Posts

IBON launches alternative to failed govt econ agenda

by IBON Media

Research group IBON launched its campaign on People Economics to promote much-needed policy reforms that would really benefit the majority of Filipinos and engender genuine national development.

IBON held the forum “People Economics: May Magagawa!” at the College of Science Admin Auditorium, UP Diliman last October 10 to discuss why there is a need for and what the principles and policy outlines are of People Economics.

After four decades of neoliberal globalization and its market-driven policies, the group said that the country remains underdeveloped.

Many Filipinos are struggling with worsening poverty and jobs crisis, while only a wealthy few are benefiting. The global economic slowdown is not letting up, and in response several countries, especially the big capitalist powers, are becoming increasingly protectionist, the group said.

IBON said that People Economics is an alternative to government’s failed neoliberalism.

This draws from the policies and demands of the people’s movement, as well as IBON’s more than 41 years of experience in advocating for social and economic reforms.

The group said that it envisions a Philippines that can be transformed into a modern industrialized nation that is more equal, humane, and ecologically sustainable. It lays the foundation for a future where the Filipino people continuously change society for the better.

People economics is comprised of six pillars: Develop the countryside; Build Filipino industries; Protect the environment; Uphold people’s rights and welfare; Finance development; and Strive for sovereignty and independence.

IBON said that People Economics can be further articulated and enriched as an alternative to neoliberalism. The contributions of the progressive movement and other advocates for genuine change is needed to come up with the most concrete and comprehensive solutions to the country’s social and economic problems, the group said. #

(Kodao publishes IBON.org’s reports and analyses as part of a content-sharing agreement.)

IBON questions CITIRA job creation claims

by IBON Media

Research group IBON said the Department of Finance’s (DOF) claim of over a million jobs to be created by corporate income tax cuts under the proposed Corporate Income Tax and Incentives Rationalization Act (CITIRA) is imaginary.

The group said that the DOF is hyping job creation to justify implementation of regressive tax measures. CITIRA will increase corporate profits and executive pay without increasing jobs or even wages, IBON said.

The group recalled that the DOF repeatedly claimed that the Tax Reform for Acceleration and Inclusion (TRAIN) law would benefit “99%” of Filipinos or households when they were lobbying for this.

The DOF did so despite knowing, on the contrary, that the poorest 17.2 million Filipino families would eventually be burdened by additional consumption taxes especially after the smokescreen of temporary cash transfers, said IBON.

“The DOF is now claiming that CITIRA ‘will benefit more than 99% of companies’ and that the proposed corporate income tax (CIT) cuts will create 1.5 million jobs. There is no legitimate basis for such a claim,” said IBON executive director Sonny Africa.

“The DOF seeks to justify even more tax cuts for the rich following TRAIN’s reduction of personal income taxes (PIT),” Africa added.

“The DOF’s suddenly claiming that CITIRA will create jobs is suspicious,” Africa said.

He noted that there were no job generation estimates when the bill was first submitted to Congress in early 2018 as TRAIN Package 2, when it was passed by the House of Representatives (HOR) in September 2018 as the renamed Tax Reform for Attracting Better and High-Quality Opportunities (TRABAHO) bill, nor even at the first Senate hearing on it right after.

Africa recalled that DOF undersecretary Karl Chua said outright at the Senate hearing: “We do not see a job impact.”

Department of Labor and Employment (DOLE) director Dominique Tutay on the other hand answered pointedly: “Mayroon po [mawawalan ng trabaho].”

Africa said that it was only on October 17, 2018, that the DOF suddenly declared in a press release that the proposed law would create 1.4 million jobs.

He added: “The DOF’s job generation claim is unfounded speculation that has no theoretical or empirical basis.”

“The new jobs will supposedly come from businesses ‘reasonably’ spending half of their increased profits from the lower corporate income tax ‘in growing their businesses’ but companies already have enough profits as it is,” Africa said.

He cited DOF reports that large firms account for some three-fourths (75%) of corporate income tax collections.

Africa pointed out that the profits of the country’s Top 1000 biggest corporations have been growing some 12% annually in the past decade, and have more than tripled from Php415 billion in 2008 to Php1.33 trillion in 2017.

“Simplistically claiming that corporate tax cuts will magically create 1.5 million jobs is deceitful as the argument opportunistically ignores key economic realities,” said Africa.

He pointed out that global growth is slowing, trade is weakening, foreign investment flows are falling, and protectionism is growing, while Philippine economic growth has already slowed to its lowest in 17 quarters.

“It is more likely that CITIRA’s tax cuts will just go to increasing corporate profits and justify increasing already exorbitantly high executive pay. They will certainly not go to increasing wages because corporations have kept real wages flat for over a decade-and-a-half despite rising labor productivity,” concluded Africa. #

(Kodao publishes IBON.org’s reports and analyses as part of a content-sharing agreement.)

Job creation volatile, mostly of poor quality work

by IBON Media

Research group IBON said that the recently reported job generation is mostly in poor quality work and confirms volatile labor market conditions rather than a strengthening economy.

The group made the statement after the recent release of seemingly favorable employment figures and warned against complacency.

The Philippine Statistics Authority (PSA) reported an increase in the number of employed by 2.3 million and an increase in the number of unemployed by 103,000 in July 2019 from the previous year.

The employment and unemployment rates stayed the same as last year at 94.6% and 5.4%, respectively.

IBON however said that the extreme volatility in the labor market since 2016, for instance, should temper overenthusiasm that the economy and the labor force situation is improving.

Millions of Filipinos are making do with poor quality work and hundreds of thousands more are in and out of work.

The group recalled that the reported 2.3 million additional employment in 2016 reversed to 664,000 net job losses in 2017.

In 2018, 2.4 million new jobs were reported generated in the January labor force survey round, measured year on year, but this reversed to 218,000 net job losses in the October round.

The situation remains as volatile so far this year, ranging from 387,000 net job losses in January 2019 to the recently reported 2.3 million job creation in July 2019.

This volatility indicates Filipinos struggling to find work where they can on a day-to-day basis rather than a strengthening economy creating steady jobs paying decent incomes, IBON stressed.

Looking at employed persons in terms of hours worked, 2.2 million or an overwhelming part of the net 2.3 million additional employed in July 2019 was actually just in part-time work of less than 40 hours.

This caused the share of part-time work in employment to markedly rise from 28.2% to 31.8 percent.

Looking at employed persons by class of worker, IBON pointed out that the biggest employment increases were actually in low-earning, insecure, and informal work, as well as in unpaid family work.

The number of self-employed without paid employees grew by 1.1 million and the number of unpaid family workers grew by 854,000.

Finally, IBON said that looking at the three biggest job-creating sectors also does not give confidence.

The sectors creating the most jobs included wholesale and retail trade which grew by 820,000, and accommodation and food service by 292,000.

These subsectors are notorious for high informality and uncertainty, the group said.

IBON noted the 716,000 increase in agricultural employment but pointed out that this is likely only momentary because agricultural employment is in long-term decline especially from lack of government support for the sector.

IBON also commented on the underemployment rate falling significantly from 17.2% in July 2018 to 13.9% in July 2019.

This is equivalent to the 7 million underemployed last year falling to just 6 million this year.

The group said that while falling underemployment is commonly used as a proxy for improving quality of work, the latter is not necessarily what is happening.

Underemployment refers to employed persons wanting additional hours of work in their present job, an additional job, or a new job with longer working hours.

IBON explained that the large drop in the underemployed is possibly only because workers are already working such long hours that they do not want additional hours in their present job, cannot take on an additional job, or cannot imagine a new job with even longer hours.

The breakdown of reported underemployed persons is not inconsistent with this, the group said.

The number of those working 40 hours and over in a week, or the invisibly underemployed, fell by a huge 1.5 million from 3.7 million in July 2018 to 2.2 million in July 2019.

Those who worked less than 40 hours, or the, visibly underemployed, meanwhile, increased by 352,000, hence the net decrease of some 1.1 million total underemployed.

IBON said that while more employment is always desirable, government should ensure that jobs are decent and sustainable.

But as long as government neglects the development of domestic agriculture and industries to generate stable and quality work, the jobs crisis will continue to worsen, and Filipinos will keep grappling with poor job prospects. #

Duterte’s midterm: change for the worse

(IBON 2019 Midyear Birdtalk Briefing Paper economic situation highlights)

The country’s slowing economy, and worsening jobs crisis and poverty disputes the Duterte administration’s hype of economic gains. IBON said that this is bound to worsen if the Duterte administration continues unopposed on its current neoliberal trajectory wherein the interests of big foreign and local business prevail to the detriment of millions of Filipinos, especially the poor.

Economic growth slowing since the start of the administration.Philippine Statistics Authority (PSA) data show that gross domestic product (GDP) growth has been slowing in the 11 quarters since the start of the Duterte administration from 7.1% in the third quarter of 2016 to 5.6% in the first quarter of 2019. There was a momentary increase to 7.2% in the third quarter of 2017 but growth fell rapidly after this. Notably, growth was slowing even before the budget impasse and election ban on infrastructure spending.

High real unemployment. Computing according to the original definition of unemployment for comparability would show that the real unemployment rate in 2018 is 10.1% and the real number of unemployed is 4.6 million. These are much worse than the already high 9.0% unemployment rate and 4 million unemployed in 2016, again computed according to the original definition. In contrast, officially released figures for 2018 were a grossly underreported 5.3% and 2.3 million, respectively.

The record real unemployment last year is a direct result of how only an annual average of 81,000 new jobs have been created since the start of the Duterte administration, from 41.0 million employed in 2016 increasing by 162,000 to 41.2 million in 2018. To put this into context and even granting that the administration is just at its midpoint, this is so far the worst employment generation post-Marcos.

Lowest and least frequent wage hikes under Duterte. The Duterte administration is so far making the worst record on wage hikes of all post-Marcos administrations. In the NCR, for instance, it has only given an average of one wage hike every 18 months. The frequency of wage hikes previously ranged from one every 16 months under Arroyo to one every 10 months under Ramos. Over the two wage hikes under Duterte, the nominal value of the wage increased by only 9.4% – compared to a range of 11.5% by Benigno Aquino III to 45.9% by Corazon Aquino over their respective first two wage hikes.

Poverty underreported. IBON estimates on Family Income and Expenditure Survey (FIES) data in 2015 found that the poorest 50% or 11.4 million families had monthly incomes of just Php15,000 or less, and the poorest 60% or 13.6 million families just some Php18,000 or less.

Inequality worsening. The net worth of the country’s richest Filipinos and profits of the largest corporations continue to grow, in some cases even outpacing economic growth. The net worth of the 10 richest Filipinos grew from Php2.5 billion in 2016 to Php2.7 billion in 2018. The net worth of the 40 richest Filipinos grew from Php3.7 billion to Php3.8 billion in the same period. The net worth of the 40 richest as percentage of GDP was 21.9% in 2018.

Agriculture in crisis, manufacturing stalling. Agriculture has been left to perform chronically poorly. The sector grew by just 0.8% last year and in the first quarter of 2019. This is just around half the growth pace of 1.5% in the 2010s and not even a third of the 2.9% clip in the 2000s. Employment in agriculture has fallen by 1.1 million between 2016 and 2018, with an initial further 376,000 losses reported in April 2019 from the same period last year.

Manufacturing already appears to be stalling with growth of just 4.9% in 2018 – the slowest since 2012 – and slowing further to 4.6% in the first quarter of 2019. The share of manufacturing in total employment of just 8.8% in 2018 is actually even much lower than its 10.1% share in 1990 and 11% in 1990. These are despite the sector growing by 22.1% between 2016 and 2018, according to national accounts data.

Poorest land distribution. Lands covered by the Comprehensive Agrarian Reform Program (CARP) should have been distributed by 1998. This deadline was reset twice, yet until now 100% distribution has not been met. To add to this injustice, distribution is slow and is even going at a slower pace than before under the Duterte administration. Department of Agrarian Reform (DAR) land distribution accomplishment in the period 2016-June 2019 is just at an average of 2,920 hectares monthly. This is much less than under Benigno Aquino III (8,254 hectares, July 2010-2015), Arroyo (9,047 hectares, January 2001-June 2010), Estrada (11,113 hectares, July 1998-2000), Ramos (26,389 hectares, July 1992-June 1998), and Corazon Aquino (14,142 hectares, July 1987-June 1992).

Build Build Build, for whom?Over the 2016-2017 period, the biggest concentration of gross value in public construction was in Pres. Duterte’s home region of Davao (Region XI) accounting for 14.1% of the total. The increase in Davao is notable in almost doubling from 7.9% over the period 2010-2015 to 14.1% in 2016-2017. Close Duterte allies have reportedly been among the beneficiaries of the surge in Davao construction projects.

Mounting debt. The government is already borrowing heavily. Total outstanding debt of the national government stood at Php7.9 trillion as of May 2019 implying a total increase of Php2 trillion since the start of the Duterte administration. In nominal terms, this is equivalent to an average monthly increase in debt of Php56.2 billion, which is over two-and-a-half times that of the Arroyo administration (Php21.2 billion) and nearly three times that of the previous Aquino administration (Php19 billion).

Truth about TRAIN. The Duterte administration has tried to divert from the regressive nature of its tax reforms by repeatedly claiming that it benefits “99% of taxpayers” and giving the impression that 99% of Filipinos gain from TRAIN Package One. The reality however is that only 5.5 million personal income taxpayers coming largely from the highest income groups will gain from TRAIN’s personal income tax cuts. An additional two million taxpayers are minimum wage earners and so previously already exempt. On the other hand, the poorest 17.2 million or eight out of 10 (76%) Filipino families will pay TRAIN’s higher taxes on consumption goods including petroleum products and sugar-sweetened beverages. #

President’s SONA in denial of slowing growth and fundamental economic crisis

by IBON Media

In his fourth State of the Nation Address (SONA), President Duterte did not admit that the economy is on a slowdown and that the country’s production sectors are deteriorating. Instead, the President harped on deceptive, business-biased policy proposals that at the very least do not address the basic problems of the economy, and at worse, may aggravate economic woes. Government should build policies upon an honest recognition of the country’s real situation.

Slackening economy ignored

Nowhere in the President’s SONA was it mentioned that the country’s economy has been slowing from 7.1% growth of gross domestic product (GDP) in the third quarter of 2016 to 5.6% in the first quarter of 2019. Growth fell rapidly even after a momentary increase to 7.2% in the third quarter of 2017. This slowdown was happening long before the 2019 national budget impasse and the election ban on infrastructure spending and despite record levels of foreign investment reaching US$9.8 billion in 2018.

It would have been important for the President to note this and admit that the slowdown is due to reliance on unsustainable, external sources of growth: Slowing overseas remittances (average growth rate fell from 15.5% annually in 2002-2008 to 3.7% in 2017-2018) and a slowing business process outsourcing (BPO) sector (average growth rate fell from 43% annually in 2005-2009 to only 2.7% in 2017-2018) that impacted on real estate, renting, and business activities. Household spending, export of services (including BPOs), capital formation (including construction), and government spending also slackened.

This points to the urgency of developing sustainable long-term drivers of growth pertaining to more vibrant agriculture, dynamic Filipino industry, and equitable distribution of economic gains. In his SONA, however, the President, though acknowledging the need to boost agriculture and jobs, stuck to the same type of market-oriented measures that perpetrate underdevelopment and backwardness.

Hampering agriculture

Pres. Duterte vowed to continue investing in agriculture programs to increase the income and productivity of small farmers and fisherfolk. In particular, he said that government will ensure the full implementation of the Rice Tariffication Law’s Rice Competitiveness Enhancement Fund (RCEF) to safeguard the livelihood of small farmers.

But the RCEF amount of Php10 billion annually for six years, which government claims will fund farm inputs and operations, is dismally low compared to Vietnam and Thailand agriculture subsidies. Hugely the funds will be used to purchase commercial equipment, seeds, and services for distribution to local government units and certified farmers organizations. RCEF is prone to patronage politics and might marginalize rather than benefit farmers. Peasant groups also fear that the removal of restrictions on rice importation will displace over 2 million rice farmers and imperil the local rice industry with the influx of imported rice.

By sourcing the Philippine staple from a volatile world market and allowing unlimited albeit tariffied rice importation, rice tariffication threatens farmers’ livelihoods and the country’s food security. It does not address the current state of shrinking agriculture. The sector lost over a million jobs from 2016-2018, and barely grew at 0.8% in 2018 and in the first quarter of 2019. Its 8.2% share of GDP in the first quarter of 2019 is its smallest ever share of the economy, yet 2019 budget allocation to agriculture was reduced by Php3.4 billion from an already low Php50.7 billion in 2018 to just Php47.3 billion in 2019.

Instead of pushing rice liberalization, which will benefit rice importers and private traders more than local rice farmers and rice-eating Filipinos, the government should preserve its mandate to procure a minimum of 25% of local produce to sell at a reasonable price that will influence market rice prices to be affordable. There should also be a genuinely distributive and free land reform program to liberate farmers from having to amortize awarded land, and substantial agriculture support and subsidies from domestic industries that will truly aid in raising productivity and incomes instead of burdening the sector with conditional support and mounting debts.

Stifling Filipino industries

The President also did not address a manufacturing sector that appears to be stalling. Manufacturing growth was just 4.9% in 2018 – the slowest since 2012 – and slowed further to 4.6% in the first quarter of 2019. The sector remains shallow and mostly disconnected from the local economy due to being foreign-dominated and capital-intensive in export enclaves. As a result, employment generation has been relatively weak. Manufacturing employment increased by just 221,000 or 6.5% between 2016 and 2018, with even a contraction of 101,000 reported in April 2019, according to official labor force data.

Instead, he praised the Tax Reform for Acceleration and Inclusion (TRAIN) for helping fund government programs, and pressed for the enactment of the Tax Reform for Attracting Higher and Better Opportunities (TRABAHO) to energize micro, small and medium enterprises (MSME’s) and generate more than a million jobs.

But TRABAHO is a misnomer because its focus is not on creating the stable jobs that Filipinos need, but on lowering corporate taxes and rationalizing incentives. It in fact adds to the regressiveness of TRAIN, which relieves the rich of personal, estate and donor taxes, by increasing corporate profits and the wealth, income, and property of the rich. On the other hand, government will make up for the resulting losses in tax revenues through indirect levies which tax consumption – including by mostly low-wage workers and low-income Filipino families – regardless of their lack of wealth, income and property.

The President’s recommending TRABAHO for MSMEs in his speech diverts from MSMEs’ being mostly in the service sector wherein jobs are usually temporary and low-paying: the top five MSME industries are wholesale and retail trade, repair of motor vehicles and motorcycles, accommodation and food service activities, manufacturing, service activities, and financial and insurance activities. The manufacturing sector would potentially be a generator of stable jobs, however contractualization is rampant. The transnational corporations-dominated sector has even seen Filipino workers suffer poor working conditions and stifled labor rights.

Not only do Filipinos need more jobs, the people need quality jobs. But behind the hype of improved employment are signs of a persistent jobs crisis that no corporate-biased policy intends to cure: over 11 million of the combined unemployed and underemployed, and almost 28 million of the employed being in informal, non-regular, or agency-hired work.

(Malacañang photo)

Reorient the economy

Filipino firms must instead be built, sourcing materials from a robust agriculture, and building across consumer, light to heavy industries that will supply the people’s and the nation’s needs. This removes the need to rely on – or be limited to – commercial sources. This will also certainly improve production, stimulate job generation, increase working Filipinos’ incomes, and enliven economic activity both in the rural and urban areas.

All these mean that the government should thwart its business bias so that the country’s economic direction can be refocused to truly prioritize the people’s well-being and national development. This has not been the course of the Duterte administration as evidenced by the neoliberal policies highlighted in his SONA such as rice tariffication and TRABAHO. #

Duterte’s Midterm: Change for the Worse

Research group IBON said that the Duterte administration is being dishonest in its recent pronouncements about high growth, reducing unemployment, and reducing poverty.

The group said that the government is taking liberties with statistics as part of its propaganda campaign that President Duterte is keeping his promise of real change.

In its pre-State of the Nation Address (SONA) forum, the Department of Finance (DOF) hailed the Duterte administration for its achievements during its first three years in terms of “rapid economic expansion”, “the lowest [unemployment] in 40 years”, “alleviating poverty”, and Tax Reform for Acceleration and Inclusion (TRAIN) law “benefiting 99 percent of taxpayers”.

According to IBON executive director Sonny Africa however, growth has actually been slowing since the start of the Duterte administration.

Philippine Statistics Authority (PSA) data show that gross domestic product (GDP) growth has been slowing in the 11 quarters since the start of the Duterte administration from 7.1% in the third quarter of 2016 to 5.6% in the first quarter of 2019. There was a momentary increase to 7.2% in the third quarter of 2017 but growth fell rapidly after this.

IBON also pointed out that the growth was slowing even before the budget impasse and election ban on infrastructure spending.

Africa added that the economic managers are being deceitful in claiming that the 5.1% unemployment rate in April 2019 is the lowest unemployment in four decades.

He pointed out that the DOF is well aware that the change in the official definition of unemployment in 2005 drastically reduced the reported unemployment rate and number of unemployed which makes the April 2019 figure incomparable with the 25 years of data before 2005.

On the contrary, IBON said, computing according to the original definition of unemployment for comparability would show that the real unemployment rate in 2018 is 10.1% and the real number of unemployed is 4.6 million.

These are much worse than the already high 9.0% unemployment rate and 4 million unemployed in 2016, again computed according to the original definition.

In contrast, officially released figures for 2018 were a grossly underreported 5.3% and 2.3 million, respectively.

The high unemployment is a direct result of how only an annual average of 81,000 new jobs have been created since the start of the Duterte administration, from 41 million employed in 2016 to 41.2 million in 2018.

This is the worst job generation in the post-Marcos period.

Poverty statistics meanwhile show seemingly less poor Filipinos only because of government’s very low poverty threshold, said Africa.

The government’s Php69.50 daily per capita poverty threshold and only Php48.60 subsistence or food threshold in the first semester of 2018 are absurdly low and not conceivably enough to meet decent minimum standards for food, shelter, transportation, health care, and education, stressed Africa.

He said that this leads to a gross underestimation of the real number of poor Filipinos.

Finally, Africa clarified that it is very deceitful to claim that TRAIN benefited 99% of taxpayers.

The Duterte administration wants to make it appear that 99% of Filipinos benefited from TRAIN but the truth is that only 5.5 million personal income taxpayers with tax cuts out of 23 million Filipino families gain from TRAIN.

The poorest 17.2 million or eight out of 10 Filipino families will pay TRAIN’s higher consumption taxes but without any personal income tax gains to offset these.

The government is trying to distract the public from how a disproportionate part of TRAIN revenues come from the poorest majority of Filipinos due to additional levies on consumption goods including petroleum products and sugar-sweetened beverages, said Africa.

IBON warned the public to be more discerning about the government claims and not to take these at face value.

Yet the country can only start to take steps to real solutions when there is more candor and honesty, rather than self-serving propaganda, about the real problems the economy and the people face. #

Duterte selling out sovereignty for Chinese funding – IBON

Research group IBON said that the Duterte administration’s downplaying of the hit-and-run by a Chinese vessel of a Philippine fishing boat in the West Philippine Sea (WPS) shows how it gives more importance to Chinese funding over Philippine sovereignty.

On June 9, a Chinese vessel rammed and sank the Filipino fishing boat F/B Gem-Ver and left the 22 fishermen on board adrift at sea.

President Rodrigo Duterte’s first comment on the issue over a week after it happened, on June 17, was to dismiss it as a simple “maritime incident” being played up by “stupid politicians”.  

The president echoed the Chinese foreign ministry’s statement a few days earlier calling the boat sinking “an ordinary maritime traffic accident” and warning against “irresponsibly politicizing” the collision.

IBON explained that the Duterte administration’s position is most likely influenced by how it is courting billions in dollars in aid, debt and investments from China.

The government is reportedly seeking as much as US$14.3 billion in official development assistance (ODA) from China to finance 29 ‘Build, Build, Build’ infrastructure projects costing US$16.8 billion.

China ODA has already increased by 24,200% under the Duterte administration – from US$1.5 million in 2016 to US$364.9 million in 2018, said the group.

China ODA is seen as essential to fund flagship infrastructure projects.

Loan agreements with China have already become controversial for having terms disadvantageous for the Philippines and compromising its sovereignty.

The most expensive infrastructure project to be funded by China is the Philippine National Railway (PNR) South Long Haul Project worth US$3.3 billion.

China is also being targeted to fund the Mindanao Railway Project Phase 1 worth US$677 million.

IBON also noted surging foreign direct investments (FDI) from China.

China FDI increased from US$0.4 million in 2016 to US$163.4 million in 2018.

Moreover, the Duterte administration also managed to get pledges from Chinese companies of around US$12.1 billion during the second Belt and Road Forum for International Cooperation last April 2019.

Prime Minister Xi Jinping also pledged US$148 million in grants to help boost the Philippine economy during the forum.

The Duterte administration is not asserting the country’s sovereignty or upholding the rights of the Filipino fishermen for fear of jeopardizing the China aid and investments it is so eager for, said IBON.

It is desperate to stimulate the Philippine economy amidst its sluggish performance.

Growth of gross domestic product (GDP) fell to 5.6% in the first quarter of 2019 from 6.5% in the same period last year.  

IBON also warned that China has already been implicated in controversial deals gone bad where governments were pressured to give up strategic assets like ports.

China-funded projects around the world have also been hounded by allegations of hundreds of millions of dollars in corruption and overpricing.

IBON said that a truly independent foreign policy includes asserting the country’s sovereignty and upholding domestic economic development including the welfare of all Filipinos.

The Duterte administration should stop privileging China in Philippine territory just because it is promising so much financing, the group said. #

Prices still higher now than since start of Duterte admin

Research group IBON said that while June inflation has slowed, the prices of basic food items are still higher, especially when compared to prices at the start of the Duterte administration. The wages and incomes of many Filipinos are unable to keep up with the high prices.

The group said that food prices will continue to increase as long as government neglects Philippine agriculture and the country becomes further dependent on imports.

The Philippine Statistics Authority (PSA) reported that nationwide inflation slowed to 2.7% in June 2019 from 3.2% the previous month.

Inflation in the National Capital Region (NCR) eased to 3.0% from 3.4%, and inflation in areas outside of NCR fell to 2.6% from 3.1%, during the same period.

IBON executive director Sonny Africa said however that this lower inflation is not being felt by the public.

He said that food is still generally more expensive than in the same time last year, and especially compared to July 2016 at the start of the Duterte administration.

For instance, in Metro Manila, between the first week of July 2018 and the same period in July 2019, rice is slightly cheaper but fish, chicken and many vegetables are much more expensive, Africa said.

According to the PSA, the prevailing retail price of commercial well milled rice in the first week of July 2019 was Php44 per kilogram (/kg), which is only one peso cheaper than the Php45/kg in the first week of July 2018.

The cost of fish like bangus and tilapia meanwhile was much higher, increasing by Php10 and Php20, respectively.

Retail prices for whole chicken, carrots, and potatoes also rose by Php10, Php40, and Php20.

Africa said that NCR food prices are much more expensive now compared to prices during the first week of July 2016, at the start of the Duterte government.

Commercial well milled rice is higher by Php4.00/kg; bangus by Php20; tilapia by Php10; galunggong by Php20; whole chicken by Php20; ampalaya by Php20; carrots by Php30; habitchuelas by Php20; tomato by Php30; potato by Php10; and eggplant by Php20.

But the wages and incomes of ordinary Filipinos are not enough to cope with these higher prices, he said.

IBON estimates that the family living wage (FLW) needed to meet basic needs is PHP1,008 for a family of five and Php1,210 for a family of six in the NCR as of June 2019.

But the NCR nominal minimum wage of Php537 is not enough with wage gaps of Php471 and Php673, respectively.

Africa said that food prices will keep rising and be unnecessarily expensive as long as government continues to neglect the country’s agriculture sector.

He noted that the budget for agriculture continues to shrink, with the Department of Agriculture (DA) budget cut by Php3.4 billion in 2019 and of the National Irrigation Administration (NIA) by about Php5.6 billion.

The country’s increasing dependence on food imports because of policies like the Rice Tariffication Law will only worsen the country’s agriculture crisis, Africa said.

Rice liberalization will not necessarily ensure a cheap and stable supply of rice while harming the livelihoods and incomes of Filipino rice farmers.

Increased rice imports may have been behind the falling farmgate price of palay which significantly dropped from Php21.36/kg last year to Php17.91 this year.

Rather than rely on rice imports, domestic rice production should be made more efficient and productive to make this cheaper, said Africa.

Africa said that lowering food prices through more developed domestic agriculture is essential for lower inflation.

He also said that low inflation will be more meaningful for the public if they have higher incomes to begin with.

The government can give relief to Filipino families struggling with high food prices not just by continuing to provide affordable NFA rice but also by substantially increasing wages and salaries. #

Duterte administration being dishonest about economic ‘gains’

Research group IBON said that the Duterte administration is being dishonest in its recent pronouncements about high growth, reducing unemployment, and reducing poverty. The group said that the government is taking liberties with statistics as part of its propaganda campaign that President Duterte is keeping his promise of real change.

In its pre-State of the Nation Address (SONA) forum, the Department of Finance (DOF) hailed the Duterte administration for its achievements during its first three years in terms of “rapid economic expansion”, “the lowest [unemployment] in 40 years”, “alleviating poverty”, and Tax Reform for Acceleration and Inclusion (TRAIN) law “benefiting 99 percent of taxpayers”.

According to IBON executive director Sonny Africa however, growth has actually been slowing since the start of the Duterte administration. Philippine Statistics Authority (PSA) data show that gross domestic product (GDP) growth has been slowing in the 11 quarters since the start of the Duterte administration from 7.1% in the third quarter of 2016 to 5.6% in the first quarter of 2019. There was a momentary increase to 7.2% in the third quarter of 2017 but growth fell rapidly after this. IBON also pointed out that the growth was slowing even before the budget impasse and election ban on infrastructure spending.

Africa added that the economic managers are being deceitful in claiming that the 5.1% unemployment rate in April 2019 is the lowest unemployment in four decades. He pointed out that the DOF is well aware that the change in the official definition of unemployment in 2005 drastically reduced the reported unemployment rate and number of unemployed which makes the April 2019 figure incomparable with the 25 years of data before 2005.

On the contrary, IBON said, computing according to the original definition of unemployment for comparability would show that the real unemployment rate in 2018 is 10.1% and the real number of unemployed is 4.6 million. These are much worse than the already high 9.0% unemployment rate and 4 million unemployed in 2016, again computed according to the original definition. In contrast, officially released figures for 2018 were a grossly underreported 5.3% and 2.3 million, respectively.

The high unemployment is a direct result of how only an annual average of 81,000 new jobs have been created since the start of the Duterte administration, from 41 million employed in 2016 to 41.2 million in 2018. This is the worst job generation in the post-Marcos period.

Poverty statistics meanwhile show seemingly less poor Filipinos only because of government’s very low poverty threshold, said Africa. The government’s Php69.50 daily per capita poverty threshold and only Php48.60 subsistence or food threshold in the first semester of 2018 are absurdly low and not conceivably enough to meet decent minimum standards for food, shelter, transportation, health care, and education, stressed Africa. He said that this leads to a gross underestimation of the real number of poor Filipinos.

Finally, Africa clarified that it is very deceitful to claim that TRAIN benefited 99% of taxpayers. The Duterte administration wants to make it appear that 99% of Filipinos benefited from TRAIN but the truth is that only 5.5 million personal income taxpayers with tax cuts out of 23 million Filipino families gain from TRAIN. The poorest 17.2 million or eight out of 10 Filipino families will pay TRAIN’s higher consumption taxes but without any personal income tax gains to offset these. The government is trying to distract the public from how a disproportionate part of TRAIN revenues come from the poorest majority of Filipinos due to additional levies on consumption goods including petroleum products and sugar-sweetened beverages, said Africa.

IBON warned the public to be more discerning about the government claims and not to take these at face value. Yet the country can only start to take steps to real solutions when there is more candor and honesty, rather than self-serving propaganda, about the real problems the economy and the people face. #

Slower economy affirms undue hype over credit rating upgrade

Slower gross domestic product (GDP) growth during the first quarter of 2019 belies any claim of a healthy Philippine economy.

Research group IBON stressed that the Duterte administration’s enthusiasm over the recent credit rating upgrade that the country got is unwarranted.

Instead of hailing business-biased programs, government should look to more sustainable undertakings in order to push genuinely inclusive economic growth.

The Philippine Statistics Authority (PSA) reported that Philippine GDP grew at its slowest in 16 quarters at 5.6% in the first quarter of 2019 since the 2015 first quarter GDP growth rate of 5.1%.

This is slower than the 2018 first quarter GDP growth of 6.5 percent.

Trade and repair of motor vehicles, motorcycles, personal and household goods and financial intermediation were the drivers of the first quarter growth with faster rates, but the rest of the economic sectors slowed down.

Agriculture had stagnant growth in the last three years, while manufacturing and real estate registered the slowest first quarter growth in the past decade.

News of the economy’s slower growth came at the heels of a credit rating upgrade of BBB+ from Standard & Poor’s, which the Duterte administration attributes to its economic reforms.

The administration’s economic team is also hopeful that with the credit rating upgrade the country could encourage and attract more foreign investments.

IBON however said that the slowdown proves the Duterte administration’s economic centerpiece to be unsustainable, all the more rendering the credit rating upgrade to be meaningless.

The unsustainability of the infrastructure program, Build Build Build, IBON pointed out, was underscored by the slowdown of the construction and real estate sectors, which the National Economic and Development Authority (NEDA) attributed to the delayed enactment of the 2019 national budget.

Construction slowed significantly to 3.9% in the first quarter of 2019 from 10.2% in the same period last year.

A closer look reveals that public construction nosedived from 22.6% to -8.6% during the same period.

Private construction, meanwhile, was slightly faster from 8.1% to 8.6% within the same period, however registering a substantial slowdown from 19.3% in the fourth quarter of 2018.

Real estate, renting and business activities continued its slowdown from 8.7% in the first quarter 2016 to 4.1% in the first quarters of 2019.

IBON added that the budget delay, which reportedly stifled government spending as agencies were compelled to operate on a reenacted 2018 budget, even puts government’s determination for rapid growth into question.

Any government that is solid on its development vehicle, in this case, an ambitious infrastructure program, would not waste time to promptly allocate the needed budget for it, said the group.

IBON said that instead of focusing on the infrastructure program to boost GDP growth, loans, investments, and even employment, government should exert greater efforts towards sustainable sources of inclusive growth.

The group noted that contrarily, the country’s production sectors are stagnant or on a continuous slowdown.

IBON noted that growth in agriculture, fishery, and forestry fell to 0.8% in the first quarter of 2019 from an already negligible 1.1% in the first quarter of 2018.

Manufacturing slackened further to 4.6% from 7.3% in the same period.

Agriculture registered 1.7 million jobs lost from January 2018 to January 2019, the largest contraction of agriculture jobs across all January rounds post-Marcos administration.

Manufacturing created only 110,000 jobs in the same period, only a fourth of the seasonal jobs created in construction.

IBON reminded that government’s bid for the pro-business Build Build Build and for foreign investments will not bring long-term benefits to the country unless accompanied by a solid agriculture and industry centered development plan.

Without boosting the country’s production base, sustainable and inclusive economic growth will remain elusive, said the group. #