ON THE ENERGY SUMMIT :SEEKING MORE FOREIGN INVESTMENTS IN ENERGY SECTOR WON’T SOLVE ENERGY WOES

Independent think-tank IBON advised against using the ongoing energy summit in further promoting foreign investments in the energy sector, particularly in the burgeoning biofuels industry.

According to the Department of Energy the summit is a “listening and hearing out” session involving all stakeholders in the local energy sector in order to draft longer-term solutions to the country’s energy problems, such as high oil prices. But IBON research head Sonny Africa noted that the summit is being used to further promote foreign investment in alternative fuels, such as biofuels, as a solution to the current oil crisis.

This step, he said, would only intensify further foreign control over the local energy industry. In the oil industry, for instance, the exclusive control of the industry by oil transnational corporations is the reason behind high pump prices. “There must first be a recognition that the worsening global energy insecurity is because of this dominance,” he said.

There is no question about the necessity to develop alternative sources of energy in order to confront pressing issues such as high oil prices, he said. “But to effectively address these issues there is a need to radically change the framework that countries use to develop other renewable energy sources, including biofuels.”

This requires making governments the central players in the national exploration, development and utilization of alternative sources of energy if poor countries are to achieve energy security and independence. At present, most biofuels programs in the Third World are designed to rely heavily on foreign capital and technology, and external markets. Such programs thus end up merely creating more opportunities for First World TNCs exploit the natural resources of developing countries.

Energy independence can only be achieved if energy resources are effectively controlled and managed by the state, and not by corporate interests. Effective state control, for instance, would prevent the wanton conversion of agricultural lands for biofuels production and ensure that the rights of farmers to their land, as well as national food security, would not be compromised.

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MOODY’S UPGRADE NOT A SIGN OF FISCAL HEALTH FOR RP

Rating to result in more debts, says think-tank

The Philippines’ fiscal crisis remains and could come to a head in 2008 despite the upgrade given by international ratings agency Moody’s Investors Service, according to independent think-tank IBON Foundation. The likelihood of this will increase the more adverse impact of the US economy’s troubles on Philippine exports, remittances and financial markets.

Moody’s upgraded the Philippines ’ credit ratings outlook from stable to positive, saying that government had reduced its dependence on foreign loans. But this does not mean that the Arroyo administration has reduced its dependence on debt, merely that it has shifted borrowing from foreign to domestic sources. In 2008, government will still borrow some P346 billion, 64% of which will come from local sources. As a result of added borrowings this year, outstanding government debt is seen to hit P3.8 trillion by end-2008.

Tax collections continue to be moribund and the Arroyo administration is relying on privatization revenues to paint a false picture of fiscal health. Tax revenues from January to November 2007 increased by just 8.3%, in line with the annual average revenue increase of 8.2% recorded from 2000-2004 before government implemented the reformed value-added tax. The increase in tax revenues did not even keep pace with nominal economic growth of 9.6% in the first three quarters of 2007. Meanwhile, privatization revenues reached a record P90.6 billion last year, or nearly as much as was generated over the previous fifteen years.

Without the privatization revenues there would actually have been a deficit of P78 billion deficit from January to November last year instead of the P12.6 billion that the government actually reported. The administration cannot continue to rely on privatization for revenues and may have to implement new and higher taxes this year to meet its goal of a balanced budget.

Rather than being a sign of an improving fiscal situation, the ratings upgrade actually even paves the way for more government borrowings, with the Arroyo administration already offering US$500 million in sovereign bonds following the improved outlook. Much less does the ratings upgrade reflect improvements in the conditions of millions of Filipinos who suffer record joblessness, falling real incomes and deepening poverty.

RP CALL CENTERS, OFWS TO BE HIT WORST BY U.S. SLOWDOWN

Call centers and overseas Filipino workers, both lauded by the Arroyo government as economic winners, are seen to be the worst hit by an anticipated US recession and general slowdown in the world economy, according to independent think-tank IBON Foundation.

IBON research head Sonny Africa said that the country’s economy would be hurt by a foreseen US economic slowdown, particularly given the Philippines ’ strong economic ties with the superpower. Africa said the US is one of the country’s top investment and exports partners. The US accounted for nearly 32% of total approved foreign direct investment in the first semester of 2007 and 17% of total Philippine exports from January to November 2007.

Africa said that the business process outsourcing sector, which is led by call centers, may experience job losses and pressure on wages to fall, and the same may happen to US subcontractors in the country’s export processing zones. The effect would be magnified further by how many Philippine exports to East Asia are actually intra-firm exports with the US being the ultimate destination. Major US firms with BPO operations in the Philippines include Accenture, Amex and AIG, while the US accounts for 14% of the total investments in export processing zones from 1995 to 2005.

Overseas Filipino workers’ remittances would also likely drop, which would further hurt the country’s growth by slowing domestic consumption. Africa pointed out that although the US is not a top destination for the country’s OFWs, most of the employing countries depend on US investments, such as trade centers like Hong Kong and oil-producing countries like Saudi Arabia . Further, OFW deployments may drop with a similarly expected slump in world economic growth, which has been slowing from 5.4% in 2007 to an expected 5.2% in 2007 and 4.8% in 2008.

These developments may also result in a bursting of the domestic real estate bubble of the past few years, which has been driven mainly by OFWs demand for housing and call centers, for office space.

“If there is a worsening of the fiscal crisis as a result of the slowdown of these two vital sectors, the country could experience a steep economic slowdown in the coming years,” said Africa .

He added that this scenario could have been avoided if only the country had developed stronger domestic industry and agriculture sectors, which would have created enough jobs to absorb displaced overseas workers.

EDSA II ANNIVERSARY: JOBLESSNESS, FAMILY INCOMES WORST IN LAST 7 YEARS

President Gloria Arroyo’s seven years in office has brought record levels of joblessness as well as falling family incomes, according to independent think-tank IBON Foundation.

According to IBON research head Sonny Africa, historical levels of joblessness were registered under the Arroyo administration since 2001. In 2007, there were 4.1  million jobless Filipinos and an annual average unemployment rate of 10.8 percent. Although 2007 figures were a slight improvement from 2006, the average annual unemployment rate of 11.3% over the 2001-2007 period remains the worst such period recorded in the country’s history, Africa said.

Moreover, most jobs created in 2007 were in domestic household help, followed by the transport, storage and communication sector, wholesale and retail trade, real estate, rental and business activities (which include business process outsourcing) and construction. Africa pointed out that in general, these are the lowest-paying and most insecure jobs in the country. For example, household help would be lucky to earn P3,000 to P3,500 a month, he said.

Since 2001 Filipinos’ incomes have also continued to fall throughout the Arroyo administration. Figures from the 2006 Family Income and Expenditure Survey show that average family income for all families in real terms (at base year 2000) fell by P20,400 between 2000 and 2006. For the poorest 10% of the country’s families, this meant a decline in annual income to P23,000 in 2006 from P25,000 in 2000. Since incomes were insufficient to meet their expenses, there was an annual debt of P1,700 per household in 2006.

Inequality also remained high in 2006, as the richest 20% of the country’s richest families account for nearly 53% of total family income, while the poorest 20% share less than 5% of total family incomes

GOV’T JOBS DATA EXCLUDES 1.4 MILLION JOBLESS FILIPINOS

Independent think-tank IBON Foundation disputes government data on employment, estimating that government statistical manipulation removed over a million Filipinos from the official unemployment count.

Government data showed that in 2007, there was an annual average of 2.7 million unemployed Filipinos, a steep drop from figures recorded in recent years. IBON research head Sonny Africa cited the recent IBON study that estimates at least 4.06 million jobless Filipinos and an unemployment rate of 10.8 percent. This was 1.4 more than the official count of 2.7 million, which placed the average unemployment rate for 2007 at just 7.3 percent.

Average unemployment rate of 11.3% over the 2001-2007 period shows the economy is still suffering record joblessness despite government’s attempts to obscure the figures.

Government reports lower joblessness only because it revised the definition of unemployment to exclude discouraged job hunters from the labor force count, not because the economy created more jobs, Africa said. The effect of this new methodology in 2007 was to dramatically reduce the labor force participation rate (the percentage of population 15 years and above who are in the labor force) to 64% from the 66.5% under the NSO’s traditional unemployment definition.

IBON had requested the NSO for employment figures based on the old methodology, but said that it no longer computed such labor force data, unlike in past years when it presented data using both methods. “This makes comparison of current employment data with previous years impossible as it paints a false picture of an improving jobs situation,” Africa said. IBON made its own estimates to roughly compare employment figures using both methods.

Africa added that the 601,000 net additional jobs created in 2007 is just a 1.8% increase from the year before which is the slowest rate of job creation since the start of the Arroyo administration. The most jobs were created in domestic household help with 142,000 additional such jobs created.

In contrast only 72,000 agriculture jobs and 4,000 manufacturing jobs were added. Employment and unemployment trends in 2007 then confirm the deep problems of the Philippine economy despite much hype about rapid economic growth and a “strengthening” peso, Africa said.

OIL TRANSNATIONALS WILL BENEFIT MORE WITH TARIFF CUT – IBON

Independent think-tank IBON Foundation said that the tariff cut on crude oil imports would mainly benefit the transnational corporations (TNCs) that dominate the local oil industry while having a negligible, if any, effect on pump prices.

Experience shows that TNCs pass on costs of high tariffs to pump prices but enjoy savings when tariffs are low. Firms do not actually translate tariff reductions to lower oil prices and do not deliver on consumers’ hope for reduced prices on oil products. In fact, the first reaction of independent oil players to news of the tariff cut was to say that it was not enough to ensure lower pump prices.

The only answer to high oil prices is for government to nationalize the local oil industry, starting with the repeal of the Oil Deregulation law (Republic Act 8479). The law has only allowed TNCs to further intensify their control over the local industry even as it has resulted in near-weekly rounds of oil price hikes.

IBON reiterates the call for the lifting of the 12% value-added tax on petroleum products since it would result in a substantial reduction in pump prices of at least P4 per liter; such a call is in the spirit of the more urgent necessity of governemnt regulation of the industry.

JPEPA LOSSES TO RP ECONOMY GO BEYOND MONETARY COST

Independent think-tank IBON Foundation reacted to Senator Mar Roxas’s statement that he would advocate for the ratification of the Japan-Philippines Economic Partnership Agreement (JPEPA).

Sen. Roxas said yesterday although there was not much gain inherent in the free-trade pact, “the loss is definitely calculable”. But IBON research head Sonny Africa said that the loss to the local economy of JPEPA goes beyond what can immediately be computed in monetary terms to affect the country’s future economic development.

Even as IBON estimates annual revenue losses at P10.6 billion because of tariff removals under JPEPA, Africa said that the bigger loss from the free trade pact is ultimately its effect on the country’s economic sovereignty and its right to impose policies to protect its industries and promote its long-term economic development.

For example, the JPEPA has investment provisions that require the Philippine government to place Japanese investors on equal footing with their local counterparts while preventing the country from imposing policies to favor Filipino entrepreneurs and enterprises. It also prohibits the government from imposing such development measures as requiring Japanese investors to hire a given level of Filipino nationals, transfer technologies or production processes to local companies, or achieve a certain level of local content in products it manufactures or subcontracts in the Philippines .

The effect of these provisions can not be readily computed monetarily, but the loss to the domestic economy is very real and concrete, Africa said, in terms of lost livelihoods and local firms closed. Just as big a loss will be the continued and chronic backwardness of the Philippines ‘ agricultural and industrial sectors, which would deny tens of millions of Filipinos decent work and force them to risk their lives abroad as overseas workers. “These losses are inherent in the JPEPA,” he said.

Africa said that senators considering ratification of the controversial pact should ultimately look not just at the immediate losses the JPEPA will bring but also its future legacy: the destruction of the people’s welfare and any hope of the country’s future development