“Growth” for big business, at the people’s expense

The Ayala and Pangilinan groups team up in a bid to bag the ₱60-billion LRT 1 privatization project, so far the biggest PPP initiative of the Aquino administration. San Miguel Corp. of presidential uncle Danding Cojuangco is also bidding for the contract. These groups, which enjoy close ties with Aquino, have made a fortune by cornering privatization deals that burden the people with high user fees. (Photo from www.ppp.gov.ph)

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Structural issues

With the rapid and steady decline of the domestic labor market, labor export has further intensified under Aquino who deploys an average of 1.58 million OFWs a year, a significant jump from the 1 million during Arroyo’s term. If you stretch the comparison to the 1980s, the country is exporting about 3-4 times more OFWs today. In addition, OFW deployment relative to the number of domestically employed workers has steadily increased through the years – from just 2.9% in 2001 to 4.5% in 2011 – indicating the deepening reliance on labor export of the Philippines.

Their remittances (which for the first time breached the $20-billion mark in 2011 and as of September 2012 is reported at $15.57 billion but expected by the World Bank to reach a new record high of $24 billion for the full year) have been keeping the economy afloat in the past three decades by providing means for domestic consumption and payments for our 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, which is also the quick and straight answer to one of the favorite 2012 highlights of the administration – the Philippines supposedly being a creditor nation).

In fact, while exports and FDI inflows have increased this year, OFW remittances, the third largest in the world behind remittances from Chinese and Mexican migrant workers, remained the single largest source of dollars for the economy. In the past 10 years, annual OFW remittances are almost 90 times the size of net FDI while the trade balance, as in previous decades, remained perennially in the red, meaning that the neocolonial import-export sector continues to take out invaluable resources from the country, while others in the region like Indonesia, Malaysia, South Korea and Singapore are posting trade surplus of between $25 to $43 billion. Like neocolonial trade, labor export actually takes away more from the economy than the remittances it brings as 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 left unmeasured by statistics, should not be ignored as well.

While actually symptomatic of the permanent and structural crisis that forever besets the Philippines, labor export and remittances drive “growth” as measured by the GDP. This is perhaps one of the biggest anomalies of our maldevelopment. The surprising third quarter expansion, for instance, was mainly driven among others by the 24.3% growth in construction gross value-added (GVA) and 24.8% 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 which is expected to hit a record 400,000 to half a million square meters this year, or an increase of as much as 25% from 2011.

Like labor export, growth stimulated by BPO is an aberration because its predominance in economic production is actually indicative of the country’s continuing failure to develop and industrialize. Both are the results of the domestic economy’s longstanding structural inability to generate sustainable and productive jobs from vibrant local industries including the manufacture of consumer and industrial goods and modernized agriculture. Without a national industrialization plan, we are forced to rely on what the US and other rich countries require us to do for their advanced economies, whether as production workers in their global assembly lines and factories or as call center agents to service the various needs of their clients. Certainly, they do create some (low-paying, insecure) jobs but just enough to meet their needs while the jobs generated are totally detached from our own development needs.

Furthermore, the so-called resilience amid the global crisis is not because the economy is internally-driven by sustainable, job-generating domestic industries but because our main drivers of growth – BPO and labor export – are precisely useful cost-cutting schemes for the crisis-hit economies of the First World to cope with the economic crunch. In other words, we may continue to “grow” amid the global crisis, but at the great expense of our workers who will be 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

“Growth” indeed has been at our expense. Not only is the supposed growth not creating enough jobs, it is also being 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 the year as usual saw the regular rate increases in privatized electricity and water. While this meant additional burden for the public, it meant more profits for the private corporations that control them.

The nine-month profits of the Manila Electric Co. (Meralco), for instance, increased by 7.9% to ₱12.89 billion, which the company expects to hit ₱16 billion for the full-year. Similarly, In the first nine months of 2012, Maynilad Water Services Inc. has amassed more than ₱5 billion in profits (13% higher than last year) while Manila Water Co. has raked in ₱3.9 billion in profits (26% higher than last year). Due to the never-ending surges 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 such as presidential uncle Danding Cojuangco and 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 ₱1.96-billion Daang Hari – Slex Link Road project earlier this year; Pangilinan/Ayalas, Cojuangco’s San Miguel Corp. and the Consunjis are all vying for the ₱60-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 hospitals are not spared such as the ₱5.6-billion privatization of the Philippine Orthopedic Center which Pangilinan is eyeing to add to his growing list of hospitals.

The much ballyhooed 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 and imposing new charges through Administrative Order (AO) No. 31 and imposing more taxes like the newly-signed Sin Tax Law to generate additional revenues. Most of these revenues, however, will go to debt servicing as Aquino needs to gain favorable reviews from creditors and credit rating agencies.

Since Aquino took over up to September this year, government has already shelled out ₱1.59 trillion for debt servicing, equivalent to 70.2% of total revenues and 53.3% of total expenditures plus principal amortization. For comparison, debt servicing under Arroyo was equivalent to 65.8% of revenues and 41.5% of expenditures. These belie claims that the national budget under the Aquino administration is now being redirected towards social services to empower and benefit the poor. The expenditure program from 2011 to the recently signed ₱2-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 being behind the supposed drastic economic turnaround, much of the so-called reforms it is undertaking – 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. The false assumption is that when business is thriving, the people will ultimately benefit through more jobs and income opportunities and improved living conditions. But clearly, this is not happening as the gains from a supposedly expanding economy have remained 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 of 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) makes an even more ideal political setting to push for 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 obviously laying the groundwork for their prolonged rule and continued imposition of their brand of elite governance and economics beyond the 2016 term of Aquino.

However, contradictions will surely heighten as the crisis gripping the great majority of Filipinos intensifies. The deception of good governance is good economics and the popularity of Aquino will certainly reach their threshold if joblessness, poverty and hunger continued to deteriorate. The significant 12-point drop in Aquino’s latest satisfaction rating despite the scorching speed of GDP growth could be a portent of things to come. ###

Economy in 2012: Rising joblessness, poverty amid Aquino admin’s claims of growth

Joblessness, poverty and hunger are reaching record highs under the Aquino administration amid claims of growing economy (Photo from www.flickr.com)

In 2012, the dominant theme peddled by the Aquino administration was “good governance is good economics”. The main propaganda line of Malacañang is that the “daang matuwid” (straight path) has created a favorable environment for economic growth that is inclusive. From being the sick man of Asia, the country now brims with vitality, declared President Benigno Aquino III in his State of the Nation Address (Sona).

To the uncritical, such assertions would 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 one in saying that the prospects are indeed upbeat for the country. There are even claims that we are the new tiger in the region, joining the likes of Singapore and South Korea.

Good news for big business

After growing by 7.1% in the third quarter, way above the market’s media forecast of 5.4%, the gross domestic product (GDP) has now expanded by 6.5% for the 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 that the GDP will likely grow by 7% this year, well beyond the earlier official forecast of 5-6 percent. Many share the same optimism like the World Bank which also raised its projection to 6% from the previous 4.2 percent.

Meanwhile, Standard and Poor’s (S&P) upgraded the credit rating of the Philippines from “stable” to “positive” following the GDP report which 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 continued to feed optimism in the market with trading at the Philippine Stock Exchange posting 38 record highs this year, making it one of the most vibrant equities market worldwide.

Other economic data, as culled by the Christmas Day Inquirer editorial, also seem encouraging. In the first nine months of the year and amid the global crisis, exports grew by 7.2% and foreign direct investments (FDI) by 40% compared to the same period in 2011. Consequently, as of November, the country has an all-time high of $84.1 billion in gross international reserves (GIR) and a balance of payments (BOP) surplus of $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, of course, has every reason to be upbeat. High GDP growth, robust stock market and favorable credit rating all reflect not the state of the ordinary people but of how lucrative the economy is for the moneyed few. Further, 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.  This small group of the super-rich has seen their wealth balloon 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

Because amid the purportedly stellar growth of the economy, series of credit rating upgrades, streak of stock market highs and favorable reviews by banks, fund managers and investors are the hard realities of rising joblessness, worsening hunger and deteriorating poverty. Social indicators which are most vital to the people have been deteriorating in the past three years amid the 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% in 2011 and 2012 from 7.3% in 2010. We are supposed to be the second fastest growing economy in the region just behind China but the official jobless rates of our neighbors are much lower. Thailand’s is 0.7%; Singapore, 2.1%; Malaysia, 3%; South Korea, 3.8%; China, 4%; and Taiwan, 4.2 percent. To be sure, like in the Philippines, these official unemployment figures understate the true extent of domestic joblessness in the respective 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.)

And we have not even looked at the quality of available jobs. A quick peek at the 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. That’s easily 22 million out of the reported 37.7 million employed workers (more than 58%) with disputable quality of jobs.

Then 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 ₱917 per day as of September 2008 in Metro Manila. More than four years later, Metro Manila’s daily minimum wage is still a measly ₱419-456.

To have an idea of how massive job scarcity in the Philippines could be, we may refer to the regular surveys of the Social Weather Stations (SWS). In 2010, 22.5% of Filipino workers said they were jobless which increased to 23.6% in 2011. This year, it ballooned to 30.1 percent. In absolute terms, there were about 9.5 million unemployed workers in 2010 and 2011; this year, it climbed to 12.1 million workers. In Aquino’s first three years in power, the number of workers who said that they were jobless increased by 2.6 million based on SWS surveys.  (Results of SWS surveys cited in this article all refer to annual averages.)

With the economy not producing enough jobs and livelihood opportunities even as wages become even more depressed, poverty and consequently hunger have been at their worst. Again using the SWS surveys, 47.5% of Filipino families considered themselves poor in 2010. Since then, the percentage has steadily climbed to 49.3% in 2011 and 51% 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, the number of poor families ballooned by 1.4 million. This means that some 7 million Filipinos have been added to the number of poor in the past three years. Note that between 2009 and 2012, the budget for the controversial conditional cash transfer (CCT) program swelled from just ₱5 billion to ₱39.4 billion (a whopping 688% increase) but apparently failing to make a dent on poverty.

Hunger incidence, still as surveyed by the SWS, follows the same path. In 2010, the percentage of families who reported to have experienced hunger was at 19.1 percent. It climbed to 19.9% the next year and to 21.1% this year. In absolute figures, there were 3.6 million hungry families in 2010; 4 million in 2011; and 4.3 million in 2012. Under Aquino, the number of Filipino families who experience hunger has so far grown by 700,000 or about 3.5 million people as measured by the SWS.

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“Growth” built on maldevelopment

BPO and labor export as growth drivers is an aberration because their prevalence is symptomatic of the economy’s continuing failure to industrialize (Photo from callcenterphilippines.com)

Written for The Philippine Online Chronicles

The National Statistical Coordination Board (NSCB) reported that the Philippine gross domestic product (GDP) grew by 7.1% in the third quarter of 2012. The expansion was beyond the general expectation of 5.4% and second only to China’s 7.7 percent. Encouraged by the “surprising growth”, government chief economist Arsenio Balisacan is predicting that the country will surpass its 5-6% growth target for 2012. Earlier, the International Monetary Fund (IMF) also forecast that the Philippines will grow faster than projected and could become the only economy in the world that will beat expectations.

It’s not every day that the economy outperforms forecasts and ranks behind the region’s largest economy so this must be good news, right? But if you are assuming that we are finally on the path toward sustained and inclusive growth thanks to the good governance reforms of the Aquino administration, you might want to rethink your optimism.

Because the hard truth is that our supposed economic growth is an aberration, a result of our maldevelopment. It is “growth” that is being spurred by volatile foreign capital and markets and not by dynamic and reliable domestic productive sectors. It is growth that underlines the structural defects of our economy. Thus, it could never be banked on to produce long-term jobs and curb poverty, much less jumpstart national industrialization. (For a discussion on job creation and inclusive growth, read this earlier article on GDP growth.)

Let us look at the latest national accounts released by the NSCB. The 7.1% expansion in the GDP was mainly the result of the extraordinary performance of the construction sector both in the production and consumption sides. NSCB data show that by industrial origin, the gross value added (GVA) in construction grew by 24.3% in the third quarter, the largest among all sectors. Manufacturing, on the other hand, expanded by just 5.7 percent. Meanwhile, construction expenditure expanded by 24.8% during the same period, easily the fastest growth rate among all types of expenditures that contributed to the GDP growth. (See Table)

What’s driving the scorching growth in construction? Is the country constructing new infrastructure and factories to support the building of national industries? Is the economy producing domestically sourced surplus income that spurs the demand for residential construction?

Sadly, no. The high growth in construction, and consequently the acceleration in the GDP growth, is mainly attributable to the inflows of funds from external sources, in particular the foreign direct investments (FDI) for the business process outsourcing (BPO) sector and the remittances of overseas Filipino workers (OFWs). These externally driven funds are fuelling the so-called “construction boom” in the country, which in turn pushed the substantial GDP growth.

BPO, according to industry sources, has been driving up demand for new office space which is expected to hit a record 400,000 to half a million square meters this year, or an increase of as much as 25% from 2011. Such expansion in BPO commercial space is extremely limited to the country’s BPO hubs. Of the 2.2 million square meters in additional office space for BPO up to 2015, 69% are in Quezon City, Makati, Mandaluyong and Manila while the rest is in other major urban centers like the cities of Davao and Cebu. Certainly, this isn’t inclusive growth both geographically and in terms of the demographic of the domestic labor market. Meanwhile, OFWs continue to stimulate residential construction, with foreign buying of property increasing by 61% this year, according to industry sources.

Why is growth stimulated by BPO and OFWs an aberration?  Because their predominance in economic production is actually symptomatic of the country’s continuing failure to develop and industrialize. Both are the results of the domestic economy’s longstanding structural inability to generate sustainable and productive jobs from vibrant local industries including the manufacture of consumer and industrial goods and modernized agriculture.

Without a national industrialization plan, we are forced to rely on what the US and other rich countries require us to do for their advanced economies.  Since the 1970s, they made us production workers in their global assembly lines and factories. Since the 2000s, they made us call center agents to service the various needs of their clients. In both cases, the rationale has been the same – for American and other foreign firms to exploit our cheap labor in order to cut costs and maximize their profits. To be sure, they do create some jobs but just enough to meet their needs while the jobs generated are totally detached from our own development needs. They are just squeezing dry our labor and human resources while the economy is left with crumbs in the form of several million dollars in investments and several hundred thousand jobs amid tens of millions in employment needs.

The same thing is true with labor export that deprives the economy of the productive capacity of its own work force. Certainly, the remittances keep the economy afloat and provide the much needed boost for consumer spending. But when measured against what is being taken away from us when millions of our skilled workers, scientists and engineers, health workers, teachers, etc. use their invaluable skills to serve the needs of other countries instead of ours, the net impact is far more disastrous economically (not to mention the social costs of labor export).

The maldevelopment of our economy is further emphasized when Malacañang and the IMF boast that the Philippines will continue to grow and be resilient amid the global economic crisis. The reason behind such resilience is not because the economy is internally-driven but because our main drivers of growth – BPO and labor export – are precisely useful cost-cutting schemes for the crisis-hit economies of the First World to cope with the economic crunch. In other words, we may continue to “grow” amid the global crisis at the great expense of our workers who will be 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 States.

A country of call center agents and exported workers will just never industrialize. ###

Junking the Marcosian debt policy for people’s needs

Despite its trappings of reformist language, the Aquino administration’s budget proposals are still reflective of the same anti-people and anti-development policy thinking of the past regimes; and still emasculated by the Marcosian automatic debt servicing

Continued from Part 1

Until today, under post-Martial Law so-called democratic regimes, the Marcosian policy of automatic debt servicing and the heavy debt burden continue to cripple the capacity of government to provide sufficient social services and attend to the basic needs of the people. In an earlier research, think tank Ibon Foundation noted that Filipino taxpayers will continue to shoulder the Marcos debts until 2025, more than half a century since the late strongman imposed Martial Law.

The most controversial and biggest white elephant funded by Marcos debts and paid for by taxpayers was the $2.3-billion Bataan Nuclear Power Plant (BNPP). While we have already completed the payment for the BNPP that has never produced a single kilowatt of electricity, government continues to look for funding sources for the maintenance of the mothballed nuke plant.

These issues take more significance every time Congress prepares the national budget. Since taking over, the Aquino administration has been peddling the deception that unlike in the past, government’s priority now is the provision of social services and empowerment of the people through well-funded programs that directly benefit the poor. But as already noted, automatic payments for principal and interest continue to eat up the largest portion of public resources, including in the so-called 2013 “Empowerment Budget” of the Aquino administration.

Still way short

The Department of Budget and Management (DBM) describes its proposed 2013 national budget as an “Empowerment Budget” because it supposedly heeds the people’s demand to ensure that government resources are used for their benefit. One indicator, said the DBM, is the increase in the budget allocation for social services, which will get the lion’s share of the proposed ₱2.006-trillion budget at 34.8%, up from last year’s 33.8 percent.

Of the proposed budget for social services (₱698.4 billion), the combined allocation for basic education, health and housing is pegged at ₱365.6 billion, which represent the proposed budget for the Education and Health departments, and government’s housing programs excluding those for the soldiers and police. But this amount is just about ¼ of the needed budget to reasonably meet the demands of the people for such services. Based on urgent needs as well as international standards, it is estimated that the budget for basic education, health and housing alone should be about ₱1.4 trillion. Of the said amount, basic education accounts for ₱885 billion (as estimated by the ACT Teachers); health, ₱440 billion (Coalition for Health Budget Increase or CBHI); and housing ₱ 97billion (Ibon).

Resources for social services

There are possible sources of funding for such huge needs of basic social services but it requires a substantial reorientation in government policies and shift in priorities. Based on the 2013 budget, for instance, there are some ₱860 billion that can be tapped, partially or wholly, to fund basic education, health and housing.

Of the said amount, the largest portion is comprised of the national government’s debt service burden, which is pegged at ₱782.2 billion for principal amortization and interest payments. The rest comes from programs and projects whose concept and/or expected benefits are disputed such as the conditional cash transfer (CCT) program, public-private partnership (PPP), counterinsurgency-related initiatives, privatization obligations from past projects, and tourism promotion and development. (See Table 3)

Debt servicing still represents the biggest drain in the country’s already limited resources. Adding principal amortization to interest payments, debt servicing comprises almost 32% of what the Aquino administration is planning to spend in 2013. At ₱782.2 billion, debt servicing is bigger than the budget for all social services in the current budget proposal, pegged at ₱698.4 billion or 28% of the budget including principal amortization.

As pointed out, the culprit is the Martial Law-era automatic debt servicing policy of government. This policy has greatly undermined the constitutional duty of Congress to allocate funds that will meet the pressing needs of the people. Under EO 292, government computes all public debt obligations that have to be settled and automatically sets aside the needed amount to ensure timely payments.

Meanwhile, Congress has to make do with whatever is left of government’s meager resources to budget for the social and development needs of the people. What makes this whole situation more unjust and oppressive is that most of the country’s public debt has been used for projects and/or programs that were tainted with corruption, did not benefit the people or worse, had caused more hardship to the poor. Examples include the power privatization loans from the Asian Development Bank (ADB) which have already reached around $1.3 billion since 2002.

There are many other odious loans that should be reviewed, renegotiated and/or altogether cancelled to reduce the debt burden. But EO 292 deprives Congress and the Filipino people of this policy option.

Debt-funded dole

Even the much ballyhooed CCT program is being partly funded by foreign debt worth $805 million from the ADB and the World Bank, adding to the country’s debilitating debt burden. And while adding to the debt burden, the CCT’s positive impact on alleviating poverty is also suspect. Between 2009 and 2012, the number of CCT beneficiaries ballooned from 594,356 households to more than 3 million (or an enormous 407% increase); the national budget for CCT during the same period also swelled from ₱5 billion to ₱39.4 billion (or a whopping 688% hike). But self-rated poverty, as measured by the Social Weather Stations (SWS) worsened from an average of 48% in 2010 to 51% this year.

Privatization and debt

Funding PPP initiatives, on the other hand, is problematic given the country’s experience with privatization in the past two decades. PPP schemes in the water and power sectors, for instance, have resulted in soaring and exorbitant user fees. Aquino’s plan to tap PPP to construct school buildings and health facilities is fe

ared to further marginalize the poor as fees skyrocket to ensure the profits of participating private contractors while aggravating the indebtedness of government.

In fact, the national budget has long been being undermined by the impact of such onerous PPP contracts. Case in point is the controversial build-lease-transfer (BLT) contract to run the metro rail transit (MRT) where the Aquino administration is pushing to implement a fare hike of as much as 100% to pass on to commuters the government’s debt obligations and guaranteed profits of the private investor. Another is the National Power Corp. (Napocor) which after a decade of privatization and doubling of electricity rates is still mired in deep debts reaching almost P1 trillion, portion of which will be directly shouldered by consumers through the universal charge.

Other reforms

Budget items related to government’s counterinsurgency campaign can also be diverted to basic social services. Poverty alleviation initiatives like the Payapa at Masaganang Pamayanan (Pamana) and CCT being used as part of the Oplan Bayanihan actually undermines the peace and development process by marginalizing efforts to address the root causes of insurgency (i.e. peasant landlessness) based on the fundamental principle of social justice while perpetuating the conflict and rampant human rights violations.

Aside from these items in the proposed 2013 budget, revenue generation can also be significantly increased by improving collection efficiency, reforming the tax system to maximize collections from the rich and reversing the neoliberal policies that deprived government of revenues such as trade liberalization as well as the numerous fiscal incentives to attract investors. Around ₱867 billion in new revenues can be raised from these reforms, based on Ibon estimates.

Fiscal policy for development

A national budget is important because it sets how government will use its resources. For backward countries, the issue of budget takes a more crucial role considering the scant public resources available amid the massive needs of the people and economy. In fact, for the Philippines, government needs to take a bigger responsibility to ensure that the people’s most basic needs such as education, health and housing, among others are met adequately given the chronic poverty and job scarcity.

At the same time, government must sensibly use the budget to invest in programs and policies which create the most favorable conditions for sustainable development and industrialization that will, in turn, create long-term jobs and address poverty. To achieve this, government needs a fiscal policy – tools on raising revenues and ways to spend them – that redistributes wealth and best serves the interests of the people, in particular the poor and marginalized.

Alas, despite its trappings of reformist language and deceptive increases in allocation for social services, the Aquino administration’s budget proposals, including the 2013 budget, are still reflective of the same anti-people and anti-development policy thinking of the past regimes; and still emasculated by the Marcosian automatic debt servicing. (end)

Martial Law legacy: debt servicing, top priority from Macoy to Noynoy

Image from gmanetwork.com

Last September 21, the country marked the 40^th anniversary of the imposition of Martial Law by the late strongman Ferdinand Marcos. Those dark years were notorious for the numerous cases of human rights atrocities committed by the military; for the unprecedented cronyism; and for the massive and flagrant ransacking of state coffers by Marcos, his relatives and friends.

Seldom pointed out is how the Marcos dictatorship also instituted national policies that further tied our pre-industrial economy to perpetual backwardness and bound a great majority of our people to acute poverty. Seldom pointed out is how the anti-Marcos faction of the ruling elite led by Cory Aquino who supposedly restored democracy, and her successors – including son, incumbent President Benigno Aquino – have upheld and continued these policies to the serious detriment of the country and the people.

One such policy was automatic debt servicing. Guaranteed payments of the national debt, even if they were incurred under questionable circumstances; went to the pockets of corrupt government officials; and/or used to fund programs and projects that harmed the economy and the people is a testament to the still dismal state of governance and democracy in the country 40 years after Martial Law was imposed.

That the Marcosian policy of automatic debt servicing continues to deprive the people of much needed social services contradicts assertions by the Aquino government of a pro-people national budget. It has hyped, for instance, its proposed 2013 ₱2.006-trillion national budget as “Empowerment Budget”, building on its previous packaging of “Reform Budget” (2011) and “Results-Focused Budget” (2012). Underlying all these budget proposals is the theme of “daang matuwid” (straight path) and “kung walang corrupt, walang mahirap” (without corruption, there’s no poverty).

But behind the pro-people packaging is the reality that the priorities and programs of government, as reflected in its national budget, remain unresponsive to the urgent social needs of the poor and development requirements of the country. From the late strongman Macoy to the son of supposed democracy icons Noynoy, keeping the creditors assured has always been the top priority in crafting the national budget.

Current debt data

Marcos’s borrowing spree – from less than $1 billion when he first became President in 1966, the foreign debt ballooned to $28 billion by the time he was kicked out of Malacañang twenty-years later – set off the crippling debt burden that the country has had to endure. To keep the foreign loans coming, which had become the dictatorship’s largest source of corruption (one estimate claimed that Marcos pocketed at least ⅓ of foreign loans), Marcos issued Presidential Decree (PD) 1177 or the Budget Reform Decree of 1977 that automatically appropriates for debt servicing regardless of how much is left of the country’s resources to fund basic social services. The late President Corazon Aquino affirmed this policy through Executive Order (EO) 292 or the Administrative Code of 1987.

As of July 2012, the outstanding debt of the national government, according to the Bureau of the Treasury (BTr) stood at ₱5.16 trillion, of which ₱3.12 trillion (61%) come from domestic creditors and the rest, ₱2.04 trillion (39%) from foreign lenders.  When President Aquino assumed office in June 2010, that debt was pegged at ₱4.58 trillion (₱2.59 trillion, domestic; ₱1.99 trillion, foreign). Since taking over, the Aquino administration has added more than ₱580 billion to the debt burden, or an average of more than ₱23 billion a month (July 2010 to July 2012). During the Arroyo administration, the outstanding debt of the national government was growing by a monthly average of ₱21 billion (January 2001 to June 2010).

Meanwhile, looking at the foreign debt data (which include public and private debt, with the former accounting for 77% of the $62.9-billion total as of March 2012) as monitored by the Bangko Sentral ng Pilipinas (BSP), it appears that the country’s external loans have been accumulating most rapidly under the current Aquino administration with an average of $268.81 million per month. It is the largest monthly growth in foreign debt among all post-Marcos administrations. (See Chart)

A news report on the latest debt data noted that each Filipino now owes the national government’s creditors some ₱53,715 (based on the latest estimated population of 96 million by the National Statistical Coordination Board of NSCB). A minimum wage earner in the National Capital Region (NCR) will need to give his salary for 120 to 131 workdays if he will be forced to pay for his share of this debt; or 232 days if he is from the Autonomous Region in Muslim Mindanao (ARMM).

Meager allocation for social services

But the real impact of such heavy debt burden is felt by the poor in the meager allocation that important social services get from government because limited resources are being siphoned off by automatic debt servicing. And Aquino is proving to be worse than Arroyo in this respect. Under the Aquino administration, government has already shelled out ₱1.45 trillion for debt servicing from July 2010 to July 2012. It’s equivalent to ₱58.05 billion a month, almost ₱10 billion bigger than Arroyo’s ₱48.18 billion a month during her prolonged 9 ½-year term. (See Table 1)

Further, debt servicing relative to total expenditures (including principal repayments) is pegged at almost 59% under Aquino, compared to 42% under Arroyo; and relative to total revenues collected, it’s 76% under Aquino and 66% under Arroyo. These figures mean that that the absolute increase in debt servicing in the past two years is exerting more pressure on public resources which could not cope with the country’s growing expenses, including the need to pay for government’s mounting debts. To finance its expenses, including payments for past debts, the Aquino administration is borrowing more.

Debt servicing continues to eat up a huge portion of the national budget despite claims by the Aquino administration that social services are now being prioritized by government. The expenditure program from 2011 to the proposed 2013 national budget, for instance, 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. (See Table 2)

To be concluded

Sona 2012: How the rich is getting (scandalously) richer under Aquino

Among the major commitments he made in his so-called Social Contract, creating favorable conditions for private business is the only promise that Aquino has been fulfilling (Photo from The Philippine Star)

Part II: Reviewing Aquino’s “Social Contract” and performance

Read Part I: On job creation here

In 2009, the Forbes magazine reported that the 40 richest Filipinos had a combined wealth of $22.4 billion. Last year, the amount more than doubled to $47.43 billion, amid deteriorating poverty and joblessness. What explains such rapid accumulation of wealth? The short and simple answer is that government, including the incumbent Aquino administration, has been creating the most favorable policy environment for big business.

Indeed, Aquino’s apathy to the working class is matched only by his concern for big business. In fact, among the major commitments he made in his so-called Social Contract, creating favorable conditions for private business is the only promise that Aquino has been fulfilling.

In particular, the administration is creating a conducive environment and providing more profit-making opportunities for big business through further privatization of infrastructure, utilities, social services and other vital sectors, or what is called public-private partnership (PPP). Aquino has also aggressively promoted extractive industries including foreign-dominated, export-oriented mining and oil and gas exploration that create social, development and ecological issues.

Privatization and plunder

He has been calling it “daang matuwid” but Aquino’s good governance campaign is more about instituting reforms to reduce business costs and risks than going after big-time plunderers like Mrs. Gloria Macapagal-Arroyo. His campaign to oust Renato Corona as Chief Justice of the Supreme Court (SC) was less about his supposed reform agenda but more about consolidating his control over the entire bureaucracy.

Executive hegemony over government branches that make policies (Congress) and review the legality of such policies (Judiciary) creates an even more favorable political environment to push for retrogressive economic programs that favor certain big local businesses and their foreign partners. They include those who are closely associated with the Cojuangco-Aquino clan and are taking advantage of government’s centerpiece program, the PPP, as well as new contracts in mining and oil and gas exploration, among others.

These big business interests are the same companies that have been expanding their economic empire by taking over, through PPP deals, infrastructure development in energy, telecommunications, transport, and water and storage in the past almost three decades. They include the Ayala family ($10.2 billion in investment commitments from 1984 to 2009); Lopez ($7.1 billion); Pangilinan ($5.3 billion); Razon ($3.2 billion); Aboitiz ($2.8 billion); Ang/Cojuangco of SMC ($2.6 billion); and Consunji ($1.1 billion).

Expectedly, they are the same families that are bagging PPP contracts under the current regime. The Ayalas and its Spanish partner, for instance, cornered the ₱1.9-billion Daang Hari – SLEx link road project. Meanwhile, the Ayala family is also competing with the Ang/Cojuangco group, Pangilinan and Consunji and their respective foreign partners for the ₱60-billion LRT Line 1 extension project. PPP projects oppress the poor not only through higher user fees. To give way to PPP projects, tens of thousands of urban poor families are also being displaced from their communities. (More on this in the next article)

Aside from infrastructure and utilities, another major source of massive profits for the local elite and foreign corporations is the wanton extraction and exploitation of the country’s natural wealth; in particular the vast domestic reserves of mineral and energy resources. Three of Aquino’s closest businessmen-allies are already dominating the energy sector with power firms associated with Cojuangco, Aboitiz and Lopez controlling more than half of the national generating capacity.

For sure, these families were able to increase their power portfolio even before Aquino became President. But under Aquino, they are enjoying even more opportunities for expansion as government implements the Electric Power Industry Reform Act (Epira) of 2001 even more aggressively. Aquino has made a strong pitch to fully implement the Epira in Mindanao, where Cojuangco and Aboitiz have pending coal-fired power plant projects and where private power operators are eyeing the privatization of the Agus-Pulangi hydropower complex.

Meanwhile, it is estimated that some 24% of approved mining applications have been clinched in the first two years of the Aquino administration. As such, it’s not a coincidence that Cojuangco’s SMC has been on a buying spree of mining firms in the past two years.

In 2011, it bought 10.1% stake in Australian firm Indophil Resources NL which owns 37.5% of Sagittarius Mines Inc. (the rest owned by Swiss firm Xstrata Copper), the operator of the estimated $5.9-billion Tampakan copper-gold project in South Cotabato – one of the world’s largest undeveloped sites. In 2010, SMC bought three coal mines in South Cotabato and Sultan Kudarat previously owned by Daguma Agro Minerals, Inc., Bonanza Energy Resources, Inc. and Sultan Energy Mining and Development Corp.

But mining, while profitable, is also contentious and invites strong opposition from various sectors. Consistent with the deception of daang matuwid, Aquino recently issued Executive Order (EO) No. 79, which supposedly attends to concerns on environmental degradation and negligible economic benefits from mining.

While the EO imposes a mining ban on 78 areas designated as ecotourism sites (including Palawan, apparently to appease Gina Lopez and co.) and a moratorium on new mining deals until Congress passes a new law that will increase government’s mining revenues, it will not stop controversial and greatly destructive mining projects such as SMC’s Tampakan. More significantly, Aquino does not intend to reorient the industry and reverse its liberalization the Mining Act of 1995.

Land (un)reform

In his Social Contract, Aquino also promised to recognize farms and rural enterprises as vital to achieving food security and more equitable economic growth. In his PDP, he identified food security and increased rural incomes as among the major goals of government. Also, for agriculture to fulfill its role in reducing rural poverty and achieve food security in the long term, increased incomes, productivity and production shall be enhanced, according to the PDP.

While government boasts of improving rice and food production, even claiming that the country may become self-sufficient in rice by next year, agriculture officials also admit that domestic agriculture remains very dependent favorable weather. But what make domestic food production especially vulnerable to adverse weather events are the accumulated effects of decades of neoliberal restructuring such as trade liberalization, land use conversion, promotion of export crops, etc. which aggravate the basic problems of backward agricultural system (one report said Philippine agriculture is among the least mechanized in Southeast Asia) and landlessness among the direct food producers.

Alas, Aquino is not reversing these neoliberal policies much less implement genuine land reform. The dismantling of large haciendas for land distribution is not in Aquino’s agenda, which of course is not unexpected for someone who comes from one of the wealthiest and most influential landlord clans in the country. Last year, the Department of Agrarian Reform (DAR) was able to distribute just 113,196 hectares out of the already small target of 200,000 hectares, or an accomplishment rate of below 57 percent.

DAR data also show that since taking over as President in July 2010, Aquino’s land acquisition and distribution (LAD) has averaged below 18,000 hectares a month – the second lowest among all post-Edsa administrations. As of yearend 2011, government still needs to acquire and distribute almost 962,000 hectares of land, which at its current LAD rate will be accomplished two to three years after the 2014 deadline set by the Comprehensive Agrarian Reform Program Extension with Reforms (Carper).

Such lackluster performance in LAD is indicative of how the landlord President is indifferent to the plight of landless farmers. The Aquino family’s Hacienda Luisita remains a contentious target for land distribution despite the Supreme Court (SC) ruling, which revoked the stock distribution option (SDO) and ordered the transfer of the sprawling sugar estate to the direct control of farmers and farmworkers.

Taking advantage of the basic flaws of Carper, the President himself is pushing for so-called “just compensation” that his family calculates at a staggering ₱10 billion – a further insult to the poor farmers who are the real owners of the hacienda.

Instead of land reform and consistent with its bias for big corporations, the Aquino administration has been promoting projects that result in further displacement of farmers such as the case of almost 700,000 hectares of agricultural lands that foreign firms from the US, Europe, Middle East and others control (or will control) through agribusiness deals. And as mentioned, the PPP and mining projects that also grab lands away from tillers.

Genuine land reform is indispensable if Aquino truly wants to increase rural income and reduce rural poverty like he stated in his Social Contract and PDP. As shown in previous studies, dismantling the land monopoly will generate an enormous amount of income and free up huge resources, in the process reducing poverty in the countryside where two out of three poor Filipinos live.

Part III: Aquino’s failure to ease poverty and provide social services

Economic growth not creating jobs, excluding the poor

Aquino is the worst performing President in terms of job creation. Adult unemployment under him, using SWS surveys, is averaging 26.8% compared to Arroyo’s 19.6%; Estrada’s 9.2%; and Ramos’s 10.3% (Photo from BusinessWorld/AFP)

First published by The Philippine Online Chronicles

For the Aquino administration, the past week has been all good news. First, the impeachment it initiated against Renato Corona ended in its favor, with the Senate convicting 20-3 the former Chief Justice. Second, first quarter data showed that the economy grew by 6.4%, which officials said is the second highest in Asia behind China.

As expected, Malacañang was quick to squeeze brownie points from the two developments. In a speech, President Benigno Aquino III hailed the conviction as proof that change can be achieved under his administration. The economic growth, meanwhile, was pledged to be more “inclusive” and will benefit everyone.

Exaggerated gains

In both cases, however, it appears that Aquino is exaggerating the gains for the people. The ouster of Corona, while widely seen as positive for anti-corruption efforts, is also tainted by the political and economic agenda of the Aquino administration. Valid concerns on the Supreme Court (SC) undermining its earlier decision on Hacienda Luisita, for instance, are being raised. A subservient Judiciary has also put the ruling Liberal Party (LP) in a better position to consolidate and perpetuate its reign.

The same overstatement of gains for common folks is true with regards to the reported expansion in the economy. Trends on joblessness, poverty and hunger don’t support government’s claim of robust and inclusive growth.

Above expectations

The National Statistical Coordination Board (NSCB) called the 6.4% growth of the gross domestic product (GDP) in the first quarter of the year “above expectations”. It was higher than the 5-6% full-year target of the National Economic and Development Authority (Neda) and the 4.8% forecast of most analysts. Even more remarkable was that the growth was attained amid a deteriorating global economy. And as mentioned, it’s number two in the region after China.

This, said the NSCB, put the economy to a “rousing start” after a lackluster performance in 2011 when GDP grew by 4.9 percent. Main growth drivers during the quarter were the services sector (8.5%) and industry (4.9%) while agriculture posted anemic growth (1%). On the expenditure side, growth was pushed by the 24% increase in government spending.

What jobs?

Economic growth is often dismissed as meaningless due to lack of tangible gains for the people, especially the poor. Not this latest growth, if we were to believe government claims. New Neda head Arsenio Balisacan said that the quarterly growth produced some 1.1 million jobs, which bodes well for the Aquino administration’s efforts to cut poverty.

It was not clear where Balisacan got his 1.1 million jobs created by the 6.3% GDP growth. The latest jobs data from the National Statistics Office (NSO) refer to the January 2012 survey, which showed 37.39 million employed workers. That’s 1.1 million higher than the January 2011 survey of 36.29 million workers.

Misleading the public

If the Neda chief was referring to these NSO data, then he is misleading the public. A comparison of the January surveys does not capture the number of jobs created in the first quarter. Comparing the number of workers between January and April this year (the next survey round) would have been more appropriate.

Further, the number of jobs actually fell by 1.16 million between the January and October 2011 surveys of the NSO. This means that the first quarter growth should have produced at least 2 million additional jobs for Balisacan’s claim of 1 million jobs created to be true.

Worst performing President

Truth is, like in the past, the economic expansion during the quarter failed to generate jobs. In fact, the period even saw the number of jobless balloon by more than 4 million, based on surveys done by the Social Weather Stations (SWS). In its March 2012 survey, the SWS reported that a record high 34.4% were jobless, equivalent to about 13.8 million workers. In its December 2011 survey, unemployment was pegged at 24% or about 9.7 million workers.

Aquino is the worst performing President in terms of job creation. Adult unemployment under him, using SWS surveys, is averaging 26.8% compared to Arroyo’s 19.6%; Estrada’s 9.2%; and Ramos’s 10.3 percent.

Miserable living

Because growth is not creating long-term and sustainable livelihood opportunities, living conditions have continued to deteriorate. Again using SWS surveys, poverty worsened to 55% in March from 45% in December. That translates to around 2 million families (from 9.1 million to 11.1 million) added to the number of poor during the quarter when the economy was supposedly growing by 6.4 percent.

Poverty in the country has been chronic and even the drastically expanded conditional cash transfer (CCT) program under Aquino is not mitigating it. On the contrary, poverty has been alarmingly on an uptrend in recent SWS surveys. Before Aquino took over, poverty was pegged at 43% and has since steadily climbed. It breached the 50% mark in four of the last eight quarters and is now at its highest since September 2008.

Hunger also rose to an all-time high 23.8% of families in the first quarter of the year. The number of families that experienced involuntary hunger reached 4.8 million in March from December’s 4.5 million (22.5%). The average incidence of hunger under Aquino (20.9%) is more than double that of the level under Estrada (10%) and significantly higher than Arroyo (14.1%).

Excluding the poor

Inclusive growth is the favorite mantra of Aquino when talking about his plans for the economy, such as in his speech during the Asian Development Bank (ADB) meeting in Manila last month. It is the central theme of his Philippine Development Plan (PDP) 2011-2016. But the policies he promotes in the PDP, under the tutelage of foreign creditors like the ADB, are the same policies that have long been excluding the poor.

His centerpiece program, the public-private partnership (PPP), for instance, is harming the poor twice. First, physically through brutal demolition to accommodate PPP projects. Second, economically through prohibitive rates in toll, power, fares, water, hospital fees, tuition and others.

Also, because the path is towards privatization, Aquino is spending less on social services and more on debt servicing so government can borrow more to fund its PPP initiatives. Credit rating agencies like Aquino more than Arroyo not because of his supposed anti-corruption reforms but because he is a better payor. Since taking over, Aquino has been paying creditors P60.37 billion a month compared to Arroyo’s P48.18 billion.

Growth for the elite

While excluding the poor, Aquino’s programs greatly benefit the rich including his relatives and cronies such as Danding Cojuangco, Manny Pangilinan, the Lopezes, Ayalas, Aboitizes and others who are expanding their business interests by bagging large PPP contracts. These elite families and their foreign partners also rake profits from the economy under Aquino’s policies of low wages, contractualization, liberalization and deregulation.

Last year, these billionaires saw their wealth expand tremendously even when the economy slowed down. The 40 richest Filipinos posted a collective $34 billion in net worth in 2011, more than $11 billion bigger than 2010’s $22.8 billion.

The economy did grow by 6.4% but not for everyone. #

Anti-ADB protest in Manila: Photo slideshow

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On May 4, activists from the multisectoral group Bagong Alyansang Makabayan (Bayan) trooped to Roxas Boulevard in Manila to protest the ongoing 45th meeting of the Asian Development Bank (ADB).

(Read Bayan’s news release here, and more about the ADB and its role in Philippine maldevelopment here and here)

ADB: Anti-Development Bank

The Asian Development Bank (ADB) is holding its 45^th annual meeting from May 2 to 5 in Manila. Some 4,000 delegates including finance ministers and central bank governors from ADB’s member-countries; as well as representatives of big business, international financial institutions (IFIs), transnational banks, credit rating agencies, global media, and even so-called civil society are attending the said event. With the theme “inclusive growth through better governance and partnerships”, the event will mark the 15^th time that the ADB has held its annual meeting in Manila. Venues have been arranged at the Philippine International Convention Center (PICC).

The ADB was founded in 1966 and now has 67 members. It’s one of the global financial institutions set up by the industrial powers to fund their programs and projects in backward countries. Together with the International Monetary Fund (IMF), the World Bank and other IFIs, the ADB bankrolled numerous restructuring efforts that aim to liberalize, deregulate and privatize the economies of many countries in the Asia Pacific. These reforms have been implemented through huge and burdensome debts. The Philippines is a founding member of the ADB and has been hosting the bank’s main headquarters since its inception.

ADB’s 45^th meeting is an opportune time for the Filipino people to register its strongest condemnation of the multilateral bank that has been funding numerous anti-poor economic reforms and destructive projects in the country.

Neoliberal offensive in energy

In the Philippines, ADB’s disastrous impact is most felt in the energy sector through the Electric Power Industry Reform Act of 2001 (Epira) and the neoliberal reforms implemented in the sector in the past two decades. The ADB started funding the power sector reforms through loans and equity investments to independent power producers (IPPs) as well as guarantees for bonds issued by the National Power Corp. (Napocor). Due to sweetheart deals with the IPPs, Napocor further went deeper in debt, which the ADB used to justify its total privatization.

As Napocor’s largest creditor, the ADB aggressively pressured the national government to fully privatize the state-owned power firm and enact the Epira. In 1994, it funded a study that eventually became the basis of the then Ramos administration’s blueprint for power sector restructuring. This blueprint took the form of an Omnibus Power Bill that was filed in 1996 that aimed to privatize Napocor and restructure the power industry. The Omnibus Power Bill would later become the Epira, a process that was bankrolled by the ADB’s $300-million 1998 Power Sector Restructuring Program (PSRP). To access the loan, the ADB listed 61 specific conditionalities that the government should follow, including designing content and legislation of the Epira.

Even Epira’s actual implementation is being funded by the ADB. Since 2002, the ADB has approved an estimated $1.3 billion in loans to support the various programs and projects under Epira. These include debts to guarantee the bond issuance and improve the creditworthiness of the Power Sector Assets and Liabilities Management Corp. (Psalm), which Epira put up to oversee the privatization of Napocor, and establish the wholesale electricity spot market (WESM).

Under Epira, electricity bills have soared amid energy insecurity such as the case in Mindanao. According to one study, the power rates for residential users in Manila and Cebu are the first and third most expensive in Asia, respectively. Even the supposedly “cheap” electricity rates in Mindanao are still much more expensive than the rates in more progressive Asian cities like Hong Kong, Beijing, Kuala Lumpur and Seoul. Since Epira was implemented, the rates of the Manila Electric Co. (Meralco) have jumped by 112% while the rates of the Napocor have increased by 95 percent.

Meanwhile, the lack of energy security is the result of government’s abandonment of its mandate to invest in the rehabilitation of existing plants and construction of new ones. Instead of ensuring that there is enough energy supply consistent with a long-term industrialization plan, government used its time and resources to dispose the generation and transmission assets of Napocor as mandated by Epira.

Anti-poor reforms

Aside from the neoliberal restructuring of the power sector, the ADB has also aggressively promoted various privatization and commercialization initiatives including in water utilities, irrigation, dam, and the National Food Authority (NFA), among others. These reforms have resulted in food insecurity and in skyrocketing cost of living.

Privatization is one of the major programs of the ADB in the Philippines, including the public-private partnership (PPP) initiative of the Aquino administration. ADB is the main funder of the Project Development and Monitoring Facility (PDMF), which is government’s revolving fund for feasibility studies for projects under the PPP scheme. The ADB has already committed $21 million for the PDMF.

Furthermore, the ADB also bankrolled a 1993-1994 study that became the basis of the destructive Mining Act of 1995. This program, which liberalized the Philippine mining industry, has paved the way for the further wanton plunder of the country’s mineral resources, the destruction of the environment, and dislocation of communities.

Oppressive debt

Worse, these anti-development and anti-poor programs have been funded by onerous ADB loans. The ADB is now the country’s single largest foreign creditor. As of 2011, the country owes the ADB around $5.84 billion, which is almost 10% of the total foreign debt of the Philippines pegged at $16.71 billion. Among the multilateral creditors, the ADB accounts for more than 50% of the country’s total multilateral debt. All in all, the country has accumulated the fifth largest debt from the ADB, accounting for about 8% of total sovereign lending.

Due to automatic debt servicing, a huge portion of the national budget is being siphoned off by debt servicing, leaving almost nothing for social services. For 2012, for instance, the Aquino administration is ready to spend P738.6 billion for debt servicing, including interest payments and principal amortization. This is much bigger than the P575.8 billion that government is willing to spend for education, social security, health services, housing, land reform, and other social services.

To smokescreen the harsh effects of the neoliberal reforms that it has been sponsoring and the lack of resources for social services due to debt servicing, the ADB – together with the World Bank – is also funding the conditional cash transfer (CCT) program of the Aquino administration. Under the CCT, government provides direct cash assistance of as much as P1,400 to selected poor families on the condition that pregnant mothers will have their regular checkup and school age children will regularly go to class. But aside from being highly temporary and limited, the CCT also further deepens the indebtedness of the Philippines. The ADB is funding the CCT to the tune of $400 million in loans while the World Bank is also lending $405 million for the program.

Strong protest

ADB’s theme of inclusive growth for its meeting this year reflects the main theme of the host government’s Philippine Development Plan (PDP) 2011-2016. Under the PDP, inclusive growth is supposed to be achieved by expanding the domestic economy by 7-8%, which will generate jobs and livelihood and alleviate poverty. But Aquino’s inclusive growth means the implementation of the same policies and programs of liberalization, deregulation and privatization that the ADB – together with the IMF, World Bank and other global imperialist institutions – has long been imposing on the country.

We should not let the ADB meeting pass without registering our strong opposition to its decades of intervention in Philippine policy making and to the many programs that it has bankrolled through odious debts that perpetuate the backwardness of our economy and the poverty of our people. (end)

Silverio Compound: A fight for the right to live

(Video by Tudla Productions)

The Silverio Compound demolition in Parañaque City was the most brutal in recent memory, leaving at least one dead and some 36 hurt, mostly by gunshot wounds. Some 33 residents and protesters were also arrested, including seven minors and two women. Twenty-nine of them were eventually charged with resistance and disobedience to a person in authority and disturbance of public order. While some of the wounded were brought to various hospitals, many others refused to seek proper medical attention out of fear of being arrested or simply due to lack of money.

Negotiations

On April 23, residents blocked certain portions of Silverio Compound as early as 5 a.m. The main barricade was set up at Purok 4, which fronts the SM Hypermart. By 7 AM, five 6×6 trucks each carrying 30 to 40 policemen from the Parañaque City Civil Disturbance Management Unit (CDMU) along with two fire trucks began arriving in the area. They were backed by several members of the police’s Special Weapons and Tactics unit (SWAT) who were armed with high-powered assault rifles. By around 7:30 AM, many residents had already occupied Sucat Road, which was meant to cause traffic and delay the demolition. A demolition team of some 50 men arrived at about 8 a.m.

Initial findings of the emergency fact-finding mission (FFM) conducted by the Bagong Alyansang Makabayan (Bayan) several hours after the bloody incident show that members of the CDMU provoked the violent confrontation. Prior to the hostility, leaders of the residents and local politicians Cong. Edwin Olivarez, former Cong. Ed Zialcita, and Councilor Eric Olivarez were negotiating with the police (talks began at around 9 a.m.) to suspend the demolition as the Silverio compound is the subject of a pending court case. The CDMU, on the other hand, was asking the protesters to free up a portion of the road to let vehicles pass.

Gun shots

Despite ongoing negotiations to suspend the demolition and willingness of residents to heed the police’s request to allow traffic flow, the CDMU prepared to turn toward the direction of the protesters at past 10 a.m. Witnesses also said they saw men secure the local politicians, which indicated that the police was getting ready to move. Thinking that the CDMU was about to disperse them, the residents started to hurl stones at the police. Eventually, the police responded by firing teargas toward the direction of the protesters. Accounts claimed that the police fired more than 10 teargas canisters.

The CDMU and SWAT members were forced to backtrack a bit but moments later, gun shots were heard, apparently fired by the police, sporadic at first and then in succession. The string of gun shots forced protesters to back down and run away while the CDMU and SWAT teams advanced and began arresting people. One person – later identified as 21-year old Arnel Leonor, a resident of Silverio Compound – was seen lying on the pavement, with what appeared to be a fatal gunshot wound in the head. He was brought to a hospital by the police many minutes later but was declared dead on arrival.

Violations galore

The atrocities committed by the police did not end in the indiscriminate shooting of the residents that killed Leonor and wounded others. Many of those who were already apprehended or subdued were still assaulted by the angry police. They were truncheoned, punched, kicked and slapped at whim by the arresting officers. These were captured by the media who were covering the incident. Worse, the arrests were arbitrary; the police picked up anyone they wanted. Some of those arrested and assaulted by the police were mere onlookers. They said they did not run away because they did not participate in the protest and thus thought will not be arrested, much less assaulted by members of the CDMU.

Arbitrary house-to-house searches were also carried out by the police to look for more people to pick up. Witnesses claimed that some police officers again fired their guns during these house searches. The demolition team, meanwhile, pushed through with the demolition of several stalls and houses.

Private profits over public housing

This bloody incident could have been prevented had Mayor Florencio Bernabe respected the original agreement between Silverio Compound residents and former Mayor Joey Marquez that the entire 9.7-hectare property will be used for socialized housing. This means that the 28,000 families occupying the property will just amortize the land to the Parañaque City government. It was Marquez who, in 2003, initiated the expropriation proceedings by virtue of an ordinance against Silverio Compound’s private owner Magdiwang Realty Corp. But Bernabe changed the plan, reduced the size for socialized housing to 3 hectares, and pushed for the construction of 32 medium-rise condos that can only accommodate some 1,900 families.

Bernabe is pushing for a public-private partnership (PPP) project for Silverio Compound, eyeing big developers including SM Development Corp. (SMDC) to build the medium-rise buildings and other infrastructures in the area. The remaining 6.7 hectares of the property will also be devoted for commercial development in a bid to entice private investors in the city. Clearly, this is a case of the local government prioritizing private profits over the people’s basic right to shelter.

Impunity

The blatant disregard for human rights displayed by the police involved in the incident speaks volume of how deep the culture of impunity has been ingrained among our law enforcers and security forces. To end this culture of impunity, those who are involved, directly and indirectly, and not only members of the SWAT and CDMU but even police and civilian officials, in the tragic Silverio Compound demolition must be held liable.

What is alarming is that recent developments point to the regrettable possibility of a whitewash. National officials, for instance, are now seemingly conditioning the public mind that Leonor could have died from a bullet fired by one of the protesters. Supposedly, one of those arrested tested positive for gunpowder. Only an independent probe of the incident, including a re-autopsy of Leonor’s body by an independent party, could provide a more credible finding.

There is no doubt that the police used excessive force in enforcing the demolition order. Their abuses have been well-documented by media outfits who covered the incident and their identities could be easily established. Bernabe, on the other hand, clearly abused his power in insisting to implement the demolition. There are more than enough grounds to immediately make these people accountable.

Call for support

While the residents of Silverio Compound remain undaunted by oppression and brutality, they need all the support that they can muster to ensure that justice will be served. At the same time, they also need assistance – medical, legal, etc. – to help them cope with the tragedy inflicted on them by institutions that are supposed to uphold their rights and promote their interests.

The people of Silverio Compound, like those in other urban poor communities who have been dislocated or threatened by PPP projects that only profit the few, are fighting not only for their homes but for their right to live as human beings. All those who value this very fundamental human right could not allow them to fail. (end)

Written for Paninindigan, Bayan’s official publication (click here)