Why is it that despite the much-ballyhooed 8 percent growth rate during the first three quarters of the year, there seems to be no improvement in the people’s lives? Data from independent sources such as IBON Foundation and even from the government would reveal why.BY BENJIE OLIVEROS
YEAREND REPORT – THE ECONOMY
Bulatlat
Vol. VII, No. 47, January 6-12, 2008
Why is it that despite the much-ballyhooed 8 percent growth rate during the first three quarters of the year, there seems to be no improvement in the people’s lives? Is it because time is needed before the gains of the growth in the economy trickle down to the people? Is it because the Arroyo government is not doing enough so as to make the people benefit from these gains?
Hardly.
A deeper analysis of the statistics released by the government would reveal the chronic infirmities besetting the country. For one, manufacturing, which was the main engine of growth of industrialized countries when they were still fledgling economies, has continuously weakened because of the onslaught of globalization and the recession afflicting the global economy. Its percentage share in the Gross National Product (GNP) has gone down from a low 23 percent in 2001 to an even lower 20.9 percent during the first three quarters of 2007. The growth rate of manufacturing has slowed down from 4.6 percent in 2006 to 3.6 percent during the first three quarters of 2007. Manufacturing for local consumption suffered most with the dumping of imported goods with no or very low tariffs. Manufacturing for exports, especially those in export enclaves that are mainly multinational corporations, was affected by the economic slowdown in the U.S. and the ‘appreciation’ of the peso. Exports would suffer further with the projected worsening of the recession in the U.S., the main trading partner of the Philippines.
Data from IBON foundation showed that manufacturing even lost 105,000 jobs in 2006. The anemic performance of the manufacturing sector also explains the high rates of unemployment and underemployment - which affected 11.6 million Filipinos in 2006 - bearing down on the Filipino people. Industry cannot generate enough jobs to absorb increases in the workforce as well as those who are displaced by the backward, landlord-dominated rural economy.
The sectors that registered high growth rates in 2007 are mining and quarrying at 24.2 percent, construction at 19.3 percent, net factor income from abroad (mostly remittances from overseas Filipinos) at 18.9 percent, and finance at 11.5 percent. Others include transportation, communication, and storage at 8.9 percent, private services at 8.7 percent, and trade at 8.5 percent.
But mining and quarrying for export was never an engine for growth of First World countries. Mining and quarrying signify development if it supplies the demand of local industry for raw materials. Mining and quarrying for export, on the other hand, reveal the backwardness of the economy and would lead not to development but to the destruction of the environment as the country would try to supply more and more minerals as world prices dip. And the environmentally-destructive “modern” methods of mining specifically open pit mining hardly generate employment as it relies on heavy equipment.
The growth in construction may be explained by the May 2007 elections. While by law, construction projects by government agencies are prohibited during campaign period for elections, apparently this was hardly followed as government expenditures jumped to 10.3 percent in 2007 from 6.1 percent in 2006 and an average of 2 percent in recent years. But construction is hardly sustainable if the productive sectors such as manufacturing are stagnant or worse, weakening.
An increase in remittances from overseas Filipinos (OFs) is not an indicator of real growth in the economy. On the contrary, it shows the weakness of the economy as more and more Filipinos are forced to look for gainful employment abroad for lack of opportunities in the country.
The much-touted growth in Business Process Outsourcing (BPO) such as call centers, medical transcription companies, accounting services and the like is not something to be proud of nor is it a sign of development. It just shows that the country is merely a source of cheap labor. Why else would companies outsource part of their services if not to reduce costs? A call center agent in Canada earns around $13 an hour, or $104 for an eight-hour shift, while in the Philippines a call center agent earns around P15, 000 ($365 at an exchange rate of $1=P41.01) a month. The monthly salary of a call center agent in the Philippines is equivalent to three to four days salary of his/her Canadian counterpart. The benefit of the influx of BPOs, at best, is that it is a source of employment for graduates of exclusive schools with good English proficiency. Thus, it hardly makes a dent in the unemployment problem as graduates of exclusive schools make up a small percentage of the labor force. In fact, the demand for employees of BPOs are not being filled up as only a small fraction of applicants passes the required English proficiency.
Agriculture, which employs the most number of Filipinos, remains backward and vulnerable to weather disturbances such as typhoons and drought. There are only a few agro-industrial corporations mainly producing cash crops for export.
But even as the country exports more and more agricultural products, minerals, and semi-manufactures, its trade deficit remains. For the first three quarters of 2007, the country’s trade deficit is around $2,055,000,000. This deficit is due to the falling prices of agricultural and mineral products and the high imported content of semi-manufactures.
The seeming appreciation of the peso compared to the US dollar gives the impression that the economy is improving. But the increase in the value of the peso is far from being an indicator that the Philippine economy is getting stronger. The peso is being propped up by the increasing remittances of overseas Filipinos, projected to reach $15 billion dollars this year; local and foreign borrowing through loans and sale of bonds; and the influx of highly fickle portfolio investments valued at $964,000,000 dollars for the first three quarters of 2007. If the appreciation of the peso is due to increases in trade favorable to the Philippines, thus increasing the demand for peso as a currency for trade, only then could it be made an indirect measure of growth and development. But that has never happened in the country’s history and is definitely not the case now.
The real state of the economy can be seen in the runaway increases in the prices of basic goods, services, and utilities, in the increasing tax burden of the Filipino people, and in the double digit rates in unemployment and underemployment for the last six years. It is also characterized by extreme inequities where the income of the richest 10 percent is 21 times that of the poorest 10 percent; and the net worth of the country’s 10 richest individuals, amounting to $12.4 billion in 2006, is equivalent to the combined annual income of the country’s poorest 9.8 million households or 49 million Filipinos. When Macapagal-Arroyo administration declared that the country is well on its way to achieving “First World” status in less than a decade, people expressed disbelief. But if seen in the context of some 65 million Filipinos or around 80 percent of the population struggling to survive on the equivalent of PhP96 or less per day, it becomes a blatant lie. Bulatlat
YEAREND REPORT – THE ECONOMY
Bulatlat
Vol. VII, No. 47, January 6-12, 2008
Why is it that despite the much-ballyhooed 8 percent growth rate during the first three quarters of the year, there seems to be no improvement in the people’s lives? Is it because time is needed before the gains of the growth in the economy trickle down to the people? Is it because the Arroyo government is not doing enough so as to make the people benefit from these gains?
Hardly.
A deeper analysis of the statistics released by the government would reveal the chronic infirmities besetting the country. For one, manufacturing, which was the main engine of growth of industrialized countries when they were still fledgling economies, has continuously weakened because of the onslaught of globalization and the recession afflicting the global economy. Its percentage share in the Gross National Product (GNP) has gone down from a low 23 percent in 2001 to an even lower 20.9 percent during the first three quarters of 2007. The growth rate of manufacturing has slowed down from 4.6 percent in 2006 to 3.6 percent during the first three quarters of 2007. Manufacturing for local consumption suffered most with the dumping of imported goods with no or very low tariffs. Manufacturing for exports, especially those in export enclaves that are mainly multinational corporations, was affected by the economic slowdown in the U.S. and the ‘appreciation’ of the peso. Exports would suffer further with the projected worsening of the recession in the U.S., the main trading partner of the Philippines.
Data from IBON foundation showed that manufacturing even lost 105,000 jobs in 2006. The anemic performance of the manufacturing sector also explains the high rates of unemployment and underemployment - which affected 11.6 million Filipinos in 2006 - bearing down on the Filipino people. Industry cannot generate enough jobs to absorb increases in the workforce as well as those who are displaced by the backward, landlord-dominated rural economy.
The sectors that registered high growth rates in 2007 are mining and quarrying at 24.2 percent, construction at 19.3 percent, net factor income from abroad (mostly remittances from overseas Filipinos) at 18.9 percent, and finance at 11.5 percent. Others include transportation, communication, and storage at 8.9 percent, private services at 8.7 percent, and trade at 8.5 percent.
But mining and quarrying for export was never an engine for growth of First World countries. Mining and quarrying signify development if it supplies the demand of local industry for raw materials. Mining and quarrying for export, on the other hand, reveal the backwardness of the economy and would lead not to development but to the destruction of the environment as the country would try to supply more and more minerals as world prices dip. And the environmentally-destructive “modern” methods of mining specifically open pit mining hardly generate employment as it relies on heavy equipment.
The growth in construction may be explained by the May 2007 elections. While by law, construction projects by government agencies are prohibited during campaign period for elections, apparently this was hardly followed as government expenditures jumped to 10.3 percent in 2007 from 6.1 percent in 2006 and an average of 2 percent in recent years. But construction is hardly sustainable if the productive sectors such as manufacturing are stagnant or worse, weakening.
An increase in remittances from overseas Filipinos (OFs) is not an indicator of real growth in the economy. On the contrary, it shows the weakness of the economy as more and more Filipinos are forced to look for gainful employment abroad for lack of opportunities in the country.
The much-touted growth in Business Process Outsourcing (BPO) such as call centers, medical transcription companies, accounting services and the like is not something to be proud of nor is it a sign of development. It just shows that the country is merely a source of cheap labor. Why else would companies outsource part of their services if not to reduce costs? A call center agent in Canada earns around $13 an hour, or $104 for an eight-hour shift, while in the Philippines a call center agent earns around P15, 000 ($365 at an exchange rate of $1=P41.01) a month. The monthly salary of a call center agent in the Philippines is equivalent to three to four days salary of his/her Canadian counterpart. The benefit of the influx of BPOs, at best, is that it is a source of employment for graduates of exclusive schools with good English proficiency. Thus, it hardly makes a dent in the unemployment problem as graduates of exclusive schools make up a small percentage of the labor force. In fact, the demand for employees of BPOs are not being filled up as only a small fraction of applicants passes the required English proficiency.
Agriculture, which employs the most number of Filipinos, remains backward and vulnerable to weather disturbances such as typhoons and drought. There are only a few agro-industrial corporations mainly producing cash crops for export.
But even as the country exports more and more agricultural products, minerals, and semi-manufactures, its trade deficit remains. For the first three quarters of 2007, the country’s trade deficit is around $2,055,000,000. This deficit is due to the falling prices of agricultural and mineral products and the high imported content of semi-manufactures.
The seeming appreciation of the peso compared to the US dollar gives the impression that the economy is improving. But the increase in the value of the peso is far from being an indicator that the Philippine economy is getting stronger. The peso is being propped up by the increasing remittances of overseas Filipinos, projected to reach $15 billion dollars this year; local and foreign borrowing through loans and sale of bonds; and the influx of highly fickle portfolio investments valued at $964,000,000 dollars for the first three quarters of 2007. If the appreciation of the peso is due to increases in trade favorable to the Philippines, thus increasing the demand for peso as a currency for trade, only then could it be made an indirect measure of growth and development. But that has never happened in the country’s history and is definitely not the case now.
The real state of the economy can be seen in the runaway increases in the prices of basic goods, services, and utilities, in the increasing tax burden of the Filipino people, and in the double digit rates in unemployment and underemployment for the last six years. It is also characterized by extreme inequities where the income of the richest 10 percent is 21 times that of the poorest 10 percent; and the net worth of the country’s 10 richest individuals, amounting to $12.4 billion in 2006, is equivalent to the combined annual income of the country’s poorest 9.8 million households or 49 million Filipinos. When Macapagal-Arroyo administration declared that the country is well on its way to achieving “First World” status in less than a decade, people expressed disbelief. But if seen in the context of some 65 million Filipinos or around 80 percent of the population struggling to survive on the equivalent of PhP96 or less per day, it becomes a blatant lie. Bulatlat
