Economy, Poverty

A regime of high prices: Aquino’s apathy towards the poor

More than half a year since Aquino became President, the only substantial change people have seen is the drastic increase in prices of almost everything

(This article was first published by the Philippine Online Chronicles)

Slammed by critics for his landlord roots and rich kid fascination for luxury cars, President Benigno Aquino III is increasingly being perceived as having no concern for the poor.

When he promised change during the campaign, many voters apparently believed him. But more than half a year since Aquino became the Chief Executive, the only substantial change that the people have seen so far is the drastic increase in prices of almost everything. Inflation in January recorded 3.5 percent, the fastest since August last year, said the National Statistics Office (NSO).

While Malacañang has expressed concern over the sharp rise in prices, alas it does not intend to directly intervene. It merely said that the Bangko Sentral ng Pilipinas (BSP) has to manage inflation through setting of the official interest rate. Setting higher interest rates, for instance, is expected to limit money in circulation and thus temper demand and prices. But the impact of the central bank intervention on ordinary consumers is uncertain and possible benefits are further down the line.

The BSP itself as well as the National Economic and Development Authority (NEDA) aren’t very worried and predicted a worst-case inflation of 5 percent this year. Overall, the Aquino administration has remained passive on the issue of high prices despite warnings including from the United Nations’ (UN) Food and Agriculture Organization (FAO) that the skyrocketing costs of basic goods could fuel unrest. Hunger riots have already erupted around the world and, in Tunisia, even led to the ouster of its current government.

Indeed, in poor countries like the Philippines, where some 3.4 million families experience hunger, said a recent survey, high prices easily become a political issue. At the same time, it also highlights the basic flaws in the kind of economic policies being espoused by the Aquino administration, which continues the past governments’ bias towards so-called market forces, the interest of private investors, and minimal state intervention.

Thus, the situation today requires much more than asking the central bank to manage inflation. Drastic political action is needed for immediate economic relief. Otherwise, Aquino’s much-touted high political capital will be eroded rather quickly amid the growing public perception of his ineptness in running the country and in addressing the poverty that grips a great majority of the people.

Food prices

How much have prices increased since Aquino took over? A comparison of the retail prices of basic food commodities in Metro Manila shows a steep hike between June 29, 2010 – a day before Aquino’s inauguration – and February 5, 2011, which is the latest monitored date by the Bureau of Agricultural Statistics (BAS).

Onion, for example, shot up by P140 per kilo during the period while Galunggong jumped by P40 a kilo. The retail prices of sugar have also increased by P12 to P13 while cooking oil went up by P30 per longneck bottle. The increases in prices are often justified by tight supply amid high demand. Others, however, are the result of policy decisions made by the Executive. For instance, the retail price of rice being sold through the National Food Authority (NFA) increased by P2 (well-milled) to P4 per kilo (premium).  The NFA, which is mandated to sell subsidized rice to ensure food security especially of the poor, increased the prices in December supposedly to ensure the “long-term viability” of the food agency. (See Table 1)

Oil prices

Similarly, the pump prices of petroleum products have also jumped significantly in the past seven months. The average retail price of oil products in January 2011 was pegged at P47.61 per liter or more than P5 higher than its June 2010 average. During the same period, the pump prices of gasoline products have increased by around P6 while diesel, which is used by public utility jeepneys, has seen its retail price grow by almost P5. The retail price of LPG has already increased by P6.95 per liter or P136.76 for each 11-kilogram cylinder tank commonly used by households. (See Table 2)

This week, oil companies have again raised pump prices by P0.75 a liter for diesel and gasoline and P1 for kerosene. Like its immediate predecessor, the Aquino administration claims it is helpless since local prices are supposedly dictated by the global oil market, which has been seeing an astronomical rise in prices similar to the situation in 2008. Apart from publishing on the Department of Energy (DOE) website the formula in computing price adjustments, government has not taken a more proactive stance in ensuring fair oil prices despite persistent allegations of overpricing. While the President has indicated that he is open to amending the Oil Deregulation Law (Republic Act 8479) and study further factors affecting prices, this was not included in the list of priority bills that Malacañang recently bared.

Utility rates

Another aspect of high prices under the Aquino administration is the extraordinary increases in the rates being charged by almost all utilities – from water and power to toll and mass transportation fares. Aquino, of course, can claim that these increases are the result of privatization obligations forged and petitions approved long before his administration came to power. But Malacañang chose to justify these increases, calling for instance the increase in water rates and jeepney fares “minimal”.

The first seven months of the Aquino administration saw the basic charge of Manila Water increase by P3.46 per cubic meter (m³) (There is no published data on the average increase in Maynilad’s basic charge although news reports say that for its customers using 30 m³ a month, the rate hike will result in additional P2.3 per m³). The rate hike was the second tranche of increases in the basic charge arising from the 2009 extension of their Concession Agreement with the Metropolitan Waterworks and Sewerage System (MWSS). In December last year, the Energy Regulatory Commission (ERC) granted the rate hike petition of the Manila Electric Co. (Meralco) that raised the average distribution charge by 15.47 centavos per kilowatt-hour (kWh). Jeepney and taxi fares have also increased in February amid continuing rise in oil prices. (See Table 3)

But the largest increases are being felt by motorists that regularly use the South Luzon Expressway (SLEX). After a prolonged court battle, the South Luzon Tollway Corp. (SLTC), which is owned by Malaysian investors, has finally been allowed by the Supreme Court (SC) to increase tolls at the SLEX by 300 percent. As of February, SLEX toll rates have jumped by 259 to 270 percent from its previous level with the full increase to be implemented by April.

This kind of situation, where investors’ profits are undermined by regulatory intervention such as by the judiciary, is the circumstances that the President wants to address with his so-called regulatory risk guarantee. “If private investors are impeded from collecting contractually agreed fees by regulators, courts, or the legislature, then our government will use its own resources to ensure that they are kept whole,” Aquino said in his speech at the public-private partnership (PPP) summit last year.

LRT, MRT fares

Like in the issue of higher price of NFA rice, fares in Metro Manila’s light rail transit system are also set to go up due to Aquino’s direct order. Seen by critics as a prelude to privatization, the Light Rail Transit Authority (LRTA) and the Department of Transportation and Communications (DOTC) have “provisionally” approved a fare hike of as much as P10 in LRT 1 (Baclaran to Roosevelt line), LRT 2 (Recto to Santolan line), and MRT (along EDSA). (See Table 4)

Aquino first hinted his intention to raise the fares in LRT and MRT in his State of the Nation Address (SONA) last year when he accused the Arroyo administration of artificially lowering the fares for political brownie points. Consistent with Aquino’s PPP scheme, the LRTA-DOTC, in a study, has said that the fare hike is intended to “send clear signal to private sector investors that regulatory risks will be minimized in future public-private partnership projects”. Groups opposing the fare hike, meanwhile, have pointed out that the increase is meant to pass on to the commuters an increasing portion of the LRT and MRT’s debt burden, which includes onerous loans and contractual obligations. Despite widespread opposition, as shown during the two-day public consultation, it appears that the authorities will go ahead with the fare hike. More than a million daily commuters – of whom 8 out 10 are ordinary workers and students – will shoulder the fare increase.

Political intervention

There is a clear and urgent need for the Chief Executive to exercise his vast political power and influence to protect the people from the prevailing regime of high prices. Indicators show that the situation will not ease soon. Global oil prices, for example, will continue its uptrend as the world market is again facing massive speculation due to the tension in Egypt (2-3 million barrels of oil pass through its Suez Canal).

Aquino could not rely on his controversial P21-billion conditional cash transfer (CCT) program or the Pantawid Pamilyang Pilipino Program (4Ps). This program, which covers only less than half of the poor as measured by government, also excludes millions of families who are not poor by official standards but still feel the impact of high prices. Authorities, for example, are reportedly considering the CCT to cushion the impact of the LRT and MRT fare hike on the poor. However, a great majority of CCT beneficiaries who are extremely poor does not even use the LRT and MRT.

There are immediate solutions which only require political will and genuine concern for the poor. For one, Aquino can withdraw his order to increase the LRT and MRT fares and direct the NFA to roll back the retail prices of its subsidized rice. Another is to impose a price cap on prime commodities, especially food, which the President has the authority to do under the current Price Act (RA 7581). Lastly, he can suspend the collection of the 12 percent value added tax (VAT) especially on oil products and electricity and convince allies in Congress to repeal the Oil Deregulation Law and the Electric Power Industry Reform Act (EPIRA or RA 9136), which allowed utility rates to soar.

These are remedial measures, however, that do not substitute for long-term reforms that address the underlying reasons behind escalating prices and worsening hunger and chronic poverty in the country. Genuine change is truly a long way to go. (end)

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Poverty

North Triangle demolition: a glimpse of what the poor can expect from Noynoy’s PPP

As Pres. Aquino talks about poverty reduction and the MDGs in New York, the urban poor of North Triangle are forced to defend their shanties against demolition (Photos by Associated Press and Boy Santos)

While late because a temporary restraining order (TRO) has already been issued yesterday (Sep. 23) by a local trial court, Pres. Aquino’s order to suspend the forced relocation of residents of an urban poor community in North Triangle must be welcomed if only for the temporary respite it brings. But the issue is far from settled since the suspension simply intends to allow the “orderly” demolition of the remaining shanties.

In fact, the threat of eviction remains not only against residents of North Triangle but against all urban poor families who stand in the way of the administration’s centerpiece economic program – the public-private partnership (PPP). Indeed, the violent demolition of shanties in Sitio San Roque, Barangay Bagong Pag-asa yesterday gives a glimpse of what awaits the poor under the PPP.

(See the short video on Sitio San Roque’s demolition produced by multimedia production group Kodao Productions)

The demolition, which left several people injured, marks the start of the implementation of a P22-billion PPP project in the form of a joint venture between the National Housing Authority (NHA) and property giant Ayala Land Inc. to develop a 29.1-hectare property in North Triangle into the so-called Quezon City Central Business District (CBD). It is similar to another Ayala Land project and PPP initiative – the Bonifacio Global City in Taguig that also displaced thousands of urban poor families.

Based on official estimates, some 9,000 families will be evicted from Sitio San Roque to give way to the NHA-Ayala Land project but urban poor group Kadamay pegs the total number of affected families at 16,000.

This is just the beginning of what promises to be a tremendously and increasingly oppressive times for the urban poor not only in Metro Manila but in other parts of the country as well as the Aquino administration has vowed to aggressively pursue privatized infrastructure development through PPPs. An initial list of 10 priority PPP projects worth P127.78 billion for 2011 has been released by government, with the expansion of the mass rail transit system accounting for 55 percent of the amount.

While the poor of Sitio San Roque were desperately defending their shanties against the Metro Manila Development Authority’s (MMDA) demolition force backed by the Quezon City Police District (QCPD), Pres. Aquino was in New York with other world leaders to talk about progress in achieving the so-called Millennium Development Goals (MDGs), a set of targets aiming to halve poverty by 2015. According to reports, the country’s efforts to reduce poverty have been well-received at the United Nations’ (UN) assembly on the MDGs.

The World Bank even promised to fund government’s MDG efforts because in its view the Aquino administration is “moving in the right direction” with its promotion of PPP and conditional cash transfer (CCT). By the way, it was the World Bank that funded the framework plan of the CBD, which is now being implemented by the NHA and Ayala Land, whose board vice chairman Jaime Augusto Zobel de Ayala II, incidentally, joined Noynoy in his US trip to help scout for potential American partners in PPP initiatives.

The contrasting image of Noynoy in his neat Americana suit in New York talking about poverty reduction and of men in tattered shirts in North Triangle hurling stones at the MMDA and police in a desperate defense of whatever is left of their demolished shanties captures the hypocrisy of the MDGs and deception of the Aquino administration’s poverty alleviation program.

By promoting pro-business, anti-poor PPP projects such as the NHA-Ayala Land joint venture, government and the World Bank deprive the poor of shelter and consequently of a chance to be productive and get out of poverty. Instead of a decent, accessible, and sustainable housing project and other social services, what the poor get are CCT dole-outs from the Department of Social Welfare and Development (DSWD) to supposedly encourage them to send their kids to school and for pregnant or lactating mothers to have their regular check-up (note: universal primary education and improved maternal health are among the MDG targets).

But how can poor children attend school even with financial incentives from the DSWD when their families have been forcibly uprooted from their community and forever economically dislocated by wrong policies?

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2010 elections, Economy, Poverty

What Gloria did not say in her farewell speech

(Read the transcript of Mrs. Arroyo’s farewell address here.)

In a televised address last night (June 23), Mrs. Gloria Arroyo gave what Malacanang described as her last speech as president. Consistent with the “legacy” propaganda of government, an aggressive and expensive campaign that started last year and has produced numerous advertisements (worth more than P845 million in 2009 alone), a P10-million parade last June 12, and recently, two books, Mrs. Arroyo declared confidence that she is leaving a nation “much stronger than I came to office”.

In her farewell address, Mrs. Arroyo repeated her favorite themes: that she sacrificed popularity to do the right things such as raising taxes (including the notorious VAT reforms); but she only did so in order for government to have more money for education, health and job creation; that as a result we had 37 quarters of uninterrupted economic (GDP) growth; that as a result we had new and better roads, bridges, and other infrastructures; and that 9 million (yes, 9 million) new jobs have been created.

But there are many things that she did not say in her speech. She did not say that while we had 37 quarters of uninterrupted growth, we also had nine years of double-digit unemployment rate which is the longest sustained joblessness in history. Nine million new jobs? A simple comparison of the total number of jobless between the January 2001 and January 2010 rounds of government’s Labor Force Survey (LFS) shows an increase of more than 620,000 unemployed workers.  Such increase captures only a portion of how job scarcity has actually deteriorated as it does not yet account the quality of jobs available in the domestic labor market. (Note also that since its April 2005 LFS, the National Statistics Office (NSO) started to use a new definition of unemployment, which excluded discouraged workers and those not willing or available for work from the labor force. The redefinition had a net effect of “statistically” reducing the number of unemployed.)

She did not say that under her 9-year rule, the absolute number of unemployed workers has been pegged at about 4 million a year, significantly higher than during the time of former Presidents Joseph “Erap” Estrada (3.17 million); Fidel V. Ramos (2.58 million); and Corazon “Cory” Aquino (2.28 million). She did not say that her administration is the biggest exporter of Filipino workers, at about 1 million a year, because the 37 quarters of uninterrupted growth could not produce jobs for the burgeoning labor force.

She did not say that despite three-decade high economic growth, poverty has deteriorated with the number of poor Filipino families (i.e. living on around ₱1,200 a month) increasing from 25.5 million in 2001 to 27.6 million in 2006. (Preliminary data from the NSCB indicate that at best, there’s no substantial change in the 2009 official poverty figures compared to 2006 data.) She did not say that hunger incidence nearly doubled from 11.4 percent in 2000 to 20.3 percent in 2009.

She did not say that as she raised the VAT from 10 to 12 percent, and further expanded it to include power and oil among others, she also pinned government spending on health, education, and housing to their lowest levels while raising payments for government debts, which has also become her administration’s biggest source of corruption.

She did not say that she was the biggest spender on debt servicing but the most frugal on social services among all Philippine presidents. Every year since 2001, the amount of debt servicing has been equivalent to 42.7 percent of annual government expenditures and 67.4 percent of annual revenues. Meanwhile, combined government spending for education, social security, health, land distribution, and housing does not even account for half of what the Arroyo administration was spending for interest and principal payments.

Mrs. Arroyo said that she is leaving behind more roads and bridges, a stronger economy. She did not say that she is also leaving behind a gargantuan budget deficit of P162.1 billion in the first five months of 2010 alone, already higher than the first half deficit ceiling of P145.2 billion, and a 2009 full-year deficit of P298.5 billion, an all-time high in absolute terms. She did not say that from 2001 to 2009, the average national budget deficit was pegged at P148.37 billion while the average deficit as a percentage of the GDP was 2.93 percent, both historic highs.

There are many other things she did not say – how she persecuted her critics, including the 1,000 plus victims of extrajudicial killings, the 200 plus people who were abducted by her security forces like Jonas Burgos, and those like the Morong 43 that they placed behind bars for trumped up charges to silence them; how she called up Garci in 2004 and asked for a 1-million vote lead over the late FPJ; how she, her husband, their relatives and friends milked public coffers and government contracts dry; how her officially declared net worth jumped by more than 114 percent during her presidency; and how she and her friends  dined in New York for almost P1 million.

There are many other things she did not say.

She did not say goodbye, which reminds us that she will still be very much around.

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2010 elections, Agrarian reform, Poverty

Kung walang corrupt, walang mahirap: How Noynoy obscured the link between Hacienda Luisita and poverty

“The basic premise of Noynoy’s advocacy conceals the structural roots of poverty. It hides the universal truth that the working people are poor because a very small minority monopolizes ownership over production means and the wealth society produces.”

Save for  the official proclamation, the presidential elections is now over with Senator Benigno “Noynoy” Aquino III emerging victorious. Partial and unofficial tallies separately released by the Commission on Elections (Comelec) and its accredited poll watchdog Parish Pastoral Council for Responsible Voting (PPCRV) show Noynoy garnering at least 40 percent of the votes.

The main message of the Aquino campaign, which apparently captured the sentiment of many Filipinos, is that the people are poor because of corrupt government leaders. Such message not only effectively depicted Noynoy as the anti-thesis of his despised and corrupt predecessor Mrs. Gloria Macapagal-Arroyo. It also underscored his only edge (i.e. lacking in competence and experience, he has at least a supposedly untarnished record) over his closest rivals in the presidential derby – convicted plunderer former President Joseph Estrada and Senator Manny Villar, whose presidential bid has been hounded from the start by, among others, the C5 corruption scandal.

It remains to be seen if Noynoy can fulfill his campaign promise of immediately prosecuting Mrs. Arroyo and her cohorts for plundering the country with impunity and on a scale never before seen since the Marcos dictatorship. What is clear is that Noynoy and his handlers misled the people by asserting that without corruption, poverty will end.  This point is crucial because it speaks a lot on what the Aquino presidency has to offer beyond prosecuting Mrs. Arroyo for massive corruption, specifically in terms of economic reforms that will benefit the poor and oppressed.

Kung walang corrupt, walang mahirap?

This basic premise of Noynoy’s advocacy conceals the structural roots of poverty. It hides the universal truth that the working people are poor because a very small minority monopolizes ownership over production means and the wealth society produces. It obscures the fact that as long as Aquino’s landlord family exerts effective control over Hacienda Luisita, the farmers and farm workers there will remain poor and their children will suffer even greater poverty even if Noynoy does not steal a single centavo from public coffers.

“Hindi ako magnanakaw” was Aquino’s bold declaration, an assertion he repeatedly proclaimed in his political ads and rallies.

But isn’t the exploitation of the farmers and farm workers of Hacienda Luisita pagnanakaw in its worst form? It may have been legitimized by his mom’s (late Pres. Cory) Comprehensive Agrarian Reform Program (CARP) and stock distribution option (SDO) but it is still pagnanakaw. Exploitation steals from the farmers and farm workers their due share of the wealth they themselves produce, and shackles them into perpetual and worsening poverty.

If Noynoy’s vision is walang mahirap, what is needed is not only walang corrupt but more importantly, no Filipino farmer should be walang lupa. Currently, 7 out of 10 farmers are walang lupa and Noynoy must correct this age-old injustice by starting at his own backyard.

Aquino, of course, promised to distribute the Hacienda Luisita by 2014, the deadline of the extended CARP.  But almost half a century ago, his family also promised to distribute the contested landholding to its rightful owners – the farmers and farm workers. More than two decades ago, it was again promised by Pres. Cory. Fourteen people have already been killed in relation to the labor and agrarian dispute at the hacienda in the last five years, including seven who were massacred in November 2004.

Why wait for 2014 when Noynoy, if he truly has the high moral ground compared to his opponents as he claims, can distribute the hacienda immediately? All he has to do is convince his family to withdraw the temporary restraining order (TRO) they sought from the Supreme Court (SC) that stopped farmers from revoking their devious SDO contract with Noynoy and his family.

Unfortunately, Noynoy will not do that. In his first press conference after the May 10 polls, he reiterated that the Hacienda Luisita case is pending at the SC and he is respecting that process. Some have argued that Noynoy’s strong stance against Arroyo’s appointment of the next SC Chief Justice may have something to do with Hacienda Luisita, a contention that is not farfetched.

It is simply not in Noynoy’s interest to give up the hacienda. While Hacienda Luisita makes him vulnerable to political attacks, it is still the material source of his and his family’s clout.

The wanton plunder perpetrated by Mrs. Arroyo is only one of the great injustices that Filipinos suffer today. Corruption certainly aggravates the poverty of the people. While this must be addressed immediately and without compromise, the old and continuing social injustice bred by Hacienda Luisita and lack of genuine land reform must be addressed as urgently and as relentlessly.

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Climate change, Economy, Poverty

Notes on the economic and social impact of Ondoy and Pepeng

Ondoy victims in Pila, Laguna receive relief goods from volunteers of the Bayan's Bayanihan Alay sa Sambayanan (BALSA)

Ondoy victims in Pila, Laguna receive relief goods from volunteers of Bayan's Bayanihan Alay sa Sambayanan or BALSA (photo from Bulatlat.com)

The twin devastation brought by typhoons Ondoy and Pepeng hit the Philippines at a time when the country is still reeling from the impact of the global financial and economic crisis. According to the latest (as of Oct 16) consolidated report of the National Disaster Coordinating Council (NDCC), the total cost of damage from the two typhoons reached P21.29 billion. The cost of damage to agriculture accounted for 64.8% of the total, and infrastructure, 35.1%. About 7.43 million were affected in the country’s 12 regions, including Metro Manila. (See Table 1)

Initial estimates from the National Economic Development Authority (NEDA), meanwhile, claimed that the macroeconomic impact of the two typhoons is about 0.2% of the gross domestic product (GDP). This could be mitigated, according to NEDA, by remittances from overseas Filipino workers (OFWs) who would tend to send home more money because of emergencies and “will make up for the billions lost in devastating floods”.

Table 1. Estimated extent of impact of Ondoy and Pepeng, data cited as of Oct 16, 2009
Indicators Ondoy Pepeng Total
Affected no. of people (in million) 4.32 3.11 7.43
Total no. of casualties, of which: 781 654 1,435
   No. of dead 354 419 773
   No. of injured 390 184 574
   No. of missing 37 51 88
Cost of damage (in P billion), of which: 10.85 10.44 21.29
   Infrastructure 4.08 3.40 7.48
   Agriculture 6.77 7.03 13.8
   Private property n.d.c. 0.003 0.003
Total no. houses damaged, of which: 101,278 33,883 135,161
   Totally 25,259 4,040 29,299
   Partially 76,019 34,843 110,862
Regions affected, of which: III, IV-A, IV-B, V, VI, IX, X, ARMM, CAR, NCR I, II, III, IV-A, V, VI, CAR, NCR n.a.
   No. of barangays 1,902 4,585 n.a.
   No. of municipalities 155 361 n.a.
   No. of cities 30 35 n.a.
   No. of provinces 25 27 n.a.
Notes: n.d.c. – no data cited; n.a. – not applicable
Compiled using data from the NDCC Situation Report No. 31 dated Oct 16, 2009

Because of the need for additional spending for post-Ondoy and Pepeng rehabilitation and reconstruction, on top of the need to pump-prime the economy amid the global financial and economic crisis, the 2009 budget deficit could reach as much as P307.9 billion, according to the Department of Finance (DOF). There is no official figure yet on the actual amount needed for rehabilitation and reconstruction but Congress has already approved a P12-billion supplemental budget for the immediate needs of the typhoon victims.

In addition, a total of P32 billion spread over 10 years is needed to relocate more than half a million illegal settlers, including those occupying waterways in Metro Manila. Mrs. Arroyo has ordered the immediate relocation of families near waterways following the massive flooding caused by Ondoy.

Meanwhile, the Arroyo administration has also successfully raised $1 billion from the global bonds market which it said would be used for its reconstruction efforts in regions affected by Ondoy and Pepeng.

While government tends to downplay the effects of the recent typhoons on the economy, with NEDA pointing out that reconstruction will spur domestic growth, the costs are actually much higher considering the still unquantified short- and medium-term effects of losses in jobs and livelihood due to Ondoy and Pepeng, although independent think tank IBON Foundation, in an estimate, said that Ondoy alone would push at least 276,000 families in NCR, Calabarzon, and Central Luzon into “long-term poverty”.

Note also that official unemployment before the storms ravaged the country was pegged at 7.6% nationwide (National Statistics Office’s July 2009 Labor Force Survey), with the top three highest regional unemployment posted by the NCR (12.1%); Calabarzon (11.1%); and Central Luzon (9.9%) – the regions most affected by the typhoons. These regions account for 79.9% of the total number of permanently displaced workers due to economic reasons from Jan 2008 to Jun 2009 as well as 69.3% of the total number of families affected by Ondoy and Pepeng. (See Table 2

Table 2. Unemployment rate, no. of permanently displaced workers due to economic reasons, and population affected by Ondoy and Pepeng by region
Region Unemployment rate (in %, Jul 2009) No. of permanently displaced workers due to economic reasons (full-year 2008 & 1st half 2009) No. of affected families by Ondoy & Pepeng (as of Oct 16, 2009)
NCR 12.1 40,427 176,776
IV- A – Calabarzon 11.1 22,241 509,221
III – Central Luzon 9.9 9,902 382,788
I – Ilocos Region 6.7 328 234,479
Cordillera Administrative Region 4.6 1,182 54,507
VI – Western Visayas 7.4 1,360 316
X – Northern Mindanao 5.7 982 0
V – Bicol Region 5.4 347 70,389
XII – Socksargen 5.1 226 603
IV-B – Mimaropa 4.3 635 7,296
IX – Zamboanga Peninsula 4.1 295 191
ARMM 3.4   350
II – Cagayan Valley 2.8 308 105,529
National total (including other regions not affected by Ondoy & Pepeng) 7.6 90,788 1,542,445
Compiled using data from the NSO on unemployment, BLES on displaced workers, and NDCC on affected families by Ondoy & Pepeng
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Economy, Poverty

Inflation lowest in 22 years: Juan & Juana ask, “E ano ngayon?”

Photo from Bulatlat.com

Photo from Bulatlat.com

The National Statistics Office (NSO) today reported that inflation in August further slowed down to 0.1% from July’s 0.2%, the lowest in 22 years.

Inflation shows the rate at which the general level of prices for goods and services is rising.

What does the 22-year low inflation mean for Juan and Juana? Does it mean that ordinary wage and income earners could now better afford the basic goods and services their family needs to survive every day?

0.1% inflation simply means that prices (as measured by the consumer price index or CPI) have not practically moved in August 2009 compared to their levels in August 2008, when overall prices have peaked mainly due to unprecedented increases in oil and food (in particular rice) prices in the first half. In other words, prices today remained very high.

The CPI in August 2008 peaked at 160.3. Compared then to August 2009 CPI of 160.5, year-on-year inflation rate is thus calculated at an unusually low 0.1 percent. Pushed down by declining oil prices in the second half, the monthly CPI last year began its descent in September 2008 and closed the year at 156.7.

Thus, this may be considered a hiccup in the general trend of increasing prices since current prices are being compared to abnormally high levels in 2008 and inflation may “normalize” by September to show the increasing trend in prices of basic goods and commodities.

But more importantly, it does not hide the fact that prices have jumped astronomically under the Arroyo administration especially since last year, and that wages and income have failed to cope.

Comparing the January 2008 and August 2009 CPI, the rate in increase in general level of prices will be at 9.3 percent. Also, annual inflation from 2005 to 2009 is pegged at a higher 5.7% than the 2001 – 2004-period when it was at 4.8 percent.

For ordinary wage and income earners, the low inflation rate in August did not mean improved buying capacity and decent living for their families. For instance, a minimum wage earner in Metro Manila takes home only as low as ₱345 per day while his or her family ideally needs about ₱1,000 for their daily food and non-food requirements.

Inflation lowest in 22 years? E ano ngayon?

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Economy, Poverty

Le Cirque tab could have fed 9,480 families in one night

Image from mypost.com

Image from nypost.com

Press Secretary Cerge Remonde described the P960,000-dinner of the Arroyo entourage at the posh Le Cirque restaurant in New York as “simple”, even “forgettable”.

But consider these figures:

In Metro Manila, the estimated cost of food as of June 2009 is P9,114 per month for an entire family.

Thus, with P960,000, around 105 families in Metro Manila could have enjoyed a fairly decent three square meals a day for one month.

Spent for one day, it could have fed 3,160 families.

Spent for one dinner (as Arroyo and company did at Le Cirque), it could have fed 9,480 families.

An ordinary family has five members, so just go figure how many mouths that “simple, forgettable” dinner could have satisfied.

According to the June 2009 survey of the Social Weather Stations (SWS), there are about 7.2 million Filipino families nationwide that are “food-poor”. That’s around 36 million poor people.

The same survey also reported that 6.1 million families (or around 31 million Filipinos) are on the borderline of food poverty.

Does Remonde still remember John Paul Mahinay?

Mahinay was the 11-month old baby from a poor family in General Santos City who died of severe malnutrition and hunger-related disease on September 19, 2005.

And the Le Cirque dinner was simple and forgettable?

To say that the Le Cirque dinner was lavish is a gross understatement. For millions of Filipinos who go to bed hungry every night, it was revolting, scandalous, immoral.

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Economy, Poverty, SONA 2009

SONA 2009 notes: 3.8 M more poor Filipinos, Gloria richer by P78 M (& they’re even understated)

GMA laban kahirapanOn her 9th State of the Nation Address (SONA), Mrs. Gloria Macapagal-Arroyo would surely brag again how her administration has successfully steered the economy amid the raging global financial and economic crunch. The best argument that will dispel assertions by Arroyo of a strong and resilient economy is the reality on the ground, the grinding poverty that confronts an increasing number of Filipinos on a daily basis. Such poverty has been constantly present and ever worsening even during the decades-high GDP growth the country posted before the successive collapse of the biggest Wall Street firms and the largest TNCs in the world. Under Arroyo’s almost nine-year old term, the economic hardships facing the people have become even more pronounced because of wrong economic policies and aggravated by the global crisis.

Data cited in the table below were culled from official monitoring and reports of government agencies and it would be interesting to see how Arroyo would explain them (or distort them) to give a semblance of credibility to government’s version of the state of the nation under her illegitimate and corrupt leadership. Deregulation and privatization policies aggressively implemented by Arroyo combined with the continued operation of private cartels (both local and foreign), the continued imposition of and increases in onerous taxes such as the value added tax (VAT) have pushed prices up and the overall cost of living. Consequently, poverty continued to worsen as wages remained depressed while an increasing number of workers become jobless and underemployed.

Amid the people’s worsening poverty, which according to official poverty figures worsened by 3.8 million Filipinos between 2003 and 2006 (latest available data), Gloria Arroyo has amassed even greater wealth. (Note that such poverty figures are hugely understated considering the ridiculously low standards used by government to measure poverty.) The last row in the table below shows the declared net worth of Arroyo when she first assumed the presidency in 2001 and her latest declaration in 2008. During the said period, her declared wealth increased by P77.79 million, or almost 115 percent. Note that the said figures are the officially declared personal wealth of Arroyo and exclude all the ill-gotten wealth she and husband Mike Arroyo have accumulated through the years in Malacañang.

Indicator

Start of Arroyo’s term as president (Jan 2001, unless otherwise indicated)

Present

Retail price of LPG per 11-kg tank

P192

P440 (June 2009)

Pump price of diesel per liter

P12.62

P33.29 (June 2009)

Retail price regular-milled rice per kilo

P17.51

P30 (July 2009)

Effective rates of Meralco per kilowatt-hour

P5.13

P8.81 (May 2009)

Basic rates of water services in NCR per cubic meter

Manila Water – P2.95

Maynilad – P6.58

Manila Water – P19.64

Maynilad – P23.05

(4th quarter 2008)

Minimum wage in NCR including COLA

P213 – 250

P345 – 382

Estimated cost of living in NCR for a family of five

P509

P917 (Sep 2008)

No. of Filipinos officially considered as poor

23.8 million (2003)

27.6 million (2006)

No. of workers officially considered as jobless & underemployed

8.34 million

9.98 million (Apr 2009)

No. exported migrant workers

867,599 (2001)

1,376,823 (2008)

DECLARED NET WORTH OF GLORIA ARROYO

P66.75 million

P144.54 million (2008)

Data sources:

  1. LPG & diesel prices from the Department of Energy (DOE)
  2. Price of rice from the Bureau of Agricultural Statistics (BAS)
  3. Effective Meralco rates as monitored by AGHAM
  4. Water rates from Metropolitan Waterworks and Sewerage System (MWSS)
  5. Minimum wage & cost of living (family living wage) from the National Wages and Productivity Commission (NWPC)
  6. Number of poor & jobless & underemployed workers from the National Statistics Office
  7. Number of exported (deployed) migrant workers from the Philippine Overseas Employment Administration (POEA)
  8. Declared net worth of Gloria Arroyo from the Office of the Ombudsman
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Economy, Fiscal issues, Poverty

Why Gloria’s P330-B “Stimulus Package” Will Fail (Part 1)

A Critique of the Economic Resiliency Plan (ERP)
Part 1 of a two-part series, originally published in Bulatlat.com

gloria-pointing-up1The Economic Resiliency Plan (ERP) is a package of programs put together by the Arroyo administration in response to the global financial and economic crisis. Its stated objectives include the mitigation of the crisis’ impact and the invigoration of the domestic economy through a mix of accelerated government spending, tax cuts and public-private sector investments in infrastructure projects.

For the Filipino workers, the ERP aims to save and create as many jobs as possible and to protect the returning overseas Filipino workers (OFWs) and workers in export industries. The whole package costs P330 billion, of which almost half would be funded by the increase in the 2009 national budget. (See Table 1)

Funding issues

Publicized as a “stimulus package”, the ERP is criticized even by neoliberal economists as severely lacking in funds to stimulate economic activity amid the global downturn. According to them, a real stimulus package needs significant additional resources on top of what the government has already planned to spend. But it is estimated that of the P330 billion (US $6.92 billion based on current exchange rate of USD 1 = PhP47.672) allocated for the ERP, only P50 billion ($1.85 billion) can be considered as new funds. The said amount represents the sum realigned from the P252 billion allotted for servicing debt interest payments in the P1.41-trillion ($ 29.58 billion) national budget for 2009.

erp-table-13

The P50 billion ($1.85 billion) forms part of the P160 billion ($3.35 billion) allocated for the ERP from a total P188-billion ($3.94 billion) increase in the 2009 budget. Thus, P110 billion ($2.3 billion) of the said amount could not be considered a stimulus fund because it was already a planned increase without accounting the global crunch. If we compute the P50 billion as a portion of the gross domestic product (GDP), it is equivalent to only 0.67 percent, said economist Winnie Monsod. Compare it with, say China’s stimulus package, which is about 18 percent of its GDP. In a briefing paper, think tank IBON Foundation pointed out that the 2009 national budget is equal to only 16 percent of the GDP – the lowest since 1986! It confirmed that the current budget was not designed to respond to the global crisis.

Meanwhile, the P100 billion ($2.09 billion) of which a portion would be bankrolled by government financial institutions and social security institutions is facing serious uncertainty. A counterpart fund is supposed to come from private investors to raise the amount needed to fund large infrastructure projects. But as of this writing, administration officials have yet to clinch a definite commitment from private business. They have been negotiating with the Philippine Chamber of Commerce and Industries (PCCI) but the said group threatened to back out in February if they will not get guarantees from government and if the projects will not start in the first half of the year. A portion of the P100 billion ($2.09 billion) will be also sourced from the Social Security System (SSS), which proposed to shell out P12.5 billion ($26 million) for the ERP. However, it is facing uncertainty as well due to strong resistance from SSS members and some lawmakers.

The P40 billion ($839 million) in tax cuts under the ERP are of course not fresh funds provided by government. They represent the estimated additional savings for low- and middle-income earners and corporations accruing from the Reformed Value Added Tax (RVAT) Law enacted in 2005. Finally, the P30 billion ($629 million) in additional benefits to members of social security institutions like the SSS and Government Service Insurance System (GSIS) are also unsure. They will depend on the viability of the said institutions’ investments. Arroyo’s own economic adviser, Albay Governor Joey Salceda, doubted such viability and pointed to the “paper losses” of the SSS and GSIS in their stock market investments, a consequence of the global economic turmoil.

More debts, more onerous taxes

Aggravating these funding problems is the perennial shortfall in government revenues to support its expenditures. The budget deficit this year is expected to jump to P177.2 billion ($3.71 billion) up to as much as P257 billion ($5.39 billion), which some analysts predicted as not even the worst case scenario. Such high budget deficit is not entirely due to government’s pump priming efforts, which as already discussed, could not even be considered real pump priming. Revenues will surely fall this year as corporate incomes drop and the number of wage earners decline because of the global crisis, adding to the already significant number of businesses that have been folding up and displacing workers even before the recession of the world economy. Already, the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC) have both lowered their collection targets for this year by P44.4 billion ($923 million) and P39.8 billion ($834 million), respectively.

The Arroyo administration then will have to further increase its borrowing. This year, it plans to increase its foreign debt by $500 million and its domestic debt by P55.45 billion ($1.16 billion). But borrowing from domestic banks will further worsen the situation for local businesses scrambling for much needed capital as they will need to compete with government for loans and raise interest rates in the process. Government thus would have to turn more to foreign creditors. But the question is will the foreign loans be available? According to the Institute of International Finance (IIF), net bank lending to emerging economies this year will see a negative swing of $227 billion (i.e. more outflows than inflows) as investors become more risk averse amid the deepening global crisis. With a tight supply of credit from foreign sources, government would be forced to accept even more onerous terms, including more burdensome conditionalities such as liberalization, deregulation and privatization, tied to these foreign loans.

To fund these debts, government is pushing for more onerous taxes on consumers already heavily burdened by the regressive VAT. Proposals to impose a tax on text messaging have been revived in Congress aside from plans to enforce new taxes on so-called sin products, soft drinks, and other consumer items. These additional taxes on ordinary consumers amid massive displacements become more outrageous considering that at the same time, proposals to provide new tax perks for big business are also being pushed in Congress while fresh liberalization commitments – reducing or eliminating tariffs on imports – through free trade deals are in the offing.

They include House Bill (HB) 6073 of Speaker Prospero Nograles which intends to attract more agribusiness firms in the country by giving them a host of tax incentives, implementation of new liberalization commitments under the ASEAN Free Trade Area (AFTA) and the Japan-Philippines Economic Partnership Agreement (JPEPA), as well as negotiations for new deals such as the Partnership Cooperation Agreement (PCA) with the European Union (EU). All these will deprive the country of billions of pesos in potential revenues, which the Arroyo administration plans to compensate as usual by burdening consumers and ordinary income earners with more taxes.

Social (in) security

Aside from paying for the additional debt that government will surely incur to fund the ERP, ordinary income earners and taxpayers will also directly shoulder a significant amount of the Arroyo administration’s stimulus package. The supposed added benefits to members of social security institutions apparently would come from their extra contributions, and not from government funds. NEDA, for instance, is proposing to extend P10, 000 ($209) in so-called “unemployment benefits” to SSS members affected by the global economic turmoil. The said agency did not specify where it intends to source the money for this, but SSS raised the option of increasing the contributions from its members to bankroll the unemployment benefits.

As part of expanding the benefits of members of social security institutions, the SSS has already approved a P500-million ($10.48 million) fund to allow its members hit by the global crunch to avail of a maximum P15, 000 ($314) in emergency loans. But because the scheme involves loans instead of grants, it only threatens to bury in deeper debts the jobless SSS members who face a worsening uncertainty of finding a job soon, if at all. The said social security institution has also set strict and highly restrictive guidelines for those who can avail of the emergency loan. To illustrate, only SSS members who were retrenched from work starting January 1 are eligible, must have updated contributions and updated loan amortization. In other words, the SSS is further milking the workers dry instead of making available to them funds, which come from the workers themselves through their contributions, to help them cope with the raging crisis.

The ERP also intends to supposedly expand government’s social protection programs including the so-called Conditional Cash Transfers (CCTs). But this program is also criticized for being extremely limited both in funding and scope. For instance, out of some 4.5 million poor households nationwide, CCTs target only 321,000, mostly in Metro Manila. (See Table)

erp-table-2

The CCTs is an old program of the Arroyo administration that is being funded mainly through the so-called “Katas ng VAT”. But since a huge portion of government’s VAT collections comes from the poor and ordinary income earners through their VAT payments for petroleum products, electricity, water and other essential goods and services, the ordinary people themselves are the ones funding the CCTs. Furthermore, CCTs are also meaningless amid skyrocketing cost of living, deteriorating jobs crisis and worsening poverty in the country that remain unaddressed and are even aggravated by wrong economic policies of government.

Meanwhile, the education and health components of the ERP will not have an impact on the social protection needs of the people as long as the overall policy direction of government is to privatize and commercialize the country’s public hospitals and schools such as HB 3287 of Rep. Roque Ablan Jr., which intends to corporatize 68 public hospitals nationwide. ERP’s health and education programs are also lip service in the context of meager and declining national budget for social services. In fact, compared to the Aquino, Ramos and Estrada administrations, the Arroyo administration posts the lowest annual budget allocation for health (1.7 percent of the national budget), education (15.2 percent, second lowest behind Aquino’s 12.3 percent) and housing (0.4 percent). (To be continued)

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Fiscal issues, Oil deregulation, Poverty

At our expense: Malacañang collects almost P123 M daily in VAT from diesel, kerosene, LPG

Crude futures prices continue to post record highs after breaching the $130 a barrel mark last Wednesday. In my previous article, I have argued that these prices are speculative and while they tend to push prices up in the physical spot market, pump prices in the Philippines should not be affected.

But all Energy Secretary Angelo Reyes can say is that “this is the reality that we must face” as he warned the public yesterday to brace for still higher fuel prices. Reyes added that the government is cancelling the 3% tariffs on imported crude and refined oil to mitigate price hikes by at least 50 centavos per liter.

I do not know what relief this move can provide to hapless consumers considering that oil firms have been implementing P1 a liter weekly oil price hikes and will continue to do so in the coming weeks. Compare this with the proposal to scrap the 12% value added tax (VAT) on oil which can immediately lower pump prices by P5 to 6 per liter.

Unfortunately for the public, the VAT particularly on oil is one of the Arroyo government’s most important and reliable sources of tax revenues. But these revenues are raised at our expense as we are forced to cope with spiraling oil prices amid depressed wages and incomes and job scarcity.

To give an idea how much the government has been collecting from the oil VAT and how it burdens ordinary people, let us look at three of the most socially sensitive petroleum products – diesel, kerosene and liquefied petroleum gas (LPG). In 2007, the average daily consumption for diesel is around 17.63 million liters; kerosene, 4.54 million liters; and LPG, 5.06 million liters.

Applying these consumption levels to 2008 average pump prices, Malacañang has been collecting since the start of the year until May around P122.7 million everyday in VAT revenues from diesel (P82.81 million), kerosene (P17.87 million), and LPG (P22.02 million) alone. This translates to total collections of about P18.65 billion in the first five months of the year for the three petroleum products. (See tables below for details)

Official data from Finance department show that total VAT collections from oil in 2006 and first half of 2007 reached P67.8 billion or 56.2% of total revenues from the VAT during the said period.

2008 estimated VAT collections from diesel

Month

Pump price ave

VAT

Consumption (million liters)*

Est. VAT collections (P million)

Jan

38.45

4.61

546.53

2,521.69

Feb

37.03

4.44

511.27

2,271.88

Mar

38.31

4.60

546.53

2,512.51

Apr

40.28

4.83

528.90

2,556.49

May**

41.54

4.98

546.53

2,724.34

Total VAT collections

12,586.91

* Based on 2007 consumption levels

** Based on 1-7 May ave only

Estimates by Bayan based on DOE data

2008 estimated VAT collections from LPG

Month

Pump price ave

VAT

Consumption (million liters)

Est. VAT collections (P million)

Jan

30.64

3.68

156.86

576.74

Feb

29.52

3.54

146.74

519.81

Mar

29.06

3.49

156.86

547.00

Apr

28.77

3.45

151.80

524.07

May*

29.15

3.50

156.86

548.70

Total VAT collections

2,716.33

* Based on 2007 consumption levels

** Based on 1-7 May ave only

Estimates by Bayan based on DOE data

2008 estimated VAT collections from kerosene

Month

Pump price ave

VAT

Consumption (million liters)

Est. VAT collections (P million)

Jan

39.99

4.80

140.74

675.38

Feb

39.61

4.75

131.66

625.81

Mar

40.90

4.91

140.74

690.75

Apr

42.86

5.14

136.20

700.50

May*

44.12

5.29

140.74

745.13

Total VAT collections

3,437.58

* Based on 2007 consumption levels

** Based on 1-7 May ave only

Estimates by Bayan based on DOE data

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