Ibon Foundation Roundtable Conference
Speech
Sa ngalan ng National Economic Protectionism Association, magandang umaga sa inyong lahat!
Lubhang napapanahon ang roundtable conference na ito na ipinatawag ng Ibon Foundation sa okasyon ng G8 at G20 summit sa Canada. Mabuti na lamang at roundtable conference ang ating inilulunsad ngayon di tulad nang nangyaring riots sa pagitan ng Toronto police at ng black shirts protesters na tumututol sa papatinding pandaigdigang krisis sa ekonomya at pinansya. Ang naganap na mga kaguluhan sa halos lahat ng pulong ng WTO, GATT at iba pang multi-lateral conferences kaugnay ng pandaigdigang ekonomya ay senyales lamang ng nagaganap at nagbabadyang krisis sa buong bahagi ng daigdig kasama na ang ating bansa.
Malinaw ang mga katanungang inihapag ng IBON sa pulong natin ngayon. Subalit tulad ng maraming tanong, mahirap, kumplikado ang mga sagot. Pagpasensyahan nyo na ang aming munting ambag.
Has there been or rather is there recovery from the worldwide financial and economic crisis? If the events in Greece, and earlier in Iceland, is any indication, we believe that is no recovery as of yet.
The worldwide crises and attempts to mitigate and control the financial turmoil triggered by the US sub-prime and mortgage debt problems created and multiplied the crisis exponentially. That much is clear.
From a purely domestic and US problem of greed in profit making, the world reaped a recession none had ever seen before. The US-led stimulus or pump priming effort increased the public debts of governments worldwide not unlike the mythical Hydra – the more you cut off the heads more threats and problems you have.
And so, the much ballyhooed $4 trillion stimulus package the US had been bandying about, more if we count the European counterpart stimulus package, created a new monster in the form of massive sovereign debt. Greece is only just the beginning.
Already, developed countries are in a quandary – will it pursue the US-initiative of pump priming their economy or be more prudent in the form of austerity measures – the same measures EU imposed on Greece in exchange for 300 billion euros? This is the problem the G8 and G20 summit are trying to accomplice.
What ever their solutions are, one thing is clear, it would be in the interest of their respective economies. The Philippines need to think the same. What would be in our interests?
The worldwide recession impacted on the Philippine economy almost immediately. The electronic manufacturing sector, along with several other industries lost tens of thousands of jobs. Labor export contracted across the board. The cost of imports primarily that of petroleum increased triggered in part by increased demand and a falling peso-dollar exchange rate. The list is long. But again, this is the price we are paying for a globalized economy.
The Philippine response had been typical. Follow the US lead. And so the government initiated its own version of a stimulus package. But lacking the manufacturing and industrial base and strong domestic market with which to maximize any pump priming activity, our version of pump priming had been lost in haze corruption estimated in the billions of pesos annually.
The result of our half-hearted and misdirected stimulus spending is massive public debt and a P300 budgetary deficit. The Philippines debt problem had long been in life support, surviving primarily on the billions of dollar annual remittances of our overseas contract workers. Without these, its common knowledge that our finances and economy had long ago went belly up.
Should we follow the austerity route? Sad to say, the Philippines had been there, done that to no effect. The austerity measures initiated by President Marcos during the early 80’s and especially following the Aquino assassination only led to the EDSA revolution. Not all economic effects of an economic measure can be found in the accounting books. Same with Greece, and before that Argentina. Austerity measures generally means that the poor should have less while the capitalists, the big banks, and the big corporations who all contributed heavily in the financial and economic crisis are the ones that get bailed out!
And so, I believe that whatever the consensus in the G8 and G20 summit in Canada are – be it a continuation of the stimulus route or the austerity measures, the implications for the Philippines will be the same. We would still be in an economic and financial free fall. The stimulus package or austerity measures will arguably prioritize putting to work citizens of developed countries to the detriment of migrant labor. Austerity measures will reduce to a trickle investments in the Middle East already feeling the crunch of real estate bubble. Any which way, Filipino migrant workers, already a tenth of our population faces uncertain future abroad, and a bleaker future once they return to our country.
The reasons are clear – we lack the manufacturing and industrial base that can immediately absorb a burgeoning labor force. My friends, sex education is not the answer though we get shafted a lot these days.
President-elect Noynoy Aquino economic program is not comforting to say the least. Based on his speech to the Makati Business Club last February, his economic platform is grounded on one: anti-corruption efforts designed to eliminate a P280 billion waste in government budget annually; two, focus on what the American Chamber of commerce are rooting for the Big Seven – agriculture, business process outsourcing, creative industries, infrastructure, manufacturing, logistics, mining and tourism and thirdly, fiscal reforms grounded on a no-new taxes promise.
On its own, the anti-corruption platform will not immediately translate to the reduction of the budget deficit as corruption is deeply ingrained in almost all economic and governmental activities. For one, it will probably slow down flagship projects and government bidding and procurement procedures. Secondly, going after plunderers and big-time grafters will most probably get bogged down in the judiciary system. And if the Marcos and the PCGG experience is any guide, it will take decades before any verdict is handed down, and not necessarily to the interests of justice for the people.
The no-new-taxes policy is at best misguided or just plain political propaganda. The Aquino administration is looking at a more than P300 billion deficit and a P600 billion yearly debt amortization and increasing. Simply removing the estimated P280 billion losses to corruption and plugging it to the fiscal deficit in a year or so will not cut it in the real world.
What is more worrisome is the growth focus of the current administration. It appears that the Aquino government had copied verbatim the economic agenda of foreign chambers of commerce and the US chamber of commerce in the Philippines. If adopted by the Aquino administration, the government will only be replicating the economic pattern started by his predecessor with the same or worse results.
The Big Seven cannot generate the number of jobs required to mitigate the worst of the world wide economic recession.
The BPO industry is plateauing, due in part to the slowdown of business activity in the US. What remains in the BPO industry are generally credit card collection efforts and customer service of American banks and credit card companies.
The mining industry as evidenced by the practice of the Arroyo administration are generally the issuance of exploratory permits and what little practical real-world mining existed is bogged down by serious environmental concerns.
The manufacturing sector, mainly the electronics and car parts manufacturing sector are all dependent to the US market. And we all know how the US car industry is in the US and in Europe today. The Big Three in Detroit is bankrupt, and the computer and electronics industry is in a state of overproduction. The food and beverage industry offer a bit of hope it can only grow so much before the saturation point is reached as the purchasing power of the Filipinos is constricted by loss of jobs and decreasing remittances.
Agriculture, what the US and the Arroyo meant was new high-value crops such as jethropa and industrial cassava are encountering and will encounter serious social challenges as these require vast amount of land already occupied by farmers.
Tourism? What can I say? It is hard to imagine Americans or Europeans doing much traveling to the Philippines these days except maybe for the Koreans.
Infrastructure? That is promising on paper but the Aquino administration had to show in detail what infrastructure project to prioritize and more importantly, how it will be funded.
We hate to be a wet blanket for the Aquino administration but these are serious concerns.
As to solutions, NEPA had for the past 75 years had been a voice in the wilderness. But the voice of economic nationalism had been proven right during the only period when the country experienced high economic growth – that is during the 50’s.
Why the country then practiced economic protectionism – whether sanctioned by the US as it was focused in rebuilding Europe following the devastation of World War II or threatened by the HUKBALAHAP insurgency, is a matter for historians. But one thing is clear, our country managed to build its industry and manufacturing sector and became the second most developed nation in the whole of Asia.
The current global crisis is similar to the one that confronted us during the 50’s. We have an opportunity, ladies and gentlemen. An opportunity to build a comprehensive economy where we as a nation produce what we need, interacting with the world but standing on our own two feet. We need not look very far for examples. Korea is an economic giant. Malaysia is also quite near there. Once agricultural economies, it took them only a few decades to become economic powerhouse using the path of national industrialization. Whereas we, a developing nation during the 50’s took us several decades of export oriented development to become the sick man of Asia.
For starters, we propose the following:
One, immediate suspension and review of all tariff reduction commitments especially on agriculture and local manufacturing industries.
Two, increased state investments in and promotion of local manufactures. We call for more state support for small and medium-sized entrepreneurs in form of increased credit and technical support.
Three, immediate increase in wages and salaries in order to increase the purchasing power of the Filipino consumers. This is especially important in the light of an expected downturn in overseas remittances.
Four, immediate buy-back of all strategic industries and corporations sold to foreign interest, especially petroleum and steel industry.
Five, increase protection to agriculture in order to raise farm gate prices and agricultural wages. The Filipino farmers comprise the majority of the population and we must do our best to increase their buying capacity of Filipino products.
Six, immediate suspension of the automatic debt reduction scheme and the implementation of a more rational debt payment mechanism.
And seven, creation of a body to formulate a national industrialization strategy.
Ladies and gentlemen, we cannot continue on our current path – the one pursued from one Macapagal to the other Macapagal. The G20 summit will not save us, only ourselves. Let us unite under the banner of economic nationalism.
