PH rice import dependence rising amid weakening global production

Rice import liberalization harms both the consumers and rice farmers, and only the foreign and domestic private traders reap the benefits.

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In the past two decades, imported rice has been accounting for an increasing portion of our domestic consumption. Prior to the 1995 birth of the World Trade Organization (WTO), the country’s rice import dependency ratio (i.e., the extent of dependency on importation in relation to domestic consumption) only averaged 2.45% (1990 to 1994 average). In the latest available 10-year average (2006 to 2016), the ratio has risen by 4.5 times to 11.06 percent. In the immediate 10 years since the WTO (1995 to 2005), the average ratio was 11.24 percent.

Despite increasing dependence on cheaper imported rice, the retail price of rice has continued to rise. The average annual inflation rate for rice accelerated from 4% in 1996-2006 to 5.7% in 2006-2016. Apparently, more rice imports do not necessarily translate to lower retail prices. Yet, to tame rising rice prices and ease faster overall inflation, the Duterte administration’s answer is further liberalization of rice imports through the Rice Tariffication Bill(RTB). Already passed by the Houselast month, a Senate RTB counterpart is expected before the year ends.

The RTB will liberalize rice trade by removing the quantitative restriction (QR) on imported rice. This entails scrapping the current minimum access volume (MAV) which caps rice imports at 805,200 metric tons (MT) with a 35% in-quota (e.g. within MAV) tariff. Rice imports outside the MAV are slapped with a 40% tariff. In lieu of a QR, a general tariff will be imposed.

Rice tariffication and liberalization is a Philippine commitment to the WTO but repeatedly postponed in the past due to the socially sensitive nature of rice as an agricultural commodity. The Duterte administration used the soaring price of riceto justify finally replacing the rice QR with tariff, selling the idea that the entry of more imports will bring down local prices. As of the third week of August, well-milled rice retails at Php46.35 per kilo (10% higher than a year ago) and regular milled rice at Php42.85 (13% higher).

According to government’s economic managers, tariffication could reduce the priceof rice by as much as Php4.31 per kilo and lessen inflation by at least one percentage point. Rice production in Thailand and Vietnam, the country’s main sources of rice imports, is pegged at Php6 per kilo. In the Philippines, production cost is said to be double that amount.

While not a guarantee to lower prices in the long run, opening up the rice sector to unbridled imports leaves the country’s rice security at the mercy of an unpredictable and increasingly unreliable world market. This as 95% of Philippine rice imports come from just two countries whose own domestic production is either slowing down or declining. Globally, rice production has been steadily decelerating in the past four decades.

At the same time, the already precarious livelihoodof up to 20 million Filipinos who rely on the rice sector, including some 2.5 million rice farmers, gets more insecure than ever.

Rice production in Vietnam, which accounts for almost 69% of Philippine rice imports (2010 to 2016 average), and in Thailand, which comprises 26%, has been weakening in the past four decades. In Vietnam, rice (paddy) production decelerated from an annual growth of more than 5% in the 1980s and 1990s to 2.2% in the 2000s, and 1.6% this decade. Thailand’s rice production slowed down from a yearly growth of 3% in the 1980s to 2.1% in the 1990s, before recovering to 3.1% in the 2000s. But this decade, Thai rice production is actually contracting by 3.1% every year.

Other Southeast Asian countries that are also among the world’s major rice exporters (and potential Philippine suppliers) are experiencing production declines as well. Myanmar’s rice (paddy) production went down from an annual growth of 4.9% in the 2000s to a yearly contraction of 3.1% this decade. Cambodia is still posting a 3.8 growth since 2010, but it’s twice slower than its annual expansion of 7.4% last decade.

Our own rice (paddy) production has decelerated to 1.2% this decade from a more than 3%-annual expansion in the 1990s and 2000s and about 4-5% in the 1960s and 1970s. Worldwide, rice production has been continuously slowing since the 1980s when annual growth was pegged at 3.2 percent. This declined to 1.8% in the 1990s; 1.2% in the 2000s; and 1.1% in the 2010s.

It is estimated that lifting the QR on rice will double the volume of the country’s rice imports in five years. For the already impoverished Filipino rice farmers, this means a sharp drop in income (some projections say by around 29%) as rice that are 100% cheaper to produce in Thailand and Vietnam due to heavy subsidies flood the domestic market.

Government allays fears of more bankruptcy among rice farmers through the proposed six-year Rice Competitiveness Enhancement Fund (Rice Fund) where all the duties collected from rice imports would be supposedly used to support small rice farmers. The central bank estimates an additional Php28 billion in annual revenues from rice tariffs that could be used to help prepare rice farmers for competition from imports through the Rice Fund.

But this was the same promise made to vegetable farmers and fisher folk most affected by WTO tariffication in 1995 with the Agricultural Competitiveness Enhance Fund (ACEF). Marred by corruption and mismanagement issues, the fund only ended up favoring agribusiness corporations as small farmers and fisher folk were further impoverished by massive agricultural imports.

In fact, since its introduction more than two decades ago, ACEF’s initial six-year life has been extended and reformed several times – the most recent in 2016, with implementation starting this year– because it has failed to achieve its stated objectives of protecting and preparing the farmers and fisher folk.

As mentioned, the influx of cheaper imported rice has not resulted to cheaper retail prices for consumers. The monopoly control that big private traders have over imported rice and those procured from local farmers allows them to keep retail prices high even as farmgate prices are depressed. Privatization and deregulation of its functions on palay procurement, rice importation, marketing and price control have made the National Food Authority (NFA) inutile in affecting prices. Inefficiency and corruption made the situation even worse.

Even as the price of rice continued to increase, the farmer’s share to retail prices is actually lower today. Prior to the WTO, farmer’s share to consumer peso (i.e. how much of the price paid by the consumers goes back to the rice farmers) decreased from 30.5% (1990 to 1994 average) to 28.3% in 1995 to 2005 and just slightly climbing up to 28.6% in 2006 to 2016. Note that the actual amount that goes to the rice farmers is much lower due to usury and landlessness that eat into their share in prices.

Liberalization harms both the consumers and rice farmers, and only the foreign and domestic private traders reap the benefits. Tariffication and the promotion of more imports give these private traders even greater control over the rice industry. ###

Sources of data: Philippine Statistics Authority (PSA); Food and Agriculture Organization (FAO)

How to bring down oil prices by as much as Php10 per liter and why it is justifiable

The Duterte administration can afford to forego additional windfall oil tax revenues, if only to protect the public from further taking a hit from escalating cost of living.

(Photo from ABS-CBN News)

Suspending the imposition and collection of the 12% value-added tax (VAT) and the additional excise taxes under the TRAIN (Tax Reform for Acceleration and Inclusion) Law could immediately bring down the prices of oil products by more than Php8 to as much as Php10 per liter. This is urgent as oil prices continue to soar, and with inflation further accelerating to a fresh nine-year high at 6.7% in September.

While the Bangko Sentral ng Pilipinas (BSP) claims that inflation may have already peaked last month, projections such as that of the US-based Energy Information (EIA) peg even higher global oil prices in the fourth quarter of 2018 due to lingering supply concerns.

Removing oil taxes now is also justifiable and fair, considering that apparently in just nine months (Jan to Sep 2018) the government may have already almost equaled their full year 2017 collections from the VAT on diesel and gasoline, based on estimates. Total revenues from excise taxes on oil products in the first six months of the year, on the other hand, are 181% higher than what was collected during the same period last year according to an official Department of Finance (DOF) preliminary report. All these mean that government can afford to forego additional windfall oil tax revenues, if only to protect the public from further taking a hit from escalating cost of living.

Unabated price hikes

Oil firms advised that starting Oct 9, the price of diesel will again go up by Php1.45 per liter; gasoline, Php1.00; and kerosene, Php1.35. These upward adjustments will bring the total increases for the year at Php14.95 per liter for diesel; Php14.37 for gasoline; and Php14.00 for kerosene. The latest increases are the ninth straight round of oil price hikes (OPH) in as many weeks, and the twenty-ninth for the year.

With the recent OPH, the common price of diesel in Metro Manila is now at almost fifty peso per liter (Php49.75) while gasoline (RON 95) is already the approaching sixty-two-peso mark (Php61.50). At these levels, oil prices are now at their highest in nominal terms in the past decade.

The VAT is equivalent to Php5.97 per liter for diesel and Php7.38 per liter for gasoline (or 12% of their respective common price). The TRAIN Law’s additional excise taxes, meanwhile, is at Php2.50 per liter for diesel and Php2.65 for gasoline for this year. Thus, removing both from the current common price will translate to an immediate reduction of Php8.47 per liter for diesel and Php10.03 for gasoline. (See Table)

Oil prices, TRAIN excise & VAT as of Oct 9

Suspending the oil VAT and excise taxes under the TRAIN Law should be doable for the government since doing so would no longer adversely impact its revenue generation from petroleum products. Economic managers projected international crude oil prices to be at just between US$45 to 60 per barrel and the foreign exchange (forex) rate at just Php48 to 51 per US dollar for 2018. Actual Dubai crude prices for the year, however, have ranged between US$60 to 80 per barrel while the forex rate is averaging Php52.48 per US dollar so far this year.

Windfall revenues

In other words, the Duterte administration has been collecting windfall revenues from the 12% VAT on oil products due to incessantly increasing prices as a result of higher than anticipated Dubai crude prices and a weaker peso. The DOF reported that overall VAT collections in the first semester of 2018 have reached Php179.95 billion, or about Php1.51 billion higher than what was raised during the same period last year.

While the DOF also said that VAT collections in the first half were 19% short of the government target for the period, this was not due to lower revenues raised from the oil VAT, which as mentioned have certainly skyrocketed due to higher pump prices. Apparently, small and medium enterprises (SMEs) and self-employed individuals that used to remit the VAT before the TRAIN Law became effective are now using other tax options under the new law. But that VAT collections in the first semester are still slightly higher than last year’s first half total is indicative of how much windfall the government has raised from rising oil prices.

There is no publicly available data on how much revenues that government has raised so far from the oil VAT. But using the average common price in Metro Manila for 2018 and based on domestic oil consumption data as of 2017 (as monitored and reported by the Department of Energy or DOE), VAT revenues from diesel and gasoline can be estimated. At a Php43-per liter average common price and daily consumption of almost 29.91 million liters, diesel generated about Php42.29 billion in VAT revenues from Jan to Sep 2018. At a Php55-average common price and daily consumption of almost 17.02 million liters, gasoline generated around Php30.78 billion in VAT revenues during the same period.

That’s about Php73.06 billion in VAT revenues from diesel and gasoline. For comparison, at an average common price of Php32 per liter in 2017 for diesel and Php46 for gasoline, total VAT collections from the two oil products for full year 2017 may have reached an estimated Php76.21 billion.

Removing onerous taxes

These are, of course, just estimates and actual collection figures may differ, perhaps even widely. But there should be no significant disparity between the comparison of oil VAT revenues between 2017 and 2018, whether estimates or actual collection data. The point is that government can decide to stop collecting more oil taxes now to immediately ease the burden of the public, even simply based on the fact that they have already collected enough.

Meanwhile, excise taxes collected from all petroleum products reached Php18.03 billion in the first six months of 2018, or almost thrice of the excise taxes collected from oil products in the same period last year, according to initial DOF data. That should be more than enough given how inflation has rapidly accelerated this year with increasing oil prices under the TRAIN Law as one of the primary culprits.

The whole point of raising taxes is to send back the generated resources to the people in the form of key economic and social services as well as programs and projects that benefit them and the country. But if the taxes are so onerous especially for the poor such as the VAT and excise taxes on petroleum products, they become an unnecessary burden and are oppressive. They negate whatever supposed benefits the people expect to get from the government. For the government to insist on collecting such taxes is unacceptable.

Imagine, for instance, a jeepney driver or small fisher whose income has been substantially eroded by increasing diesel and gasoline prices. Public education or health services, even new roads and bridges funded by their taxes are meaningless amid high prices that deprive them of decent living. Then there is the question of whether these tax resources are actually used for public interest and welfare given how corruption remains rampant in the bureaucracy not to mention that many programs and projects funded by these resources are anti-poor by design.

On the contrary, removing the VAT and excise taxes on oil now will have an immediate favorable impact on household budgets. ###

Militarizing development work: Army chief Rolando Bautista as DSWD head

Instead of development and peace, militarizing development work with Bautista’s appointment as DSWD chief will actually bring greater poverty and conflict.

(Photo from The Philippine Star)

By appointing Army chief Rolando Bautista as the next DSWD Secretary, Pres. Duterte is transforming government’s social welfare and development work into one big Civilian Military Operations (CMO) for counterinsurgency.

This has serious implications, among others –

  1. It will undermine genuine development work. Already limited public resources intended for development will be further and more systematically diverted for military purposes. Gains will be measured not in development terms but whether target rebel groups have been weakened.
  2. Poor communities that require assistance will be held hostage by the military agenda as government assistance would be contingent not on their actual and urgent needs but on their support and cooperation with the military’s counterinsurgency campaign.
  3. It will make the job of civilian development workers more difficult and could even put them at risk as they will be seen as agents of the military, who many communities distrust because of their atrocities.

Thus, instead of development and peace, militarizing development work with Bautista’s appointment as DSWD chief will actually bring greater poverty and conflict. ###

Another “record” for Duterte: Oil prices highest in 10 years

Overall, since Pres. Duterte took over, the common price of diesel in Metro Manila has already ballooned by Php20.35 per liter and gasoline by Php19.35.

Today’s oil price hikes (OPH) bring the nominal prices of diesel and gasoline to their highest levels in a decade. Oil firms announced that they will increase the price of diesel by Php1.35 per liter today and gasoline by Php1.00.

With these upward adjustments, the common price of diesel in Metro Manila is now pegged at Php48.30 per liter. The last time the prevailing pump price of diesel was higher was on Oct 1, 2008 when diesel in Metro Manila was retailing at a range of Php46.95 to Php49.09 per liter.

On the other hand, the common price of gasoline (RON 95) in Metro Manila is now at Php60.50 per liter. The last time that the prevailing pump price of gasoline in the capital region breached the Php60-mark was on Jul 21, 2008 when unleaded gasoline was retailing at a range of Php59.20 to Php61.07 per liter.

The announced OPH today is the eighth straight in as many weeks and the 28th overall. Total price increases for the year is Php13.50 per liter for diesel and Php13.37 for gasoline. The increases include the impact of Pres. Duterte’s TRAIN (Tax Reform for Acceleration and Inclusion) Law that added Php2.80 per liter in the pump price of diesel and Php2.97 for gasoline.

Overall, since Pres. Duterte took over, the common price of diesel in Metro Manila has already ballooned by Php20.35 per liter and gasoline by Php19.35.

Taking advantage of automatic weekly price adjustments under the Oil Deregulation Law, oil firms also appear to be implementing much higher price changes than what global price movement and forex fluctuations supposedly warrant. This simple profiteering has allowed oil firms to pocket about Php1.41 per liter in additional profits from diesel, and around Php2.53 per liter from gasoline.

Meanwhile, liquefied petroleum gas (LPG), according to the Energy department, is also now retailing in Metro Manila at Php705 to Php866 per 11-kilogram (kg) cylinder tank after oil firms increased LPG prices again yesterday (the eighth time this year). Before Pres. Duterte took over, the price range was only Php400 to Php650. Put another way, the most expensive LPG before Duterte became President in 2016 is still much cheaper than the “cheapest” LPG under him today. ###

“Red October” Day 1: What’s destabilizing the Duterte regime?

As it hunts for “Red October”, the Duterte administration should look at itself instead. Apparently, its own economic policies – together with its repressive schemes – are the ones destabilizing and isolating the regime.

(Photo from AP/Bullit Marquez/The Philippine Star)

It’s “Red October” Day 1. Who or what is destabilizing the Duterte government today?

The oil companies. Oil firms announced that they will be implementing another round of oil price hikes starting Oct 1. Pilipinas Shell is hiking its LPG (liquefied petroleum gas) price by about Php2.36 per kilogram (kg) while Petron Corp. will also increase by Php2.35. These translate to an increase of almost Php26 for an 11-kg cylinder tank usually used by households. Including the previous increases since Pres. Duterte took over, LPG prices have already ballooned by an estimated Php216 to Php246. Further, starting Oct 2, oil firms will also implement a big-time price hike for diesel, gasoline and kerosene. Oil companies already announced that they will hike the price of diesel by Php1.35 per liter; gasoline, Php1.00; and kerosene, Php1.10. This will be the eighth straight week of unabated oil price hikes and would be the 28th overall for the year. Since Duterte became President, the price of diesel has already soared by more than Php20 per liter (Php13.50 this year alone) and gasoline by more than Php19 per liter (Php13.37 this year). (Read more on the latest oil price hikes here.)

The private water concessionaires of the MWSS (Metropolitan Waterworks and Sewerage System). Starting Oct 1, Maynilad Water Services Inc. will be billing its customers an additional Php0.90 per cubic meter for its basic charge under its rebased rates approved by the MWSS-Regulatory Office. This is on top of the Php0.11 per cubic meter increase due to the quarterly foreign currency differential adjustment (FCDA). Manila Water Corp.’s basic rates will likewise increase by Php1.46 per cubic meter due to rate rebasing while it will charge an extra Php0.02 per cubic meter due to the FCDA. Both rate rebasing and FCDA are mechanisms created under the privatization of MWSS that allow the private water concessionaires to adjust rates in order to pass on to the consumers all the costs of running the water services system and at the same time guarantee their profits. The rate hikes this “Red October” under the rate rebasing are just the first in four installments of increases with the three others to be implemented in Jan 2020, Jan 2021 and Jan 2022 – the second half of the Duterte presidency (that is if he is still in power).

Earlier, the Department of Economic Research of the Bangko Sentral ng Pilipinas (BSP) has estimated that inflation for September could reach 6.8%, with a range of 6.3% and as high as 7.1 percent. If the central bank’s forecast happens, this would be the ninth straight month of accelerated inflation and will be the highest in nine years. Pres. Duterte’s economic managers have repeatedly assured the public that inflation will ease in the latter part of 2018. But with the continued climb in oil prices, water rates, food prices (made worse by the impact of typhoon Ompong that destroyed almost Php27 billion worth of crops) and other basic goods and services, this appears to be a very optimistic forecast.

Rising prices and the inability or outright refusal of the Duterte administration to reverse current policies that allow unabated price hikes such as oil deregulation and water privatization, as well as its continued insistence on additional taxes under the TRAIN (Tax Reform for Acceleration and Inclusion) that further bloat prices are fueling social unrest and instability. The latest Pulse Asia survey showed that rising prices are the most urgent concern of Filipinos along with other economic concerns such as increasing workers’ pay, reducing poverty and creating more jobs.

As it hunts for “Red October”, the Duterte administration should look at itself instead, and not at the communists and their supposed co-plotters. Apparently, its own economic policies – together with its repressive schemes – are the ones destabilizing and isolating the regime. ###

Richest Filipinos and ‘Endo’ kings are Duterte’s friends

With the biggest employers of contractual workers like Henry Sy and Ramon Ang as Duterte’s biggest backers, Duterte’s failure to fulfill his promise of ending endo should not come as a surprise.

(First published by Bulatlat.com) — The Department of Labor and Employment (DOLE) has recently released a list of 20 firms that it said are engaged or suspected to be engaged in labor-only contracting. Some of the country’s largest companies topped the list, including Jollibee (14,960 workers); Dole Philippines (10,521); and PLDT (8,310).

Conspicuously absent in the list are known supporters of the Duterte administration.

One is SM, which is known for its chain of malls that hires thousands of contractual workers. According to Labor Secretary Silvestre Bello III, SM was not included in the list because it promised to regularize a total of 10,000 workers. He said that they are “satisfied” already with the retail giant’s commitment. But still, such promise does not justify the absence in the DOLE list of perhaps the most notorious and known biggest employer of contractual workers in the Philippines.

By its own account, the SM Group has more than 94,500 employees which include various companies under the conglomerate engaged in banking, financing, property, retail, malls, hotel, resorts and entertainment. According to one estimate, nine out of 10 SM employees are contractual workers.

Another is San Miguel Corporation (SMC). The diversified conglomerate (with operations in food and beverages, packaging, fuel and oil, power, and infrastructure) is said to employ around 20,000 workers, of whom only about 1,000 are regular workers.

What could possibly explain the exclusion of these giant conglomerates – two of the biggest not only in the Philippines but also in the Asian region?
The obvious answer is their close ties with President Duterte.

Among the country’s major business groups, SM has been one of the most supportive to the current regime. Its top officials are among the select tycoons that share an intimate dinner or travel abroad with the President to look for business opportunities, and invited to government events to show support to centerpiece Duterte programs like the “Build, Build, Build”. Along with state-run banks, SM Group’s BDO Unibank is financing Duterte’s contentious modernization program for jeepneys.

Its officials have publicly defended the controversial war on drugs and also offered the free showing of government’s anti-drug ads in SM cinemas nationwide. They supported the administration’s warming up of ties with China even as the latter has occupied and militarized Philippine-claimed territories in the South China Sea.

SM was founded by the country’s only trillionaire Henry Sy Sr. who has been the richest Filipino for over a decade now. Sy’s already massive wealth has been rising astronomically under Duterte – from just below US$14 billion in 2016 to US$18 billion in 2017 and further to US$20 billion in 2018. That’s almost a 54 percent increase in just three years.

SM aims to cash in on closer Philippine-China ties under Duterte. China is the world’s largest consumer market and the second biggest economy that could soon topple the US as number one. For Filipino oligarchs, the potential for profits is vast.

On top of the already seven malls it has in China, SM is building a “supermall” in the major port city of Tianjin (said to rival the size of the US’s Pentagon building) as well as residential projects in various key Chinese cities. With closer bilateral ties, Chinese tourists are also flocking the country, benefitting SM’s interests in resorts and entertainment.

An even more vocal apologist of the Duterte administration is SMC, especially its head honcho Ramon S. Ang. The SMC president was among Duterte’s campaign contributors in 2016 giving an undisclosed amount and perhaps other forms of support as Ang wasn’t even listed in the official Statement of Contributions and Expenditures (SOCE). Ang also offered to buy Duterte a private jet (worth as much as US$65 million) that he could use as President while donating Php1 billion to the Chief Executive’s pet campaign, the war on drugs.

Like Sy, Ang’s fortune has also vastly grown in the past three years. From a reported net worth of US$1.21 billion in 2016, his wealth has more than doubled to US$2.5 billion in 2018. Duterte’s infrastructure push apparently also pushed up Ang’s riches, which also include interests in construction.

Like SM, SMC has been capitalizing on Duterte’s programs. SMC is among those most aggressive in expanding in Mindanao particularly in establishing vast plantations and constructing infrastructure. In partnership with Malaysia’s Kuok Group, the conglomerate is developing about 18,495 hectares of forestlands covering four Davao del Norte municipalities for oil palm production. Just last August 2016, SMC also opened a 2,000-hectare industrial estate in Malita, Davao Occidental that also has a 20-meter deep seaport that can accommodate container vessels.

SM and especially SMC are among the leading proponents in Duterte’s “Build, Build, Build” infrastructure development program, including through the controversial unsolicited route. SMC alone accounts for 53 percent (P1.59 trillion) of the cost of all unsolicited proposals (P3 trillion) that have pitched to the Duterte administration. These include the P700-billion New Manila International Airport; the P338.8-billion Manila Bay Integrated Flood Control, Coastal Defense and Expressway Project; and P554-billion expansion of the Metro Manila Skyway and the South Luzon Expressway (SLEX).

SM (together with the Ayala group), on the other hand, has submitted an unsolicited proposal to build a P25-billion 8.6-kilometer elevated toll road that will supposedly help decongest traffic along EDSA. But as SM itself admitted, the main objective of the toll road is to increase access to its Mall of Asia complex. Through its BDO Unibank, SM also aims to profit from the “Build, Build, Build” by lending to project proponents or operators.

One of the major campaign promises that Duterte made was ending “endo” (end of contract scheme or contractualization). But two years into his presidency, that promise has remained largely unfulfilled.

With the biggest employers of contractual workers like SM and SMC as Duterte’s biggest backers, that should not come as a surprise.

SONA 2018: How much have prices increased in Duterte’s first two years?

Prices today are rising five times faster than they were before President Duterte took over.

(Photo from Xinhua/Rouelle Umali)

The first two years of the Duterte presidency have been without a shortage of controversies. Endless allegations of human rights abuses related to its bloody drug war and recently its oppressive anti-tambay campaign (both targeting the poor) continue to face the administration. Tyranny has reared its ugly head as President Rodrigo Duterte placed Mindanao under Martial Law and intensified the militarization of the rural areas. Extrajudicial killings that target activists, journalists, and even local politicians are on the rise amid a reign of worsening impunity.

Its push for federalism through Charter change(Cha-cha) is widely seen as an attempt not just to perpetuate the current regime but to concentrate further political power in the hands of Duterte and his clique. With deepened control over Congress, Judiciary and the military through patronage, harassment and a combination of both, and with the backing of both the US and China, Duterte has been laying the groundwork for an authoritarian rule not unlike the Marcos years.

But while creating the illusion of consolidation of political power, all these are actually creating instability and greater conflict. Underneath this social unrest is the deteriorating living condition of millions of Filipino families. Indeed, as the Duterte presidency resorts to more repression and curtailment of human rights to assert its narrow political agenda, the overall economic direction it pursues only serves to accelerate the impoverishment and exclusion of the people.

This has been most felt by the public and most pronounced in the form of increased prices of key commodities and higher charges for basic services that have defined the state of the economy in the first two years of the Duterte administration. Looking at data culled from various government agencies and media reports, sharp increases were recorded in the pump prices of oil products; in the rates of public utilities like electricity, water and transportation; as well as in the retail prices of several basic food items.

More expensive food items and public utilities

The price of diesel under Duterte has already increased by almost 60%; gasoline by more than 33%; and LPG, by 23 to 45 percent. Residential rates charged to ordinary households by the Manila Electric Co. (Meralco) have jumped by 14 to 23% in the past two years. Water rates, on the other hand, are higher by 5% (Maynilad) to 8% (Manila Water). The minimum fare in jeepney has also been hiked by an equivalent of 29%, and by 9% (aircon) to 11% (regular) for buses. In addition, the flag down rate for taxis is 33% more expensive today. (See Table 1)

Table 1 utilities under Duterte SONA 2018

Among the food items, the largest relative increases in prices were observed in vegetables with some doubling their retail prices and others posting more than 60% price hikes. Significant increases were also noted in the retail prices of fish (14-20%); meat (14-27%); sugar (8-14%); and commercial rice, in particular the cheaper varieties consumed by most households (regular milled rice, 8%-hike; well-milled rice, 11%). (See Table 2)

Table 2 basic goods under Duterte SONA 2018

These significant increases in the prices of basic goods and services are captured by inflation rate data, which measure how fast prices are rising. For six straight months this year, the inflation rate has been steadily acceleratingand has already reached 5.2% in June, the highest in at least the last half decade. The rate of price increases today (January to June 2018 average inflation rate of 4.3%) is five times faster than it was during period immediately preceding Duterte’s term (January to June 2016 average inflation rate of 0.8%). (See Chart)

Chart inflation under Duterte

For most Filipino families, especially the poor and those in the lower income brackets, the rising costs of these basic needs mean tremendous pressure on household budgets. Also, the poorer the family, the larger they spend for food and to a certain degree for utilities (including housing) relative to their income as the latest Family Income and Expenditure Survey (FIES) of the Philippine Statistics Authority (PSA) shows. To illustrate, 59 to 60% of total expenditures of those with an annual income of less than Php100,000 go to food compared to 35% for those with Php250,000 or more. (See Table 3)

Table 3 family expenditures by type

TRAIN, neoliberal policies and Duterte’s accountability

What explains the rapid rise in prices especially in recent months? To deflect accountability, Duterte’s economic team points to global factors that are beyond the control of government such as the increasing world prices of oil and weakening peso against the US dollar (thus making imports more expensive). These economic managers are some of the country’s most rabid advocates of neoliberalism, a model of economic development that transfers control of economic factors from the government or public sector to the profit-driven market forces and private sector, taking the form of liberalization, privatization, and deregulation as well as fiscal reforms to lessen state subsidies and increase tax collections.

However, it is obvious that prices are climbing up because of the past neoliberal economic policies that the Duterte administration chose to continue and the new neoliberal programs that it has started to implement, chief among them the Tax Reform for Acceleration and Inclusion (TRAIN) Law. Implemented since January 2018, the TRAIN Law while lowering the personal income tax for also introduced additional taxes for socially sensitive goods such as oil products, triggering a spike in inflation as shown in the chart above.

Additional taxes on petroleum products under TRAIN aggravated the impact of the two-decade old Oil Deregulation Law which allows oil firms to automatically adjust pump prices every week. This year (up to July 17), oil prices have increased already by a total of Php6.45 per liter for diesel; Php6.00 for gasoline; and Php6.70 for kerosene. TRAIN accounts for 30% of the total price hikes for diesel and 33% each for gasoline and kerosene.

Without government regulation on price adjustments, the oil industry has also been further opened up to abuses and price manipulation. For instance, oil firms have implemented oil price adjustments that are about Php0.80 per liter (diesel) to Php1.26 per liter (gasoline) more than what the supposed movements in global oil prices and foreign exchange rates warrant (for the period January 1 to July 10, 2018); meaning oil players could be charging the public more than what they should. Of course, this only considers the import costs and does not factor in yet the far larger (and more important) impact on domestic pump prices of monopoly pricing at the global level. (How these estimates are made is discussed herebased on available data at the time.)

All these combine to make the price of oil exorbitant, which is crucial because of the strategic role that oil plays in making the economy run (manufacturing factories, power plants, transport, etc.) and has a domino effect on consumer prices, services and the overall costs of living. Fare increases for public transport are the direct and most visible impact of increasing oil prices.

The privatization of public utilities, meanwhile, has exposed the people to unabated increases in user fees such as what the captured markets of Meralco, Manila Water, Maynilad and other private electricity and water service providers are being subjected to. Liberalization of agriculture made the country highly dependent on food imports (including rice, vegetables and meat), thus exposing the people to the vagaries of the global market where speculators and monopolies dominate (aside from the local cartels such as in rice), even as our own small food producers and farmers are neglected amid lack of genuine agrarian development.

No ease in the rise of cost of living

The bad news is that the prices of basic goods and services are not seen to ease anytime soon as the administration persists in its neoliberal direction. Duterte’s Cha-cha, for instance, is about neoliberalismin the economy as much as it is about federalism. When implemented, Cha-cha will pave the way for foreigners to take over and run, among others, the country’s public utilities that could result to even higher user fees for electricity, water, telecommunications and transport as these strategic sectors become further detached from national interest and public welfare. Cha-cha will also allow foreigners to own agricultural lands that could further undermine domestic food production and consequently the costs of food while poor farmers are further displaced from their means of production.

Already, huge increases in water ratesare looming again under Maynilad (seeking more than Php11 per cubic meter hike in its basic charge) and Manila Water’s (Php8.31 per cubic meter) privatization deal with the government that allows them to increase their basic charge every five years (on top of various periodic, automatic adjustments) and to pass on questionable charges to consumers, most notably their corporate income tax. LRT-1 fares could also jumpby Php5-7 as part of government’s privatization contract with the consortium of the Ayala family and Manny Pangilinan’s group that allows them to hike their basic fare every two years.

And lest the public – still reeling from the impact of the first wave of increases under the TRAIN Law – forgets, more tax hikes (and consequently, spikes in consumer prices) are coming under Duterte’s tax reform program. The TRAIN law mandates that the excise tax for diesel, pegged this year at Php2.50 per liter, will climb to Php4.50 in 2019 and further to Php6 in 2020. For gasoline excise tax, the schedule is Php7 this year, and then Php9 and Php10 in 2019 and 2020, respectively.

Duterte’s tough guy personality and foulmouthed rants unseen before from a President may have in the beginning amused a public too weary of sweet-talking traditional politicians. But amid the ever-rising costs of the people’s basic daily necessities, Duterte is steadily being exposed as the same despised trapo who covet power while abandoning the interests and welfare of the people.

It certainly does not help that the public’s legitimate concern on skyrocketing prices is being met with apathy by the chief architects of Duterte’s flawed neoliberal economic program such as Budget Secretary Benjamin Diokno’s crybaby remark. Unconditional cash transfer and Pantawid Pasadadiesel subsidy for jeepney drivers to mitigate the impact of TRAIN, aside from already delayed, are band aid solutions that will not reverse the long-term impact of high prices.

The wanton killings under Duterte and his repulsive tirades have sparked public outrage and the people’s protests are spreading. The unabated increases in prices and the cost of living will only add fuel to the fire. ###