IBON on Estrada’s 1999 economic report:  
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A year of ironies and half-truths in troubled times

By Gina Mission

A year 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 wasn’t 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 President’s 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 government’s 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 government’s decision to pump-prime the economy." Also, a look at the expenditure share’s 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.

__Isn’t it common sense that you save money when you don’t 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 government’s 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 year’s 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
to smile."

__"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 government’s 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 country’s 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 country’s 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 investments–which 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 Ho’s 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 Ho’s, 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.

__As if these were not bad enough, government also plans for this year and the next three years, to lower the budget deficit without cutting down on expenditures, as reflected in its fiscal targets. Arao pointed out, this could only mean that government intends to collect more and more taxes from the people.

__"Collection from indirect taxes – shouldered by both rich and poor people (i.e., value-added tax, specific tax on petroleum products) – is expected to increase by 62 per cent in five years," Arao said.

__Still, life must go on, low wages and low purchasing power of the peso notwithstanding. But how enjoyable could life be for the ordinary Filipino worker in these troubled times? Data from the Center for Trade Union and Human Rights (CTUHR) show that workers of 65 establishments in Metro Manila and Laguna either went on strike or staged picket protests, involving some 12,677 union members.

__The Department of Labor and Employment (DOLE) also reports that 108,238 workers were affected by closures or retrenchments in 1,586 establishments due to economic reasons.

__Human rights violations are also rampant; about 68 per cent of the recorded cases, according to the CTUHR, involve assault, arrest and detention. Reports culled from the National Consultation on the Intensifying Militarization, held on November 11-14 in Quezon City and participated in by human rights organizations in 13 regions, documented a total of 538 human rights violations committed during the President’s first 16 months in office. The same consultation also reported an increase in human rights violation cases and a worsening peace and order situation as government’s anti-insurgency campaign, Oplan Makabayan, heightened. Armed confrontations between government and the New People’s Army, and between government and the Moro Islamic Liberation Front, also increased.

__The Ecumenical Commission for Displaced Families and Communities has documented some 27 cases of military operations or depopulation affecting 163 barangays, mostly in Muslimareas. In the trade union front, the CTUHR documented 124 cases of violations of workers rights in 1999 involving 6,906 workers.

__As Antonio Tujan, Jr., outgoing IBON executive director said in his paper, Early Political Instability Under the Estrada Regime: "The economic crisis rages unabated and has brought forth a situation of discontent and restlessness among the people. It has resulted in the emergence of large strikes considering the extreme difficulty and risks for union leaders to wage a strike because of the anti-union Labor Code. Economic struggles at the community and local level have been multiplying not only among the workers but also among other sectors like the farmers and peasants, indigenous communities, urban poor, students and fisherfolk."

Prospects for the new year

__If charter change pushes through this year, Arao warned the public to expect the education, advertising, mass media, public utilities and other sensitive industries to be invaded by foreign investors who will be able to acquire 100 per cent equity ownership. The privatization of government companies like the National Power Corporation the National Food Authority, the Food Terminal Incorporated, and the Philippine Phosphate Fertilizer Corporation, as well as the plan to privatize government equity shares in the Philippine National Bank, are under way.

__The country, Arao observed, entered the new century with age-old challenges of redistributive justice and social transformation. For indeed, with the disheartening events of 1999, what can one expect in the year 2000?

__"More of the same," said Arao. However, he added, "there is hope" if the current social involvement, vigilance and militancy of Filipino civil society groups are sustained.

CyberDyaryo | 2000.01.20

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