Inclusive growth? Think self interest!June 1, 2014 DEMAND AND SUPPLY By Boo Chanco (The Philippine Star) May 28, 2014
A week after hosting the World Economic Forum, one wonders if it was just another talkfest. The Aquino administration saw it as a platform to toot its horn about the country becoming an economic miracle under their watch.
We also heard academics, taipans, bankers, economists and yes, politicians talk about inclusive growth. Everyone seems to be saying that high GDP growth rate is not the ultimate goal. Economic growth must be felt by the man-on-the-street. It must be inclusive to be meaningful.
Indeed, it is not to the interest of our economic social elite that 11.8 million households consider themselves poor, with 8.8 million households food poor. We are talking of half our population of 100 million assuming five persons per family. Joblessness is pervasive at 27.5 percent. Non inclusive growth resulting in a widening income gap is a dangerous social volcano rumbling to erupt.
It was good to hear at the WEF some concern on the widening income gap. It is good to know the rich think it is untenable. It would be better if they did something about it, as in putting their money where their mouths are.
An official of the International Monetary Fund (IMF) said the Philippines must address the widening income gap if we hope to sustain our economic growth. IMF deputy managing director Naoyuki Shinohara warned in a forum entitled “Rethinking Economic Growth” at the WEF that we may be able to enjoy high growth for a short amount of time, but it’s not sustainable if income inequality is high.
He thinks our government must collect more taxes from the country’s conglomerates. Shinohara pushed for higher income taxes compared to consumption taxes, such as value-added taxes, with the latter being “regressive” and “hitting the poor more than the rich.”
In an interview on the sidelines of the WEF conference, Shinohara told Iris Gonzales of The Star that our government must deal with the problems of inequality and very high poverty in the medium term.
This is why I think a super summit meeting of the country’s top 10 or 15 taipans or heads of conglomerates with P-Noy will probably be useful.
Get JAZA, Tessie Sy Coson, John/Lance Gokongwei, Andrew Tan, Manny Pangilinan, David Consunji, Oscar/Gabby Lopez, Ramon del Rosario, Tony Tan Caktiong, Andrew Gotianun, Ricky Razon, Lucio Tan, George Ty, Ramon Ang, Erramon Aboitiz and maybe a few more in a private pow wow with P-Noy to discuss inclusive growth.
Other than P-Noy, the only other government official who should be in that meeting should be NEDA chief Arsi Balisacan. He is the only one we can be confidently assured to have no other interest or connection that compromises him. His academic work had been on poverty and that should help move the discussions forward.
The meeting should seek to get agreement among our economic elite and the President that this inclusive growth problem is more serious than everyone wants to believe. These powerful people should seek to craft a strategy to hasten the process of spreading the benefits of growth more evenly. Government alone cannot do it in the ordinary course of business.
They could start with an agreement on simple things like paying the right taxes… even plugging loopholes they all use… such as incorporating themselves. Income must be income in whatever form an individual receives it, salary or dividends, and must be taxed the same way.
It is the same thing about smuggling, technical or outright. It must surely be within the power of these top business leaders to stop such activities if they really wanted to.
P-Noy must emphasize that it is in the self interest of our economic elite to see inclusive growth happen more quickly unless we want to be another Thailand.
That thing going on in Thailand today between the red shirts (farmers, etc) against the yellow shirts (royalists, urbanites) can be seen as a rich vs poor kind of fight. The conflict was sparked by a typical self serving politician (Thaksin Shinawatra) and more threatening to Thailand’s stability than the decades old NPA insurgency is to ours.
The Thai crisis could deteriorate into a bloody civil war. Protests and violence are still happening despite a military-led martial law regime. Thailand’s high growth tiger economy was not inclusive and this is what it has become.
I saw something posted by Global Financial Integrity (GFI) that makes it clear our kind of business as usual is not sustainable. Government and big business must agree on how to fix things.
GFI reported that “the Philippine economy lost at least $132.9 billion in illicit financial outflows from 1960 to 2011. These outflows represent the proceeds of crime, corruption, and tax evasion, and have serious negative consequences for the Philippines.
The report “found $277.6 billion in illicit inflows to the Philippine economy, primarily due to trade under-invoicing, also known as technical smuggling… The study found that since 1990, the Philippine Treasury lost $23 billion from customs evasion.
“In 2011, the Philippines lost $3.85 billion in lost tax revenue, which is twice the size of its fiscal deficit, and equal to 95 percent of the total government expenditures on social benefits that year.”
The report estimated the size of the Philippine underground economy “averaged 34.8 percent of GDP over the study period, and 29.7 percent of GDP in 2011. Large underground economies facilitate crime and corruption and decrease tax revenue collection.”
The choice is really ours. Pretend nothing is wrong and we can go on proudly proclaiming the Philippine economic miracle and risk our version of the Thai calamity happening here. Or face our problem of inequality and agree to fix it for good, even if for no other reason than the self interest of our economic elite for self preservation.
I received this e-mail from Ignacio Manalili.
I would like to comment on your column sub-titled: NFA blots P-Noy’s honesty image. I wish to comment on the DA’s failure in its commitment made in 2012 that our country will be self-sufficient in rice by 2013.
As a former asst. scientist of the International Rice Research Institute (IRRI) and consultant in rice production of the Food Agricultural Organization (FAO) of the UN for a project in West Africa, I seriously doubted at that time that the DA would be able to fulfill such commitment. There are two aggravating reasons for this: 1. The prevailing weather in the Philippines is hostile to rice production, especially now that the global warming phenomenon is becoming a reality, and 2. Rice production in this country is not competitive due to the high cost of labor.
Studies showed that the sudden wetting of mature rice grains by rain will have significant effect in the reduction of the grain quality and recovery. The flooding of rice crops during heavy rain would consequently have far more devastating effect in all stages of production.
A report from IRRI showed that the farm labor cost in the Philippines is more than twice that of Thailand. That is why rice is more expensive here than in other Southeast Asian countries. That is also why rice smuggling has become such a lucrative venture.
About three years ago I emailed Sec. Alcala to suggest an innovative rice production system to mitigate the ill effect of inclement weather and to substantially reduce the cost of labor. I did not know if it was due to the typical bureaucratic system in government, but the fact is I did not receive a reply from him.
In case Senator Pangilinan would be interested in my idea I would be glad to send him the details if I could be furnished his email address through your column.
Thank you and more power to you.
I can’t believe that a respected multinational bank is now resorting to spam marketing of its services. I keep on getting spam text messages from a Gerald offering non collateral personal loan from Standard Chartered Bank and it really is a nuisance.
Come on, Stan Chart… business cannot be that bad that you guys have to compete with the Bombay 5/6 guy on a motorbike.
A no collateral loan offered to whom it may concern by text spam? I am not even sure this is prudent bank marketing practice.
I still have to get a response from the BSP if that’s legal. But I am sure sending spam to potential high value customers is bad marketing strategy and damages the top reputation of Stan Chart.
My real life friend, Andre Kahn posted this on Facebook.
At breakfast, the husband says to his wife, “What would you do if I won the Lotto?”
“I’d take my half and leave you” she says.
“Great” he says. “Here’s $6. I won $12 yesterday! Stay in touch.”