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Midyear Briefng
July 14 - 15, 2011
N CenterTimog Avenue, Quezon Citykline: (632) 9277060 to 62(632) 9292496
ail: [email protected]: http://www.ibon.org.
IBON
FOUNDATION
INC.
MIDYEAR 2011:
Failing Economy,
Growing Disenchantment
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2 IBON Economic and Political Briefng 14 -15 July 2011
IBON Foundation
is an independent
development institution
established in 1978
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IBON Economic and Political Briefng 14 -15 July 2011 3
One year is long enough to evaluate the Aquino administration. Economic directions and
political priorities have been set which can already be measured against the countrys long-
standing problems and the needs of the people. Without expecting that the change Filipinos
hope for will happen overnight, a year is more than enough time to see if the rst decisive steps
towards this have been taken.
Pres. Benigno Noynoy Aquino III promised change and so effectively sent this message that he
won the presidency by it. A year later, however, the countrys economic and political problems are as
entrenched as ever. The snag is not merely of untangling a mess inherited from the previous Arroyo
administration the new administration itself has moved to the forefront of reproducing instead of
resolving these problems.
The countrys troubles are undoubtedly considerable: tens of millions of poor Filipinos, severe
social inequality, manufacturing and agricultural decline amid global crisis, recurring scal
troubles, persistent political repression, weak and undemocratic institutions of governance, systemic
corruption, and lack of national sovereignty. The administration admits as much to justify its lack of
tangible accomplishment so far and claims that its rst year was about creating the foundations for
future progress.
Yet, especially in the realm of the economy, the policies and medium-term plan put in place actually
undermine such progress. The Aquino administrations approach is identical to that of the previous
Arroyo government, though economic strategies should have been overhauled towards real social,
agricultural and industrial development. Much of the poor economic performance in the rst year of
the administration is certainly due to failed globalization policies of the past but in choosing those
same policies, the Aquino administration has made this poor performance its own.
The political inadequacies are more fully the Aquino administrations and go far beyond the widely-
perceived personal incompetence and favoritism. The administration has consistently played up its
banner anti-corruption/anti-Arroyo drive yet even here there is scant movement. On the other hand,
state-sponsored human rights violations clearly persist astride rising militarism. Also conspicuous is
the rapid subordination to United States (US) geostrategic interests at the expense of the countrys
sovereignty.
Any claim to a productive rst year will rest on a imsy case. The dole-out programs rolled out give
temporary relief for the countrys poor but alarmingly mask how the roots of their socioeconomic
woes are not being dealt with or, worse, being preserved. There are also narrow economic indicators
meaningful only for international nancial institutions, credit ratings agencies, investment managers
and big business. And there are the sensational exposs of Arroyo-era corruption. These give the
appearance of achievement but have not yet led to actual accountability and decisive action.
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4 IBON Economic and Political Briefng 14 -15 July 2011
What is weightier is the absence of real economic nationalism which upholds the rights of Filipinos
to development and that asserts social justice. Dissatisfaction is already spreading rapidly among the
vast majority who are poor and directly suffer persistent joblessness, low incomes and unaffordable or
decrepit social services. Even those reached by massive cash dole-outs know that these will be short-
lived. Also striking is how the countrys political troubles have been reduced to merely corruption
in particular the Arroyo governments corruption while there is stagnation or even backsliding on
larger concerns of human rights, national sovereignty and real democracy.
Working for genuine change in these vital areas is the continuing challenge for the people as the
country enters the second year of the Aquino administration.
FAILING ECONOMY
When Pres. Aquino took ofce, the Philippine economy was suffering problems accumulated fromyears of failed policies. There were record numbers of jobless Filipinos, real incomes were falling,poverty was widespread, landlessness persisted, domestic manufacturing and agriculture were on the
decline, and the government was mired in debt. In short, there was much to be done. A year later it is fairto say that the situation has not improved and there has not been any headway against these problems.
The only thing the government can claim to have concretely done in the economy so far is to dispense
a few billion pesos in conditional cash transfer (CCT) dole-outs and Pantawidpublic relations damage
control. Even its much-touted public-private partnership (PPP) program has apparently not yet taken off
with the one project in a relatively advanced stage, the Metro Rail Transit-Light Rail Transit (MRT-LRT)
contract, still being reviewed. It cannot take credit for the regular housekeeping and maintenance functions
of government funded by its Php1.645 trillion budget these are normal expenses every year. If anything,
the administration can even be put to task for choosing to spend less on agriculture, agrarian reform, rural
infrastructure, public hospitals, and state universities and colleges.
While the lack of accomplishment is one thing the disturbing direction of economic policy is another. Interms of policy intent, the administration nally released its Philippine Development Plan (PDP) 2011-
2016. However this disturbingly only recycles the failed globalization policies of previous administrations
with marked added emphasis on CCTs and PPPs and so cannot but have the same adverse results for
the economy as before. These poor outcomes were already very much felt in the rst year of the Aquino
administration. Particularly disquieting is how the plan conrms that the government will not take the
crucial steps needed to actively develop the domestic economy which are so urgent amid an increasingly
volatile global environment. The administrations exposed attitude to such basic issues as wages and land
also plainly show the limits of its pro-people rhetoric.
Consequently, the prospects in the next ve years are that the situation will not improve and may even
get much worse depending on how quickly the global crisis intensies. The administration will ensure a
steady stream of CCT and other dole-outs in a massive propaganda effort that poverty is being reduced.It is also possible for a few big foreign and domestic investors to make their prots especially with the
governments efforts to give guarantees through its PPP program. Although, as it is, there are already
signs that implementation of these banner programs will be far from smooth. The persistent absence of
nationalist economic policies however is of greatest consequence the peoples economic troubles will
continue without real redistributive reforms, agricultural development and national industrialization.
Growth will remain low and unstable, joblessness severe, incomes low and poverty fundamentally
unresolved if there are no substantial policy changes in the coming years.
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IBON Economic and Political Briefng 14 -15 July 2011 5
Peoples welfare
The prices of fuel, transport, water, power and food continue to rise and in many instances steeply.
The prices of basic commodities and services are particularly signicant given the generally low incomes
of the largest number of Filipinos. Incomes are already so low that even slight price increases are
burdensome in coming on top of previous rounds of increases.
According to the National Statistics Ofce (NSO), the countrys headline year-on-year ination rate
(2006=100) went up signicantly to 5.2% in June 2011 from 3.7% in July 2010; similarly, annual ination
in the National Capital Region (NCR) rose to 4.7% from 3.8% over the same period. (See Table 1)
Indicator and Commodity July 2010
Inflation (National; in %) 3.7% 5.2% (June)
Inflation (Outside Metro Manila; in %) 3.7% 5.3% (June)
Metro Manila
Inflation (in %) 3.8% 4.7% (June)
Jeepney fare (minimum; in Php) 7.00 8.00 (July)
Oil prices (in Php/liter, except LPG at Php/11 kg-tank)
Diesel 32.50 44.50 (July 12)
Gasoline 42.00 55.15 (July 12)
LPG 558.00 - 625.00 662.00 - 735.00 (July 3)
Water rates (All-in tariff; in Php/cu. m.)
MWCI (Manila Water) 29.98 33.57 (February)
MWSI (Maynilad) 33.08 40.80 (February)
Power rates (in Php/kWh)Meralco (basic rate) 9.32 9.60 (July)
Residential bill (consuming 150 kWh/month) 1,571.46 1,609.52 (July)
Napocor (ERC-approved effective rates) 3.75 3.82 (June)
Selected basic commodities (in Php)
NFA rice (per kilo) 25.00 27.00 (July 7)
Galunggong (per kilo) 100.00 120.00 (July 7)
Sitao (18-20 strings/bundle) 50.00 60.00 (July 7)
Eggplant (8-10 pcs/kilo) 30.00 60.00 (July 7)
Cooking oil (lapad bottle) 20.00 35.00 (July 7)
Sources:National Statistics Office (NSO), Department of Energy (DOE), Metropolitan Waterworks and Sewerage
System (MWSS), and Bureau of Agricultural Statistics (BAS)
Table 1. Selected Pr ice Indi cat ors, July 2010 and June 2011
2011 (as of )
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6 IBON Economic and Political Briefng 14 -15 July 2011
The past year has in any case seen prices of essential items going up by lesser or greater amounts
collectively due to anti-poor and anti-national policies of globalization. Price increases have been
particularly marked in the sectors subjected to deregulation (i.e. oil) and privatization (i.e. water, power,
and transport).
Domestic pump prices of oil products have seen the highest increases as global monopolization of the
industry asserted itself once more with the prices ofliquefied petroleum gas (LPG), gasoline and diesel
rising from 18% to 37% in the rst year of the administration. (See Table 1) Domestically-based rms
have moreover engaged in brazen proteering and not adjusted local pump prices commensurate to
changes in the price of global crude and foreign exchange movements. They have also been charging the
highest possible prices that they can in provinces and regions outside the main urban centers.
The privatization of key utilities also continues to be felt through soaring water and power rates. In the
past year, water rates have risen by 12% in the Manila Water service area and by 23% in Maynilads
continuing a trend of rapidly rising rates over the last decade. (See Table 1) Power rates have only slightly
increased since the middle of last year but these nonetheless come on top of high power rates in the past
decade under the implementation of the Electric Power Industry Reform Act of 2001 (EPIRA) with the
rates paid by Meralco residential consumers for instance having more than doubled as of last year. More
power rates are in any case looming with pending applications for even more increases.
Food price increases have been mixed, although the prices of some basic sh and vegetable items have
noticeably increased. (See Table 1) The continued push to privatize the National Food Authority (NFA)
however raises the prospect of higher and volatile rice prices.
The jobs cr isis continues with double-digit r eal unemployment and underemployment despite
growth. There has not been any meaningful improvement in the employment situation. The government
ofcially reports the unemployment rate falling to 7.2% in April 2011 from 8.0% in the same period last
year; this corresponds to just 2.9 million unemployed Filipinos. (See Table 2) IBON estimates seeking
to correct for the changed employment denition in April 2005 however indicate that the unemployment
rate is rather at 10.9% with 4.5 million unemployed Filipinos, while likewise seeing a slight drop in the
unemployment rate (by 0.7 percentage points) and levels (by 184,000).
There are at the same time clear indications of a decrease in the quality of jobs. The underemploymentrate rose to 19.4% in April 2011 from 17.8% the year before which is a very large 829,000 increase in the
number of Filipinos not earning enough from their jobs and seeking additional work to 7.1 million. This
brings the total number of real unemployed and underemployed Filipinos to a considerable 11.6 million
or 28% of the labor force. (See Table 2) Alternatively, there were 21.1 million Filipinos jobless or in
insecure, low-paying and even hazardous work, equivalent to around 52% of the labor force consisting
of the 4.5 million unemployed, 4.3 million unpaid family workers and 12.2 million own account workers.
(See Tables 2 and 3) There are also the 1.8 million Filipinos working as generally poorly-paid household
helpers earning the lowest among wage and salary workers at just Php130/day.
In principle, the 969,000 additional wage and salary jobs and 783,000 additional full-time work are
welcome, especially after many years of new jobs disproportionately going to own account and unpaid
family workers, or to part-time work. (See Table 3) However, a large portion of the 969,000 net jobscreated since last year were in among the economys lowest-earning sectors (by wage and salary)
agriculture (639,000 jobs at Php155/day) and trade (369,000 jobs at Php272/day).
It is notable though how manufacturing jobs have only grown by a very small 67,000, despite supposed
8.6% growth in the rst quarter, which afrms its failure to serve as the countrys main driver of
employment. (See Table 3) The sector only accounted for 8.5% of jobs which is still among the lowest
in decades. The scant 9,000 additional mining and quarrying jobs despite relatively rapid 18.6% growth
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IBON Economic and Political Briefng 14 -15 July 2011 7
2010 April 2010 April 2011 2010 p April 2010 April 2011 p
Population 15 Years Old and Over
(in 000)60,718 60,561 61,778 60,717 60,561 61,778
Labor Force 40,438 40,080 41,304 38,894 38,512 39,692
Employed 36,044 35,413 36,821 36,035 35,413 36,821
Underemployed 6,758 6,297 7,126 6,762 6,297 7,126
Unemployed 4,394 4,667 4,483 2,859 3,099 2,871
Not in the Labor Force 20,280 20,481 20,474 21,823 22,049 22,086
Labor Force Participation Rate
(in %)66.6 66.2 66.9 64.1 63.6 64.2
Employment rate 89.1 88.4 89.1 92.6 92.0 92.8
Underemployment rate 18.8 17.8 19.4 18.8 17.8 19.4
Unemployment rate 10.9 11.6 10.9 7.4 8.0 7.2
Table 2. Key Employment Ind icator s, Annual Average 2010, Apr i l 2010 and 2011
IBON Estimates Officially Reported a
Indicator
Sources:National Statistics Office (NSO) Labor Force Survey and IBON estimates
Note: Since figures according to the old LFS unemployment definition since 2008 are unavailable even from the NSO, IBON
made rough estimates for labor force and correspondingly unemployment by assuming a labor force participation rate (LFPR)
of 66.1% in 2008, 66.5% in 2009 and 66.6% in 2010. These assumed LFPR figures were derived by applying the changes in
official reported annual average LFPR in 2008, 2009 and 2010 to the LFPR in 2007 that was still computed using the old
unemployment definition i.e., 0.4 percentage point reduction in 2008, 0.4 increase in 2009, 0.1 increase in 2010. A similar
exercise was done to estimate the April round figures.
a - based on new LFS definitions since April 2005 (official data based on old definition unavailable)
p - preliminary, totals may not add up due to rounding
in turn reects the intrinsically low job-generation in this sector. The 228,000 increase in real estate jobsparallels the marked increase in foreign investment in this sector and may be driven by this; but it is
uncertain how these jobs will fare if this reects a growing bubble.
The prole meanwhile of the unemployed remains disturbing with alarmingly high rates of jobless high
school- and college-educated Filipinos. Almost nine out of ten (87.7%) of reported unemployed have
reached a high school or college education, with over four out of ten (43.5%) even having college-level
schooling. (See Table 4) This strongly indicates that the unemployment problem is not so much the lack
of education per se but rather the lack of employment opportunities in the economy to begin with. Half of
jobless Filipinos are young at between 15-24 years old, and nearly two-thirds (64.0%) are male.
Poor employment and income prospects at home continue to force more and more Filipinos to work
abroad. Some 4,030 Filipinos left the country every day in 2010, according to Philippine OverseasEmployment Administration (POEA) data, which is slightly higher than the 3,897 leaving per day in 2009.
The wage increase gran ted was far less than how much workers needed and employers could afford.
The Aquino administration granted a Php22 cost of living allowance (COLA) increase in May 2011
bringing the mandated minimum wage in the NCR to Php426 per day. The meager wage hike, the rst
under the new administration, indicates the limits of the administrations pro-poor rhetoric.
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8 IBON Economic and Political Briefng 14 -15 July 2011
April 2010 April 2011 pChange
(2010-2011)
Total Employed Persons 35,413 36,821 1,408 308 4.9
By Industry
Agriculture, Fishery and Forestry 11,512 12,151 639 155 4.2
Agriculture, Hunting and Forestry 10,073 10,678 605 152 6.2
Fishing 1,439 1,510 71 193 (3.7)
Industry 5,487 5,634 147 nda 7.2
Mining and Quarrying 212 221 9 272 18.6
Manufacturing 3,063 3,130 67 310 8.6
Electricity, Gas and Water 137 147 10 515 (0.4)
Construction 2,075 2,136 61 291 4.0
Services 18,414 19,036 622 nda 3.7
Wholesale and Retail Trade 6,885 7,254 369 272 0.8
Hotels and Restaurants 991 1,031 40 276 7.3
Transport, Storage & Communications 2,741 2,688 (53) 378 5.5
Financial Intermediation 383 405 22 504 5.4
Real Estate, Renting & Bus. Activities 1,061 1,289 228 458 5.9
Public Administration & Defense, Compulsory
Social Security1,959 1,952 (7) 452 (4.6)
Education 1,156 1,178 22 566 6.7
Health and Social Work 447 442 (5) 440 8.6
Other Community, Social & Personal Service
Activities984 957 (27) 332 nda
Private Households w/ Employed Persons 1,804 1,841 37 130 nda
Extra-Territorial Organizations 3 - - 356 nda
By Class of Worker
Wage and Salary Workers 19,283 20,252 969 308
Private household 1,804 1,841 37 130
Private establishment 14,226 15,244 1,018 294
Government/govt corporation 3,157 3,093 (64) 508
With pay (family owned business) 97 74 (23) 235
Own Account 11,950 12,188 238 -
Self-employed Workers 10,686 10,899 213 -
Employers 1,264 1,289 25 -
Unpaid Family Workers 4,179 4,382 203 -
By Hours of Work
40 Hours and Over (Full-Time Employment) 21,715 22,498 783 -
Less than 40 Hours (Part-Time Employment) 12,959 13,661 702 -
Did Not Work 738 663 (75) -
nda - no data available
Sources:Employment data from National Statistics Office (NSO) Labor Force Survey and GDP data from National Statistical
Coordination Board (NSCB) National Accounts of the Philippines
Average Daily
Basic Pay
(Jul 2010,
in Php) a
1st Qtr 2011
GDP Growth
(in %; constant
2000 prices)
Table 3. Employed Persons, Average Dai ly Basic Pay of Wage and Salary Workers, and Gross
Domest ic Produc t Growt h By Indus t ry
Employed Persons (in '000)
Note: For purposes of comparability, "Financial Intermediation" in theNational Accounts of the Philippines (NAP, source of GDP data) isconsidered equivalent to "Finance" in the Labor Force Survey (LFS, source of employment data), "Ownership of Dwellings & Real
Estate" to "Real Estate, Renting & Bus. Activities", "Public Administration & Defense, Compulsory Social Security" to "Government",
and "Health and Social Work" to "Medical and Health".p- preliminary, totals may not add up due to roundinga- for wage and salary workers only
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IBON Economic and Political Briefng 14 -15 July 2011 9
Taking away the effect of ination, the new NCR minimum wage of Php426 is worth Php245 in real terms
(measured in 2000 prices). This real value is even less than what the Arroyo government was able to give
in February 2002 when the Php280 mandated minimum wage was equivalent to Php258 in real terms. (See
Chart 1) A higher Php25 wage hike was also even given on two other occasions in June 2005 and July
2006. If only by these standards, the current administration, ironically, is so far doing even less than the
previous Arroyo government.
The end result is that real wages have not broken from the trend of being basically at over the last decade.
The gap between the mandated minimum wage and the family living wage also continues to rise, reaching
Php572 in June 2011. (See Table 5) As it stands, the minimum wage is just 43% of the Php998 estimate
needed for decent living by a family of six in the NCR. The living wage is the amount of family income
needed to provide for a familys food and non-food expenditures with sufcient allowance for savings forsocial security to enable the family to live and maintain a decent standard of human existence beyond mere
subsistence level, taking into account all of the familys physiological, social and other needs.
Small and large employers can evidently afford a much larger wage hike if only they accept a cut in their
already considerable prots. The benets for workers and their families are unambiguous and the wage
hike will substantially improve their welfare even if not yet necessarily bringing all of them up to a decent
standard of living. The economy has more than enough prots to support for instance a Php125 wage hike.
2010 p April 2010 April 2011 p 2010 p April 2010 April 2011 p
Total Unemployed Persons 2,859 3,099 2,871 100.0 100.0 100.0
By Sex
Male 1,809 1,936 1,837 63.3 62.5 64.0
Female 1,051 1,163 1,034 36.7 37.5 36.0
By Age Group
15-24 years old 1,460 1,584 1,436 51.1 51.1 50.0
25-54 years old 1,293 1,400 1,329 45.2 45.2 46.3
55 years old and over 106 114 103 3.7 3.7 3.6
By Highest Grade Completed
No Grade Completed 14 15 14 0.5 0.5 0.5
Elementary 374 415 339 13.1 13.4 11.8
Undergraduate 174 191 152 6.1 6.2 5.3
Graduate 201 224 187 7.0 7.2 6.5
High School 1,293 1,380 1,269 45.2 44.5 44.2
Undergraduate 363 407 336 12.7 13.1 11.7
Graduate 930 973 936 32.5 31.4 32.6
College 1,178 1,290 1,249 41.2 41.6 43.5
Undergraduate 621 682 663 21.7 22.0 23.1
Graduate 557 608 586 19.5 19.6 20.4
Source:National Statistics Office (NSO) Labor Force Survey
Population (in '000) Share to Total (in %)
Table 4 . Summar y Sta t is t ic s on Unemployment , Annua l Average 2010, Apr i l 2010 and 2011
Note: Based on the new official unemployment definitionp- preliminary
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1 0 IBON Economic and Political Briefng 14 -15 July 2011
In 2008, establishments in the country with total employment of 20 and over had combined prots of
Php895.2 billion and 2.74 million employees, according to the preliminary results of the 2008 Annual
Survey of Philippine Business and Industry (ASPBI) of the NSO. Granting an across the board wage hike
of Php125 means workers will receive an additional Php3,802 per month, and that employers will spend an
additional Php49,427 per employee per year (assuming 13 months of pay). The total cost of the proposed
wage hike will only be Php135.6 billion which, subtracted from total prots, will still leave establishmentswith Php759.6 billion in prots. This is only a 15.1% cut in their prots.
Giving a Php125 wage hike in NCR in particular will cost employers Php61 billion and reduce their prots
by only 17.3%, from Php352.1 billion to Php291.1 billion. Average prot per establishment in the NCR
will only fall by Php6.8 million and still leave them with an average of Php32.2 million in prots each. A
large wage hike will be benecial not just for workers and their families but also the economy. The transfer
of money from rich to poor households will increase aggregate demand and stimulate the economy. High-
income households have a higher propensity to save and low-income households, so deprived even of
basic necessities, a higher propensity to consume.
The administration gives low priority to agrarian reform and is among the poorest performing in
terms of land distribution. The Aquino administrations low priority for land reform can be gleaned fromits policy moves and, more importantly, its actual practice. It continues with Comprehensive Agrarian
Reform Program with Extension and Reforms (CARPer) which merely extends the failed Comprehensive
Agrarian Reform Program (CARP) as well as relegates land reform to an Asset Reform sub-section in the
Social Development chapter of its new medium-term Philippine development plan.
37
426
120.92
203.10216.63
238.10
257.59
243.37245.11
19861987198819891990199119921993199419951996199719981999200020012002200320042005200620072008200920102011 Jan
Chart 1. Nat ion al Capita l Region Daily Minim um Wage, 1986-June 2011(in Php; 2000=100)
NominalWage
RealWage
Jun 1992
Feb 1986
Jun 1998
Jan 2001 Jun 2010
Sources:Wage data from National Wages and Productivity Commission and inflation data from Bangko Sentralng Pilipinas
1986 1990 1995 2000 2005 2011
Jun 2011
Feb 2002
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IBON Economic and Political Briefng 14 -15 July 2011 11
Realities on the ground however provide the strongest conrmation of the administrations biases against
land reform. In its rst nine months, and under CARPer, it has distributed an average of 19,901 hectaresmonthly. While this is slightly more than the 17,311 hectares per month under the Arroyo government it
is far less than the average rates tallied by the Ramos government (38,229 hectares per month), Corazon
Aquino (28,711 hectares), and Estrada (26,032 hectares). (See Table 6) Distribution under CARPer in
particular at an average of 16,461 hectares per month is also considerably slower than the 26,030 hectares
monthly average since 1987.
Justications that the land covered now involves more difcult private land, or that it is just the
administrations rst year, or that the program is in any case nearing completion are of little signicance.
Again, similar to the governments handling of the wage hike, this is not a performance consistent with the
rhetoric of change.
Such a conclusion also nds support with how the Hacienda Luisita Inc. (HLI) controversy is playingout. The Supreme Court (SC) in July ruled with a 6-4 decision to uphold the Department of Agrarian
Reforms (DAR) revocation of the HLI stock distribution option (SDO) and called for a referendum for
the haciendas agricultural workers to decide if they want shares, again, or for the land to be distributed
to them. For one, the SC decision used legal obfuscations to avoid deciding on the constitutionality of the
SDO and the giving of land to its tillers the heart of the controversy and emblematic of elite resistance to
land reform nationwide. The decision rather endorses a process that since the beginning has been biased in
favor of the Cojuangco-Aquino clan through its feudal control, economic threats and outright violence.
Year
and Month
Daily Minimum
Wage
Family Living
WageWage Gap
2009
March 382 912 526June 382 922 536
September 382 934 541
December 382 945 557
2010
March 382 951 565
June 404 958 549
September 404 962 551
December 404 985 564
2011
March 404 994 584June 426 998 572
Table 5. Dai ly Minim um Wage, Fami ly L iv ing Wage and Wage
Gap, March 2009-June 2011 ( in Php)
Sources:Wage data and family living wage estimates from National Wages and
Productivity Commission (NWPC) and inflation data from Bangko Sentral ng
Pilipinas (BSP)
Note: IBON computed these family living wage (FLW) estimates by inflating the last
FLW estimates released by the NWPC for September 2008. The NWPC reports
that its FLW estimates are under review.
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1 2 IBON Economic and Political Briefng 14 -15 July 2011
Table
6.Land
Distribution
Accom
plishm
entPer
Adm
inistration,July1987-March
2011
(in
hectares)
Aqu
ino
Ramos
Es
tra
da
Arroyo
Aqu
ino
To
tal
Ju
l1987
-Jun
1992
Ju
l1992
-Jun
1998
Ju
l1998
-Dec
2000
Jan
2001
-Jun
2010
Ju
l2010
-Mar
2011
Ju
l1987
-Mar
2011
Departmen
to
fAgrar
ian
Re
form
848
,515
1,9
00
,039
333
,389
1,0
31
,403
106
,190
4,2
19
,536
Priva
tely
-owne
dLa
nd(PAL)
471
,621
955
,243
228
,622
709
,214
nda
OperationLand
Transfer(OLT)
358,915
142,847
18,708
40,079
nda
GovernmentFin
ancialInstitutions
(GFI)
22,938
105,498
11,906
26,330
nda
VoluntaryOffertoSell(VOS)
55,079
257,373
76,896
219,383
nda
CompulsoryAcq
uisition(CA)
13,952
120,828
47,767
105,080
nda
VoluntaryLandTransfer(VLT)
20,737
328,697
73,345
318,339
nda
Non-P
AL
376
,894
944
,796
104
,767
322
,190
nda
SettlementArea
s
208,792
356,763
35,276
104,749
nda
LandedEstates
25,781
41,201
971
2,125
nda
Government-ow
ned
Lands/Kilusang
Kabuhayanat
Kaunlaran(GOL
/KKK)
142,321
546,832
68,520
215,318
nda
Departmen
to
fEnv
ironmen
tan
d
Na
tura
lResources
874
,139
862
,461
447
,572
942
,024
72
,918
3,1
99
,114
PublicAlienable
&Disposable
Lands
539,086
489,069
113,383
942,024
72,918
IntegratedSocia
l
Forestry/CommunityBasedForest
Management(IS
F/CBFM)Areas
335,053
373,392
334,189
To
tal
1,7
22
,654
2,7
52
,500
780
,961
1,9
73
,427
179
,108
7,4
18
,650
Lan
dDistribu
tion
Average
Per
Mont
h
28
,711
38
,229
26
,032
17
,311
19
,901
26
,030
nda-nodataavailable
Sources:Presiden
tialAgrarianReformCouncil(PARC)andDep
artmentofAgrarianReform(DAR)
Lan
dTyp
ean
d
Mo
deo
fAc
qu
isition
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IBON Economic and Political Briefng 14 -15 July 2011 13
For another, and notwithstanding a belated reaction by Malacaang to appeal the SC decision, the
administration is evidently not going to devote any political capital to ensure that Hacienda Luisita, owned
by Pres. Aquinos family, is going to be distributed among its farmers. The loss to the Cojuangco-Aquino
would be considerable as various government infrastructure and other projects steadily drive up Central
Luzon land values including of the hacienda. Indeed, the way the family has been acting is illustrative of
the urgency of land reform leaving such vast tracts of lands in the hands of landlords is tantamount to
institutionalizing backward agricultural production and foregoing dynamic rural development. The clan
has merely settled for sugar production (apparently unprotable) and land speculation (protable, but
unproductive) in the haciendas thousands of hectares.
As it is, landowners continue to evade land distribution so having their own land to till remains elusive for
farmers and farmworkers of various haciendas nationwide including those in Bulacan, Tarlac, Batangas,
Laguna, Bicol and Negros. At the same time agricultural lands nationwide remain up for grabs in land
deals with businesses and foreign companies, threatening local food security and undermining peasants
centuries-old struggle for land. For instance, six million hectares of idle lands have been allocated for
the production of sugarcane, coconut, cassava, jatropha, oil palm and other cash crops and two million
hectares for agribusiness development. Expecting little from the administration, organized peasants
especially under the country's largest peasant federation, Kilusang Magbubukid ng Pilipinas (KMP), are
at the forefront of waging determined agrarian struggles.
The r elief from massive cash dole-outs and other smaller subsidies is only temporar y and is being
used as a smokescreen for fur ther globalization. The CCT program is reported to already cover 79
provinces and to have reached 2.1 million beneciaries, with an additional 300,000 by the end of the
year and 700,000 by 2012. The program is claimed by government as an investment in the future of the
Filipino people but, in the context of unreformed economic policies that do not create enough jobs and
keeps incomes low, it will amount to little more than a hugely expensive effort that temporarily gives the
impression of poverty reduction.
The welfare gains for beneciaries genuinely reached by the program are welcome and arguably long
overdue. But even ifpoor families are beneting this does not necessarily mean that headway is being made
against poverty, even if this seems commonsensical. The economics of the household are very different
from the economics of the country and it is only at the economy-wide level that progress against poverty
will be far-reaching and sustainable. Is the economy as a whole creating jobs? Have the prospects fordecent work and incomes for everyone in the country improved or does the CCT program only give an
income, health and education edge to its recipients in the scramble for limited work in the country?
The CCT program is not implemented in a vacuum and should not be assessed as if it were. This is the
main limitation of the usual CCT assessments. It is certainly important to look at the specics of program
implementation and to track any improvements in the welfare of recipients but this is not the entirety
of the effect of CCTs nor, indeed, a correct way of seeing if there are gains in national poverty reduction.
Indeed, the sheer size of the program with a Php22 billion budget in 2011 and Php35 billion in 2012,
and supposedly 4.6 million beneciaries after ve years demands that the program be looked at in its
entirety.
And the reality is that beyond the welfare gains for individual beneciaries the program is being usedas a smokescreen to keep on implementing the policies that have stunted the domestic economy, caused
massive joblessness, suppressed incomes and kept people poor. The targeted 4.6 million beneciaries,
assuming they are all reached, are going to be used to claim that poverty is being reduced and to justify
continued free market globalization policies. Meanwhile, the tens of millions of Filipinos jobless,
landless or forced abroad by these policies will still have to contend with an economy of generally poor
prospects.
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1 4 IBON Economic and Political Briefng 14 -15 July 2011
At best, the CCT program will be continued indenitely as an articial trickle-down mechanism. Yet it
is uncertain how the huge resources for this could be consistently raised. At worst, and more likely, is that
the program and the welfare gains for its recipients will be merely temporary as the government restricts
its spending to maintain its creditworthiness. There is good reason to doubt the sustainability of the CCT
program. They were implemented most extensively and for the longest time in Latin America but this was
during the 1990s and 2000s which was a time of relatively rapid global growth, high commodity prices,
booming exports and better government revenues. The current global crisis has ended these favorable
conditions so their continuation and indeed their supposed poverty-reducing effect will be put to the
test.
And then there are the various implementation-specic problems on the ground which are unsurprising
given that the multi-billion peso expansion was done without benet of a comprehensive assessment of
previous CCT implementation especially regarding distribution and effectiveness. Problems are occurring
across the country, at every stage of the process, and in being so widespread may conceivably involve
hundreds of millions of misspent pesos. These include cash transfers going to non-deserving and non-
poor beneciaries, non-complying beneciaries, anomalously-chosen beneciaries and non-existent
beneciaries. There are also reports of disbursements being lower than they should be and of beneciaries
unjustiably being dropped from lists.
There are also concerns apart from the leakages and loss of funds. Beneciaries have complained of
cash transfers being made conditional not just on the programmed health and education conditions but
on following orders from local government and social welfare ofcials. Residents in the Bicol, Southern
Tagalog, Eastern Visayas and Western Visayas regions for instance have complained of threats that they
would be disqualied if they were found to be joining community activist organizations attributing these
to the program being used for counterinsurgency purposes.
The fastest reduction in pover ty has been through changes in statistical methodologies. While strictly
speaking beyond the rst year of the Aquino administration, it is important to look at ofcial poverty
statistics inasmuch as the next two scheduled national poverty rounds, in 2012 and 2015, both fall during
its term. There is reason to suspect that much of the supposed improvement in countrys ofcial reported
poverty is due more to consecutive changes in poverty methodologies than real poverty reduction. This is
on top of concerns that the ofcial poverty line is too low and underestimates the true extent of poverty.
The National Statistical Coordination Board (NSCB) released ofcial poverty gures in February based on
adjustments on the poverty estimation methodology. According to the new methodology, there were 23.1
million poor Filipinos in 2009 and the previous estimate for 2006 was also lowered to 22.2 million (from
the original count of 27.6 million). (See Table 7)
The latest revision means that there are in effect three separate estimates for poverty in the last two
and a half decades using 1992, 2003 and 2011 methodologies. Genuine improvements to scientic
methodologies are welcome but the new methodology raises some concerns. First is that it seems
unresponsive and detached to everyday realities. The ofcial poverty threshold, or the amount supposedly
necessary for a tolerable standard of living, is pegged at just Php46 per person per day. This implies that a
Filipino on average needs just Php46 a day to meet all of his or her food and non-food needs. Basic needs
include food, education, clothing and footwear, medical care, transportation and communication, fuel, lightand water, housing, housing maintenance, furnishings, household operations, personal care and effects,
and rental.
Second is that it could create the impression that poverty is being reduced when, in fact, its incidence is
not changing. Yet, on the contrary, it is possible that the actual poverty trend over the decade-and-a-half
since the mid-1990s is essentially unchanging with poverty incidence implying, that with population
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IBON Economic and Political Briefng 14 -15 July 2011 15
growth, the absolute number of poor Filipinos is rising. Putting the various estimates side-by-side raises
some questions about recent supposed poverty reduction. (See Chart 2) Abstracting from breaks indata sets due to changes in methodologies, it appears that poverty trends indicate little change from the
mid-1990s if the at movements according to the two most recent methodologies (2003 and 2011) are
connected to poverty incidence according to the 1992 methodology.
Table 7. Poverty Inc idence and Magni tude of Poor Populat ion, 1985-2009
Indicator 1985 1988 1991 1994 1997 2000 2003 2006 2009
Magnitude of po or
(in '000)
1992 Methodology 26,675 25,388 28,554 27,373 26,769 30,850
2003 Methodology 25,473 23,836 27,6172011 Methodology 19,797 22,173 23,142
Poverty incidence
(in %)
1992 Methodology 49.2 45.4 45.2 40.6 36.9 39.5
2003 Methodology 33.0 30.0 32.9 32.6
2011 Methodology 24.9 26.4 26.5
Source:National Statistical Coordination Board (NSCB)
-
10
20
30
40
50
60
-
10,000
20,000
30,000
40,000
50,000
60,000
70,000
1985 1988 1991 1994 1997 2000 2003 2006 2009
Incidence(in%
)
Magnitude(in'00
0)
Chart 2 . Povert y Incidenc e and Magni tude of Poor Populat ion, 1985-2009
1992 Methodology 2003 Methodology 2011 Methodology
1992 Methodology 2003 Methodology 2011 Methodology
Source:National Statistical Coordination Board (NSCB)
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1 6 IBON Economic and Political Briefng 14 -15 July 2011
Given the basically at trend in poverty incidence since the late 1990s, it is for instance plausible for
ofcial poverty incidence in 2009 to still be around the some 40% level of 1994. If so, this would imply
that the number of poor has increased by over 7.5 million, by a rough approximation, from 27.4 million
in 1994 to perhaps around 35 million in 2009. But even this may be grossly underestimated with, in
2009, some 65 million or 70% of Filipinos living on Php104 or much less per day with the poorest half
of the population desperately poor and struggling with Php22, Php35, Php45, Php55 or Php67 per day.
Unfortunately with consecutive changes poverty estimates over time are going to be incomparable and,
perhaps intentionally, will likely give the impression that poverty has been markedly decreasing.
False positives
The economy is already slowing from a year ago and is hobbled by weak interna l sources of growth.
The government has attributed the slow growth to external factors such as sluggish global trade and even
political turmoil in the Middle East and North Africa. While these may be proximate causes it is well-
established that the global environment is chronically uncertain, with periods of great volatility, so the real
cause of low growth must be found internally. It also cited government underspending and the absence
of election-related stimulus. More than external factors, the low growth in the country is due to peasant
landlessness and lack of rural modernization, a low value-added and delinked manufacturing sector, and
household consumption dampened by low domestic wages and incomes.
The government reported 4.9% growth in real gross domestic product (GDP) in the rst quarter of 2011
which was markedly slower than the 8.4% rate in the same period last year. (See Table 8) Consecutive
quarters are not strictly comparable but it can still be noted that the rst three quarters of the Aquino
administration has seen progressively slower growth year-on-year from 8.9% in the second quarter of
2010, 7.3% in the third quarter, and 6.1% in the fourth quarter followed by the 4.9% in the rst quarter of
this year.
On the other hand, the picture appears better using seasonally-adjusted quarterly growth rates which are
computed to allow comparison between consecutive quarters (which cannot be done with the quarterly
year-on-year gures). By this measure, the economy has been growing since mid-2010 with 0.3% growth
in the third quarter, 0.5% in the fourth quarter, and 1.9% in the rst quarter of 2011. While showing an
upward trend these are still lower than the 3.8% and 1.9% rates in the rst and second quarter of 2010,
respectively. While at least showing better performance this is unlikely to be sustained since, historically,
seasonally-adjusted growth has never been on an uptrend for more than four straight quarters. For one,
there are no signs of any change in the underlying economic structure in the last year and, for another, the
global environment will only become more adverse.
On the industry side, the agriculture sector grew by 4.2% in the rst quarter of 2011 which continues an
improvement that begun in the fourth quarter of last year after consecutive quarterly declines. (See Table
8) Aside from being erratic this remains low, however, and indicates a large untapped potential for rural
growth. Manufacturing grew by 8.6% and while higher than the growth registered in the second semester
of last year, it is still a marked slowdown from previous double digit rates. The continued dependence of
this sector on exports, especially of electronics, which are under threat is a matter of medium- to long-
term concern. Much more sustainable over the long-term is if these two sectors were fundamentally driven
by high domestic demand. Meanwhile, the contraction in public spending by 4.6% is consistent with thede facto austerity measures being implemented by the administration under the guise of anti-corruption
campaign and ofbeing discerning as to its spending.
A particular point of concern though, and which will be taken up more below, is the at 0.0% growth in
net primary income (previously called net factor income from abroad). The compensation received by
overseas Filipino workers (OFWs) not, as is commonly misunderstood, their remittances is recorded
under this item. While net primary income as a whole is at at 0.0%, the sub-item of compensation
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IBON Economic and Political Briefng 14 -15 July 2011 17
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr
Percent Distribution to GDP
1. Agriculture, Fishery, Forestry 11.6 12.3 10.2 10.8 13.1 12.2
a. Agriculture and Fishing 11.6 9.8 7.8 8.7 10.6 9.9
b. Forestry 0.0 2.5 2.4 2.2 2.5 2.3
2. Industry Sector 32.6 31.9 33.7 32.4 32.4 32.6
a. Mining and Quarrying 1.2 1.0 1.6 1.0 1.0 1.2
b. Manufacturing 22.2 22.4 21.1 21.7 23.4 23.2
c. Construction 5.7 4.9 7.3 5.7 4.9 4.9
d. Electricity, Gas and Water Supply 3.6 3.6 3.6 4.0 3.1 3.4
3. Service Sector 55.8 55.8 56.1 56.8 54.5 55.2
a. Transport., Storage, and Communication 7.5 8.0 7.8 6.8 7.4 8.0
b. Trade and Repair of Motor Vehicles,
Motorcycles, Personal and Household Goods16.6 15.5 15.6 17.7 17.7 14.9
c. Financial Intermediation 6.6 6.5 6.7 6.7 6.3 6.6
d. Real Estate, Renting and Business Activities 10.3 10.4 10.6 10.9 9.5 10.5
e. Public Administration & Defense:
Compulsory Social Security4.5 4.7 4.9 4.6 3.7 4.3
f. Other Services 10.2 10.7 10.5 10.0 9.9 10.9
Gross Domestic Product 100.0 100.0 100.0 100.0 100.0 100.0
Growth Rates
1. Agriculture, Fishery, Forestry (0.2) (1.8) (2.0) (2.0) 4.1 4.2
a. Agriculture and Fishing 0.0 (1.9) (2.1) (3.1) 5.4 6.2
b. Forestry (31.3) (1.1) (0.2) 2.8 (1.4) (3.7)
2. Industry Sector 11.6 15.4 15.7 9.8 6.5 7.2
a. Mining and Quarrying 11.4 2.4 24.4 6.8 6.9 18.6
b. Manufacturing 11.2 18.3 13.2 8.4 6.5 8.6
c. Construction 14.3 9.7 24.7 15.6 4.6 4.0
d. Electricity, Gas and Water Supply 9.9 9.8 10.2 10.1 9.4 (0.4)
3. Service Sector 7.2 7.2 7.3 7.8 6.4 3.7
a. Transport., Storage, and Communication 1.0 (2.2) 2.2 3.0 1.4 5.5
b. Trade and Repair of Motor Vehicles,
Motorcycles, Personal and Household Goods8.4 11.6 6.8 11.0 5.0 0.8
c. Financial Intermediation 10.1 8.3 5.8 13.1 13.6 5.4
d. Real Estate, Renting and Business Activities 7.5 5.2 8.6 6.6 9.4 5.9
e. Public Administration & Defense:
Compulsory Social Security5.8 7.5 9.6 6.5 (0.8) (4.6)
f. Other Services 8.4 9.8 10.9 4.4 8.7 6.8
Gross Domestic Product 7.6 8.4 8.9 7.3 6.1 4.9
Net Primary Income 10.0 21.2 10.0 5.7 3.9 0.0
Gross National Income 8.2 11.5 9.2 6.9 5.6 3.6
Industry Sector 20102010 2011
1st Qtr
Table 8. Gross Nat ional Incom e and Gross Domest ic Product By Indust r ia l Or igin,
2010-1st
Quar ter 2011 ( in %; cons tant 2000 pr ices)
Source:National Statistical Coordination Board (NSCB)
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1 8 IBON Economic and Political Briefng 14 -15 July 2011
referring to overseas workers income has actually declined by 3.9% in the rst quarter of 2011 (from
18.5% growth in the same period in 2010). This indicates falling real incomes received abroad by OFWs.
This was just offset by another sub-item, outow of property expenses which declined 35.2%, hence the
overall gure of 0.0% growth.
On the expenditure side, the drop in public spending is clear with a 17.2% decline in government
consumption. (See Table 9) Also notable is the dramatic slowdown in exports to just 3.3% in the rst
quarter of 2011 after consecutive quarters of double-digit, albeit slowing, growth. Household consumption
though picked up with 4.9% growth which is generally higher than in 2010. Also looking favorable is the
37.0% increase in capital formation which is generally higher than in 2010. The government has portrayed
this is due to domestic investor condence upon the administrations supposed good governance yet
historical trends and recent developments suggest that, while welcome, this is a temporary spurt that
will not be sustained. The domestic market remains constricted while the global market is becoming
increasingly listless.
There are signs that the limits of overseas work and remittances as a major lifeline for the economy
have been reached. Overseas work has for decades been a major source of jobs and OFW remittances
have, correspondingly, been a major source of consumption for households and foreign exchange for
the economy. The continued slowdown in remittances, however, increasingly suggests that this lifeline
function has reached its limits. This will lower the welfare of individual OFWs and their families as well
as create greater problems for the economy as a whole. Latest ofcial estimates record 8.6 million overseas
Filipinos as of 2009 composed of 4.5 million temporary/irregular workers and 4.1 million permanent
residents.
Remittances growth is growing but at ever slower rates. Monthly year-on-year growth in April 2011 was at
6.3% which continues a general downtrend, despite month-to-month variations since 2005. (See Chart 3)
Growth rates in remittances are considerably down from the earlier double-digit rates reaching as much as
30% (June 2008) to over 37% (December 2006). The slowing growth in remittances also parallels slowing
growth in deployments of land-based and sea-based workers which slowed to 3.4% in 2010 (1.47 million
deployed) from 15.1% in 2009 (1.42 million deployed) and 14.7% in 2008 (1.24 million).
Remittances in 2010 were reported at a record US$18.8 billion. Remittances had been rapidly rising and
increasing in size relative to GDP since the 1980s: ranging between 1.3-2.7% in the period 1981-1990,more or less steadily rising each year after to 9.8% in 2004, and then appearing to reach some sort of
plateau in the 6-year period since then and varying just between 9.5-10.9 percent. These calculations are
according to GDP estimates using 1985 as the base year. (See Chart 4)
The national income accounts were rebased from 1985 to 2000 recently slightly reducing the size of
remittances relative to GDP but the plateau in the last six years remains clear. (See Chart 4) Using the
rebased GDP gures, remittances as a share of GDP averaged 9.9% of GDP in the 7-year period 2004-
2010 during which time it stayed within the narrow range of 9.4% (2004 and 2010) to 10.4% (2005 and
2006).
Two factors appear to be at play. The main reason appears to be a tightening of labor markets abroad
due to the global crisis as well due to more countries sending, in accordance with a decade of migrationand development hype, increased numbers of their citizens abroad for work especially from India,
China, Mexico, Bangladesh, Pakistan, Vietnam and Indonesia. These may have had the effect of lowering
incomes and benets and of making job opportunities scarcer. For instance, remittances from the US
which accounts for around half of remittances to the country actually contracted 6.4% in 2009 after the
nancial meltdown there with barely a recovery to previous levels in 2010. From all countries, remittance
growth slowed to 5.6% in 2009, again upon the onset of crisis, after 13.7% growth in 2008. The second
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IBON Economic and Political Briefng 14 -15 July 2011 19
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr
Percent Distribution to GDP
1. Household Final Consumption Expenditure 69.2 69.2 67.3 66.8 73.1 69.32. Government Consumption 10.0 11.8 11.5 9.3 7.7 9.3
3. Capital Formation 20.8 18.4 20.1 17.4 26.5 24.0
A. Fixed Capital 20.3 21.0 20.6 19.7 20.0 22.4
1. Construction 8.6 7.5 10.4 8.6 7.8 7.7
2. Durable Equipment 10.0 11.5 8.6 9.7 10.2 12.7
3. Breeding Stock & Orchard Development 1.7 2.0 1.5 1.4 2.0 2.0
B. Changes in Inventories
C. Intellectual Property Products 0.4 0.4 0.3 0.6 0.4 0.4
4. Exports 50.6 49.9 53.7 60.5 39.4 49.2
A. Exports of Goods 41.5 38.5 44.2 51.9 32.3 40.4
B. Exports of Services 9.1 11.4 9.5 8.6 7.2 8.7
5. Less : Imports 50.6 48.9 52.2 53.7 47.7 50.8
A. Imports of Goods 40.9 37.9 43.7 44.0 38.0 41.0
B. Imports of Services 9.7 11.0 8.6 9.7 9.7 9.8
Gross Domestic Product 100.0 100.0 100.0 100.0 100.0 100.0
Growth Rates
1. Household Final Consumption Expenditure 3.4 4.0 1.9 2.4 4.9 4.9
2. Government Consumption 4.0 21.4 7.4 (6.5) (6.6) (17.2)
3. Capital Formation 31.6 31.9 38.0 34.5 25.7 37.0
A. Fixed Capital 19.5 19.0 27.1 16.0 16.1 12.0
1. Construction 17.5 11.4 25.2 17.1 14.0 7.2
2. Durable Equipment 25.5 29.2 35.9 17.6 21.6 16.7
3. Breeding Stock & Orchard Development 0.3 (0.2) 1.0 (0.3) 0.7 3.6B. Changes in Inventories
C. Intellectual Property Products 2.9 14.2 4.1 (1.1) (0.7) 10.0
4. Exports 21.0 18.8 24.0 23.1 16.8 3.3
A. Exports of Goods 24.7 27.1 28.6 26.6 15.3 10.1
B. Exports of Services 6.5 (2.7) 6.2 5.5 24.3 (19.5)
5. Less : Imports 22.5 24.2 22.1 22.1 21.9 8.8
A. Imports of Goods 23.4 26.4 23.8 21.0 23.1 13.3
B. Imports of Services 18.9 17.3 14.1 27.6 17.4 (6.6)
Gross Domestic Product 7.6 8.4 8.9 7.3 6.1 4.9
Net Primary Income 10.0 21.2 10.0 5.7 3.9 0.0
Gross National Income 8.2 11.5 9.2 6.9 5.6 3.6
2011
1st Qtr
Type of Expenditure 20102010
Source:National Statistical Coordination Board (NSCB)
Table 9. Gross Nat ional Income and Gross Domest ic Product By Expenditure Share,
2010-1st
Quarter 2011 ( in %; const ant 2000 pr ices)
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2 0 IBON Economic and Political Briefng 14 -15 July 2011
35.0
29.9
37.2
30.0
0.1
11.4
6.3
-
5
10
15
20
25
30
35
40
Chart 3 . Month ly Overseas Fi l ip ino Remit tanc e Growth,
January 2005-Apri l 2011 (year-on-year; in %)
Source:Bangko Sentral ng Pilipinas (BSP)
2005 2006 2007 2008 2009 2010 2011
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IBON Economic and Political Briefng 14 -15 July 2011 21
reason has to do with the domestic economy which, if only through steady population growth, continues to
increase in size.
These tendencies are likely to intensify. For instance the Saudi Arabian government recently adopted a
policy of Saudization or Nitaqat which requires greater hiring of Saudi nationals in a bid to create one
million new jobs to address domestic unemployment. Yet the measure is not new Spain, Italy, South
Korea and Australia all drastically reduced various quotas for foreign workers while the United Kingdom
(UK) and Canada imposed stricter requirements for certain occupations as early as 2009.
The implications are considerable. This trend highlights how relying on jobs abroad and overseas
remittances to boost private domestic consumption is increasingly untenable. In the past, these remittances
have substantially covered up for internal economic decay by boosting consumption, increasing the
welfare of recipient households, and considerably boosting foreign exchange reserves. Of course they
have still been insufcient to compensate for crisis-induced problems in export- and foreign investment-
dependent sectors and, more fundamentally, for the decline of domestic agriculture and industry.
Trends in foreign trade and investment ar e consistent with the need to aggressively refocus
on developing domestic sources of demand and capital. Recent short-term data show export and
investment slowdowns that, in the context of global economic developments, are likely reective of an
overall long-term trend of poorer prospects for foreign trade and investment.
According to the NSO, export earnings in the month of May fell 3.2% to US$4.10 billion from US$4.24
billion in the same period last year. While exports have been growing for 17 consecutive months after
the last decline of 8% in October 2009 the last twelve months have for instance seen export growth rates
slowing rapidly until actually going negative in May. (See Chart 5)
46.8
(3.2)
(10.0)
-
10.0
20.0
30.0
40.0
50.0
2010
Jan
Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec 2011
Jan
Feb Mar Apr
Chart 5. Phi l ippine Export A nnual Growt h Rates, January 2010-May 2011 ( in %)
Source:National Statistics Office (NSO)
Chart 5. Phi l ippine Export Annual Grow th Rates, Januar y 2010-May 2011 (in %)
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2 2 IBON Economic and Political Briefng 14 -15 July 2011
Total receipts from merchandise exports in the rst ve months of 2011 totalled US$20.6 billion which
is for now still up 7.5% from US$19.2 billion last year. Low-value-added electronics products remain
the countrys biggest export accounting for half of total exports at US$10.2 billion although a 9.1%
decline was recorded in January-May 2011 from the same period last year. Exports of the next biggest
item, coconut oil, increased 63.8% to US$780 million but this only accounted for 3.8% of total exports.
Exports of the third biggest export earner, articles of apparel and clothing accessories (3.7% of exports),
meanwhile increased by 15.5% to US$756.8 million.
According to the NSO, the US$3.3 billion in outward shipments of manufactured goods which
accounted for 79.8% of total export receipts in May 2011 was an 11.4% decline from the US$3.7 billion
recorded in May 2010. Earnings from agro-based products which comprised 8.3% of total exports revenue
in May 2011 rose 40.2% to US$339.3 million, from mineral products (5.8% of exports) increased by
81.2% to US$237.4 million, and from petroleum products (2.8% of exports) rose by 441.4% to US$114.3
million.
The US was the largest export market in May accounting for 17.1% of exports followed by Japan (15.2%),
China (11.9%), Singapore (9.2%), Hong Kong (7.8%) and South Korea (4.9%) cumulatively accounting
for two-thirds or 66.1% of total exports. With slight month-to-month variations between them, these have
been the countrys top export destinations in recent years.
Foreign direct investments (FDI) meanwhile have fallen 15.1% to US$552 million in the period January-
April 2011 from US$650 million in 2010 and US$872 million and 2009, respectively, over the same
period. This continues a general slowdown in foreign investment since 2009 that has apparently not
changed even upon the new Aquino administration. (See Chart 6). Investments in the rst four months
came largely from the US (74.6% of total equity invested), Singapore (12.3%), Hong Kong (7.4%),
Netherlands (4.4%) and Japan (4.1%). Foreign equity investments in this period went largely to real estate
(42.5%), mining and quarrying (22.0%), manufacturing (10.1%), utilities (6.0%), construction (5.2%) and
wholesale and retail trade (2.3%).
360
166
(290)
636
470
(100)
392
16
(36)
83 94
172 170
326
69 85
(31)
50
222
111
(2) (32)
304
441
207
97
167
81
(300)(200)
(100)
-
100
200
300
400
500
600
700
800
2009
Jan
Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec 2010
Jan
Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec 2011
Jan
Feb Mar Apr
Chart 6. Foreign Direct Investment , January 2009-Apri l 2011 ( in mil l ion US$)
Source:Bangko Sentral ng Pilipinas (BSP)
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IBON Economic and Political Briefng 14 -15 July 2011 23
The Bangko Sentral ng Pilipinas (BSP) played up that net FDI inows were still positive due to strong
macroeconomic fundamentals and favorable growth prospects although could not but acknowledge
the generally listless growth in the advanced capitalist economies, particularly Japan and the US, amid
heightened global economic uncertainties.
In contrast, foreign portfolio investments in the rst ve months of 2011 recorded US$2 billion in inows
which was 160.3% higher than the US$772 million in the same period in 2010. There was US$4.0
billion worth of investments in Philippine Stocks Exchange - (PSE) listed shares, much higher than theUS$2.5 billion recorded in 2010. These went to holding rms (US$1.0 billion), banks (US$679 million),
telecommunication companies (US$520 million), utility companies (US$509 million), and property rms
(US$497 million). Outows, according to the BSP, rose from US$2.8 billion last year to US$5.8 billion
consisting mostly of withdrawals from interim peso deposits (IPDs).
These recent export and investment trends reect a protracted global economic crisis that could quickly
deteriorate even further in the coming years. Overall, it is clear that the world economy after the 2008
crisis cannot go back to the relatively high levels in the 1990s and 2000s when massive debt and ctitious
capital served to articially drive growth. In particular, sovereign debt defaults appear imminent in weaker
Eurozone economies despite ever more drastic austerity measures which, if anything, are fomenting ever
greater political unrest. Japan in turn which has been more or less stagnant for well over a decade now has
to deal with its recent earthquake and tsunami disasters. The US is still the worlds largest economy and
the most advanced capitalist power but, even here, unemployment and government debt are at historically-
high levels.
In short, the world economy is well into an era of high uncertainty and lower economic activity.
Emergency stimulus programs are no longer viable and, indeed, governments now have to deal with the
aftershocks of huge debt and drastic austerity. These suggest further distress for the economy down the
road if the government remains overly focused on export markets and on foreign investments.
National government decit reduction has been through spending cuts more than improved revenue
collection. The Aquino administration has been using its apparent gains on the scal front as proof of its
anti-corruption successes and of rational frugality. The reality however is more basic and the government
has made a policy decision to reduce the budget in the interest of creditworthiness even at the expense of
public education and health services, infrastructure and other economic services. Also, there is as yet no
reason for the Aquino administration to claim that it has signicantly addressed the problem of revenue
leaks due to corruption.
There has been a striking turnaround in the national governments (NG) scal position. Its decit of
just Php9.5 billion in the rst ve months of 2011 is 94.1% smaller than the Php162.1 billion recorded
in the same period in 2010. (See Table 10) However this was due more to severe spending cuts where
NG expenditures fell 10.7% or by Php71.1 billion. Tax revenues from the internal revenue and customs
bureaus on the other hand only increased by Php46.9 billion with most of this 10.3% increase likely just
attributable to increased collections in line with the nominal GDP growth of 9.3% in the rst quarter of
2011.
The most remarkable revenue increase in this period was actually very specic and not even due toimproved tax collections: a large one-off Php23.8 billion in income of the Bureau of the Treasury (BTr)
from collections of dividends on shares of stock in January 2011 (part of the Php48.5 billion in Btr
income). (See Table 10) These collections in just one month were more than double the amount collected
for this item in the whole of 2010 (Php12.0 billion).
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2 4 IBON Economic and Political Briefng 14 -15 July 2011
2010 2011 in million Php in %
Revenues 1,207,926 500,009 581,501 81,492 16.3
Tax Revenues 1,093,643 456,585 503,519 46,934 10.3
Bureau of Internal Revenue 822,623 344,103 391,092 46,989 13.7
Bureau of Customs 259,241 107,473 106,894 (579) (0.5)
Other Offices 11,779 5,009 5,533 524 10.5
Non-tax Revenues 113,877 43,149 77,979 34,830 80.7
Bureau of Treasury Income 54,315 21,467 48,476 27,009 125.8
Privatization 914 95 677 582 612.6
Others 58,648 21,587 28,826 7,239 33.5
Grants 406 275 3 (272) (98.9)
Expenditures 1,522,384 662,116 591,041 (71,075) (10.7)
Surplus/(Deficit) (314,458) (162,107) (9,540) 152,567 (94.1)
Table 10. National Government Fiscal Posit ion, 2010 - January-May 2011
( in Php mi l l ion except ra tes in %)
IndicatorJanuary-May Change
2010
Source:Bureau of Treasury (BTr)
That spending cuts account for most of the improved decit situation can also be seen by looking at the
scal situation relative to GDP. The NG decit was reduced 1.2% of GDP in the rst quarter of 2011 from
6.5% in the same period in 2010 or by a signicant 5.4 percentage points. (See Table 11) However,
NG expenditures clearly accounted for two-thirds of this with a 3.5 percentage point drop compared to
just a 1.5 percentage point increase in revenues. As it is, revenues being equivalent to 14.4% of GDP
in the rst quarter is only a very slight improvement from 14.2% for the whole of 2010 and less than
what was achieved in over two decades since 1989 where revenues ranged from 14.5% (2004) to as
much as 19.9% of GDP (1994). It is also still smaller than the average 15.3% of GDP under the previousArroyo administration covering the period 2001-2010 (which averaged 15.1% even if revenues from
unprecedented privatization are removed).
Revenue leaks can only be said to have been decisively addressed once the improvements in revenue
performance are more uniform and sustained. It may also be recalled that the previous Arroyo
administration allegedly window-dressed its revenue collection in 2006 by seeking advanced tax payments
from big corporations, which subsequently showed up in lower collections from large taxpayers.
Debt service and the public debt stock in any case continue to rise. The Aquino administration has paid
Php634 billion in debt service between July 2010 and April 2011, which is Php8 billion more than what
was paid by the Arroyo government in the period July 2009-April 2010. These payments over its rst ten
months also already exceed payments for the whole year of 2007 (Php614 billion), 2008 (Php613 billion)and 2009 respectively, and of the rst two years combined of the Arroyo administration (Php632 billion).
Yet the NG debt stock has still gone up from Php4.58 trillion in June 2010 to Php4.71 trillion in April 2011
consisting of Php2.69 trillion in domestic debt and Php2.03 trillion in foreign debt. This increase in the
debt stock of Php129.5 billion was at least smaller than the Php209.4 billion increase during the equivalent
period under the previous administration.
Source:Bureau of the Treasury (BTr)
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IBON Economic and Political Briefng 14 -15 July 2011 25
Aquinomics: A Philippine Development Plan (PDP) without development
The Aquino administra tion has chosen the same decades-old economic policies behind low growth,
joblessness, falling incomes and increasing poverty. The administrations rst year conrms its lack
of vision for national and nationalist development. The Philippine Development Plan (PDP) 2011-2016
it released in May 2011 is its blueprint for implementing its declared Social Contract with the Filipino
People. The plan sums up the administrations chosen economic direction and denes its strategies and
programs for the next six years. It recycles the market-based, foreign investment-led, foreign market-
dependent globalization of previous governments despite the countrys poor experience with these in thelast three decades.
The plan specically targets [globally] competitive industries and services: foreign tourism, cheap labor
business process outsourcing (BPO), low value-added electronics for export, extractive mining, export-
oriented agri-business and forestry, and foreign-dominated ship building. It can be noted that these priority
areas of development are conspicuously similar to the Seven Big Winners pushed by the Joint Foreign
Chambers of the Philippines (JFC) in 2009 and again in 2010. The plan moreover gives a central role
to PPPs and CCTs both programs that have been aggressively pushed by the World Bank(WB) and Asian
Development Bank (ADB) especially in the last decade.
IBON has separately released a critique of the PDP with the following main points:*
1. The PDP 2011-2016 does not offer anything new in terms of strategies for more genuinely
inclusive economic growth. The plans main problem is that it dogmatically stays the course of the
neoliberal free market policies of globalization that have been so destructive for the country. This
means the government foregoing strategic economic planning and letting the market and private
sector decide on economic activity in the country national development is then expected to more
or less spontaneously happen. The plan builds on the accumulated globalization policies of previous
administrations including the Arroyo government.
20102010
1st Qtr
2011
1st Qtr2010
2010
1st Qtr
2011
1st Qtr
Revenues 1,207,926 265,824 323,078 21.5 14.2 13.0 14.4
Tax revenues 1,093,643 237,660 265,652 11.8 12.8 11.6 11.9
of which --
BIR 822,623 173,892 199,549 14.8 9.7 8.5 8.9
BOC 259,241 60,581 62,618 3.4 3.0 3.0 2.8
Non-tax revenues 113,877 27,979 57,425 105.2 1.3 1.4 2.6
Grants 406 185 1 (99.5) 0.0 0.0 0.0
Expenditures 1,522,384 400,003 349,275 (12.7) 17.9 19.5 15.6
Surplus/(Deficit) (314,458) (134,179) (26,197) (80.5) (3.7) (6.5) (1.2)
Total debt service
as % of revenues689,799 339,340 332,065 (2.1) 57.1 127.7 102.8
Interest payments 294,244 108,898 90,720 (16.7) 24.4 41.0 28.1
Principal payments 395,555 230,442 241,345 4.7 32.7 86.7 74.7
Indicator
Table 11. Nat ional Governm ent F isc a l Posi t ion and Debt Servic ing, 2010-1st
Quarter 2011
(in mi l l ion Php and in %)
Source:Bureau of Treasury
in million Php % Change
(2010 1st Qtr -
2011 1st Qtr)
as % of GDP
Source:Bureau of the Treasury (BTr)
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2 6 IBON Economic and Political Briefng 14 -15 July 2011
2. The plan is more concerned about a stable and protable environment for big business, especially
for foreign investors, than strategic Filipino-oriented development or ensur ing the well-being of
the people. On one hand, the plan is preoccupied with global competitiveness indicators because the
countrys capacity to attract trade and investments is affected by its poor international rankings. On
the other hand, measures for real national development such as greater regulation of foreign capital and
more protectionist trade policies are actually avoided for undermining this competitiveness.
3. The plan fur ther relinquishes government responsibility to pr ovide essential public goods and
social services. Using as justication that reducing the scal decit is an absolute priority, the plan
even promotes further privatization as a win-win solution for the country. The Aquino administration
has adopted PPPs as a major strategy where government shall rely on the public-private partnership
scheme to implement the bulk of its infrastructure program. This means that the private sector should
be supported and allowed to prot from providing public goods and services.
4. The plan uses CCTs as income-boosting window-dressing to cover up how millions of Filipinos
have been marginalized by globalization policies. The plan cannot but acknowledge the adverse
impact of globalization policies even if it says this in a roundabout manner. Yet instead of correcting
this, it merely proposes so-called social protection particularly CCTs. These are inherently limited
though and cannot possibly cover the tens of millions of Filipinos economically and socially displaced
by the free market.
5. The plan plays up misplaced benets from big infrastructure projects and diverts from the
more meaningful but politically more difcult socioeconomic reforms needed. There is no doubt
that building physical infrastructure in transport, water, power and elsewhere is vital for a strong
economy. But it is important to ask if this infrastructure will have the desired effect as in, be broadly
developmental in the specic inequitable conditions of the Philippine economy. It is clear how big
rms participating in PPPs will benet from guaranteed prots, and how export-oriented corporations
using the improved infrastructure may reduce their costs of doing business. Established foreign,
corporate and landed elites will then likely gain. But it is less clear how the mass of underpaid workers,
landless farmers and unemployed across the country will benet especially if the infrastructure is
concentrated in the countrys usual centers of economic activity.
6. The plans intensied privatization of health, education and housing will make these servicesavailable only to those who can afford them. The government is systematically turning vital social
services into opportunities for private prot-making rather than directly providing these so that they are
accessible to everyone including the countrys poorest.
7. The plan seeks to increase taxes paid by the poor while avoids taxing the r ich. It has an imbalanced
scal policy. The plan argues that the government faces decit problems. Hence, it will tighten
public spending and reduce outlays for domestic development in terms of public infrastructure, social
investments and welfare spending. These will have adverse effects on the poor and on the economy.
Yet the government judiciously avoids taxing the rich to raise resources such as direct taxes on high-
income individuals and corporate prots, or indirect taxes on non-essential luxury goods and services.
The administrations centrepiece PPP program is discriminatory in favor of big prot-seeking players andforeign investors over building a domestic economy providing for its constituents needs. The program
plays up the role of prot-seeking private and foreign parties in infrastructure building and providing
public goods and services. Instead of putting an end to the ills of privatization and other free market
measures, the Aquino government is further opening up the economy for big businesses and prots at the
expense of the people. (See Table 12) More expensive public facilities will aggravate Filipinos already
serious problem with making ends meet. There are 12 priority rail, road and airport projects lined up this
year worth Php157 billion although none have yet been successfully bid out, much less started.
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IBON Economic and Political Briefng 14 -15 July 2011 27
The Aquino administration also clearly seeks to build on previous globalization policies and extend
these to as many areas of the economy as possible. The leaderships of the Senate and of the House ofRepresentatives have already expressed their willingness to push for charter change particularly towards
opening up the economy to greater foreign investment. The government has also already launched a
national campaign to promote free trade agreements (FTAs) as well as declared its intent to enter into a
second FTA this time with the European Union (EU). All these indicate how the Aquino administration
is relying mainly on foreign investments and foreign markets for economic development, rather than the
painstaking but more sustainable and equitable approach of focusing on the domestic economy.
GROWING DISENCHANTMENT
Amid deteriorating living conditions and apparent lack of decisive action from government to protectthe public from rising cost of living, Pres. Aquino saw the steady and steep decline in his performanceand satisfaction ratings. There is growing disenchantment especially among the masses, who were initially
enthralled by Aquinos bold words about a presidency radically different from its predecessor one that
is not only honest and humble but most of all sensitive to the needs of the people. Pres. Aquino and his
handlers attempt to stem this trend by drawing public attention to the administrations banner issue of
corruption thus the repeated tirades against the misdeeds of Gloria Macapagal-Arroyo. But whether or not
Arroyo will face actual legal cases led by the Aquino administration remains to be seen.
After all the posturing of being the alternative to the corruption-ridden, undemocratic Arroyo regime,
the Aquino presidency has proven in a year that it is not about to turn around this crisis-battered nation.
Pres. Aquino promised reforms without a concrete reform agenda. He promised change without departing
from failed socioeconomic policies. He talked about good governance using the same patronage and elitepolitics. One by one, the bubbles of expectations that he created burst as Pres. Aquino concluded his rst
year.
The Aquino presidency is turning out to be more of the same anti-people, pro-foreign and undemocratic
governance that has been all too familiar to the Filipino people. Its rhetoric on poverty alleviation remains
that an empty rhetoric and worse, just an afterthought to its economic planning, the central theme of
Family Corporation PPP-Related Interests
Aboitiz Aboitiz Equity Ventures (AEV) power, transport
Ayala Ayala Corp. power, water, telecommunications
Cojuangco San Miguel Corporation (SMC) power, water, tollways and highways, rail, airport
Consunji D.M. Consunji, Incorporated (DMCI) power, water, constructionGokongwei JG Summit power, telecommunications
Lopez Lopez Holdings/First Balfour power, telecommunications, construction
Pangilinan Metro Pacific Investments Corp. (MPIC) power, water, tollways, ports, telecommunications
RazonInternational Container Terminal
Services, Inc. (ICTSI)ports
Ty Metrobank power
Source: IBON
Table 12. Phi l ippine Conglomerat es w i th PPP-related Int erests (pre l iminar y l is t ing)
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which is the vigorous but not so novel promotion of privatization. The Aquino presidency has not been
radical to break away from the failures of its predecessor, nor has it been a reformist as its moderate
supporters had wanted it to be. The Aquino presidency has been simply lazy, rehashing old programs and
staying within the comfort zone of elite politics.
Such inertia to address the worsening plight of the population is already one of the distinguishing marks of
Noynoy Aquinos leadership. His lack of vision, his lack of inspiration, even his lack of decency to have
purchased a multi-million-peso car (which he reportedly sold) while the people are reeling from poverty,has not helped reverse the peoples deteriorating perception of the Aquino administration. Instead, without
efforts to be discreet about his coming from a ruling clan, Pres. Aquino has wasted no time to consolidate
elite rule, continued militarist approach to stie dissent, and up the ante for foreign investors. There has
also been a strikingly increased puppetry to the US.
Kayo ang boss ko. (You are the boss) Pres. Aquino addressed the people in his inaugural speech,
dramatizing his supposedly unassuming brand of leadership and overemphasizing that he would not abuse
power. Kayo pa rin ang boss ko, (You are still the boss) he said after a year when he marked the rst
anniversary of his inauguration, trying to convince some more a disillusioned populace, or perhaps even
just his camp, that the worn-out sound byte would still work. But his appeal has waned. After having
established allegiance to elite and imperialist powers and servitude to the already discredited policies of
globalization, which have only driven the people further down to hardship, Noynoy Aquino has clearly
demonstrated to everyone who his real boss is.
The Aquino presidency does not hold the path to real change, not with its overused slogans ofdaang
matuwid(straight path) and ghting corruption in order to end poverty, as none of these is true. Its
politics has remained traditional, feudalistic, elitist and colonial, guided by the principles of free market
democracy, back to business as usual, and putting in place only cosmetic changes to maintain legitimacy.
Real change can only happen through the long, arduous road of overhauling the system that had
entrenched the elite at the expense of the people and the countrys resources. Pres. Aquino could have
at least paved the way by instituting relevant policies and programs that have long-term benets to the
people. But in a year, the Aquino presidency has shown that in its remaining years it could actually be an
obstruction to real change.
Consolidating elite r ule
The Filipino people can dream again, Pres. Aquino had declared during his inauguration. It has been a
year of one nightmare after another for the Filipino people worsening joblessness, insufcient incomes,
rocketing prices of food and basic commodities, increasing transport fares, oil price hikes, increases
in water and electricity rates, more land grabbing stories, more demolitions, less social services. There
has not been any respite from the crisis left behind by the Arroyo administration, while the Aquino
administration has only continued to fuel the social unrest by doing nothing.
Pres. Aquino just allowed things to happen, especially the things that could have uplifted the people if only
he intervened. He could have used the political momentum driven by his large mandate to confront the
oil companies on their proteering or j