa China

Walang opisyal na datos kung nasaang sektor at anong tipo ng Chinese FDI nga ba ang nakalagak sa bansa. Sinisikap pa ng IBON na tilarin ang mga hiwa-hiwalay na datos. Subalit mahalagang banggitin ang mga partikular na katangian ng kapital mula sa China.

Una, upang mamantini ng China ang pamumuhunan sa fixed assets sa kanyang ekonomiya (na host ng malaking global FDI bilang sweatshop ng mundo) at ang kanyang export competitiveness, kinokontrol nito ang kanyang currency. Ginagamit nya kung gayon ang Hong Kong bilang intermediary na lilikha ng isang liberalized currency na pinakikinabangan ng mga Chinese firms. Minsan pa nga, ang kanilang nakalagak na kapital sa Hong Kong ay bumabalik sa China bilang ‘foreign investments’ at nakikinabang sa mga insentiba na binibigay ng gobyerno ng China sa FDI.

Pangalawa, ang monopolyo ng estado sa pamamagitan ng mga state-owned enterprises (SOEs) ay nagbibigay-karakter sa FDI na animo ito ay ODA gayong pamumuhunan naman ito ng mga pribadong korporasyon na pag-aari ng mga Chinese officials.

Pangatlo, dahil nga sa malakas na interbensyon ng estado sa imperyalistang tunguhin ng China, mahalaga para rito ang kabukasan ng mga gobyerno ng host countries katulad ng kabukasan ng administrasyong Duterte.

Sa ngayon, maaaring hatiin ang Chinese FDI sa dalawa: Sa isang banda, nariyan ang malalaking pamumuhunan na may malalim na impact sa ekonomiya ng host at kadalasan ay nasa mga estratehikong sektor. Sa kabilang banda naman ang mga maliliit na pribadong namumuhunan na kadalasan ay mga small and medium enterprises.

Ang mga malalaking FDI ay kadalasang nasa imprastraktura, malalaking pasilidad, mga sektor ng ekonomiya katulad ng enerhiya o transportasyon, at iba pa. Maaari itong ODA na pinopondohan ng Chinese Exim Bank o Chinese Development Bank. Maaaring SOEs o mga pribadong monopolyo ang nangunguna, kasama ang pagtukoy ng mga pangangailangan ng materyales at paggamit ng lakas-paggawa ng China. Minsan tinatawag itong ‘government-to-government’ o G2G sa laki, subalit mali ang katawagang ito dahil bagamat estado ng China ang may huling desisyon sa mga pamumuhunang ito, pinangungunahan ang mga ito ng mga pribadong monopolyo. Ang mga maliliit naman ay makikita sa mga export processing zones (EPZs) at mga di-gaanong estratehikong sektor. Hindi sila umaasa sa mga bangko o estado ng China. May ilang pag-aaral na nagsasabing di-hamak na mas marami ang mga maliliit na kumpanyang Chinese namumuhunan sa Pilipinas kesa malalaki.

Ilan sa mga malalaking kapital ng China sa ilalim ni Duterte ay nasa mga estratehikong sektor ng transportasyon katulad ng PNR South Long Haul at Mindanao Railway, Subic-Clark Railway, at Mindanao Railway; sa tubig at irigasyon katulad ng Chico River Pump Irrigation Project, New Centennial Water Source-Kaliwa Dam, at Ilocos Norte Irrigation; roads and bridges katulad ng mga tulay sa Pasig-Marikina, Davao-Samal, Davao River, Davao City Expressway, Panay-Guimaras-Negros, at Camarines Sur Expressway; enerhiya katulad ng Agus-Pulangui Hydroelectric Power; at flood control katulad ng Ambay-Simuai Rio Grande de Mindanao. Naglagak din ang China para sa konstruksyon ng command center ng PNP, BJMP at BFP sa Metro Manila at Davao.

Kasalukuyang nagkakahalaga ang mga proyekto ng Php392 bilyon – ang PNR South Long Haul ang pinakamalaki (Php3.2 bilyon). Ang halagang ito ay maliit pa rin kumpara sa ODA mula sa Japan. Sa katunayan ang buong Chinese ODA ay katumabas lamang ng Mega Manila Subway Project ng Japan.

Samantala, dumami ang mga maliliit na negosyante at turista mula sa China, na nakisosyo sa mga negosyanteng Pilipino sa real estate, tourism, retail, at maging sa services. Nanumbalik rin ang kumpyansa ng mga Chinese firms na muling mamuhunan sa pagmimina, na dati-rati ay ‘inuusig’ ng gobyernong Arroyo at Aquino.

Ang pakikipag-mabutihan ng gobyernong Duterte

May ilang nagsasabi na ang suporta ng China sa war on drugs ni Duterte ang siyang dahilan ng pakikipag-maigihan ng gobyerno sa dati-rati ay ‘inaway’ ng administrasyong Aquino. Isa sa mga proyektong ODA ng China ang pasilidad at kagamitan ng kapulisan upang diumano’y maipatupad nang mahusay ang war on drugs. Nakakuha rin ng mga baril at amunisyon ang gobyernong Duterte mula sa China para rito. Magpapatayo rin diumano ang China ng rehabilitation center.

Subalit simple lang ang klarong dahilan ng pakikipag-mabutihang ito. Napaka-ambisyoso ng BBB at mangangailangan ito ng Php8.4 trilyon sa kabuuang termino ng administrasyon. Subalit may pihit ang administrasyong Duterte mula kay Aquino – ang hybrid public-private partnership (PPP) kung saan ang gobyerno ang magpapatayo ng mga pasilidad at ang pribadong korporasyon ang mag-oopereyt at mantine. Pumihit din ang gobyerno sa cash-based budgeting upang hindi maantala ang mga proyekto. Mangangailangan kung gayon ang BBB ng madali, mabilis at malaking pondo, at China ang ganitong kakayahan. Ipinasa ng gobyernong Duterte ang TRAIN upang simulan ang pangangalap ng pondo.

Isinantabi ni Duterte ang ilang tagumpay ng Pilipinas kaugnay ng territorial dispute nito sa China at pinaamo ang huli sa mga anti-US na pahayag at syempre sa kongkretong pagbisita at pagdalo sa Belt and Road Initiative Summit kahit hindi miyembro ang Pilipinas rito. Nagpanukala rin ang gobyernong Duterte ng isang joint energy cooperation mula sa dati nang napirmahan ni Arroyo na Joint Maritime Seismic Undertaking o JMSU. Inaasahan din na dalawang oil exploration deals ang pipirmahan ni Duterte at itataon sa pagdating ni Xi Jinping. Gusto rin ng gobyernong Duterte na alisin na ang mga moratorium sa teritoryo ng Pilipinas sa South China Sea na ipinataw ni Aquino.

Ano kung ganon ang isyu sa kapital ng China?

May ilang nagbababala na mababaon ang Pilipinas sa pagsandig sa kapital ng China. Mataas daw kasi ang interes ng Chinese ODA kumpara sa Japan. Halos para na ngang commercial loan rate ito. At dahil gobyerno ang kausap, deretso itong maniningil sa pondo ng pamahalaan.

Ang outstanding government debt nitong Agosto ay Php7.1 trilyon o 43% ng gross domestic product (GDP). Ang utang panlabas ng gobyerno at pribadong sektor ay US$72.2 bilyon, ang 48% nito ay utang ng gobyerno. Nakakabahala nga ito.

Subalit commercial credit pa rin ang kalakhan ng utang panlabas ng Pilipinas. Sa bilateral, nangunguna pa rin ang Japan, mga multilateral agencies katulad ng World Bank at ADB, at ang US. Samakatuwid, hindi nagrerehistro ang China. Kung titingnan din, lumaki nang di-hamak ang lokal na utang ng gobyerno kumpara sa dayuhang panlabas. Bahagi rito ang paghina rin ng piso sa dolyar.

Mababaon sa utang ang gobyernong Duterte dahil na rin sa kanyang programa. Ang BBB at paggamit ng hybrid PPP na walang matibay na pundasyong industriyal sa ekonomiya ang magbabaon sa Pilipinas sa utang. Kailangang mag-import ng bansa ng lahat ng kagamitan para sa ambisyong programa sa imprastraktura. Mababa rin ang kapasidad hindi lang ng ekonomiya para sa malalaking proyekto kundi mismo ang kapasidad ng gobyerno na ipatupad ito.

Bagamat sa laki at halaga ng pamumuhunan, pautang at interes ay malayong maging bihag sa kapital ng China ang Pilipinas, ang mga terms of reference ng mga ‘kasunduan sa pamumuhunan’ ang magsasadlak sa bansa sa ibayong pagka-alipin. Tinatapakan nito ang soberanya ng bansa na isinusuko ng gobyernong Duterte sa pamamagitan ng pag-collateralize ng mga rekurso at state assets, pagsunod sa batas ng China, at pagpapailalim sa korte ng China. Ito ang kasunduan sa Chico River Irrigation Pump Project, halimbawa. Isinusuko rin ng gobyernong Duterte ang mga rekurso sa teritoryo ng bansa sa South China Sea. Kaugnay nito ang pagsusumiksik ng gobyernong Duterte sa Belt and Road Initiative upang maakit ang mga pamumuhunan. Bilang kapalit, pinapadulas ng Pilipinas ang naisin ng China sa buong karagatan.

Isang nakababahala sa gusto ng China na ‘kabukasan’ ng host country ang kawalang pagkilala ng China sa environmental, labor and social standards, kasama na ang karapatang pantao. At dapat ganito rin ang pamantayan ng Pilipinas. Umaalingasaw ding usapin ang korupsyon sa mga kasunduan dahil sa kawalan ng transparency sa mga ito at sa nagdudumilat na pagpabor ni Duterte sa mga Chinese firm at mga lokal na oligarkiya at kasosyo.###

Photo from Data Journalism Philippines

Research group IBON said that the government should take the economy’s 3rd quarter growth slowdown as showing what needs to be improved in its economic policies instead of being dismissive about it. Its flagship Build, Build, Build will only be a short-term boost to the economy at best and direct measures to strengthen domestic agriculture and build Filipino industry are needed. The group noted with alarm that the economic managers are still pushing the same neoliberal framework that has weakened domestic production to begin with.

IBON pointed out that the economy’s acclaimed higher growth trajectory since the 2000s has actually been slowing in the last two years of the Duterte administration. Previously accelerating growth in gross domestic product (GDP) plateaued at 7.1% in the third quarter of 2016 and 7.2% in third quarter of 2017 before markedly slowing to the recently reported 6.1% in the third quarter of 2018.

The worsening state of agriculture and weakening growth in manufacturing – both key production sectors – are important indicators that the administration’s neoliberal policies are failing, said the group. Agriculture is stuck in its cycle of alternating growth and contractions. Agriculture growth has been falling from 3% in the third quarter of 2016 to 2.6% in the same quarter in 2017 until its -0.4% growth in the third quarter of 2018. The last such contraction was three years ago. The fisheries sector has consistently been contracting in the same period for four consecutive years now.

IBON said this chronically poor and deteriorating agricultural and fisheries performance is due to long-standing government neglect of the sector. The administration only exacerbates this by pushing further trade liberalization such as with Administrative Order No. 13 and the Rice Tariffication Bill that prioritizes food imports and export crops production over strengthening domestic agriculture for local consumption and food security, the group said.

IBON also drew attention to the notable slowdown in manufacturing growth to 4% in the third quarter of 2018 from 10.1% in the same quarter of 2017. IBON pointed out that this happened despite a hyped manufacturing resurgence since the Aquino administration and supposedly greater attention to industrial policy in the last two years of the Duterte government.

Among others, the slowdown despite increased government infrastructure spending points to the lack of domestic manufacturing capacity to produce the wide range of materials and equipment used for infrastructure development. These are instead unduly imported which only worsens the chronic trade deficit and adds further pressure on the already weak peso.

The service sector was also not spared, slowing to 6.9% from 7.3% in the same period, the group noted. This likely reflects the slackening of business process outsourcing (BPO) activity, which also greatly slowed services exports down to 2.2% in the third quarter of 2018 from 27.7% in the same period last year. As it is, investment pledges in export zones where BPOs are registered dropped by 58.6% in the first four months of 2018 to Php39.1 billion from Php94.4 billion a year ago.

IBON said that economic growth is disproportionately driven by government spending particularly in public infrastructure and construction. Government expenditures rapidly grew in the past 3 years from 3.6% in the third quarter of 2016 to 8.3% in 2017 and 14.3% in 2018. Meanwhile, growth in public construction spending doubled from 12.7% in the third quarter of 2017 to 25.4% in 2018. Private construction meanwhile jumped from 0.7% to 12.1 percent.

Household consumption slowdown is also worrisome, said the group. It indicates that Filipino households, especially the poor, are buying less, eating less, and suffering even lower levels of personal welfare. Growth in household consumption has been slowing in the past three years – from 7.3% in third quarter of 2016 to 5.4% in 2017 and 5.2% in 2018. There is a similar decline in most expenditure groups except for Housing, Water, Electricity, Gas and Other Fuels and Education. In particular, growth in food and non-alcoholic beverages consumption slowed to 2.8% in the third quarter of 2018 from 4.3% a year ago.

IBON said that the economy fails to ensure sustained growth because it has been eroded by government’s push for trade and investment liberalization, reliance on exports, and obsession with foreign investment as an end in itself. The group said that the government infrastructure offensive will be a short-term boost at best if the foundations of developed agriculture and Filipino manufacturing driven by expanding wage-led domestic demand are not attended to.###

php25 minwagehike

The new National Capital Region (NCR) minimum wage is still way below the amount that a family needs to cope with continuously rising prices, research group IBON said. The paltry increase reflects government’s refusal to institute a meaningful wage hike despite its urgency and doability. Government should instead have ordered employers to give a substantial wage increase, said the group.

The NCR wage board recently approved a Php25 increase from the current Php502 plus Php10 cost of living allowance. The National Wages and Productivity Commission (NWPC) said that the amount was approved based on the capacity of employers and the economy to absorb a wage hike, as well as its effect on inflation.

IBON however said that the Php537 minimum wage is Php464 or 46.3% short of the Php1,001 family living wage (FLW) or the amount that a family of five needs for decent living as of October 2018. The minimum wage varies and is usually lower outside NCR.

The group underscored that a substantial minimum wage genuinely helping millions of low-income Filipino families to cope with high inflation is possible.

NCR firms have more than enough profits to support a meaningful wage hike, IBON said. Figures from the Philippine Statistics Authority’s (PSA) Annual Survey of Philippine Business and Industry (ASPBI), for instance, show that NCR firms with 20 or more employees had combined profits of Php903 billion in 2015 and gave an average daily basic pay (ADBP) of Php530. Using the ADBP as a proxy wage indicator, ensuring that workers will get a substantial minimum wage of, say, Php750 will cost just Php132 billion or 14.6% of employers’ profits.

The wage hike need not accelerate inflation if employers accept this small cut in their profits instead of passing the increase on to consumers as higher prices, IBON stressed. Large companies are more capable of giving this meaningful wage increase. Meanwhile, the group said, government should make sure that micro, small, and medium enterprises (MSMEs) can afford this with sufficient assistance such as tax breaks and incentives, cheap credit, subsidized utilities, and technology and marketing support.

Growing workers’ productivity also justifies a meaningful wage hike, said IBON. NCR labor productivity grew from Php456,059 per worker to Php614,297, or by 35%, from 2009 to 2017. In the same period however, the real value of the mandated minimum wage only increased by 11%, while the ADBP increased by only 16%. This shows that workers’ productivity is not going to increasing wages, the group noted.

A substantial wage hike is an immediate measure that government can take to help Filipino workers’ families facing growing difficulty meeting their most basic needs, IBON said. The government is duty-bound to look after the rights and welfare of workers, such as by ensuring meaningful wages and equitably distributing wealth. The government has the responsibility to ensure that workers are able to attain a decent standard of living and that they get a just share of the fruits of their labor, said IBON. ###

Photo from imoney.ph

The incomes of the country’s poorest households have eroded after ten months of accelerating inflation. Research group IBON estimates that the poorest 60 million Filipinos have suffered income losses of anywhere from Php2,500 to as much as Php6,800 because of worsening inflation since the start of 2018.

The inflation rate has increased from 3.4% in January 2018 to 6.7% in October. The October inflation rate of 6.7%, unchanged from September, is more than double the 3.1% rate in the same period a year ago and over five times the 1.3% inflation rate in June 2016 at the start of the Duterte administration. Inflation is at the highest in nearly 10 years or since the 7.2% rate February 2009.

The Department of Finance (DOF) has estimated the first to sixth income deciles in the country as having monthly household incomes of Php7,724 to Php21,119 in 2018. Assuming these to be constant, the erosion of household purchasing power can be estimated by deflating them according to the prevailing monthly inflation rate. Each decile covers 10% of the country’s approximately 23 million households arranged from poorest to richest.

IBON estimates that in the first ten months of the year so far, households in the poorest first decile with Php7,724 monthly income have cumulatively lost Php2,467 due to inflation, those in the second decile (Php10,711 monthly income) have lost Php3,422 and those in the third decile (Php12,835 monthly income) have lost Php4,100. Households in the fourth decile (Php15,132 monthly income) have lost Php4,834, those in the fifth decile (Php17,309 monthly income) lost Php5,529, and those in the sixth decile (Php21,119) lost Php6,746.

The peso’s depreciation, rising global oil prices and the Tax Reform for Acceleration and Inclusion (TRAIN) Law are among the most important proximate sources of inflationary pressure. Of these factors, TRAIN Package 1 is most directly within the Duterte administration’s control, said the group.

TRAIN’s mitigating measures have failed to support the incomes of the country’s poorest and most vulnerable, said IBON. Ten months into high inflation, only seven million out of the target 10 million families are reported to have received their supposed unconditional cash transfers. Three million families have not yet gotten anything.

Yet even those transfers have been extremely delayed and millions of families suffered months of high prices and reduced consumption without receiving any cash transfers, said the group. No one received cash transfers in January and February when prices already started to soar. Millions of families still did not get anything in succeeding months: 8.2 million by March, 6.2 million by June, 3.9 million in August, and three million as of October. ###

Photo by Judgefloro | Wikimedia Commons

Research group IBON said that the apparently uncontrollable inflation is fast becoming a flashpoint of the administration’s economic mismanagement. High inflation is combining with rising interest rates, slowing remittances and failing exports to dampen economic growth. The administration is desperate for a short-term infrastructure stimulus to compensate for these, said the group, but a major growth slowdown could trigger a renewed debt and financial crisis.

IBON executive director Sonny Africa said that inflation remaining the highest in almost a decade and the worst in the region exposes the government’s short-sightedness in dealing with the problem of soaring prices.

“The government has been overly focused on reining in food prices particularly in Metro Manila to pre-empt rising unrest in the capital against the administration’s economic policies burdening the poor,” said Africa. “It has apparently been able to moderate food inflation in NCR which slowed from 9.2% in September to 7.8% in October. There are signs that the apparent focus on NCR has been at the expense of the regions where food inflation has remained high at 9.8% in October compared to 9.9% in September”, he said.

Africa noted that nevertheless, overall inflation remains high at 6.7% because inflationary pressures continue to work their way across other commodity groups particularly in housing, utilities and transport. Taken together with food these account for 76-84% of total household spending across low and high income groups, he observed. “While inflation has stayed the same at the national level, it has actually remained higher than the national average or even gotten worse in 13 out of the 16 regions outside of NCR,” Africa said.

He also noted that the Bangko Sentral ng Pilipinas (BSP) has already raised its policy rate four times this year, by 150 basis points to 4.5% as of September, and is widely expected to raise it further before the end of the year. Africa explained that the rising interest rates are designed to make borrowing more expensive and choke consumer and producer activity, which will tend to dampen economic growth.

Remittances are also slowing and only grew 2.5% in the first eight months of 2018 or at less than half the 5.4% growth in the same period in 2017, Africa further observed. Exports meanwhile continue to slacken and actually contracted by over 2.0 percent in the first eight months of the year.

“A growth slowdown will bring the problems of the country’s debt-dependent growth to the fore,” said Africa. “For instance, total outstanding government debt at a record Php7.1 trillion by August was equivalent to 42.5% of gross domestic product (GDP) as of end-June. Outstanding bank loans were similarly at a record Php8.2 trillion as of September. The foreign debt of the public and private sector was US$72.2 billion as of end-June, or 22.5% of GDP. Relatively rapid growth has been the main factor so far keeping various debt indicators manageable.”

Africa said that the government can take much more decisive measures to address inflation. He said that immediate measures include suspending the TRAIN law’s inflationary taxes especially on oil products and cracking down on overpricing of food, oil and other goods and services by implementing price controls. “The declining peso however can only be dealt with through long-term solutions such as the comprehensive development of domestic agriculture and Filipino industry,” Africa concluded. ###

 

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Research group IBON said that jeepney drivers and their families have suffered huge income losses from rising pump prices on top of facing rising prices of basic goods and services. The initial and impending fare hikes give immediate relief but only temporarily. Fare hikes only worsen the burden on commuters and the government needs to take a broader view of the situation including taking both short and longer-term measures.

Jeepney drivers have lost a total of Php18,855 from start of the year until September because of the oil excise tax under the first package of TRAIN and rising global oil prices. TRAIN is to blame for around Php13,104 of this amount, said IBON. The estimated cumulative Php18,855 loss in the first nine months means an average loss in income of Php2,095 monthly, IBON explained.

Jeepney drivers and operators petitioned for a Php2 fare increase to help the sector cope with the rising prices of goods and services and the impact of TRAIN.

IBON however said that the fare hikes are still not enough to compensate for drivers’ income losses since the start of the year. Driver’s incomes fell drastically in the first six months of the year. The provisional Php1 jeepney fare hike in July compensated for pump price increases in July and August but were not enough in September when their incomes again fell as pump prices rose.

Even the full Php2 jeepney fare hike to be implemented this November, which includes the July Php1 fare increase, will not be enough to restore their earnings to pre-TRAIN levels.

IBON estimated the income losses of drivers assuming 200 passenger trips and 20 liters of diesel consumed daily, prevailing fares, and incorporating expenses for maintenance and other miscellaneous expenses. Monthly incomes from January to September were compared to that in December 2017 as the baseline income.

IBON pointed out that the government’s narrow focus on fare hikes is pitting jeepney drivers against the riding public. Both already bear the brunt of relentless price increases not just of oil but also of other commodity items including food, said the group.

The interest of both drivers and commuters is better served by giving greater attention to the drivers of inflation. “Suspending TRAIN’s oil excise taxes immediately starting with those implemented in January 2018 will give immediate relief to jeepney drivers and consumers,” IBON executive director Sonny Africa said. “The additional oil excise taxes in January 2019 should also be suspended so as not to add to already considerable inflationary pressures,” he added.

“Further fare hikes can be prevented and a rollback may even be possible if oil firms’ overpricing is reined in,” said Africa. “The long-term solution should include fuller and more responsible regulation of the oil industry,” he concluded.

It is not yet a severe economic crisis as such but the accumulation of economic bad news is worrying. It is clear that the fundamentals are unsound and the economy is weakening aside from increasingly vulnerable to a political upheaval or to a renewed global downturn. The majority of Filipinos are poor and gained little when times were supposedly good – but they will be hit the worst when the illusion of progress is finally and thoroughly broken.” – From PH Economy Duterteriorating –  http://ibon.org/2018/08/ph-economy-duterteriorating/

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It is not yet a severe economic crisis as such but the accumulation of economic bad news is worrying. It is clear that the fundamentals are unsound and the economy is weakening aside from increasingly vulnerable to a political upheaval or to a renewed global downturn. The majority of Filipinos are poor and gained little when times were supposedly good – but they will be hit the worst when the illusion of progress is finally and thoroughly broken.” – From PH Economy Duterteriorating –  http://ibon.org/2018/08/ph-economy-duterteriorating/

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