Philippines’ economic pie – some things to chew over
By Chemrock
If you are checking in to find out what condition the country’s condition is in, I would refer you to Manuel Puig’s novel “The Kiss of the Spider Woman”. The whole novel is a conversation between two jailbirds, Molina a homosexual, and Valentin, a Marxist activist. Molina represents the majority of Filipinos, those stuck in a melodramatic dream world of celebrities and power figures, unable or refusing to see undercurrents, they stick to a deluded concept of reality. Valentin represents many Filipinos who are pawns in a world of political power play, where power or ideology is a control mechanism thrust onto society. They believe the need to belong to a power group or be rendered inutile, yet not knowing they themselves are being manipulated. The whole conversation between the two men is pure escapism. Puig’s use of ‘stream of consciousness’ technique allows readers insight into the speaker’s mind, yet it is difficult to understand what the truth is.
As it is in fentalyn-induced Philippines, so rich in events, and every incident a play with hidden agendas. Was the Congress President Alvarez-Congressman Floirendo tiff just a consequence of cat-fights of their lovers? Was the President’s invitation to the VP family for diner at Malacanang just an innocent social thing? Was the forceful dispersal of farmer protesters in Kidapawan City in 2016 a conspiracy by communists and Duterte, meant to discredit the Pnoy admin, now that we see the Senior Supt. Alexander Tagum promoted to acting police director of Davao City? Was the recent Mocha Uson rally to impeach the VP a delicate manipulation by the Marcoses to play the Duterte camp against Leni’s camp? The list goes on. It’s the state of being. Power brokers play their games, executives focus on a deadly drug war, foreign countries lambast the human rights violations and threaten curtailment of trade preferences, China is entrenched in Philippines seas, and the admin is in disarray. Look at NAIA, Imigration, DENR, Subic Bay Metropolitan Authority, Tourism Board, NIA, NFA, Philhealth — one wonders who is looking after the economy.
NEDA’S ‘PHILIPPINES’ DEVELOPMENT PLAN 2017-2022′
Neda (National Economic Devt Authority) puts up a development plan for each administration. The one for the current admin can be seen at its website. It’s a professional piece of work and makes for interesting reading. How much of it is the country chief economist’s view of things, and how much of it will be religiously adopted by Cabinet is left to be seen.
The things that capture my attention as to what will color this admin’s push are :
- expansionary budget
- the ‘golden age of infrastructure’
- the ‘sweet spot of Philippines’ demographics’.
GOVT’S 10-POINT SOCIOECONOMIC AGENDA
This is the grand plan of the Duterte admin. It has been much publicized and I would assume this is rehashed and summarized version of the Neda Plan. It calls for :
- Continue and maintain current macroeconomic policies, including fiscal, monetary, and trade policies.
- Institute progressive tax reform and more effective tax collection, indexing taxes to inflation.
- Increase competitiveness and the ease of doing business. This effort will draw upon successful models used to attract business to local cities (e.g., Davao) and pursue the relaxation of the Constitutional restrictions on foreign ownership, except as regards land ownership, in order to attract foreign direct investment.
- Accelerate annual infrastructure spending to account for 5% of GDP, with Public-Private Partnerships playing a key role.
- Promote rural and value chain development toward increasing agricultural and rural enterprise productivity and rural tourism.
- Ensure security of land tenure to encourage investments, and address bottlenecks in land management and titling agencies.
- Invest in human capital development, including health and education systems, and match skills and training to meet the demand of businesses and the private sector.
- Promote science, technology, and the creative arts to enhance innovation and creative capacity towards self-sustaining, inclusive development.
- Improve social protection programs, including the government’s Conditional Cash Transfer program, to protect the poor against instability and economic shocks.
- Strengthen implementation of the Responsible Parenthood and Reproductive Health Law to enable especially poor couples to make informed choices on financial and family planning.
I would like to opine on some points as they relate to the socioeconomic agenda based on what is already known from the past 9 months. The purpose here is not to be a smart ass on economic matters because these are calls made by professional folks in charge who have their studied ideas on which way to best take the country. Rather, it is to take a view as to whether they are in sync with proposed grand plans, and a bit of repose on the previous admin which have been unfairly maligned in many ways. Chunky data is avoided in the interest of the health of the readers’ eyes.
UNDERSPENDING BY PNOY ADMIN
The Pnoy admin has often been castigated for being slow in implementing infra projects and underspending, thus holding back growth. Remember Binay’s ‘paralysis from analysis’. Pres Arroyo (2002-2010) public spending on infra as a % of GDP was 2- 3% throughout. Pnoy had brought it up cautiously and steadily to 5%+ by 2016 (at the same time decreasing national debt levels from 52.4% in 2010 to 45% in 2015). In real terms it’s even more significant considering Pnoy had brought GDP up by 30% to Php292 billion from 2010 to 2015. The chart clearly shows the reality – it seems to be more on target to me.
Admittedly, some projects were slow to take off which ex-Budget Sec Abad explained thus:
- A lot of initial effort were spent on improving the budgeting process to stamp leakages. (Eg SARO, a weakness capitalised by crooks like Napoles, has been banished). They institutionalised processes to ensure it will be entrenched.
- They spent a lot of time reviewing brought forward projects in view of the high corruption levels in Arroyo’s time.
- Their strong anti-corruption stand, a new paradigm in admin, made line managers overly cautious and afraid to spend.
- The low absorptive capacity in civil service hampered a rush into infras.
I would add PPP (Public-Private Partnership) took a while to get organised and structured. However, in the latter part of the admin, several PPPs have been arranged. It is left to be seen whether the current admin will see these through in view of the warm reception of aid from China. (A Davao port project under PPP has been cancelled by the govt and replaced by private investment).
GROWTH IS NOT INCLUSIVE
Through disciplined macroeconomic policies and reforms to cleanse corruption and leakages, the Pnoy admin brought the country to investment grade rating by international credit rating agencies. The economy expanded by more than 1/3, infra spending increased, national debt declined, and social welfare spending increased. All these were done without increasing taxes, honoring an election promise. By most standards, an outstanding achievement that the international community applauds. Yet lots of Filipinos that long for national achievements to take pride in, reject this glory and choose to believe in the black propaganda that dumbs down the country’s progress.
Despite economic success, Aquino has been criticised for failing to ensure inclusive growth. The Pnoy admin was focused on fixing the country’s balance sheet which they did remarkably well. The economy needed to be fixed first before it could trickle down. Nevertheless, there were substantial redistribution of wealth schemes which had gone largely unappreciated.
Example 1 – Excise duties on cigarettes and alcohol in Philippiness were the lowest in the world. No president has ever dared to increase this because of powerful business lobbies. Aquino’ sin taxes on cigarettes were strongly opposed by many, including senators Recto and Bongbong Marcos. The additional Php 40 billion from cigarette tax went to fund universal health programs and tobacco farmers.
Example #2 – The 4Ps, or Conditional Cash Transfer program, was started by the Arroyo admin to assist the poorest of the poor segment. Beneficiaries receive cash grants subject to ensuring their kids attend school. Pnoy admin increased qualified beneficiaries from 800,000 to 4.4 million families. In budget allotment terms if went up from Php 10 billion in 2010 to Php 62.7 billion in 2016. It’s a remarkable achievement when considering the amount of work to qualify 4.4mm beneficiaries and the delivery of the grants to families living in the mountains and remote islands. Not to forget such programs are often riddled with corruption and politiking so getting it right is no easy achievement. If one still can’t comprehend the task, try this perspective. Vetting 4.4 million families by a small CCT team versus vetting under 1 million persons in the president’s drug list by a PNP of hundreds of thousands of personnel and which, by their own admission, they could not accomplish fully.
The Duterte admin is committed to continue with the 4Ps. There’s a subtle difference. The Pnoy admin saw the 4Ps as mainly a mechanism for social redistribution of wealth, a way to ease the sufferings of the very poor. The incumbent admin sees the importance of the 4Ps from the demand side contribution to the economy (Php 62.7 billion spending is significant) and as an effective way to alleviate poverty.
Watch out for new sin taxes to increase tax collection to help fund budget deficits, and hopefully, no attempts to politicize the 4Ps system.
EXPANSIONARY FISCAL POLICY
Current Budget Sec Diokno is a believer in spending as a way to growth. He is ushering in an expansionary phase in govt spending through deficit budgeting. Deficit budgeting leads to mindset of quick fix solutions for ill-disciplined admins. The increase in the SSS pensions (which will shorten the actuarial life to unsafe level), the doubling of the salaries of the policemen and the military, points to an admin that panders to knee jerk appeasement policies for political expediency rather than a tough and well thought out social re-distribution strategy. The latest incident is the cave-in by the president to surrender the houses built for the Army and Police to the illegal occupants of the Kadamay leftist group. Of course all these have budgetary implications — SSS shortfalls need to be funded by the govt eventually (it’s a time bomb for the next admin to resolve), salary increases need to be paid, new houses need to be built for the soldiers and policemen.
Without corresponding increase in revenues, increased govt spending leads to budget deficits. Due to increased spending in the 2nd half of 2016 by the govt, budget deficit jumped 190 % last year to P353.4 billion. This is a 5-year high and it’s just a starter. This admin sees govt spending as a driver of growth, so expansionary fiscal policy is here to stay. This is fundamentally diverging from their statement of following the macroeconomics of the previous admin.
Budget deficits need to be funded. So watch out for tax increases and DOF (Dept of Finance) build up inventory of Treasury Bills as debt builds up.
CENTRAL BANK INDEPENDENCE
With Bangko Sentral Gov Tetangco’s retirement in 2018, who Pres Duterte will appoint to head the central bank is closely watched. The outgoing governor, and most business people, are hoping it will be one of two current inhouse seasoned management staffer who will be moved up. That would mean continuity and commitment to an independent non-political central bank, a crucial undertaking. If it is another sycophant, from Mindanao or elsewhere, it will shake market and international confidence.
TRADE POLICIES
Trade policies are messy. The repercussions from western trade partners have yet to work it’s way to actually impact the economy. The EU’s threat to punish Philippines for the human rights violations by lifting preferential tariffs, if it comes to pass, will be an economic tsunami with compliments from the president. The govt is seeking alternative 
trade partners in Russia, Eastern Europe and China. Sure, there are trade possibilities but it requires years to set up all sorts of trade or bilateral agreements, meeting each countries specific standards and requirements, finding product fits, tariff negotiations, country-of-origin requirements, etc. There is only so much influence that the govt of an open economy can have. It’s left to the market to find its own way and that takes a long time. For example, we might have to forego barbie dolls and sell Russian Matryoshkas. It’s not simply a matter of trade partners, it’s what the market wants and needs.
TAX REFORM
The old ReformTax Act 1997 is dated and will be completely overhauled. Personal income and corporate tax reforms were studied extensively and prepared by the Pnoy admin and the plans handed over by outgoing DOF Sec Purisima to new Sec Dominguez. It appears the majority of the Pnoy proposals are adopted by the govt.
Tax reform will be done in 4 packages and targeted for completion by 2019. These will be (1) Wage earners or Personal Income Tax, (2) Corporate Tax, (3) Property Tax, and (4) Capital gains tax. The reform package for (1) is currently with Congress.
1. Reform package #1:
This covers a lot of grounds. The major points — tax-free for wages below Php250,000 pa, tax reduction from highest band 32% to 25%, VAT rate up from 12% to 14%, VAT base revised, and excise on petroleum and fuel-related products to be inflation-adjusted up for the next 4 years at 4% each year. Low wage workers hoping for a small windfall from a reduction of tax will be disappointed because of the increase in VAT as well as a general increase in consumer prices caused by the increase in excise on petroleum and fuel-related products.
2. Watch out for:
– As part of the effort to re-organise and improve collection at BOC (Bureau of Customs) and BIR (Bureau of Revenue), computerization at BOC is currently ongoing. This will help reduce opportunities for corrupt practices. Pnoy admin failed miserably to computerize BOC due to resistance by insiders with self-interests to protect. It would be interesting to see how the new govt fares.
– Pnoy proposal to make tax evasion a predicate crime and exempt evasion cases from banking secrecy is in reform package #1. Will this pass legislation?
3. Simplifying tax submissions / collection:
This is one of the govt’s aims. In this regards, senior citizen discounts will be discontinued. Whilst I applaud the respect and recognition of senior citizens this privilege means, I have always thought it to be a very inefficient way. The govt will replace this with some form of grant or voucher system. It’s really funny here. As Sec Dominguez is scrapping this cumbersome senior citizen discount scheme, Senator Grace Poe has filed a bill for a somewhat similar scheme for Junior Citizens.
4. The big difference in Pnoy and Duterte admin’s objective:
Pnoy’s tax reform was primarily to bring Philippines’ high tax regime down to a competitive level within Asean, in preparation for the regional economic integration. The increase in excise on fuel was to take advantage of the current low prices to adjust for inflation which has not been done for many years. Duterte’s admin looked beyond Asean competitiveness and instead are targeting net-net gain in taxes / duties to help fund budget deficits for the next 6 years. Watch out for widening of the tax net and new taxes, eg sugar tax.
5. Is the reform pro-poor or pro-rich:
If taken in totality, the 4 packages seem to be pro-rich.
Coming from a parliamentary system, I find all this talk of tax reform somewhat as symptomatic of the country’s difficulty of governance. Filipinos find such a tax reform as a big one time affair and legislature getting all worked up. In a parliamentary system, each year at budget time, the Minister of Finance (Exchequer in the case of UK) walks into parliament with a briefcase secured to his wrist. All eyes are on the briefcase. In each year’s budget debate, all tax rates and related matters are simply variables that the Minister adjusts in accordance with socioeconomic policies that the govt wishes to pursue. Parliamentary govts are thus responsive to changing times and policies. For this matter it is interesting to note reform package #1 gave the DOT the right to increase excise taxes on petroleum and fuel-related products by 4% each year for the next 4 years. Hooray, no need to legislate each year.
INDUSTRIALIZATION
I find it strange that not much is written about this. I would have thought that this is a lynchpin in a typical economic plan. You decide to go the EOI or the ISI way and all sub-strategies, plans, and policies must then be in line with the decided path.
EOI
The country identifies some niche market, usually one in which it has a comparative advantage, such as commodities, or in most cases, cheap labour. They will then attract the necessary investments, prepare the labour force to acquire the relevant knowledge and skills training, and seek market access.
Govt policies seek to reduce tariff barriers, a devalued floating exchange rate to facilitate exports, and government support for exporting sectors. As this is heavy FDI-dependent, policies often tend to suppress labour.
ISI
The govt pushes for light industries producing just for the local market. Govt intervention is normally by nationalising strategic industries or subsidising vital ones. The aim is to minimise imports to save on foreign currency by producing as much as possible what is needed at home. Low income countries are predominately dependent on agricultural and mineral activities and do not have the capital nor structure to benefit from international trade. The local industries promoted would normally be those that benefit the agricultural and mineral activities.
Govt policies lean towards subsidising strategic substitutes, protective barriers to trade, an overvalued currency to help import capital goods, and lack of interest in FDI.
Globalization
Global market-driven trade liberalization has changed past notions of EOI and ISI. Multi-national corporations take advantage of free movement of capital and labour and set up shop overseas where they find cost or strategic advantages. Factors like cheap labour, skilled labour, raw materials, tax breaks, closer to markets, tariff benefits, exchange-rate advantages, etc, play important roles. Countries with open markets take in these MNCs and benefit in the knowledge transfer, capital inflows, jobs creation, and encourage home-grown supporting industries. Equally important, these MNCs already have market access for their products. Countries like Sokor, Taiwan, HK, Singapore, India, Malaysia, China etc rode on export-driven paths to economic success and development.
On the other hand, ISI was gradually abandoned by developing countries in the latter part of the 21st century due to IMF, World Bank, and Asian Devt Bank programs that imposed structural changes in borrower countries in the name of trade liberation.
Philippines on ISI
The 10-point agenda is silent on this. NEDA Sec Pernia has mentioned that the export-driven growth model, pursued by past several admins, has failed. Whilst successful for many countries, it hasn’t worked for Philippines. The govt will switch to an ISI strategy. No mention was made as to the reasons why EOI failed. The past economic failure of Philippines has nothing to do with EOI or ISI. Let me illustrate with just one example. I once interviewed a job applicant who lost her job due to company closure. Her ex-employer was an Australian-owned company that set up operations in Philippines to produce pre-fabricated windows which are exported world-wide. They were making money so I inquired as to why the Aussies closed shop. She told me what I already knew – corruption and inefficiencies at customs and the ports broke the Aussie camel’s back. In a world of just-in-time production, factory production lines cannot be held to ransom by govt inefficiencies and corruption.
The switch to ISI is not following previous admin’s macroeconomics, it’s turning it upside down. It’s left to be seen, policy-wise, what changes will be forth-coming. Will less competitive and more expensive (due to lack of economy of scale) local products be protected in the name of import substitution? Will there be nationalization due to heavy subsidies? Will cheaper rice imports be banned or restricted to protect local farmers and Filipinos be forced to buy more expensive rice due higher cost of producing and price manipulation along the supply chain?
PHILIPPINES’ SWEET SPOT IN DEMOGRAPHICS
The ‘sweet spot’ in demographics is when youth account for a higher percentage of the population that is going to provide for a good source of labor and consumption. This is the state the Philippines is in. Whilst many countries spring off from this stage and achieve growth, it does not necessarily mean demographic dividends is a given. This is a stage where an economically active group is supporting a smaller aged population and a big economically inactive base. Much investment is required on education and creating new jobs for big numbers of fresh cohorts coming into the job market is critical.
The Philippines population is in an expansionary phase. Unless it is oil-rich, no country achieve economic success with a triangular model having a wide base. The Philippines ranks #61 in the world with a birth rate of 24.24 per 1,000 and for death rate it is #191 with 4.92 per 1,000. The population is now about 102mm. It has doubled within 34 years. If left unchecked, going forward the growth will be exponentially higher because the base of child-bearing Filipinos is getting bigger. Further analysis of the demographics shows that the highest growth is in the lower income class. Poverty can never be eradicated if no attention is paid to slowing down population growth.
Aquino has done what no previous admins have dared to do in a staunchly Catholic Philippines in passing the RH bill (Responsible Parenthood and Reproductive Health Act 2012). It was an election promise that he delivered in the face of loosing substantial political capital. That was an act of strong, quiet leadership, putting national interest above self.
The govt understands the need for investment in education, job creation and supports the RH bill. Managing a slow down of the population is critical for the economic health of Philippines and this should be central to this admin’s responsibilities. Watch out for how the govt effectively implements the RH bill for the benefit of the country. In this regard, it is noteworthy that opportunity was not taken in the tax reform to introduce creative incentives in furtherance of the RH bill objectives.
GOLDEN AGE OF INFRASTRUCTURE
The govt intends to spend about Php7 trillion each year for the next 6 years on infrastructure, about 5% of GDP each year. The economy will be driven by investments in infrastructure, education and health. The focus is on acceleration of infras to make up for what the govt views as previous admin’s failures at implementation. Of course infras are good for the country and 5% of GDP seems a fairly good rate by world standards. But the flip side is the funding. We are talking of Php 42 trillion over 6 years. With the govt pursuing expansionary fiscal policy, how much additional revenues can be raised and how much national debt will the country take on? The govt has also indicated willingness to pursue a PPP strategy in which case the private sector will provide most of the funding. However, with the pivot to China, the govt is looking to the Chinese for future source of funding for infras, which means national debt. So far, it seems 12 infra projects have already been lined up for China aid. So watch out for infras under Chinese aid money where (1) the projects will not undergo the normal bidding processes, and (2) national debt will rise.
CONCLUSION
The country’s economy is affected by external and internal factors. The external factors are matters outside the govt’s control. Top-most of these are the unpredictability and uncertainties brought about by the Trump presidency, the manipulation of interest rates by US Fed, the economic repercussions of Brexit, flat economies of Europe and US, Chinese economy running out of steam, the fear of Chinese banking and real estate market collapse, etc. Internal factors are both controllable and uncontrollable. We have no power over natural calamities. However, macro socioeconomic management and good governance are within our control. We are masters of our own economic destiny if we choose to be.
It will take some time for the actions of the new govt to impact the economy, but some signs are beginning to show, and they are ominous. Capital flight, peso depreciation, rising inflation, foreign companies holding back investment plans, US aid holding back in view of human rights issues and the pivot to China, EU countries re-assessing on trade benefits, diminished foreign interest in aid in natural calamities, etc – sure indicators of ill omen. Optimists have explained these off as external-influenced and there well may be some percentages of truth. Those compelled to political correctness may voice similar sentiments and make no reference to the human rights violations, political infighting, corruption, savage political vengeance, ineptitude in governing agencies, immature foreign policies, executive placements based on (a) personal loyalties, (b) repayment of debt of gratitude or (c) Mindanao residency, govt prosecutors’ unusual brand of justice, and executive sycophancy that panders to egos first and national interest last. But there is no denying, business confidence has dipped as reflected in surveys.
The Current Account for 2011 to 2015 averaged Php 8.2B, and in 2016 it has dropped to Php0.6B. The country is exporting less and trade in goods have widened. With the exuberance on infras, watch out for increased imports of capital goods leading to a worsening Current Account. The expansionary fiscal policy will see new taxes to increase revenues, including generous condonation on unpaid taxes to encourage faster settlements, and increased national debt. Keep an eye on one of the last bastions of Filipino pride, the country’s foreign exchange reserves. Bangko Sentral has build up over the years a foreign exchange reserve that can support slightly more than 9 months imports. This is a very healthy position and is the highest in Asean. A deteriorating balance of payments may see attempts on raiding the reserves. History taught us a president once cleaned out the central bank reserves back in the 1980s.
The Society of Honor by Joe America 
*******
1. The government economic pie is not yet quite baked but already hard to chew? In contrast, Chemrock’s meaty meat pie rocks.
2. The overview of the pie is comprehensive. One can readily see that it’s a meal pie and not a dessert pie. And Chemrock gives us a taste and foretaste of the ingredients.
2.1. Brussel sprouts, anyone?
3. But speaking of money matters, what I would like to know is — if the rumors are true — how much government funds are being squandered for:
o Political rallies – pro-Duterte and anti-Duterte enemies
o Propaganda army – trolls and sockpuppets
o Junkets – friends of the president who have no official business accompanying him
o “Vigilantes”– to perpetrate EJKs
3.1. FOI, anyone?
*****
“Junkets – friends of the president who have no official business accompanying him”
Lorraine Marie Badoy was missing in Saudi, the rest I think are accounted for.
@Joe, my first comment landed somewhere in the dustbin, please release.
Released.
thanks.
Sending Mocha Uson to Arabia to pop up the morale of the OFWs. I’m laughing when I read this. But the OFWs are too dumb to see the insult of a porn star boosting their morale.
Watch it, be careful with sweeping statements.
Ouch but thanks for some cold ice in the face at the right moment. Exasperation is difficult to contain.
All is well Chemrock.
*******
Re “vigilantes” to perpetrate EJKs, here’s part of an interview between Phelim Kine, Asia deputy director at Human Rights Watch, and Devin Stewart. [Bolding mine.]
DEVIN STEWART: If they are un-uniformed police, that would sort of explain their motives. Is there any thinking that maybe they’re being paid by the state government or paid by the police like a mercenary force or maybe even gang members? Are there other motivations that could be around?
PHELIM KINE: Human Rights Watch research did not indicate that there was any type of formal payment system for these killings. However, I would add that Amnesty International has done a report on the Philippine drug war killings, and they did determine that in fact policemen are provided a bounty for every killing that they do while they are on duty. So there is evidence out there that suggests that this is a for-profit scheme.
https://www.carnegiecouncil.org/studio/multimedia/20170323-dutertes-drug-war-and-human-rights-in-the-philippines-and-southeast-asia
*****
2.1 What’s wrong with Brussels sprouts? But don’t overcook and then sauté them in some butter with a little fried onion and half a teaspoon of sugar.
*******
Joseph, I apologize. I forgot you come from that part of the world!
In my defense, I have tried it and hated it. Also for Americans, it’s the most hated vegetable villain.
*****
As for peas, Americans like the larger ones, easier to harvest and to clean. But we like the small ones, they taste better, especially after the first frost. Overcooking modifies their sulfur content into H2S, there should be a dead penalty on overcooking.
Our tastes are programmed early on, and as many tastes of food pass the placenta, even at birth we already have our preferences, thanks to our mothers’ diets. Children (and adults)have to taste things 30 times before they start liking something new.
*******
As much as 30 times? I loved vanilla ice cream the first time around. Heh heh.
*****
Scientific explanation of paglilihi.
Except George W Bush, who loves the little green trees that I find best used for landscaping the platter whilst eating around them.
I thought your aside about Brussels sprouts was an ironic commentary on all the “EU de puta” going on in the Philippines recently. But the EU parliament is in Strasbourg, the Commission is in Brussels. What do you call a resolution that sprouts in Strasbourg?
*******
Eurabia.
*****
Me luv Brussels sprouts!! 🙂 I’d gladly take those you don’t like.
I had to look up what Brussels sprouts are. They are known as Rosenkohl over here.
What is coming into season again are asparagus, which I don’t like that much:
a lot of people go crazy over them, in May you practically can’t escape them.
“asparagi” are yummy too! Especially al dente with tinge of soft. Get with it, PiE. 🙂
Same here. Throw those asparagus/ asparagi over here, Irineo. Love them.
“The past economic failure of Philippines has nothing to do with EOI or ISI. Let me illustrate with just one example. I once interviewed a job applicant who lost her job due to company closure. Her ex-employer was an Australian-owned company that set up operations in Philippines to produce pre-fabricated windows which are exported world-wide. They were making money so I inquired as to why the Aussies closed shop. She told me what I already knew – corruption and inefficiencies at customs and the ports broke the Aussie camel’s back. In a world of just-in-time production, factory production lines cannot be held to ransom by govt inefficiencies and corruption.”
There are the kind of Filipinos who go by the mindset that “foreigners have money” – so it is OK to extort from them. Even some wives of foreigners think that way is my own observation.
I remember a woman from Mindanao casually speaking about a scam by some Filipinas to have their own foreign husbands kidnapped and then divide the money with the kidnappers. This is the kind of mindset that drove the PNPs who tried to extort money from the Korean they killed, I think. It is not just the mindset that “foreigners have money” but an almost Abu Sayyaf mindset that any means is justified is getting money from them. If they are sick behead them, to paraphrase Yasay. They forget that the world is a village and this kind of stuff spreads quickly, destroying all trust.
I don’t wish to insult my Flipino friends here, there are many good people here of course. But there are just so many scamming scallawags abound. The types like Sandra Cam and the woman who said Trillanes bribed her to fix Duterte. This is a serious problem of Filipino society I regret to say.
Your Mindanao woman type story I heard a lot too.
Sad to say I think some of the type have reached the US; a couple of cases I have heard about.
“This covers a lot of grounds. The major points — tax-free for wages below Php250,000 pa, tax reduction from highest band 32% to 25%, VAT rate up from 12% to 14%, VAT base revised, and excise on petroleum and fuel-related products to be inflation-adjusted up for the next 4 years at 4% each year. Low wage workers hoping for a small windfall from a reduction of tax will be disappointed because of the increase in VAT as well as a general increase in consumer prices caused by the increase in excise on petroleum and fuel-related products.”
Gerhard Schröder pulled something similar on us in the late 1990s / early 2000s. I was one of the fools who voted for him because of his a) tax-cutting promises and b) folksy ways that appealed to the new middle class (migrants and workers moving up) who didn’t like the old middle class. Yes I had more money in my pocket net but the prices of everything went up because of VAT and other stuff so no real gain. A comedy show even got the license from Las Ketchup to make a song about it with the same melody as the “Las Ketchup Song” – with a video showing him as a thief..
*******
VAT, (or GST) as it is known here, is 10%.
There is a talk of hiking it to 15%, but it is deemed political suicidal for any party to attempt it.
*****
Such is the strength of a 3 year parliamentary democracy. We remember and we stamp on politicians who take us for fools.
The Filipino 6 presidential system allows pollies,( = talking parots ! ) to get away with far too much
I still question the 1 Trillion spent on personnel.
It is already a huge amount, but still we lack engineers, building inspectors, judges,fiscals,teachers, etc.
The Immigration personnel ot situation must be another wake up call if all other agencies are prone to the sane situation, or we are just waiting for things to explode before we pay attention to it.
On taxes and traffic all it needed was the threat or rumor of a huge increase on car prices due to excise taxes for people to panic and buy cars before prices rise due to taxes.
End result, more cars on the road.This will continue until the CTRP is finally explained to the people.
I still say they tax the old cars instead.
On the personal services slice of the budget, If I may Karl, in soil and water engng, it’s not the discharge (amount of water) that spin the turbines and the periodic release in the sluice gates to keep the dam safe to watch for, It’s aplenty the seepage underneath, the accumulated sediments and silts and the centuries old pernicious LEAKAGE holes in the dam wall threatening yet failing to break it. There are now as many souls–more than a hundred million–as there are STARS in the night sky deserving public service in return to their taxes paid and collected. This is an addendum Karl not a divergent.
watch out for your prepositions so say JoeAm to an agriculturist therefore – “. . .deserving public service in return FOR their taxes paid and collected.”
for you wordsmiths that means a lot, me I suck at prepositions.
Thank you very much Popoy, your input is very appreciated.
periodic release… I know that the dam upstream from Munich releases water the day before storms are forecast so that it has space… it is part of a larger whole that includes many small dams, hydroelectric stations and canals along the Isar river..
now why do I read so often in Philippine news that dams are opened in the MIDDLE of storms? Are they not integrated into the water management, or don’t they read forecasts?
That reminded me of the scrapped project NOAH, sayang could have been great.
Popoy, what is your opinion about water releases during middle of storms in the PH.
Karl,
Popoy compared to me is the soil and water management expert, but here is my thought on your question.
Remember that these dams — or most of the big ones anyway — are multipurpose, among which are for irrigation and power generation purpose. It is something like damn if you do and damn if you don’t or a scoundrel or a hero however it turns out. Once built, the hydropower from the dam is the cheapest to operate. Managing these twin purposes is the game. Release too early and you have less energy to power the plant; release too late and you have a minor or major disaster. If the policy is damn the electricity cost, release the water at the earliest possible time before or during the start of the storm, then I believe the dam operators will comply. Then I am sure we have something our lawmakers can feast on; even a Pacquiao will question the common sense or stupidity of that policy.
That answers the question entirely NH, good thing you are a jack of all trades……cracker jack,numbers jack(if there is such a thing) and engineering jack.
🙂
one more problem found, the dams are operated by private entities. Nothng wrong with that per se, but I remember Joe’s very recent comment about policies dictated by private entities.
http://www.philstar.com/headlines/513399/senator-pangasinan-officials-mull-class-suit-vs-dam-operators
WOW, whaddaya know! I missed for a time
visiting the lagoon of cyberspace discourse
back for a look saw and stepped on bubbling wet sands
now am waist deep in a quagmire of dam opinions
after yakking taxes could be dammed budgeting.
Thanks guys, JoeAm’s dam busters need to get out now
so I can come another time to stand and watch
by the lips of fragile world’s volcano boiling lava
to nuke us into cool basalt rocks of
Mambajao’s Hibok-Hibok.
NH probably hit the nail right on the head.
Probably like with what happened with United Airlines and the passenger dragged out for the sake of employees needed for another flight: Wonky cost-benefit analysis, tilted towards maintaining continuous consumption.
Because if I remember right, the logic behind not pre-releasing dams is that there could be a water-shortage in the future if they estimate incorrectly. (How incorrect they could be is seldom mentioned.)
Therefore, the underlying logic will then be: It is better to get flooded than have clamped down consumption. But hey, it’s the market.
There are regional water authorities in Germany, water boards in the Netherlands which take care of all water-related matters pertaining to a certain area. In the Netherlands they are very old, dating back to the Middle Ages. They even executed people who dirtied the water supply in olden days – I wonder if there would be more executions in the Philippines if they introduced that penalty, as someone who dirties the water endangers livelihoods.
The Munich water authority has securing supply of drinking water as the first goal on its mission statement, the second goal is to prevent flooding. There is a water bureau for the entire state of Bavaria which coordinates local water authorities. One thing which has not been privatized in Bavaria IS water. If I compare water quality in Munich to Berlin where the water supply IS privatized, that is a very good thing. Of course water shortage is NOT an issue in the Alps where water comes down the mountains especially when snow melts.
Ground water here is mostly still clean as well, because this has never been neglected. For example a gasoline station when built has to fulfill a lot of regulations when it comes to waste water – and when a gas station is demolished, even the earth around it may not just be dumped anywhere as it contains chemicals that could contaminate ground water. Contrast that care for the natural base on which the country rests to the total carelessness the Philippines has shown for its water sources, especially in mining areas.
It’s not just Philippines, but many Asian countries. Many of the rivers are ‘dead’. Long ago I stayed in a hotel in Jakarta behind which was a small dead river.The water is black from where I could see from my hotel window. I saw locals doing their laundry and washing dishes by the river banks. Why can’t we get right!
We forgot the ASEAN integration, who will exit first? (joke)
Right now, our labor leaders are telling us not to worry because Filipinos will stil be a priority, what if we get the same treatment from our neighbors and they all say our priority is our citizens, then this will not work if all will do that.
I am still interested how the Asean integration will turn out.
The Philippines has a very fruitful (and nutty) relationship with the EU.
Paquiao flapped his mouth again. He lambasted the EU not knowing that that is where most of the tuna from GenSan goes. Good thing he has a match coming and maybe we will see and hear less from him.
That reminds me of a solution to the growth, by breeding, of some fruit flies preying on a fruit orchard. The solution was to release neutered male flies — through radiation (?), I forgot exactly — in amounts probabilistically determined to breed out the flies. The result was the fruit-fly population decreased to tolerable level to the fruit orchard.
So let us have more pacquiao politicians to “breed out” the more malignant ones. 🙂
Hey Karl ! Just how many kids & wives/mistresses does Paquiao have ? I seem to remember he’s been doing a lot of breeding…He is certainly not ‘neutered’ though I suggest it could be an improvement
5 kids from wife, I do not know if he has other kids from others.
That is neither fruitful nor nutty but simply fishy.
EU forgot to thank us for our fish.
“Without corresponding increase in revenues, increased govt spending leads to budget deficits.”
“Budget deficits need to be funded. So watch out for tax increases and DOF (Dept of Finance) build up inventory of Treasury Bills as debt builds up.”
If you are going to fund your deficits by borrowing or increasing tax revenue, that is not an expansionary fiscal policy. The very idea of expansionary fiscal policy is to have a budget deficit and you plug that hole through sovereign money creation, otherwise don’t ever call it expansionary.
As I understand it, expansionary policy via fiscal policy involves no increase in money supply — tax increases and govt spending. If via monetary policy, then you are right, money supply is increased.
If that’s the case then nothing is expansionary about it. It’s just like pressing one part of the balloon and you get a bulge on the other. The balloon itself didn’t increase in size. It’s just taking from the left hand and giving to the right hand.
Hey Chemrock, Micha is right here..If taxes are increased it means taking money from folks which is then spent. It is not expansionary..
A question you don’t discuss is what level of inflation the Duterte government is aiming for over the next 6 years. It’s normal ( from a Keynesian perspective ) to aim for an acceptable level of inflation, say 2%-3.5%. Usually this policy is set by the Central Bank. And this generates an expanding economy…provided the foreign exchange reserves are available to fund rising imports
The ‘expansionary’ term here is govt spending, not talking of economy. That means we are talking fiscal policy. And fiscal policy is about govt expenditure. They are talking about expanding the budget — spend more. So funding comes from more taxes, or more debts, like the US.
Whether the increased expenditure by the govt leads to more consumption and increase economy or not, I won’t know. I notice that in Phils they talk a lot of economy fro the demand side, not the production side. Eg they always explain off increased spending during election time which jacks up the economy.
If it’s expansionary monetary policy, than there is increase in money supply.
Inflation management is the responsibility of the central bank. It is not the cabinet’s responsibility.
Average inflation for 2016 was 1.8%. Based on known dynamics the central bank’s target for 2017 and 2018 is 2-4%
It’s Diokno and Perna who said ‘expansionary policy’, not me.
The balloon or economy did not increase in size is that what you mean?
Expansionary policy here means they will spend more. Govt spending spurs the economy that’s according to them, looking at the demand side. For me, I can only understand the economy as measured by GDP,is looking at production side .. all goods and services produced.
Yes, those NEDA folks and Diokno should stop using “expansionary” as a modifier or predicate to increased spending because in macro world expansionary means anticipated increase in GDP as a direct result of that spending and that’s not going to happen if they will only fund the deficits via increased taxes and borrowing – they were only using stuff that’s already in the balloon.
So watch out for infras under Chinese aid money where (1) the projects will not undergo the normal bidding processes, and (2) national debt will rise.
—
My dad and his classmates in the PMA led by Former Sec Jun Abaya’s dad,tried to question this practice during Arroyo’s time.
http://www.chanrobles.com/cralaw/2007februarydecisions.php?id=200
Well Arroyo is back pulling the strings.Does your dad agree this is the scenario?
I asked him that question before and he just said maybe. But we can guess, because during their joint birthday party, they had lots mutual admiration moments and lots of thank yous had been exchanged. All that you will lose your committees and position if you don’t support the death penalty, does not apply to Arroyo.
It will be dufficult not to follow the procurement laws here, remember we are like the TRO capital of the world.
Good read. Thanks.
An article on the emerging Philippine economic pie with an ominous ring — to chew on this most holy week of Christendom. Chemrock’s penitensiya offering. 🙂
I did not read the whole piece
with my two failing eyes,
did not cogitate on it
with mind faltering because of age
but with may be by the efficiency of
an antique scanner printer
this chemrock’s piece of rock
that rocks and mocks dirty waters
of stagnant swamps deserves
and will I give a stingy A+
as a doctoral monograph
in porous political economy.
Thank you professor.
May I suggest you reset your display so you can see bigger prints on screen.
thanks for the suggest Chemrock, touchscreen and spreading out thumb and index finger magnifies fonts and pics to size desired.
Fyi it’s fentanyl not fentalyn. Take it from someone who knows. Good article though.
Haha thanks, alert eyes. Dont worry I was’nt on that, just a typo/ Hope you have cut that shit off by now.
Chemrock, MB said, he only knows the spelling, not know how to use it.😜
Simultaneous projects, this all at once stuff would not work, but if they make it work, kudos!
Now we all now things would be hell, more traffic,etc.
What I do not want to happen will be abandonned projects like the housing projects occupied by kadamay. Also what Irineo mentioned about no maintenance budget.
I am expecting a gdp growth below 6% because high imports low exports at the start of 2017. This is lower that wb prediction of 6.2%. Lower growth means lower revenue and higher debt.
I expect the negative impact on gdp will become more apparent in 2018. We are still running on the carry forward strength of the previous admin. You may be right by then.
“A deteriorating balance of payments may see attempts on raiding the reserves. History taught us a president once cleaned out the central bank reserves back in the 1980s.”
——
I checked on our debt situation and checked on the maturity of our debts to see if the raiding of our reserves is soon to happen.
I found out that 80 percent of our external debt are medium to ling term averaging 16.9 years of maturity. I felt relieved that the possibility of raiding the reserves will take that long.
——
“About 80.6 percent of the country’s outstanding external debt consisted of medium- and long-term accounts set to mature in over a year. The weighted average maturity of these accounts improved to 16.9 years.”
http://m.philstar.com/315469/show/
61bf11c33b98ef5f47c900645cd3d304/?
http://m.philstar.com/315469/show/61bf11c33b98ef5f47c900645cd3d304/?
Don’t forget domestic debts – short term treasury bills, retail treasury bills.
Debt term may be 16.9 years but note there are 2 ways of reporting terms:
1 — The actual final maturity date — simply take each loan balance as at report date and look at it’s final maturity date. I believe your 16.9 ave years is on this basis.
2.– The other way is to list according to amortisation so you get the quantum of payments per year. This is the realistic way.
Reserves can be raided for various purposes, not just for loan repayments. There are guarantee commitments too.But mostly it will be spent in protect the exchange rate. Under import substitution regime the policy is to keep the exchange rate low.
Thanks!
I was thinking that to tiuch the reserves, you only consider external debts, so I was wrong there.
The GAA always have yearly automatic ammortizations and that is approximately 20-30 % of the budget.
When will the peso be below fifty again?
http://www.businessmirror.com.ph/peza-wants-to-offer-islands-for-long-term-lease-to-investors-from-middle-east/
Is the PEZA chief serious about leasing islands to investors from the middle east?
http://business.mb.com.ph/2017/04/14/govt-infra-spending-last-year-below-target-anew/
Procurement difficulties like failure of bidding and compliance issues, prevented infra sornding to reach its targets.
Either we relax our procurement laws in an emergency power like environment or amend the law.
I do not see that happening fast.
Who is plodding now?
This is ridiculous – amending the law on account of inefficiencies and ineffectiveness.
the emergency powers, which were opposed by Poe before, will now push through, I think.
It’s OK. Go ahead. Give them the blank checks. There is no corruption in this admin.
Yeah, right. 😉 I think that is Duterte’s speech in every state visit, that there is no corruption under his watch, so go ahead and invest. Not that I do not want investments, but the claim would be incredible, to put it mildly.
A look at the candidates for the BSP top post.
http://business.mb.com.ph/2017/04/14/professional-backgrounds-of-candidates-for-bsp-top-post/
Espenilla first; Favila last.
Guinigundo first for experience in monetary control and international exposures.
Espenilla is good operations control. Move him to take over Guinigundo’s job, then he will be an all rounder, perfect for gov in few years time. He is still relatively young.
Thanks parengtony and chemrock!
[deleted by editor]
Nice one. You say it as it and the coarse humour eases the pain somewhat.
On the whole, for me, the Filipino people are too interested in “Number One”. Until they learn courtesy on the roads and in Malls (they manouvre their shopping trolleys like a tricycle driver), control their children in public places and respect their elders (other than immediate family) they will not much change from the image you paint.
As a beneficiary of the above idiocyncracies I attribute 10% of my grey hairs daily life here in PI.
I found no humor to the posting.
I took out your posting, jamesb. It was just too full of hostility and harsh judgment. Frankly, I found it offensive for giving no consideration to the decent Filipinos who work against the grain of culture, history, and a punitive government. You piling on does not help. If you wish to post here, please bear in mind that my audience is civil, respectful, and earnest.
Wow. Barrack room speak not allowed. Noted.
I hope he returns with a more moderate style. I’m sure you will forgive him.
For sure. I was in a peaceful mood this morning, prepping up for an approaching storm. Filipinos are real people with real lives and problems. They did not seek occupation or poverty or disenfranchisement, and don’t deserve being insulted by those blessed with a more fruitful path.
Stay safe during the coming storm.
Seems like the storm is fading, so no problem. Thanks for the thought.
And here’s the “Mother” of storm that we will gladly miss:
PARIS, France — An asteroid as big as the Rock of Gibraltar will streak past Earth on April 19 at a safe but uncomfortably close distance, according to astronomers.
http://newsinfo.inquirer.net/889209/large-asteroid-in-near-miss-with-earth-on-april-19#ixzz4eJRpTC9G
My morning routine is to crawl out of bed, shrug off sleep, look to the skies and scream, “we’re all gonna die!” Then I mosey to the kitchen for a delicious barako blend coffee that rights the day.
Coincidentally, barako blend coffee does that for me too. Advance Easter Greeting to you, Joe, and the family; and to all at TSH!
Thanks, NH, and good Easter tidings as well, to you and yours.
The 9th and 10th Good Friday Intention of the Catholic Church
IX. For those in public office
Let us pray also for those in public office,
that our God and Lord
may direct their minds and hearts according to his will
for the true peace and freedom of all.
Prayer in silence. Then, by the Priest:
Almighty ever-living God,
in whose hand lies every human heart
and the rights of peoples,
look with favor, we pray,
on those who govern with authority over us,
that throughout the whole world,
the prosperity of peoples,
the assurance of peace,
and freedom of religion
may through your gift be made secure.
Through Christ our Lord.
R. Amen.
X. For those in tribulation
Let us pray, dearly beloved,
to God the Father almighty,
that he may cleanse the world of all errors,
banish disease, drive out hunger,
unlock prisons, loosen fetters,
granting to travelers safety, to pilgrims return,
health to the sick, and salvation to the dying.
Prayer in silence. Then, by the Priest says:
Almighty ever-living God,
comfort of mourners, strength of all who toil,
may the prayers of those who cry out in any tribulation
come before you,
that all may rejoice,
because in their hour of need
your mercy was at hand.
Through Christ our Lord.
R. Amen.
A HAPPY EASTER TO EVERY ONE IN THE SOCIETY OF HONOR!!
Happy Easter back, sonny. Thanks for the morning (here) reflection.
*******
Happy Easter to you too, Sonny, and to everyone.
I had a breakfast of hot cross buns with butter. This is traditional Easter fare Down Under. Instead of the Easter Bunny, we have the Easter Bilby. The bilby looks like a rodent with big ears. The egg hunt is also played here, although the eggs, like the bilby, tend to be chocolate.
*****
Heaps of Easter blessings to all to the strains of Handel’s Messiah at Paschal Vigil. Hot rice and adobo will have to make do tonight. 🙂
Hapy Easter Joe and TSH, glad the storm faded snd that asteroid won’t hit earth, and hopefully Nokor decides against nuking us all.
Why North Korea Needs Nukes – And How To End That
These are critical times. Something might go wrong and all hell breaks loose.
Norkor evacuated Pongyong, military on full alert.
Sorkor on alert.
China sent 150,000 soldiers to the border.
Japan military on alert.
US of course has hardware there already or some more on the way.
Russia on standby.
Singapore military on alert.
Philippines— the chief out of town, military focused on a small band of ASG terrorists in Bohol. No one taking the Norkor situation seriously.
None of the other Asean countries military seem to take the situation seriously. HOW COME?
Not much they can do about it, I suspect.
I would keep tap of Norkor people in Philippines, protect US assets here, cancel all military personnel leave at the least.
contingency plan to evac OFWs in norkor — how many are there?
Seven. But one is one too many.
http://www.interaksyon.com/interaktv/may-pinoy-sa-north-korea-ofws-in-pyongyang-albeit-few-out-to-cheer-for-azkals
There are hundreds in Sokor, we must also have plans for them.
63 K in Sokor
https://en.m.wikipedia.org/wiki/Filipinos_in_South_Korea
Both the US and NK know how crazy and horrible it will be to escalate their provocations into actual war that might inevitably involve the use of thermonuclear weapons.
But then of course both countries are now also ruled by crazy unpredictable Caligulas so here’s hoping some of their sane advisers will help convince the maniacs to tone down the muscle flexing.
It helped that NorKor’s ballistic missile launch failed
They did launch.
Trump said US will react if they launch.
So now the ball is in Trump’s court. No action looses credibility. What will he do?
Oh my! But really nice. A few hours before the next post like a few minutes before the change hour of a New Year and Metro Manila et al, the cities come alive, light up with whistle bombs and ear drums shattering pyrotechnics
.
http://www.msn.com/en-ca/news/world/north-korean-missile-blows-up-on-test-launch-as-pence-heads-for-south/ar-BBzSzL6?li=AAadgLE&ocid=spartandhp
Inductives, inductives I call the awareness of explaining brains in TSOH. May be serendipitous in support or debunking a blog deductive of sort: A fragile World on the Brink of Emptying a Fecal Load, natatae in Tagalog.
This is my first comment on the yet to be posted next blog.
Malcolm Gladwell’s “What the Dog Saw” may be inductive when in it somewhere, it claims an MMA dog upon acceptance of defeat lies down legs up and expose its breast and tummy for the victor to chew on while the victor like a real man worthy (I say) of a US Medal of Honor walks away in noble triumph.
With or without a “chemnuclear” payload, exceeds or short or on target, a test fired missile is TEST-FIRED for bravery or cowardice, for something or for nothing. Hope it’s not a nope in TSOH to read my deductive piece.
I just watched two youtube movies on the Enola Gay and Los Alamos Manhattan Project. NoKor & US leaders should watch and be reminded. Aug 6, 1945 is only like yesterday, and Japan can mediate convincingly, I feel.
I am afraid Japan is a main target, they are planning to evacuate Japanese in Sokor.
I don’t know if China can do the convincing, they sound like there is nothing they can do, they are even asking Russia for assistance.
Like Micha said, the advisers of the two leaders might be our hope.
And also as Micha noted, the submarine launch was a dud,but the others before that was a bit successful so it is a hit and miss, we just keep on crossing our fingers that all live missiles will be duds.
Dang!
How much payload are they packing? Are they (anybody) even aware of a nuclear winter for everybody?
http://www.news.com.au/world/asia/kim-jonguns-terrifying-new-missiles-are-fake-and-were-wobbling-during-parade-experts-claim/news-story/002b72a9cd5d4db5bec31262cf17119b
Missiles : Fake
I hope this is not fake news.
Happy Easter to you, Karl, and to the rest of our honorable club, whose membership we receive with no hazing or dues. 🙂
😄😊😀
Happy Easter to everybody here…
An interesting Easter ritual in much of Southern Germany is that food is blessed in Church..
Happy Easter Karl, and everyone at TSOH.
Happy Easter Chemrock!
Happy Easter to you too, chempo. The blessed day has just come in for us.
A Happy Easter to you, Irineo! Looks like a wonderful practice over there. My first time to see. Such uplift.
I will just post this here.
Hybrid PPP, built by government,managed privately, interesting.
How do they solve the yearly budgeting,I mean make it good for a longer period?
How do solve this aborptive capacity issue?
—–
http://m.philstar.com/breakingnews/show/b02071d781c07985135f6d1a90597f54
“Despite posting some of Asia’s highest rates of economic growth, the Philippines only ranked 95th in Infrastructure in the 2016 Global Competitiveness Report.
Lagging behind most Association of Southeast Asian Nations (ASEAN) counterparts, the country’s infrastructure is disproportionately concentrated in major urban centers such as Metro Manila, Calabarzon and Central Luzon.
For a long time, underinvestment in infrastructure could be explained by the lack of fiscal space. Yet, even under better fiscal conditions, the previous government was beset with underspending.
Addressing institutional weaknesses
In an ADRi Special Study entitled “Infrastructure and Economic Growth: The Philippine Experience,” Dr. Epictetus Patalinghug examines the country’s infrastructure situation.
President Rodrigo Duterte’s infrastructure-building campaign is the centerpiece of his economic agenda.
The administration seeks to increase infrastructure spending from 5.4percent of GDP in President Duterte’s first year in office to 7.1 percent by the end of his term.
In its first National Economic and Development Authority (NEDA) Board meeting in September, the government already approved nine projects worth P171 billion. During the second NEDA Board meeting in November, seven projects worth P270 billion were also approved.
In 2016, there was a 42.8 percent increase in infrastructure spending.
While these are positive developments, 7.5 percent of the budget was unutilized, in part because of the lack of absorptive capacity. Duterte’s team has yet to address long-standing issues in its project planning, implementing and monitoring agencies.
Key agencies should adopt a long-term infrastructure planning framework. A national masterplan would be crafted, which would identify the country’s priority infrastructure projects. An independent body could decide which projects to implement. This would de-politicize the public investment assessment and decision-making processes.
Since the legislative budgeting process is conducted annually, funding predictability is only possible for the short-to-medium term through budget ceilings. These ceilings and may not withstand changes in administration. Instead, long-term planning can be linked with the medium-term budget framework. This can be strengthened by making long-term budget commitments for large investment projects.
Hybrid PPPs
In July 2016, Department of Budget and Management Secretary Benjamin Diokno proposed a “hybrid” Public-Private Partnership (PPP) scheme, which lets the government build, while the private proponent operates and maintains the project. Dr. Patalinghug notes that pursuing a hybrid PPP might be a more preferable option, since the government has the comparative advantage of “build,” and will be better-equipped in addressing Right-of-Way (ROW) issues.
Once completed, the project will be transferred to the private proponent, which is better-suited to maintain, operate and market the project. A hybrid PPP will also guarantee that projects are built
based on the government’s infrastructure plan and reduce unsolicited proposals that are more oriented towards profitability, rather than connectivity.
The PPP program was popularized under the Aquino administration to fund large-scale infrastructure programs. At the end of his term, however, 12 projects were awarded but only 3 were completed. Delays were partly caused by weaknesses in the Build Operate Transfer (BOT) Law and institutional limitations.
Compared to traditional modes of procurement, PPPs could be advantageous since developers could internalize cost savings by bundling project development, operations, and maintenance. Dr. Patalinghug, however, reasons that internalization could also be undesirable because of developer risk aversion.
Ultimately, to sustain economic growth and improve our citizens’ quality of life, the government should continue to prioritize infrastructure development. While the target of government infrastructure spending has already reached the recommended level, the lingering issues delaying implementation have to be addressed. At this stage, it’s not about the money, it’s about the pace of execution.”
“Hybrid PPP, built by government,managed privately”
Generally, no good. Govt governs, they are not builders. The whole idea for PPP is less govt funding.
“the previous government was beset with underspending.”
See — everybody’s bought into this lie. This was the black propanganda 1 year before the election.
“An independent body could decide which projects to implement. This would de-politicize the public investment assessment and decision-making processes.”<b/?
Another layer of bureaucracy? De-politicise? Ain't gonna happen.
Thanks Chemrock,
Instead of ithe independent body, support NEDA abd CoA.
Review the Implementing rules of the procurement act,etc.
Did I mention the government spends 1 trillion for salaries, how will hybrid ppp work when the government needs to hire temporary construction workers and outsource engineers and consultants? why not let the private companies do that.
This lowest bidder thing is my problem with procurement laws, look at all the damage post earth quake or the cracks caused by jackhammers(hyperbole).
The reason I was in favor of private maintenance, lots of savings would be made for maintenance budget which is already underutilized.
No budget left for maintenance even if it was built by private contractors, transfer it to government then it is poorly maintained.
Karl, the govt can’t be builders. Every project has it’s peculiarities that only those in the trade understand, where to source stuff, how works are sub-sub-sub out to so many levels, who are those reliable etc.
Lowest bidder — yes I do agree with you, the lowest is not the best. You need specs, history of bidders capabilities, assessments and whatever else for due diligence. The govt would normally have a team for this, which sometimes include foreign consultants, the specialist experts. Problem with Philippines is the country is suckered by a preponderance on lawyers instead of engineers. Case in point — Bangko Sentral top honchos mostly MBAs, see how good they perform.
Pte maintenance vs govt maintenance — the inefficiencies of nationalisation has long been recognised.
“Instead of ithe independent body, support NEDA abd CoA.”
COA is just on paperworks and compliances. Govt projects normally has a technical team that oversees the projects. Under bad governance, these guys are often greased to overlook sub-quality works. Happens everywhere, even in Singapore.
Again many thanks!
“Duterte’s economic managers have openly stated a preference for government to first build the projects, and bid out the operations and maintenance contracts to the private sector. They argued this would lower the cost of public services since there would be no heavy investments for the private sector to recover.”
Read more: http://business.inquirer.net/228841/davao-intl-airport-may-cut-list-ppp-projects#ixzz4gC5HsKcG
Follow us: @inquirerdotnet on Twitter | inquirerdotnet on Facebook
+- 33 % if budget goes to personnel services
http://www.philstar.com/headlines/2016/09/20/1625551/national-government-payroll-hit-p1-trillion-2017?nomobile=1
+-13% of budget goes to debt services
http://www.gmanetwork.com/news/story/530878/money/economy/13-percent-of-proposed-2016-budget-goes-to-debt-service-social-watch
—-
Popy and Chemrock
How can we operate with the +- 54% of the budget that is left? (+- 1 Trillion)
plus we must always make it appear that Education gets bulk of the budget, ever since the time of Quezon.
This golden age of infrastructure is rhinestone cowboy age.
How to operate with what’s left– the 54%? For one, close down the black propagamda operations,less on president’s intel.
Personnnel services +-33% — gonna get worse if AFP and PNP salaries doubled as the president promised. If pension continues to be out of budget allocation, the %will continue to increase. This has got to be rationalised one way or another.
Good observations and suggestions.
I almost forgot, the one questioning the Aquino budget yearly is now quiet, because she is the DepEd secretary.
While researching for a school assignment, I came across some pretty shocking statistics…
http://wits.worldbank.org/CountryProfile/en/Country/PHL/StartYear/2011/EndYear/2015/TradeFlow/Export/Partner/ALL/Indicator/XPRT-PRTNR-SHR
http://wits.worldbank.org/CountryProfile/en/Country/PHL/StartYear/2011/EndYear/2015/TradeFlow/Import/Partner/ALL/Indicator/MPRT-PRTNR-SHR
Not only is China among our major destination of exports (combining HK China + China data would actually put China + HK barely above #1 destination of exports: Japan—and way above #2 destination of exports: US) but China has a scarily large amount of import share. China has been #1 since 2013 in a very steep increase (2011-2015) of their share of PH imports.
What should one make of this? Frankly—it feels a bit scary.
It would be interesting to know the contents. I’ll bet ores. Electronic piecegoods to Japan, elsewhere. Some food products everywhere. Just guesses.
It’s basically the same relationship of China vs third world countries. They suck in all your produces — food + minerals and sell you all their mass produced goods and some capital goods. They are the factory to the world. The are the biggest economy in the world now, so obviously there will be trade imbalances in their favour with pretty much with every country in the world.
*******
It’s so simple when you know.
*****
https://psa.gov.ph/content/foreign-trade-statistics-philippines-2015
People’s Republic of China was the country’s second largest trading partner in 2015 with total trade worth $17.646 billion or 13.6 percent of the total trade. Export receipts from China stood at $6.175 billion while payment for imports was valued at $11.471 billion, resulting to a $5.296 billion trade deficit (Table 4). Export-wise, the biggest sales came from Electronic Products at $3.388 billion or 54.9 percent of the country’s exports to China. Other Mineral Products followed with total receipts of $683.41 million or 11.1 percent (Table 5). Imported goods purchased from China consisted of Electronic Products worth $2.418 billion or 21.1 percent of the country’s total imports. Iron and Steel followed with imports of $1.823 billion or a share of 15.9 percent (Table 6).
For the latest stats
https://psa.gov.ph/business/foreign-trade