Elite governance, elite economics: When vaunted growth clashes with reality

By ARNOLD PADILLA
Bulatlat.com

MANILA — In 2012, the dominant theme peddled by the Aquino administration was “good governance is good economics”. Malacañang’s hoax is that the “daang matuwid” (righteous path) has created a favorable environment for inclusive economic growth. From being the sick man of Asia, the Philippines now brims with vitality. Or so, President Benigno Aquino III declared in last July’s State of the Nation Address (Sona).

Going by the mainstream media reports, Aquino’s boasts seem hard to doubt. For one, the national accounts do show rosy numbers. The Philippines is beating expectations and has been one of the supposed few bright spots amid a gloomy world economy.

International banks, local and foreign investors, credit rating agencies and multilateral financial institutions are saying the prospects are indeed upbeat for this country. The most optimistic claimed we are the new tiger in the region, joining the likes of Singapore and South Korea. If only they were correct.

Good news for big business

After growing by 7.1-percent in the third quarter, way above the market’s media forecast of 5.4-percent, the gross domestic product (GDP), they say, has expanded by 6.5-percent this year. The strong third quarter performance prompted economic managers to revise upwards their 2012 full year GDP growth projection with the National Economic and Development Authority (Neda) claiming the GDP will likely grow by 7-percent this year, higher than earlier official forecast of 5-6 percent. Many share the optimism like the World Bank which raised its projection to 6-percent from previous 4.2 percent.

Standard and Poor’s (S&P) upgraded the credit rating of the Philippines from “stable” to “positive” following the GDP report. It put the country on track to make investment grade by next year. Officials say this means lower borrowing cost for government and lower cost for doing business in the Philippines.

Prior to the S&P upgrade, the country has already posted eight credit rating upgrades since 2010. These developments fuel optimism in the market. Trading at the Philippine Stock Exchange posted 38 record highs this year, making it one of the most vibrant equities market worldwide.

Other economic data reported by mainstream media also seem encouraging. In the first nine months of the year and amid the global crisis, exports grew by 7.2-percent; foreign direct investments (FDI) by 40-percent, compared to the same period last year. As such, as of November, the Philippines has an all-time high of US$84.1 billion in gross international reserves (GIR) and a balance of payments (BOP) surplus of US$2 billion, five times its value during the same month last year.

The country’s big business groups share government’s high optimism, citing the so-called good economic fundamentals in 2012 that can lead to a “super-year” in 2013. They see more opportunities to further boost profits with the anticipated investment grade rating, the implementation of public-private partnership (PPP) projects and the upcoming midterm elections.

Big business has every reason to be upbeat. Contrary to ordinary people, to the moneyed few all these indicators as high GDP growth, robust stock market and favorable credit rating reflect how lucrative the economy is. Plus, the past and present policies of privatization and deregulation have allowed them to monopolize and greatly profit (through generous perks, incessant hikes in rates and user fees, and exploitation of workers) from key economic activities including public utilities and infrastructure development. To this small group of super-rich, wealth has ballooned in recent years. In 2009, the Forbes magazine reported that the 40 richest Filipinos had a combined wealth of $22.4 billion and in 2011, the amount more than doubled to $47.43 billion. The economy is growing but that’s good news only for big business.

Hard realities

Amid the purported stellar growth of the economy are bitter realities of rising joblessness, worsening hunger and deteriorating poverty. Social indicators most vital to the people have deteriorated in the past three years amid record-high profits and wealth of elite families, high investor confidence and positive market sentiment.

Official unemployment rate as measured by the National Statistics Office (NSO) averaged 7-percent in 2011 and 2012, from 7.3-percent in 2010. We are supposed to be the second fastest growing economy in the region, just behind China. Yet, the official jobless rates of our neighbors are much lower. Thailand’s is 0.7-percent; Singapore, 2.1-percent; Malaysia, 3-percent; South Korea, 3.8-percent; China, 4-percent; and Taiwan, 4.2-percent. To be sure, like in the Philippines, these official unemployment figures understate the true extent of domestic joblessness in these countries. But we cite them for the simple comparison of official data on the labor markets in the region. (Data on Asian countries are as of first quarter 2012 as compiled by the Bangko Sentral ng Pilipinas or BSP. During the same period, our official unemployment rate was 7.2 percent.)

The quality of available jobs is another issue. NSO’s preliminary October 2012 Labor Force Survey shows that underemployed workers – those who are employed but are still looking for additional work – numbered 7.2 million; self-employed without any paid employee, 10.7 million; and unpaid family workers, 4.1 million. All in all they comprise 22 million of the reported 37.7 million employed workers (or nearly six in every 10 employed) with disputable quality of jobs.

Also for wage and salary workers, there’s the issue of extremely low pay amid a very high cost of living (made even worse by Aquino’s enforcement of the two-tier wage system which imposes a floor wage that is even lower than the minimum wage) as well as job insecurity amid widespread labor contractualization. The last time the National Wages and Productivity Commission (NWPC) issued its estimate of family living wage (which could approximate the amount needed by a regular family to live decently) it pegged it at P917 (US$70.60) per day as of September 2008 in Metro Manila. More than four years later, Metro Manila’s daily minimum wage is still a measly P419-456 (US$ 32.26 to US$ 35.11).

To approximate how worse the problem of job scarcity in the Philippines could be, there are the regular surveys of Social Weather Stations (SWS). In 2010, 22.5-percent of Filipino workers said they were jobless; they increased to 23.6-percent in 2011. This year, they grew to 30.1 percent. That means there were about 9.5 million unemployed workers in 2010 and 2011; this year, their number climbed to 12.1 million workers. In Aquino’s first three years in power, the number of workers who said they were jobless has increased by 2.6 million based on SWS surveys.

With the economy producing scant jobs and livelihood opportunities amid a regime of more depressed wages, poverty and hunger have been at their worst. Almost half (47.5-percent) of Filipino families considered themselves poor in 2010, said the SWS. Since then, the percentage has steadily climbed to 49.3-percent in 2011 and 51-percent this year.

There are now around 10.3 million families who consider themselves poor, up from 9.9 million in 2011 and 8.9 million two years ago. Thus, in the first half of Aquino’s term, some 1.4 million more families, or seven million Filipinos, become poor. And yet, from 2009 to 2012, the budget for the controversial conditional cash transfer (CCT) program swelled seven times its amount from just P5 billion to P39.4 billion (US$ 38.5-m to US$ 30.34-b). It failed to make a dent on poverty.

Hunger incidence, still as surveyed by the SWS, also became more widespread. From 2010 up to now, about one in five families reported to have experienced hunger. It climbed 19.9-percent in 2011 and to 21.1-percent this year. In figures, there were 3.6 million hungry families in 2010; 4 million in 2011; and 4.3 million by 2012. Under Aquino, 700,000 more Filipino families as measured by the SWS experienced hunger.

Problematic structural issues

With the rapid and steady decline of local gainful employment opportunities, labor export further intensified under Aquino. His government deploys an average of 1.58 million OFWs per year, a significant jump from the one million deployed abroad annually by Arroyo.

Compared to 1980s, the Philippines is now exporting three to four times more OFWs. Also, OFW deployment relative to the number of domestically employed workers has steadily increased through the years – from just 2.9-percent in 2001 to 4.5-percent in 2011 – indicating the Philippines’ deepening reliance on labor export.

OFW remittances breached the $20-billion mark for the first time in 2011. As of September 2012 it is reported at $15.57 billion. The World Bank expects it to reach a new record high of $24 billion this year. Remittances have been keeping the Philippine economy afloat in the past three decades. It provide means for domestic consumption and payments for its import-dependent production (trade deficit stood at $6.8 billion as of October) and massive foreign debt (pegged at $61.72 billion as of September). It also makes possible one of the Aquino administration’s favorite 2012 highlights: the supposed creditor nation status of the Philippines.

While exports and FDI inflows rose this year, OFW remittances, the third largest in the world behind remittances from Chinese and Mexican migrant workers, remained the economy’s single largest source of dollars. In the last 10 years, annual OFW remittances have dwarfed the net FDI (being almost 90 times its size) while the trade balance, as in previous decades, has remained perennially in the red.

The neocolonial import-export sector continues to take away invaluable resources from the country, while others in countries like Indonesia, Malaysia, South Korea and Singapore are posting trade surpluses of US$25 to $43 billion.

Similar to neocolonial trade, labor export takes away more from the economy than the remittances it brings back. Highly-skilled and trained Filipino workers render their productivity to foreign economies instead of ours. The social costs of labor export such as disintegrating families, issues still unmeasured by statistics, cannot be ignored.

On top of being proofs of permanent and structural crisis plaguing the Philippines, labor export and remittances also drive “growth” as measured by the GDP. It is one of the biggest anomalies of Philippine maldevelopment. The surprising third quarter expansion was mainly driven by the 24.3-percent growth in construction gross value-added (GVA) and 24.8-percent growth in construction expenditure as record-breaking inflows of remittances fuel demand for residential property. The so-called real estate boom is also being pushed by the BPO sector that, according to industry insiders, has been driving up demand for new office space. The latter is expected to hit a record 400,000 to half a million square meters this year, or an increase of about a quarter from last year.

Like in labor export, growth led by BPO is an aberration as it shows the country’s continuing failure to develop and industrialize. Labor export and BPO are both results of the domestic economy’s longstanding structural inability to generate sustainable and productive jobs from vibrant local industries such as the manufacture of consumer and industrial goods and modernized agriculture.

Without a national industrialization plan, the government forces its citizens to rely on what the US and other rich countries’ more advanced economies require of it, whether as production workers in their global assembly lines and factories or as call center agents. They indeed create (low-paying, insecure) jobs but just enough for their needs. The jobs generated are also totally detached from local development needs.

Sadly, the boasted “resilience amid the global crisis” is not due to the economy’s internally-driven, sustainable, job-generating domestic industries but due to BPOs and labor export. These are in fact simply cost-cutting schemes of First World economies for their crisis-hit economies. As such, we may continue to “grow” amid the global crisis, but at a great expense to our workers who are being forced to accept further exploitative arrangements in the form of more depressed wages and lack of social protection whether as an irregular call center agent here or an undocumented migrant worker in the US.

At our expense

Aquino’s touted “growth” is at our expense. Not only is the supposed growth not creating enough jobs, it is also pushed by skyrocketing costs of basic needs and vital economic services. At current prices, electricity, gas and water grew the second fastest in the third quarter among all major industries, just behind construction as 2012 saw regular rate increases in privatized electricity and water. While it means added burden to the public, it means more profits for private corporations controlling them.

The nine-month profits of the Manila Electric Co. (Meralco), for instance, rose by 7.9-percent to P12.89 (US$ 992-m) billion. The company expects it to hit P16 billion (US$ 1.23-b) by end of 2012. Also, In the first nine months of 2012, Maynilad Water Services Inc. has amassed more than P5 billion (US$ 385-m) in profits (13-percent higher than last year) while Manila Water Co. has raked in P3.9 billion in profits (26-percent higher than last year). Due to ceaseless surge in user fees, Manila already has the most expensive electricity rates and the fifth most expensive water rates among major Asian cities.

These utilities are controlled by the country’s richest clans and individuals who are closely associated with Aquino. They include presidential uncle Danding Cojuangco, political supporters Manny Pangilinan and the Ayala family. Aside from electricity and water utilities, they also control other key infrastructure such as toll roads, telecoms and power generation. Together with other close Aquino allies like the Lopezes, Aboitizes and Consunjis, among others, these groups have positioned themselves to further expand their business empire through Aquino’s PPP scheme.

The Ayalas have already bagged the P1.96-billion (US$151-m) Daang Hari – Slex Link Road project earlier this year; Pangilinan/Ayalas, Cojuangco’s San Miguel Corp. and the Consunjis are all vying for the P60-billion LRT 1 extension and privatization project, which is also tied to government’s adamant plan to raise LRT/MRT fares by next year. Even public hospitals are not spared. Pangilinan is eyeing for his growing list of hospitals the P5.6-billion (US$ 431-m) for privatization Philippine Orthopedic Center.

The often touted credit rating upgrades are also being achieved at the people’s expense. Credit rating agencies cite the fiscal reforms being undertaken by Aquino that tame the national budget deficit. This includes, among others, raising government fees, imposing new charges through Administrative Order (AO) No. 31, and imposing more taxes like the newly-signed Sin Tax Law. All are geared to generate additional revenues. But much of these revenues are earmarked for debt servicing, so Aquino could gain favorable reviews from creditors and credit rating agencies.

Since Aquino took over up to September of this year, the government has spent P1.59 trillion for debt servicing. The amount represented US$7 of every US$10 revenues generated by the government. It is also more than half (53.3-percent) of total spending plus principal amortization. To compare, debt servicing under Arroyo was equivalent to US$6.58 of every US$10 revenues and less than half or 41.5-percent of expenditures. These belie claims that the national budget under the Aquino administration is being redirected toward social services to empower and benefit the poor.

The expenditure program from 2011 to the recently signed P2-trillion 2013 national budget shows that the budget for debt servicing (including principal amortization) is equivalent to an average of 2.5 times that of the budget for education; 6.4 times, health; and 11.2 times, housing.

For elite interests

While the Aquino administration is harping on good governance as key to the drastic economic turnaround, much of its so-called reforms – with substantial backing from the US government and multilateral institutions like the World Bank – have been more about protecting elite and big business interests and less about curbing big-time systemic corruption or democratizing government. The reforms are all about creating a more conducive atmosphere for investors, i.e. stable and predictable policy environment, less business risks and reduced costs, etc. to reinforce liberalization, deregulation and privatization.

Aquino continues to operate under the repeatedly proven as false assumption that when business thrives, the people will ultimately benefit through more jobs, income opportunities and improved living conditions. As data show, this is not happening. The gains from a supposedly expanding economy remain monopolized by a handful of big local businessmen and their foreign partners and funders.

On top of promoting the interests of big business, the good governance rhetoric is also being used to advance the agenda of the Aquino clique in the political elite. The successful ouster of Renato Corona as Supreme Court (SC) Chief Justice and the appointment of Ma. Lourdes Sereneo, for instance, were more about the consolidation of the political power of the ruling Liberal Party (LP) than making Mrs. Arroyo accountable. Executive hegemony over government branches that formulate policies (Congress) and review the legality of such policies (Judiciary) creates a more ideal political setting for pushing retrogressive economic programs that promote certain big business interests.

In the run-up to the 2013 midterm polls, the LP further heightened their political consolidation under the guise of daang matuwid. Aquino appointed Grace Padaca to the Commission on Elections (Comelec) while LP President and 2016 presidential wannabe Mar Roxas is leading the campaign to unseat non-LP governors in the vote-rich provinces of Cebu and Pangasinan through his powerful post as Secretary of the Department of Interior and Local Government (DILG). The LP is laying the groundwork for their prolonged rule and continued imposition of their brand of elite governance and economics beyond the 2016 term of Aquino.

But as in past experiences, the crisis gripping the great majority of Filipinos is fueling greater conflict. The hoax entitled ‘good governance is good economics’ and Aquino’s popularity will soon reach their threshold if joblessness, poverty and hunger continue to worsen. The significant 12-point drop in Aquino’s latest satisfaction rating, despite the scorching speed of GDP growth, is portent of things to come.