SENATOR NANCY Binay-Angeles on Sunday asked Malacañang to appoint a “Boracay czar” who would serve as the lead person for all matters concerning the resort island’s ongoing rehabilitation. Ms. Binay made the recommendation after a Senate hearing last week revealed that projects were delayed due to misunderstandings between government agencies. She also said residents are left confused as both national agencies and the local government assert authority in the area. “Who is on top of everything? We have (Environment) Sec. (Roy A.) Cimatu who is in charge of Task Force Boracay, but this is just an inter-agency council… We need a person who has the final say and who will decide if there are problems, especially when there are issues between government agencies,” said the senator, who chairs the Senate committee on tourism, in a press statement. — Camille A. Aguinaldo
I am pleased to share with you the political section of our latest quarterly report, (“Of Deficits and Rising Risks,” May 20, 2018) for GlobalSource Partners, a New York-based network of independent analysts (globalsourcepartners.com). Our subscribers are principally global asset managers and banks who are mostly focused on the more quantitative economic sections of our reports. Christine Tang and I are their Philippine Advisors.
“President Rodrigo Duterte has emerged as the country’s most powerful leader since the return of democracy in 1986. He has the support of a supermajority in both houses of congress and, with the removal of a vocal critic in the person of the former Chief Justice, an even friendlier Supreme Court. He will moreover have opportunities in the coming months to further consolidate power through his appointing authority. Most immediate are replacements for the ousted chief justice as well as the country’s chief watchdog, the Ombudsman, another critic who will retire in July. Additionally, those monitoring the retirement dates of current Supreme Court justices have counted 8 additional posts to be filled by the President this year and next, plus another 3 before he steps down in 2022.
Separately, the President’s enormous power may be gleaned from (a) his continuing high popularity, which (b) also gives his endorsement considerable weight in next year’s national and local elections, (c) media reportedly practicing self-censorship to avoid his verbal attacks, and (d) the attention he is getting internationally, not only in connection with a bloody drug war but also in upending the regional balance of power between the US and China.
Indeed, with the system of institutional checks and balances essentially out the window, many more are worrying that the President’s pragmatism in courting Chinese infrastructure support and other investment, aid, and trade cooperation may have extended too far. Not only are criticisms about his refusal to assert the country’s victory in the UN-backed arbitral ruling recognizing the Philippines’ territorial claims in the West Philippine Sea (South China Sea) continuing, but observers are pointing out the risk of the Philippines falling into what they call “China’s debt trap diplomacy.”
This comes in the wake of revelations elsewhere (e.g., Sri Lanka, Pakistan) that China’s generously extended loans for infrastructure have benefited it more than the borrowing government with the latter ending up saddled with huge debts and under China’s control.
The President appears unperturbed by all this, reminding critics that the Philippines does not have the military might to enforce its claims in the disputed waters, arbitral ruling or not, and that China is an important ingredient in his administration’s infrastructure program.
This leaves the job of policing China-funded projects to the President’s economic team, who has announced the setting up of separate guidelines exclusively for assessing China-assisted projects.
In the meantime, some are wondering what Mahathir Mohamad’s reentry in Asia’s political scene would mean for President Duterte’s strongman image. The Prime Minister, at 92, appears to be standing up to China by putting all China projects in Malaysia under review.
Aside from China, a second concern is the President’s push for a federal form of government that majority of Filipinos are not in favor of.
In our last outlook report, we concluded that the task, which involves changing the Constitution primarily to adopt federalism and possibly also open up nationality restrictions, faces an uphill climb and despite aggressive attempts in the [House of Representatives], is unlikely to happen anytime soon. Although some of the hurdles we cited have become less daunting, we still think our conclusion the right one given time constraints.
Rather, the immediate priority appears to be the Bangsamoro Basic Law (BBL), a proposed ingredient to the peace process that will set up an autonomous Muslim Mindanao which President Duterte has promised his Muslim supporters. The BBL has become much more urgent following the fighting in Marawi last year that razed the city to the ground and left over two hundred thousand homeless. The plan calls for congress to pass the proposal and submit it to a referendum in next year’s elections. Expectations are that with the President championing it, Filipinos will vote for it precisely to prevent the radicalization of young Muslims by ISIS elements that precipitated the Marawi crisis.
But that does not mean that federalism is no longer in the cards.
After all, the President had early this year formed a 19-member consultative committee headed by a former chief justice, who is a known federalism advocate, to review the Constitution and recommend changes within the year.
Members of Congress have their own ideas too although the finance secretary has been heard to privately worry about the fiscal nightmare that the emerging federalism bill in the [House of Representatives] will usher.
The thinking now among the President’s economic managers is to use the BBL as a pilot project of sorts for policy makers to learn more about federalism. Learnings from that experience can then inform charter change initiatives, which may still happen before the President’s term ends.
While a reasonable proposition, it remains to be seen whether the President would be willing to take this slower but perhaps, more prudent route.”
Romeo L. Bernardo is a Fellow of the Foundation for Economic Freedom and a Governor of the Management Association of the Philippines. He was Finance Undersecretary during the Corazon Aquino and Fidel Ramos administrations.
romeo.lopez.bernardo@gmail.com
The Electric Power Industry Reform Act (EPIRA) of 2001 or RA 9136 was among the most important pro-market reforms in the Philippines. Before that law, the government-owned National Power Corporation (NPC) was the single-biggest debtor agency and the single-biggest deficit generator, fiscally bleeding the taxpayers while providing unreliable power supply.
EPIRA has significantly changed this, moving away from a state monopoly to a competitive sector with dozens of competing players in power generation alone. Competition can pressure price declines overall while improving electricity supply quality and reliability.
Yet many sectors still glamorize that dark era of state monopoly and endless fiscal deficits. They complain of “continuously rising” electricity prices and then blame EPIRA.
Electricity prices are rising, true.
And while they occasionally spike, the general trend is a price decline.
When prices look “unaffordable” for some, people should realize that the monthly electricity bill contains about a dozen items. These include generation, distribution, and transmission charges — the three costliest items — as well as supply, universal, system loss, and metering charges. The bill also covers VAT and feed in tariffs and so on.
After EPIRA was passed, focus was placed on the privatization of NPC power plants, not in the construction of new ones.
As a result, the country’s installed capacity has hardly improved, from 14.7 GW in 2002 to 15.1 GW in 2003, 15.6 GW in 2009.
Significant capacity additions occurred only in 2010 with 16.4 GW, then 2012 with 17.0 GW, then in 2014 with 17.9 GW, 2015 with 18.8 GW, big jump in 2016 with 21.4 GW then in 2017 with 22.7 GW.
These numbers show the following:
One, installed capacity from 1991 to 2001 — the decade before EPIRA — expanded twice but power generation expanded only by 1.8 times. This suggests low productivity and efficiency under the NPC.
Two, capacity from 2001 to 2011 (EPIRA’s first decade) has expanded only 1.2 times but power generation expansion was 1.8 times. This means the private owners of NPC-privatized power plants were more efficient in optimizing the capacity and efficiency of those plants.
Three, from 2011 to 2017 (last six years), power generation has expanded 1.4 times in lock step with installed capacity despite the fact that many capacity additions were from intermittent, unstable renewables with low capacity factors like wind and solar. This shows again higher efficiency and lower prices by private players.
Fast expansion in power generation means fast expansion in power consumption and electricity prices are more affordable so the people use more electricity. And this debunks the claim by anti-EPIRA groups that electricity prices are “continuously rising.”
AN INDEPENDENT MARKET OPERATOR, FINALLY
Meanwhile, this Monday, June 25 the Philippine Electricity Market Corporation (PEMC) will hold a press briefing after the PEMC annual membership meeting. The event will include the election of a new set of PEM Board of Directors and handover of market operations and governance functions from the DOE to the new PEM Board.
This will be a very significant event for two reasons.
One, the creation of the Independent Market Operator (IMO) as specified in EPIRA will become a reality after 15 years of foot-dragging by the DOE. Rules of the Wholesale Electricity Spot Market (WESM) were promulgated in 2002 and the PEMC was incorporated one year later. The PEMC was designated by the DOE as the Autonomous Group Market Operator (AGMO) in 2004.
Two, the PEMC will become a real independent market operator (IMO) and not a DOE-designated AGMO. Chairmanship of PEMC will be held by one of the WESM players and will not come from government. This will be a first time since PEMC was created in 2003 or after 15 years.
Under the previous administrations, it may be argued that the DOE partially violated the EPIRA because it made PEMC as government-dependent market operator. So now this anomaly will be corrected.
DoE will still have regulatory power over the IMO through the issuance of related Department Administrative Orders, Memo and Circulars, and via the Energy Regulatory Commission (ERC).
Bienvenido S. Oplas, Jr. is President of Minimal Government Thinkers, a member-institute of Economic Freedom Network (EFN) Asia.
minimalgovernment@gmail.com.
By Xubei Luo
First of two parts
FATIMA ESMAEL, a young mother of two in Cotabato, dreams of having a house of their own. Her husband, a pedicab driver, earns six dollars on a good day, just enough to pay for rice and bare necessities, forcing them to stay with relatives. “My wish is for us to escape poverty,” she said.
Eliminating poverty has always been a major challenge in the Philippines. Across generations, the country’s leaders vowed to bring the poverty numbers down but it seems to have remained daunting.
In the last decade, however, there were strong indications that the Philippines has started to make a serious dent on poverty, raising hopes for the likes of Fatima that the country can eventually lick the problem.
Our recent study titled Making Growth Work for the Poor: A Poverty Assessment for the Philippines has found out that the national poverty rate fell to 21.6% in 2015 from 26.6% in 2006, based on the latest Family Income and Expenditure Survey. Poverty decline was more rapid particularly in 2012 until 2015. With a strong economy, it’s likely that this trend continues up to this day.
What drives poverty reduction in the past decade? Three things stand out.
First is the increase in farm wages and the rising number of Filipinos getting incomes outside agriculture. This accounts for two-thirds of the decline in poverty.
Agriculture’s share of the employment is declining by nearly 1 percentage point each year. While many of the poor who left agriculture landed informal services jobs, they still get incomes a bit higher than what they would get from farm-related work. Most of the poor are still doing farm work.
The second reason for the poverty reduction are transfers from social programs, contributing 25% in the reduction of poverty. Foremost of these transfers is the Government’s Pantawid Pamilya, the government’s primary social assistance program. Expanded in the last few years, Pantawid extends cash grants to 77% of poor households and contributes to reducing poverty and to building of human capital — meaning that the children of poor families remain in school and stay healthy. This trend is consistent with the global experience with the impact of social safety nets on poverty.
And the third reason: remittances from both domestic and foreign sources contribute about 12% and 6% of poverty reduction. Two-thirds of Filipinos, or 15 million households, receive domestic and foreign remittances.
School enrollment has notably increased in recent years, with universal and mandatory kindergarten as well as two years of senior high school added to the education cycles. Pro-poor policies and changes to health insurance coverage have resulted in increased use of health services. Access to clean water and sanitation and electricity has improved. Social safety nets were expanded to cover most of the poor.
Despite these gains, however, there are still around 22 million Filipinos living below poverty line as of 2015.
Compared to its neighbors in the Southeast Asian region, the country isn’t reducing poverty fast enough. While Vietnam, Indonesia, and China have been reducing poverty at 2.1 to 2.4 percentage points per year measured by the international poverty line, the Philippines’ rate of poverty reduction has been less than 1 percentage point each year in the past decade.
Several challenges prevent the country from accelerating poverty reduction.
One challenge is the pattern of growth that is less pro-poor than the country’s neighbors. The country’s agricultural sector which employs most of the country’s poor has seen minimal productivity growth.
Workers moving out of agriculture in the Philippines have generally ended up in low-end service jobs. This contrasts to the experience of countries like China, Indonesia, Malaysia, and Thailand which generated larger number of manufacturing jobs to absorb those leaving the farm sector.
Inequality is another hurdle.
In the Philippines, the top 1 percent controls more than half of the nation’s wealth. This high concentration of income and wealth limits equality of opportunity and impedes equitable public service delivery necessary for inclusive growth.
Poor people start life at a disadvantage. Malnutrition, lack of resources, poor access to quality health care, low education, and skills limit their lifetime earnings.
Also, frequent natural disasters and persistent conflict in parts of Mindanao continuously push vulnerable groups into poverty and jeopardize long-term development of the poor’s human capital.
“I lacked education; I only finished high school so I ended up selling street food here in Manila,” says Rommel Punzalan, father of four. “I wanted to become a mechanic. I need to work very hard so I can send all my four children to school. I want them to finish college.”
The country needs to do much more to help the likes of Fatima and Rommel escape poverty.
Xubei Luo is a Senior Economist of the World Bank.
By Ranier Olson R. Reusora, Researcher
Investment pledges by foreign and Filipino investors amounted P184.99 billion in the first quarter of 2018. These commitments are expected to generate 33,704 jobs should they materialize.
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