To be able to do this, the economy should have a strong and stable industrial base consisting of basic steel and machine retooling industries to enable it to produce the needs of both production and consumption, and a petrochemical industry to enable it to process raw materials. It should have a stable and modern agriculture to supply the raw materials for industry as well as food for the people. This would enable the economy to produce what it needs thereby lessening its dependence on imports and its vulnerability to price spikes in the world market, and enable it to accumulate domestic capital and wealth. The country can do this gradually as it accumulates capital from government-owned corporations, reorients local manufacturing and agriculture to supply the needs of the domestic market, negotiates for better terms in its loans, and plugs the leaks from corruption.

But instead of doing these, the Arroyo government is fast tracking the privatization of government- owned and controlled corporations, the liberalization of imports, and the deregulation of industries thereby killing local manufacturing and agriculture, making the country more dependent on imports, foreign loans, capital and investments resulting in the depletion of the country’s capital, natural and human resources, and reserves of foreign exchange.

In fact the growth in domestic capital formation has slowed down to 17.6 percent from 18.7 percent during the same period last year. Manufacturing has been on the decline. Its share of GDP has declined from 25.7 percent in 1980 to 23.1 percent in 2006 and in the first quarter of 2007. An average of 750 manufacturing establishments per year has been closing down from 2001-2005 due to unfair competition from cheaper imported goods. Its growth has slowed down to 4.6 percent during the first quarter of 2007 from 5 percent during the same period last year in spite of the fact that it is election year. During elections, the economy receives a boost from election campaign spending. IBON Foundation estimates that around P30 to P50 billion ($669,642,857 – $ 1,116,071,428 at an exchange rate of $1=P44.80) were spent by politicians for the May 2007 elections. And yet manufacturing still registered a slow down in growth.

Agriculture is also being affected by the importation of agricultural produce. Agriculture’s share of GDP fell from 25.1 percent in 1980 to 14.2 percent in 2006. Its growth rate is almost static registering a mere difference of .1 percent, 4.2 percent from last year’s 4.1 percent.

Only the service sector increased its share of GDP from 36.1 percent of GDP in 1980 to 53.7 percent in 2006. It is also the only sector which registered an increase in growth rates from 6.7 percent last year to 9 percent during the first quarter of this year. But this has been propped up by the spike in government spending, 13.1 percent this year from 7.6 percent last year, which is expected during election campaigns.

Nevertheless the fundamentals of an economy cannot be built on the service sector. According to IBON Foundation, the biggest service sub sector is wholesale and retail trade followed by the informal sector, which refers mainly to vendors and odd-jobbers. This sector, while essential, is peripheral to production. It is essential to the distribution and not the production of goods needed by the economy.

Conclusion

Data and statistics can be interpreted differently depending on what data is being highlighted. There can also be different assertions on what constitutes the fundamentals of an economy, which is the better theory, or what is feasible under the current world order. But the impending fiscal crisis and the worsening poverty situation belie any claim that everything is well with the economy.

The national government deficit has reached P41.8 billion ($933,035,714) during the first quarter of 2007, which, according to IBON Foundation, could have reached P67.8 billion ($1,513,392,857) if not for the P26 billion ($580,357,142) sale of the government’s take in the Philippine Long Distance Company. This occurred in spite of the drastic cuts in the spending for social services and the implementation of the RVAT (Reformed Value Added Tax). The government’s target for 2007 is to reduce its deficit to P63 billion ($1,406,250).

The financial situation of the government is but a reflection of the state of the economy. How can the government generate enough income if only multinational corporations, which are exempted from a lot of taxes, and trading and retail companies, which merely takes a share of the profits of foreign corporations, are the only ones benefiting from the economy? How can the government collect enough taxes if the export industry is dominated by multinational corporations, with their tax holidays, and local corporations, which supposedly pay their taxes in full, are mere subcontractors? How can the government collect more taxes when majority of the Filipino people are not earning enough income? This is also why the government has resorted to indirect taxation such as RVAT because income taxes are not enough.

When the government is unable to collect enough taxes, it has no other recourse but to loan to finance its operations. Thus, the more loans the government contracts shows that the economy is not generating enough capital and wealth and thus is weak in its fundamentals.

But of course, the best measure of the state of an economy is the situation of its people. With some 65 million Filipinos or around 80 percent of the population struggling to survive on the equivalent of PhP96 or less per day (US$1.80 at prevailing 2003 exchange rates), using data from the 2003 Family Income and Expenditure Survey (FIES), nothing can be farther from the truth than the claim that all is well with the economy.(Bulatlat.com)

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