COMMENTARY

Suffer The Poor

Privatization has not worked for the good of the poor.  By our experience, it is always for the benefit of the private investors. 

By PATRICIO P. DIAZ

How we, poor Filipinos, survive life is a miracle.  How we will survive life tomorrow, with the costs of living getting higher and higher, will be a mystery.  That the country survived the economic crisis because of the poor is a great paradox.

Inflation

According to a report, inflation in the month of May was the same as that in April at 6.7 percent.  Does that mean prices of commodities did not increase? Don't kid yourself. There's no cause for celebration.

Month-by-month inflation is the increase of the prices of goods on the monthly basis.  Prices of some goods increased; of others, decreased.  Taking the average of the increases and decreases is the inflation for the month.

Positive inflation means higher price increases; negative inflation means prices have gone down; and zero inflation means prices were steady.  The 6.7 percent inflation in May means that, on the average, prices of goods for that month increased by 6.7 percent compared to those in April.

To illustrate: bangus (milkfish) that sold at P70 per kilo in February increased to P75 per kilo in March.  That was a 7.1-percent inflation.  The same quality of bangus sold at P80 per kilo in April -- that was 6.6 percent inflation.  And that same bangus sold at P85 per kilo in May -- that was 6.25 percent inflation.  Should the price remain at P85 per kilo in June, there is zero inflation.  Should it go down to P80 per kilo in July, there is a negative inflation.

Who suffer from the ill effects of inflation? The poor who have meager and unsteady income, as well as the fixed-salaried lower middle class.  Businessmen are not affected.  They pass on the increasing costs of commodities and services to end-users who are predominantly composed of the poor and the middle class.

In the 1970s, an income of P6,000 a month could support a family of 10, including house rental.  Today, the same income is not enough for a family of five, excluding rental. The end of the worst is not in sight.

Oil Prices

Among the causes of inflation is the uncontrollable increase of oil prices. Once the prices of oil products increase, cost of production of manufactured goods and of services increase.  And the increases are passed on to end-users.  The billions of pesos raked in by the oil companies came from the pockets of the poor. (Editor’s note: For more on the profits oil companies in the Philippines are making, visit the Ibon Foundation website.)

The latest increase was revolting.  When the peso plunged to P53 or P54 to the U.S. dollar and crude went up to $34 per barrel, the oil prices were increased.  When the peso recovered to P48 to a dollar after People Power II and the price of crude went down, the oil companies reduced their prices by a few centavos.

However, note that the prices did not go back to their level before the last increase.  It meant that the consumers were still paying more than they should.  Now, the peso is only P50.75 to a dollar, not more than P54.  Why increase the prices due to the weakening of the peso from P48 to P50 plus to a dollar?

Because of the deregulation law, the consumers are at the mercy of the oil companies.  But manufacturing and service industries do not lose.  They pass on the high prices to the end-users -- the poor.

And the greatest irony is this: Oil deregulation was intended to lower prices through competition.  But the reality is that prices increase at the whims of the oil companies.  And the government is helpless.

Power, Too

Another deception of the poor is in prospect.  In order to get more loans from the International Monetary Fund and the World Bank and to attract more foreign investments, the National Power Corporation will be privatized.  One reason for the privatization is that it will benefit the poor as electricity will supposedly become cheap.

But the critics are not convinced.  Napocor has an outstanding debt of $6.7 billion.  The proceeds from the sale, $4.5 billion, will not be enough to pay the debts.  So, the government will use the people's taxes to pay the difference.  Or, if the private buyer would absorb the debt, this will be passed on to the power end-users.

Privatization has not worked for the good of the poor.  By our experience, it is always for the benefit of the private investors.  Look at the water supply in Manila.  When the operations of the National Water and Sewerage Administration were privatized, the same arguments were advanced.  Supply will improve.  Cost of water will go down.  But Metro Manila is experiencing the opposite.

The privatization of Napocor is the carbon copy of the privatization of power generation, distribution, etc. in California, U.S.A.  Before the privatization, the Californians were enjoying electricity at low cost.  After the privatization, this is no longer the case.

Private owners of any basic service like water and electricity will not sacrifice profit over service.  So the consumers or end-users must pay so the industry will make big profit.

When government runs the same basic service entities, the primary motive is service.  If the industry cannot support itself, the government subsidizes the operation.  In short, the people use their taxes for their own benefit and convenience.

Normally, government corporations operating the basic service can make the service profitable as well as efficient.  However, in many cases, those running government corporations are either incompetent or insincere in the service.  Or, they use their position to amass wealth for themselves through corruption.

The car is good, but the driver is no good.  Instead of hiring a good driver, the car owner sells the car.  This is what the government has been doing with basic services in the Philippines. 


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