Post-SONA: Key economic issues not tackled

President Marcos delivered his third State of the Nation Address, receiving resounding applause toward the end of his speech, particularly on his firm stand on the West Philippine Sea issue and his decision to ban Philippine Offshore Gaming Operations or POGOs.

Unfortunately, while the President started off his speech on a key economic concern of Filipinos, particularly on affordable rice, he eventually glossed over the continuing high cost of the Filipino food staple rice at P45 to P65 per kilo, merely attributing it to market forces and geopolitical factors that include war, supply problems and climate change such as droughts.

The President, however, failed to cite what concrete steps his administration is or has taken to address the problem of the prevailing high cost of rice, particularly on such issues like smuggling and hoarding.

At the post-SONA briefing held yesterday at the Hilton Hotel, Agriculture Secretary Francis Tiu Laurel Jr. assured stakeholders that the Department of Agriculture would go after the rice cartel but failed to elaborate on the government’s plans.

It will be recalled that prior to his election, President Marcos had boasted in his 2022 campaign that he would bring down the price of rice to P20 per kilo. After three years in office, that goal has not been attained.

The President, instead, cited the increased local production of palay or unhusked rice which he said increased last year to more than 20 million metric tons since 1987 but is only equivalent to 13 million MT of rice – much lower that the required 16 million MT consumption requirement by the population thus necessitating the importation of the staple.

In The STAR column of veteran journalist Tony Lopez, he had pointed out that the 20 MMT production has been stagnant for four years since 2020 even as the country’s population has grown.

Aside from the price of rice, the President in his speech did not fully touch on the other aspects affecting inflation and job generation. He likewise failed to give more clarity on other important issues such as the country’s rising debt and how the government will finance its huge budgetary outlay for this year.

As of end-February this year, according to the Bureau of the Treasury, the national government’s total outstanding debt was recorded at P15.18 trillion, primarily due to domestic borrowings.

Domestic debt as of end-February amounted to P10.58 trillion, while foreign debt amounted to P4.6 trillion.

The proposed 2024 budget is a whopping P5.768 trillion and yet it is still unclear how the government intends to finance the huge outlay even as the Marcos administration has created a sovereign wealth fund that should normally come from any government surplus, but instead has been sourced from the existing capital funds of the Development Bank of the Philippines and the Land Bank of the Philippines.

Additionally, the Department of Finance has been eyeing excess funds from government owned and controlled corporations or GOCCs, but only specifically from the Philippine Health Insurance Corp. and the Philippine Deposit Insurance Corp., to fund additional appropriations in the budget.

Finance Secretary Ralph Recto explained that the directive to tap the GOCCs came from Congress and that the Commission of Audit, as well as the Office of Good Governance had cleared the legality of the use of the funds to fund other appropriations.

Secretary Recto also expressed support for President Marcos’s decision to ban the operations of POGOs. The Finance chief is committing to assist the displaced Filipino workers with safety nets to ensure that they can have replacement jobs as soon as possible.

According to Secretary Recto, “We have until the end of the year to ensure that all displaced Filipino workers will have new jobs and I think that is more than enough time. The DOF will work closely with the Department of Labor and Employment (DOLE) to ensure that the workers’ incomes will not be severely disrupted and that we provide them with proper reskilling and upskilling training for new employment.”

The President, in his speech, had ordered the Philippine Amusement and Gaming Corp. (PAGCOR) to wind down and cease the operations of POGOs by the end of the year.

The President’s decision took into consideration the cost-benefit analysis report of the DOF on June 25 which also recommended the prohibition of POGO operations due to its social costs and reputational risks that far outweigh the economic benefits of keeping them.

Estimates from the DOF showed that the net cost of POGO operations reached around P99.52 billion annually while their estimated total economic benefits only amounted to P166.49 billion per year, significantly lower than the estimated total economic costs of P265.74 billion annually.

The economic benefits took into account government revenues, such as tax revenues from the Bureau of Internal Revenue (BlR) as well as gross gaming revenues from the PAGCOR.

Other estimated direct economic benefits include estimated income from office and residential space rentals, transportation, and the additional demand from the private consumption of employees and entities.

Indirect economic benefits were also taken into consideration that comprise the associated economic activities as well as government revenues earned from POGOs’ multiplier effects.

On the other hand, the estimated economic costs of POGOs include the undesired effects of reputational risks which have an impact on foreign direct investments. POGO-related crimes also bring a negative impact in terms of the country’s attractiveness as a tourist destination.

Apart from these, POGOs entail social costs that the DOF claims are unquantifiable. This includes the loss of life as well as physical and psychological harm to victims of criminal activities. POGO operations also affect communities by increasing fear and anxiety associated with illegal activities, according to the DOF recommendation.

Additionally, the perception that groups engaged in illegal or criminal activities wield significant economic influence in certain areas erodes institutional integrity.