|IBON on Estradas 1999 economic report:||
A year of ironies and half-truths in troubled times
By Gina Mission
of many ironies," was how Rose de Guzman, newly-elected executive director of IBON,
described the year 1999 at the January 12 IBON Birdtalk held at the PSSC, in Diliman,
Quezon City. Ironies which, she added, became more and more ridiculous. Later, Danny Arao,
who delivered his speech, A Review of the Economy in 1999: In Crisis Still at the Turn of
the Century, joined her, adding that it wasnt just a year of ironies, but also of
lies, or at best, half-truths.
__One such lie, said Arao, is contained in a 185-page report by the Presidential Management Staff (PMS), which stresses that the decline in the Presidents approval rating, "coupled with the reality of widening budget deficit and increasing prices of oil, contributed to the perception that our people are experiencing difficulties."
__That Filipinos experiencing difficulties is only a perception, is a blatant lie, according to Arao, as he tried to prove later with hard facts. The government, he added, wants us to "lower our expectations and appreciate social reality the way it sees it." Lower expectations, lower disappointment, and the Filipinos would have been content to just get by.
__It is because of such unresolved issues that the regular IBON Birdtalk forum has come to be. Guzman explained that economics is too serious a subject to be left to the so-called "experts". Birdtalk, a twice-a-year political and economic briefing of IBON, an independent research organization, has been a tradition since 1993.
A rosy picture
__The International Monetary Fund (IMF), the World Bank (WB), and the Asian Development Bank (ADB) all said that the Philippines has weathered the crisis through its sound economic policies. The Estrada administration has been encouraged by this and has painted a rosy economic picture for 1999. Indeed, government data cited by Arao show that, except for the budget deficit that is expected to reach P100 billion by the end of the year, the governments macroeconomic targets have been generally achieved for 1999.
__Items such as agriculture, industry, services, gross domestic product, gross national product, inflation rate foreign exchange, balance of payments, exports, imports, unemployment rate, and oil price generally saw positive trends last year. The national income grew by 3 per cent during the first nine months of 1999, which was attributed to the "quick rebound of agriculture supported by the accelerating growth of the services sector." During the first nine months of 1999, portfolio investments posted a 90 per cent increase.
__With such rosy statistics, the present administration has set higher targets for the year 2000. Agriculture is targeted to grow by 2.5 to 3.5 per cent; industry by 4.8 to 5.8 per cent; services by 4 to 5 per cent; GDP by 4 to 5 per cent; GNP by 4.5 to 5.5 per cent; inflation rate by 6.5 to 7.5 per cent; exports by up to $39.3 billion; and imports by up to $39.6 billion. The budget deficit is expected to be at P62.5 billion and the unemployment rate at 9.05 to 9.59 per cent. The poverty incidence should be at 30.4 per cent; and land distribution, 642,933 hectares.
The story behind the figures
__That the 1999 macroeconomic targets were met is expected, said Arao. "Even at the start of last year, the administration already set modest targets as the economy still reels from the aftershocks of the 1997 financial crisis," he explained.
__The much-publicized growth in agriculture, was, at best, also a half-truth, according to Arao, since government failed to mention that the growth is merely a "correction of the combined ill-effects of the El Niņo and La Niņa that hit the country." No less than the Bureau of Agriculture Statistics admitted that palay, corn, and sugarcane outputs grew by 55.48 per cent, 29.95 per cent, and 24.08 per cent, respectively from January to September 1999, due mainly to "favorable weather conditions," and "recovery from the ill-effects of the El Niņo phenomenon."
__Arao said that the growth in services was artificial as it was "buttressed by the governments decision to pump-prime the economy." Also, a look at the expenditure shares breakdown of GNP from January to September 1999 reveals that government expenditures played a vital role in pushing the national income upward. "Investments were down, and personal consumption expenditure had a lower growth rate compared to the same period in 1998," Arao said.
__Isnt it common sense that you save money when you dont spend a lot? "The growth in the national income, therefore, was short-term and speculative," Arao remarked.
__Arao reminded the audience that when government, because of its promise to the IMF, imposed a 25 per cent mandatory reserve on government expenditures through the 1998 stand-by arrangement, rank-and-file government employees and public school teachers were among those affected. "They experienced delays in salaries and benefits and even the non-granting of the much-talked-about amelioration pay towards the end of 1999," recalled Arao.
Balance of payments
__The governments balance of payments (BOP) data, said Arao, is no better than its GNP data. "On the surface, it looks good but the real picture can only be seen and appreciated as one looks at the nitty-gritty of the bottom line," he said. This is because the BOP during the first nine months of 1999 is a 112 per cent increase from the previous years figure. As Arao stressed, "Indeed, the $3.3 billion surplus is enough to offset the ballooning budget deficit, so the Estrada administration has every reason
__"However," Arao continued, "it cannot be denied that medium and long-term loans (coincidentally also amounting to $3.3 billion) had a key role in ensuing positive balance of payments." Even the NEDA admits that, "the bulk of the capital inflows came in the form of medium and long-term loans, which rose by 22.3 per cent, a large part of which financed the national government budget."
__The admission is contained in a NEDA Report published on December 21, 1999 entitled, The Philippine Economy: Performance and Prospects. And yet, Arao asked, who would have dug up these things? Would the President explain these matters when he delivers his State-of-the-Nation address?
__Again, Guzman is probably right: economics is complex and we all should get involved in it.
__In addition, the BOP contains an interesting entry, called the "net unclassified item" or NUI, which rose from $362 million in 1998 to $3.976 billion in 1999. This huge outflow of dollars negates, according to Arao, the huge gains in the governments current account (trade and transfers). According to Arao, one learns in basic economics that a negative NUI reflects a high incidence of dollar salting and smuggling in the country.
Foreign debt, investments and dollars, dollars, dollars
__As of June 1999, the countrys foreign debt already amounted to $48.1 billion, representing a 22 per cent increase from the 1995 figure. With a population of 70 million, this means that each Filipino owes $687.56 to foreign creditors.
__Despite the massive retrenchment in countries where they work, plus a government that provides them inadequate support, the overseas Filipino workers (OFWs), as always, remain the countrys top dollar earners. Records from the Bangko Sentral ng Pilipinas, as cited by Arao, show that from January to September 1999, OFW remittances was $5.4 billion, surpassing the total 1998 OFW remittance of $4.9 billion.
__In contrast, foreign investmentswhich the government has been going all-out to entice and accommodate--registered a downtrend from 1996 to 1998. While the 1999 figures showed a 90 per cent increase, according to Arao, these are "speculative investments and do not necessarily translate to job generation or technology transfer" which are vital to national development. Even the dollars poured into the stock market or treasury notes, Arao pointed out, can be pulled out just as quickly.
__Arao further called attention to the quality of investments that entered the country in the past year, the most prominent of which is the establishment in the country of gambling tycoon Stanley Hos casino empire. Is it the dire need for dollars that prompted the government to instill a culture of gambling among Filipinos when it launched the weekly on-line bingo games on top of the expanded lotto, and resurrected jai-alai? Arao wanted to know.
A perceived difficulty or harsh realities?
__At the receiving end of these "investments," including Stanley Hos, are Filipino workers, three million of whom were unemployed as of October 1999. According to the National Statistics Office, more than one-fifth of those employed are either working less than 40 hours a week or are "dissatisfied with their jobs."
__The 29 million employed receive low wages and work under harsh working conditions. And despite the order to increase wages by P125, workers still do not get the right amount, as regional wage boards continued to ignore the order. Instead, they went on to give increases of only P25.50 (in Metro Manila), and P10-15 in other regions.
__The December 1999 consumer price index pegged the purchasing power of the peso at 68 centavos, eroding the value of money by 32 per cent.
CyberDyaryo | 2000.01.20