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PH ‘stimulus’ smallest in region

Philippine spending in response to the COVID-19 pandemic is among the smallest in the region, said research group IBON.

The narrow-minded obsession with ‘creditworthiness’ stops the government from taking the urgent steps needed to restore livelihoods and save the economy. The group said that having economic managers dominated by finance people rather than development experts is the biggest obstacle to real recovery.

According to the International Monetary Fund (IMF) Policy Responses to COVID-19 tracker, the fiscal policy response of the Philippines is equivalent to just 3.1% of its gross domestic product (GDP).

IBON noted that this is the smallest among the major economies of Southeast Asia. This is less than in Singapore (19.7%), Vietnam (13.3%), Thailand (9.6%), Indonesia (4.4%) and Malaysia (4.3%). It is also less than half of the global average of around 6.2% of GDP.

The Philippines’ ranking does not change even if the Bayanihan 2 bill recently approved by the Senate is passed into law, said the group.

The proposed Php140 billion stimulus program is worth just 0.7% of the GDP and will bring the country’s fiscal response only to 3.8% of GDP.

The IMF notes that country data are not always strictly comparable but the figures are nonetheless indicative.

IBON said that upcoming national government (NG) budgets meanwhile see the smallest post-crisis ‘stimulus’ increases in decades, further undermining economic recovery.

Department of Budget and Management National Budget Memorandum No. 136 only foresees a 5.7% budget increase in 2021 falling to an even smaller 1.8% increase in 2022, despite the country facing the worst economic decline in its history in 2020 because of the pandemic.

The budget increase in 2021 would be the smallest in a decade and in 2022 the smallest in over 30 years.

These increases also compare unfavorably with budget increases after the 1997 Asian financial crisis and 2008 global financial and economic crisis.

After the Thai Baht collapsed in 1997, the NG budget rose by 9.3% in 1998 and then by 8.0% in 1999. After the Lehman Brothers firm collapsed in 2008, the NG budget rose by 9.1% in 2009 and by 2.7% in 2010.

The economic managers have been blocking larger stimulus packages proposed by Congress since at least May, the group said.

The House of Representatives and Senate took up more meaningful stimulus measures worth at least Php1.3 trillion or more but stopped when the finance department told them to because these were ‘unfundable’ and ‘unsustainable’.

These measures would have been closer to the global average.

Among others, this also affirms that the so-called power of the purse of Congress is illusory and how the president and executive branch are actually in complete control of the country’s finances. The president can implement a bigger stimulus package if he wants to, said the group.

The obsession of the economic managers with ‘creditworthiness’ is misplaced, said IBON.

Thailand, Vietnam and Indonesia have lower credit ratings than the Philippines but are spending more to respond to and recover from the pandemic. Financing can be raised by reallocating from less productive infrastructure and debt service, and by a more progressive tax system with higher taxes on large firms and the wealth of the country’s super-rich.

The magnitude of the country’s response has to be commensurate to the crisis at hand. This should span health measures, continued cash subsidies to improve household welfare and boost aggregate demand, and support especially to Filipino and domestic market-oriented micro, small and medium enterprises, said the group. #

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

The unbelievable indifference of the Duterte administration

By Sonny Africa

The Duterte government insists that it is successfully responding to the COVID-19 pandemic. The reality is a little bit different – it hasn’t done enough, and is planning to do even less.

The coronavirus is spreading faster than ever. It took over three months to reach the first 10,000 confirmed cases but less than a week to add the last 10,000, at over 57,000 to date. University of the Philippines (UP) researchers forecast between 100,000 to 131,000 cases by the end of August.

Characteristically, the government’s containment measure of choice was a military lockdown – among the fiercest and longest in the world. It justified this as harsh but necessary, repeating a favored talking point used to justify all sorts of sins.

The effect on the economy and the people was certainly brutal.

The country was plunged into the worst crisis of mass unemployment in its history with 14 million unemployed and a 22% unemployment rate in April 2020, by IBON’s reckoning. The combined 20.4 million unemployed and underemployed are over two-fifths (40.2%) of the presumed labor force. These correct for serious underestimation in officially released figures.

The joblessness and collapse in livelihoods are expected to ease as restrictions are relaxed. But whatever improvement will still not be enough to return to a pre-pandemic state.

The country’s gross domestic product (GDP) is projected to contract by 2.0-3.4% for the whole of 2020, according to the government’s Development Budget Coordination Committee (DBCC). The World Bank has a slightly more optimistic projection of -1.9% while the International Monetary Fund (IMF) and Asian Development Bank (ADB) see it worse at -3.6% and -3.8%, respectively.

This will be the worst growth performance in 35 years since the -7.3% (negative) GDP growth in 1983 and 1984. But if the low estimates materialize, it will also be the biggest decline from positive growth ever recorded.

As it is, the economy is well on the way to its fourth straight year of slowing growth. It already contracted at -0.2% growth in the first quarter of 2020 with just two weeks’ worth of lockdowns. The second quarter figures that will come out in August will be much worse.

Unhealthy response

No one is likely to have thought that the worst public health crisis and economic decline in the country’s history would be enough to spur the Duterte administration to reform its anti-democratic and anti-development ways. It didn’t.

The government’s military-dominated COVID-19 response team has proven unfit for purpose and the steeply rising cases today point to the protracted lockdown being squandered. Yet the rise in reported cases do not even give the complete picture.

To date, there’s a validation backlog of over 15,000. The positivity rate of 12.4% meanwhile indicates that testing is still, months into the pandemic, far below the levels needed. Local transmission is still gaining momentum even as other Southeast Asian countries have already stopped theirs.

The hazy picture is a poor starting point for the contact tracing, isolation and selective quarantines needed. But the rise in COVID-19 cases is sufficient to show how social distancing and other precautionary measures can’t go far enough.

Assuming all pandemic-related deaths are accounted for, the 1,534 reported deaths are still relatively few and the number of daily fatalities fortunately fewer than the peak in March. This may however soon change as the virus spreads in the coming weeks and as the health system becomes overstretched even just by those who can afford it.

Hospital capacity hasn’t been beefed up so much as portions of it carved out at the expense of non-COVID-19 cases. The National Capital Region (NCR) and Cebu are the pandemic’s epicenters in the country. As much as 19 NCR hospitals are at or nearing their capacity of ICU beds for COVID-19 patients – 14 of which were acknowledged by the Department of Health (DOH) last week – while Cebu’s hospitals are already overwhelmed.

Hyped assistance

The inadequacy of the health response is more disturbing in how the time for this was bought with lost incomes, small business closures, joblessness and hunger. Tens of millions of Filipinos even suffered more than they should have because of similarly inadequate emergency relief.

At the start of the lockdowns, 18 million beneficiary households were promised Php5,000-8,000 in monthly cash subsidies for just two months. That right there is an immediate problem – the lockdowns are running on four months now, since mid-March, with only partial easing in June.

Emergency subsidies reportedly reaching 19.4 million beneficiaries under various programs of the departments of social welfare, labor and agriculture sounds impressive.

However, the aid was very slow in coming. Most beneficiaries had to wait 6-10 weeks before getting their first monthly tranche.

The aid is also very stingy. Taken altogether, the first tranche of the cash subsidy programs only amounts to an average of Php5,611 per beneficiary family. Over the last four months this comes out to just Php11 per person per day.

The government has even recanted and said that only 12 million beneficiaries will get the second tranche. But the number of those who will actually get this second tranche may be even less than that. The government is invoking bureaucratic difficulties to explain why only 1.4 million of the 12 million have received this tranche to date.

These emergency cash subsidies are also much lower than the latest official poverty threshold of Php10,727 monthly for a family of five. Yet this miserly relief will even seem generous in the period to come because little more is forthcoming. The official government policy was succinctly put by the presidential spokesperson recently: “We cannot afford to give ayuda (aid) to keep everyone alive.”

Business as usual

The Duterte administration’s lockdowns precipitated what may be the greatest economic collapse in Philippine history. The lockdowns per se are of course temporary – indeed, as too the pandemic, even if this will linger for at least another year or more.

Though temporary, the simultaneous demand and supply shock to the Philippine economy, other countries, and the global economy as a whole is unprecedented in the modern era. The world economy is said to be undergoing its worst recession since the Great Depression.

Yet apart from a momentary surge in emergency relief and despite lip service to the economic crisis, it bizarrely still seems to be business as usual for the economic managers. There are a couple of reasons for this.

The most basic is how the economic managers – and most of our political leaders – are blinded by the free market dogma imbibed over four decades of neoliberal globalization. There is a rigid faith that market forces will be enough to meet the pandemic-driven economic challenge. This is matched by an inability to grasp that responsible state intervention is needed not just to deal with the crisis but for long-term national development.

But there is also an extreme narrow-mindedness common among many afflicted by that dogma – that ‘creditworthiness’, ‘competitiveness’ and ‘investor-friendliness’ are not just a means to but actually ends of development. The people who make up the majority of the economy are peripheral and ever in the margins.

These go far in explaining the lack of urgency and, apparently, seeing the current crisis as an inconvenient but minor speed bump on the highway to free market-driven progress.

Fragments of a response

Genuine attention would start with immediately coming up with a plan fitting the vastly changed pandemic-driven crisis conditions. Nearly six months into the pandemic, all that the people have are fragments – including fragments which are self-evidently exaggerated to give the impression of substantial action.

The economic team came up with a “4-pillar strategy” in April that was eventually rebranded as the Philippine Program for Recovery with Equity and Solidarity (PH-PROGRESO). Supposedly worth Php1.7 trillion or an impressive 9.1% of GDP, this figure was grossly bloated by double-counting of interventions and their sources of financing, by conflating actual spending with merely foregone tax and tariff revenues, and by including additional liquidity from monetary measures.

The Inter-Agency Task Force Technical Working Group for Anticipatory and Forward Planning (IATF-TWG for AFP) released its We Recover As One report in May. This seemed more detailed, comprehensive and forward-looking. There are some relevant health and education measures.

But some very important measures are missing – expanding the public health system, social protection to help everyone in need, and protecting jobs, wages and workers’ rights. Trade, industrial and agricultural measures also seem oblivious to unsound fundamentals, the global crisis, and accelerating protectionism. On the other hand, unfunded feel-good platitudes are aplenty.

The economic managers started working with Congress on a Bayanihan 2 bill in June. This replaces the Php1.3 trillion package that Congress originally proposed but which the finance department summarily shot down ostensibly for lack of funds. The Bayanihan 2 proposal is now just one-tenth in size at Php140 billion.

At present, the stinginess of the economic managers is the biggest binding constraint to addressing the pandemic, alleviating economic distress of poor households, and economic recovery. The Php140 billion is much too small compared to the magnitude of the crisis at hand. At the same time, the sweeping insistence on infrastructure as a magic bullet and on sacrosanct debt servicing means continued unproductive spending rather than on what would have the greatest development impact.

A Philippine Economic Recovery Plan was supposed to be made public at the pre-SONA forum of the economic and infrastructure cluster on July 8. But this was not presented and is still strangely kept secret. Neither the Department of Finance (DOF) nor the National Economic and Development Authority (NEDA) websites share this with the public, and a direct request was declined.

It’s five-and-a-half months since the first confirmed COVID-19 case in the Philippines, and about four months since declaring a public health emergency, a state of national emergency, and the start of lockdowns. The Duterte administration has throughout portrayed itself as doing everything it needs to.

In reality, it seems to be doing as little as it can. A new anti-terrorism law was apparently even seen as more urgent than clinching a stimulus program. This languid COVID-19 response is bringing us to the edge of the precipice on both the health and economic fronts. #

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

Gov’t should check SAP’s gross failure as COVID cases rise – IBON

by IBON Media & Communications

Research group IBON said that the Duterte government should correct the huge shortfall of the Social Amelioration Program (SAP) especially amid a continuously increasing number of COVID-19 cases.

Aside from getting the stingy first tranche of emergency subsidies, 9 million of the 18 million target recipients and 1.5 million more “wait-listed” beneficiaries will no longer get the second tranche.

This is as the government limits distribution to residents in enhanced community quarantine (ECQ) and modified ECQ (MECQ) areas. Yet, the country reaches a record of 36,438 cases as of June 29.

According to the recently expired Bayanihan law, the Philippine government was supposed to provide emergency subsidies to low-income families and vulnerable sectors whose jobs and incomes were disrupted by the lockdown.

Support amounting to Php5,000-8,000, depending on regional minimum wage rates, was to be given to some 18 million poor households for two months.

The first month-tranche came in the duration of three months, making the already stingy aid even much delayed.

The second month-tranche, on the other hand, according to an inter-agency joint memorandum, will be distributed now only to beneficiaries in the ECQ and MECQ areas.

This reduces the original 17.7 million target beneficiaries to just 8.6 million households in the following areas: Central Luzon except Aurora, the National Capital Region (NCR), Calabarzon, Benguet, Pangasinan, Iloilo, Cebu province, Bacolod City, Davao City, Albay province, and Zamboanga City.

This leaves 9.1 million of the original target SAP beneficiaries affected by the three-month lockdown to make do with the meager first tranche, said IBON. This is even if economic activity cannot fully resume in now general community quarantine (GCQ) and modified GCQ areas.

Considering that Php98.3 billion has been distributed to 17.5 million households as of June 27, IBON computes that the first tranche averages out to Php5,617 per family.

Without the second tranche supposedly for the second month of lockdown, the subsidy amounts to just Php53 per family or Php12 per person per day for the past 106 days since the COVID-19 lockdown started.

Even those who will receive the second tranche will still end up stretching a small amount over three months of lockdown, IBON said.

Some Php6.79 billion in second tranche aid has already been distributed to 1.3 million recipients, or an average of Php5,047 per family.

Combining both tranches, these 1.3 million families each got only a total of Php10,664.

This amounts to Php101 per family or Php23 per family member for each of the 106 lockdown days.

IBON also noted that 5.28 million low-income households even continue to wait for the first tranche of SAP.

This figure includes the remaining 278,206 beneficiaries out of the target 17.7 million according to Department of Social Welfare and Development (DSWD) data as of June 27.

The rest are the families declared by the DSWD in mid-May as also eligible to receive aid but have not received any.

Yet, the government retracted and said that only 3.5 million of the wait-listed beneficiaries in MECQ and ECQ areas as of end-May are to get two tranches of emergency subsidy.

This means that the remaining 1.5 million in GCQ and modified GCQ areas are getting only one tranche.

The country does not seem to be winning the war against COVID-19, but the government has remained indifferent to the impact of the pandemic on the millions of poor families, said IBON.

The Duterte administration has continued penny-pinching even as people’s livelihoods and incomes are already irrecoverable and public health is at risk.

People’s socioeconomic welfare along with an efficient health response are the urgent matters that the Duterte government should be focusing on instead of staying apathetic to the mounting health and economic crisis, IBON said. #

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

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. #

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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. #

Ang sinapit ng mga drayber

“Dati, kami ang kinakawayan. Ngayon, kami ang kumakaway [para mamalimos].”–Joel Caligayan, tsuper ng jeep biyaheng Rosario-Cubao

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. #

Government employees oppose ‘mass layoff circular’ amid pandemic

By Joseph Cuevas

Government employees raised alarms over a new budget circular instructing agencies to realign their budget for Covid-19 programs, saying the new measure is anti-labor and anti-poor.  

In an online press conference Tuesday, June 9, the Confederation for Unity, Recognition and Advancement of Government Employees (COURAGE) said Department of Budget and Management (DBM) National Budget Circular (NBC) No. 580 would only result in mass layoffs and budget cuts to programs and services for the people.

The new DBM measure, dubbed the Adoption of Economy Measures in Government Due to the Emergency Health Situation, was issued last April 12.

It derives legal basis from Republic Act No. 11469 or the Bayanihan Act of 2020 that gave emergency powers to President Duterte to raise and realign  funds for government’s efforts against Covid-19.

Section 4.3 of the circular orders the discontinuance of hiring of job orders except those considered as frontliners during the ongoing state of public health emergency, COURAGE said.

The National Housing Authority (NHA) initially released a memorandum effecting the circular but, after a dialogue with union members, issued an addendum assuring that no workers would be affected.

COURAGE also said government agencies are realigning or have already realigned their work and financial plans to comply with the circular, sacrificing many social service programs and poverty alleviation plans.

Among such programs may include the Kapit-Bisig Laban sa Kahirapan (KALAHI) and Sustainable Livelihood Program (SLP) program of the Department of Social Welfare and Development (DSWD), COURAGE revealed.

COURAGE national president Santiago Dasmariñas Jr. said as many as 600,000 government employees all over the country, especially job-order and contractual employees, are worried.

Dasmariñas said COURAGE wrote DBM Secretary Wendel Angel Avisado last April 29 to express opposition to the circular, particularly DBM’s plans to reduce or remove funds for government employees’ wages.

“The COS, JO workers, and the like, need their wages now, more than ever, in this time of pandemic caused by the COVID-19. And it will be an injustice if the budget intended for their wages shall be SLASHED and cut which will result to their eventual termination from work,” COURAGE’s letter states. #

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. #

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Kodao publishes IBON reports 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. #

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