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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IBON ON JPEPA RATIFICATION: GOV’T HAS CLEARLY NOT LEARNED ITS LESSON

It is not surprising but still disappointing that the government has clearly not learned its lesson. The current global turmoil and its impact on the Philippines underscore the vulnerability of our economy. The country is extremely vulnerable because of nearly three decades of reckless “free market” policies of globalization.

Progressive groups warned in 1994 about the damage that a World Trade Organization (WTO) deal would cause. Yet the government insisted on ratifying the deal and even implemented policies opening up the economy beyond what the WTO agreement required. The so-called safety nets were ineffectual and local industry and agriculture has been devastated causing unprecedented joblessness.

The economy’s fundamentals are very weak and will be weakened further by JPEPA and other such deals to come. The country’s historic jobs crisis will worsen, more Filipinos will be forced to try and find work abroad, millions more will suffer poverty and deprivation.

We condemn the surrender of the country’s sovereignty and patrimony by the government through JPEPA. The country’s negotiators have absurdly given up nationalist and protectionist policy measures that Malaysia, Indonesia and Thailand for instance held on to in their respective trade deals with Japan.

The only acceptable deal for the Philippines is one based on the principles of solidarity, mutual benefit and development for those who have long suffered poverty and backwardness. The JPEPA however is a treasonous deal that must be completely rejected.



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.

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.

ARROYO’S STATE OF THE NATION 2007: A LEGACY OF ECONOMIC DECAY

In the face of its glaring failures, the Arroyo government continues to pursue the very same bankrupt economic policies that caused these in the first place

By Sonny Africa

IBON Features– Undoubtedly, President Gloria Macapagal-Arroyo will use her State of the Nation Address (SONA) to hype her achievements. Arroyo would likely claim that her greatest achievement and her legacy is to set the Philippines well along the road to progress and prosperity. To buttress her claims she will certainly roll out the familiar rosy economic indicators that she has consistently used to try and silence her critics: the fastest quarterly growth rate in nearly two decades, stock market indices soaring to all time highs, record international reserves, the “strengthening” of the peso and steady increases in foreign investment.

However, these claims would not hold up to even the most cursory scrutiny. The scores of homeless people living on the streets and sidewalks of Manila testify to widespread poverty and joblessness despite Malacañang’s claims that poverty has decreased. The more than 3,000 Filipinos who leave the country every day to seek work abroad belie the government’s claim that it has generated more than 800,000 jobs a year since it came into office in 2001.

Yet, even in the face of its glaring failures, the Arroyo government continues to pursue the very same bankrupt economic policies that caused these in the first place. In fact, it promises to pursue these policies even more aggressively and apply them to more areas of the economy.

Behind ‘Economic Growth’

One of the key economic indicators that the Arroyo government undoubtedly will be hyping is the continuous economic growth it has experienced. According to Palace Secretary Ricardo Saludo, the country has enjoyed twenty-five consecutive quarters of Gross Domestic Product (GDP) growth, with GDP hitting 6.9% in the first quarter of 2007, supposedly the highest in seventeen years.

But the GDP merely tracks the continued erosion of the country’s productive sectors. The share of the manufacturing sector has been steadily falling, from 25.7% of total domestic output in 1980 to 23% last year. Over the same period, agriculture fell from 25% of GDP to 14 percent.

Even if the economic growth could be taken at face value, it remains meaningless to the millions of poor Filipinos for whom its benefits have not “trickled down”. IBON estimates that some 65 million Filipinos or around 80% of the total population struggle to survive on the equivalent of P96 or less per day. This is substantially larger than the Arroyo government’s official poverty incidence figure of 24 million Filipinos.

Increased growth has also not reduced the gross income inequalities that continue to haunt the country. In 2000, the poorest 30% of families (some 3.8 million) accounted for almost 8% of total family income, while the richest 10% (1.3 million families) accounted for 38.4 percent. By 2003, inequality had barely softened, with the poorest 30% (now nearly five million families) accounting for 8.5% while the richest 10% (1.6 million families) accounted for 36.3 percent.

Meanwhile, the richest Filipinos continued to get richer. The wealth of the country’s three richest individuals/families (Henry Sy, Lucio Tan and Jaime Zobel de Ayala and family) grew in real terms from P177.4 billion in 2001 to P261.5 billion last year.

Speculation

The Arroyo government also continues to hype the peso’s all time highs and the booming stock market. But when looked at in an overall regional context, the seven-year high of the peso and the all-time high of the stock exchange are not even particularly impressive. They merely reflect an overall trend of appreciating currencies and exuberant stock markets.

A look at the trend from 2001 shows that Asian currencies, in general, have been appreciating against the US dollar especially since the middle of 2006. The US economy is heavily weighed down by its historic budget and trade deficits as well as by the wars it is unable to win in Afghanistan and Iraq . It is also widely expected to experience an economic slowdown this year.

Asia has also been receiving markedly higher inflows of speculative investment, many of which are going to the region’s stock markets, with the trend again being especially marked since the middle of last year. During the first quarter of the year, some US$2.8 billion or 78% of gross foreign portfolio inflows into the country went to the Philippine Stock Exchange. These inflows were equivalent to nearly half of gross inflows in the whole of 2006 and two-thirds of gross inflows in 2005.

The Philippines is also one of Southeast Asia ’s laggards in terms of economi c p erformance. Philippine economic growth of 5.3% last year was the third worst in Southeast Asia and even less than the ASEAN average of 5.8 percent. The country has the worst unemployment and is the fifth poorest country in terms of GDP per capita and national poverty rates. Although comparisons of this sort are problematic because of differing methodologies and measures, it should at least serve as a wake-up call for the administration.

Fiscal Hype

Another achievement that would surely be hyped in the SONA is how Arroyo succeeded in arresting the country’s fiscal crisis through “reforms” such as the implementation of the reformed value-added tax (RVAT). But the country remains vulnerable to another financial crisis, which could explode at any time.

The budget deficit has indeed gone down from the historic high it reached it 2002 when it peaked at 5.4% of GDP. Last year it was at 1.1% of GDP. But the deficit was addressed not through improved revenues or dealing with runaway debt service payments; instead, government cut spending on vital social services such as education, heath, and housing, whose combined share in the national budget fell to 15.6% in 2007 to 19.7% in 2001.

Meanwhile, the Arroyo administration is making the most debt payments of any administration in the country’s history. Foreign and domestic debt ate up a historic 87.3% of revenues and 14% of GDP in 2006. Total debt service last year on foreign and domestic debt was a colossal P854.4 billion in 2006. And public debt continues to increase, hitting P3.9 trillion as of March 2007. National government debt was 65% of GDP in 2006.

Although the RVAT netted P76.9 billion in 2006 and P18.7 billion in the first quarter of 2007, it was not enough to make up for revenue losses from trade liberalization, corporate tax evasion and corruption. The government’s tariff reduction program has resulted in import duties as a share of total revenues falling to 19% in 2006 from 36% in 1993.

Meanwhile, corporate tax evasion may cost the government some P54 billion in lost revenues annually (according to a 1998-2002 survey by the National Tax Research Center ) and some P146 billion may have been lost to corruption in the 2007 national budget (based on the 13% estimate of the 2001 budget by the United Nations). This means that as much as P200 billion may be lost this year due to corruption and tax evasion.

In fact, government recently reported that its half-year deficit had already reached P41 billion or 65% of the year-end target of P63 billion.  Its only hope now of achieving its deficit target is the privatization of some of its remaining assets, such as its stakes in San Miguel Corp. and the Manila Electric Co. (Meralco), which could fetch as much as P105 billion. But this represents a one-time boost in revenues. Thus, higher taxes on the scale of the RVAT are likely inevitable despite government denials.

Unsound fundamentals

The Philippines ’ weak productive sectors are ultimately what underpin its financial vulnerability. Its declining agriculture and manufacturing sectors result in chronic trade deficits because the country is dependent on imported inputs and finished products, while having a limited capacity to export genuinely Philippine-made goods. This in turn increases the dependence on foreign sources of financing and capital. The local economy thus becomes unduly sensitive to the fluctuations of global markets.

The country’s problems are essentially due to liberalization policies enacted under an economic globalization framework. These policies have eroded incomes and destroyed livelihoods, undermined domestic productive sectors and created the conditions for financial crisis. Trade liberalization destroys local agriculture and manufacturing while reducing tariff revenues. Liberal investment regimes have given generous incentives to foreign corporations while reducing the benefits to the domestic economy to nothing.

Pres. Arroyo, a staunch believer in so-called free market economics and was instrumental in the country’s membership to the World Trade Organization, will likely continue her adherence to neoliberal policies, which will reinforce the country’s structural inequities and weaknesses.

For example, she will undoubtedly continue to pursue liberalization through the various WTO agreements and free-trade agreements such as the Japan-Philippine Economic Partnership Agreement (JPEPA) and liberalization of the mining sector and privatization of the power generation and transmission sector in order to further encourage foreign investment.  And then there is the removal of economic sovereignty provisions in the Constitution through Charter change.

With these policies, it is clear that Arroyo’s legacy will not be that of a prosperous Philippines but rather an economy that is ripe for another bout of financial and fiscal crisis.