In July 1, 2010 – the “straight path” of Aquino’s Hacienda Economics hyped and hoped to be a yellow ray of sunshine for an improved Philippine economy. Two years after Noynoy Aquino was sworn in as President of the Philippines, the yellow ray, when passed through the prism of reality yielded different outcomes for different “wavelengths”.
Today, July 2012, BS Aquino scratches his heads and says how could it be possible for joblessness, poverty, and hunger remain high when the GNP is increasing and the sovereign debt ratings are being upgraded. In BS Aquino’s mind (and his supporters) – this situation is a “contradiction”. Noynoy is oblivious (or deliberately ignores??? – at his peril if I may say so) that his premise is wrong. Noynoy presumes that the increase in GNP should be accompanied by a decrease in joblessness and poverty.
A reduction in poverty, unemployment, underemployment, hunger will accompany an increase in GNP provided the wealth is more equitably distributed. In a situation where only 10 Filipino families control the businesses in the Philippines – will mean that the growth will benefit only those who control the wealth. For those who don’t control the wealth there will not be much improvement – it will be shitty as usual.
Let’s express this concept in the form of an equation in elementary algebra.
Let W = Wealth. Let R = economic growth rate. Let X = Net Worth.
After a certain period of time, the net worth will have grown by R or X = W * (1+R).
If you have no wealth, then under conditions of extreme income inequality, the net worth becomes X = 0 * (1+R); X = 0. No wealth implies no income. No income further implies either one does not have a business – or a job. On both circumstances – you still wind up with poverty and hunger.
Now if 10 families have W = 0.95 while 90 million Filipinos have W=0.05 – and that arrangement remained constant since 1987 – factor in population growth rate of 1.5% (which is decreasing by the way) – and you’ll have a situation where the proverbial rich are getting richer, the poor are getting poorer.
What does the NSCB’s Paderanga have to say about the state of income inequality in the Philippines? As of May 2012, Here’s what NSCB Chief Statistician Paderanga said – Income of rich 18 times more than poor’s:
Based on the above NSCB statement we can revise the equation to:
Xr (Net Worth of Rich) = Wr (Wealth of Rich) * (1+R) = Wr * 1.065 = 1.065Wr
Xp (Net Worth of Poor = (Wr/18) * 1.065 = 1.065Wr/18
Xr = Xp/18
Therefore, whether economy grows 3.9% (2011) or 6.5% (Q1 2012) , the impact on the net worth of the rich and the poor, will still be the same – the rich will be richer than the poor by a factor of 18.
What Actions Were Taken By Aquino To “Reduce Poverty”? Were these effective?
The policy steps actions taken by BS Aquino from July 1,2010 to July 11,2012 are the following:
1 – CCT Subsidies. Spending has increased by P10B since 2011. The program is full of fraud and has been targetted for release in areas supportive to Aquino. At a time when the unsustainability of political patronage and welfare programs has been demonstrated by Portugal, Italy, Greece, and Spain – and prior to that, the Scandinavian states and the former communist East European states – instead of embarking on austerity, BS Aquino is embarking on extravagant spending – just like that broke pinoy neighbor resorting to 5/6 so he can give a party during the town fiesta.
2 – Public/Private Enterprises. Privatization which is not accompanied by liberalization only substitutes public monopoly with private monopoly. The consumers still pay higher prices for basic services – such as non-existent electricity (now the highest in the world). Calling for price controls will not work either because it will stifle the growth of capital that can be used for investing in upgrades to existing capacity. The restrictive power market limits the players to Filipino majority-owned companies only
3 – Sovereign Debt Ratings Upgrades. The premise for these ratings upgrades is that it will allow the Philippine government to BORROW money for its projects. The words “Philippine government” and “money” just don’t go together well. Market knowledge estimate that 35% of projects of the Philippine government end up in the pockets of corrupt officials and their business partners who are bankrolled by the Philippine oligarchy. These debts have to be paid by taxpayers in the future. It is ironic that Aquino is following the steps of Marcos in plundering the tax coffers.
We should also remember that these debt ratings don’t mean squat given the high ratings given to the economies of Portugal, Italy, Greece, and Spain which are on the verge of bankruptcy due to fiscally irresponsible welfare programs, ridiculous regulations, and a high tax burden.
4 – GOCC Subsidies. While the news says that GOCC subsidies have been “slashed” – the fact is these GOCCs are still receiving substantial subsidies. Bureau of Treasury data showed that subsidies given to GOCCs reached P11.4 billion from January to May this year.
Major recipients of subsidies in the first five months of the year include cash-strapped National Food Authority (NFA) with P4 billion, followed by Philippine Health Insurance Corp. (PHIC) with P2.1 billion, National Electrification Administration (NEA) with P1.56 billion, National Housing Authority (NHA) with P1.2 billion, and Philippine Coconut Authority (PCA) with P656 million.
Note that these agencies have not contributed to reducing the cost to consumers – or provide consumers jobs and/or revenue that will allow consumers to afford goods and services. The NFA, NEA, PCA are ridden with scams and come up with regulations that only hurt consumers, farmers, and small businesses.
Recently, the Philhealth even had the gall to attempt to charge OFWs for health services – even if OFWs were already being provided health services in their country of work.
5 – Corona Impeachment. All the trial achieved was to seal Aquino’s (and the oligarchy) control on the three branches of government. An innocent man was sold for P100 million pesos worth of taxpayer’s money – the gall!!! Any reasonable person of intellect would have long declared a mistrial and junked the farcical impeachment proceedings. But no, we had to allocate resources on a monumental travesty of justice and liberty. Worse – Aquino is considering candidates who show contempt of the Supreme Court – for the position of Chief Justice.
Other generic same o same policies implemented by Aquino are:
- Increased Public Debt.
- Increase Taxes
- Tariff Controls
- Continued Arroyo’s OFW-Remittance Dependency
- Expanded Pork Barrel Spending
- Retaining Protectionist 60/40 Constitutional Restrictions
What are the Outcomes? Where are the Results?
1 – Income Inequality – In a study by former National Statistics Administrator Mr. Tomas Africa presented at the SWS in 2011, he concludes that income distribution of families in the Philippines has not worsened nor improved after three decades, thus, “there was no major change in inequality from 1985 to 2009.”
The Philippines has not gained much headway in addressing income inequality up to today. During the recent ADB summit, the Philippines was challenged to reduce its income inequality index of 46% – which was considered as among the highest in South East Asia.
2 – Joblessness – BS Aquino recently hyped the reduction in jobless reported by SWS. A labor force survey showed that the unemployment rate dropped slightly to 6.9 percent in April from the 7.2 percent registered in the same period last year. That’s still 7% unemployment – which when expressed in absolute terms – is still 2.803 million unemployed.
What’s more interesting is the high rate of underemployment – the number of the underemployed rose to 7.312 million in April this year compared to the 7.127 million recorded during the same period last year. The underemployment rate in April was at 19.3 percent, which was nominally lower than the 19.4 percent recorded a year ago. That’s still 19% underemployment – or at least 7 million underemployed Filipinos. Given the dirt cheap wages paid to the underemployed – they might as well be virtually unemployed.
As far as am concerned, the unemployed plus the underemployed totals 10 million virtually unemployed Filipinos – and growing. Of course, it goes without saying – more unemployed and underemployed equals more hunger and poverty.
3 – Foreign Direct Investments. The Philppines has consistently attracted anywhere from 2% to 5% of all the FDI that went to ASEAN.
Recently there has been a net outflow of FDI – starting with Ford Philippines. Net FDI outflow reached $13 million in April, a reversal of the $78-million net inflow recorded in the same month last year. Last June 22, the central bank tempered its outlook for FDI net inflows this year to $1.2 billion from an original $2 billion announced in December last year, citing euro-zone uncertainties.
So while the Philippines adjusted its FDI target to $1.2 billion – here’s what our neighbors are doing.
According to the United Nations Conference on Trade and Development (Unctad) World Investment Report 2012, Malaysia was ranked third for FDI inflow into Asean last year, with Singapore and Indonesia positioned at the top with US$64 billion and US$18.91 billion respectively, while Thailand occupied fourth spot at US$9.57 billion.
As of July 2012, Vietnam’s FDI disbursement may reach US$10 billion this year despite the sharp decrease in FDI inflow in the first six months of 2012.
The UNCTAD report also revealed that FDI inflow reached a new record in the sub-regions of East Asia and Southeast Asia last year, up 14% to US$336 billion, accounting for 22% of the total globally.
Imagine, out of the $336B that went to East Asia and Southeast Asia the Philippines can’t top $2 billion.
What Next for the Rudderless Hacienda Republic?
The Philippine government has been painting an optimistic picture about the economy – growth of 7% to 8%.
The Asian Development Bank however has a different take on the matter:
Given the possibility of a double dip recession in the US, the implosion of the Eurozone, bubbles in the Chinese economy, the Philippine government stubbornly clings to a development model that relies on remittances, big government, subsidies, taxes, regulations, welfare programs, protectionism, and corporatism.
The UNCTAD report revealed that FDI inflow reached a new record in the sub-regions of East Asia and Southeast Asia last year, up 14% to US$336 billion, accounting for 22% of the total globally. And out of this pie of $336 billion, the Philippines can’t get more than $2B?
What gives? What happened to all the talk of increasing competitiveness? What happened to the talk of it’s more fun in the Philippines? Why can’t the Philippines get more than $2 billion out of the $336 billion that went to Asia last year? It can’t get more than $1.5 billion this year – and foreign owned companies are leaving the Philippines and moving to other locations like Thailand and Vietnam.
The Philippine oligarchy will soon realize – in a rude awakening – that its protectionist stranglehold on the Philippine economy leads to lower purchasing power for consumers, which leads to a thin market, that leads to lower sales, which led to a reduction in business activity.
As the anchor industrial base moves out of the Philippines, the bottom line of small and medium enterprises which rely on the bigger firms will be negatively impacted. These companies will have the options of waiting for another company to replace the client lost, relocate to where their primary customer operates, and/or close shop. Clearly, it will take awhile for investors to consider the Philippines given the more lucrative destinations in the neighborhood – namely, Vietnam, Thailand – not to mention the big boys – China, Singapore, and Hong Kong.
The recent mining EO of BS Aquino didn’t help either as mining companies packed up and divested their operations.
It looks to be another bumpy year for the Philippine economy – nothing new. You can swear on your sweaty butt (no thanks to MERALCO’s EXPENSIVE rolling power outages).
The failure of Aquinomics will be glossed over by more political circuses, even warmongering – anything to distract the public from the greatest threat to the Philippines national security – nope, it’s not China – it’s POVERTY, stupid!
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