|
Experts, some of them columnists and staff-members of The Manila
Times, describing the true state of the nation in their specific
fields of interest, give the Arroyo administration mixed reviews.
In the economy, they mostly see a perfect storm
but with the President and her economic team putting up a good fight
against the elements, supported by sound fundamentals, determination
and the astonishing good luck that have been its mainstays.
Our agriculture expert gives GMA a passing mark
but warns of a looming corn crisis that could severely affect our
chicken production.
Our labor expert finds plenty to laud the
administration for.
The banking sector, says our expert, has been
served well by luck and its conservatism and family-centeredness.
The Bangko Sentral ng Pilipinas is also in good
shape and doing all the right things to limit inflation.
Of all the sectors, the telecom appears to be in
very good health. The players there want the government regulator to
keep the environment friendly to them. But they also want the
National Telecommunications Commission to protect consumer interests
against them!
Calling on the President to exercise political
will, our anti-child abuse and anti-human- trafficking crusader for
now gives GMA bad marks.
Our law and philosophy pundit, with a heavy
heart, predicts that given the current state of the nation’s
political life, the President may choose survival and self-interest
instead of the higher good of the nation. Rene Q. Bas Editor in
Chief
___
By Likha Cuevas-Miel, Reporter
The Arroyo administration was praised by
international financial institutions for its prudent fiscal policy
that allowed interest rates and inflation—which is the rise in
general level of the prices of goods and services—to come down to
record lows. Businesses have reaped the benefits of the
government’s plan of balancing the budget as corporations posted
rising incomes as a result.
However, some things are still amiss—and
President Gloria Arroyo may now be facing a “perfect economic
storm” that could rock her government hard. High fuel and food
prices have sparked protests left and right, pushing the government
to search for palliative but temporary measures to ease the
public’s burgeoning burden.
A perfect economic storm, as economists say, is
characterized by rising inflation, high interest rates and a slowing
economy—a situation that the Philippines is facing today.
Benjamin Diokno, a professor of economics at the
University of the Philippines, Diliman, told The Manila Times that
the country had an “abnormally low” inflation rate last year as
the increase in prices of food and other goods was tempered by cheap
Chinese goods. In addition, overseas Filipino workers’ (OFW)
remittances hit record highs that helped strengthen the peso, making
imported goods such as oil less expensive.
This has since been reversed as the
international price of rice tripled from US$300 per metric ton last
year to $1,000 this year. The Philippines remains the world’s
largest importer of this commodity, a proof that the country is far
from being self-sufficient. This is a goal that this administration
said it would achieve years ago.
“Had they succeeded in that, then we would not
have this tripling of rice prices,” Diokno said.
The poor, who make up majority of the
population, bore the brunt of soaring food prices as they allocate
60 percent of their incomes to food. About 20 percent of this food
budget goes to rice alone.
This situation is also compounded by the loss of
about half a million jobs since January as the economy slumped 5.2
percent in the first quarter. According to government data, the
number of unemployed persons rose by 17.5 percent to 2.9 million, up
by some 436,000 from April 2007. Instead of creating 1 million jobs
a year, as the government has promised to fulfill until 2010, the
labor market is not growing by leaps and bounds, the economist said.
As market forces would have it, global oil
prices have spiked to a high of $147 per barrel, which pushed up
local pump prices, causing cost of delivering goods and public
transport to mount. If this continues, it would spell disaster to
the economy and security of the Arroyo administration. However, in
the past few days, oil prices have shown slight declines.
But the government’s attempt to impose its
will of “reducing the price in a deregulated environment” is not
helping at all.
This effort of the President “abolishes the
law of supply and demand,” the UP economist said.
What the government can do, however, is to tweak
the value-added tax (VAT) on oil and petroleum products since it has
a “cascading effect” anyway. Meaning, as the price of fuel goes
up, the government collects more taxes. The government should be
open to reducing the VAT from 12 percent to 10 percent to ease
inflation. Doing this will not mean it would collect less taxes or
not meet its revenue goals.
Another option, Diokno said, is for the
government to retain the 12-percent VAT but it should impose a
ceiling, for example, $100 or $125 per barrel. The excess of that
amount can be VAT-free. The Department of Finance’s refusal to
budge for fear of reducing revenues reflects its “myopic view”
of the situation.
Reviewing the VAT on oil would benefit 90
million Filipinos, not just a chosen few who receive subsidies, most
of which are the urban poor. Subsidy programs (from the VAT
windfall) have leakages. As much as 70 percent of the total
recipients “do not deserve” them. “What is their criteria for
‘deserving’? What about those in the countryside? Those in the
ARMM and CARAGA, aren’t they deserving, too?” Diokno said.
Instead of using the revenues from VAT to
subsidize the few chosen poor, President Arroyo should allocate
these funds to more infrastructure spending, education and health
programs that would create more jobs, Jonathan Ravelas, Banco de Oro
Unibank market strategist, told The Times.
“The rising oil price scenario is not unique
to the Philippines. What would set us apart is how we will mitigate
rising inflation. We need to sustain the gains from the fiscal
prudence implemented,” he said.
If the VAT windfall goes to pump-priming the
economy, the whole country would benefit, not just a few subsidy
recipients. Economist Diokno said government spending on this front
has been sorely left in the doldrums since “government was so
obsessed in balancing the budget by the end of 2008.” This can
still be done, besides diverting VAT collections to infrastructure
and basic services spending, through a supplemental budget to be
passed in Congress.
Jose Vistan, head of research at AB Capital
Securities Inc., said the government should address the problem of
the poor since “the market is sensitive to politics” as they
determine the popularity of the president. Investors look for
stability, not only of capital market, but also of the political
situation in a given country.
“The government’s position is difficult,”
the market analyst said, since inflation is difficult to manage when
external and domestic factors come at play. “Let market forces
dictate [the prices] but address the hoarding [of oil and rice] and
leakages. Do not go for the populist strategies,” Vistan said.
The government has been warned by various
financial and research institutions that the perfect economic storm
has been brewing since December last year. Experts say the Arroyo
administration should have done something about it sooner but it is
better to be late than never. “It will not have an overnight
effect but at least they did it and it would benefit us the people
in the long run,” Diokno said.
|
