March 27, 2008

Real crises

There is real danger that rice will soon become a very scarce commodity beginning with the market stalls but eventually, from the dining table of tens of millions of poor Filipinos. This is not to say that this staple food has not become scarce before and is even now beyond the reach of a scandalously huge number of Filipinos.

For the longest time our farmers, especially the poor, who do not own the plots they till, or whose plots are too small they produce only enough income for the family's subsistence, have had great difficulty in ensuring three rice meals a day. This was long before import liberalization and other neoliberal "globalization" policies wreaked havoc on our agricultural sector, especially the rice industry.

Rather than confront the crisis and undertake necessary measures to mitigate it and to prevent its recurrence, the Arroyo administration has promptly acted to cover up the truth behind the crisis -- even denying the crisis exists at all – to deflect criticism and escape responsibility for the looming disaster.

In fact, the rice crisis gives the lie to Mrs. Arroyo’s claim to being a top-notch economic manager. Combined with highest levels of unemployment and underemployment, an increase in the number of poor people and pressure for a new round of price increases in basic commodities, the prospect of rice scarcity alongside steep price hikes is even more threatening to the mistrusted, unpopular Arroyo regime than the Senate investigation into the ZTE National Broadband Network corruption scandal allegedly involving no less than the de facto President and First Gentleman.

The truth is that the current rice crisis is a manifestation of the chronic crisis of the Philippine economy in general and its agricultural sector in particular. For centuries, Philippine agriculture has been characterized by backward production and intense concentration of the means of agricultural production, most especially land, in the hands of big landlords and big traders/middle men.

Such backwardness and absence of genuine agrarian reform have been aggravated by the neoliberal restructuring of agriculture, which has been most intense since the 1990s. They include the WTO-AOA (Agreement on Agriculture), rice import liberalization, privatization of the NFA (National Food Authority), removal of subsidies for irrigation and other agricultural support, land use and crop conversion that prioritized the planting of high value crops for export instead of food, including rice, for domestic consumption, among others.

These have resulted in the substantial erosion of the country’s self-sufficiency and self-reliance in food production. The farm area for palay contracted by 86,606 hectares between 1991 and 2002 as a result of land use conversion, based on the 2002 Census of Agriculture (CA) of the NSO (National Statistics Office). Overall, the country has become a net food importer after decades of surplus food production.

Thus, the current rice crisis can be summed up as the country’s incapacity, because of years of neoliberal agricultural restructuring, to meet domestic requirements through local production amid a situation of tightening global supply of rice.

In the past years, the share of rice imports to the gross domestic supply of rice has been significantly increasing. BAS (Bureau of Agricultural Statistics) data show that from 1990 to 2000, imports comprised an average of 5.9% of the country’s annual gross supply of rice. The figure jumped to 9.7% for the period 2001-2006. In 2005 and 2006, the import ratio was 13%.

For 2008, imports could account for as much as 20% of the country’s rice consumption. This is much higher than the government claim of an 8%-share of rice imports to national rice requirements. The Department of Agriculture (DA) has stated that rice imports this year could reach as high as 2.4 million MT. This volume is equivalent to almost 20% of the country’s average annual rice consumption of around 11.9 million MT.

With such a high degree of dependence on rice imports, the country is definitely facing a serious insecurity in rice supply given the tight situation in the global supply-demand balance for rice. Worse, Vietnam, which in 2006 supplied more than 85% of our rice imports, is itself facing grave concerns on its own supply security. Thus there is no assurance that Vietnam and the country’s other sources like Thailand can deliver. Note also that China, which used to export rice to the Philippines, is now a net rice importer.

Moreover, because of tightening global supply, combined with uncertainties in the US economy that encourage massive speculation in commodities including rice, the price of rice has been soaring. As a consequence, local retail prices have been increasing rapidly.

The NFA has been ineffective in stabilizing rice prices, which is one of its mandates, as it has been substantially weakened by commercialization and privatization efforts of past and present governments. While the government intends to keep NFA rice at P18.25 per kilo, NFA’s limited participation in the local rice market (only 5% according to IBON), which continues to be dominated by a cartel, does not make a dent on overall rice retail prices.

Tight supply and high prices will hurt the poor most. The rich have extra money to buy a big volume of rice, even at unusually high prices, that could meet their families’ need for a couple of months. For most families, however, they buy rice to meet a day’s need, or in many cases, a meal’s need.

The urgency of drastic reforms, both in the short and long term, is highlighted by the fact that the various reasons behind the tightening global supply of rice – climate change, energy insecurity, US recession and the crisis of monopoly capitalism in general – are far too complex to be resolved any time soon. On the other hand, indicators show that they will continue to worsen in the coming years, and thus put even greater pressure on the country’s food security. Changing weather patterns, for instance, will significantly reduce production and yield in the generally backward agricultural systems of the world’s rice producing countries, including the Philippines. The mad rush to shift to biofuels to meet growing energy needs, in particular in the First World, will continue to undermine food production.

To ensure food security, the country needs to be self-reliant and self-sufficient in its food production. Medium to long-term reforms must include the implementation of genuine agrarian reform; substantial and reliable state support to encourage farmers to be more productive; reversal of agriculture liberalization; reversal of NFA privatization/commercialization and strengthening of its mandate to ensure sufficient and accessible supply at affordable prices of food crops; dismantling the rice cartel; and a stop to land use and crop conversion and expansion of domestic food/rice production among others. These policy reforms must start now.

In terms of immediate interventions, Mrs. Arroyo must stop downplaying the crisis and recognize the urgent need for significant state intervention. These should include: centralized procurement of imported rice by the NFA and cancellation of the import licenses of private traders; an increased presence of NFA distribution/retail outlets particularly in areas where poor families are concentrated (urban and rural); an emergency fund that will directly go to rice farmers to subsidize production cost; price control (under RA 7581 or the Price Act, government can impose a price ceiling during times of calamity, disaster or other emergencies.)

Unfortunately, Malacanang is more worried that the rice crisis could further destabilize the government and fuel more protests. So the expedient thing to do is deny, obfuscate and cover-up the crisis. Indeed, old, bad habits die hard. #

*Published in Business World
28-29 March 2008

March 15, 2008

Myths, lies and half-truths (Part II)

When the National Security Adviser recently declared "the worst is over" one would wish that, for the good of the nation, he was referring to the orgy of corruption, bribery, coercion, killings and disappearances, even treasonous acts that have been the hallmark of the Arroyo administration.

But on the contrary, he was referring to this regime's worst fears that the mounting wave of protest and demands for truth and accountability would turn into another demonstration of people power that would unseat Mrs. Gloria Macapagal-Arroyo (GMA) and install a new government.

Mr. Gonzales is trying hard to sound like a disinterested analyst reading the current political situation. He even made the not so erudite prediction that there would be a waning of protest with Holy Week and summer vacation coming up.

He however noticeably failed to weigh the significance of the series of protest actions that have been sustained for several weeks since the Lozada exposé -- from forums and “Masses for Truth” in schools and churches, to localized noise barrages, to public declarations and streamer hanging by various groups, to small and medium-sized demonstrations involving hundreds to thousands of people, to the huge rallies that have been drawing crowds in the tens of thousands with a much broader representation of Philippine society.

Neither did he mention any prospects for a clear and definitive resolution of the controversies hounding his boss. Malacanang's hypocritical stance that Mrs. Arroyo is leading the fight against corruption rather than abetting it and being its prime beneficiary rankles a public that independent surveys have consistently shown to have overwhelmingly adjudged the Arroyo regime as corrupt and deceitful. Add to this more recent poll of the Political and Economic Risk Consultancy Ltd. (PERC) survey showing that the Philippines is perceived by expatriate businessmen to be the most corrupt Asian economy.

It is not surprising that Mr. Gonzales and the Arroyo camp would gloat over the seeming inability of the regime's critics to ignite people power. What is deeply disturbing, however, is the regime's track record that when protests die down and the mass media becomes less vigilant, it is encouraged to engage in ever bigger and more anomalous deals including the sell-out of the national patrimony and sovereignty. This seems to be the lesson emerging from the controversy over the joint exploration contract entered into by the government with China that experts say has jeopardized the Philippines’ territorial claims over some of the disputed resource-rich Spratly Islands.

Neither is it surprising that Mrs Arroyo would be pleased by the Senate's failure to squeeze out the truth and acquire evidence, much less an admission of any wrongdoing, from Mr. Leo San Miguel, erstwhile “surprise witness” of Senator Panfilo Lacson on the anomalous National Broadband Network deal. This unexpected turn of events has undoubtedly boosted the regime's confidence in its ability to cover its tracks and preempt damning testimony from would-be whistle-blowers through intimidation, if not cooptation.

These latest machinations and maneuvers of the Arroyo mafia underscore the limitations and even futility of purely “legal, constitutional processes" that Malacanang wants to dupe the people into believing are the only acceptable ways of ferreting out the truth and attaining accountability. Nonetheless, Messrs. Neri, Razon, Atutubo, Gaite and San Miguel may have withheld damning testimony, just as Mrs. Arroyo’s shameless allies in the House of Representatives have managed to block impeachment moves, but the people have begun to see the truth behind all the lies and dirty tricks.

It is wishful thinking, if not self-delusion, for the National Security Adviser, with all his unaudited intelligence funds, and the rest of the GMA camp to believe that Holy Week and summer vacation can induce mass amnesia and delete all of the regime’s sins from the public’s collective memory. The shame of it all is that while the whole of Christendom prepares for cleansing and atonement of sins, the regime sees in the coming Lenten season, not an occasion to right itself , but an opportune moment to wiggle out of a tight fix.

To the extent that GMA regime has indeed succeeded in preventing full and untrammeled disclosure of the truth, it has also evaded accountability and prosecution. What it cannot prevent more and more is the public discernment of the truth behind all the lying and stonewalling. More and more it is becoming extremely difficult for the regime to escape public judgment and condemnation.

This is not the first time both the cocky Mr. Gonzales and his boss will be proven wrong in their mendacious, precipitate and self-serving predictions. Such arrogant posturing can only add fuel to the fire of outrage, protest and resistance spreading rapidly across the nation.#

March 09, 2008

Myths, lies and half-truths (Part I)

There are just a few major lines of argument we keep hearing as to why it is supposedly wrong, bad for the country, and/or irresponsible to call for the resignation -- worse still -- the ouster, of de facto president Gloria Arroyo. Let's try to answer them one by one.

Argument 1: The economy has never been so good. A change of government at this time -- whether through constitutional means, resignation or impeachment, or forcible removal by extra constitutional means ("People Power" and a combination of withdrawal of support by the military and civilian bureaucracy) -- would not be good for the economy because of the climate of instability and uncertainty it would create as well as the mismanagement that could ensue should a less competent chief executive take over.

One is tempted to simply retort that whatever economic growth there is, it is not being felt by the vast majority of the Filipino people. Latest official poverty statistics from the National Statistical Coordination Board (NSCB) for 2004-2006 show that 4.7 million families, equivalent to 26.9% of the total, were poor in 2006, an increase from 4 million or 24.4% in 2003. "Poor" means not being able to provide, in a sustained manner, for minimum basic needs -- food, clothing, shelter, education and health. This, despite the average 5.4 per cent economic growth experienced for the same period.

Independent think-tank, IBON Foundation, for its part disputes government data on employment. Joblessness eased not because the economy created more jobs but by sheer statistical manipulation. The definition of unemployment was recently revised to exclude discouraged job hunters from the labor force count. The effect of this new methodology in 2007 was to dramatically reduce the labor force participation rate (the percentage of population 15 years and above who are in the labor force) to 64% from the 66.5% under the NSO's traditional unemployment definition.

The result: more than a million jobless were erased from the books. In 2007, there was an annual average of 2.7 million unemployed Filipinos, a steep drop from figures recorded in recent years, placing the average unemployment rate for 2007 at just 7.3 percent. Still, the average unemployment rate of 11.3% over the 2001-2007 period shows the economy is suffering record joblessness despite government's attempts to obscure the figures.

There is no truth to the government claims of a healthy and growing economy. Government statistics are deceiving if not outright false. GDP/GNP growth are unsustainable and bloated reflecting the heavy reliance on OFW remittances; government expenditures underwritten by a policy of debt-dependence including loans for corruption-laden official development aid (ODA) projects; a persistent contraction of the productive sectors of the economy, specifically manufacturing and agriculture, with the manufacturing sector smaller than it was in the 1950s and agriculture, the smallest ever in the country's history.

The appearance of growth and improved fiscal position is also the result of the imposition of a hiked 12% VAT and other indirect taxes rather than an improvement in tax collection especially customs tariffs and income taxes of big corporations and wealthy individuals (including high-rolling government officials). The expanded VAT on oil and power, air and water transportation, non-food agricultural products, medical and legal services, etc. contributed significantly to higher prices of goods and services that caused even greater poverty. NEDA Director-General Augusto Santos candidly acknowledged that the higher prices of commodities resulted from the government's need to improve its revenue collection.

Ironically, revenue collections are not keeping pace with the increase in economic activity as reflected in "the highest ever quarterly GDP rates" that the Arroyo administration likes to crow about. The likely explanation why government is not collecting enough is either gross inefficiency or corruption or both.

The auction of government assets prettifies the fiscal picture but it is a short-sighted policy. More ominously, the more than P90 billion revenue created by asset sales last year is equivalent to the sum of all those earned through privatization in three previous administrations. It signifies an unprecedented selling frenzy. This cover-up for revenue shortfalls has not gone unnoticed by credit rating agencies and multilateral financial agencies such as the IMF who have expressed concern about the sustainability of efforts to cut the budget deficit and are already coaxing government to impose new taxes.

On the other hand, the strong showing of the peso is primarily the result of the weakening of the US dollar, a phenomenon that is buoying up currencies across the globe whether of the developed capitalist countries or the backward, mal-developed countries like the Philippines. For the Arroyo regime to claim credit is plain hogwash.

It is actually the record foreign exchange remittances of more than eight million overseas Filipinos that constitute the second biggest factor in the healthy state of the gross international reserves and the appreciating peso. Unfortunately, due to the import-dependent, export-oriented character of the economy, the overvalued peso is not necessarily a boon to the economy. The shrinking buying power of OFW families tied to a fixed dollar income sent by their relatives abroad and the shrinking market for more expensive Philippine exports attest to this fact.

Hot money seeking the best country to park in and earn interest from the speculative markets is finding the Philippines a safe haven so far, especially with a sure influx of foreign exchange from OFWs. It is contributing to the peso appreciation no doubt, but how long it will stay and what long-term impact such portfolio investments have on the economy is the more important concern.

The income disparity and social inequality has been going on since the birth of this republic. The situation worsened during the Marcos dictatorship and even under the regimes that followed, and the reason for this is not divinely ordained or in the nature of things but because of the conscious and active effort of the socio-economic elite and the governments they control to keep things that way. The social wealth in this country doesn’t trickle down because it’s not supposed to – despite the propaganda.

What the Arroyo administration has been doing is more of the same and worse. It pretends to give back, in terms of dole-outs, what it takes in by the billions of pesos through indirect taxes such as VAT and onerous foreign loans, such as the Chinese-funded projects, that the people will eventually pay back. These are then squandered on mind-boggling graft and corruption (NBN-ZTE and other scams, electoral fraud, bribery and patronage politics to buy the loyalty of congressmen and local officials) and wasteful as well as wrongful priorities (the servicing of onerous debt, bloated military and police budgets, unaudited “intelligence funds” and Mrs. Arroyo’s foreign junkets).

*Published in Business World
8-9 March 2008