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Groups demand junking of TRAIN Law

Progressive organizations and Partylist groups held protested at the office of Bureau of Internal Revenue in Quezon City Wednesday, February 12, demanding the junking of the Tax Reform for Acceleration and Inclusion Law (TRAIN) and Oil Deregulation Law.

Saying both laws have severely eroded the people’s economic wellbeing, the protesters also demanded an increase in the wages of both private (P750 per day) and public (P16,000 per month) workers.

In his speech, Bagong Alyansang Makabayan secretary general Renato Reyes Jr urged candidates in the coming local and national elections in May to fight for people’s issues.

Makabayan senatorial candidate Atty. Neri Colmenares for his part vowed to push what he calls the people’s agenda if elected in the Senate. He added that he will protect ordinary Filipinos against high prices and taxes. (Video by Joseph Cuevas)

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.#

High prices still burden poor despite inflation slowdown

On the release of the November 2018 inflation rate, research group IBON said that prices are still high and rising even with the reported slowdown.

This remains a burden on poor families trying to live off low and precarious incomes. Substantial and longer-term solutions are still needed, said the group.

Headline inflation slowed to 6.0 percent in November from 6.7 percent last month.

Inflation slowed in food and non-alcoholic beverages; housing, water, electricity, gas, and other fuels; and communication.

Inflation however worsened in the rest of the commodity groups. Additionally, year-on-year inflation is still double the 3.0 percent rate in November 2017.

IBON stressed that prices are still higher than before due to the inflationary impact of the Tax Reform for Acceleration and Inclusion’s (TRAIN) consumption taxes, rising global oil prices and the peso depreciation.

Rice, fish, meats, fruits, vegetables and other basic commodities are still more expensive now than a year ago.

The majority of Filipino families who have low incomes are burdened the most. Inflation has eroded the incomes of the poorest 60 percent households by a total of Php2,650 to as much as Php7,000 from January to November of this year.

The Php537 minimum wage in the National Capital Region is the highest nationwide but even this falls far short of the estimated family living wage of Php1,002 for a family of five.

Meanwhile, some 2.5 million of the target 10 million beneficiaries of TRAIN’s unconditional cash transfers (UCT) have still not received anything almost a year into TRAIN.

The Duterte administration’s economic managers said that slowing inflation “suggests” the effectiveness of government’s anti-inflationary measures such as Administrative Order No. 13 removing barriers to agricultural imports.

IBON executive director Sonny Africa disputes this: “The government is too quick to take credit and too dishonest to accept blame.”

“The inflation slowdown may even be due more to falling global oil prices since October than the Duterte administration’s half-hearted anti-inflation measures,” he said. “On the other hand, government refuses to accept how the higher taxes from TRAIN have driven prices up and will do so again in less than a month.”

Africa said that government’s decision to push through with the next tranche of fuel excise taxes next month in January 2019 shows its insensitivity to the plight of millions of poor Filipinos.

He said that real steps to curb inflation begin with stopping TRAIN, and giving meaningful support to domestic agriculture and Filipino industry. #

 

TRAIN Package 1A: From the poor to the rich

Government’s continued implementation of the Tax Reform for Acceleration and Inclusion (TRAIN) means that TRAIN’s taxes will keep raising prices next year and make inflation higher than it should be.

Read: TRAIN still inflationary with lifting of fuel excise suspension

TRAIN still inflationary with lifting of fuel excise suspension

Research group IBON said that government’s continued implementation of the Tax Reform for Acceleration and Inclusion (TRAIN) means that TRAIN’s taxes will keep raising prices next year and make inflation higher than it should be.

The group said that lifting the fuel excise tax suspension shows the Duterte administration’s insincerity and insensitivity in addressing the inflationary impact of the tax reform program, particularly on poor Filipino households.

The administration’s interagency Development Budget Coordination Committee (DBCC) recently announced its plan to recommend that the second tranche of fuel excise tax be implemented, backpedaling on its previous suspension proposal.

The DBCC cited the lowering of Dubai crude oil prices and consideration of possible foregone revenues as reasons for its latest recommendation.

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

The liquid petroleum gas (LPG) excise tax of Php1.00 per kilogram (kg) in 2018 increases to Php2.00/kg in 2019, and Php3.00/kg in 2020. Diesel excise tax of Php2.50/liter in 2018 increases to Php4.50/liter in 2019, and Php6.00/liter in 2020.

Kerosene excise tax of Php3.00/liter in 2018 increases to Php4.00/liter in 2019 and Php5.00/liter in 2020.

The gasoline excise tax meanwhile is set to increase from Php7.00/liter in 2018 to Php9.00/liter in 2019 and Php10.00/liter in 2020.

IBON said that another fuel excise tax hike further increases costs of production. This will create a domino effect that will sustain the high prices of goods and services that many Filipinos, especially the poor, suffered this past year.

IBON estimates that the poorest 60 million Filipinos have already endured real income losses of anywhere between Php2,500 to Php6,800 due to worsening inflation since the onset of 2018.

The group added that it is premature to think that oil prices are going to stay low or that the peso will not continue to depreciate.

Oil prices remain volatile and could still increase next year with US sanctions on Iran gaining traction, possible Organization of Petroleum Exporting Countries (OPEC) production cuts, and untoward geopolitical events.

IBON insisted that the administration can do much to moderate inflation by suspending the inflationary taxes of TRAIN package 1.

IBON said that government should stop imposing higher consumption taxes such as the fuel excise which burdens the majority of poor Filipinos who can ill afford this amid low wages and growing joblessness. 

 

Instead, the government should improve revenue collection by cracking down on tax evaders and corruption in the Bureau of Internal Revenue (BIR) and Bureau of Customs (BOC). 

 

It should also build a tax system that raises revenues more from higher income, wealth and property taxes on the rich.#

Rice tariffication will displace rice farmers, worsen food insecurity–IBON

Rice tariffication and uncontrolled rice imports will displace rice farmers and worsen food insecurity without solving the problem of expensive rice, research group IBON said.

The government is using high inflation to justify rice sector liberalization according to long-standing demands of the World Trade Organization (WTO) and big foreign agricultural exporters.

Domestic agriculture should be strengthened with ample government support instead of being prematurely opened up to cheap foreign government-subsidized imports from abroad, said IBON.

Senate Bill 1998 or the Rice Tariffication Bill, which was approved by the Philippine Senate on third and final reading recently, is currently undergoing bicameral deliberation.

Government said that this will protect the rice industry from volatile prices, and consumers from rising inflation.

The measure is also supposed to earn Php10 billion annually which will be used to fund development of the local rice industry.

IBON however stressed that uncontrolled rice imports will drive rice farmers into worse poverty.

If the Philippines imports two million metric tons of palay, for instance, some 500,000 of around 2.4 million rice farmers will be adversely affected.

Even the government’s own Philippine Institute for Development Studies (PIDS) projects a 29 percent decline in rice farmers’ incomes from a Php4-decrease in palay farm gate prices when rice tariffication is implemented.

As it is, farmers’ average monthly income of Php6,000 at the Php21 farmgate price is already far short even of the government’s understated Php9,064 average poverty threshold for a family of five.

It is also not even one-fourth (23 percent) of IBON’s estimated monthly family living wage (FLW) of Php26,026 for a family of five as of October 2018.

Filipino rice farmers are unproductive and domestically-produced rice is unnecessarily expensive because of long-standing government neglect of the agriculture sector.

No more than five percent of the national budget has been given to agriculture over the last two decades.

The Duterte administration does not correct this and, for instance, the Php49.8 billion 2019 Department of Agriculture (DA) budget it submitted to Congress in July is just 1.3 percent of the national budget and even Php862 million less that its cash-based equivalent of Php50.7 billion this year.

The hyped Php10 billion (US$190 million at current exchange rates) rice development fund of the Rice Tariffication Bill is too little and too late, said IBON.

This compares unfavorably to rice industry support given by other rice producers including some countries the Philippines imports rice from — Vietnam (US$400 million), United States (US$619 million annually), Thailand (US$2.2-4.4 billion), India (US$12 billion), Japan (US$16 billion), and China (US$12-37 billion).

IBON also pointed out that there is no guarantee that retail rice prices will be lower in the long run with unhampered importation.

Relying on rice imports makes the country vulnerable to higher world market prices as well as to rice production and export decisions of other countries.

In 2008, for instance, IBON recalled bow Vietnam, India and Pakistan restricted their rice exports amid rising global rice prices.

Thailand also raised the idea of creating a global rice cartel similar to that for oil exporting countries.

Government’s neoliberal prioritization of food imports and production of crops for export should be reversed, IBON said.

The Philippine government should instead strengthen the local rice industry. This begins with free land distribution to all willing tillers, followed by giving substantial support for rice producers, and taking control of the market to ensure reasonable prices for rice and other agricultural produce. #

 

Beware of onerous China ODA – IBON

In its eagerness to raise billions of pesos in funds for its hyped infrastructure program, the Duterte administration is brokering questionable deals with China that could threaten Philippine sovereignty, research group IBON warned.

IBON said that agreements between both governments include China’s official development assistance (ODA) loans for Build, Build, Build infrastructure project like the Php12.2 billion New Centennial Water Source-Kaliwa Dam, which will be 85 percent funded by China.

The Duterte administration needs Php8.4 trillion for its whole term to bankroll Build, Build, Build, said the group, and is apparently counting on China to provide a substantial amount of this.

IBON said the size and value of China investments, loans and interest is not yet as extensive as those of other countries like Japan and the US, or financial institutions like the International Monetary Fund (IMF) and World Bank (WB).

However, Filipinos should be particularly wary of the onerous conditions China imposes, which could result in the Philippines virtually giving up its sovereignty, said the group.

For instance, China ODA has been known to stipulate the collaterization of resources and state assets should a country default on its loan payments, noted the group.

The Sri Lankan government, for instance, was forced to lease its strategic Hambantota Port for 99 years to a Chinese company when it was unable to pay back its debt to China.

IBON also noted that another lopsided condition terms of reference in China loans that require the agreement as well as the rights and obligations of both parties be put beyond the scope of Philippine laws and transparency in the public domain. China apparently prefers disputes to be settled at the China International Economic and Trade Arbitration Commission (CIETAC).

These conditions are included in the Chico River Pump Irrigation loan agreement.

Additionally, IBON questioned the provision in the loan agreement stating that it “shall be governed by and construed in accordance with the laws of China.”

The group expressed concern that this could mean that Chinese law will supersede Philippine law in case there is a conflict between the two.

Also of concern is the Duterte administration’s willingness to give up its territorial resources in the South China Sea to secure China investments and loans, the group said.

In line with this is the administration’s efforts to be a part of China’s Belt and Road Initiative (BRI), which supposedly gives access to coveted infrastructure investments.

In exchange, the Philippines has been easing the way for China’s interests in the disputed waters.

IBON said that 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.

To be beneficial to the country, foreign investments and loans that are being considered should be planned in accordance with the genuine development of domestic agriculture and industries, with close monitoring and regulation by the government. #

33 percent rise in rice allowance for QC teachers

The Alliance of Concerned Teachers (ACT) expressed elation over the approval of a bigger quarterly rice allowance for Quezon City public school teachers and employees.

“This is a victory for the long campaign of the Quezon City Public School Teachers Association (QCPSTA) and the ACT Teachers Union-National Capital Region,” ACT national president Joselyn Martinez told Kodao.

The local government of Quezon City announced Monday that Mayor Herbert Bautista approved City Ordinance 2754-2018 increasing the rice allowance of the city’s public school personnel from P1,500.00 to P2,000.00 “in recognition of their valuable services to society.”

The new ordinance amended City Ordinance 2312-2014 that granted a P1,500 quarterly rice allowance to teaching and non-teaching personnel of the Division of City Schools of Quezon City.

The increased benefit will be implemented in the first quarter of 2019, the QC government said.

Martinez cited QC Councilors Ally Medalla and Raquel Malangen as authors of the ordinance.

“This is the result of QCPSTA’s alliance work with the city councilors. [It] talked to all members of the City Council as well as Mayor Bautista and Vice Mayor Joy Belmonte,” Martinez said.

Martinez called on the city government to revert to Landbank in dispensing teachers’ local allowances citing delays caused by local government unit’s transfer to BPI Globe Banko. # (Raymund B. Villanueva)