Dutertenomics: lost cause?

July 20, 2017

by IBON Foundation

During the Duterte administration’s first year, there was all the hype about aiming for inclusiveness and championing the common Filipino family’s dream for a comfortable life. The President took important, some unprecedented steps including hinting nationalism, willingness to work with progressives in the cabinet and pursuit of peace negotiations. Yet the administration capitalized on bloody wars on drugs and other forces perceived to be enemies of the State, barely changed the way the economy was run and saw the nation deteriorating further.

The following are highlights of the Duterte administration’s economic direction: the context of deterioration amid growth, a short-sighted development plan, and continued implementation of discredited economic policies.

  1. Deterioration amid growth

The Duterte administration’s continued adherence to the neoliberal frame has not changed and can only worsen joblessness, poverty, inequality and decline that persisted despite high reported growth.

The Philippines was hailed as the second fastest growing economy in Asia and 10th fastest in the world. Growth in gross domestic product (GDP) at an average of 6.7% from 2012-2016, the highest in seven decades.

Yet production comprising agriculture, manufacturing, construction and mining, which steadily fell over decades of neoliberal policies, shrunk to a low 39.2% of the economy in 2016. In three decades the annual average of the combined share of agriculture and manufacturing in GDP  fell to just 32% in 2016 from 54% in the ‘50s to ‘70s. The share of agriculture in GDP dropped to 8.4% in April 2017.

IBON estimates unemployment, which averaged 5.1% in the 70’s, to be at an annual average of some 10.2% in the period 2010-2016. The official definition of ‘unemployment’ has removed millions of discouraged jobless Filipinos from the labor force. Underemployment remains on a high annual average of 18.9% from 2010-2016. The number of employed Filipinos dropped by 393,000 in April 2017. Meanwhile an average of 5,771 Filipinos left the country daily in 2016 to work abroad.

There was a concentration of economic activity in corporations, and income and wealth in a few individuals while transnational companies (TNCs) have disproportionate control of the economy.. The gross revenue of just the top 100 corporations, for instance, increased from being equivalent to 59% of GDP in 2010 to 71% in 2015. TNCs accounted for 37% of Top 1000 revenues and 63% of manufacturing by 2015. The net worth of just the 40 richest Filipinos grew from being equivalent to 14% of GDP in 2010 to 26% in 2016.

On the other hand, IBON estimates at least 56 million Filipinos as poor with a poverty line of around Php100 per person per day. These include 21.9 million Filipinos officially counted as poor by a very low poverty line of Php60 per person per day.

For the employed, wages remained insufficient for decent living. The highest mandated minimum of the NCR of P491 is only 43% of IBON-estimated family living wage at P1,130 for a family of six in June 2017.

Contractualization which is also a condition of wage repression is worsening despite government hype that it is being curbed. According to latest data available, IBON estimates that one in three rank and file workers are non-regular.

  1. Pro-business, short-sighted Dutertenomics

The Duterte administration’s Philippine Development Plan 2017-2022 is its economic blueprint for the economy which relies on external sources instead of building and strengthening the economy towards self-reliance. Its programs, which include an infrastructure boom, will benefit big business and foreign investors but not the poor majority who need social and economic  infrastructure the most.

For instance, its grand Build! Build! Build! Infrastructure program will only be a short-term stimulus to economic growth because the transport and other infrastructure proposed does not develop domestic agriculture and Filipino industry on a nationwide scale. It is a short-sighted effort that will not result in broad-based economic growth, social progress, and national development. Past administrations such as the Marcos and Aquino regimes were biased towards a similar infrastructure-heavy approach. Yet the economy remains underdeveloped; agriculture and industry backward; and the majority still poor.

The ‘Build! Build! Build!’ infrastructure program of over 4,000 projects with 75 big-ticket flagships covers big-ticket infrastructure: mass transit, roads and bridges, railways, airports, seaports, flood control, communication and information, and so-called ‘new cities’. Fifty-three of these have identified budgets cumulatively worth Php1.58 trillion but is overwhelmingly concentrated in NCR, CL and ST which account for 63.5% of the total value.

Such infrastructure program strengthens prevailing enterprises engaged in neocolonial trade especially in NCR, CL and ST. The main beneficiaries would be existing big foreign and domestic corporations in low value-added manufacturing for export, natural resource extraction, and services including selling of imported products. Commuters may benefit but rates may hinder the access of low and no-income users. The planned infrastructure does not benefit farmers in terms of more productivity, irrigation, post-harvest facilities and farm-to-market roads. Poor communities may even stand to be displaced by large infrastructure projects.

The true financial cost of the infrastructure whether under the public-private partnership (PPP) scheme or its hybrid variant also has to be put under scrutiny. Project financing is one aspect – coming from government funds, ODA (bilateral and multilateral), private capital – and the eventual rates or fees charged to the public are also relevant. The persistently regressive taxation bolstered by government’s tax reform package will also figure in exacting amounts from millions of poor Filipinos through additional value added, oil and sweetend beverages taxes to fund Build! Build! Build!.

  1. “Economy not broken”– business-biased framework upheld

The Duterte government’s economic direction built on instead of changed the failed neoliberal or business-biased framework of the past administrations.

In many words, President Duterte promised the nation a break from the woes of the past, yet saw the economy as something that was not broken and did not need fixing. He instructed his cabinet not to change existing rules and laws and to honor existing agreements between government and its foreign counterparts. The President affirmed neoliberal policies and appointed avid defenders of this market-oriented framework as his economic managers in the budget, finance, and economic planning departments—that are most decisive in running the economy.

Instead of taking nationalist and democratic measures and pushing real reforms in agriculture, social welfare, labor and education, the administration upheld measures favorable to foreign capital and domestic ruling elites. Thus trade and investment liberalization, which benefits advanced nations, continues to take its toll on the country’s resources, production sectors and the nation’s sovereignty. Public services and infrastructure development continue to be privatized for profit at the expense of the public. Removal of State regulation in various industries continues to be institutionalized to favour big businesses over consumers.

It is not too late for any government to shift gear and pursue measures that have been proven beneficial to the people in other countries’ experiences. Landlords, bureaucrats, big business and even foreign powers will expectedly oppose these. But real agrarian reform, rural development and building Filipino industries is crucial to strengthen the economy, raise incomes, create stable jobs, and provide sufficient education, health, housing, and public utilities.