Conventional wisdom says that for a government to lick poverty, it must provide for the basic needs of the poor—food, education, health, and cheap utilities.
These are the items that constitute up to 80 percent of the consumer basket. Food alone is 55 percent of the poor man’s consumer price index. Utilities, basically telephony and transportation, add another 20 percent. Nationwide, 38.98 points of the Philippine CPI’s 100 points is food, 22.47 utilities, 7.81 transportation, 2.26 communications, and 3.36 education.
If these basic services are readily available at reasonable cost, then inflation will be under control, resulting in increased purchasing power for the poor. Increased purchasing power means additional income for the poor. Additional income means higher level of standard of living. And a better standard of living means eradicating poverty.
With 55 points of the CPI for the poor being food, shouldn’t the Duterte administration be focusing more on food production, rather than infra? After all, together—utilities at 22.47 points, transpo at 7.81, and communication at 2.26 points constitute only 32.54 percent of the consumer basket, or 60 percent of what the poor allocate for food. In 2016, agricultural output fell by three percent.
Sadly, the administration’s bright boys are involved in a bitter power struggle on the issue of importing rice. One group wants to import rice to bring down prices or inflation. Another group, supported by the President himself, does not want to import rice because it will hurt the farmers. Rice in the Philippines costs twice as much as imported rice. That is why half of the poor’s money, or whatever is left of it, goes to food. Food for the poor is just too expensive. That is why the poor remains poor. There are more than 25 million such poor Filipinos.
The Duterte administration seems to believe that to lick poverty, the government must invest heavily in infrastructure—roads, bridges, railways, schools, power plants, airports and ports. These big-ticket items cost money and only the rich and powerful can afford to bankroll them. Of course, the government can also bankroll these projects but it could mean higher taxes on goods and services—exactly the scheme proposed by Finance Secretary Carlos Dominguez under his so- called TRAIN—Tax Reform for Acceleration and Inclusion.
With P156 billion in tax revenue a year, TRAIN is the greatest wealth transfer ever attempted by the government under President Duterte. It will bring unprecedented purchasing power to at least 40 million of 104-million Filipinos. The 40 million are currently at the fringes of society. They are cashless. TRAIN’s author, Albay Congressman Joey Salceda estimates 80 percent of Filipino families effectively will get unconditional cash transfers, at a yearly rate of P5,600 for the lower 30 percent of families, to P39,000 for middle class families. The rich, meanwhile, will lose income, at the rate of P10,000 to P2.2 million yearly. Not bad for the super rich in terms of social equity or preventing a revolution.
The Duterte administration has lined up an ambitious infrastructure program that will spend P8.4 trillion over the next five years, 2017-2022. Of the P8.4 trillion, the total investment requirement is P3.6 billion. It is not clear what to call the remaining P4.79 trillion; it may be the budget for schools, which the government counts as infra.
In his 10-point Socioeconomic Agenda, President Duterte envisioned the reduction of poverty from 21.6 percent in 2015 to 13 percent -15 percent by 2022.
Among the reforms that will drive this Agenda is the acceleration of infrastructure and the development of industries that will yield robust growth across the archipelago, create jobs and uplift the lives of Filipinos.
Among the big-ticket projects are: Bonifacio Global City-NAIA Bus Rapid Transit, to be completed in 2021; Clark International Airport Modernization (2019); the P32-billion Phase One of the Mindanao Railway (from Tagum, Davao del Norte to Digos, Davao del Sur, (2021); Subic-Clark Cargo Railway (2020); Philippine National Railway from Manila to Clark (2021); PNR South Railway from Manila to Bicol (2022); and the Mega Manila Subway, Phase One, from Quezon City to Taguig City (2024).
These are ambitious and herculean projects. Duterte’s boys promise to finish all seven of them (or least some usable portions), plus 48 others, by the time the President’s term ends in 2022. The 55 projects will cost P612 billion.
Please note that under the six years of President Benigno Simeon Cojuangco Aquino III, there were also huge projects under his so-called Public-Private Partnership projects. None of them took off or were completed, except for a four-km Daang Hari extension of the South Luzon Expressway called MCEX, done by the rich Ayala family, for four years at a cost of P2 bilion. Great achievement, indeed.
“Our program of infrastructure build-up will entail trillions in economic investments. We need to undertake these investments for the sake of the next generation of Filipinos—or else they will remain in the same poverty trap that we found ourselves in,” Finance Secretary Carlos Dominguez III said during the forum on “Dutertenomics.”
Dutertenomics is supposed to bring the Philippines to middle-income status by 2022, with Filipinos having a per capita income of $5,500, from the present $3,500. This makes the Philippines an upper middle-income country, says Economic Planning Secretary Ernesto Pernia, secretary-general of the National Economic and Development Authority.
“Our program of infrastructure build up will entail trillions in economic investments,” Pernia said at the April 18 forum.
For 2017, the Duterte administration’s infrastructure spending will amount to P847 billion or 5.3 percent of gross domestic product.
This is higher than the 2.6 percent of GDP average infrastructure spending for the last six administrations, Pernia pointed out. Infra spending rises to P1.13 trillion by 2018.
According to Pernia’s calculations, spending 7.4 percent of GDP on infrastructure will increase economic output by five percent and would generate 1.7 million more jobs.
Neda targets a GDP growth of between 6.5 percent and 7.5 percent this year, and seven percent to eight percent from 2018 to 2022.
For his part, Finance Secretary Carlos Dominguez said the government’s infrastructure investment would be funded by official development assistance and tax collections.
Meanwhile, Transport Secretary Arthur Tugade said the agency is set to sign by November a deal with the government of Japan to build a P227-billion Mega Manila Subway Project.
“This is one of the very ambitious projects of the Duterte administration. We call it the Mega Manila Subway project, and this [will be] the first subway in the Philippines,” the DOTr chief said.
Tugade promised to start the project by 2019 and will be completed by fourth quarter of 2024.
