GLOBALIZATION, PROFITEERING, LACK OF GENUINE AGRARIAN REFORM BEHIND WORSENING FOOD CRISIS

Civil society groups call October 16 ‘World Foodless Day’

As the world celebrates World Food Day today, research group IBON join civil society groups worldwide in denouncing globalization polices and corporate profiteering, which have made food a commodity for trade and speculation that worsened global hunger.

Global food prices have risen by 75% since 2000, according to the World Bank, while prices of rice, corn, wheat, and soybean have hit all-time highs. Prices of meat, poultry, eggs and dairy products naturally follow the upward trends of grains prices. Amid the global financial crisis, increased speculation in food and fuel prices is seen as a possible consequence that will further push food prices up and worsen the poor’s access to food.

The world is facing its worst food crisis that has been aggravated by trade liberalization policies imposed by international finance institutions (IFIs) like the International Monetary Fund and trade bodies such as the World Trade Organization. These policies have allowed intensified profiteering by food transnational corporations (TNCs). In fact while more and more people go hungry everyday, TNCs such as Cargill and grain traders such as Archer Daniels Midland reported increased profits as of the first quarter of 2008.

TNCs in its desire for more profits have continued to lobby IFIs and Third World government to implement globalization policies in food and agriculture, including liberalization of trade and investment in agriculture, privatization of public organs in agricultural extension services such as irrigation, trading and the like, and deregulation of government roles in pricing, marketing and even land reforms. These globalization policies compound the deep crisis of agriculture and food production in underdeveloped countries due to decades-old landlessness of farmers, backwardness of their tools and production, monopoly of land, tools and inputs, TNC control in production and trade, and government neglect. Thus, ironically, hunger is at its worst in rural communities in the Third World where most food and agricultural production take place.

Globalization has not only resulted in the increasing bankruptcy and worsening poverty and hunger of farmers and consumers, but also in continuously eroding local production and self-sufficiency of Third World countries.

Civil society, peasant groups, and people’s organizations around the world consider World Food Day an opportune time to send a strong message that farmers and people of the Third World reject globalization, trade liberalization, and TNC profiteering of agriculture. It is also a time to recognize the successful efforts of broad alliances of farmers and people’s organizations for strengthened protests against globalization, struggle against genuine agrarian reform, and relentlessly demand for social accountability. (end)

World Foodless Day events are being held in more than fourteen countries across Asia and being supported by civil society groups around the globe. For more details on the events of World Foodless Day, visit http://www.panap.net/wfd

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JPEPA RATIFICATION PUTS RP IN MORE DANGER VS GLOBAL CRISIS

Contrary to Pres. Arroyo’s statement that the ratification of Japan-Philippines Economic Partnership Agreement (JPEPA) will protect the country from the global financial crisis, research group IBON Foundation says it will make the country more vulnerable to economic shocks.

JPEPA and similar free trade deals further opens the local economy to more foreign plunder and drags the country to the global crisis worsened by trade and investment liberalization, said IBON research head Sonny Africa. Bilateral deals like JPEPA enables beleaguered countries like Japan to pass their crisis to other economies in the region through more liberalization.

Even as Japan claims that it is on the way to recovery, its economy has grappled with stagnant growth and high unemployment for nearly two decades and is aiming to further open up other economies to cope with its internal problems. The emerging scenario of a US economic slowdown, financial disorder, soaring energy and food prices only make its situation more urgent.

The experience of the country with similar free trade deals such as the GATT-WTO, which the Senate ratified in 1994, has proven that no amount of safety nets could protect the economy and people’s livelihood from the harmful effects of liberalization.

According to Africa, it is ironic that the Senate ratified the JPEPA even as the WTO talks broke down precisely because of questions on the supposed development gains to be achieved from trade and investment liberalization. “When will this government learn from the harmful effects of liberalization on the economy?” he asked.

The approval of JPEPA surrenders Philippine sovereignty and will reinforce the country’s backwardness. The country will be further prevented from implementing economic policies essential for its development and will be obliged to give similar disadvantageous terms in pending deals with the US, European countries and others.

There is no real gain for the Philippines and especially the poorest and most marginalized sectors with JPEPA. In agriculture it is the big corporate plantations that will gain and not the country’s millions of small farmers, Africa added.

To protect and build the domestic economy, the country needs trade protection against imports such as tariff and non-tariff barriers and investment controls, and not free trade deals like JPEPA that only further expose the country and deepen its links to the failing global economy. (end)

IBON is one of the convenors of No Deal! Movement Against Unequal Economic Agreements.

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INCREASED BUDGET FOR THE POOR URGED AMID GLOBAL CRISIS

With the worsening crisis of the US and global economy expected to further aggravate poverty in the country, independent think-tank IBON Foundation today said that it has become more crucial for government to ensure enough resources are spent for the poor.

IBON said that the Arroyo administration must start by increasing the allocation for social services in the 2009 national budget. The group criticized the allocation of 2.5% of the total budget for health; 13% for education; and 0.4% for housing as atrociously low especially in today’s environment of rapidly rising prices and greater economic uncertainty.

IBON said that the perennially low budget allocation for social services will have a deeper repercussion on the poor and vulnerable sectors as the deteriorating global economic crisis destroys more jobs and livelihood and inflates the cost of living.

Experts count slowdown in export demand, tighter flows in foreign investments and increased speculation in food and fuel prices as among the consequences of the US financial crisis and overall slump in the world economy.

With increased poverty, it becomes more urgent for government to provide sufficient social services such as health, education and housing. But the proposed budget levels obviously could not cover the expected increased demand for public schools and hospitals among others.

For the past ten years, government has been spending an amount equivalent to 2.1% of the gross domestic product (GDP) for education, way below the international standards of 5% to 6%. For health, it has been spending only 3.2% of the GDP, lower than the norm set by the World Health Organization (WHO).

IBON said that the government should at least meet these levels to alleviate the present condition in the country seen to worsen with the global crisis. To increase spending for social services, government should put a stop to burdensome payments and cut back on military spending. The proposed budget for 2008 allocates P683 billion for debt principal and interest payment, while it allocates P5 billion for AFP modernization. In contrast, government allots only P30 million for health care asssitance.

The group added the removal of regressive taxes such as the reformed value-added tax (RVAT) on oil is equally urgent to lessen the inflationary impact of the financial crisis.

The Arroyo government should also abandon its proposal for new taxes because these will further burden the Filipinos already suffering from low incomes and spiraling cost of living. IBON also urged the administration not to use the global crisis as an excuse to impose more taxes in its effort to achieve a balanced budget.

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RP EXPOSURE TO U.S. FINANCIAL CRISIS TO RESULT IN BUSINESS SLOWDOWN

The exposure of Philippine banks to the global financial crisis will result in the contraction of local businesses and job losses because economic liberalization has made the local banking system vulnerable to external factors. 

According to research group IBON Foundation, Philippine banks are merely a conduit of foreign capital, and being in a liberalized and deregulated environment, are vulnerable to the current volatility of global finance.

Even as the Bangko Sentral ng Pilipinas has assured the public that only a few local banks have exposure to cash-strapped US investment banks, the impact on local businesses will be felt since majority of investments in the country are dominated by foreign capital, accounting to around 54% of total flows in the country. Thus though not exposed to the Lehman Brothers, investments in the country are affected by the jitters of foreign capital.

The local banking system, dominated by foreign banks, will likely be prudent in lending to small local businesses and would instead opt to protect large businesses with foreign capital. Unavailable access to lending would result in business slowdown and possibly lead to more establishment closures. As it is, financial losses have led to a significant number of closures among establishments in the past years.

Business slowdown will worsen the country’s unemployment, which is already at its record high, as business owners will be forced to cut down on their labor force or close shop. Job losses will be first felt in all trade and investment enclaves in the country, both manufacturing and business process outsourcing (BPOs), and then by the few Filipino firms exporting to the US and related markets. 

The global crisis will further worsen the Philippines’ own economic crisis as neoliberal reforms have further deepened its links to the US and the global economy. However, the economy would have been less vulnerable if the domestic economy were not overly dependent on trade, foreign loans and capital, and if nationalist economic policies were in place

RP VULNERABLE TO U.S., GLOBAL FINANCIAL CRISIS: ECONOMIC RELIEF TO PEOPLE URGENT

Contrary to Pres. Arroyo’s statement that her administration’s economic measures will withstand the current global financial crisis, research group IBON Foundation says it is precisely government’s economic strategies that have made the Philippine economy overly vulnerable to external factors.

The chronic dependence on exports, foreign investment and debt– including official development aid that ends up as foreign debt– is at the heart of the economy’s vulnerability. Economic relief measures are thus urgent as the people will bear the brunt of the effects of the global crisis on the Philippine economy.

The government overplays the so-called “decoupling” effect where the Philippines is supposedly much less dependent on the US market. On the contrary, developments in the US will still have a severe impact on the local economy as the US remains one of the country’s top exports and investments partners. Third-party partners such as South and East Asian markets are also finally linked to the US ambit.

Drops in US consumption and investments will be deeply felt as the largest part of Philippine exports directly or indirectly goes to the US . Around 20% of foreign investment in the country comes from the US . Further, some 20% of exports already directly go to the US but a large part of exports to Japan, China , Hong Kong , South Korea , Taiwan and Malaysia which take up another 50% of exports, are actually components for assembly into products whose final destination is still the US . Slower growth in third party countries that depend on the US and which the Philippines deals with will also have adverse effects on Philippine exports manufacturing.

Even the vaunted local information technology (IT)-enabled industry will be likely hit hard because of its considerable dependence on the US market, further aggravated by the continued peso appreciation. The US is an overwhelming presence in the business process outsourcing (BPO) sector and accounted for nearly 90% of total BPO exports revenue and over two-thirds of foreign equity in 2005. The impact will be most felt in the National Capital Region (NCR) where an estimated 80% of BPO employees are located.

Slow global growth could restrain OFW deployments and slow down remittances which will reduce domestic consumption. The global financial crunch could also result in further cuts in the salary and benefits of OFWs as employers react to the crisis. All this highlights the folly of government economic strategies which unduly rely on external factors instead of creating jobs and producing goods by building domestic agriculture and industry.

Immediate economic relief measures have to be taken to arrest the inflationary impact of the financial crisis starting with the removal of the regressive RVAT on oil. Other urgent measures include implementing a nationwide across-the-board wage hike, increasing the budget for social services, and suspending debt payments because of the people’s urgent need for resources and support.

It is becoming all the more urgent for the government to put a stop to failed policies of globalization. Beyond the immediate economic relief, much more meaningful over the longer term is to focus all efforts to build a genuinely self-reliant domestic economy.

EIGHT REASONS TO REJECT THE JPEPA

The JPEPA can be best described in three words: unequal, defeatist and destructive.

Recent government propaganda, however, has been trying to depict the JPEPA as an indispensable agreement– even as the country is currently reeling from a food crisis brought about by the same neoliberal framework that JPEPA was designed from.

With this, IBON is again releasing this summary below, which briefly explains why the country stands to lose from JPEPA and why the Philippine Senate should reject this patently unequal deal.

1. The JPEPA is a grossly unequal deal.

Under the JPEPA, Japan protects numerically more sectors of its economy from investment liberalization than does the Philippines and in addition is also very specific in protecting what it deems as vital sectors.

Advanced Japan lists at least 16 sectors to be so protected, many of which even require a minimum of 66% of full nationality. Japan rightly includes such strategic areas as mining, telecommunications, air and water transport, shipping, and banks and financial institutions for small businesses.

Underdeveloped Philippines , on the other hand, lists just five specific sectors: mining, rice and corn, geothermal energy, atomic energy and shipping. The other items are just formulated generically and are meaningless in terms of explicitly supporting and protecting specific sectors of the economy.

2. The JPEPA gives false or marginal gains for the Philippine economy.

There is much hype that Japan will open its doors to Filipino nurses and caregivers under JPEPA provisions on “movement of natural persons”. The pact allows for the entry and temporary stay of persons who engage in supplying services as nurses or certified caregivers for one to three years (which may be extended). There are, however, strict requirements that must be fulfilled as well as regulations to be followed under Japanese law.

Among the prerequisites are that nurses and caregivers should be proficient in both spoken and written Japanese and be qualified under Japanese law. Although these professional and language requirements are not unreasonable, they are limiting as far as deployment of Filipino health workers to Japan are concerned.

In all likelihood very few nurses and caregivers will be able to surmount the considerable language, technical and cultural barriers. Even assuming Japan lifts its quota limits, only a few thousand health workers may hurdle these barriers.

3. JPEPA lays the basis for increased toxic waste from Japan.

Under JPEPA, the country risks becoming a big dump site for Japanese waste materials, not just the recyclable ones but also toxic materials fit for disposal such as clinical and chemical wastes. Once the pact is ratified and implemented, these wastes can be imported tariff-free, from their original tariffs of 3% to 30% set under the Most Favored Nation treatment of the World Trade Organization.

In the face of widespread protests against JPEPA, the two governments have since come up with a side agreement that supposedly addresses these issues. However, this does not detract from how the Philippine government, under the pretext of developing local waste treatment and disposal capacity, did concede to the entry of these wastes by lowering existing tariffs to zero, notwithstanding the provision on “non-relaxation” of environmental protection.

4. “Free trade” does not result in development for backward countries.

On the contrary, historical and current experience show that: 1) industrialized countries like Japan developed on the basis of protection and discriminatory support; and 2) Third World countries like the Philippines that prematurely liberalized have suffered.

Japan certainly has more to gain from so-called free trade with the Philippines . The Japanese economy’s gross domesti c p roduct (GDP) of US$4.4 trillion in 2006 is 50 times larger than that of the Philippines . Japan is also the biggest foreign investor in the Philippines with a cumulative US$3.9 billion as of 2005, constituting over one-fifth of the country’s foreign investment stock. Japan accounted for 17% of the Philippines ‘ total trade in 2005 and is its second largest trading partner, while the Philippines accounted for just 1.4% of Japan ‘s total trade.

Underlying these figures are economies of vastly different industrial, agricultural and service sector strength. The myth of “comparative advantage” and the so-called “level playing field” between such economies is merely a smokescreen for giving the stronger economy free rein to profit from the other.

5. The JPEPA’s liberalization agenda severely limits the Philippines‘ freedom to set economic policy.

Government controls on how foreign investors operate in the country are necessary to ensure that the Philippines gets concrete and substantial benefits from such investments. This means, among others, ensuring control over investors’ operations through equity and ownership requirements or joint ventures. It also means ensuring benefits to the domestic economy through local content requirements and technology transfers.

These linkages between foreign investors and domestic entrepreneurs will not spontaneously arise and have to be consciously built, yet the JPEPA would disallow policies to build these. Investment provisions on “National Treatment” and “Most Favored Nation Treatment” will prevent the Philippines from favoring Filipino entrepreneurs over Japanese investors. There are also explicit “Performance Requirement Prohibitions” which disallow the Philippine government from requiring Japanese investors to achieve a certain level of domestic content, purchase goods and services in its area of operations, among others.

All these are designed to give Japanese investors greater protections, to ensure that they retain their advantages and to enable them to extract the maximum profit from their operations.

6. The JPEPA will worsen Philippine de-industrialization and cause job losses.

The government claims the local exporters would gain through export growth as tariffs are reduced and removed altogether. But the majority of Philippine exports to Japan are industrial manufactures that are actually subcontracted from Japanese transnational corporations (TNCs) and assembled using imported inputs while taking advantage of cheap Filipino labor.

If anything, the JPEPA actually raises the danger that some electronics and auto parts suppliers based in the country, whether TNCs or any genuinely Filipino enterprises, will be affected. Of course, there is no genuinely Filipino electronics or auto industry to speak of. But there are still such suppliers based in the country that import raw materials or components and assemble them either for re-export or as inputs to other electronics or auto assemblers in the country.

Such firms may have to close down if the removal of tariffs on these items makes them cheaper to import than procure from locally based manufacturers. Local steel makers will also be facing steeper production from Japanese producers. The resulting plant closures and layoffs could well mean some tens of thousands of jobs will be lost.

7. The JPEPA will increase landlessness and undermine agricultural livelihoods.

There is also much hype about supposed export gains from a more open Japanese market for Philippine bananas and pineapples. However, food exports are actually a small and even diminishing share of total Philippine exports to Japan, accounting for only 7.4% of total exports to it from 2001-2006. While food exports potentially have high local linkages to the local economy, grassroots farmers and farm workers are unlikely to benefit from JPEPA.

Agriculture in the Philippines , including that of bananas and pineapples, is in general very backward and underdeveloped because of the lack of true land reform and the absence of government support and extension services. Further, foreign agri-business TNCs, such as Dole and Del Monte and their big domestic corporate growers, account for virtually all banana and pineapple exports from the Philippines.

Local farmers are reduced to entering into oppressive contract growing and farm lease arrangements with these TNCs. These arrangements place all the risk of cultivation onto the farmers and force them to buy overpriced inputs. Such arrangements raise the high possibility that small farmers may lose their lands and become workers for hire or join the exodus to the cities.

8. The JPEPA is not about Philippine development.

The JPEPA’s provisions on trade and investment liberalization are designed to give Japan ‘s corporations the greatest benefit to make huge profits, at the expense of the greatest damage to the Philippine economy.

The pact also contains other measures that complement that central thrust. While packaged as being aimed towards developing domesti c p roductive capacity, their real objective is to make it even easier for Japanese firms to trade and invest in the Philippine on terms that are the most beneficial to them.

These include the supposed cooperation in trade and investment promotion, trade facilitation, technical assistance to meet Japanese requirements and regulations, capacity building in paperless trading, training to facilitate improvements in the competitiveness of workers, human resource development and language proficiency training.

BREAKING MONOPOLIES, REVERSING LIBERALIZATION: A STEP TO END RICE CRISIS

The presence of a rice cartel is only part of the monopoly control of land and capital in Philippine rice production, trade, and marketing and aggravated by neoliberal policies adhered to by the Philippine government

By Jennifer H. Guste

IBON Features– As the government insists there is enough rice available for everyone, it is now looking at rationing rice to three kilos per family, and has secured the importation of around 2.2 million metric tons (MT) of rice from Vietnam, Thailand and the United States. This is the country’s biggest volume of importation since 1998.

From being a self-sufficient and rice exporting country in the 1980s, the country has become a net importer of rice since 1993. It is now the world’s top importer of rice, the country’s staple food crop.

Why this has become so can be traced to the backwardness of Philippine agricultural production and the exploitative relations of production, which are both exacerbated by globalization. Production tools are outdated, almost all farms are not mechanized, more than half are not yet irrigated, and most of all, seven out of 10 peasants are still landless. Despite three agrarian reform programs, land is still in the hands of few families who control not only land but also trade and marketing. Aggravating the condition are the globalization policies of trade liberalization, privatization and deregulation adopted by the government since the late 1980s.

Rice Production in Chronic Crisis

Philippine average rice yield per hectare is stagnant. Since the 1990s, the country’s rice yield has averaged at 3 metric tons per hectare even as it records yearly increases in production. According to the International Rice Research Institute (IRRI), the required yield for the Philippines to sustain food security is 5.4 metric tons per hectare.

Philippine rice lands is only four million hectares compared to its counterparts in Asia. For instance, Thailand devotes more than 10 million hectares for its rice production; Vietnam has more than seven million hectares planted to rice.

Rice production remains small-scale and productivity is low. This situation is even worsened by the increasing instances of conversion of rice farms to commercial uses and conversion of crops from rice to export winners, which has put the country in constant state of crisis in its rice supply.
Meanwhile, landlessness and the absence of government support through production and price subsidies leave millions of Filipino rice farmers at the mercy of big land owners and traders.

Even with the use of hybrid rice that promises a boost in rice production with minimal lands devoted to rice farming, rice supply in the country is still under threat of shortage and government will always find reason to resort to rice importation to fill in its buffer stocks. According to the National Food Authority (NFA), the country can only supply approximately 90% of its total rice consumption; the rest, according to the NFA, would have to be imported.

In reality, government has practically stopped subsidizing local agriculture for decades, and can be seen from the meager budget allocations received by the agricultural and fisheries sector. Worse, the funds intended for the sector are even reportedly siphoned off to corruption.

Even its much-hyped Agriculture and Fisheries Modernization Act (AFMA) did little in improving post-harvest facilities or even significantly increasing irrigated rice farms.

Reinforcing backwardness

Policies of globalization on rice, i.e. trade liberalization (allowing rice imports), privatization (clipping NFA powers), and deregulation (lifting of government production and price support), which the government started to implement in the 1980s, has reinforced the rice crisis.

The privatization of the NFA, for one, has been one of the conditions for the Philippine government to avail of loans from the World Bank and the Asian Development Bank (ADB). The NFA was once allowed to engage in grains procurement and distribution using government buffer stock and subsidized pricing system as main intervention instruments. But since the 1980s as a result of reforms adopted by the Philippine government to comply with the World Bank and ADB prescriptions, the role of the NFA in ensuring the country’s food security and price stabilization has been reduced to being a “facilitator” of the market forces– the big rice traders and retailers.

The NFA has increasingly relied on rice imports for local distribution. On the other hand, from an average of 7.95% of total palay production in 1977-1983, and 3.63% from 1984 to 2000, NFA rice procurement from 2001 to 2006 was barely 0.05% of total palay production. The NFA is originally mandated to procure at least 12% of total palay production.

Other than the World Bank and ADB conditionalities for minimized NFA intervention in grains procurement and trading, under the Agreement on Agriculture (AoA) of the World Trade Organization, the country has been compelled to import a minimum volume of rice from other countries whether or not it produces rice sufficiently. Rice importation has increased as a consequence, from 0 in 1994 to 257,260 MT in 1995 and consistently increasing to 1.7 million MT by 2006.

Yet, with the current rice crisis, private traders have still renewed calls for the full privatization of the NFA. Secretary Arthur Yap of the Department of Agriculture is even entertaining options to lower tariffs on rice importation to encourage greater private sector participation in rice importation and trade. Presently, licensed private traders are allowed to import a minimum of 300,000 MT of rice but this according to the NFA has been hardly utilized by the private traders due to the 50% tariff on rice.

Ironically, instead of re-considering government subsidy to farmers’ production, an increase in the subsidy given to the NFA is even being considered to allow the state agency to shoulder some of the import costs of private importers!

Yap said the scheme would call for the NFA to import rice “through a tax-expenditure-subsidy scheme and the volume that NFA brings can be sold to the private sector for it to distribute on the basis of an equalization fee that they will bid for.” Under this plan, the private sector will be allowed initially to bring in 163,000 tons of rice this year, with each importer given a maximum volume of 2,500 tons.

Rice Price Speculation

Peasant organization Kilusang Magbubukid ng Pilipinas (KMP), on the other hand, maintains that there is no need to import rice. According to the group, if the projected 7.2 million MT palay output for this season is met, combined with the total rice inventory as of March 25, then there should be enough rice available for every Filipino table until the first week of October, even without importation.

In an interview with IBON Features, KMP chairperson Rafael Mariano said that the government is importing rice because it has already committed rice importations earlier from Vietnam and the US.
He said the NFA is importing rice because it has persistently failed to perform even its minimal procurement of 12% of the total palay production. Mariano added NFA has only procured only about 1% of palay production in the last cropping season, leaving most of the tradeable rice into the hands of big rice traders, particularly the so-called Big Seven cartel who now dictates the price of rice in the market.

In fact, a few days after the DA wrote a memorandum to the office of the President warning of the threat of a tightening global rice supply and thus the need to secure rice imports, news of a rice shortage in major markets in the NCR and in the provinces broke out. Subsequently, rice prices skyrocketed and created panic among rice retailers and consumers nationwide.

The same thing happened during the rice crisis in 1994-1995, largely a result of the semi-privatization of NFA which then procured only 0.5% of total palay production. Private traders seized the opportunity to create an artificial rice shortage and jacked up prices by as much as 90% to 100 percent.

The monopoly control in the trade and marketing of rice through the so-called Big Seven manipulates rice price increases especially during rice crises. The reduced role and intervention of the NFA in the rice market allows private traders to control both the trade in inputs and produce, thus influencing the movement of prices in the trade and marketing of rice.

Despite its import injections, the NFA’s limited distribution because of its minimal palay procurement also prevents the NFA from influencing retail rice prices. In fact, the NFA has distributed an annual average of only 6% of the nation’s rice requirements, and much of the rice distributed is even imported.

Ending Monopolies

The presence of a rice cartel is only part of the monopoly control of land and capital in Philippine rice production, trade, and marketing. It is a manifestation of the chronic rice crisis in the Philippines, which is aggravated and reinforced by neoliberal policies adhered to by the Philippine government.

There are doable measures to solve the chronic rice crisis the country. One step that government should do is to regain control of the trade and marketing of palay and rice to break the monopoly control of cartels. The country should also break away from binding agreements that government made to the GATT-WTO and reinstate agricultural tariffs while increasing support to Filipino farmers. Ultimately the crisis could be resolved by implementing a genuine agrarian reform program that do not only provide free distribution of land to farmers, but also provides input and capital subsidies, and investments in post-harvest facilities that will help end land monopoly.

GOVT URGED TO DISCONTINUE BANKRUPT LAWS LIKE AFMA:Policies only worsened RP’s dependence on rice imports

Independent think-tank IBON Foundation today urged the Arroyo administration to discontinue policies like the Agriculture and Fisheries Modernization Act (AFMA), which has only contributed to the country’s current rice crisis.

Rice imports have consistently increased since the AFMA was signed into law in 1997. From 722,000 metric tons in 1997, rice imports as of 2006 have already reached 1.7 million metric tons. For 2008 the country is estimated to import some 2 million metric tons of rice.

AFMA, which was signed in 1997, promised to develop and modernize the agriculture sector through investments and importation of machinery. It allows the private sector to participate in rice importaion, and targets to separate and partly privatize the regulatory and trading functions of the NFA.

The AFMA complements the government’s medium-term plan in agriculture, which aims to reduce the production of rice and corn from 5 million MT to 3.1 million MT and invite foreign businesses to invest in the country’s key production areas.

Neither the medium-term plan nor the AFMA can address the basi c p roblems of the country’s farmers, such as lack of support services and subsidies. Instead, it encourages more foreign investment in export-oriented agricultural production through the Strategic Agriculture and Fisheries Development Zones (SAFDZ).

The country can never achieve food security and self-sufficiency under liberalization policies like AFMA because it promotes entry of foreign investments in the local agriculture instead of supporting the sector and subsidizing Filipino farmers. What is needed is for the government to address age-old problems through government support for agriculture and reversing trade liberalization, while implementing genuine agrarian reform.

AMID BARRAGE OF HYPE, REALITY OF WEAK ECONOMY PERSISTS

The clearest signs of economic failure under the Arroyo administration are in the poor conditions of millions of Filipinos.

By Sonny Africa
IBON research head

IBON Features– The administration has made much noise of its economic performance in 2007. Most of all it crows about rapid growth in gross domestic product (GDP), the peso’s appreciation against the dollar, and reining in the national government deficit. Unfortunately these are not the whole story. There is a barrage of hype but the reality is of a weak economy and, absent fundamental economic reforms, millions of Filipinos consigned to joblessness and poverty.

A more complete descent into economic turmoil was averted last year by record overseas remittances, debt-driven spending, an upsurge in “hot money”, the fortuitous weakening of the United States (US) dollar, and a US economy that had yet to fall into recession. There was also an unmatched privatization spree with the P91 billion worth of public assets sold equivalent to nearly as much as had been sold in the previous 15 years spanning three administrations. These conditions are unlikely to recur in 2008– and the downward pull of accumulated economic problems is unavoidable.

Crisis times

The clearest signs of economic failure are in the poor conditions of millions of Filipinos. The 11.3 percent average annual unemployment rate over the period 2001-2007 is the worst 7-year period recorded in the country’s history. There were 4.1 million jobless Filipinos and 6.8 million underemployed last year, or almost 11 million Filipinos looking for work.

The government uses statistical sleight of hand to give the illusion of an improved jobs situation. Its definition of unemployment since April 2005 cuts the number of jobless not by giving them jobs but by classifying long-discouraged jobseekers and those not available/willing to immediately take up work as “not in the labor force”. This had the effect of reducing the “official” unemployment by around 3.5% and the number of jobless by 1.4 million in 2007.

Yet job creation is far short of the targeted million jobs a year and also of poor quality. Despite supposedly record growth the 861,000 net additional jobs created in 2007 is only a 2.6% increase in employment from the year before and is the fourth slowest rate of job creation in the last seven years.

The sources of jobs also betray economic backwardness. The leading sector in job creation is domestic household help with an additional 142, 000 jobs, followed by 116,000 jobs in transport, storage and communication, and 111,000 jobs in wholesale and retail trade. These are among the lowest-paying, most temporary and insecure jobs in the country. In stark contrast only 72,000 agriculture jobs and 4,000 manufacturing jobs were added yet these sectors constitute the internal productive base of the national economy.

The latest Family Income and Expenditure Survey (FIES) noted average family income dropping between 2000 and 2006 with nominal incomes not keeping up with inflation. The incomes of the poorest four-fifths of Filipino families – or some 13.9 million families – fell between five and almost 13 percent. These 70 million or so Filipinos each struggle to survive on P110 or even much less a day.

Critical times

Things can only get worse in 2008 with the US recession and a generalized slowdown in the world economy. The domestic situation is made worse than it should be by internal weaknesses resulting from “globalization”, the erosion of domestic productive sectors and over-dependence on trade, foreign loans and capital.

As it is, manufacturing sector growth slowed to 3.3% in 2006 and its 23.1 percent share in GDP is as low as in the late 1950s. Agriculture grew at a faster 5.1% clip but then wide year-to-year variances are the norm for the sector and the its 18.4% share in GDP is the smallest in the country’s history. This internal domestic weakness makes the country unduly vulnerable.

The country has significant links to the US economy which remains our top investment and exports partner (accounting for 20 percent of the country’s respective totals). Drops in US consumption and investments will be deeply felt. This effect is magnified by “globalization” where much of Philippine exports to East Asian countries like China, South Korea, Taiwan and Malaysia are actually intra-firm trade with the US still the ultimate destination. Slower growth in third party countries that depend on US and which Philippines deals with will also cause problems.

Even the vaunted local information technology (IT)-enabled industry will likely be hit hard because of its considerable dependence on the US market, further aggravated by the continued peso appreciation. The US is an overwhelming presence in the business process outsourcing (BPO) sector and accounted for nearly nine-tenths of total BPO exports revenue and over two-thirds of foreign equity in 2005. Nearly nine-tenths of BPO service exports were to the US market. The impact will be most felt in the National Capital Region (NCR) where an estimated 80% of BPO employees are located.

There are also other sources of problems. Slow global growth could restrain OFW deployments and slow down remittances which will reduce domestic consumption. The administration’s inability to even let revenues keep up with nominal GDP growth, compounded by the dearth of remaining assets to sell, could lead to an uncontrolled intensification of its fiscal crisis in 2008.

The rumbling political instability stemming from unresolved issues of legitimacy, graft, corruption and political violence are also taking their toll. If these are amplified by a drop in local business sentiment then this year or the next might even see the beginning of a steep downward economic spiral.

All this highlights the folly of government economic strategies which unduly rely on external factors instead of creating jobs and producing goods by building domestic agriculture and industry. The country’s economic prospects are unfortunately made even worse by the crying need for credible leadership underpinned by a broad-based democracy.

DEFICIT FIGURES FORESHADOW 2008 FISCAL CRISIS –IBON

DEFICIT FIGURES FORESHADOW 2008 FISCAL CRISIS –IBON

As the Arroyo administration plays up its full-year 2007 deficit of P9.4 billion as being the “lowest in a decade”, a closer look at the figures foretells a possible fiscal crisis this year, according to independent think-tank IBON Foundation.

According to IBON research head Sonny Africa, the deficit was kept in check by one-time privatization revenues of P90.6 billion Without these proceeds from the sale of government assets, the 2007 budget deficit would have reached more than P100 billion, Africa said.

Meanwhile, he pointed out that government has not been able to improve its revenue collections. Although the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC) both were able to increase their collections from 2006, such collections were substantially lower than government targets. The BIR had a revenue shortfall of P54.3 billion and the BOC, P17.7 billion.

Africa said that if revenue collections don’t improve in 2008 then the administration will end up with a P68.4 billion deficit (extrapolating revenues without privatization of P1,194 billion on the assumption that revenues increase by 8.1% in 2008, less budgeted expenditures in the national budget program of P1,227 and factoring in targeted privatization revenues of P30 billion). This also implies that government faces an underlying budget deficit of P98.4 billion in 2008 if privatization revenues are not factored in.

Revenue collections in the coming year are unlikely to improve because of the Arroyo administration’s dismal record in addressing large-scale corruption, as shown by its alleged attempts to cover up anomalies in the ZTE broadband network deal, plus its continued policy on liberalization which similarly cost government billions in foregone revenues because of tariff reductions and eliminations.

And since the focus of government’s efforts to address the fiscal crisis are to ensure that it can continue to service the country’s debts, new taxes may be inevitable– something that the Department of Finance has already hinted at, Africa said. (end)

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