Excerpts from discussions at ANC’s senatoriables forum, moderated by Ricky Carandang; with senatorial candidates John Henry Osmeña (GO) and Adrian Ordoñez Sison (Kapatiran) as participants. Panelists are Dr. Cayetano Paderanga of the UP School of Economics, Peter Wallace of the Wallace Business Forum and Dr. Felix Asperer, dean of the Conrado Benitez Institute for Business Education of the Philippine Women’s University. 

Carandang:  This is a very interesting subject tonight, because poverty is not really well defined. It means many things to many people. This country has poverty all over the place. There’s poverty of health, poverty of order, of justice, of education, of employment. You’ve got poverty all over, and when you say poverty alleviation, the question that comes to mind is which of all these poverties do you seek to alleviate? Or was the term poverty alleviation simply invented by the Makati Business Club to justify the rising prices of stocks and the improving exchange rate, both of which do not reach the people? The rising cost of the peso prejudices our overseas worker. When he used to get 55 to the dollar, for every hundred dollars he would send over he could put P5,500  in the hands of his relatives before the VAT tax. Now that it’s 47 the corresponding decrease has taken place. The Cebu exporters who make rattan furniture are impoverished by the improvement of the exchange rate. The sugar farmer is also impoverished by it. So what is poverty alleviation? What makes or what constitutes poverty alleviation? We can settle that question tonight. 

Sison: (Translated from Filipino) We released our platform in the newspapers. Part of our legislative agenda is a preferential option for the poor. Now we ask, why are there more poor people? Because, as we keep pointing out, of our budget of P1.1 trillion, about 50 percent is used to repay debt. It’s not a bad thing to pay debts, but when you use half of the budget for that, you reduce the resources for creating jobs, for development, technology and other things people need. Yes, even for schoolbuildings. One congressman put up a feeding program just to discourage children from being absent from classes. It seems to work—I think those are the initiatives people need.

There are also debts we shouldn’t even be paying because, for one, they ruined the economy. Not a single kilowatthour was used from the nuclear power plant, so why are we paying for its loan? We should have negotiated first with creditors. Our prioritization of legislation, particularly where scarce resources should be allocated first, also needs reviewing. In many cases, money goes to areas that don’t really help people. 

First Round 

Panelist Paderanga: What concrete programs would they (senatoriables) propose, including proposed legislation, in order to spread the economic growth, and how effective do they think these programs will be? 

Sison: I think we should put a cap on our debt service, say, 25 percent of the national budget could go to pay debt. And we must have legislation to empower the executive department to re-negotiate loans; let’s give our officials parameters to define the renegotiation. And we must really set aside a bigger budget for education. As the Constitution says, the biggest budget should be on education not defense. Let’s review the defense budget, perhaps reduce arms procurement and pursue peace negotiations with rebels in Mindanao. Besides the human toll, when there’s fighting, investors shy away; people can’t have livelihood and their capacity to live another day is hindered. Many of our people die by default because people don’t want to invest.  

Osmeña: The long-term solution to poverty alleviation in this country lies in a very dramatic change in our political organization. The present government is centrist, power is concentrated in Manila. I have been proposing for 20 years the conversion of our government into a federal system, which not only distributes power to all regions, but also addresses a main source of instability: the Christian “tyranny” over our Muslim population. If we could create a Muslim commonwealth we could be well on our way to solving the Muslim problem, or should I say the Christian problem. On specifics, I will address the question of agriculture. At least 18 million hectares of forest land remain forest land because our lands, our laws on land, since 1919 have not been amended, and that is what we have to do. 

Panelist Wallace: Last year the Philippines attracted about US$1 billion in foreign investment; there’s another $1 billion in expansion of existing business here. This was a considerable increase on the previous year, but it happens to be the lowest in Asia. The interest in the Philippines is just not strong there. What’s your view on the role of foreign investment in the country and its economic growth, and what would you do to increase dramatically—I stress dramatically—the level of foreign investment? 

Sison: Investments both by foreigners and locals are important. But only $1 billion has come in because the perception of businessmen seems to be that our investment policies are not consistent. Our cost of money is also high; interest rates may need to be reduced. We also must invest in infrastructure because when Lee Kuan Yew came here in 1992, he listed five things: first, he said, we must spend on infrastructure. Second, we have to train people well. Three, enforce the law regardless of who is involved. Four, there’s need for transparent governance, and five, accountability. Let’s start with these, and maybe then more people will invest here. By the way, we must also stop extra-judicial killings because they ruin the country’s image [as a democracy]. 

Osmeña: I welcome foreign investments, but they should address the problem of poverty. Poverty does not exist in Makati. It exists in the countryside. So, foreign investments should be directed at the agricultural sector. I earlier mentioned 18 million hectares of forestry without trees, which foreign investors could use for plantation type agriculture. The most successful agricultural ventures in this country are Dole, Del Monte and the banana plantations in Davao. So obviously foreign investment, directed towards agriculture in the areas of poverty, [will] address poverty. The other problem is the nature of this foreign investment. We like to put our foreign investments in so-called export processing zones, which are nothing better than glorified King Philip tailoring shops. You walk into a tailoring shop, you pick the material you want for your suit and you come back three days later and you pay him P6,000, P8,000 for that suit, but how much of that suit has the tailor really put in? P1,000? The other P7,000 are from material imported from England. That is what goes on in the export processing shop zones. 

Asperer: I’ll pick up from the statement of Senator Osmeña regarding the trickledown effect on the economy. Normally there are three classifications of a population—the upper class, middle class and the lower class. Practically all the interventions that are being done are towards the upper group and the lowest group. We tend to forget that right in the middle, that group could act with a multiplier effect. So I’ll focus the question on that particular area. What are your proposals in order to, let’s say tap, the multiplier effect of the middle class? 

Sison: How to expand the middle class? Let’s look at the tax: the first P100,000 are exempt from taxes but that’s not enough. I think it’s time we restore that setup when high-school education tuition was deductible from income tax. Let’s restore it to encourage people to stay in school. The tax rates on the middle class are high. Since VAT has been successful, experts are saying we can cut income tax. If that can be done, the middle class will grow, will have more money in their pocket, and they can even invest. Second, I propose a carrot approach for employers, for them to apply profit sharing, or possible stock options. These days not even the top 1000 corporations are listed in the stock exchange. Let’s encourage that. Anyway, they don’t want to touch the minimum wage law; then let’s have profit sharing, so we all grow together. 

Osmeña: The middle class is the one most hurt by the E-VAT, which was P90 billion last year, P70 billion the year before, and P45 billion before that—a total of almost P205 billion from the middle class yan. If you want to help them, scrap the E-VAT, raise the income tax; raise the taxes on [luxury cars] that Sen. Recto reduced. The rich can very well afford to pay higher tax on those. Let’s scrap the tax-free exchange to gain control—that’s what Ayala Land uses to avoid paying capital gains tax. They can pay but they [skirt] it. So if we really want to help middle class, scrap the regressive taxes like E-VAT, raise the taxes of the rich, let’s have a progressive tax system.  

Second Round 

Paderanga:  Senator (to Osmeña), I’d like to follow up on your statement on Charter change. One of the knocks on charter change, for a federal form of government is that it would increase the levels of authority and therefore make running the government more costly. How would you address that? 

Osmeña: We will not increase the level of authority, because you will have a national government, and after that you will have a regional government. The ones that will be diminished by a federal system will be the provincial governments because from the region, you go to a regional assembly down to the component provinces, minus the provincial board. Now, while there may be costs to that, these costs will have to be borne in the interest of people. Because you will have to replicate in each region certain functions like planning that are now being undertaken by the national government. As a matter of fact, what would be left to the national government would simply be defense, the administration of finance, justice; everything else will pass on to the regional government. To me what is important is that Muslims in Mindanao will have a government that is Muslim-oriented, run by Muslims, without Christians in Manila telling them what to do with their lives. And we in Cebu, we can pursue investments, without having to wait for Manila to trickle down whatever we should get because we gave her a 1-million vote majority. 

Paderanga: The other fear is that if you give certain regions autonomy, you will in fact start the movement for separatism. 

Osmeña: That is a very real fear, but I don’t think any region can exist as a separate nation. Maybe we can have our Cebuano nation, we are certainly capable of it. Anyway, I think that fear is not really going to materialize. We can keep our country together; we have overcome for example the language divisions. Tagalog is now the generally spoken language. We have one educational system, one monetary system. We are approaching a single identity. I am confident, what was feared by the Americans in 1910, that Mindanao would be lost to the national government, is no longer a valid fear today. 

(to be continued)

Do we have a poverty of options?