With all the economic problems facing the country, President Duterte should now focus on the economy instead of pursuing his “relentless and chilling,” not to mention bloody and brutal, drug war and going after his critics. More than ever, the President will need the support of every Filipino to halt the rapidly rising inflation and the visible deceleration of economic growth.
With the people reeling from astronomical prices of rice, vegetable, meat, and other food items, it is foolhardy for the administration to continue focusing on killing and harassing the poor and throwing threats and accusations on the opposition while the country suffers from runaway inflation, a rapidly weakening peso, a growing trade deficit and continuing capital flight.
Consider these: the 6.4-percent inflation rate in August is the highest in more than 10 years; the value of the peso, pegged at more than $54 to the dollar last week, is the lowest in almost 13 years; the stock market has fallen 22 percent since its highest in January; the trade deficit hit more than $3.7 billion in May; and the balance of payments reached $455 million in July.
The BOP deficit, according to former Finance Secretary Margarito Teves, is indicative of heavy importations, heavy debt servicing, capital flight and divestment from the country.
All these indicators will continue to rise after the Duterte administration, in another knee-jerk reaction, lifted restrictions on the importation of rice, food and other items in an effort to curb inflation and to ease the burden of the people. It is important to note that food comprise half of the Filipinos’ household budget, with rice alone accounting for 20 percent.
The rice situation has become so dire that our good friend Agriculture Secretary Manny Pinol was reported to have said that he would recommend to the National Food Authority the legalization of all transaction involving rice, including smuggling, to ease the rapidly deteriorating rice crisis.
The administration must be so desperate to even consider legalizing smuggling of the country’s staple food and to relax all restrictions in the importation of rice and food products. While this could help to slow down inflation and at least give much-needed relief to the suffering Filipinos, economic experts are worried that prolonging the liberalized importation of these items could irreparably damage the rice and food industries, which are key sectors of the country’s economy.
Economists warned that the government should withdraw the temporary relaxed food importation rules immediately once the prices have stabilized. If the liberalized importation of food and other basic commodities is prolonged beyond what is necessary, the local food industry could be crippled beyond repair, exposing the country to even more inflation problems in the future.
The country’s economic managers should sit down with the lawmakers and come up with more sustainable solutions to our economic problems.
For example, in the Duterte administration’s rush to implement its ambitious “Build, Build, Build” program, it rammed the approval of its Tax Reform for Acceleration and Inclusion (TRAIN) Law that aimed to raise revenues for the government’s lofty infrastructure program.
In a veiled effort to make the TRAIN provisions acceptable to the majority of the people, the law exempted individuals earning P250,000 or less annually from paying income taxes. On the same breath, the TRAIN law levied high excise taxes on premium goods, especially on oil and petroleum, which resulted in higher costs for manufacturers and importers that the latter simply passed on to the consumers, thus the sharp rise in prices and the resulting spike in inflation.
So in reality, it is the ordinary Juan de la Cruz who eventually ends up paying for the ambitious “Build, Build, Build” program instead of the wealthy businessmen, who continue to laugh their way to the bank while the poor people could hardly put decent food on the table.
As business columnist Rudy Romero says, the Duterte administration’s Tax Reform for Acceleration and Inclusion (TRAIN) is neither reformist nor inclusive. In other words, instead of pushing inclusive economic growth, it will eventually result in slower economic growth and continued exclusion of the majority of the people from the benefits of growth.
Despite the apparent failure of TRAIN to stimulate the economy and uplift the condition of the poor, Duterte’s economic managers have now introduced the sequel to the poor episode, TRAIN 2. But with the word TRAIN now associated to bungled policy, they have surreptitiously named the proposed law as the Tax Reform for Attracting Better and High-quality Opportunities (TRABAHO).
The proposed law is geared to supposedly encourage investments by lowering the corporate income tax rate from 30 to 20 percent by 2029 and “rationalize” fiscal incentives given to businesses, including those situated in the country’s economic zones.
But many economic analysts say that instead of encouraging investors, the proposed measure would dampen investments because it will make the country even less competitive.
“While the proposed tax reforms may be fiscally prudent, it will likely make the Philippines less competitive versus its regional peers. Investments could slow over the near-term as the proposed conditional corporate tax reduction and repealing of fiscal incentives create uncertainties for businesses,” the Fitch Group’s research arm BMI Research said in a statement.
The Philippine Ecozones Association also warned that the Trabaho law could, in fact, result in job losses, not to mention lower production output and exports and even capital flight, thus disturbing the already investor-friendly conditions in the country’s economic zones.
Expected to be hardest hit by the proposed law would be two of the country’s biggest export revenue earners – the electronics and semi-conductors sector and the business process outsourcing (BPOs), many of which are located inside economic zones and thus enjoy fiscal incentives.
“The Philippine Economic Zone Authority (PEZA) law is one of the most potent investment tools that has buoyed our economy in the past decades, why tamper with it now?” asked Philea president Francisco Zaldarriaga.
The TRABAHO bill is expected to easily pass the rubber-stamp House of Representatives. We can only hope the Senate will consult all the major players in the country’s economy and consider the bill’s effect on the people, who after all are the ones suffering from the effects of the runaway TRAIN.
(valabelgas@aol.com)
