Some immediate steps the government must take to address the country’s economic woes
May 5, 2011
PRESIDENT BENIGNO SIMEON AQUINO III
Compound J. P. Laurel St., San Miguel, Manila City
Dear Mr. President:
Allow me to first congratulate the administration in its implementation of anti-poverty and anti-graft and corruption measures. The administration’s efforts to fulfill the promises it made to the Filipino people is truly laudable.
However, as is the problem of developing economies, the masses are consistently beset by economic difficulties.
Since we deepened the national economy’s integration to the global production line, millions of Filipinos have been victimized by the ups- and downturns of the global market. The people continue to suffer the skyrocketing prices of fuel and the often-fluctuating prices of basic food commodities, and the scarcity of permanent employment and adequate wages.
It is important to implement short-term programs that would alleviate the burden of ordinary Filipino people. It is likewise imperative to put into motion medium-term and longer-term programs that would lead the country to self-sustainability.
Allow me to propose policies that would deal with the nation’s top three concerns: inflation, wages, and jobs.
Revisiting Fuel Price Regulation
The ever-increasing price of fuel remain on top of people’s concerns, as the price of fuel increased by 9.7% from the first quarter of 2010 and the public continues to suffer fuel price hikes reflecting the movement of the price of fuel in the global market due to the brewing unrest in the Middle East.
It is also the lack of transparency by which oil cartels determine oil and fuel prices that make it seem like the determination of fuel prices is arbitrary and solely geared to meet the profit-motive of big oil companies. This creates the impression that the people are powerless and the market reigns supreme when it comes to crucial economic issues, and leaves masses insecure.
The administration has already made the initial step to address this problem by declaring that it will look closely into the price hikes that have successively been implemented over the first 4 months of this year. We urge you to look deeper into their books to determine the profit margins that the big oil companies have maintained. While oil firms have justified the price hike as a means to cope with the increasing global fuel prices, it is important to dispel the worry of the people that the oil cartel also takes advantage of the crisis to earn super-profits. The Department of Energy must take the necessary action against any hint of over-pricing.
To substantially reduce the burden of fuel price inflation on the masses, it is important for the government to gain partial control of the market. We need a team of experts that would direct the government’s intervention; this should include the secretary of the Energy department, independent technical experts on the fuel industry and representatives of the big oil companies. The mission of this team: to keep fuel prices at a reasonable, minimum price – one that allows the people respite from the economic hardships of today, at the same time that it ensures minimum profit for local fuel suppliers. The team should further monitor the prices and make periodic adjustments whenever necessary. It is important to make the point that, clearly, we are no longer leaving the price-setting power solely to the oil cartel, because the market has failed the Filipino people.
Towards Food Security
Let us now discuss food security. We are very happy that the Department of Agriculture announced that we would be able to meet palay production targets for the year. This is proof that food security is within our reach, so long as the administration continues to provide support and technical innovations to our local producers. Intelligence reports, however, warn against a looming rice crisis. Whether or not the report is accurate, it creates the impression that supply remains inadequate, which may produce a sudden spike of palay prices.
In response, we must increase the government’s capability to intervene in the local market by filling local warehouses with domestically produced rice. By ensuring that local warehouses are sufficiently stocked, government has the flexibility to “flood the market” to drive down retail rice prices. Likewise, it would be important to consider setting a price for palay sold in the market.
It is important to source rice domestically for the simple reason that this will allow us to protect consumers, small farmers, and local producers simultaneously. Let me elaborate: In 2008, the Arroyo administration, in a bid to control rising rice prices, flooded the market using imported rice. While it was able to help control retail rice prices to a certain degree, it resulted in greater poverty in the countryside because it dampened local farm gate prices. What we had then were local producers who were forced to sell their palay at a loss, pushing them deeper into poverty and destitution.
Filling up warehouses with rice sourced from small farmers at fair prices will help ensure that government has the capacity to intervene in the rice market, at the same time that we are able to support local farmers. In this case, I recommend to the administration to look into increasing local palay farm gate prices. This will pose as an increase in the income of small farmers, which, over and above existing subsidies and cash transfers, would improve their purchasing power and assist tremendously in allowing small producers to meet daily needs, especially in a time of economic difficulty.
I also propose that the administration prepare for unforeseen impacts of climate change and other factors on global and national rice supply by making arrangements with ASEAN to procure rice in case of emergencies through the ASEAN Plus Three Emergency Rice Reserve (APTERR). One of the risks attached to limiting importation is the fact that, should global and national rice supplies be compromised by climate change events and other factors, the Philippines will not have enough supply to meet the consumption requirements of its population. To minimize this risk, government should maximize arrangements through ASEAN to have access to regional rice stocks at fair prices, under the APTERR in times of emergencies and volatilities in the global rice market.
On top of these proposals, I also urge the government to support Akbayan’s cocktail of agricultural legislative measures that would provide greater social, financial and technical assistance to small local producers and reinvigorate Philippine agriculture, especially in meeting the challenge of climate change and trade liberalization.
Wage hike and Non-Wage Benefits
The disparity between economic growth statistics and poverty incidence would persist if growth does not lead to the optimal employment of human resources, reduction of inequality, and the substantial improvement of the opportunities and lives of the poor. It is therefore of grave importance to any development program and all poverty alleviation efforts to make employment opportunities available to the poor and unemployed and ensure that wages and non-wage benefits are adequately provided and in compliance with the labor law.
As the cost of living continues to rise, minimum wage becomes increasingly inadequate for workers and their families. And because the pool of unemployed is so vast and jobs are scarce, the Filipino masses would take on any available job, forgoing the risks and the making do with the bare-minimum benefits whatever sort of employment affords. This has granted, for the longest time, the private sector the upper hand in labor-management relations.
For workers, the call to increase wages to bring it closer to the “living wage,” or the level that would allow workers to adequately meet the costs of living, becomes a matter of both economic urgency and social justice. A serious consideration of a substantial wage increase becomes vital in meeting the needs of the people.
It would also be important to heed the discontentment of labor organizations regarding the powers of regional wage boards and consider their abolition. In essence, regional wage boards have been used as a means to consolidate the power of employers against labor, which has rendered its existence antithetic to its main purpose – to empower workers especially when it comes to the determination of wages.
In the meantime, that wage increase remains unresolved, a good measure that the government can undertake is to provide, and encourage the private sector to provide, increased non-wage benefits such as tax exemptions, emergency allowance and other social security subsidies that would improve the capacity of workers and their families to weather economic difficulties.
In terms of creating jobs, I urge the administration to implement the labor-based/ equipment supported (LBES) technology when undertaking infrastructure and public works construction and maintenance. Endorsed by the International Labor Organization (ILO), this means optimizing the number of laborers to construct and maintain public infrastructure, instead of the commonly preferred alternative, which is to intensify capital or equipment. Using LBES, employment in construction projects would increase by 10- 30 per cent, it is particularly ideal for boosting employment and social welfare in developing countries that have high unemployment rates and scores of development projects in the pipeline.
In the early 1980s up to 2000, various infrastructure projects were undertaken by the different administrations employing LBES. In these projects, LBES was proven effective in generating employment and creating socio-economic benefits especially for rural communities and local governments.
As the Aquino administration sets out to implement 10 important projects for 2011 and some 70 projects in the medium-term, it is in the best position to maximize the Philippine labor force and improve over-all welfare of the people by employing LBES technology.
The jobs created will translate into a constant income stream for families that have had to weather the one-two punch of poverty and underdevelopment and put them on the path to improving their lives.
By encouraging the implementation of LB technology in infrastructure development, we are also able to ensure that the contribution of the private sector to the economy is not solely for the improvement of growth rates and other statistical economic indicators but also trickles down to grassroots communities and improves the standard of living for a majority of the population.
Moreover, this will complement the government’s conditional cash transfer program, as it would cover households who became poor after potential CCT beneficiaries were already selected. It also requires no additional budget overlays as it would create jobs from existing projects and budgets, which will be made available to the underemployed poor earning the equivalent of the maximum CCT incomes.
End Labor Contractualization
I also propose that the administration look into the private sector’s sub-contracting practice. Sub-contracting is the new trend in employment, the private sector minimizes costs and obligations to their employees by keeping them on short-term contracts. However, especially at a time of economic crisis, the periodic termination of employment leaves workers and their families with very little to prevent their descent into poverty. By periodically replacing employed people by unemployed ones, this employment illusion will certainly provide no improvement to the nation’s 7.4 per cent unemployment rate, nor will it have considerable contribution in the administration’s anti-poverty efforts.
It is important to ensure that employers will not make radical cuts in employment to maintain profit margins, and ensure that workers are provided with permanent employment and the corresponding benefits, as stipulated in the labor code. The administration must remain on the side of workers and regulate, and even minimize, the private sector’s sub-contracting practices. Akbayan, pro-labor representatives and our labor partners spearhead the on-going legislative effort to redesign the rules governing contractual work and ensure the security of tenure of workers, to ensure the jobs for the Filipino people; the administration must also certify the Security of Tenure bill pending in Congress as urgent.
In essence, more stable jobs and higher wages would create a wider base of working people that would serve as the fuel to the economy. As the workers’ purchasing power improves and they are able to meet the needs of their families, the better-off they become, and the better they perform in their jobs.
Economic Reforms, Perfect Complement to Pnoy’s Political Reforms
Restoring integrity to our democratic institutions by cracking down on graft and corruption, and easing the economic burden on the poor through conditional cash transfers and other poverty alleviation programs are in-roads to more sustainable development. We commend the efforts of the government to embark on this difficult task.
The perfect complement to the administration’s efforts at reform is, still, economic reforms that would protect consumers and producers from economic shocks brought about by our integration to the global market, and enable a more pro-labor environment of employment.
It is a matter of both political will and innovative policies that the Aquino administration can make the most out of reforms. And in all these efforts, Akbayan is one with the administration in pursuing the development of the grassroots communities and local economies, and the improvement of the standards of living of each and every Filipino.
HON. WALDEN BELLO