The numbers are out – as the Philippine government increases spending by an average of 10 percent annually, poverty has not budged a bit. Frankly, I am not surprised because I have been saying it for the longest time – more public spending will not reduce poverty.
When compared against the flat-line reduction in poverty, the Philippines national budget which is presented as a “commitment to lift the poor from poverty through honest and effective governance” is an empty, unsupported statement.
For all the bluster about high GDP growth, historic PSE indexes, CCT subsidy, Sin Tax law, RH law, AO 31, bond flotations, debt ratings upgrade, being on the cover of TIME Magazine, the SWS approval ratings – the mainstream media can’t fudge the numbers:
Graphic by Jerry Ocampo, Tanggulang Demokrasya
Allow me to show what the numbers mean by using the infographics below:
Increased public spending has not reduced poverty
Just the numbers – increased public spending has not reduced poverty
Percentage-wise, let’s look at how the spending has changed – and whether there was a reduction in poverty.
Increases in spending have not reduced poverty
More public spending has not reduced poverty
Busting the Aquino Myth Factory
Lots of Pinoys have bought the historic PSE indexes as a sign of a dynamic economy. Well if the economy was so dynamic why hasn’t that led to a reduction in poverty? Why has poverty remained constant at 28% – joblessness remains constant, underemployment has expanded – and hunger has also expanded?
There’s Foreign Portfolio Investments – and there’s Foreign Direct Investments.
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Portfolio investments
“Hot money” refers to portfolio investments – stock trading, the financial markets – in local terms, the PSE. Only stocks of PSE members are traded in the PSE – and foreign investors can choose to buy or sell stocks of the PSE members.
This is a list of PSE members (there may be new members)
2GO Group
ABS-CBN Corporation
Allied Bank
Ayala Corporation
Ayala Land
Banco de Oro Universal Bank
Bank of the Philippine Islands
Bankard
Benguet Corporation
Cebu Pacific
Centro Escolar University
Century Properties
Chemrez Technologies
Chinabank
Cityland Development Corporation
Citystate Savings Bank
EastWest Bank
Empire East Land Holdings, Inc.
Energy Development Corporation
Far Eastern University
Filinvest Land, Inc. F cont.
First Philippine Holdings Corporation
Globe Telecom
GMA Network
Integrated Microelectronics, Inc.
International Container Terminal Services Inc.
JG Summit Holdings
Jollibee Foods Corporation
Manila Broadcasting Company
Manila Water
Manulife Philippines
MediaQuest Holdings, Inc.
Megaworld Corporation
Meralco
Metro Pacific Investments Corporation
Metropolitan Bank and Trust Company
MRC Allied Inc.
Petron Corporation
Philippine Bank of Communications
Philippine Business Bank
Philippine Dealing Exchange
Philippine Long Distance Telephone Company P cont.
Philippine National Bank
Philippine National Oil Company
Philippine Savings Bank
Philippine Stock Exchange
Philtrust Bank
Phoenix Petroleum Philippines, Inc.
Pilipino Telephone Corporation
Puregold
RFM Corporation
Robinsons Land Corporation
San Miguel Brewery
San Miguel Corporation
Security Bank
Shang Properties, Inc.
SM Development Corporation
SM Investments Corporation
SM Prime Holdings
STI College
Union Bank of the Philippines
Universal Robina
Vista Land and Lifescapes, Inc.
Since portfolio investments does not require that the foreign investor register a local business nor owning real estate in the country – the foreign investor is not hindered by the 60/40.
The stocks they will buy or sell are still are the stocks of the PSE members only.
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Foreign direct investments
FDI refers to investments in buildings, offices, payroll, office supplies, utilities – for short, money which flows into the “real” economy. This type of money cannot be immediately taken out – and will take some time to liquidate or dispose of if the investor so wishes.
The companies in the PSE – are protected from competition thru the 60/40.
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Foreigner investors options are limited to
a) being sucked by the 60/40 Pinoy joint venture partner (and the headache of dealing with the philippine government) OR;
b) handing over their money and investing it into the PSE companies (as against competing against the PSE members locally).
It works for the oligarchy in many ways:
1 – no competition
2 – the would-have-been foreign competitors wind up bankrolling the oligarchs
This means of course, that Filipino consumers choices are limited to goods, services, and jobs of the oligarchy only.
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It gets more dicey because:
1) The US Federal Reserve printed more money (Quantitative Easing – QE3) – thus increasing the money supply. The price of goods adjust to reflect the increase in the money supply and inflation sets in.
To hedge against inflation in the US, foreign investors bring the freshly printed money to the PSE – and boom…. Aquino has his historic PSE indexes – that wasn’t due to economic fundamentals but due to the QE3 – note that during the same time the BSP was busy buying dollars as exporters were reeling from the decrease in competitiveness of their products due to a stronger peso.
The other thing to watch for is the formation of asset bubbles. Watch the building and construction “boom” in particular as the banks and developers traded on the PSE become awash with funds and the supply in units is more than the local market can handle. Some banks will also be more aggressive with lending practices to developers – and will have risky exposure. Once the BSP steps in (and it has) to require higher reserve requirements from the banks at a time when the PSE indexes are soaring – you will know that the BSP is in red alert status.
When the loans mature – or when the shares are called in – and the banks and developers are not able to meet their obligations – you have a Lehman Brothers in the making in Manila
In keeping the 60/40, we are vulnerable to “hot money” flows
By removing the 60/40 – “hot money” is provided an avenue for turning into investments on the ground, thereby relieving pressure from the stock markets – and providing for a more balanced growth – and a widening of the middle class and a shrinking poor
Also, the foreign investors will now be able to participate in the PSE – or even partner with locals other than the oligarchy
If we recall the ASEAN financial crisis in the late 90s – the protectionist ASEAN countries imposed capital controls on their financial markets and paid heavily for doing so. Singapore, on the other hand, was able to weather the financial turbulence because it had robust FDI.
What Next Philippines?
Lemme guess, Filipinos will still give Team Patay este Team PNoy a majority. They will still elect the incompetent, the crooked, and the morons – using the ridiculously flawed PCOS machines under the guidance of an IT illiterate COMELEC chairman appointed by an equally incompetent president. Then there will be a big party for the winners. Then there will be chaos as the PCOS results will be questioned. Meanwhile, ABS-CBN, MERALCO, MAYNILAD – and all the PSE members do business as usual – and Pinoys remain as dirt poor as ever. That’s a “first class” Filipino citizen for you – living off on the remittances of “second class” OFWs.
Filipinos will get the government and economy they deserve – they voted for it, they got it.
If Filipinos truly want to get out of poverty – instead of remaining in poverty and being content with handouts like the CCT subsidy – they will have to exert the effort to:
a) demand to have an open competitive economy from their current leaders
b) identify and vote for candidates who are in favor of removing the 60/40, reducing taxes, keeping government/taxes/regulations small
In the absence of the above – the only viable non-violent option is to vote with your feet and head for an environment where innovation, freedom, and creativity is tolerated if not encouraged – let the pinoy freeloaders rot in their poverty and hunger – that’s what they voted for.
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