Btalk 2010 Yearend - 20110113

Real Change, or More of the Same?
YEAREND 2010:
Yearend Briefing, January 13 and 14, 2011 UP Balay Internasyonal, UP Diliman Quezon City
IBON Foundation is an independent development institution established in 1978
2 IBON Economic and Political Briefing
13-14 January 2011
Yearend 2010: Real Change, or More of the Same?
2010 gave the country a new administration generally acknowledged as legitimate and hailed
for its popularity and large mandate. The rise to the presidency of Benigno Aquino III, as the storyline goes, ushers in a new era of good governance, democracy and poverty alleviation. Over six months into the new administration, how much change has there been or are we moving towards? What change, if any, and for whom? Filipinos want to be optimistic but the situation so far is not encouraging. Change will not come spontaneously and the government has a key role, as do the people whose interests will be upheld the more they can claim the government as their own. Yet it has been a very disappointing start for the new Aquino administration which has not shown a real reform agenda beyond the repeated anti-corruption pronouncements and recycling of old programs. Its declarations and actions are more consistent with continuity of failed policies, merely superficial or cosmetic changes, and empty slogans rather than the bold reforms the country needs. This raises the challenge for Filipinos to redouble efforts for change in the country. Six months is long enough to get a sense of the governments priorities and directions. In particular, it can be asked: what kind of political change has there been if the economic thrusts remain the same? The Aquino administration is hobbled in many important ways. It visibly lacks even the most basic starting point: a meaningful and sweeping vision for change that decisively attacks the roots of the countrys long history of economic and political backwardness. It appears little inclined to use whatever political capital it has with the general public to challenge elite interests. Even more alarmingly, the rhetoric of good governance, democracy and poverty alleviation which resonate with so many Filipinos who have long-suffered bad governance, marginalization and deep poverty is being used to maintain policies and programs that have failed to benefit the majority of Filipinos. The past year underscored the countrys deep problems of high unemployment, poor quality of jobs and low incomes amid rapid growth, rising corporate profits and growing private wealth. Traditional politics of patronage and power struggles also remained very much in play before and after the elections. The Aquino administration for now still has relatively high popularity and a strong mandate. But 2011 will be a defining year for it with the fading of post-Arroyo euphoria and of new administration goodwill, as economic difficulties mount and the global crisis drags on, as political controversies increase, and as unreformed Philippine politics returns to its accustomed self-serving in-fighting. The powers-that-be would like the public to trust in the new administration and be lulled into complacency and even vilifies those who would continue struggling to uphold the peoples interest and welfare. This is dangerous for the nation and the people. Filipinos have made substantial gains over the last decades in building the foundations for democracy: the people are more politically aware, more organized, and willing to take action. Complacency will reverse these gains. As ever, the peoples efforts are the key to rapidly advancing the cause of real change in the country not just in the remaining five-and-a-half years of the Aquino administration but also beyond.
IBON Economic and Political Briefing
13-14 January 2011
ECONOMY GROWING, BUT UNDERDEVELOPED

Economy Growing, But Underdeveloped
he preferred economic themes of the old Arroyo administration have been methodically repeated in the first six months of the new Aquino government: the Philippine economy is resilient and coping amid the global crisis, has avoided recession, has solid foundations for growth and progress, and only needs to be more business-friendly. What has been added is the one theme that the Arroyo government could not credibly roll out: that economic development will come with good governance and transparency. This amounts to a continuing denial of the real state of the Philippine economy, aside from a cynical manipulation of public aversion to bad news and of the desperation for improvements in their lives from wherever this might come. The reality is that the economy as a whole and the welfare of the people has continued to deteriorate especially upon the failed neoliberal globalization policies of the last decades. Big business has profited but the country faces old and on-going problems of agricultural decline, industrial decay, fiscal crisis, growing joblessness, worsening poverty and inequality, and environmental destruction. If anything, these have mounted in 2010 and more than ever demand a decisive response. Yet while the problems are old, the administration offers no new solutions. Indeed, the looming MediumTerm Philippine Development Plan (MTPDP) 2011-2016 affirms globalization policies with an outright recycling of old programs for instance, conspicuously, decades-old privatization as public-private partnerships (PPPs) and Arroyo-era conditional cash transfers (CCTs) which will directly or indirectly only worsen the countrys problems. The government is implementing a corporate profit-seeking agenda sugar-coated with palliatives that, ironically, the people themselves are paying for through a regressive tax system and additional public debt. There are strong reasons to believe that growth will slow in 2011 and that unemployment and poverty will remain high. National government (NG) spending is being compressed this year and there are no elections to momentarily boost spending. Global stimulus programs are wrapping up and a renewed downturn cannot be ruled out, which exert downward pressures on exports and overseas remittances. It is also clear that the administration will not even begin to start taking the difficult but necessary steps for strategic economic development, such as real agrarian reform and building national industry, which further diminishes prospects over the long-term. Momentary growth, poor prospects Despite serious limitations as an indicator for development, growth in the economy according to gross domestic product (GDP) or gross national product (GNP) is still commonly used as a measure (out of convenience more than appropriateness). In this regard the Aquino administration, like the one before it, has played up official reported growth rates as a sign of economic strength and implicitly of progress and improvement in peoples lives. The reality however is that economic growth has been and continues to be exclusionary fundamentally because economic activity and the distribution of its benefits are increasingly organized along market-based lines. Dominant players and the owners of the means of production are given the greatest freedom to make their profits at the expense of the working people. In any case, the second semester is already seeing the start of a downturn due to internal and external factors. GDP grew 7.5% in the first nine months of 2010 from the same period in the year before, which is markedly faster than the corresponding 0.7% rate in 2009. (See Table 1) Overall, there is a base effect with growth in 2010 being measured from the virtual stagnation upon the global crisis in 2009. Aside from this, the figures are consistent with election-related and government-boosted spending in the first semester, post-Ondoy/Pepeng calamity reconstruction, and an uptick in electronics manufacturing in the first semester and its exports in the third quarter.
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Table 1. National Income Accounts, Growth Rates, 2007 - 1st-3rd Quarter 2010 (in %; at constant 1985 prices) 2009 Indicator By Industrial Origin I. Agriculture, Fishery and Forestry II. Industrial Sector A. Mining and Quarrying B. Manufacturing C. Construction D. Electricity, Gas and Water III. Service Sector A. Transportation, Communication and Storage B. Trade C. Finance D. Owners Dwelling and Real Estate E. Private services F. Government services By Expenditure Shares I. Personal Consumption Expenditures II. Government Consumption III. Capital Formation A. Fixed Capital Formation IV. Exports of Goods and Services V. Less: Imports of Goods and Non- Factor Services Gross Domestic Product (GDP) Net Factor Income from Abroad Gross National Product (GNP) Source: National Statistical Coordination Board 5.8 6.6 12.4 10.9 5.5 (4.1) 7.1 12.4 7.5 4.7 0.4 2.3 2.7 0.8 3.7 34.5 6.4 4.1 10.9 (5.7) (0.4) (1.9) 1.1 28.0 4.0 3.7 10.1 (9.1) (2.6) (15.2) (5.0) 0.7 31.6 4.0 4.7 6.3 13.9 18.6 27.5 20.1 7.5 10.3 7.9 5.4 20.0 21.9 16.0 22.4 22.4 7.8 14.1 8.6 4.6 5.8 10.8 25.5 29.1 20.4 8.2 3.9 7.6 4.2 (6.1) 8.9 13.4 29.9 18.2 6.5 13.7 7.5 4.9 6.8 26.0 3.3 21.0 6.7 8.1 8.3 8.2 13.1 5.9 8.4 2.7 3.1 4.9 1.9 4.2 7.6 7.3 3.1 4.2 1.2 2.5 5.8 4.9 3.0 0.0 (0.9) 21.5 (4.4) 9.8 (2.9) 2.8 0.6 1.0 5.9 (0.3) 6.4 6.1 1.2 (2.7) 22.9 (7.7) 12.9 (3.8) 2.7 1.8 0.4 5.9 (1.4) 5.6 7.2 (2.8) 13.7 18.6 13.9 14.2 8.3 7.1 1.9 11.1 5.5 7.7 7.6 4.5 (2.7) 15.9 7.4 20.4 4.3 8.2 7.1 (1.1) 12.6 6.5 4.9 8.5 6.5 (3.2) 16.1 37.4 12.7 22.5 8.6 6.7 3.5 9.1 1.7 9.0 7.1 7.9 (2.5) 9.2 4.6 9.3 11.1 8.1 7.7 3.5 11.7 8.4 9.1 7.2 (1.3) 2007 2008 2009 1st Qtr3rd Qtr 2010 1st Qtr3rd Qtr 1st Qtr 2010 2nd Qtr 3rd Qtr
(2.0) (13.4)
By industry, the fastest growing sectors over the first nine months were mining (18.6% growth), construction (14.2%), manufacturing (13.9%) and trade (11.1%). (See Table 1) However considering not just sectoral growth rates but their respective shares in the economy, the biggest contributors to growth were manufacturing and trade. The countrys backward agriculture chronically erratic from undue vulnerability to the weather and government neglect in turn contracted 2.8% over the first nine months. It can also be noted that although private services as a whole grew faster (7.6%), the business services subsector where business process outsourcing (BPOs) are reflected slowed to 9.4% growth from 11.8% the year before underscoring the limited contribution of hyped BPOs to the economy. By expenditure, exports (27.5% growth) and capital formation (13.9% growth) grew fastest although consumption which accounts for over two-thirds of expenditure contributed more than its relatively slower 4.7% growth would appear to.
13-14 January 2011
However, looking at quarterly year-on-year growth rates provides some indication of trends not evident in the full 9-month figures. By industry, the third quarter 9.3% growth of manufacturing continues a slowdown from the rapid 20.4% rate in the first quarter and 12.7% in the second quarter (especially in electrical machinery); the growth of trade was also slower in the third quarter from the first quarter; agriculture was contracting in every quarter. By expenditure, the third quarter 4.2% growth in personal consumption was lower than earlier in the year and government consumption fell drastically to contract by 6.1% from 20.0% growth in the first quarter. The third quarter 8.9% growth in capital formation was likewise lower than in the previous quarters particularly dragged down by a drastic contraction in public construction. While exports still grew by 29.9% growth in the third quarter driven particularly by exports of semiconductors and other electronics this was not enough to offset the slowdown elsewhere and third quarter GDP growth of 6.5% has been lower than in previous quarters. Seasonally adjusted quarterly growth rates are also computed to allow comparison between consecutive quarters that cannot be done with the quarterly year-on-year figures. By this measure, the economy has been slowing since the start of 2010 from 3.7% growth in the first quarter, 1.4% in the second quarter and a 0.5% contraction in the third quarter. This is the sharpest slowdown in the economy since the 1997 Asian crisis (with a 4.2 percentage point drop over the last two quarters compared to the 3.0 percentage point drop in the third quarter of 1997 and 2.5 percentage points in the first quarter of 1998). Overseas remittances are conventionally seen as an important prop of the domestic economy so an emerging and possibly adverse trend can be pointed out. According to the national income accounts, growth in compensation inflows mostly consisting of overseas Filipino incomes, drastically slowed to 5.7% in the first nine months of 2010 from 30.7% growth in the same period the year before largely explaining why the growth of net factor income from abroad (where compensation inflows are recorded) has correspondingly slowed to only 10.3% in 2010 compared to 31.6% growth in 2009. At the same time, it can be observed that the share to GDP of actual remittances, using data from the Bangko Sentral ng Pilipinas (BSP), has been generally flat since 2005 even declining marginally from 10.8% of GDP in the whole of 2009 to 10.3% in the first nine months of 2010. (See Chart 1) This could indicate that the country is reaching or has reached its limits in relying on remittances to prop up the economy given the growing size of the domestic economy and the tightening of labor markets abroad. This apparent plateau is also significant considering how deployments continue to rise with the Philippine Overseas Employment Administration (POEA) tallying 805,422 deployments of land- and sea-based workers in the first half of 2010 implying some 4,413 deployments a day which outpaces the average 3,897 per day in 2009. Meanwhile, the Commission on Filipinos Overseas (CFO) reports 8.6 million overseas Filipinos by end-2009 (composed of 4.5 million temporary/irregular workers and 4.1 million permanent residents) which is some 392,000 more than the year before. It is likely that part of the reason for the slowdown in remittances is that some 52% of Filipinos abroad is in crisis-stricken North America, Europe and Japan. The mining and quarrying subsector has been posting rapid growth for the last two years, at 18.6% in the first nine months of 2010 and an even faster 22.9% in the same period in 2009. The sources and patterns of growth in 2010 point to difficulties in 2011, even just from the growth perspective. There will no longer be any election- or calamity-related spending (barring Ondoy/Pepengscale disasters), the recently-passed 2011 NG budget is an austerity budget, and the global crisis is dragging on at best and which could even take a turn for the worse.
13-14 January 2011
The United Nations (UN), in its latest report on the world economic situation and prospects for 2011, acknowledges the fragility of supposed recovery in 2010 and expects weaker global growth in 2011 and 2012 with deceleration on a broad front. In spite of the seeming rapid recovery last year, the world economy has still not overcome its general downward growth trend since the start of the 1970s. (See Chart 2) The advanced capitalist economies which take up the largest part of the world economy are still struggling to find sources of growth after the end of the debt-, finance- and speculation-driven growth era. Fiscal stimulus measures served to momentarily stabilize economies and boost corporate profits but cannot be sustained in the face of high and rising public debt by 2009 already reaching some 80% in the major advanced economies (See Chart 3) and revenues undermined by poor economic growth. The troubles with sovereign finances, especially but not only in Europe, are a critical flashpoint especially amid overall economic weakness.
13-14 January 2011
Drastically rising unemployment even in the major global powers drag recovery aside from being a further source of great political and social stress. (See Chart 4) Global unemployment of some 250 million is already the highest level on record, while still underestimating the true jobs crisis by not including workers discouraged by months of fruitless job searching or those pushed into precarious informal or poorly-earning employment. Persistent high unemployment is already also making wages and benefits stagnate or even decline. All these stresses increase the possibility of protectionist measures, retaliation and counter-retaliation. The underdeveloped countries particularly China, India, Brazil and other relatively large economies in Asia and Latin America have been hailed as drivers of global recovery, apparently registering more rapid growth rates than the advanced economies since the start of the crisis. However, this better performance is in an important respect illusory and largely reflects their economic backwardness and relatively less direct dependence on fictitious capital to drive their consumption and production. In any case, as with
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13-14 January 2011
the Philippines, the most globalized sectors of these underdeveloped countries, are highly dependent on developed countries and were adversely affected. This was certainly from weaker exports and remittances, but possibly also through tighter capital flows and official development finance. There are also pressures from international financial institutions (IFIs) such as the World Bank and International Monetary Fund (IMF) to remove fuel and food subsidies, privatize health and education, and cut wages and benefits. In addition they are facing a recent problem of a surge in speculative capital flows seeking profit that are appreciating their currencies. This makes their exports more expensive, reduces the local currency equivalent of overseas remittances, and risks the inflation of domestic asset bubbles. Speculation in commodity markets also raises the hazard of volatile food and oil prices in the near future. The problems in the global economy underscore the need to ensure a solid domestic economic base, even as any opportunities in foreign trade and investment are taken. Globalization however has one-sidedly played up supposed benefits at the expense of domestic requisites resulting in the general decline of manufacturing and agriculture. This is most evident in their falling as a share of GDP in the case of manufacturing to as small as in the 1950s or over half a century ago, and in agriculture to its smallest in the countrys history. (See Chart 5) This has had drastic repercussions including an economy that fails to generate sufficient jobs for the population, food insecurity, low capital generation, poor technological development, undue foreign dependence, and a general lack of dynamism.
Not only has manufacturings share in GDP and employment fallen but it has become increasingly foreign-dominated and disconnected from the local economy with weak forward and backward linkages. Developments in information, communication and transport technology amid the removal of tariff barriers have facilitated reducing manufacturing enterprises into low value-added links in global production chains. Manufacturing evidently remains an important source of production and for instance accounts for 47.7% of gross revenues of top 1,000 corporations in the country yet 71.1% of this is accounted for by foreign transnational corporations (TNCs). Trends in 2010 do not overturn this and 84.1% of approved manufacturing investment in Jan-Sep 2010 is foreign direct investment (FDI). The decline of agriculture is particularly problematic because of its significance for so much of the population one-third of the employed are still in agriculture and two-thirds of the poor are in rural areas.
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The countrys food security has also been affected and increasing shares of food consumed is imported such as rice (18.1% imported in 2009), garlic (82.9%), onion (35.2%), peanuts (35.1%), beef (21.3%), chicken (5.1%), pork (4.9%) and tuna (5.4%). As a result agricultural trade deficits have risen ten-fold in 2009 (US$2.9 billion) and thirteen-fold in 2008 (US$3.8 billion) from US$287.4 billion in 1994. The recent economic growth is well-reflected in the growing profits of leading big foreign and domestic business groups in the country and in the rising wealth of the handful of richest Filipinos. The net income of the countrys top 1,000 corporations has overall been rising since 2001 despite a momentary dip in 2008. As it is, their combined annual net income of Php756.0 billion in 2009 is six-and-a-half times the Php116.4 billion in 2001, with a cumulative net income over the period 2001-2009 of Php3,788.9 billion. (See Chart 6) Notably and in contrast, the average daily basic pay of wage and salary workers over the same period has hardly risen (much less if inflation is taken into account).
That trend of huge gains for a few continued last year. For instance, the Philippine Stock Exchange (PSE) reported that the profits of the countrys 251 listed firms increased 20.1% in the first semester of 2010 to Php232.2 billion from Php193.4 billion in the same period the year before. Among the sectors with the biggest growth in net earnings were mining and oil (275% increase), finance (27%), and property (25%). The Bangko Sentral ng Pilipinas (BSP) meanwhile reported that the combined profits of universal and commercial banks increased 30.3% in the first nine months of 2010 to Php62 billion from Php47.6 billion in the same period in 2009. Continuing jobs crisis The poor employment situation underscores how growth in the economy continues to be exclusionary and unable to produce decent livelihoods for millions of Filipinos. The number of jobless Filipinos is still high and 2001-2010 is the worst decade of recorded unemployment in the countrys history. The supposedly rapid economic growth in the first three quarters of 2010 did not translate into enough new jobs to absorb labor force entrants and cut into the large stock of unemployed Filipinos: there was
1 0 IBON Economic and Political Briefing
13-14 January 2011
only a 2.8% increase in employment despite the 7.5% GDP growth in the first nine months of the year. The disconnect is further highlighted with how there was 11.1% unemployment in 2009 at a time of 0.7% GDP growth (in the first nine months), compared to 10.9% unemployment in 2010 with 7.5% GDP growth. As an indicator of the jobs crisis, IBON estimates that there were 11.2 million Filipinos either jobless or employed but still looking for additional work, equivalent to some 28% of the labor force (as estimated by IBON see note in Table 2) or 4.4 million unemployed and 6.8 million underemployed Filipinos in 2010. (See Table 2) Alternatively, there were 20.8 million Filipinos jobless or in insecure, low-paying and even hazardous work, equivalent to around 52% of the labor force or 4.4 million unemployed, 4.2 million unpaid family workers and 12.3 million own account workers. (See Tables 2 and 3) The estimated 10.9% unemployment in 2010 was slightly improved from 11.1% the year before but still higher than in 2007 and still high enough to continue a historic decade of unprecedented high unemployment with an annual average unemployment rate of 11.2 percent. It is also possible that labor force conditions are even worse than the unemployment numbers suggest if trends in the number of discouraged workers are also considered.
Table 2. Key Employment Indicators, Annual Average 2007-2010 (in '000 except rates in %) Indicator Population 15 Years Old and Over Labor Force Employed Underemployed Unemployed Not in the Labor Force Labor Force Participation Rate Employment rate Underemployment rate Unemployment rate
p a
2007 a 56,565 37,633 33,560 6,756 4,073 18,932 66.5 89.2 20.1 10.8
IBON Estimates 2008 57,848 38,237 34,089 6,579 4,149 19,610 66.1 89.1 19.3 10.9 2009 59,327 39,452 35,060 6,692 4,392 19,875 66.5 88.9 19.1 11.1 2010 60,718 40,438 36,044 6,758 4,394 20,280 66.6 89.1 18.8 10.9
Officially Reported 2008 b 57,848 36,805 34,089 6,579 2,716 21,043 63.6 92.6 19.3 7.4 2009 b 59,237 37,893 35,062 6,693 2,831 21,344 64.0 92.5 19.1 7.5 2010 b, p 60,718 38,902 36,044 6,758 2,859 21,816 64.1 92.7 18.8 7.3
- preliminary; totals may not add up due to rounding. - official data based on old LFS definitions. b - based on new LFS definitions since April 2005 (official data based on old definition unavailable). Note: Since figures for 2008 and 2009 according to the old LFS definitions were unavailable even upon request to NSO, IBON made rough estimates for labor force and correspondingly unemployment by assuming a labor force participation rate (LFPR) of 66.1% in 2008, 66.5% in 2009 and 66.6% in 2010. These assumed LFPR figures were derived by applying the changes in official reported annual average LFPR in 2008, 2009 and 2010 to the LFPR in 2007 that was still computed using the old unemployment definition i.e., 0.4 percentage point reduction in 2008, 0.4 increase in 2009, 0.1 increase in 2010. Source of basic data: National Statistics Office Labor Force Survey
The 929,000 additional wage and salary jobs is welcome as is the 1.3 million additional full-time work, especially after consecutive years of new jobs disproportionately going to own account and unpaid family workers, or to part-time work. (See Table 3) Still, a large portion of the total 983,000 new jobs generated in 2010 were in among the economys lowest-earning sectors manufacturing (137,000 jobs, with average daily basic pay of around Php300/day), construction (121,000 jobs at Php277/day) and trade (305,000 jobs at Php258/day). It is also uncertain how much of these jobs will still be there upon the expected downturn in 2011. The loss of 72,000 agricultural jobs following the sectors contraction is worrying given the
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Table 3. Employed Persons and Gross Domestic Product Growth By Sector, 2009-2010 (in '000 except rates in %) Employed persons (in '000) Indicator 2009 Total Employed Persons By Industry Agriculture, Fishery and Forestry Agriculture, Hunting and Forestry Fishing Industry Mining and Quarrying Manufacturing Electricity, Gas and Water Construction Services Wholesale and Retail Trade Hotels and Restaurants Transport, Storage & Communications Financial Intermediation Real Estate, Renting & Bus. Activities Public Administration & Defense, Compulsory Social Security Education Health and Social Work Other Community, Social & Personal Service Activities Private Households w/ Employed Persons Extra-Territorial Organizations By Class of Worker Wage and Salary Workers Own Account Self-employed Workers Employers Unpaid Family Workers By Hours of Work 40 Hours and Over (Full-Time Employment) Less than 40 Hours (Part-Time Employment) Did Not Work
p
2010 p 36,044 11,972 10,503 1,470 5,392 199 3,031 150 2,012 18,681 7,040 1,062 2,720 399 1,147 1,845 1,176 450 913 1,926 2 19,611 12,279 10,885 1,394 4,155 22,890 12,680 475
Change, 2009-2010 (in '000) 982 (72) (80) 7 299 33 137 8 121 756 305 52 40 30 83 96 38 29 36 46 (0) 929 116 160 (44) (63) 1,344 (266) (96)
Employment growth, 2009-2010 (in %) 2.8 (0.6) (0.8) 0.5 5.9 19.6 4.7 5.4 6.4 4.2 4.5 5.2 1.5 8.1 7.8 5.5 3.3 6.9 4.1 2.5 (6.4) 5.0 1.0 1.5 (3.1) (1.5) 6.2 (2.1) (16.8)
GDP growth by industry, 1st-3rd Qtr 2009-2010 (in %) 7.5 (2.8) nda 0.8 13.7 18.6 13.9 8.3 14.2 7.1 11.1 7.2 1.9 5.5 7.7 4.5 0.3 3.9 nda nda nda
35,062 12,044 10,582 1,462 5,093 166 2,894 142 1,891 17,925 6,735 1,010 2,680 369 1,064 1,749 1,138 421 877 1,880 2 18,682 12,163 10,725 1,438 4,218 21,546 12,946 571
- preliminary, totals may not add up due to rounding. nda - no data available Note: For purposes of comparability, "Financial Intermediation" in the National Income Accounts (NIA, source of GDP data) is considered equivalent to "Finance" in the Labor Force Survey (LFS, source of employment data), "Ownership of Dwellings & Real Estate" to "Real Estate, Renting & Bus. Activities", "Public Administration & Defense, Compulsory Social Security" to "Government", and "Health and Social Work" to "Medical and Health". Source of basic data: National Statistics Office Labor Force Survey and National Statistical Coordination Board
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already low earnings there and concentration of poor, indicating a serious worsening of rural poverty. The profile of the unemployed is also unsettling with alarmingly high rates of jobless high school- and college-educated Filipinos almost nine out of ten (86.4%) of reported unemployed; some two out of ten are even college graduates. (See Table 4) This strongly suggests that it is not so much the lack of education or perceived jobs-skill mismatch that are behind the inability to find jobs but the lack of employment opportunities to begin with. Over half (51.1%) of jobless Filipinos are young at between 15-24 years old.
Table 4. Summary Statistics on Unemployment, 2009-2010 (in '000 except share in %) Indicator Total Unemployed Persons By Sex Male Female By Age Group 15-24 years old 25-54 years old 55 years old and over By Highest Grade Completed No Grade Completed Elementary Undergraduate Graduate High School Undergraduate Graduate College Undergraduate Graduate
p
Number (in '000) 2008 2,716 1,714 1,002 1,389 1,223 104 14 379 173 207 1,237 338 899 1,085 574 512 2009 2,831 1,770 1,062 1,437 1,284 109 13 377 167 210 1,279 344 936 1,162 619 544 2010 p 2,859 1,808 1,050 1,460 1,293 106 14 375 174 201 1,293 363 930 1,178 621 557
Share to Total Unemployed (in %) 2008 100.0 63.1 36.9 51.1 45.0 3.8 0.5 14.0 6.4 7.6 45.5 12.4 33.1 40.0 21.1 18.8 2009 100.0 62.5 37.5 50.8 45.4 3.9 0.5 13.3 5.9 7.4 45.2 12.1 33.1 41.1 21.9 19.2 2010 p 100.0 63.2 36.7 51.1 45.2 3.7 0.5 13.1 6.1 7.0 45.2 12.7 32.5 41.2 21.7 19.5
- preliminary Note: Based on the new official unemployment definition. Source: National Statistics Office Labor Force Survey
Persistent poverty The rebounding of growth in 2010 did little to relieve the majority of Filipinos burdened by joblessness, low incomes, high prices and the resulting poverty. A string of calamities in December even further highlighted the vulnerabilities of the countrys poor who are already in wretchedly difficult circumstances to begin with. The preliminary results of the 2009 Family Income and Expenditure Survey (FIES) were released and confirm how the incomes of Filipinos have hardly improved. At Php113 per day in 2009, real average personal income, taking inflation into account, was virtually unchanged since 2003 despite six years of supposedly continuous economic growth. (See Table 5) There were only marginal increases in the
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incomes of the poorest half of the population of just a peso or so a day with slight decreases in the remaining higher deciles. The preliminary results can also be interpreted as implying that some 70% of the population or 64.6 million Filipinos struggle to survive and meet all their basic food and other needs on Php104 or much less per day on as little as Php22, Php35, Php45, Php55 and Php67 in the case of the poorest half of the population.
Table 5. Estimated Daily Average Family and Personal Income by Decile, 2003, 2006 and 2009 (in Php) Decile Philippines First Decile Second Decile Third Decile Fourth Decile Fifth Decile Sixth Decile Seventh Decile Eighth Decile Ninth Decile Tenth Decile At Current Prices 2003 81 15 23 31 38 47 59 74 96 134 294 2006 95 18 28 36 44 55 68 86 112 160 341 2009 113 22 35 45 55 67 82 104 134 187 399 At 2000 Prices (2000 = 100) 2003 71 13 20 27 33 41 51 65 84 118 258 2006 69 13 20 26 32 40 49 62 82 116 247 2009 71 14 22 28 34 42 51 65 84 117 249
Note: These are rough estimates computed by dividing annual family income per decile by five (5) family members (average family size) and 365 days. Source of basic data: National Statistics Office Family Income and Expenditure Survey
The government officially reports poverty incidence of just 32.9% in 2006 according to a low poverty line of just Php41 per person per day for minimum basic food and non-food needs. But even this low threshold still resulted in 27.6 million Filipinos officially considered poor in 2006 which was 3.8 million more than in 2003. The official 2009 poverty figures could be released in the first quarter of 2011 and it would be surprising if the number of poor and incidence of poverty did not drastically increase given such adverse intervening developments as the global crisis, soaring food and oil prices, and serious natural calamities. As it is, 2010 tragically closed with heavy rains and massive flooding in 23 provinces in eight regions including four of the countrys poorest regions: Bicol, Eastern Visayas, Caraga and the Autonomous Region in Muslim Mindanao (ARMM) since December. The National Disaster Risk Reduction and Management Council (NDRRMC) estimated 235,867 families with some 1.23 million people affected by floods and landslides some 602,000 people in Caraga, 275,000 in Eastern Visayas (Samar, Leyte), and 196,000 in Bicol (Albay, Sorsogon). Overwhelmingly farmers and small rural producers already suffering squalor on a daily basis, they have been pushed into even more wretched conditions. Inequality meanwhile is as bad as in the mid-1980s on the eve of the fall of the Marcos dictatorship and notwithstanding supposedly two-and-a-half decades of democracy, economic growth, growing exports and increased foreign investment. In 2009 the highest income 20% of the population accounted for over half (51.9%) of total family income leaving the poorest 80% to divide the remaining 48.1% among them which is little changed from the situation in 1985. (See Table 6) If anything, the poorest half and poorest 70% of the population have even seen their share fall even more.
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Table 6. Distribution of Total Family Income by Decile, 1985-2009 (in %)
Decile Group Philippines First Decile Second Third Fourth Fifth Sixth Seventh Eighth Ninth Tenth Memo items: Bottom 50% Bottom 70% Bottom 80% Top 20%
1985 100.0 2.0 3.2 4.1 5.0 6.0 7.3 8.9 11.4 15.7 36.4 20.3 36.5 47.9 52.1
1988 100.0 2.0 3.2 4.1 5.0 6.0 7.3 9.0 11.0 16.0 35.8 20.3 36.6 47.6 51.8
1991 100.0 1.8 2.9 3.8 4.7 5.7 7.0 8.8 11.4 16.1 37.8 18.9 34.7 46.1 53.9
1994 100.0 1.9 3.0 3.9 4.9 6.0 7.4 9.1 11.8 16.4 35.5 19.7 36.2 48.0 51.9
1997 100.0 1.7 2.7 3.5 4.3 5.4 6.8 8.7 11.5 16.2 39.3 17.6 33.1 44.6 55.5
2000 100.0 1.7 2.7 3.5 4.4 5.5 6.9 8.8 11.7 16.3 38.3 17.8 33.5 45.2 54.6
2003 100.0 1.8 2.9 3.8 4.7 5.8 7.2 9.1 11.9 16.6 36.3 19.0 35.3 47.1 52.9
2006 100.0 1.9 2.9 3.8 4.7 5.8 7.2 9.0 11.9 16.9 36.0 19.1 35.3 47.2 52.9
2009 100.0 2.0 3.1 3.9 4.8 5.9 7.3 9.2 11.9 16.6 35.3 19.8 36.2 48.1 51.9
Source: National Statistics Office Family Income and Expenditure Survey
Inequality in the country is also starkly reflected comparing reports by Forbes Asia on the wealthiest Filipinos with the results of the 2009 FIES. The net worth of just the 25 richest Filipinos of US$21.4 billion (Php1,021.1 billion at the prevailing exchange rate then) is equivalent to the combined annual income of the countrys poorest 11.1 million families or some 55.4 million Filipinos (computed with an average family size of five) of Php1,029 billion in 2009. The net worth of the countrys 25 richest Filipinos also significantly increased from US$15.2 billion (Php836.2 billion) reported in 2006 by Forbes Asia. Low wages are among the factors behind such low incomes for Filipinos. The official minimum wage has both substantive and symbolic significance. It is directly substantive if received by workers in establishments that should be covered by the minimum wage. But it is also symbolic, and no less meaningfully for that, by sending a solid political signal from the government of the extent to which it upholds the interests of wage-earners and other working people in the rest of the economy. By this measure, the worsening lack of a pro-people bias is evident from wage trends over the years. Taking inflation into account, the daily minimum wage in the National Capital Region (NCR) for instance has remained essentially flat for a decade with a barely Php5 worth of increase in 2010 from 2001. (See Chart 7) As it is, inflating the Php917 NCR family living wage from September 2008 the latest month for which the National Wages and Productivity Council (NWPC) provides a figure by 2009 and 2010 inflation would bring this to around Php983 by end-2010. This implies that the NCR daily minimum wage currently at Php404 is less than half the family living wage (FLW) with a wage gap of Php513. The new administration is fully in a position to rectify this situation if it were so inclined. Struggles against poverty Filipinos have not been passively accepting their plight and continued to wage economic and political struggles against poverty and for decent livelihoods in 2010.
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Notwithstanding agricultural decline the sector still remains the single biggest source of livelihoods for the country, directly and indirectly employing the largest number of Filipinos and providing subsistence for the largest number of Filipino families. These make agrarian struggles particularly significant. There is conspicuous government inaction on the vital issue of agrarian reform causing traditional landed and other rural elites persist in wide areas of the countryside. At the policy level, the problem lies in the mere extension of the flawed Comprehensive Agrarian Reform Program (CARP) through CARP extension with reforms (CARPer) and with not even lip service to agrarian reform in important policy speeches. While meaningful for being illustrative of landlord resistance is the presidents evasive stance on the family-owned 6,453 hectare Hacienda Luisita where, on one hand, Pres. Aquino uses the excuse of having divested himself of his shareholdings in Hacienda Luisita, Inc. (HLI) even as, on the other hand, family discussions on overall plans and tactics regarding HLI vis-a-vis the active peasant claims on it continue. HLI farmworkers under United Luisita Workers Union (ULWU) and Alyansa ng mga Manggagawang Bukid ng Asyenda Luisita (AMBALA) await a decision from the Supreme Court (SC) on the nullification of the notorious stock distribution option (SDO) and August 2010 compromise deal. The Aquino administrations handling of the Hacienda Luisita issues will send the strongest signal of its interest, or lack of, in agrarian reform. Other peasant struggles for land include for some 5,000 hectares in Negros Occidental (claimed by Eduardo Cojuangco) 5,000 hectares in Batangas (Sobrepeas and Sy families), 430 hectares in Leyte (Vicente Veloso), 400 hectares in Laguna (Yulo family and real estate developers), 348 hectares in Bulacan (Luis Villafuerte), 311 hectares in Bulacan (Gregorio Araneta, III), 208 hectares in Pampanga (Pineda family), and 11 hectares in Pangasinan (Humberto Solis). Organized farmworkers in Bukidnon are also campaigning against high land rent and usury, as well as for higher farm wages, and farmgate prices. Organizations under the national peasant federation Kilusang Magbubukid ng Pilipinas (KMP) are also undertaking bungkalan (cultivation) campaigns affirming the political nature of the agrarian struggle and the centrality of organized peasant action, aside from giving concrete economic benefits for farmers and their communities. These bungkalan efforts among others already covers 2,000 hectares of rice farms and
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hundreds more hectares planted to fruits and vegetables in Hacienda Luisita in Tarlac, and 1,381 hectares also planted to rice, fruits and vegetables in Negros island by former sugarworkers. Various urban-based sectors also waged struggles for their social and economic rights in 2010. The Koalisyon ng Progresibong Manggagawa at Mamamayan (KPMM) a wide coalition of workers and government employees with migrants, teachers, health workers, farm workers, urban poor and other sectors was formed in November to demand meaningful wage hikes for private and public sector workers. Meanwhile Defend Jobs-Philippines continued its campaign against retrenchment, union-busting, contractualization and labor flexibilization, and higher wages against Triumph International, Advan, media giant ABS-CBN, flag carrier Philippine Airlines, Pepsi Cola, Comfoods, Philippine Ports and in export processing zones. In December, kuliglig (hybrid transport vehicles) drivers and operators protested the Manila City government ban on them and were violently dispersed an example of how the effort by a mass of otherwise jobless to seek gainful employment was stifled by local government without providing alternatives. Thousands of residents of urban poor communities in Tondo, Navotas, Pasig, Quezon City, Metro Baguio, Metro Cebu and Metro Davao also organized to resist demolition of their homes, often facing violent dispersals. Eroding government, rising debt The 2011 NG budget goes far in revealing the development framework, thrusts and priorities of the Aquino administration. It is an austerity budget to be able to keep repaying debt, yet at the same time is bloated by patronage funds. The budget does not support long-term economic and social development and reflects an approach to socioeconomic governance where the government shies away from its vital responsibilities. The 2011 budget continues the trend of eroding government capacity to uphold, protect and promote the peoples welfare with adverse long-term consequences. The Php1,645 billion budget as proposed for 2011 seems large but actually continues the long-run decline of government spending relative to the economys size and its needs. At a projected 18.2% of GDP, it is in effect smaller than the 2010 budget and far below the peak of 24% in 1990. (See Chart 8) It also shrinks in real terms where non-debt spending, taking projected inflation into account, contracts by 2.1% in 2011 from 2010. This is inconsistent with the need to expand well-designed public expenditure on social services, infrastructure, industrial support and agricultural development.
19
86
19
91
19
96
20
01
20
06
20
11
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Budget priorities remain distorted. Absolute priority is still given to foreign and domestic debt service with Php357.1 billion in interest payments (aside from an off-budget Php466.2 billion in principal payments, for a total of Php823 billion in debt payments) where the Php80.9 billion hike in interest payments even takes up 78% of the Php104.4 billion increase from 2010. Military spending also increases to a high Php105 billion even as there are cuts in social services. The health budget is reduced and includes cuts for 12 specialty hospitals in Metro Manila and 40 public hospitals nationwide and in subsidies for indigent patients, among others. Insufficient priority is given to education and while there is an overall budget increase mainly to raise teachers salaries, The budget for state universities and colleges (SUCs) was cut prompting nationwide strikes from end-November involving tens of thousands of students and academic workers. As it is, even the UN has raised concerns that the Philippines needs to spend much more on education, health and basic services to meet its Millennium Development Goal (MDG) targets by 2015. There is also a large drop in the budget for economic services which falls by 9.5% from Php398.9 billion in 2010 to Php361.1 billion in 2011. Cutbacks are particularly large in the areas of: agriculture and agrarian reform (falling by Php23.1 billion or 26%); communication, roads and other transportation (Php7.9 billion or 5.2%); water resources development and flood control (Php4 billion or 21.4%); and power and energy (Php3.4 billion or 65.5%). These cuts also create the justification for the further privatization of critical public infrastructure, even as diminishing direct government engagement in the economy undermines its capacity to regulate. And while the government continues to push Filipinos abroad for work, it is failing to ensure that they are adequately protected while overseas. The budget of the Department of Foreign Affairs (DFA) has been reduced, with cuts also in legal and other assistance funds for overseas Filipino workers. The 2011 budget moreover contains some Php245-billion in vague lump-sum funds, or some 15% of the total budget. These funds, composed of big budget items for no properly identified purpose, at the very least run contrary to the Aquino administrations declared thrust of transparency and accountability and at worst can be used as corruption-prone patronage-driven pork barrel funds. The lump-sum items include among others: Php66.91-billion unprogrammed funds and Php1-billion contingent fund subject to essentially presidential discretion; Php29.29-billion fund for the greatly expanded Pantawid Pamilyang Pilipino Program (4Ps) and National Household Targeting System; Php15billion fund divided equally among three ambiguous public-private partnership support funds under the Department of Public Works and Highways (DPWH), Department of Transportation and Communication (DOTC) and Department of Agriculture; Php2.34-billion fund to the military for support to national development; Php1.46 billion in intelligence funds, which is Php403 million more than in Arroyos 2010 budget; Php1.19 billion for major information and communication technology projects, which is reminiscent of the failed NBN-ZTE deal; and the Php24.82 billion for the Priority Development Assistance Fund (PDAF). It now appears that the government may meet its full year 2010 target deficit of Php325 billion with the NG deficit in the first 11 months of 2010 at just Php269.8 billion which is even lower than in the same period last year. (See Chart 9) This defies the earlier projections of many analysts including IBON. But while the Aquino administration would like to be seen as succeeding in its efforts against tax evaders and smugglers, the deficit was contained not by overall revenue growth (which was slower than in the first semester) but by a drastic cut in expenditures which contracted 1.6% in July-November from the same period the year before. (See Table 7) The countrys revenue shortfall is due to widespread evasion and corruption, fiscal incentives and tax breaks to corporations, drastic tariff cuts, and a regressive tax system that avoids taxing the wealthy so there will be limits to how far the administration can raise revenue if it only means to do this through supposedly better enforcement and a crackdown on corruption. The temptation is then ever-present to
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Table 7. National Government Cash Operations, 2009-November 2010 (in million Php except rates in %) Indicator Revenues Tax Revenues Bureau of Internal Revenue Bureau of Customs Other Offices Non-tax Revenues BTr Income Privatization Fees & Other Charges Others Grants Expenditures Surplus/(Deficit) 2009 Jan-Nov 2010 1,123,211 1,104,754 981,631 750,287 220,307 11,307 141,389 69,912 1,390 19,253 50,834 191 (298,532) 998,501 753,325 223,500 11,676 105,880 52,406 552 21,144 31,778 373 Jan-Jun 2009 545,702 486,399 375,612 104,811 5,976 59,221 30,125 525 28,571 82 699,115 2010 592,104 540,532 403,469 130,722 6,341 51,207 24,912 146 26,149 365 788,833 Jul-Nov 2009 475,968 407,423 306,301 96,636 4,486 68,539 30,374 566 37,599 6 595,078 2010 512,650 457,969 349,856 102,778 5,335 54,673 27,494 406 26,773 8 585,741 (73,091) % Change, 20092010 Jan-Jun 9 11 7 25 6 (14) (17) (72) (8) 345 13 28 Jul-Nov 8 12 14 6 19 (20) (9) (28) (29) 33 (2) (39)
1,421,743 1,374,574
(269,820) (153,413) (196,729) (119,110)
Source: Bureau of the Treasury
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keep the deficit in check through further spending compression (such as privatization of health, education and infrastructure, removal of subsidies and support on food, and cuts in other economic services). This is aside from higher taxes (such as on alcohol, tobacco and petroleum products), and government fees and charges. Expenses are moreover bloated by chronic indebtedness and debt servicing. The NG paid Php660.4 billion in debt service in the first 11 months of 2010, continuing the trend of inexorably rising debt payments. (Although there were two years of consecutive slight decline in 2007 and 2008 after the record Php854.4 billion paid in 2006.) As it is, outstanding NG debt stood at Php4,664.2 billion as of September 2010 or some Php49,610 per Filipino and is projected to keep rising to reach Php5,185.7 billion by the end of 2011. Currently around 58% of the debt is domestic and 42% foreign. Continuing failed globalization The Aquino administrations policy actions in its first six months and, by all indications, its upcoming MTPDP 2011-2016 confirm the governments adherence to obsolete neoliberal free market globalization policies and, worse, its intent to take the process even further. This is inappropriate for the countrys development needs and hinders real progress that benefits the majority of Filipinos. The absence of real change in economic thrusts confirms the absence of meaningful change in the countrys underlying politics where policy-making remains under the control of dominant economic elites. The Aquino administrations economic thrust is straightforward. It aims for economic growth through public infrastructure development, particularly through so-called PPPs, and by creating an overall macroeconomic and policy environment attractive to foreign investors. In backhanded acknowledgment of the failure of markets to deliver development, there will be social protection such as CCTs for the poor and vulnerable. Having a transparent and accountable government is supposedly key to achieving these. Peace and security must also be enhanced, mainly meaning putting an end to the countrys armed conflicts. This approach is flawed on several counts. Most of all, it is oblivious to the severe impact of decades of globalization policies on the Philippine economy and the Filipino peoples welfare which has been affirmed by further adverse outcomes in 2010. Foreign-dependent economic growth has not created productive employment opportunities or raised incomes. And, indeed, the armed conflicts in the country result from the poverty in the country to begin with and not the other way around. The administration approach is also heedless of the dramatic changes in the world economy upon the onset of the global crisis. This includes the unambiguous end of the export- and foreign investment-dependent development model. The failure to build the domestic economy is bad enough but insisting on more of the same in the face of overwhelming counter-evidence borders on dogmatism. The administrations market-based thrust also has wrong assumptions about the causes of poverty. It simplistically views poverty as largely due to corruption, the lack of infrastructure and foreign investments in the country, and insufficient entrepreneurial skills and capital (financial and human) by poor individuals. This view ignores deeper structural problems of land monopolies, wage suppression, regressive taxation, enforced industrial backwardness, and foreign-dominated trade and investment. Conveniently, promoting market-based policies gives the greatest benefits for narrow foreign and elite interests while gains for the working people immediately and over the longer-term are scant. There is at most social protection subject to being withheld or denied according to whether or not the government prioritizes resources for this and deems the people qualifying for it. Critically there is no real income, asset and wealth redistribution so that people can participate in the economy on their terms rather than merely being forced to accept what landlords and capitalists offer. The fixation on FDI is unjustified. While there are potential benefits from foreign investment, active state intervention is needed for these to materialize and Philippine governments have unfortunately been
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unwilling to assert the countrys sovereign right to more strongly regulate FDI and ensure these benefits. There is also a defeatist attitude towards local industrial and agricultural producers who are denied significant, sustained and strategic protection and support. The MTPDP 2011-2016 for instance presumes that foreign investment is the primary means to developing the industrial and service sectors. It is consequently focused on attracting FDI at all costs even if this includes foregoing any real long-term developmental gains. On one hand, the government will exert extra effort to making the country more convenient and profitable for foreign investors: macroeconomic stability, cutting red tape, giving fiscal and other incentives, and providing the infrastructure and kind of workforce they want. The MTPDP is replete with proposals on these. On the other hand, there is nothing at all about defining their expected contribution to domestic development and building Filipino industrial and production capacity, such as greater use of local inputs and genuine technology transfer, for fear of discouraging FDI. Domestic producers such as medium, small and micro enterprises (MSMEs) meanwhile are valued not as the starting elements of a strong local economy but as subordinate links in a foreign TNC-dominated global supply chain. Specifically mentioned in the MTPDP 2011-2016 is how the government aims to promote investment and PPPs in mining, mass housing, agri-business, tourism, BPOs, and electronics these declared priorities are consistent with the Seven Big Winners identified by the Joint Foreign Chambers of the Philippines (JFC) in their June 2009 policy paper (i.e., agri-business, BPOs, mining, tourism, manufacturing [especially electronics] and logistics, creative industries and infrastructure). Foreign big business has also been vocal in seeking amendments to what it sees as restrictive economic provisions. While the Aquino administration has said that charter change is not a priority, it is not inconceivable for it to subsequently back-track on this ostensibly upon a public clamor that it itself manufactured or encouraged behind the scenes. Yet the Philippine experience with rising FDI has little to show in terms of aggregate economic development. FDI has over the last two decades been granted extraordinary privileges and incentives by the Ramos, Estrada and Arroyo administrations. The cumulative stock of FDI has consequently increased twenty-six-fold from US$914 million in 1980 to US$23.6 billion in 2009, increasing as a percentage of GDP from 2.8% to 14.6% over that same period. Annual inward FDI flows, in turn, increased from US$114 million in 1980 to US$1.95 billion in 2009. As a percentage of gross fixed capital formation, these flows rose from 1.3% in 1980 to a peak of 17.7% in 2006 before dropping to 8.3% in 2009. FDI accounted for 39% of total approved investments in 2009, or Php121.8 billion in FDI out of total approved investments worth Php314.4 billion. As it is, some 47.1% of approved investments over the decade 20002009 were FDI and, in 2009, TNCs accounted for 44.3% of gross revenues of top 1,000 corporations in the country. Foreign investment has generated profits, increased exports and contributed to growth but the supposed gains for the economy and the people in terms of jobs, poverty reduction, industrialization and an advanced economy have not materialized. Rising FDI has been accompanied by growing unemployment, increasing labor export, falling real wages, shrinking domestic manufacturing and more volatile growth. There have also not been any real increases in domestic capital formation or in government revenues which have increasingly relied on regressive taxes on personal consumption. While jobs in export processing zones or special economic zones have been increasing, these have not been able to offset job losses and stunted industrial development elsewhere in the domestic economy. Public costs, private gain The one-sided fixation with foreign investment is exemplified by the PPP scheme. Though presented by the Aquino government as a new solution, PPPs are enhancements of privatization policies started by previous administrations. They seek to broaden the scope of privatization and to create the most favorable conditions for investors even at the expense of long-term national development.
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PPPs are a central pillar of the administrations economic thrust. In his first state of the nation address in July, Pres. Aquino pitched PPPs as a magic bullet for the countrys infrastructure needs and the governments fiscal problems. The national budget submitted a month later had multi-billion peso PPP support funds aside from funding a PPP center in the national economic planning agency. In November, the government organized a PPP conference attended by the highest ranking officials of government agencies, public and private sector corporations, foreign and domestic banks and financial groups, foreign chambers of commerce, IFIs such as the World Bank, IMF, and official donor agencies. And the MTPDP 2011-2016 due for release in early 2011 affirms PPPs aside from explicitly pursuing these in the health, education and housing sectors. PPPs in the social sectors are even being used as a way to draw into the government fold so-called civil society groups with possible vested interests. The main incentive being offered by the Aquino administration is guaranteeing foreign investors against any regulatory risks to their profits such as regulatory bodies, courts or Congress deciding to stop companies from collecting fees, imposing new environmental standards or performance requirements, and others. The benefits of PPPs are played up. It is claimed that they allow government to implement important projects with no or minimal public debt or spending because of the private financing. Aside from capital, the private sector also brings in assumed expertise and other capacity to the project that the government does not have. Effectively sub-contracting to the private sector also frees up government attention and resources for other matters. The problems however are downplayed. Notwithstanding supposedly strict project viability and procurement processes, contingent liabilities are actually difficult to estimate and could bloat significantly over the course of the projects life depending on various market conditions as well as contract terms which will be shouldered by the Filipino public. The private sector is not even necessarily infallible or efficient and problematic projects can have major cost overruns or result in poor delivery of services; the worst cases of these may even involve bailouts. For those projects which the government can charge users with the capacity to pay such as infrastructure for big corporations the government in effect loses any revenues earned that partially or wholly instead go to the private firm. The government also does not build its own capacity in infrastructure and services as much as if it had engaged in these projects on its own or, in cases of joint ventures, as the clearly dominant partner. This keeps the state unduly dependent on the private sector as well as undermines its capacity to regulate effectively over the long-term. Finally, and most directly meaningful for consumers private sector participation means operating for profit and user fees for what should be mainly or even solely publicly-provided social services and utilities. At worst, state-sanctioned private monopolies are created that charge fees for delivering public services such as water and highways. The danger of escalating and unaffordable pricing is particularly hazardous in health, education and housing but is also there in infrastructure. The experience with Manila water tariffs following privatization in 1997 is illustrative. Although rates were substantially cut at the start and for a few years, rate hikes by both concessionaires eventually started accelerating to eventually far outpace inflation (or the general rise in prices). (See Chart 10) This is consistent with a revenue-generating strategy that keeps prices low at the start to lessen opposition but then makes up for this in later years when consumers no longer have a choice. Through the PPP, Aquino intends to continue the ongoing power sector restructuring program under the Electric Power Industry Reform Act (EPIRA) that will supposedly address high electricity cost and power supply insecurity through privatization and deregulation. After 10 years of EPIRA, however, Philippine power rates are the highest in Asia, surpassing even that of Japan, while average annual electricity rates of distribution utilities such as Manila Electric Co. (Meralco) increased by 50 % for residential
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customers. On top of this, taxpayers have been paying for the debts used to implement these anti-people power reforms. The looming Light Rail Transit/Metro Rail Transit (LRT/MRT) train fare hikes and South Luzon Expressway/North Luzon Expressway (SLEX/NLEX) highway toll fee increases similarly illustrate how private revenue- and profit-seeking considerations can easily dominate over public interest concerns. Even if the government in principle still retains the power to regulate towards meeting social needs, this is in practice diluted by extraneous considerations of contracts, investor backlash, and corporate maneuvering to ensure private returns. Aside from the impending train fare and toll fee hikes, the start of 2011 was greeted by increases in prices of food and petroleum products as well as impending hikes in bus and jeepney fares. These increases are not unexpected and in fact supported by the Aquino administration that has vowed to protect private investment through the PPP. Such trend of rising prices and rates is sure to build up under the PPP initiative - targeting power and water utilities, hospitals, public transport system, agriculture infrastructure, among others. Politics of palliatives The failure of globalization to deliver development is clear from the countrys experience which should be reason enough to consider alternative policies and programs. Yet powerful interest groups profiting from these policies not just big foreign and domestic corporations but also corrupt government bureaucrats have a stake in maintaining them. Poverty and inequality are however so severe that palliatives are needed to undercut opposition to globalization. This is the political motivation behind the administrations greatly expanded so-called social protection programs (especially the Arroyo-era CCTs) undertaken on a massive scale, they will give the momentary illusion of development to justify pressing with the anti-developmental but profitable neoliberal agenda. Part of this is the selective implementation in the Philippine countryside as the
IBON Economic and Political Briefing 13-14 January 2011
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psychological-warfare component of counter-insurgency programs seeking to undermine long-standing and growing support for armed and revolutionary movements. The social reform aspects also conveniently provide the framework for the more direct involvement and cooptation to the administration agenda of erstwhile adversarial civil society groups. The Aquino administrations social protection program has three components: conditional cash transfers (CCTs, taking up the largest part of its Pantawid Pamilyang Pilipino Program, or 4Ps), basic infrastructure and community social service projects (especially through the Kapitbisig Laban sa KahirapanComprehensive and Integrated Delivery of Social Services, or Kalahi-CIDSS), and livelihood projects (such as through the Self-Employment Assistance-Kaunlaran, or SEA-K). The CCT program is the biggest budgeted and the most significant. Piloted in 2007, the Aquino administration is dramatically expanding it and targets to reach 2.3 million households in 2011 (2.6 million by other reports) and up to four million beneficiaries by 2016. The 4Ps budget has been increased from Php10 billion in 2010 to Php29.2 billion for 2011, of which Php21.2 billion is for the implementation of CCTs. It is an administratively expensive program with related administration costs around Php1.9 billion annually but reaching over Php4.0 billion if other costs such as trainings to implementers, parent-leaders and communities are included. A large part of the CCTs are even debt-funded. Depending on interest rate trends, initial IBON estimates are that the countrys total loan service for its CCT loans from the World Bank and the ADB could reach at least US$1.007 billion (Php44.3 billion at current exchange rates). This includes US$202 million (Php8.9 billion) in projected interest payments US$94.6 million to the World Bank and US$107.4 million to the ADB. These already include a US$1,012,500 front-end fee (a percentage payable once usually at the loan signing) to the World Bank, although more than US$1 million in commitment charges (annual percentage fee usually paid quarterly) to the ADB are not yet covered. The program has problems even on its own terms. Although it involves apparently huge and rising amounts, these are still minor relative to the breadth and depth of poverty in the country. While poor households get some temporary relief from the windfall CCT doleout this is still no real solution with jobs, for instance, still scarce even for those with high school and college educations. It amounts to institutionalized mendicancy beneficiaries are dependent on the whims of their benefactor (and budget availability); and what they receive is not the result of their productive labors but from a patronizing scheme where they are rewarded for good parenting behavior. The program is also prone to implementation problems including faulty monitoring and non-poor beneficiaries, leakages due to corruption, and use for patronage purposes. Yet while no solution to the countrys poverty, the CCT doleout is large enough to effectively serve various anti-developmental purposes. They are being used to sugar-coat harsh globalization policies that destroy jobs, undermine livelihoods and cut education and health services and to momentarily mask the persistence of deeper structural problems in the economy. They are being used to effectively buy the support of the poor and of implementing civil society groups and non-government organizations (NGOs) for the Aquino administration. They are even going to be used for counterinsurgency as a key microlevel intervention focusing on households and communities, according to a draft of the MTPDP 20112016, coordinated under the PAMANA program in conflict areas in effect functioning as a propaganda component of military operations to increase the legitimacy of the Aquino government. Governance for profit The distinctiveness of the Aquino administrations economic reforms, compared to those before it, is the more aggressive effort to further transform the government into a supporter and facilitator of profit-seeking big foreign corporations and their domestic partners. It aims to mobilize and direct state resources to give
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substantial profits to big foreign and domestic business groups rather than ensure wider public benefits and social gain. It shrinks further away from providing affordable, if not entirely free, vital social services and public utilities for the largest number of Filipinos, and away from supporting Filipino producers more rooted in the domestic economy. The countrys long-standing links between politics and big business has also become even more overt in the Aquino Cabinet and its many appointees with strong business and financial affiliations. This is a misuse of the governments vast powers for narrow foreign and private gain. The decades of experience with market-based policies up to the current global crisis of capitalism underscore the serious hazards with assuming that giving big profit-seeking private sector interests free play will spontaneously result in economy-wide development. There are limits to how far private sector dynamism can contribute to development. Indeed, whatever gains are possible will even only materialize if the sector is consciously supported, directed and regulated by a responsible state that has the national and peoples interest rather than profits for a few as its primary objective. It is also ironic that while the anti-corruption drive is played up, the economic reforms actually create the conditions for this to flourish. Wide-scale privatization creates rent-seeking opportunities for government officials and politicians in positions to influence decisions and profits for big business groups entering into deals. Private sector interest groups will be competing for the finite opportunities for profit through PPPlegitimated private claims on public resources. These will occur away from public scrutiny with exposes depending mainly on how political or corporate rivalries play out. The presidents choice of Cabinet, especially relating to economic policies, goes far in establishing the administrations economic policy priorities. The administrations pro-business rather than pro-people bias is then expected given its ultra-conservative corporate-biased economic team, many of whom are Cabinet returnees responsible for the poor and diminished state of the Philippine economy (from the Corazon Aquino government to the previous Arroyo presidency). Key economic team appointees with significant corporate links include finance secretary Cesar Purisima from SGV & Co./Ernst & Young, trade secretary Gregory Domingo from SM Investments Inc./Chase Manhattan Bank/Chemical Bank, energy secretary Jose Rene Almendras from Manila Water Company/ Aboitiz & Co., public works secretary Rogelio Singson from Maynilad Water Service, transport and communication secretary Jose de Jesus from Meralco, tourism secretary Alberto Lim from the Makati Business Club, and planning secretary Cayetano Paderanga from business consultancies and Philippine Stock Exchange. These and other Cabinet appointments were unsurprisingly immediately hailed by big business groups such as the Philippine Chamber of Commerce and Industry (PCCI), Employers Confederation of the Philippines (ECOP), Management Association of the Philippines (MAP), Makati Business Club (MBC), Philippine Exporters Confederation (Philexport) and foreign chambers of commerce, among whose members were said to have been major funders of the Aquino presidential campaign. The professional and ideological background of the economic team virtually assures that the countrys economic policy will take its lead from IFIs, credit ratings agencies, foreign TNCs, and foreign powers pushing their respective corporate interests. The disconnect between the supposed economic growth and the peoples welfare will likely continue with the administration not undertaking measures to redistribute income or wealth such as through a wage hike or progressive taxation, nor providing basic health and education services, nor creating opportunities for work through real land reform or supporting small local businesses.
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POLITICS DIFFERENT, BUT UNCHANGED
res. Aquinos rise to the presidency was dramatic and tinged with euphoria but is in many respects also shallow. While it was a victory to remove the ambitious, plundering and brutal Arroyo administration there has not been any real shift in the balance of political power in the country from elite groups towards the greater majority. While large numbers of the public voted for Pres. Aquino, this was largely spontaneous and, for many, merely sentimental support. While the proclaimed anti-corruption, transparency and accountability campaign is important there is no sign of an offensive against politically entrenched economic interests that corner the gains from economic growth and the resources of the country. While the administration harps on its Kung walang corrupt, walang mahirap (If no one is corrupt, no one will be poor) line, it is bereft of a meaningful alternative social and economic program for long-term development. Hence there is really little momentum to break the inertia of the countrys problems and bring about real change. The last six months tend to confirm this aside from giving little reason to expect that things will become much different in the year to come. 2011 will likely see Pres. Aquinos appeal begin to diminish, starting from the vast number of poor who will be unreached by the massive but still finite patronage resources being mobilized to support the new incumbent. Political transition After the elation of the elections, the last six months of 2010 have been about the more mundane transitioning into a new administration. The incoming Aquino watch has tried to sustain public optimism about change and made symbolic but well-received gestures -- the wang-wang siren ban, titillating exposs of corruption and excess under the Arroyo administration, relatively lower-budget foreign trips starting with to the United States, and others. Yet while somewhat distracting and helping shore up public approval, they barely covered up the underlying reality: little has changed upon the election and little is changing as the administration draws on. In spite of the spectacle around the presidency, the elections were not a break from the past and had a familiar outcome. Elected officials have come from the usual political families or otherwise had similarly conservative economic and political backgrounds. The non-representative class character of the government continued going far in ensuring reactionary policymaking and governance and the continued influence of big corporate and landed interests. The new government spent the last months in the very traditional consolidation of rule and distribution of spoils, made additionally difficult by the mixed bag of political interests around Pres. Aquino. Filling up the Cabinet dragged on and while at first justified as being discriminating was quickly revealed to be due to the gridlock of competing interests -- the presidents multi-headed communications group being a particularly visible early sign of discord. The two most prominent factions of the administration are reputedly the so-called Balay and Samar groups. The Balay group supposedly supported the tandem of Aquino and former senator Manuel Roxas, II and is associated with the Liberal Party (LP) led by Roxas (with Presidential Spokesman Edwin Lacierda and Presidential Development and Strategic Planning Secretary Ricky Carandang). Closely identified with it are budget secretary Butch Abad, finance secretary Cesar Purisima, and the other so-called Hyatt 10 of resigned former Arroyo officials, interior secretary Jesse Robredo, internal revenue commissioner Kim
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Henares, customs commissioner Lito Alvarez, former defense secretary Avelino Cruz and the various LP personalities holding office. The Samar group in turn supposedly backed the Noy-Bi tandem of Aquino and Vice-president Jejomar Binay (with Presidential Communications Operations Office Secretary Herminio Coloma). This is said to count House speaker Feliciano Belmonte, Sen. Francis Escudero, defense secretary Voltaire Gazmin, energy secretary Rene Almendras, interior undersecretary Rico Puno, and close Aquino and Cojuangco relatives -- encapsulating the so-called Kabarkada, Inc. and Kamag-anak, Inc. Political in-fighting could be among the first cracks breaking the illusion of change under the Aquino administration. It is likely that the lobbying, maneuvering and counter-maneuvering of contesting vested interests -- for immediate gain but also with a view to the national elections including the presidency in 2016 -- will become more visible as the administration progresses. The opposition from the ranks of the traditional political parties has not yet been active and appears to still be biding its time while the popularity of the Aquino administration remains. Factionalization would only aggravate what is believed to be a weak presidency. The competence of Aquino himself as well as of members his Cabinet and close advisers has already been questioned from its mishandling of various emerging situations needing quick, correct and decisive actions. This started as early as August with the hostage fiasco ending in the death of eight Hong Kong tourists. But there have also been legal missteps particularly the questioning of its first three executive orders: on the setting up of a Truth Commission (Executive Order 1, or EO 1), on revoking Arroyo midnight appointments (EO 2), and on giving career executive service officer rank to government lawyers (EO 3). These bring to mind the questions raised during the campaign period about Pres. Aquinos leadership ability, lackluster political performance, and lack of preparedness. Also reflecting the persistence of traditional politics is how the Aquino administration has not just kept but increased the notorious pork barrel of senators and representatives of Congress. In 2011 each senator will get Php300 million, each representative Php70 million (with favored House members apparently getting an additional Php50 million). These are apart from the hundreds of billions of pesos in essentially presidential pork mentioned above. Civil society politics Another point of continuity of the Aquino administration is the trend of slow but steady absorption into government of so-called civil society, which started after the fall of the Marcos dictatorship. At one level this seems like a steady trend toward greater democracy in the country, with increasing participation in governance by the public through their organizations and by non-traditional political personalities. The presumption is that an active Filipino civil society improves the quality of democracy by engaging in policy making, performing a watchdog role, helping in actual service delivery, supporting electoral process, and generally playing a part in the various aspects of governance. This is a view embraced by major international agencies and bodies like the UN, World Bank, the ADB, and big power governments like the United States of America (US). At another level however it must also be recognized that its contribution to making the country genuinely more democratic is modest at best. It is for instance striking that the markedly rising and prominent engagement since the Corazon Aquino administration of seemingly formidable civil society groups -the country being renowned internationally for these -- seems to have made little headway in improving the conditions of Filipinos. Indeed, the period of increasing State-civil society interaction with the first Aquino, Ramos, Estrada and even Arroyo administrations coincides with the period of ever more globalization policies.
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This raises the prospect that matters will not be very different under the Aquino administration and the increased and more direct involvement of various civil society groups, including seemingly Leftist progressives, who formed an alliance with Pres. Aquino and the traditional Liberal Party as early as the campaign period. Official language and messaging is likely to improve and be enriched with rhetoric of social justice, human rights and development (as happened during all the post-Marcos administrations). The real test however is whether the government has indeed been influenced to make hard decisions and tough actions against deep-rooted vested interests. Will land for instance be decisively distributed, wages increased, the wealthy taxed, foreign capital regulated and the biggest plunderers prosecuted? There is little sign of these whether in the first six months of the administration or in the governments forthcoming economic plan. Peoples participation in the countrys political life is a vital aspect of democracy and must be advanced. At the same time, there must be caution against gains made being short-term or, at worst, illusory. There is a real danger that participation will benefit government propaganda of legitimacy, good governance and poverty alleviation and increasing its credibility more than delivering substantive change. The presence of so many civil society personalities and organization certainly contributes to easing the heavily pro-business character of the Cabinet and the administration (even if the integrity of some supposed progressives has been questioned since the controversial PEACe Bonds scam). This could also be seen as a pragmatic move by the Aquino government which effectively neutralizes a portion of civil society that in the past had participated in movements to oust sitting presidents, and had been vocal in articulating non-mainstream economic and political demands. It is worth watching how this engaged and directly participating civil society reacts to the continuation of the major economic policies that have kept millions of Filipinos as poor. A tepid response will make them vulnerable to charges of being transformed by rather than transforming undemocratic Philippine politics. Uncertain progress The Aquino administrations progress on key issues remains tentative, weak or still absent. On its banner issue of corruption, the immediate concern is the prosecution and accountability of former president Gloria Macapagal-Arroyo and high Arroyo administration officials. The SC ruling that EO 1 creating a Truth Commission caused the body supposedly formed to investigate anomalies, previously criticized for being toothless, to be stillborn. The Aquino administration was also seen to at the very least be indecisive and at worst complicit in allowing some Php2.1 billion in pork barrel projects in the congressional district of now Rep. Arroyo. Sensational cases of Arroyo era excess have also been cited in major presidential policy speeches yet over six months into the new administration there does not yet appear to be concrete progress. If there have been cases filed against them for corruption, electoral fraud or human rights violations these have been uncharacteristically not publicized. Indeed, the plea bargain under which former military comptroller Gen. Carlos Garcia is released with only a portion of plundered funds returned, even if this was supposedly begun during the previous administration, sends a signal of lack of determination. It remains to be seen how much progress there will be beyond exposs and investigations towards actual prosecutions and convictions. As it is, the SC and Ombudsman Merceditas Gutierrez perceived to be biased for Arroyo are a formidable legal rearguard for her. Secondly, the Aquino administration has also not taken any strong action against extrajudicial killings and other State-sponsored human rights violations and has conspicuously avoided even beeing seen as out to hold the military accountable. There is no sign of any progress towards convictions with cases either mired in court processes, dismissed or outright unaddressed. Rights violations continued with 20 extrajudicial
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killings and two enforced disappearances in the first four months of the Aquino administration. (See Table 8) Independent human rights group Karapatan counts 1,226 extrajudicial killings and 208 enforced disappearances from January 2001 until October 2010. These have been attributed - including by the United Nations (UN) Special Rapporteur on Extrajudicial Killings and scores of local and international groups - to official government policy and its counter-insurgency (COIN) programs. Other human rights violations also occurred even during the Aquino watch so far. (See Table 9)
Table 8. Victims of Extrajudicial, Summary or Arbitrary Execution and of Enforced or Involuntary Disappearances, 2001-October 2010 Number of Victims Year 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Jan-Jun 2010 (Arroyo Administration) Jul-Oct 2010 (Aquino Administration) Total
p
Extrajudicial killings 100 124 130 85 194 235 100 90 130 38 18 20 1,226
Enforced disappearance 8 10 11 23 32 78 30 9 4 3 1 2 208
- preliminary Note: Previously unreported cases in 2001-2009 have been added. Source: KARAPATAN Alliance for the Advancement for People's Rights
The Morong 43 health workers were finally released in December around human rights day and following their hunger strike. This was however seen as less from Pres. Aquinos intervention who was noticeably foot-dragging or evasive on the issue when asked. Major factors appear to be the determined struggle of the victims against their illegal detention and trumped-up charges as well as the intense and widespread pressure from groups in the country and abroad. The justice secretary herself even pointed out the legal untenability of their arrest and detention. And there are still over 300 political detainees locked up nationwide, some for many years now. A third key issue is the matter of peace talks with the countrys armed and revolutionary movements. Fighting with the Moro Islamic Liberation Front (MILF) has greatly lessened in intensity while, on the other hand, that with the Communist Party of the Philippines-New Peoples Army-National Democratic Front of the Philippines (CPP-NPA-NDFP) has been on an uptrend. The 295 monitored armed confrontations between the government and the NPA in 2010 is the second highest in the last decade and almost as much as in the year with the most number in 2005. (See Annex) Indeed, the CPP has apparently assessed that its armed struggle not only remains viable but, upon meeting certain requisites, can significantly advance towards a strategic stalemate in the next five years.
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Table 9. Consolidated Human Rights Violations, 2001-October 2010 Number of Victims Type of Violation Extrajudicial, summary and arbitrary execution Frustrated killing Enforced or involuntary disappearance Torture Illegal arrest Physical assault and injuries Threat, harassment and intimidation Indiscriminate firing Illegal search and seizure Forcible evacuation and displacement Hamletting Violation of domicile Food and other economic blockade Use of schools, medical, religious and other public places for military purposes
p
2001-June 2010 (Arroyo Administration) 1,206 379 206 1,099 2,059 30,119 81,835 538,017 53,893 873,787 39,803 29,101 87,152 57,914
July-Oct 2010 (Aquino Administration) p 20 4 2 16 23 3,280 29 896 33 754
Total 1,226 383 208 1,115 2,082 30,119 85,115 538,017 53,922 874,683 39,803 29,134 87,152 58,668
- preliminary Note: Previously unreported cases in 2001-2009 have been added. Source: KARAPATAN Alliance for the Advancement for People's Rights
There are going to be informal talks with the NDFP in mid-January in preparation for the resumption of formal talks in February. It is also positive that the new government panel is relatively more acceptable to the NDFP. However the continued detention of NDFP peace consultants -- including one from the Southern Tagalog region captured on the eve of the talks -- has been interpreted as putting the governments compliance with talks-related agreements into question. For now it appears that the NDFP is seeking to resolve the issue of security guarantees and other agreements before the formal resumption. In any case, early signals are of uphill battle to assert implementation also of the Comprehensive Agreement on Human Rights and International Humanitarian Law (CARHRIHL) -- including accountability and prosecution for human rights violations -- and the need for a solid agreement on social and economic reforms. Taking up the Comprehensive Agreement on Social and Economic Reforms (CASER) would have the benefit also of generating wider public discussion on the roots of armed conflict in the country, as well of both the NDFPs and the governments respective proposed programs for addressing this. Meanwhile the peace talks between the government and the MILF are dragging with barely any movement in the last months. The MILF panel was newly-reconstituted in September and among its early pronouncements is the proposal for establishing a sub-state in the southern region of Mindanao as part of the final peace agreement or comprehensive compact. Under this arrangement the Moro sub-state will be ceding to the central government only national defense, foreign affairs, currency and coinage, and as postal services. Among the immediate impediments though is the government seeking to replace a senior Malaysian facilitator it sees as biased towards the MILF but which the MILF is opposing.
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The government approach to the peace talks needs to be interpreted in the context of the other aspects of its approach to the countrys armed conflicts. Indications are that the militarist approach to dealing with the NDFP and the MILF remains. The Arroyo-era Oplan Bantay Laya (OBL) was extended for six months, until December, rather than repudiated for causing widespread human rights violations. In January 2011 this was replaced by a new Oplan Bayanihan which critics say is merely OBL repackaged into counterinsurgency with a human face -- with combat operations supplemented by a marked increase in community projects in armed conflict areas including cash transfers, school buildings, water systems, health centers, farm to market roads, livelihood projects, and the like. In an attempt to forestall further criticism of its human rights record, the Armed Forces of the Philippines (AFP) has also become active in projecting itself as taking various steps to respect human rights. The AFP is also adopting a whole-of-government and whole-of-nation approach which involves increasing the involvement of local government units, line agencies, private corporations, NGOs, community organizations, schools and others in propaganda and counter-insurgency. Pro-Aquino interests The gravity of the countrys problems point to the need for a radical break from the past. Among others this includes taking a pro-people stance, going against entrenched domestic interests, challenging foreign corporations one-sidedly benefiting from the economy, and asserting national sovereignty. Yet what is happening so far is a sharpening of lines between progressives and of the State on gut issues and more obvious government deference to US imperial power and domination. The new government has had enough time to establish its priorities through its pronouncements and its actions. The consistent anti-corruption rhetoric, essential continuity with the major social and economic policies of the past, and large cash doleout for the poor are insufficient for development. But these have prompted votes of confidence from foreign and domestic big business, foreign governments such as the US and the European Union (EU), IFIs, and global credit ratings agencies all correctly perceiving that the Aquino administration will promote their respective interests. On the other hand, important peasant, worker, women, youth and other grassroots constituencies making up the majority of the population remain unconvinced in the absence of real measures that address their basic economic demands. The various urban and rural struggles attest to this. Outside of the few beneficiaries reached by cash doleouts, the wider Filipino public has little more to hold on to than vague promises that their lives will indeed somehow improve. The Aquino administration is also clearly aligning with US interests on major economic and security concerns. Certainly, the US has strong imperialist geopolitical and economic stakes in the Philippines. The country has a key role in projecting US military force in the region, in amplifying the US diplomatic presence in regional forums, aside from providing profitable opportunities for US investors. The US is the countrys largest source of foreign investment accounting for US$2.9 billion or 24.4% of total equity over the decade 2000-2009. The 50 biggest US TNCs in the country tallied Php4.5 trillion in gross revenues over the period 2001-2009. The US is the only foreign power with a standing permanent and rotating deployment of troops in the country at any time ranging from a few hundred embedded in AFP combat units or deployed in post-9/11-built facilities such as in Mindanao to as much as 7,000 during military exercises or socalled community relations or civic action projects across the country. The troop presence and military intervention all occur under the auspices of the Visiting Forces Agreement (VFA) and Mutual Logistics Support Agreement (MLSA) both of which Pres. Aquino supports and, in the case of the VFA, the administration wants to review remedy supposed infirmities with respect to jurisdiction over covered soldiers.
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The US has spent considerable amounts to maintain and strengthen its influence including: US$1.31 billion in military and socioeconomic aid over the post 9/11 decade 2002-2011. The annual average over that period is markedly higher than in the pre-9/11 years from US$47.4 million in 2001 to average US$130 million annually in 2002-2011, or by two to three times as much. The US Millennium Challenge Corporation (MCC) also announced, in September during Pres. Aquinos trip to the US which was his first foreign trip abroad, that the Philippines will receive a multi-year US$434 million grant (the ninth largest out of 45 given since the MCC program started in 2004). The US directly supports counter-insurgency operations in the country with significant civil-military and US Agency for International Development (USAID) projects in armed conflict areas. These go far beyond the original Abu Sayyaf areas then justified as part of counter-terrorism to now saturate MILF areas in Mindanao, aside from also starting in CPP-NPA-NDFP areas of influence nationwide. As it is, key elements of the USs comprehensive approach to counter-insurgency are adopted by the Aquino administration including among others: immediate relief, essential services, infrastructure and socioeconomic activities; physical security against insurgent violence; and political reconciliation, reform and popular mobilization. Overlaid on sustained combat operations, these aim to establish the legitimacy of government and to convince the public of the illegitimacy of armed groups and their causes. The US last year showed a particular interest and involvement in the countrys national elections. This might have been interpreted as merely reflecting its declared intent of promoting electoral democracies worldwide. Yet at the same time there are certain particularities to the Philippine context that threaten US interests a strong nationalist mass movement and, in the countryside, armed revolutionary groups opposed to US imperialism. Taking these into consideration points to a specific role for the Aquino administration: to project itself as a moderate reformist government (even if its policies really fall short of that) restoring a semblance of political stability to undercut more radical challenges to the inequitable status quo. The appearance of a concerned government pushing change serves the purpose of glossing over problems, dulling dissatisfaction, encouraging passivity, and stifling dissent. Overall, this is in line with the US neoliberal thrust since the 1980s of promoting electoral democracies as the preferred political set-up for consolidating free market processes and structures. Amid the personality-centered politics of the country, the unassuming and erstwhile uncontroversial Aquino has gone far in reestablishing the legitimacy of government which was eroded under the previous aloof, ambitious and corrupt Arroyo. In this sense an important source of legitimacy for the government is Aquino himself. Aquino and by extension the government could remain acceptable or tolerable as long as Aquino personally appears to remain modest, honest and sincere, and untarnished by corruption charges. However political capital diminishes and in Pres. Aquinos case is already beginning to decline. The administration is compromised in lacking a meaningful and genuinely pro-people vision with which to galvanize active popular support beyond being anti-Arroyo or anti-corruption. Public support for the president cannot but diminishes as expectations of relieving long-standing poverty remain unmet, to the extent that the democratic facade erodes, and to the extent that political and perhaps even personal controversies arise. The administration will certainly try to offset this with major propaganda gimmickry such as massive cash transfers and by hyping Pres. Aquinos incorruptibility and there being no alternative from the ranks of corrupt politicians. It will also keep mobilizing high-profile diplomatic support from the US and other foreign governments and the approval of prominent local personalities. Like the administration before it, it will also likely blame noisy minorities or destabilizers. Progressive groups will play an important role in combating these administration propaganda offensives and in bringing the true situation of the country to light.
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ADVANCING WITH OPTIMISM
he Filipino people were promised change but there is no sign that the current administration will push for the needed social, economic and political overhaul that directly challenges powerful entrenched elites who monopolize gains from the peoples labors and the countrys resources. This challenges the Filipino people to amplify their advocacies and intensify their struggles. The government must be made to recognize and address the peoples demands and urgent needs with real affirmative actions and bold reforms in the economy. A thoroughgoing reform agenda with a comprehensive and strategic perspective is necessary. This begins with a distinct economic vision learning from the failure of neoliberal globalization and providing real hope. There needs to be a focus on developing the domestic economy, on building local agriculture and national industry with active state support, and on more aggressively ensuring the welfare of the people. There has to be meaningful income, wealth and asset redistribution: agrarian reform, substantial wage and benefit increases, lower value-added taxes yet higher personal, corporate income and wealth-related taxes. The people must have affordable or even free basic education and health services, and decent housing. Foreign trade and investment policy must support these development objectives, not subvert them. Attending to all these will also address the severe social and economic injustices at the root of the countrys armed conflicts. Political problems remain and have to be met over the short- and long-term. It is a given that there should be real transparency and accountability in government and a crackdown on chronic corruption. But there also needs to be more aggressive efforts to stop State-sponsored human rights abuses and political repression the military and paramilitary forces in particular must be held accountable. This is vital to allow greater political space for people-centered political and economic struggles towards breaking elite rule and strengthening democracy in the country. For the people, the firmest basis of optimism for change comes from a peoples movement strengthened upon decades of struggle and continuing to grow these are the real foundations of democracy in the country. A mass movement tightly allied with advocates of change that challenge elite governance and inequitable structures is the real spur for progress. Democracy in the country has to be pushed: beyond personality politics to dealing with vital issues from a nationalist and progressive perspective; beyond a passive citizenry mobilized for just one day every three and six years to vote; and beyond individual efforts to survive towards collective struggles for changes at the community and national levels. More democratic politics especially at the grassroots and vibrant local economies are building blocks to wider social change and the strongest basis for challenging foreign domination and elite rule by the few families and powerful economic interests that have kept Filipinos in dismal conditions for too long.
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Annex
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35
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Real Change, or More of the Same?

IBON Foundation is an independent development institution established in 1978

2 IBON Economic and Political Briefing

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Yearend 2010: Real Change, or More of the Same?

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ECONOMY GROWING, BUT UNDERDEVELOPED

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IBON Economic and Political Briefing

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Source: International Monetary Fund Historical Public Debt Database

Source: International Monetary Fund

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Table 6. Distribution of Total Family Income by Decile, 1985-2009 (in %)

Source: National Statistics Office Family Income and Expenditure Survey

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(269,820) (153,413) (196,729) (119,110)

Source: Bureau of the Treasury

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POLITICS DIFFERENT, BUT UNCHANGED

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Enforced disappearance 8 10 11 23 32 78 30 9 4 3 1 2 208

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July-Oct 2010 (Aquino Administration) p 20 4 2 16 23 3,280 29 896 33 754

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ADVANCING WITH OPTIMISM

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