Being Right

There’s this memorable scene in Escape to Victory where Pele’s character needed to leave the pitch due to a brutal tackle. Rather than substitute him, with the team down four-nil, the coach (played by Michael Caine) decided to play with only 10 men. Hearing this, one of Pele’s teammates muttered wryly: “This isn’t going to be easy.”

Right now, it’s looking that way for the Philippines.

BusinessWorld reports “merchandise exports in March contracting by 24.9% to $4.53 billion compared to a 2.8% growth in February and a 0.1% uptick recorded in March 2019. Likewise, merchandise imports fell 26.2% to $6.91 billion in March, deteriorating from an 11.6% decline in February and a 12% growth observed in the same month last year. The March export fall broke three consecutive months of growth and was the lowest in nearly a decade, or since the 27% contraction logged in September 2011.” Philippines goods and services exports account for 31.68% of GDP (imports are 44.37%) and exports are expected to fall by $300 million. All this within a global trade forecasted by the World Trade Organization to contract by 13%-32%.

Common wisdom dictates that our economy is propped by OFW remittances. Indeed, going by 2018 numbers, there are around 2.2 million contracted OFWs whose remittances constitute 9.3% of Philippine GDP. With this Chinese coronavirus pandemic, OFW remittances growth is expected to contract to 2% (from 3%), with 21,000 sea-based OFWs and 15,000 land-based OFWs already repatriated.

The DoLE (Department of Labor and Employment) itself announced that it received 223,000 applications for government assistance, with only 150,000 expected to receive any benefit from the P1.5-billion budget of the Abot Kamay ang Pagtulong (AKAP) program.

All this coming at a time that Philippine government will be spending P275 billion pesos, as provided for under the Bayanihan Law, plus an additional P600 billion economic stimulus. Add the individual and corporate losses, related deaths, bankruptcies, and such that will affect government finances one way or another. Plus loan payments directly related to this pandemic, like the $1.5 billion from ADB. But the foregoing amounts were mostly projected for a period of two months, starting March. With the lockdown well into May, the need for additional funding is palpable.

But those are expenses because of the pandemic, which are expected to increase with every day of a lockdown. Yet there are new government expenditures that were planned even before the pandemic happened. One is free universal education, expected to cost an additional P7-8 billion. Then there are the ongoing Conditional Cash Transfers, now budgeted at P145.3 billion, with the Pantawid Pamilyang Pilipino Program at P108.8 billion and unconditional cash transfers (UCTs) at P36.5 billion.

There was quite some self-indulgent spending promised by the government last year, such as Republic Act No. 11210, providing 105 days of full paid maternity leave. Single mothers are allowed additional 15 days fully paid leave. All to be answered for by the SSS and employers (for private sector employees) or tax money for government employees. RA 8972 (the “Solo Parent Act”) additionally provides taxpayer-funded housing, education, and health benefits for single mothers.

Meanwhile, Philippine GDP was seen contracting by 0.2% in the first quarter, the lowest quarterly growth in 22 years. In money terms, this is likely signifying an expected loss of P2.5 trillion. Overall, what should have been 6.5% GDP growth for 2020 is now expected to be at a measly 2%, with the IMF predicting 0.6%. Unemployment (latest data showing 2.39 million, with 6.32 million underemployed workers,) is expected to rise to 6.2% to 8%. And there’s still the 800,000 new graduates expected to enter the workforce. Lastly, there is the Philippine debt pre-China coronavirus of P7.76 trillion, of which P2.64 trillion is owed to foreign lenders.

Moving forward (and we have to move forward), government needs to do considerable belt-tightening: Cut welfare packages, including the CCT, reduce free tuition, privatize government-owned or -controlled corporations, and downsize, merge, or abolish some government agencies. If there’s ever a time to re-engineer and streamline government, it is now.

Many public building programs need to be likely stopped, including related planned foreign borrowings. In contract termination terms, the pandemic is as fortuitous an event as you can get.

The Balik Probinsya Program is a step in the right direction and long overdue. It should preclude any further attempts at charter change and federalism. In any event, the foregoing has to be accompanied by slashing income tax and government red tape. The Philippine Competition Commission’s jurisdiction and power needs reducing — this is not the time to hold back Philippine-owned corporations.

Finally, the government should start identifying the industries needing tariff increases, to bound rate levels if need be. Expect most of our trading partners to do that anyway. A Buy Filipino program both for the private and public sector certainly needs to be legislated immediately. Let’s worry about the WTO and ASEAN later.

There are certainly tough days ahead. We just have to do what we have to do.


Jemy Gatdula is a Senior Fellow of the Philippine Council for Foreign Relations and a Philippine Judicial Academy law lecturer for constitutional philosophy and jurisprudence.

Twitter @jemygatdula