“Growth” for big business, at the people’s expense

growth under aquino - ayala-pangilinan-ppp.gov.ph
The Ayala and Pangilinan groups team up in a bid to bag the ₱60-billion LRT 1 privatization project, so far the biggest PPP initiative of the Aquino administration. San Miguel Corp. of presidential uncle Danding Cojuangco is also bidding for the contract. These groups, which enjoy close ties with Aquino, have made a fortune by cornering privatization deals that burden the people with high user fees. (Photo from www.ppp.gov.ph)

Read first part

Structural issues

With the rapid and steady decline of the domestic labor market, labor export has further intensified under Aquino who deploys an average of 1.58 million OFWs a year, a significant jump from the 1 million during Arroyo’s term. If you stretch the comparison to the 1980s, the country is exporting about 3-4 times more OFWs today. In addition, OFW deployment relative to the number of domestically employed workers has steadily increased through the years – from just 2.9% in 2001 to 4.5% in 2011 – indicating the deepening reliance on labor export of the Philippines.

Their remittances (which for the first time breached the $20-billion mark in 2011 and as of September 2012 is reported at $15.57 billion but expected by the World Bank to reach a new record high of $24 billion for the full year) have been keeping the economy afloat in the past three decades by providing means for domestic consumption and payments for our import-dependent production (trade deficit stood at $6.8 billion as of October) and massive foreign debt (pegged at $61.72 billion as of September, which is also the quick and straight answer to one of the favorite 2012 highlights of the administration – the Philippines supposedly being a creditor nation).

In fact, while exports and FDI inflows have increased this year, OFW remittances, the third largest in the world behind remittances from Chinese and Mexican migrant workers, remained the single largest source of dollars for the economy. In the past 10 years, annual OFW remittances are almost 90 times the size of net FDI while the trade balance, as in previous decades, remained perennially in the red, meaning that the neocolonial import-export sector continues to take out invaluable resources from the country, while others in the region like Indonesia, Malaysia, South Korea and Singapore are posting trade surplus of between $25 to $43 billion. Like neocolonial trade, labor export actually takes away more from the economy than the remittances it brings as highly-skilled and trained Filipino workers render their productivity to foreign economies instead of ours. The social costs of labor export such as disintegrating families, issues left unmeasured by statistics, should not be ignored as well.

While actually symptomatic of the permanent and structural crisis that forever besets the Philippines, labor export and remittances drive “growth” as measured by the GDP. This is perhaps one of the biggest anomalies of our maldevelopment. The surprising third quarter expansion, for instance, was mainly driven among others by the 24.3% growth in construction gross value-added (GVA) and 24.8% growth in construction expenditure as record-breaking inflows of remittances fuel demand for residential property. The so-called real estate boom is also being pushed by the BPO sector that according to industry insiders has been driving up demand for new office space which is expected to hit a record 400,000 to half a million square meters this year, or an increase of as much as 25% from 2011.

Like labor export, growth stimulated by BPO is an aberration because its predominance in economic production is actually indicative of the country’s continuing failure to develop and industrialize. Both are the results of the domestic economy’s longstanding structural inability to generate sustainable and productive jobs from vibrant local industries including the manufacture of consumer and industrial goods and modernized agriculture. Without a national industrialization plan, we are forced to rely on what the US and other rich countries require us to do for their advanced economies, whether as production workers in their global assembly lines and factories or as call center agents to service the various needs of their clients. Certainly, they do create some (low-paying, insecure) jobs but just enough to meet their needs while the jobs generated are totally detached from our own development needs.

Furthermore, the so-called resilience amid the global crisis is not because the economy is internally-driven by sustainable, job-generating domestic industries but because our main drivers of growth – BPO and labor export – are precisely useful cost-cutting schemes for the crisis-hit economies of the First World to cope with the economic crunch. In other words, we may continue to “grow” amid the global crisis, but at the great expense of our workers who will be forced to accept further exploitative arrangements in the form of more depressed wages and lack of social protection whether as an irregular call center agent here or an undocumented migrant worker in the US.

At our expense

“Growth” indeed has been at our expense. Not only is the supposed growth not creating enough jobs, it is also being pushed by skyrocketing costs of basic needs and vital economic services. At current prices, electricity, gas and water grew the second fastest in the third quarter among all major industries, just behind construction as the year as usual saw the regular rate increases in privatized electricity and water. While this meant additional burden for the public, it meant more profits for the private corporations that control them.

The nine-month profits of the Manila Electric Co. (Meralco), for instance, increased by 7.9% to ₱12.89 billion, which the company expects to hit ₱16 billion for the full-year. Similarly, In the first nine months of 2012, Maynilad Water Services Inc. has amassed more than ₱5 billion in profits (13% higher than last year) while Manila Water Co. has raked in ₱3.9 billion in profits (26% higher than last year). Due to the never-ending surges in user fees, Manila already has the most expensive electricity rates and the fifth most expensive water rates among major Asian cities.

These utilities are controlled by the country’s richest clans and individuals who are closely associated with Aquino such as presidential uncle Danding Cojuangco and political supporters Manny Pangilinan and the Ayala family. Aside from electricity and water utilities, they also control other key infrastructure such as toll roads, telecoms and power generation. Together with other close Aquino allies like the Lopezes, Aboitizes and Consunjis, among others, these groups have positioned themselves to further expand their business empire through Aquino’s PPP scheme.

growth under aquino - table

The Ayalas have already bagged the ₱1.96-billion Daang Hari – Slex Link Road project earlier this year; Pangilinan/Ayalas, Cojuangco’s San Miguel Corp. and the Consunjis are all vying for the ₱60-billion LRT 1 extension and privatization project, which is also tied to government’s adamant plan to raise LRT/MRT fares by next year; even hospitals are not spared such as the ₱5.6-billion privatization of the Philippine Orthopedic Center which Pangilinan is eyeing to add to his growing list of hospitals.

The much ballyhooed credit rating upgrades are also being achieved at the people’s expense. Credit rating agencies cite the fiscal reforms being undertaken by Aquino that tame the national budget deficit. This includes, among others, raising government fees and imposing new charges through Administrative Order (AO) No. 31 and imposing more taxes like the newly-signed Sin Tax Law to generate additional revenues. Most of these revenues, however, will go to debt servicing as Aquino needs to gain favorable reviews from creditors and credit rating agencies.

Since Aquino took over up to September this year, government has already shelled out ₱1.59 trillion for debt servicing, equivalent to 70.2% of total revenues and 53.3% of total expenditures plus principal amortization. For comparison, debt servicing under Arroyo was equivalent to 65.8% of revenues and 41.5% of expenditures. These belie claims that the national budget under the Aquino administration is now being redirected towards social services to empower and benefit the poor. The expenditure program from 2011 to the recently signed ₱2-trillion 2013 national budget shows that the budget for debt servicing (including principal amortization) is equivalent to an average of 2.5 times that of the budget for education; 6.4 times, health; and 11.2 times, housing.

For elite interests

While the Aquino administration is harping on good governance as being behind the supposed drastic economic turnaround, much of the so-called reforms it is undertaking – with substantial backing from the US government and multilateral institutions like the World Bank – have been more about protecting elite and big business interests and less about curbing big-time systemic corruption or democratizing government. The reforms are all about creating a more conducive atmosphere for investors, i.e. stable and predictable policy environment, less business risks and reduced costs, etc. to reinforce liberalization, deregulation and privatization. The false assumption is that when business is thriving, the people will ultimately benefit through more jobs and income opportunities and improved living conditions. But clearly, this is not happening as the gains from a supposedly expanding economy have remained monopolized by a handful of big local businessmen and their foreign partners and funders.

On top of promoting the interests of big business, the good governance rhetoric is also being used to advance the agenda of the Aquino clique of the political elite. The successful ouster of Renato Corona as Supreme Court (SC) Chief Justice and the appointment of Ma. Lourdes Sereneo, for instance, were more about the consolidation of the political power of the ruling Liberal Party (LP) than making Mrs. Arroyo accountable. Executive hegemony over government branches that formulate policies (Congress) and review the legality of such policies (Judiciary) makes an even more ideal political setting to push for retrogressive economic programs that promote certain big business interests.

In the run-up to the 2013 midterm polls, the LP further heightened their political consolidation under the guise of daang matuwid. Aquino appointed Grace Padaca to the Commission on Elections (Comelec) while LP President and 2016 presidential wannabe Mar Roxas is leading the campaign to unseat non-LP governors in the vote-rich provinces of Cebu and Pangasinan through his powerful post as Secretary of the Department of Interior and Local Government (DILG). The LP is obviously laying the groundwork for their prolonged rule and continued imposition of their brand of elite governance and economics beyond the 2016 term of Aquino.

However, contradictions will surely heighten as the crisis gripping the great majority of Filipinos intensifies. The deception of good governance is good economics and the popularity of Aquino will certainly reach their threshold if joblessness, poverty and hunger continued to deteriorate. The significant 12-point drop in Aquino’s latest satisfaction rating despite the scorching speed of GDP growth could be a portent of things to come. ###

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“Growth” built on maldevelopment

BPO and labor export as growth drivers is an aberration because their prevalence is symptomatic of the economy’s continuing failure to industrialize (Photo from callcenterphilippines.com)

Written for The Philippine Online Chronicles

The National Statistical Coordination Board (NSCB) reported that the Philippine gross domestic product (GDP) grew by 7.1% in the third quarter of 2012. The expansion was beyond the general expectation of 5.4% and second only to China’s 7.7 percent. Encouraged by the “surprising growth”, government chief economist Arsenio Balisacan is predicting that the country will surpass its 5-6% growth target for 2012. Earlier, the International Monetary Fund (IMF) also forecast that the Philippines will grow faster than projected and could become the only economy in the world that will beat expectations.

It’s not every day that the economy outperforms forecasts and ranks behind the region’s largest economy so this must be good news, right? But if you are assuming that we are finally on the path toward sustained and inclusive growth thanks to the good governance reforms of the Aquino administration, you might want to rethink your optimism.

Because the hard truth is that our supposed economic growth is an aberration, a result of our maldevelopment. It is “growth” that is being spurred by volatile foreign capital and markets and not by dynamic and reliable domestic productive sectors. It is growth that underlines the structural defects of our economy. Thus, it could never be banked on to produce long-term jobs and curb poverty, much less jumpstart national industrialization. (For a discussion on job creation and inclusive growth, read this earlier article on GDP growth.)

Let us look at the latest national accounts released by the NSCB. The 7.1% expansion in the GDP was mainly the result of the extraordinary performance of the construction sector both in the production and consumption sides. NSCB data show that by industrial origin, the gross value added (GVA) in construction grew by 24.3% in the third quarter, the largest among all sectors. Manufacturing, on the other hand, expanded by just 5.7 percent. Meanwhile, construction expenditure expanded by 24.8% during the same period, easily the fastest growth rate among all types of expenditures that contributed to the GDP growth. (See Table)

What’s driving the scorching growth in construction? Is the country constructing new infrastructure and factories to support the building of national industries? Is the economy producing domestically sourced surplus income that spurs the demand for residential construction?

Sadly, no. The high growth in construction, and consequently the acceleration in the GDP growth, is mainly attributable to the inflows of funds from external sources, in particular the foreign direct investments (FDI) for the business process outsourcing (BPO) sector and the remittances of overseas Filipino workers (OFWs). These externally driven funds are fuelling the so-called “construction boom” in the country, which in turn pushed the substantial GDP growth.

BPO, according to industry sources, has been driving up demand for new office space which is expected to hit a record 400,000 to half a million square meters this year, or an increase of as much as 25% from 2011. Such expansion in BPO commercial space is extremely limited to the country’s BPO hubs. Of the 2.2 million square meters in additional office space for BPO up to 2015, 69% are in Quezon City, Makati, Mandaluyong and Manila while the rest is in other major urban centers like the cities of Davao and Cebu. Certainly, this isn’t inclusive growth both geographically and in terms of the demographic of the domestic labor market. Meanwhile, OFWs continue to stimulate residential construction, with foreign buying of property increasing by 61% this year, according to industry sources.

Why is growth stimulated by BPO and OFWs an aberration?  Because their predominance in economic production is actually symptomatic of the country’s continuing failure to develop and industrialize. Both are the results of the domestic economy’s longstanding structural inability to generate sustainable and productive jobs from vibrant local industries including the manufacture of consumer and industrial goods and modernized agriculture.

Without a national industrialization plan, we are forced to rely on what the US and other rich countries require us to do for their advanced economies.  Since the 1970s, they made us production workers in their global assembly lines and factories. Since the 2000s, they made us call center agents to service the various needs of their clients. In both cases, the rationale has been the same – for American and other foreign firms to exploit our cheap labor in order to cut costs and maximize their profits. To be sure, they do create some jobs but just enough to meet their needs while the jobs generated are totally detached from our own development needs. They are just squeezing dry our labor and human resources while the economy is left with crumbs in the form of several million dollars in investments and several hundred thousand jobs amid tens of millions in employment needs.

The same thing is true with labor export that deprives the economy of the productive capacity of its own work force. Certainly, the remittances keep the economy afloat and provide the much needed boost for consumer spending. But when measured against what is being taken away from us when millions of our skilled workers, scientists and engineers, health workers, teachers, etc. use their invaluable skills to serve the needs of other countries instead of ours, the net impact is far more disastrous economically (not to mention the social costs of labor export).

The maldevelopment of our economy is further emphasized when Malacañang and the IMF boast that the Philippines will continue to grow and be resilient amid the global economic crisis. The reason behind such resilience is not because the economy is internally-driven but because our main drivers of growth – BPO and labor export – are precisely useful cost-cutting schemes for the crisis-hit economies of the First World to cope with the economic crunch. In other words, we may continue to “grow” amid the global crisis at the great expense of our workers who will be forced to accept further exploitative arrangements in the form of more depressed wages and lack of social protection whether as an irregular call center agent here or an undocumented migrant worker in the States.

A country of call center agents and exported workers will just never industrialize. ###

Greed amid calamity

Bayan and its member groups and allies have launched efforts to generate relief goods for flood victims. See table below for a partial list of drop-off centers.

The country’s largest and most profitable firms are oblivious to the devastation being wrought by torrential rains on Metro Manila and various provinces in Luzon. Displaying barefaced greed, oil companies led by Petron Corp. hiked their pump prices, the fifth round in as many weeks since July. Then, the Manila Electric Co. (Meralco) announced a new increase in its generation charge this month. Also, the Business Process Outsourcing Association of the Philippines (BPAP) asked for an exemption from the work suspension order issued by Malacañang.

All these even as hundreds of thousands of mostly poor people are still struggling to survive the worst downpour since tropical storm Ondoy hit the country in 2009. According to the latest update (as of Aug.7, 5 p.m.) from the National Disaster Risk Reduction and Management Council (NDRRMC), the heavy rains spawned by the southwest monsoon have submerged 46 cities and municipalities in Metro Manila and Regions I, III and IV-A, affecting more than 541,000 people. Sixteen have been reported dead.

Such display of cold-blooded corporate greed amid a grave natural disaster is most unconscionable. We have yet to cope with this latest tragedy (and still reeling from the impact of typhoon Gener that preceded the heavy monsoon rains), and already we are being battered by increases in oil prices and electricity rates. Many families have yet to be rescued and still call center firms are requiring their employees to report for work.

But we must not forget that these profit-gluttonous companies have the temerity to do what they do because government allows them. They abuse and oppress the people with impunity because they know that government policies favor them, because they know that they are Aquino’s real bosses.

Petron, owned by presidential uncle Danding Cojuangco, and other oil firms increased their pump prices despite the calamity because the Oil Deregulation Law, which President Aquino has staunchly defended amid criticisms and allegations of overpricing, gives them the right to automatically hike their prices without a public hearing.

Meralco, also owned by Danding and known presidential allies Manny Pangilinan and the Lopez family, increased its generation charge despite the calamity because the Electric Power Industry Reform Act (Epira), whose full implementation is being pushed by Aquino despite strong opposition from Mindanao and other sectors, allows it to automatically increase its generation rates without a public hearing.

BPAP, meanwhile, knows that the BPO industry is one of the few supposedly growth areas prioritized by Aquino in his medium-term Philippine Development Plan (PDP) 2011-2016 for government promotion. I’m not sure if the administration has granted BPAP’s request. But Executive Secretary Jojo Ochoa said that call centers and other private firms that will require their employees to report for work should just “ensure personnel safety and give premium pay”. Para saan pa ang suspension order?

These intolerable acts of greed by the oil companies, Meralco and BPO firms bolster our argument for government to rethink and undo its current policies and programs. Especially during times of calamities, Aquino could not claim helplessness to stop oil price and power rate hikes because his predecessors, as dictated by foreign creditors, chose to deregulate the setting of pump prices and generation charge.

Government must revise its economic plan and stop relying on externally-driven growth sources like the BPO that is so detached from our own development needs, and in this particular case, from our domestic realities. BPO serves American and other foreign clients. Ano bang malay nila kung binabagyo na tayo at nalulunod na sa baha ang mga Pilipinong call center agents?

Unfortunately, Aquino has shown time and again that he is incapable and unwilling to implement the fundamental policy reforms we need.

For an in-depth discussion of these issues, click here (oil), here (power) and here (government’s development plan).

***

The Bagong Alyansang Makabayan (Bayan) and its member groups and allies have launched efforts to generate relief goods for flood victims. Please refer to the table below for a partial list of these initiatives and see which drop-off center for relief goods is nearest to you. Some of the groups have also provided bank accounts where you can deposit cash donations.