Special Report on the Economy
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From the economic front

Not surprisingly in a country obsessed with entertainment and politics, the headlines have been hogged by the tantalizing tiff between the grand poohbahs of the House and the grander poohbahs of the Senate. 

I’m amazed by the rancor that’s developed between both chambers despite being thoroughly dominated, both of them, by the ruling PDP-Laban party. Even on an issue as important to Duterte as federalism and charter change, they still can’t seem to get their act together over how to proceed.

Con-Con or Con-Ass? Joint or separate voting? If their institutional and personal egos can’t abide what after all are simple procedural differences, how can the honorable legislators be trusted to tackle more serious matters of true import to the future shape of the Constitution and the Republic?

Time’s running out on these bickering mandarins. If they end up  being sidelined by history for the greater good, that will be exclusively on them.

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It’s from the economic front these days where we’re getting news that’s generally upbeat.

For starters, from SWS’ 4th quarter 2017 survey last December, it seems that poverty is abating a bit faster. Thirty-one percent of the respondents said they had escaped poverty within the last four to five years, which is measurably higher than the 26.6 percent with a similar response in the September survey.

This bit of good news puts an interesting frame on the latest report that the farmgate prices of local rice rose by 7 percent at the start of the new year. Remember that rice accounts for 10 percent of consumer budgets here. What can be done to mitigate the impact of such price increases especially on our poorest households?

The BSP’s redoubtable deputy governor, Diwa Guinigundo, offers an interesting solution from macro-economics: Replace the current policy of quantitative restrictions (QR) on rice imports, implemented through NFA’s monopoly of that trade, with a policy to open up the rice import market to everyone, subject only to a 35-percent border tariff.

Guinigundo estimates that this “tariffication” policy could shave as much as one percentage point off the general inflation rate. Finance Undersecretary Gil Beltran adds that the retail price of rice could drop by up to P7 per kilo, while government collects an additional P27.3 billion of tariff revenue over the next six years. 

Of course, nothing’s free in economics. In this case the likely losers are local rice farmers, who will no longer be able to enjoy the NFA subsidies and other government protections that let them compete against imported rice that costs half as much.

Unfortunately for them, democracy means paying attention to the economic as well as political interests of the majority, not the minority. Instead, what government can do for our rice farmers is to invest most of the additional tariff revenues in programs that can augment their incomes, improve rice productivity, move them into higher-value crops or even non-farming activities, and otherwise ease their transition pains. 

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Another piece of potential—not yet actual—good news is the generally positive report from the European Union, one of our biggest trading partners, about the progress we’ve made on various social and political issues that determine if we’ll still be eligible for preferential trade treatment under their GSP+ program.

The EU approvingly noted our progress in the areas of gender equality, human trafficking, labor rights, health, education, socio-economic rights, anti-corruption, and environmental protection. Only two areas were marked up for concern.

One has to do with pending legislation to restore the death penalty and lower the age of criminal responsibility. Personally, we’re not confident about the prospects of these controversial bills, which have been languishing in Congress for a while and have now been overtaken by the big to-do over Cha-Cha.

The other area, predictably, concerns drug-related killings, perhaps the only consistently sore point between our country and the West. We hope the grand poohbahs in the EU will take note of the following points on this issue:

Duterte himself has repeatedly said there is no official policy of so-called EJK’s.

Suspicious killings from the past are now being slowly but surely investigated and tried, including the killings of two teenagers in Caloocan City. In this particular case, we have Persida Acosta of the Public Advocate’s Office to thank for spearheading the official inquiry.

Hundreds of rogue cops have already been dismissed by the PNP, including the entire Caloocan organization and an entire Manila precinct. Among other reforms implemented: body cameras, limiting the number of cops authorized for anti-drug operations per precinct, closer coordination with barangay officials.

The entire war on drugs has been placed under the leadership of the PDEA, a non-police agency. 

Any policy conclusions by the EU on this issue ought to be prospective, not retrospective, because we’re talking about maintaining a relationship going forward, not backward. If they pay greater attention to what lies ahead, and if they value a balanced scorecard, we ought to be seeing the continuation of what Claude Rains in Casablanca called “a beautiful friendship.”

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Lastly on the infrastructure front, we now count as many as three private sector groups who want to take the problem of rehabilitating and operating Naia off government’s hands.

One is San Miguel Corporation, the country’s biggest conglomerate by revenue size. The second is a joint venture between SSS and construction giant Megawide. And the third is a “super consortium” among seven of our biggest business groups, perhaps in partnership with Singapore’s venerable Changi airport.

That’s a lot of business interest. And that’s why, despite the administration’s reservations about doing a lot of public private partnerships (PPP), we do hope that an exception will be made for Naia. 

It’s a project that could cost up to P700 billion. That’s a lot of money for any government to shell out, especially when there’s so many other infrastructure projects also on the drawing board, and when getting the necessary tax reforms past Congress is like squeezing the proverbial camel through a needle’s eye. 

I stumbled across an online item yesterday about Vietnam aggressively seeking out private foreign investment for its economic growth plans. Why should we be more statist and nativist than that nominally still-communist country? Even today, when we really ought to know better, that is still, unfortunately, the 64-dollar question about us. 

Readers can write me at [email protected]

Topics: Federalism , Constitutional change
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