2013: Unchanged policies and economic disasters

December 1, 2013

by superadmin

IBON Features | Growth is becoming more exclusionary with every year of the Aquino administration and its unreformed economic policies

IBON Features— The year 2013 has seen more rapid economic growth, rising foreign investment, and praise from international agencies and big business – yet also falling job generation, rising unemployment, soaring prices, growing poverty, and stagnant incomes.

The Aquino administration will be announcing a revised economic development plan and industrial road maps at the start of 2014. However if the policy choices remain biased for foreign investors and local big business, these plans are unlikely to improve conditions for the majority Filipinos. In fact, growth is becoming more exclusionary with every year of the Aquino administration and its unreformed economic policies.

Stellar performance?

The administration, in a yearend report, played up the “stellar performance” of the Philippine economy in 2013 headlined by “some of the highest growth numbers in Asia”. Official numbers show five consecutive quarters of at least 7% growth in gross domestic product (GDP) including an average of 7.4% in the first three quarters of 2013.

Net foreign direct investment (FDI) grew significantly with inflows rising 33.3% to US$3.1 billion in the first nine months of 2013 from US$2.3 billion posted in the same period the year before. Foreign investment approvals likewise grew substantially and more than doubled (growing 114%) in the first nine months to Php126.5 billion from Php58.9 billion.

The World Bank’s Doing Business Report meanwhile ranked the country 108th in 2013 or a jump of 30 notches from 2012. There was a similar improvement in the World Economic Forum’s Global Competitiveness Report with the country going up to 87th in 2013-14 from 114th in 2010-2011. The three major credit ratings agencies also each gave the Philippines its first ever respective investment grade ratings. The Philippine Stock Exchange Index (PSEi) reached its all-time record-high.

The economy however remains distorted with supposed gains apparently at the expense of national economic development and the welfare of the majority of Filipinos.

Economy’s duality

There is a severe disconnect between economic growth and foreign investment, on one hand, and job generation. The latest data for 2013 showed GDP growing by 7.4%, FDI inflows by 33.3% and FDI approvals by 114% – yet employment only increased by 317,000 or 0.8% in 2013 from the year before. Job generation has actually been falling steeply in the last three years of the Aquino administration with 1.2 million jobs generated in 2011, down to 408,000 in 2012 and falling further to the 317,000 in 2013. Job generation in 2013 was the lowest since 2000 during the Estrada administration.

Job generation is poor because growth has been driven mainly by the real estate and construction boom. These sectors are only a small part of the economy and, even considering their inter-linkages, such as with finance and manufacturing, account for only around 15-20% of GDP. They are moreover heavily concentrated in the National Capital Region (NCR), Central Luzon and Calabarzon regions where 50-75% of their operations are located. Indeed there is also reason to doubt if the debt-driven and speculative nature of growth in these sectors is sustainable.

The number of unemployed Filipinos reached an all-time record high in 2013 at 4.5 million Filipinos, using IBON estimates correcting for government underestimation; the conclusion is unchanged even using the lower official estimate of 2.9 million unemployed. Also considering the 7.3 million underemployed means that there were 11.8 million Filipinos either jobless or looking for additional work in 2013.

Wages and salaries adjusted for inflation continued to stagnate or fall in 2013 especially upon policy statements by the president and economic planning secretary against wage increases. The average daily basic pay of wage and salary workers in sectors accounting for 79% of employment – agriculture, manufacturing, trade, construction, finance, mining and quarrying, electricity, gas and water, and other services – was unchanged or even dropping between 2010 and April 2013 (latest data available).

2013 was also characterized by record increases in prices of basic commodities and services. In particular, the country saw huge increases in power rates, LPG prices, and water rates as monopolies continue to take advantage of government’s privatization and deregulation policies. However due to widespread public resistance, the implementation of water and power hikes have been delayed.

The Aquino government also revived moves to implement the long-stalled scheme to increase MRT and LRT fares as part of its privatization plans. Amid public opposition, government is geared to hike the train system’s fares starting January 2014.

Extreme poverty

The release of the latest poverty statistics in 2013 further confirmed the economy’s duality. The economy grew by an average of 5% annually between 2006 and 2012 and expanded by 33.8% over the entire period. GDP per capita in turn increased by 21.5% from Php54,226 in 2006 to Php65,904 in 2012. And yet despite these the official number of poor families increased 405,638 or by 10.6% to 4.2 million in 2012; the number of poor Filipinos increased 1.1 million or by 4.9% over the same period to 23.7 million. The poverty situation worsened despite Php76.1 billion spent on 4Ps conditional cash transfers (CCT) between 2006 and 2012.

The official estimates however use an extremely low poverty line of Php52 per person per day on average nationwide. The inadequacy of official national, regional and provincial poverty lines is highlighted by how government estimates insist on negligible poverty in NCR – official estimates are of only 2.6% poverty incidence among families (76,530 poor families) and 3.9% among population (460,831 poor people). IBON on the other hand approximates around 66 million Filipinos or 70% of the population struggling to survive on some Php100 or much less daily. The devastation from typhoons and the earthquake in the Visayas only pushed more families into deeper poverty in 2013.

Poverty is rising while corporate profits and personal wealth for a few are growing. The net income of the country’s Top 1000 corporations almost doubled from Php599 billion in 2006 to Php1.08 trillion in 2012 amid the high poverty and unemployment. The cumulative net worth of the 40 richest Filipinos meanwhile grew three-fold from US$16.0 billion in 2006 to US$47.4 billion in 2012.

This situation of worst jobs and poverty crisis in the country prompted the strong indignation against the pork barrel controversy that erupted this year. As millions of Filipinos face desperate circumstances, the abuse of congressional and presidential pork became a public outrage—especially since the arbitrary, self-serving and patronage-determined use of public funds is a wasteful use of scarce government resources. The public outrage in 2013 reached a new peak with the Aquino administration’s lack of preparation to reduce the risks of super typhoon Yolanda. Government’s utter negligence after the disaster demonstrated deep-seated and chronic economic and political crises.

All in all, 2013 underscores the need for a new path for the economy. Growth could continue in 2014 barring any sudden adverse internal or external shocks. However this growth will likely continue to benefit a few at the expense of the majority unless there is a thorough change in policies and programs that prioritize national economic development.

There must be a push for real income, wealth and asset redistribution – especially of land but also through higher wages and a progressive tax system. Social services such as education and health should be publicly-provided rather than turned into commodities to be sold for private profit. It is long overdue for the government to begin its fight against poverty and unemployment; pushing for real socioeconomic reforms thus remains a huge challenge in 2014. IBON Features