REASONS WHY PHILIPPINES IS POOR, ACCORDING TO IMF

[PHOTO - Hating-Kapatid (Filipino for "sharing of siblings) By: Benson Galguerra]

 MANILA, DECEMBER 12, 2011 (STANDARD) by Roderick T. dela Cruz - WEAK government spending and political uncertainty are just some of the reasons why the Philippines has been outperformed by most of its Asian neighbors, a study sponsored by the International Monetary Fund showed.

The 25-page working paper, The Determinants of Economic Growth in the Philippines: A New Look, compared the Philippines to 23 emerging markets for the period 1965–2008 to analyze the factors behind per-capita GDP growth in the Philippines.

           A previous study noted that in the 1950s, the Philippines had the second highest per capita GDP in Asia. Today, its Southeast Asian neighbors Malaysia, Indonesia, Thailand, and Vietnam are described as high performing economies that are targetting first world statuses, while the Philippines was operating on a low-growth trajectory.

          “The Philippines’ mediocre performance in a number of indicators—particularly relative to its Asian counterparts—illuminates some of the existing pieces of the Philippine growth puzzle,” Willa Boots Tolo, author of the report and now a bank officer at the Philippines’ Bangko Sentral, said.

Among the factors blamed for the country’s weak economic performance were weak agricultural productivity, high government debt, low public, private, and foreign investment, weak research and development spending, low spending on education, lackluster tourism sector, relatively high income inequality, high corruption, strong population growth, more episodes of financial crisis, and political uncertainty.

             It suggested that the Philippines lacked a sustained period of relatively strong economic reforms.

Tolo said that, in order to catch up with its East Asian counterparts, the Philippines would need to maintain macroeconomic stability, expand its fiscal space, and redirect public spending to agriculture, infrastructure, and research and development.

            “Expansion of the fiscal space and thus scaling up spending on public investment requires raising tax revenue through both administrative and selective tax policy measures. This would include strengthening tax administration, reform in excise taxes, rationalization of fiscal incentives, and addressing exemptions in value-added taxation,” she said.

            The study said better irrigation, access to fertilizers, farm-to-market roads, and storage facilities could support development in the agricultural sector.

              The government’s focus on public-private partnerships for traditional and non-traditional infrastructure investments would also maximize the returns to development, while strengthening the focus of education on the sciences in all levels would encourage future researchers and scientists who would be instrumental in nation building.

http://www.newsflash.org/2004/02/be/be004450.htm

             The article in consideration tells about the major factors impeding the Philippines' progress towards first world status. Among the factors cited from the study "The Determinants of Economic Growth in the Philippines: A New Look" by Willa Boots Tolo, were weak government spending concerning research and development, agricultural productivity, and education. Prevalent government debt, corruption, political uncertainty, episodes of financial crises and strong population growth were also included. And in order to catch up with other fast growing East Asian countries, both authors of the report and news article are convinced that Philippines should maintain macroeconomic stability, redirect public expenditures towards those previously stated major factors, and expand its fiscal space.

            However, dissecting further the ideas presented within the article we could affirm if those mentioned above indeed describes the true nature of Philippines' slow growth. Among the problems listed, I would agree to those except for one, that strong population growth is a hindrance. For in my opinion, human resource is one most valuable resource a nation possesses. The aim therefore of our efforts must be raising the quality of life of individual Filipinos and consequently advancing our workforce. And improving the quality of life entails sufficient food production, and the backbone of our nation's production lies in our ability to tap our agricultural potential. If I may suggest, hand in hand with better irrigation, farm-to-market roads, and storage facilities, efforts must also be made to make better farmers. Because we cannot deny the fact that in our local context, our thoughts of farming and being a farmer are prejudiced. Farmers struggle to make their children professionals and unfortunately none of their children also wants to stay in the fields. Improving the life of these farmers and equipping them with modern machineries may, modern farming techniques may shift their view and in turn, boost our food production.  Courtesy of the law of supply and demand, prices of several commodities would lower down.

              Regarding financial crises and government spending, I would agree that expanding our fiscal space is one solution. Raising the tax revenues, implementing strict tax administration, and reform in excise taxes may avail us substantially. However, this may be ineffective if corruption would still prevail. I'm afraid regardless of our authorities' vigilance, the prevention of corruption among our government's ranks lies in our privilege of choosing our officials. On education, research and development, and technology, it is undeniable that we are at a setback. Students are ill-equipped with rooms, facilities, faculties, learning materials and encouragement. It is a long and rough road before our government can actually provide affordable and quality education for all, but granted that we boost our food production, a situation wherein most Filipinos do not anymore suffer hunger, then most of the population will be able to go to school and improve our over-all literacy rate. With many intellectuals, investment in research and development, as suggested in the article may very well return profits essential to our goal of attaining first world status.

            My opinions, especially some disagreements made within this blog, may have been brought about by my bias towards public policies that has direct impact to the commoner rather than those which affects enormous institutions and industries. It may have been also affected by my yet lack of deep rooted knowledge of economic policies. But I am confident that the ideas presented here throughout essentially intend to express my sympathy towards the slow growth of the Philippines' economy.

JAPAN ECONOMIST: PHL INFLATION MAY HIT AS HIGH AS 5% THIS YEAR

MANILA, MARCH 5, 2012 (PHILSTAR) By Lawrence Agcaoili

        Nomura Securities Co. of Japan warned that inflation in the Philippines could kick up to as high as 5.8 percent this year. 

        In a study, Nomura economist Euben Paracuelles said that the Philippines is one of the most vulnerable countries in the region to higher oil prices as it is importing nearly all of its oil requirements. 

“Without any fuel subsidies, there is high pass-through from imported inflation into headline domestic inflation,” Paracuelles stressed.

He pointed out that inflation could rise sharply to 5.8 percent in the “ugly” scenario, 4.9 percent in the “bad” scenario, and four percent in the “good” scenario. The BSP has set an inflation target of three percent to five percent between 2011 and 2014.

       Under its “ugly” scenario, Nomura sees the price of Brent averaging $135 per barrel this year. Oil price is seen averaging $115 per barrel in the first quarter but supply-side concerns or financial speculation intensify causing the oil price to spike to an average of $150 per barrel in the second before falling to $140 in the third and finally to $125 in the fourth quarter as demand destruction starts to kick in. 

Nomura sees oil price averaging $125 per barrel in each of the four quarters under the “bad” scenario and $115 per barrel under its base case or “good” scenario wherein it would average $120 per barrel in the first before falling to $115 in the second, $105 in the third, and $100 in the fourth.

       The rise in the price of Brent crude took a breather last week, stabilizing at about $124 per barrel but up nearly 15 percent from $108 per barrel at the end of last year. This pales in comparison to the 364 percent surge over the prior five years to the peak of $144 per barrel in July 2008. 

       As such, Paracuelles said the BSP could raise interest rates by as much as 75 basis points, bringing the overnight borrowing rate to 4.75 percent and the overnight lending rate to 6.75 percent this year in the “ugly” scenario. 

      “But in the ugly scenario, we expect a total of 75 basis point hikes to 4.75 percent given how sensitive core inflation becomes to increases in the headline number once it breaches the BSP’s target,” he added. 

The BSP slashed interest rates by another 25 basis points last March 1 bringing the overnight borrowing rate back of record low level of four percent and the overnight lending rate at six percent due to benign inflation outlook amid soaring oil prices.

http://www.newsflash.org/2004/02/be/be004481.htm

TO HIGH PRICES;  IS IT A HI OR A BYE?

          Philippines is one of the most vulnerable countries in the region to higher oil prices as it is importing nearly all of its oil requirements, this is in accordance to what have the  Nomura Securities Co. of Japan and Nomura economist Euben Paracuelles to be specific studied. This seemed to be evident when we try to look at the average of 300,000 vehicles that passed in EDSA alone in a daily basis. These figures would plausibly increase in a high note as it runs on all the country’s respective national roads. The demand of oil supply in our country, if to be treated in its positive aspect, can be used as one of the country’s way in providing more jobs by virtue of private gasoline stations. With no strict qualifications, Filipinos can easily gain an employment under those private gasoline stations.

           But what is existing right now is the other side of the dice. The demand of oil supply is being abused to its fullest as what is being interpreted by the article of Lawrence Agcaoili. Agcaoili used the terms of UGLY scenario, BAD scenario and GOOD scenario as his own way to elaborate the levelling of Philippine inflation in terms of percentage. Private oil producers contradict one of the vital laws either in demand or supply. It is said in the law of supply if the price goes high so as the supply goes high. Well we know that it really is transparent in oil production, we haven’t experienced oil shortage, have we? Nevertheless, the law of demand says that if the price rises, the demand falls. Is there any fall in oil demand in the Philippines even at one point? So if the demand doesn’t fall,  if I may ask so, how come the price is still high and currently going high? A rollback of 50 cents in oil products is being succeeded in a couple of weeks by a one peso price increase. If there is these PRIVATE oil producers as I called the different oil companies, could I say that it is also possible in the power given to the government to make an oil company of his own, considered that it is run by the government, it is safe to call it as a PUBLIC oil company. Upon the idea that I have proposed, considering that we have no enough or even as efficient and effective oil subsidies, I think my own version of PUBLIC Oil Company will be a great help. We know that the increase in oil prices has a domino effect to various products that we used to buy and falls under our needs. If I am in the position to initiate my version of PUBLIC oil company, then it has already been existing by this time. Not to compete but to help because I’m a consumer myself not just of oil products but merely of the products that is being affected in terms of price.