What you need to know
Price hikes, rice liberalization, rising taxes and more have sparked concern over Rodrigo Duterte's economic policies. Could the worst be yet to come?
It is increasingly difficult to pinpoint one singular event or policy that can be blamed for mangling the state of the Philippine economy. Where one trouble ends, another begins.
Costs of basic goods have increased due to regressive tax laws. The government has responded with opening up the economy further, but this has spurred fears of either greater price hikes. And when expenses look to be hell bent on remaining high, where does it go? To what end?
Farmers and consumer groups are up in arms about the recently signed Rice Tarrification Law, which seeks to further liberalize the Philippine economy. Last week, President Rodrigo Duterte signed the act, hoping to draw a greater supply of rice from neighboring ASEAN countries.
Congressman Ariel Casilao slammed the passage of the law a day after it was signed saying it was a “tombstone” for the Philippine rice industry.
“I refuse to accept that Filipinos will rely on rice, coming from as far as 1,467 or 2,265 kilometers, to be freighted 907 or 1,418 nautical miles, which is totally contrary to food security,” the lawmaker said, referring to the distance of the Saigon and Laem Chabang ports in Vietnam and Thailand, respectively, from the port of Manila.
Rice prices have already increased dramatically during the last half of 2018. Regular and well milled rice reached 44.11 Philippine pesos (US$0.85) per kilogram, a 5.58 percent increase. In addition, the subsidized rice of the National Food Authority (NFA) was not nearly enough to offer an alternative as imports from ASEAN countries only came in at 250,000 metric tons priced at P32 (US$0.62) in the market.
Ask any Filipino, no meal is complete without a serving of rice. As such, this affects the expenses of all households in the country.
Peasant activist Cathy Estavillo of Bantay Bigas (Rice Watch), a network of consumers in poor communities, hit out at the proposal saying it “shows how insensitive and ignorant is the government on the plight of the poor and the marginalized. Most Filipinos especially those who are earning way below the minimum wage barely afford a kilo of rice as a result of the record-high inflation rate. Now unlimited imported rice will surely give power to the market to raising prices even more” The group labelled it as a step towards privatization and liberalization.
Think tank IBON Foundation criticized government economists for arguing that imported rice playing to the free market will reduce prices. This will inevitably make NFA rice obsolete. In truth, they foresee that prices will soar once more as cheaper rice from abroad (acquired at only P33 per kilo as opposed to P40) will let rice traders increase their markups on the rice they sell.
Aside from fears that the new policy will flood the market and strangle the domestic rice market, employees of the NFA have also sounded the alarm over their imminent reduced role in light of the new law. They worry that many NFA employees could lose their jobs as the agency’s functions will be deemed redundant.
According to the Confederation for the Unity, Recognition and Advancement of Government Employees or Courage, a nationwide federation of government unions, the Rice Tarrification Law will turn the NFA into a “glorified warehouse” as it “virtually abolishes” the agency’s functions. They estimate that around 4,000 employees will be laid off with 400 already under the immediate chopping board.
Death by taxes
The uncertainty over rice prices has also been greatly impacted by the overall economic situation in the Philippines which has taken a sharp turn for the worse since mid-2018.
Gross domestic product (GDP) growth in the Philippines slowed from 6.7 percent in 2017 to 6.2 percent in 2018, sparking concerns over what had been seen as a “rising star” economy. In 2018, inflation reached record highs in the last 10 years by climbing to 6.7 percent resulting from the implementation of the Tax Reform for Acceleration and Inclusion Law, or TRAIN Law. Duterte’s tax package has been incessantly marred by criticism for greatly contributing to the rising costs of basic needs.
Ibon estimates that low-income households have incurred income losses ranging from P2,500 to P6,800 (US$48 to US$130) as a result of the economic downturn.
Transport, utilities and food especially are some of those hit hardest by the TRAIN Law and inflation. These also happen to comprise up to 84 percent of a poor household’s expenditures. Coupled with a sharp decline in the peso value, also the worst in 13 years, the country’s poorest have been left struggling to feed themselves.
While inflation has since slowed to 4.4 percent, 2019 saw immediate increases in fuel prices also due to the TRAIN Law – an additional P2 per liter on diesel and gasoline – which progressively adds to the excise taxes.
In the heart of Metro Manila, residents of Sitio San Roque face the double-edged sword that comes with unwelcome tax policies and unruly rice costs. Ricky Indicio has lived here for decades peddling fruits and vegetables in the local market. He also stands as head of the San Roque Vendors Alliance, a community organization that has been hit hard by the relentless price hikes.
“We used to make up to P10,000 (US$192) a day to buy more supplies to sell the following day and maybe save some money,” said Incidio. “Now we are lucky to make P7,000 (US$135), not enough for the stall and a decent meal. We get less, people buy less. Both consumers and small vendors have to contend with this. My family used to buy a can of sardines for dinner for P15, now it costs P22. It’s really hard, nobody wants to go hungry.”
“Families have been eating less. Ironic how our community is so close to the NFA office, yet affordable rice isn’t available to the vendors here,” Indicio groaned.
Tax hikes foreshadow greater threat
Under the government framework of Build Build Build, or BBB, hundreds of thousands of infrastructure projects are being laid out across the country through public-private partnerships. Approximately 70 percent of the BBB program will be funded by the revenues from the administration’s controversial tax hike program which started this year.
San Roque is also plagued by persistent eviction attempts due to a public-private partnership deal by the local government, the National Housing Authority and real estate conglomerate Ayala Land. The project aims to displace the thousands of families living there to make way for several commercial centers.
Indicio says that this trend of prioritizing corporate interests instead of shelter has been going on for years. Governments have facilitated this and now look to do so even more as per the BBB.
According to the Urban Poor Resource Center (UPRC), a group closely monitoring the ill effects the BBB could have on informal settlements, more than 500,000 slum dwelling families will be evicted from their homes nationwide.
This has led to concerns that the Duterte regime is making its citizens pay more for a project that will not only benefit Chinese business interests but will displace a sizeable amount of the city’s urban poor population.
Indicio explained: “The government says that the BBB will save the economy, but right now we are carrying the tax burden for projects that will displace communities like San Roque.”
It seems that for many Filipinos, the unbearable inflation accompanied by rising costs are only a prelude to something much worse.
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Editor: Nick Aspinwall (@Nick1Aspinwall)
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