Official unemployment figures understate historic jobs crisis

by IBON Media & Communications

IBON said that the unemployment crisis is actually even worse than official figures show.

The group estimates that the real unemployment rate is likely around 22% and the real number of unemployed around 14 million.

The 20.4 million real unemployed and underemployed today is the worst crisis of mass unemployment in the country’s history.

The Philippine Statistics Authority (PSA) reported 7.3 million unemployed and 6.4 million underemployed in April 2020.

As it is, this is the worst government-recorded unemployment (7.3 million) and combined unemployment and underemployment (13.7 million) in the country’s history.

IBON pointed out, however, that the technical definition of unemployment does not count as much as 4.1 million Filipinos who did not formally enter the labor force because of the ECQ and another 2.6 million that the revised unemployment definition since April 2005 stopped counting.

The drastic drop in the labor force participation rate (LFPR) to 55.6% is most of all due to the ECQ, said the group.

The jobless Filipinos who did not enter the labor force will not be counted as unemployed because the technical definition of unemployed requires them to be in the labor force to begin with.

If the LFPR had stayed the same at 61.3% in April 2019, there would be an additional 4.1 million in the labor force.

The methodology for counting the unemployed was revised in April 2005. Since then, jobless Filipinos who did not look for work in the last six months or are unable to immediately take up work are no longer considered unemployed and removed from the labor force.

This lowered officially reported unemployed Filipinos and stopped comparability with data from previous years.

The revised unemployment definition tends to underestimate the magnitude of unemployment by 35% and the unemployment rate by 3.3 percentage points.

An initial correction for this would mean an additional 2.6 million jobless Filipinos who should be counted as unemployed according to the previous definition, said the group.

IBON said that it is important to see historical trends in the country’s unemployment situation to get an accurate picture of the long-term implications of economic policies. Having data that is comparable over time will give a much clearer indication of the structural economic changes the economy is undergoing which will enable better policymaking. #

= = = = = =

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

GCQ Reality Check

by Rosario Guzman

Struggling with the dilemma for about a month now – caught between the lack of science and intense pressure from big business to continue profit-making – the Duterte government is about to decide to transition the country to a general community quarantine (GCQ). Its narrative has been apparent – it is winning against the coronavirus and is ready to pick up from the economic slump.

Before you obey the government when it says it is alright to go out now, please answer the following questions truthfully.

1. Have we flattened the curve? No one really knows. The health department has cited the doubling time slowing down from 3 to 5.5 days and wrongly used it as proxy indicator that the government is winning the curve war. Up to this point, we know nothing. We know about daily new cases, like we had 350 new cases on May 26, the highest since April 7. We know about 14,669 cases nationwide and our high 6% mortality rate. But these metrics are based on a government pandemic response where there is only limited testing. Our knowledge thus can only be that – limited.

The curve is all about the infection rate of the virus – any effort to flatten it is futile if there is no mass testing, contact tracing, isolation, and quarantine. We hoped to have that sane health response in that order, but government simply imposed a hard lockdown, euphemized as enhanced community quarantine (ECQ), without mass testing and strengthening the rest of the health system.

Presidential spokesperson Harry Roque quibbling over the semantics of “mass testing” is also a pathetic attempt to tiptoe around the issue. There is no such thing as mass testing, Malacañang would repeatedly say, but would later clarify that it was referring to government policy on mass testing, a much worse admission actually. Then later, government would go by the “we-don’t-have-the-money-for-that” narrative, which only makes apparent that the overarching governance principle of the Duterte administration during COVID or otherwise is to evade and default on state responsibility.

Curves and waves – these have only brought down the credibility not only of the health department but of the entire inter-agency task force. Such mass confusion shouldn’t even have happened while we are in the middle of the pandemic. But yes, that’s where we are – almost three months of lockdown and we are still debating on terms.

2. Have we increased our testing capacity? Again, in this regard, Malacañang has made another confusing claim that we have already reached 30,000 per day testing capacity. All we know is that we only have 42 testing centers nationwide, not all were even operational from the beginning of the lockdown.  The highest number that these centers have tested per day is 10,841 unique individuals. From May 16 to May 25, the government has only tested a daily average of 8,077 samples. The health department also has a backlog of 6,835 for validation of positive results, which are not yet included in the 14,669 confirmed cases. There are 818,338 remaining kits on hand, which may not refer to the number of tests that may be done because laboratories count all the supplies they have to make one test. In any case, what use is it that we have the kits if government still won’t have a directed program of free mass testing?

3. Have we strengthened the health system? The country has only 1,845 COVID-19 referral and accepting hospitals, and most of these are private hospitals, while the Department of Health (DOH) accounts for only 73 of these. There are only a reported 72 quarantine facilities nationwide, and these are even operating under capacities. Some of the so-called quarantine facilities assigned for returning overseas Filipino workers are also reportedly crowded and lacking medical services. Obviously, the DOH is more inclined towards personal or home quarantining than building public facilities.

There are 478 ICU beds, 2,356 isolation beds, 972 ward beds, and 816 mechanical ventilators in the public health system of the National Capital Region (NCR). On the average, around 56% of these beds are currently occupied based on DOH data, while 28% of the mechanical ventilators are being used. The NCR has 9,481 confirmed cases – 6,312 are active, of which 823 have been admitted while the majority 5,373 are still pending status. To put simply, if all active cases had to be admitted in the public hospitals, which is the ideal treatment if only we had many quarantine facilities, NCR with a total of only 3,806 beds of different uses would be swamped.

What is unspoken is the cost of consultation and hospitalization that pushes patients away to just go home without getting any medical attention. The main weakness of the Philippine health system is that the government has a universal health care law that is insurance-driven instead of focused on direct service provision. It is a universal misnomer that is more inclined to ensure the profits of private hospitals instead of socializing health care. For COVID-19, PhilHealth can only provide Php14,000 per worker for admission and referral and at least Php43,997-786,384 for confinement, which are not enough. This affliction of a commercialized and privatized health system has been manifestly bared during the coronavirus crisis.

The Philippines has the highest proportion of infected health frontliners in the region, reaching about 17% of total infected population. This worries the World Health Organization because the country apparently is an outlier in a region that registers only a 2-3% proportion of infected health frontliners. This tragedy can only be explained by the lack of personal protective equipment (PPE) for our frontliners, government’s delayed and limited procurement of PPE, lack of DOH guidelines and training, and the frontliners being overburdened. Even the plan to hire and beef up the number of health workers by hundreds of thousands is not attracting applicants, what with government offering the same low compensation levels and thankless jobs.

Ready for the GCQ? If you don’t know the answers because government has failed to inform you, or if you indeed know the answers as government has failed to take action, by all means go out and make government answerable. #

= = = = =

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

Why make the poor pay for COVID-19 response?

By Sonny Africa

There’s more than enough money for all the COVID-19 response we need – the Duterte administration just has to take the side of the people and stop being so scared of the rich.

The Philippines is in the middle of its worst public health and economic crisis in decades, possibly even in its history. The social, economic and health measures needed to deal with this are undoubtedly expensive. But are they unaffordable?

Hangin

The government seems to think so. The president famously said that the government does not have enough money to respond – “hangin lang iyan,” he lamented.

The rest of the Inter-Agency Task Force for the Management of Emerging Infectious Diseases haven’t been as blunt but they’ve been acting that way. The social welfare department has, in effect, been rationing already stingy cash aid with unduly strict requirements. The health department isn’t testing, tracing, isolating and treating as much people as they should for want of resources.

The finance department is at the helm of the government’s economic team. It is voting with its feet – its Philippine Program for Recovery with Equity and Solidarity (PH-PROGRESO) and stimulus plans don’t give income support for tens of millions of cash-strapped families beyond the lockdown.

Unfortunately, strangely affirming the importance Karl Marx gives to the economic base of society, the economic managers are too decisive. The finance department is also in charge of revenue generation. If it says there isn’t any money, then the rest of government won’t have any money. Which explains where the president’s hangin comment came from.

But is there really no money to be had?

The plan

But before looking into that, a more basic question – how much does the government really need? Four months into the pandemic, it’s still not actually very clear. PH-PROGRESO is presumably the national government’s plan but this doesn’t include what must also be considerable efforts at the local government level.

The four-pillar PH-PROGRESO also has to be interpreted carefully because the finance department adds up actual spending, loans and guarantees, foregone revenue, financing, and additional liquidity to come up with an impressive looking grand total of Php1.74 trillion.

As it is, it looks like there’s only Php506 billion in actual spending. This includes Php321.6 billion in emergency support, Php133.7 billion in loan and credit guarantees, and Php50.7 billion for health measures.

The balance of Php1.24 trillion is actually composed of tax cuts and other foregone revenues (Php142.8 billion), liquidity released into the system by central bank measures (Php233 billion), and financing mostly from new debt (Php861.8 billion). Put another way, the government doesn’t actually need to raise funds for all these items accounting for 71% of the ‘grand’ total.

So where to get that Php506 billion that will actually be spent?

The Php861.8 billion in new financing of PH-PROGRESO – Php436.9 billion from official development assistance (ODA) and Php419.4 billion from government bonds – is presumably a source.

But the program also mentions up to Php673 billion freed up from existing budget items and so not really needing new financing or revenue sources. This is from the 2019 and 2020 national budgets, off-budget items from government-owned and controlled corporations and government financial institutions, and private sector contributions as well as from “financial sector, monetary policy, regulatory relief”. In his last weekly report to Congress, the president cited raising Php257 billion already from discontinued, abandoned, reprogrammed, reallocated and realigned items in the 2019 and 2020 budgets.

Looked at in this way, it appears that the government has come up with a reasonably prudent plan.

Poor pay for meager response

But appearances can be deceiving. There are two problems here.

The first is that the planned Php506 billion in actual spending falls far short of being a sufficient response. The COVID-19 response needs to be much more comprehensive and ambitious. The combined cost of the range of health measures, emergency relief, income support, and enterprise support needed is likely more in the order of Php1.5-2 trillion.

Clearly, the perceived lack of funds is a major binding constraint to the broader response that is really needed and, indeed, even just a larger COVID-19 response than at present. This self-imposed limitation gravely undermines the public health response, risks undue infections and deaths, and will mean socioeconomic difficulties on a massive scale.

Which leads to the second problem. Meager as the response is, the poor are paying for it more than they should – through debt and higher taxes – while the rich are paying much less than they can.

Most of the Php861.8 billion in financing of PH-PROGRESO is actually new and additional debt that will be paid for from taxes. Only a tiny Php404 million of this financing are grants and the rest are ODA loans and government bonds. The government has already been reported as seeking US$5.7 billion in foreign loans for its COVID-19 response. To date, the finance department reports US$4.9 billion in COVID-related foreign debt.

The taxes to pay for this debt are disproportionately borne by the poor with their low incomes. Especially after the Tax Reform for Acceleration and Inclusion (TRAIN) Package 1 of 2017, the country’s tax system is more regressive and consumption tax-oriented than it has ever been.

The self-imposed debt trap even to so-called development agencies and friendly governments is glaring. The Duterte administration is programmed to pay US$1.7 billion in debt service to multilateral and bilateral agencies – especially the World Bank and Asian Development Bank – this year. These are also the very agencies it has borrowed an additional US$2.5 billion from to respond to COVID-19.

Taxing consumption

The government is also quick to tax consumption including of the poor. Consumption taxes are inherently regressive in being paid the same by everyone regardless of how poor or rich they are – as opposed to direct taxation of income and wealth which is more progressive.

The administration has already hiked tariffs on imported oil products by 10% to raise funds for dealing with the pandemic. The planning agency, headed by a former finance department official, is already proposing higher consumption taxes that will add to the burden of poor and middle class families.

This includes a digital economy value-added tax proposal which adds a Php50 billion tax burden on online consumers over 2021-2023, higher taxes on sweetened drinks and junk food adding a Php22.7 billion burden, and a higher Motor Vehicle Road Users’ Tax adding a Php40 billion burden.

Increasing taxes on low-income families amid a recession would be perplexing if the insensitivity of the Duterte administration and its economic managers when it comes to taxes were not already well-established. They are only being hugely opportunistic in exploiting the COVID-19 crisis to push their long-standing TRAIN agenda of raising consumption taxes on poor and low-income groups while reducing taxes on the rich.

It’s all a bizarre repeat of TRAIN where the poor are made to pay more so the rich can pay less. This time around, amid the COVID-19 crisis, the rich will benefit from the biggest corporate tax break in Philippine history.

TRAIN Package 2, comically renamed Tax Reform for Attracting Better and High-Quality Opportunities (TRABAHO) bill, soberly renamed the Corporate Income Tax and Incentives Reform Act (CITIRA), and now opportunistically renamed the Corporate Recovery and Tax Incentives for Enterprises Act (CREATE), is being primed for rapid legislative passage. The Duterte administration is giving up Php667 billion in potential COVID-19 response funds to boost corporate profits.

Tax the rich

So where can funds for the comprehensive COVID-19 response needed come from? From the very same sources that funding for national development should come from – the accumulated wealth and income of the rich.

The pandemic has seen the ideas of solidarity, unity and compassion raised repeatedly. Beyond spontaneous acts of charity, paying higher taxes is putting money where your mouth is.

In our population of 108 million, an estimated 596 Filipinos each have wealth of some Php2.5 billion pesos or more. This includes the 50 richest Filipinos whose combined wealth of around Php4.1 trillion is, by IBON’s estimates, more than what the poorest 71 million Filipinos own combined.

There’s no reasonable argument that taxing their wealth above Php1 billion will adversely affect their well-being and welfare. A wealth tax of 1% on wealth above Php1 billion, another 2% above Php2 billion, and another 3% above Php3 billion will raise Php236.7 billion annually from these 50 richest alone. They are not going to be spending this anyway versus the huge social, economic and health returns from using this for COVID-19 response.

Other tax measures can also be considered. A two-tiered corporate income tax scheme with higher taxes on large firms and lower taxes on micro, small and medium enterprises can be designed to generate about Php70 billion annually. Similarly, a personal income tax scheme with higher taxes on just the richest 2.5% of Filipino families can raise about Php127 billion annually.

These are illustrative figures for now but the Duterte administration can come up with more precise figures if it was so inclined. There are technical challenges but these are not insurmountable and no reason not to try.

A wealth tax, higher taxes on large corporations, and higher taxes on the richest Filipinos are the most rational sources of revenues for COVID-19 response and development.

Does Congress have the political will for these? Sadly, our senators and representatives, looking to the 2022 elections already, are the biggest political won’t. #

= = = = =

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

Duterte gov’t giving up Php667-B in potential COVID response funds to boost corporate profits

by IBON Media & Communications

At a time when funds are urgent for the huge COVID-19 response needed, research group IBON said that the Duterte administration is giving up Php667 billion in revenues to boost the profits of the country’s largest corporations.

Oligarch profits are boosted at the expense of aiding poor families, containing the spread of the coronavirus, and treating those with COVID-19, said the group.

In a Senate hearing on Tuesday, Department of Finance (DOF) Secretary Carlos Dominguez III said that the administration wants to cut the corporate income tax (CIT) from 30% to 25% starting July this year.

The CIT will be lowered again starting 2023 to fall to just 20% by 2027.

This will result in an estimated revenue loss of Php42 billion in 2020 and a further Php625 billion over the succeeding five years.

The faster and bigger CIT cut proposed is grossly unconscionable at a time when the government is blaming its incomplete response to the COVID-19 crisis on the lack of funds, said IBON.

Cash transfers are inadequate for tens of millions of Filipino families, the government says mass testing is unaffordable, and small businesses and workers are bearing the burden of precautionary measures.

There is also no substantial increase in the number of health workers, beds, intensive care units, and ventilators in the public health system, the group noted.

And yet, IBON stressed, The DOF is using the COVID-19 crisis as an excuse to increase the profits of large corporations.

Corporate Recovery and Tax Incentives for Enterprises Act (CREATE) pushed by the DOF as “one of the largest stimulus measures in the country’s history” is the very same regressive TRAIN Package 2 it has been pushing for over three years, said the group.

CREATE is only its latest renaming after being called Corporate Income Tax and Incentives Reform Act (CITIRA).

The finance department is also being untruthful in saying that the measure “is meant to fuel economic dynamism, especially among the country’s growth engines – the micro, small and medium enterprises (MSMEs) – that employ a majority of Filipino workers”, said IBON.

In a Senate Ways and Means Committee hearing in 2018, the DOF itself reported that 75% of CIT revenue collected comes from large corporations and only 25% from MSMEs. Hence, it is large corporations and not MSMEs who are the biggest winners getting the biggest boost in their profits from the CIT cut.

IBON said that if the government is really serious about supporting MSMEs and not just using them as a smokescreen to increase oligarch profits, it can instead introduce a more progressive two-tiered CIT scheme with 20% CIT for MSMEs and a higher 35% for large enterprises.

The group said that countries with such segmented CIT schemes in ASEAN include Thailand, Malaysia, Cambodia and Brunei.

The proposed measure is also misguided in being designed as an incentive for foreign investors to come to the Philippines, IBON added.

Most foreign investment in the country is in low value-added operations. Reducing tax revenues collected from them reduces among the biggest concrete benefits from letting them operate in the country, the group explained.

The big business bias of the government’s COVID-19 response is becoming increasingly evident, according to IBON.

The Duterte administration is giving them CIT cuts, supporting lower wages for workers, and preparing huge loans, loan guarantees and bailouts.

These should be corrected in favor of more generous income support for affected families, strengthening the public health system, and supporting Filipino MSMEs, said the group. #

= = = = = =

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

To give or not to give SAP tranche 2

by Xandra Liza C. Bisenio

How many mothers have been forced to leave their little ones at home, walk far, and stand in long lines for ayuda only to go home empty-handed? How many senior citizens and persons with disability (PWD), despite their frailty and limits, still tried to get support but in vain?

What can government say to people asking: “Paano na kami, ano nang kakainin namin sa sunod? Kung ano-ano nang ginagawa sa itlog – nilalaga, sinisigang, inaadobo.”, or “Itinutulog na lang ng mga anak ko ang agahan at tanghalian, kasi pang-isang kain na lang ang meron kami.” There are countless, grimmer accounts of such despair.

As of May 16, exactly two months after Luzon and some parts of the country were put under a lockdown to contain COVID-19, the official count of beneficiaries that have not received the first tranche of social amelioration was still quite a number – 811,193 families or some 4 million people. Even if everyone gets served eventually, the point is that millions of Filipinos were made to wait that long for the much-needed aid to come. Yet the Duterte administration dilly-dallies about distributing the second tranche of the social amelioration program (SAP), as if it is an option to give or not to give.

Those who are in modified enhanced community quarantine (MECQ) areas unarguably need continued support from government. The lockdown has caused two months of difficulty in terms of jobs, livelihood and incomes.

But the over 13 million families who now fall in the category of general community quarantine (GCQ) also still need continued support. They were also under lockdown for six to eight weeks and, at best, only got a small amount of support under the first tranche. Moreover, data as of the exact second month of the lockdown showed that there were even 659,850 households in GCQ areas who have actually not yet received their first tranche. This included 189,467 households in the new GCQ areas.

There should be no question that the second tranche needs to be distributed not just in the remaining MECQ areas but in the GCQ areas as well.

Bayanihan is explicit about it

The SAP targets 17.7 million beneficiaries. The National Capital Region, Region III except Aurora and Tarlac, Laguna, Mandaue City and Cebu City are under MECQ until the end of the month, covering about 4 million beneficiaries. Erstwhile ECQ areas Benguet, Pangasinan, CALABARZON except Laguna, Ilo-ilo, Cebu, Davao City and Bacolod City now join the rest of the country under GCQ – bringing the number of SAP beneficiaries in GCQ areas up to 13.7 million.

The usual economic activities can resume in GCQ areas. There are still minimum health requirements such as physical distancing, frequent handwashing, and bodily protection because the battle against the coronavirus continues. MECQ areas meanwhile maintain restrictions on mobility outside the home, as well as on non-essential activities.

Malacañang initially announced that only MECQ areas will get the second tranche of social amelioration. Soon after, the president gave orders to not just give it all 18 million families but to actually add 5 million more, earning him additional popularity points. Yet is this really something for the president to give or not give according to how generous he is feeling?

The Bayanihan to Heal as One Law or Republic Act 11469 is actually clear. Section 4 (c) of explicitly states that the government shall “Provide an emergency subsidy to around eighteen (18) million low income households: Provided, That the subsidy shall amount to a minimum of Five thousand pesos (P5,000.00) to a maximum of Eight thousand pesos (P8,000.00) a month for two (2) months.”

Making the people wait

At the onset of the Bayanihan law, the government promised Php250 billion for social amelioration and health response. It acknowledged the huge task of strengthening the country’s health system to contain the coronavirus and to save lives. It also recognized that the lockdown would result in widespread displacement of jobs and disruption of livelihoods, badly hitting the majority of the country’s low-income households.

Two months later, there is still no consensus among scientists and medical professionals on whether or not the pandemic curve is flattening. The number of confirmed cases continues to rise, now exceeding 12,700, and also deaths at over 830 already. Our health workers and frontliners are holding the line as best as they can. But they are also the first to take the brunt amid a private sector-dominated health system that is itself ailing from a gross lack of equipment, facilities, infrastructure and manpower to  deal with the pandemic.

The government owes the health sector a grand boost, in the same way that it owes the people in the GCQ areas the second tranche of SAP.

To what end

Is the administration’s dilly-dallying part of a script where, to be able to give help to now 23 million SAP beneficiaries, the government will now be forced to sell public assets to fund social amelioration? Who is buying – China?

Time and again, Malacañang has said that it doesn’t have enough funds, and that it’s only thanks to the president’s prudence that the government has found money to spend. Still, resources are limited so the people have to wait. Or even sacrifice – social welfare secretary Rolando Bautista even once said that not receiving the second tranche is perhaps actually in the spirit of Bayanihan, in freeing up resources for others.

Yet there are funds that can be tapped without the government selling off its assets. IBON estimates a universe of Php3 trillion worth of funds that can be explored and tapped. This includes: realigning Build, Build, Build and confidential and intelligence funds; realigning debt service payments by pushing for a debt moratorium, restructuring or even cancellation; and raising new revenues from issuing COVID-19 solidarity bonds and higher income taxes and wealth taxes on the super-rich.

This would indeed mean a big shift for the Duterte administration whose economic managers already have their minds set on a recovery program that pushes instead of thwarts those business-biased measures, for example, big-ticket infrastructure, tied debts, lower corporate income taxes, and tax incentives for investors. But there should be no second thoughts either about doing everything necessary to help the people survive the crisis.

Some Metro Manila local government units (LGUs) did not make people trapped in the lockdown wait for too long. They defied the apparent limitations of the bureaucracy by tapping internal funds to distribute assistance to their constituents early in the ECQ. They combined technology and people’s volunteerism to deliver help as expediently as they could.

The people have been at the center of these LGUs’ emergency relief operations. This does not seem to be the case with the Duterte administration or even its predecessors. Because, if they were, why is our health system still at a loss with COVID-19? Why can’t the government drop everything to make sure that all vulnerable households get the first and second tranche of social amelioration immediately?

Why are more hapless citizens arrested than are tested? Also, why are relief volunteers, community leaders, mobile kitchens, and even journalists – who are merely trying to fill in gaps in emergency assistance – being harassed, arrested, or even killed by law enforcers?

The huge health and economic crisis that the country is facing now can only be hurdled, humanely and effectively, if the people were heeded and not hindered from actively participating. #

= = = = =

Xandra heads IBON’s Media and Communications Department. She loves to write songs, listen to her panganay’s music and play chess with her bunso on the side.

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

Financial strength, development weakness

By Sonny Africa

The Inter-Agency Task Force on the Management of Emerging Infectious Diseases (IATF), presided by Pres. Rodrigo Duterte, addressed the country on Tuesday. Finance Secretary Carlos Dominguez III was a moment of lucidity especially compared to his principal’s rambling incoherence. Unfortunately, being lucid doesn’t necessarily mean being correct.

Resilient and the best?

Sec. Dominguez opened by rejoicing about the Philippines being ranked number six out of 66 countries in the world for “economic resiliency” and supposedly “the best in Southeast Asia for financial strength”. The compulsion to welcome any sort of accolade is understandable especially coming from The Economist, a well-regarded business newspaper. We’re so starved of good news that ranking highly on any international scale – like in boxing or beauty pageants – always gives an endorphin rush.

But then again, it’s probably useful to be a little more circumspect about the metrics used to say that the country is supposedly doing well. The four measures of ‘financial strength’ in the magazine’s report are of course fine as they are and include the most important usual measures of financial strength – public debt, foreign debt, cost of borrowing, and foreign exchange reserves. Hence Sec. Dominguez’s elation over our so-called financial strength and the country’s credit ratings.

But we should presumably see things from a real development perspective and beyond the shallow endorphin rush. In which case, the main problem is the confusion between means and ends. This is actually a recurring problem with our neoliberal economic managers in particular, and free market-biased economists, policy folks, and business minds in general.

The four metrics and credit ratings aren’t valuable in themselves but for how useful they are for the presumably real development ends of policymaking – enough jobs and livelihoods so that there are no poor Filipinos, and an equitable, stable, self-reliant and sustainable economy. It’s always been odd that whenever policymakers see a conflict between financial strength and social development, the latter always loses.

Which is also to highlight that while those measures are of course better favorable than unfavorable, supposedly favorable performance can actually be undesirable depending on the price paid to get them.

Financially strong for whom?

So, some thoughts on Sec. Dominguez’s self-congratulatory echoing of an assessment that the Philippines “continues to enjoy the confidence of the international community” – meaning all the foreign creditors and investors whose main interest in the country is that we keep borrowing and stay profitable for them, to put it bluntly.

First, “financial strength” is a misnomer if this is in any way taken to refer to the level of development of the Philippine economy or even of the government. The only underlying so-called strength these metrics refer to is the country’s perceived ability to pay its foreign debt obligations. There’s no direct correlation between such so-called financial strength and a country’s level of development – a quick scan of the ranking with countries like Botswana, the Philippines, Nigeria, Indonesia and India ranking high should make that easily clear.

Finance secretaries, central bankers, and other economic managers around the world are regularly feted as the World’s Best this or that by global finance magazines and organizations. Their countries, economies and governments correspondingly benefit from the halo effect and are projected as developing – even if, as is often the case, they’re not.

Second, it matters how “good performance” along these indicators was achieved. Put another way, what may be good for financial strength may be bad for development. As is often the case.

For instance, the Philippines has had comfortable foreign exchange reserves since the 1990s mainly because of remittances from the unprecedented export of cheap labor and overseas Filipino workers. We’re so used to it, but it’s worth keeping in mind that this enormous reliance on overseas work is at huge social costs for families and exposes the inability of the domestic economy to create enough jobs for its population. It also actually distorts the economy with a huge imbalance between domestic production and incomes and final household demand. Mammoth overseas remittances – not brilliant economic managers – are arguably the biggest factor in the country avoiding foreign debt payments crisis such as in the 1980s.

Public debt, including public foreign debt, has moderated and credit ratings also improved. However, this was done on the back of an increasingly regressive tax system that relies more and more on consumption taxes rather than on direct taxes. The regressive trajectory of the country’s tax system started in earnest with the introduction of value-added tax (VAT) in the 1980s then worsened with VAT expansion in the 2000s and 2010s, and with cuts in personal income, estate and donor taxes particularly through the regressive Tax Reform for Acceleration and Inclusion (TRAIN) reforms since 2018.

All this increases so-called financial strength by unduly burdening poor and low-income groups who make up the majority of the population, while making it easier for the narrow sliver of the richest in the country. Sec. Dominguez is unrepentant and noticeably still pushing for the Corporate Income Tax and Incentives Rationalization Act (CITIRA) bill which, among others, lowers corporate income taxes – most of all to gain further favor from the international community.

Lastly, what is prevented by insisting on these measures as if they were ends in themselves also matters. The onset of COVID-19 and the national and global measures to control the pandemic have a tremendous impact on the economy. The Philippines and the world are in recession, and some are saying that the world is in its worst economic crisis since the Great Depression almost a hundred years ago.

Our current pandemic panic will eventually settle in the coming months, but the economy will still be stumbling. Worse, poverty and unemployment will be soaring. In such circumstances, it doesn’t make sense to be so insistent on narrow indicators of so-called financial strength to the point that urgent development measures are prevented.

Today, it’s incredibly important to put more money in people’s pockets both to help them maintain their welfare as well as to boost effective demand. It’s also important to support rural producers and small enterprises to ensure that the goods and services needed are still available. It’s also important to rapidly expand the public health system to deal with the pandemic and to meet the country’s vast COVID-19 and non-COVID-19 health problems.

Attending to all this means the government having to spend more as well as building up its capacity to intervene. Giving unwarranted emphasis on measures of ‘financial strength’ unfortunately sets artificial limits to the government meeting its human rights obligations to intervene on a massive scale.

To force an analogy, it’s like being in the hinterlands of the Philippines with an emergency case in the back of the car and the nearest hospital hours away. In this kind of situation, you don’t obsess about fuel-efficient driving or not red-lining the tachometer or limiting the car’s mileage – you step on the gas. Glorifying ‘financial strength’ is stepping on the brakes. #

= = = = = =

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

The fate of BBB in the time of COVID-19

by Jose Lorenzo Lim

The COVID-19 lockdown and further containment measures are drastically slowing down economic activity in the Philippines and elsewhere. The government sees the Build, Build, Build (BBB) program as jumpstarting the Philippine economy in the time of the pandemic. But with its current neoliberal framework, will BBB be enough?

Even before COVID-19, multilateral funding institutions like the World Bank and Asian Development Bank (ADB) have been pushing for an infrastructure offensive especially in developing countries. Moreover, as early as the late 1980s the World Bank proposed using the private sector to fund and undertake these projects in lieu of the Keynesian idea of giving the State a bigger role in the economy especially in terms of large public spending.

The Golden Age of Infrastructure

Infrastructure is a tool for reducing poverty and driving economic growth. But the current framework of infrastructure development in the Philippines and other developing countries is profit-driven and hence overly focused on economic infrastructure. Contrarily, development in so-called advanced and high-income countries such as the US, Singapore, South Korea, and Taiwan also included substantial public investment in social infrastructure such as education and health.

The Duterte government’s focus on a narrow set of economic infrastructure is aimed at attracting foreign capital. This is driven by the belief that having better infrastructure attracts more foreign investments, which enables countries to attain economic development. The World Bank claimed that, in Asia, around US$8.6 trillion worth of infrastructure investments are required in 2010-2020 to achieve economic development. It cited a huge infrastructure investment gap in Asia, Sub-Saharan Africa, and Latin America, which are mostly composed of developing countries.

One of the promises of the Duterte government is to usher in a “Golden Age of Infrastructure” through its grandiose BBB program. The project includes high-impact projects under the Department of Transportation (DOTr), Department of Public Works and Highways (DPWH), and the Bases Conversion and Development Authority (BCDA) to build more railways, urban mass transport, airports and seaports, more bridges and roads, and new and better cities.

In selecting the original 75 flagship projects, the government applied the following criteria, among others: 1) consistency with regional and national development plans; 2) implementability (i.e. must be accomplished within the Duterte administration); 3) high economic impact with 10% minimum social discount rate; and 4) “big-ticket” (above Php500 million or US$10 million).

Issues, from 75 to 100

Despite the supposedly meticulous criteria for identifying the most important projects to undertake, many issues surround the infrastructure flagship projects (IFPs). Its neoliberal fixation with pleasing investors and big business puts to question whether or not it will benefit the people and lead to genuine development.

First, the identification of IFPs was problematic from the start. In November of 2019, the government announced that it revised the list of IFPs from 75 to 100. The National Economic and Development Authority (NEDA) Board chaired by the President approves each project before it is even considered as a flagship infrastructure project. However, the BCDA said that the Duterte administration put the wrong projects on the list. Moreover, some projects turned out to be unfeasible, which is strange because this was presumably a basic criterion for selecting the 75 flagship projects in the first place.

The Duterte administration had been boasting of the 75 IFPs since assuming office in June 2016. Former Budget and Management Secretary Benjamin Diokno was even optimistic that the Duterte administration would complete 74 of the 75 projects before its term ends in 2022. Now, the BCDA expects only 38 of the 100 IFPs to be completed by the time Duterte steps down.

The Metro Manila Bus Rapid Transit (BRT) Line 1 and Line 2 and Cebu BRT project, for example, were taken out of the 75 IFPs due to narrow roads and right-of-way issues. The DOTr even wrote a letter to the NEDA Investment Coordination Committee (ICC) to cancel the projects. Yet the projects were eventually re-included after a technical inspection by the World Bank and NEDA on Quezon Avenue (one of the main stations of Metro Manila BRT) and in Cebu.

The Metro Manila and Cebu BRT projects are targeted to be funded by France and the World Bank, but they have faced problems with financing. It also did not augur well that Pres. Duterte suspended all talks on loans and grants from the 18 countries that supported a United Nations Human Rights Council (UNHRC) resolution to probe his controversial drug war, which included France. Ultimately, the fate of the Metro Manila BRT is in limbo since it is no longer among the 100 IFPs. The Cebu BRT meanwhile is still included and is targeted for completion by 2021.

Second, the priorities of the infrastructure projects are questionable. The majority of the projects are for transport when the country badly needs social infrastructure. For instance, there is a need especially for more hospitals and health facilities as bared by the country’s glaring incapacity in the face of the COVID-19 pandemic. The country also badly needs infrastructure for agriculture production, and to support local industries.

The 100 IFPs are now 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 overwhelming majority are for transport and mobility. In the absence of a basic strategy for developing agriculture and domestic industry, these will mainly end up supporting the overly import-oriented and export-oriented enterprises constituting our economic backwardness.

Third, BBB will be hugely funded by loans from other countries and financial institutions and will further bloat Philippine debt. The 100 IFPs are worth around Php4.3 trillion and official development assistance (ODA) is the biggest funding source of projects. There will be Php2.4 trillion funded with ODA, followed by Php1.2 trillion through public-private-partnership (PPP) funding, and Php172 billion funded solely from the General Appropriations Act (GAA).

Leading the ODA funders is Japan with a total of around Php1.3 trillion, China with Php700 billion, and ADB with Php273 billion. Data from NEDA as of June 2019 show that the Philippines has US$8.1 billion worth of ODA loans from Japan, US$2.8 billion from ADB, and US$273 million from China.

Fourth, contrary to the goal of infrastructure pushing development, most of the 100 IFPs are still centered in Luzon, where poverty incidence is relatively lower compared to other parts of the country.

Of 26 projects worth Php1.6 trillion in Luzon, the biggest concentration of 22 projects worth Php916.5 billion will be built in the National Capital Region. Meanwhile, there are 17 projects worth Php474.6 billion in Visayas, and 25 projects worth Php474.4 billion in Mindanao. Additionally, there are projects worth Php913.5 billion that will be implemented nationwide, the bulk of which is taken up by the New Manila International Airport located in Bulacan.

Fifth, vested interests appear to be benefiting from the BBB infrastructure offensive. Bong Go’s family has been accused of being the largest contractor in BBB projects. Go’s father, Desiderio Go, owns the Davao-based construction company CLTG builders. Through CLTG builders, the Go family secured 20 contracts in 2017 for road networks in Davao. These were worth around Php3 billion in solo projects and joint ventures. In 2018, CLTG Builders also bagged Php116 million worth of projects in Davao.

Aside from Go’s family, other businessmen may also be gaining from the BBB program. For instance, DPWH secretary Mark Villar’s father, Manuel Villar, through Prime Asset Ventures Inc. (PAVI) is eyeing two unsolicited proposals worth Php213.3 billion. These include the LRT 6 Cavite Line A project worth Php56.3 billion and the Cavite LRT Line 6c and Sucat Line 6b projects worth Php157 billion.

The COVID-19 pandemic does call for a “new normal”. This should include a change in the way the government spurs economic growth where the current infrastructure push is becoming irrelevant.

Jumpstarting the economy

The BBB program is seen by the government as essential in jumpstarting the economy. While economic managers have already insisted that they will hardly touch funding for infrastructure projects to augment the budget for COVID-19 response, they took a step back and realigned some of the infrastructure budget.

The DOTr in April realigned funding for infrastructure projects worth Php16.9 billion that is from 35 projects. The MRT-3 rehabilitation and the PNR Clark Phase 1 are some of the projects that had their budget realigned for the government’s COVID-19 response, which are transportation related.

Data from NEDA show that there are 34 projects from the 100 IFPs that are already being implemented. Of the 34 projects, 26 are transport and mobility related, 2 are ICT projects, 3 are urban development, and 3 are water resources.

Meanwhile, there are 43 pending projects in the 100 IFPs to be implemented within 6-8 months. Majority is still composed of transport and mobility projects with over 30 projects, 4 water resource projects, 4 ICT projects, and 5 urban development and redevelopment projects.

These roads and airports under the 100 IFPs would have been useful to aid economic activity in the long run, particularly tourism and trade. But will these be useful in the “new normal”? For instance, the Department of Tourism has already acknowledged that the number of foreign visitors will drastically fall until at least next year. The United Nations World Tourism Organization estimates that foreign travel will fall by 20-30% and tourism receipts by one-third in 2020. Meaning, the tourism industry in the time of COVID-19 is practically suspended indefinitely.

The 2020 Budget of Expenditures and Sources of Financing shows that the government has allotted Php989.2 billion for infrastructure outlays. Of this, the highest share or Php349.9 billion is allotted for road networks. Government should review the budget for road network projects which could be additionally used for the country’s COVID-19 response. Another source could be the outlay for airport systems worth Php2.4 billion.

The composition of BBB projects being mostly road networks and airports is attributed to its business and trade inclined framework. Basically, the aim of the government’s infrastructure program is to push for high-impact projects to stimulate the economy and arrest its further slowdown and possible decline. But while the Philippines does need these types of infrastructure, the factor of the COVID-19 pandemic highlights a long-overdue change in this framework.

The future of infrastructure

Looking at IBON’s economic blueprint dubbed People Economics, developing the countryside, building Filipino industries and protecting the environment could be used as the new framework for the government’s infrastructure development.

One way to reframe the government’s infrastructure program in the time of COVID-19 is to focus on social infrastructure such as government hospitals and health centers in the provinces, sanitation facilities on barangay level, and housing projects for the poor. This should be coupled with a plan for countryside development and building rural and national industries. This puts substance in a ‘Balik-Probinsya’ program if it genuinely aims inclusive development.

With a plan of building Filipino industries and making them competitive, the Philippines won’t have to be dependent on importing a wide range of commodities. The countryside could also benefit from a much-needed infrastructure push with irrigation, post-harvest facilities, farm-to-market roads, and ICT projects such as marketing, prices and production support. This does not end with a basic social services and infrastructure push but ensuring that people have decent jobs and living wages to support domestic consumption and demand. Decongesting Metro Manila then won’t be a problem.

The Philippines has to improve the current state of infrastructure especially in the context of COVID-19: one that supports a strong public health system and the stable production of the nation’s needs in order to withstand and battle a pandemic. The problem with the BBB program is how this massive infrastructure program is not only disconnected from correcting but even reinforces the fundamental problem. BBB ignores the need for reliable, strong and public-controlled social services and public utilities infrastructure, for agricultural development and national industrialization, and healthy environment.

What infrastructure to build should figure in a larger strategic plan that supports sustainable consumption and production and social well-being. The current infrastructure framework needs to be transformed. #

= = = = = =

The author is a researcher at IBON Foundation. His research topics include Build, Build, Build, the oil industry, and social services. Prior to IBON, he served as Editor-in-Chief of the UPLB Perspective for the academic year 2016-2017. When not in the office, Jose Lorenzo enjoys writing with his fountain pens and trying out new ink.

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

Oil tax hike insensitive and will make poor Filipinos suffer more

by IBON Media & Communications

Research group IBON said that raising taxes on imported oil products will push prices up and burden many poor households already struggling with jobs and income losses amid the COVID-19 pandemic.

The group said that government should instead look to better sources of response funds such as taxing the super-rich.

The Duterte administration recently issued an executive order increasing taxes on imported crude oil and refined petroleum products to 10 percent. This is supposed to fund government’s COVID-19 response.

IBON said this oil tax increase will ultimately be passed onto consumers, especially the poor, through higher prices. Some 18.9 million working people and their families are already dealing with mass unemployment, income losses and delayed and insufficient social amelioration.

The oil tax hike comes on top of additional oil excise taxes already from the government’s regressive Tax Reform for Acceleration and Inclusion (TRAIN) program.

The TRAIN law hiked oil excise taxes by Php6 per liter of diesel, Php5.65 per liter of gasoline, Php5 per liter of kerosene, and Php3 per kilogram of liquefied petroleum gas (LPG).

The additional oil tax will make socially-sensitive products more expensive as well as increase the general price level.

Instead of pursuing this grossly insensitive revenue measure, IBON said that government should instead impose a wealth tax on the country’s super-rich.

The Philippines’ 50 richest have Php4.1 trillion in combined wealth, which is more than what the poorest 71 million Filipinos own put together, the group said.

A tax of 1% on wealth above Php1 billion, another 2% above Php2 billion, and another 3% above Php3 billion will raise Php236.7 billion from these 50 richest individuals alone.

The wealthy can well afford to pay more taxes and this will not have any effect at all on their already extremely high standards of living, said IBON.

Tax revenues from this can then be prioritized towards fighting the COVID-19 crisis and providing sufficient social amelioration for poor and vulnerable Filipinos, the group said. #

= = = =

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

Why can’t food self-sufficiency be our new normal?

by Rosario Guzman

From the outset of the Duterte government’s military lockdown as its response to the spread of the coronavirus, it has directed the continuous flow of food commodities, along with medicines and other essentials. Food is inarguably essential to people’s survival during a pandemic and in its socioeconomic aftermath.

Government’s response however has fallen short in ensuring food production and supply. In fact, the military and authorities have controlled even the movements of the direct producers, both in tending their farms and selling their produce to the markets. Even activist volunteers who endeavored to bridge the farmers’ produce to urban consumers and to deliver relief goods to the farming families were detained and accused of violating quarantine rules and inciting to sedition.

The thing is, government has erased “food self-sufficiency” from its agricultural planning principles, now totally unheard of in the Philippine Development Plan 2017-2022. It has instead focused on “economic opportunities” anchored on “market orientation”. The country’s lack of food self-sufficiency has made government’s coping with crises such as COVID-19 utterly chaotic.  It is the economy’s sinkhole that will make us fall deeper into a COVID-aggravated economic crisis.

Yet, eight weeks into the military lockdown, while it continues to wrestle with its insufficient health response, the Duterte government is talking of a “new normal” in agriculture. A closer look at the plan, however, reveals it to be a bunch of old habits that have hampered Philippine agriculture from achieving even the most basic goal of food security, much more self-sufficiency.

Pre-COVID crisis

Only eight weeks ago, the country’s “normal” agriculture was having its worst crisis in decades. The sector lost 1.4 million jobs in 2017-2019, the highest number in a three-year period in the last two decades. Its average annual growth rate of 2.1% in the same period is also lower than the 3.5% average in the last 70 years. The sector has also reached its smallest share in history at just 7.8% of the country’s gross domestic product.

In the first quarter of 2020, agriculture posted a 1.2% decline in output, finally collapsing after a momentary recovery from a decline in 2016 and a three-year slowdown thereafter.

Neoliberal policies that government has recklessly implemented are the culprit in agriculture’s near demise. Starting off with the evasion of free land distribution to tillers and rampant land conversions to favor finance capital, government has oriented agriculture towards commercialization, high value cash crops, inorganic chemicals dependency, paid-for irrigation, imported machinery, and trade liberalization. Agriculture is not a government priority, which is putting it mildly when the figures clearly manifest state neglect. The 3.5% average share of agriculture and agrarian reform in the 2017-2020 budgets is the lowest in two decades. In 2018, the Duterte administration delivered the coup de grace with the liberalization of rice imports.

Landowners and merchants have exploited this “normal” – that is the classic story why our food frontliners are the most destitute and hungry in Philippine society. And like adding insult to injury, the government points to farmers’ lack of capacity and technology (and interest to carry on) as the reason why food self-sufficiency is not feasible.

Government gross neglect

Then, COVID-19 happened. Government agencies could not even provide a full picture of our food buffer stocks. The Philippine Statistics Authority has stopped updating the rice inventory, for instance. This showed that, as of March 1, our rice stocks were enough for only 65 days, quite below the 90-day buffer. Vietnam’s announcement that it would implement a rice export ban added to Filipinos’ anxieties – Vietnam accounts for about 38% of Philippine rice imports.

A day before the declaration of a lockdown, euphemized as ‘enhanced community quarantine’ (ECQ), the Department of Agriculture (DA) made assurances that there was enough food for everyone in Metro Manila. The stocks of rice, vegetables and root crops, poultry and meat products, fish, and eggs were sufficient. It took time before some local government units started distributing relief foods, and even then mostly unhealthy canned sardines.

Farming has been disrupted. IBON estimates about 2.5 million farmers, farm workers and fisherfolk economically dislocated by the ECQ. The ECQ guidelines specifically allow establishments engaged in food production and trade but are painfully quiet about the farmers. Farmers’ organizations have said it succinctly – there is no work from home for them. They are subsistence farmers who will go hungry if they are not allowed to farm.

The Duterte government’s COVID response for agriculture under the Bayanihan to Heal as One Act is to provide Php5,000 cash assistance each to only 591,246 beneficiaries under the Financial Subsidy to Rice Farmers (FSRF). But as of 28 April 2020, seven weeks into the lockdown, the Duterte government has served only 266,284 rice farmers.

Farming families may have been given cash assistance through the social amelioration program of the Department of Social Welfare and Development (DSWD), which even then has only served 57% of its target 18 million beneficiaries as of 1 May 2020.

Granting that the rice farmers have indeed received subsidies, IBON estimates these to be equivalent to only Php80-119 per day over 49 days of lockdown, or less than one-fourth of the already low official poverty line of Php353 per day for a family of five.

Government’s meager and much-delayed response to the pandemic is pushing the poor and vulnerable farmers and fisherfolk deeper into poverty and hunger, which gets more and more morally unacceptable at this point in our crisis.

Photo by Lito Ocampo

Neoliberal inertia

The DA is among the first agencies to talk of a new normal. We should rethink and restructure our policies and practices, said DA secretary William Dar. But the DA’s emphasis on the continuation of neoliberalism especially under a global economy that is about to plunge into a grave depression cannot be missed. The Duterte government cannot fake a new normal narrative when its transition plan remains neoliberal.

The budget priority for the DA to transition to its “new normal” remains for cash assistance instead of production support. This is under the Rice Farmers Financial Assistance (RFFA), which is in line with the implementation of the Duterte administration’s rice liberalization law. The RFFA targets to provide Php5,000 to rice farmers who are tilling 0.5-2 hectares. The FSRF is in addition to RFFA and is packaged as the COVID-19 response, which targets rice farmers who are tilling one hectare and below. The total target beneficiaries of both packages are 1.2 million rice farmers nationwide, but there are 2.5 million rice farmers in the country who are definitely dislocated by rice liberalization.

The program priority is a food resiliency action plan that is aimed at an unhampered flow of food and agri-fishery products. It is anchored on the aforementioned cash assistance as consumption stimulus and market links such as the Kadiwa program, market satellites and market on wheels. In short, it is anchored on trade, again not so much on strengthening farmers’ production. The plan is also about popularizing urban and backyard gardening, which is overly focusing on individual consumers to go on survival mode instead of improving the production and conditions of farming communities in the real spirit of bayanihan.

The DA has proposed to implement nationwide the “Ahon Lahat, Pagkaing Sapat (ALPAS) Laban sa Covid-19” or what it dubs as Plant, Plant, Plant program to “increase the country’s food adequacy level”, with an approved Php31-billion supplemental budget. But this will be done by intensifying the use of quality seeds, inputs, modern technologies – which have been proven from experience to only add to the farmers’ debt burdens. The DA unfortunately has perennially acted as a marketing agent and endorsed the sale of seeds, inputs and farm machinery of big agribusiness to Filipino farmers, while it has shunned the promotion of agroecological practices.

The Duterte government still emphasizes that in order for agri-fishery to grow and cope with emergencies such as pandemics, the sector needs to attract more investments and resources and partner with the private sector. And there we are back on the neoliberal road.

Photo by RB Villanueva

Build the momentum

Surely, food self-sufficiency can be our new normal. But first in the face of a pandemic, farmers need fast and sufficient relief assistance, both for their daily needs and health services and as production subsidy. In the same manner that urban consumers should be relieved of paying their bills during COVID-19, farmers should have been long ago condoned of their mounting debts from unpayable land amortizations, loans from unscrupulous traders, and even from availing of government lending programs. Then, farmers and fisherfolk should be allowed to go to their farms and on fishing trips and deliver their produce to the markets.

But in the long-term, food self-sufficiency is about the assertion of an entire range of human rights. The state should recognize the right to food, the right to produce food, the right to till the land, and to have control of the land that farmers have been tilling for generations. Farmers have the right to choose their own production system, so as not to be dictated by the whims of the market and made vulnerable to market vagaries. We can envision an agriculture that is moving away from the profit-oriented concept of value chain that disregards the small producers and their environment, and move towards sustainable farming practices.

In the end, we can build the momentum for food self-sufficiency only from the farmers’ struggle and movement for genuine agrarian reform. And that should be our new normal. #

= = = =

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

PH economy was already slowing – COVID-19 just made it worse

by IBON Media & Communications

The Philippine economy was already weak coming into the COVID-19 crisis, research group IBON said. Growth will remain slow if the government does not acknowledge pre-existing weaknesses that the pandemic merely intensified.

The group said that recognizing the problem is the first step to the bold measures needed for long-term growth and development.

The Philippine Statistics Authority (PSA) reported -0.2% growth in gross domestic product (GDP) in the first quarter of 2020, marking a significant drop from the 5.7% growth in the same period last year.

The National Economics and Development Authority (NEDA) attributed this to the Taal volcano eruption in January, decrease in trade and tourism due to COVID-19 in February, and the eventual lockdown in March.

IBON said however that the economy was already slowing for three consecutive years and headed for its fourth such year even before COVID-19 came into the picture.

Official figures show annual GDP growth falling from 7.1% in 2016 to 6.9% in 2017, 6.3% in 2018 and 6.0% in 2019.

Year-on-year first quarter growth also reflects this trend, falling from 6.9% in the first quarter of 2016 to 6.4% in 2017.

This slightly increased to 6.5% in 2018 but fell to 5.7% in 2019. In 2020, first quarter growth dove to -0.2%, which is the first GDP contraction since the fourth quarter of 1998 (-3.4%).

Important accustomed drivers of growth were falling even before the eruption of Taal Volcano in January and the COVID-19 crisis since February and especially since the lockdown starting mid-March.

Growth in overseas remittances slowed from 5.3% in 2017 to 3.9% in 2019, and foreign investment flows from US$10.3 billion to US$7.6 billion over the same period.

The manufacturing sector slowed from 8% in 2017 to 3.2% in 2019, and agriculture from 4.2% to 1.2% over the same time.

Tourism had also been lackluster, said the group. Growth in gross value added of tourism industries remained virtually stagnant from 10.1% from in 2016 to 10.3% in 2017 and 10.6% in 2018.

In terms of expenditure, gross capital formation considerably slowed from 10.9% growth in 2017 to 2.5% in 2019 and exports from 17.4% to just 2.4 percent.

Household consumption spending remained steady at 6% in 2017 and 5.9% in 2019.

Hence, overall economic growth has just been artificially driven by government consumption spending, which increased from 6.5% in 2017 to 9.6% in 2019 and by public infrastructure projects rather than an underlying dynamism from vibrant domestic agriculture and industry.

These basic economic weaknesses result in record joblessness and the proliferation of informal and irregular work.

Correcting the official methodology which underreports joblessness, IBON estimated that the number of unemployed reached a record 4.7 million in 2019.

The group also estimated that 27.2 million or 64% of employment in the same year was really poor quality work comprised of non-regular and agency-hired, government contractuals, and informal earners.

Widespread poverty is another indicator of a sluggish economy, said the group.

According to PSA data, some 12.4 million or over half of 22 million families nationwide were trying to survive on less than P132 per person per day.

IBON pointed out that the last three years of slowing growth has been despite the Duterte administration’s expanding Build, Build, Build infrastructure program.

Despite annual appropriations for infrastructure increasing to 4.7% of GDP in 2019, economic growth still fell for a third consecutive year.

The group explained that infrastructure spending is a short-term stimulus at best and that domestic agriculture and Filipino industry have to be strengthened for growth to be higher and more sustained.

The agriculture sector has been weakening due to long-time government neglect. It grew from -0.1% in 2016 to 4.2% in 2017, but steadily declined thereafter to 1.1% in 2018 and 1.2% in 2019.

First quarter growth in agriculture slid to -0.4% in 2020 from 0.5% the previous year. Continued agricultural liberalization, such as of the rice subsector, will only weaken agriculture further.

Growth in manufacturing, which has long been foreign-dominated and export-oriented, has also been dwindling. The sector registered 6.8% growth in 2016, which increased to 8.0% in 2017. But this dropped to 5.1% in 2018 and 3.2% in 2019. First quarter growth in manufacturing went down to -3.6% in 2020 from 5.2% in 2019.

IBON said that the government will be making this same mistake in overly relying on infrastructure spending as its response to the unprecedented COVID-19 crisis.

The group stressed that the government needs to implement bolder measures that prioritize the needs of Filipinos, especially the most vulnerable, and that genuinely develop the national economy.

These include: immediate emergency relief, and especially with unemployment soaring, extended income support to poorest households; expanding the public health system and providing universal social protection; and repurposing the economy for domestic demand-driven employment and growth by strengthening agriculture and building Filipino industry.

The resources needed for these can be raised by imposing a wealth tax, higher personal income taxes for the richest families, and higher corporate income tax for the largest corporations.

IBON said that if the government insists on its old neoliberal policies and does not change course, the economy will be even weaker after the COVID-19 crisis. #

= = = = =

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