Talk about being between a rock and a hard place. Our monetary authorities need to find a way to counteract inflationary pressures without abetting unemployment.
Inflation is a scourge for the poor. It pushes up prices of vital necessities, putting them beyond the reach of fixed wage earners. We have a high food price regime to begin with which this administration, for all its self-congratulatory talk, has done nothing to erode. As inflation pushes up food prices even more, hunger will stalk the land.
In the first quarter of this year, our GDP growth dropped unexpectedly way below prediction. The inflation rate surged to the higher end of the band.
The usual policy response to an inflationary spike is to hike interest rates. That is easy to do — but the results could be devastating. Nothing guarantees an economic slowdown better than higher interest rates.
Higher interest rates raise the cost of capital, therefore raising risks for new investments. If investments do not happen, jobs will not be created. That will leave 14.5 million Filipinos currently looking for jobs out in the cold. Higher interest rates will be a scourge on the unemployed.
Economist Ben Diokno warned the Monetary Board against taking the easiest way out of an inflationary spiral, resorting to sharp adjustments in policy rates. The cure could be worse than the disease.
This is a time for some really hard, out-of-the-box thinking to find a creative solution. It is not an easy challenge to lick inflation without undermining the economy’s growth momentum.
A bad response to this dilemma facing our economy could leave us in worse straits: a stagnant economy beset by sharply rising prices. That will make life even tougher for the nation’s poor, whose ranks swelled rather than diminished under the present dispensation.
So much relies on the brilliance of the Monetary Board, the agency that makes the policy decisions impacting on the health of our financial system — which might be likened to the body’s circulatory system. Those decisions will have immediate impact on the life prospects of the nation’s poor.
Two Monetary Board seats, by the way, need to be replenished. Among those seeking to be appointed to those seats are some of the most unworthy appointees made by this administration to other posts. It will be an injustice to inflict their incompetence long into the future.
If this administration truly has the wellbeing of our people at heart, it should appoint a hard-nosed economist like Ben Diokno or someone of his caliber to the Monetary Board. Just this once, the Aquino administration should resist the impulses of cronyism and make appointments on the basis of real merit.
Upswing
There is no question the City of Taguig is on an upswing. From a backwater municipality, it has blossomed into a robust city.
Much of Taguig’s success, to be sure, is due to the growth of Bonifacio Global City — a revenue-rich district that is about to revert to Makati’s jurisdiction. Should that happen, Taguig will still continue to benefit from the spill-over business and residential districts developed over the past few years. In addition, there is much promise in the redevelopment of the old Food Terminal compound into a new business district.
Coinciding with Taguig’s 427th foundation anniversary, the city went on an advertising splurge, trumpeting the city’s achievements in raising the quality of life of its residents. Flush with revenues from the Global City and residential developments nearby, Taguig has been able to improve the quality of its services, particularly involving education and health.
Taguig’s emergence is not just accidental, to be sure. The city government responded quickly to opportunities coming its way by improving its governance capacities, undercutting neighboring cities with lower business taxes and improving on the ease of doing business.
Recently, the World Bank ranked Taguig first in its Ease of Doing Business Index among all the highly urbanized cities in the Philippines. By comparison, Makati ranked 9th and Quezon City 13th.
Between 2010 and 2013, Taguig nearly doubled its revenues from P805.9 million to P1.588 billion. This jump in revenues allowed the city to dramatically improve the quality of services it delivers its residents.
The much wealthier city government has upgraded the Taguig-Pateros District Hospital and established three “Super Health Centers†to service residents around the clock. Officials here boast the quality of medical care rivals the best in any locality.
Taguig now allocates P400 million for scholarship programs that benefit 24,000 students enrolled in tertiary and vocational courses. Taguig’s officials are eager to point out that the broad scholarship program is funded entirely out of savings from the previously bloated garbage collection budget. With a larger population now, Taguig spends P100 million less in its garbage collection contracts.
Of all the innovations in local governance, Taguig’s Business One Stop Shop (BOSS) is probably most worthy of emulation by other local governments. It has simplified business registration and start-up in the city, making Taguig a place for flourishing businesses.