Is it really “the Economy, Stupid?”
The Gardener’s Tales (Fourth of a Series) By Charlie Avila
Manila, March 13 ,2022 – Is it really “the Economy, Stupid?”Isn’t this the question for the coming elections? Or does it matter at all?
In the study concluded last month by economists in our National Food Coalition (Ria M. Teves, Director), we saw how large-scale illegal acquisition of lands continued unabated during the lockdown in 2020 to 2021. The methods included large scale plantation, mining, tourism and real estate development, causing air and water pollution exacerbated by climate crisis, deforestation, and loss of biodiversity.
The use of force often accompanied these land-grabbing methods, and this disregard for the rule of law and human rights observance resulted in displacement of entire communities, their loss of livelihood, and farmers and indigenous people being driven deeper into hunger and poverty.
Still another consequence was land and ocean degradation, contributing to greater marginalization, impoverishment and hunger of the farmers, fishers and indigenous people.
Hunger and Food Insecurity
Two-thirds of Filipino households (62.1%) experienced hunger and food insecurity – 21.9% higher than the pre-pandemic rate of 40.2%, according to the Food and Nutrition Research Institute of the Department of Science and Technology.
A Bloomberg study stated that more than half of the households (56.3%) reported difficulties in accessing food during lockdowns mainly because they had no money to buy food (22.1%), or had no access to or limited public transportation (21.6%), or had lost their jobs (19.5%), or there were only a few food stores in the area (10.8%).
About 5.1% of households had difficulty accessing food during the lockdowns because these households were composed mostly of older persons who were not allowed to leave their homes during this period and there were no other family members who could buy food for them.
The heightened cases of COVID 19 restricted the movement of the Filipino population and drove the small and medium enterprises into bankruptcy, leaving the economy in shambles and the consumers hungry and impoverished.
Prior to the pandemic, 83% of children within a specified age group participated in OPT Plus or Operation Timbang Plus, the annual weighing and height measurement of children in order to identify and locate malnourished children. During the pandemic, only half (51.1%) of children were weighed and measured for height; 48.8% of children were not weighed nor measured for height because the lockdown prevented children from visiting the health center (51%), or the barangay health worker did not visit the children (33.5%), or because the respondents were unaware of the program (12.4%).
Unemployment/Underemployment
According to the Philippine Statistics Authority (PSA), in January 2021 some 4 million Filipinos were unemployed – higher than the 3.8 million unemployed in October 2020 and the 2.4 million in January 2020. Additionally, some 6.6 million people who already had jobs were still looking for more to increase their income to meet their daily needs, leading to a higher underemployment rate of 16% in January.
The National Economic and Development Authority (NEDA) studied the cost of the pandemic and quarantines on the present and future generations of Filipinos, and found that during the 18 months of lockdowns, 17.6 million Filipinos were unemployed, and, at its peak, 8.7 million workers lost their jobs.
As a result, the loss of total household wages and incomes amounted to about PhP1.04 trillion in 2020, representing an average loss of PhP23,806 per Filipino worker.
The Philippines Statistics Authority (PSA), however, reported much lower unemployment (6.9%) and underemployment (20.9%) rates for July 2021.
Likewise, the World Bank noted that between October 2020 and March 2021, around 5.5 million jobs were created, and 2.2 million new jobs were added between February and March 2021.
Persistent Income Loss
The same World Bank, however, expressed concern over the quality of jobs arising. It noted an increase in the share of “elementary occupations (or those commonly associated with low-pay jobs),” an increase in underemployment, with the newly underemployed coming from the agricultural sector, an increase in the share of self-employed and non-paid workers, and a decrease in the share of wage and salary workers and employers in the labor force.
Of the 2.2 million new jobs, more than half were in construction, while other sectors, like education and real estate, saw losses in employment.
It noted that the “increase in underemployment, fall in hours worked, shift to non-wage employment, and agricultural disruptions contributed to earnings losses and to fall in household income.”
A UNDP Survey found that 83% of households experienced a decrease in their household income, with 34% totally losing their source of income.
Slightly less than half (44%) of the households which earned below PhP10,000 monthly completely lost their income, while among those households which earned between PhP10,000 and PhP30,000 roughly three-fourths lost at least half of their incomes.
The survey also found that informal sector workers suffered more: around 42% completely lost their income, compared with 35% permanent workers who lost their jobs.
Given this dire situation, government promised to extend cash and in-kind assistance, locally called Ayuda (Filipino term meaning aid, assistance or help), to mitigate the effects of COVID-19 and its lockdown policy choices (e.g., restrictions on mobility, curfews, physical distancing requirements, etc.).
Needless to say, however, not everyone among those who needed Ayuda most—the hungry, the jobless, the poor—actually received the assistance they needed when they needed it.
Rising Debt
Taking advantage of the pandemic, the government resorted to borrowing more, both domestically and overseas.
At the end of August, 2021, Philippine outstanding debt stood at PhP11.6 trillion, 0.28% higher than its debt level in July, and 21% higher than its debt level in 2020.
In 2020, debt exceeded half of our GDP for the first time since 2013. Philippines’s debt-to-GDP ratio has been climbing. Each Filipino’s share of the Philippine debt in June 2021 amounted to PhP101,454 per person.
The fundamental issue, of course, in the matter of incurring debts is the country’s ability to repay its debt, which in turn hinges on the government’s ability to put new borrowings to good use.
Government borrowings or debt is very tricky because, in theory, it is intrinsically neutral. It can be good or bad for the country depending on the magnitude, the use, and the management of the debt.
So national debt is stated as a percentage of the country’s GDP, and the servicing of that debt in relation to the country’s international reserves and government revenues, as well as, earlier on, the effectiveness of the government in deploying its debt to productive investments that will grow the economy.
What, then, is the current score? At year end 2021, Philippine debt was 60% of our GDP of P20 trillion. It was 45% of our gross international reserves, and was costing us an average of 2% per annum, eating P223 billion or 5% of the national budget excluding payments for the principal.
This means that to be able to service the debt amortizations of principal and interests. our GDP/economy and government revenues should grow by at least 5% annually.
This could happen if the borrowed funds were deployed in productive investments by the government. But now, given the Pandemia and Ukraine, our country’s development planners have stated that it is quite unlikely for the country’s economy to grow 5% annually.
The Graft and Corruption Factor in the Economy
Pharmally Amidst the Pandemic
We said earlier that the fundamental issue in the matter of incurring debts is the country’s ability to put new borrowings to good use, not to graft and corruption. It has been estimated that 20% of the government budget is lost to corruption.
The case of Pharmally Pharmaceutical Corporation precisely demonstrates the lack of concern for the plight of the Filipino people already battered by the pandemic. A Senate inquiry had discovered that Pharmally Pharmaceutical Corporation was awarded a total of 15 contracts in 2020 and 2021 from three government agencies worth at least PhP10.85 billion.
What made the award suspicious was that Pharmally had registered with the Securities and Exchange Commission only in September 2019, and had a paid-up capital of only PhP625,000.00.
The aforementioned contracts covered the purchase of pandemic supplies, including personal protective equipment, test kits, surgical masks and face shields. The Senate inquiry found these items to be overpriced.
Based on the prices from other companies with contracts to supply the same items to the government during the same period, the Senate inquiry saw that the overprice of Pharmally’s supplies could reach PhP80.26 million. Several of those who own and operate Pharmally were later linked to the safe office of presidential advisers.
The Graft and Corruption Factor in the Economy
The Malampaya-Udenna Deal
It seems that the biggest crony agreement in the world did not happen in the time of Marcos, but under the Duterte administration.
Activist lawyer Rodel Rodis told me the story of the #MalampayaGasField and Dennis Uy.
The Malampaya is the sole natural gas field in the country which supplies 40% of Luzon’s energy requirement.
It is a joint undertaking of the Philippine government and the private sector specifically with shares of 45% to Chevron, 45% to Shell, and 10% to the gov’t.
Recently, however, the shares of Chevron and Shell were sold to Udenna Corp. owned by Dennis Uy, top Duterte crony. Uy now owns 90% of the Malampaya.
The ongoing issue is that this transaction was questionable and allegedly breached the law.
The agreement in the Malampaya Project said that if Chevron and Shell would like to sell their interest, they will first have to offer it to the Philippine gov’t — something that did not happen at all.
Atty. Rodis, one of those who filed a complaint against Energy Secretary Cusi & Dennis Uy, said that the Dept. of Energy failed to do its job by approving the sale of shares to a company that didn’t even meet the technical & financial qualifications for handling a natural gas field.
Note that Udenna entered this contract without any assets & a 100-billion-peso debt loans. It also has zero track record on handling operations of a gas power plant.
In fact, “Udenna didn’t pay a single centavo in the acquisition of the Malampaya oil gas field”, according to Atty. Rodis.
Why is this alarming?
Firstly, since everything is on loan, Udenna has nothing to lose. They are not liable to any mistake because they don’t have investments on this agreement. They also now have control over the largest enterprise in the country.
Secondly, the Philippines lost 138-billion pesos in this Malampaya contract and Dennis Uy is the one who benefited most being the crony closest to President Duterte.
Thus, Malampaya is now handled by a company w/ incompetent people. Any mistake can lead to a gas leakage that will destroy the entirety of Palawan Sea and can even extend to Batangas.
Kung nagalit tayo sa 8-billion-peso crony contract ng Pharmally, what more yung 138 billion pesos?
We are giving a huge asset of the Philippines to a single entity, and in doing so, we are granting Dennis Uy an enormous control on the energy oil industry. This Malampaya issue is a theft of natural resources.
Atty. Rodis even said that they found out that there have been ongoing talks between Udenna and China with regard to developing other gas fields in the Palawan Sea. When that happens, then eventually our fear of China controlling the energy sector will be true.
We still have the chance to stop this if we choose the people who understand the systemic character of corruption in our economy and will ensure that this contract will be voided.
Start questioning now the presidential candidates on where they stand in this Malampaya issue.
(More to come 😊)