Window-dressing the economy

Last week, former NEDA director-general and Economic Planning Secretary under the Ramos presi-dency, Dr. Cielito Habito, was the guest speaker at a forum organized by concerned women and a couple of supportive husbands.

We are being told that because of the good performance of our stock market and the strength of the peso, economic takeoff is underway and that glorious days are ahead.

But is this true? Are our minds and eyes being obfuscated from the truth by a dazzle that doesn’t really exist? Is there too much window-dressing going on as far as the true economic state of our country is concerned? Are our eyes being forcibly shut from the sight of a family living in the slums, eating fried rats and charcoal-broiled mice – something I witnessed on a TV program a month ago and cannot keep off my mind?

The gathering, held at the Turf Room of the Manila Polo Club, was organized by two lady friends of mine, Bettina Kahn-Legarda and Marily Ysip-Orosa, with great support from their husbands. Bettina holds a bachelor’s degree in history from the Assumption Convent, and has been in a very successful food business for years. Marily holds a bachelor’s degree in communication arts from Maryknoll College and is a multi-awarded graphic designer and book publisher.

Currently the director of the Ateneo Center for Economic Research and Development and full-time economics professor, Dr. Habito obtained his PhD in economics from Harvard University and his bachelor’s degree in agriculture, major in agricultural economics, from the University of the Philippines, summa cum laude. He served as NEDA assistant director-general in 1990, was promoted the next year to deputy director-general, and in 1992 was President Fidel V. Ramos’ Economic Planning secretary and NEDA director-general. Not only was Ciel a brilliant economist, he is a man of integrity, honor and truth.

Categorically stating that it is too early for GMA "to party," and that definitely we are not on the verge of a takeoff as claimed by the presidency, Habito did not mince words when he said that our economic growth has in fact been slowing down over the last six quarters, as shown by the sharp downturn in investments, in exports and imports, the foreign exchange and equities markets, etc.

Citing statistics and data as regards the comparative growth of our neighboring East Asian countries, the pathetic situation of the Philippines was stark. Already a lingering malady is the country’s credit outlook because, where the other countries are getting well-deserved upgrades, ours is down.

Using graphic charts and statistics, he showed how confidence of the business sector is down, development and construction, both in the public and private sectors, are also down.

He showed very particularly how, after former Revenue Commissioner Willie Parayno resigned, revenue collections took a downswing in July, improved a bit in August, but again took the downturn in September, indeed falling below target. One striking feature of Habito’s explanation as far as the pathetic revenue effort is concerned was the fact that some maneuvering had been undertaken by government in August where the statistics registered a slight improvement, and that this was due to some degree of provocation employed on a large taxpayer to pay up. In fact the same provocation was exerted on another corporate taxpayer. What crossed my mind as I heard this, was the word "window-dressing," a typical strategy of government today.

Tax evasion has become massive amounting to about P250 billion. We all know that the budget deficit is the worst feature in the economic scene. The fiscal crisis is indeed so drastic because of the huge debt payments. For 2005, the target tax revenue is P750 billion, but our debt service payments amount to P646 billion, so that, for every P10 collected by way of revenues, P9 goes to government expenditures, which, by the way, Habito noted is unprecedented in history! Hence, government has to continue to incur debt massively for it cannot antagonize its creditors.

This budget gap can be narrowed by equitable and far greater collection of revenues, drastically reducing unnecessary government spending, addressing a really bloated bureaucracy with so many overlapping new positions; addressing the problems derived from those huge deficits of government corporations; lessening those deviations from the medium-term development plan of the Philippines; rationalization of tax incentives and reform of the tax audit system; broadening of the tax net, and implementation of those elements in the Comprehensive Tax Reform Program that, for some reason or another, remains unimplemented.

Pointing out that the collection efficiency with regard to the VAT is a poor 13 to 20 percent, this just means that it is not being collected well, and this could be improved by using industry benchmarks. He said that government’s statement that only 17 percent of the poorest 50 percent, and 83 percent of the rich will bear the burden of the EVAT is not happening, because a lot of the businesses are taking advantage of the EVAT by collecting more than what is required.

There is a slowdown even in the thriving telecom industry. Even the middle class is hurting because there is a drastic drop in enrollment in private schools like La Salle and Ateneo, and a sharp increase in delinquency of tuition payments. And, there has been a steady rise in public school enrollment which increases the problem of the public school system due to insufficient budget allocation.

What’s even worse is the fact that government is planning to allot more for debt-servicing in 2006, which will amount to P721.78 billion or P2 billion per day – a 12 percent increase from the previous years. And so, he recommended a negotiated debt relief.

The corruption statistics were deplorable and Dr. Habito correctly stressed the fact that we need a credible and inspiring leadership. Zeroing in on the strength of the peso and the improved stock market performance being bannered by government, he showed how the Philippines is actually at the tail end of the line for "hot money" or those "excess global funds!" We have also not regained the peso level we had in 2003. The dollar has weakened, that’s why. Furthermore, there is a strong upward surge in OFW remittances, especially at this time of the year, although this is not all that good because it reduces the value of the dollars the heroic OFWs have been remitting.

The data on poverty were stunning. Kids do not eat well and look for their daily sustenance in the trashcans of the country. When health care and education are given budget allocations grossly lower than the minimum requirements projected, what hope does our motherland have?

Dr. Habito enjoined the 125 women and 15 men at the forum to adopt one poverty-stricken family on a sustained basis. To quote a line from St. Augustine: "The life we have is God’s gift to us, and what we do with our lives is our gift to God."

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