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Bayanihan 2: Too small, hinders health and recovery

by Sonny Africa

The beggarly Bayanihan 2 bill preferred by the economic managers and imposed on Congress is much too small for the magnitude of the crisis facing the country. It makes health and recovery years away and farther than ever.

The Bayanihan 2 bill passed by the bicameral conference committee and ratified by the Senate is worth just Php165.5 billion. Of this, Php25.5 billion is even just a “standby fund”, only available once “additional funds are generated”.

Every centavo spent of Bayanihan 2 is welcome. There’s no doubt about that because the extraordinary scale of the health and economic crisis demands extraordinary spending. The problem is that the Duterte administration is spending far too little for the problem at hand.

Looked at in aggregate, Bayanihan 2 pales compared to the as much as Php1.9 trillion lost in gross domestic product (GDP) in 2020 because of the pandemic. This includes not just what is lost from the economy contracting but from what it should have been if it kept on growing.

But the shortfall is even clearer looking at the details. Bayanihan 2 allots Php30.5 billion for health-related responses spanning tracing, treatment, support for health workers, health facilities and pandemic research.

Bayanihan to Recover as One Act

Yet the health infrastructure spending doesn’t even make up for huge budget cuts here since the start of the Duterte administration. There’s Php10 billion budget for testing but this is in the standby fund and made contingent on finding new funds, which the economic managers are so sparing in doing.

The provision for Php5,000-8,000 in emergency cash subsidies is necessary but only Php13 billion is allotted for this. This is paltry compared to how the lockdown-induced recession has already displaced anywhere from 20.4 million to as much as 27 million of the labor force (43-57% of the labor force), according to IBON’s estimates.

Bayanihan 2 will help just 1.6-2.6 million beneficiaries at most and, even then, not by much. At Php5,000-8,000 per household, it will only give the equivalent of a token Php37-60 per person per day for a month. This paucity is little changed even if the Php6 billion budget for social welfare department programs, Php820 million for overseas Filipinos, and Php180 million for national athletes and coaches is added.

The budget for the transport programs includes Php5.6 billion for displaced public utility vehicle (PUV) drivers especially jeepney drivers. But this isn’t even enough to compensate them for the now five months that the government has kept them out of work and driven into poverty.

Much more substantial cash assistance is needed to improve household welfare in these difficult times. This also has macroeconomic benefit of boosting aggregate demand and stimulating a virtuous cycle of spending and production. Economic activity is impossible and production support will be futile if too many are jobless and have nothing to spend.

There’s Php77.1 billion for production and enterprise support. This includes Php24 billion for agriculture which gives the sector an emphasis in Bayanihan 2 that it is due. There is also Php39.5 billion for government financial institutions (GFIs) to support lending, Php9.5 billion for transport programs, and Php4.1 billion for tourism programs.

The total amount is however only going to help a few of the 997,900 micro, small and medium enterprises in the country employing 5.7 million workers – and probably none of the hundreds of thousands more informal and unregistered enterprises. If available, the additional Php15.5 billion under the standby fund for low interest Land Bank of the Philippines (LBP) and Development Bank of the Philippines (DBP) loans will help but still not be enough.

The Php8.9 billion for education is critical to keep the youth educated and eventually productive. But the budget is a mere fraction of the tens of billions of pesos needed to ensure that schools are safe and have internet connectivity, and to help parents keep their children in school. There are some 70,000 elementary and secondary schools and around 2,000 higher education institutions in the country.

The remaining Php3.5 billion for local government units (LGUs) will also certainly help the recipients but, measured against the scale of the intervention needed across the breadth of the economy, are almost tokenism.

The economy will rebound somehow but this will be slight and Bayanihan 2 is too small to hasten real recovery. The government is the only entity in a position to implement the huge stimulus program the economy needs and there needs to be more boldness to spend and, especially, to raise money for this.

The Duterte administration can raise the money needed if it really wanted to. In the short-term it can realign from infrastructure projects and at least some of the debt servicing to development agencies and friendly official creditors.

Big-ticket infrastructure projects that are no longer economically or financially viable, or are too import- or capital- intensive, can be put off or shelved. Debt service to development banks and the like can be restructured on the argument that there are more pressing uses for scarce government funds.

The government can actually wield its creditworthiness to borrow if needed on favorable terms. The best way to pay for any additional debt is not from more consumption taxes on the people but from higher income and wealth taxes on the country’s super-rich. The huge accumulated wealth concentrated in the few is more than enough for all the stimulus the country needs and can be the foundation of a credible medium-term fiscal plan.

A much more progressive tax system with higher direct taxes is the most rational and sustainable source of government revenues. This most of all means a wealth tax on the country’s super-rich (raising Php240 billion annually from just the 50 richest Filipinos), higher personal income taxes on the richest 2.5% of families (Php130 billion), and a two-tiered corporate income tax scheme (Php70 billion).

The economic managers’ obsession with creditworthiness is the binding constraint to fighting COVID-19 and the economic misery in its wake. This self-imposed fiscal straitjacket is misguided. Spending less, not spending more, is keeping the country off the path to health and recovery.

The country is grossly short-changed by Bayanihan 2. It’s all the people are getting not because it’s all the government can afford but rather because it’s all the Duterte administration wants to give.

Real Duterte Legacy: Three years of slow growth sign of failing gov’t econ policies

by IBON Media

Research group IBON said that the economy is on its third year of slowing growth under the Duterte administration, and the slowest in eight years. This shows that government’s market-oriented policies are failing and its claimed economic gains are myths, said the group.

The Philippine Statistics Authority (PSA) reported 5.9% annual growth in gross domestic product (GDP) for 2019, missing government’s revised target of 6-7% growth for the year. Government attributed this to the delayed 2019 budget and election ban on infrastructure in the first half of 2019 and slowing agriculture due to weather-related factors like El Niño.

IBON countered government’s claim that the budget delay and ban on infrastructure pulled back growth last year, noting that the economy was already slowing prior to this. From 6.9% in 2016, the country’s growth in GDP slowed to 6.7% in 2017 and 6.2% in 2018. The 5.9% in 2019 marks the third year of economic slowdown under the Duterte administration. This is also the slowest growth in eight years or since the 3.7% in 2011, the group said.

IBON said that the economic slowdown is really due to the lack of strong foundation in agriculture and Filipino industry – made worse by government’s faulty market-oriented policies.

Growth in the agriculture sector dropped from 4% in 2017 to 0.9% in 2018, then slightly increased to 1.5% in 2019, the group said. Yet government continues its neglect and low prioritization of agriculture as reflected in the national budget. Agriculture’s share in the 2020 budget is just 3.5% – the lowest since 2004 at 3.3 percent.

Meanwhile, growth in manufacturing drastically declined from 8.4% in 2017 to 4.9% in 2018 and just 3.8% in 2019. The group said this is because domestic consumption and exports have weakened amid a protracted crisis and increasing protectionism in the global economy. Manufacturing is low value-added and overly dependent on foreign capital and technology, and produces for the world market.

IBON said that instead, government has relied on temporary external factors to drive growth, but these are weakening. For instance, overseas remittances are growing at a slower rate, decreasing from 5% in 2016 to 4.3% in 2017 and 3.1% in 2018. This rose to 4.6% in the first ten months of 2019 but is not likely to surpass the 2016 growth rate. Growth in exports are also falling from 19.7% to 13.4% in 2018 and just 3.2% in 2019.

The consumer spending and real estate booms that for a time fueled growth are also losing steam. Household consumption registered 7.1% growth in 2016 but dropped to 5.9% in 2017, 5.6% in 2018 and slightly grew to 5.8% in 2019. Real, estate, renting and business activities decreased from 8.9% growth in 2016 to 7.4% in 2017, 4.8% in 2018, and further fell to 3.7% in 2019.

IBON said that government has been attempting to boost a lackluster economy through more government spending and its infrastructure program. But this was not enough to stimulate growth. For instance, construction drastically fell from 14.9% growth in 2018 to just 7.7% in 2019.

IBON said that the country’s economic situation will worsen as long as government pushes policies that favor big business interests. It should admit its failure and take on real reforms needed to strengthen and develop agriculture and domestic industries and turn around the country’s flagging economy, the group said. #

(Kodao re-posts IBON reports as part of a content-sharing agreement.)

Amid Taal disaster, ‘Duterte Legacy’ disinformation campaign launched

by IBON Media

Research group IBON hit Malacañang’s launching of the ‘Duterte Legacy’ campaign while relief operations are still ongoing for tens of thousands of families displaced by the present eruption of Taal volcano. The campaign is not just rife with disinformation, said the group, but also insensitive politicking for the still distant 2022 elections.

Organized by the Presidential Communications Operations Office (PCOO), the Duterte Legacy Campaign was launched by Malacañang at the Philippine International Convention Center barely a week after Taal volcano erupted. Cabinet officials showcased the Duterte administration’s accomplishments in three “key pillars”: peace and order, infrastructure development, and poverty alleviation.

IBON executive director Sonny Africa criticized the launch for its insensitivity. “The government pleaded lack of relief funds and asked the public for support,” Africa said, “but here comes the PCOO using its bloated propaganda budget for presidential self-promotion conspicuously in anticipation of the 2022 elections.” The PCOO budget which averaged Php1.1 billion a year in 2011-2016 has greatly increased under the Duterte administration to Php1.7 billion for 2020.

Africa said that the PCOO campaign is only the latest disinformation effort of the administration. “The Duterte Legacy Campaign is deceiving the public about the real state of the economy with its selective and misleading presentation of figures.”

The PCOO claims 4.2 million jobs generated through ‘Build, Build, Build’ to hype its impact. Africa said this is an exaggeration though and points out, for instance, that this is even more than the 4.15 million total employed in the construction sector in 2019 reported by the Philippine Statistics Authority (PSA). There is so much double-counting that the number is virtually made up, he stressed.

The 4.5% unemployment rate is meanwhile disingenuous because the figure is only for the October 2019 labor force survey round. The PCOO would be more honest, he said, if they cited the higher 5.1% unemployment rate for the whole year which is already available from the PSA. Africa also said that the supposed 5.9 million Filipinos being lifted from poverty is only because a very low and unrealistic poverty line of Php71 was used to compute this.

IBON pointed out that the Philippine economy is in worse shape because of the unreformed neoliberal policies of the Duterte administration. The group noted that: growth has been slowing since the start of the administration to just 5.8% in the first three quarters of 2019; agriculture grew weakly at just 1.5% and manufacturing slowed to 3.7%. The group also cited government debt bloating to Php7.9 trillion; regressive tax reforms eating away at the incomes of the poorest 60% of the population; high real unemployment at 4.7 million; and more than 12 million families trying to survive on Php132 or less per person per day. #

(This article is being reprinted by Kodao as part of a content-sharing agreement with IBON.)

Real Duterte Legacy: Agri crisis belies admin claims of econ success

by IBON Media

Research group IBON said that the crisis in Philippine agriculture due to government negligence contradicts claimed economic achievements under the Duterte Legacy Campaign. The group said that the administration’s neglect and prioritization of local and foreign big business interests is worsening an already weak and struggling sector.

IBON said signs of this agriculture crisis include slowing sectoral growth; shrinking share in gross domestic product; rising import dependence; increasing trade deficit; significant job losses; and widespread rural poverty.

The Philippine Statistics Authority (PSA) reported a minimal 0.4% growth in agriculture in the fourth quarter of 2019. Under the administration, year-on-year growth trend in agriculture has been declining. From a contraction of 1.2% in 2016, agriculture bounced back with a 4% growth in 2017. But this was short-lived when growth fell to 0.9% in 2018 with a slight increase to 1.5% in 2019, noted the group.

IBON said that agriculture’s share in gross domestic product (GDP) has been declining from 8.8% in 2016 to 8.5% in 2017, 8.1% in 2018, and 7.8% in 2019. This is a far cry from its over 40% share in the economy in the 1960s.

While the country has been increasingly dependent on food and agricultural imports in the past couple of decades, this has further heightened under the Duterte administration, the group said. For instance, the country’s consumption of garlic imports was only 1.1% in 1990, but this surged to 91% in 2018.  Rice import dependency ratio (IDR) meanwhile decreased from 9% in 1990 to 5% in 2016. But this grew to 13.8% in 2018 and could worsen with the increase in rice imports due to the Rice Liberalization Law.

IBON noted that as much as 1.4 million jobs were lost in agriculture, with employment falling from 11.1 million in 2016 to 9.7 million in 2019. This translates to an average annual job loss of 455,000 in this period.

Another indicator of agriculture in crisis is widespread rural poverty, said IBON. Poverty incidence among farmers (34.3%) and fisherfolk (34%) is higher than the national average (21.6%), according to latest available figures. However, IBON estimates that at least 90% of farmers and fisherfolk are impoverished, if based on more reasonable standards of poverty measurement.

IBON said that despite its worsening state, the agriculture sector remains low priority for the administration. The 3.5% share of agriculture in the 2020 budget is the lowest since 2004 at 3.3 percent. The group also noted that annual average share of agriculture in the national budget from 2017 to 2020 was just 3.6% – the lowest since the Ramos administration (3.5%).

IBON said that agriculture, hand in hand with domestic manufacturing, is an important productive sector that, if supported and strengthened towards public interest, could help boost and sustain genuine development and job creation. The administration’s continued neglect of the sector and advancement of harmful pro-big business policies that are destroying local production and farmers’ livelihoods only shows how fake the Duterte Legacy really is, the group said. #