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Midyear Briefng

July 14 - 15, 2011

N CenterTimog Avenue, Quezon Citykline: (632) 9277060 to 62(632) 9292496

ail: [email protected]: http://www.ibon.org.

IBON

FOUNDATION

INC.

MIDYEAR 2011:

Failing Economy,

Growing Disenchantment

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2 IBON Economic and Political Briefng 14 -15 July 2011

IBON Foundation

is an independent

development institution

established in 1978

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IBON Economic and Political Briefng 14 -15 July 2011 3

One year is long enough to evaluate the Aquino administration. Economic directions and

political priorities have been set which can already be measured against the countrys long-

standing problems and the needs of the people. Without expecting that the change Filipinos

hope for will happen overnight, a year is more than enough time to see if the rst decisive steps

towards this have been taken.

Pres. Benigno Noynoy Aquino III promised change and so effectively sent this message that he

won the presidency by it. A year later, however, the countrys economic and political problems are as

entrenched as ever. The snag is not merely of untangling a mess inherited from the previous Arroyo

administration the new administration itself has moved to the forefront of reproducing instead of

resolving these problems.

The countrys troubles are undoubtedly considerable: tens of millions of poor Filipinos, severe

social inequality, manufacturing and agricultural decline amid global crisis, recurring scal

troubles, persistent political repression, weak and undemocratic institutions of governance, systemic

corruption, and lack of national sovereignty. The administration admits as much to justify its lack of

tangible accomplishment so far and claims that its rst year was about creating the foundations for

future progress.

Yet, especially in the realm of the economy, the policies and medium-term plan put in place actually

undermine such progress. The Aquino administrations approach is identical to that of the previous

Arroyo government, though economic strategies should have been overhauled towards real social,

agricultural and industrial development. Much of the poor economic performance in the rst year of

the administration is certainly due to failed globalization policies of the past but in choosing those

same policies, the Aquino administration has made this poor performance its own.

The political inadequacies are more fully the Aquino administrations and go far beyond the widely-

perceived personal incompetence and favoritism. The administration has consistently played up its

banner anti-corruption/anti-Arroyo drive yet even here there is scant movement. On the other hand,

state-sponsored human rights violations clearly persist astride rising militarism. Also conspicuous is

the rapid subordination to United States (US) geostrategic interests at the expense of the countrys

sovereignty.

Any claim to a productive rst year will rest on a imsy case. The dole-out programs rolled out give

temporary relief for the countrys poor but alarmingly mask how the roots of their socioeconomic

woes are not being dealt with or, worse, being preserved. There are also narrow economic indicators

meaningful only for international nancial institutions, credit ratings agencies, investment managers

and big business. And there are the sensational exposs of Arroyo-era corruption. These give the

appearance of achievement but have not yet led to actual accountability and decisive action.

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What is weightier is the absence of real economic nationalism which upholds the rights of Filipinos

to development and that asserts social justice. Dissatisfaction is already spreading rapidly among the

vast majority who are poor and directly suffer persistent joblessness, low incomes and unaffordable or

decrepit social services. Even those reached by massive cash dole-outs know that these will be short-

lived. Also striking is how the countrys political troubles have been reduced to merely corruption

in particular the Arroyo governments corruption while there is stagnation or even backsliding on

larger concerns of human rights, national sovereignty and real democracy.

Working for genuine change in these vital areas is the continuing challenge for the people as the

country enters the second year of the Aquino administration.

FAILING ECONOMY

When Pres. Aquino took ofce, the Philippine economy was suffering problems accumulated fromyears of failed policies. There were record numbers of jobless Filipinos, real incomes were falling,poverty was widespread, landlessness persisted, domestic manufacturing and agriculture were on the

decline, and the government was mired in debt. In short, there was much to be done. A year later it is fairto say that the situation has not improved and there has not been any headway against these problems.

The only thing the government can claim to have concretely done in the economy so far is to dispense

a few billion pesos in conditional cash transfer (CCT) dole-outs and Pantawidpublic relations damage

control. Even its much-touted public-private partnership (PPP) program has apparently not yet taken off

with the one project in a relatively advanced stage, the Metro Rail Transit-Light Rail Transit (MRT-LRT)

contract, still being reviewed. It cannot take credit for the regular housekeeping and maintenance functions

of government funded by its Php1.645 trillion budget these are normal expenses every year. If anything,

the administration can even be put to task for choosing to spend less on agriculture, agrarian reform, rural

infrastructure, public hospitals, and state universities and colleges.

While the lack of accomplishment is one thing the disturbing direction of economic policy is another. Interms of policy intent, the administration nally released its Philippine Development Plan (PDP) 2011-

2016. However this disturbingly only recycles the failed globalization policies of previous administrations

with marked added emphasis on CCTs and PPPs and so cannot but have the same adverse results for

the economy as before. These poor outcomes were already very much felt in the rst year of the Aquino

administration. Particularly disquieting is how the plan conrms that the government will not take the

crucial steps needed to actively develop the domestic economy which are so urgent amid an increasingly

volatile global environment. The administrations exposed attitude to such basic issues as wages and land

also plainly show the limits of its pro-people rhetoric.

Consequently, the prospects in the next ve years are that the situation will not improve and may even

get much worse depending on how quickly the global crisis intensies. The administration will ensure a

steady stream of CCT and other dole-outs in a massive propaganda effort that poverty is being reduced.It is also possible for a few big foreign and domestic investors to make their prots especially with the

governments efforts to give guarantees through its PPP program. Although, as it is, there are already

signs that implementation of these banner programs will be far from smooth. The persistent absence of

nationalist economic policies however is of greatest consequence the peoples economic troubles will

continue without real redistributive reforms, agricultural development and national industrialization.

Growth will remain low and unstable, joblessness severe, incomes low and poverty fundamentally

unresolved if there are no substantial policy changes in the coming years.

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Peoples welfare

The prices of fuel, transport, water, power and food continue to rise and in many instances steeply.

The prices of basic commodities and services are particularly signicant given the generally low incomes

of the largest number of Filipinos. Incomes are already so low that even slight price increases are

burdensome in coming on top of previous rounds of increases.

According to the National Statistics Ofce (NSO), the countrys headline year-on-year ination rate

(2006=100) went up signicantly to 5.2% in June 2011 from 3.7% in July 2010; similarly, annual ination

in the National Capital Region (NCR) rose to 4.7% from 3.8% over the same period. (See Table 1)

Indicator and Commodity July 2010

Inflation (National; in %) 3.7% 5.2% (June)

Inflation (Outside Metro Manila; in %) 3.7% 5.3% (June)

Metro Manila

Inflation (in %) 3.8% 4.7% (June)

Jeepney fare (minimum; in Php) 7.00 8.00 (July)

Oil prices (in Php/liter, except LPG at Php/11 kg-tank)

Diesel 32.50 44.50 (July 12)

Gasoline 42.00 55.15 (July 12)

LPG 558.00 - 625.00 662.00 - 735.00 (July 3)

Water rates (All-in tariff; in Php/cu. m.)

MWCI (Manila Water) 29.98 33.57 (February)

MWSI (Maynilad) 33.08 40.80 (February)

Power rates (in Php/kWh)Meralco (basic rate) 9.32 9.60 (July)

Residential bill (consuming 150 kWh/month) 1,571.46 1,609.52 (July)

Napocor (ERC-approved effective rates) 3.75 3.82 (June)

Selected basic commodities (in Php)

NFA rice (per kilo) 25.00 27.00 (July 7)

Galunggong (per kilo) 100.00 120.00 (July 7)

Sitao (18-20 strings/bundle) 50.00 60.00 (July 7)

Eggplant (8-10 pcs/kilo) 30.00 60.00 (July 7)

Cooking oil (lapad bottle) 20.00 35.00 (July 7)

Sources:National Statistics Office (NSO), Department of Energy (DOE), Metropolitan Waterworks and Sewerage

System (MWSS), and Bureau of Agricultural Statistics (BAS)

Table 1. Selected Pr ice Indi cat ors, July 2010 and June 2011

2011 (as of )

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The past year has in any case seen prices of essential items going up by lesser or greater amounts

collectively due to anti-poor and anti-national policies of globalization. Price increases have been

particularly marked in the sectors subjected to deregulation (i.e. oil) and privatization (i.e. water, power,

and transport).

Domestic pump prices of oil products have seen the highest increases as global monopolization of the

industry asserted itself once more with the prices ofliquefied petroleum gas (LPG), gasoline and diesel

rising from 18% to 37% in the rst year of the administration. (See Table 1) Domestically-based rms

have moreover engaged in brazen proteering and not adjusted local pump prices commensurate to

changes in the price of global crude and foreign exchange movements. They have also been charging the

highest possible prices that they can in provinces and regions outside the main urban centers.

The privatization of key utilities also continues to be felt through soaring water and power rates. In the

past year, water rates have risen by 12% in the Manila Water service area and by 23% in Maynilads

continuing a trend of rapidly rising rates over the last decade. (See Table 1) Power rates have only slightly

increased since the middle of last year but these nonetheless come on top of high power rates in the past

decade under the implementation of the Electric Power Industry Reform Act of 2001 (EPIRA) with the

rates paid by Meralco residential consumers for instance having more than doubled as of last year. More

power rates are in any case looming with pending applications for even more increases.

Food price increases have been mixed, although the prices of some basic sh and vegetable items have

noticeably increased. (See Table 1) The continued push to privatize the National Food Authority (NFA)

however raises the prospect of higher and volatile rice prices.

The jobs cr isis continues with double-digit r eal unemployment and underemployment despite

growth. There has not been any meaningful improvement in the employment situation. The government

ofcially reports the unemployment rate falling to 7.2% in April 2011 from 8.0% in the same period last

year; this corresponds to just 2.9 million unemployed Filipinos. (See Table 2) IBON estimates seeking

to correct for the changed employment denition in April 2005 however indicate that the unemployment

rate is rather at 10.9% with 4.5 million unemployed Filipinos, while likewise seeing a slight drop in the

unemployment rate (by 0.7 percentage points) and levels (by 184,000).

There are at the same time clear indications of a decrease in the quality of jobs. The underemploymentrate rose to 19.4% in April 2011 from 17.8% the year before which is a very large 829,000 increase in the

number of Filipinos not earning enough from their jobs and seeking additional work to 7.1 million. This

brings the total number of real unemployed and underemployed Filipinos to a considerable 11.6 million

or 28% of the labor force. (See Table 2) Alternatively, there were 21.1 million Filipinos jobless or in

insecure, low-paying and even hazardous work, equivalent to around 52% of the labor force consisting

of the 4.5 million unemployed, 4.3 million unpaid family workers and 12.2 million own account workers.

(See Tables 2 and 3) There are also the 1.8 million Filipinos working as generally poorly-paid household

helpers earning the lowest among wage and salary workers at just Php130/day.

In principle, the 969,000 additional wage and salary jobs and 783,000 additional full-time work are

welcome, especially after many years of new jobs disproportionately going to own account and unpaid

family workers, or to part-time work. (See Table 3) However, a large portion of the 969,000 net jobscreated since last year were in among the economys lowest-earning sectors (by wage and salary)

agriculture (639,000 jobs at Php155/day) and trade (369,000 jobs at Php272/day).

It is notable though how manufacturing jobs have only grown by a very small 67,000, despite supposed

8.6% growth in the rst quarter, which afrms its failure to serve as the countrys main driver of

employment. (See Table 3) The sector only accounted for 8.5% of jobs which is still among the lowest

in decades. The scant 9,000 additional mining and quarrying jobs despite relatively rapid 18.6% growth

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2010 April 2010 April 2011 2010 p April 2010 April 2011 p

Population 15 Years Old and Over

(in 000)60,718 60,561 61,778 60,717 60,561 61,778

Labor Force 40,438 40,080 41,304 38,894 38,512 39,692

Employed 36,044 35,413 36,821 36,035 35,413 36,821

Underemployed 6,758 6,297 7,126 6,762 6,297 7,126

Unemployed 4,394 4,667 4,483 2,859 3,099 2,871

Not in the Labor Force 20,280 20,481 20,474 21,823 22,049 22,086

Labor Force Participation Rate

(in %)66.6 66.2 66.9 64.1 63.6 64.2

Employment rate 89.1 88.4 89.1 92.6 92.0 92.8

Underemployment rate 18.8 17.8 19.4 18.8 17.8 19.4

Unemployment rate 10.9 11.6 10.9 7.4 8.0 7.2

Table 2. Key Employment Ind icator s, Annual Average 2010, Apr i l 2010 and 2011

IBON Estimates Officially Reported a

Indicator

Sources:National Statistics Office (NSO) Labor Force Survey and IBON estimates

Note: Since figures according to the old LFS unemployment definition since 2008 are unavailable even from the NSO, IBON

made rough estimates for labor force and correspondingly unemployment by assuming a labor force participation rate (LFPR)

of 66.1% in 2008, 66.5% in 2009 and 66.6% in 2010. These assumed LFPR figures were derived by applying the changes in

official reported annual average LFPR in 2008, 2009 and 2010 to the LFPR in 2007 that was still computed using the old

unemployment definition i.e., 0.4 percentage point reduction in 2008, 0.4 increase in 2009, 0.1 increase in 2010. A similar

exercise was done to estimate the April round figures.

a - based on new LFS definitions since April 2005 (official data based on old definition unavailable)

p - preliminary, totals may not add up due to rounding

in turn reects the intrinsically low job-generation in this sector. The 228,000 increase in real estate jobsparallels the marked increase in foreign investment in this sector and may be driven by this; but it is

uncertain how these jobs will fare if this reects a growing bubble.

The prole meanwhile of the unemployed remains disturbing with alarmingly high rates of jobless high

school- and college-educated Filipinos. Almost nine out of ten (87.7%) of reported unemployed have

reached a high school or college education, with over four out of ten (43.5%) even having college-level

schooling. (See Table 4) This strongly indicates that the unemployment problem is not so much the lack

of education per se but rather the lack of employment opportunities in the economy to begin with. Half of

jobless Filipinos are young at between 15-24 years old, and nearly two-thirds (64.0%) are male.

Poor employment and income prospects at home continue to force more and more Filipinos to work

abroad. Some 4,030 Filipinos left the country every day in 2010, according to Philippine OverseasEmployment Administration (POEA) data, which is slightly higher than the 3,897 leaving per day in 2009.

The wage increase gran ted was far less than how much workers needed and employers could afford.

The Aquino administration granted a Php22 cost of living allowance (COLA) increase in May 2011

bringing the mandated minimum wage in the NCR to Php426 per day. The meager wage hike, the rst

under the new administration, indicates the limits of the administrations pro-poor rhetoric.

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April 2010 April 2011 pChange

(2010-2011)

Total Employed Persons 35,413 36,821 1,408 308 4.9

By Industry

Agriculture, Fishery and Forestry 11,512 12,151 639 155 4.2

Agriculture, Hunting and Forestry 10,073 10,678 605 152 6.2

Fishing 1,439 1,510 71 193 (3.7)

Industry 5,487 5,634 147 nda 7.2

Mining and Quarrying 212 221 9 272 18.6

Manufacturing 3,063 3,130 67 310 8.6

Electricity, Gas and Water 137 147 10 515 (0.4)

Construction 2,075 2,136 61 291 4.0

Services 18,414 19,036 622 nda 3.7

Wholesale and Retail Trade 6,885 7,254 369 272 0.8

Hotels and Restaurants 991 1,031 40 276 7.3

Transport, Storage & Communications 2,741 2,688 (53) 378 5.5

Financial Intermediation 383 405 22 504 5.4

Real Estate, Renting & Bus. Activities 1,061 1,289 228 458 5.9

Public Administration & Defense, Compulsory

Social Security1,959 1,952 (7) 452 (4.6)

Education 1,156 1,178 22 566 6.7

Health and Social Work 447 442 (5) 440 8.6

Other Community, Social & Personal Service

Activities984 957 (27) 332 nda

Private Households w/ Employed Persons 1,804 1,841 37 130 nda

Extra-Territorial Organizations 3 - - 356 nda

By Class of Worker

Wage and Salary Workers 19,283 20,252 969 308

Private household 1,804 1,841 37 130

Private establishment 14,226 15,244 1,018 294

Government/govt corporation 3,157 3,093 (64) 508

With pay (family owned business) 97 74 (23) 235

Own Account 11,950 12,188 238 -

Self-employed Workers 10,686 10,899 213 -

Employers 1,264 1,289 25 -

Unpaid Family Workers 4,179 4,382 203 -

By Hours of Work

40 Hours and Over (Full-Time Employment) 21,715 22,498 783 -

Less than 40 Hours (Part-Time Employment) 12,959 13,661 702 -

Did Not Work 738 663 (75) -

nda - no data available

Sources:Employment data from National Statistics Office (NSO) Labor Force Survey and GDP data from National Statistical

Coordination Board (NSCB) National Accounts of the Philippines

Average Daily

Basic Pay

(Jul 2010,

in Php) a

1st Qtr 2011

GDP Growth

(in %; constant

2000 prices)

Table 3. Employed Persons, Average Dai ly Basic Pay of Wage and Salary Workers, and Gross

Domest ic Produc t Growt h By Indus t ry

Employed Persons (in '000)

Note: For purposes of comparability, "Financial Intermediation" in theNational Accounts of the Philippines (NAP, source of GDP data) isconsidered equivalent to "Finance" in the Labor Force Survey (LFS, source of employment data), "Ownership of Dwellings & Real

Estate" to "Real Estate, Renting & Bus. Activities", "Public Administration & Defense, Compulsory Social Security" to "Government",

and "Health and Social Work" to "Medical and Health".p- preliminary, totals may not add up due to roundinga- for wage and salary workers only

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Taking away the effect of ination, the new NCR minimum wage of Php426 is worth Php245 in real terms

(measured in 2000 prices). This real value is even less than what the Arroyo government was able to give

in February 2002 when the Php280 mandated minimum wage was equivalent to Php258 in real terms. (See

Chart 1) A higher Php25 wage hike was also even given on two other occasions in June 2005 and July

2006. If only by these standards, the current administration, ironically, is so far doing even less than the

previous Arroyo government.

The end result is that real wages have not broken from the trend of being basically at over the last decade.

The gap between the mandated minimum wage and the family living wage also continues to rise, reaching

Php572 in June 2011. (See Table 5) As it stands, the minimum wage is just 43% of the Php998 estimate

needed for decent living by a family of six in the NCR. The living wage is the amount of family income

needed to provide for a familys food and non-food expenditures with sufcient allowance for savings forsocial security to enable the family to live and maintain a decent standard of human existence beyond mere

subsistence level, taking into account all of the familys physiological, social and other needs.

Small and large employers can evidently afford a much larger wage hike if only they accept a cut in their

already considerable prots. The benets for workers and their families are unambiguous and the wage

hike will substantially improve their welfare even if not yet necessarily bringing all of them up to a decent

standard of living. The economy has more than enough prots to support for instance a Php125 wage hike.

2010 p April 2010 April 2011 p 2010 p April 2010 April 2011 p

Total Unemployed Persons 2,859 3,099 2,871 100.0 100.0 100.0

By Sex

Male 1,809 1,936 1,837 63.3 62.5 64.0

Female 1,051 1,163 1,034 36.7 37.5 36.0

By Age Group

15-24 years old 1,460 1,584 1,436 51.1 51.1 50.0

25-54 years old 1,293 1,400 1,329 45.2 45.2 46.3

55 years old and over 106 114 103 3.7 3.7 3.6

By Highest Grade Completed

No Grade Completed 14 15 14 0.5 0.5 0.5

Elementary 374 415 339 13.1 13.4 11.8

Undergraduate 174 191 152 6.1 6.2 5.3

Graduate 201 224 187 7.0 7.2 6.5

High School 1,293 1,380 1,269 45.2 44.5 44.2

Undergraduate 363 407 336 12.7 13.1 11.7

Graduate 930 973 936 32.5 31.4 32.6

College 1,178 1,290 1,249 41.2 41.6 43.5

Undergraduate 621 682 663 21.7 22.0 23.1

Graduate 557 608 586 19.5 19.6 20.4

Source:National Statistics Office (NSO) Labor Force Survey

Population (in '000) Share to Total (in %)

Table 4 . Summar y Sta t is t ic s on Unemployment , Annua l Average 2010, Apr i l 2010 and 2011

Note: Based on the new official unemployment definitionp- preliminary

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1 0 IBON Economic and Political Briefng 14 -15 July 2011

In 2008, establishments in the country with total employment of 20 and over had combined prots of

Php895.2 billion and 2.74 million employees, according to the preliminary results of the 2008 Annual

Survey of Philippine Business and Industry (ASPBI) of the NSO. Granting an across the board wage hike

of Php125 means workers will receive an additional Php3,802 per month, and that employers will spend an

additional Php49,427 per employee per year (assuming 13 months of pay). The total cost of the proposed

wage hike will only be Php135.6 billion which, subtracted from total prots, will still leave establishmentswith Php759.6 billion in prots. This is only a 15.1% cut in their prots.

Giving a Php125 wage hike in NCR in particular will cost employers Php61 billion and reduce their prots

by only 17.3%, from Php352.1 billion to Php291.1 billion. Average prot per establishment in the NCR

will only fall by Php6.8 million and still leave them with an average of Php32.2 million in prots each. A

large wage hike will be benecial not just for workers and their families but also the economy. The transfer

of money from rich to poor households will increase aggregate demand and stimulate the economy. High-

income households have a higher propensity to save and low-income households, so deprived even of

basic necessities, a higher propensity to consume.

The administration gives low priority to agrarian reform and is among the poorest performing in

terms of land distribution. The Aquino administrations low priority for land reform can be gleaned fromits policy moves and, more importantly, its actual practice. It continues with Comprehensive Agrarian

Reform Program with Extension and Reforms (CARPer) which merely extends the failed Comprehensive

Agrarian Reform Program (CARP) as well as relegates land reform to an Asset Reform sub-section in the

Social Development chapter of its new medium-term Philippine development plan.

37

426

120.92

203.10216.63

238.10

257.59

243.37245.11

19861987198819891990199119921993199419951996199719981999200020012002200320042005200620072008200920102011 Jan

Chart 1. Nat ion al Capita l Region Daily Minim um Wage, 1986-June 2011(in Php; 2000=100)

NominalWage

RealWage

Jun 1992

Feb 1986

Jun 1998

Jan 2001 Jun 2010

Sources:Wage data from National Wages and Productivity Commission and inflation data from Bangko Sentralng Pilipinas

1986 1990 1995 2000 2005 2011

Jun 2011

Feb 2002

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Realities on the ground however provide the strongest conrmation of the administrations biases against

land reform. In its rst nine months, and under CARPer, it has distributed an average of 19,901 hectaresmonthly. While this is slightly more than the 17,311 hectares per month under the Arroyo government it

is far less than the average rates tallied by the Ramos government (38,229 hectares per month), Corazon

Aquino (28,711 hectares), and Estrada (26,032 hectares). (See Table 6) Distribution under CARPer in

particular at an average of 16,461 hectares per month is also considerably slower than the 26,030 hectares

monthly average since 1987.

Justications that the land covered now involves more difcult private land, or that it is just the

administrations rst year, or that the program is in any case nearing completion are of little signicance.

Again, similar to the governments handling of the wage hike, this is not a performance consistent with the

rhetoric of change.

Such a conclusion also nds support with how the Hacienda Luisita Inc. (HLI) controversy is playingout. The Supreme Court (SC) in July ruled with a 6-4 decision to uphold the Department of Agrarian

Reforms (DAR) revocation of the HLI stock distribution option (SDO) and called for a referendum for

the haciendas agricultural workers to decide if they want shares, again, or for the land to be distributed

to them. For one, the SC decision used legal obfuscations to avoid deciding on the constitutionality of the

SDO and the giving of land to its tillers the heart of the controversy and emblematic of elite resistance to

land reform nationwide. The decision rather endorses a process that since the beginning has been biased in

favor of the Cojuangco-Aquino clan through its feudal control, economic threats and outright violence.

Year

and Month

Daily Minimum

Wage

Family Living

WageWage Gap

2009

March 382 912 526June 382 922 536

September 382 934 541

December 382 945 557

2010

March 382 951 565

June 404 958 549

September 404 962 551

December 404 985 564

2011

March 404 994 584June 426 998 572

Table 5. Dai ly Minim um Wage, Fami ly L iv ing Wage and Wage

Gap, March 2009-June 2011 ( in Php)

Sources:Wage data and family living wage estimates from National Wages and

Productivity Commission (NWPC) and inflation data from Bangko Sentral ng

Pilipinas (BSP)

Note: IBON computed these family living wage (FLW) estimates by inflating the last

FLW estimates released by the NWPC for September 2008. The NWPC reports

that its FLW estimates are under review.

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Table

6.Land

Distribution

Accom

plishm

entPer

Adm

inistration,July1987-March

2011

(in

hectares)

Aqu

ino

Ramos

Es

tra

da

Arroyo

Aqu

ino

To

tal

Ju

l1987

-Jun

1992

Ju

l1992

-Jun

1998

Ju

l1998

-Dec

2000

Jan

2001

-Jun

2010

Ju

l2010

-Mar

2011

Ju

l1987

-Mar

2011

Departmen

to

fAgrar

ian

Re

form

848

,515

1,9

00

,039

333

,389

1,0

31

,403

106

,190

4,2

19

,536

Priva

tely

-owne

dLa

nd(PAL)

471

,621

955

,243

228

,622

709

,214

nda

OperationLand

Transfer(OLT)

358,915

142,847

18,708

40,079

nda

GovernmentFin

ancialInstitutions

(GFI)

22,938

105,498

11,906

26,330

nda

VoluntaryOffertoSell(VOS)

55,079

257,373

76,896

219,383

nda

CompulsoryAcq

uisition(CA)

13,952

120,828

47,767

105,080

nda

VoluntaryLandTransfer(VLT)

20,737

328,697

73,345

318,339

nda

Non-P

AL

376

,894

944

,796

104

,767

322

,190

nda

SettlementArea

s

208,792

356,763

35,276

104,749

nda

LandedEstates

25,781

41,201

971

2,125

nda

Government-ow

ned

Lands/Kilusang

Kabuhayanat

Kaunlaran(GOL

/KKK)

142,321

546,832

68,520

215,318

nda

Departmen

to

fEnv

ironmen

tan

d

Na

tura

lResources

874

,139

862

,461

447

,572

942

,024

72

,918

3,1

99

,114

PublicAlienable

&Disposable

Lands

539,086

489,069

113,383

942,024

72,918

IntegratedSocia

l

Forestry/CommunityBasedForest

Management(IS

F/CBFM)Areas

335,053

373,392

334,189

To

tal

1,7

22

,654

2,7

52

,500

780

,961

1,9

73

,427

179

,108

7,4

18

,650

Lan

dDistribu

tion

Average

Per

Mont

h

28

,711

38

,229

26

,032

17

,311

19

,901

26

,030

nda-nodataavailable

Sources:Presiden

tialAgrarianReformCouncil(PARC)andDep

artmentofAgrarianReform(DAR)

Lan

dTyp

ean

d

Mo

deo

fAc

qu

isition

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For another, and notwithstanding a belated reaction by Malacaang to appeal the SC decision, the

administration is evidently not going to devote any political capital to ensure that Hacienda Luisita, owned

by Pres. Aquinos family, is going to be distributed among its farmers. The loss to the Cojuangco-Aquino

would be considerable as various government infrastructure and other projects steadily drive up Central

Luzon land values including of the hacienda. Indeed, the way the family has been acting is illustrative of

the urgency of land reform leaving such vast tracts of lands in the hands of landlords is tantamount to

institutionalizing backward agricultural production and foregoing dynamic rural development. The clan

has merely settled for sugar production (apparently unprotable) and land speculation (protable, but

unproductive) in the haciendas thousands of hectares.

As it is, landowners continue to evade land distribution so having their own land to till remains elusive for

farmers and farmworkers of various haciendas nationwide including those in Bulacan, Tarlac, Batangas,

Laguna, Bicol and Negros. At the same time agricultural lands nationwide remain up for grabs in land

deals with businesses and foreign companies, threatening local food security and undermining peasants

centuries-old struggle for land. For instance, six million hectares of idle lands have been allocated for

the production of sugarcane, coconut, cassava, jatropha, oil palm and other cash crops and two million

hectares for agribusiness development. Expecting little from the administration, organized peasants

especially under the country's largest peasant federation, Kilusang Magbubukid ng Pilipinas (KMP), are

at the forefront of waging determined agrarian struggles.

The r elief from massive cash dole-outs and other smaller subsidies is only temporar y and is being

used as a smokescreen for fur ther globalization. The CCT program is reported to already cover 79

provinces and to have reached 2.1 million beneciaries, with an additional 300,000 by the end of the

year and 700,000 by 2012. The program is claimed by government as an investment in the future of the

Filipino people but, in the context of unreformed economic policies that do not create enough jobs and

keeps incomes low, it will amount to little more than a hugely expensive effort that temporarily gives the

impression of poverty reduction.

The welfare gains for beneciaries genuinely reached by the program are welcome and arguably long

overdue. But even ifpoor families are beneting this does not necessarily mean that headway is being made

against poverty, even if this seems commonsensical. The economics of the household are very different

from the economics of the country and it is only at the economy-wide level that progress against poverty

will be far-reaching and sustainable. Is the economy as a whole creating jobs? Have the prospects fordecent work and incomes for everyone in the country improved or does the CCT program only give an

income, health and education edge to its recipients in the scramble for limited work in the country?

The CCT program is not implemented in a vacuum and should not be assessed as if it were. This is the

main limitation of the usual CCT assessments. It is certainly important to look at the specics of program

implementation and to track any improvements in the welfare of recipients but this is not the entirety

of the effect of CCTs nor, indeed, a correct way of seeing if there are gains in national poverty reduction.

Indeed, the sheer size of the program with a Php22 billion budget in 2011 and Php35 billion in 2012,

and supposedly 4.6 million beneciaries after ve years demands that the program be looked at in its

entirety.

And the reality is that beyond the welfare gains for individual beneciaries the program is being usedas a smokescreen to keep on implementing the policies that have stunted the domestic economy, caused

massive joblessness, suppressed incomes and kept people poor. The targeted 4.6 million beneciaries,

assuming they are all reached, are going to be used to claim that poverty is being reduced and to justify

continued free market globalization policies. Meanwhile, the tens of millions of Filipinos jobless,

landless or forced abroad by these policies will still have to contend with an economy of generally poor

prospects.

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At best, the CCT program will be continued indenitely as an articial trickle-down mechanism. Yet it

is uncertain how the huge resources for this could be consistently raised. At worst, and more likely, is that

the program and the welfare gains for its recipients will be merely temporary as the government restricts

its spending to maintain its creditworthiness. There is good reason to doubt the sustainability of the CCT

program. They were implemented most extensively and for the longest time in Latin America but this was

during the 1990s and 2000s which was a time of relatively rapid global growth, high commodity prices,

booming exports and better government revenues. The current global crisis has ended these favorable

conditions so their continuation and indeed their supposed poverty-reducing effect will be put to the

test.

And then there are the various implementation-specic problems on the ground which are unsurprising

given that the multi-billion peso expansion was done without benet of a comprehensive assessment of

previous CCT implementation especially regarding distribution and effectiveness. Problems are occurring

across the country, at every stage of the process, and in being so widespread may conceivably involve

hundreds of millions of misspent pesos. These include cash transfers going to non-deserving and non-

poor beneciaries, non-complying beneciaries, anomalously-chosen beneciaries and non-existent

beneciaries. There are also reports of disbursements being lower than they should be and of beneciaries

unjustiably being dropped from lists.

There are also concerns apart from the leakages and loss of funds. Beneciaries have complained of

cash transfers being made conditional not just on the programmed health and education conditions but

on following orders from local government and social welfare ofcials. Residents in the Bicol, Southern

Tagalog, Eastern Visayas and Western Visayas regions for instance have complained of threats that they

would be disqualied if they were found to be joining community activist organizations attributing these

to the program being used for counterinsurgency purposes.

The fastest reduction in pover ty has been through changes in statistical methodologies. While strictly

speaking beyond the rst year of the Aquino administration, it is important to look at ofcial poverty

statistics inasmuch as the next two scheduled national poverty rounds, in 2012 and 2015, both fall during

its term. There is reason to suspect that much of the supposed improvement in countrys ofcial reported

poverty is due more to consecutive changes in poverty methodologies than real poverty reduction. This is

on top of concerns that the ofcial poverty line is too low and underestimates the true extent of poverty.

The National Statistical Coordination Board (NSCB) released ofcial poverty gures in February based on

adjustments on the poverty estimation methodology. According to the new methodology, there were 23.1

million poor Filipinos in 2009 and the previous estimate for 2006 was also lowered to 22.2 million (from

the original count of 27.6 million). (See Table 7)

The latest revision means that there are in effect three separate estimates for poverty in the last two

and a half decades using 1992, 2003 and 2011 methodologies. Genuine improvements to scientic

methodologies are welcome but the new methodology raises some concerns. First is that it seems

unresponsive and detached to everyday realities. The ofcial poverty threshold, or the amount supposedly

necessary for a tolerable standard of living, is pegged at just Php46 per person per day. This implies that a

Filipino on average needs just Php46 a day to meet all of his or her food and non-food needs. Basic needs

include food, education, clothing and footwear, medical care, transportation and communication, fuel, lightand water, housing, housing maintenance, furnishings, household operations, personal care and effects,

and rental.

Second is that it could create the impression that poverty is being reduced when, in fact, its incidence is

not changing. Yet, on the contrary, it is possible that the actual poverty trend over the decade-and-a-half

since the mid-1990s is essentially unchanging with poverty incidence implying, that with population

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growth, the absolute number of poor Filipinos is rising. Putting the various estimates side-by-side raises

some questions about recent supposed poverty reduction. (See Chart 2) Abstracting from breaks indata sets due to changes in methodologies, it appears that poverty trends indicate little change from the

mid-1990s if the at movements according to the two most recent methodologies (2003 and 2011) are

connected to poverty incidence according to the 1992 methodology.

Table 7. Poverty Inc idence and Magni tude of Poor Populat ion, 1985-2009

Indicator 1985 1988 1991 1994 1997 2000 2003 2006 2009

Magnitude of po or

(in '000)

1992 Methodology 26,675 25,388 28,554 27,373 26,769 30,850

2003 Methodology 25,473 23,836 27,6172011 Methodology 19,797 22,173 23,142

Poverty incidence

(in %)

1992 Methodology 49.2 45.4 45.2 40.6 36.9 39.5

2003 Methodology 33.0 30.0 32.9 32.6

2011 Methodology 24.9 26.4 26.5

Source:National Statistical Coordination Board (NSCB)

-

10

20

30

40

50

60

-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

1985 1988 1991 1994 1997 2000 2003 2006 2009

Incidence(in%

)

Magnitude(in'00

0)

Chart 2 . Povert y Incidenc e and Magni tude of Poor Populat ion, 1985-2009

1992 Methodology 2003 Methodology 2011 Methodology

1992 Methodology 2003 Methodology 2011 Methodology


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Given the basically at trend in poverty incidence since the late 1990s, it is for instance plausible for

ofcial poverty incidence in 2009 to still be around the some 40% level of 1994. If so, this would imply

that the number of poor has increased by over 7.5 million, by a rough approximation, from 27.4 million

in 1994 to perhaps around 35 million in 2009. But even this may be grossly underestimated with, in

2009, some 65 million or 70% of Filipinos living on Php104 or much less per day with the poorest half

of the population desperately poor and struggling with Php22, Php35, Php45, Php55 or Php67 per day.

Unfortunately with consecutive changes poverty estimates over time are going to be incomparable and,

perhaps intentionally, will likely give the impression that poverty has been markedly decreasing.

False positives

The economy is already slowing from a year ago and is hobbled by weak interna l sources of growth.

The government has attributed the slow growth to external factors such as sluggish global trade and even

political turmoil in the Middle East and North Africa. While these may be proximate causes it is well-

established that the global environment is chronically uncertain, with periods of great volatility, so the real

cause of low growth must be found internally. It also cited government underspending and the absence

of election-related stimulus. More than external factors, the low growth in the country is due to peasant

landlessness and lack of rural modernization, a low value-added and delinked manufacturing sector, and

household consumption dampened by low domestic wages and incomes.

The government reported 4.9% growth in real gross domestic product (GDP) in the rst quarter of 2011

which was markedly slower than the 8.4% rate in the same period last year. (See Table 8) Consecutive

quarters are not strictly comparable but it can still be noted that the rst three quarters of the Aquino

administration has seen progressively slower growth year-on-year from 8.9% in the second quarter of

2010, 7.3% in the third quarter, and 6.1% in the fourth quarter followed by the 4.9% in the rst quarter of

this year.

On the other hand, the picture appears better using seasonally-adjusted quarterly growth rates which are

computed to allow comparison between consecutive quarters (which cannot be done with the quarterly

year-on-year gures). By this measure, the economy has been growing since mid-2010 with 0.3% growth

in the third quarter, 0.5% in the fourth quarter, and 1.9% in the rst quarter of 2011. While showing an

upward trend these are still lower than the 3.8% and 1.9% rates in the rst and second quarter of 2010,

respectively. While at least showing better performance this is unlikely to be sustained since, historically,

seasonally-adjusted growth has never been on an uptrend for more than four straight quarters. For one,

there are no signs of any change in the underlying economic structure in the last year and, for another, the

global environment will only become more adverse.

On the industry side, the agriculture sector grew by 4.2% in the rst quarter of 2011 which continues an

improvement that begun in the fourth quarter of last year after consecutive quarterly declines. (See Table

8) Aside from being erratic this remains low, however, and indicates a large untapped potential for rural

growth. Manufacturing grew by 8.6% and while higher than the growth registered in the second semester

of last year, it is still a marked slowdown from previous double digit rates. The continued dependence of

this sector on exports, especially of electronics, which are under threat is a matter of medium- to long-

term concern. Much more sustainable over the long-term is if these two sectors were fundamentally driven

by high domestic demand. Meanwhile, the contraction in public spending by 4.6% is consistent with thede facto austerity measures being implemented by the administration under the guise of anti-corruption

campaign and ofbeing discerning as to its spending.

A particular point of concern though, and which will be taken up more below, is the at 0.0% growth in

net primary income (previously called net factor income from abroad). The compensation received by

overseas Filipino workers (OFWs) not, as is commonly misunderstood, their remittances is recorded

under this item. While net primary income as a whole is at at 0.0%, the sub-item of compensation

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1st Qtr 2nd Qtr 3rd Qtr 4th Qtr

Percent Distribution to GDP

1. Agriculture, Fishery, Forestry 11.6 12.3 10.2 10.8 13.1 12.2

a. Agriculture and Fishing 11.6 9.8 7.8 8.7 10.6 9.9

b. Forestry 0.0 2.5 2.4 2.2 2.5 2.3

2. Industry Sector 32.6 31.9 33.7 32.4 32.4 32.6

a. Mining and Quarrying 1.2 1.0 1.6 1.0 1.0 1.2

b. Manufacturing 22.2 22.4 21.1 21.7 23.4 23.2

c. Construction 5.7 4.9 7.3 5.7 4.9 4.9

d. Electricity, Gas and Water Supply 3.6 3.6 3.6 4.0 3.1 3.4

3. Service Sector 55.8 55.8 56.1 56.8 54.5 55.2

a. Transport., Storage, and Communication 7.5 8.0 7.8 6.8 7.4 8.0

b. Trade and Repair of Motor Vehicles,

Motorcycles, Personal and Household Goods16.6 15.5 15.6 17.7 17.7 14.9

c. Financial Intermediation 6.6 6.5 6.7 6.7 6.3 6.6

d. Real Estate, Renting and Business Activities 10.3 10.4 10.6 10.9 9.5 10.5

e. Public Administration & Defense:

Compulsory Social Security4.5 4.7 4.9 4.6 3.7 4.3

f. Other Services 10.2 10.7 10.5 10.0 9.9 10.9

Gross Domestic Product 100.0 100.0 100.0 100.0 100.0 100.0

Growth Rates

1. Agriculture, Fishery, Forestry (0.2) (1.8) (2.0) (2.0) 4.1 4.2

a. Agriculture and Fishing 0.0 (1.9) (2.1) (3.1) 5.4 6.2

b. Forestry (31.3) (1.1) (0.2) 2.8 (1.4) (3.7)

2. Industry Sector 11.6 15.4 15.7 9.8 6.5 7.2

a. Mining and Quarrying 11.4 2.4 24.4 6.8 6.9 18.6

b. Manufacturing 11.2 18.3 13.2 8.4 6.5 8.6

c. Construction 14.3 9.7 24.7 15.6 4.6 4.0

d. Electricity, Gas and Water Supply 9.9 9.8 10.2 10.1 9.4 (0.4)

3. Service Sector 7.2 7.2 7.3 7.8 6.4 3.7

a. Transport., Storage, and Communication 1.0 (2.2) 2.2 3.0 1.4 5.5

b. Trade and Repair of Motor Vehicles,

Motorcycles, Personal and Household Goods8.4 11.6 6.8 11.0 5.0 0.8

c. Financial Intermediation 10.1 8.3 5.8 13.1 13.6 5.4

d. Real Estate, Renting and Business Activities 7.5 5.2 8.6 6.6 9.4 5.9

e. Public Administration & Defense:

Compulsory Social Security5.8 7.5 9.6 6.5 (0.8) (4.6)

f. Other Services 8.4 9.8 10.9 4.4 8.7 6.8


Net Primary Income 10.0 21.2 10.0 5.7 3.9 0.0

Gross National Income 8.2 11.5 9.2 6.9 5.6 3.6

Industry Sector 20102010 2011

1st Qtr

Table 8. Gross Nat ional Incom e and Gross Domest ic Product By Indust r ia l Or igin,

2010-1st

Quar ter 2011 ( in %; cons tant 2000 pr ices)


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referring to overseas workers income has actually declined by 3.9% in the rst quarter of 2011 (from

18.5% growth in the same period in 2010). This indicates falling real incomes received abroad by OFWs.

This was just offset by another sub-item, outow of property expenses which declined 35.2%, hence the

overall gure of 0.0% growth.

On the expenditure side, the drop in public spending is clear with a 17.2% decline in government

consumption. (See Table 9) Also notable is the dramatic slowdown in exports to just 3.3% in the rst

quarter of 2011 after consecutive quarters of double-digit, albeit slowing, growth. Household consumption

though picked up with 4.9% growth which is generally higher than in 2010. Also looking favorable is the

37.0% increase in capital formation which is generally higher than in 2010. The government has portrayed

this is due to domestic investor condence upon the administrations supposed good governance yet

historical trends and recent developments suggest that, while welcome, this is a temporary spurt that

will not be sustained. The domestic market remains constricted while the global market is becoming

increasingly listless.

There are signs that the limits of overseas work and remittances as a major lifeline for the economy

have been reached. Overseas work has for decades been a major source of jobs and OFW remittances

have, correspondingly, been a major source of consumption for households and foreign exchange for

the economy. The continued slowdown in remittances, however, increasingly suggests that this lifeline

function has reached its limits. This will lower the welfare of individual OFWs and their families as well

as create greater problems for the economy as a whole. Latest ofcial estimates record 8.6 million overseas

Filipinos as of 2009 composed of 4.5 million temporary/irregular workers and 4.1 million permanent

residents.

Remittances growth is growing but at ever slower rates. Monthly year-on-year growth in April 2011 was at

6.3% which continues a general downtrend, despite month-to-month variations since 2005. (See Chart 3)

Growth rates in remittances are considerably down from the earlier double-digit rates reaching as much as

30% (June 2008) to over 37% (December 2006). The slowing growth in remittances also parallels slowing

growth in deployments of land-based and sea-based workers which slowed to 3.4% in 2010 (1.47 million

deployed) from 15.1% in 2009 (1.42 million deployed) and 14.7% in 2008 (1.24 million).

Remittances in 2010 were reported at a record US$18.8 billion. Remittances had been rapidly rising and

increasing in size relative to GDP since the 1980s: ranging between 1.3-2.7% in the period 1981-1990,more or less steadily rising each year after to 9.8% in 2004, and then appearing to reach some sort of

plateau in the 6-year period since then and varying just between 9.5-10.9 percent. These calculations are

according to GDP estimates using 1985 as the base year. (See Chart 4)

The national income accounts were rebased from 1985 to 2000 recently slightly reducing the size of

remittances relative to GDP but the plateau in the last six years remains clear. (See Chart 4) Using the

rebased GDP gures, remittances as a share of GDP averaged 9.9% of GDP in the 7-year period 2004-

2010 during which time it stayed within the narrow range of 9.4% (2004 and 2010) to 10.4% (2005 and

2006).

Two factors appear to be at play. The main reason appears to be a tightening of labor markets abroad

due to the global crisis as well due to more countries sending, in accordance with a decade of migrationand development hype, increased numbers of their citizens abroad for work especially from India,

China, Mexico, Bangladesh, Pakistan, Vietnam and Indonesia. These may have had the effect of lowering

incomes and benets and of making job opportunities scarcer. For instance, remittances from the US

which accounts for around half of remittances to the country actually contracted 6.4% in 2009 after the

nancial meltdown there with barely a recovery to previous levels in 2010. From all countries, remittance

growth slowed to 5.6% in 2009, again upon the onset of crisis, after 13.7% growth in 2008. The second

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1st Qtr 2nd Qtr 3rd Qtr 4th Qtr

Percent Distribution to GDP

1. Household Final Consumption Expenditure 69.2 69.2 67.3 66.8 73.1 69.32. Government Consumption 10.0 11.8 11.5 9.3 7.7 9.3

3. Capital Formation 20.8 18.4 20.1 17.4 26.5 24.0

A. Fixed Capital 20.3 21.0 20.6 19.7 20.0 22.4

1. Construction 8.6 7.5 10.4 8.6 7.8 7.7

2. Durable Equipment 10.0 11.5 8.6 9.7 10.2 12.7

3. Breeding Stock & Orchard Development 1.7 2.0 1.5 1.4 2.0 2.0

B. Changes in Inventories

C. Intellectual Property Products 0.4 0.4 0.3 0.6 0.4 0.4

4. Exports 50.6 49.9 53.7 60.5 39.4 49.2

A. Exports of Goods 41.5 38.5 44.2 51.9 32.3 40.4

B. Exports of Services 9.1 11.4 9.5 8.6 7.2 8.7

5. Less : Imports 50.6 48.9 52.2 53.7 47.7 50.8

A. Imports of Goods 40.9 37.9 43.7 44.0 38.0 41.0

B. Imports of Services 9.7 11.0 8.6 9.7 9.7 9.8


Growth Rates

1. Household Final Consumption Expenditure 3.4 4.0 1.9 2.4 4.9 4.9

2. Government Consumption 4.0 21.4 7.4 (6.5) (6.6) (17.2)

3. Capital Formation 31.6 31.9 38.0 34.5 25.7 37.0

A. Fixed Capital 19.5 19.0 27.1 16.0 16.1 12.0

1. Construction 17.5 11.4 25.2 17.1 14.0 7.2

2. Durable Equipment 25.5 29.2 35.9 17.6 21.6 16.7

3. Breeding Stock & Orchard Development 0.3 (0.2) 1.0 (0.3) 0.7 3.6B. Changes in Inventories

C. Intellectual Property Products 2.9 14.2 4.1 (1.1) (0.7) 10.0

4. Exports 21.0 18.8 24.0 23.1 16.8 3.3

A. Exports of Goods 24.7 27.1 28.6 26.6 15.3 10.1

B. Exports of Services 6.5 (2.7) 6.2 5.5 24.3 (19.5)

5. Less : Imports 22.5 24.2 22.1 22.1 21.9 8.8

A. Imports of Goods 23.4 26.4 23.8 21.0 23.1 13.3

B. Imports of Services 18.9 17.3 14.1 27.6 17.4 (6.6)


Net Primary Income 10.0 21.2 10.0 5.7 3.9 0.0

Gross National Income 8.2 11.5 9.2 6.9 5.6 3.6

2011

1st Qtr

Type of Expenditure 20102010


Table 9. Gross Nat ional Income and Gross Domest ic Product By Expenditure Share,

2010-1st

Quarter 2011 ( in %; const ant 2000 pr ices)

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35.0

29.9

37.2

30.0

0.1

11.4

6.3

-

5

10

15

20

25

30

35

40

Chart 3 . Month ly Overseas Fi l ip ino Remit tanc e Growth,

January 2005-Apri l 2011 (year-on-year; in %)

Source:Bangko Sentral ng Pilipinas (BSP)

2005 2006 2007 2008 2009 2010 2011

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reason has to do with the domestic economy which, if only through steady population growth, continues to

increase in size.

These tendencies are likely to intensify. For instance the Saudi Arabian government recently adopted a

policy of Saudization or Nitaqat which requires greater hiring of Saudi nationals in a bid to create one

million new jobs to address domestic unemployment. Yet the measure is not new Spain, Italy, South

Korea and Australia all drastically reduced various quotas for foreign workers while the United Kingdom

(UK) and Canada imposed stricter requirements for certain occupations as early as 2009.

The implications are considerable. This trend highlights how relying on jobs abroad and overseas

remittances to boost private domestic consumption is increasingly untenable. In the past, these remittances

have substantially covered up for internal economic decay by boosting consumption, increasing the

welfare of recipient households, and considerably boosting foreign exchange reserves. Of course they

have still been insufcient to compensate for crisis-induced problems in export- and foreign investment-

dependent sectors and, more fundamentally, for the decline of domestic agriculture and industry.

Trends in foreign trade and investment ar e consistent with the need to aggressively refocus

on developing domestic sources of demand and capital. Recent short-term data show export and

investment slowdowns that, in the context of global economic developments, are likely reective of an

overall long-term trend of poorer prospects for foreign trade and investment.

According to the NSO, export earnings in the month of May fell 3.2% to US$4.10 billion from US$4.24

billion in the same period last year. While exports have been growing for 17 consecutive months after

the last decline of 8% in October 2009 the last twelve months have for instance seen export growth rates

slowing rapidly until actually going negative in May. (See Chart 5)

46.8

(3.2)

(10.0)

-

10.0

20.0

30.0

40.0

50.0

2010

Jan

Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec 2011

Jan

Feb Mar Apr

Chart 5. Phi l ippine Export A nnual Growt h Rates, January 2010-May 2011 ( in %)

Source:National Statistics Office (NSO)

Chart 5. Phi l ippine Export Annual Grow th Rates, Januar y 2010-May 2011 (in %)

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Total receipts from merchandise exports in the rst ve months of 2011 totalled US$20.6 billion which

is for now still up 7.5% from US$19.2 billion last year. Low-value-added electronics products remain

the countrys biggest export accounting for half of total exports at US$10.2 billion although a 9.1%

decline was recorded in January-May 2011 from the same period last year. Exports of the next biggest

item, coconut oil, increased 63.8% to US$780 million but this only accounted for 3.8% of total exports.

Exports of the third biggest export earner, articles of apparel and clothing accessories (3.7% of exports),

meanwhile increased by 15.5% to US$756.8 million.

According to the NSO, the US$3.3 billion in outward shipments of manufactured goods which

accounted for 79.8% of total export receipts in May 2011 was an 11.4% decline from the US$3.7 billion

recorded in May 2010. Earnings from agro-based products which comprised 8.3% of total exports revenue

in May 2011 rose 40.2% to US$339.3 million, from mineral products (5.8% of exports) increased by

81.2% to US$237.4 million, and from petroleum products (2.8% of exports) rose by 441.4% to US$114.3

million.

The US was the largest export market in May accounting for 17.1% of exports followed by Japan (15.2%),

China (11.9%), Singapore (9.2%), Hong Kong (7.8%) and South Korea (4.9%) cumulatively accounting

for two-thirds or 66.1% of total exports. With slight month-to-month variations between them, these have

been the countrys top export destinations in recent years.

Foreign direct investments (FDI) meanwhile have fallen 15.1% to US$552 million in the period January-

April 2011 from US$650 million in 2010 and US$872 million and 2009, respectively, over the same

period. This continues a general slowdown in foreign investment since 2009 that has apparently not

changed even upon the new Aquino administration. (See Chart 6). Investments in the rst four months

came largely from the US (74.6% of total equity invested), Singapore (12.3%), Hong Kong (7.4%),

Netherlands (4.4%) and Japan (4.1%). Foreign equity investments in this period went largely to real estate

(42.5%), mining and quarrying (22.0%), manufacturing (10.1%), utilities (6.0%), construction (5.2%) and

wholesale and retail trade (2.3%).

360

166

(290)

636

470

(100)

392

16

(36)

83 94

172 170

326

69 85

(31)

50

222

111

(2) (32)

304

441

207

97

167

81

(300)(200)

(100)

-

100

200

300

400

500

600

700

800

2009

Jan


Jan


Jan

Feb Mar Apr

Chart 6. Foreign Direct Investment , January 2009-Apri l 2011 ( in mil l ion US$)

Source:Bangko Sentral ng Pilipinas (BSP)

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The Bangko Sentral ng Pilipinas (BSP) played up that net FDI inows were still positive due to strong

macroeconomic fundamentals and favorable growth prospects although could not but acknowledge

the generally listless growth in the advanced capitalist economies, particularly Japan and the US, amid

heightened global economic uncertainties.

In contrast, foreign portfolio investments in the rst ve months of 2011 recorded US$2 billion in inows

which was 160.3% higher than the US$772 million in the same period in 2010. There was US$4.0

billion worth of investments in Philippine Stocks Exchange - (PSE) listed shares, much higher than theUS$2.5 billion recorded in 2010. These went to holding rms (US$1.0 billion), banks (US$679 million),

telecommunication companies (US$520 million), utility companies (US$509 million), and property rms

(US$497 million). Outows, according to the BSP, rose from US$2.8 billion last year to US$5.8 billion

consisting mostly of withdrawals from interim peso deposits (IPDs).

These recent export and investment trends reect a protracted global economic crisis that could quickly

deteriorate even further in the coming years. Overall, it is clear that the world economy after the 2008

crisis cannot go back to the relatively high levels in the 1990s and 2000s when massive debt and ctitious

capital served to articially drive growth. In particular, sovereign debt defaults appear imminent in weaker

Eurozone economies despite ever more drastic austerity measures which, if anything, are fomenting ever

greater political unrest. Japan in turn which has been more or less stagnant for well over a decade now has

to deal with its recent earthquake and tsunami disasters. The US is still the worlds largest economy and

the most advanced capitalist power but, even here, unemployment and government debt are at historically-

high levels.

In short, the world economy is well into an era of high uncertainty and lower economic activity.

Emergency stimulus programs are no longer viable and, indeed, governments now have to deal with the

aftershocks of huge debt and drastic austerity. These suggest further distress for the economy down the

road if the government remains overly focused on export markets and on foreign investments.

National government decit reduction has been through spending cuts more than improved revenue

collection. The Aquino administration has been using its apparent gains on the scal front as proof of its

anti-corruption successes and of rational frugality. The reality however is more basic and the government

has made a policy decision to reduce the budget in the interest of creditworthiness even at the expense of

public education and health services, infrastructure and other economic services. Also, there is as yet no

reason for the Aquino administration to claim that it has signicantly addressed the problem of revenue

leaks due to corruption.

There has been a striking turnaround in the national governments (NG) scal position. Its decit of

just Php9.5 billion in the rst ve months of 2011 is 94.1% smaller than the Php162.1 billion recorded

in the same period in 2010. (See Table 10) However this was due more to severe spending cuts where

NG expenditures fell 10.7% or by Php71.1 billion. Tax revenues from the internal revenue and customs

bureaus on the other hand only increased by Php46.9 billion with most of this 10.3% increase likely just

attributable to increased collections in line with the nominal GDP growth of 9.3% in the rst quarter of

2011.

The most remarkable revenue increase in this period was actually very specic and not even due toimproved tax collections: a large one-off Php23.8 billion in income of the Bureau of the Treasury (BTr)

from collections of dividends on shares of stock in January 2011 (part of the Php48.5 billion in Btr

income). (See Table 10) These collections in just one month were more than double the amount collected

for this item in the whole of 2010 (Php12.0 billion).

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2010 2011 in million Php in %

Revenues 1,207,926 500,009 581,501 81,492 16.3

Tax Revenues 1,093,643 456,585 503,519 46,934 10.3

Bureau of Internal Revenue 822,623 344,103 391,092 46,989 13.7

Bureau of Customs 259,241 107,473 106,894 (579) (0.5)

Other Offices 11,779 5,009 5,533 524 10.5

Non-tax Revenues 113,877 43,149 77,979 34,830 80.7

Bureau of Treasury Income 54,315 21,467 48,476 27,009 125.8

Privatization 914 95 677 582 612.6

Others 58,648 21,587 28,826 7,239 33.5

Grants 406 275 3 (272) (98.9)

Expenditures 1,522,384 662,116 591,041 (71,075) (10.7)

Surplus/(Deficit) (314,458) (162,107) (9,540) 152,567 (94.1)

Table 10. National Government Fiscal Posit ion, 2010 - January-May 2011

( in Php mi l l ion except ra tes in %)

IndicatorJanuary-May Change

2010

Source:Bureau of Treasury (BTr)

That spending cuts account for most of the improved decit situation can also be seen by looking at the

scal situation relative to GDP. The NG decit was reduced 1.2% of GDP in the rst quarter of 2011 from

6.5% in the same period in 2010 or by a signicant 5.4 percentage points. (See Table 11) However,

NG expenditures clearly accounted for two-thirds of this with a 3.5 percentage point drop compared to

just a 1.5 percentage point increase in revenues. As it is, revenues being equivalent to 14.4% of GDP

in the rst quarter is only a very slight improvement from 14.2% for the whole of 2010 and less than

what was achieved in over two decades since 1989 where revenues ranged from 14.5% (2004) to as

much as 19.9% of GDP (1994). It is also still smaller than the average 15.3% of GDP under the previousArroyo administration covering the period 2001-2010 (which averaged 15.1% even if revenues from

unprecedented privatization are removed).

Revenue leaks can only be said to have been decisively addressed once the improvements in revenue

performance are more uniform and sustained. It may also be recalled that the previous Arroyo

administration allegedly window-dressed its revenue collection in 2006 by seeking advanced tax payments

from big corporations, which subsequently showed up in lower collections from large taxpayers.

Debt service and the public debt stock in any case continue to rise. The Aquino administration has paid

Php634 billion in debt service between July 2010 and April 2011, which is Php8 billion more than what

was paid by the Arroyo government in the period July 2009-April 2010. These payments over its rst ten

months also already exceed payments for the whole year of 2007 (Php614 billion), 2008 (Php613 billion)and 2009 respectively, and of the rst two years combined of the Arroyo administration (Php632 billion).

Yet the NG debt stock has still gone up from Php4.58 trillion in June 2010 to Php4.71 trillion in April 2011

consisting of Php2.69 trillion in domestic debt and Php2.03 trillion in foreign debt. This increase in the

debt stock of Php129.5 billion was at least smaller than the Php209.4 billion increase during the equivalent

period under the previous administration.

Source:Bureau of the Treasury (BTr)

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Aquinomics: A Philippine Development Plan (PDP) without development

The Aquino administra tion has chosen the same decades-old economic policies behind low growth,

joblessness, falling incomes and increasing poverty. The administrations rst year conrms its lack

of vision for national and nationalist development. The Philippine Development Plan (PDP) 2011-2016

it released in May 2011 is its blueprint for implementing its declared Social Contract with the Filipino

People. The plan sums up the administrations chosen economic direction and denes its strategies and

programs for the next six years. It recycles the market-based, foreign investment-led, foreign market-

dependent globalization of previous governments despite the countrys poor experience with these in thelast three decades.

The plan specically targets [globally] competitive industries and services: foreign tourism, cheap labor

business process outsourcing (BPO), low value-added electronics for export, extractive mining, export-

oriented agri-business and forestry, and foreign-dominated ship building. It can be noted that these priority

areas of development are conspicuously similar to the Seven Big Winners pushed by the Joint Foreign

Chambers of the Philippines (JFC) in 2009 and again in 2010. The plan moreover gives a central role

to PPPs and CCTs both programs that have been aggressively pushed by the World Bank(WB) and Asian

Development Bank (ADB) especially in the last decade.

IBON has separately released a critique of the PDP with the following main points:*

1. The PDP 2011-2016 does not offer anything new in terms of strategies for more genuinely

inclusive economic growth. The plans main problem is that it dogmatically stays the course of the

neoliberal free market policies of globalization that have been so destructive for the country. This

means the government foregoing strategic economic planning and letting the market and private

sector decide on economic activity in the country national development is then expected to more

or less spontaneously happen. The plan builds on the accumulated globalization policies of previous

administrations including the Arroyo government.

20102010

1st Qtr

2011

1st Qtr2010

2010

1st Qtr

2011

1st Qtr

Revenues 1,207,926 265,824 323,078 21.5 14.2 13.0 14.4

Tax revenues 1,093,643 237,660 265,652 11.8 12.8 11.6 11.9

of which --

BIR 822,623 173,892 199,549 14.8 9.7 8.5 8.9

BOC 259,241 60,581 62,618 3.4 3.0 3.0 2.8

Non-tax revenues 113,877 27,979 57,425 105.2 1.3 1.4 2.6

Grants 406 185 1 (99.5) 0.0 0.0 0.0

Expenditures 1,522,384 400,003 349,275 (12.7) 17.9 19.5 15.6

Surplus/(Deficit) (314,458) (134,179) (26,197) (80.5) (3.7) (6.5) (1.2)

Total debt service

as % of revenues689,799 339,340 332,065 (2.1) 57.1 127.7 102.8

Interest payments 294,244 108,898 90,720 (16.7) 24.4 41.0 28.1

Principal payments 395,555 230,442 241,345 4.7 32.7 86.7 74.7

Indicator

Table 11. Nat ional Governm ent F isc a l Posi t ion and Debt Servic ing, 2010-1st

Quarter 2011

(in mi l l ion Php and in %)

Source:Bureau of Treasury

in million Php % Change

(2010 1st Qtr -

2011 1st Qtr)

as % of GDP

Source:Bureau of the Treasury (BTr)

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2. The plan is more concerned about a stable and protable environment for big business, especially

for foreign investors, than strategic Filipino-oriented development or ensur ing the well-being of

the people. On one hand, the plan is preoccupied with global competitiveness indicators because the

countrys capacity to attract trade and investments is affected by its poor international rankings. On

the other hand, measures for real national development such as greater regulation of foreign capital and

more protectionist trade policies are actually avoided for undermining this competitiveness.

3. The plan fur ther relinquishes government responsibility to pr ovide essential public goods and

social services. Using as justication that reducing the scal decit is an absolute priority, the plan

even promotes further privatization as a win-win solution for the country. The Aquino administration

has adopted PPPs as a major strategy where government shall rely on the public-private partnership

scheme to implement the bulk of its infrastructure program. This means that the private sector should

be supported and allowed to prot from providing public goods and services.

4. The plan uses CCTs as income-boosting window-dressing to cover up how millions of Filipinos

have been marginalized by globalization policies. The plan cannot but acknowledge the adverse

impact of globalization policies even if it says this in a roundabout manner. Yet instead of correcting

this, it merely proposes so-called social protection particularly CCTs. These are inherently limited

though and cannot possibly cover the tens of millions of Filipinos economically and socially displaced

by the free market.

5. The plan plays up misplaced benets from big infrastructure projects and diverts from the

more meaningful but politically more difcult socioeconomic reforms needed. There is no doubt

that building physical infrastructure in transport, water, power and elsewhere is vital for a strong

economy. But it is important to ask if this infrastructure will have the desired effect as in, be broadly

developmental in the specic inequitable conditions of the Philippine economy. It is clear how big

rms participating in PPPs will benet from guaranteed prots, and how export-oriented corporations

using the improved infrastructure may reduce their costs of doing business. Established foreign,

corporate and landed elites will then likely gain. But it is less clear how the mass of underpaid workers,

landless farmers and unemployed across the country will benet especially if the infrastructure is

concentrated in the countrys usual centers of economic activity.

6. The plans intensied privatization of health, education and housing will make these servicesavailable only to those who can afford them. The government is systematically turning vital social

services into opportunities for private prot-making rather than directly providing these so that they are

accessible to everyone including the countrys poorest.

7. The plan seeks to increase taxes paid by the poor while avoids taxing the r ich. It has an imbalanced

scal policy. The plan argues that the government faces decit problems. Hence, it will tighten

public spending and reduce outlays for domestic development in terms of public infrastructure, social

investments and welfare spending. These will have adverse effects on the poor and on the economy.

Yet the government judiciously avoids taxing the rich to raise resources such as direct taxes on high-

income individuals and corporate prots, or indirect taxes on non-essential luxury goods and services.

The administrations centrepiece PPP program is discriminatory in favor of big prot-seeking players andforeign investors over building a domestic economy providing for its constituents needs. The program

plays up the role of prot-seeking private and foreign parties in infrastructure building and providing

public goods and services. Instead of putting an end to the ills of privatization and other free market

measures, the Aquino government is further opening up the economy for big businesses and prots at the

expense of the people. (See Table 12) More expensive public facilities will aggravate Filipinos already

serious problem with making ends meet. There are 12 priority rail, road and airport projects lined up this

year worth Php157 billion although none have yet been successfully bid out, much less started.

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The Aquino administration also clearly seeks to build on previous globalization policies and extend

these to as many areas of the economy as possible. The leaderships of the Senate and of the House ofRepresentatives have already expressed their willingness to push for charter change particularly towards

opening up the economy to greater foreign investment. The government has also already launched a

national campaign to promote free trade agreements (FTAs) as well as declared its intent to enter into a

second FTA this time with the European Union (EU). All these indicate how the Aquino administration

is relying mainly on foreign investments and foreign markets for economic development, rather than the

painstaking but more sustainable and equitable approach of focusing on the domestic economy.

GROWING DISENCHANTMENT

Amid deteriorating living conditions and apparent lack of decisive action from government to protectthe public from rising cost of living, Pres. Aquino saw the steady and steep decline in his performanceand satisfaction ratings. There is growing disenchantment especially among the masses, who were initially

enthralled by Aquinos bold words about a presidency radically different from its predecessor one that

is not only honest and humble but most of all sensitive to the needs of the people. Pres. Aquino and his

handlers attempt to stem this trend by drawing public attention to the administrations banner issue of

corruption thus the repeated tirades against the misdeeds of Gloria Macapagal-Arroyo. But whether or not

Arroyo will face actual legal cases led by the Aquino administration remains to be seen.

After all the posturing of being the alternative to the corruption-ridden, undemocratic Arroyo regime,

the Aquino presidency has proven in a year that it is not about to turn around this crisis-battered nation.

Pres. Aquino promised reforms without a concrete reform agenda. He promised change without departing

from failed socioeconomic policies. He talked about good governance using the same patronage and elitepolitics. One by one, the bubbles of expectations that he created burst as Pres. Aquino concluded his rst

year.

The Aquino presidency is turning out to be more of the same anti-people, pro-foreign and undemocratic

governance that has been all too familiar to the Filipino people. Its rhetoric on poverty alleviation remains

that an empty rhetoric and worse, just an afterthought to its economic planning, the central theme of

Family Corporation PPP-Related Interests

Aboitiz Aboitiz Equity Ventures (AEV) power, transport

Ayala Ayala Corp. power, water, telecommunications

Cojuangco San Miguel Corporation (SMC) power, water, tollways and highways, rail, airport

Consunji D.M. Consunji, Incorporated (DMCI) power, water, constructionGokongwei JG Summit power, telecommunications

Lopez Lopez Holdings/First Balfour power, telecommunications, construction

Pangilinan Metro Pacific Investments Corp. (MPIC) power, water, tollways, ports, telecommunications

RazonInternational Container Terminal

Services, Inc. (ICTSI)ports

Ty Metrobank power

Source: IBON

Table 12. Phi l ippine Conglomerat es w i th PPP-related Int erests (pre l iminar y l is t ing)

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which is the vigorous but not so novel promotion of privatization. The Aquino presidency has not been

radical to break away from the failures of its predecessor, nor has it been a reformist as its moderate

supporters had wanted it to be. The Aquino presidency has been simply lazy, rehashing old programs and

staying within the comfort zone of elite politics.

Such inertia to address the worsening plight of the population is already one of the distinguishing marks of

Noynoy Aquinos leadership. His lack of vision, his lack of inspiration, even his lack of decency to have

purchased a multi-million-peso car (which he reportedly sold) while the people are reeling from poverty,has not helped reverse the peoples deteriorating perception of the Aquino administration. Instead, without

efforts to be discreet about his coming from a ruling clan, Pres. Aquino has wasted no time to consolidate

elite rule, continued militarist approach to stie dissent, and up the ante for foreign investors. There has

also been a strikingly increased puppetry to the US.

Kayo ang boss ko. (You are the boss) Pres. Aquino addressed the people in his inaugural speech,

dramatizing his supposedly unassuming brand of leadership and overemphasizing that he would not abuse

power. Kayo pa rin ang boss ko, (You are still the boss) he said after a year when he marked the rst

anniversary of his inauguration, trying to convince some more a disillusioned populace, or perhaps even

just his camp, that the worn-out sound byte would still work. But his appeal has waned. After having

established allegiance to elite and imperialist powers and servitude to the already discredited policies of

globalization, which have only driven the people further down to hardship, Noynoy Aquino has clearly

demonstrated to everyone who his real boss is.

The Aquino presidency does not hold the path to real change, not with its overused slogans ofdaang

matuwid(straight path) and ghting corruption in order to end poverty, as none of these is true. Its

politics has remained traditional, feudalistic, elitist and colonial, guided by the principles of free market

democracy, back to business as usual, and putting in place only cosmetic changes to maintain legitimacy.

Real change can only happen through the long, arduous road of overhauling the system that had

entrenched the elite at the expense of the people and the countrys resources. Pres. Aquino could have

at least paved the way by instituting relevant policies and programs that have long-term benets to the

people. But in a year, the Aquino presidency has shown that in its remaining years it could actually be an

obstruction to real change.

Consolidating elite r ule

The Filipino people can dream again, Pres. Aquino had declared during his inauguration. It has been a

year of one nightmare after another for the Filipino people worsening joblessness, insufcient incomes,

rocketing prices of food and basic commodities, increasing transport fares, oil price hikes, increases

in water and electricity rates, more land grabbing stories, more demolitions, less social services. There

has not been any respite from the crisis left behind by the Arroyo administration, while the Aquino

administration has only continued to fuel the social unrest by doing nothing.

Pres. Aquino just allowed things to happen, especially the things that could have uplifted the people if only

he intervened. He could have used the political momentum driven by his large mandate to confront the

oil companies on their proteering or j

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