SONA 2012: Broken contract, broken record?

By SONNY AFRICA
Ibon Foundation

In his state of the nation address (SONA) on Monday, Pres. Noynoy Aquino will likely highlight so-called economic achievements such as the recent economic growth, stock exchange performance, strengthening peso, credit upgrades and the like. These are indicators that are meaningless to the public and only give the appearance of development.

The Aquino administration has to be measured against the urgent tasks needed to reform the economy. Unfortunately as the SONA nears, it is clear that there has been scant real progress and so-called Aquinomics has meant exclusionary growth.

Yet the administration set high standards for itself. Upon taking office in 2010, Pres. Aquino released his platform of government “A Social Contract with the Filipino People”. The platform stressed “A National Leadership in Need of Transformational Change” and also covered on key economic issues.

The statements on economic concerns are spread out in different sections of the platform but basically revolve around five themes: 1) jobs, 2) anti-poverty programs, 3) social services, 4) natural resources and 5) overall economic directions. These can be taken in turn.

Jobs

The domestic jobs crisis is unresolved. The administration may play up over one million jobs reported created in April 2012 from the year before but this aggregate figure masks a drastic deterioration in the quality of jobs. The number of full-time workers actually fell by 1.6 million and was only compensated for by a much larger 2.5 million increase in the number of part-time workers which is conventionally low-paying, insecure and without benefits. As a result part-time work now accounts for over four out of ten (43%) jobs in the economy or 16.2 million out of 37.8 million employed.

According to IBON estimates on National Statistics Office (NSO) data, the total number of unemployed and underemployed Filipinos increased by 780,000 in the last two years from 10.9 million in April 2010 to 11.7 million in April 2012 – consisting of 4.4 million unemployed and 7.3 million underemployed. The unemployment rate over the same period fell from 11.4% to 10.3% but this was more than offset by rising underemployment which rose from 17.8% to 19.3 percent. The unemployed and underemployed comprised 27.7% (11.5 million) of the labor force in 2011 which is marginally higher than the 27.6% (11.2 million) in 2010 but significantly higher than the 26.4% (8.7 million) in 2001. These trends remain even if official NSO data that underreports unemployment is used.

Wages meanwhile remain too low for decent living. Even with the recent staggered Php30 wage hike in NCR, for instance, the mandated minimum wage of Php446 in May 2012 is just 44% of the Php1,017 family living wage (FLW). This wage gap is even greater than a decade ago, in May 2002, when the minimum wage was 53% of the FLW. As it is the real wage of wages that workers actually received was virtually unchanged between July 2010 (Php308) and July 2011 (Php307, taking inflation into account).

Anti-poverty programs

The most far-reaching and sustainable anti-poverty measure is an economy that creates good quality jobs providing decent incomes, which is not happening. Among the reasons for this is that government economic policies are not about building genuinely Filipino industry and developing domestic agriculture – and consequently generating jobs – but rather about providing foreigners cheap Filipino labor and natural resources. This is the fatal error of an economic program fixated on overseas work, business process outsourcing (BPOs), mining, and low value-added electronics manufacturing.

The government’s flagship anti-poverty conditional cash transfer (CCT) program, the Pantawid Pamilyang Pilipino Program (4Ps), is a massive dole-out scheme that alleviates poverty only partially and temporarily. The CCT/4Ps program peaks in 2013/2014 with 3.7-4 million beneficiaries and graduates its last 350,000 beneficiaries in 2018. The first batch of some two million beneficiaries will graduate from the program next year and there is no reason to expect that their prospects for jobs and incomes will be any better even after the CCT/4Ps and especially upon an economy with a severe jobs crisis.

At the same time, the NSO has reported some 5.5 million child workers between the ages of 5 and 17 in 2011 – equivalent to almost one out of every five (19%) children aged 5-17 years – of whom 3 million work in hazardous environments.

Social services

The Aquino administration continues to neglect education, health and housing. National government spending on education has fallen from a peak of 4.0% of gross domestic product (GDP) in 1998 to 2.7% in 2011. The Philippine government spends only the equivalent of 2% of gross national product (GNP) on education, lagging behind Malaysia, Indonesia and developed countries for primary education. There is a shortage of 132,483 teachers, 97,685 classrooms, 865,000 chairs, and 153,709 water and sanitation facilities for school year 2012-2013. Some 126 million textbooks are also needed.

The administration’s thrust for so-called universal health care through PhilHealth is a flawed strategy for ensuring affordable and accessible health services for the people. Private hospitals and public hospitals run along private sector lines means increasing fees for treatment and confinement. Yet the administration plans to reduce and eventually outright remove budget support for public hospitals even as more expensive private hospitals already comprise six out of ten hospitals in the country. The government’s budget for PhilHealth is increasingly then, in effect, a subsidy for private hospitals.

PhilHealth benefits are also insufficient and patients will still keep paying large sums from their own pockets. In 2008, PhilHealth covered some 40% of families yet only 7% of total health spending in the country, leaving 58% of health expenses out-of-pocket. Out-of-pocket expenses will likely still be unacceptably high even if coverage increases to the projected 80% of Filipinos.

The total estimated housing backlog by 2013 is 3,551,431 housing units – of which half is in NCR (1,076,149 units, or 30%), CALABARZON (408,315 units, 11%) and Central Luzon (289,857 units, 8%) – which is estimated to reach 5,732,454 by 2016. Yet according to the latest Philippine Development Plan (PDP) the government’s housing target is only 1,377,612 units as of 2013 or just 39% of the backlog.

Natural resources

The Aquino administration is still pushing for mining liberalization as long as it has a greater share of revenues from the sector. The newly released Executive Order (EO) 79 seeks to facilitate foreign mining investment in the country procedurally and by neutralizing local government opposition. Environmentalist groups have already criticized the EO as insufficient for preventing the continued destruction of the environment. The EO also does not address the problem of raw Filipino mineral resources being used by foreign economies instead of for domestic industry and national development. The increased revenue share sought by government through higher excise taxes and mining royalties does not change the very limited employment, income, and economic development benefits of the current mining industry.

Overall economic directions

The Aquino administration has encouraged the profits of a few while the needs of tens of millions of Filipinos remain unmet. In contrast to the conditions of most Filipinos who remain poor, the wealth of an elite few and corporate profits have continued to soar. Amid poverty and economic underdevelopment the collective wealth of the 40 richest Filipinos more than doubled and grew by US$24.6 billion (108%) from US$22.8 billion reported in 2010 to US$47.4 billion in 2012. For comparison, US$47.4 billion is equivalent to over one-fifth (21%) of GDP last year.

The government is seeking Public-Private Partnerships (PPPs) in infrastructure, health, education and housing in such a way that private and especially foreign investors are ensured their profits either through high user fees, so-called regulatory risk guarantees, or both. The local partners will largely be the same big business interests that have cornered large energy, telecommunications, transport and water deals for decades: Ayala, Lopez, Pangilinan, Razon, Aboitiz, Cojuangco/Ang and Consunji.

Agrarian reform is vital for rural development. Yet the Aquino administration has the worst performance of land distribution by the Department of Agrarian Reform (DAR) of any post-Marcos government. It distributed an average of 9,324 hectares in 2011 and at the current rate, is five years behind schedule with its June 2014 target under the extended agrarian reform program CARPer.

There is much reason to conclude that the so-called social contract with the Filipino people has been broken many times over. Growth remains exclusionary and the prospects for real, equitable and sustained development remain poor. However it is unlikely that these will be covered in the 2012 SONA. On the other hand, what is likely is that the SONA will be a broken record repeating accounts of supposedly inclusive growth and an economic upsurge that is belied by realities on the ground. The government and its untransformed policies unfortunately remain the bottleneck to development.

IBON Foundation, Inc. is an independent development institution established in 1978 that provides research, education, publications, information work and advocacy support on socioeconomic issues.