On the BBB fix: Why do you build me up?

by Jose Lorenzo Lim

In its recent pre-SONA forum, the economic team spent the most time talking about four years of infrastructure accomplishments. On the other hand, there was next to nothing about the government’s plans for economic recovery from the serious crisis brought on by the pandemic. The misplaced emphasis on infrastructure during the pre-SONA forum only reflects the misplaced emphasis on infrastructure as some kind of magic bullet for the country’s development.

The Philippine economy has a basic problem – it is dependent on external and temporary drivers of growth. These include overseas remittances and foreign investments especially for business process outsourcing (BPOs) and manufacturing. Yet COVID-19 wreaked havoc on these. Overseas remittances fell by 5% in March as thousands of OFWs were repatriated back to the Philippines. BPO investments are slowing down more than ever and export demand is weakening from a sluggish global economy.

The economy lacks substantial and sustainable internal drivers of growth such as from developing the core productive sectors of agriculture and manufacturing. Yet, instead of developing these, the government is looking to infrastructure spending to spur growth even if this is superficial and short- term.

More than any other government since the Marcos era, the Duterte administration is extremely dependent on public infrastructure spending to boost growth. It has been relying on infrastructure as a major economic stimulus long before COVID-19. The longest lockdown in the world delayed implementation of various infrastructure projects around the country.

Yet the government is still hell-bent on pursuing a grand infrastructure program amid the pandemic and despite its actually bleak accomplishments so far. The government says it will revise its list of infrastructure projects to adapt to COVID-19. But does it really have the will to shift the focus of its infrastructure program, or even the capacity to fully implement this?

2 out of 75

The Philippines was said to lag behind its neighboring Asian countries in terms of infrastructure. The Duterte government dreamed of building high-impact infrastructure projects through the Build, Build, Build (BBB) program.  BBB aims to build more railways, urban mass transport, airports and seaports, more bridges and roads, and new and better cities. The program is estimated to cost Php8 to 9 trillion from 2017-2022.

The BBB program originally had 75 infrastructure flagship projects (IFPs) composed of transportation (53), water resources (15), power/energy (4), and social infrastructure (3). The government said these projects would facilitate efficient movement of goods and help bring down production costs in the country. They would also improve the income of rural families, encourage countryside development, and create 1.7 million jobs by 2022.  These are grand claims considering that the 75 IFPs were mainly concentrated in the National Capital Region (NCR), Region III, and Region IV-A and IV-B which are the trading centers of the country.

Altogether, the 75 IFPs were estimated to cost around Php2.1 trillion. The government planned to tap official development assistance (ODA) and the private sector to fund these. Of the 75 IFPs, ODA would fund 57 worth Php2 trillion, public private partnerships or PPP would fund 6 worth Php23.3 billion, and government budget would be allocated for 12 IFPs worth Php138.5 billion. This means that most of the 75 IFPs would be funded with loans from various countries.

The status of the projects was telling of its progress. Data from the National Economic and Development Authority (NEDA) shows that only two out of the 75 IFPs were completed in November 2018.  These were improvements along the Pasig River from Delpan Bridge to Napindan Channel (Phase IV) and the selective dredging of the Pulangi River. It is also worth noting that the Pasig-Marikina River Channel Improvement Project has three other phases that started as early as 2009. Only Phase IV was constructed during the Duterte administration. NEDA’s last update on the status of the 75 IFPs on July 2019 reported the same two projects as being completed. 

38 out of 100 before Duterte steps down?

In November 2019, the Duterte government announced that it revised the list of IFPs from 75 to 100 in order to ‘streamline’ the list and make it ‘more feasible’. This was due to the slow rate at which projects were going. With their new list, the Bases Conversion and Development Authority (BCDA) expects only 38 of the 100 IFPs to be completed by the time Pres. Duterte steps down.

The 100 IFPs are composed of projects for transport and mobility (73), water resources (10), urban development (9), information and communication technology or ICT (6), and power and energy (2). The list is primarily composed of economic infrastructure to make the country more palatable to investors, which has basically been the basis of infrastructure planning for a long time. Noticeably, the current infrastructure program lacks social infrastructure, which is much needed by Filipinos to live humanely and decently.

The 100 IFPs are worth around Php4.3 trillion and ODA is the biggest funding source. There will be Php2.4 trillion funded with ODA, followed by Php1.2 trillion through PPP, and Php172 billion funded solely from the General Appropriations Act (GAA). The glaring over-reliance on loans and private sector funding reflects the sore absence of government capacity for these.

Leading the ODA funders for the 100 IFPs is Japan with a total of around Php1.3 trillion in loans, China with Php700 billion, and the Asian Development Bank (ADB) with Php273 billion. Data from NEDA as of June 2019 show that the Philippines has already received US$8.1 billion worth of ODA loans from Japan, US$2.8 billion from ADB, and US$273 million from China.

The short-sightedness of the government’s infrastructure program was really highlighted during the outset of the COVID-19 pandemic. The government had to scramble to convert evacuation centers into quarantine facilities to absorb the rising number of COVID-19 cases. More alarming is how just recently 11 hospitals in Metro Manila have reached full capacity for their COVID-19 dedicated beds.

The government announced a few weeks ago that construction of some road projects under the 100 IFPs will resume. Still, COVID-19 has to a certain extent compelled government to announce that it will come up with a revised list of the 100 IFPs to cater to the country’s health needs.

In line with reviewing the current list of 100 IFPs, the government could reconsider large projects such as the Metro Manila Subway Projects Phase 1 and the Safe Philippines Project Phase 1. Instead of spending on these import- and capital-intensive projects, the budget could instead be used for subsidizing jeepney modernization. This would benefit more Filipino commuters as well as support the employment of thousands of jeepney drivers.

The controversial Kaliwa Dam should also be reconsidered for the environmental and community impacts combined with the nature of the onerous loan agreement.  Another project that could be shelved is the Bataan-Cavite Interlink Bridge. The huge amount spent to shorten travel time may not deliver commensurate returns, and the money is likely spent better on more urgent pandemic-related needs. Additionally, the Safe Philippines Project Phase 1, a CCTV surveillance system project, may just make Filipinos more unsafe especially in the current repressive political environment.

The ODA loans are specifically for these projects but the government can negotiate with Japan, China and the ADB to realign these towards the country’s more urgent needs. These lenders say they are focused on promoting development so the Philippine government should not be afraid to hold them up to that intent.

The government has not yet released its supposedly revised list of projects because of the pandemic. The public is waiting to see how much of the revised list includes health, housing, and education-related infrastructure.  COVID-19 may also have pushed the implementation of some projects back, and the public deserves to know about delays and how many would be completed before President Duterte steps down.

Complementing the New Normal

The BBB program gives the impression that building more infrastructure per se is the key to sustained long-term economic growth. This notion is reinforced by the visible short-term stimulus that large-scale construction provides. New bridges, roads, airports, and railways also seem to give palpable gains. The real economic question however is not just whether there are benefits but if these benefits are worth the costs.

Improving mobility around the country, which comprises majority of BBB projects, is not in itself enough to improve the country’s economy. Without active promotion of agriculture and manufacturing, the improved infrastructure will mainly benefit just the service- and trading-oriented sectors that dominate our shallow economy.

Infrastructure can contribute to long-term economic growth if it helps push the country’s agricultural and manufacturing potential. Policy changes are needed for this to happen. The government has to protect and support agriculture which unfortunately has been backsliding especially with rice liberalization. Additionally, the Filipino manufacturing sector is waning due to investment liberalization that favors foreign investors at the expense of nurturing domestic capital. The country’s policies are even more misguided amid increasing protectionism and departures from liberalization globally.

The government should release the revised infrastructure list immediately. As healthcare has become the priority, the government should add more social infrastructure like hospitals to help deal with congested health facilities. More socialized housing units could also help decongest urban settlements in the country and help prevent the spread of the coronavirus.

Moreover, policy reforms such as protecting agriculture and the manufacturing sector to complement the country’s revised infrastructure plan can result in long-term economic growth to benefit Filipinos. Dealing with the COVID-19 pandemic in a way that prioritizes the people’s well-being should be the present challenge and government should realign its infrastructure program to complement this. #

Gov’t should check SAP’s gross failure as COVID cases rise – IBON

by IBON Media & Communications

Research group IBON said that the Duterte government should correct the huge shortfall of the Social Amelioration Program (SAP) especially amid a continuously increasing number of COVID-19 cases.

Aside from getting the stingy first tranche of emergency subsidies, 9 million of the 18 million target recipients and 1.5 million more “wait-listed” beneficiaries will no longer get the second tranche.

This is as the government limits distribution to residents in enhanced community quarantine (ECQ) and modified ECQ (MECQ) areas. Yet, the country reaches a record of 36,438 cases as of June 29.

According to the recently expired Bayanihan law, the Philippine government was supposed to provide emergency subsidies to low-income families and vulnerable sectors whose jobs and incomes were disrupted by the lockdown.

Support amounting to Php5,000-8,000, depending on regional minimum wage rates, was to be given to some 18 million poor households for two months.

The first month-tranche came in the duration of three months, making the already stingy aid even much delayed.

The second month-tranche, on the other hand, according to an inter-agency joint memorandum, will be distributed now only to beneficiaries in the ECQ and MECQ areas.

This reduces the original 17.7 million target beneficiaries to just 8.6 million households in the following areas: Central Luzon except Aurora, the National Capital Region (NCR), Calabarzon, Benguet, Pangasinan, Iloilo, Cebu province, Bacolod City, Davao City, Albay province, and Zamboanga City.

This leaves 9.1 million of the original target SAP beneficiaries affected by the three-month lockdown to make do with the meager first tranche, said IBON. This is even if economic activity cannot fully resume in now general community quarantine (GCQ) and modified GCQ areas.

Considering that Php98.3 billion has been distributed to 17.5 million households as of June 27, IBON computes that the first tranche averages out to Php5,617 per family.

Without the second tranche supposedly for the second month of lockdown, the subsidy amounts to just Php53 per family or Php12 per person per day for the past 106 days since the COVID-19 lockdown started.

Even those who will receive the second tranche will still end up stretching a small amount over three months of lockdown, IBON said.

Some Php6.79 billion in second tranche aid has already been distributed to 1.3 million recipients, or an average of Php5,047 per family.

Combining both tranches, these 1.3 million families each got only a total of Php10,664.

This amounts to Php101 per family or Php23 per family member for each of the 106 lockdown days.

IBON also noted that 5.28 million low-income households even continue to wait for the first tranche of SAP.

This figure includes the remaining 278,206 beneficiaries out of the target 17.7 million according to Department of Social Welfare and Development (DSWD) data as of June 27.

The rest are the families declared by the DSWD in mid-May as also eligible to receive aid but have not received any.

Yet, the government retracted and said that only 3.5 million of the wait-listed beneficiaries in MECQ and ECQ areas as of end-May are to get two tranches of emergency subsidy.

This means that the remaining 1.5 million in GCQ and modified GCQ areas are getting only one tranche.

The country does not seem to be winning the war against COVID-19, but the government has remained indifferent to the impact of the pandemic on the millions of poor families, said IBON.

The Duterte administration has continued penny-pinching even as people’s livelihoods and incomes are already irrecoverable and public health is at risk.

People’s socioeconomic welfare along with an efficient health response are the urgent matters that the Duterte government should be focusing on instead of staying apathetic to the mounting health and economic crisis, IBON said. #

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Kodao publishes IBON reports as part of a content-sharing agreement.

Higher inflation for poorest Filipinos underscores urgent need for continued cash subsidies

by IBON Media & Communications

Research group IBON said that the higher inflation is problematic but particularly burdens the poorest Filipinos. Inflation rates for the 30% poorest households are higher than the national average.

Especially amid historic joblessness, this affirms how the government should continue giving cash subsidies as income support, the group said.

According to the Philippine Statistics Authority (PSA), headline inflation rose to 2.5% in June 2020 from 2.1% in May 2020.

Behind this uptick are price increases in: transportation, particularly tricycle fares; alcoholic beverages and tobacco; housing, water, electricity, gas, and other fuels; and communication.

However, the 3.0% inflation rate in June for the poorest 30% of households was higher than the headline inflation rate of 2.5 percent.

This means that the cost of living is rising fastest for the country’s poorest households.

IBON said that this is troublesome for millions of poor families suffering interrupted incomes and stingy emergency relief. 

IBON said that the rise in inflation despite repressed consumption during the lockdown is worrying and points to problems in supply and production.

The government is primarily responsible for ensuring these especially during a public emergency.

For instance, the group said, the notable increase in the transport index shows the government’s weakness in ensuring this vital public service.

Rising prices especially for the poorest affirms the urgency of continued income support, IBON said.

The number of beneficiaries getting the second tranche of emergency subsidies should not be limited. The 18 million poorest Filipinos, including the 5 million wait-listed beneficiaries of the Social Amelioration Program, should receive both the first and second tranches of the Php5,000-Php8,000 per-month emergency aid, said the group.

The government said that only those residing in enhanced community quarantine (ECQ) and modified ECQ areas will be getting a second tranche.

This is only 8.6 million families of the original 18 million target beneficiaries, and 3.5 million households of the five million wait-listed.

This also means that 10.6 million beneficiaries now in general community quarantine (GCQ) and modified (MGCQ) areas will have to make do with just their first tranche.

With the cost of living fast rising amid an even worsening pandemic, limiting the number of beneficiaries getting the second tranche of emergency aid is unconscionable, IBON said.

The government should even consider additional tranches for vulnerable households that continue to reel from lost livelihoods and income, said the group. #

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Kodao publishes IBON articles as part of a content-sharing agreement.

Hatid Probinsya and Balik Probinsya, more harm than good?

by Casey Salamanca

The national government’s program of sending people back to their hometown recently came under fire for spreading COVID-19 in the provinces. For example, Tanauan town and Baybay City in Leyte each recorded their first respective confirmed COVID-19 cases last May 28. Both confirmed cases were among the first and so far only batch of beneficiaries of the Balik Probinsya, Bagong Pag-asa Program (BP2). Meanwhile, in the war-torn city of Marawi, nine confirmed cases are beneficiaries of the Hatid Probinsya program.

BP2 and Hatid Probinsya

BP2 is a pet project of President Duterte’s long-time trusted aide and now Senator Bong Go. Executive Order 114, which enabled the said program, came two days after the Senate adopted Go’s resolution urging the executive department to formulate and implement a Balik Probinsya program.

BP2 is a “long-term program of the government intended for Metro Manila residents who want to go home to their provinces for good”. It reportedly aims to decongest the National Capital Region (NCR) and is mostly targeted at people from urban poor areas. It is also packaged as “redistributing wealth” by bringing development to the countryside.

According to BP2’s website, the first batch was composed of 112 individuals from the province of Leyte. Leyte Governor Dominic Petilla said that most of them are workers who lost their jobs due to the Luzon-wide lockdown. BP2 has three phases of intervention, namely short-, medium-, and long-term.

The short-term intervention provides beneficiaries transport, cash assistance of Php15,000, and livelihood opportunities. All government programs, activities or projects with funding will be adapted for the program.

The medium-term intervention involves projects or programs for implementation after the lockdown and lifting of travel restrictions. This includes establishing new special economic zones in Visayas and Mindanao, among others. The long-term plan includes passing of laws deemed important for rural development.

The program’s goals look good on paper but its pretentious character is exposed by the absence of concrete plans for strengthening rural production. Beyond the program’s promises, what work will people going back to their hometowns really have?

Likely not much, because the program’s vision of developing the countryside is still under the framework of neoliberalism which continues to destroy the country’s agricultural sector. The special economic zones the program envisions to build will, if anything, just cater to the needs of foreign capital but with scant domestic linkages and contributions to national development.

The long-term plan includes the passage of the Duterte administration’s priority bills like the National Land Use Act and giving tax incentives to tourism industries – both have the potential to hasten land conversions. Even legislation supposedly giving incentives for agriculture is more inclined to push for more destructive corporate plantations. There is also the self-serving political logic and push for shifting to a federal system through Charter change.

On the other hand, Hatid Probinsya is intended to help individuals stranded in Metro Manila by quarantine travel restrictions go back to their home provinces. This includes overseas Filipino workers (OFWs). The program arose after reports of thousands of OFWs stranded for more than a month in quarantine facilities. BP2 trips have been temporarily suspended to prioritize the Hatid Probinsya program.

Infecting the provinces

In the absence of a mass testing program, BP2 and Hatid Probinsya are turning out to be additional sources of COVID-19 transmission in some provinces. It is a disaster slowly unfolding especially with the healthcare capacity in rural areas much lower than in NCR.

Mass testing means testing all suspected cases whether symptomatic or asymptomatic, testing all close contacts of positive cases, regular testing of all frontline healthcare workers, and testing for surveillance of high-risk communities or vulnerable populations. Testing is crucial to detect cases, isolate carriers, and trace contacts to contain the spread of the virus.

The Department of Health (DOH) claims that its expanded risk-based testing broadens the coverage of persons to be tested. However, according to the Department Memorandum No. 2020-0285, RT-PCR testing is still based on a prioritization scheme.

RT-PCR is the gold standard for COVID-19 testing. In the Hatid Probinsya program, locally stranded individuals (LSIs) are tested only using the rapid test method. Scientists and medical groups do not recommend relying solely on rapid tests to check if individuals are positive for COVID-19. Their results are not that reliable and hence of very limited use in infection control.

The country’s current healthcare capacity is also still not suited to respond to pandemics like COVID-19. It is very much privatized and uneven between regions; thus access is an issue.

As of June 27, the NCR recorded 17,450 total confirmed COVID-19 cases surpassing scientists’ projection of 16,500 cases by the end of June. As of June 26, the region has 2,487 isolation beds, 1,071 ward beds, 569 ICU beds and 879 ventilators dedicated to COVID-19. The 10 doctors per 10,000 population and 12 nurses per 10,000 population in the region generally meets World Health Organization standards (10:10,000 for doctors and nurses). However, there are much fewer physicians and nurses in regions outside Metro Manila.

According to DOH Region 8, there are 499 total confirmed cases of COVID-19 in Eastern Visayas, of which 68% or 341 cases are returning residents, as of June 27. Of these returning residents, 293 are LSIs, 45 are OFWs, and three are BP2 beneficiaries. Leyte, which accounts for 40% of the cases in Region 8, is the destination of most of the returning residents who tested positive with COVID-19.

Meanwhile, in the Bangsamoro Autonomous Region in Muslim Mindanao (BARMM), there are 58 confirmed cases, with the province of Lanao del Sur having the highest number of cases at 35. This includes the nine returning residents confirmed to be COVID-19 positive in Marawi City.

Eastern Visayas has only two COVID-19 testing centers, both are located in Tacloban City. Of the two, one is a private testing center and the other one, the Eastern Visayas Regional COVID-19 Testing Center, is a public facility. BARMM, on the other hand, has only one testing center, the Cotabato Regional and Medical Center, located in Cotabato City, Maguindanao.

The majority of licensed COVID-19 testing centers in the country are in the NCR, accounting for 29 of the 67 total centers. This could be a factor why Metro Manila is the top region with total number of cases—higher testing capacity results in more cases detected.

In terms of facilities, the province of Leyte only has nine ICU beds, 203 isolation beds, 50 ward beds, and 10 mechanical ventilators dedicated to COVID-19 cases, as of June 26. Data from the 2018 Field Health Service Information System (FHSIS) shows that there are only 57 medical doctors in Leyte, including 7 doctors in Ormoc City, 4 doctors in Tacloban City, and 117 public health nurses.

Quarantine facilities in Region 8 are currently running on full capacity prompting the Regional Task Force 8 and local government units to request for a 14-day moratorium on the national government’s Hatid Probinsya program.

Lanao del Sur meanwhile reported 3 ICU beds, 30 isolation beds, one ward bed, and four mechanical ventilators exclusive for COVID-19 cases. There are only 31 medical doctors and 16 public health nurses. In the city of Marawi there are only 2 doctors and 2 nurses.

In the whole region of BARMM, the doctor and nurse ratio per 10,000 population are 0.8 and 3.8 respectively. For Region 8 the ratios are 2.5 doctors per 10,000 population and 6.6 nurses per 10,000 population.

The increase of confirmed cases in Leyte is disproportionately affecting healthcare workers. On June 16, of the 59 new cases reported in Region 8, 22 are hospital workers. Of the 59 new cases, 52 are from Leyte. As of June 27, there are already 94 healthcare workers infected with COVID-19 in the region.

Ill-conceived plan and self-serving agenda

The Hatid Probinsya and Balik Probinsya programs are proof of government’s ill-conceived COVID-19 response. The less able rural areas are now bearing the brunt of the lack of a cohesive response plan that addresses the gross socioeconomic and healthcare incapacity of the country.

The government failed to maximize the three months of lockdown to start the mass testing, tracing of all contacts of positive cases, and isolation and quarantine needed to contain the spread of the virus. It also did not increase the health system’s capacity to treat all COVID-19 cases.

Instead of focusing on boosting the country’s healthcare capacity, the government apparently even used the pandemic to boost the political career of Palace favorites and to push for more neoliberal and authoritarian policies. Injecting a self-serving political agenda undermines the competent health response so needed by the people.

The administration’s prescriptions and practice to deal with the health crisis are not working. This only makes the call for an alternative approach that contains the virus and cures patients, instead of compromising them, even more urgent. #

The anomaly of transport modernization (Part II)

by Rosario Guzman

Read the first part here:

Government’s misplaced scheme

In many instances, the solution to the complex transport problems of Metro Manila lies in the physics of the problem, in the same way that dealing with COVID-19 requires medical science. But the Duterte administration has simply picked up its pre-COVID proposal of “jeepney modernization” and used the pandemic to justify finally pushing for it, amid protestations by jeepney drivers and the adverse impact on millions of commuters.

The government is a signatory to the Bangkok Declaration on Sustainable Transport Goals (Bangkok 2020) on “environmentally-sustainable” transport policy. This is also in relation to the ADB’s Sustainable Transport Initiative that is ultimately premised on the continuation of “free market” and “inclusive” economic growth. The Duterte government’s accomplishment in fulfilling Bangkok 2020 rests on the jeepney modernization program. Ultimately, this is important for the Duterte administration to attract transport infrastructure investments as well as to push for the sale of brand new, imported, so-called environment-friendly, and modern jeepneys.

Through the Omnibus Franchising Guidelines (OFG) that the DOTr issued on 19 June 2017, the government is requiring the make of the body and engine of the traditional jeepney to be compliant with the requirements set by the Land Transportation Franchising and Regulatory Board (LTFRB). These requirements definitely prioritize electric jeepneys (e-jeep), while pushing away the traditional jeepneys which need to go through numerous hurdles to get licensed to operate. These hurdles include: upgrading combustion engines to comply with Euro IV and similar emissions standards; complying with the LTFRB-set age-limit of oldest vehicle part; refurbishing and rebuilding that should pass the type approval system test; and still finally going through the Land Transportation Office (LTO) for a roadworthiness test to get registration renewal.

Concerned automotive engineers, scientists and mechanics contest the need to phase out traditional jeepneys and argue that the government should support locally manufactured environmental solutions. They also question the availability of the parts of the imported modern jeepneys in case of repairs, unlike with the traditional jeepneys that can be replaced easily. They also claim that the body engineering of the modern jeepneys is not suited to Metro Manila’s narrow roads and more prone to accidents. Environmentalists have also criticized the government’s going electric or Euro IV as hypocritical when its own energy program is reliant on coal and other fossil fuels.

But the OFG just keeps on narrowing the chances for traditional jeepneys to survive. The OFG also requires a fleet size of 15 units for any type of PUV for six months for new routes, which prevents small operators from applying for new franchises. Actually, even medium-scale operators – if they exist – are constrained and marginalized under the modernization program. The modern jeepney costs about Php1.6 million to as high as Php2.5 million, which means that an operator needs at least Php24 million to get a franchise.

The DOTr has stated that the government is not phasing out jeepneys but simply modernizing. However, the government plays with words. The jeepney modernization program will ultimately kill the livelihoods of thousands of jeepney drivers and complete the corporate capture of the ‘last-mile’ resort of millions of Filipino commuters.

Still pushing for Build, Build, Build and foreign ownership

The Duterte administration is also not compromising its Build, Build, Build (BBB) infrastructure projects, despite their questionable viability even before COVID-19 struck and their diminishing relevance now. Of the 100 infrastructure flagship projects (IFPs) worth Php4.3 trillion, 73 are for transport and mobility. The government does not have plans to strengthen economic production so the projects will just end up reinforcing a service economy dependent on import-export trade, foreign investments and tourism. Much of the construction materials used are even imported rather than produced locally.

The transport sector is reflective of how the government has lost its capacity to govern and manage public services because of privatization. This raises questions therefore on government’s absorptive capacity for such a grand infrastructure program. Four years into the ambitious BBB, there are only two (2) completed and nine (9) ongoing projects to date. The Duterte administration has even increased the IFPs from 75 to 100 to make BBB “more feasible”. But it appears that only 38 projects will be finished by the end of its term.

The future of BBB in the time of COVID-19 is precarious. But like a beaten beast, the Duterte administration refuses to yield. The pandemic is posing serious challenges to the continuation of BBB, apart from the program’s innate weakness of simply being aimed at attracting foreign investments and momentarily stimulating a slowing economy.

The most obvious challenge for the construction industry is physical distancing because  masses of workers need to gather to finish a project. The IATF suspended construction at the start of the lockdown but later allowed it, while passing on to the construction companies the responsibility of ensuring that workers comply with health protocols.

The next challenge is how travel restrictions and physical distancing will certainly dampen transport, travel and tourism businesses, and foreign trade and investment for a long time. These are the sectors that BBB wishes to be relevant for – but they are less and less important for the economy’s survival in the time of COVID-19.

Another challenge is the commercial viability of the projects on which they are all premised. Instead of catering to genuine public service, the completed projects are designed to be run by private transport corporations who will collect user-fees for their profitability and sustainability. The most expensive BBB projects are mass commuter railways whose viability depends on expensive fares that will be beyond the reach of the majority of the poor and working people.

But the greatest challenge is how BBB’s socially inappropriate orientation can be shifted to support the proper health response to COVID-19. The pandemic has revealed how weak our health system is – lacking facilities and equipment, lacking health personnel, and even lacking the means to transport health personnel. Not a few health frontliners have had fatal road accidents biking to work due to lack of transport support from the government. There is not even a single health infrastructure facility in the IFP lineup. The administration has made pronouncements that it would reorient BBB to respond to the health crisis but has yet to release a new IFP list.

Meanwhile, one priority legislation of the administration is the amendment of the Public Services Act (PSA). On March 10, just before the lockdown, the House of Representatives passed on final reading House Bill (HB) 78 to amend the PSA. It is now at the Senate for deliberation and approval. These amendments include narrowly defining public utilities to bypass Constitutional restrictions on foreign ownership. Sectors considered public services, transportation included, can be opened up to complete foreign ownership. This further undermines public interest and national development. The PSA amendments will pave the way for the full foreign ownership of the mass transport system and government’s eventual surrender to private transport and transport infrastructure corporations.

The right direction

The Duterte government can address the transport crisis in the time of COVID-19 and in fact can look at the pandemic as an opportunity to overhaul the system. The health protocols may be followed indeed if only the government recognizes and addresses the transport crisis in a scientific manner.

There should be a first-step long-term modal shift from road to rail. The government can start by upgrading and adding rolling stock and rails to the train system. The corporations and officials of government agencies who forged lopsided privatization contracts should be held liable for poor service including breakdowns and accidents. The Philippines is among the first countries in Asia to have an urban rail system and has a long history of government running rail transport systems. These assets can be nationalized again and returned to public control. Rail transport can then be central to urban planning as well as to the dispersal of economic activities to the rural areas.

An efficient rail transport system, not to mention fully linked and accessible, will be the basis of an equally efficient route rationalization plan for PUBs and PUVs. The government should seriously conduct its own study to identify where the mass of commuters can have the most optimal travel time, including number of stops, from their workplaces to their homes. This should also include designation of walkways and bike lanes. It should not rely on self-interested privatization stakeholders to make such studies.

For a route rationalization plan to be truly systematic, PUBs and PUVs along with rail should be publicly run. Government can start by organizing PUBs and PUVs into cooperatives rather than allowing only single or corporate proprietorship of large fleets. It can also incentivize cooperatives to improve their service and compliance. Then, government can move on to careful consolidation of fleets through joint ventures and eventual nationalization. Such crucial steps will finally make PUB and PUV modes more economical and fares more affordable.

The DOTr is proposing to introduce service contract arrangements with private transport operators for the “new normal”. It also aims to shift from the “boundary system” to daily fixed wage for drivers and conductors so they can have steady incomes regardless of reduced ridership. This sounds acceptable, especially if we consider that transport groups have long been clamoring for government to abolish the “boundary system” to avoid competition-driven stresses, road hazards, and transport unpredictability.

However, the DOTr proposal remains outside the vision of living wages for transport workers, promoting their welfare and strengthening their unions, subsidizing commuters and controlling fares, and diminishing competition among the private contractors with stronger public control. In short, the current proposal should be within the framework of nationalization, lest it end up being another privatization contract.

The proposal is welcome if it is not being done in the context of the government’s jeepney modernization program. The Duterte administration cannot even give sufficient social amelioration to displaced drivers and conductors during a pandemic.

Moreover, government should once and for all restrain the explosive private car sales that defies all public mass transport logic. These just give the automotive corporations maximum returns on their businesses.

Finally, the pandemic gives us the vast opportunity to rethink sustainable development perspectives. The need for agrarian development and national industrialization cannot be overemphasized. But the government can start with arresting the anarchic building of offices especially for business process outsourcing and online gambling, shopping malls, hotels and leisure structures, residential and private subdivisions, and condominiums. Metro Manila’s urban development Is geared to increasing real estate profits and the wealth of the country’s economic oligarchs at the expense of public mobility and welfare.

Government can start by planning an economy that genuinely addresses severe inequalities existing pre-COVID-19 that, without corrective steps, will persist even far beyond. #

The anomaly of transport modernization (Part I)

by Rosario Guzman

The transport chaos on the first day of the less restrictive general community quarantine (GCQ) was painful to watch. With limited public transport, thousands of Metro Manila commuters eager to recover lost jobs and incomes were practically left on their own to figure out how to get to work.

Department of Transportation (DOTr) secretary Arthur Tugade said that the government has “concrete plans” for GCQ. He also had to say that the government is not “sacrificing the people” just to revive the economy, because that was what it seemed.

The recommendation by the Inter-Agency Task Force (IATF) to transition to GCQ was apparently based more on the compulsion to reopen business than on categorical facts of virus containment. The Duterte government was also reportedly already “out of funds” for socioeconomic relief.

The government once again resorted to the military. The military and police deployed trucks and cars to ferry the stranded passengers, breaking distancing protocol and betraying government’s lack of preparedness. Then, the usual victim blaming – the Metropolitan Manila Development Authority (MMDA) and Malacañang blamed commuters for the mayhem. Then, the DOTr made a U-turn from its initial pronouncement and said that it never promised to meet the transport needs of the public under GCQ.

For the majority of poor commuters, what is more painful to see now is how the Duterte government, not backed by science, is on the verge of banning the traditional jeepney from the road forever and insisting that modernization is the cure.

If there is anything that COVID-19 has emphasized, it is the fact that the Philippine transport sector is in its worst crisis – a reality that the Duterte administration had repeatedly denied before the pandemic. If the economy has to transition to a genuinely better shape, the government has to address the basic woes of the transport sector. Vice versa, if the mass transport system has to be more efficient, the economy has to be transitioned to a genuinely better one.

But we seem to be stuck in our old problems.

Havoc in the new normal

The DOTr resumed public transport operations in two phases. During the first phase, trains and bus augmentation (which means bus loading and unloading at designated stations of MRT3), taxis, transport network vehicle services (TNVS), and point-to-point (P2P) buses were allowed with limits on the number of passengers. Tricycles were also allowed, subject to the approval of the concerned local government units (LGUs). Bicycles have also been encouraged.

During the second phase, public utility buses (PUB) and modern public utility vehicles or jeepneys (PUV/PUJ) were allowed with a limited number of passengers in rationalized routes. There are currently 30 routes from previously 96 routes for PUB and 34 new routes for the modern jeepneys. The DOTr will open more routes for the modern PUV in the coming days. Meanwhile, the traditional jeepneys remain prohibited from plying their routes unless seen as “roadworthy”. They are also the least priority and will only be used to fill in transportation gaps that arise.

Utility vans (UV) express will be allowed to operate with limited passengers as soon as more modern PUV routes are added. Provincial buses remain prohibited from entering Metro Manila.

The DOTr has also given some “new normal” guidelines, such as wearing of face masks at all times, cashless payments to avoid physical contact, use of thermal scanners, provision of alcohol and sanitizers, use of disinfection and establishment of disinfection facilities, and contact tracing. Costs for all of these are of course to be shouldered by the private transport operators and the passengers.

Apart from the added inconvenience these adjustments bring to the already unreliable mass transport system, there has also been lots of confusion on other relevant guidelines. The Philippine National Police (PNP) for instance prohibits backrides on motorcycles even for couples, yet some members of the police themselves are seen violating the rule. Interior and local government secretary Eduardo Año attempted to get around the prohibition by suggesting the use of sidecars but these are not allowed on the metro’s major highways.

Promoting the use of bicycles has not been accompanied by government policies to designate bike lanes and road-sharing with cyclists for a safe and efficient bike commute. Ironically, even the initiative by bikers’ groups and advocates to marshal the bike traffic along the “killer highway” Commonwealth Avenue was fined by the MMDA for “traffic obstruction”. Some LGUs are also reviving their old bike registration ordinances to collect fees even if they have not yet provided the needed support to bikers.

But the most glaring havoc is in the future of the traditional jeepneys – the ones that do not pass the DOTr’s standard of “modern” – which now hangs in the balance. Jeepneys were prohibited during the lockdown and are now under threat of being banned permanently from the roads in the name of the “new normal”.

The pandemic has obviously given the DOTr the opportunity to push for its “old normal” fixation on a modernization program that it has been proposing even before COVID-19. The modernization program revolves around: the digitization of fare and toll collection systems, vehicle registration, franchising, licensing, and navigation and positioning systems; routes rationalization; the transformation of EDSA; and jeepney phaseout.

It is premised on easing Metro Manila’s notorious traffic and pollution. But it is clearly a business-minded proposal that promotes the sales of private cars, modern PUVs and modern PUBs, and the privatization of transportation infrastructure. It is private transport-centric, while our obvious problem is the lack of an efficient and reliable public mass transport system. Now that the perennial road congestion is aggravated by physical distancing, the solution still seems to disfavor the mass of working class commuters.

Principles of E-R-A-S-E

The country badly needs an efficient, reliable, affordable, safe and environment-friendly public mass transport system. With or without the pandemic and physical distancing, these features of a public mass transport system should be ever-present for real and sustainable development. A strong government role is crucial in this.

Efficiency means that we are transported by vehicles through the shortest distance and in the shortest time possible. This also means less fuel use, less vehicle emissions, less costs, and less traffic.

Reliability means getting the mass of commuters to their destinations on time, with the least difference between the anticipated amount of travel time and the actual one. The crucial fact in reliability is that a large number of people rely on public transportation for their mobility.

Affordability and accessibility mean that the majority of the population who are wage workers and informal earners can afford public transportation and can easily avail of it from their dwelling and work places. This also includes facilities for persons with disability and senior citizens.

Safety includes measures that prevent harm to the riding public and create pedestrian-friendly conditions and infrastructure to reduce accidents and traffic deaths and to improve public health.

Finally, environment-friendly means public mass transport promotes healthier cities and living spaces. This includes the need to use clean and energy-efficient technologies and fuel for motorized transport on one hand, and the promotion of non-motorized modes such as walking and cycling on the other.

The crisis is real

The country’s public mass transport system is far from having these positive features. This reflects how the government has defaulted on its responsibility to ensure people’s mobility, and shows the general lack of national economic planning for sustainable development.

Our problem may be summarized as follows: 1) Mass transportation is left in the hands of private providers, including private rail corporations, bus franchises and single proprietors; 2) Deregulation is an operative principle in the entire sector, with the government’s role reduced to licensing, franchising and the like; 3) There is a lack of urban planning based on rural development and national industrialization that genuinely decongests the cities; and 4) Our mass transport system is corporate-driven, promoting the interests of infrastructure, transport, automobile and rail corporations as well as the profitability of real estate corporations, shopping malls, fare collecting banks, and the rest of the service-oriented and trading economy.

These problems manifest in many ways. The various modes of transportation are not fully linked, and there is heavy reliance on the ‘last-mile’ modes such as jeepneys, tricycles and even pedicabs. There is more road than rail transport, which is an indication of quite an unsustainable and expensive transport system. On the other hand, rail is privatized instead of being government-owned, controlled and operated, thus it is profit-driven and maintained by user-fees.

Fares are high as a consequence of privatized transport. According to the latest available data from the Family Income and Expenditure Survey in 2015, passenger transport for land travel eat up 7% of total non-food expenses of families in the National Capital Region (NCR). This covers fares for railway, jeepney, bus, taxi, tricycle and pedicab rides.

Transport is unreliable, with roads saturated and the quality of rail service poor. This is not to mention that roads are unsafe and rail accidents and breakdowns are frequent. Air pollution in the metropolis is one of the worst in the world, according to the World Health Organization. Lastly, there is a high volume of vehicles on the road. Navigation app Waze identified the Philippines as having “the worst traffic on earth”.

The anatomy of the transport mess

Metro Manila or the National Capital Region (NCR) has a total land area of 63,600 hectares and population of 12.9 million that swells to about 15 million by daytime. It accounts for one-third of the national economy and is home to about one-fourth of the urban population.

Metro Manila has six conferential roads and 10 radial roads. The radial roads do not intersect one another and intersect the conferential roads not more than twice. There are interchanges that separate these roads, but there are still missing sections in these interchanges. There are fully grade separated expressways in the north (NLEX), south (SLEX), and on the southwestern part (Cavitex) that connect Metro Manila to neighboring provinces.

These roads and highways were constructed to lead traffic in and out of the NCR. But lack of national economic planning has weakened job creation, increased rural poverty and displacement, and concentrated economic activities in the NCR. The region is the most congested city out of 278 cities in developing Asia, according to the Asian Development Bank (ADB). The region is brimming with urban blight and poverty.

There are the more recently built Metro Manila Skyway and Ninoy Aquino International Airport (NAIA) Expressway to decongest SLEX and speed up travel to NAIA, the country’s major international gateway. These are also obviously to cope with the high traffic brought on by government’s labor export policy. The country’s international airports process the some 6,000 Filipino migrant workers who leave the country every day, which is more than twice as many as new jobs created locally.

There are more than three million registered motor vehicles in the NCR as of 2019, which accounts for almost one-fourth of the country’s total. This is a 9.7% increase from 2018 and a 28% increase from 2016, yet the urban space is finite and unchanging.

The latest data for vehicles disaggregated by type is as of 2016. It shows that motorcycles or tricycles comprised almost 40% of registered vehicles in NCR. Utility vehicles follow at 36% and cars and sports utility vehicles are at almost 30 percent.

On the other hand, the latest statistics on units for land transportation services is as of 2012, which shows that PUJs accounted for most of the franchises and units. There were 49,305 PUJ franchises and 50,153 PUJ units, which only shows that jeepney operators are small-scale and own only a little more than one unit. There were no registered PUBs in the NCR at that time, but there are 14,500 registered buses by 2016. If we try to extrapolate the 2012 data, considering that the number of PUJs almost remains the same over time, it means that PUJs and PUBs accounted for only 7.8% of registered utility vehicles in 2016.

The MMDA recorded an average daily volume of 405,882 vehicles plying the main thoroughfare EDSA in 2019, an increase of 22,054 vehicles from the previous year. About 63% of this volume are cars (255,732 units). PUBs make up only about 3% of total EDSA traffic, while PUJs are not allowed along EDSA. There is therefore no statistical basis to blame mainly the PUBs and PUJs for the traffic and transport anarchy in Metro Manila.

Traffic demand is at 12.8 million trips in Metro Manila, based on a study by the Japan International Cooperation Agency (JICA). Public transport accounts for 69% of total trips. The lesser share (31%) is done by private mode, and yet it is this mode that takes up 78% of road space. The traffic volume within the metropolis already exceeds the capacities of existing roads.

In terms of rail, Metro Manila has one commuter line (the Philippine National Railway or PNR) and three rapid rail lines (LRT1, LRT2 and MRT3). It has the least number of rail lines and the shortest urban rail system (51 kilometers) among 11 major Asian cities. The rail lines are not fully linked, only compounding the problem of an intermodal transport system where Metro Manila commuters use a variety of modes of transport and take an average of two to three transfers to reach their destinations.

MRT3 is privately owned like the PUBs, PUJs, taxis, TNVS, P2P, and UV express. The PNR, LRT1 and LRT2 are the only government transportation assets, although the operations and maintenance of LRT1 are privatized. The government does not subsidize fares, and in fact increases fares to attract private contractors.

The rapid rail system is the epitome of the inefficient, unreliable, unsafe and unsustainable public mass transport system in NCR. It is bogged down by frequent breakdowns, diminishing numbers of operational trains, accidents, inappropriate trains, and even non-working elevators and escalators. It is also in the center of corruption controversies.

Where does the commuter figure in all of this mess? The government through all its numerous transport agencies cannot even give a complete picture. An oft-cited study by JICA estimates that 39% of passengers’ trips in Metro Manila and nearby provinces are by jeepney and 38% are by tricycle. This indicates over-reliance on what has only been a coping mechanism for lack of system. Buses account for 13.6% and trains for only 8.6% of the number of trips by public mode.

Per day, LRT1 and MRT3 carry about half a million passengers each, while LRT2 ferries more than 200,000 passengers. Taking into account the number of registered buses and the estimated vehicle capacity by the JICA study, it may be surmised that buses also carry half a million passengers. Using the same extrapolation, jeepneys have the same passenger load.

Privatizing the rapid rail lines and phasing out the ever-reliable traditional jeepneys are therefore not solutions to the transport crisis. #

The last part of this series will discuss how government uses the pandemic to justify pre-COVID programs like the jeepney phaseout and Build, Build, Build that will further aggravate the socioeconomic crisis, and what steps government should take to genuinely address the country’s mass transport troubles.

Govt jeepney ban has already cost drivers Php78,000

by IBON Media & Communications

Thousands of small public utility jeepney (PUJ) drivers have lost as much as Php78,000 each from three months of mass transport suspensions since the lockdown.

The government has been insensitive and stingy assistance has pushed jeepney drivers and their families into poverty, said IBON.

Their troubles risk becoming permanent with the government exploiting the COVID-19 pandemic to keep small drivers and operators off the road to fast-track its jeepney phaseout program, it added.

The Duterte administration suspended mass transport, including jeepneys, when it declared enhanced community quarantines (ECQ) in Luzon then in other parts of the country in mid-March.

Quarantine measures have since eased to general community quarantine (GCQ) in many areas and public transport has resumed in phases.

The first phase started in June 1 and the second is due to begin on June 22.

Jeepneys, however, will still remain prohibited.

PUJ drivers have suffered lost incomes for over three months already, IBON said. Among them are the estimated 55,000-70,000 jeepney drivers in Metro Manila.

For instance, before the ECQ, drivers plying the MCU-Rotonda via Taft route earned an average of Php1,000 per day after a 12-hour shift, net of boundary and fuel expenses.

Jeepney drivers on this route usually worked six days a week.

This means that, to date, they have lost some 78 working days over the past 3 months or 13 weeks of suspended mass transport.

This translates to a total net income loss of Php78,000 or Php26,000 per month of lockdown, said IBON.

Out of work jeepney drivers lose Income with each passing day of transport suspension.

The group stressed that government assistance has been far from enough to make up for these lost incomes.

The social welfare department reports only 36,200 jeepney drivers getting cash aid in the past three months.

Even then, some jeepney drivers only received one tranche of the Php5,000-8,000 of social amelioration and it remains unclear if they will even get the second tranche.

Many small jeepney drivers and operators could become permanently out of work, particularly in Metro Manila, IBON said. 

Transport officials are using the mass transport suspension to force the phaseout of traditional jeepneys by only allowing modernized jeepneys to run.

Under the Land Transportation Franchising and Regulatory Board (LTFRB)’s Memo Circular 2020-017 on public transport guidelines in GCQ areas, only modernized jeepneys and traditional jeepneys under a corporation or cooperative are allowed to operate.

This leaves out small jeepney operators and drivers who, unlike big or corporate fleet operators, can ill-afford the costly Php1.6–2.2 million modernized units, or steep fees and requirements to form a cooperative.

They are even less able after three months of lost incomes and depleted savings, if any.

IBON said that the livelihoods of thousands of small jeepney drivers and operators are at stake. Instead of putting corporate interests first and pushing its phaseout program, the government should give immediate cash assistance to drivers and their families who have suffered three months of lost incomes.

It should also support drivers and operators in upgrading or replacing their units to meet safety, health and environmental standards. #

Open-air jeepneys safer against COVID-19 than enclosed modernized counterparts

by IBON Media & Communications

With only modernized jeepneys allowed to resume operations this week, research group IBON said that keeping traditional jeepneys off the road inconveniences commuters and also denies them potentially safer means of transport.

The group said that the traditional open-air jeepney is likely even safer against COVID-19 than its air-conditioned modernized counterpart. With the pandemic still ongoing, insisting on jeepney modernization unnecessarily puts commuters at risk of possible airborne coronavirus infections.

The second phase of public transport resumption in general community quarantine (GCQ) areas will begin on June 22.

Public utility buses (PUB), modern public utility vehicles (PUVs) like modern jeepneys, and utility vans (UV) express will be allowed to operate.

Traditional jeepneys will remain prohibited.

IBON said that the Duterte administration is using COVID-19 as an excuse to force jeepneys off the road and fast-track its ill-conceived modernization.

IBON however said that the ban on traditional jeepneys should be lifted.

According to the group, there are studies which indicate that open-air transport may have advantages over enclosed, air-conditioned transport in controlling the spread of COVID-19.

Most coronavirus transmissions are acknowledged to occur via droplet infection, from coughing and sneezing, and partly through contaminated surfaces.

Nonetheless, recent studies show that the number of pathogens increases considerably in enclosed spaces and that regular ventilation reduces the risk of infection.

Despite physical distancing, enclosed modern jeepneys can become centers for spreading the virus compared to the natural ventilation of traditional jeepneys, said the group.

Medical researchers and physicists from the University of Amsterdam (UvA) have found that small cough droplets, potentially containing virus particles, can stay in the air of enclosed spaces especially when poorly ventilated.

Air quality and health experts from the Chinese Academy of Sciences similarly find that airborne transmission is a significant route of infection in indoor environments.

The UITP (Union Internationale des Transports Publics) or International Association of Public Transport, with 1,600 members in 96 countries, has issued guidelines warning that public transport systems are “high risk environments” due to the “confined space and limited ventilation”

The risk of community transmission through enclosed public transport has already prompted many countries to take specific measures against this, said IBON.

The European Centre for Disease Prevention and Control (ECDC) advises “proper ventilation in [public transport] at all times” and “the use of windows [to] increase replacement with fresh air”.

Similarly, the United States (US) Centers for Disease Control and Prevention (CDC) came out with guidelines for mass transit administrators which include, among others, “[increasing] circulation of outdoor air as much as possible”.

In Thailand, the transport ministry has instructed public transport operators to open windows for good air ventilation.

In China, some public transport groups have retrofitted window vents to air-conditioned fleets.

In India, buses are enjoined to improve ventilation by increasing the frequency of fresh air intake.

With COVID-19 still spreading, traditional jeepneys have the advantage of being open-air, dissipating droplets with the virus faster, and lowering the risk of transmission, said IBON.

Jeepney drivers prevented from going back to work by the government ask for help. (Kodao)

Yet the government’s narrow-minded focus on corporate-driven jeepney modernization threatens to forego this important built-in advantage in the mass transport system.

The pandemic is being used to put thousands of jeepney drivers out of work and take traditional jeepneys permanently off the road in a brutal enforced phaseout, the group said.

IBON stressed that efficient and reliable public transport is critical to resume as normal social and economic life as possible amid the pandemic.

Commuters suffering from the lack of jeepneys include many health workers and emergency service providers at the frontlines of the battle against COVID-19.

Jeepney drivers and operators need subsidies to make up for revenue losses and higher operating expenses. The current situation is also an opportunity to promote cooperativization towards the eventually nationalized public mass transport for ensuring this vital service. #

PH Debt: All’s well that swells

by Rosario Guzman

Lenders have offered to defer debt payments for those severely affected by the lockdown. The World Bank has encouraged the Group of 20 nations to postpone repayment of official bilateral credit, although has not yet considered suspending debt payments owed it. The International Monetary Fund has approved debt relief to its 25 poorest member countries. Commercial banks have offered a 60-day grace period for loans, including for household debts borrowed through credit cards. Even informal moneylenders in the Philippines’ urban poor communities have reportedly stopped collecting loan installments for a while.

These are not necessarily all done out of sheer goodwill. In many cases they seek to stop debtors from succumbing to severe debt-driven crisis due to the pandemic which would stop them from paying anything at all in the future. In short, they are also favorable to the creditors.

The Duterte government, with its much-brandished good credit standing, could have moved for debt relief too but instead, at the height of the COVID-19 pandemic, it started borrowing more. The finance department underscores the need for government to borrow from foreign sources to fund its economic recovery plan. Multilateral and country creditors have unsurprisingly exploited the situation and recycled funds to lend.

Do we really need to borrow for COVID response? People have asked. How are we going to pay for all of these debts?

Accumulating debt

The Duterte administration’s Philippine Program for Recovery with Equity and Solidarity (PH-PROGRESO) is worth Php1.7 trillion, Php561 billion (US$11 billion) of which is targeted by the Department of Finance (DOF) to come from bilateral and multilateral loans and global bonds. There is another Php404 million (US$8 million) in foreign grants.

From March 14 to June 4 this year, based on IBON monitoring, the Duterte government has already obtained foreign commitments of US$3.95 billion in loans, US$17.3 million in grants, and US$5 million in technical assistance (TA) – all for addressing the COVID-19 pandemic. The Philippine-headquartered Asian Development Bank (ADB) accounts for US$2.1 billion of the loans plus all of the TA and much of the grants. The World Bank accounts for US$1.1 billion, and the China-led Asian Infrastructure Investment Bank (AIIB) for US$750 million. There are US$9.3 million in grants from USAID. In sum, there are 7 project loans, 2 grants, and 1 regional TA so far.

Loans amounting to US$3.95 billion are, at the current exchange rate of Php50.05 to a US dollar, equivalent to Php197.7 billion. This increased the outstanding national government debt which has already risen from Php7.7 trillion by the end of 2019 to an astounding Php8.6 trillion by April 2020. The Php869-billion increment in the last four months far surpasses the full-year increments of the last three years.

Government securities increased by Php436 billion, while the Bangko Sentral ng Pilipinas used its repurchase facility to lend Php300 billion to the national government for COVID response. Meanwhile, external debt increased by Php133.1 billion from December 2019 to April 2020. In April 2020, the Duterte government’s foreign debt grew 16.5% year-to-date and 16.4% year-on-year, or the biggest increase in the last four years.

The Duterte government has already reached 66% (or Php919.5 billion) of its Php1.4 trillion projected gross borrowings for the year. If the planned foreign financing for PH-PROGRESO alone is realized, the government would already go over its borrowing projection. This does not yet include the uncontrollable increase in domestic debt due to the continuous issuance of government securities. Domestic debt comprises 68% of the outstanding national government debt.

For whose sake, really?

The loan commitments are specified for strengthening healthcare, augmenting funds for socioeconomic relief, and providing economic stimulus for agriculture and micro, small and medium enterprises (MSMEs). There are also wage subsidies for small enterprises and support for repatriated overseas Filipino workers (OFWs).

These are urgent things to attend to during the pandemic that the Duterte government has not competently addressed. Instead, we have only witnessed how government’s policy of health privatization, neglect of essential economic sectors, and myopic understanding of the poor have made it ill-prepared for an emergency such as COVID.

COVID-19 is unplanned thus the need to apply for a loan – that has been the official line. Are the loans meant to help us cope with the coronavirus, while government opts to keep spending for its neoliberal policies and to protect business?  Actually, these urgent loan-financed items are part of a larger package which includes even bigger support for businesses who get financial relief in the form of tax deferrals, low-interest loans, and credit guarantee schemes.

The country’s creditors are more straightforward. They will provide budgetary support so that the country’s economic managers can continue spending on the administration’s Build, Build, Build (BBB) infrastructure projects, foreign investment attractions, tourism and other boosters of the otherwise slowing, and now contracting, economy.

The ADB has pledged US$1.5 billion from its COVID-19 Active Response and Expenditure Support (CARES) program for fiscal management, among others. The AIIB’s US$750 million loan is co-financed with CARES. The AIIB only has loan facilities for infrastructure investment and does not have a ‘development financing’ orientation. It recently launched a COVID recovery facility but even this is oriented towards addressing liquidity problems, providing fiscal and budgetary support in partnership with multilateral banks, and building health infrastructure – all so that governments can focus on COVID impacts and leave infrastructure funds alone.

The more recent Php400 million loan commitment of the ADB to strengthen domestic capital markets and investments is more explicit. This is to enable the Duterte government to fund infrastructure at lower costs and to enable the private sector to raise infrastructure funds from capital markets.

COVID-19 is unplanned, while the Duterte administration’s focus is unchanged. The government is still fixated on burnishing the economy’s image to attract foreign investors, and will only address the emergency by as much as it can borrow. This reinforces the country’s vicious spiral of debt and shallow economic growth. Creditors are complicit in this neoliberal COVID response.

Protecting profits

But what really demolishes the argument that government needs to take out a loan for COVID-19 is that there are viable sources of money that government chooses to forego in behalf of big business. Case in point is the DOF-backed Corporate Recovery and Tax Incentives for Enterprises (CREATE) bill, the renamed second package of the unpopular Tax Reform for Acceleration and Inclusion (TRAIN) Law. The first package taxes consumption goods by the poor and relieves the rich of paying income taxes. CREATE in turn reduces corporate income tax from 30% to 25%  from July 2020 until 2022 and thereafter 1% yearly cut until 20% by 2027. This gives corporations up to Php667 billion worth of tax breaks over the next five years, which is the largest in the country’s history.

CREATE is at the core of the administration’s recovery plan, PH-PROGRESO. It also proposes Php133.7 billion in loans and guarantees, Php142.8 billion in other tax cuts and foregone revenue, and Php233.3 billion in additional liquidity. PH-PROGRESO declares prioritizing the resumption of BBB. To do so, it incentivizes big business with tax cuts and liquidity and equity infusion through government intervention and borrowing in the guise of helping them recover from the pandemic recession. The creation of jobs and recovery of incomes of the poor and vulnerable are an afterthought.

Indeed, government has to revive the economy from the unnecessary lockdown, but this has to start with what is truly essential. The COVID crisis is an extraordinary opportunity for government to strengthen national production in agriculture and industry – a surefire way to stimulate employment and consumption. But agriculture and the MSMEs that make up the majority of the country’s enterprises are extremely marginalized.

In the House-approved Php1.3 trillion Accelerated Recovery and Investments Stimulus for the Economy (ARISE) bill, agriculture gets a paltry Php66 billion and MSMEs are allocated only Php125 billion in loans and guarantees. The COVID crisis is also a golden chance to bridge the chasm between rich and poor, which has become stark especially during COVID. But quite to the contrary the Duterte government has relieved the rich and increased borrowing to sustain such economic order – an addition to the mounting burden of the poor.

Unpayable future

The DOF reiterates that the debt is payable and that the country is in no way headed to a debt crisis. It says that the debt-to-gross domestic product (GDP) ratio is only around 39.6% at the end of 2019 and 43.3% as of March 2020. The ratio indicates manageable levels, says the government, and is much less than in 2000-2010 when the debt-to-GDP ratio hovered around an annual average of 60% until it started going down in 2011 at the start of the country’s high growth episode.

But those days are gone. Fast economic growth peaked in 2012-2016 then steadily declined since the start of the Duterte presidency. Before COVID, the administration tried to but could not cover up the slowing economy. The GDP growth slowed from 6.9% in 2016, 6.7% in 2017, 6.2% in 2018, and to just 6.0% in 2019, the slowest in eight years. The economy shrank in the first quarter of 2020 by 0.2%, and the economic managers are seeing a severe decline in full-year real GDP growth to -0.6% to 4.3 percent.

All the sources of economic growth that government has relied on – OFW remittances and foreign direct investment in BPOs and export manufacturing – have slowed down since the beginning of the Duterte administration. And these are definitely headed into a tailspin as the global economy sinks deeper into crisis.

The Duterte government has never considered the erosion of agriculture and manufacturing to arrest the economic slowdown. Instead, it has artificially boosted economic growth with pump-priming – increasing government spending to its highest level as percent of GDP. Infrastructure spending comprised 4.7% of the GDP in 2019 and is targeted to reach 7.0% of the GDP by 2022. It shall be the highest among all the administrations.

BBB projects are the Duterte administration’s preferred drug for resuscitating the ailing economy before it slips away. However, it has been borrowing heavily for this. Of the Php4.3 trillion needed for the 100 flagship infrastructure projects of the administration, 83% is expected to come from official development assistance (ODA), mostly in the form of loans. The Duterte government’s borrowing binge is unprecedented – on a monthly average, it is borrowing Php45.6 billion, almost three times as much as Aquino (Php19.0 billion) and over twice as much as Arroyo (Php21.2 billion).

The fiscal deficit is thus a growing problem, with the Php660.2 billion deficit in 2019 equivalent to 3.5% of GDP. The fiscal deficit is already at Php348 billion as of April 2020.

Here is why the debt is eventually unpayable and such a huge burden. First of all, ODA loans may be at concessional rates but are tied to the conditionality of using the technology, materials and expertise of the creditor country. In the case of China, this includes even the use of Chinese labor. Secondly, absorptive capacity in a program as grand as BBB is a major issue. The Philippine government lacks the bureaucratic and technical capacity to implement all the grand infrastructure projects. This capacity has been eroded by decades of privatization and deregulation. The private sector, on the other hand, is not that deep because of the economy’s backward fundamentals. Third, BBB’s main focus is mobility for the benefit of the service and trading oriented economy, and not in building Philippine agriculture and industry. Thus the infusion of infrastructure capital or even the construction of the facility will not be useful in the long run for national development.

Lastly and most ironically, we are being obliged to fully pay for this mounting debt. This early, the government is already thinking of taxing and raising government fees on the very coping mechanisms of the dislocated working people. For instance, the economic managers want to tax online selling even as people are losing their sources of livelihood, or want to collect bike registration fees as workers seek alternatives to the poor public mass transport, among others. The government already failed to meet its revenue target in 2019, short by Php12.2 billion, and is anticipating even bigger spending and bigger debt in 2020.

Our future is being mortgaged. It doesn’t help to cure apprehensions when government says that the debt is manageable. Government has to end its anti-people neoliberal economic policies, and only then shall we be well. #

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Kodao publishes IBON articles as part of a content-sharing agreement.

Duterte administration’s recovery plans help the rich more than the poor

by IBON Media & Communications

IBON said that the government’s supposed recovery plans are more concerned about supporting business profits than helping the mass of unemployed Filipinos.

The finance department’s Philippine Program for Recovery with Equity and Solidarity (PH-PROGRESO) and stimulus bills in Congress give considerable support to businesses while millions of affected families get token support at best.

PH-PROGRESO of the economic managers does not give any cash support to poor and low-income families most in need, including the mass of unemployed, noted IBON.

The Corporate Recovery and Tax Incentives for Enterprises Act (CREATE) proposal of PH-PROGRESO wants to give Php667 billion worth of corporate tax breaks, the biggest in the country’s history. The Php133.7 billion in loans and guarantees, Php142.8 billion in other tax cuts and foregone revenue, and Php233.3 billion in additional liquidity will also benefit mainly enterprises.

The group said that the stimulus bills in Congress, including the Accelerated Recovery and Investments Stimulus for the Economy of the Philippines (ARISE) recently passed by the House of Representatives (HOR), are not much better.

ARISE allocates a total of Php40 billion for cash-for-work programs and Php42 billion for education subsidies.

On the other hand, it allocates Php1.2 trillion for formal enterprises, said the group.

There is a strong likelihood that the bulk of this will go to large firms of oligarch conglomerates and possibly even foreign transnational corporations.

Big firms dominate the tourism, transport, import and export, manufacturing, and service industries identified for support.

There is also no explicit prohibition of foreign companies, IBON noted.

Meanwhile only Php135 billion of the Php1.2 trillion is explicitly for micro, small and medium enterprises (MSMEs).

Giving large firms equal access to the subsidized financing will likely crowd out MSMEs especially the neediest smaller firms, IBON said.

The focus on formal enterprises will also mean that vast numbers of informal earners and displaced workers will not be reached.

This Php1.2 trillion includes the Php110 billion for wage subsidies. The stimulus bill says that freelancers, professionals, self-employed, and overseas Filipino workers can also receive this.

In practice, however, there is likely to be a bias for workers in formal enterprises, which means the subsidies are in effect subsidies for firms’ payroll expenses, said the group.

IBON said that support to enterprises should give much greater and more explicit priority to Filipino MSMEs.

These are the foundations of the domestic-oriented development so urgent amid the global recession and increasing protectionism even by the world’s most powerful economies.

At the same time, government recovery plans need to give much greater direct income support to poor and low-income households.

This is both direct support for families’ welfare as well as a meaningful stimulus that increases effective demand in the economy. #

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Kodao publishes IBON articles as part of a content-sharing agreement.