A Radical's Nut

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The World Bank, in its latest quarterly report on the Philippines, recently proposed that government increase the current excise tax of P4.35 per liter imposed on gasoline products to ensure a quality implementation of Arroyo’s fiscal stimulus plan and address a ballooning budget gap.

According to the multilateral lending institution, its proposal would “improve the progressivity of the tax system as petroleum products are disproportionately consumed by the richer citizens”. In other words, it is acceptable to hike current taxes imposed on gasoline products because the poor will not be hurt.

The World Bank, a global institution controlled by the US and other rich countries, has become increasingly discredited and notorious through the years. For a brief discussion on how it works to intensify global poverty, as told by a former World Bank “insider” – its former Chief Economist Joseph Stiglitz – watch the short video below.

With just a little over two weeks before Mrs. Gloria Arroyo deliver her supposedly farewell State of the Nation Address (SONA), I expected Malacañang to issue an outright rejection of the World Bank proposal. Severely wanting in favorable public opinion and amid persistent allegations of overpriced petroleum products, a categorical “no” from government would have been at least a positive public relations move.

But Finance secretary Margarito Teves, while acknowledging that the World Bank proposal is untimely, said that his department is seriously studying the suggestion and implied that if the World Bank can convince them, they might increase the gasoline excise tax, albeit in a proper time. Maybe after SONA?

There are two points I wish to raise here. One, petroleum products in the country are already artificially and unjustly high due to onerous taxes such as the 12% value added tax and overpricing especially by the Big Three (Petron, Shell, and Chevron) oil cartel. Further increasing gasoline prices through a higher excise tax will further aggravate the injustice and abuse that consumers already suffer.

Two, it is not true that the poor will not be hurt. It has been the recurring argument of Malacañang in its efforts to justify the continued imposition of the 12% VAT (which incidentally, Arroyo worked hard to increase from 10% to the current 12% starting in November 2005). But studies we made at Bayan point to the contrary. For instance, in the case of gasoline products, private car owners are not the only ones who will bear the impact of an excise tax hike. Tricycle drivers and small fishers using motorized bancas who also use gasoline products for their livelihood will be hurt more.

These people barely earn enough to meet the daily needs of their families and every centavo that will be added to their expenses will certainly make their daily existence much harder. At present, almost 600,000 tricycle drivers nationwide directly pay government P9.42 per liter in taxes on unleaded gasoline, representing the 12% VAT and the current excise tax of P4.35 per liter. Such taxes are already burdensome for them as they consume an average of 4 liters a day and thus pay government almost P38 daily in taxes.

Similarly, some 700,000 small fishers using motorized bancas directly pay government P9.10 per liter in taxes on regular gasoline, representing the VAT and excise tax. Per fishing trip, a fisher consumes as much as 10 liters and thus pay government almost P91 daily in taxes.

The World Bank, together with its twin the International Monetary Fund (IMF), has significantly shaped the country’s fiscal policies over the decades. It has strongly supported and pushed for more and higher taxes including the VAT to ensure that government would be able to service its debt obligations. At the same time, the World Bank has firmly opposed policy reforms to control the prices of basic goods and services such as the repeal of the Oil Deregulation Law. It has pushed for lower government spending on social services and promoted the privatization and commercialization of such services.

The people must oppose this latest policy dictate (cloaked as “proposal”) of the World Bank. The burden of addressing the budget gap and raising tax revenues should not fall on the shoulders of the poor. The 12% VAT on oil products must be scrapped and additional revenues should be generated through efficient tax collection, curbing corruption and smuggling, arresting the biggest tax evaders which are the corporations, and re-imposing the eliminated or reduced tariffs on imported goods.

On her 9th State of the Nation Address (SONA), Mrs. Gloria Macapagal-Arroyo would surely brag again how her administration has successfully steered the economy amid the raging global financial and economic crunch. The best argument that will dispel assertions by Arroyo of a strong and resilient economy is the reality on the ground, the grinding poverty that confronts an increasing number of Filipinos on a daily basis. Such poverty has been constantly present and ever worsening even during the decades-high GDP growth the country posted before the successive collapse of the biggest Wall Street firms and the largest TNCs in the world. Under Arroyo’s almost nine-year old term, the economic hardships facing the people have become even more pronounced because of wrong economic policies and aggravated by the global crisis.

Data cited in the table below were culled from official monitoring and reports of government agencies and it would be interesting to see how Arroyo would explain them (or distort them) to give a semblance of credibility to government’s version of the state of the nation under her illegitimate and corrupt leadership. Deregulation and privatization policies aggressively implemented by Arroyo combined with the continued operation of private cartels (both local and foreign), the continued imposition of and increases in onerous taxes such as the value added tax (VAT) have pushed prices up and the overall cost of living. Consequently, poverty continued to worsen as wages remained depressed while an increasing number of workers become jobless and underemployed.

Amid the people’s worsening poverty, which according to official poverty figures worsened by 3.8 million Filipinos between 2003 and 2006 (latest available data), Gloria Arroyo has amassed even greater wealth. (Note that such poverty figures are hugely understated considering the ridiculously low standards used by government to measure poverty.) The last row in the table below shows the declared net worth of Arroyo when she first assumed the presidency in 2001 and her latest declaration in 2008. During the said period, her declared wealth increased by P77.79 million, or almost 115 percent. Note that the said figures are the officially declared personal wealth of Arroyo and exclude all the ill-gotten wealth she and husband Mike Arroyo have accumulated through the years in Malacañang.

The Head of the European Commission (EC) in the Philippines, Mr. Alistair Macdonald, and the Department of Foreign Affairs (DFA) are deceiving the public by claiming that there is no “request” from the European Union (EU) for the Philippine government to modify the 1987 Constitution, specifically to lift the constitutional ban on 100% foreign ownership of land and foreign practice of certain professions in the country.

Such document exists and is actually available online. Click this link and browse the page and look for the link “Philippines” to access the document in PDF format.

This document, which the EU has attempted but failed to keep secret, forms part of the negotiation process for the General Agreement on Trade in Services (GATS) of the World Trade Organization (WTO). The objective is to achieve further economic liberalization through a “request and offer process”, i.e. a country will submit a list of sectors it wants liberalized, identify the legal barriers to  foreign investment, and request that such barriers be eliminated. The party to which the request is made will then have to make an offer (which sectors the country is willing to eliminate the barriers identified by the EU). The EU made a request to a total of 109 WTO members, including the Philippines.

Reading this document, one would not find the phrase or term “Cha-cha” or an explicit request to modify the Constitution. Instead, the document simply enumerates the identified liberalization barriers and then proposes that such barriers be eliminated. For instance, on page 3 of this document, we will find these entries:

• Participation of foreign investors is limited for certain expressly reserved activities reserved by law to Philippine citizens (MA). EC request: Eliminate this requirement of citizenship…

• Acquisitions of land (MA) require 60% local capital. Foreign investors may lease only private owned land. EC request: eliminate

Limits on foreign investors on certain economic activities and land ownership are implemented because the 1987 Constitution mandates the government to do so, obviously to protect the national interest. By requesting that these prohibitions be “eliminated”, the EU is in effect lobbying for Cha-cha to accommodate their “requests” under the GATS.

External pressure from the rich countries to implement Cha-cha for more economic liberalization has already been raised in the past. In fact, it is the Americans, and not the Europeans, who are more vocal and explicit in their demand for Cha-cha to allow unbridled foreign investments in the Philippines. While the EU veils its Cha-cha lobby under the negotiation process of the WTO-GATS, US-based corporations bluntly state in their official papers the need for Cha-cha.

The American Chamber of Commerce of the Philippines Inc. (AmCham), for instance, candidly said in its advocacy paper “The roadmap to more foreign investment” that when the 1987 Constitution is amended, restrictions on foreign investment and land ownership should be removed. In its 2006 Investment Climate Improvement Project (ICIP) advocacy plan, AmCham vows to seek “removal from the Constitution of all restrictions on foreign investment and professions” to “further liberalize the foreign investment regime to bring needed capital, skills, and technology into the country.”

AmCham’s ICIP, which aims to initiate investment climate reforms in the Philippines, is being funded with an undisclosed amount by the US government.

Meanwhile, the office of the US Trade Representative (USTR), an agency of the US government in charge of directly negotiating trade agreements with foreign governments , as well as resolve disputes, and participate in global trade policy organizations, has identified several provisions of the 1987 Constitution that it considered as “trade barriers.”

These papers are all publicly available, just Google them.

Over and above the narrow, self-serving political agenda of the Arroyo administration, there has always been intense and persistent pressure from the rich and powerful countries to implement Cha-cha and liberalize the economy. While the Philippine economy has already achieved a relatively advanced level of liberalization, such opening is still not enough to meet the insatiable need of powerful countries like the US for markets and profit-making opportunities. And as Arroyo herself has declared, the next phase of liberalization in the Philippines will be in the form of Cha-cha. Arroyo and her clique have been riding on this imperialist agenda to implement their own political agenda to stay in power.

Thus, if Cha-cha is implemented, we will end up with the illegitimate Arroyo government and at the same time surrender to the US and EU whatever is left of our lands, our jobs, our industries and our economic sovereignty.

The people must defeat this evil scheme.

The Makati rally yesterday (June 10) drew in an estimated 10,000 to 13,000 people to protest what former President Cory Aquino described as “a shameless abuse of power” by the Arroyo administration. Organizers warned that the protest would surely escalate in the coming weeks, especially if congressmen force to convene the constituent assembly (con-ass) for Charter change (Cha-cha)

Expectedly, the beleaguered Arroyo administration is now using all sorts of arguments why people should not join the protests against Cha-cha. One major argument is the economy, which it has always used to discourage public demonstration of outrage against the regime’s barefaced abuse of power.

When massive protests broke out set off by the Hello Garci electoral fraud and later by the NBN-ZTE corruption scandal, the tune was that protests would only offset the gains made by the economy.

The country could not afford a political crisis, much less another EDSA. “Ramdam na ang kaunlaran at sayang naman ang umuunlad na ekonomya” was the recurring theme of Malacañang’s defense against calls for the ouster of Mrs. Arroyo. The propaganda line was that the economy has achieved a certain level of stability under Mrs. Arroyo’s leadership. Removing her from office, or instigating moves to get rid of her, would put such economic stability at risk.

But as I have pointed out in a previous article, the deceit of economic growth and industrialization that Malacañang peddles has been further exposed by the latest official figures on the state of economy. According to the National Statistical Coordination Board (NSCB), the country is “teetering into recession”. The massive displacements of Filipino workers here and abroad due to the global crunch could not be concealed as well by false claims of economic stability.

Thus, amid threats of intensified anti-Arroyo protests caused by the renewed push for Cha-cha, the administration’s economic managers have adjusted their tune. From stability and “First World status”, what is supposedly at risk now is the “resiliency” of the economy amid the raging global recession.

On the eve of the Makati rally against Cha-cha, the Bangko Sentral ng Pilipinas (BSP) issued this warning: the disruptive impact of political events could affect the county’s economic policies and therefore the performance of the economy. Markets have become “edgy” over the past few days because of the looming showdown between the Arroyo administration and its critics and opponents, BSP Governor Armando Tetangco cautioned. Investors in the stock market are cashing in on gains to secure their money, causing the stock market index to drop by 29.47 points.

National Economic and Development Authority (NEDA) Secretary Ralph Recto, meanwhile, appealed to the public last week not to further aggravate the weak economy. With the gross domestic product (GDP) growing by only 0.4% in the first quarter, Recto warned that there is an “economic cost to political instability and political uncertainty”.

Malacañang’s chief economist added that “In this challenging time of the global economic crisis, let us not add more shocks to our resilience. Let us remain focused in our efforts to navigate the economy through this time of global hardship.”

Running out of materials to spin and promote the country’s supposed economic growth, government is now using the precarious situation of the domestic economy to help prevent from further intensifying the public outrage triggered by the railroading last week of House Resolution (HR) 1109 to convene Congress, with members of the Senate and House of Representatives voting as one, into a con-ass

But instead of dampening the people’s outrage, such statements would only further stoke public indignation. The worsening economic uncertainties the country faces are not the people’s fault, in the same manner that HR 1109 that will push for Cha-cha and perpetuate Arroyo to power is not the people’s wishes. What is definite is that the blatant push for Cha-cha to serve Arroyo’s narrow political interests at a time when the hyped economic growth is unraveling spells huge political consequences for the despised Arroyo administration.

Indeed, it’s not the legitimate protests that will aggravate the country’s economic woes. Job scarcity, forced labor migration, poverty, destruction of local industries, and vulnerabilities to the global recession are all deteriorating due to wrong economic policies of the Arroyo administration.

It’s the worsening economic condition of the Filipino people that will feed the worsening political crisis. It is the raging economic crisis, amid the shameless abuse of authority by the Arroyo administration, that would compel the people to thwart the scheme of this regime to prolong its stay in power through Cha-cha.

What is the real worth of the reported $2.2 billion in investment pledges that Mrs. Gloria Macapagal-Arroyo “brought” home from her weeklong trip to South Korea and Russia?

The reported amounts are “pledges”, a promise to invest and not actual investments. And investment pledges these days, at a time when old giants like General Motors are crumbling, are simply not dependable.

Indeed, many factors go against the realization of these pledges to become actual investments. The sectors where the committed investments are supposed to flow in currently face dim prospects amid a worsening global financial and economic crisis.

A case in point are the pledges made by South Korea in alternative energy projects, particularly biofuels. There is actually an emerging “biofuels bubble” as the largest biofuels producers in the US fold up one by one due to the combined impact of the global crunch, high cost of biofuels feedstock and substantially lowered global crude oil prices from record highs in the past years.  American biofuels producers also saw their income drop by 89% between 2005 and 2008. So whatever promised investments in the biofuels sector made today are highly tentative.

Portion of the promised investments will also go to the construction of hotels and golf courses as government continues its aggressive promotion of tourism. But the outlook for tourism is also not as bright as economic managers hope it to be as relatively well-off income earners (the tourists) worldwide struggle to keep their savings, or whatever is left of it, amid the growing uncertainties in the global economy.

The World Tourism Organization already projected in January that global tourism this year may still grow but at a slower pace. This has been recently affirmed by the June forecast of the International Air Transport Association (IATA) that the airline industry is expected to lose $9 billion this year due to the global economic meltdown. The reason presumably is that less people will travel for business, much less vacation and pleasure.

Press Secretary Cerge Remonde, who released the official statement upon Mrs. Arroyo’s arrival at the NAIA last Sunday (June 7), wanted to highlight the investment pledges as the supposed “achievements” of the latest presidential junket. The idea obviously is to create an image of a hardworking president who delivers and is not at all distracted by threats of massive protests against her scheme to stay in power through Charter change (Cha-cha).

But the Filipino people have heard and seen enough to buy this deceit.