Employers can afford Php750 minimum wage—IBON

Employers can very well afford to raise the minimum wage to Php750 which only entails a small cut in their profits, research group IBON said.

The Rodrigo Duterte administration should support this hike which will help millions of Filipino households dependent on wages and salaries cope with the rising cost of goods and services, said the group.

Current minimum wages are far from IBON’s estimate of the family living wage (FLW) needed by a family of five.

The current minimum wage in the National Capital Region (NCR) of Php537 is already the highest in the country, but it is Php467 short of the Php1,004 FLW as of March 2019.

IBON said that raising the minimum wage to Php750 will significantly raise the incomes of Filipino workers.

The group’s computations also show that employers can afford to increase the minimum wage they pay to Php750.

In the NCR, raising the average daily basic pay (ADBP) of Php562 to Php750 will add Php4,095 to the monthly income and Php53,231 to the annual income (including 13th month pay) of employees.

IBON pointed out that this will only cost Php115 billion out of the Php1.17 trillion in profits of the 14,414 establishments in NCR, which is equivalent to just 9.8% of their profits.

Raising the ADBP of Php401 nationwide to Php750 will in turn add Php7,649 to employees’ monthly income and Php99,432 to their annual income (including 13th month pay).

This will cost the 35,835 establishments nationwide just Php465 billion or only 21.5% out of their Php2.16 trillion in profits, as per IBON computations.

The group stressed that meaningful wage hikes are doable if only companies were willing to accept a small cut in their profits.

IBON also pointed out that raising wages will not be inflationary if companies share a little more of their profits with workers instead of passing the wage hike on to consumers as higher prices.

These were estimated using the latest Annual Survey of Philippine Business and Industry (ASPBI) data of the Philippine Statistics Authority (PSA) for enterprises with 20 or more workers.

IBON however underscored that the government can help micro, small and medium enterprises afford the wage hike by providing them tax breaks and incentives, cheap credit, subsidized utilities, and technology and marketing support.

The growing productivity of Filipino workers is among the main drivers of economic growth and they deserve a significant wage increase, IBON said.

The richest individuals and biggest corporations in particular have more than enough for granting wage increase.

It is the government’s responsibility to ensure that workers get a fairer share of the gains from economic growth rather than have these gains concentrated in the hands of a few, concluded IBON.#

Workers left behind in growing economy under Duterte administration

Wages of workers in the National Capital Region (NCR) continue to fall even as their growing labor productivity drives economic growth under the Duterte government, research group IBON said.

The mandated minimum wage is not even keeping up with the rising cost of living for ordinary Filipinos, the group revealed, adding that keeping wages low distributes wealth unevenly and worsens inequality.

The Philippine economy is slowing but real gross domestic product (GDP) still grew 6.7% in 2017 and 6.2% in 2018.

The regional GDP of NCR grew 6.2% and 4.8% in that same period, registering a total increase of 11.3% between 2016 and 2018.

In NCR, this economic growth was most of all driven by rising labor productivity. Labor productivity in NCR, measured by regional GDP divided by total employed, increased from Php568,092 per worker in 2016 to Php640,125 in 2018 or a total increase of 12.7% between 2016 and 2018.

These are IBON estimates using the latest available data from the Philippine Statistics Authority (PSA).

Yet despite rising labor productivity, the NCR real minimum wage is actually falling under the Duterte administration.

Measured at constant 2012 prices, this fell from Php467 in July 2016 to just Php457 in March 2019.

The Php46 worth of wage hikes since 2016 have been more than off-set by inflation and the continually rising costs of goods and services especially last year.

IBON also pointed out that the wage gap, or the difference between the minimum wage and the family living wage (FLW), is growing wider under the Duterte administration.

The NCR nominal minimum wage of Php491 in July 2016 was only 54.6% of the Php900 FLW for a family of five at the time.

Today, the NCR minimum wage of Php537 is just 53.5% of the Php1,004 FLW for a family of five.

The wage gap is even wider for a family of six where the NCR minimum wage is just 44.6% of the required Php1,205 FLW.

The research group said that real wages falling even further behind economic growth is worsening the elitist and exclusionary character of the economy.

Moreover, improving labor productivity is not translating to benefits for the working people but is instead going to bloating corporate profits and oligarch wealth.

The people are left to struggle with the rising costs of their food and non-food needs.

IBON stressed that the Duterte government is very much in a position to change this situation.

Among the most important measures is ensuring sufficient incomes for workers by legislating a national minimum wage of Php750.

IBON’s estimates using the latest available data, for 2016, show that a Php750 minimum wage in NCR will only cost 9.8% of the profits of establishments and still leave them with Php1.17 trillion in profits.

The increase in welfare for millions of workers and their families will however be palpable.#

Don’t insist on low poverty threshold, address jobs crisis, gov’t told

The National Economic and Development Authority (NEDA) recently attributed reduced poverty in the first semester of 2018 to the rising quality of jobs under the Duterte administration.

But research group IBON said that dismal jobs creation, the magnitude of joblessness, poor quality work, and meager wages give away the true picture of Philippine poverty.

The group stressed that government needs to first admit that there is a jobs problem to embark on real solutions to poverty.

Very weak job creation indicates an economy in crisis that deprives people of livelihoods, IBON said.

Job generation in the first two years of the Duterte administration was the worst in six decades and nine administrations.

Employment grew by an annual average of only 0.2% in in 2017 and 2018 compared to the 1.6%-3.9% annual average under the administrations since the time of Diosdado Macapagal in the 1960s.

IBON added that the persistence of joblessness and underemployment, where even those employed seek additional work, underscores the inability of the economy to generate enough stable and decent work.

The group estimates the unemployment rate to have grown from 9% in 2016 to 10.3% in 2017 and 9.9% in 2018.

In 2018, IBON estimates 4.6 million unemployed and 6.7 million underemployed Filipinos.

IBON also underscored that wages remain far below what households need on a daily basis.

NEDA claims that poverty fell due to higher incomes from wages and salaries especially among the poorest families.

IBON however pointed out, for instance, that the Php575.18 average daily basic pay of wage and salary workers in January 2018 is not even enough at 60% of the estimated Php955 National Capital Region family living wage at that time.

It should also be noted, said IBON, that the methodology of poverty and unemployment statistics obscures the real situation of poverty and unemployment.

The unrealistically low poverty threshold results in millions of Filipinos not being counted as poor.

Similarly, the definition of unemployment since 2005 results in millions of jobless Filipinos, including discouraged workers, not being counted as unemployed millions.

Rather than hyping supposedly on-track poverty reduction, the Duterte administration should count the real numbers of poor and unemployed Filipinos.

This is the only real basis for an effective strategy for poverty alleviation, said IBON.

The Filipino people deserve a comprehensive and broad-based poverty alleviation strategy that includes enabling the economy to create jobs, raise people’s incomes and livelihood, and increase economic production and capacity for consumption.

Government can embark on this instead of setting such a low poverty threshold and harping on reducing the number of poor just by changing the way they are counted, IBON said.

Lower official poverty estimates don’t mean less poor Filipinos — IBON

Research group IBON said lower reported official poverty estimates for the first semester of 2018 unfortunately do not necessarily mean that the country’s poverty situation is improving.

The group observed that standard of living allowed by the official poverty line is very low and grossly underestimates the real number of poor Filipinos.

Unless corrected, it gives a misleading picture of the conditions of millions of poor Filipinos and hinders the country’s anti-poverty efforts, IBON said.

The Philippine Statistics Authority (PSA) reported the proportion of supposedly poor Filipinos as falling to 21.0% in the first semester of 2018 or to just 23.1 million poor Filipinos.

This is a seemingly marked improvement from the reported 27.6% poverty incidence and 28.8 million poor Filipinos in the same period in 2015.

The proportion and number of poor families likewise also fell.

IBON observed however that the supposed improvement is based on a daily per capita poverty threshold averaging just some Php69.50 nationwide and a daily per capita subsistence or food threshold of only some Php48.60 in the first semester of 2018.

These are grossly underestimated thresholds that do not meet decent minimum standards for food, shelter, transportation, utilities, health care and education, the research group said.

The research group urged economic planners to review the official methodology in poverty estimation.

The subsistence and poverty thresholds are in dire need of updating and upgrading according to more decent standards, IBON said.

The PSA estimates the poverty threshold by first computing a subsistence or food threshold and then mechanically multiplying this by a factor of around 1.43 to get the poverty threshold.

These are both problematic, IBON added.

The subsistence food basket is estimated using so-called ‘least cost’ and ‘revealed preference’ approaches.

 These result in an extremely cheap food menu, which, while technically meeting bare nutritional requirements, is not just sorely lacking in variety but also only hypothetically available for families, IBON said.

The research group observed furthermore that the crude multiplier applied to calculate non-food items is also unacceptable.

This method does not calculate a budget for meeting families’ other needs for shelter, transportation, utilities, health care and education.

It is then unable to account for rising costs of housing, public transport, water, electricity, medical treatment and medicines, and schooling.

The research group pointed out that IBON estimates on Family Income and Expenditure (FIES) data in 2015 revealed that that the poorest 50% or 11.4 million families had monthly incomes of just Php15,000 or less and the poorest 60% or 13.6 million families just some Php18,000 or less.

These estimates at around those income levels would give a better picture of the real state of deprivation of tens of millions of Filipinos than current official poverty statistics, IBON said.

The choice of official poverty lines is a political one, IBON said.

Setting a high standard indicates the government having a high level of ambition for poverty eradication.

Conversely, setting a low standard indicates low targets for dealing with the poverty situation.

Government, however has chosen the latter, which results in tens of millions of Filipinos not meeting minimum standards of well-being and hidden behind unrealistic official poverty statistics, IBON concluded. #

Gov’t designed Kaliwa loan to favor China

The Kaliwa Dam loan agreement is designed to unduly favor Chinese interests over that of the Philippines.

IBON Foundation raised this concern in the wake of the release, upon public pressure, of this and other loan agreements.

Metro Manila private water concessionaire Manila Water Company, Inc. and the Metropolitan Waterworks and Sewerage Systems (MWSS) have long insisted on building the Kaliwa Dam and on a Chinese loan for this.

The Department of Finance (DOF) seized on the recent disruption of water services, which IBON estimates to have affected at least 6.1 million Filipinos or 80% of the total 7.1 million population covered by the Manila Water service area, to further justify the project and the loan.

IBON executive director Sonny Africa however warned that the Kaliwa loan agreement signed last year during the visit of Chinese president Xi Jinping is unduly biased for China and against the Philippines.

“Countries give official development aid (ODA) not out of charity but always to advance their foreign policy and self-interest,” Africa said.

“The Chinese loans negotiated by the Duterte administration are suspiciously disadvantageous for the Philippines,” he added.

IBON said that the practice of tied aid where loans are spent on the creditor country’s goods and services is unfortunately the norm in bilateral ODA.

In the Kaliwa loan deal, for instance, the proceeds will pay for Chinese contractors and controversially even Chinese workers. China has a record of charging relatively high interest rates and for instance charges the highest nominal interest rates among all of the Philippines’ bilateral donors.

The group however pointed out that the Kaliwa loan deal goes far beyond these and creates conditions for a debt trap.

This starts with the agreement’s Article 7 which makes it too easy for China to declare that the loan is in default and to subsequently declare “all the principal of and accrued interest… immediately due and payable”.

The loan for instance can apparently consider the Philippines in default if payment is more than thirty (30) days overdue, if the Philippines defaults even on other loans not in any way connected to the Kaliwa loan or project, or if “in the opinion of the Lender [there is] a material deterioration of the financial conditions of the Borrower”.

There are no such provisions in the other Japan and Korean loans that the DOF recently released.

Moreover, IBON said, the loan is explicitly governed by and construed in accordance with the laws of China (Article 8.4) and any disputes will be settled in the Hong Kong International Arbitration Centre (Article 8.5).

The arbitration rules of the HKIAC are however biased for China such as in the choice of arbiters and especially if Chinese law is made the agreement’s governing law.

IBON said the country is being set up to potentially give up natural and strategic resources.

In the agreement’s Article 8.1, the country “waives any immunity on the grounds of sovereignty or otherwise for itself or its property in connection with any arbitration proceeding” on assets within the territory of the Philippines unless prohibited by law.

IBON stressed that this provision is dangerous especially given the current administration’s predisposition to wield the law haphazardly for narrow ends.

“China rationally seeks to advance its self-interest as much as possible,” Africa said, “but it is suspicious that the Philippine government is giving so much to China and so badly failing to protect the country’s interest.”

He also pointed out: “China is not just any lender and is aggressive in asserting its global agenda even at the expense of human rights, environmental protection, and feeding corruption in debtor governments.”

The Kaliwa Dam project does not even yet have an updated feasibility study, environmental clearance, or the free, prior and informed consent (FPIC) of the communities.

IBON pointed out that the Duterte administration is seeking as much as US$14.4 billion for 23 infrastructure projects under its Build, Build, Build program.

“China has already been implicated in a few controversial debts gone bad where governments were pressured to give up control over strategic assets like ports,” Africa said.

“As it is, China’s actions in the mineral- and marine- rich West Philippine Sea islands and destruction of the rich marine biodiversity with reclamation activities shows that it is unconcerned about Philippine sovereignty and our interests,” he added.

Africa said: “The Duterte administration made a big show of supposedly independent foreign policy at the start of its term — it can start now by taking bold measures to modify or terminate these disadvantageous agreements.” #

Govt should be transparent, release 9 signed foreign loan agreements — IBON

Research group IBON said the Duterte administration should immediately release to the public all nine foreign loan agreements it has already signed for infrastructure projects, especially for the upcoming Kaliwa Dam project with China.

The group raised concerns of government’s transparency since it has denied IBON’s previous requests for copies of the loan agreements.  

The government has an obligation to disclose these contracts as a matter of public interest and protecting the country’s sovereignty, the group said.

The nine foreign loan agreements signed by the government include the Chico River Pump Irrigation and New Centennial Water Source-Kaliwa Dam with China; Pasig-Marikina River Channel Improvement, Cavite Industrial Area Flood Management, Metro Manila Subway, and North-South Railway with Japan; Panguil Bay Bridge; and the new Cebu International Container Port with Korea.

IBON research head Rosario Bella Guzman said that there is lack of transparency of government offices to disclose loan agreements signed by the government. 

IBON wrote a letter to the Department of Finance (DOF) in June 2018 requesting copies of the loan agreement for the Chico River Pump Irrigation Project.

The DOF responded that the contract has a confidentiality clause and that the agency is not allowed to disclose details of the contract to any third party.

Loan agreements should be disclosed since the projects are public infrastructure which are supposed to be serving public interest, said Guzman.

The Chico River Pump Irrigation Project, with the provisions that could be disadvantageous to the country, may become the gold standard of other loan agreements, Guzman added.

Guzman said that the contracts for other Chinese loans such as the one for the New Centennial Water Source-Kaliwa Dam Project would follow the template of onerous provisions found in the Chico River Pump Irrigation Project.

The loan agreement for the Kaliwa Dam which was signed in November 2018 is yet to be made public and IBON has yet to receive a copy of the loan agreement it requested from concerned offices.

Guzman added that the Php12.2-billion Kaliwa Dam will be 85 percent funded by China official development assistance (ODA), in other words, debt that will be paid for by the public in the future.

“China loans are one-sided and impose onerous conditions, which could result in the Philippines virtually giving up its sovereignty,” said Guzman.

IBON previously raised questions on the Chico River Pump Irrigation loan agreement being governed by China laws, and that any arbitration or suit shall be heard at the China International Economic and Trade Arbitration Court (CIETAC).

“Natural resources, including water, are the subject of these loan agreements, which makes it more problematic if conditions are lopsided in favor of foreign governments, creditors and investors,” Guzman added.

Instead of prioritizing the attraction of one-sided foreign investments and loans for its infrastructure program, the government should put national interest and public welfare first over local and foreign big business interests.

Government can start by subjecting the loan agreements it is signing to public scrutiny and declining those that are not mutually beneficial and do not contribute to the country’s domestic economic development, IBON concluded. #

Businessmen cashing in on Metro Manila Reclamation project–IBON

Research group IBON said that the Manila Bay reclamation project under the Build, Build, Build program is a profit-led infrastructure plan that will mainly benefit big business.

The group said that contrary to government claims, the project will displace nearby communities from their homes and livelihoods and destroy the environment.

The Manila Bay Reclamation project involves a series of infrastructure reclamation projects spanning the coasts of Bulacan, Manila, Pasay, and Cavite.

According to the Philippine Reclamation Authority, there are a total of 22 proposed projects for Manila Bay alone, four of which have been approved.

The project is under the “Operational Plan for the Manila Bay Coastal Strategy (OPMBCS)” by the Japan International Cooperation Agency (JICA).

It aims to tap private sector investments to develop Manila Bay and supposedly usher economic growth.

IBON said that there are a number of corporations set to build and profit from these projects during the Manila Bay Reclamation.

The largest and most expensive of these are being carried out by the San Miguel Corporation (SMC) led by Ramon Ang.

The Php735-billion Bulacan International Airport or Aerotropolis will reclaim around 2,500 hectares of Manila Bay waters, and the Php400-billion Manila Bay Integrated Flood Control project will reclaim 11,200 hectares.

The Php72-billion Pasay Harbor Reclamation Project will be built by the Pasay Harbor City consortium made up of the Udenna Development Corp. (UDEVCO), Ulticon Builders, Inc., and China Harbour Engineering Company Limited.

The project will reclaim and develop 265 hectares for various tourist attractions, high-rise and low-rise condominiums, and a yacht pier.

IBON observed that long-time Duterte supporter and Davao businessman Dennis Uy has a stake in these reclamation projects through his company UDEVCO.

A top contributor to Duterte’s 2016 presidential campaign, Uy’s companies have so far bagged under the administration the original proponent status for the Davao Monorail Project; the Department of Energy’s nod to develop the country’s first liquified natural gas terminal together with Chinese firm, CNOOC Gas and Power Group Co. Ltd; as well as the third telco slot under the Mislatel consortium.

Other big companies with projects lined up in Manila Bay include the Manila Solar City Project of the Manila Goldcoast Development Corp (MGDC), a subsidiary of the Wilson Tieng-led Solar Group of Companies, and the Sy Family with various reclamation projects in Pasay City.

Mostly urban poor communities stand to lose their homes and livelihoods to make way for reclamation projects, said IBON.  

The government announced its plan to relocate around 220,000 families living in Manila Bay to National Housing Authority (NHA) relocation units in Central Luzon and Southern Tagalog.

But the plan for livelihood and services provision remains to be seen.  

Meanwhile, the livelihoods of 5,000 fisherfolk will be affected by SMC’s Aerotropolis.

According to national fisherfolk federation, Pamalakaya, 20,000 fisherfolk will be affected by the construction of the Navotas Boulevard Business Park, part of the reclamation project.

Moreover, documents from the Environmental Management Bureau (EMB) state that the projects will have ecological impacts in Manila Bay.

Throughout the construction of the various projects, contaminants from dredged sediments will be released, deplete dissolved oxygen, and destroy natural habitats of sardines and mangroves found in Manila Bay. 

Once finished, the projects will interfere with the natural tide flow of water in the area and erode the shoreline of nearby beaches. The erosion could cause flooding in nearby low-lying areas especially during a typhoon.

IBON said that with the data from the EMB, all the more, government should follow its own environmental impact assessment.

IBON also said that while Manila Bay should be rehabilitated, the government’s current plan serves the interest of a profit-minded few and will cause significant displacement and environmental damage.

The government should suspend the Manila Bay reclamation project and develop a rehabilitation plan that is environmentally sustainable and will improve the conditions and livelihoods of people living in Manila Bay, said the group. #

Second year of slowing growth a wake-up call – IBON

Research group IBON said that the second year of slowing growth under the Duterte administration should be enough to jolt it out of its complacency and denial. The downturn in the last two years and the poor prospects in the year to come should be a wake-up call to start to undertake the difficult but necessary reforms for genuinely inclusive growth and national development.

The Philippine Statistics Authority (PSA) reported a 6.2 percent annual growth in the country’s gross domestic product (GDP) for 2018, lower than government’s revised growth target of 6.5-6.9 percent for the year.

Government cited slowing agriculture and high inflation as among the main factors pulling back growth, while the main drivers were growth in construction, and trade and repair of motor vehicles, motorcycles, personal and household goods.

“Growth is slowing most of all because of the economy’s unsound fundamentals in backward agriculture and shallow industry,” said Sonny Africa, IBON executive director.

The agriculture sector registered just 0.8 percent growth in 2018 from 4 percent in 2017.

This is the sector’s worst performance since its contraction in 2016.

Yet, Africa said, the administration seems to have little interest in reversing this trend.

For example, the Php49.3 billion agriculture department budget for 2019 proposed by Congress is Php1.4 billion less than the Php50.7 billion in 2018 (in equivalent cash-based terms).

Africa also noted that manufacturing growth slowed to 4.9 percent in 2018 from 8.4 percent the year before, which is the slowest since the 4.7 percent growth in 2011.

He said that this is due to weaker demand in domestic consumption and weaker exports amid the global economic slowdown. Manufacturing also remains shallow in being low value-added, foreign-dominated, and dependent on foreign capital and technology.

Africa pointed out that recent rapid growth has instead relied on external short-term factors that are fading. Yet remittances are slowing, exports are falling, and interest rates are rising. The real estate and consumer spending booms are also petering out.

Growth in overseas remittances slowed from 5.0 percent in 2016 to 4.3 percent in 2017 to just 3.1 percent in the first 10 months of 2018, said Africa.

Exports growth increased from 11.6 percent in 2016 to 19.5 percent in 2017, but then fell to 11.5 percent in 2018.

Meanwhile, the benchmark overnight reverse repurchase (RRP) rate rose steeply from 3.0 percent in 2017 to 4.8 percent by end-2018, reversing the decade-long general decline in interest rates.

Africa also said that household consumption spending markedly slowed from 7.1 percent growth in 2016 and 5.9 percent in 2017 to just 5.6 percent in 2018.

The real estate boom is also tapering with 2016 growth of 8.9 percent in real estate, renting and business activities declining to 7.4 perent in 2017 and falling further to just 4.8 percent in 2018.

“Rising government spending and its infrastructure offensive haven’t been enough to offset the reliance on waning external factors,” said Africa. “The administration’s efforts to stimulate growth to its 7-8 percent target with even more spending, are not going to be enough amid high disguised unemployment, low incomes, and the global slowdown this year.”

Global GDP growth is estimated to slow from 3.1 percent in 2018 to 3.0 percent this year.

“The Duterte administration needs to stop downplaying slowing growth and hyping that this as still among the fastest in the region and the world because the growth is becoming more jobless than ever,” Africa said.”

The number of employed only increased by 162,000 from 41 million in 2016 to 41.2 million in 2018, according to data from the Philippine Statistics Authority (PSA).

Average annual job creation was then only 81,000 in the period 2017-2018, which is the lowest level of job creation among post-Marcos administrations.

Africa said that government continues to ignore telltale signs of an economic downturn and deceive Filipinos with its rosy picture of the economy.

He said that the sooner the administration admits the failure of its neoliberal policies, the sooner measures that will spur domestic industries and benefit the Filipino people can be implemented. #

2018 inflation highest in 10 years amid slowing growth — IBON

Inflation for 2018 is more than double the Duterte administration’s original inflation target for the year and the highest in a decade, research group IBON said.

Along with slowing economic growth, this further points to the failure of government’s economic managers to rein in consumer prices and of its neoliberal policies, such as the Tax Reform for Acceleration and Inclusion (TRAIN), which continue to burden the poorest Filipino families, said the group.

The reported annual average inflation rate rose to 5.2 percent in 2018 from 2.9 percent in 2017 and 1.6 percent in 2016.

IBON noted that this is much higher than the government’s original annual inflation projection of two to four percent for 2018 and the highest since the 8.2 percent rate in 2008.

Aside from missing its inflation target, the government is also facing an economic slowdown.

The economic growth target for 2018 has already been adjusted downwards from 7-8 percent to 6.5-6.9 percent.

The gross domestic product growth rate already slowed to 6.3 percent in the first three quarters of 2018 from 6.7 percent in 2017 and 6.9 percent in 2016.

Inflation eased last December to 5.1 percent but the poorest half of the population still saw their real income erode by anywhere from Php3,300 to Php7,300 from the high inflation throughout 2018.

Rising prices always spell more difficulty for the poor especially amid low or even stagnant incomes, IBON said.

The Duterte administration should also not be too quick to take credit for the lower year-end inflation, IBON added.

The biggest factor easing inflation is not anything the government has done but rather falling global oil prices from increased supply amid a global economic downturn.

On the contrary, the Duterte administration’s insistence on TRAIN’s second tranche of fuel excise taxes adds inflationary pressure, the group said.

The economic managers will fallaciously claim that relatively slower inflation in the first few months of 2019 proves that TRAIN and the additional fuel excise taxes are not inflationary, IBON said.

Such dismissiveness of how TRAIN makes consumer goods and services more expensive however only affirms the government’s insensitivity to the plight of the Filipino people, especially the poor.

IBON said that poor Filipino families worst affected by last year’s high prices will continue to carry the burden of these into the new year if government does not take genuine measures to curb inflation and arrest a faltering economy.

The government can start with repealing TRAIN and implementing a progressive tax system. #

2018 Yearender: Are You High? The Economy Isn’t

by Sonny Africa

Executive Director, IBON Foundation

The Duterte administration’s economic managers made some odd statements as the year wound up. Economic planning secretary Ernesto Pernia said “the Philippine economy became stronger and even more resilient than ever”. Finance secretary Carlos Dominguez III insisted on “the soundness of the Duterte administration’s economic development strategy”. Bangko Sentral ng Pilipinas (BSP) governor Nestor Espenilla meanwhile said that they “expect growth to remain solid in the years ahead”.

These are odd because the economy clearly showed signs of increasing stress in 2018. If anything, the year just passed confirmed the end of the long period of relatively rapid growth for the Philippines.

In denial

Growth has been slowing since the start of the Duterte administration. It is already its slowest in three years. Inflation reached a nine year-high and was even worse for the poorest Filipinos. The current account deficit is at its worst in 18 years. The peso is at its weakest in 13 years. International reserves are in their lowest in 10 years. The jobs crisis is disguised but really at a historic high. Overseas remittances are also slowing — this further dampens household consumption and welfare.

The government seems to think that it can just spend its way out of this. It holds its ‘Build Build Build’ infrastructure offensive as some kind of magic bullet. This will be difficult with the end of the decade of low global and local interest rates and rising borrowing costs. Accelerating government debt will also only become more unmanageable as growth continues to slow. As it is, the budget deficit is already at its worst in seven years.

All these the government’s chief economic propagandists will euphemistically call ‘headwinds’ or ‘challenges’. Yet barring a real change of economic course, there is little reason to expect that the economy will get better anytime soon. Elite business profits will likely continue to grow, but it may just be a matter of time before even these suffer.

As if being near the top of a sinking ship is a good thing, the administration will keep on claiming that the Philippines is among the fastest growing economies in the region and in the world that is caught in a protracted crisis, Still, the 6.3% growth in the first three quarters of 2018 is markedly slower than the 6.7% growth on 2017 and 6.9% in 2016.

Deteriorating

Agriculture is doing particularly badly: its 0.4% growth in the first three quarters of 2018 is approaching its worst performance since 2016. But even the hyped manufacturing resurgence is hitting a wall – the 5.7% growth in the first three quarters is much slower its 8.4% clip in 2017, and the full year results may be the slowest since 2015.

Filipino industry and domestic agriculture would have been solid foundations of domestic demand and production, if only these had really been developed these past years. This is impossible though under the government’s obsolete globalization and free trade mantra. Agriculture is still left to the vagaries of the weather and small peasant labor. Manufacturing remains shallow and foreign-dominated.

The services sector never should have been the driver of economic growth. But even this is failing. The real estate boom appears to be ending with 5.9% growth of finance and real estate in the first three quarters of 2018 continuing the trend of slowing growth from 7.5% in 2017 and 8.5% in 2016. Reflecting weakening household consumption, even trade is down – at just 6.0% in the first three quarters compared to 7.3% in 2017 and 7.6% in 2018.

The main drivers of growth in 2018 have been the intrinsically short-term boost from government spending – this increased to 13.1% growth in the first three quarters from just 7.0% in 2017. , Construction also increased to 13.3% growth in the first three quarters from just 5.3% in 2017.

Real score on jobs twisted

The worst effect of a backward economy is not creating enough decent work for the growing population.

The economic managers hailed 825,000 new jobs created in 2018 and unemployment falling by 140,000 bringing the unemployment rate down to 5.3 percent. Unfortunately, these do not tell the whole story.

The Duterte administration has actually created just an average of 81,000 jobs annually with 43.5 million jobs in 2018 compared to 43.4 million in 2016. This is because the economy lost a huge 663,000 jobs in 2017, which was the biggest contraction in employment in 20 years or since 1997.

So the largest part of the supposed job creation, or some four out of five ‘new’ jobs, was really just restoring jobs lost in 2017.

But how to explain the falling unemployment? This is a statistical quirk. According to the official methodology, jobless Filipinos have to be counted as in the labor force to be counted as unemployed.

It seems that huge numbers of Filipinos are no longer seeking work and dropping out of the labor force. This is reflected in how the labor force participation rate dropped to 60.9% in 2018 which is the lowest in 38 years or since 1980.

While employment grew by just 162,000 between 2016 and 2018, the number of workers not in the labor force grew by a huge 2.9 million over that same period. It is likely that the reported 62,000 fall in the number of unemployed between 2016 and 2018 reflects workers dropping out of the labor force because of tight labor markets rather than their finding new work (because of weak job creation).

This scenario is supported by IBON’s estimates of the real state of unemployment in the country. The government started underestimating unemployment in 2005 when it adopted a stricter definition that made subsequent estimates incomparable with previous figures.

Reverting to the previous definition to give a better idea if the employment situation really is improving or not, IBON estimates that the real unemployment rate in the decade 2008-2017 is some 10.2 percent. This maintains high unemployment in the economy since the onset of globalization policies in the 1980s. IBON does not yet have estimates for 2018, but the real number of unemployed in 2017 was 4.6 million or almost double the officially underreported estimate of just 2.4 million.

Job generation trends in 2018 are in any case worrisome as it is. The quarterly labor force survey showed drastically worsening job generation since the start of the year. Measured year-on-year, some 2.4 million jobs were reported created in January 2018 but this fell to 625,000 in April then 488,000 in July and then 218,000 jobs actually lost, rather than created, in October.

Economy needing rehab

Perhaps high on their own propaganda, the country’s neoliberal economic managers continue to confuse abstract growth figures, business profits and foreign investment with development and the conditions of the people. The reality however is of chronically backward Filipino industry and agriculture and an economy that went sideways in 2018. The real challenge is to discard failed neoliberalism and to replace this with an economics truly serving the people.#