POSTSCRIPT / October 7, 2004 / Thursday


Philippine STAR Columnist

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GMA flips the page to show the good news

TO FEEL GOOD: Before we collapse from an overload of bad news, we pause for some good news coming from no less than President Arroyo.

Speaking before business leaders and members of the Philippine Chamber of Commerce and Industry yesterday, Ms Arroyo rattled off these little known positive points (no big deal, really, but…) about the Philippines:

  1. The country is (or will be?) a major car exporter. Ford expects to export more than 100,000 units in the next five years. (I wonder if these are/will be completely built and assembled in the country.)
  2. The Philippines is No. 3 in call centers, next only to India and China. Customers abroad calling giant multinational firms are unaware that they are being served by English-proficient Filipinos handling the global calls from a Philippine site.
  3. The Philippines is No. 4 worldwide in competence and skills for Information Communications Technology.
  4. America Online or AOL has 1,000 people on Clark Field answering 90 percent of AOL’s global email inquiries.
  5. Texas Instruments on Mactan produces chips that run 100 percent of Nokia and 80 percent of Erickson cellphones.
  6. The most advanced Pentium 4 chip of Intel is produced in the Philippines.
  7. The Philippine-owned International Container Terminal Services Inc. (ICTSI) has won the bid to develop, operate and manage a Baltic container port in Poland for US$100 million.
  8. San Miguel Corp. is one of the most respected companies not only in Asia but also in the world. Let’s drink to that!
  9. Jollibee is competing with McDonald’s in the latter’s home ground the United States.
  10. Cebu Pacific is spreading its wings across the Atlantic, while Philippine Airlines continues to court the China market.
  11. High-end Toshiba laptops are produced in Laguna, where Panasonic also churns out thousands of cellphones exported worldwide. Days ago, the President was reported to have thrown her Toshiba in a fit of temper, and the poor thing kept working.
  12. The President told the well-heeled business leaders: “If you are driving a Benz or a BMW or a Volvo, it is very likely that the automatic brake system in your car was made in the Philippines.”

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JOB FAIR: In connection with call centers, there will be a job fair Oct. 9-10 at the Mendiola parking area in front of Malacanang.

Some 20 contact center companies needing an additional 20,000 new personnel will join the job fair co-sponsored by the Office of the Press Secretary, the Department of Labor and Employment, and the Metro Manila Development Authority.

The Bureau of Local Employment will assist job seekers through the on-line Philippines-Jobnet job-and-skill matching system. The National Bureau of Investigation, Social Security System, Bureau of Internal Revenue, and the Department of Trade and Industry will help with other paperwork requirements.

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CRISIS’ HISTORY: President Arroyo gave assurance that the fiscal crisis bedeviling the country will be resolved, after which test she said the republic would come out stronger and wiser.

In the “Roadmap to Fiscal Strength for Fighting Poverty” sent to POSTSCRIPT Monday, the President traced the background of the crisis threatening to crash the economy in two years. The Roadmap gave this “brief history” of the problem:

“For over two decades, the Philippine government has been operating on a fiscal deficit, except in the years 1994-1997. The budget surpluses we posted in those years were mainly attributable to the privatization proceeds raised during this period.

“Our revenue efforts peaked in 1994 and again in 1997 when the impact of the 1996 Comprehensive Tax Reform Law was at its highest. Since then, however, there has been a steady decline in revenue ratios, indicating the inability of our revenue effort to keep up with our growth needs.

“In 1986, expenditures were 18.1 percent of Gross Domestic Product (GDP). There was a sharp rise in expenditure in (20.2 percent) 1990 when the power crisis resulted in heavy government support for the energy sector. Since then, however, expenditure-to-GDP ratios ranged from 19.8 percent to 19.2 percent, before its marked decline in 2004 resulting from a stronger effort to cut down costs.”

* * *

PESO TOTALS: Those who want to read or copy the full text of the Roadmap may go to our website where I have posted it together with six illustrative charts.

I find it frustrating, however, that the Roadmap talks mostly in percentages (such as in relation to the Gross Domestic Product) but has no consolidated and unbundled PESO TOTALS for the debt burden and the budget deficit that we want to minimize over time.

It is helpful for us laymen to see the fiscal problem in terms of pesos so we can have a good idea of how big the problem is and be able appreciate revenue peso targets being cited.

Malacanang may want to insert consolidated and unbundled peso figures for obligations, expenditures and revenues in case it edits the Roadmap again.

* * *

FOREIGN PRESSURE: There have been figures compiled by various monitoring groups, including the Freedom from Debt Coalition, but we need the government’s own data for comparison.

The FDC says that this year, debt service amounts to P542.2 billion. It adds that in 2005, debt service will amount to P645.8 billion (P344.1 billion for maturing principal and P301.7 billion for interest payments).

The Roadmap also fails to break down per source the projected revenues intended to close the deficit. It could turn out that after the administrative reforms are able to raise substantial extra revenue, there might not be any more need to impose all those new and higher taxes.

My impression is that the tax measures are being forced on us because of pressure from foreign entities, such as the IMF-WB and international money-lenders who want the government to raise money and pay up, or else….

* * *

VAGUE PICTURE: To us plain folk, the Roadmap’s description of the national government deficit is vague. We do not get a clear picture from this:

“Our expenditure ratio declined since 1990, but our revenue collection rates dropped even more sharply. From 1997 to 2004, we have been spending much more than we could earn. The decline was most pronounced from 1997 to the year 2000.

“As the gap between revenues and expenditures grew, so did the national government’s deficit rise. From 1986 to 1993 and then 1998 to the present, our budget has been in the red. As a percentage of GDP, our deficit has started to become smaller after 2002.

“We annually set since 2001 an annual deficit ceiling referring to the acceptable limit for our deficit for the year. We were within our deficit ceilings in 2001 and 2003. Given our program for more prudent spending, we are optimistic about meeting our deficit target in 2004.

“Similarly, since 1986, our Consolidated Public Sector Financial Position has always been in deficit except in 1996. There has been a steady downward trend since 1996.

“In the past 10 years, our Public Sector Debt-to-GDP ratios and National Government Debt-to-GDP ratios have likewise steadily increased. The increases are due to the widening fiscal gap from 1994 to 2004.”

Let us have peso totals and breakdowns.

* * *

MORE WEALTH SOURCES: In addition to the revenue programs mentioned in the earlier draft of the Roadmap, such as the privatization of the National Power Corp., the President has added these wealth-generating activities:

  1. Mobilize investors for Mt. Diwalwal gold mine.
  2. Explore and develop more oil/gas wells.
  3. Re-launch massive reclamation projects.
  4. Embark on a major nationwide reforestation program.
  5. Create Hong Kong-type enclaves to capture long-term investors.

The government’s revenue effort, which has never gone higher than 20 percent in the past 18 years and has dropped to 14.1 percent of GDP, is the second lowest in Asia.

Compare this with those of our ASEAN neighbors:

  • Indonesia posted a 19.1 percent revenue effort while suffering a negative deficit of -2.1 percent of GDP, but better than the Philippines’ 4.2 percent.
  • Malaysia has a high revenue effort of 22.7 percent, but also a high deficit of -5.3 percent.
  • Thailand has a revenue effort of 16.6 percent, which is better than ours, and also enjoys a slight surplus of .6 percent.
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(First published in the Philippine STAR of October 7, 2004)

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