The OPSF and Malacañang’s efforts to blunt calls to regulate the oil industry

Cartoon by Salvador Jorque/Ibon Foundation

A think tank based at the House of Representatives (HoR), the Congressional Planning and Budget Department (CPBD), on Tuesday released a report upholding Republic Act (RA) 8479 or the Downstream Oil Industry Deregulation Act of 1998. The report, written by CPBD director general Rodolfo Vicerra, warned that without RA 8479, the domestic oil market would need price intervention and taxpayers would have to bear the burden of keeping oil prices stable. The CPBD report argued that scrapping the oil deregulation law “would require reviving the Oil Price Stabilization (OPSF) to be funded again by the taxpayers”.

On the same day that the CPBD report was released to the media, the Big Three (Petron Corp, Pilipinas Shell, and Chevron Philippines) has again hiked their gasoline prices by P1 a liter, and kerosene and diesel by 50 centavos. The price increases followed a 30 centavo-hike in diesel prices implemented by the same firms four days earlier, citing increasing prices in the global oil market.

The recent rounds of oil price hikes further amplified persistent calls to repeal or at least amend RA 8479. At the HoR, its Oversight committee chaired by Representative Danilo Suarez (Quezon province, 3rd district, KAMPI) is pushing for an amendment of RA 8479. Suarez said he and House energy committee chairman Rep. Mikey Arroyo (Pampanga, 2nd district, LAKAS-CMD) are crafting a bill that will “partially” regulate the downstream oil industry. The bill, according to Rep. Suarez, would focus on regulating pump prices, controlling oil imports and limiting industry participants.

The details of Suarez’s bill remain sketchy at this point, and we are not certain what he exactly means by partial regulation. Nonetheless, some quarters have expressed opposition to moves to entirely scrap RA 8479 and have instead pushed for amendments to supposedly plug its loopholes and prevent excessive and predatory pricing. This is the official position of the Department of Energy (DOE), and by extension of Malacañang, and which explains the initiatives on the oil industry of Reps. Suarez and Arroyo. These developments should make consumers wary because they blunt the calls to junk RA 8479 and establish an entirely new set of measures to effectively regulate the downstream oil industry.

A misleading and often recycled argument against proposals to regulate the country’s downstream oil industry is the discredited OPSF. Aside from the CPBD, the DOE has also raised the OPSF as an issue to thwart calls for regulation. The department’s Oil Industry Management Bureau (OIMB) chief Zenaida Monsada said that government “should be cautious about reverting to a regulated system as it could not afford reviving the OPSF” which “cost the country a lot of money”. In 2005, the DOE formed an “independent” body to review RA 8479 and among its findings was that “subsidizing oil prices (through the OPSF) is not feasible in a regime of rising crude prices due to lack of government resources”.

While a buffer fund will be needed in a regime of regulated oil prices, such fund is entirely different from the flawed OPSF. It must be emphasized that it is possible to establish a buffer fund without passing on the burden to the taxpayers and consumers. One way of doing it is for the buffer fund to be financed by government earnings and savings from its increased participation in a regulated downstream oil industry.

Under this proposal, the government will become the exclusive importer of crude oil and petroleum products. As such, the country can expand potential oil sources and shop for the cheapest available oil. Bilateral agreements with state-owned companies from oil exporting countries may be pursued under special arrangements, including commodity swaps, which can provide the country considerable discounts. Savings and earnings from these transactions can be used to finance the buffer fund. Such system of centralized procurement also addresses the concern that a buffer fund will not work because of rising global oil prices.

The national government should also participate in storing, refining and retailing oil products in the country and use whatever earnings it will generate from these activities to finance the proposed buffer fund. Initially, the buffer fund can be financed through allocating a portion of the national budget and when un-utilized within the fiscal year should be carried over to the next fiscal year. Uncollected taxes from the oil companies, such as the P21 billion in unpaid custom duties of Shell, can also serve as seed money for the buffer fund.

Remember that the OPSF failed because it was not used strictly as a buffer fund but was designed to protect the profits of the Big Three during oil price shocks. Established under Presidential Decree (PD) 1956 on Oct 10, 1984, oil firms replenished the OPSF when their pump prices were higher than world prices and withdrew from it when the reverse happened. To prevent the OPSF from drying up, government delayed rolling back the pump price even if world prices fell thus imposing the burden to refill the OPSF on hapless consumers while protecting the profits of the Big Three.

A strict set of guidelines must be drawn up on when the government can tap into the buffer fund to prevent unwarranted utilization and corruption. A trigger price may be computed by the Department of Energy (DOE) that will determine when the buffer fund should be used to mitigate sudden and huge increases in oil prices.

The point is there are alternatives to the Oil Deregulation Law and a concrete set of measures to implement them are available if only the legislators will seriously study these proposals. We must engage the lawmakers, government agencies, and their technocrats in a debate on these issues so as to prevent questionable policy proposals like the planned bill of Reps. Suarez and Arroyo from hijacking the people’s demand to scrap RA 8479 through their so-called partial regulation. Of course, they will have an advantage if we limit the engagement in congressional hearings alone. These efforts must be complemented by continued public pressure through protest actions, etc. and broadening public support for oil industry regulation.

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Oil firms and Malacañang unjustly squeeze P329 M every day from consumers

poverty-ibonPump prices continued its downtrend, with three rounds of rollbacks announced by the oil firms in the first week of March. On Monday (March 2), the so-called Big Three (Petron Corporation, Pilipinas Shell, and Chevron Philippines) slashed the price of their diesel and kerosene by P1 per liter and gasoline by 50 centavos. It was followed by two rounds of price cuts in liquefied petroleum gas (LPG) by members of the LPG Marketers’ Association (LPGMA) on Wednesday (March 4) and Friday (March 6), which brought down the price of an 11-kilogram (kg) cylinder tank by a total of P22. It matched the earlier rollback in LPG prices by the major oil players.

The reductions have come at a time when public officials have all but admitted that Republic Act (RA) 8479 or the Oil Deregulation Law have been ineffective in curbing manipulations in the industry. Under public pressure to get tough on abusive oil companies, Secretary Angelo Reyes of the Department of Energy (DOE) said that while the government’s role is to protect public interest, it will “have to follow what the law dictates”. And the law (i.e., RA 8479), Reyes added rather candidly, does not say that government takes “more aggressive action versus the oil companies”.

But with the recent price cuts, proponents of deregulation will surely argue that there is no need for such state intervention. Market forces such as competition will supposedly impose discipline on the oil companies. The problem is despite these rollbacks, the unfortunate consumers are still burdened with overpriced petroleum and the profiteering of the oil companies, especially the major players, remains vicious.

Due to overpricing, oil companies in the country are earning extra profits of around P289.51 million daily, according to the latest estimates of the multisectoral group Bagong Alyansang Makabayan (Bayan). Petron Corporation accounted for the lion’s share of the daily extra profits cornering an estimated P112.04 million; followed by Pilipinas Shell, P86.56 million; Chevron Philippines, P40.82 million; and Total Philippines, P13.03 million. Other oil players posted an estimated collective share of P37.06 million.

The huge amounts of extra profits that oil companies collect from overpricing make the series of price cuts that they have implemented in the past two weeks meaningless. The price rollbacks are much smaller than what oil firms should reflect in pump stations to offset their overpricing. Bayan earlier said that as of mid-February, oil products in the country remain overpriced. Diesel is overpriced by around P2.94 per liter; kerosene, P6.42; unleaded gasoline, P2.31; and 11-kg LPG cylinder, P125.35.

The group’s overpricing estimates looked at the monthly movement of Dubai crude and the US dollar – peso exchange rate and their combined impact on pump prices. The results were then compared with the actual price changes as monitored by the DOE.

The extra profits were computed using the latest available (i.e. first half of 2008) figures on local oil demand of around 286.6 thousand barrels per day (MBD) and the market share of each player. As of first half 2008, Petron controls almost 39% of the market, followed by Shell, 30%; Chevron, 14%; and Total, 4%. The rest of the market, 12.8%, is divided among the smaller oil players. Furthermore, the overpricing and profiteering belie claims of losses by oil companies such as Petron’s reported P3.9-billion net loss last year due to “extreme volatility” of global oil prices. The commanding position that Petron enjoys in the local market and the automatic price adjustments under the Oil Deregulation Law allow it to squeeze billions of profits from hapless consumers.

But are Malacañang and its allies in Congress willing to pass a law, or amend RA 8479, that will allow aggressive government intervention against the abuses of the oil industry? Consider that the national government is collecting an additional P39.48 million everyday in value added tax (VAT) imposed on overpriced oil products.

Such amount is on top of Malacañang’s regular collections from the 12% VAT on oil, which the Department of Finance (DOF) described as the “biggest tax measure since the birth of the republic”. Why will government kill its own milking cow? Obviously, the additional VAT collections of government from overpriced oil make it disinterested in calls to regulate the industry and repeal the Oil Deregulation Law.

The oil companies and Malacañang together squeeze about P328.98 million in unjust collections everyday from the Filipino consumers. This brazen act of exploitation is downright condemnable, especially today that millions of workers face unprecedented job scarcity and poverty.

The Oil Deregulation Law should be repealed to ensure reasonable pump prices. The VAT on oil must be cancelled to immediately bring down the prices of petroleum products. These urgent measures can go a long way in easing the impact of the global financial and economic crisis on ordinary Filipino consumers. (END)

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mula sa aming hindi makakalimot na mga kababayan
man from manila, paalam, paalam.

No hope for fair prices under oil deregulation

First published by Bulatlat.com (Vol. IX No. 5)

Following fresh charges of overpricing, oil firms have implemented a series of oil price rollbacks last week. The retail price of liquefied petroleum gas (LPG) was slashed by a total of P44 per 11-kilogram (kg) cylinder tank. The pump price of diesel was also cut by P1 per liter (one firm, Seaoil Phil., cut its diesel price by P3).

Multisectoral group Bagong Alyansang Makabayan (Bayan) earlier said that as of mid-February, oil products are still hugely overpriced. LPG is overpriced by as much as P125.35 per 11-kg tank, Bayan said. Diesel, based on the group’s computations, is overpriced by P2.94 a liter; kerosene, P6.42 and; unleaded gasoline, P2.31.

Some lawmakers have revived calls to junk Republic Act (RA) 8479 or the Oil Deregulation Law. Bayan noted that Congress must treat such move as urgent as it warned that global oil prices are again on an uptrend and will be exploited by abusive oil firms. Since December, the spot price of Dubai crude has already jumped by more than 9 percent.

But apparently, Malacañang – despite its noise about probing the oil firms – is not inclined to heed this call, dashing consumers’ hope for reasonable oil prices amid deteriorating economic conditions.

Puzzled

Judge Silvino Pampilo Jr. of the Manila regional trial court Branch 26 said he was puzzled that Justice Secretary Raul Gonzales ordered a task force to probe the oil industry’s Big Three for alleged cartel activities. Pampilo wondered whether Gonzales has “forgotten” that the same task force released a report only last month clearing the oil firms of the said charges. “There’s a conflict now,” the Philippine Daily Inquirer quoted the judge as saying.

Pampilo is presiding over a case accusing Petron Corporation, Pilipinas Shell, and Chevron Philippines of monopoly, cartelization, and predatory pricing. He asked the task force, created under RA 8479, to investigate and submit a report. People from the Department of Energy (DOE) and Department of Justice (DOJ) make up the task force.

Was it a simple case of memory lapse by the aging Justice Secretary? Maybe. But this oversight bares a far more important point. Despite repeated warnings and press statements, government does not intend to go after the oil cartel. Under public pressure, DOE Secretary Angelo Reyes was forced to question the small oil price rollbacks last year. At one point, former Press Secretary Jesus Dureza even warned that government will use its “iron fist” as Gonzales pushed for an “independent” audit.

But all these are hogwash. The policy bias of the Arroyo administration remains on deregulation and free market. Administration officials may issue sound bites somewhat hostile to the oil firms to douse critical public opinion. If they will back their words with concrete actions is another matter. In many instances, in fact, their actions contradict their words. The recent booboo by Gonzales is a case in point.

Reviewing RA 8479

In her 2008 State of the Nation Address (SONA), Mrs. Gloria Arroyo had this to say on oil deregulation:

“The government has persevered, without flip-flops, in its much-criticized but irreplaceable policies, including oil and power VAT and oil deregulation.” (Emphasis added)

But recent events in the oil industry have bolstered the case against Arroyo’s “irreplaceable” deregulation policy. The huge increases in global prices in the first half of 2008 pushed up local pump prices to record levels. This was followed in the second half with steep cuts in world prices that were not reflected in the refilling stations. Oil prices remained high and onerous, and the public blamed the greedy oil companies and lack of state regulation.

Then this year, the reported “shortage” in liquefied petroleum gas (LPG) broke out and probed by the lower House. In the hearings, Reyes all but declared that the DOE is helpless in curbing abuses in the oil industry like hoarding and overpricing. Reyes said:

“We need to review the price act … There’s a listing of commodities there and petroleum products are not included. Now if we want closer monitoring of the LPG industry, let us include it there. And if we really want more government action, let us regulate the industry”. (Emphasis added)

But Reyes later backtracked and instead pushed for an amendment of RA 8479, which is the official Malacañang line. The DOE now wants additional powers to check abuses but still within a deregulated regime. Malacañang said that it will support moves to put RA 8479 under review.

Note that it was only in 2005 that the DOE last reviewed RA 8479. The independent panel set up by government concluded then that “deregulation has the tendency to reduce oil prices”. It also said that “deregulation has increased competition in the downstream oil industry”.

The so-called independent review was staged to justify the continued implementation of RA 8479. In fact, the panel chairperson picked by the DOE was the former head of accounting giant SGV. Its clients include the Big Three and other oil companies. Thus, there is little hope that a review of RA 8479 today, as initiated by Malacañang or its allies in Congress, will lead to an honest review of deregulation. It will only be used as a platform to uphold deregulation and at best introduce token changes.

Pro-cartel, by design

The DOE and self-proclaimed consumer advocate Raul Concepcion argue that effective monitoring will make deregulation work. Concepcion even insists that government is just remiss in implementing RA 8479. According to him, the simple solution is for the DOE-DOJ task force to do its job.

But at the heart of deregulation is free market, where state intervention is taboo. It is where so-called market forces decide everything. But the basic problem is that free market in the oil industry is a myth. Since its birth, the global oil industry has always been under a cartel. This cartel rules in the Philippines through the Big Three.

When the first deregulation law in 1996 was passed, it set the stage for the oil cartel to further dominate. Automatic price adjustments allowed for more overpricing and profiteering.

The “proper” implementation of RA 8479 or even amendments will not address the problem. It does not have any provision on overpricing because deregulation assumes that the market will set the “fair” price. Government could not penalize the oil firms for overpricing because they do not violate any law.

Thus, when Secretary Ralph Recto of the National Economic and Development Authority (NEDA) said last October that diesel should be only around P35 a liter instead of the prevailing price then of P47, Reyes had to warn him not to create “false expectations”.

RA 8479 did create the DOE-DOJ task force to look into “any report of an unreasonable rise in the prices of petroleum products”. But how can it determine an excessive oil price hike? Which yardstick will it use when the only standard on pricing recognized under deregulation are the “business decisions” of “competing” oil firms?

Worse, the public is not even entitled to know the factors behind these “business decisions”. RA 8479 prevents government from disclosing “any trade secret or any commercial or financial information which is privileged and confidential”. Additional powers for the task force will not correct this basic defect. Unless such extra powers will include imposing a standardized pricing formula, it will not be able to curb overpricing.

But then again, it will contradict the very spirit of deregulation. (END)

Forum on global crisis

The Bagong Alyansang Makabayan (Bayan), IBON Foundation, and RESIST!, an anti-globalization network, organized a forum on the global financial and economic crisis last February 9 and 10 at the De La Salle University (DLSU) in Manila and the University of the Philippines (UP) in Quezon City. Almost 400 participants, from a broad array of sectors representing the workers (including those displaced by the crisis), farmers, urban poor, students and youth, the academic community, and the diplomatic community among others, attended the event. The forum also launched a nationwide education and information campaign on the roots and nature of the global crisis, the people’s immediate demands and long-term alternative, and what the people can do – an initiative of Bayan, IBON and other partners. Canada-based Prof. Michel Chossudovsky, an award-winning author and economics professor, was among the speakers.

Below is the paper presented by Bayan at the said forum.

bayan-logo2Global Financial and Economic Crisis: The People’s Response

The challenges we face and opportunities for broadening and strengthening the people’s movement for meaningful reforms

The deep-seated neocolonial linkage of the Philippine economy to that of the US and its deepening ties with the global economy in the era of “neoliberal globalization” have undermined and compromised the country’s growth and development. With the US and global economy facing what some analysts describe as a “supercrisis” and a looming “Greater Depression”, the country’s purported  major drivers of growth and employment,   the export of commodities and labor, are further exposed as extremely hollow, unreliable and unsustainable. Unable and unwilling to undertake a radical shift in economic model  that will promote internal and sustainable sources of growth, the Arroyo administration is poised to further intensify  sellout of the national patrimony and sovereignty; give more incentives and openings for foreign goods and capital amid the greater destruction of local agriculture and marginal industries, small  businesses, jobs and livelihoods; impose more taxes and incur more onerous debts; and allow prices to go higher  amid even more depressed wages and incomes.

Mrs. Gloria Arroyo at first tried to downplay the impact of the global financial and economic crises on the domestic economy and the people, claiming that her administration has built a “firewall” of reforms as protection. Alas, GMA is not referring to fundamental reforms that will make the economy strong, self-reliant and less vulnerable to the US and global recession but rather of fiscal measures such as the hiked value added tax (VAT) that today represents an even heavier burden for the people. But even the most optimistic bureaucrats of the administration could not belie the gravity of the situation. Arroyo’s own chief economist, for instance, is projecting job losses this year to reach 800,000 and is ridiculously encouraging the expected 900,000 new entrants to the labor force to “return to school” so as not to aggravate job scarcity.

The worst crisis of global monopoly capitalism and the intensifying permanent crisis of the semi-feudal, semi-colonial Philippine economy present favorable objective conditions for exposing the decaying economic system and propose genuine alternatives. The raging crisis only serves to affirm the legitimacy and correctness of the Filipino people’s struggle to build a progressive and self-reliant economy through national industrialization and genuine land reform. But these crucial reforms will not happen without a people’s movement clamoring for fundamental change. The raging crisis confronting the country and the world is providing unparalleled openings for progressive social movements and people’s organizations to struggle for alternative policy frameworks and programs, rally the people, especially the exploited and oppressed, around these, and seriously challenge the current failed models of economic development.

This broad, grassroots-based, people’s movement for meaningful socio-economic reforms, and the political changes that necessarily go with it, must continue to enlighten the biggest possible number of people on the roots and nature of the crisis. The displaced workers and farmers, government employees, office workers, small- and medium-scale Filipino businesses, the youth, women, the urban poor and other sectors most affected by the crisis will only pour out in hundreds of thousands and even millions clamoring for meaningful reform if they can comprehend the historical and current roots of the crisis and not be swayed by deceptive explanations by the government and vested interests.

We need to dispute the presumption, for instance, that the crisis can be corrected by bailing out the giant banks and industrial corporations in the US and other industrialized countries. Or that the crisis the Philippines has been facing is just a temporary, albeit violent, storm that can be weathered by a supposedly resilient domestic economy and so-called sound macroeconomic fundamentals. Or that the worsening job scarcity can be addressed through the same flawed policies of labor export, cheap and flexible labor, neocolonial trade, unbridled foreign investment, etc.

Uncritical acceptance of these erroneous ideas passed off as conventional wisdom will trap us into accepting the extremely short-sighted and palliative government response. One such major plank is the P330-billion “stimulus package” that is intended to create highly temporary jobs through infrastructure pump-priming.  Furthermore, we will be trapped into accepting that the people must shoulder even further burdens through more massive jobs loss, labor flexibilization and job insecurity, more depressed wages and incomes, more onerous taxes, etc. in order to save a floundering economic system. Thus we are challenged to put forward our own views and analyses on the crisis, learned not just from books and as discussed by economic experts, but more important from our accumulated concrete experiences as a people struggling for national liberation, democracy, peace and all-round progress.

In this spirit, Bayan, together with our partners IBON and Resist and in cooperation with friends from the La Salle community, organized this public forum. The forum launches a nationwide lecture series on the global financial and economic crisis and alternative solutions. Through this initiative, we hope to reach the widest possible audience from among the universities, urban and rural poor communities, factories, the business community, policy and opinion makers, and the rest of our people all over the country. We wish to spark discussion on  our current socio-economic situation and its exploitative and oppressive roots.  We aim to generate substantial collective discussions on what we can do as a people and what we can demand of government in terms of immediate relief and more substantial socio-economic reforms.

We are not starting from scratch in terms of alternative, pro-people, pro-Filipino proposals and campaigns to address the crisis. Bayan, as a multisectoral alliance of progressive people’s organizations, for instance, has campaigned hard to press the government to scrap the burdensome 12% VAT on oil and power during these hard times. Together with patriotic individuals and people’s organizations under the alliance NO DEAL! Movement, we have exerted  efforts to stop the Senate ratification of the Japan-Philippines Economic Partnership Agreement (JPEPA) for being a patently  one-sided  agreement that will further destroy jobs and local industries. Bayan, together with a broad array of political forces, has also vigorously and consistently pressed the campaign to have Mrs. Gloria Arroyo step down from power.  The point is not just to call for her accountability for wanton graft and corruption, systematic electoral fraud, and grave human rights violations perpetrated by state forces, but also for imposing even greater poverty and misery on our long-suffering people.

We are inspired by the efforts of our allied sectoral organizations like COURAGE, a nationwide confederation of unions in the public sector that recently launched a campaign called “Tanggol Trabaho” opposing the massive displacement of government employees such as those in the National Food Authority. MIGRANTE, an organization of OFWs, has been actively campaigning for genuinely pro-OFW emergency relief measures and for decent jobs at home as a long-term reform. The Kilusang Mayo Uno (KMU) continues to campaign for a decent wage hike and against labor contractualization while the Kilusang Magbubukid ng Pilipinas (KMP) has engaged Congress to pass the Genuine Agrarian Reform Bill (G ARB). PISTON, an alliance of public transport drivers and operators, has been active in the campaign to repeal the Oil Deregulation Law (ODL) and GABRIELA, which advocates women’s rights and welfare, for price control on basic consumer goods especially food. Our allied youth organizations like the League of Filipino Students (LFS) and Anakbayan have also been active in the campaign for economic reforms, particularly greater state support for public education.

However, the intensity of the crisis and its still-unfolding destructive effects on our people’s well-being, challenges us to face the situation with even greater resolve to struggle, not just to mitigate the crisis, but to work for a resetting of the policy framework and actual direction of the economy for the benefit of our people. We must build upon our ongoing campaigns to help bring about an even bigger and broader people’s movement that will resolutely struggle for this kind of change.  In addition to rallying greater numbers among the masses, we need to encourage the greater participation of the academe –  students, faculty and  enlightened administration officials; the experts, the opinion makers and policy makers; nationalist Filipino businesspersons, and other segments of the Philippine society that are marginalized or yearning for reforms.  All their contributions should input into a common people’s agenda.

This process can take different forms, through public fora such as this, through direct consultations at the basic level, through discussion groups in homes and workplaces, etc. What is crucial is that these discussions should translate into concrete actions and campaigns, whether they are a mass signature drive or coordinated activities, or an actual alliance or coalition of like-minded groups and personages. Furthermore, these efforts must be able to link up with the efforts of people’s movements in other countries, whether in underdeveloped countries like Philippines or in advanced capitalist countries like the US, that are campaigning for a similar platform of pro-people economic reforms and a total overhaul of an existing abusive and exploitative economic system.

Our fighting demands for economic relief, survival and long-term reforms: Ensuring a pro-people and nationalist response to the crisis

Allow us now to share with you the urgent reform measures that we vow to fight for in this time of hardship and crisis. These demands range from the short-term or immediate relief measures to the medium to long-term pro-people, pro-Filipino and nationalist economic reforms that need to be supported by the people and undertaken by government.

1.    On jobs and benefits

a. Ensure easy access to social security benefits and expand                 unemployment benefits for displaced workers

b. Provide immediate and easy availment of cash assistance for displaced OFWs

c. Stop the retrenchment of government workers; Scrap the so-called “rationalization plans” under Executive Order 366

d. Stop the erosion of wages and protect jobs against flexible labor policies and unjust retrenchment

2.    On taxes and debt

a. Full-implementation of tax breaks for minimum wage earners and their equivalent in the public sector. This includes tax rebates for the year 2008 under RA9504 or the Act Amending the Internal Revenue Code (only partially implemented last year)

b. Removal of VAT on oil, power, food items and other basic goods and services as an urgent measure to lower prices and ease the tax burden on consumers

c. Moratorium on debt payments (to include cancellation of onerous debt), and prioritize instead support for displaced workers and farmers, social services and job creation

d. Tax breaks and financial assistance package for small and medium-size Filipino-owned enterprises

e. Crack down on government corruption, bureaucratic wastage, and smuggling and re-impose tariffs on imported goods

3.    On prices

a. Imposition of price control mechanisms on basic commodities especially food. Repeal deregulation policies on oil and power

b. No new increases in utilities such as water, power and transportation

c. Freeze in tuition increases in both public and private schools; repeal deregulation policy for tuition fees

d. Ensure availability of affordable food, especially rice; bring back to the markets and make accessible the P18.25 NFA rice; increase domestic rice purchased by the NFA and ensure that palay will be bought from farmers at P17/kilo

4.    On liberalization

a. Put the brakes on free-trade agreements (FTAs) that severely undermine and weaken the domestic economy; stop the impending implementation of the JPEPA; stop negotiations of new FTAs; no new commitments in the WTO and stop the implementation of WTO agreements

b. Oppose moves for more investment liberalization such as House Resolution 737 that proposes 100% foreign ownership of land and resources in the Philippines

c. Reverse the neoliberal policy of trade liberalization; support local production  by restoring tariffs

5.    On the domestic economy

a. Orient the economy towards production for domestic self-sufficiency, self-reliance and consumption

b. Government should provide incentives and support domestic industries to allow them to expand and create jobs at home; uphold the policy of national industrialization and the establishment of national industries should be a priority

c. Implement genuine  land reform and undertake rural industrialization to spur development and deal decisively with rural unemployment and poverty

The global financial and economic crisis, as projected even by mainstream economists, will be long and deep. Meanwhile, the further economic dislocation and impoverishment of countless of Filipinos as the crisis drags on and intensifies will fuel even greater political turmoil and social unrest. The powers-that-be, as represented today by the Arroyo administration, is clearly incapable of providing lasting, pro-people solution to the crisis. On the contrary, it will further aggravate the crisis on the ground experienced daily by the ordinary people even as it incessantly schemes to cling on to power. The people must collectively fight back. It is where our greatest and only hope to get out of the raging crisis lies.

Despite P330-B stimulus package, job losses to hit around 1.2 M in 2009

layoffs-graphWith the entry of fresh graduates and first time workers into the labor force, the number of unemployed Filipino workers could increase by around 1.2 million by yearend. While this is bad news enough, the worse news is that the Arroyo administration could not adequately handle the worsening jobs crisis despite its much-touted P330-billion economic stimulus package.

Rapid pace of dislocations

The additional 1.2 million jobless Filipinos this year assumed that the labor force will grow by 900,000 this year, the annual average since 2001. The National Economic and Development Authority (NEDA), meanwhile, projected job losses could reach as high as 800,000 by the end of 2009. Assuming an optimistic scenario that the stimulus package could create 500,000 jobs this year, and then the job creation deficit will still be around 1.2 million by December.

Add to this the expected massive displacements of overseas Filipino workers (OFWs); of which at the rate they are being retrenched could reach at least 21,000 by yearend. The number could be much higher in reality because 575,000 OFWs are directly and immediately vulnerable to displacements due to the crisis including some 268,000 factory workers in Taiwan, Macau, and South Korea.

Such estimate is also supported by the fact that foreign direct investment (FDI) and commodity exports, main drivers of local job creation in the country, are contracting due to the financial and economic crisis. Thus, except perhaps for a few thousands of contractual jobs from the outsourcing business, there is no expected significant expansion in jobs this year that could make a dent on the rapid pace of unemployment.

As of January, the official tally by the Department of Labor and Employment (DOLE) pegged the cumulative number of retrenched workers at 40,000 and that of displaced OFWs at 5,404.

The rapid pace of dislocations will aggravate the perennial job scarcity facing the Philippines, where an average of almost 4 million workers, or more than 11% of the labor force, are unemployed every year since 2001 – based on official surveys.

Consider that even before the recent wave of massive displacement of Filipino workers here and abroad, the growth in the number of jobless was already alarmingly high at more than 90,000 per year under the Arroyo administration.

Temporary, flexible jobs & labor export

The main response of the Arroyo administration is emergency employment through the so-called stimulus package. Around 500,000 jobs could be generated from it mainly through pump priming on infrastructure projects, according to the NEDA. But these jobs, which also include street sweepers hired by the Metro Manila Development Authority (MMDA), are highly temporary, lasting for a couple of weeks and will have no meaningful impact on the accelerating pace of displacements.

Aside from temporary employment, labor flexibilization is the other “solution” that the government offers. Labor flexibilization has long characterized domestic employment and has compounded the problem of job insecurity and scarcity in the country. But the situation is sure to deteriorate as the DOLE has further legitimized labor flexibilization in the guise of responding to the crisis.

Under DOLE Advisory No. 2 series of 2009, the labor department has issued guidelines on compressed workweek arrangements; reduction of workdays; rotation of workers; forced leave; broken time schedule; and flexible holiday schedules.

Alas, the guidelines just create more room for the intensified abuse and exploitation of Filipino workers. At the expense of the workers, many firms, even the ones that are not hit hard by the crisis, will take advantage of the guidelines to implement flexible work arrangements to maximize profits. The guidelines also send the unmistakable message that the workers alone should bear the brunt of the crisis.

But while labor flexibilization may jack up the profits of some companies, it will in general fail to keep many local businesses afloat as long as key issues behind the jobs crisis, such as overdependence on foreign markets and capital, are not dealt with. Thus it will fail to even moderate the massive job losses.

Finally, labor export continues to be the principal job “creation” strategy of the Arroyo administration. Reintegration and retraining programs have been set to re-export displaced OFWs to other potential labor markets. At the same time, aggressive “marketing missions” and facilitation are being carried out by the Philippine Overseas Labor Offices (POLOs) in 30 so-called strategic host destinations worldwide. The 1.4 million-jump in global deployment of OFWs last year further boosted the bullish outlook of the Philippine Overseas Employment Administration (POEA) on government’s labor export policy.

This optimism is however oblivious to recent developments in the global labor market. The International Labor Organization (ILO) has projected the number of jobless worldwide to increase by as much as 50 million as the economic crisis deepens. Mounting demand from workers abroad to protect and generate domestic jobs will limit opportunities for OFW deployment. Countries like Macau and Malaysia have already started efforts to curb the entry of migrant workers in certain jobs. Industrial unrest is sweeping Europe with British workers protesting the entry of foreign workers amid rising unemployment.

Responding to the “supercrisis”

Experts have described the recession as a “supercrisis” and could be long and deep. Its impact on poor and underdeveloped economies like the Philippines is just starting to unfold. Obviously, emergency employment through a stimulus package as well as labor flexibilization and export will not do the trick. A total overhaul of the economy’s orientation must now be started – shifting from an externally driven growth and job creation to a one driven by internal sources of economic expansion and employment.

This requires the creation of a medium- to long-term comprehensive development plan for local industries especially the small and medium enterprises (SMEs) that will primarily cater to the domestic market. Indispensably, this means refocusing the decades-old colonial bias towards foreign goods, capital, and market to a nationalist bias for local investment and commodities. SMEs account for more than 60% of total employment in the country.

Deeply related to this is genuine and lasting agrarian development, which must be pursued with real land distribution to the tillers at its core. Schemes that will further dispossess the tillers of land must be abandoned such as extending the flawed Comprehensive Agrarian Reform Program (CARP) and 100% foreign ownership of land through Charter change (Cha-cha). The Genuine Agrarian Reform Bill (GARB) pending at the House of Representatives must be passed as it could set off the process for genuine and lasting agrarian development to take place.

A highly developed agricultural sector, instead of catering to the First World markets like it has been doing since time immemorial, should supply the needs of local industries and form crucial linkages in the domestic economy. It must be noted as well that the agricultural sector directly and indirectly accounts for more than 70% of domestic employment.

Immediately, the government must desist from further opening up the domestic economy to foreign competition – an economic policy which for decades has pushed thousands of Filipino firms into bankruptcy and dislocated millions of Filipino workers, farmers, and farm workers. More liberalization of trade and investment through bilateral, regional, and multilateral free trade agreements (FTAs) and economic partnerships must be stopped.

Instead, a host of readily available and accessible support package such as tax breaks and exemptions and other privileges must be exclusively extended to Filipino SMEs and other local direct producers such as the farmers and their organizations. This will spur domestic production and consumption, invigorate the economy and create more jobs at home.

But these important reforms will not materialize without a movement of people clamoring for change. The raging crisis confronting the country and the rest of the world is providing fresh opportunities for progressive social movements to present alternative economic policy frameworks and programs that will challenge the current flawed paradigm of development.

Amid the economic gloom, there is reason to be hopeful.

Firms controlling 92% of LPG market making identical price hikes is clearly dubious

Oil companies have announced identical increases in the retail price of LPG (Photo from Luis Liwanag/AFP/Getty Images)

Something is clearly dubious when four companies that together control almost 92% of the domestic market for liquefied petroleum gas (LPG) implement identical price hikes. Last week, Petron, Shell, Liquigaz, and Total separately announced the same increase of P4 per kilogram in the retail price of their LPG. These same companies have also separately announced identical LPG price hikes of P2 per kg in the second week of January. The rounds of price increases came amid reports of supposed shortage in LPG supply and allegations of overpricing.

Petron controls 37.8% of the domestic LPG market, followed by Liquigaz (24.6%); Shell (20.5%); and Total (8.7%). Only through their collusion can a supposed “shortage” in LPG supply occur and rake in windfall profits from higher retail prices. The greed for profits of these oil companies becomes even more deplorable considering that they have yet to adequately answer allegations of abusive pricing. Bayan, for instance, has earlier estimated that LPG prices should be rolled back by almost P61 per 11-kg cylinder tank to offset the oil firms’ overpricing last year. Even the Department of Energy (DOE) has been saying that LPG retail prices should not exceed P500 per 11-kg tank.

Threats of sanctions from the DOE are apparently not enough to check the abuses of the oil companies, especially the local units of the world’s largest oil transnational corporations (TNCs). Despite “strong warnings” from the DOE and the existence of a DOE-DOJ task force, created under the Oil Deregulation Law to purportedly curb abuses in the industry, not a single oil company has been punished for preying on the consumers. The problem is not simply the proper implementation of the Oil Deregulation Law because this policy by design creates conditions for price abuses to take place.

With thousands of Filipino workers here and abroad being displaced everyday due to the global financial and economic crisis, such abuses, tolerated by the government under the pretext of free market, become increasingly unforgivable. Worldwide, the raging economic crunch, bankruptcies, and economic dislocations have profoundly discredited the so-called free market implemented through policies such as the Oil Deregulation Law. Even the most ardent proponents of free and deregulated markets including the US government are now gradually reining unrestricted economic activities in hope to address what is now widely described as the worst crisis of global monopoly capitalism.

Price control, including effective regulation of oil price adjustments, is among the package of immediate measures that can help mitigate the impact of the global crisis on ordinary Filipinos. As more workers become jobless and underemployed, reasonable prices and affordable cost of living through effective state intervention become more imperative. Indeed, the massive economic dislocation, which even labor officials concede is happening at an alarming pace, further justifies the people’s demand to repeal the Oil Deregulation Law.