by Herbert Docena and Jenina Joy Chavez

 

Despite Malacanang’s attempts to give a positive spin to the crisis, the government’s own data unambiguously attest to how Filipinos are reeling from an economic downturn made worse by increases in the price of basic commodities. A previous Focus report documented the grim signs: The 7.3% GDP growth of a year ago dipped to 5.2% in the first quarter of 2008. About 9.5 million of the country’s 33.5 million workers are either unemployed or underemployed. Inflation in June breached double-digit at 11.4%, compared to 2.3% last year. Prices soared high in the fuel, light and water commodity group, registering a doubling of inflation from 3.8% to 7.6% in June on a year-on-year basis. Even more staggering was the inflation in food, beverages and tobacco which shot up to 16.5% in June from 2.6% last year. Little wonder that 2.8 million families, or 15.7% of total, experienced hunger.

A more visionary leadership would have implemented an emergency response while laying the ground for long-term measures. Instead, the crisis has been used as an excuse to gain political points. Government’s answer is an elaborate package of dole-outs that are palliatives at best. (See related article.)

The crisis is caused by fundamental weaknesses in the economy. These include the government’s perennial lack of funds, the inability of the majority of the population to contribute to and gain from the economy due to their lack of incomes or assets, and the power of a few to dominate the economy in ways that promote their interests over the larger public’s.

We put forward an eight-point agenda that address – instead of evade – these problems.

1. End corruption and wasteful spending.
When President Arroyo and her delegation went to the US recently, they reportedly spent P66 million – enough to buy 4.4 million kilos of NFA rice. Banning junkets and other frivolous expenses will bring considerable savings which can instead be spent for more essential and urgent expenditures. Corruption sucks our already limited resources dry, effectively shrinking government budget by about one-fifth annually, according to the World Bank. This translates to about P250 billion out of this year’s budget of P1.12 trillion. That’s 14 billion kilos of rice – enough to assure 170 kilos of rice for every single Filipino. For starters, we can work to recover those P700 million in fertilizer funds. And no more P100,000 goodie bags. At the end of the day, however, no anti-corruption drive will work unless change begins at the top.

2. Ease the tax burden on the poor and rationalize the tax system to make it more progressive. 
The current crisis is debilitating and calls for immediate relief, and what better way than to target VAT which cuts across all classes. To avoid a deep fissure in revenue projections, a minimum immediate action can be the restoration of VAT rates from 12% to the original 10%. The 2% add-on was put in place in 2006 to respond to what President Arroyo considered the most urgent problem at the time, the burgeoning public sector deficit. A strong peso and two years of the 12% VAT have addressed this problem. Meanwhile, the government has raked in a windfall from VAT collections due to the rapid increase in the prices of oil and other products. Said windfall amounts to as much as P73.1 billion from oil alone (based on government estimate of revenue losses if VAT on oil is scrapped). Instead of funneling the windfall to a dubious Katas ng VAT dole-out program, it would be better to slash the VAT rate and let more people and the entire economy enjoy the benefit.

It goes without saying that steps to correct the institutional weaknesses of our tax system and to improve tax administration should be put in place. The system should be designed to rely more on taxes on wealth and profit.

3. Spend more on social services and social investments. 
The largest portion of next year’s budget should go to social services and investments – health, education, housing, social welfare, land reform, investments in agriculture, etc – up from only 10% today. This re-allocation of spending will not only help Filipinos cope with the crisis – by decreasing what they have to pay for school or hospital bills – but will also spur demand and production, thereby boosting mid-term and long-term growth prospects.

Social Watch Philippines’ Alternative Budget presents concrete recommendations for spending an additional P20 billion but an even larger increase is needed. Meeting the international ideal of spending 6% of GNP on education by increasing the budget of the Department of Education from P140 billion to P440 billion could lead not only to the construction of more school buildings, thereby boosting the construction industry, but also to more productive workers, better-paid teachers, more research and development and, thus, to more innovations. Mass housing projects will not only put roofs above people’s heads; they will also boost consumption. Wiping out TB and other communicable but preventable diseases is not just good in itself; it will also enhance the country’s social capital in the long-term.

4. Reduce debt service.To ensure that there are enough resources for social services and investments, government must reduce debt service.
Total debt service this year will gobble up 37% of total government spending of P1.6 trillion. At close to P600 billion, it will be 170 times larger than what the national government will spend on housing, 120 times bigger than that for social welfare, 30 times that for health, and four times larger that for education. GMA’s much-trumpeted P2 billion cash subsidy for small power users, or the National Food Authority’s budget of P2 billion, is only 0.3% of debt service. (See graph.) At a time when one in six Filipino families is going hungry, this spending priority is not only scandalous, it makes no economic sense. It is like being forced to donate blood while one is also already hemorrhaging.

 

Part of the debts we have incurred are anomalous. Freedom from Debt Coalition strongly advocates stopping payment of these anomalous debts. They also call for an official debt audit to find out which debts were fraudulently incurred and should be cancelled. All these will of course be opposed by creditors and their local underwriters who will expectedly threaten to withdraw funds from and withhold lending to the Philippines in the future. But as Argentina – which refused to pay part of its debts in 2002 and has since been growing 9% annually – has shown, this reallocation from debt to productive spending may be the only “win-win” solution both for the country and the creditors in the long-term.  

 

5. Bring down the price of oil and electricity. 

One way to reduce the costs of electricity is to review the expensive contracts with Independent Power Producers (IPPs). Government gives them generous guarantees which make us pay even for power we don’t consume. As of December 2007, we still have an oversupply of electricity, with 15,937 megawatts of total installed generation capacity for peak demand of only 8,993 megawatts. A technical audit of these IPPs will give government a clear basis to renegotiate the terms of their contracts, and save us billions of pesos.

The Energy Regulatory Commission (ERC) should also start examining the cost structure of distribution utilities like Meralco. ERC should look behind the submissions of electric distributors, and in particular, check whether the purchases of the distributors are competitively priced. For the ERC to act decisively, there should be a revamp of its officials, with only bureaucrats of proven integrity appointed.

The VAT on oil should be scrapped, and in its stead a specific tax lower than what the VAT now yields should be reinstituted. This way, oil will still be taxed high enough to pay for its environmental costs, to discourage wasteful use, and to replace some of the revenues lost from the removal of VAT. The government should also reclaim its role in the energy sector. The Oil Industry Deregulation Law and the Electric Power Industry Reform Law should be revisited. Plans to privatize the Philippine National Oil Company (PNOC) and its remaining 40% stake in Petron should be abandoned. Energy is a strategic industry where government presence is desirable. Government needs to have a direct stake in the industry to be able to exercise price leadership and better monitoring, and to serve strategic concerns beyond profits (e.g. development of renewable and clean energy).

 

6. Revive industry, create more jobs, and increase workers’ and farmers’ incomes. 

We are concerned about the plight of Filipinos as consumers, but it is important to emphasize that they are also producers and workers. The goal of development should not be narrowly defined by low consumer prices, a goal which has been used to justify a myriad of policies from trade liberalization to the freezing of wages. Cheap prices have come at the expense of income and employment, particularly in agriculture, promoted the restructuring of the economy towards services, and undermined our productive capacities in both agriculture and industry.

For starters, the current minimum wage must be raised. Government estimates that a family of six must have at least P894 everyday to afford a minimum standard of living in Metro Manila but the current minimum wage is only P382.

The predilection of government to sign trade and economic agreements left and right should be checked. The government should refuse to sign the Doha Round agreement in the World Trade Organization which seeks to further open up our markets. Opening up has led to jobless growth, de-industrialization and the implosion of agriculture. Contrary to the promises of its proponents, it has failed to raise income and employment, as has been conceded by UP School of Economics Professor Ramon Clarete.

This must be reversed by a review of the tariff structure, adjusting it upwards to protect domestic employment and incomes – not to coddle and enrich local capitalists as in old-style protectionism but to foster sustainable industrialization and development the gains from which must be more broadly shared.

7. Extend and reform the Comprehensive Agrarian Reform Program
Increasing trade protection is not enough for the farm sector, characterized as it is by a highly skewed asset distribution and landlessness, low investments, low technology, high production costs and low productivity. To address the asset distribution issue, government must undertake to extend the Comprehensive Agrarian Reform Program (CARP) with reforms. CARP still has 1.9 million hectares of land to redistribute to more than half a million potential beneficiaries. Beyond land redistribution, CARP needs to step up on the support services necessary to sustain existing as well as assist new farmer beneficiaries, and help stem reversals in the program. (For more on our recommendations regarding land reform, see http://www.focusweb.org/philippines/content/view/159/4/)

8. Provide the poor jobs and services, not dole-outs.
The dole-out programs now in vogue with government are only appropriate as an immediate response in the wake of a disaster or calamity. The poorest lack the means to buy basic essentials, but they do not lack talent or the will to work. They deserve to be treated with more dignity and not be subject to a near-mendicant, dependent existence.

That said, targeted intervention is necessary for the poorest, because they are the least able to manage the impact of a crisis, even as they are the last to share in the benefits of growth. To be sustainable and respectful of the dignity of the poorest of the poor, however, the intervention must be employment-based rather than dole-outs. For this, appropriate social mobilization is necessary involving both the state and the community. For example, employment-based intervention can involve public works at the local government units or the public school system. Everyone has the right to employment and services and it is the duty of government to ensure that these rights are respected – not as a matter of charity but as an obligation. Fulfilling these obligations is not just good in itself, however, but it is also a prerequisite for progress.

 

Taken together, this 8-point package of interventions will allow the majority of Filipinos to cope with the crisis. To get by for another day should not be our only goal, however. These policies should be seen as initial efforts to break free from the dominant economic paradigm that has guided policy-making in the country for the last few decades and which have resulted in stagnation and immiseration.

In the medium-term, the government should aim to rebuild its capacity to act in the economy so as to promote the welfare of the most number of people by assuming leadership in strategic economic sectors, pursuing an industrial policy to rebuild our manufacturing capacity, and abandoning trade agreements and arrangements that disallow the government from upholding the interests of the larger population. Bondage from debt must be finally broken. The government should also continue to prioritize policies to democratize economic power – through land reform, progressive taxation, and other redistributive measures – in order to widen the economic base required for long-term sustainable growth. At the same time, the government should, in cooperation with other developing countries, play its role in transforming the international environment to make it more conducive for attaining sustainable and equitable development.

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by Walden Bello

 

Joseph Goebbels, the chief of the Nazi propaganda machine, must be a role model for President Gloria Macapagal-Arroyo and her spin doctors. If people remember, Hitler’s right-hand man said that if one repeats a lie often enough, it gets accepted as truth. In her eighth State of the Nation address, Arroyo piled on top of one another half truths, factoids taken out of context, irrelevant details, distortions, and outright lies to paint a picture of a government laboring to serve the people under conditions of tremendous stress. The more than one hundred times the pro-administration crowd applauded on cue was part of the scenario building.

Agriculture’s Savior

Agriculture was the centerpiece of the speech. This was not surprising given the administration’s poor record in preparing the country for the skyrocketing food prices of the last four months. Factoids were interspersed with outright lies such as the Arroyo’s claim that the 1.5 million hectares of cultivated land that her administration has supposedly brought under irrigation was a “historic high.” Fact: the Marcos regime achieved this figure over 20 years ago. The president made it seem like she’s had all along a plan to increase food production and food self sufficiency. The truth is that the food crisis is so severe precisely because there has been so little planning in agriculture except to buy rice abroad to make up for production shortfalls. The truth is this government gave up on achieving rice self sufficiency long ago, something Arroyo came close to admitting when she derided our being able to export rice in the period 1978 to 1981 as a fluke and blamed nature—the Philippines being on the “path of typhoons”—to excuse her administration’s addiction to rice imports. The fact is agriculture has been deprived of much needed investment, with the country’s financial resources going instead to repaying the massive foreign debt.

 

Rewriting Economic History

Arroyo’s greatest lie was her painting the economy as in great shape prior to 2008: “Just a few months ago, we ended 2007 with the strongest economic growth in a generation. Inflation was low, the peso strong and a million jobs were created.” The truth is that the economy, under the management of Arroyo, was already in severe distress before the spectacular rice and oil price increases that began in the first quarter of 2008. The 7.3 per cent growth in gross domestic product that the president boasted of –the “strongest in a generation”--was a statistical illusion to which the main arithmetic contribution was a 5.4 per cent decrease in imports. This was not a sign of health, the World Bank noted.

 

The Bank further pointed to an increase in poverty incidence between 2003 and 2006, with the level of poverty in 2006 very closely approximating the 2000 level. In 2006, 27.6 million out of 84 million Filipinos fell below the poverty line—more than at any other time in this country’s history.

The president went on to claim that while we may be suffering today, other countries are in worse shape. In fact, in the last 15 years, the record of the Philippines in terms of economic growth has been the worst in Southeast Asia. Second-tier ASEAN states such as Laos, Cambodia and Myanmar have fared much better with average GDP per capita growth rates ranging from 3.8 to 6.6 %. Compare that with the measly 1.6% for the Philippines.

 

The Anti-Corruption Crusader

The most astonishing part of the president’s speech, however, came when she portrayed herself as an indefatigable fighter against corruption. When she boasted of her administration’s successful prosecution of “dozens of corrupt officials,” the people at the sari-sari store I stopped at to get a drink had had enough of almost 45 minutes of non-stop distortion: they shouted angrily. “E yung asawa mo?” (What about your husband?)

 

When, during their electoral debate several years ago, President Jimmy Carter laid out statistic after statistic to prove that his administration was successfully dealing with stagflation that gripped the US during his term, Ronald Reagan interrupted him and asked the audience if they felt they were better off then than they were four years before, when Carter took office. Reagan successfully cut to the chase and won the presidency. Similarly, let us cut through the crap. We dare this government to ask citizens a similar simple question: do they feel they are better off today than they felt in 2001?

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by Aya Fabros

 

Official pronouncements coming out so far claim: ‘SONA 2008 government targets on track.’ For this year’s state of the nation address (SONA), the plot thickens and twists abound, with a despised president speaking before a discredited congress amid a backdrop of widespread hunger, skyrocketing prices, and escalating discontent. Confronted with a plummeting -38% net satisfaction rating, 11.4% inflation rate, and 16.3% hunger incidence, Gloria Arroyo will be brandishing before Congress and the rest of the nation her accomplishments and forthcoming programs, anticipating applause for every point and pause.

According to the Philippine Information Agency, “the SONA 2008 will revolve on investments made, investments being made and investments to be made by the government to ensure long term development for the nation.” This shall highlight so-called achievements in 2007, including perhaps the passage of the Cheaper Medicines Law (RA 9502), the creation of 53,026 teaching positions (2002-2007) and provision of scholarships to 563,906 students, the allocation of P1 billion to TESDA for its PGMA Training for Work Scholarship program in 2007, an emergency employment program to provide employment to out-of-school and out-of-work youth, subsidies and the conditional cash transfer program, as well as the completion and opening of Ninoy Aquino International Airport Terminal 3.

National Social Welfare Program and the Noah’s Ark
GMA is also expected to put forward her blueprint to address the current economic crisis, as she expounds on the National Social Welfare Program and her administration’s attempt to address the devastating ‘impact of the adverse global environment.’ By virtue of Administrative Order No. 232, government agencies, such as the Department of Social Welfare and Development (DSWD), Department of Health (DOH), Department of Education (DepEd), Government Service Insurance System (GSIS), and the Social Security System (SSS), have been clustered to facilitate more cohesion and interagency coordination in carrying out social welfare programs, with the SSS administrator at the helm of this interagency initiative. AO 232 does not enumerate specific projects, however, the Noah’s Ark framework, which has been ‘approved in principle’ according to proponent, Gov. Joey Salceda, reveals particular thrusts for the remainder of GMA’s term.

Noah’s Ark, an allusion to the vessel that protected and saved humanity from the great flood, is being presented as a strategic and consolidated response to the fuel and food crisis. “Social protection, in contrast to growth impetus as instrument of poverty reduction, has now become the foremost undertaking of the national government. Thus, we propose to the President and to our policy makers this social protection plan to build a Noah’s Ark of basic needs to shelter the poor so no one would be left behind once the surging waters of economic adversities sweep over our shores,” according to former presidential chief-of-staff and current Albay Governor, Joey Salceda.

The multi-year social protection plan is reportedly backed by a P316 Billion budget to be funded by domestic borrowing and loans from the World Bank and the Asian Development Bank. It aims to augment incomes of poor and middle class families and increase public goods spending on agriculture, education, health and housing. Several reports identify the following elements of the Noah’s ark: conditional cash transfers targeting 4.7 million impoverished households, with an allocation of P84 billion for three years, or 28 billion annually; P 36 billion for Commission on Higher Education scholarships and training vouchers from the Technical Education and Skills Development Authority; P58 Billion incremental budget for the Department of Agriculture; Rice subsidy P 90 Billion; and P30 billion for NFA budget to build up a strategic rice reserve by buying from local farmers, according to reports.

The components of this strategic response appear to be patterned after various interim initiatives put forward with the onslaught of the multiple crises of unemployment, prices, hunger, and energy, such as the Katas ng VAT, Pantawid Kuryente and the conditional cash transfer program, which have been criticized for being short-term, ‘band aid’, populist measures. In the first quarter of 2008, additional revenues generated from consumption taxes have been funneled into 8 Billion pesos worth of subsidy, relief and dole-outs handed out to lifeline users of electricity, poor households with young school children, wives of public transport drivers, and calamity victims.

Similarly, for this multi-year plan, cash subsidies and direct transfers comprise a major bloc. With the intensification of hunger and poverty, poor households would certainly welcome the dole-outs. However, criticizing these initiatives as populist palliatives is not really off the mark. For one, dividing up P28 billion to 4.7 Million impoverished families would only amount to a meager P5,957 per household per year, clearly below the annual per capita poverty threshold of P15,057 set in 2006 (the latest Family Income and Expenditure Survey), and this does not even capture the inflation surge in 2008. This hardly constitutes ‘pantawid gutom’, juxtaposed with the Family Living Wage (FLW), the official rate, comprised of food and non-food expenditures needed to sustain a family of six, set by the National Wages and Productivity Commission, which for NCR (June 2008) was pegged at P894, or P326,310 per family per year. In fact, the recent SWS survey on hunger indicates an increase in and intensification of hunger, with almost 200,000 more families experiencing severe hunger, 760,000 families compared to 570,000 families last quarter, even after the cash transfers and dole-outs were carried out.

A central part of this so-called social protection framework is simply just an extension of an unsustainable, dole-out regime. The problem with a ‘pantawid gutom’ strategy is that hunger is a symptom not the disease. How this can be considered a strategic response, without addressing the chronic problem of joblessness, precarious livelihoods, and low-paying, unsteady work, not to mention the glaring disparities in assets, resource endowments and income distribution, is something that only the creative imagination of this administration can fathom. Or perhaps these inherent contradictions are being deliberately ignored to evade the tough decisions that have to be made to ensure thorough going growth and development? The other thing is that these efforts of the administration are concentrated mostly in NCR, where public, media attention is focused and dissatisfaction is greatest, which raised a lot of questions on who’s being targeted and why. The question to ask then is this-- pro-poor or pro-pogi points?

It’s really not surprising that strategies are inadequate and misdirected, considering that this administration does not really acknowledge the full extent of the crisis and the reasons behind it. In their books, the whole crisis is brought about by external factors beyond our control. “As a country, we are all suffering from the world economic downturn. Factors beyond our control have seriously assaulted our economy and our way of life. The sound economic and fiscal program of government has provided us with the necessary buoyancy that has so far kept us afloat in these rough seas,” says deputy spokesperson Lorelei Fajardo.

She adds, ‘if not for the Arroyo administration’s strong economic fundamentals in the past years’, “we can only imagine how devastating the world fuel price crisis would have affected us.”

 

Notice how Fajardo pins the blame on the world economic downturn, gives GMA the credit for purportedly keeping our head above water, but forgets to mention the liberalization and deregulation thrusts that slaughtered domestic agriculture and industry, and rendered our economy even more vulnerable to the swings and shocks of the world market; or this administration’s failure to provide the necessary social investment and asset reform infrastructure to prepare us for the impending deluge. Claims of sound economic fundamentals are challenged by data that show us trailing behind our neighbors. As Walden Bello emphasized in an earlier article, the recent UNDP Human Development Report show that while our economy was growing, Philippine per capita income growth was the ‘worst in Southeast Asia’ at an average 1.9% growth between 1990-2005, in contrast with Vietnam (5.9%), Thailand (2.7%), Laos (3.8%), Cambodia (5.5%) and Myanmar (6.6%) The truth is, benefits of moderate economic growth under GMA failed to trickle down to the poor; and in fact poverty incidence increased from 30% in 2003 to 32.9% in 2006, according to the National Statistics Coordination Board. Moreover, glaring disparities in income distribution continue to persist, with the poorest families (decile) getting a meager 2.16% of the total annual family income growth, while the richest families (decile) got 34.26%. Under an economic regime where distribution of resource endowments and access to opportunities to earn are skewed and limited to precarious livelihood, with low, unsteady incomes, it is not surprising that the incomes of the richest grew 16 times more than the incomes of the poorest (download the study here). Given a limited framework that refuses to recognize (or insists on ignoring) these contradictions in our economy, the nation is bound to be stuck with mediocre mitigation measures rather than strategic solutions. (For some suggestions toward strategic intervention, see Chavez and Docena, Eight-Point Memo to Address the Economic Crisis.)

A country in crisis, a president-in-distress
Instead of an admission of accountability and a more truthful assessment of the situation, GMA’s crew offers us consuelo de bobo and asks us to take comfort in the fact that we have a ‘a very dedicated and hardworking president’, “a very active performing achiever, performing political leader, performing President,” who would rather “buckle down to the nitty gritty of seeking ways to help cushion the effect of the world economic situation and just see to the immediate and effective implementation of programs to benefit our people.” These are the lines given by Cerge Remonde, Eduardo Ermita and Lorelei Fajardo, respectively, who came to GMA’s defense after her ratings plunged to -38%, an all-time record low, crowning Gloria Arroyo as the most unpopular president in history, disliked by at least 60% of the people, in all regions, across the archipelago. Survey or no survey, the whole image of a leader, bent to carry out necessary, tough, unpopular measures, is negated by her waffling position on urgent and critical legislation such as the CARP extension (particularly the extension of Land Acquisition and Distribution of 1.9 Million hectares identified for redistribution and not just support services to beneficiaries) and the Reproductive Health bill.

What we have before us at this point is a flawed framework (insufficient and shortsighted) hyped up by an intensified propaganda offensive carried out by Arroyo’s spin doctors. What’s being fed to us, branded as strategic solution, is essentially a populist politician’s propaganda; and what’s lacking in substance and sincerity is fervently filled up with a heaping shit-load of spin. Ultimately, what we’re being asked to count on is a politician in distress steering this so-called ark at a time of dire crisis.

The problem here is that GMA has her eyes set on mitigating her own crisis, the lack of legitimacy, confidence and mandate that besets her regime, rather than the larger crisis that holds the nation hostage. A closer look at her propaganda drive, her political appointments and subsequent plays at a programmatic response actually betrays a blueprint for GMA’s shelter and not ours. The recent round of political appointments completely erodes her posturing and pretense of a well-meaning, well-thought out strategy, with Arroyo’s handpicked allies and cronies being given key positions in crucial agencies, such as the National Economic Development Authority, the Energy Regulatory Commission and the Social Security System, all critical in determining the outcome of the current crisis. (See related article on political appointments.) Certainly, Recto wasn’t chosen for his track record in socioeconomic planning, but more likely for his participation (and failed bid) in Team Unity and his proximity to possible vice presidential candidates being eyed by the administration. Further, the political appointment of Romulo ‘executive privilege’ Neri, who will be at the head of the social welfare cluster, coordinating efforts under the National Social Welfare Program, including the infusion of funds toward direct cash transfers, could very well be a step toward assuring GMA’s sustenance as they pave the way for the road beyond 2010. Possibly, we are looking at the groundwork for yet another ZTE-NBN or Bolante fertilizer scam. It really doesn’t help that the key actors in this crisis situation are the same ones who have orchestrated large-scale, perpetual plunder, deception and fraud. (See related article.)

At this stage of the crisis, survival clearly is the name of the game. But whose survival and at whose expense, that is the nagging question. Meanwhile, with GMA on top of the food chain, the 14.5 Million who are hungry and the 60 percent who are dissatisfied will have to make do with a rehash of the Marie Antoinette quip ‘qu’ils mangent de la brioche!’ (let them eat cake) Of course, what GMA and her gang are in fact saying at a time of grave crisis is this: ‘Qu’ils mangent des mensonges, qu’ils mangent de la merde!’

But then again, as history tells us, there’s always the option to collectively cry out, “off with their heads, off with their heads!”

 

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by Mary Ann Manahan

 

The recent round of presidential appointments has aroused suspicion over the motivations and logic behind Gloria Macapagal-Arroyo’s decisions. Rather than merit, integrity, and competence, political relationships seem to be the common thread behind these appointments. Government positions, and the authority over policy and resources that go with it, appear to be handed out as part of a largesse package that oils a network of transactional politics.

 

The designation, for instance, of Ralph Recto, a defeated administration senatorial candidate in the 2007 elections, as National Economic Development Authority (NEDA) chief conveniently came after the one-year ban on appointing those who lost in elections. Recto, known as the main proponent of increasing the Value Added Tax rate, is only the second non-economist to head the socio-economic planning authority in the last 35 years. Though NEDA’s top post does not have to be reserved exclusively for an economist, Recto’s appointment has reinforced government critics’ claim that it was all political payback for sticking with the administration during the last elections.

 

Zenaida Ducut’s selection as head of the potentially powerful Energy Regulatory Commission (ERC) has been attributed to her closeness to the president as a cabalen (province-mate) and former classmate. Ducut’s decisions will have implications on government resources and on prices. She will also play a role in the Meralco controversy. Prior to her appointment to the ERC, Ducut served as the president’s deputy presidential legal adviser and as a three-term representative of Pampanga’s second district. While Ducut chaired the House Committee on Energy and co-authored the Energy Power Reform Act, government regulation is a different ballgame

 

Perhaps the news that raised most eyebrows in the last few weeks was the transfer of Romulo Neri as head of the Commission on Higher Education (CHED) to administrator of the Social Security Services (SSS). Neri has been hopping from one government body to another – he headed NEDA before being transferred to the CHED after the ZTE-NBN controversy (see related article on the controversies hounding the Presidency in this issue). He will now handle the SSS’ P30-billion trust fund. His appointment also coincided with the launch of the National Social Welfare Program, which clusters existing social welfare programs, currently under the Government Service Insurance System, Department of Social Welfare and Development, and the Department of Health. Neri will lead this umbrella body, thereby, giving him a cabinet rank and retaining his immunity from having to disclose any information on Arroyo’s involvement in the NBN-ZTE scandal (by invoking executive privilege).

 

Recto, Ducut, and Neri are just few of the recent appointees considered loyal functionaries and defenders of Arroyo. With her presidency under fire, having close friends and allies in key managerial positions in the bureaucracy is imperative for her political survival. This, however, reinforces what former Civil Service Commission (CSC) Chair Karina Constantino-David describes as the “politicization of the bureaucracy”, a situation where political appointees ‘invade’ positions usually reserved for career service personnel. Appointing political allies to plum posts is not a new practice, but Arroyo has done it far too much. A 2004 World Bank study on public sector improvement and corruption found that political appointees have reached the levels of service director, regional director, and bureau director, which are usually reserved for career service personnel or those who passed the constitutionally-mandated eligibility tests.

 

Arroyo also seems to have a soft spot for retired generals and those connected to the military establishment. It will be recalled that the military played a decisive role during the 2001 EDSA uprising and in neutralizing some factions within the armed forces that have plotted to overthrow Arroyo’s government.

 

According to the CSC, at least 48 retired military officers occupy key positions in the government today. Six out of 29 cabinet officials had links with the military establishment. Angelo Reyes stands out for having been appointed to four Cabinet posts in the last seven years: National Defense in 2001, Interior and Local Government in 2004, Environment and Natural Resources in 2006, and Energy in 2007. Reyes was the Armed Forces Chief of Staff who led the mass defection against Estrada in January 2001.

 

Arroyo’s habit of dispensing political positions has become a pervasive practice, to the extent that new positions and titles are created to accommodate chosen cronies. Mike Defensor and the Task Force on the NAIA is a case in point. The same World Bank study mentioned earlier found that rather than enhancing “bureaucratic capability and efficiency”, the situation has led to demoralization, discontent and ineffectiveness. The most recent sets of Arroyo’s political appointments punch holes on her supposed decisive resolve to address the economic crisis. Putting political allies with little background and at best questionable capacity or competence at the helm of key agencies given strategic roles in solving the crisis does not inspire confidence. Finally, while political appointments may still fall within presidential prerogatives, Arroyo’s abuse of the practice places her nowhere near the good President that she aspires to be. She runs an administration mired in patronage, plunder and payback.

 

by Joseph Purugganan

 

Growing public distrust and skepticism continue to hound the GMA administration  

Notwithstanding the attempts to re-fashion herself as a pro-poor president who promptly responds to people's needs in times of crises, majority of Filipinos remain skeptical of President Gloria Arroyo's performance, with a larger percentage expressing disapproval and distrust. Results of a recent Pulse Asia survey released a day before the State of the Nation Address (SONA) show that almost one in two Filipinos (48%) is critical of President Arroyo's performance and a majority (53%) distrusts her.

The survey also reveals that trust and performance ratings were largely unaffected by the spate of cash dole outs and subsidy programs for the poor initiated by government, with respondents who have received these subsidies expressing the same level of disapproval and distrust.  

Public distrust and disapproval of the Arroyo regime reached their highest levels between October 2007 and March 2008 at the height of the ZTE-NBN controversy that rocked the embattled administration to the point of near collapse. The latest ratings indicate that GMA has failed to reverse the general public's critical judgment of her presidency, with negative perception and feedback continuously building up over the course of her corruption-mired seven year term. 

GMA's reported achievements and the prescriptions in her SONA, particularly in the areas of graft and corruption, agricultural development and agrarian reform and infrastructure development, should be viewed against the stark glare of controversies that Arroyo may have been able to ride out but that nevertheless continue to hound her embattled administration. The three cases below exemplify the massive kickbacks and large-scale plunder associated with the Arroyo administration.

North Rail Rehabilitation Project (2002)

A US$503 million contract between the North Luzon Railway Corporation (NLRC) and China's National Machinery and Equipment Group (CNMEG) was signed to rehabilitate the Caloocan to Malolos section of the Philippine National Railways (PNR). A government-to-government deal financed the bulk of project cost, with a US$400 million loan granted by the Export-Import Bank of China on the condition that a Chinese firm bags the construction deal.

By 2004 allegations of overpricing and questions on the feasibility of relocating 40,000 residents started to hound the project. According to reports, the North rail reconstruction costs US$15 million per kilometer, more expensive than the ground-breaking 2,000-km Qinghai to Tibet system, which only cost US$3.6 billion, or US$1.8 million per kilometer. A substantial part of the initial downpayment allegedly went to kickbacks and payoffs. Since 2004, the Philippine government has reportedly paid out P1.4 billion for the project that has yet to commence, with interest payments amounting to a massive P1 million a day. In 2005, two separate Senate committees began investigation on the two issues of relocation and alleged price-padding.

The Senate investigation on the alleged overpriced contract continued despite the lack of cooperation from the executive branch which repeatedly invoked executive privilege. Under Executive Order 464, department heads are required to seek executive permission first before appearing in Senate hearings.Calls to nullify the contract reached the courts when affected residents with assistance from the League of Urban Poor Action (LUPA) and the UP Law Center filed cases before the Supreme Court and the Makati Regional Trial Court. On May 15, 2007, Judge Cesar Santamaria of Makati RTC Branch 45 issued an omnibus order that upheld the petition of LUPA-Bulacan and lawyers from UP Law Center.

In early July 2008, NLRC President Edgardo Pamintuan issued a statement saying the project has been "demobilized" due to differences with the Chinese on engineering and construction standards. Pamintuan retracted his statement a few days later saying that the project has just been delayed due to the failure of the NLRC to clear old railway bridges and ordered the demolition of the said railway within 45 days. NLRC is now reviewing the contract eyeing the resumption of the project.

Fertilizer Fund Scam (2004)

P728 million in fertilizer funds under the Ginintuang Masaganang Ani (GMA) program were allegedly diverted to the campaign kitty of GMA to finance her 2004 presidential bid. Reports show that the funds were released to dummy non-government organizations and cooperatives, as well as in urban areas where no farming is done.

A Senate investigation into the deal recommended that President Gloria Macapagal-Arroyo be held accountable in the mismanagement of the fund. The joint committee report prepared by the Agriculture and Food, and Blue Ribbon committees recommended the filing of plunder and graft charges and malversation of public funds against former Department of Agriculture (DA) Secretary Luis Lorenzo, DA Undersecretary Jocelyn "joc-joc" Bolante, Undersecretary Ibarra Poliquit, incumbent Undersecretary Belinda Gonzales, and Assistant Secretary Jose Felix Montes. 

 

The report has been sitting in the Department of Justice and the Ombudsman. Bolante left the country at the height of the Senate investigation. He was arrested and detained in the United States on July 7, 2006 for possession of a revoked US visa. Bolante, who is believed to be a close associate of First Gentleman Jose Miguel Arroyo, later applied for but denied political asylum. 

 

The Senate Committee on Agriculture under the administration of Senator Edgardo Angara has refused to reopen the investigation saying that the Senate has already done its job and the report has already been submitted to the Department of Justice (DOJ) and the Ombudsman. 

 

The Court of Appeals (CA) First Division recently granted the petition filed by the Anti-Money Laundering Council to freeze 70 bank accounts listed under Bolante and some other individuals and entities allegedly linked to the scam. The CA found probable cause that these accounts could be where the P728-million fertilizer funds have been transferred. 

 

ZTE-NBN Broadband Deal (2007)

A $329 million contract between the Philippine government and the Chinese telecommunications firm, Zhong Xing Telecommunication Equipment Company Limited (ZTE), was inked in order to build a national broadband network intended to improve communications between government agencies. 

 

The deal triggered a scandal when reports came out in the media about alleged US$130 million in kickbacks involving Benjamin Abalos, then Chairman of the Commission on Elections (COMELEC), as well as the First Gentleman Jose Miguel ‘Mike’ Arroyo. 

 

By September 2007, five months after the story broke out in the media, a full-scale Senate investigation was launched. The Senate investigation produced a number of witnesses including Joey de Venecia, co-owner of Amsterdam Holdings, losing bidder for the NBN project, and son of then House Speaker and erstwhile GMA ally Jose de Venecia. The younger de Venecia accused the First Gentleman Mike Arroyo of pushing the over-priced contract and telling him to "back off" from the project. Former NEDA chief Romulo Neri also appeared before the Senate and confirmed that Abalos was brokering the deal and that the Comelec Chair offered him a P200 million bribe in exchange for NEDA's go-ahead for the project. Invoking executive privilege, Neri later declined to answer questions on whether or not he got specific orders from President Arroyo to approve the ZTE contract. 

 

President Arroyo suspended the broadband contract with ZTE on September 27, 2008 and in October Abalos resigned from the Comelec. These actions, however, did not stop the Senate from continuing with its investigation. By January 2008, a new witness, IT expert Rodolfo "Jun" Lozada, a trusted colleague of Neri, surfaced after being abducted by the police, and gave his own account to the Senate regarding the web of bribery, kickbacks and overpricing surrounding the controversial contract. 

 

In February, the DOJ and the Ombudsman started their own investigations into the deal. In March 2008, the Supreme Court, in a vote of 9-6, upheld Neri's invocation of executive privilege.

What's Inside FOP?

Eight-Point Memo to Address the Economic Crisis
by Herbert Docena and Jenina Joy Chavez

PERSPECTIVE: Goebbel's Disciple
by Walden Bello

PHOTO OF THE MONTH: Women on Reproductive Health

by Aya Fabros

DEVELOPMENT BRIEF: Let them Eat 'Spin': National Social Welfare Program, Noah's Ark, and so-called Strategic Responses to the National Crisis
by Aya Fabros

SOCIO ECONOMIC MONITOR: Research Shows Arroyo Administration Failing to Meet Own Targets

by Julie de los Reyes

POLITICAL ROUND UP: Politicizing the Bureaucracy, Recycling Political Allies

by Mary Ann Manahan

POLITICAL ROUND UP: Gloria's 8th SONA and the ghosts of past controversies

by Joseph Purugganan

 

UPCOMING EVENTS