Birdtalk Yearend 2013 Final
Transcript of Birdtalk Yearend 2013 Final
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January 15, 2014Balay Internasyonal,
UP Diliman, Quezon City
YEAREND 2013:
Deepening Crisisand Disillusionment
Economic andPolitical BriefingBirdtalk
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114 Timog AvenueQuezon City 1103 PhilippinesTel. Nos: +63 2 927-7060 to 61Fax: +63 2 929-2496www.ibon.org
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IBON Economic and Political Brieng 15 January 2014 3
The rst three years of the Aquino administration gave the perception of stability and economic progress.
A conuence of favorable factors made this possible: coming from political crises during the previous
Arroyo government, steady publicity about good governance and a popular president, cheap capital from
unprecedented loose monetary policy in developed countries, improving domestic macroeconomic indicators,
and business enthusiasm in some sectors of the economy. There was shallow optimism caused by a break from
the dark past.
Yet it was perhaps only a matter of time before the economys unsound fundamentals and unreformed politics
asserted themselves. Major issues emerged in 2013 to dissolve the illusion that profound social, economic
and political change was happening in the Philippines: mounting joblessness, growing poverty, rising prices,
human rights violations, continuing patronage and pork barrel politics, bureaucrat capitalism, and foreign policy
dened by United States (US) interests. These happened amid steadily increasing prots for big corporations
and accumulating wealth by the countrys richest families.
The dening feature of the Aquino presidency is turning out to be exclusionary growth and elite-biased
governance. This growth is moreover narrow and shallow as well as articial and unsustainable. The countryspro-market economic policies are failing to deliver development, there are scant political reforms and patronage
has even been defended, human rights are violated, and foreign policy is becoming more neocolonial. The
political leadership is facing mounting disillusionment which is fuelling increasing demands for political
change.
Growing rapidly
The economy has been growing more and more rapidly in the last three years. The administration, in its yearend
report, played up the stellar performance of the Philippine economy in 2013 headlined by some of the
highest growth numbers in Asia. Ofcial gures show ve consecutive quarters of at least 7% growth in gross
domestic product (GDP) including an average of 7.4% in the rst three quarters of 2013. (See Table 1)This
growth is above the Philippine annual average of 4.2% over the long period 1956-2012 and among the fastest inAsia and emerging markets worldwide.
Net foreign direct investment (FDI) also grew signicantly with inows rising 35.3% to US$3.4 billion in
the rst 10 months of 2013 from US$2.5 billion posted in the same period the year before. (See Table 2)
The National Statistical Coordination Board (NSCB) reported foreign investment approvals likewise growing
substantially and more than doubling (growing 114.8%) to Php126.5 billion in the rst nine months of 2013
from Php58.9 billion in the same period in 2012; local approved investments only grew 6.6 percent. Over half
(56.8%) of these total approved investments were in the power sector followed by almost one-fth (19.5%) in
real estate activities.
The World Banks Doing Business Report ranked the country 108th in 2013 or a jump of 30 notches from
2012. There was a similar improvement in the World Economic Forums Global Competitiveness Report withthe country going up to 87th in 2013/14 from 114th in 2010/11. The three major credit ratings agencies Fitch,
Standard & Poor and Moodys also each gave the Philippines its rst ever investment grade ratings last year.
The Philippine Stock Exchange Index (PSEi) reached its all-time high.
The Aquino administration played these up as signs of progress due to its good governance.
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4 IBON Economic and Political Brieng 15 January 2014
Table 1. National Accounts of the Philippines By Industry Group and By Type of Expenditure,
2010-2012 and 2013 1st-3rd Quarter (growth rates; at constant 2000 prices; in %)
Industry Group / Expenditure Share 2010 2011 20122013
1st-3rd Quarter
By Industry Group
1. Agriculture, Hunting, Forestry and Fishing (0.2) 2.7 2.7 1.1
a. Agriculture, Hunting, Forestry - 4.5 3.5 0.6
b. Fishing - (4.1) (0.7) 3.3
2. Industry Sector 11.6 2.3 6.5 9.8
a. Mining and Quarrying 11.4 7.0 (3.7) (2.0)
b. Manufacturing 11.2 4.7 5.4 9.8
c. Construction 14.3 (7.3) 14.4 16.3
d. Electricity, Gas and Water Supply 9.9 0.6 5.1 4.4
3. Service Sector 7.2 5.1 7.4 7.3
a. Transportation, Storage, and Communication 1.0 4.3 9.1 5.3
b. Trade and Repair of Motor Vehicles, Motorcycles, Personal andHousehold Goods
8.4 3.3 7.5 6.0
c. Financial Intermediation 10.1 5.2 7.8 13.3
d. Real Estate, Renting and Business Activities 7.5 9.3 7.9 9.3
e. Public Administrat ion and Defense: Compulsory Social Security 5.8 0.3 3.3 5.1
f. Other Services 8.4 6.6 7.2 5.7
By Expenditure Share
1. Household Final Consumption Expenditure 3.4 6.3 6.6 5.6
2. Government Final Consumption Expenditure 4.0 1.0 12.2 12.3
3. Capital Formation 31.6 8.1 (3.2) 24.4
a. Fixed Capital 19.1 0.2 10.4 14.0
i. Construction 17.5 (6.2) 15.1 15.9
ii. Durable Equipment 25.5 5.2 8.0 14.8
iii. Breeding Stock and Orchard Development 0.3 (0.3) 1.4 (0.5)iv. Intellectual Property Products 2.9 11.8 18.0 13.3
4. Exports of Goods and Services 21.0 (4.2) 8.9 (1.4)
a. Export of Goods 24.7 (6.0) 10.3 (2.2)
b. Export of Services 6.5 4.0 3.5 1.7
5. Less: Imports of Goods and Non-Factor Services 22.5 0.2 5.3 4.4
a. Import of Goods 23.4 0.4 (18.3) 3.7
b. Import of Services 18.9 (0.7) 15.9 7.1
Gross Domestic Product 7.6 3.9 6.6 7.4
Gross National Income 8.2 3.2 5.8 7.3
Source: National Statistical Coordination Board (NSCB) National Accounts of the Philippines
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IBON Economic and Political Brieng 15 January 2014 5
The economic growth is reected in the growing corporate prots and personal wealth of a few. The total net
income of the countrys Top 1000 corporations almost doubled from Php599 billion in 2006 to Php1.08 trillion
in 2012 amid the growing poverty and unemployment over that time. The Php212.8 billion increase in their
net income in 2012 was 24.5% growth from the year before a rate that was three times faster than the
growth in nominal GDP. (See Table 3) The highest growth in net income was posted by information and
communication (115.5%), real estate (51.6% change from the year before) and construction (56.4%); in terms
of gross revenues though real estate and construction companies had the highest growth rates at 36.6% and
42.2%, respectively.
The cumulative net worth of the 40 richest Filipinos from the Sy, Tan, Razon, Gokongwei, Ayala,
Aboitiz,Consunji, Ty, Cojuangco, Zobel, Yuchengco, Lopez, Araneta and other families meanwhile grew
almost four-fold from US$16.4 billion in 2009 to US$64.2 billion in 2013. (See Table 3) These are also the
families who own and control the handful of conglomerates that cut across the major sectors of the economy
and are the dominant players in Philippine business. The US$16.8 billion increase in the net worth of 40
Filipinos in 2013 will likely be equivalent to over 70% of the incremental increase in nominal GDP for the year.
Growing inequitably
The growth however has been inequitable with conditions even worsening for the poor majority. Recent
economic growth has been useful for bolstering hype about progress, but those who need improvements in their
conditions the most are apparently gaining the least. The headline aggregate gures have been used to downplay
or even conceal the economys distortions and deep structural problems. There are well-founded criticisms that
the supposed economic gains are at the expense of national economic development and the welfare of most
Filipinos.
Table 3. Net Income of PSE-Listed Firms and Top 1,000 Firms in the Philippines and Net Worth of 40Richest Filipinos, 2009-2013 (net income in billion Php; net worth in billion US$)
Indicator 2009 2010 2011 2012 2013
Net income of PSE-listed rms (billion Php) 360.6 438.1 430.0 501.3 275.5
Net income of Top 1,000 rms (billion Php) 756.0 804.1 868.1 1,080.9 nda
Net worth of 40 richest Filipinos (billion US$) 16.4 27.8 34.0 47.4 64.2
PSE - Philippine Stock Exchangenda - no data availablea - data for January-June only
Sources:Philippine Stock Exchange website (www.pse.com.ph), Business World Top 1000 Corporations in the Philippines and Forbes website (www.forbes.com)
Table 2. Total Net Foreign Direct Investments and Net Portfolio Investments,
2010-2012 and 2012-2013 January-October (in million US$)
Indicator 2010 2011 20122012
Jan-Oct
2013
Jan-Oct
Total Net Foreign Direct Investments 1,298.0 1,852.0 2,033.0 2,485.0 3,361.5
Total Net Portfolio Investments 4,610.4 4,077.6 3,911.3 2,689.2 3,659.8
Source: Bangko Sentral ng Pilipinas (BSP)
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There is a severe disconnect between economic growth and foreign investment, on one hand, and job generation
on the other. While the latest data for 2013 showed GDP growing by 7.4%, FDI inows by 35.3% and FDI
approvals by 114%, employment in turn only increased by 317,000 or 0.8% in 2013 from the year before. (See
Table 4)
Job generation has been falling steeply in each of the last three years of the Aquino administration with 1.2
million jobs generated in 2011, down to 408,000 in 2012 and falling further to the 317,000 in 2013 accordingto the Labor Force Survey (LFS) of the National Statistics Ofce (NSO). Job generation in 2013 is the lowest
since 2000 during the Estrada administration. It is also less than half the annual average of 640,000 jobs created
over the long 37-year period 1976-2013 which spanned many severe external shocks and domestic economic
and political turmoil.
The number of unemployed Filipinos increased by 87,000 in 2013 to reach an all-time high of 4.5 million
Filipinos, using IBON estimates correcting for government underestimation; the conclusion is unchanged even
using the lower ofcial estimate of the unemployed at 2.9 million. (See Table 4) The 7.3 million underemployed
is a slight decrease from the year before but it still means that there were 11.8 million Filipinos either jobless
or looking for additional work in 2013. The Aquino administration is seeing the most unemployed and
underemployed Filipinos in the countrys history.
The real unemployment rate was 10.6% in 2013, again correcting for the change in unemployment denition
in 2005 that reduces the ofcial count, while the LFS ofcially reports 7.1 percent. By either measure though
the unemployment rate has been increasing since 2011, is the worst unemployment rate in Asia, and among the
worst in the world. Some of the latest ofcially reported quarterly gures from the region for instance are 0.7%
Table 4. Labor Force Population, 2010-2013 (levels in '000; rate in%)
IndicatorOfcially Reported IBON Estimates a
2010 2011 2012 2013 p 2010 2011 2012 2013
Population (in thousands)
Total 15 years old and over 60,717 61,882 62,985 63,847 60,717 61,882 62,985 63,847
Labor Force 38,893 40,006 40,426 40,813 40,440 41,555 42,003 42,412
Employed 36,035 37,192 37,600 37,917 36,035 37,192 37,600 37,917
Underemployed 6,762 7,163 7,514 7,325 6,762 7,163 7,514 7,325
Unemployed 2,859 2,814 2,826 2,896 4,385 4,374 4,404 4,491
Not in the Labor Force 21,824 21,876 22,559 23,034 20,277 20,326 20,982 21,435
Rates (in %)
Participation Rate 64.1 64.6 64.2 63.9 66.6 67.2 66.7 66.4Employment Rate 92.7 93.0 93.0 92.9 89.1 89.5 89.5 89.4
Underemployment Rate 18.8 19.3 20.0 19.3 18.8 19.3 20.0 19.3
Unemployment Rate 7.4 7.0 7.0 7.1 10.8 10.5 10.5 10.6
p- preliminarya- IBON computes estimates on the labor force according to the old LFS unemployment denition for the purposes of comparison. This
is done by computing substitute labor force participation rates (LFPR) where changes in ofcial reported annual average LFPR are
applied to the LFPR in 2007 that was still computed using the old labor force (and correspondingly unemployment) denition.
Source:National Statistics Ofce (NSO) Labor Force Survey
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IBON Economic and Political Brieng 15 January 2014 7
(Thailand), 2.1% (Singapore), 2.8% (Korea), 3.1% (Malaysia), 3.6% (Vietnam), 4.0% (China), 4.2% (Taiwan),
and 6.3% (Indonesia).
Unemployment has a particularly youthful character with the LFS noting that almost half (48.5%) of
unemployed in 2013 are between 15-24 years old. The difculty of employment even among the educated
further highlights the poor jobs prospects in the country. One out of ve (20.3%) of the unemployed have a
college degree, two out of ve (39.1%) have graduated high school or post-secondary school, and almost one
out of ve (15.5%) have at least additional post-secondary/college education. This implies that well over seven
out of 10 (74.9%) unemployed cannot nd jobs despite having a reasonably high educational attainment.
The release of the latest poverty statistics in 2013 further conrmed the economys duality. The latest ofcial
estimates of poverty are 25.2% population poverty incidence with 23.7 million poor Filipinos and 19.7% family
poverty incidence with 4.2 million poor families in 2012. (See Table 5)
The economy grew by an average of 5% annually between 2006 and 2012 and expanded by 33.8% in real terms
over the entire period. Real GDP per capita in turn increased by 21.5% from Php54,226 in 2006 to Php65,904
in 2012. And yet despite these, the ofcial number of poor families increased by 10.6% or 405,638 families
between 2006 and 2012; the number of poor Filipinos increased by 4.9% or 1.1 million over the same period.
The poverty situation worsened despite economic growth and also even after Php76.1 billion was spent on
Pantawid Pamilyang Pilipino Program (4Ps) conditional cash transfers (CCT) between 2006 and 2012.
Table 5. Poverty Incidence and Magnitude of Poor, 1985-2012 (incidence in %; magnitude in million)
Indicator 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012
Poverty incidence (in %)
Family
1992 Methodology 44.2 40.2 39.9 35.5 31.8 33.7
2003 Methodology 29.2 27.5 24.4 26.9 26.3
2011 Methodology (CPI, 2000=100) 28.3 20.0 21.1 20.9
2011 Methodology (CPI, 2006=100) 29.7 21.0 20.5 19.7
Population
1992 Methodology 49.2 45.4 45.2 40.6 36.9 39.5
2003 Methodology 34.1 33.0 30.0 32.9 32.6
2011 Methodology (CPI, 2000=100) 33.1 24.9 26.4 26.5
2011 Methodology (CPI, 2006=100) 34.4 26.6 26.3 25.2
Magnitude of poor (in million)
Family
1992 Methodology 4.4 4.2 4.8 4.5 4.5 5.1
2003 Methodology 4.1 4.0 4.7 4.9
2011 Methodology (CPI, 2000=100) 3.3 3.7 3.9
2011 Methodology (CPI, 2006=100) 3.6 3.8 4.0 4.2
Population
1992 Methodology 26.7 25.4 28.6 27.4 26.8 30.9
2003 Methodology 25.5 23.8 27.6 28.5
2011 Methodology (CPI, 2000=100) 19.8 22.2 23.1
2011 Methodology (CPI, 2006=100) 21.7 22.6 23.3 23.7
Source: National Statistical Coordination Board (NSCB)
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Ofcial poverty estimates use an extremely low poverty line of Php52 per person per day on average
nationwide. This is ofcially estimated as sufcient to meet all a persons basic food and non-food needs. IBON
on the other hand approximates around 56 million Filipinos or 60% of the population struggling to survive and
meet all their basic needs on some Php100 or much less daily; another 10 million have around Php125 daily.
Philippine poverty estimates started to be generated in 1987 and the methodology of counting the poor has
undergone three major changes since then in 1992, 2003 and 2010/11. These renements were said to be made
so as not to overestimate poverty, to be able to come up with provincial poverty statistics, and to improve
comparability across space and time. Each renement has consistently had the effect of reducing the numberof those counted as poor. The change in 1992 reduced the number counted as poor by 9.6 million, the change
in 2003 by 4.0 million, and the change in 2010 by 5.3 million more or at least some 19.0 million in total
removed from ofcial poverty estimates.
In any case and according to whatever methodology is used, the trend over the last decade including in the
last three years of the Aquino administration is for poverty incidence to be statistically unchanged while the
absolute number of poor is steadily increasing.
The inadequacy of ofcial national, regional and provincial poverty lines is also demonstrated by how
government estimates declare negligible poverty in the National Capital Region (NCR) ofcial estimates are
of only 2.6% poverty incidence among families (76,530 poor families) and 3.9% among population (460,831
poor people) in NCR. This is because a poverty threshold of just Php58 was used. Unemployment and povertyhas generally increased more outside NCR and its few neighboring provinces, adding to already serious
socioeconomic troubles in the countrys backward regions. The devastation from typhoons and the earthquake
in the Visayas could only have pushed more families into deeper poverty in 2013.
Narrow and shallow
The growth is exclusionary because it has been narrow and shallow. The main sources of growth are real
estate and construction which account for a relatively small percentage of employment and which are weakly
integrated to the rest of the economy. They have a limited multiplier effect whether sectorally, geographically or
across time. Their development impact is also very limited.
Economic growth in 2013 has been driven mainly by the real estate and construction boom with some spill-
over effects in a few related manufacturing subsectors. Manufacturing sectors associated with the boom include
chemicals and chemical products, basic steel, non-metallic mineral products, and furniture and xtures. Growth
in the chemicals subsector has been primarily due to demand for chemical-based products such as paint, wood
and cement additives, insulation and other similar items used in building homes, ofces and infrastructure.
Similarly, the basic steel subsector includes steel products used as structural materials in construction while the
non-metallic mineral products include concrete, cement, plaster, glass and other like materials.
The centrality of the boom to the Philippine growth story is exemplied in the growth gures for the rst three
quarters of 2013. (See Table 1) The fastest growing sectors were real estate, renting and business activities (9.3%
growth), construction (16.3%), manufacturing (9.8%), and nancial intermediation (13.3%). Nearly four-fths of
manufacturing sector growth in gross value-added however came from just the four real estate- and construction-
related subsectors: chemical and chemical products (growing 84.8%), basic metal industries (64.0%), furniture
and xtures (25.0%) and non-metallic mineral products (14.0%). This rapid growth offset negative growth orcontractions in 13 other manufacturing subsectors. These resulted in the biggest percentage point contributions to
growth in the rst nine months of 2013 being due to the real estate and construction boom.
There was much slower growth in agriculture, sheries and forestry (1.1% growth), electricity, gas and water
(4.4%), wholesale and retail trade (6.0%), transport, storage and communication (5.3%), public administration
and defense (5.1%), and other services (5.7%); the mining and quarrying sector actually contracted (negative
2.0%). (See Table 1)
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IBON Economic and Political Brieng 15 January 2014 9
Those leading growth sectors constitute a signicant share of the economy which is also why their performance
has such an impact on the headline growth gures. According to NSCB data the real estate, renting and other
business activities which also includes business process outsourcing (BPO) accounted for 12.0% of GDP
in the rst three quarters of 2013, construction for 5.3%, and the four real estate- and construction-related
manufacturing subsectors for 4.4%, or a total of 21.7 percent.
The benets from rapid growth in these sectors are however limited by how they cumulatively account for just
some 8.0% of total employment. The real estate subsector only employs 172,000 which is just 0.5% of total
employment; construction employs much more at 2.4 million accounting for 6.2% of total employment. (SeeTable 6) Estimated using establishment data from the NSO rather than the household-based LFS, employment
in the relevant manufacturing subsectors sums to perhaps around 1.0-1.3% of total employment at best, for a
total of 8.0 percent for all the sectors at hand.
Table 6. Employed Persons By Industry Group, 2012-2013 (in '000)
Industry Group 2012 2013 p
Total Employed Persons 37,600 37,917
Agriculture 12,093 11,759
Agriculture, Hunting and Forestry 10,660 10,361
Fishing 1,432 1,398
Industry 5,743 5,917
Mining and Quarrying 250 251
Manufacturing 3,112 3,150
Electricity, Gas, Steam and Air Conditioning Supply 89 94
Water Supply; Sewerage, Waste Management and Remediation Activities 59 60
Construction 2,232 2,363
Services 19,765 20,241
Wholesale and Retail Trade; Repair of Motor Vehicles and Motorcycles 6,864 7,073
Transportation and Storage 2,617 2,721
Accommodation and Food Service Activities 1,571 1,598
Information and Communication 338 341Financial and Insurance Activities 437 447
Real Estate Activities 170 172
Professional, Scientic and Technical Activities 189 194
Administrative and Support Service Activities 937 1,013
Public Administration and Defense; Compulsory Social Security 1,958 1,950
Education 1,200 1,221
Human Health and Social Work Activities 438 464
Arts, Entertainment and Recreation 328 344
Other Service Activities 2,149 2,179
Activities of Households as Employers; Undifferentiated Goods and Services Producing
Activities of Households for Own Use 566 521
Activities of Extraterritorial Organizations and Bodies 2 3
p- preliminary
Source: National Statistics Ofce (NSO) Labor Force Survey
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10 IBON Economic and Political Brieng 15 January 2014
Inclusiveness is also affected by how the job generation capacity of the booming sectors is apparently quite
weak and well below all of their respective rates of growth. (See Table 6) Employment in real estate only
increased by 2,000 (or 1.2% growth, which is probably statistically insignicant), in construction by 131,000
(5.9% growth) and in manufacturing as a whole by 38,000 (or 1.2%).
These sectors are moreover heavily concentrated in the NCR, Central Luzon and Calabarzon regions. The latest
available regional GDP data from the NSCB is for 2012 and shows that a huge 73.4% of the value of real estate,
renting and business activities in GDP and 48.3% of construction are found in just these three regions. The NCR
alone accounts for 53.5% of real estate, renting and business activities and 23.1% of construction.
The weak linkages of the growth sectors are very relevant. Among the economys major sectors, according
to the latest 2000 input-output accounts for the Philippines of the NSCB, the real estate and ownership of
dwellings sector has the lowest backward linkage and third lowest forward linkage while construction has the
second lowest forward linkage (and the third highest backward linkage). The backward linkage measures the
relative importance of the sector as a purchaser of raw material inputs from the system of production sectors
while the forward linkage indicates its importance as a supplier of raw materials.
These explain why the increase in the outputs of these sectors as has been happening in recent years and in
2013 has had a low degree of stimulative and cyclical effects on the entire system of industries. The real estate
sector is not much of a purchaser or supplier to the production process in the country so its expansion has the least
inducement to productive activities, whether in terms of inducing more raw material inputs or itself providinginputs to other industries outputs. Construction is similarly also not much of a supplier to the production process,
although as a purchaser it has stimulated activities in the short-term where it has obtained inputs.
The manufacturing sector as a whole has the highest backward and forward linkages and corresponding effects.
Although a more detailed disaggregation of its subsectors is not yet available, it can be presumed that the local
benets from the fastest-growing chemical and basic steel subsectors are also limited because these are both
very import-intensive.
There is likewise no disaggregation for the BPO sector but refuting its contributions to economic development
is straightforward. The sector employs some 426,401 (according to Philippine Economic Zone Authority
or PEZA data) to 777,000 (according to Information Technology and Business Process Association of the
Philippines or IBPAP) but it is by nature a low value-added operation that does not contribute to the domesticeconomy in terms of inducing production, developing local productive capacity, or increasing its capital stock.
By mainly generating salaries for its workers it is merely virtual cheap labor export similar to overseas work.
Recent growth has also been exclusionary because it has not translated into higher wages for the working
classes whose real earnings have been falling as a whole. Wages and salaries adjusted for ination continued
to stagnate or fall in 2013 especially upon policy statements by the president and economic planning secretary
against wage increases.
The NCR has the highest mandated minimum
wages in the country and stood at Php466 as of
November 2013 or Php10 higher than the year
before. (See Table 7) However an estimatedfamily living wage (FLW) of Php1,054 means
that the minimum wage falls short by Php588
and is not even half (44.2%) of the FLW. The
wage gap has remained wide under the Aquino
administration and the shortfall is even larger than
a decade ago in 2003 when the minimum wage
was exactly half (50%) of the FLW.
Table 7. Nominal Wage, Estimated Family
Living Wage and Wage Gap,
November 2012 and 2013 (in Php)
Indicator Nov 2012 Nov 2013
Nominal Wage 456 466
Estimated Family Living Wage 1,034 1,054
Wage Gap 578 588Sources: National Wages and Productivity Commission (NWPC)
and National Statistics Ofce (NSO)
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IBON Economic and Political Brieng 15 January 2014 11
223.50
466.00
302.44362.36
-
100.00
200.00
300.00
400.00
500.00
Jan-00Jan-01Jan-02Jan-03Jan-04Jan-05Jan-06Jan-07Jan-08Jan-09Jan-10Jan-11Jan-12Jan-13
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Nominal
Wage
Real
Wage
Sources:National Wages and Productivity Commission (NWPC) and National StatisticsOffice (NSO)
Periodic hikes in the mandated minimum wage give the impression of rising wages. The real value of the wage
however has actually been at for the past decade and the Aquino administration continues a trend that started
during Pres. Arroyos term. The real value of the minimum wage increased slightly over the long period from
1986 to 2002 but it has been virtually at since then. (See Chart 1)
If the mandated minimum wage has remained at, the actual wage received has been falling. The average daily
basic pay nationwide of wage and salary workers in sectors accounting for 79% of employment agriculture,
manufacturing, trade, construction, nance, mining and quarrying, electricity, gas and water, and other
services was unchanged or even dropping between 2010 and April 2013. (See Tables 6 and 8) The direction
of declining real wages in the important productive sectors of agriculture and industry in particular does not
indicate that earnings prospects for workers in these sectors will improve as further growth takes place.
Artifcial and unsustainable
Apart from having limited development impact, the recent growth is articial and unsustainable. The real estate
and construction boom is debt-driven and underpinned by record low interest rates, which have made nancing
for production and for consumption articially cheap. This in turn is articially increasing economic activity
and demand. But this situation of cheap nancing is only momentary.
Interest rates are at an all-time low. This is a result of the global nancial and economic crisis that erupted in2007/08 and which keeps the world economy in a protracted depression. Global demand collapsed and the
advanced capitalist countries responded with unprecedented loose monetary policy to lower interest rates
in an effort to stimulate sluggish real economies. The policy of quantitative easing (QE) was implemented
particularly in the US, Europe and Japan and has injected at least US$3.5 trillion into banks, nancial
institutions and the global economy since 2008. If this amount were an economy, it would be equivalent to
the fourth largest in the world after the US, China and Japan and larger than Germany, France and the United
Kingdom.
Chart 1. NCR Daily Non-Agricultural Minimum Wage,
Jan 2000-Dec 2013 (in Php; 2006=100)
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12 IBON Economic and Political Brieng 15 January 2014
Table 8. Average Daily Basic Pay, 2012 and April 2013 (in Php)
Industry Group
At current prices At 2006 prices
20122013
April
Change,
2012-
Apr
2013
20122013
April
Change,
2012-
Apr
2013
All Industries 333.82 346.27 12.45 256.59 260.75 4.16
Agricultural 166.74 167.76 1.02 128.16 126.33 (1.84)Agriculture, Hunting and Forestry 165.27 167.53 2.26 127.03 126.15 (0.88)
Fishing 191.68 172.20 (19.48) 147.33 129.67 (17.66)
Industry 328.46 326.83 (1.63) 252.47 246.11 (6.36)
Mining and Quarrying 317.21 259.94 (57.27) 243.82 195.74 (48.08)
Manufacturing 330.03 333.31 3.28 253.67 250.99 (2.69)
Electricity, Gas and Water Supply a 553.79 465.36 (88.43) 425.66 350.42 (75.24)
Construction 310.65 315.35 4.70 238.78 237.46 (1.32)
Services 383.48 399.96 16.48 294.76 301.17 6.42
Wholesale and Retail Trade, Repair of Motor Vehicles,Motorcycles and Personal and Household Goods b
282.05 291.48 9.43 216.79 219.49 2.69
Hotels and Restaurants c 280.86 303.59 22.73 215.88 228.61 12.73
Transport, Storage and Communications d 449.88 459.25 9.37 345.80 345.82 0.03
Financial Intermediation e 579.26 578.41 (0.85) 445.24 435.55 (9.69)
Real Estate, Renting and Business Activitiesf 522.50 539.53 17.03 401.62 406.28 4.66
Public Administration and Defense, Compulsory SocialSecurity
533.66 541.86 8.20 410.19 408.03 (2.17)
Education 677.62 704.13 26.51 520.85 530.22 9.37
Health and Social Work g 484.73 530.51 45.78 372.58 399.48 26.90
Other Community, Social and Personal Activitiesh 275.91 271.25 (4.66) 212.08 204.25 (7.82)
Private Households with Employe Persons i 114.41 118.57 4.16 87.94 89.28 1.34
Extra-Territorial Organizations and Bodiesj 1,185.61 404.95 (780.66) 911.31 304.93 (606.37)
Notes:1. Excludes those paid on commission basis, honorarium and boundary as in the case of jeepney/bus/tricycle drivers.2. Industry grouping is in accordance with the 1994 Philippine Standard Industria l Classication (PSIC) for 2001-2011 and 2009 PSIC for
2012 and 2013.a- Electricity, Gas and Water Supply = "Electricity, Gas, Steam and Air Conditioning Supply" and "Water Supply; Sewerage, Waste
Management and Remediation Activities"b- Wholesale and Retail Trade, Repair of Motor Vehicles, Motorcycles and Personal and Household Goods = "Wholesale and Retail
Trade; Repair of Motor Vehicles and Motorcycles"c- Hotels and Restaurants = "Accommodation and Food Service Activities"d- Transport, Storage and Communications = "Transportation and Storage" and "Information and Communication"e- Financial Intermediation = "Financial and Insurance Activities"f - Real Estate, Renting and Business Activities = "Real Estate Activities", "Professional, Scientic and Technical Activities" and
"Administrative and Support Service Activities"g- Health and Social Work = "Human Health and Social Work Activities"h- Other Community, Social and Personal Activities = "Arts, Entertainment and Recreation" and "Other Service Activites"i - Private Households with Employed Persons = "Activities of Households as Employers; Undifferentiated Goods and Services-
producing Activities of Households for Own Use"j- Extra-Territorial Organizations and Bodies = "Activities of Extraterritorial Organizations and Bodies"
3. Annual data are averages of the four survey rounds of the Labor Force Survey.
Sources:National Statistics Ofce (NSO) Labor Force Survey as cited in Bureau of Labor and Employment Statistics (BLES) 2013 Year-book of Labor Statistics and December 2013 Current Labor Statistics
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IBON Economic and Political Brieng 15 January 2014 13
The QE stimulus efforts combined with the lack of effective demand caused global interest rates to fall
drastically. The key 3-month London Interbank Offer Rate (LIBOR) in US dollars for instance has fallen
steeply from the annual average of 5.2% over the period 1986-2006 and 5.3% in 2007 to just 0.27% in 2013;
this is far below the peak of 9.3% in 1989. Bangko Sentral ng Pilipinas (BSP) data show domestic interest rates
correspondingly dropping to all-time recorded lows. (See Chart 2) The bank average lending rate (8.7% in
2007), reverse repo rate or RRP (6.8%) and interbank call loan rate (6.9%) have fallen to 5.8%, 3.5% and 2.4%
respectively in 2013. These interest rates are far below their respective historical annual average rates of 12.9%,
10.1% and 10.2% over the period 1986-2013.
The unprecedented low interest rates drove the real estate and construction boom in two inter-related ways: on
the supply side, the low-cost nancing facilitated investment and production by real estate and construction
rms while, on the demand side, property became cheaper for buyers or leasers. These supply and demand
tendencies also mutually-reinforced each other in a virtuous cycle. The demand surge for real estate is
reported to be mainly coming from overseas Filipinos and BPO rms. Demand for real estate has also been
boosted further by how developers have reportedly innovated with very loose payment schemes for potential
homeowners.
The surge in construction in 2012 and 2013 has been driven, aside from the private sector component, by
increased government spending on national roads, bridges, ood control projects and other infrastructure.
Public construction accounts for about a quarter of gross value in construction and grew 32.4% in 2012 and
31.8% in the rst nine months of 2013 compared to private construction which grew slower at 13.7% and
11.5% over the same periods.
-
5.0
10.0
15.0
20.0
25.0
30.0
1986 1990 1995 2000 2005 2010 Nov
2013
Chart 2. Selected Domestic Interest Rates,
1986-November 2013
(in %)
Bank Average
Lending Rates
RRP Rates
(Overnight)
Interbank Call
Loan Rates
Year
RRP - reverse repurchase rate
Source:Bangko Sentral ng Pilipinas (BSP)
Chart 2. Selected Domestic Interest Rates,
1986-November 2013
(in%)
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14 IBON Economic and Political Brieng 15 January 2014
The expanding debt in the economy due to low interest rates is reected in how Philippine bank loans have been
rising rapidly since 2008 and through 2013. (See Chart 3) BSP data shows that total bank loans outstanding
grew by an annual average of 0.9% in 2002, of 6.0% in the period 2003-2007, of 10.6% in 2008-2012 and
accelerating further to 15.0% in the rst nine months of 2013 to reach Php3,922.5 billion in September 2013.
Growth in the total universal and commercial bank (UKB) loans, which is the biggest category of bank loans,
increased even more rapidly: from 2.4% in 2002, an annual average of 5.4% 2003-2007, of 13.5% in 2008-2012
and then by 13.8% in the rst 11 months of 2013 to reach Php3,856.3 billion in November.
The most dramatic increases in loan growth has been to real estate which accounts for the biggest share of loansoutstanding. The insignicant 0.2% growth in 2002 increased to an annual average of 1.5% in the period 2003-
2007 and then expanded exponentially to an annual average of 21.9% in 2008-2012, and growing still by 21.8%
in the rst 11 months of 2013 to Php665 billion in November. The rate of growth of debt has far outpaced
economic growth, government revenues and spending.
Consumption by more afuent consumers has also likely been boosted by negative real interest rates. The BSP
reports that domestic savings deposit rates dropped from 2.2% in 2007 to just 0.9% in 2013 which is much
lower than the ination rate meaning that money unspent and kept as saving are actually losing value due
to ination. Although such credit/debt-driven consumption is probably restricted to the minority middle- and
higher-income slice of the population with access to the formal nancial system. The majority of the population
of up to 70% with low or otherwise uncertain incomes are not likely to be involved despite increasingly loose
credit standards.
This low interest rate- and debt-driven growth in real estate and construction is however only a short-term
stimulus. Demand for new real property and infrastructure is cyclical because these are relatively big ticket
items for both consumers and producers. It is not likely that demand by overseas Filipinos or by BPOs will
continue to increase at the rates in past years nor that there will be new sources of property demand especially
once interest rates start to rise. Property buying in any case is concentrated in the small part of the population,
the middle- and high-income classes, with sufcient disposable income for this.
-
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Chart 3. Philippine Loans, 1986-2013* (in million Php)
Total Bank Loans Total UKB Loans Outstanding Of Which for Production Of Which to Real Estate
Year
* - 2013 data as of November, except for Total Bank Loans that are as of September
UKB - Universal and Commercial Bank
Source:Bangko Sentral ng Pilipinas (BSP)
Chart 3. Philippine Loans, 1986-2013* (in million)
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IBON Economic and Political Brieng 15 January 2014 15
The contribution to long-term production and productivity of the booming real estate and construction sectors is
weak not only because of their generally weak backward and forward linkages but also because of the nature of
their activities. Their growth has not contributed to developing the two mutually necessary elements for growth
to be sustained over the medium- to long-term: a wide base of stable domestic demand (such as through wide-
scale job generation) or the production capacity to meet this demand (such as developed agriculture or Filipino
industry).
The Philippines is strictly speaking not yet a bubble economy where this appears conclusively only whenit actually pops. Yet the economy is certainly heading in that direction in how record low interest rates and
cheap credit are articially driving consumption of real estate, autos and consumer goods as well as fuelling
enterprises particularly in real estate and construction. Non-performing loans still remain very low, but this
is understandable given low interest rates and do not necessarily indicate solid and sustainable repayment
capacity. The main concern is what will happen when interest rates eventually begin to rise and when more
consumer and producer debt becomes unpaid.
The Aquino administration and its economic policy choices and directions are generally supported by
international organizations and agencies that represent the interests of foreign transnational capital, and by
domestic big business. These are reected in the favorable assessments by international organizations and
agencies. Yet while the Philippines is currently popular in this way, it is useful to consider that the so-called
BRICS (i.e. Brazil, Russia, India, China and South Africa) were the same before their unsound fundamentals
reasserted themselves and started to limit the opportunities for foreign capital to prot.
Continued burdens
The economic hype has partially diverted from the increasing socioeconomic burdens on the people. Prices of
privatized and deregulated utilities, basic services and social security rose rapidly in 2013. Last year the effects
of privatization continued to be felt with expensive water and electricity rates. Although further increases in
rates were thwarted by public outcry, the absence of any real moves to reverse privatization, curb private sector
proteering, and build efcient public services could mean that these are only momentary.
Amid claims of attaining rice self-sufciency the price of rice has increased through 2013. According to the
Bureau of Agricultural Statistics (BAS) the price of regular milled rice in NCR increased from Php30 per
kilo at the end of 2012 to Php36 in December 2013, with prices in other regions increasing from a range of
Php30-36 to Php32-40 per kilo over the same period. The prices of ampalaya, cabbage, carrots, eggplant,
tomatoes, potatoes, other vegetables and cooking oil similarly also increased by anywhere from some 10-35%
in December from the year before.
Last year also saw more or bigger hikes, less or smaller rollbacks, and hence generally rising prices of
petroleum products. The biggest increase was in the price of liqueed petroleum gas (LPG) whose price rose
substantially from a range of Php670-814 per 11-kilogram tank in 2012 to Php842-965 in 2013 despite fewer
hikes and more rollbacks. Gasoline prices were hiked 26 times and rolled back 14 times, raising the price
from a range of Php39.50-42.45 per liter to Php49.15-55.30 in 2013. The price of diesel, which the inuential
militant transport sector is particularly sensitive to, fell slightly from a range of Php47.60-53.95 to Php41.35-
45.75.
The year ended with Meralco, the countrys largest power distributor and biggest corporation by gross revenue,
announcing in December the highest increase in billing in the countrys history. The Energy Regulatory
Commission (ERC)-approved hike of Php4.15-per-kilowatt-hour increase to be implemented in three monthly
tranches was reportedly to cover for higher generation charges due to momentarily tighter electricity supply
due to scheduled maintenance on the Malampaya natural gas platform, the single biggest source of energy in
Luzon, and high prices paid for power sourced from the Wholesale Electricity Spot Market (WESM).
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16 IBON Economic and Political Brieng 15 January 2014
The rate hike was immediately criticized as baseless and the result of collusion by the handful of power rms,
of prominent oligarchs and business families, monopolizing the industry. The controversy has drawn attention
to the impact of the Electricity Power Industry Reform Act (EPIRA) and the state policy of power privatization
on electricity costs, consumer welfare, industrial development and the overall economy and by extension
to the underlying contradiction between private prots and the public welfare. The Supreme Court issued a
temporary restraining order and scheduled oral arguments in the latter part of January.
The Aquino government also revived moves to implement the long-stalled scheme to increase Metro RailTransit (MRT) and Light Rail Transit (LRT) fares as part of its privatization plans. Amid public opposition, the
government is geared to hike the train systems fares in 2014. Metro Manila water consumers meanwhile are
still awaiting lower water rates after regulators of the Metropolitan Waterworks and Sewerage System (MWSS)
denied the water rms proposal for rates increase and instead adjusted these downwards. There is even a
possibility that the lower rates could be reversed with the ongoing arbitration. Last year, the two private water
concessionaires, Manila Water Corp and Maynilad, led separate notices of dispute before the International
Chamber of Commerces International Court of Arbitration.
Failed policies
Growth is becoming more exclusionary with every year of the Aquino administration. This is the result of the
market-based elite-biased socioeconomic policies implemented by consecutive administrations for decades and
continued by the current Aquino government. Implemented more aggressively since the 1980s, these are biased
against domestic production and make prices of basic goods and services unaffordable. There is a one-sided
emphasis on creating protable opportunities for foreign investors and domestic oligarchs even at the expense
of the national economy, incomes of workers, livelihoods of farmers, and opportunities for the poor majority.
The country is in essentially the same situation that had actually already happened under previous
administrations. The economy for instance grew above its long-term average annual rate at various points
during the Arroyo (in 2003-2008), Estrada (in 2000), Ramos (in 1994-1997) and even Corazon Aquino (in
1987-1989) administrations. There were also other supposedly positive economic indicators but also persistent
joblessness and poverty. Then as now the government appealed for patience from the public for benets that
never trickled down.
The boom is happening amid continued agricultural and industrial backwardness and unsound economic
fundamentals. The shares of manufacturing and agriculture in the economy have been falling steadily for at
least four decades. (See Chart 4) Agricultural production is low and chronically volatile unduly affected
by the weather while the largest part of the manufacturing sector has low value-added and is even foreign-
dominated. As it is, for instance, some two-thirds (65%) of gross revenue of the manufacturing rms in the top
1,000 corporations of the country is accounted for by transnational corporations.
More than having taken active measures to bring about growth, the Aquino administration has beneted from
a favorable conuence of factors: coming from political crises during the previous Arroyo government, steady
hype about good governance and a popular president, global liquidity with unprecedented loose monetary
policy in developed countries, improving domestic macroeconomic indicators, and business enthusiasm in some
sectors of the economy.
Among these the biggest contribution of the administration has been to avoid political controversy of the scale
during the previous Arroyo administration and, in doing so, contributed to a sense of stability that stimulated
Keynesian animal spirits and business condence. However, this is a contribution mainly by omission while
the more basic policy choices and conditions for national development and social progress remain absent. But
that conuence of factors is eeting and the economy remains vulnerable especially with the recent growth
period not creating the sound fundamentals for sustained and long-term growth.
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IBON Economic and Political Brieng 15 January 2014 17
-
10
20
30
40
50
60
19461950 1960 1970 1980 1990 2000 2010 -13
* - 2013 data based on 1st-3rd quarters only
Source: National Statistical Coordination Board (NSCB)National Accounts of the Philippines
Continuing failure
The Aquino governments policy directions in its nal three years are unreformed and compromise national
economic development.The administrations macroeconomic, scal, nancial, trade, investment and sectoral
policies are identical to those under the previous Arroyo government i.e. liberalization, privatization,
deregulation, scal tightening, ination-targeting, higher and more regressive taxes, encouraging hot money
inows, bias for foreign investors over small domestic capital, wage repression and so on. The administration
will announce an updated economic development plan and industrial roadmaps at the start of 2014. But thereare strong reasons to believe that these will not sustain growth, even in the short-term, nor result in long-term
socioeconomic development.
The updated Philippine Development Plan (PDP) acknowledges that growth has not reduced poverty. It is called
a roadmap to inclusivity, and presents target benets of job generation and poverty reduction in a more rened,
elaborated and systematic manner. The spatial and sectoral dimensions of exclusion and poverty in particular
are raised as requiring due attention.
The supposedly updated plan however still relies on the same failed policy thrusts of the past and their one-
sided emphasis on creating the conditions for prot-making and business while avoiding the more far-reaching
and developmental-inducing measures of income, wealth and asset redistribution. Although such redistribution
is given lip service, they are more frequently decried as disruptive to business and to growth and hence setaside. Yet these are necessary measures to create the conditions for the poor majority to be productive and
benet from the national economy.
The updated plans bias for foreign investors and local big business is evident in the declared strategy of
reducing regulatory burdens and policy consistency echoing capitals demands for removing regulations on
foreign investment, reducing state intervention in the public interest even in public utilities and social services,
and ensuring legal protections for prot and prot-seeking.
Chart 4. Gross Domestic Product By Industry Share, 1946-2013*
(at constant 2000 prices; in %)
IndustryShare(in%
)
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18 IBON Economic and Political Brieng 15 January 2014
The situation is the same with the proposed industrial roadmaps being packaged as a Comprehensive National
Industrial Strategy. These acknowledge the countrys industrial backwardness and present target benets of
industrial development in a more rened, elaborated and systematic manner. However they merely repackage
long-standing demands by foreign transnational corporations and their junior partners to expand their
opportunities for prot-making.
The roadmaps were generated through a perverse bottom-up process of starting from what individual
corporations and industries, including foreign businesses, desired to expand their production and increase theirprots. In particular they esh out the priority sectors of the economy that the Joint Foreign Chambers of the
Philippines (JFC) pushed as Seven Big Winners in 2009, again in 2010 and which in 2011 nally found its
way into the Aquino administrations original PDP 2011-2016. These are the [globally] competitive industries
and services of foreign tourism, cheap labor BPO, low value-added electronics for export, extractive mining,
export-oriented agribusiness and forestry, and foreign-dominated ship-building; only the seventh, so-called
creative industries, is absent.
Individual enterprises and to some degree even foreign investment can play an important role in national
development. But the more sensible approach is to start from and give greater priority to a strategic vision
of national industrial development. The roadmaps on the other hand start with the wrong notion that
national development can spontaneously emerge from individual prot-seeking which is a recycling of the
discredited invisible hand argument of neoliberalism and neoclassical economics. If implemented, they will
in effect amount to government support for foreign investors and their local partners rather than for national
development.
The updated PDP and industrial roadmaps will only reinforce the anti-development bias for foreign capital and
foreign markets. It is evident that foreign investment will operate to create the greatest prots for itself, with
only incidental benets for the domestic economy and the welfare of the people. Transnational Corporations
(TNCs) are intrinsically limited in their contributions to Philippine development by their overriding compulsion
for immediate and long-term prots. This results in the universal tendency to repress wages, to lower domestic
value-added or pay low prices for inputs because local segments of production are structured according
to global value chains, and to prevent the development of local science and technology and any Filipino
competitors to retain their monopolistic advantages.
Genuinely domestic or Filipino production in contrast means paying higher wages, steadily increasing the
use of local inputs and hires, improving local scientic and technological capacity, and reinvesting in local
enterprises. Industrial policy should be aimed at expanding Filipino production and increasing domestic value-
added over the long-term.
The leaders of the Senate and House of Representatives in December also declared their intent to push for
amendments to the economic provisions of the 1987 Constitution towards greater liberalization, effectively
removing the last and so far most intractable legal barriers to the prot-seeking operations of foreign investors
in the country. The president has publicly distanced himself from the charter change initiative although this has
been interpreted more as a calculated move to insulate him from controversy rather than actual resistance and
it is possible that Malacaang is reserving visible support until a minimum of political consensus is reached.
Averting development failure
Decades of free-market open-economy policies have burdened the Philippines and the majority of poor
Filipinos with an exclusionary, imbalanced and unstable pattern of growth. These have stied the development
of local agriculture and industry, caused record joblessness and increased poverty. Episodes of relatively rapid
growth including the current one are fundamentally unsustainable, unstable and dependent on eeting or
otherwise external sources of growth.
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IBON Economic and Political Brieng 15 January 2014 19
Continuing development failure can be averted. An inclusive, balanced and stable pattern of growth requires a
package of social and economic policies that interact and work together. Domestic demand needs to be boosted
through a more aggressive and decisive agrarian reform program and by real and substantial wage increases.
These will in addition immediately improve the welfare of the majority of Filipinos. Rural development in
particular remains hindered by a clunky agrarian reform program that does not give land to the peasantry nor
provide them with the means to make the land productive.
However increased domestic demand needs to stimulate domestic production for there to be a virtuous circle of
improved livelihoods, increased consumption, higher investment, better productivity, greater employment, and
improved wages and rural earnings.
Domestic production then needs to be expanded concurrently through greater and more responsible State
intervention, support and protection. Filipino rms and farms need government support in terms of nancing,
technology, training, marketing, tax breaks, procurement, infrastructure and protection against foreign
competition. Abuses and inefciency can be prevented by putting democratic controls in place.
Government economic policy needs to be biased for Filipino producers rather than, at present, for foreign-
dominated or -dependent economic activity in every major modern production sector of the economy. Filipino
producers need to be prioritized over foreign capital that merely locates in the Philippines to prot from the
countrys labor, natural resources and markets. The private sector and even foreign capital can continue to
operate but in ways that contribute to broad-based and sustainable national development, such as by the use of
performance requirements.
The greatest number of Filipinos needs to be given opportunities and a larger share of the national product in
the most far-reaching ways possible. The most immediately effective measures for this are the free distribution
of land to tens of millions of farmers and meaningful wage increases for millions of workers and employees.
The economy as a whole needs to be systematically geared towards improving the welfare of the people. Social
services such as education and health should be publicly-provided rather than turned into commodities sold for
private prot that are affordable only for a few while being unnecessarily expensive for the large majority of
poor in the country. Likewise with vital public utilities and services such as power, water and transportation.
Public resources can be generated for these through a more progressive tax system, while public capacity can
only improve or start to be developed upon more active state engagement in these utilities and services.
The countrys relations with other countries and integration into the world economy need to be made supportive
of national socioeconomic development. Unfortunately the government in 2013 pursued international trade
and investment agreements favouring the advanced capitalist countries at the expense of Philippine economic
development and the needs of Filipinos.
In December the administration supported the deal reached by the World Trade Organization (WTO) at the
conclusion of its 9th ministerial meeting in Bali, Indonesia. This included an agreement on Trade Facilitation
(TF) that simplies customs and other bureaucratic procedures to make imports from developed countries easier
while, in practice, not really creating export opportunities for the Philippines. This will worsen the countrys
rising merchandise trade decit and make it even more difcult to create the domestic conditions for local
agriculture and industry to develop.
The Aquino government also took steps towards more disadvantageous free trade deals. The Department of
Trade and Industry (DTI) actively pursued meetings with the European Union (EU) commissioner to start
negotiations on an EU-Philippines free trade agreement (FTA) and reportedly sent a delegation to Brussels in
November for technical discussions to prepare for this. The government also advanced in its efforts to join the
US-dominated Trans-Pacic Partnership (TPP) Agreement and scheduled the sending of a team to the US in
January 2014 for technical consultations on this.
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20 IBON Economic and Political Brieng 15 January 2014
The looming next stage in Association of Southeast Asian Nations (ASEAN) economic integration in
2015 meanwhile cannot be accepted as it is in merely aiming to make Southeast Asia more conveniently
integrated for the global value chains of big foreign transnational corporations. The onset of the ASEAN
Economic Community even threatens a rush of imports especially of agricultural products but also of low-tech
manufactured goods that will compete with local production and further undermine domestic livelihoods. The
beneciaries will be mainly US, Japanese and European capital and their junior partners in ASEAN.
Regional integration has potential benets but ASEAN integration needs to be reinvented on a more sovereign
basis as being attempted by many Latin American countries with such initiatives as the Bolivarian Alliance
for the Peoples of our America (ALBA), Union of South American Nations (UNASUR), and the Community
of Latin American and Caribbean States (CELAC). This however presumes progressive governments in the
countries of ASEAN.
There is actually a period of opportunity with the world economy uncertain, old imperialist powers grappling
with their crises, and alternative centers stirring. Reforming one-sided policies to support Filipino producers,
asserting national economic sovereignty, tackling social inequity and making public institutions more
democratic are necessary to improve the conditions of majority Filipinos.
Entering uncertainty: Economic crisis
The country is entering a period of uncertainty as the economy winds down from a lack of internal dynamismand as repressed political pressures slowly emerge in the run-up to the 2016 elections and transition from the
current Aquino administration to a new one. The economic risk is the winding down of the economy from a
combination of less favorable external conditions in the global economy amid unresolved internal problems of
low and inhibited domestic demand. The short-term real estate and construction stimulus has diverted from how
the economy still lacks sustainable domestic sources of growth.
The limits of the countrys most recent episode of high growth will become more apparent as the debt-driven
expansion winds down with easing demand for goods and services, including real estate, and more expensive
nancing for production. There are already indications that the extended period of historic low interest rates,
yields and borrowing costs is coming to an end particularly with the US Federal Reserve cutting back on its
nance-driven economic stimulus efforts. The investment in real estate, construction, malls and department
stores did not lay the foundations of domestic productive capacity which can only be found in robust localagriculture and Filipino industry.
Overseas remittances also appear to be reaching their limits in contributing to domestic demand. While
remittances are still increasing in absolute terms their growth is slowing. (See Chart 5) BSP data show
remittances growing 6.0% in the rst 10 months of 2013 from the year before, but which rate is slower than
the 6.3% growth in 2012, 7.2% in 2011 and 8.2% in 2010. The equivalent share of remittances to GDP is
also steadily dropping to 8.4% of GDP in the rst three quarters of 2013, steadily and markedly down from
the peak of 10.4% in 2005/2006. This means that remittances have already started to diminish as a source of
domestic demand relative to the size of the economy and the growing population.
National accounts data from the NSCB are also consistent with these trends where the compensation inow
component of net primary income from the rest of the world representing mainly the earnings of Filipinos
overseas slowed to 5.1% growth in the rst nine months of 2013 from 7.5% in the same period in 2012. This
is possibly because overseas Filipinos are starting to be paid less, and possibly because of slowing recorded
deployments.
Data from the Philippine Overseas Employment Agency (POEA) show that the average number of overseas
workers deployed daily has been increasing since the start of the current administration: 4,030 leaving the
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IBON Economic and Political Brieng 15 January 2014 21
country daily in 2010 (1.47 million deployed for the year), 4,624 in 2011 (1.69 million), and 4,924 in
2012 (1.80 million). However it is possible that deployments in 2013 will be lower than the year before
with deployments in January-September 2013 averaging just 4,295 daily compared to 5,194 over the same
period in 2012, or a marked 17.3% less. If so this would be the rst decline in deployments in a decade
where the last time this happened was in 2003 which saw a marginal 2.7% dip in deployments. But it is
also possible for the drop in recorded deployments to be offset by increasing number of undocumented
workers.
On the other hand, the continued backwardness of local agriculture and Filipino industry interacts with
persistently high unemployment and poverty to prevent sustained and growing domestic demand over themedium- to long-term.
Entering uncertainty: Poverty and pork
There are political issues against the Aquino administration from 2013 which will gain momentum in
the year to come. The administration has been able to sustain itself through the shallow but politically
effective stratagem of Pres. Aquino perceived as distinct from his traditional political allies and
opportunistic family members not yet being personally embroiled in any corruption scandals. However,
the year also saw the unraveling of Pres. Aquino as a supposed reformist. His defense of the pork barrel
system, a long-time symbol of the countrys rotten politics, has further exposed the hollowness of the
administrations anti-corruption rhetoric. Various surveys show a consistent trend of increasing public
dissatisfaction.
Various issues in 2014 will continue to put the Aquino presidencys reformist image and correspondingly
its political legitimacy under increasing stress.
The most important political failure of the Aquino administration is its consistent use of the vast powers
of the state to promote private prots of foreign corporations and domestic oligarchs while equally
Chart 5. Overseas Remittances Growth and Equivalent Share in
Gross Domestic Product, 1991-2013* (in %)
-
5
10
15
(20)(15)(10)
(5)-5
101520
2530354045
1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 OverseasRemitt
ances
EquivalentShareinG
DP(in%)
OverseasRemitt
ances,
GrowthRate(in%)
Year
Overseas Remittances, Growth Rate (in %) Overseas Remittances Equivalent Share in GDP (in %)
* - 2013 data based on 1st-3rd quarters only
Source:Bangko Sentral ng Pilipinas
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22 IBON Economic and Political Brieng 15 January 2014
consistently avoiding the redistribution and reforms so vital to promote the public welfare especially of the poor
majority. This causes the unrelenting poverty and worsening condition of tens of millions of Filipinos.
Pres. Aquino and his economic policies are visibly supported by international nancial institutions, global
nancial players, foreign capital, large sections of the domestic oligarchy, and even the US and other big
power governments. There is corresponding support from the middle-classes and intellectuals which in turn
has inuenced a measure of wider popular support. Deep socioeconomic problems however have always been
volatile conditions for social unrest in the country.
The administration is aware of this and is undertaking a massive multi-year multi-billion cash transfer program
for the poor in an effort to pre-empt turmoil from below. The so-called social protection 4Ps program has grown
substantially over the course of the Aquino administration and increased six-fold from Php10 billion in 2010 to
Php62.6 billion in 2014, with the number of household beneciaries covered also growing from 1.0 million to
4.3 million. (See Table 9) The program is strategically implemented and targets the poorest of the poor in towns
and villages nationwide including, conspicuously, in areas of armed conict.
The 4Ps intervention is played up as pro-poor even as it takes place in the noticeable absence of more basic and
far-reaching pro-poor reforms. For instance administrative data on land distribution conceals how agrarian reform
is subverted by continuing landlord claims over millions of hectares of agricultural land and continuing landlord
control over millions of peasants and their produce due to resistance, reversals and land reconcentration. After
decades of agrarian reform programs, barely a tenth of supposed beneciaries have fully paid for land they till
that is being sold to them under the programs, and rural poverty remains widespread and far above the national
average. The government also continues to avoid meaningful wage hikes and, on the contrary, has shifted to a
two-tier wage scheme to lower the mandated minimum wage. Measures to make the labor force more exible
according to the priorities of employers and foreign investors are even being considered. Meanwhile, anomalies
continue to hound the program. Just recently, the Commission on Audit (COA) reported that 7,782 CCT
beneciaries who received Php50.15 million could not be located. Also, some Php18 billion disbursed under theprogram from 2008 to 2012 have remained undocumented. The Department of Social Welfare and Development
(DSWD) explained the issue as a simple technical glitch in their recording system.
The administrations unwillingness and inability to take the difcult steps for real reform is underscored by
how the majority is asked for patience and momentarily distracted with minimal, though steady, cash transfers
while the prots and wealth of a few immediately and signicantly rise. The government meanwhile remains
Table 9. Pantawid Pamilyang Pilipino Program
Annual Target Benefciaries and
Budget, 2007-2014 (amount in Php)
Year Household Budget Beneciaries (in Php)
2007 4,600 50.0 million
2008 320,411 299.0 million
2009 734,691 5.0 billion
2010 1.0 million 10.0 billion
2011 2.3 million 21.2 billion
2012 3.0 million 39.5 billion
2013 3.7 million 44.3 billion
2014 4.3 million 62.6 billion
Source:Department of Social Welfare and Development (DSWD)
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IBON Economic and Political Brieng 15 January 2014 23
aggressive in seeking to create protable opportunities for foreign and domestic big business which are
packaged as indispensable for the countrys development. The priorities are distorted.
Last year for instance the government approved Php30 billion in the 2014 national budget as a Risk
Management Program to assure corporations of their prots when entering into Public-Private Partnership
(PPP) projects. The new contingency fund in the budget materializes the regulatory risk guarantee
promised by Pres. Aquino in his rst state of the nation address in 2010. The size of the fund depends on
the number and size of PPP projects and attendant assurances required by investors so the initial Php30-
billion fund will only become larger as more PPPs come on line. The PPP program is for now criticized
mainly for its slow progress with contracts awarded so far only to ve out of some 50 targeted. More than
this however the main issue as the water and power privatization controversies in 2013 showed is of
terms in the private prot-oriented PPP deals that are disadvantageous to the public interest. This will
become more evident as the negotiations, contracts and terms are subjected to greater public scrutiny.
After three years, the Aquino administration will also have to deal with being assessed on its declarations
of political reforms. The last year however gave strong indications of the persistence of traditional
practices of elite and undemocratic politics notwithstanding the sustained good governance publicity. The
administration coalitions seemingly decisive victory in the May 2013 midterm elections happened amid
questions surrounding the integrity of automated elections which were systematically downplayed and
remain unresolved. The same equipment, software and electoral infrastructure will be used in the 2016
elections.
The Php10 billion pork barrel scam that emerged mid-year has grown far beyond itself and brought the
practice of patronage politics and even the use of public powers for private gain to greater public attention.
The scam initially involved the Priority Development Assistance Fund (PDAF) of several members of
the Senate senators Juan Ponce Enrile, Jinggoy Estrada, Gregorio Honasan, Ferdinand Marcos, Jr. and
Bong Revilla and of the House of Representatives (HOR) and implicated mainly political opposition
including ranking ofcials believed to be running for high public ofce in 2016. A subsequent report by
the Commission on Audit (COA) pointed to 12 senators, 180 representatives, other national and local
government ofcials, and 10 government agencies.
The political opposition countered by exposing Pres. Aquinos alleged use of presidential pork barrel
specically a portion under its novel Disbursement Acceleration Program (DAP) in the campaign toimpeach and unseat former chief justice Renato Corona. It has been estimated that anywhere from Php3-
4.4 billion was given to senators and representatives towards getting a conviction in May 2012.
The Supreme Court (SC) declared the PDAF unconstitutional in November and this was formally removed
from the 2014 budget. However senators and congressmen, aside from a few who declined, in effect
still individually decided on the allocation of lump sum pork barrel funds by realigning these through
amendments in the 2014 budget to government agencies and even local government units of allied
ofcials. This highlights how the SC decision is a welcome though still very partial victory against the
pork barrel system.
The Makabayan coalition in particular drew attention to some Php1.1 trillion in presidential pork barrel
funds from a variety of sources of which the controversial PDAF is only a small part. (See Chart 6) Pres.Aquino has actively defended the DAP and by extension the wide range of presidential pork barrel
variously arguing that the DAP is a driver of the countrys economic boom, that he and his administration
can be trusted to spend discretionary funds wisely, and that these funds are used for the benet of the
people. In this context the SC abolition of PDAF also possibly creates the conditions for legislators to
become more compliant with the president to be able to access pork barrel funds.
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24 IBON Economic and Political Brieng 15 January 2014
Public indignation against the pork barrel system drove a resurgent of protests including from among a wide
section of the middle classes. This outrage also underpins a potentially historic Peoples Initiative where,
instead of the usual legislative process, a law for the complete abolition of the pork barrel is enacted through
a signature campaign from 10% of all registered voters in the country including at least 3% in each legislative
district. The effort is most of all compelled by public distrust of the legislature and of the executive branch that
is so inuential on it. It is being pushed by an increasingly politically-aware public that is testing the possibility
of using the most directly democratic means of law-making in the country.
Rights violations and neocolonial relations
The countrys social and mass movements are the strongest force pushing for more democratic governance
in the country. Their struggles for economic, social and cultural rights are the most concrete and effective
counterforce against structural mechanisms of underdevelopment exemplied by the continuing assertions for
land by the organized peasants of Hacienda Luisita despite violent attacks on them, the trade union struggles for
higher wages and benets and against illegal dismissals, the urban poor community opposition to demolitions,
and many others across sectors and across the country.
The Aquino administration engages a signicant portion of civil society in various initiatives most prominentlyin such as the 4Ps cash transfer program and bottom-up-budgeting in a few local government units. This has
allowed it to bolster its participatory and good governance credentials as well as, perhaps not inadvertently,
neutralize possible criticism and opposition. At a broader level however the essential continuity in awed
economic and social policies, unreformed political practices, and poor socioeconomic outcomes raises questions
as to the effectiveness of this engagement and of who the government and the elite interests it protects or civil
society and the people they presumably uphold gains more from it.
Savings 280.8
SpecialPurpose Funds
294.0
Regularagency budgets
235.3
Unprogrammed funds139.9
MalampayaFund137.3
CHED Higher
Education Devt Fund
1.5Presidents Social
Fund/PAGCOR
2.0Presidents Charity
Fund/PCSO
8.1
Motor Vehicle Users
Charge
10.7
PriorityDevelopment
Assistance Fund25.2
Chart 6. Indicative Pork Barrel Estimates (in billion Php)
Sources: Makabayan House Resolution No. 298, Commission on Audit (COA) and Department of Budget and Management (DBM) Budget of Expenditures and Sources of Financing (BESF) 2014
National government budget items Off-budget items
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IBON Economic and Political Brieng 15 January 2014 25
It is evident though that grassroots movements are being subjected to sustained repression which continues a
phenomenon that intensied under the previous Arroyo administration. The independent human rights group
Karapatan has continued to monitor civil and political rights violations particularly against organized forces
of the social and mass movements launching protest actions and waging local struggles. Grave violations
monitored last year as of August 2013 include 15 extrajudicial killings, 14 more frustrated attempts, four
enforced disappearances, four cases of torture and 89 cases of illegal arrest and detention, among others. These
have brought the total monitored such violations under the Aquino administration to 152 extrajudicial killings,
168 more frustrated attempts, 18 enforced disappearances, 80 cases of torture and 250 cases of illegal arrest and
detention. (See Table 10) There are tens of thousands more victims of military abuse of communities, forced
eviction, demolitions and other rights violations.
The Center for Trade Union and Human Rights (CTUHR) for its part monitored 8,139 violations of labor,housing rights and civil liberties of which 3,928 were of labor and civil liberties. The 41 incidents of civil and
political rights violations with 892 victims mainly attacks on picket lines and other dispersals of organized
workers actions in 2013 is an increase from the year before. Similarly, the 7,788 monitored victims of
economic, social and cultural rights is more than the 7,342 year from the year before; the biggest part of this
were violations of the right to freedom of association followed by demolitions of urban poor communities. (See
Table 11)
Table 10. Violation of Civil and Political Rights Under the Aquino Admnistration,
July 2010-August 2013
Violations No. of Victims
Extrajudicial Killing 152
Enforced Disappearance 18
Torture 80
Rape a 3
Frustrated Extrajudicial Killing 168
Illegal Arrest without Detention 250
Illegal Arrest and Detention 358
Illegal Search and Seizure 214
Physical Assault and Injury 238
Demolition 12,843
Violation of Domicile 397
Destruction of Property 11,711
Divestment of Property 282
Forced Evacuation 31,779
Threat/Harassment/Intimidation
b
34,901Indiscriminate Firing 7,015
Forced/Fake Surrender 54
Forced Labor/Involuntary Servitude 172
Use of Civilians in Police and/or Military Operations as Guides and/or Shield 297
Use of Schools, Medical, Religious and Other Public Places for Military Purpose 29,423
Restr iction or Violent Dispersal of Mass Actions, Public Assemblies and Gatherings 3,231
a- all victims are minorsb- mostly communities in militarized areas
Source: KARAPATAN Alliance for the Advancement for People's Rights
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26 IBON Economic and Political Brieng 15 January 2014
Neocolonial relations with the US are visibly worsening under the Aquino administration with these ties
deepening last year in both political and economic terms. Politically, the much greater dependence on the USis most evident in the administrations reliance on US military might and diplomatic clout in its handling of the
territorial dispute with China in the West Philippine Sea/South China Sea. There is however also the US-driven
international offensive in multilateral organizations, by US agencies, among the business community, and
media to build up the Aquino government as a model of good governance and of reforming towards greater
market policies.
Table 11. Trade Union-Related Human Rights Violations, 2013
Case Title No. of Cases No. of Victims
Civil and Political Rights Violations 41 892
Extrajudicial Killing 2 2
Physical Assault/ Injury (includes mauling) 10 48
Arbitrary Arrest/ Detention 5 28
Fabrication of Criminal Charges due to political acts/belief or labor dispute 8 33
Assault on the Picket Line 2 129
Breaking up/ Violent Dispersals of workers' concerted actions 2 429
Economic, Social and Cultural Rights (ESCR) Violations a 65 7,788
Violation of the right to security of tenure
Illegal dismissal
Retrenchment / Closure 10 1,347
Dismissal due to labor dispute 6 242
Unsafe working condition
Death due to unsafe working condition 9 21
Violation of the right to receive fair/just wages
Underpayment of minimum wage 4 850Violation of the right to freedom of association (FOA) and collectively bargain
Union-busting 10 1,034
Harassment of unionists inside the workplace 4 470
Intervention on trade union affairs 2 938
Anti-union discrimination 3 133
Prohibition of the right to strike 2 629
Collective Bargaining Agreement (CBA) violations and issues
Non-implementation of CBA 1 64
Bargaining in bad faith / Refusal to bargain 6 1,680
Total ESCR-FOA Violations on Workers 57 3,912
Other ESCR Violations
Demolition of urban poor communities 8
Total Trade Union-Related Human Rights Violations (Labor and Civil Liberties) 86 3,928
Total Human Rights Violations (Labor, Housing Rights and Civil Liberties) 106 8,139
Note: Number of victims will not add up to total due to multiple reporting.a- labor and housing rights; victims are affected workers unless stated
Source: Center for Trade Union and Human Rights
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IBON Economic and Political Brieng 15 January 2014 27
The governments compliance with the USs hegemonic agenda in the region meanwhile is expressed in the
increasing presence of US military forces in the country. The number of American soldiers participating in
so-called exercises has risen to record highs under the Aquino administration, at 7,000 in 2012 and then 8,000
in 2013 both during the Balikatan exercises; this is aside from the over 5,000 troops that came in the wake of
supertyphoon Yolanda. The number of reported ship visits by the US Navy to various ports and harbors has
likewise been growing substantially.
The Aquino administration is also negotiating a more formal and greater rotational presence of US troops inthe country which appears stalled less by the government disagreeing than by the government anxious about
the inevitable public backlash. Before the year ended foreign secretary Albert del Rosario even took the lead
in arguing for a larger and more permanent US military presence with a public statement that the US military
assistance in Yolanda-related relief efforts proves the need for their presence in the country.
The increasing role that the Philippines is playing in the USs hegemonic and imperialist agenda in the region
are dangerously creating the conditions for even greater US interference in domestic affairs and the US will
become even more involved to ensure that this role is not disrupted. Among others this means ensuring friendly
poli