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Big stimulus bill prioritizing aid more urgent than easing foreign restrictions–IBON

Research group IBON said that a real stimulus package that prioritizes emergency cash subsidies, support for small businesses and farmers, and strengthening the health system should be top of lawmakers’ legislative priorities.

This is more critical, the group said, than the bills lifting limits on full foreign ownership in certain economic sectors which the President recently certified as urgent.

IBON said that containing the pandemic, helping the sick, and helping millions of Filipinos badly affected by job losses and falling incomes need immediate attention.

Prioritizing bills to attract foreign investors now is misplaced, and legislators’ attention is much better spent on the country’s more pressing needs, the group said.

Pres. Duterte certified as urgent amendments to the Public Services Act, the Foreign Investments Act, and the Retail Trade Liberalization Act.

The amendments seek to allow full foreign participation in public services such as transportation and communications; lower the number of local hires required of foreign companies in the country; and lower the paid-up capital for foreign enterprises here, respectively.

IBON stressed that the enhanced community quarantine (ECQ) and modified ECQ (MECQ) in the NCR+ only added to the 12.1 million unemployed and underemployed Filipinos already as of February 2021.

The most badly affected are the majority of informal workers especially in retail trade, carinderias, transport and small businesses, and in the hotel and restaurant, transportation and storage, and manufacturing sectors.

The group also said that some 4.9 million poor and low-income families in the Greater Manila area are extremely vulnerable to any income losses from not having any savings to cushion interruptions of their livelihood.

The impact of the ECQ and MECQ will affect these distressed households the most. IBON also said that as much as 189,000 small businesses may have closed nationwide by February, with many likely being in the Greater Manila area.

The continued spread of COVID-19 shows how dismal the government’s testing and tracing efforts to track the virus are over a year since the pandemic hit.

Infected people continue to circulate and too many of those who eventually get sick are not even able to get proper treatment.

IBON blamed this on the government’s tepid response, which falls far short in dealing with the situation.

The Philippines’ fiscal response, equivalent to just 3.8% of gross domestic product (GDP), is among the weakest in Southeast Asia, according to the Asian Development Bank (ADB).

Economic recovery is hampered by the spread of COVID-19 and the lack of fiscal stimulus.

IBON pointed out that the 11.3% increase in government spending last year was even below the average annual increase of 14.3% from 2017-2019.

There is also little aid forthcoming, which the group scored as insensitive. The Php239.3 billion allotment for COVID aid under Bayanihan 1 was reduced to just Php22.8 billion under Bayanihan 2, and even further to Php18.4 billion under the 2021 budget.

Despite tight quarantine levels being sustained beyond two weeks since end-March, the government has not spoken of any addition to the Php23 billion in aid for 22.9 million affected individuals in NCR+.

The Duterte administration’s refusal to spend what’s needed to address the pandemic crisis means that any measure that increases spending on COVID-19 response is urgent and very welcome, IBON said.

In its own recommendation for a Php1.5-trillion expansionary fiscal policy, IBON proposes Php540 billion in emergency cash subsidies for 18 million poor and low-income families (Php10,000 per month for three months); Php101 billion in wage subsidies to micro, small and medium enterprises (MSMEs) to support a Php100/day wage increase for three months; Php40.5 billion for cash-for-work programs; Php220 billion in agricultural support; Php200 billion in financial assistance for MSMEs especially those that are Filipino-owned and domestically-oriented; Php78 billion in financial assistance for informal earners; Php200 billion in COVID-19 health response; and Php113 billion to fund distance education.

The group also cited the Makabayan bloc’s House Bill 7620 or the People’s Strategy for Strengthening Health, Social Protection, Economic, and Local Industrial Development (SHIELD) and House Bill 8628 or the Bayanihan to Arise as One Act (Bayanihan 3) sponsored by House of Representatives Speaker Lord Velasco and Marikina Representative Stella Quimbo.

SHIELD’s Php1.57 trillion budget includes allocations for free and intensified COVID-19 mass testing, treatment, tracing and mass hiring of healthcare and non-healthcare personnel, monthly subsidies for the unemployed, stipends for students, and strategic economic programs.

Bayanihan 3 meanwhile allocates Php420 billion for subsidies to small businesses, businesses in critically-impacted sectors, social amelioration for households, assistance to agriculture producers, and aid for the unemployed.

IBON said that the Duterte administration and lawmakers should give the greatest attention to these proposals which are most deserving of being certified as urgent.

Every additional COVID-19 response measure over the meager amounts allotted by the administration will help the country get out of this crisis faster, stressed the group, whereas bills expanding foreign businesses’ profit-making will not be of any help at all. #

14 Charts: What the Government Has Done to Our Pandemic Economy

by IBON Communication

If you bothered to start to read this then you probably know by now that the 9.5% contraction of the Philippine economy last year was the worst on record – which is to say since the end of World War II which is only when gross domestic product (GDP) started to be estimated for the country.

he government blames the bad economic performance on the pandemic. Well, COVID-19 certainly was a problem for the country.

In September last year, the well-respected Lancet medical journal reported to the United Nations 75th General Assembly that the Philippines ranked 65th out of 91 countries worldwide in terms of COVID-19 response. We were already the worst performer in Southeast Asia then.

The Lowy Institute came out with a similar study last month. In the chart showing the Philippines and a few of our Southeast Asian neighbors, a higher line means better performance in dealing with COVID-19 as the weeks go by. The Communist Party-led Socialist Republic of Vietnam was a star performer from the very beginning.

The Philippines fared even worse in the Lowy Institute study and placed 79th out of 98 countries worldwide. The only countries that ranked lower in Asia were Bangladesh (84th), Indonesia (85th), and India (86th). Perhaps not coincidentally, what the four worst performing countries in Asia have in common is that the pandemic hit as they all struggled with authoritarian leaders and democratic decline.

Effective public health response is the most important starting point of good COVID-19 response without which other measures wouldn’t get much traction. But the economic response is also very important.

Unfortunately the Philippines lagged badly even here and, measured as share of gross domestic product (GDP), had among the smallest fiscal response in the region. The poor public health response combined with the trifling fiscal response to result in the Philippines having the worst economic performance in the region.

And is actually set to have the worst performance not just in the region but to as far away as South Asia and across East Asia.

The Duterte administration insists that it was a choice between health and the economy, kalusugan or kabuhayan, and portrayed itself as having agonized but made the difficult choice to prioritize health. The economic collapse was the price to pay, it said.

But that is a false choice – both could have been attended to well as the experience of the likes of Vietnam and Thailand have shown.

And it’s also not really the choice the administration made. In terms of COVID -19 response, the choice they made was the militarist one to treat the people as the enemy and rely on harsh lockdowns and long community quarantines. And also the choice to prioritize creditworthiness over spending to contain the pandemic and to ease the suffering of tens of millions of Filipinos.

The Duterte government chose not to spend. In the first 11 months of 2020, it only spent Php3.69 trillion which is just an 11.6% increase from the same period in 2020. Unless government spending picks up substantially in December, the last month of the year, this means that it even underspent its 2020 budget which is supposed to be as much as 13.6% more than the 2019 budget.

The historical annual average increase of budgets for the last four decades is 11.1% so the government can’t claim that there’s any stimulus happening.

And so the economy’s unprecedented collapse – because the pandemic was not contained and then because the government did not spend to stimulate it.

Hotels and restaurants, transport and storage, and construction were hit especially bad. Investments and foreign trade as well.

The biggest job losses were in hotels and restaurants, transport and storage, and manufacturing.

Agricultural employment increased – maybe partly because so much of farming and fishing is physically-distanced already, and maybe partly because retrenched and laid-off workers thought to find work there instead. Somewhat surprisingly, employment in education rose.

The biggest job losses were in hotels and restaurants, transport and storage, and manufacturing.

Agricultural employment increased – maybe partly because so much of farming and fishing is physically-distanced already, and maybe partly because retrenched and laid-off workers thought to find work there instead. Somewhat surprisingly, employment in education rose.

The drop in employment was unparalleled. In April 2020, at the height of the government’s lockdown, the number of employed suddenly fell to 33.8 million which was as low as a dozen years before in 2008.

In short, there’s a huge social crisis with millions of unemployed, poverty increasing, and hunger worsening.

Yet the Duterte administration seems oblivious and COVID-19-related emergency cash assistance, or ayuda, has dwindled to almost nothing this year – while corporations (especially large and foreign firms) are being given Php133 billion in corporate income tax cuts.

Meanwhile, hundreds of thousands of distressed micro, small and medium enterprises (MSMEs) are getting scant support. Various surveys by the International Trade Center (ITC), Department of Labor and Employment (DOLE), United Nations Development Program (UNDP) and World Bank reported as much as 10-15% of businesses expecting to close permanently.

Yet, according to the president’s reports to Congress, Bayanihan 1 and Bayanihan 2 have extended financing support to less than 28,000 by the end of last year.

The government’s preferred approach of using monetary and financial policy to stimulate the economy simply isn’t working. Despite hundreds of billions of pesos in liquidity poured into the economy and interest rates down to record lows, businesses aren’t borrowing – with loan growth even contracting for the first time in 14 years.

This is most of all because so many ordinary Filipinos with no work and no incomes just don’t have enough money to spend so businesses have no reason to stay in or expand their businesses.

Now it’s true that the government is grappling with record budget deficits…

… and with record debt.

The problems are huge but the equally huge solutions are well within the capacity of the government to implement if it so wanted. The Philippines needs a much more ambitious COVID-19 economic response than the Duterte administration’s current business-as-usual approach.

In broad strokes, the Duterte administration has to take much more decisive measures to contain the pandemic such as by: tracing better, more judicious quarantines, and more rapid isolation; giving more emergency cash subsidies and support to MSMEs; and actually starting on long-term reforms to strengthen domestic agriculture and build national industry.

Most of all, it has to respond in a much more rational and humane manner. Too many Filipinos and their families are suffering from the government’s inaction, and too many small businesses are distressed from being left behind.

IBON takes up the economy’s problems in more detail and outlines possible solutions more concretely in our forthcoming Birdtalk paper. Please have a look at it! #

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

Shifting to MGCQ a short-sighted and desperate move without containing pandemic

By IBON Communications

Research group IBON said that lifting COVID-related restrictions to boost the economy is a short-sighted and desperate move amid continuing failure to contain the pandemic. The group agreed that the government’s excessive quarantine restrictions since last year are behind the economy’s unprecedented and continuing collapse. IBON however said that easing restrictions will not spur recovery without a real fiscal stimulus while risking the more rapid spread of COVID-19.

Economic planning secretary Karl Kendrick Chua recently advised Malacañang to put the entire country under modified general community quarantine (MGCQ). The ‘less restrictive’ MGCQ will supposedly allow the resumption of business activities previously limited under the pandemic lockdown.

IBON pointed out that the proposal to ease restrictions comes while the number of COVID-19 cases has been increasing since the start of the year. The 9,161 cases in the first week of the year increased to 10,741 so far in the week February 4-10. Data for this most recent week may even still be incomplete because of delays in reporting. The group asked where the optimism that the coronavirus is contained is coming from.

IBON stressed that the administration needs to greatly improve its measures to contain COVID-19 instead of relying on its favored blunt instrument of protracted community quarantines. The group enumerated the measures needed as better testing, more aggressive contact tracing, selective quarantines of possible cases, and speedy isolation of confirmed cases. With the number of cases still increasing, easing restrictions without these measures in place risks COVID-19 spreading even faster.

At the same time, IBON added, shifting to MGCQ may not even spur the economy all that much because the government still refuses to spend on any real fiscal stimulus. The group stressed that significantly higher levels of government spending are needed to make up for the lockdown-driven collapse in consumption and investment. This is more so given the now record joblessness and widespread loss of incomes and savings.

Government first of all needs to contain the pandemic better, IBON said. On top of this, it simply has to spend more to help households and small businesses cope with record jobs and income losses and to recover from the economic shock, stressed the group.

The group pointed out how the record 9.5% contraction of the economy in 2020 was substantially due to how the Philippine government refused additional spending last year. In the first 11 months of 2020, its disbursements only increased by 11.6% which is not just below the originally programmed 13.6% increase for the year but even lower than the average 12.9% increase in spending over the period 2017-2019. 

IBON also highlighted how spending even slows this year with the Php4.5 trillion 2021 national budget just a 9.9% increase from the 2020 budget. As it is, the Philippine COVID-19 response is the smallest of the major countries of Southeast Asia at just 6.3% of GDP according to the Asian Development Bank (ADB).

IBON proposes the following to address people’s urgent needs and stimulate the economy:

  1. Php10,000 monthly emergency cash subsidies to 18 million poor and low-income families (poorest 75% of families) or Php10,000/month for up to three months or Php5,000 for six months. This amount comes to Php540 billion.
  2. Php100 emergency wage relief for workers (towards eventual implementation of a Php750 national minimum wage). Micro, small and medium enterprises (MSMEs) can be supported to give this for three months with a Php101 billion fund.
  3. Php40.5 billion cash-for-work programs for the unemployed.
  4. Php78 billion financial assistance (zero/low interest rate and collateral-free loans) for informal earners.
  5. Php200 billion in financial assistance (zero/low interest rate and collateral-free loans) prioritizing Filipino-owned and domestically-oriented MSMEs.
  6. Php220 billion in agricultural support to increase the productivity of farmers and fisherfolk.
  7. Php200-billion COVID-19 health response and Php113-billion distance education to ensure quality education.

The group also stressed that the government can finance these if it really wanted to. IBON identified a universe of at least Php3.9 trillion in funds from which realignments can be made, Php1 trillion in emergency bonds and other government securities, Php391.9 billion in immediate revenues from progressive taxes especially a wealth tax, and at least Php333 billion more from a land value tax. #

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

Wage hike necessary, overdue amid pandemic and high prices

The Duterte administration gave least number of wage hikes and lowest wage increases of any administration in past 35 years.

by IBON Media & Communications

Research group IBON said that, amid rising prices of basic commodities, minimum wage earners are suffering from how the Duterte administration has been giving the least number of wage hikes and lowest wage increases of the past six administrations in the post-Marcos era. This only made working class families even more vulnerable to the economic shocks triggered by the pandemic. Multiple strategies are needed to arrest the economic distress of poor and low-income households especially since the onset of the pandemic.

IBON noted how the real minimum wage, or the value of wages after adjusting for inflation, is worth 7.2% less today than at the start of the Duterte administration. (See Table) This does not even yet fully include the recent surge in prices of pork, fish, chicken and vegetables. IBON estimates that the real value of the National Capital Region (NCR) minimum wage has fallen to Php434.47 from Php468.06 in June 2016. This is the lowest real wage in over eight-in-a-half years or 103 months.

The Duterte administration was sparing with its wage hikes even before the pandemic. The NCR minimum wage was only increased twice, in September 2017 and November 2018, and by such small amounts that they did not even make up for inflation. When the lockdowns started in March 2020 the real value of the minimum wage was already 3.6% less than in June 2016 – this only deteriorated further to being 7.2% less today.

IBON pointed out that other administrations hiked wages six or seven times and that even the Estrada administration hiked wages twice in its short 2 ½ years in power. These resulted in the real minimum wage increasing by 2.7% (Arroyo) to as much as 54% (Cory Aquino) compared to the more or less continuous decline under the Duterte administration.

It has been more than two years or 27 months since the Duterte administration’s last wage hike to Php537 in November 2018, said IBON. This is the longest period without an increase since July 2004 under the Arroyo administration when the wage increase came after a dry spell of 29 months.

IBON noted that the current minimum wage is even further away from meeting the basic needs of workers’ families. The Php537 minimum wage in NCR is Php520 or 49% short of the Php1,057 family living wage or the amount a family of five needs for a decent living as of December 2020.

As it is, the December 2020 inflation rate of 3.5% is the highest in 21 months, mainly due to higher inflation in food and non-alcoholic beverages, health and transport. The prices of pork, ampalaya, sitao, cabbage, carrots, habitchuelas, tomato, potato and eggplant significantly went up from anywhere between Php40 to Php120 per kilo since December last year. Price increases were even worse for the poorest 30% of households nationwide with a 4.3% inflation rate.

IBON said that the Duterte administration needs to give much greater attention to alleviating widespread economic distress among poor and low-income families. The most urgent measure are new cash subsidies of Php10,000 monthly for at least 2-3 months especially while record unemployment and falling household incomes are not resolved. Price controls are also needed on the food items whose prices are soaring especially amid reports of alleged exploitative pricing by wholesale and retail traders.

The Duterte administration however also needs to go beyond short-term damage control, stressed IBON. The long-term solution to rising food prices is for meaningful government support for farmers and fisherfolk to increase agricultural productivity and output. Yet, IBON pointed out, the share of the national government budget for agriculture has been falling from 3.6% in 2019 to just some 3.2% in 2021.

IBON moreover stressed that a substantial wage hike remains just and necessary even amid the pandemic economic shock. The group said that it is incumbent on the government to come up with schemes to enable a wage hike that increases incomes of low-income households and which will also stimulate aggregate demand in the economy. Among others, this can include mandating higher wages while giving wage subsidies to micro, small and medium enterprises (MSMEs). Wage hikes are long overdue and it is unfair for the working classes to always be made to bear the burden of adjustment to economic crises. #

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

IBON debunks economic Cha-cha movers’ claims on FDI

Claims that changing the supposedly restrictive economic provisions of the 1987 Constitution and liberalizing foreign direct investment (FDI) into the country will help economic recovery and lead to development are unfounded. On the contrary, said research group IBON, further FDI liberalization will have long-term adverse impacts on national economic development.

In its Birdtalk semi-annual discussion of economic and political trends, IBON debunked three major myths about FDI and development.

First, increasing FDI is not in and of itself necessary for development. South Korea and Taiwan are the last newly-industrialized countries (NICs) to graduate to developed country status. They did this in the 1970s and 1980s with less FDI than the Philippines is getting today, according to data from the United Nations Conference on Trade and Development database (UNCTADStat).

The two NICs had growth rates averaging some 7-10% in the fifteen years between 1970-1984, especially on the back of rapid industrial development. (See Table) They did this with FDI inflows over that period averaging just 0.5% of gross domestic product (GDP) in the case of South Korea and just 0.4% in the case of Taiwan.

In stark contrast, FDI inflows to the Philippines are over three-fold these and averaged 1.6% of GDP in 2005-2019 but with growth at an annual average of only 5.8 percent. In 1984, FDI inward stock was equivalent to just 1.7% of GDP in South Korea and 5% in Taiwan. In contrast, FDI inward stock in the Philippines was already as much as fourteen-fold that and equivalent to 23.1% of GDP in 2019.

These indicate that the two East Asian NICs rapidly developed during their break-out period in the 1970s and 1980s while having much less FDI than the Philippines today. South Korea and Taiwan are today still less reliant than the Philippines on FDI, in relative terms. Measured as share of GDP, FDI inward flows and stock to them are smaller than FDI to the Philippines over the period 2015-2019.

Second, FDI is not in and of itself sufficient for development. Despite hysterical claims that the Philippines is being left behind in the FDI race, FDI to the country has soared. FDI inward flows have increased over thirty-fold from an annual average of US$187 million (equivalent to 0.5% of GDP) in 1980-1984 to US$6.3 billion (2% GDP) in 2015-2019.

This includes manufacturing FDI tripling from an annual average of US$286 million in 2000-2004 to US$728 million in 2015-2019, according to data from the Bangko Sentral ng Pilipinas (BSP). Yet manufacturing’s share in GDP has actually fallen from 22.5% in 2000 to 18.6% in 2019, with the share of manufacturing to total employment also falling from 10% to 8.5% over the same period.

This includes US$8.3 in foreign investments by Intel, Hanjin and in the Malampaya project. Yet despite headline-grabbing billions of dollars in investments and exports and as much as around 35,000 in jobs created over decades in the country, the Philippines has still not developed any Filipino electronics, shipbuilding or natural gas industries.

Third, increased FDI may not even be immediately forthcoming while the constriction of the policy space for economic development is going to be foreclosed. Economic cha-cha proponents decry the Philippines supposedly having among the most restrictive FDI policy regimes in the world. Yet there does not in general appear to be any strong correlation between FDI restrictiveness and FDI inward flows.

Plotting FDI inward flows as a share of GDP against the FDI Restrictiveness Index of the Organization for Economic Cooperation and Development (OECD), both for 2019, does not even support the idea that less restrictive economies will receive more FDI. (See Chart) The uncertain effect on FDI flows is made more uncertain by how UNCTAD also reports FDI inflows generally falling even before the pandemic hit from US$2 trillion in 2015 (2.7% of GDP) to US$1.5 trillion in 2019 (1.8%).

On the other hand, removing the last remaining protections against FDI through economic Cha-cha will make the nationalist and pro-Filipino economic policies needed even more difficult to put in place. Potentially powerful Constitutional provisions to regulate foreign investment for development – as the currently developed countries have all done in their respective periods of break-out progress – will be lost.

IBON stressed that the economic arguments for lifting restrictions on foreign ownership in crucial areas of the economy – natural resources, land, public utilities, education, mass media and advertising, and any identified strategic enterprises – need to take much greater consideration of historical facts and the current global context.

The research group said that the economy’s development lies in using the protections in the Constitution to gain from foreign investment, not in taking away the protections and giving self-interested foreign investment free rein over the domestic economy. Foreign capital can contribute to development but IBON stressed that responsible government intervention and regulation is needed to create meaningful linkages and long-term benefits for the economy. #

Inflation highest in 21 months, NEDA warns of continuing increase

The country’s Inflation rate accelerated to 3.5% in December 2020, driven by the increase in the prices of food non-alcoholic beverages, transport, and restaurant and miscellaneous goods and services, the National Economic Development Authority (NEDA) reported Tuesday.

The inflation rate last month is higher than the 3.3% in November 2020 and the 2.5% in December 2019.

Among the sub-groups, prices of vegetables and meat significantly increased from the previous month, traced to lower production following the damage caused by previous typhoons, the NEDA said.

The increase in the prices of meat inched up for the third consecutive month owing to the decline in domestic swine production due to the African Swine Fever (ASF), the agency added.

NEDA said that country’s average inflation rate for 2020 is at 2.6%, higher than the 2.5% the previous year but within the 2% to 4% target range of the government.

Acting socioeconomic planning secretary Karl Kendrick Chua blamed the coronavirus pandemic and the string of calamities that hit the country for the increase.

“The imminent threat of natural calamities every year highlights the need for long-term solutions such as infrastructure investments that would improve flood control, water management and irrigation systems, reforestation, climate-resilient production and processing facilities, among others,” Chua said.

Chua warned that the ongoing La Niña weather phenomenon may continue to adversely affect the economy.

Inflation hardest for the poor

Research group IBON noted that the December 2020 inflation rate is the highest inflation in 21 months, and even higher for the poorest 30% of Filipino households at 4.3%.

IBON said that even Philippine Statistics Authority (PSA) data show that the December inflation rate is the highest since March 2019.

“The prices of food and non-alcoholic beverages rose the fastest at 4.8% last month from 4.3% in November 2020. Inflation in health and transport was also higher at 2.6% and 8.3%, respectively,” IBON reported.

“The higher December 2020 inflation figures underscore the urgency of giving poor and low-income families additional emergency cash subsidies. The faster increase in prices is all the more burdensome due to record joblessness and decreasing incomes amid the pandemic lockdown,” the group said.

IBON blamedthe government’s continuing failure to contain the pandemic it said resulted in more unemployed Filipinos today than at any time in the country’s history.

The group estimates unemployment in October 2020 at 5.8 million Filipinos — or two million more than the official 3.8 million count — or an unemployment rate of 12.7 percent. # (Raymund B. Villanueva)

Govt stinginess worsens Filipinos’ suffering and PH economic collapse

by IBON Media & Communications

The -11.5% growth, or contraction, in gross domestic product (GDP) in the third quarter, confirms that the Philippines is on its way to becoming the worst performing economy in Southeast Asia in 2020. The economy is saddled by the Duterte administration’s refusal to spend on aid for Filipino families and support for small businesses so needed amid the pandemic.

A fiscal response commensurate to the crisis at hand is critical but the economic managers are tying the government’s hands. The government package’s demand-side effort is grossly insufficient and even undermines its supply-side measures.

The Php3 trillion in government spending in the first three quarters of 2020 is only a 15.1% increase from the same period the year before. While this is larger than the 5.5% year-on-year increase in the same period in 2019, it is still much less than the corresponding 23.6% increase in 2018.

It remains to be seen how much more spending the administration can manage in the fourth quarter of 2020. The Bayanihan 2 law is supposedly the government’s main response to COVID in the remaining months of the year.

However, as of the president’s last report to Congress at the start of November, it appears that at most just Php28.4 billion has been spent so far. With only a little over a month left in the law’s effectivity, this is just 20.3% of Bayanihan 2’s Php140 billion in appropriations and just 17.1% of its Php165.5 billion including its standby fund. The report mentioned Php76.2 billion in allotments and releases which appears relatively large.

However, the same report did not mention any actual disbursements in major items especially for aid or support to small businesses or agriculture. These items with allotments released but not reported spent include: Php6 billion for the social amelioration program (SAP); Php13.1 billion for the COVID-19 Adjustment Measures Program (CAMP), Tulong Panghanapbuhay sa Ating Disadvantaged/Displaced Workers (TUPAD) and Abot-Kamay ang Pagtulong (AKAP) programs; Php9.5 billion for public utility vehicle (PUV) programs; and Php12.1 billion for the agriculture stimulus package. While there is supposedly Php8.1 billion for small businesses, only Php893 million worth of loans were reported.

There is also little real stimulus in the proposed 2021 budget. The proposed Php4.51 trillion budget is a 9.9% increase from the 2020 budget. This is however smaller than the 13.6% increase in the programmed 2020 budget from the year before, and even smaller than the historical annual average 11.1% increase in the national budget over the 35 years of the post-Marcos era. The Development Budget Coordination Committee (DBCC) actually projects an even smaller 5.3% increase in 2022 which will be less than half the historical average.

The DBCC initially projected the economy to have -5.5% growth in 2020. To achieve this, GDP will have to grow an impossible 6.6% in the last quarter of the year which is all the more impossible with the administration refusing to give meaningful aid to millions of distressed families and small businesses including in the country’s vast informal sector.

Additional direct cash assistance to households is already pitifully small under Bayanihan 2 and virtually non-existent in the proposed 2021 budget. The record joblessness and collapse in family incomes because of the government’s poor COVID response compels much larger support to alleviate wide and deep suffering.

The economic managers also keep insisting that the CREATE law’s corporate income tax cuts will most of all benefit micro, small and medium enterprises (MSMEs). This is untrue. Large taxpayers account for an overwhelming 72% of all corporate collections as of 2019 which means that large firms will be the biggest beneficiaries of CREATE. Moreover, many MSMEs are also unregistered and in the informal sector so will not really benefit from any tax cuts under CREATE.

The International Monetary Fund (IMF) projects the economy to contract with -8.3% GDP growth in 2020. This is the worst GDP performance in the region with other countries either contracting less or even registering positive growth: Thailand (-7.1%), Malaysia (-6%), Cambodia (-2.8%), Indonesia (-1.5%), Singapore (-6%), Brunei (0.1%), Lao PDR (0.2%), Vietnam (1.6%), and Myanmar (2%).

Even the IMF’s projected 7.4% GDP growth rebound in 2021 will still not be enough to bring the economy back to its level last year in 2019. As it is, the 2020 Philippine economy is going to be as small as it was three years ago in 2017, and with GDP per capita approaching as low as it was in 2016.

The Philippines’ COVID response is the smallest among those announced by the region’s major economies, according to the Asian Development Bank’s (ADB) COVID policy tracker. This earlier reported the Philippines’ response as equivalent to just 5.8% of 2019 GDP which is smaller than in Singapore (26.2%), Malaysia (22.7%), Thailand (16%), Indonesia (10.9%), and Vietnam (10.1%).

Months into the worst economic collapse in the country’s history, the Duterte administration’s obsession with creditworthiness and the myth of a fundamentally strong Philippine economy is preventing it from taking the measures needed for real and rapid recovery. Its insensitivity is placing the burden of rebound and protracted recovery on millions of poor families and distressed small businesses. #

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

Swept away – Philippine agriculture bears wrath from government neglect

by IBON Media & Communications

Government’s long-time neglect of the country’s agriculture sector has been disastrous to small producers. The recent series of super-typhoons – Quinta, Rolly and Ulysses – has highlighted this.

The country’s geophysical characteristics as well as geographic location make it exposed to natural hazards. What makes it extremely vulnerable to risks is government’s lack of relevant policies to strengthen the agriculture sector and the larger economy, including policies and practice of disaster risk reduction and management (DRRM).

Fresh damage

According to a combined bulletin by the Department of Agriculture-Disaster Risk Reduction Management Operations Center (DADRMMOpCen), Quinta left damages to agriculture amounting to Php2.7 billion, with a volume production loss of 149,475 metric tons (MT) in Regions I, II, III, CALABARZON, MIMAROPA, V, VI, and VIII. This affected 57,858 farmers and fisherfolk with 96,474 hectares of agricultural areas.

Still reeling from this devastation, the regions again felt Rolly’s wrath and sustained Php5.79 billion in damages and losses affecting 48,682 farmers and fisherfolk in 127,298 hectares of agricultural areas. The volume of production loss was at 177,091 MT. The National Disaster Risk Reduction Management Council (NDRRMC) further reported that Rolly damaged 170,773 houses and infrastructure worth some Php12.9 billion.

Then, Ulysses happened, leaving 73 dead, 24 injured, and 19 missing in Regions II, CALABARZON, V, and CAR. Damages to agriculture are estimated to be worth Php4.2 billion, to infrastructure some Php6.1 billion, with a total of 67,391 houses partially or totally destroyed. Affected were 102,500 farmers and fisherfolk in 99,660 hectares of agricultural areas. Production loss in commodities including rice, corn, high value crops, fisheries, livestock and poultry, irrigation facilities, and agricultural infrastructures was estimated by the DA to be at 167,385 metric tons (MT).

Some 62,220 hectares planted to rice alone sustained damages and losses amounting to Php1.98 billion with volume of production lost at 124,437 MT. Some 14,132 hectares planted to high variety crops (HVC) areas sustained Php907.7 million worth of damages with volume of production lost at 35,487 MT. As for areas planted to corn, up to 23,308 hectares were affected, with volume of production lost at 7,461 MT amounting to Php371 million. In the fisheries, some Php712 million was lost in terms of affected fin fish, milkfish, hito, tilapia, carp, crabs, and prawns. Livestock and poultry sustained Php51.69 million in damages affecting 72,146 heads. Some Php11.9 million were damaged or lost in terms of irrigation and agriculture facilities.

Quinta and Rolly damages and losses totaled to Php8.46 billion affecting 106,540 farmers and fisherfolk in 223,772 hectares. Volume of production lost reached 326,566 MT. Combined estimates of damages and losses in the Philippine agriculture sector due to typhoons Quinta, Rolly and Ulysses are estimated to have reached some Php12.4 billion to date.

The devastation in agriculture was also grave particularly for Catanduanes province, a top producer of abaca in the country, which is second biggest world producer of the cash crop. According to the Philippine Fiber Development Authority (PhilFIDA), the province accounted for 30% of the country’s annual abaca output. But then Rolly battered Bicol and other abaca-growing regions – CALABARZON, MIMAROPA, and Eastern Visayas, resulting in Php1.2 billion worth of farm damages. The 30% decline in abaca output due to the typhoon as per the estimate of PhilFIDA would land at only 50,000 metric tons (MT) of produce, the crop’s lowest in 20 years. Using PhilFIDA estimates of Php1,000 income for every 10 kilos harvested, this decline is equivalent to a Php2.1 billion loss in farmers’ incomes.

What preparedness?

Government’s DRRM plan, actual implementation, recovery strategy, and even budget allocation of calamity funds are all telling – there is little acknowledgment of the Philippines being a calamity-prone country. It is no basis to say that the country is indeed disaster-prepared.

The Philippines ranks 9th among countries with the highest disaster risk index according to the World Risk Report of 2019. An average of 20 tropical cyclones enter the Philippine area of responsibility annually. Yet the budget allocation for disaster risk reduction in 2020 of Php16 billion declined from the already meager Php20 billion or 0.5% share in the 2019 national budget. The NDRRMC is again set to get Php20 billion in lump sum calamity funds in the 2021 national budget. But it remains a mere 0.4% of the total budget.

Components of the National Disaster Risk Reduction and Management Plan (NDRRMP) 2011-2028 are: disaster prevention and mitigation, disaster preparedness, disaster response, and disaster recovery and rehabilitation. This should mean building massive evacuation and shelter infrastructure, for instance. This should also mean making available competent education, health, and housing, and providing sufficient energy, water, communication and transport mechanisms that can withstand any weather hazard. For a largely agricultural country, it should also mean the availability of crop insurance, food stocks, production support at all times, whether or not during recovery, and other measures that ensure farmers, fisherfolk, and farmworkers’ continued sustenance when calamities strike. Neither the NDRRM Plan nor the DARRMOpCen explicitly mandate these as part of the mitigation and preparedness steps of DRRM.

The NDRRMC reported Php115 million worth of assistance provided to Ulysses victims. The DA assured Php400 million in Quick Response Funds and Php300 million worth of emergency loans with zero interest and no collateral, payable in 10 years under the Survival and Recovery (SURE) Loan Program of Agricultural Credit Policy Council (ACPC) for farmers and fishers affected by Quinta and Rolly. The agency has also assigned the Philippine Crop Insurance Corporation (PCIC) to provide insurance protection to farmers against losses arising from various calamities. Those insured under the PCIC are set to receive Php10,000-15,000 in insurance claims for damaged farm equipment, fishing boats, and gear. But this measure is premium-dependent and ties impoverished farm producers to indebtedness.

PCIC coverage is quite limited and leaves millions of agricultural producers behind. PIDS explains that the amount of cover is based on the cost of production inputs specified in the farm plan and budget submitted by the farmer upon application of insurance. Insurance premium rates vary based on the type of insurance cover, risk classification, type of farmer, and type of insurance cover availed. Premium for high value crop insurance is solely shouldered by the farmers, ranging from 2-7% of the total sum ensured. Premium rates for fisheries are solely determined by the PCIC.

According to latest available Philippine Statistics Authority (PSA) and PCIC 2018 figures cited by the Philippine Institute for Development Studies, only 2.2 million farmers in 1.8 million hectares are insured. This is a small number compared to the over 10.9 million farmers, farmworkers and fisherfolk in the government’s Registry System for Basic Sectors in Agriculture or RSBSA. It was also noted that while a huge chunk or 1.1 million of listed farm parcels reported by the Census of Agriculture and Fisheries (CAF) were less than 0.5 hectare in size, the penetration rate of the PCIC in these holdings was quite low compared to parcels of bigger sizes.

Long-time neglect of agriculture

Even given the backdrop of being a natural hazard-prone nation, government action for the farming and fisheries sectors has long-been either too little or too detrimental. Weather disturbances have even gotten worse over the years due to climate change, increasing further havoc on the country’s agriculture communities.

Philippine agriculture is in crisis, growing at an average 2.1% in 2017-2019, its slowest pace after 70 years of growing at 3.5% annually on the average. In the same period the sector lost over one million jobs. In the third quarter of this year, the sector grew only by 1.2%.

In 2018, the country’s agricultural trade deficit was the largest in history, and in 2019 the Philippines began importing its staple food rice.

However, despite the sector’s decline and disaster vulnerability, the budget for agriculture and agrarian reform averaged just a measly 3.6% of the total national budget annually from 2017-2019. This has been reduced further to 1.7% in 2020 and 1.6% for 2021 under the Duterte administration.

Calamity-battered Bicol

An example of the vulnerability and crisis of the country’s agriculture is the Bicol region. The region is prone to natural calamities such as typhoons, volcanic eruptions, drought and flooding, almost on a yearly basis. It is among the areas whose agriculture sector was hard-hit by the recent consecutive typhoons. The several calamities that have torn through the region in recent years resulted in billions of pesos in agricultural damage.

These include, for instance, tropical depression Usman which left Php1.6 billion worth of agricultural damages in Bicol at the end of 2018. Typhoon Tisoy, which hit the country in early December 2019, resulted in over Php1.7 billion worth of agricultural damages in the region, affecting its major crops. Bicol’s agriculture has also suffered crop losses from the El Niño drought last year and its abaca sector’s battle with the Abaca Bunchy Top Disease.

The region’s agriculture sector is now reeling from damages wrought by Quinta (Php395.8 million), Rolly (Php3.6 billion), and Ulysses (Php168.5 million).

Bicol’s abaca and coconut industries have not yet recovered from the havoc wreaked by Typhoon Tisoy. In the second quarter of the year, coconut production and abaca production both registered negative growth rates of 8 and 4 percent, respectively, from the same period last year.

Build Back Better” vs. inclusive response

The region’s disaster risk reduction bodies undertook early warning measures such as preemptive evacuation and advanced harvesting during typhoons Usman and Tisoy. In a way, mitigation was leveled-up. Yet, the Bicol Region’s agriculture sector, as with the rest of the country’s, was left vulnerable to destruction. The DADRROpCen practices the integration of DRR measures in the plans of government agencies. But like the NDRRMC plan, it is weightier on response, relief and recovery rather than building the core capacity of the agriculture sector. Making it flourish and able to stand on its own is not part of the plan.

The bottomline of the Philippines’ disaster risk reduction plan is the global-inspired “Build Back Better” which has been used in various calamities worldwide but saw big contractors and businesses taking the upper hand in rehabilitation and recovery. This is instead of focusing on really strengthening communities per se in terms of ensured rights to basic needs including food and jobs, adequate standards of living, a balanced ecology, ample services and development. These would be what will forge the capacity to withstand disasters.

In the case of agriculture, policies destroy rather than hone the sector’s own contribution to building this capacity. Decades of subscribing to global market dictates have crippled the agriculture sector and reduced it to being a supplier of cash crops, now being enhanced by the Plant, Plant Plant program. The National Land Use Act will accelerate the conversion of agricultural lands into commercial ones. Rice import liberalization meanwhile is destroying farmers’ incomes with falling palay prices and results in the shutdown of mills.

Through these policies, the government pushes Philippine agriculture off the cliff and keeps our farmers poor and vulnerable to calamities. Government lacks the sense of urgency to aid the calamity-stricken agricultural producers and only promises some farm inputs and limited financial assistance, not to mention in the form of burdensome loans. This jives with its non-interest to develop the sector other than for what the global market needs it to be.

The only way the country can really be disaster-prepared would be if risk reduction and response followed a comprehensive plan across pre-calamity and calamity scenarios. This needs to start with strengthening the heart of the economy and that is Philippine agriculture and manufacturing. Agriculture programs from the most token to those that destroy the industry and Filipino producers’ livelihoods must be stricken out especially liberalization and commercialized and profit-oriented insurance and credit-facilitation.

Land should be free for the tillers and not converted to non-agricultural use; the decision on how to make it productive theirs; give them substantial farm subsidies and direct farm facilities, machine and inputs support; and ensure their social protection. Especially during a pandemic such as the one that grips the nation and the world now, sustained financial assistance and direct support for producers is very much in order.

Governance that decides to sovereignly boost agriculture this way will be the same one that will forge policies and infrastructure for domestic industry, a healthy environment, people’s rights, and funding development, which are certain foundations of people-centered disaster preparedness. #

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

Govt stinginess worsens Filipinos’ suffering and PH economic collapse

Govt stinginess worsens Filipinos’ suffering and PH economic collapse

November 10, 2020

by IBON Media & Communications

The -11.5% growth, or contraction, in gross domestic product (GDP) in the third quarter, confirms that the Philippines is on its way to becoming the worst performing economy in Southeast Asia in 2020. The economy is saddled by the Duterte administration’s refusal to spend on aid for Filipino families and support for small businesses so needed amid the pandemic.

A fiscal response commensurate to the crisis at hand is critical but the economic managers are tying the government’s hands. The government package’s demand-side effort is grossly insufficient and even undermines its supply-side measures.

The Php3 trillion in government spending in the first three quarters of 2020 is only a 15.1% increase from the same period the year before. While this is larger than the 5.5% year-on-year increase in the same period in 2019, it is still much less than the corresponding 23.6% increase in 2018.

It remains to be seen how much more spending the administration can manage in the fourth quarter of 2020. The Bayanihan 2 law is supposedly the government’s main response to COVID in the remaining months of the year.

However, as of the president’s last report to Congress at the start of November, it appears that at most just Php28.4 billion has been spent so far. With only a little over a month left in the law’s effectivity, this is just 20.3% of Bayanihan 2’s Php140 billion in appropriations and just 17.1% of its Php165.5 billion including its standby fund. The report mentioned Php76.2 billion in allotments and releases which appears relatively large.

However, the same report did not mention any actual disbursements in major items especially for aid or support to small businesses or agriculture. These items with allotments released but not reported spent include: Php6 billion for the social amelioration program (SAP); Php13.1 billion for the COVID-19 Adjustment Measures Program (CAMP), Tulong Panghanapbuhay sa Ating Disadvantaged/Displaced Workers (TUPAD) and Abot-Kamay ang Pagtulong (AKAP) programs; Php9.5 billion for public utility vehicle (PUV) programs; and Php12.1 billion for the agriculture stimulus package. While there is supposedly Php8.1 billion for small businesses, only Php893 million worth of loans were reported.

There is also little real stimulus in the proposed 2021 budget. The proposed Php4.51 trillion budget is a 9.9% increase from the 2020 budget. This is however smaller than the 13.6% increase in the programmed 2020 budget from the year before, and even smaller than the historical annual average 11.1% increase in the national budget over the 35 years of the post-Marcos era. The Development Budget Coordination Committee (DBCC) actually projects an even smaller 5.3% increase in 2022 which will be less than half the historical average.

The DBCC initially projected the economy to have -5.5% growth in 2020. To achieve this, GDP will have to grow an impossible 6.6% in the last quarter of the year which is all the more impossible with the administration refusing to give meaningful aid to millions of distressed families and small businesses including in the country’s vast informal sector.

Additional direct cash assistance to households is already pitifully small under Bayanihan 2 and virtually non-existent in the proposed 2021 budget. The record joblessness and collapse in family incomes because of the government’s poor COVID response compels much larger support to alleviate wide and deep suffering.

The economic managers also keep insisting that the CREATE law’s corporate income tax cuts will most of all benefit micro, small and medium enterprises (MSMEs). This is untrue. Large taxpayers account for an overwhelming 72% of all corporate collections as of 2019 which means that large firms will be the biggest beneficiaries of CREATE. Moreover, many MSMEs are also unregistered and in the informal sector so will not really benefit from any tax cuts under CREATE.

The International Monetary Fund (IMF) projects the economy to contract with -8.3% GDP growth in 2020. This is the worst GDP performance in the region with other countries either contracting less or even registering positive growth: Thailand (-7.1%), Malaysia (-6%), Cambodia (-2.8%), Indonesia (-1.5%), Singapore (-6%), Brunei (0.1%), Lao PDR (0.2%), Vietnam (1.6%), and Myanmar (2%).

Even the IMF’s projected 7.4% GDP growth rebound in 2021 will still not be enough to bring the economy back to its level last year in 2019. As it is, the 2020 Philippine economy is going to be as small as it was three years ago in 2017, and with GDP per capita approaching as low as it was in 2016.

The Philippines’ COVID response is the smallest among those announced by the region’s major economies, according to the Asian Development Bank’s (ADB) COVID policy tracker. This earlier reported the Philippines’ response as equivalent to just 5.8% of 2019 GDP which is smaller than in Singapore (26.2%), Malaysia (22.7%), Thailand (16%), Indonesia (10.9%), and Vietnam (10.1%).

Months into the worst economic collapse in the country’s history, the Duterte administration’s obsession with creditworthiness and the myth of a fundamentally strong Philippine economy is preventing it from taking the measures needed for real and rapid recovery. Its insensitivity is placing the burden of rebound and protracted recovery on millions of poor families and distressed small businesses. #

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

Bayanihan 2 and 2021 budget leave millions of unemployed behind

by IBON Media & Communications

The latest July 2020 labor force survey (LFS) figures confirm the inadequacy of the Duterte administration’s response to what is developing into the worst jobs crisis in the country’s history. The Bayanihan 2 and the proposed 2021 national government (NG) budget give the appearance of assistance but will leave millions of jobless and distressed Filipinos behind. The level of aid for the people is much too small for the magnitude of the crisis at hand.

This year will likely see the biggest contraction in employment in the country’s history. Employment contracted by 1.2 million in July 2020 from the same period last year, falling to 41.3 million employed according to the latest LFS. This comes after the reported 8.0 million year-on-year contraction in April 2020. For the whole of 2020, IBON estimates employment to fall by 2-2.5 million from last year. This will far surpass the previous record employment losses of 833,000 in 1980 and 821,000 in 1997.

The crisis of joblessness is unprecedented. The official unemployment rate of 10% in July 2020 brings the average of the first three rounds for the year so far to 11% which is not likely to improve much even when the October round results come out. The 4.6 million officially reported unemployed in July 2020 is already 2.1 million more than in the same period last year.

Adding 4.6 million unemployed and the 7.1 million underemployed means that the government acknowledges at least 11.7 million Filipinos jobless or looking for additional work to increase their incomes in July 2020. IBON however has long pointed out that official unemployment figures since 2005 tend to underestimate the real number of unemployed Filipinos by around 2-2.5 million annually.

Moreover, the labor department has already reported 604,403 overseas Filipino workers seeking assistance of which only a little over one-third (237,778) have been helped so far. In a press briefing today, they also said that they expect another 200,000 to need help until the end of the year.

Official figures likely underestimate the extent of the problem. However, even going by these, the inadequacy of the government’s response to directly help the people is clear.

Bayanihan 2 promises Php5,000-8,000 in emergency cash subsidies and other assistance for poor households, displaced workers and OFWs. However, only Php19.2 billion is budgeted for cash subsidies and other assistance which is just 3.8 million beneficiaries at most. The aid will also just be a mere Php37-60 per person per day for a month or even less than the official Php71 poverty threshold.

In the proposed 2021 NG budget, there is no provision for substantial emergency cash subsidies beyond existing social welfare department programs such as the Pantawid Pamilyang Pilipino Program (4Ps) and smaller programs. Indigent pensioners are not getting any increase in their pensions. Even the labor department’s Tulong Panghanapbuhay sa Ating Disadvantaged/Displaced Workers and Government Internship Program (TUPAD-GIP) program gets just a meager Php3.2 billion increase to Php9.9 billion.

Micro, small and medium enterprises (MSMEs) are also not getting the focused assistance that they need. There are 997,900 MSMEs employing 5.7 million workers aside from hundreds of thousands more unregistered establishments with millions more workers. Formal sector establishments had over Php21 trillion in expenses in 2018. In July 2020, the DTI said that 26% of companies they surveyed closed operations and another 52% were only partially operating. Those partially operating also said their income was down by 90 percent.

The Php77.1 billion Bayanihan 2 budget for production and enterprise support will cover only a small fraction of workers in MSMEs, and is even shared with farmers and fisherfolk. In the proposed 2021 NG budget, the MSME Development Program is even getting a Php416 million budget cut to just Php2.3 billion. The budget of the Small Business Corporation (SBC) stays the same at just Php1.5 billion.

In their press briefing today, the economic managers projected a 12% unemployment rate in 2020 (mid-point of the Development Budget Coordination Committee estimate of 11-13%) improving to 6-8% in 2021 then 4-5% in 2022. These optimistic projections cannot materialize without substantially increasing aggregate demand through meaningful cash transfers to millions of distressed households and more support to hundreds of thousands of struggling MSMEs.

Tens of millions of Filipinos and their families will continue to suffer for years without a genuine stimulus program overriding the misguided fiscal conservatism and reckless optimism of the economic managers. #

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