The latest labor force statistics reaffirm what we already know. Positive economic growth is slowly coming back, alongside the gradual re-opening of the economy. This is reflected in the declining number of the unemployed. The country’s unemployment rate was down to 7.4 percent in October 2021, which is below the 8.7 percent recorded in April 2021 and the astronomical 17.7 percent in April 2020. The unemployed now number 3.5 million, while the employed total 43.8 million.
However, there is a downside on the nature of the growth taking place. The underemployed, those with jobs but still looking for work, are growing in number. At 16.1 percent, they are more than double the unemployed. This figure is reinforced by other PSA data: the number of those working at less than 40 hours is rising and so are the unpaid family workers who work without pay in small farms and micro family-owned businesses, most of which belong to the large and unprotected informal sector. In short, there is a shortage of good quality jobs and businesses capable of providing workers with decent jobs. But many less fortunate workers, desperate to have a job, are accepting whatever jobs are available, no matter how low is the compensation or how bad the work conditions are.
What the country needs is stronger economic and jobs recovery. Not a slow-by-slow or gradual recovery based on the assumption that opening up the economy will bring it back automatically to the pre-Covid “old normal.” As it is, the Philippine unemployment rate is among the highest in Asia, and its economic recovery, among the slowest in the world.
The next administration should have the capacity to strategize, develop and implement a program of vibrant, inclusive and sustainable growth. This will not be easy. It shall inherit a bad fiscal situation: high level of national indebtedness (at unpayable 65 percent debt-to-gross domestic product ratio) and limited available financial resources.
How shall the next government nurse the economy to grow at a higher and faster level if it does not have the financial weapons to do so? This is the reason why civil society movements such as the Freedom from Debt Coalition and the Nagkaisa Labor Coalition are pushing for a wealth tax, a tax to be levied on the country’s richest corporations and families. It is a tax not to punish the wealthy per se but to save the economy and save everyone, including the rich who cannot make money in an unstable economy.
The next administration should also review and re-strategize the country’s development blueprint. The call to go back to the “old normal” is a bad call. The economy was not exactly doing well in the pre-pandemic period, with President Duterte himself declaring, middle of his term, that the economy was “in the doldrums” (“Duterte: economy in the doldrums,” Philippine Daily Inquirer, June 24, 2018). He made this comment during his inspection of the situation in the provinces and in the communities near the military camps. Yes, the economy then was growing but it was growing in a very unequal and unsustainable (in terms of the environment) way, with the industrial and agricultural sectors remaining stagnant or hardly growing.
In reality, the call to “go back to the old normal” is a call for the deregulated economy to resume the old neoliberal way. This old neoliberal way assumes that the road to recovery depends on FDI coming in in a liberalized market. Is this not the reason why the DOF and Neda, instead of raising corporate tax, even pushed for its lowering through the new CREATE law?
Now, they are pushing for new laws further liberalizing a liberalized trade/investment regime. The target is not manufacturing where 100 percent foreign equity has long been allowed. The main target: abolition of the requirement for Filipino participation in the capitalization of businesses operating public utilities, owning land and extracting minerals. The CSOs are against such proposed liberalization. The Philippine experience in the liberalization and the privatization of the power sector (from generation to transmission and distribution) shows that big players, foreign and domestic, simply engage in oligopolistic business practices, content in capturing guaranteed profits at the expense of the consumers.
As to mineral exploitation, these have serious implications on the environment. Same with the land market liberalization, which can lead to more social and economic inequality.
Another FDI liberalization target: further opening up of the retail market to foreigners down to the pop-and-mom level or neighborhood small stores. A number of SMEs and CSOs are questioning how liberalization at such a low level in the highly competitive retail market can infuse dynamism in the economy. The likely scenario is that the big players, foreign and domestic, will simply displace thousands of micro entrepreneurs and sari-sari store owners, as what has been happening since the 1980s-1990s.
But why focus on a program of attracting FDI through fiscal incentives, which lower the government’s overall tax collections? History shows that the biggest attraction to FDI is a booming economy, not necessarily fiscal incentives or cheap labor and other resources. And why focus on attracting FDI as the main economic stimulus at a time of “global distancing” among countries and trade conflicts among big players? Why forget the potentials of developing domestic industries catering to 110 million Filipinos?
Incidentally, local producers bewail how the country lost some golden opportunities to use the pandemic to strengthen domestic agriculture and domestic manufacturing. At the height of the pandemic, the government liberalized the importation of rice (under the Rice Tariffication law or RTL), pork, chicken, vegetables and fish, a certain volume of which is not even taxed because they are smuggled (under-declaration or mis-declaration by importers with the connivance of corrupt customs officials). The flood of rice imports in 2020-2021 even forced a number of farmers, especially in the rice sector, to get out of farming. The projection by the lousy free-trade economists that the rice farmers would become stronger and competitive did not happen. The rice farmers were simply clobbered by the bad tariffication law enacted by a government insensitive to the situation of farmers. As to the objective that rice would be cheaper for the consumers, this did not happen either. The big private rice importers and distributors kept rice prices at pre-Covid levels while grabbing the extra profits generated by the low prices of rice imports.
As to manufacturing, the pandemic provided the country the opportunity to develop industries supportive of the health sector such as those producing face masks, face shields, ventilators, coveralls, PPEs and so on. The DOH even challenged the local manufacturers to show their capability in producing these materials. A number responded positively by reengineering or re-purposing their facilities (particularly those in the garments, electronics and auto parts industries). But what did the DOH do? It turned around and, together with the DBM, supported the graft-ridden importation of the said medical supplies from China.
Clearly, the review and re-strategizing of the development blueprint by the next government should be as rigorous and exhaustive and participatory as possible. It will be a mistake if the next government shall repeat the mistakes of past administrations to rely on a small group of neo-liberal economists whose shopworn economic remedies—trade and investment liberalization, economic deregulation, privatization—have failed to deliver the promises of strong and sustained growth, poverty reduction and good quality jobs for the Filipino masses.
Dr. Rene E. Ofreneo is a Professor Emeritus of the University of the Philippines.
For comments, please write to reneofreneo@gmail.com.