Upon her return from the ASEAN Conference in Singapore last November 21, 2007, President Gloria Macapagal Arroyo ebulliently declared, "The Philippine economy and our people have only benefited from economic growth due to global engagement. Increased trade between ASEAN nations will continue to accelerate our economic growth, foreign investment and the creation of good jobs for our people." Hmmm… Sounds like broken promises. For one thing, President Arroyo's rhetoric never failed to amuse me.
One of my readers, in response to my recent article, "Road to Perdition or Redemption" (November 9, 2007), commented: "How can we talk about broken promises while our country is on the verge of economic ascent?" Indeed, economic ascent or "economic boom" is the new buzzword today. Why not? The peso has been gaining strength against the US dollar... The growth in the second quarter this year was a whopping 7.5%… More mega malls and high-rise condos are being built… The OFWs are sending more money to their families back home… And the government has been on a "borrowing spree" from foreign lenders -- particularly China -- to fund its infrastructure projects.
The three factors that contributed to the "economic boom" were: (1) OFW remittances; (2) weakening of the US dollar; and (3) foreign direct investment. Evidently, the estimated $15 billion in OFW remittances this year would be a major element in boosting the Gross Domestic Product. It would also compensate for the trade deficit this year which was already $11.68 billion in the first nine months, an increase of 38.6% over the same period in 2006. At the rate it is going -- and with escalating oil prices -- the trade deficit would most likely to be somewhere between $16 billion and $18 billion at the end of the year.
The weakening of the US dollar has immensely contributed to the strengthening of the peso. At the current exchange rate of P43.00 to US$1.00, President Arroyo couldn't be happier. A weak US dollar means that the Philippines' repayment of its foreign debt would decrease substantially. As a result, the windfall -- P24 billion at the end of September -- has prompted the government to propose huge budget increases for education, health and infrastructure next year.
Foreign direct investment (FDI) has been averaging at $2.5 billion in recent years. Although FDI into the country has been increasing gradually, according to former Economic Planning Secretary Romulo Neri -- remember the guy who allegedly turned down a P200 million bribe from former COMELEC Chairman Benjamin Abalos? -- "the ratio of investments to the GDP remained below 15 percent, which was not enough to ensure sustainability of high economic growth."
Indeed, "sustainability" is the name of the game. In my article, "Gloria's Enchanted Kingdom and the De Venecia Code" (August 4, 2006), I talked about "747: A Program for Economic Takeoff Toward Sustained Growth," a study commissioned by Speaker Jose de Venecia about five years ago. The study identified seven strategic programs designed to generate seven percent growth for seven years in order to achieve a "Philippines without absolute poverty by 2010." These are: 1) Rural modernization; 2) Creating a world-class service sector; 3) Promoting domestic competition; 4) Magnets for foreign investment and development aid; 5) Enhancing the assets of the poor, 6) Resource Mobilization; and 7) Political and administrative modernization.
Well, "747" never took off the ground. Instead, "economic boom" was achieved with the government doing nothing. The government has nothing to do with the weakening of the US dollar and the increasing inflow of OFW remittances. In other words, Arroyo was just lucky.
In a survey conducted by the Social Weather Station (SWS) from September 2-5, 2007, 30% (around five million families) said that they were "better off before" while 13% (around two million families) said they were "better off now." A poll among families with at least one member working overseas (17% or around three million families), 45% said that the strengthening of the peso did not make any difference while 37% said they were "better off before" and 18% said they were "better off now."
Recently, a "wild card" -- the skyrocketing price of oil -- suddenly came in to play in the grand scheme of things. Apparently, President Arroyo didn't have any contingency plan on how to deal with out-of-control oil prices. Part of the problem is the Oil Deregulation Law which was implemented in 1996 to give big oil companies a free rein in setting the price of oil particularly at the gas pumps. Clearly, the oil profiteers are having a field day today.
In its media release last November 16, 2007, IBON Foundation, a research-education-information development institution, pronounced: " The already weak economy could only but worsen amid the high oil prices. In the coming months, we should expect more and more companies reporting plant shutdowns and retrenchment, aggravating job scarcity in the country, which has already been at its worst levels in history, and resulting in overall economic slowdown. With less businesses and wage earners to tax, government would have less domestic sources for its revenues. It will then have to increasingly rely on the regressive value added tax (VAT) on petroleum products that further drives up oil prices. The country is entangled in this vicious cycle with ordinary income earners shouldering all the costs." Whoa! Are we ready for this?
With 50% of Filipinos poor -- 40% of whom have experienced hunger -- and with unemployment rate at 7.8%, what we will soon be hearing is the "astronomic boom" of discontent and the wailing cry of the helpless poor. Indeed, Arroyo's boo-boo economics has created a short span of high -- albeit false -- expectations. She promised jobs for the people, yet more than one million Filipinos are leaving each year for jobs overseas. None of the seven strategic programs of de Venecia's "747" has been achieved. In other words, the "economic boom" that the Arroyo government has been heralding is nothing more than a mirage.
It's time for the government to do away with its practice of boo-boo economics and institute sound economic policies that would sustain real and long-term progress, peace, and prosperity.
(PerryDiaz@gmail.com)