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2018 Yearender: Are You High? The Economy Isn’t

by Sonny Africa

Executive Director, IBON Foundation

The Duterte administration’s economic managers made some odd statements as the year wound up. Economic planning secretary Ernesto Pernia said “the Philippine economy became stronger and even more resilient than ever”. Finance secretary Carlos Dominguez III insisted on “the soundness of the Duterte administration’s economic development strategy”. Bangko Sentral ng Pilipinas (BSP) governor Nestor Espenilla meanwhile said that they “expect growth to remain solid in the years ahead”.

These are odd because the economy clearly showed signs of increasing stress in 2018. If anything, the year just passed confirmed the end of the long period of relatively rapid growth for the Philippines.

In denial

Growth has been slowing since the start of the Duterte administration. It is already its slowest in three years. Inflation reached a nine year-high and was even worse for the poorest Filipinos. The current account deficit is at its worst in 18 years. The peso is at its weakest in 13 years. International reserves are in their lowest in 10 years. The jobs crisis is disguised but really at a historic high. Overseas remittances are also slowing — this further dampens household consumption and welfare.

The government seems to think that it can just spend its way out of this. It holds its ‘Build Build Build’ infrastructure offensive as some kind of magic bullet. This will be difficult with the end of the decade of low global and local interest rates and rising borrowing costs. Accelerating government debt will also only become more unmanageable as growth continues to slow. As it is, the budget deficit is already at its worst in seven years.

All these the government’s chief economic propagandists will euphemistically call ‘headwinds’ or ‘challenges’. Yet barring a real change of economic course, there is little reason to expect that the economy will get better anytime soon. Elite business profits will likely continue to grow, but it may just be a matter of time before even these suffer.

As if being near the top of a sinking ship is a good thing, the administration will keep on claiming that the Philippines is among the fastest growing economies in the region and in the world that is caught in a protracted crisis, Still, the 6.3% growth in the first three quarters of 2018 is markedly slower than the 6.7% growth on 2017 and 6.9% in 2016.

Deteriorating

Agriculture is doing particularly badly: its 0.4% growth in the first three quarters of 2018 is approaching its worst performance since 2016. But even the hyped manufacturing resurgence is hitting a wall – the 5.7% growth in the first three quarters is much slower its 8.4% clip in 2017, and the full year results may be the slowest since 2015.

Filipino industry and domestic agriculture would have been solid foundations of domestic demand and production, if only these had really been developed these past years. This is impossible though under the government’s obsolete globalization and free trade mantra. Agriculture is still left to the vagaries of the weather and small peasant labor. Manufacturing remains shallow and foreign-dominated.

The services sector never should have been the driver of economic growth. But even this is failing. The real estate boom appears to be ending with 5.9% growth of finance and real estate in the first three quarters of 2018 continuing the trend of slowing growth from 7.5% in 2017 and 8.5% in 2016. Reflecting weakening household consumption, even trade is down – at just 6.0% in the first three quarters compared to 7.3% in 2017 and 7.6% in 2018.

The main drivers of growth in 2018 have been the intrinsically short-term boost from government spending – this increased to 13.1% growth in the first three quarters from just 7.0% in 2017. , Construction also increased to 13.3% growth in the first three quarters from just 5.3% in 2017.

Real score on jobs twisted

The worst effect of a backward economy is not creating enough decent work for the growing population.

The economic managers hailed 825,000 new jobs created in 2018 and unemployment falling by 140,000 bringing the unemployment rate down to 5.3 percent. Unfortunately, these do not tell the whole story.

The Duterte administration has actually created just an average of 81,000 jobs annually with 43.5 million jobs in 2018 compared to 43.4 million in 2016. This is because the economy lost a huge 663,000 jobs in 2017, which was the biggest contraction in employment in 20 years or since 1997.

So the largest part of the supposed job creation, or some four out of five ‘new’ jobs, was really just restoring jobs lost in 2017.

But how to explain the falling unemployment? This is a statistical quirk. According to the official methodology, jobless Filipinos have to be counted as in the labor force to be counted as unemployed.

It seems that huge numbers of Filipinos are no longer seeking work and dropping out of the labor force. This is reflected in how the labor force participation rate dropped to 60.9% in 2018 which is the lowest in 38 years or since 1980.

While employment grew by just 162,000 between 2016 and 2018, the number of workers not in the labor force grew by a huge 2.9 million over that same period. It is likely that the reported 62,000 fall in the number of unemployed between 2016 and 2018 reflects workers dropping out of the labor force because of tight labor markets rather than their finding new work (because of weak job creation).

This scenario is supported by IBON’s estimates of the real state of unemployment in the country. The government started underestimating unemployment in 2005 when it adopted a stricter definition that made subsequent estimates incomparable with previous figures.

Reverting to the previous definition to give a better idea if the employment situation really is improving or not, IBON estimates that the real unemployment rate in the decade 2008-2017 is some 10.2 percent. This maintains high unemployment in the economy since the onset of globalization policies in the 1980s. IBON does not yet have estimates for 2018, but the real number of unemployed in 2017 was 4.6 million or almost double the officially underreported estimate of just 2.4 million.

Job generation trends in 2018 are in any case worrisome as it is. The quarterly labor force survey showed drastically worsening job generation since the start of the year. Measured year-on-year, some 2.4 million jobs were reported created in January 2018 but this fell to 625,000 in April then 488,000 in July and then 218,000 jobs actually lost, rather than created, in October.

Economy needing rehab

Perhaps high on their own propaganda, the country’s neoliberal economic managers continue to confuse abstract growth figures, business profits and foreign investment with development and the conditions of the people. The reality however is of chronically backward Filipino industry and agriculture and an economy that went sideways in 2018. The real challenge is to discard failed neoliberalism and to replace this with an economics truly serving the people.#

‘Trabaho, serbisyo, paninirahan’

“Kaming mga maralita, ang panawagan namin ay trabaho na may sapat na sahod, gayundin ang serbisyong panlipunan—lalong-lalo na ang disenteng paninirahan.”—Bea Arellano, Chairperson, Kadamay

295,000 jobs lost since Duterte assumed office, IBON maintains

Research group IBON stood by its estimates that close to 300,000 jobs were lost since the start of the Duterte administration after Employers’ Confederation of the Philippines (ECOP) honorary chair Sergio Ortiz-Luis said the group’s description of jobs lost is “deceiving”.

Ortiz-Luis reportedly said that it is deceiving to claim that the number of employed decreased by 300,000 just because there is data showing that employment dropped, even if there are new entrants to the labor market.

But Philippine Statistics Authority (PSA) data reports net employment generation, said IBON executive director Sonny Africa. “Net employment generation means employment created net of employment lost,” he explained.

“Ortiz-Luis’ argument about the number of entrants into the labor force is meanwhile puzzling because this is actually irrelevant in the PSA’s measurement of employed Filipinos,” Africa added.

“The number of employed reflects the number of jobs the economy generates, while the labor force measures those who have to compete with each other for whatever jobs the economy generates,” he explained.

PSA figures show that the number of employed fell from 40.954 million in July 2016 to 40.659 million July 2018.

IBON attributed the drop in the number of employed Filipinos to a huge 1.8 million reduction in agricultural employment over the same period.

Job losses and expensive food characterize the crisis in the agricultural sector, the group said.

IBON further said that job creation in the rest of the economy was not enough to compensate for the big agriculture job losses.

Gross job losses counted 2.2 million while gross job creation was only 1.9 million, hence the 295,000 drop in the number of employed.

The biggest job generation is in sectors that do not necessarily indicate a strong economy, IBON said, such as in the public sector and construction.

The group added that net job creation from July 2017 to July 2018 is feeble at 488,000 additional jobs compared to the 701,000 jobs created on average annually in the decade prior to the Duterte administration.

This failed to offset the 783,000 jobs lost in July 2017 from July 2016.

IBON said that Ortiz-Luis joins the administration’s economic managers in being dismissive of the jobs crisis becoming more severe under the Duterte administration.

“They have on the contrary hyped latest employment statistics as the highest among July rounds in the last 10 years, deflecting the issue of massive job losses,” the group said.

“It’s the economic managers that have been deceiving us, apparently Mr. Ortiz-Luis included,” Africa said. #

Jobs crisis getting worse under Duterte gov’t – IBON

Research group IBON said that the jobs crisis in the country is getting more severe under the Duterte administration.

The group said that the government should be more forthright and admit growing economic insecurity from inflation and joblessness rather than keep trying to downplay this.

Millions of Filipinos are jobless, including those excluded from official unemployment figures, or have jobs but endure poor quality work.

IBON said there are less jobs available now compared to the start of the Duterte administration.

The number of employed Filipinos has fallen by 295,000 from 40.95 million in July 2016 to just 40.67 million in July 2018.

This is largely due to a huge 1.8 million drop in agricultural employment over that period.

Job losses and expensive food characterize the crisis in the agricultural sector.

IBON pointed out that job creation in the rest of the economy was not enough to compensate for the huge job losses especially in agriculture.

There were gross job losses of 2.2 million between July 2016 and July 2018 but only 1.9 million in gross job creation, hence the 295,000 drop in the number of employed.

Moreover, the group said, the biggest job generation is in sectors that do not necessarily indicate a strong economy.

The largest part of additional employment since July 2016 was in the public sector where 500,000 jobs were created, followed by construction with 393,000 in likely mostly short-term work.

These were followed by 269,000 jobs in manufacturing which is potentially important but barely 14 percent of gross job creation in the last two years.

IBON stressed that net job creation in the economy is feeble. Only 488,000 additional jobs were generated in July 2018 from the year before.

This is less than the 701,000 jobs created on average annually in the decade 2006-2015 prior to the Duterte administration.

It was also not enough to make up for the huge 783,000 jobs lost in July 2017 from the last year, hence net job losses since the start of the administration.

This crisis is obscured in the official statistics because millions of discouraged workers are no longer counted as unemployed even if they are jobless and are just statistically dropped from the labor force, said the group.

Combined with the effect of K-12 implementation in senior high school (SHS) since 2016, the labor force participation rate has dropped to 60.1 percent in July 2018 which is the lowest in 36 years or since 1982.

There are also signs that the quality of work is drastically worsening, said IBON.

The number of under-employed, or those with jobs but seeking additional work, increased by 464,000 in July 2018 from the year before to reach 7 million.

The underemployment rate has correspondingly risen to 17.2 percent from 16.3 percent last year.

The current jobs crisis consists of the millions of jobless Filipinos including those who are no longer officially counted as unemployed and the millions of Filipinos who have jobs but suffer poor quality work that is not enough to live securely and decently.

As it is, IBON conservatively estimates at least 11.3 million unemployed (4.3 million) and underemployed (7.0 million) Filipinos as of July 2018 which is one in four (25 percent) of the labor force.

IBON said that amid skyrocketing prices and inflation, it is more urgent than ever to ensure sustainable and decent employment for millions of Filipinos.

The only long-term solution is for the government to invest in genuinely developing domestic agriculture and Filipino industries. #

Jobs crisis intensifying under Duterte – IBON

Research group IBON said that despite recently hyped growth of 6.8 percent in first quarter 2018 the country’s jobs situation continues to worsen under the Rodrigo Duterte administration.

The Philippine Statistics Authority (PSA) reported that the employment rate grew slightly to 94.5 percent in April 2018, while the unemployment rate was lower at 5.5 percent.

The jobs situation seemed to improve as the number of employed Filipinos rose by 625,000 and the number of unemployed declined by 83,000.

The government largely attributed this to increased infrastructure spending.

According to IBON estimates correcting for government underestimation, however, the number of unemployed actually grew by 82,000 to 4.1 million in April 2018 from 4 million in April 2017.

Official unemployment figures do not reflect discouraged workers or those who have dropped out of the labor force after failing to find work after six months.

The agriculture sector, which is the second largest source of employment among the country’s sectors, had the most job losses, said the group.

Official data shows that the number of employed in agriculture fell by 723,000 to 9.8 million in April 2018 from 10.5 million in April 2017.

The sector has been plagued with job losses for the past four consecutive rounds of the labor force survey.

IBON also noted that the agriculture, hunting and forestry subsector lost 558,000 jobs, while fisheries lost 134,000.

The fisheries subsector had notable job losses for all labor force survey rounds under the Duterte government.

Poor quality work or jobs that are insecure, lack benefits and have low wages persists, said the group.

The number of underemployed or those looking for additional work increased by 466,000 from around 6.5 million in April 2017 to 6.9 million in April 2018.

IBON noted that among underemployed persons, those who worked 40 hours and over in a week grew by 758,000 from 2.4 million last year to 3.2 million this year.

The growing underemployment despite the increase in full-time work may indicate that much of reported full-time work still does not give enough income for the employed to meet their basic needs.

The number of part-time workers who worked less than 40 hours in a week decreased but still comprised 52.5 percent of total underemployed in April 2018.

The group also noted that nearly half or 47.1% of underemployed for this round were in the services sector, 32.4 percent in agriculture, and 20.5 percent in the industry sector.

Both services and industry sectors registered increases in underemployed persons from April last year.

IBON said that government has been content with minimal job generation in the non-productive sectors such as the kind offered during job fairs.

According to the group, government should instead ensure sustainable and decent jobs and livelihoods for Filipinos.

This can be done by embarking on a solid economic program that genuinely boosts the agriculture and fisheries sectors and develops the country’s vastly rural economy to build strong and vibrant domestic industries. #

‘There’s no such thing as tambay culture’

“There is no such thing as a tambay culture. That practice is a result of workers’ ways of dealing with precarious work, it’s how the jobless deal with joblessness, and joblessness as we all know is a result of a backward non-industrial economy based on export orientation and import-dependence.” —Prof. Sarah Raymundo, sociologist

A meme by the Alliance of Concerned Teachers on the issue of President Duterte’s order to the Philippine National Police to arrest loiterers in communities.

Stop over-relying on foreign investments, government told

The Rodrigo Duterte government should not depend on foreign investments for economic progress and job generation soon after the enactment of the Ease of Doing Business and Efficient Government Service Delivery Act, research group IBON said.

The Ease of Doing Business Act or Republic Act (RA) 11032, signed into law last May 28, aims to simplify the application process for the establishment of businesses in the country.

Proponents say that RA 11032 aims to attract more foreign investments.

IBON said however that even after several decades of rising foreign investments, domestic industries and agriculture remain lagging while the Filipino people continue to be mired in a poor jobs situation.

Foreign direct investments (FDI) have grown by 391 percent from US$664 million in 2013 to US$3.3 billion in 2017.

But most of these investments have gone to foreign export enclave manufacturing, business process outsourcing, commercial and residential real estate, and transport infrastructure.

These areas are profitable for foreign and local big business, but not necessarily beneficial to the country’s economic development, said the group.

IBON explained that investments have remained scarce in domestic industries and agriculture sectors that are much-needed for sustainable and genuine growth and job generation.

For instance, agriculture only received 0.6 percent (US$19.6 million) of total FDI in 2017.

Meanwhile, the gross domestic product (GDP) share of agriculture declined from 10.5 percent in 2013 to 8.5 percent in 2017.

Manufacturing remains stagnant with minimal change from its 22.8 percent GDP share in 2013 to 23.6 percent in 2017.

Rising FDI has not translated into improved job generation.

IBON noted that the number of employed Filipinos fell by 663,000 from 40.3 million in 2017 from the previous year, which is the biggest contraction in employment in 20 years.

The labor force participation rate (LFPR) also dropped to 63.7 percent, the lowest in 20 years when it was 63.1 percent in 1985 during the severe economic crisis.

More recent official labor data for the first quarter of 2018 shows that there are over one million underemployed despite higher employment and lower unemployment.

Before RA 11032 was signed, the World Competitiveness Report showed that the Philippines’ attractiveness to corporations wanting to do business here was diminishing.

The country’s ranking plunged by nine slots, reportedly the biggest drop in Asia, due to employment concerns and poor social infrastructure.

IBON however said that instead of focusing on attracting foreign investments, the Philippine government should first ensure its control over key local industries, utilities and services, as well as place national interest and public welfare above local and foreign big business interests.

For the country to truly benefit from foreign investments, these should be planned in accordance with genuine domestic development, with close government monitoring and regulation, said the group. #

 

Still no better jobs for Filipinos–IBON

First quarter economic growth this year did not translate to better jobs for Filipinos, research group IBON said.

This means that despite government claims that the groundwork for reforms has been laid, growth has remained essentially exclusionary, generating jobs that are insecure and low-paying, said the group.

Socio-Economic Planning Secretary Ernesto Pernia recently announced the 6.8 percent Philippine economic growth for the first quarter of 2018 to be among the fastest in Asia, second only to Vietnam’s 7.4 percent and at par with China’s.

According to Pernia, these indicate that infrastructure development is accelerating and “Build, Build, Build” is gaining ground.

NEDA even said that OFWs could thus consequently come home to more jobs.

IBON however underscored how at the same time, underemployment, part-time work and informal work swelled by over a million jobs each.

The group said that this implies how, amid supposedly growing capacity to produce goods and services, Filipinos were subjected to more insecure and low-paying jobs.

From January 2017 to January 2018, employment grew by 2.4 million especially in agriculture, services, manufacturing, and construction.

But the number of underemployed or persons looking for additional work grew from 6.4 to 7.5 million.

The number of part-time workers or those who worked below 40 hours a week increased by 1.2 million from 13.5 to 14.7 million.

Those in informal work, meanwhile, or in jobs that are uncertain or irregular with poor pay and benefits, increased by 1.4 million from 14.6 to 16 million.

According to IBON, poor quality work is growing because employers seek to peg wages at a low, minimize benefits and keep labor flexible to be able to increase their profits.

The government takes the side of employers and supports them with its policies of wage rationalization and labor flexibilization, which it justifies as needed to attract investments and drive growth, said the group.

It argued, however, that government’s vision for progress should instead include building a strong domestic economy that can generate regular, full-time and decent-paying jobs.

These can boost the Filipino working people’s purchasing power and yield higher returns for the Philippine economy, IBON said. # (IBON.org)

Homeless, jobless, and penniless, residents resist closure of the Philippines’ Boracay island

Residents and workers of the Philippines’ Boracay island are speaking out against the government’s order to shut down the world-famous resort destination for six months in order to carry out renovation work that includes the upgrade of the island’s obsolete sewerage system.

With the signing of Presidential Proclamation 475 on April 26, 2018, the country’s president, Rodrigo Duterte, placed Boracay under a state of calamity — a move which formalized the tourist island’s temporary closure, and which several groups are petitioning the court to invalidate.

Appellants at the Supreme Court questioned the constitutionality of what they deemed to be an arbitrary decision by the president. They also sought a temporary restraining order on the closure and eviction of businesses on the island.

Authorities have justified the shutdown as part of its efforts to purportedly “rehabilitate” the island amidst environmental woes. But after it was reported that the government had initially approved the construction of two mega casinos on Boracay, many people questioned this rationale.

Still, the closure has been pushed without any prior master plan for rehabilitation, or any strategy to minimize its effects on the livelihood of those who live and work on Boracay, many of whom will be forced to relocate. The massive lay-offs have already affected thousands of workers.

The Friends of Boracay Facebook page highlighted the negative effects of the shutdown on people’s lives — and livelihoods. These online testimonies have been included in the statements gathered by civil society organizations during a fact-finding and solidarity mission they conducted in and around Boracay and Aklan province between April 16-19, 2018.

Some of these organizations include Bayan-Aklan, Friends of Boracay, Tabang Aklan Action Center, Gabriela Panay-GuimarasThe Center for Environmental Concerns, the Iloilo Pride Team, and the National Union of People’s Lawyers.

One tour guide shared how the closure of Boracay will affect his family:

Photo by Friends of Boracay, used with permission by Global Voices.

“I am a Boracay tour guide. I have been in Boracay for 11 years. What’s happening to us is very painful; there are 2,000 of us tour guides. We have no regular wages because we work only on a commission basis. I went to the Labor Department because of the closure. I have social security, which I have been contributing to for six years. I asked if I can apply for a calamity loan, just so I have a budget for food. I live in a cardboard house in the Wetland. Our question is, will there be alternative employment? We are idle, yet we need to eat every day. I have three children and I send them money in Bacolod. We need financial assistance.”

A resident recounted the aggressive behavior of authorities who were sent to issue eviction notices to small businesses and resort owners on the island:

Photo by Friends of Boracay, used with permission by Global Voices

Sir, we would like to tell the story of what they did to us here. We were served [by the government’s environment ministry] a Show Cause Order and Notice to Vacate. When they came, they were accompanied by five policemen in fatigue uniforms carrying long firearms. We were panicking because there were children. They went back and forth among the houses. They gave us 15 days to vacate our homes.

A single motor operator had a similar experience with the police:

Photo by Friends of Boaracay, used with permission by Global Voices.

“People already don’t have work, yet they still do things through intimidation. Which leads us to ask, are we included in the demolition? There are no more passengers; we go round and round but get no income. Will we be bulldozed like dogs and left to sleep on the ground? Of course, we will not resist if we are demolished, they are heavily armed. We have nowhere to go. We have feelings and we are very afraid because they are armed.”

Sand artists insisted that it is the government’s own actions that created the problem in the first place:

 

“We cousins have been making sand art for four years. We are from Boracay. We are not destroying the island. Those building the big buildings who were given permits by the [government’s environment ministry] are the ones destroying Boracay.”

One Facebook post echoed the views of many who are concerned about the plight of the displaced:

“As an advocate for the environment I want it rehabilitated too… BUT I BLEED MORE for the people who are affected by the closure because of lack of planning and foresight on the part of the government in ensuring that safety nets are in place prior to closedown.”

According to the initial fact-finding and solidarity mission report, 40% of the island’s population have received notices to self-demolish and vacate their residences. These notices came from state employees who were accompanied by heavily-armed policemen, over 600 of which have been deployed to the island days ahead of its scheduled closure.

In response to the outcry, President Duterte has threatened the permanent closure of Boracay — but workers, residents and their supporters are not backing down. They continue to defend their livelihoods, and oppose the entry of big casinos into the island. # (Karlo Mongaya/Global Voices)

(This article was originally published by Global Voices. Kodao is a Global Voices’ Philippines partner.)