Posts

Higher inflation for poorest Filipinos underscores urgent need for continued cash subsidies

by IBON Media & Communications

Research group IBON said that the higher inflation is problematic but particularly burdens the poorest Filipinos. Inflation rates for the 30% poorest households are higher than the national average.

Especially amid historic joblessness, this affirms how the government should continue giving cash subsidies as income support, the group said.

According to the Philippine Statistics Authority (PSA), headline inflation rose to 2.5% in June 2020 from 2.1% in May 2020.

Behind this uptick are price increases in: transportation, particularly tricycle fares; alcoholic beverages and tobacco; housing, water, electricity, gas, and other fuels; and communication.

However, the 3.0% inflation rate in June for the poorest 30% of households was higher than the headline inflation rate of 2.5 percent.

This means that the cost of living is rising fastest for the country’s poorest households.

IBON said that this is troublesome for millions of poor families suffering interrupted incomes and stingy emergency relief. 

IBON said that the rise in inflation despite repressed consumption during the lockdown is worrying and points to problems in supply and production.

The government is primarily responsible for ensuring these especially during a public emergency.

For instance, the group said, the notable increase in the transport index shows the government’s weakness in ensuring this vital public service.

Rising prices especially for the poorest affirms the urgency of continued income support, IBON said.

The number of beneficiaries getting the second tranche of emergency subsidies should not be limited. The 18 million poorest Filipinos, including the 5 million wait-listed beneficiaries of the Social Amelioration Program, should receive both the first and second tranches of the Php5,000-Php8,000 per-month emergency aid, said the group.

The government said that only those residing in enhanced community quarantine (ECQ) and modified ECQ areas will be getting a second tranche.

This is only 8.6 million families of the original 18 million target beneficiaries, and 3.5 million households of the five million wait-listed.

This also means that 10.6 million beneficiaries now in general community quarantine (GCQ) and modified (MGCQ) areas will have to make do with just their first tranche.

With the cost of living fast rising amid an even worsening pandemic, limiting the number of beneficiaries getting the second tranche of emergency aid is unconscionable, IBON said.

The government should even consider additional tranches for vulnerable households that continue to reel from lost livelihoods and income, said the group. #

= = = = =

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

The anomaly of transport modernization (Part II)

by Rosario Guzman

Read the first part here:

Government’s misplaced scheme

In many instances, the solution to the complex transport problems of Metro Manila lies in the physics of the problem, in the same way that dealing with COVID-19 requires medical science. But the Duterte administration has simply picked up its pre-COVID proposal of “jeepney modernization” and used the pandemic to justify finally pushing for it, amid protestations by jeepney drivers and the adverse impact on millions of commuters.

The government is a signatory to the Bangkok Declaration on Sustainable Transport Goals (Bangkok 2020) on “environmentally-sustainable” transport policy. This is also in relation to the ADB’s Sustainable Transport Initiative that is ultimately premised on the continuation of “free market” and “inclusive” economic growth. The Duterte government’s accomplishment in fulfilling Bangkok 2020 rests on the jeepney modernization program. Ultimately, this is important for the Duterte administration to attract transport infrastructure investments as well as to push for the sale of brand new, imported, so-called environment-friendly, and modern jeepneys.

Through the Omnibus Franchising Guidelines (OFG) that the DOTr issued on 19 June 2017, the government is requiring the make of the body and engine of the traditional jeepney to be compliant with the requirements set by the Land Transportation Franchising and Regulatory Board (LTFRB). These requirements definitely prioritize electric jeepneys (e-jeep), while pushing away the traditional jeepneys which need to go through numerous hurdles to get licensed to operate. These hurdles include: upgrading combustion engines to comply with Euro IV and similar emissions standards; complying with the LTFRB-set age-limit of oldest vehicle part; refurbishing and rebuilding that should pass the type approval system test; and still finally going through the Land Transportation Office (LTO) for a roadworthiness test to get registration renewal.

Concerned automotive engineers, scientists and mechanics contest the need to phase out traditional jeepneys and argue that the government should support locally manufactured environmental solutions. They also question the availability of the parts of the imported modern jeepneys in case of repairs, unlike with the traditional jeepneys that can be replaced easily. They also claim that the body engineering of the modern jeepneys is not suited to Metro Manila’s narrow roads and more prone to accidents. Environmentalists have also criticized the government’s going electric or Euro IV as hypocritical when its own energy program is reliant on coal and other fossil fuels.

But the OFG just keeps on narrowing the chances for traditional jeepneys to survive. The OFG also requires a fleet size of 15 units for any type of PUV for six months for new routes, which prevents small operators from applying for new franchises. Actually, even medium-scale operators – if they exist – are constrained and marginalized under the modernization program. The modern jeepney costs about Php1.6 million to as high as Php2.5 million, which means that an operator needs at least Php24 million to get a franchise.

The DOTr has stated that the government is not phasing out jeepneys but simply modernizing. However, the government plays with words. The jeepney modernization program will ultimately kill the livelihoods of thousands of jeepney drivers and complete the corporate capture of the ‘last-mile’ resort of millions of Filipino commuters.

Still pushing for Build, Build, Build and foreign ownership

The Duterte administration is also not compromising its Build, Build, Build (BBB) infrastructure projects, despite their questionable viability even before COVID-19 struck and their diminishing relevance now. Of the 100 infrastructure flagship projects (IFPs) worth Php4.3 trillion, 73 are for transport and mobility. The government does not have plans to strengthen economic production so the projects will just end up reinforcing a service economy dependent on import-export trade, foreign investments and tourism. Much of the construction materials used are even imported rather than produced locally.

The transport sector is reflective of how the government has lost its capacity to govern and manage public services because of privatization. This raises questions therefore on government’s absorptive capacity for such a grand infrastructure program. Four years into the ambitious BBB, there are only two (2) completed and nine (9) ongoing projects to date. The Duterte administration has even increased the IFPs from 75 to 100 to make BBB “more feasible”. But it appears that only 38 projects will be finished by the end of its term.

The future of BBB in the time of COVID-19 is precarious. But like a beaten beast, the Duterte administration refuses to yield. The pandemic is posing serious challenges to the continuation of BBB, apart from the program’s innate weakness of simply being aimed at attracting foreign investments and momentarily stimulating a slowing economy.

The most obvious challenge for the construction industry is physical distancing because  masses of workers need to gather to finish a project. The IATF suspended construction at the start of the lockdown but later allowed it, while passing on to the construction companies the responsibility of ensuring that workers comply with health protocols.

The next challenge is how travel restrictions and physical distancing will certainly dampen transport, travel and tourism businesses, and foreign trade and investment for a long time. These are the sectors that BBB wishes to be relevant for – but they are less and less important for the economy’s survival in the time of COVID-19.

Another challenge is the commercial viability of the projects on which they are all premised. Instead of catering to genuine public service, the completed projects are designed to be run by private transport corporations who will collect user-fees for their profitability and sustainability. The most expensive BBB projects are mass commuter railways whose viability depends on expensive fares that will be beyond the reach of the majority of the poor and working people.

But the greatest challenge is how BBB’s socially inappropriate orientation can be shifted to support the proper health response to COVID-19. The pandemic has revealed how weak our health system is – lacking facilities and equipment, lacking health personnel, and even lacking the means to transport health personnel. Not a few health frontliners have had fatal road accidents biking to work due to lack of transport support from the government. There is not even a single health infrastructure facility in the IFP lineup. The administration has made pronouncements that it would reorient BBB to respond to the health crisis but has yet to release a new IFP list.

Meanwhile, one priority legislation of the administration is the amendment of the Public Services Act (PSA). On March 10, just before the lockdown, the House of Representatives passed on final reading House Bill (HB) 78 to amend the PSA. It is now at the Senate for deliberation and approval. These amendments include narrowly defining public utilities to bypass Constitutional restrictions on foreign ownership. Sectors considered public services, transportation included, can be opened up to complete foreign ownership. This further undermines public interest and national development. The PSA amendments will pave the way for the full foreign ownership of the mass transport system and government’s eventual surrender to private transport and transport infrastructure corporations.

The right direction

The Duterte government can address the transport crisis in the time of COVID-19 and in fact can look at the pandemic as an opportunity to overhaul the system. The health protocols may be followed indeed if only the government recognizes and addresses the transport crisis in a scientific manner.

There should be a first-step long-term modal shift from road to rail. The government can start by upgrading and adding rolling stock and rails to the train system. The corporations and officials of government agencies who forged lopsided privatization contracts should be held liable for poor service including breakdowns and accidents. The Philippines is among the first countries in Asia to have an urban rail system and has a long history of government running rail transport systems. These assets can be nationalized again and returned to public control. Rail transport can then be central to urban planning as well as to the dispersal of economic activities to the rural areas.

An efficient rail transport system, not to mention fully linked and accessible, will be the basis of an equally efficient route rationalization plan for PUBs and PUVs. The government should seriously conduct its own study to identify where the mass of commuters can have the most optimal travel time, including number of stops, from their workplaces to their homes. This should also include designation of walkways and bike lanes. It should not rely on self-interested privatization stakeholders to make such studies.

For a route rationalization plan to be truly systematic, PUBs and PUVs along with rail should be publicly run. Government can start by organizing PUBs and PUVs into cooperatives rather than allowing only single or corporate proprietorship of large fleets. It can also incentivize cooperatives to improve their service and compliance. Then, government can move on to careful consolidation of fleets through joint ventures and eventual nationalization. Such crucial steps will finally make PUB and PUV modes more economical and fares more affordable.

The DOTr is proposing to introduce service contract arrangements with private transport operators for the “new normal”. It also aims to shift from the “boundary system” to daily fixed wage for drivers and conductors so they can have steady incomes regardless of reduced ridership. This sounds acceptable, especially if we consider that transport groups have long been clamoring for government to abolish the “boundary system” to avoid competition-driven stresses, road hazards, and transport unpredictability.

However, the DOTr proposal remains outside the vision of living wages for transport workers, promoting their welfare and strengthening their unions, subsidizing commuters and controlling fares, and diminishing competition among the private contractors with stronger public control. In short, the current proposal should be within the framework of nationalization, lest it end up being another privatization contract.

The proposal is welcome if it is not being done in the context of the government’s jeepney modernization program. The Duterte administration cannot even give sufficient social amelioration to displaced drivers and conductors during a pandemic.

Moreover, government should once and for all restrain the explosive private car sales that defies all public mass transport logic. These just give the automotive corporations maximum returns on their businesses.

Finally, the pandemic gives us the vast opportunity to rethink sustainable development perspectives. The need for agrarian development and national industrialization cannot be overemphasized. But the government can start with arresting the anarchic building of offices especially for business process outsourcing and online gambling, shopping malls, hotels and leisure structures, residential and private subdivisions, and condominiums. Metro Manila’s urban development Is geared to increasing real estate profits and the wealth of the country’s economic oligarchs at the expense of public mobility and welfare.

Government can start by planning an economy that genuinely addresses severe inequalities existing pre-COVID-19 that, without corrective steps, will persist even far beyond. #

The anomaly of transport modernization (Part I)

by Rosario Guzman

The transport chaos on the first day of the less restrictive general community quarantine (GCQ) was painful to watch. With limited public transport, thousands of Metro Manila commuters eager to recover lost jobs and incomes were practically left on their own to figure out how to get to work.

Department of Transportation (DOTr) secretary Arthur Tugade said that the government has “concrete plans” for GCQ. He also had to say that the government is not “sacrificing the people” just to revive the economy, because that was what it seemed.

The recommendation by the Inter-Agency Task Force (IATF) to transition to GCQ was apparently based more on the compulsion to reopen business than on categorical facts of virus containment. The Duterte government was also reportedly already “out of funds” for socioeconomic relief.

The government once again resorted to the military. The military and police deployed trucks and cars to ferry the stranded passengers, breaking distancing protocol and betraying government’s lack of preparedness. Then, the usual victim blaming – the Metropolitan Manila Development Authority (MMDA) and Malacañang blamed commuters for the mayhem. Then, the DOTr made a U-turn from its initial pronouncement and said that it never promised to meet the transport needs of the public under GCQ.

For the majority of poor commuters, what is more painful to see now is how the Duterte government, not backed by science, is on the verge of banning the traditional jeepney from the road forever and insisting that modernization is the cure.

If there is anything that COVID-19 has emphasized, it is the fact that the Philippine transport sector is in its worst crisis – a reality that the Duterte administration had repeatedly denied before the pandemic. If the economy has to transition to a genuinely better shape, the government has to address the basic woes of the transport sector. Vice versa, if the mass transport system has to be more efficient, the economy has to be transitioned to a genuinely better one.

But we seem to be stuck in our old problems.

Havoc in the new normal

The DOTr resumed public transport operations in two phases. During the first phase, trains and bus augmentation (which means bus loading and unloading at designated stations of MRT3), taxis, transport network vehicle services (TNVS), and point-to-point (P2P) buses were allowed with limits on the number of passengers. Tricycles were also allowed, subject to the approval of the concerned local government units (LGUs). Bicycles have also been encouraged.

During the second phase, public utility buses (PUB) and modern public utility vehicles or jeepneys (PUV/PUJ) were allowed with a limited number of passengers in rationalized routes. There are currently 30 routes from previously 96 routes for PUB and 34 new routes for the modern jeepneys. The DOTr will open more routes for the modern PUV in the coming days. Meanwhile, the traditional jeepneys remain prohibited from plying their routes unless seen as “roadworthy”. They are also the least priority and will only be used to fill in transportation gaps that arise.

Utility vans (UV) express will be allowed to operate with limited passengers as soon as more modern PUV routes are added. Provincial buses remain prohibited from entering Metro Manila.

The DOTr has also given some “new normal” guidelines, such as wearing of face masks at all times, cashless payments to avoid physical contact, use of thermal scanners, provision of alcohol and sanitizers, use of disinfection and establishment of disinfection facilities, and contact tracing. Costs for all of these are of course to be shouldered by the private transport operators and the passengers.

Apart from the added inconvenience these adjustments bring to the already unreliable mass transport system, there has also been lots of confusion on other relevant guidelines. The Philippine National Police (PNP) for instance prohibits backrides on motorcycles even for couples, yet some members of the police themselves are seen violating the rule. Interior and local government secretary Eduardo Año attempted to get around the prohibition by suggesting the use of sidecars but these are not allowed on the metro’s major highways.

Promoting the use of bicycles has not been accompanied by government policies to designate bike lanes and road-sharing with cyclists for a safe and efficient bike commute. Ironically, even the initiative by bikers’ groups and advocates to marshal the bike traffic along the “killer highway” Commonwealth Avenue was fined by the MMDA for “traffic obstruction”. Some LGUs are also reviving their old bike registration ordinances to collect fees even if they have not yet provided the needed support to bikers.

But the most glaring havoc is in the future of the traditional jeepneys – the ones that do not pass the DOTr’s standard of “modern” – which now hangs in the balance. Jeepneys were prohibited during the lockdown and are now under threat of being banned permanently from the roads in the name of the “new normal”.

The pandemic has obviously given the DOTr the opportunity to push for its “old normal” fixation on a modernization program that it has been proposing even before COVID-19. The modernization program revolves around: the digitization of fare and toll collection systems, vehicle registration, franchising, licensing, and navigation and positioning systems; routes rationalization; the transformation of EDSA; and jeepney phaseout.

It is premised on easing Metro Manila’s notorious traffic and pollution. But it is clearly a business-minded proposal that promotes the sales of private cars, modern PUVs and modern PUBs, and the privatization of transportation infrastructure. It is private transport-centric, while our obvious problem is the lack of an efficient and reliable public mass transport system. Now that the perennial road congestion is aggravated by physical distancing, the solution still seems to disfavor the mass of working class commuters.

Principles of E-R-A-S-E

The country badly needs an efficient, reliable, affordable, safe and environment-friendly public mass transport system. With or without the pandemic and physical distancing, these features of a public mass transport system should be ever-present for real and sustainable development. A strong government role is crucial in this.

Efficiency means that we are transported by vehicles through the shortest distance and in the shortest time possible. This also means less fuel use, less vehicle emissions, less costs, and less traffic.

Reliability means getting the mass of commuters to their destinations on time, with the least difference between the anticipated amount of travel time and the actual one. The crucial fact in reliability is that a large number of people rely on public transportation for their mobility.

Affordability and accessibility mean that the majority of the population who are wage workers and informal earners can afford public transportation and can easily avail of it from their dwelling and work places. This also includes facilities for persons with disability and senior citizens.

Safety includes measures that prevent harm to the riding public and create pedestrian-friendly conditions and infrastructure to reduce accidents and traffic deaths and to improve public health.

Finally, environment-friendly means public mass transport promotes healthier cities and living spaces. This includes the need to use clean and energy-efficient technologies and fuel for motorized transport on one hand, and the promotion of non-motorized modes such as walking and cycling on the other.

The crisis is real

The country’s public mass transport system is far from having these positive features. This reflects how the government has defaulted on its responsibility to ensure people’s mobility, and shows the general lack of national economic planning for sustainable development.

Our problem may be summarized as follows: 1) Mass transportation is left in the hands of private providers, including private rail corporations, bus franchises and single proprietors; 2) Deregulation is an operative principle in the entire sector, with the government’s role reduced to licensing, franchising and the like; 3) There is a lack of urban planning based on rural development and national industrialization that genuinely decongests the cities; and 4) Our mass transport system is corporate-driven, promoting the interests of infrastructure, transport, automobile and rail corporations as well as the profitability of real estate corporations, shopping malls, fare collecting banks, and the rest of the service-oriented and trading economy.

These problems manifest in many ways. The various modes of transportation are not fully linked, and there is heavy reliance on the ‘last-mile’ modes such as jeepneys, tricycles and even pedicabs. There is more road than rail transport, which is an indication of quite an unsustainable and expensive transport system. On the other hand, rail is privatized instead of being government-owned, controlled and operated, thus it is profit-driven and maintained by user-fees.

Fares are high as a consequence of privatized transport. According to the latest available data from the Family Income and Expenditure Survey in 2015, passenger transport for land travel eat up 7% of total non-food expenses of families in the National Capital Region (NCR). This covers fares for railway, jeepney, bus, taxi, tricycle and pedicab rides.

Transport is unreliable, with roads saturated and the quality of rail service poor. This is not to mention that roads are unsafe and rail accidents and breakdowns are frequent. Air pollution in the metropolis is one of the worst in the world, according to the World Health Organization. Lastly, there is a high volume of vehicles on the road. Navigation app Waze identified the Philippines as having “the worst traffic on earth”.

The anatomy of the transport mess

Metro Manila or the National Capital Region (NCR) has a total land area of 63,600 hectares and population of 12.9 million that swells to about 15 million by daytime. It accounts for one-third of the national economy and is home to about one-fourth of the urban population.

Metro Manila has six conferential roads and 10 radial roads. The radial roads do not intersect one another and intersect the conferential roads not more than twice. There are interchanges that separate these roads, but there are still missing sections in these interchanges. There are fully grade separated expressways in the north (NLEX), south (SLEX), and on the southwestern part (Cavitex) that connect Metro Manila to neighboring provinces.

These roads and highways were constructed to lead traffic in and out of the NCR. But lack of national economic planning has weakened job creation, increased rural poverty and displacement, and concentrated economic activities in the NCR. The region is the most congested city out of 278 cities in developing Asia, according to the Asian Development Bank (ADB). The region is brimming with urban blight and poverty.

There are the more recently built Metro Manila Skyway and Ninoy Aquino International Airport (NAIA) Expressway to decongest SLEX and speed up travel to NAIA, the country’s major international gateway. These are also obviously to cope with the high traffic brought on by government’s labor export policy. The country’s international airports process the some 6,000 Filipino migrant workers who leave the country every day, which is more than twice as many as new jobs created locally.

There are more than three million registered motor vehicles in the NCR as of 2019, which accounts for almost one-fourth of the country’s total. This is a 9.7% increase from 2018 and a 28% increase from 2016, yet the urban space is finite and unchanging.

The latest data for vehicles disaggregated by type is as of 2016. It shows that motorcycles or tricycles comprised almost 40% of registered vehicles in NCR. Utility vehicles follow at 36% and cars and sports utility vehicles are at almost 30 percent.

On the other hand, the latest statistics on units for land transportation services is as of 2012, which shows that PUJs accounted for most of the franchises and units. There were 49,305 PUJ franchises and 50,153 PUJ units, which only shows that jeepney operators are small-scale and own only a little more than one unit. There were no registered PUBs in the NCR at that time, but there are 14,500 registered buses by 2016. If we try to extrapolate the 2012 data, considering that the number of PUJs almost remains the same over time, it means that PUJs and PUBs accounted for only 7.8% of registered utility vehicles in 2016.

The MMDA recorded an average daily volume of 405,882 vehicles plying the main thoroughfare EDSA in 2019, an increase of 22,054 vehicles from the previous year. About 63% of this volume are cars (255,732 units). PUBs make up only about 3% of total EDSA traffic, while PUJs are not allowed along EDSA. There is therefore no statistical basis to blame mainly the PUBs and PUJs for the traffic and transport anarchy in Metro Manila.

Traffic demand is at 12.8 million trips in Metro Manila, based on a study by the Japan International Cooperation Agency (JICA). Public transport accounts for 69% of total trips. The lesser share (31%) is done by private mode, and yet it is this mode that takes up 78% of road space. The traffic volume within the metropolis already exceeds the capacities of existing roads.

In terms of rail, Metro Manila has one commuter line (the Philippine National Railway or PNR) and three rapid rail lines (LRT1, LRT2 and MRT3). It has the least number of rail lines and the shortest urban rail system (51 kilometers) among 11 major Asian cities. The rail lines are not fully linked, only compounding the problem of an intermodal transport system where Metro Manila commuters use a variety of modes of transport and take an average of two to three transfers to reach their destinations.

MRT3 is privately owned like the PUBs, PUJs, taxis, TNVS, P2P, and UV express. The PNR, LRT1 and LRT2 are the only government transportation assets, although the operations and maintenance of LRT1 are privatized. The government does not subsidize fares, and in fact increases fares to attract private contractors.

The rapid rail system is the epitome of the inefficient, unreliable, unsafe and unsustainable public mass transport system in NCR. It is bogged down by frequent breakdowns, diminishing numbers of operational trains, accidents, inappropriate trains, and even non-working elevators and escalators. It is also in the center of corruption controversies.

Where does the commuter figure in all of this mess? The government through all its numerous transport agencies cannot even give a complete picture. An oft-cited study by JICA estimates that 39% of passengers’ trips in Metro Manila and nearby provinces are by jeepney and 38% are by tricycle. This indicates over-reliance on what has only been a coping mechanism for lack of system. Buses account for 13.6% and trains for only 8.6% of the number of trips by public mode.

Per day, LRT1 and MRT3 carry about half a million passengers each, while LRT2 ferries more than 200,000 passengers. Taking into account the number of registered buses and the estimated vehicle capacity by the JICA study, it may be surmised that buses also carry half a million passengers. Using the same extrapolation, jeepneys have the same passenger load.

Privatizing the rapid rail lines and phasing out the ever-reliable traditional jeepneys are therefore not solutions to the transport crisis. #

The last part of this series will discuss how government uses the pandemic to justify pre-COVID programs like the jeepney phaseout and Build, Build, Build that will further aggravate the socioeconomic crisis, and what steps government should take to genuinely address the country’s mass transport troubles.

Govt jeepney ban has already cost drivers Php78,000

by IBON Media & Communications

Thousands of small public utility jeepney (PUJ) drivers have lost as much as Php78,000 each from three months of mass transport suspensions since the lockdown.

The government has been insensitive and stingy assistance has pushed jeepney drivers and their families into poverty, said IBON.

Their troubles risk becoming permanent with the government exploiting the COVID-19 pandemic to keep small drivers and operators off the road to fast-track its jeepney phaseout program, it added.

The Duterte administration suspended mass transport, including jeepneys, when it declared enhanced community quarantines (ECQ) in Luzon then in other parts of the country in mid-March.

Quarantine measures have since eased to general community quarantine (GCQ) in many areas and public transport has resumed in phases.

The first phase started in June 1 and the second is due to begin on June 22.

Jeepneys, however, will still remain prohibited.

PUJ drivers have suffered lost incomes for over three months already, IBON said. Among them are the estimated 55,000-70,000 jeepney drivers in Metro Manila.

For instance, before the ECQ, drivers plying the MCU-Rotonda via Taft route earned an average of Php1,000 per day after a 12-hour shift, net of boundary and fuel expenses.

Jeepney drivers on this route usually worked six days a week.

This means that, to date, they have lost some 78 working days over the past 3 months or 13 weeks of suspended mass transport.

This translates to a total net income loss of Php78,000 or Php26,000 per month of lockdown, said IBON.

Out of work jeepney drivers lose Income with each passing day of transport suspension.

The group stressed that government assistance has been far from enough to make up for these lost incomes.

The social welfare department reports only 36,200 jeepney drivers getting cash aid in the past three months.

Even then, some jeepney drivers only received one tranche of the Php5,000-8,000 of social amelioration and it remains unclear if they will even get the second tranche.

Many small jeepney drivers and operators could become permanently out of work, particularly in Metro Manila, IBON said. 

Transport officials are using the mass transport suspension to force the phaseout of traditional jeepneys by only allowing modernized jeepneys to run.

Under the Land Transportation Franchising and Regulatory Board (LTFRB)’s Memo Circular 2020-017 on public transport guidelines in GCQ areas, only modernized jeepneys and traditional jeepneys under a corporation or cooperative are allowed to operate.

This leaves out small jeepney operators and drivers who, unlike big or corporate fleet operators, can ill-afford the costly Php1.6–2.2 million modernized units, or steep fees and requirements to form a cooperative.

They are even less able after three months of lost incomes and depleted savings, if any.

IBON said that the livelihoods of thousands of small jeepney drivers and operators are at stake. Instead of putting corporate interests first and pushing its phaseout program, the government should give immediate cash assistance to drivers and their families who have suffered three months of lost incomes.

It should also support drivers and operators in upgrading or replacing their units to meet safety, health and environmental standards. #

PH Debt: All’s well that swells

by Rosario Guzman

Lenders have offered to defer debt payments for those severely affected by the lockdown. The World Bank has encouraged the Group of 20 nations to postpone repayment of official bilateral credit, although has not yet considered suspending debt payments owed it. The International Monetary Fund has approved debt relief to its 25 poorest member countries. Commercial banks have offered a 60-day grace period for loans, including for household debts borrowed through credit cards. Even informal moneylenders in the Philippines’ urban poor communities have reportedly stopped collecting loan installments for a while.

These are not necessarily all done out of sheer goodwill. In many cases they seek to stop debtors from succumbing to severe debt-driven crisis due to the pandemic which would stop them from paying anything at all in the future. In short, they are also favorable to the creditors.

The Duterte government, with its much-brandished good credit standing, could have moved for debt relief too but instead, at the height of the COVID-19 pandemic, it started borrowing more. The finance department underscores the need for government to borrow from foreign sources to fund its economic recovery plan. Multilateral and country creditors have unsurprisingly exploited the situation and recycled funds to lend.

Do we really need to borrow for COVID response? People have asked. How are we going to pay for all of these debts?

Accumulating debt

The Duterte administration’s Philippine Program for Recovery with Equity and Solidarity (PH-PROGRESO) is worth Php1.7 trillion, Php561 billion (US$11 billion) of which is targeted by the Department of Finance (DOF) to come from bilateral and multilateral loans and global bonds. There is another Php404 million (US$8 million) in foreign grants.

From March 14 to June 4 this year, based on IBON monitoring, the Duterte government has already obtained foreign commitments of US$3.95 billion in loans, US$17.3 million in grants, and US$5 million in technical assistance (TA) – all for addressing the COVID-19 pandemic. The Philippine-headquartered Asian Development Bank (ADB) accounts for US$2.1 billion of the loans plus all of the TA and much of the grants. The World Bank accounts for US$1.1 billion, and the China-led Asian Infrastructure Investment Bank (AIIB) for US$750 million. There are US$9.3 million in grants from USAID. In sum, there are 7 project loans, 2 grants, and 1 regional TA so far.

Loans amounting to US$3.95 billion are, at the current exchange rate of Php50.05 to a US dollar, equivalent to Php197.7 billion. This increased the outstanding national government debt which has already risen from Php7.7 trillion by the end of 2019 to an astounding Php8.6 trillion by April 2020. The Php869-billion increment in the last four months far surpasses the full-year increments of the last three years.

Government securities increased by Php436 billion, while the Bangko Sentral ng Pilipinas used its repurchase facility to lend Php300 billion to the national government for COVID response. Meanwhile, external debt increased by Php133.1 billion from December 2019 to April 2020. In April 2020, the Duterte government’s foreign debt grew 16.5% year-to-date and 16.4% year-on-year, or the biggest increase in the last four years.

The Duterte government has already reached 66% (or Php919.5 billion) of its Php1.4 trillion projected gross borrowings for the year. If the planned foreign financing for PH-PROGRESO alone is realized, the government would already go over its borrowing projection. This does not yet include the uncontrollable increase in domestic debt due to the continuous issuance of government securities. Domestic debt comprises 68% of the outstanding national government debt.

For whose sake, really?

The loan commitments are specified for strengthening healthcare, augmenting funds for socioeconomic relief, and providing economic stimulus for agriculture and micro, small and medium enterprises (MSMEs). There are also wage subsidies for small enterprises and support for repatriated overseas Filipino workers (OFWs).

These are urgent things to attend to during the pandemic that the Duterte government has not competently addressed. Instead, we have only witnessed how government’s policy of health privatization, neglect of essential economic sectors, and myopic understanding of the poor have made it ill-prepared for an emergency such as COVID.

COVID-19 is unplanned thus the need to apply for a loan – that has been the official line. Are the loans meant to help us cope with the coronavirus, while government opts to keep spending for its neoliberal policies and to protect business?  Actually, these urgent loan-financed items are part of a larger package which includes even bigger support for businesses who get financial relief in the form of tax deferrals, low-interest loans, and credit guarantee schemes.

The country’s creditors are more straightforward. They will provide budgetary support so that the country’s economic managers can continue spending on the administration’s Build, Build, Build (BBB) infrastructure projects, foreign investment attractions, tourism and other boosters of the otherwise slowing, and now contracting, economy.

The ADB has pledged US$1.5 billion from its COVID-19 Active Response and Expenditure Support (CARES) program for fiscal management, among others. The AIIB’s US$750 million loan is co-financed with CARES. The AIIB only has loan facilities for infrastructure investment and does not have a ‘development financing’ orientation. It recently launched a COVID recovery facility but even this is oriented towards addressing liquidity problems, providing fiscal and budgetary support in partnership with multilateral banks, and building health infrastructure – all so that governments can focus on COVID impacts and leave infrastructure funds alone.

The more recent Php400 million loan commitment of the ADB to strengthen domestic capital markets and investments is more explicit. This is to enable the Duterte government to fund infrastructure at lower costs and to enable the private sector to raise infrastructure funds from capital markets.

COVID-19 is unplanned, while the Duterte administration’s focus is unchanged. The government is still fixated on burnishing the economy’s image to attract foreign investors, and will only address the emergency by as much as it can borrow. This reinforces the country’s vicious spiral of debt and shallow economic growth. Creditors are complicit in this neoliberal COVID response.

Protecting profits

But what really demolishes the argument that government needs to take out a loan for COVID-19 is that there are viable sources of money that government chooses to forego in behalf of big business. Case in point is the DOF-backed Corporate Recovery and Tax Incentives for Enterprises (CREATE) bill, the renamed second package of the unpopular Tax Reform for Acceleration and Inclusion (TRAIN) Law. The first package taxes consumption goods by the poor and relieves the rich of paying income taxes. CREATE in turn reduces corporate income tax from 30% to 25%  from July 2020 until 2022 and thereafter 1% yearly cut until 20% by 2027. This gives corporations up to Php667 billion worth of tax breaks over the next five years, which is the largest in the country’s history.

CREATE is at the core of the administration’s recovery plan, PH-PROGRESO. It also proposes Php133.7 billion in loans and guarantees, Php142.8 billion in other tax cuts and foregone revenue, and Php233.3 billion in additional liquidity. PH-PROGRESO declares prioritizing the resumption of BBB. To do so, it incentivizes big business with tax cuts and liquidity and equity infusion through government intervention and borrowing in the guise of helping them recover from the pandemic recession. The creation of jobs and recovery of incomes of the poor and vulnerable are an afterthought.

Indeed, government has to revive the economy from the unnecessary lockdown, but this has to start with what is truly essential. The COVID crisis is an extraordinary opportunity for government to strengthen national production in agriculture and industry – a surefire way to stimulate employment and consumption. But agriculture and the MSMEs that make up the majority of the country’s enterprises are extremely marginalized.

In the House-approved Php1.3 trillion Accelerated Recovery and Investments Stimulus for the Economy (ARISE) bill, agriculture gets a paltry Php66 billion and MSMEs are allocated only Php125 billion in loans and guarantees. The COVID crisis is also a golden chance to bridge the chasm between rich and poor, which has become stark especially during COVID. But quite to the contrary the Duterte government has relieved the rich and increased borrowing to sustain such economic order – an addition to the mounting burden of the poor.

Unpayable future

The DOF reiterates that the debt is payable and that the country is in no way headed to a debt crisis. It says that the debt-to-gross domestic product (GDP) ratio is only around 39.6% at the end of 2019 and 43.3% as of March 2020. The ratio indicates manageable levels, says the government, and is much less than in 2000-2010 when the debt-to-GDP ratio hovered around an annual average of 60% until it started going down in 2011 at the start of the country’s high growth episode.

But those days are gone. Fast economic growth peaked in 2012-2016 then steadily declined since the start of the Duterte presidency. Before COVID, the administration tried to but could not cover up the slowing economy. The GDP growth slowed from 6.9% in 2016, 6.7% in 2017, 6.2% in 2018, and to just 6.0% in 2019, the slowest in eight years. The economy shrank in the first quarter of 2020 by 0.2%, and the economic managers are seeing a severe decline in full-year real GDP growth to -0.6% to 4.3 percent.

All the sources of economic growth that government has relied on – OFW remittances and foreign direct investment in BPOs and export manufacturing – have slowed down since the beginning of the Duterte administration. And these are definitely headed into a tailspin as the global economy sinks deeper into crisis.

The Duterte government has never considered the erosion of agriculture and manufacturing to arrest the economic slowdown. Instead, it has artificially boosted economic growth with pump-priming – increasing government spending to its highest level as percent of GDP. Infrastructure spending comprised 4.7% of the GDP in 2019 and is targeted to reach 7.0% of the GDP by 2022. It shall be the highest among all the administrations.

BBB projects are the Duterte administration’s preferred drug for resuscitating the ailing economy before it slips away. However, it has been borrowing heavily for this. Of the Php4.3 trillion needed for the 100 flagship infrastructure projects of the administration, 83% is expected to come from official development assistance (ODA), mostly in the form of loans. The Duterte government’s borrowing binge is unprecedented – on a monthly average, it is borrowing Php45.6 billion, almost three times as much as Aquino (Php19.0 billion) and over twice as much as Arroyo (Php21.2 billion).

The fiscal deficit is thus a growing problem, with the Php660.2 billion deficit in 2019 equivalent to 3.5% of GDP. The fiscal deficit is already at Php348 billion as of April 2020.

Here is why the debt is eventually unpayable and such a huge burden. First of all, ODA loans may be at concessional rates but are tied to the conditionality of using the technology, materials and expertise of the creditor country. In the case of China, this includes even the use of Chinese labor. Secondly, absorptive capacity in a program as grand as BBB is a major issue. The Philippine government lacks the bureaucratic and technical capacity to implement all the grand infrastructure projects. This capacity has been eroded by decades of privatization and deregulation. The private sector, on the other hand, is not that deep because of the economy’s backward fundamentals. Third, BBB’s main focus is mobility for the benefit of the service and trading oriented economy, and not in building Philippine agriculture and industry. Thus the infusion of infrastructure capital or even the construction of the facility will not be useful in the long run for national development.

Lastly and most ironically, we are being obliged to fully pay for this mounting debt. This early, the government is already thinking of taxing and raising government fees on the very coping mechanisms of the dislocated working people. For instance, the economic managers want to tax online selling even as people are losing their sources of livelihood, or want to collect bike registration fees as workers seek alternatives to the poor public mass transport, among others. The government already failed to meet its revenue target in 2019, short by Php12.2 billion, and is anticipating even bigger spending and bigger debt in 2020.

Our future is being mortgaged. It doesn’t help to cure apprehensions when government says that the debt is manageable. Government has to end its anti-people neoliberal economic policies, and only then shall we be well. #

= = = = = =

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

Duterte administration’s recovery plans help the rich more than the poor

by IBON Media & Communications

IBON said that the government’s supposed recovery plans are more concerned about supporting business profits than helping the mass of unemployed Filipinos.

The finance department’s Philippine Program for Recovery with Equity and Solidarity (PH-PROGRESO) and stimulus bills in Congress give considerable support to businesses while millions of affected families get token support at best.

PH-PROGRESO of the economic managers does not give any cash support to poor and low-income families most in need, including the mass of unemployed, noted IBON.

The Corporate Recovery and Tax Incentives for Enterprises Act (CREATE) proposal of PH-PROGRESO wants to give Php667 billion worth of corporate tax breaks, the biggest in the country’s history. The Php133.7 billion in loans and guarantees, Php142.8 billion in other tax cuts and foregone revenue, and Php233.3 billion in additional liquidity will also benefit mainly enterprises.

The group said that the stimulus bills in Congress, including the Accelerated Recovery and Investments Stimulus for the Economy of the Philippines (ARISE) recently passed by the House of Representatives (HOR), are not much better.

ARISE allocates a total of Php40 billion for cash-for-work programs and Php42 billion for education subsidies.

On the other hand, it allocates Php1.2 trillion for formal enterprises, said the group.

There is a strong likelihood that the bulk of this will go to large firms of oligarch conglomerates and possibly even foreign transnational corporations.

Big firms dominate the tourism, transport, import and export, manufacturing, and service industries identified for support.

There is also no explicit prohibition of foreign companies, IBON noted.

Meanwhile only Php135 billion of the Php1.2 trillion is explicitly for micro, small and medium enterprises (MSMEs).

Giving large firms equal access to the subsidized financing will likely crowd out MSMEs especially the neediest smaller firms, IBON said.

The focus on formal enterprises will also mean that vast numbers of informal earners and displaced workers will not be reached.

This Php1.2 trillion includes the Php110 billion for wage subsidies. The stimulus bill says that freelancers, professionals, self-employed, and overseas Filipino workers can also receive this.

In practice, however, there is likely to be a bias for workers in formal enterprises, which means the subsidies are in effect subsidies for firms’ payroll expenses, said the group.

IBON said that support to enterprises should give much greater and more explicit priority to Filipino MSMEs.

These are the foundations of the domestic-oriented development so urgent amid the global recession and increasing protectionism even by the world’s most powerful economies.

At the same time, government recovery plans need to give much greater direct income support to poor and low-income households.

This is both direct support for families’ welfare as well as a meaningful stimulus that increases effective demand in the economy. #

= = = = =

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

Official unemployment figures understate historic jobs crisis

by IBON Media & Communications

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

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

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

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

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

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

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

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

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

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

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

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

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

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

= = = = = =

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

GCQ Reality Check

by Rosario Guzman

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

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

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

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

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

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

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

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

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

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

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

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

= = = = =

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

Why make the poor pay for COVID-19 response?

By Sonny Africa

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

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

Hangin

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

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

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

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

But is there really no money to be had?

The plan

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

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

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

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

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

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

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

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

Poor pay for meager response

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

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

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

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

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

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

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

Taxing consumption

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

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

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

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

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

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

Tax the rich

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

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

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

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

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

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

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

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

= = = = =

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

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

by IBON Media & Communications

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

= = = = = =

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