How PSEi member stocks performed — June 27, 2018
Here’s a quick glance at how PSEi stocks fared on Wednesday, June 27, 2018.
DSWD says no basis for DA claim that cash transfers make beneficiaries idle
THE Department of Social Welfare and Development (DSWD) said the Department of Agriculture’s (DA) plan to use cash transfers on farm livelihood projects will take away funding that keeps poor children in school and encourages their families to go for regular health checks.
The DSWD said the cash transfer program, known as the Pantawid Pamilyang Pilipino Program (4Ps), currently gives poor families with children in school P300 per child per month, up to P900; and P500 per month for doctor visits for children and pregnant women.
DSWD Acting Secretary Virginia N. Orogo said in a briefing at Malacañang on Wednesday that she met with Agriculture Secretary Emmanuel F. Piñol to explain where the 4Ps money goes.
In a statement last month, Mr. Piñol said: “My proposal is to use the same amount of money for livelihood projects (to make) 4Ps beneficiaries productive, instead of just (receiving) cash assistance with very little supervision from government.”
He added there should be “a timetable on how long a family would receive livelihood assistance from the government.”
“Under the 4Ps cash grant program, it seems like families who are listed under the program could receive the benefits forever. This deprives other families who also need support from government from benefitting from the program,” Mr. Piñol said.
The 4Ps cash grants, according to Mr. Piñol, “have taken away from ordinary people the drive to work, especially in the countryside, where many beneficiaries just wait for their cash grants rather than look for other income-earning opportunities. The result of this is very low agricultural and fisheries productivity. I know that the 4Ps issue is a very touchy and controversial issue, especially among our political leaders. Many other political leaders share my views and thoughts on the amount of money being splurged by government on the program which could have been used for productive endeavors.”
Asked to comment on Mr. Piñol’s plans, Ms. Orogo said she has “never encountered a family that has become idle and dependent” after receiving about P1,400 a month.” — Arjay L. Balinbin
Inflation, taxation, and protectionism
Fans, allies, and supporters of Dutertenomics continue to cite high world oil prices as the reason for the Philippines’ rising inflation rates.
As expected, they maintain that tax hikes imposed by the newly implemented revenue legislation — Tax Reform for Acceleration and Inclusion (TRAIN) — have little impact on inflation.
The numbers for many countries say otherwise.
All countries were affected by high world oil prices but only a few of them have introduced higher taxes starting January 2018, unlike the Philippines. The result is indeed ugly for Dutertenomics to accept (see table).
Even with these results, certain adjustments — if implemented — will have additional inflationary pressures.
These include:
One, fare hikes on public land transportation such as jeepneys, taxi, ride-hailing vehicles, UV expresses, and buses.
Owing to higher oil prices combined with increased taxes, several vehicle operators may be forced to cut costs elsewhere — buying cheaper spare parts, for instance — if they aren’t given the chance to raise fares, at least until end-2018.
Two, wage hikes by many companies that are reeling from the uncertainties of TRAIN 2 on the removal of various fiscal incentives.
Three, another round of oil/LPG/coal tax hikes by January 2019 or half-year away.
One option that Dutertenomics and its allies has not seriously considered is the reduction of VAT from 12% — the highest in ASEAN, higher than those in Japan, South Korea, Taiwan, China, Australia — and reduce the number of exempted sectors. Prosperous Hong Kong has zero VAT or gross sales tax (GST); Malaysia has also abolished its 6% GST as a result of Mahathir’s campaign promise. Cutting VAT from 12% to 8% (Taiwan has only 5%, Singapore has 7%, Japan has 8%) or even 10% will be a good anti-inflation policy.
On the positive side, Dutertenomics is pushing for the abandonment of rice protectionism this year, liberalizing trade imports by converting quantitative restrictions into lower tariff, no cap or maximum on rice importation. They project that rice prices can go down up to P7/kilo and hence, food inflation will follow.
This is a good move but pushed rather late instead of being legislated side by side with TRAIN 1. But it is better late than never.
Besides rice, government should also consider freer trade in many other commodities — clothes, shoes, appliances, gadgets and consumer electronics, oil, etc.
And we go to the subject of protectionism.
To stop or reduce all those accusations of who’s protectionist, (1) everyone or all countries should go for zero or near-zero tariff, zero or near zero subsidy, and minimal non-tariff measures/barriers (NTM/NTBs). And (2) let this demand will come from us, consumers, not from Trump or any head of state or politician.
Free trade, zero or near-zero tariff, is beautiful and is currently done by 10 member countries within the ASEAN, done by 28 member countries within the European Union (EU).
Free trade means cheaper commodities — cheaper food and medicines, cheaper oil and gas, cheaper mobile phones and computers, cheaper cars and motorcycles, etc. — and low inflation (even deflation for some), more consumption of more goods by the people.
On the global scene, here is one example.
Tariff rates on imported cars are 25% in Canada, 10% in the EU, and 2.5% in the US.
When Trump challenged equalized zero tariff for all, the others got angry. When Trump challenged equalized high tariff, the others remained angry.
So one big problem is that while people enjoy more choices via free trade, they also produce all sorts of protectionist excuses why free trade cannot be done in their country then lambast some leaders and countries for being protectionist. Double talk and trade hypocrisy is very evident here.
There are net gains (positives outweigh the negatives) from free trade and there are net pains from protectionism.
Bienvenido S. Oplas, Jr. is President of Minimal Government Thinkers, a member-institute of Economic Freedom Network Asia.
minimalgovernment@gmail.com.