In
his fourth State of the Nation Address (SONA), President Duterte did not admit
that the economy is on a slowdown and that the country’s production sectors are
deteriorating. Instead, the President harped on deceptive, business-biased
policy proposals that at the very least do not address the basic problems of
the economy, and at worse, may aggravate economic woes. Government should build
policies upon an honest recognition of the country’s real situation.
Slackening
economy ignored
Nowhere
in the President’s SONA was it mentioned that the country’s economy has been
slowing from 7.1% growth of gross domestic product (GDP) in the third quarter
of 2016 to 5.6% in the first quarter of 2019. Growth fell rapidly even after a
momentary increase to 7.2% in the third quarter of 2017. This slowdown was
happening long before the 2019 national budget impasse and the election ban on
infrastructure spending and despite record levels of foreign investment
reaching US$9.8 billion in 2018.
It
would have been important for the President to note this and admit that the
slowdown is due to reliance on unsustainable, external sources of growth:
Slowing overseas remittances (average growth rate fell from 15.5% annually in
2002-2008 to 3.7% in 2017-2018) and a slowing business process outsourcing
(BPO) sector (average growth rate fell from 43% annually in 2005-2009 to only
2.7% in 2017-2018) that impacted on real estate, renting, and business activities.
Household spending, export of services (including BPOs), capital formation
(including construction), and government spending also slackened.
This
points to the urgency of developing sustainable long-term drivers of growth
pertaining to more vibrant agriculture, dynamic Filipino industry, and
equitable distribution of economic gains. In his SONA, however, the President,
though acknowledging the need to boost agriculture and jobs, stuck to the same
type of market-oriented measures that perpetrate underdevelopment and
backwardness.
Hampering
agriculture
Pres.
Duterte vowed to continue investing in agriculture programs to increase the
income and productivity of small farmers and fisherfolk. In particular, he said
that government will ensure the full implementation of the Rice Tariffication
Law’s Rice Competitiveness Enhancement Fund (RCEF) to safeguard the livelihood
of small farmers.
But
the RCEF amount of Php10 billion annually for six years, which government
claims will fund farm inputs and operations, is dismally low compared to
Vietnam and Thailand agriculture subsidies. Hugely the funds will be used to
purchase commercial equipment, seeds, and services for distribution to local
government units and certified farmers organizations. RCEF is prone to patronage
politics and might marginalize rather than benefit farmers. Peasant groups also
fear that the removal of restrictions on rice importation will displace over 2
million rice farmers and imperil the local rice industry with the influx of
imported rice.
By
sourcing the Philippine staple from a volatile world market and allowing
unlimited albeit tariffied rice importation, rice tariffication threatens
farmers’ livelihoods and the country’s food security. It does not address the
current state of shrinking agriculture. The sector lost over a million jobs
from 2016-2018, and barely grew at 0.8% in 2018 and in the first quarter of
2019. Its 8.2% share of GDP in the first quarter of 2019 is its smallest ever
share of the economy, yet 2019 budget allocation to agriculture was reduced by
Php3.4 billion from an already low Php50.7 billion in 2018 to just Php47.3
billion in 2019.
Instead
of pushing rice liberalization, which will benefit rice importers and private
traders more than local rice farmers and rice-eating Filipinos, the government
should preserve its mandate to procure a minimum of 25% of local produce to
sell at a reasonable price that will influence market rice prices to be
affordable. There should also be a genuinely distributive and free land reform
program to liberate farmers from having to amortize awarded land, and
substantial agriculture support and subsidies from domestic industries that
will truly aid in raising productivity and incomes instead of burdening the
sector with conditional support and mounting debts.
Stifling
Filipino industries
The
President also did not address a manufacturing sector that appears to be
stalling. Manufacturing growth was just 4.9% in 2018 – the slowest since 2012 –
and slowed further to 4.6% in the first quarter of 2019. The sector remains
shallow and mostly disconnected from the local economy due to being
foreign-dominated and capital-intensive in export enclaves. As a result,
employment generation has been relatively weak. Manufacturing employment
increased by just 221,000 or 6.5% between 2016 and 2018, with even a
contraction of 101,000 reported in April 2019, according to official labor
force data.
Instead,
he praised the Tax Reform for Acceleration and Inclusion (TRAIN) for helping
fund government programs, and pressed for the enactment of the Tax Reform for
Attracting Higher and Better Opportunities (TRABAHO) to energize micro, small
and medium enterprises (MSME’s) and generate more than a million jobs.
But
TRABAHO is a misnomer because its focus is not on creating the stable jobs that
Filipinos need, but on lowering corporate taxes and rationalizing incentives.
It in fact adds to the regressiveness of TRAIN, which relieves the rich of
personal, estate and donor taxes, by increasing corporate profits and the
wealth, income, and property of the rich. On the other hand, government will
make up for the resulting losses in tax revenues through indirect levies which
tax consumption – including by mostly low-wage workers and low-income Filipino
families – regardless of their lack of wealth, income and property.
The
President’s recommending TRABAHO for MSMEs in his speech diverts from MSMEs’
being mostly in the service sector wherein jobs are usually temporary and
low-paying: the top five MSME industries are wholesale and retail trade, repair
of motor vehicles and motorcycles, accommodation and food service activities,
manufacturing, service activities, and financial and insurance activities. The
manufacturing sector would potentially be a generator of stable jobs, however
contractualization is rampant. The transnational corporations-dominated sector
has even seen Filipino workers suffer poor working conditions and stifled labor
rights.
Not
only do Filipinos need more jobs, the people need quality jobs. But behind the
hype of improved employment are signs of a persistent jobs crisis that no
corporate-biased policy intends to cure: over 11 million of the combined
unemployed and underemployed, and almost 28 million of the employed being in
informal, non-regular, or agency-hired work.
Reorient
the economy
Filipino
firms must instead be built, sourcing materials from a robust agriculture, and
building across consumer, light to heavy industries that will supply the people’s
and the nation’s needs. This removes the need to rely on – or be limited to –
commercial sources. This will also certainly improve production, stimulate job
generation, increase working Filipinos’ incomes, and enliven economic activity
both in the rural and urban areas.
All
these mean that the government should thwart its business bias so that the
country’s economic direction can be refocused to truly prioritize the people’s
well-being and national development. This has not been the course of the Duterte
administration as evidenced by the neoliberal policies highlighted in his SONA
such as rice tariffication and TRABAHO. ###
Photo from Garciabillyjoe | wikipedia.org