[OPINION] The war on poverty

DURING the Arangkada Forum on September 14, there was much focus on sectors with substantial growth potential—including agriculture, creative industries, ICT, manufacturing, mining, logistics and tourism. In my panel, we discussed agriculture, creative industries and tourism. Inclusive growth and raising the poor out of poverty through employment generation were issues raised by all panelists, given the fact that the high rate of poverty and the high number of poor citizens has been a persistent development challenge in the Philippines.

Within the Asean region, Malaysia and Thailand have nearly eliminated poverty below $1.25 a day in their countries, while Indonesia and Vietnam have made better progress in this indicator of development than the Philippines. These countries in past decades (to varying degrees) have had more economic growth, more investment and quality job creation, fewer national disasters and better political and policy stability than the Philippines.

In recent years, however, the Philippines is doing better. With consistent stronger economic growth, higher domestic and foreign investment, better governance and a declining population growth rate, the poverty rate is declining. The targeted rate of reduction of the Duterte administration is 1.5 percent per year so that the percentage of Filipinos in poverty in 2022 will decline to 17 percent.

According to the Philippine Statistics Authority, farmers and fishermen are among the poorest in the country: “Among the nine basic sectors, farmers, fishermen and children belonging to families with income below the official poverty threshold or poor families posted the highest poverty incidences in 2015 at 34.3 percent, 34 percent and 31.4 percent, respectively. These sectors consistently registered as the three sectors with the highest poverty incidence in 2006, 2009 and 2012. Also, 5 of the 9 basic sectors consisting of farmers, fishermen, children, self-employed, unpaid family workers and women, belonging to poor families  had higher poverty incidence than the general population estimated at 21.6 percent in 2015.”

The poor are often hungry. Their diet is inadequate. Their children are frequently malnourished and stunted. In Metro Manila there are more than 300,000 families living without shelter and under bridges. These families need a massive improvement in nutrition. Urban farming is one of the options to address this and improve the learning capacity of poor children in school. Better nutrition needs to go hand-in-hand with the Conditional Cash Transfer (CCT) program, or the Pantawid Pamilyang Pilipino Program, implemented by the Department of Social Welfare and Development. CCT now assists 4.4 million households totaling 20 million Filipinos. The transfers are provided directly to recipients on the condition that their children are inoculated and participate in school feeding programs to combat childhood diseases and malnutrition. Total funding increased from  P10 billion in 2010 to P79 billion in the 2017 budget.

Quite a number of recommendations were made at the Arangkada Forum to improve social-protection programs, including the government’s CCT program, to protect the poor (I selected a few).

Recommendations:

  • Continue to reduce number of poor in absolute terms and as percentage of population.
  • Continue to reduce the incidence of hunger.
  • Expand insurance coverage to include more poor.
  • Successfully implement expanded CCT program to include all 6.9 million poor
    families.
  • Implement unemployment insurance as a social safety net.
  • Enhance CCT program to ensure that the rights of poor children are upheld and to help child beneficiaries and their families to become more self-sufficient and self-reliant. (Urban farming is the way to go; the city of Quezon City is doing well along this line).
  • Create jobs and economic opportunities. Job creation in the industrial, agricultural and service sectors will be facilitated by the government, in collaboration with the private sector.
  • Implementation of national identifaiction card (ID) system for improved targeting of social services. Participants identified the pressing need to institute a national ID system that will allow government agencies to provide more targeted social services, and prevent double counting or leakage.

As the focus of my column is agribusiness, we need to deliver support services to farmers and fishermen, such as financing, incentives, technology, irrigation, post-harvest facilities, farm-to-market roads, improved logistics and integration in the supply chain to fully develop the potential of the agricultural industry to develop rural areas and the countryside.

As a consequence, some 20 million rural Filipinos can be lifted out of poverty. And the children of farmer will stop moving from rural areas to urban centers or become  overseas Filipino workers. Isn’t this what the 10-point socioeconomic agenda of the Duterte administration has in mind? Fighting poverty in agriculture?      

Source: https://businessmirror.com.ph/the-war-on-poverty/         

Infra projects lack skilled workers

By Richmond Mercurio (The Philippine Star) 

MANILA, Philippines — Businessmen are worried that the country’s “golden age of infrastructure” may lose its luster given the shortage in skilled labor in the construction sector.

For both local and foreign businessmen, the realization of the government’s ambitious “Build Build Build” program may take a hit, if such skilled labor supply tightness continues.

“If the economy grows, we do not have enough qualified people. Even the infrastructure, if you talk about it, there’s a shortage in construction workers, welders, and others,” Philippine Chamber of Commerce and Industry president George Barcelon said.

“We do already see the severe shortage in skilled labor. You find enough unskilled labor, but you find severe shortage in skilled labor. If we want to see just half the projects through that are in the pipeline, we cannot cover that with local talents alone because we need more people that understands the industry and will make it better,” European Chamber of Commerce of the Philippines (ECCP) president Guenter Taus said separately.

Real estate consultancy services firm Colliers International Philippines said the lack of skilled workers in the country is already causing construction delays in the private sector.

The Duterte administration is ushering in what is touted as the golden age of infrastructure through an aggressive infrastructure spending program.

Dubbed Build Build Build, the government will spend a total of P8.4 trillion or approximately $160 billion for infrastructure in the next six years.

For 2017 alone, the government allocated 5.4 percent of gross domestic product for infrastructure spending.

“If we want to grow at the rate that is forecasted, we need to look at sources of foreign employment in various sectors,” Taus said.

The ECCP has long been lamenting restrictions on international contractors in the country.

At present, foreign contractors in the construction industry operating in the Philippines can only hold 40 percent equity in businesses.

This, according to businessmen, makes foreign investors reluctant to bring in technology and capital into the country.

“Opening up of the construction industry serves many purposes. One, it provides you with the labor you may not have enough of. Second, it provides you with transfer of technology in some fields. And third, it also provides you with competition, it basically keeps costs down,” Canadian Chamber of Commerce of the Philippines president Julian Payne said.

Source: http://www.philstar.com/business/2017/09/18/1740032/infra-projects-lack-skilled-workers

Spend, spend, spend

Corporate Watch by Amelia H.C. Ylagan | September 18, 2017

Diokno
Budget Secretary Benjamin Diokno reveals the means on how the government can source funds for the different infrastructure projects under the “Build! Build! Build!” program during the DuterteNomics Forum at Conrad Manila in Pasay City on April 18, 2017. Also in the photo are Presidential Spokesperson Ernesto Abella, Transportation Secretary Arthur Tugade, and Executive Secretary Salvador Medialdea. — PRESIDENTIAL COMMUNICATIONS

Budget Secretary Benjamin Diokno and National Economic Development Authority (NEDA) Secretary Ernesto Pernia keynoted the Arangkada 2017 Forum on Sept. 14, when the Joint Foreign Chambers of Commerce and Filipino partners in business listened to economic opportunities in the near-, medium- and long-term.

“The Duterte administration will be different. We envision that by the time we step down in 2022, we would have ushered in the Golden Age of Infrastructure in the Philippines, an era that Filipinos will look back with affection as one that laid the necessary foundations for robust and equitable growth in the long-term,” Diokno said.

Sec. Diokno lamented the opportunities lost in the less than 2% of GDP of infrastructure spending from 1986 to 2016, which he said “reflected decades of neglect and misallocation of public resources.” He noted that “the suggested ratio for infrastructure spending as a share of GDP is 5% for developing countries.” Loud and clear, the “Build, build, build” program will reverse previous alleged “inaction” to high-gear “Spend, spend, spend” to stimulate economic development.

Sec. Pernia acknowledged past administrations’ accomplishments: “GDP growth has been on a sharp monotonic uptrend over the last three and a half decades. With a 6.9% GDP growth in 2016 — high end of the government’s target of 6% to 7% — the Philippines is poised to be one of the fastest rising economies in Asia over the medium-term.” Regarding the relative slowdown in the first two quarters of 2017 under Duterte, Pernia pointed out that this phenomenon seems normal, reflecting post-election-year effect on growth.

“The economy is also undergoing structural transformation — growth is increasingly being driven by investments vis-à-vis consumption, and is led by the industry sector relative to the service sector. In other words, sources of economic growth have broadened. Total factor productivity growth of the economy in recent years has been the fastest among ASEAN-6 countries at 3.3% for the period 2010-2014, and the highest in the group at 1.48% over the period 2010-2016” Pernia objectively said of the economic situation prior to “Dutertenomics.”

Pernia is confident that the economy is robust and sustainable, but he laments the inequality across households and regions, and the chronic poverty that persists amidst the glowing GDP numbers. “The country’s GDP remains concentrated in the Mega Urban-Industrial Region comprising the National Capital Region (Metro Manila), Calabarzon (Region 4A), and the Central Luzon Region (Region 3), which collectively accounted for nearly two-thirds of total GDP for the period. But the per capita income of NCR is almost triple the national average of P78,712 for 2016, while ARMM’s per capita income is now only 1/4 of the national average and 1/13th of NCR’s,” Pernia said.

“This is why we have identified infrastructure development as a priority of the Duterte administration,” Diokno emphasized. “We have to close the infrastructure gap soon if we are to realize our development objectives of becoming an upper-middle income economy by 2022 and reducing poverty rate to 14%. DBM is targeting at least 5% of GDP for infrastructure financing in the medium term; 5.4% for 2017; and 6.3% for 2018. In nominal terms, these figures translate to P858 billion and P1.1 trillion for FY 2017 and 2018, respectively.”

Diokno plans to finance this through an expansionary fiscal policy that first, increases the planned deficit from 2% to 3% of GDP. Second are the assumed increased revenues from the Tax Reform program. Combining the two expansionary measures, the government would generate an additional fiscal space amounting to P309 billion in 2018 and rising up to P524 billion in 2022, Diokno assumes.

But what if Diokno’s assumptions on revenue inflows do not actually happen? Would the brave swing to “Spend, spend, spend” from past “inaction” dent the “monotonic (boring?) uptrend of GDP” — the close to 7% GDP growth — acknowledged by Pernia?

The government will have to borrow more, that’s what it means.

Hopefully, the shortfall from unrealized revenues will not drive up long-term debt for future generations to pay for — we are still paying, until 2025, for the debts in Marcos’s martial law: “During the Marcos regime… many ‘successes’ were built on ‘debt-driven growth.’ While it is true that the regime embarked on an infrastructure spending spree, this was pursued largely to justify its existence and at the exorbitant cost of the ballooning of the country’s external debt (Rappler, 03.25.2016).”

And the spending of Marcos did not translate to higher GDP growth for him to brag about. “The economic setback due to the Marcos regime cemented our title as the ‘sick man of Asia’ for the good part of the past 3 decades, and prevented us from partaking of the so-called ‘East Asian miracle’ where by the time we recovered in 2003 the incomes of our neighbors had grown 2-4 times their 1982 levels (Ibid.).”

Many economists have warned that increased government spending does not necessarily stimulate GDP growth, and that the Keynesian recipe of “Spend, Spend, spend” (originally for the post-war economic rehabilitation) has lost flavor in the recent unpredictable, anti-cyclical booms and busts of financial and economic crises. Some even say that increased government spending can hamper economic growth, for the “crowding out” of the private sector, and for the politics that murk the decision factors for government intervention in economic planning.

Professor Emeritus of Law at George Mason University Gordon Tullock suggests that politicians and bureaucrats try to gain control of as much of the economy as possible. Demand for government resources by the private sector leads to misallocation of resources through “rent seeking” — the process by which industries and individuals lobby the government for money. Rather than spend money where it is most needed, legislators instead allocate money to favored groups. Though this may yield a high political return for incumbents seeking reelection, this process does not favor economic growth (mercatus.org, 06.10.2010).

A note to our present leaders and economic planners: Yes, we need roads and bridges, and other infrastructure. But when and if you decide to (over)spend on the “Build, build, build” hybrid PPP program, please be careful to study recent abundant analyses on the advantages and disadvantages of government spending as a stimulus to that much-desired GDP growth figure — make sure there is something to brag about in the end, as our economic history writes itself.

Amelia H. C. Ylagan is a Doctor of Business Administration from the University of the Philippines.

Source: http://bworldonline.com/spend-spend-spend/

Pernia rejects draft RFINL for being ‘too puny’

The Duterte administration wants to adopt a more aggressive stance when it comes to reducing the country’s Regular Foreign Investment Negative List (RFINL), according to the National Economic and Development Authority (Neda).

On the sidelines of Arangkada Pilipinas Forum 2017, Socioeconomic Planning Secretary Ernesto M. Pernia said he wants to allow 100-percent foreign ownership in certain sectors. 

While he declined to name these sectors, Pernia has already made known his position on the need to liberalize sectors, such as public utilities, the media and the practice of professions, such as teaching. 

“[We want more] aggressive liberalization…. They have shown me a draft, and I find it too puny in terms of the changes, you know. I want a more aggressive [list] and we have to be on a par with the other Asean countries,” Pernia said. 

“There are many things in there; they are not increasing it by 40-percent to 60-percent equity. [But] I said bring it up to 100 percent for certain areas,” he added. 

Pernia said this was the reason the revised version of the RFINL was not discussed in the Neda Board meeting on Tuesday evening. 

However, he assured that the revised version will be presented in the next Neda Board meeting. Pernia also said this will ensure that the President will be able to issue an executive order (EO) on the matter. 

Neda Undersecretary Rosemarie Edillon told the BusinessMirror on Thursday that the new EO only has to do with the administration’s agenda for reform. 

The EO will be released to instruct agencies to liberalize sectors that they regulate. This means that the EO will mandate agencies to actively seek amendments to existing laws that further the liberalization of industries and professions. 

“Actually, the EO is an agenda for reform. It provides the marching orders for the concerned agencies to work toward the easing of foreign-equity restrictions of certain sectors,” Edillon said via SMS. 

Earlier, Pernia said once the Neda Board approves the new list, the President can already issue the needed EOs to allow more foreigners and foreign investments to practice their profession and do business in the country. 

These include allowing foreign professors to teach in various universities in the Philippines. Currently, private and public universities cannot hire foreign faculty members. 

This becomes a problem, especially in the case of Filipino-American professors, who, based on their credentials, are qualified to teach in the Philippines. But before they can teach here, they have to renounce their American citizenship. 

“The reason our universities are not highly rated—its only UP [University of the Philippines] that’s rated—is we don’t allow foreign professors to teach and be paid, get an item that is already standard in other countries,” Pernia said. 

The Neda is tasked to review and revise the country’s RFINL, which contains restrictions on foreign investments and the practice of professions based on the constitution and Philippine laws. 

The RFINL contains investment areas/activities where foreign-equity participation is limited by mandate of the Constitution and specific laws. It also consists of investment areas/activities where foreign- equity participation is limited for reasons of defense, security, risk to public health and  morals, and protection of small- and medium-sized domestic market enterprises.

The amendment of the list is headed by the Neda Secretariat, as provided for under Section 8 of Republic Act 7042, or the Foreign Investments Act of 1991, which states that amendments may be made upon the recommendation of the secretary of national defense or the secretary of health, or the secretary of education, endorsed by the Neda, approved by the President, and promulgated by a Presidential Proclamation.

Source: https://businessmirror.com.ph/pernia-rejects-draft-rfinl-for-being-too-puny/