Palace poodle Alex Magno, minutes before yesterday’s SONA predicted the President will make a “very detailed, specific, technical report.” Indeed, the President is counting on most Filipinos not being able to make heads or tails of her laundry list of statistics. After all, these are the numbers she collated from the various departments. Who can dispute official government data?
Others have pored over the coded political messages couched in her hour-long speech. While remaining coy about perpetuating herself in power, Mon Casiple points out that Arroyo is not likely to leave the political scene. Manolo Quezon summed in three brief sentences the President’s core messages:
1. Don’t count me out.
2. Cha-Cha is a go.
3. We will mobilize vs.certain presidential candidates.
Popoy De Vera makes a quick assessment of GMA’s so-called accomplishments. Of eight points: balanced budget, education for all, automated election, transportation and digital infrastructure, terminate hostilities with milf and npa, healing the wounds of EDSA, electricity and water for all, opportunities for livelihood and 10 million jobs, decongest Metro Manila, develop Subic and Clark, only one item is a clear fact. The other are either complete fiction or deserve qualifiers.
While there may be no ‘smoking gun’ to tie the President to the graft and corruption scandals that have plagued her stay in power, Rep. Mong Palatino reminds us of human rights violations and the undisputed (missing) body count of militant and journalist desaparecidos.
Sassy Lawyer makes the obvious point that the President will strive to make her last address optimistic. Why indeed would she talk about her failures? Because the SONA is a highly publicized event it is a good opportunity for the president to legitimize and deodorize her incumbency. Nobody expected an inspirational tale from her. Nobody expected a rallying cry that would capture the Filipino nation’s imagination. So yes, her SONA, like her previous ones, was short on rhetoric and long on numbers and cheap shots at ‘opposition’ players.
Let us go back to the outrageous claims on the economic front. Gloria Arroyo PhD’s number crunching deserves some demystification. Aside from outright lies, they also betray false assumptions that result to her claiming the country’s ‘economic fundamentals’ are sound.
DEBT
Watching her speech yesterday, my eyebrows shot up the roof when she said she had “exorcised” the demon of foreign debt.
Far from Neutral uses IBON data to illustrate that Arroyo said an outright lie when she said that she has “exorcised” Philippine debt. By March 2009, government debt has nearly doubled from P2.17 trillion in 2000 to P4.23 trillion.
In a roundtable discussion organized by the Freedom from Debt Coalition, former Budget Secretary Boncodin presents us more hard data on the government’s budget deficit and debt.
Debt owed to domestic lenders rose from P1.06 trillion in 2000 to P2.4 trillion in 2008. Debt owed to foreign lenders rose from P1.09 trillion to 1.8 trillion in 2008. And the President, dear beloved President in pink, has the gall to say she has “exorcised” debt???
FINANCIAL CRISIS
Arroyo also generously gave herself credit for ‘accomplishment’s in which she had no direct hand.
“In 2008 up to the first quarter of 2009 we stood among only a few economies in Asia-Pacific that did not shrink.”
Dr. Josef Yap of PIDS observes the drop in GDP growth rate in 2007 is consistent with the onset of the global financial crisis. And the Philippines is not unique in weathering the financial storm. He credits this to the following:
- the very limited direct exposure of the region to subprime and other related securitized products
- relatively strong bank balance sheets with a return to profitability—as impaired loans from the 1997/98 Asian financial crisis have been worked off
- improvements in risk and liquidity management
- strengthening of supervisory and regulatory systems
- moves by banks into new and profitable domestic business lines such as consumer lending.
The country has escaped the worst of the crisis because of the conservatism (dare I say backwardness?) of local financial markets. This meant financial players preferred to keep capital at home rather than play high stakes in the global casino. This conservatism probably has more to do with hard lessons learned in the 1997 financial crisis than excellent forecasting by Arroyo’s economic team.
In the same FDC roundtable mentioned earlier, another former Budget Secretary, Benjamin Diokno, presents data on falling exports.
He expects these figures to worsen in 2009 as the economies of the top 10 destinations of our exports, accounting for 84 percent of the total, are also expected to weaken.
The President was triumphant in proclaiming yesterday:
Our reforms gave us the resources to protect our people, our financial system and our economy from the worst of shocks that the best in the west failed to anticipate.
Cash handouts give the most immediate relief and produce the widest stimulating effect. Nakikinabang ang 700,000 na pinakamahihirap na pamilya sa programang Pantawid Pamilya.
We prioritize projects with the same stimulus effects plus long-term contributions to progress.
Early in the year the administration announced a P330 billion stimulus package that was supposed to target spending to save the economy. This just means the government (instead of the private sector) will spend money to promote economic activity. For example, if it commissions public work projects – this will create employment and business opportunities for construction workers and contractors.
Since the President makes no mention of the results of her stimulus package, did she plunk all P330 billion in her “Pantawid Pamilya” program?
Former National Treasurer Prof. Briones notes that of the P1.4 trillion 2009 budget, only P10 billion was allocated for the “Economic Stimulus Fund” and the rest were from normal government spending.
So, did all P10 billion go to Arroyo’s “Pantawid Pamilya” program?
POVERTY
Another outright lie is her claim that poverty has gone down during her watch.
“Bumaba ang bilang ng mga nagsasabing mahirap sila sa 47% mula 59%. Maski lumaki ang ating populasyon, nabawasan ng dalawang milyon ang bilang ng mahihirap.”
Not less than the government’s NSCB data disproves her claim! While the data may be dated at 2006 stats, the numbers categorically show a worsening of poverty incidence between 2000 and 2006 and more people now fall under the poverty threshold.
FOREIGN DIRECT INVESTMENTS
The World Economic Forum is a pow-wow of the most powerful business actors in the world. Yearly they compile a report called the “Global Competitiveness Report.” This signals to businesses where they may invest profitably. Last year, the report categorically states that foreign businesses have been avoiding the Philippines like the plague for these reasons:
1. Corruption
2. Inefficient government bureaucracy
3. Inadequate supply of infrastructure
4. Policy instability
5. Government instablity/coups
Somehow, I doubt that Speaker Nograles’ proposal to amend the constitution, supposedly to encourage investments, will attract these businesses. They will have to eliminate themselves first.
MAGICAL GDP GROWTH
Many experts now agree that GDP is not a sufficient measure of a country’s economic welfare. As the adage goes, if you cut trees the GDP goes up. If you have two cars smash into each other on the road, the GDP goes up. This is because GDP accounts for activities that go into producing products (things) and services. It is an ‘amoral’ measure in that it posts a plus for trees cut but cannot measure the costs of the same. Obviously, we all need trees for clean air.
Nevertheless, let us try to unpack the mystery that is Gloria Arroyo’s bullish GDP! Yesterday she happily announced:
“…our economy posted uninterrupted growth for 33 quarters; more than doubled its size from $76 billion to $186 billion. The average GDP growth from 2001 to the first quarter of 2009 is the highest in 43 years.”
Looking at the UPSE Economic Database, the figures seem to confirm a continuous upward increase in GDP from 2001 to 2008. The thing that puzzles though, and what ultimately makes experts scratch their heads, is why the so-called growth does not match other indicators to measure the over-all health of the economy.
This paper written by former NEDA head Felipe Medalla and Karl Robert Jandoc note that while GDP growth rates are on the up and up, other indicators do not go up along with them.
“We ask why is it that if economic growth is being correctly measured, many indicators and data sets are at odds with the supposedly high economic growth. Moreover, we find that Philippine growth patterns—shrinking growth of domestic absorption, exports, and imports accompanying rising output growth—do not fit the pattern in other Asian economies.”
Pattern One: GDP went up even as imports contracted. These economists note that the pattern for other Asian countries show that both indicators go up at the same time. It makes sense, if the local economy is making more goods and providing more services, it will need to import materials – the most crucial of which that we lack, I think, is oil.
Pattern Two: GDP went up even as exports also contracted. Among the nine Asian countries surveyed, the Philippines again miraculously bucks the trend! There were more goods and services consumed…but we didn’t export any of them?
So if GDP has enjoyed a consistent upward trend since Arroyo took over, and the products and services the economy produced were not exported, this must mean that Filipinos themselves did most of the consumption.
Medalla and Jandoc express serious doubts about the government’s statistics on the strength of the Filipino’s buying power. They make mention of many other inconsistencies, and here I will only mention that between Gloria’s Statistics and the Family Income and Expenditure Survey.
“Now, if the obvious fact that the FIES and the NIA begun to diverge after 2000 is accepted, the question is which data set should given more weight for assessing what happened to the economy after 2000. As already pointed out, the incredibly high growth of food consumption and personal consumption growth that far exceeds the growth of purchasing power as estimated in the NIA itself already casts strong doubt on the claims that the economy has grown the fastest in recent years.”
So, the GDP grew even when the Filipino’s buying power did not. Allow me then to paraphrase their conclusions without jargon – something is wrong with Gloria’s number crunching.
A STRONG ECONOMY BUILT ON WHAT?
After all this the President concludes: “The state of our nation is a strong economy.”
The President is not coy about her administration’s engines of growth. Her castle rests on our young and talented serving BPOs and the export of more of the young and talented to all corners of the world.
Why I do not think this is sustainable and will hardly earn us First World status by 2020, deserves another blog entry.
For now, let me just say, I am not looking for a visionary come 2010. I am looking for one who will at least not lie so audaciously.
Popularity: 2% [?]
About our economic conservatives. If they can still sell sugar at it’s pre-70s prices, we’ll have pinoy sugar barons competing with Arab princes on rolls royces and 100-million-dollar yachts while the rest of our people will be as ill-educated as the rest of Arabia.
Ms Sparks,
These are nothing new,but still just my two cents.
Re:GDP vs. Import Growth
Since there is no way tot have a record of how much smuggling is going on like technical smuggling and ordinary smuggling; the import data coming from the BOC is not reliable.
IMF even reported that BOC failed to account $ 13 b dollars yearly.(2007 inq :Banal)
I think that is the cause of the inverse proportion of GDP/ import growth.
OFW remittances are not computed in the GDP but through consumption and investments.
A part of if not all of that $ 16 billion annualy gets computed to our GDP.
Money from loan sharks (5-6) used by the informal sector does not go to the official statistics, but somehow finds a way in our GDP computation maybe again by means of consumption.
But again, the point of this post is the Sona seems misleading(putting it mildly).You already addressed that in the beginning of your blog by citing Sassy Lawyer to paraphase what you wrote, The Sona is never about talking about failures.
33 quarters of uninterrpted gdp growth does not mean that there are no negative percentage growth in between.
As they say the devil is in the details.
Thanks, that’s all.
Are you not all glad that GMA will (and even DingG says that he believes GMA)… that GMA will leave Malacanang in June 2010?
Unfortunately, she did not directly state that she will leave. She just said that her term ends in June 2010. That’s a fact. But as she said, one year is still a long way. She can still pull a Martial Law or Charter change.
You know, I am exhausted by all the statistical data. There is so much my head spins. I found the NSCB web site and hundreds of categories of information and I figure about 683 thousand bazillion numbers there with no MEANING attached to them. Trends and numbers out the gazoo and no one knows what to do with them. Everything remains screwed up. I read three articles on FV dealing with SONA and came away spinning in opposite directions. Pin ball Joe.
But I look around and I see a LOT of poor folks; all the neighbors and wife’s friends and relatives positively beg for cash. You like statistics? 73% of Filipinos age 42 and above lack more than 57% of their teeth, have been to a doctor 0.007 times during the past 10 years, and owe an average of 7,430 pesos to 15.91 people. Guess the lady in pink forgot that one.
I think the solution is step up the baby production. Build the one product that the Philippines is known for worldwide. Ramp up those remittances and things will be fine. Screw the rest of the numbers. Forget about mining and tourism and all that industrial crap.
Just put a “baby production line” in the GNP calculation, maybe right below a newly inserted line for “siphonage”, which is a tabulation of money siphoned from government coffers into private pockets. You can have subcategories of siphonage since the number is so large. Construction kickbacks, re-routed roads, pet pork projects aimed at re-election, contract skimming (airports, ZTE’s). Why hide it? Take pride in it. Indeed, create a class that Blackshama can teach called “Siphonage and the Science of Graft”. Doctoral level, of course. The skills here are amazing; world class.
WHATEVER you do, don’t scope out government expenditures on any kind of RETURN VALUE basis; that might lead to productivity and screw things up. Just keep building those fine concrete roads through the rice paddies so that local reps can get re-elected and the big fat karabao can keep their feet dry and have a clean, empty place to poop. Shove thick wads of paperwork at importers so they take their troublesome wares elsewhere. Make sure to balance the books by taxing the poor folks to kingdom come with fees every time they come to a government office and BLINK. But DON’T tax properties of the landowners at fair value; no, no, they might whine.
Joe
And that is really how it all boils down to, along the lines of Reagan’s “… do you feel better now than 4 years ago?”.
EXCEPT there was another item. The Opposition had raised the specter that this SONA will include a GMA-declaration to postpone 2010-elections ..FOR PEACE AND ORDER or some “for the greater good” pablum . When it did not happen, there was a moment for conjecturing and a few folks (PatricioM, DingG) reached unexpected conclusions.
… about which (GMA stepping down).. the Inquirer reports what Pacquiao and Kinney-the-ambassador says:
When you want to confuse people on your bad performance. You feed them with number crunching data. They will never figure out how you
con them.
You can also project an Illusion of Prosperity, by showing people
who succeeded in life. Like Manny Pacquiao. These tactics will not
help people with gumbling stomachs and people without jobs.
Great piece. Exposes and debunks all those dubious claims made by Gloria
an important clarification… this: ” As the adage goes, if you cut trees the GDP goes up. If you have two cars smash into each other on the road, the GDP goes up. This is because GDP accounts for activities that go into producing products (things) and services. ”
is NOT necessarily correct.
say the two cars did not crash. the money that would have been used to repair or buy a new car presumably might be used for someother purpose/thing. hence, GDP need not necessarily go down.
same is true for the tree cutting example.
what you wrote is true only if it were added production that would not otherwise have been made. in depression/recession conditions, this is plausible. but in general, its very hard to prove this.
I can understand if FVR will say he "exorcised" debt because it was during his term when the Philippines emerged 35 years of IMF program supervision.
Foreign debt is not evil when such debt is used to generate revenues. The question is what is the composition of the 1.09 trillion in debt. If it is debt that does not generate revenue then I agree that Arroyo doesn’t have the gall.
Somehow, I doubt that Speaker Nograles’ proposal to amend the constitution, supposedly to encourage investments, will attract these businesses. They will have to eliminate themselves first.
Well, Item No. 4. Policy Instability – is a euphemism for anti-foreign investments/protectionist policy, specially, when said policy is enshrined in the Constitution under the sectoin on National Patrimony.
Pattern One: GDP went up even as imports contracted.
Pattern Two: GDP went up even as exports also contracted.
There were more goods and services consumed…but we didn’t export any of them?
The authors provide the answer in Page 9 –
At any rate, it is quite clear that NIA statistics and even indicators of foreign asset holdings depict not a consumption-driven rise in economic growth after the Asian Financial Crisis but an import-substitution driven one. Can expenditure switching or import substitution explain the rise in Philippine economic growth after the Asian Financial Crisis? If the national income accounts are reliable, this would be a tautological question since the numbers clearly say that such was indeed thecase.
They also suggest that:
6 – Consumption growth is probably overestimated
7 – Agriculture may not be as robust
8 – On the contrary, Industry is weakening
9 – There are many problems in the measurement of service sector growth
The authors includes that consumption might be overestimated. They forgot to include imports are underestimated and exports are understimated. These underestimations, in case people forget, is the lifeblood of customs. it would be safe to say that all the goods coming in and out of the Philippines are under – declared. while the customs duties for such goods are not declared, their entry into the economy will have an impact and will be reflected as an increase in consumption as people pay for goods that they consume – but these goods were not captured at the point of entry or exit into the Philippines.
A STRONG ECONOMY BUILT ON WHAT?
It is an economy built on the paradigm of import-substitution, pretty much a protectionist paradigm – which of course is institutionalized in the Constitutional provisions on national patrimony. An economy built on the whims of the local economic elite, without any worries about foreign competition. The local economy is has a captive market that the local economic elite can toy with, with impunity. And of course, the locals hypnotized under the protectionist/nationalist mantra are being cooked in their own lard to the tunes of kaching kaching in the cash registers of the local economic elite. Tough luck. Can’t have the cake and eat it too.
I can understand if FVR will say he "exorcised" debt because it was during his term when the Philippines emerged 35 years of IMF program supervision.
Foreign debt is not evil when such debt is used to generate revenues. The question is what is the composition of the 1.09 trillion in debt. If it is debt that does not generate revenue then I agree that Arroyo doesn’t have the gall.
Somehow, I doubt that Speaker Nograles’ proposal to amend the constitution, supposedly to encourage investments, will attract these businesses. They will have to eliminate themselves first.
Well, Item No. 4. Policy Instability – is a euphemism for anti-foreign investments/protectionist policy, specially, when said policy is enshrined in the Constitution under the section on National Patrimony.
The authors provide the answer in Page 9 –
At any rate, it is quite clear that NIA statistics and even indicators of foreign asset holdings depict not a consumption-driven rise in economic growth after the Asian Financial Crisis but an import-substitution driven one. Can expenditure switching or import substitution explain the rise in Philippine economic growth after the Asian Financial Crisis? If the national income accounts are reliable, this would be a tautological question since the numbers clearly say that such was indeed the case.
They also suggest that:
6 – Consumption growth is probably overestimated
7 – Agriculture may not be as robust
8 – On the contrary, Industry is weakening
9 – There are many problems in the measurement of service sector growth
The authors includes that consumption might be overestimated. They forgot to include imports are underestimated and exports are understimated. These underestimations, in case people forget, is the lifeblood of customs. it would be safe to say that all the goods coming in and out of the Philippines are under – declared. while the customs duties for such goods are not declared, their entry into the economy will have an impact and will be reflected as an increase in consumption as people pay for goods that they consume – but these goods were not captured at the point of entry or exit into the Philippines.
It is an economy built on the paradigm of import-substitution, pretty much a protectionist paradigm – which of course is institutionalized in the Constitutional provisions on national patrimony.
An economy built on the whims of the local economic elite, without any worries about foreign competition. The local economy is has a captive market that the local economic elite can toy with, with impunity.
And of course, the locals hypnotized under the protectionist/nationalist mantra are being cooked in their own lard to the tunes of kaching kaching in the cash registers of the local economic elite. Tough luck. Can’t have the cake and eat it too.
I think number of jobs generated should be replaced with number of stable salaries generated. That’s a more useful statistic for me.
Hyden,
That really carried all the altruisms to that deceiving 9th Sona.
I cannot but agree.