War on poverty

MANILA, Philippines—The first order of business when President-elect Noynoy Aquino begins his term on June 30 is to inventory all the problems he would inherit from the current regime. “I want to emphasize that the wrong identification of the problem leads to the wrong solution,” he auspiciously declared during his first press conference upon being proclaimed by Congress last June 9.

Auspicious beginning. P-Noy’s war on poverty also auspiciously begins with a 7.3 percent growth rate in the country’s gross domestic product (GDP) for the first quarter of 2010. Analyzing the supporting data, economist Romeo Bernardo explained, “The surprise element has been the 20.7 percent growth in manufacturing activity, a double digit rate unseen since 1988 and presumably underpinned by export recovery. Manufacturing uncharacteristically added 4.3 ppts to overall growth. In contrast, activity directly related to the elections may have contributed less than 2 ppts at best.”

Citing usually reliable forecasters like Standard Chartered Bank and JP Morgan, which adjusted their 2010 annual Philippine growth forecasts to 5.9 percent and 6.8 percent, respectively, the June 5 Inquirer editorial conceded that “…many things point to a ‘good beginning’” for the Aquino presidency. Despite a predictable cut in government spending and a shutout of election-related expenses for the rest of 2010, I think the 7.3 percent 1Q growth is a clear beachhead for P-Noy’s war on poverty.

The enervating Philippine performance during the last quarter should also be assessed in the context of the even more amazing surge of our Asean neighbors: Malaysia, 10.1 percent; Thailand (despite its red and yellow streaks), 12 percent; and Singapore, 15.5 percent. Unless the debt crisis in the PIIGS (Portugal, Ireland, Italy, Greece, Spain) and Hungary engulfs the whole European economy, the Asean tigers—including the Philippine cub—seem to be on the recovery track.

As a layperson, I used to read economic data in terms of three “rates:” the inflation rate, interest rate and the peso-dollar exchange rate. On this basis, the Arroyo administration has fared relatively well. Later on, I learned to look too at GDP, GNP, GIR, FDI, stock market indices, property prices, OFW remittances, electric consumption of the industrial sector, vehicle sales, etc.

Different understanding. I hasten to add however that our “masa,” the “mahirap” in “Kung walang corrupt, walang mahirap,” understand the war on poverty to mean their ability to serve rice on their “dulang,” secure viable employment and pay the school expenses of their children. Esoteric economic jargon may make sense to technocrats and business leaders, but they mean very little to our impatient people who have been deprived for too long and of too much.

To satisfy urgent needs, innovative solutions must be explored. To my suggestion of negotiating amortization moratoriums, Bernardo commented that our country’s dollar debt is owed mostly to Filipinos, either directly or via deposits and trust accounts in banks. “So a debt moratorium,” he wrote me, “is likely to hurt our own countrymen and banking system.”

A reader, who requested anonymity, argued that a delay in the payment of debts, be it principal or interest, would be prejudicial to the credit standing of the Philippines. While a few African countries have been given occasional debt waivers, they have been classified thereafter as “failed states” that no longer qualify for future help.

Be that as it may, the incoming government must still innovate to meet impatient expectations. Finance Secretary Gary Teves’ proposal to increase the VAT from the present 12 percent to 15 percent is a surefire formula for mass disenchantment. I think there must first be innovative relief for the poor to satisfy their hunger and want, before any unpopular tax is imposed.

The Philippines can. Certainly, “shovel-ready” programs that provide immediate employment while awaiting their long-term impact should be prioritized. These would include construction of public highways, railways, airports, mass transit systems, low-cost housing, schoolhouses, water projects and flood control.

Many of these could be undertaken with grants from foreign governments like the overseas development assistance (ODA) program of the Japan International Cooperation Agency, US Millennium Challenge Corporation, US-AID, Canadian International Development Agency and Chinese aid agencies, not to mention the World Bank and the Asian Development Bank. So, too, many Philippine companies are oozing with cash, ready to fund—on BOT (build, operate and transfer) basis—many infrastructure projects.

For many years, Indonesia was the basket case in corruption and poverty in Southeast Asia. On Aug. 24, 2005 during a Supreme Court-sponsored forum, a senior World Bank official, Anthony Gerald Toft, said that in Indonesia—during the 1990s and early 2000s—“few were impressed by someone being a lawyer… being a judge carried very little prestige; being a Supreme Court justice carried very little more.”

But now, thanks to President Susilo Bambang Yudhoyono, who was elected in 2004 and overwhelmingly reelected last year, Indonesia—while not yet out of the woods—is definitely tracking a clear road to prosperity. If Indonesia could do it right in just six years, certainly the Philippines can. Our new President can use his thunderous People Power mandate to reinvent the nation and free it from corruption and poverty.

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