Economic doldrums amid so much cash

President Duterte says the economy is in the doldrums. He is right.

Duterte said on June 22 that the situation in the provinces had become a problem. Projects were barely progressing. This shows how bad is red tape in the government.

 “Interest rates are picking up, are getting high so it destroys the existing [economic gains] … You raise your [interest rate], our [peso value] goes down, theoretically,” the President said in a speech at the National Information and Communications 2018 Summit at SMX Convention Center in Davao on June 22, 2018.

Two Fridays later, on July 6, the President again picked up the issue of slow-moving projects. This time, Duterte was more specific. He gave his cabinet secretaries a warning.

“I would like to call the attention of the secretaries, especially Secretary [Mark] Villar, that if there is any slippage of any work of any kind by the national government. If you delay or if I see tomorrow, beginning tomorrow… Kaya sinasabi ko sa inyo… Yang project mo pagka pumalpak, I will hold the Secretary responsible,” he said.

It seems the Department of Public Works and Highways has more money than it could handle and more projects than it could manage to complete. My friend, Boo Chanco, quotes the Commission on Audit which noted that DPWH implemented only a third of its P663-billion budget for farm roads, school buildings, flood control projects.

The problem is not new. DPWH utilized only P185.12 billion of its P542.23-billion budget in 2016 and P148.23 billion of its P435.58 billion outlay in 2015 under the BS Aquino administration.

“Management was not able to effectively manage the increasing amount of funds entrusted to the agency due to low physical delivery of target projects and activities,” CoA reported. The agency noted that Villar failed to rescind or terminate contracts even after the contractors have exceeded the 10-percent allotted period to finish the projects.

CoA said mismanagement starts at the preliminary engineering stage where managers and consultants failed to consider key factors affecting the viability of the DPWH projects such as right-of-way issues, lack of coordination with uncooperative local government units, lack of permits and basically inept contractors. CoA said management should have resolved these problems before bidding out the projects.

Meanwhile, as I wrote a year ago, it still takes at least two months to get an appointment to apply for a passport.   You apply today, you get an appointment in August or September. You still cannot get your plastic driver’s license and the overpriced medical eye exam remains a sham.  You still cannot get your metal car plate. You still cannot get to your place of work in less than two hours of commute, one way.

 True, the economy expanded by 6.9 percent in 2016, and 6.7 percent in 2017. These are among the highest growth rates in Asia. But this robust growth is a credit primarily to the economy’s intrinsic strength and strong fundamentals.

It is not for lack of money that the government cannot institute drastic reforms and alleviate poverty. This government and this country are awash with cash.  The economy is awash with cash.

 Where is that money?  To start with, the savings rate is 30 percent of the value of output of goods and services or GDP.  GDP is P16 trillion.  So 30 percent of that is P4.8 trillion.   With that, we can finance the entire government’s operations for one year and still have P1.1-trillion of excess money.

 We have $27 billion in annual OFW remittances. That’s P1.43 trillion. It can finance the entire government infrastructure program in 2019. The P1.43 trillion is twice the infra budget of 717 billion for 2018. 

 This P1.43 trillion is orphan money because nobody marshals it for productive purposes.  The P1.43 trillion thus is marooned inside elegant malls and in forests of condos where a square meter is overpriced at least five times the land’s real value.

 In addition, we earn $25 billion from our call centers and business process outsourcing (BPO).  That’s another P1.325 trillion.

 Right at the central bank, private banks have parked P3 trillion of private deposits—money the banks are too lazy or too afraid to lend (because the BSP is a much better borrower and you talk to only one guy).  If the banks were to lend out the P3 trillion, they would have to employ entire bureaucracies—processing loan applications, interviewing loan applicants, visiting or assessing properties used as collateral, and holding so many meetings to approve the loans. 

 To release P3-trillion loans to individuals, the banks will have employ one million additional loan officers. Why bother then.  Go to the BSP, which is also too lazy or too afraid to pressure the banks to release the loans to the public.  Besides, there are no more than 5,000 Filipinos who make P5-million income a year and are thus qualified to borrow big-ticket loans.  And the banking system is owned by only five people.  That is what you call financial inclusion—for the very rich only.

Additionally, the Philippines has $79.2 billion in foreign reserves—money that can pay for importations for a year. That’s another P4.197-trillion money.

The Philippines is capital-surplus.  In fact, the country has been exporting capital, rather than importing, in the past 10 consecutive years.

Amid so much cash, how can you explain the fact that in Asean, with the possible exception of Indonesia, the Philippines has the highest inflation rate, the highest interest rates, the highest unemployment, the highest poverty incidence, and the lowest foreign investment inflow and the lowest ranking in Asean in Human Development Index or a measure of people’s well-being.

 How come out of 1,500 towns, at least 600 towns do not have a bank branch?  How come more than 80 million Filipinos do not have a bank account?

Amid so much liquidity (the techspeak for so much cash), how come 22 million Filipinos wallow in abject poverty? Is red tape to blame—or is there a problem more serious?

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Topics: President Duterte , economy , National Information and Communications 2018 Summit , Department of Public Works and Highways
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