Notes on the economic and social impact of Ondoy and Pepeng

Ondoy victims in Pila, Laguna receive relief goods from volunteers of Bayan's Bayanihan Alay sa Sambayanan or BALSA (photo from Bulatlat.com)

The twin devastation brought by typhoons Ondoy and Pepeng hit the Philippines at a time when the country is still reeling from the impact of the global financial and economic crisis. According to the latest (as of Oct 16) consolidated report of the National Disaster Coordinating Council (NDCC), the total cost of damage from the two typhoons reached ₱21.29 billion. The cost of damage to agriculture accounted for 64.8% of the total, and infrastructure, 35.1%. About 7.43 million were affected in the country’s 12 regions, including Metro Manila. (See Table 1)

Initial estimates from the National Economic Development Authority (NEDA), meanwhile, claimed that the macroeconomic impact of the two typhoons is about 0.2% of the gross domestic product (GDP). This could be mitigated, according to NEDA, by remittances from overseas Filipino workers (OFWs) who would tend to send home more money because of emergencies and “will make up for the billions lost in devastating floods”.

Table 1. Estimated extent of impact of Ondoy and Pepeng, data cited as of Oct 16, 2009
Indicators	Ondoy	Pepeng	Total
Affected no. of people (in million)	4.32	3.11	7.43
Total no. of casualties, of which:	781	654	1,435
No. of dead	354	419	773
No. of injured	390	184	574
No. of missing	37	51	88
Cost of damage (in ₱ billion), of which:	10.85	10.44	21.29
Infrastructure	4.08	3.40	7.48
Agriculture	6.77	7.03	13.8
Private property	n.d.c.	0.003	0.003
Total no. houses damaged, of which:	101,278	33,883	135,161
Totally	25,259	4,040	29,299
Partially	76,019	34,843	110,862
Regions affected, of which:	III, IV-A, IV-B, V, VI, IX, X, ARMM, CAR, NCR	I, II, III, IV-A, V, VI, CAR, NCR	n.a.
No. of barangays	1,902	4,585	n.a.
No. of municipalities	155	361	n.a.
No. of cities	30	35	n.a.
No. of provinces	25	27	n.a.
Notes: n.d.c. – no data cited; n.a. – not applicable
Compiled using data from the NDCC Situation Report No. 31 dated Oct 16, 2009

Because of the need for additional spending for post-Ondoy and Pepeng rehabilitation and reconstruction, on top of the need to pump-prime the economy amid the global financial and economic crisis, the 2009 budget deficit could reach as much as ₱307.9 billion, according to the Department of Finance (DOF). There is no official figure yet on the actual amount needed for rehabilitation and reconstruction but Congress has already approved a ₱12-billion supplemental budget for the immediate needs of the typhoon victims.

In addition, a total of ₱32 billion spread over 10 years is needed to relocate more than half a million illegal settlers, including those occupying waterways in Metro Manila. Mrs. Arroyo has ordered the immediate relocation of families near waterways following the massive flooding caused by Ondoy.

Meanwhile, the Arroyo administration has also successfully raised $1 billion from the global bonds market which it said would be used for its reconstruction efforts in regions affected by Ondoy and Pepeng.

While government tends to downplay the effects of the recent typhoons on the economy, with NEDA pointing out that reconstruction will spur domestic growth, the costs are actually much higher considering the still unquantified short- and medium-term effects of losses in jobs and livelihood due to Ondoy and Pepeng, although independent think tank IBON Foundation, in an estimate, said that Ondoy alone would push at least 276,000 families in NCR, Calabarzon, and Central Luzon into “long-term poverty”.

Note also that official unemployment before the storms ravaged the country was pegged at 7.6% nationwide (National Statistics Office’s July 2009 Labor Force Survey), with the top three highest regional unemployment posted by the NCR (12.1%); Calabarzon (11.1%); and Central Luzon (9.9%) – the regions most affected by the typhoons. These regions account for 79.9% of the total number of permanently displaced workers due to economic reasons from Jan 2008 to Jun 2009 as well as 69.3% of the total number of families affected by Ondoy and Pepeng. (See Table 2) 

Table 2. Unemployment rate, no. of permanently displaced workers due to economic reasons, and population affected by Ondoy and Pepeng by region
Region	Unemployment rate (in %, Jul 2009)	No. of permanently displaced workers due to economic reasons (full-year 2008 & 1st half 2009)	No. of affected families by Ondoy & Pepeng (as of Oct 16, 2009)
NCR	12.1	40,427	176,776
IV- A – Calabarzon	11.1	22,241	509,221
III – Central Luzon	9.9	9,902	382,788
I – Ilocos Region	6.7	328	234,479
Cordillera Administrative Region	4.6	1,182	54,507
VI – Western Visayas	7.4	1,360	316
X – Northern Mindanao	5.7	982	0
V – Bicol Region	5.4	347	70,389
XII – Socksargen	5.1	226	603
IV-B – Mimaropa	4.3	635	7,296
IX – Zamboanga Peninsula	4.1	295	191
ARMM	3.4		350
II – Cagayan Valley	2.8	308	105,529
National total (including other regions not affected by Ondoy & Pepeng)	7.6	90,788	1,542,445
Compiled using data from the NSO on unemployment, BLES on displaced workers, and NDCC on affected families by Ondoy & Pepeng

Beyond Ondoy and climate change, blame goes to Arroyo and Teodoro

Residents wade in floodwaters caused by Typhoon Ondoy in Cainta Rizal east of Manila September 27, 2009 (photo from Reuters)

First published by Bulatlat.com

“A President must be on the job 24/7, ready for any contingency, any crisis, anywhere, anytime… As a country in the path of typhoons …we must be as prepared as the latest technology permits to anticipate natural calamities when that is possible; to extend immediate and effective relief when it is not….The mapping of flood- and landslide-prone areas is almost complete. Early warning, forecasting and monitoring systems have been improved…”

These were the confident words of Mrs. Gloria Arroyo in her State of the Nation Address (SONA) last July 27 as she vowed that her government will continue to invest in environment even as, according to her, the country is “safer from environmental degradation”.

But on that fateful weekend of September 26-27, all these talk about disaster preparedness – and sadly along with it more than 280 lives and more than ₱5 billion in properties (and counting) – were deluged by tropical storm “Ondoy”, which brought the heaviest rains and flooding in the country since 1967.

No excuse

As expected, Malacañang quickly warded off criticisms for its obvious lack of prompt and organized response to Ondoy. In an attempt to explain the unprecedented devastation caused by Ondoy, Anthony Golez, one of the presidential spokespersons, noted that “When you try to scientifically observe the data … we will find this year and last year as very strange years, and we can only presuppose that this is due to climate change”.

Indeed, there is no disputing the fact that Ondoy in less than half a day brought rains in Metro Manila and nearby provinces a volume that was even higher than the usual rain that falls on the metropolis for the entire month of September.

But while there is no debate about climate change, which explains the abnormal typhoon patterns and intensity in recent years, accountability still falls on the Arroyo administration in particular on Mrs. Arroyo herself as President and climate change czar and her 2010 presidential bet Defense Secretary and National Disaster Coordinating Council (NDCC) Chairperson Gilberto Teodoro Jr.

More than two years ago, Mrs. Arroyo created the Presidential Task Force on Climate Change (PTFCC) as government recognized that “being an archipelagic country and located in the typhoon belt” the country “is highly vulnerable to the adverse effects resulting from climate changes and has been experiencing unusual number of high-intensity typhoons that have wrought devastations and anguish to our people”. In December 2008, Mrs. Arroyo appointed herself as the head of this task force so she can have a “hands-on approach in crafting and implementing initiatives for environmental security”.

Among the PTFCC’s tasks is to design concrete risk reduction and mitigation measures and adaptation resources, especially to address short-term vulnerabilities, on sectors and areas where climate change will have the greatest impact. This entails among others preparedness to respond to devastation or impact of extreme weather conditions brought about by climate change such as Ondoy’s.

 At a loss

 What happened last weekend? As early as Thursday evening (September 24), the Philippine Atmospheric, Geophysical, and Astronomical Services Administration (Pagasa) had already issued flood warnings and even raised storm signals by Friday (September 25). By that time, the NDCC could have already coordinated with concerned local government units (LGUs) and readied an evacuation and rescue plan. The forced release of water from the Angat and other dams during the height of rainfall last Saturday (September 26) – which aggravated the flooding – could have been properly timed with evacuation efforts, and would surely have saved many lives in affected areas.

But none of these were evident during Ondoy’s onslaught. Until Saturday noon, during the height of the heavy rains and when flooding began, the NDCC seemed to be at a loss on what to do. Numerous pleas for rescue from affected residents through the broadcast media mostly went unheeded and many were able to escape death by themselves or with the help of neighbors.

The NDCC’s excuse was that they only had 13 rubber boats at that time. Government, however, could not claim lack of funds. In 2007 alone, the Philippines received official development assistance (ODA) commitments from foreign donors worth $8.9 million to fund disaster prevention and preparedness aside from $32.28 million from 2005 to 2007 for climate change-related initiatives. These amounts are on top of what government allocates for its calamity fund. What happened to these funds?

Warnings came much earlier

Actually, the warnings came much, much earlier than Pagasa’s flood bulletin last September 24, if only government listened and responded enough. Extreme weather events and climate anomalies have already been observed in the country in the past couple of decades. The 2007 report of the United Nation’s (UN) Intergovernmental Panel on Climate Change (IPCC), for instance, noted that the number of typhoons entering the Philippine area of responsibility has increased by 4.2 during the period 1990 to 2003. Increases in annual rainfall and in the number of rainy days have also been noted as well as the increasing sea level in the country’s major coastal cities, with Manila exhibiting the highest increase.

The Philippines, in fact, is among the first countries to recognize the threats of the climate crisis. As early as May 1991, the late Pres. Corazon Aquino already issued Presidential Order No. 220 that created the Inter-Agency Committee on Climate Change (IACCC) under the Department of Environment and Natural Resources (DENR). The country is also among the original signatories to the UN Framework Convention on Climate Change (UNFCC) in 1994 and among the first to ratify its Kyoto Protocol in 2003.

It is important to note, however, that these landmark agreements which direct global response to climate change are hampered by fundamental issues. For instance, not only are the targets outrageously low, rich countries – which account for bulk of historical greenhouse gas (GHG) emissions with the eight richest countries comprising about 65% – can also achieve them even without actually reducing their emissions. In fact, the implementing rules of the Kyoto Protocol, as largely defined by First World countries and corporate lobby groups, could even result in a net increase in GHG emissions in the long run. Critics point out that the introduction and use of market-based mechanisms namely, the Clean Development Mechanism (CDM), Emissions Trading, and Joint Implementation have systematically weakened and distorted the Kyoto Protocol “from the inside”. Meanwhile, under the current Medium-Term Philippine Development Plan (MTPDP 2004-2010), the Arroyo administration has pursued environmental management and addressing the threats and impact of climate change mainly in the context of energy independence and investment promotion.

In terms of response to the impact of climate change, it has been noted in a 2005 World Bank report that “the Philippine institutional arrangements and disaster management systems tend to rely on a response or reactive approach, in contrast to a more effective proactive approach, in which disasters are avoided, by appropriate land-use planning, construction and other pre-event measures which avoid the creation of disaster-prone conditions”.  The report went on to say that “local level systems are response-driven –there is no obvious effort to initiate proactive hazard management/risk reduction coordination”.

Disastrous response

While there are crucial issues that the international community and the Philippines must address in terms of mitigation and adaptation approaches in relation to climate change, Ondoy’s devastation and its aftermath have also exposed some very alarming and more basic issues. Among them is that while the country’s handling of extremely changing weather conditions is being described as reactive, it appears that even in terms of effective disaster response the country is not also well-prepared.

This is so evident not only in the disastrous rescue efforts of the NDCC but also in the current relief drive of government. The scene of flood victims scrambling for limited relief goods, overcrowded evacuation centers lacking basic hygiene necessities, displaced families forced to spend the night on sidewalks and some in a slaughterhouse amid reports of a depleted national calamity fund, etc all paint a picture of chaos, of a government stumped and perplexed in the face of a tropical storm that experts say was not even super typhoon.

Making the Palace an evacuation center for a handful of “fortunate” flood victims who enjoy relatively better food and more “convenient” temporary shelter to generate favorable publicity for Gloria and Gibo will not do the trick. The Arroyo administration, in particular Mrs. Arroyo and Teodoro as the top officials dealing with climate change and disaster response, must be held accountable for the hundreds of deaths and unspeakable suffering that the victims of Ondoy currently endure. They could not blame Ondoy or climate change – these are realities that the country must now face – but the question is are we dealing with them effectively and responsibly?

Drowned by Ondoy, drowned by debt

A community in Pasig City remains flooded days after tropical storm Ondoy hit Metro Manila and nearby provinces (photo from Bayan - NCR)

Malacañang admitted Thursday (Oct 1) that government’s calamity fund of ₱1 billion is in danger of being depleted. Thus, members of the Senate and the House of Representatives held an emergency meeting with some Cabinet officials and agreed to pass a ₱10-billion supplemental budget in the wake of Ondoy’s onslaught in Metro Manila and adjacent provinces last weekend (Sep 26-27).

The problem is where to source the money. Not surprisingly, Department of Finance (DOF) Secretary Margarito Teves announced that they will tap the global bond market again in order to raise funds for relief and rehabilitation of “Ondoy” victims. This would be the third round of global bond issuance for the Philippine government this year, after the $1.5-billion bond sale in January and the $750-million sold in July, and would come ahead of the scheduled Samurai bond issuance later in the year.

But instead of borrowing more which will only aggravate the country’s debt problems, the more sensible step would be for government to cancel debt payments to free up billions of pesos in public funds that can be used for disaster relief and rehabilitation in the immediate, and provide much needed social services in the medium and long-term.

Debt servicing, since the time of the dictator Ferdinand Marcos, has been siphoning valuable public resources from the country, with the current Arroyo administration paying out the biggest amount of public funds for debt servicing. Debt servicing (interest payments and principal amortization) under Mrs. Arroyo has been, on the average, more than 10% of the country’s gross domestic product (GDP) – higher than Aquino’s 8.1%, Ramos’s 6.8% and Estrada’s 6.6 percent.

Under its proposed national budget for 2010, the Arroyo administration will shell out a huge ₱746.18 billion for debt servicing covering interest payments and principal amortization. In 2009 and 2008, government spent ₱702.6 billion and ₱612.68 billion for debt servicing, respectively. These are huge amounts of money, with interest payments in 2010, for instance, eating up 22.1% of the national budget compared with housing’s 0.4%, health’s 2.5%, and education’s 15.3% – all of which will surely require more funds now because of Ondoy and other stronger typhoons expected to hit the country.

Is debt cancellation possible? Ecuador just did it earlier this year, with its President calling the country’s foreign debt “immoral”.

Considering the still unfolding humanitarian crisis that Ondoy has caused and threats of more super typhoons, the

Youth groups under the Serve the People Brigade join relief efforts for Ondoy victims in Laguna (photo from Kabataan party-list - Southern Tagalog)

 Philippines can justify its move to cancel debt servicing and attend to the more immediate needs of its people. On top of this is the long-standing issue that many of the country’s debts are considered odious and thus the people should not be burdened to pay for them.

Current debt-funded projects such as the multi-million dollar road projects being bankrolled by Asian Development Bank (ADB) and the Japan Bank for International Cooperation (JBIC), $100-million text book project of the World Bank, China’s $885.4-million South Luzon railways project, ADB’s $750-million power sector reform programs and projects, among others are tainted with irregularities and corruption and should be considered for debt cancellation.

While emergency grant assistance for disaster relief from foreign donors are welcome, debt cancellation should be a top option for the Philippines in terms of raising sufficient resources in a sustainable manner to deal with disasters and other immediate and basic needs of its people.

As an initial move, Congress must repeal the Marcosian automatic debt servicing rule as provided under the revised Administrative Code of 1987 and rechannel funds allocated to debt servicing in the 2010 national budget to social services and disaster relief and rehabilitation.

BALSA: Relief effort for “Ondoy” victims

Affected number of families, by area, as monitored and compiled by Bagong Alyansang Makabayan – National Capital Region (Bayan-NCR)

Manila Area, Caloocan Area:
Dam Site 452 families
Dagat Dagatan500 families
Hapiland 450 families
Bagong Silang 500 families
Parola 520 families
Basco 600 families
Dapo Ilang Ilang 2,325 families

Valenzuela Area:
Kahilom 250 families
Marulas 150 families
Banana 300 families
Malinta 150 families

Quezon City Area, Marikina Area:
Payatas 2,000 families
Tumana and Malanday 1,000 families
Bagong Silangan 1,000 families (29 dead 109 missing)
Tatalon 1,000 families

Malabon Area:
Frisco 1,000 families
Tonsuyan 500 families
Damayang Lagi 800 families
Panghulo 500 families
Brgy. Old Balara 1,500 families
Catmon 500 families (3 dead San Jose, Daanghari 300 families 20 missing)
San Roque NBBS 300 families
Brgy. Bagong Bayan 100 families
NBBN Tanza 400 famlies
Brgy. Pansol 300 families
Daang Tubo 50 families

Pasig Area:
Quirino 500 families
Maybunga, Floodway 1,500 families
Project 4 450 families
Sta. Lucia Eastbank 569 famlies
Brgy. E. Rodriguez 400 families
Westbank Floodway 700 famlies
Kalawaan 500 families

Muntinlupa Area, Taguig Area:
Sucat Creek and Lawa 1,785 famlies
Tipas 30,000 families
Buli 120 families
Bagong Bayan 3,000 families
Cupang 1600 families
West Bicutan 2,000 families
Alabang 200 families
Putatan 1,650 families
Poblacion 450 families
Tunasan Sukatville 120 families
Advan BWLU 250 families

Notes on the text tax

also published in Bulatlat.com

As expected, the revived proposal to impose a tax on text messaging is again controversial and widely opposed. What surprised some people perhaps are the strong statements from telecommunication companies (telcos). They called the plan “anti-poor”, “oppressive” and “one of the worst anti-consumer legislations ever made”.

Telcos, of course, are still reeling from the public relations beating they had from questionable charges, missing load and other abuses recently probed by the Senate. Thus some may think that telcos just hope to recover some publicity points by taking on an issue their customers strongly oppose. But Globe Telecom and Smart Communications are actually defending their business interests threatened by the proposal, which include their promotional bucket-priced short message service (SMS) plans that allow them to protect their market share and earn billions of pesos in profits.

Broad opposition

Nonetheless, the firm position of Globe and Smart against the text tax is a welcome development. They reinforced the broad opposition versus an onerous tax proposal repeatedly raised by Congress as well as Malacañang the last 7 or 8 years. Members of the Senate, led by self-styled consumer advocate Senate president Juan Ponce Enrile, have also spoken strongly against the text tax. Add the 2010 elections to the equation, some say, then it is almost certain that this plan will not materialize any time soon.

But proponents of the measure are adamant. The House ways and means committee led by Quezon Rep. Danilo Suarez and Ilocos Sur Rep. Eric Singson has promised to pass a law imposing a 5-centavo tax on SMS within the year. Some sort of an alternative bill is also being pushed by Sen. Richard Gordon reportedly supported by the DOF and NEDA. In Gordon’s version, the text tax is in the form of a 5-year levy on telcos’ profits on SMS. Malacañang has not asked its allies to drop the text tax though it set conditions for its support, namely no pass-on to users; telcos must pay; and revenues for education, health or computerization.

IMF pressure

The latest incarnation of the text tax (a consolidated version of Singson’s House Bill 6625 and Suarez’s House Resolution 282) comes in the context of an administration under pressure from the International Monetary Fund (IMF) to widen its revenue base. In its latest consultation with Philippine officials concluded last January 2009, the IMF Executive Board “suggested” that government raise tax collection effort, broaden revenue base and rationalize fiscal incentives. The IMF noted the still high level of public debt amid continuing need for a measured fiscal stimulus, and thus raised said proposals to provide government “more scope for fiscal easing and well-targeted pro-poor cash transfers”.

While no longer in debt with the IMF, the Philippines remains hostaged to it because its assessment of a country’s fiscal situation is used as a signal by foreign creditors and investors. A favorable review by the IMF means high “creditworthiness” for the debt-dependent economy. The IMF has exercised control over the country’s fiscal policies through regular consultations between its Executive Board and Filipino officials such as the one they concluded in January.

Incidentally, it was the IMF that first openly pushed the text tax idea in 2002 to address government’s burgeoning budget deficit. But it was hugely unpopular and promptly rebuffed by some lawmakers. Even so, various text tax and related bills have been filed in Congress since then. Finance and Trade officials have also raised the proposal at various times and circumstances – at one point to pressure the bicameral committee to fast track the also infamous Reformed Value-Added Tax (RVAT) law in 2005 and in some instances as trial balloon on public opinion. The National Tax Research Center (NTRC) has conducted a study as well on the text tax in 2007 to weigh potential revenues and impact on consumers.

Lobby vs. sin taxes

Due to its unpopularity, the text tax could not be found in official policy pronouncements of Mrs. Arroyo. In her July State of the Nation Address (SONA), for instance, Mrs. Arroyo has categorically asked Congress, to further restructure so-called “sin taxes”, which unlike the text tax does not invite loud public outcry. During its January consultation with IMF officials, Arroyo officials promised to pass a law imposing separate uniform tax rates for alcoholic drinks and cigarette products.

But apparently, Malacañang and Congress have given in to the strong lobby of local manufacturers of sin products, who reportedly sought a meeting with Mrs. Arroyo in her Forbes Park (Makati) home to lobby against the proposal. The coming 2010 elections could have also played a role – with known huge election campaign contributors Lucio Tan (who owns Asia Brewery Inc and Fortune Tobacco) and Danding Cojuangco (who own San Miguel Corp) as among the stakeholders to be affected by sin taxes reform. There is also strong opposition from the so-called Northern Luzon bloc, or congressmen from the country’s tobacco-producing region.

While openly asking for sin taxes reform, Mrs. Arroyo has also been discreetly pushing for a text tax law, which in March she described as having a rate of between “5 to 10 centavos” and with collections earmarked for “education”. Note that these are the same salient provisions of current House proposal for a text tax. After Mrs. Arroyo’s SONA, sin taxes are no longer in the agenda of the Malacañang-controlled House ways and means committee. Its chairman Antique Rep. Exequiel Javier has already declared that the text tax is more doable than the sin taxes reform.

Do we need new taxes?

For the IMF, what is important is that government be able to widen its revenue base and manage the national budget deficit, which is expected to balloon to ₱250 billion this year. The IMF and government hope to reduce this to ₱233.4 billion in 2010 through new taxes. Whether the new taxes will come from our cellphones or our beer, the intention is to assure creditors that the Philippine government, which presently has a debt of ₱4.23 trillion, will continue to be a viable borrower.

But do we really need new taxes when government losses from anomalous contracts in infrastructure projects alone such as the botched NBN-ZTE broadband project reach at least ₱30 billion a year and nearly approximate the projected ₱36 billion in potential annual revenues from the text tax?

Consider also that even without modifying our existing commitments with the World Trade Organization (WTO) and other free trade deals, the Philippines can hike tariffs across the board and raise billions of pesos in revenues. Note that due to continuing trade liberalization, total collections from tariffs on imported goods and services under Arroyo now only account for 2.8% of total revenues and gross domestic product (GDP), compared to around 4.5% for most of the 1990s. In the first half of 2009 alone, we are giving up almost ₱117 million in potential revenues per month due to lower duties.

Government claims that revenues from the text tax will be used for education. In a policy regime of automatic debt servicing, this is lip service, to say the least. In the proposed 2010 national budget, for instance, the Arroyo administration is allocating a per capita education budget of ₱2,502, while each Filipino will have a debt servicing burden of ₱7,944. For health, Malacañang is allocating ₱402 for 2010 and ₱58 for housing. Thus, this administration which always uses social services to defend its oppressive taxes is allocating a combined budget for education, health and housing with an amount that is merely 37% of what it intends to pay its creditors.

And finally, how can a regime whose highest officials dined for $35,000 (ostensibly using taxpayers’ money) in two nights during a US junket justify another onerous tax on a people already battered by high prices, low wages and job scarcity?

By the way, text tax proponent Suarez claimed to have paid for one of those dinners.