The Inter-Agency\nTask Force on the Management of Emerging Infectious Diseases (IATF), presided\nby Pres. Rodrigo Duterte, addressed the country on Tuesday. Finance Secretary Carlos\nDominguez III was a moment of lucidity especially compared to his principal\u2019s\nrambling incoherence. Unfortunately, being lucid doesn\u2019t necessarily mean being\ncorrect.<\/p>\n\n\n\n
Resilient and the\nbest?<\/strong><\/p>\n\n\n\n Sec.\nDominguez opened by rejoicing about the Philippines being ranked number six out\nof 66 countries in the world for \u201ceconomic resiliency\u201d and supposedly \u201cthe best\nin Southeast Asia for financial strength\u201d. The compulsion to welcome any sort\nof accolade is understandable especially coming from The Economist<\/em>, a well-regarded business newspaper. We’re so starved\nof good news that ranking highly on any international scale \u2013 like in boxing or\nbeauty pageants \u2013 always gives an endorphin rush.<\/p>\n\n\n\n But\nthen again, it’s probably useful to be a little more circumspect about the\nmetrics used to say that the country is supposedly doing well. The four\nmeasures of ‘financial strength’ in the magazine\u2019s report are of course fine as\nthey are and include the most important usual measures of financial strength \u2013\npublic debt, foreign debt, cost of borrowing, and foreign exchange reserves.\nHence Sec. Dominguez’s elation over our so-called financial strength and the\ncountry’s credit ratings.<\/p>\n\n\n\n But\nwe should presumably see things from a real development perspective and beyond\nthe shallow endorphin rush. In which case, the main problem is the confusion\nbetween means and ends. This is actually a recurring problem with our\nneoliberal economic managers in particular, and free market-biased economists,\npolicy folks, and business minds in general.<\/p>\n\n\n\n The\nfour metrics and credit ratings aren’t valuable in themselves but for how\nuseful they are for the presumably real development ends of policymaking \u2013 enough\njobs and livelihoods so that there are no poor Filipinos, and an equitable,\nstable, self-reliant and sustainable economy. It’s always been odd that\nwhenever policymakers see a conflict between financial strength and social\ndevelopment, the latter always loses.<\/p>\n\n\n\n Which is also to highlight that while those measures are of course better favorable than unfavorable, supposedly favorable performance can actually be undesirable depending on the price paid to get them.<\/p>\n\n\n\n Financially\nstrong for whom?<\/strong><\/p>\n\n\n\n So,\nsome thoughts on Sec. Dominguez’s self-congratulatory echoing of an assessment\nthat the Philippines \u201ccontinues to enjoy the confidence of the international\ncommunity\u201d \u2013 meaning all the foreign creditors and investors whose main\ninterest in the country is that we keep borrowing and stay profitable for them,\nto put it bluntly.<\/p>\n\n\n\n First,\n\u201cfinancial strength\u201d is a misnomer if this is in any way taken to refer to the\nlevel of development of the Philippine economy or even of the government. The\nonly underlying so-called strength these metrics refer to is the country’s\nperceived ability to pay its foreign debt obligations. There’s no direct\ncorrelation between such so-called financial strength and a country’s level of\ndevelopment \u2013 a quick scan of the ranking with countries like Botswana, the\nPhilippines, Nigeria, Indonesia and India ranking high should make that easily\nclear.<\/p>\n\n\n\n Finance\nsecretaries, central bankers, and other economic managers around the world are\nregularly feted as the World\u2019s Best this or that by global finance magazines\nand organizations. Their countries, economies and governments correspondingly\nbenefit from the halo effect and are projected as developing \u2013 even if, as is\noften the case, they\u2019re not.<\/p>\n\n\n\n Second,\nit matters how \u201cgood performance\u201d along these indicators was achieved. Put\nanother way, what may be good for financial strength may be bad for\ndevelopment. As is often the case.<\/p>\n\n\n\n For\ninstance, the Philippines has had comfortable foreign exchange reserves since\nthe 1990s mainly because of remittances from the unprecedented export of cheap\nlabor and overseas Filipino workers. We’re so used to it, but it’s worth\nkeeping in mind that this enormous reliance on overseas work is at huge social\ncosts for families and exposes the inability of the domestic economy to create\nenough jobs for its population. It also actually distorts the economy with a\nhuge imbalance between domestic production and incomes and final household\ndemand. Mammoth overseas remittances \u2013 not brilliant economic managers \u2013 are\narguably the biggest factor in the country avoiding foreign debt payments\ncrisis such as in the 1980s.<\/p>\n\n\n\n Public\ndebt, including public foreign debt, has moderated and credit ratings also\nimproved. However, this was done on the back of an increasingly regressive tax\nsystem that relies more and more on consumption taxes rather than on direct\ntaxes. The regressive trajectory of the country\u2019s tax system started in earnest\nwith the introduction of value-added tax (VAT) in the 1980s then worsened with\nVAT expansion in the 2000s and 2010s, and with cuts in personal income, estate\nand donor taxes particularly through the regressive Tax Reform for Acceleration\nand Inclusion (TRAIN) reforms since 2018. <\/p>\n\n\n\n All\nthis increases so-called financial strength by unduly burdening poor and\nlow-income groups who make up the majority of the population, while making it\neasier for the narrow sliver of the richest in the country. Sec. Dominguez is\nunrepentant and noticeably still pushing for the Corporate Income Tax and Incentives\nRationalization Act (CITIRA) bill which, among others, lowers corporate income\ntaxes \u2013 most of all to gain further favor from the international community.<\/p>\n\n\n\n Lastly,\nwhat is prevented by insisting on these measures as if they were ends in\nthemselves also matters. The onset of COVID-19 and the national and global\nmeasures to control the pandemic have a tremendous impact on the economy. The\nPhilippines and the world are in recession, and some are saying that the world\nis in its worst economic crisis since the Great Depression almost a hundred\nyears ago. <\/p>\n\n\n\n Our\ncurrent pandemic panic will eventually settle in the coming months, but the\neconomy will still be stumbling. Worse, poverty and unemployment will be\nsoaring. In such circumstances, it doesn’t make sense to be so insistent on\nnarrow indicators of so-called financial strength to the point that urgent\ndevelopment measures are prevented. <\/p>\n\n\n\n Today,\nit’s incredibly important to put more money in people’s pockets both to help\nthem maintain their welfare as well as to boost effective demand. It’s also\nimportant to support rural producers and small enterprises to ensure that the\ngoods and services needed are still available. It’s also important to rapidly\nexpand the public health system to deal with the pandemic and to meet the\ncountry’s vast COVID-19 and non-COVID-19 health problems. <\/p>\n\n\n\n Attending to all this means the government having to spend more as well as building up its capacity to intervene. Giving unwarranted emphasis on measures of \u2018financial strength’ unfortunately sets artificial limits to the government meeting its human rights obligations to intervene on a massive scale. <\/p>\n\n\n\n To force an analogy, it’s like being in the hinterlands of the Philippines with an emergency case in the back of the car and the nearest hospital hours away. In this kind of situation, you don’t obsess about fuel-efficient driving or not red-lining the tachometer or limiting the car’s mileage \u2013 you step on the gas. Glorifying \u2018financial strength\u2019 is stepping on the brakes. <\/p>","protected":false},"excerpt":{"rendered":" COMMENTARY<\/p>\n In this kind of situation, you don’t obsess about fuel-efficient driving or not red-lining the tachometer or limiting the car’s mileage \u2013 you step on the gas. Glorifying \u2018financial strength\u2019 is stepping on the brakes.<\/p>","protected":false},"author":13,"featured_media":9670,"comment_status":"open","ping_status":"open","sticky":false,"template":"single-withbanner.php","format":"standard","meta":{"_acf_changed":false,"_exactmetrics_skip_tracking":false,"_exactmetrics_sitenote_active":false,"_exactmetrics_sitenote_note":"","_exactmetrics_sitenote_category":0,"footnotes":"","_expiration-date-status":"saved","_expiration-date":0,"_expiration-date-type":"","_expiration-date-categories":[],"_expiration-date-options":[]},"categories":[2048,2050],"tags":[2199,347,2269,2270,1463,481,116],"acf":[],"_links":{"self":[{"href":"https:\/\/www.ibon.org\/tl\/wp-json\/wp\/v2\/posts\/9668"}],"collection":[{"href":"https:\/\/www.ibon.org\/tl\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.ibon.org\/tl\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.ibon.org\/tl\/wp-json\/wp\/v2\/users\/13"}],"replies":[{"embeddable":true,"href":"https:\/\/www.ibon.org\/tl\/wp-json\/wp\/v2\/comments?post=9668"}],"version-history":[{"count":2,"href":"https:\/\/www.ibon.org\/tl\/wp-json\/wp\/v2\/posts\/9668\/revisions"}],"predecessor-version":[{"id":9672,"href":"https:\/\/www.ibon.org\/tl\/wp-json\/wp\/v2\/posts\/9668\/revisions\/9672"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.ibon.org\/tl\/wp-json\/wp\/v2\/media\/9670"}],"wp:attachment":[{"href":"https:\/\/www.ibon.org\/tl\/wp-json\/wp\/v2\/media?parent=9668"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.ibon.org\/tl\/wp-json\/wp\/v2\/categories?post=9668"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.ibon.org\/tl\/wp-json\/wp\/v2\/tags?post=9668"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}