Gov’t debt may top P7 trillion in 2018 amid infra push

THE GOVERNMENT’S outstanding debt may breach the P7 trillion mark next year, according to the Treasury bureau.

Amid preparations for the Budget Expenditures and Sources of Financing report for next year, National Treasurer Rosalia V. De Leon said that they have given the Budget department a P7.05 trillion debt forecast to be programmed in the general appropriations act.

“For 2018, its P7.05 trillion,” she told reporters late last week when asked for its debt program next year.

The projected rate of increase for the 2018 debt is 8.96% against the downward-adjusted P6.47 trillion outstanding debt in 2017. The growth rate compares to 6.24% between 2016 and 2017.

However in terms of the share of the country’s economy, the projected total is 39.7% of gross domestic product (GDP) from the 40.76% ratio for this year and 42.18% in 2016.

Asked for the economic implications of higher debt, Finance undersecretary Gil S. Beltran said that the growing economy will outpace the rise in debt.

“It’s just a number. Actually it’s nominal so even if the number increases the value of that debt decreases, because over time it’s subject to inflation. So the best measure is actually percentage of GDP because that is the level of resources that a country generates,” he said.

“Payments come out from production -- the goods and services that are produced. It is always measured in terms of percent of GDP. And (the share) is going down,” said Mr. Beltran, who is also the Finance department’s chief economist.

He said that the globally accepted standard of a safe debt ratio is 50%.

Union Bank of the Philippines chief economist Ruben Carlo O. Asuncion said his asessment of the debt will depend on the success of tax reform.

“It is fiscally sound, as long as the government sticks to its targets, particularly that of the needed reforms in taxes and improvements in the general collection of taxes. In all fairness, government has been collecting more and is expected to collect more when the new taxes are in place,” he said.

“Fiscal discipline is important moving forward. If the fiscal reforms are not instituted as expected and planned, there might be difficulty meeting the targets and the overall plan of making lives better for all will be undermined.”

The tax reform program aims to raise government revenue by making the tax system more efficient, by removing some tax exemptions, harmonizing estate and donor taxes, increasing petroleum and automobile excise tax rates while reducing personal income tax rates.

The government had a P6.345 trillion debt as of end-May, growing 7.8% from a year earlier. The outstanding debt was at 98.07% of the P6.47 trillion programmed for this year.

Over 65% or P4.14 trillion of this amount is owed to domestic lenders, while the P2.21 trillion remaining obligation was borrowed from external sources.

The government borrows to plug its fiscal deficit, and to likewise pay down maturing debt. It aims to maintain an 80-20 borrowing mix, in favor of domestic sources.

The government has secured official development assistance (ODA) packages and concessional loans from regional partners such as China, Japan and South Korea, noting their willingness to participate in building up the country’s infrastructure.

“[The debt] has to increase because we are building infra,” said Mr. Beltran. -- Elijah Joseph C. Tubayan

Can we afford to spend more?

UNLESS, like some people, you are only driven by a political agenda—“The administration is always wrong/right”—it is important to try to understand what the government is doing. When we try to comprehend something that is complex, we attempt to bring it down and simplify the situation in terms of our own experience. This is particularly true of government finances, which can be like trying to learn a foreign language.

If we spend more money than we earn, that creates a deficit, a budget deficit. In order to make up that shortfall, we borrow money. Borrowing money from a bank, which will not tolerate any excuses for late or nonpayment, is like the government borrowing from foreign sources. Borrowing money from your relatives is more like a government’s domestic borrowings, which can be paid in local currency that is created through simple accounting “tricks”.

There is concern with the Philippine government’s efforts to ramp up its infrastructure program in that the necessary funding will not be available without increasing its budget deficit, which will be met with borrowings. It is important that the public be aware and knows exactly how much, to whom and at what price any additional debt will be added.

However, perhaps driven by politics, there seems to be an extreme, and maybe unnecessary, concern over the government increasing both its budget deficit and its external borrowings.

When you look around the world, you see two different conditions that are striking in their difference. There are economies like the Philippines that are growing and those that are not. The reason is obvious on closer observation. You cannot have a healthy national economy if the government’s “economy” is unhealthy.

For two decades the Philippine economy was a “basket case” because the government’s finances were in the same basket, depending on debt and handouts. This changed because—in the words of a recent speech at the United Nations by Ambassador Teddy Locsin Jr.—President Gloria Macapagal-Arroyo saved the economy “in the Wall Street global financial crisis”.

In 2008 the government debt as a percentage of GDP was 54.7 percent. It is now 23 percent lower at 42.1 percent. Back then the government budget deficit as a percentage of GDP was 3.7 percent. In 2015 it was 0.9 percent. The Aquino administration took advantage of those facts to increase spending in 2016 as supposedly the Duterte administration will in 2017 to increase the deficit to over 3 percent again. But is that a problem?

Compare this with other nations. Brazil’s debt-to-GDP ratio is now at 17 percent. The US and Japan are both over 4 percent. While a plus 3-percent Philippine deficit will be higher than Canada, Australia, France and the UK, there are two big differences.

The Philippine economy is growing much faster than in those nations and can handle a 4-percent budget deficit much more easily. Further, those countries are using their deficit to support their failing economies while the Philippines will use the money to build infrastructure to increase growth.

We must be vigilant that the government does not borrow and spend foolishly. That is our job. But there is a sound financial foundation to justify more spending to build for our future.

source:  BusinessMirror Editorial

The Asian financial crisis, Part Two. The Philippine response

Let us recall again how the Asian financial crisis started 20 years ago in July 1997, and how it produced a domino effect on Asian countries.

Thailand’s banks and large corporations had been borrowing US dollars at cheaper rates and then turned around, converting them to baht for re-lending to domestic borrowers at higher rates. There was an abundant flow of credit that  encouraged overlending to many ventures of marginal profitability, much of this to property development.  This was the scenario, but what was ignored was the fact that Thailand had overborrowed and its foreign reserves had dwindled fast, exacerbated by a sudden drop in exports and the strengthening of the dollar against the baht (which was pegged to the dollar). In short, Thailand was in a most vulnerable position of being unable to meet its foreign-debt obligations.

The Philippines was not exactly surprised when the Asian financial crisis descended upon the Asian scene. Bangko Sentral ng Pilipinas (BSP) Governor Gabriel Singson would have known that in May 1997, Thailand had poured billions of US dollars from its foreign reserves to defend the Thai baht from the concentrated assaults of currency speculators, and Moody’s, the credit-rating agency, had in April 1997, in fact, downgraded Thailand’s ratings, noting the drastic reduction of the country’s foreign reserves.

Anticipating a possible contagion from the currency speculators, the BSP raised in mid-May 1997 the overnight borrowing rate by 175 bps to 13 percent as a defense measure. The peso-dollar exchange was 26.40 to 1, trading within a 1.5-percent band. On July 2, 1997, the day the baht was devalued, the BSP drastically increased its overnight borrowing rate to 24 percent. There were rife rumors that the Philippines would devalue the peso, and this fueled greater speculation. The BSP further increased its overnight borrowing rate to 30 percent the next week, then higher to 32 percent!

These moves notwithstanding, the peso was being sold for dollars in unusually big amounts. At the Philippine Dealing System Exchange, daily volume of transactions had shot up to over $1 billion, as against the BSP’s foreign-exchange reserves of $12 billion.  This level could easily be dissipated if the BSP used it—i.e., sell dollars—to defend the peso-dollar rate at the 26.40 to 1 level.

On July 11, 1997, a Friday, just nine days after Thailand devalued, the Philippines followed suit and allowed the peso to be traded beyond the limited 1.5 percent band.  The peso depreciated by 11.5 percent that day; the peso hit 29.45 to one US dollar, from the “normal” 24.5. In August 1997 the peso-dollar rate was recorded at 28.98, shooting up to 35.61 in October 1997.

The International Monetary Fund (IMF) was very much involved in rescue operations, and offered a $1-billion loan facility to the Philippines to help it replenish its reserves.  The facility was used, for it was needed.

In further support of the peso, the BSP increased liquidity reserve requirements from 2 percent to 3 percent on July 30, 1997, then quickly to 4 percent a couple of days later.  On August 20, 1997, the BSP closed its lending window to reduce liquidity in the market in further defense of the peso.  On August 28, 1997, liquidity reserve requirements were increased further to 8 percent.

The BSP was closely managing the situation.

It is a peculiar immediate response, when defending a level of foreign-exchange rate, to hike local interest rates. Higher interest rates translate to a higher return on funds, which, because of this, might induce these funds to stay on in the local currency.  The problem is, interest rates also translate to cost of funds for business borrowers, and any sudden increase in interest rates—as in this case of managing the defense of the exchange rate—creates havoc on the profitability, even the viability, of businesses and business projects whose borrowing costs have unexpectedly increased. That is why the BSP has always been sensitive and aware that interest rates have to be as quickly brought down to normal levels after—hopefully—stabilizing the foreign-exchange speculative environment.

Consequently, the benchmark overnight lending rate was brought down to 15 percent in mid-October 1997as the market calmed down a bit.  The consensus was that the BSP performed well and managed the currency volatility properly.

It is easy now to look back and recount how we survived the crisis, but those where harrowing days.  We must continue to review the lessons we need to learn from the experience.

I find the following explanation as providing about the most succinct capsulized broad perspective of the crisis, and I share this with my readers.

“The underlying causes of the Asian crisis have been clearly identified. First, substantial foreign funds became available at relatively low interest rates, as investors in search of new opportunities shifted massive amounts of capital into Asia.  As in all boom cycles, stock and real-estate prices in Asia shot up initially, so the region attracted even more funds.

However, domestic allocation of these borrowed foreign resources was inefficient because of weak banking systems, poor corporate governance and a lack of transparency in the financial sector.

These countries’ limited absorptive capacity also contributed to the inefficient allocation of foreign funds. Second, the countries’ exchange rate regimes—exchange rates were effectively fixed—gave borrowers a false sense of security, encouraging them to take on dollar-denominated debt.  Third, in the countries affected by the crisis, exports were weak in the mid-1990s for a number of reasons, including the appreciation of the US dollar against the yen, China’s devaluation of the yuan in 1994, and the loss of some markets following the establishment of the North American Free Trade Agreement.
“The massive capital inflows and weakening exports were reflected in widening current-account deficits.  To make matters worse, a substantial portion of the capital inflows was in the form of short-term borrowing, leaving the countries vulnerable to external shocks.” (Bijan B. Aghevli, “The Asian Crises. Causes and Remedies” in the IMF quarterly magazine, Finance and Development, June 1999 vol. 36. No.2)

Never should we ever be complacent.

source:  Business Mirror by Santiago F. Dumlao Jr.

Lopez’s open pit mining ban has no legal basis, MGB finds

Lopez’s open pit mining ban has no legal basis, MGB finds

THE legal division of the Mines and Geosciences Bureau (MGB) said a review of open pit mining ban issued by former Secretary Regina Paz L. Lopez has concluded that her order has no legal basis.

“If you read the DAO (department of administrative order), the only premises for banning open pit are to safeguard the environment, the common good, things like that, which are already enshrined in the Constitution,” MGB’s Legal Service Division Officer-in-charge Larry M. Heradez told reporters on the sidelines of the forum on responsible mining Thursday in Quezon City, while describing the “controversial” order as having “no legal basis.”

He said the geological characteristics of the Philippines are such that “we expect to find mineral deposits through surface mining... We can mine on the surface and make it technically and financially feasible... It’s not a matter of economics. It’s technical,” he added.

Administrative Order No. 2017-20 issued and signed by Ms. Lopez on April 27,2017, requires all open pit metal mines that have not become operational but with an approved Declaration of Mining Project Feasibility to review their proposed mining methods and submit their findings by October.

The order did not say what is to be done with the results, nor did it list sanctions on miners that fail to comply.

The Philippines has an estimated $1 trillion worth of untapped mineral reserves. Data from the MGB show that, as of June 2016, 2.70% or 0.811 million hectares of the Philippines’ total land area is covered by mining tenements.

Sagittarius Mines, Inc.’s $5.9-billion Tampakan project is proposing an open pit method of extraction.

Other projects such as Silangan Mindanao Mining Co., Inc.’s $32-million copper-gold project in Surigao del Norte and Kingking Mining’s $145-million copper-gold project in Compostela Valley -- respectively expected to start operations in 2018 and 2020 -- will also involve open-pit methods

Other than the open pit stoppage, Mr. Heradez said the MGB is reviewing all of Ms.Lopez’s directives.

“The goal is to determine if the directives were proper, appropriate, and relevant. After the review, the new secretary can revise, amend, or supersede [the orders],” the legal division chief said.

“Secretary (Roy A.) Cimatu, right from the start, ordered the review of policies. They have been reviewed at the staff level by Undersecretary (Mario Luis J.) Jacinto... We have the result of our review and are ready to produce it anytime, if ordered,” he added.

The review covers, aside from the open pit ban, Ms. Lopez’s “questionable” order to cancel 75 mineral production sharing agreements of mines in pre-operational phase due to their location in watersheds, and the P2 million trust fund imposed on suspended mines, among others, Mr. Heradez said. -- Janina C. Lim

source:  Businessworld

Moral ascendancy by Cecilio Arillo

DOES former President Fidel V. Ramos have the moral ascendancy to frequently criticize President Duterte?

I asked this question because every time Ramos raves and rants on Duterte, he gives us the impression that he has the moral authority over him on issues of politics, economics, foreign policy, governance, national security, public safety, and graft and corruption, among others.

At his inaugural address on June 30, Duterte acknowledged the presence of Ramos, saying: “President Fidel Ramos, sir, salamat po sa tulong mo [thank you for your help] making me President…” Many political observers doubted this, though, because Duterte lost in Pangasinan, Ramos’s vote-rich home province, where Duterte got only 338,644 votes behind Poe’s 559,571 who was at No. 1.

Last Friday was the latest Ramos rant, when he slammed Duterte’s threat to impose martial law and warned him “against inevitable abuses under military rule”.

Former Senate President Juan Ponce Enrile, Ramos’s boss and mentor in the Marcos nine-year martial law (September 1972 to January 1981), promptly defended Duterte, thus: “The President has to be harsh in implementing martial law because he has the monopoly of legitimate, legal violence through the police and the military.”

“The current firefight in Marawi City is more than a rebellion because we are dealing with an ideological and, worst, a religious problem which is Washhabism, a kind of fanatical Islamism followed by Saudi Arabia that is being taught in madrassas in Mindanao,” Enrile revealed, adding,  “the martial-law decision is based on strategic intelligence information in the President’s possession and that he was elected by the people to represent the general will”.

As the 12th president (1992-1998), Ramos was credited for a number of accomplishments but his term was also known for its legacy of perfidy, having been the only head of state in contemporary history to have been recommended by the powerful Senate Blue Ribbon Committee to be prosecuted along with his five Cabinet members in connection with the multibillion-peso Centennial scam.

As one senator commented then in the book, Power Grab, 2001: “The Ramos government may emerge as one with the most number of big-time scams in the country’s history.”

The senator cited as an example the P30-billion PEA-Amari deal; the P9-billion Centennial scam; the P7.8-billion missing AFP trust modernization fund; the P42-billion housing scandal between 1997 and 1999; the P30-billion tax-credit certificates scam from 1995 to the first half of 1998; the mismanagement of the P3.5-billion soldiers’ trust funds; the nonremittance of P14-billion national government employees contributions to the Government Service and Insurance System (GSIS); and lately, the highly scandalous and irregular deals involving the National Steel Corp. and the National Power Corp., which then-Senator Enrile had unearthed.

The Senate committee found out that the multibillion-peso project was grossly overpriced and had used substandard materials and unaudited government and private funds.

Ramos, then, was apparently trying to make a lasting impression to the world of his term by window-dressing the country’s image during its first centennial.

The Centennial project housed the largest amphitheater in Asia, with a seating capacity of 35,000, and mini exhibits featuring the different regions of the country.

It includes a giant Freedom Ring and was intended as the centerpiece of the 60-hectare Philippine Centennial Exposition that cost the government P1.2 billion.

Documents submitted to the Blue Ribbon Committee showed that government funds and private donations that went into the whole project reached a whopping P9 billion.

The Ramos administration raised this mind-boggling amount from the special allotment release order or Saro of various state agencies for P4.7 billion; the general allotment release order or Garo for P350 million each from the GSIS, Social Security System, Land Bank of the Philippines and the Development Bank of the Philippines; P75 million each from the Philippine Amusement and Gaming Corp. and the Philippine Charity Sweepstakes Office; and P2.1 billion through the government budget, funds of the Office of the President and the Department of Public Works and Highways.

The whole structure remains today as a monument to the excesses of the Ramos administration.

The Senate Blue Ribbon and Government-owned Corporations and Public Enterprises Committees that investigated the PEA-Amari deal found evidence pointing to the involvement of key officials of the Ramos administration in the scam.

The fraud involved the transfer of a government property to a private firm under highly questionable terms. Then-Blue Ribbon Committee Chairman Sen. Franklin M. Drilon said the conveyance of the piece of reclaimed land along Roxas Boulevard to the Amari group was “disadvantageous and injurious to the government”.

The state agency, Philippine Estate Authority (PEA), under a joint- venture agreement with the Thailand-based Ital-Thai Development Corp. Ltd.-led consortium, obligated itself to convey the title and possession of the 1.578-million square-meter property for P1.89 billion or a giveaway price of P1,200 per sq m.

According to the zonal valuation of the Bureau of Internal Revenue, the value of land in the area then should have been P7,800 per sq m.
The Municipal Assessor of Parañaque City, where the property is located, pegged the market value of the property at P6,000 per sq m. 

To reach the writer, e-mail cecilio.arillo@gmail.com.

source:  Business Mirror

Guilty as charged?

DEMAND AND SUPPLY By Boo Chanco (The Philippine Star)

I am still trying to understand the statement of Finance Secretary Sonny Dominguez not to accept the EU’s offer of a grant of about $280 million because it would involve a review of our adherence to the rule of law.  According to Sec Sonny, because of that, the specific EU grant is considered interference in our internal affairs.

Come on Sec. Sonny… Aren’t we supposed to be adhering to the rule of law anyway? That’s what the Constitution is all about.

When President Duterte took his oath of office, he swore to uphold the Constitution. That means he must ensure our government operates on the basis of the rule of law… our law, mind you, not the EU’s.

We have also signed international covenants like the Universal Declaration of Human Rights and I presume that having ratified such covenants, they are as good as being incorporated as part of the laws of the land.

We made a declaration as a people that we believe all human beings have certain inalienable rights – right to life, liberty and the pursuit of happiness. Are we now saying we no longer subscribe to these universal standards?

When our government rejected the EU aid offer because it requires a review of our adherence to the rule of law, we are saying – guilty as charged…

Unfortunately, rule of law to President Duterte is synonymous to respect for human rights which he doesn’t subscribe to. Even then, he cannot by himself take the Filipino nation out of the family of nations that’s governed by civilized norms of behavior.

We agree we have a serious drug problem that requires drastic solutions. But Mr. Duterte cannot try to do what he did in Davao on a national scale and not expect a sharp backlash.

EJK in Davao may be accepted by a smaller population that’s easier to control. But on a nationwide scale, it is unacceptable. That’s why the strategy caught worldwide attention and condemnation.

In any case, the strategy is unsustainable. It is not possible for any leader to kill every drug pusher, drug addict and drug lord.

What makes the task really impossible is that the PNP is tainted. It was Mr. Duterte who said that too. And the leadership of the PNP seems not up to the task of cleansing the ranks to regain credibility.

A president with a singular focus on killing everyone associated with drugs, proven or otherwise, will eventually cause problems in other areas of national importance.

The virtual admission that we can’t survive scrutiny of our adherence to the rule of law puts our economy at risk. Investors will have second thoughts.  Adherence to the rule of law is topmost in an investor’s concern. It is too risky to invest in a country that is not governed by the rule of law.

Indeed, we are losing more than that $280 million in EU assistance. We are liable to lose potential investors not just from the EU, but also from other countries too. We may even lose local jobs dependent on manufacturing products meant for export to the EU.

That’s why the economic planning secretary was surprised and worried upon hearing the news. He said the rejection was spawned only by the “temporary” unhappiness of President Duterte with the EU.

“No, no, no. It will not be a policy, not a permanent policy. It’s temporary… temporary unhappiness,” Sec. Pernia answered when asked if this was a signal of a permanent change in government official policy.

In this regard, I do not believe the claim of Sec. Dominguez that it was he who recommended the rejection. I think he is covering up for the President, thinking he can fix things later.

As my paper’s editor-in-chief pointed out, that decision has an impact on gut issues. The worse immediate possibility is losing our preferential trading status with the European Union under the GSP plus that accords our exports duty free entry.

The Philippines is the only ASEAN country and among 13 beneficiaries with a GSP+ status. See how special we are to the EU! But this privilege is also subject to among others, adherence to the rule of law.

There are foreign investors who moved manufacturing facilities here from China with the intention of exporting to EU states. Exports to the EU grew 48 percent in the first quarter of 2017, making the EU the biggest and fastest-growing export destination of Philippine goods. The EU overtook the longtime top export markets, the United States and Japan, in March.

Then there are our seamen. As my editor pointed out, “at least 28,874 Filipinos serve as crew on EU-registered commercial ships, remitting a hefty $3.35 billion over the years to their loved ones in the Philippines. Some of the sailors are ship captains… These are not investments or jobs that China can replace, especially now that the threat of war has been raised.”

Europe is now the fourth top source of OFW remittances contributing about 10 percent to the Philippines’ GDP. BSP data show remittances from Europe reached about $3.8 billion, the fourth top source next to Asia, the Middle East and US, in 2016. Those inflows from Europe accounted for about 14 percent of the total $26.9 billion in remittances that overseas Filipinos sent home in 2016.

So the President is now in Russia in pursuit of an independent foreign policy. Befriending Russia is good even if there is nothing Russia can significantly contribute to our economy any time soon. 

Maybe we can sell bananas to the Russians and reduce dependence of our banana exporters to China. Maybe there is potential in tourism. Russians trying to escape their cruel winters are frequent visitors to Boracay.

We may buy weapons from Russia to cover what the US will not sell us due to human rights concerns. But getting investments from Russia? Nada! Its nuclear arms aside, Russia is as third world as we are.

We ought to get increasingly worried about how the President conducts foreign policy. It seems dependent on his mood or frame of mind.

The President conducts no policy discussions with the Cabinet and the professional diplomats at DFA. And now that our secretary of foreign affairs is an ambitious politician with zero experience in diplomacy and no inclination to correct Duterte, we really have problems.

The governance of our nation and our foreign affairs cannot be determined by the single issue of drugs. The Mayor has to learn to become the president that we elected him to be… he has more areas of concern than the anti-drug drive.

And in making new friends among nations, we don’t have to throw aside old friends… no matter how personally pissed he is with them. We have invested years working with old allies in trying to build up our country and improve the lives of our people.

Yes let us reject foreign aid with strings attached detrimental to us… like virtually giving up territory a UN Court has determined to be ours. But objecting to a requirement calling for “adherence to the rule of law” is like saying the rule of law in our country is dead or is applied only as our President sees fit.

That’s shameful. Every Filipino should honor the blood spilled by our heroes who fought and died precisely so we, their children, can live in a country where adherence to the rule of law is paramount.

Boo Chanco’s e-mail address is bchanco@gmail.com. Follow him on Twitter @boochanco.     

Behind the dark clouds

I recently called attention to “dark clouds” that we need to watch, seen in weakening numbers on the economy, particularly accelerating price inflation, rising unemployment, and slowing growth. These weakening signs must be arrested before they turn into a trend. Let’s take a closer look to understand where the weaknesses are coming from.

Let’s start with rising prices. Last month’s year-on-year inflation rate of 3.4 percent was the fastest seen in 28 months. It went as low as 0.4 percent in late 2015, but sped up last year, especially in the latter half, mostly owing to faster increases in food and energy prices. What’s bad about inflation that’s driven more by food prices is that it takes a heavier toll on the poor, for whom food makes up a dominant portion of the family budget. As a general category, food prices rose by 4.2 percent last month, and even though it actually slowed down slightly from 4.3 percent in February, it still rose significantly faster than overall inflation.

Price rises were notably faster in rice and meat, which led Socioeconomic Planning Secretary Ernesto Pernia to eye the government’s import constraints as the likely culprit. “Inflationary pressure may ease following the removal of quantitative restrictions on rice importation, and the timely augmentation of supplies,” he noted. Rice alone takes up almost a tenth of the average Filipino family budget, and for poor families, an even bigger share. This is why the ongoing debate on rice importation is so critical, given the profound impact of the price and accessibility of the commodity on the welfare and nutritional status of the poor. Analysts have attributed the much higher incidence of child malnutrition and stunting among Filipinos relative to our neighbors to the much higher prices Filipinos pay for rice, rendering it less accessible to large numbers of people.

The other major reversal has been in the jobs situation. After three years of successive decline in the officially measured unemployment rate, and having already dropped below 5 percent in the last few quarters, joblessness jumped anew to 6.6 percent in January. The quarterly Labor Force Survey reports an overall loss of 700,000 jobs over the past year (from January 2016 to January 2017). This is alarming given that an average of one million new workers join our labor force yearly. The
data clearly show agriculture to be the main reason, with a recorded loss of nearly 800,000 jobs, while services also lost 64,000 jobs. The silver lining was industry’s gain of 149,000 net new jobs, almost all of it in construction. Utilities also gained 17,000 new jobs, but mining lost 36,000 jobs for reasons now well known, and manufacturing similarly lost 9,000 jobs.

Did new restrictions on contractualization have a role in the jobs decline? At first glance, it would appear otherwise; there was actually a net gain of 361,000 jobs in wholesale and retail trade (where contract employment is common), and vehicle repair. But the data don’t distinguish trade jobs in large retail establishments from those of self-employed vendors in the informal sector or “underground economy.” One gets a clue from the statistic on individually self-employed workers, whose numbers rose by 370,000, suggesting that the rise in trade jobs was mainly in the informal sector. The numbers could thus still be consistent with thousands of jobs having been lost in the formal retail trade sector, where contractuals tend to be most prevalent—but more detailed data need to be gathered for more conclusive evidence.

As for slowing economic growth, agriculture has been the main culprit, having declined by 1.3 percent last year, even as industry and services grew briskly. The sad truth is that the observed weaknesses, whether in presyo, trabaho or kita, all point to bad agricultural performance. That is how important the sector is. We simply need to stop neglecting agricultural products with high income potential because of an inordinate preoccupation with rice, and instead emulate the fast growing and much more diversified agriculture our neighbors have had. Every Filipino will be all the better off for it.

cielito.habito@gmail.com

source:  Philippine Daily Inquirer