Spend More, Talk Less

With the release of third quarter GDP figures upsetting all but the most ardent economic apologists for this administration, the time has come for it to re-think its priorities.

image from wallpapers-diq.net

The situation is nearing a critical level. As the whole of Europe is placed on credit watch and as recovery in the US struggles for momentum, the vibrancy in the domestic economy is being sucked out by government’s poor infrastructure spending rate just at a time when it is needed. Cabinet officials throughout the year have been promising a more rapid deployment, but this has so far not materialized.

The incorrigible ‘prophet of boom’ from the Ateneo Graduate School of Business Cielito Habito despite his best efforts at painting a rosy picture for the government has himself acknowledged the third quarter results to be disappointing. Here is how this professor of ‘Aquinomics’ concludes his most recent column for the Inquirer entitled, Is confidence dissipating?

(W)hat worries me most is the possible dissipation of the initial confidence surge that greeted the new administration and led to brisk private domestic investment growth over the past year. With these private domestic investment numbers now apparently slowing down while price increases have been speeding up, the President and his men on top of the economy should keep a close eye on the ball—or risk losing steam altogether (emphasis added).

That’s it—the penny has finally dropped. Only a delusional person would keep insisting that the government is headed in the right direction when it comes to managing the economy. Will this lead to a teachable moment, or will the administration remain antagonized by criticism seeing sinister plots behind them, spooked by shadows and haunted by the spectre of its immediate predecessor?

Throughout the year, the government has continued to fall back on its good poll figures to demonstrate that it has been performing to the satisfaction of the people. Poll figures however may not be a good barometer of the government’s competence in economic affairs given the ‘halo effect’ that has made the administration appear more creditable than it should.

Market analysts have already pointed out and the Bangko Sentral agrees that stimulating greater demand to address the slowdown in growth lies not in the hands of monetary authorities at this point but with fiscal managers. What this means is that the government has to spend more and talk less. Or in the words of Jerry Maguire, it has to “show me the money!

All talk, no action

The government talks profusely about the need to ramp up infrastructure spending in its Philippine Development Plan released early this year (see page 17). “An inefficient transport network and unreliable power supply”  is what has created a poor investment climate according to the Plan. Solving this meant greater spending, but when it comes to actually delivering on this, the government fell short of its rhetoric. Next year’s appropriations will hit a mere 2.5%, when the benchmark for a middle income country such as ours is 5% of GDP.

P-Noy in his first SONA said that the infrastructure build-up would be achieved through public-private partnerships, but nearly eighteen months on and counting, the fulfillment of the now diminished scope of this program remains to be seen. The confidence of the business community will eventually wear thin as Habito suggests if delays persist.

When the president addressed a meeting of the Makati Business Club, a community highly supportive of his candidacy, there was some disappointment over his over-emphasis on the case against former president Gloria Arroyo and his squabble with the Supreme Court. As these businessmen suggest, the risk is for P-Noy to get so focused on prosecuting Mrs Arroyo that he fails to keep his ‘eye on the ball’.

And it requires some doing. To ramp up spending by 2.5% of GDP will require as much concentration as he can muster. In a ten trillion peso economy, this will mean doubling the present effort of 250 billion pesos a year. This will dwarf  the growth of the CCT or conditional cash transfers which cost about thirty billion.

Because the president closed off the avenue of raising revenues through new taxes, he found himself left with no other option but to fund his development plan through private financing. That has proven tricky as well, which is why he now needs to consider a third option.

That third option which I had first written about late last year which then got echoed by no less than the BSP Governor a few months back is for the government to issue infrastructure bonds to the BSP which is at present earning negative returns on its foreign currency reserves.

Better returns

By offering the Bank a better yield, the government would be doing it a favour. Raul Fabella a former dean of the UP School of Economics has lent this proposal his seal of approval. He believes the risk from runaway inflation to be negligible under the proven monetary stewardship of the BSP.

The continued growth of foreign remittances from OFWs makes this option feasible, but if the government needed further convincing, then the following points should help build the case for it:

  1. Infrastructure spending is needed as we face a slowdown of demand from Western economies for our goods and services.
  2. It is the best vehicle for avoiding the ‘Dutch disease’ that afflicts countries experiencing windfall profits from resource booms (in our case, this stems from human not natural resources).
  3. Unlike increased social entitlement spending during a boom which becomes painful to retract at the end of the cycle, infrastructure spending leaves a tangible legacy and productivity dividend.
  4. It will help our exporters remain competitive because the increased spending will lead to a modest rise in inflation which will stem the appreciation of the peso against the greenback.
  5. It will unlock complementary investments by the private sector which is being deterred by poor public infrastructure.
  6. Government failure will be minimized as most transport and power projects can be turned over to the private sector under a PPP arrangement once completed. Revenue earned from transport and power projects would settle the interest and debt owed to the BSP.
  7. It will help prop up employment and growth which will spur increased tax collection.
  8. It will reduce the cost of doing business for most firms, not just exporters.
  9. It will help achieve the government’s growth target of 5-7% in the medium term.
  10. It will fulfill the government’s own development plan and set us on a higher growth plane.

Greater public infrastructure spending not by new taxes, nor by increased external or internal borrowing (as per Mrs Arroyo’s stimulus program in 2008/09), but by tapping our excess foreign currency reserves is not only appropriate, it would be the most effective and innovative way for this government to sustain economic growth through the turbulence in the global economy and beyond.

But we have to get real now. When faced with a possible course of action that is within the feasible set as defined by technocrats, what often prevents governments from acting is not the lack of rational arguments but the incentive problem. What led to this whole debacle in the first place was the administration’s fear of spending that would benefit internal patron-client networks left behind by its predecessor. In other words, politics rather than economics has been driving its decisions.

Making daang matuwid work

In the past we have seen how corruption and rent-seeking have reduced the amount of money available for developmental spending, but now we see how the opposite has reduced that amount even more. In the words of Samuel Huntington, “In terms of economic growth, the only thing worse than a society with a rigid overcentralized, dishonest bureaucracy is one with a rigid, overcentralized honest bureaucracy.”

The challenge for P-Noy is to make his mantra of daang matuwid work for the country rather than against it. Through the discipline and hard work of Filipinos working overseas, the country has a rather unique opportunity to make up for the shortfall in taxes generated internally. The current situation reminds me of the parable of the talents where the honest, but slothful servant dug a hole in the ground to store the talent that was entrusted to him by his master for safekeeping.

The Aquino government is like that servant. It was entrusted with a small but buoyant economy at the beginning of its term. So far, it has managed to keep it afloat, running while standing still, growing on aggregate but shrinking in real per capita terms. At the end of the story, the master reprimands the servant by saying, “To everyone who has will be given, and he will have abundance, but from him who doesn’t have, even that which he has will be taken away.”

That sound a lot like where the economy is heading under the president’s watch. The little that the Philippines had at the start could be taken away from it, while the plenty that our ASEAN neighbours have keeps on growing. It is time this government put its money where its fiscal mouth has been and start showing us the money. From another biblical parable comes the saying, “to whom much is given, much is required.” P-Noy was given a huge electoral mandate back in 2010. It is time he used it.

Subsidies (not studies) for the skills mismatch

A national apprenticeship program that provides subsidies to both employers and employees in areas where a skills mismatch has occurred would fix the problem.

The president in answering the questions submitted and rated by viewers on Youtube reiterated many of his “talking points” during his second State of the Nation Address. This comment was raised by many viewers of the 43 minute “Ask PNoy” event co-hosted by World View and the ABS-CBN News Channel.

The very first question asked concerned the plight of millions of Filipinos who seek employment overseas because of a lack of opportunities at home. The president’s reply was to cite the same statistic he noted during his SONA with regard to the skills mismatch of about fifty to sixty thousand job openings on the government’s PhilJobs.net website that have remained unfilled (see video below–at around the 1.30 minute mark to about the 3.30 minute).

The president’s solution as he declared during his speech last July was to instruct the agencies concerned to study ways to address this imbalance through the educational system. This is well and good, but the immediate concern of filling these vacancies, plus the prevailing unemployment of close to three million Filipinos needs to be addressed soon, not down the track.

During his interview, the president spoke of various government sponsored programs: (1) to address the need for “green” energy by replacing thousands of diesel powered engines and vehicles that make up our transport infrastructure, (2) to provide thousands of housing units to soldiers and policemen to address the peace and order situation in the countryside, (3) to beef up our coastline security through a defense modernization fund, and (4) to expand social insurance through conditional cash grants to indigent families to address intergenerational poverty.

But when it comes to addressing the first imperative of any government which is to provide jobs, jobs, jobs, it seems the solutions are not as solid or programmed, as such. A very quick and do-able solution would be for the government to provide employment and training subsidies to the firms unable to fill job vacancies.

The purpose of this subsidy would be to defray part of the costs of training cadets or apprentices on the role they will fill within the firms seeking to employ them. Part of this  subsidy could go to the employer to help pay for the wages of unskilled apprentices and trainees while they undergo a period of formal schooling, on-the-job training, or a combination of both.

This could last for a period of between eighteen-to-thirty-six months. To qualify for such a subsidy, the employer would have to show that an advertised job vacancy remained unfilled by qualified workers after a period of say six-to-nine months.

Another part of the subsidy could go to the apprentice or trainee for such things as transportation, uniforms, tools (if needed for the job) and other similar work-related expenses. Formal contracts of training would stipulate the responsibilities of each party under such a scheme and reviewed periodically.

Fifty-to-sixty thousand internet job ads on the government's website are not filled according to employment officials.

Fifty-to-sixty thousand unfilled vacancies is nothing to sneeze at. It constitutes about two percent of the nearly three million unemployed members of the workforce.  It would cost around one-and-a-half billion pesos annually to provide a two-and-a-half thousand peso subsidy per trainee each month (thirty thousand a year) assuming all of these vacancies are filled via this approach. That is a rounding error in the government’s total budget of over one trillion pesos.

It would provide presumably high paying, sustainable jobs in the end–something that social insurance programs cannot boast of. Surely with the “savings” PNoy was quite happy to highlight during his interview such an “investment” in people’s human potential would be worth making. Surely a new initiative such as this with a very modest budget impact and a significant contribution to raising employment would have earned the president praise from all sides (both employers and employees included). So why shouldn’t he do it?

That question sadly remains unanswered, but if the president were to temporarily overcome his strong aversion to criticism as he expressed by way of a Christmas wish to Santa towards the end of the interview, I am sure it could be made to work real soon.

The Inefficiency of POEA

This wasn’t the first time I saw this complaint on my twitter stream.  Apparently, the Philippine Overseas Employment Administration makes it very difficult for Filipinos to leave the country.  @saritaonline described OFWs looking like puppies begging for signatures.  Here’s a sample:

[blackbirdpie url=”https://twitter.com/saritaonline/status/83355362287288320″]

[blackbirdpie url=”https://twitter.com/saritaonline/status/83355682966994944″]

[blackbirdpie url=”https://twitter.com/saritaonline/status/83356104339374080″]

[blackbirdpie url=”https://twitter.com/saritaonline/status/83356665344294912″]

[blackbirdpie url=”https://twitter.com/saritaonline/status/83358730858659840″]

Perhaps a better system needs to take place?

Have you guys experienced something similar?  Hit the comments, and lets make it known to government what needs to get done.


Photo credit: scion_cho, some rights reserved.

7 Pinoys: Suspect in million dollar Istanbul diamond emerald necklace robbery

Seven Filipinos have been suspected of stealing a diamond emerald necklace with an estimated worth of US$1 million in Istanbul, Turkey, reports ABS-CBN News. Citing the news site Today’s Zaman, ABS-CBN reports that the suspects allegedly stole the necklace from the Zela Jeweler booth at the 32nd Istanbul Jewelry Expo last month.

The suspects reportedly flew to Dubai after the heist and went back to the Philippines. Six of them were identified through security camera footage: Janice Apostol, Armando Fajardo, Edgardo Ramos, Cesar Galvez, Rosita Panlilio and Herbie Cruz.

Read the full story at Yahoo PH.

Image via Diamond Rocks

Hat tip to @kabayan2010

How to find people in Japan after Earthquake? (updated)

1. Google People finder for Japan EarthQuake
2. DFA has established a hotline for Japan-related concerns, call (632) 8344646 and 834-4580. Requests for information may also be sent through e-mail address [email protected]
3. Philippine Overseas Employment Administration (POEA) Hotline: 722-1144, 722-1155
4. Hotlines in phil emb tokyo : +813 5562-1570; +813 5562-1577; +813 5562-1590. Embassy can also be reached at: [email protected]

Exclusion of foreign maids in HK minimum wage hit

Exclusion of foreign maids in HK minimum wage hit


MANILA, Philippines – A group of migrant workers in Hong Kong, including Filipinos, lambasted the Legislative Council’s (LegCo) final vote against the inclusion of foreign domestic workers (FDWs) in the statutory minimum wage.

“Slavery, marginalization and discrimination have now been put into law in HK. There is neither justice nor democracy in the Legislative Council’s (LegCo) vote against the inclusion of foreign domestic workers in the statutory minimum wage,” said Dolores Balladares, spokesperson of the Asian Migrants Coordinating Body (AMCB).

Balladares’s group described the decision as “a legislation of slavery, discrimination and poverty”. She said the legislation excluded live-in domestic workers, majority of whom are foreign workers numbering more than 240,000.

“Legislators who voted for our exclusion should be ashamed for they just revealed their real nature as anti-migrants, discriminatory and champions of slavery,” she said.

Balladares said that the exclusion meant that the FDW wage will remain “imprisoned” by that Minimum Allowable Wage or MAW policy that is “unjust, not transparent and arbitrary.”

“Our wage shall remain to be insecure and vulnerable to the whims of the HK government who never put the interest of FDWs as one of its priorities. To them, we are disposable workers whose rights can always be discarded,” she said.

The group will challenge the decision and is eyeing the possible filing of a judicial review against the exclusion. They will also send protest letters and petition to the international community, including the International Labour Organization and the United Nations.

“This decision should be exposed as an international shame. Slavery and discrimination is alive in Hong Kong and, worse, has become institutionalized,” she said.

New admin, OFW money keep investors' confidence high

New admin, OFW money keep investors’ confidence high

by Jesse Edep
GMA News

Investors remain confident in the Philippine market because of strong remittance trends and the smooth transition to new administration, a global financial services group said Thursday.

In its quarterly Investor Dashboard Survey, ING Group showed an 18-point increase in investors’ sentiment to 157 points in the second quarter of the year from 139 points a quarter earlier. This increase marks the highest since the fourth quarter of 2007.

“The fact that average daily turnover in stock market is higher by 31 percent from a year earlier and mostly driven by local activity is affirmative of investors’ combined optimism on the economy and prospects of a new government,” said PJ Garcia, head and chief investment officer of ING Investment Management Philippines.

“Foreign investors have also been supportive of the local market after pumping in a net inflow of $377 million to date,” Garcia added.

The Netherlands-based firm said that the rise in the Philippines’ gross domestic product – forecast this year from 3.6 percent to 6 percent in June due to strong consumption – may lead to increased optimism, among investors, about the country’s economic situation in both the second and third quarters of the year.

The recent national elections, ING Group said, had positive effects on investors’ sentiment.

The firm also said, “The Philippine Stock Exchange index significantly picked up in the second quarter of 2010. With a 12-percent growth rate as against the first quarter’s 4-percent growth rate, it is not surprising that the number of Philippine investors with a positive outlook towards the stock exchange in the next three months increased, as did interest in high risk or high return investment.”

Garcia said growth assets will continue to outperform defensive assets in this environment where the economy looks poised for sustainable growth, and the global recovery continues to drive overseas Filipino workers’ remittances to record levels and stimulate domestic consumption.

“We continue to enjoy a low interest-rate environment and this encourages investment,” he said, elaborating that on a global picture, emerging markets will continue to outperform developed markets because of favorable dynamics between growth and risk.

“Despite their momentum, leverage remains modest in these parts of the world,” Garcia said.

When asked where Filipinos should invest their money, Garcia said, “The best way to play this recovery is to invest in a fund so you can get the benefits of asset class appreciation without the time-consuming aspect of having to manage the money yourself.”

Palace: No mediation yet for 3 OFWs facing death in Saudi

No mediation yet for 3 OFWs facing death in Saudi—Palace

By Maila Ager

MANILA, Philippines – The government will not intercede yet for three Filipinos facing the death penalty in Saudi Arabia pending final resolution by the court, a spokesman for President Benigno Aquino III said Tuesday.

But in the meantime, Edwin Lacierda pointed out that the Department of Foreign Affairs was in touch with the family of the victim in an effort “to obtain forgiveness by way of blood money.”

Victorino Gaspar, Jr., Paul Miquibas, and Edgardo Genetiano were convicted by a Saudi Court for robbing and killing another Filipino worker in Jeddah.

Lacierda explained that the death penalty was promulgated by the committee of five judges and has just been elevated before the court of appeals.

“I understand from the Department of Foreign Affairs that it will take approximately three months for them to decide and after that, if we have an adverse decision against the three Filipinos, the Saudi lawyer who is representing the 3 Filipinos will elevate the case before the Supreme Court,” he said.

“In the meantime, the DFA is in touch with the family of the victim in an effort to obtain forgiveness by way of blood money so right now medyo malayo pa [it’s still far] so we’re hoping that the DFA is still doing all its best to communicate with the family of the victim. So it will take sometime,” he said.

A reader's grievances about Crown Asia

The following is a comment left by a reader of Pro Pinoy. I decided to post it to help the reader air her grievances regarding Maia Alta, a subdivision owned by Sen. Manny Villar. Crown Asia is always welcome to reply.

maia says:
February 26, 2010 at 1:56 pm

tinanggal ko talaga pangalan ko dito kasi baka pag-initan lang ako. wala akong paki kung mahirap o mayaman si villar. pero nabwibwisit lang ako kasi ginagawang gatasan kami dito sa maia alta. 1. hanggang ngayon e ayaw ihandover iyong subdivision sa aming mga homeowners. 2. di makapasok iyong gusto naming cable company. 3. di makapasok iyong gusto naming water company ( ang mahal ng metro nila ). 4. ilang taon bago napayagan lang ng crown asia na makapasok ang pldt kasi ayaw ng developer kahit bulok na iyong service ng ibang telco na gusto ng crown asia. 5. binili ang hardware store sa tapat ng subdivision at kinonvert na preschool na ang tuition ay mas mainam pa na dalhin mo na lang anak mo sa ateno o lasalle sa kamahalan kahit ito ay magsisimula palang ng school at ang hitsura e wala sa ayos ( kasi nga hardware store ito noon ). 6. nagpapatayo ngayon ng grocery sa tapat ng gate ang crown asia kahit alam na nila na dapat kumuha muna ng permit sa homeowners kasi hindi ito dapat in the first place palagyan ng kahit anong grocery sa loob ng subdivision ( na sinabi rin noon ng crown asia ). kaso dahil may pagkakakitaan e wla na silang paki. 7. bumaha iyong isang phase nung ondoy kasi pangit iyong drainage pero hanggang ngayon e wala paring ginagawa na plano 8. iyong mga model houses nila ay maganda tingnan pero pag nakatira ka na e after a 3 or 4 months e naglalabasan ang problema sa tulo sa kesame, banyo na bumabara ang drain, nagpapawis na mga wall o pader, mga kahoy at kesame na kinakain na ng anay. 9 mga amenities gaya ng swimming pool at clubhouse ay mahal pa rin ang singil ( na dapat ang may-ari e homeowners na ) kahit sa mga homeowners… ang masasabi ko lang para naman fair e pwede ba kayong pumunta ng maia alta at kausapin nyo po kaming mga residente. lahat kaming phases ay siguradong maraming makukuwento sa inyo.
finally ito lang ang masasabi ko. si villar e businessman. at walng pakialam sa mga homeowners dito sa kanyang dinevelop na subdivision. ang importante kay villar e kumita. kayo kung merong “nakaligo na ba kayo sa basura….” e pwede ko iyan dagdagan ng “nakatira na ba kayo sa bahay na tumutulo pag umuulan… “, “nakagamit na ba kayo ng banyo na nagbabara…”, sa madaling salita : “naloko na ba kayo ng isang gahaman na developer…”. ang sagot ko ay “OO”. uppercase po iyan.
tungkol naman sa ofw? e ako po ay ofw. at dito ko binuhos iyong pinundar ko. kaya ang advise ko e dalawa: 1. kilatisin nyo maigi iyong taong ito. 2. wag kayong bibili at magsasayang ng pera sa crown asia.

ps: pumunta po kayo sa maia alta para malaman ninyo kung haka haka ito. at magpapasalamat kami na sabihin itong mga problema namin kay villar/crown asia.