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April 18, 2013 / emmanintheworld

Inequality in the Philippines

With the surprise GDP growth rate that the country achieved last year, many are hoping that the good news would carry over this 2013. Fortunately for PNoy and his administration, a lot of things are pointing to that direction: the high level of business confidence for the Philippine economy, benign inflation rates, historically-low interest rates, the recent investment grade status from Fitch, and the increased consumer and government spending that is expected from an election year. Early warnings of the pricey valuations of most stocks in the Philippine Stock Exchange index have also contained the adverse effects of the correction on the economy to the minimum.

Challenges, however still remain as these economic gains are mostly felt by the upper class or the private sector. Majority of Filipinos, for example, can’t feel the effects of the Fitch upgrade. In an article for Rappler’s Thought Leaders, Ronald Mendoza argued that the upgrade would have minimal effect for the majority of poor Filipinos as there is little credit being extended to SMEs, which is made up primarily of lower-income families, from financial institutions. It also remains to be seen if the Fitch rating would lead to job-generating investments as the Philippines ranks low in the World Bank’s 2012 Ease of Doing Business Index.

Self-rated poverty also rose during October 2012 from 47% to 53%, according to Social Weather Station’s survey. Despite the impressive 7.1% GDP growth during the third quarter (which is the highest compared to other countries in ASEAN), more than half of the whole population thought that they were poor. According to the same report, food threshold or the budget for food remained ‘sluggish despite considerable inflation’. This means that households’ food budgets did not increase with inflation, which implies a lower standard of living. Food budgets even declined in Metro Manila and Visayas.

The 6.6% GDP growth in 2012 is also not shared equitably among Filipinos as it is driven mainly by the services sector. In fact, the agriculture sector, where most poor Filipinos are, only grew a measly 2.7% compared to the 7.4% growth rate of the services sector. Inflation-adjusted gross national income data also shows that the agriculture sector only contributed 8.5% of the total output which is far away from the service sector’s 43.5%.

What’s more depressing is that last year’s inequitable growth has been going on for decades. Increasing inequality in times of rapid economic growth is, in fact, a characteristic of the whole region. According to a report from the Asian Development Bank, the Gini coefficient, a measure of income inequality where 100 indicates absolute inequality, of the region has risen from 39 in the 1990s to 46 in the late 2000s. The Philippines’ Gini coefficient, although declining, is not really something to celebrate about as it only went from 49 to 45 in the twenty-year period.

In a separate World Bank report, income inequality is more evident as the Gini coefficient of the Philippines has never reached levels below 40%. Although the Gini coefficient is on a downward trend after hitting a high of 46.2% in 1997, its level in 2009 is almost the same as what it was in the early 1990s. The lack of improvement with regards to income inequality in the country has made it lag behind other ASEAN members like Cambodia and Thailand, which, at different points in time, have had higher Gini coefficients than the Philippines. Even China, which actually doubled its Gini coefficient from 1984 to 2009, is still better off than the Philippines.

Aside from the differences between the richest and poorest 10%, income inequality is also manifested in the differences of income between regions. Understandably, the National Capital Region has the highest average family income among the regions. However, the gap of P70,000 between NCR and Calaborzon, which has the second-highest average family income, is too large. This is a far cry from 1988 when there was only a gap of P33,000 between NCR and Central Luzon, which was then second region in terms of average family income.

With the elections coming up, one would expect that senatorial candidates, especially from the United Nationalist Alliance, would pounce on these to criticize the government. Although some did and went on record, it hasn’t caught on with the rest of the candidates. For some reason, people have less and less interest with the problem of inequality that it is not even a key election issue. The most anyone could get from these candidates about the topic is a mention of how the rich are oppressing the poor.

It is disheartening to hear this because inequality is so complex that a simple ‘rich vs poor’ argument would only be a scratch in the surface. This topic is also about the gap between the poor and the middle class, the imbalance of resources between regions, the skewed growth towards the unproductive services sector, and so much more.

Inequality is a structural problem that all want to forget, or at the very least ignore.








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January 20, 2013 / emmanintheworld

The Fall of the Senate

When you reach the top, the only way to go is down.

After reaching highs on its approval ratings for impeaching former Chief Justice Renato Corona,  the Senate of the Philippines has lost most of what it has gained because of in-fighting and debates on controversial bills.

The Senate during 2012 presented two contrasting images of itself to the public. In the first half of the year, it was an impressive and respectable institution which made sure that due process was followed in the Corona impeachment trial. Disagreements were resolved in the privacy of caucuses and the senator-judges defended each other in front of the media. Under the leadership of Senate President Enrile, the institution was nothing but united, giving it the same prestige it had when legendary senators such as Jovito Salonga, Eulogio Rodriguez, and Ninoy Aquino walked down its halls.

That all changed in the second half of 2012 when the senators fought with each other in public. In contrast with the respectable image it portrayed before, the Senate during this time was not much different than the showbiz industry where every dirty laundry and petty rivalries were done in front of the media. Legitimate debates about the future of the country devolved into tit-for-tat fights for political mileage.

The first major fight between senators was between Senate President Juan Ponce Enrile and Senator Sonny Trillanes. Contesting the creation of Nueva Camarines, Trillanes accused Enrile of railroading the bill and being a puppet of former President Gloria Arroyo, whose son will benefit from the creation of the new province. Enrile responded by denying Trillanes’ accusation and by exposing his role as the backdoor negotiator of the Philippines during the tensions with China over the Scarborough Shoal. He further said that Trillanes’ role in the negotiations did more harm than good and threatened to release the ‘Brady notes’ which detailed Trillanes’ activities in the negotiations.

This rivalry sparked again, three weeks later, when Enrile declared that he will expose Trillanes during the campaign period so that he would lose votes in the 2013 elections. There was also an argument on who really created the Philippine Archipelagic Baselines Law, with Enrile claiming that Trillanes simply copied the draft that Solicitor-General Estelito Mendoza made for the Senate President. Trillanes responded by saying that the veteran senator should attend a public policy seminar because there is no copying with regards to bills filed in the Congress since refiling is common.

Another prominent fight was between Senator Vicente “Tito” Sotto and Senator Pia Cayetano. They argued over the former’s alleged attempts to delay the Reproductive Health Bill. Sotto, a fiercely anti-RH senator, was seen by the public as a big factor for the bill’s slow pace in the legislative process.Frustrated by the pace of the bill in the Senate floor and Enrile’s pronouncements that the vote for the bill would happen in 2013, Cayetano questioned Enrile’s objective to interpellate  Sotto’s turno en contra speech, saying that there’s not point for the interpellation since both are anti-RH anyway.

Sotto also made headlines when his turno en contra speech was revealed to be plagiarized from multiple blog posts. The issue intensified when he looked down on the plagiarism issue, calling it a non-issue, and refused to apologize. Outraged, the public criticized Senator Sotto and his nonchalant attitude towards plagiarism. Further scrutiny of his next speech also showed another case of plagiarism when he used former US President Kennedy’s famous “ask what you can do for your country” quote without citation. He defended himself by saying that his translation of the quote to Filipino removes the need for citation.

December was a particularly cold month in the Senate when the Reproductive Health Bill debates turned personal. Senator Miriam Defensor-Santiago took offense when Enrile returned her Christmas gift. Enrile returned the gift, citing the “ice-cold” relationship he has with Miriam over the past few months as his reason.

The headlines on Senate in-fighting also spilled over to 2013 when it was revealed in January that Enrile gave out a “Christmas gift” of P1.6 million, billed as Maintenance and Other Operating Expenses, to 18 senators. In contrast, he only allocated P250,000 for the same expense to Senators Santiago, Trillanes, and the two Cayetanos. The senators, especially Santiago were quick to denounce the unequal allocation of funds by Enrile, calling the move “unethical” and “unconstitutional”. Feeling slighted, Senator Santiago criticized Enrile in different fora, from university speeches to on-air interviews.

Her criticisms of Enrile sparked a fight between her and Senator Lacson, who she described as Enrile’s attack dog. Lacson responded by calling  Santiago as a “crusading crook” and a “hypocrite”. A day after his tussle with Santiago, Lacson revealed in a radio interview that the Commission of Audit should investigate a senator for using Senate funds to pay groceries, maid’s salaries, and the rental of a satellite office owned by the senator.

After the Christmas gift controversy,  the media reported that Enrile recalled key employees of Trillanes and Senator Alan Peter Cayetano. Defending his move, Enrile told the press that his recall order was made in early December and was done without malice. Cayetano, however, said that the timing was suspicious and questioned why Trillanes and himself were singled out.

Maybe it’s just in the nature of politicians to fight with each  other when elections are near but it’s still disheartening to see supposedly exemplary men and women resort to calling each other names and throwing coup threats like it’s nothing.

Isn’t the impeachment trial and the exemplary way the Senate handled it a testament to the growing political maturity of the Philippines? How can Filipinos ever be politically mature when our legislators act like petty children?

January 13, 2013 / emmanintheworld

Sustainability Through Governance

The GDP growth rate exceeded the government’s 5%-6% target. The stock index soared, breaking multiple record highs. Consumer and business confidence was positive. The exchange rate reaching the P40:$1 territory, which hadn’t happened in years. No one can deny that 2012 was a good year for the Philippine economy.

The unexpectedly good performance of the Philippine economy in 2012, therefore, is buoying expectations for 2013. Add to that the positive effect of elections in consumer spending, and it would seem like it would be another rosy year for the Philippine economy.

However, the improving situation of the economy should not make the public, especially the government, be complacent. There are still a lot of fundamental concerns that needs to be addressed. One of these is the issue of sustainability.

Sustaining the 2012 growth, not only for this year but for a longer time period, should be the focus  of the Aquino administration. Growth without a long-term vision would eventually lead to crises, similar to the current Euro crisis and the United States’ so-called Great Recession. Unsustainable growth would also expose the economy to volatility that would lower the country’s long-term economic prospects.

In order to achieve sustainable economic growth, the government should take steps in strengthening the institutions in the country. Perhaps one of the country’s problems, in terms of governance, is the tendency of administrations to criticize and dismantle the gains that the previous administration had for political mileage. This presents a huge problem for the country’s long-term progress because it discourages the construction of key infrastructure that would take more than 6 years to build.

This encourages the government, especially local-level politicians like congressmen and governors, to spend their budgets on visible, short-term projects like waiting sheds, basketball courts, and the repaving of roads. Consequently, the rehabilitation of the railroad network, sewerage system, and other long-term projects are set aside.

Putting in place a culture of transparency and honesty would also go a long way in sustaining growth as it would discourage the creation of complicated and ‘creative’ instruments and procedures for the benefit of the few. Coupled with a conducive environment for vigilant media organizations, a culture of transparency and openness would increase the costs for government officials and top executives to cheat the public.

There are many other ways to achieve sustainability through governance. The point is that the issue of sustainability cannot be addressed by economic policies alone. It requires the strengthening of both economic and political institutions.

December 16, 2012 / emmanintheworld

Dear Senators of the Philippines

For years, it seemed like the Reproductive Health Bill was stuck in the slow-moving legislative process of the Philippines. That all changed last week with the voting on the bill’s 2nd reading in the House of Representative and President Aquino’s certification of the bill as urgent.

It’s expected that the voting in the Senate would be as intense and close as the last Wednesday’s vote in the House of Representatives. I’m just hoping that each senator’s explanation won’t be as illogical as some of the congressmen’s.

No more predictions of the crash of the Philippine economy, loss of morality, and, god forbid, the start of the “sexual revolution”. As amusing as some of these “arguments” are, I hope that you are not that stupid to say these in national television. You are, after all, voted by all Filipinos and not just people living in specific districts.

I’m also hoping you won’t bring up the “kung may RH Bill nung panahon ng magulang ko, wala sana ako dito” argument. Contraception may stop the sperm from meeting the egg but so does the natural family planning that the Church promotes. If you timed having sex during the times when your wife is infertile, then aren’t you intentionally preventing the meeting of the sperm and the egg?

Also, please don’t vote against the bill because you are against the teaching of sex education to students. Sex education is badly needed here because the HIV/AIDS rate is exponentially growing, which is opposite of what’s happening around the world. People should be taught about the sexually-transmitted diseases that they could get in order to stress the importance of contraception.

With the perception that sex education is an immoral thing to teach to children, remember that it is not just about the act of sex itself. Students would be taught the proper names and functions of their sexual organs. Age-appropriate sex education also means teaching students where babies are from, what to do if you’re menstruating, and how puberty changes a person.

This kind of knowledge is important in a country where a penis is called “putotoy” and a vagina is called “kiki”. It’s important in a country where people think that the kissing can give you sexually-transmitted diseases.

And it’s especially  important in a country where women are ashamed to speak up against sexual abuse because, somehow, it becomes their fault for being groped, harassed, or even raped.

December 13, 2012 / emmanintheworld

Contraceptives’ Effect on Population

Victory after 14 years. Just a few hours ago, the House of Representatives finally approved the Reproductive Health Bill in its 2nd reading with a vote of 113-104-3.

This historic vote came after a period of amendments that featured a line-by-line analysis of all 27 pages of the RH bill. This thorough reading of the bill made some Congressmen frustrated because it seemed like the same arguments were being rehashed over and over again. For the public, it looked like the bill was stuck in limbo.Obviously, that’s not the case and the period of amendments was soon followed by the voting of the Congressmen.

During the voting, there were many who took the chance to explain the basis of their vote. Some voted ‘Yes’ because they believe that family planning is a basic right that should be enjoyed by all. Others who voted ‘Yes’ said that access to information is imperative in making informed choices. Those who voted ‘No’, on the other hand, based their decision on the teachings of the Church. Others said that the bill is unnecessary because it is redundant, wasteful, and ineffective.

One argument for the ‘No’  votes that kept on popping up in the speeches of the anti-RH Bill Congressmen caught my attention. They argued that the Philippines should not be looking at ways to reduce the population growth rate because it would have detrimental effects on the Philippine economy. They said that the effects of population control measures in the Philippines would result to the population troubles that plague countries like Japan, and Singapore.

Some developed countries are having trouble nowadays because their workforce are too old to produce at optimum levels. This tends to lead towards lower competitiveness and productivity levels which has a tendency to affect the total output of the economy. On the other hand, the Philippines’ young and booming population presents the country with a competitive advantage to take on jobs in both the domestic and international market.

With the RH Bill mandating the distribution of contraceptives, the anti-RH Bill lawmakers fear that the Philippines’ demographic advantage may come to a halt in a few years. While it’s true that measures that promote contraceptives have an effect on the demographics of the country, I’m not convinced that it causes depopulation to the effect that these Congressmen are saying.

For one thing, I haven’t seen any study nor any evidence that establishes contraceptives’ causal relationship to depopulation. Of course, the Congressmen who kept on repeating the population argument conveniently forgot to point to real studies.

Another point is that there are other factors that are more likely to affect a family’s decision to have children. To support this, I point to the literature in economics that study the theories of fertility.

One of the leading economists in this field is Gary Becker who proposed a framework called the “Microeconomics of Fertility.” He applied the principles of economics into a family’s decision to add an additional child. In order to do this, he treated children as a durable good and analyzed how the “demand” for children changes with the change in several factors. It is important to note that Becker saw it possible to analyze the demand for children because he saw not much difference in the demand factors for luxury goods and necessities.

The demand factors which Becker studied were taste, quality of children or human capital, income, and cost. The decision to have another child in the family is then analyzed using the basic demand principles.

In his study, Becker focused on developing a theory that would explain the declining fertility rates of developed countries. One of his conclusions was that there would be an increase in level of living as family income increases. That means that human capital increases because the family would be able to invest more per child with higher income. Another conclusion of his is that fertility rates increases with the increase in income.

However, he explained the paradox of high-income families having fewer children by saying that the income elasticity for quantity of children is smaller compared to that for the quality of children. That’s why families would tend to increase the quality of a child first before having another one when their income increases.

This second conclusion is contentious because, as Deussenberry and Okun said in the notes section of the paper, the evidence that Becker used to support the positive relationship of income and family size is weak. They also point to the increases in the level of living compared to income as the reason why family size is low in high-income families.

Deussenberry said that although an increase in income will enable family size to increase, this may not be the case in reality because an increase in income will also change what families think is the necessary cost of having a child is. Okun similarly argues that the “income elasticity of demand for children may well be negative, or if positive, be very low.” There is lower demand for children because of an increase in quality expenditures per child.

Becker belongs to a different school of thought in the economic theories of fertility as Deussenberry and Okun but their ideas does not point to contraceptive knowledge and use as the reason for declining fertility rates. Also, these economists point to factors like indirect costs of pregnancy (Becker), and higher investment in human capital (Deussenberry and Okun) as the reasons for the decline in fertility rates among developed nations.

That’s why it’s funny when anti-RH Bill lawmakers are saying that the government should instead divert the budget for condoms to education and job creation  because that also has the potential to lead to declining fertility rates.

To sum it up, there are many reasons to take a stand for or against the Reproductive Health Bill. However, it is very misleading to use the argument of low population growth in developed countries because other factors like income and “costs” of having a child may be more influence on this than the population control measures that they’ve adopted.



P.S. Isn’t it ironic that some anti-RH lawmakers are citing labor-intensive China as the model for economic growth when its one-child policy is one of the most famous population control measures in history?

December 6, 2012 / emmanintheworld

Public Deception

Rigoberto Tiglao is at again.

In case you do not know, Rigoberto Tiglao is a columnist in the Philippine Daily Inquirer. He often writes opinion pieces against the President Aquino and his administration in issues ranging from the West Philippine Sea dispute with China to the President’s smoking habits.

A frequent reader of the opinion section in the Philippine Daily Inquirer can note the contrast between Tiglao and pro-Aquino columnist Conrado de Quiros. Their differences is interesting to note whenever the Aquino administration is in another controversial issue.

However, what separates De Quiros and Tiglao the most is that De Quiros is willing to criticize the President Aquino when warranted. On the other hand, Tiglao cannot seem to accept whenever President Aquino and his administration does something right. Instead, he twists the issue and frames PNoy’s accomplishments in a negative way.

And of course, that includes the surprisingly good economic performance of the country during the third quarter of 2012.

In his December 6 column, Tiglao said that there is a misunderstanding about the 7.1% Philippine GDP growth rate for the third quarter. He said that we shouldn’t analyze growth rates year-on-year but instead we should look at it in a quarter-on-quarter perspective, as some countries like the United States do.

Tiglao said that if we analyze the GDP quarterly, the Philippines’ total output actually decreased. The total output for the third quarter is only $1.525 trillion, down from the $1.6 trillion output in the second quarter. This is a 4.4% decline of output in a quarter-to-quarter basis, according to Tiglao’s computations.

There are two problems in this analysis: Tiglao didn’t account for seasonality during the year and his claims are just wrong.

What Tiglao forgot to mention is that you simply cannot compare GDP that way. There are patterns in spending and production during the year that affects quarterly GDP greatly. For example, household consumption  in May-June would be higher compared to normal levels because of the start of classes. Spending would also be higher during November-December because of the Christmas season compared to January when families are trying to save whatever income was left from their gift-giving.

This is why countries which compare GDP data on a quarter-on-quarter basis automatically adjusts their numbers when presenting it to the media. Tiglao even mentioned this in his column when he said that the US releases data on a seasonally adjusted annualized rate.

The GDP data presented by the National Economic Development Authority (NEDA) and the National Statistical Coordination Board (NSCB) to the media, however, wasn’t adjusted for seasonality. That’s why the $1.525 trillion and the $1.6 trillion figures that Tiglao used was wrong.

If you really want to compare Philippine GDP data on a quarter-on-quarter basis, a quick look on the NSCB website can satisfy your curiosity. The NSCB already did the math and compiled the data on a table of seasonally-adjusted quarterly GDP data from 1998 to the present.

And contrary to Tiglao’s claim that the economy contracted by 4.4% compared to the last quarter, the economy actually grew by 1.3% when you adjust it seasonally!

After claiming that the economy contracted during the 3Q, Tiglao also  attributed the 7.1% GDP growth to “arithmetic reasons”. He said that the reason why growth rate grew so much is because of the economy started from a low base. And in fairness to him, he’s right.

It is easier to achieve high growth rates if the data that you’re comparing it to is below average. In this case, the disappointing 3.2% GDP growth during 3Q 2011 partly contributed to the high growth rates in 3Q of 2012.

But we still can’t ignore the 7.1% growth rate simply because it came from a low base. The  growth rates for the 1st and 2nd quarters of 2012 also came from a low base but it only reached the 6% level. That means that the Aquino administration did something right during the third quarter to drive up the growth rate to the 7% level.

Tiglao’s twisting of the facts is troubling because it means that he is willing to deceive the public just so that he can convince readers to support his bias.The rules against bias may be looser for opinion writers but they are still responsible to uphold the truth.

December 2, 2012 / emmanintheworld

Aquinomics: Good Governance is Good Economics

There is  more fun in the Philippines, especially for the Aquino administration.

Last week, the National Economic Development Authority announced that the economy grew by 7.1% during the third quarter compared to the same period last year. Driving the growth were the strong performance in private and public spending, the late surge in exports performance, and the surprising 28.5% growth of construction.

The growth in construction and government spending are important things to note because these were the same factors that were lacking in the economy last year. A decline by 7.2% in construction during the 3Q of 2011 contributed heavily in the disappointing 3.1% GDP growth in the same period, along with the slow disbursement of the national budget.

The slowing down of  government expenditures, where public construction is a major component, came from the decision of the administration’s decision to review all bidding and purchases made by the Arroyo administration. With his popular anti-corruption platform, President Aquino felt that he needed to clean up the government and start over because of all the irregularities he found. The corruption allegations thrown at key government officials, multiple bonuses to non-performing departments, screwed-up bidding and awarding ceremonies were just too much for him.

Of course, reviewing all the transactions made by the government means that many projects would be delayed and some disadvantageous agreements have to be broken off. Also, his seemingly one-track mind of removing Arroyo officials like Former Ombudsman Merceditas Guiterrez and Former Chief Justice Renato Corona drew a lot of criticism. Critics were saying that Aquino’s focus on his anti-corruption drive was harming the economy, which in 2010 grew by an impressive 7.3%.

The Aquino administration, however, described their approach to the economy as good governance-based. Their reasoning was if the fair and transparent political institutions were put in place, the improvement of the economy of the Philippines would also follow. For them, “good governance is good economics.”

And it looks like it worked.

In the recent 2012 Global Competitiveness Report released by during the World Economic Forum, the Philippines jumped 22 places to the 65th place. Although corruption and inefficient government bureaucracy are still the highest barriers to business that investors face, they are saying that the government improved greatly in these factors. Perception of corruption among investors are also declining and confidence, both for consumers and investors, are up.

Trust and approval ratings on political institutions are also high. The MMDA, a place generally seen as inefficient and corrupt; the Senate, which conducted the impeachment trial of Former Chief Justice Renato Corona; the Supreme Court, coming from a low trust rating after Corona’s management are especially getting good grades from the public.

By addressing corruption and transparency issues early, the Aquino administration took steps in changing the culture and habits of Filipinos. This is essential in achieving sustainability, which requires long-term growth coming from different and diverse bases.

The approach of the administration is also important in meeting its goals for 2016. Most of the solutions detailed in the Philippine Development Plan 2011-2016 needs efficiency and transparency in order to work. One example of this is the Conditional Cash Transfer Program (CCT) which is the flagship anti-poverty measure of the government. Because of the large amount of funds invested in this program, it is very vulnerable to bribery and fraud. The government needs to ensure that the key checks and audits are in place and that everything is operating smoothly.

It’s not yet clear if the economic performance of the country is sustainable and inclusive. What I’m sure of, however, is that the measures taken by the administration early on helped drive the growth of the country in the short-term.

Hopefully, 2012 will prove not to be a fluke and be the start of the breakout of the Philippines.