THE Philippines could experience another lost decade if the current administration fails to address the impact of multiple crises of food, fuel, and the pandemic amid rising debt, according to the Freedom from Debt Coalition (FDC).
In a presentation at the State of the People Address (SOPA) on Wednesday, FDC President and University of the Philippines Professor Emeritus Rene E. Ofreneo said among the problems of the country now is the rise in commodity prices, notably for rice: to P50 per kilo from P37 per kilo. Inflation, he said, has breached the 6-percent mark due to excise taxes on oil, fuel products, sugar, etc.
On top of the high prices, slow economic growth and the pandemic, the rise in unemployment and poor-quality jobs, as well as worsening poverty which increased to 23.7 percent in the first semester of 2021 are major concerns, Ofreneo stressed.
“The country is facing multiple crises that if left unaddressed, could plunge the country into our own ‘decada perdida,’ a lost decade not unlike that experienced by several Latin American countries in the 1980s when their economies collapsed from the weight of failed policies and unserviceable debt,” FDC said in a statement.
In order to address the crises, FDC recommended that the administration reduce its reliance on foreign investors to boost the economy and increase its own stake in the economy by making human capital investments.
FDC said relying on foreign investments has been a long-time strategy that has not always benefited ordinary Filipinos. Citing data from the Philippine Statistics Authority (PSA), FDC said, total approved investments was only at P8.98 billion or less than half of the P19.5 billion for the same period last year.
The decline in investment pledges came at a time when the Corporate Recovery and Tax Incentives for Enterprises (CREATE) had come into effect. The law aimed to reduce income taxes of companies in a bid to encourage them to increase investments.
Last year, the National Economic and Development Authority (Neda) explained that the law aimed to make the corporate income tax system performance-based, targeted, time-bound, and transparent.
Key provisions of the law include the reduction of the regular CIT (corporate income tax) by 10 percentage points, or from 30 to 20 percent for domestic corporations with a taxable income of P5 million and below, and with total assets of not more than P100 million; and reduce the regular CIT by 5 percentage points, or from 30 to 25 percent, for all other domestic corporations, as well as foreign corporations currently paying the regular rate.
Neda said the law aimed to promote stronger governance in the grant and review of tax incentives through the oversight function of the Fiscal Incentives Review Board (FIRB), ensuring accountability and transparency.
Instead of reducing the taxes of these foreign players, the government must increase spending on education, health care, housing and nutrition, Ofreneo stressed. This will address the impact of the pandemic, particularly on the job losses, and ensure more Filipinos can afford their basic food and non-food needs.
“The Marcos administration faces a dilemma, with the country struggling to recover from the pandemic, and facing a myriad of crises. Will it save the corporations or will it save the ordinary people first?” FDC said.
“For the Freedom from Debt Coalition, which has been sounding the alarm on the emerging debt and fiscal crisis in an increasingly uncertain global context for years, the answer is clear. Focus on the people first,” he added.
Bold reforms–IBON
In a separate briefing, Ibon Foundation Inc. said the new administration must take pains to institute bold reforms given the challenges the country faces.
Ibon said addressing these challenges means discontinuing the Duterte administration’s “neoliberal policies that enriched oligarchs, immiserated the majority, and plundered resources.”
The think tank added: “Bold measures that will truly develop agriculture and industry need to be identified, and the new administration can start with junking existing harmful policies such as the Rice Tariffication Law, expanded foreign investment liberalization such as in public utilities, and lopsided trade deals only favoring rich countries.”
The group called for the implementation of immediate measures such as providing cash assistance to households, substantial wage hike and subsidies, removing oil taxes, ensuring affordable and available transport, and supporting agricultural producers and micro, small and medium enterprises.
These measures, Ibon said, do not only strengthen aggregate demand but also help ensure supply response and mitigate further inflation.
Ibon also recommended that the administration realign the budget for non-urgent infrastructure, debt service and the military, and impose a billionaire’s tax.
It should start expanding policy space by reviewing the promarket and big business-friendly framework which has only made millions of Filipinos more vulnerable.
Ibon noted that the Philippines is among the poorest performing economies compared to its neighbors. Its gross domestic product (GDP) had the biggest contraction of 9.6 percent in 2020, followed by Thailand and Malaysia, which contracted by 6.2 percent and 5.6 percent, respectively.
It added that the average annual GDP growth of 3.8 percent from 2016 to 2021 ranks the country as the 5th worst economic performer in the region before and during the pandemic.
The share of agriculture and manufacturing in the economy at 9.6 percent and 19.2 percent in 2021, respectively, are their smallest in history—in the case of manufacturing, in 70 years.