Dutertenomics: He’s leaving it to the experts

Presidential Photo

While its record in upholding human rights leaves much to be desired, the  Duterte administration will get high marks on the economy from the business community. What President Duterte did was to admit a lack of knowledge about economic affairs. He then assembled a team of seasoned executives and economists to craft and implement a sustainable growth plan for the economy, which is now bustling with so many activities. Railways to boost local economies, regional airports and seaports to encourage trade and tourism, and a third telco player to provide better and cheaper internet starting next year. More than 70 major infrastructure projects have been lined up under the ambitious “Build, Build, Build” program. While some will be delayed, the majority will break ground or be finished when a new regime takes over in 2022. By then, the country’s infrastructure will have become more developed, and it is expected that the Duterte administration will be leaving the economy better than when it took the helm in 2016.

INFRASTRUCTURE development

What was promised

Promises

Infrastructure

Increase number of Metro Rail Transit 3 running trains from 16 to 20 and increase train speed from 40 kilometers per hour to 60 kph (Sona 2016).

“Build, build, build”: Bring the country to a “golden age of infrastructure” for enhanced mobility and connectivity.

Accelerate spending for Mindanao Logistics Infrastructure Network and other road network master plans. Modernize ports of Iloilo, General Santos, Cagayan de Oro and Zamboanga (2016). Pursue and complete rail projects in Metro Manila and the Mindanao Railway Project, Davao Transit System, Cebu Transit System, North and South Luzon Railways, and the Panay Railways project by end of term (2017).

Decongest Ninoy Aquino International Airport (Naia) and shift some domestic and international flights to Clark Airport (2016).

Revive Pasig River ferry service.

Address perennial flooding in Metro Manila and neighboring areas/put up new pumping stations in strategic places (2016).

Metropolitan Manila Development Authority, Manila and Cebu local governments directed to clear road obstructions; emergency powers pushed to address traffic problems and map secondary roads with local government units (2017).

TELCO

Develop a national broadband plan, provide free Wi-Fi in public areas (2016).

Ensure reliable telecommunications services.

Usher in a new major player.

Lower interconnection rates between the two giant industry players (2018).

FOOD SECURITY

Promise (when made)

What has been delivered

Delivered/Accomplished

Between January and July 2019, the most number of trains that were operational in a day was 16.

Out of 75 flagship projects identified, 37 projects approved by Investment Coordination Committee and confirmed by the National Economic and Development Authority board as of April 30.

25 projects expected to be completed by end of Duterte term; 24 in development stage; 46 in the implementation stage; 11 in the construction stage.

Groundbreaking for Metro Manila subway project held February 2019.

First package of Philippine National Railways’ Clark Phase 1 project, launched in May 2019.

Expansion of Clark International Airport is ongoing; 47.02 percent done as of January 2019.

Mindanao Rail Project Phase 1 is still in the budgeting/financing stage.

In June 2019, the President orders immediate transfer of domestic flight operations to Sangley Point, Cavite, to ease Naia congestion. There is also a proposal to build an airport in Bulacan.

Government keen on tapping state-owned Chinese infrastructure contractor China First Highway Engineering Co. Ltd. (CFHEC) to help rehabilitate the waterway. Pasig River Rehabilitation Commission signed on March 22 a memorandum of understanding with CFHEC to undertake feasibility study.

$500-million Metro Manila Flood Control Management Project launched in January 2018, partly funded by World Bank and China-led Asian Infrastructure Investment Bank (AIIB) for $207.6 million each. Remaining $84.7 million would be funded by government. Project slated for completion in 2024 to benefit mainly Marikina and Quezon City residents. Other ongoing projects include Pasig-Marikina river channel improvement and Mandaluyong main drainage project (phase 2 started in 2014).

Skyway Stage 3, which will divert 100,000 vehicles away from Edsa and cut travel time between Makati and Quezon City, expected to be finished by end of 2019, with a few ramps opened. Another Metro Manila elevated connector road and the 32.6-km Southeast Metro Manila Expressway (C6) Project would remove another 100,000 cars from Edsa. Both projects are expected to be completed by 2021.

In February 2018, the Department of Information and Communications Technology (DICT) issued draft guidelines for selection of new major telco player that would break the duopoly of PLDT Inc. and Globe Telecom. In November that year, Mislatel Consortium, the venture between Udenna Corp. (owned by Dennis Uy, a friend of the President and one of his top campaign contributors) and China Telecom, was named the country’s third mobile player. Mislatel hopes to obtain license to operate by this month.

In March 2019, the DICT sealed partnership with United Nations Development Programme to hasten the rollout of the government’s free Wi-Fi project in public places, such as schools, airports, public hospitals, and other state facilities. The DICT targets 200,000 sites by 2022.

In August 2017, the President signed Republic Act No. 10929 establishing free internet access program in public places. Under “Pipol Konek,” more than 13,000 live sites had been introduced, covering places, such as public schools, public parks and plazas, government hospitals, public libraries, national and local government offices, state universities and colleges, and seaports, airports and train stations.

What works, what’s wanting, what’s next

DON’T DELAY OR PH TO KEEP MISSING TRAIN

By Miguel R. Camus

@miguelrcamusINQ

Railways are a major component of the administration’s plan to usher in a “golden age of infrastructure” under the “Build, Build, Build” banner. And while the Department of Transportation (DOTr) has made progress across a number of projects, most of the those in the pipeline remain in the preconstruction, planning or procurement stages.

None of the new railway lines launched during this administration that were being implemented using official development assistance (ODA) loans—deemed faster than the Aquino-era public private partnership (PPP) projects—has yet to start actual construction.

Further, the budget row that started last year and ended in the first quarter of 2019 set back parts of the “Build, Build, Build” initiative.

New railway projects that started, including Ayala Corp.-Metro Pacific Investments Corp.’s Light Rail Transit Line PPP Cavite project, the North-South Commuter Railway project Phase 1 (Tutuban, Manila to Malolos, Bulacan) and San Miguel Corp.’s Metro Rail Transit Line 7 are carryovers from the previous administration.

Still, Transportation Secretary Arthur Tugade said it was important to get started on the vast pipeline, offering a glimmer of the “golden age.” The DOTr wants to expand the current 77 kilometers of railway lines (MRT 3, LRT 1, LRT 2 and Philippine National Railways, or PNR) to 322 km by the end of 2022.

Among of the big-ticket items are the 30-km Metro Manila subway and the 147-km North-South railway, which will link Calamba City, Laguna, to Clark, Pampanga. Both will be funded by the Japanese government.

Other major components are the PNR Bicol line and the Mindanao Railway project, whose first phase will stretch 102 km from Tagum City, Davao del Norte, to Digos City, Davao del Sur.  Those projects will be funded by China.

The administration will need to start work on those projects within the next three years or risk another round of delays after the 2022 elections.

The MRT 3 along Edsa in Metro Manila is another area where the administration has made improvements, albeit still short of their targets.

MRT 3 now runs with about 14 trains a day, almost double the figure from just a year ago but still short of the 20 trains needed for optimal operations. The DOTr tapped the original Japanese maintenance provider, the Sumitomo-Mitsubishi group, to fully restore the MRT 3 by July 2021.

The Department of Public Works and Highways (DPWH) is also busy implementing its huge slice of the “Build, Build, Build.” One of its largest projects is the Luzon Spine Expressway Network, an 888-km highway that will cut travel time between Ilocos and Bicol from 20 hours to nine hours.

The DPWH is also helping San Miguel Corp. with the Metro Manila Skyway Stage 3. A separate Makati-QC elevated expressway is being built by Metro Pacific Investments Corp., which plans to finish it by 2021.

Public Works Secretary Mark Villar said those two projects would ease traffic in Metro Manila, where road congestion adds up to about P3.5 billion in economic losses per day, according to the Japan International Cooperation Agency.

SHIFTING POLICIES STALL AIRPORT PROJECTS’ TAKEOFF

By Miguel R. Camus

@miguelrcamusINQ

Upgrades in the aviation sector are taking place, but the Department of Transportation (DOTr) appears to be doing these with one hand tied behind its back. Halfway through the Duterte administration, the DOTr said 17 airport projects—from the opening of new gateways to runway and terminal improvements—had been completed, while 28 more were underway.

It could have moved faster if not for a string of policy changes that resulted in a still-vague airport strategy for Metro Manila and delayed improvements for several key provincial gateways, which were public private partnership (PPP) projects scrapped in the early months of President Duterte’s term.

Since 2016, the DOTr has opened gateways, such as the Lal-lo International Airport in Cagayan, Bohol-Panglao International Airport in Bohol and a new passenger terminal at Mactan-Cebu International Airport in Cebu, a PPP project from the previous administration.

The country’s main gateway, Ninoy Aquino International Airport (Naia), however, has failed to catch up despite its congestion problems that had been recognized years ago. PPP projects meant to upgrade Naia and regional airports, such as Bacolod, Iloilo, Laguindingan and Davao were dropped in favor of unsolicited proposals.

Yet these proposals have stalled to this day as the government insists on better terms from the private sector.

The Naia proposal was made in February 2018 by Naia Consortium, which is composed of the country’s largest conglomerates. If that fails, another group led by Megawide Construction Corp. has a pending offer before the DOTr.

Adding to the confusion is the lack of a defined airport strategy for Manila. The DOTr said any group that would meet its requirement of “no government guarantees” and would be willing to bear the risks was free to build an airport.

Apart from Naia and Clark is a proposal by conglomerate San Miguel Corp. to build a new international airport in Bulacan, a province about 50 kilometers northwest of Manila. That project has been approved and a price challenge is currently underway.

The provincial government of Cavite also wants to redevelop the nearby Sangley Airport into a new international airport. For now, the DOTr is preparing Sangley for general aviation flights and limited commercial operation by November this year.

Apart from airports, the DOTr has also improved the maritime sector, with the Philippine Ports Authority (PPA) having completed about 200 commercial and social and tourism port projects nationwide.

On July 15, the PPA inaugurated the country’s biggest  passenger terminal building at the Port of Cagayan de Oro.

FINALLY, A STRONG SIGNAL FOR ENDING DUOPOLY

By Miguel R. Camus

@miguelrcamusINQ

The Duterte administration will likely be remembered most as the government that introduced fresh competition in the telecommunications sector amid strong public clamor.

Building on a promise to shake up incumbents PLDT Inc. and Globe Telecom, the Department of Information and Communications Technology (DICT) and the National Telecommunications Commission launched in 2018 a bidding process that lasted almost a year, with the eventual winner now known as Dito Telecommunity (formerly Mislatel).

While customers saw the consolidation of the so-called telco duopoly in 2011 with the sale of Sun Cellular to PLDT, they now have hopes for better and more inexpensive internet as demand continues to rise.

For subscribers, that desire for better service quality exceeds even national security worries from an adversarial China. The DICT said its Israeli-backed cybersecurity platform would monitor Dito, its competitors and other threats to help secure the country’s critical infrastructure.

It is a long road ahead for Dito, which has promised to deliver a minimum average internet speed of 27 megabits  per second and 37-percent population coverage in its first year. Speed should go up to 55 mbps and coverage to 84 percent by the end of its commitment period.

The third telco, which is budgeting some P257 billion over five years, will be going up against entrenched opponents with deep pockets. Both PLDT and Globe are spending over P100 billion yearly to upgrade services.

Dito’s first year started on July 8. Its commitments will be regularly audited over five years or it will lose its frequencies and it will have to give up whatever is left of its P25.7-billion bond.

This administration has also pursued programs to support the new telco. It launched a cell-tower sharing policy while a mobile number switching scheme is being implemented.

The government’s Pipol Konek Free Wi-Fi Internet Access in Public Places Project is meant to provide free internet in public spaces across the country. Thus far, it has reached 2,565 live sites covering 17 regions, 58 provinces and 394 municipalities.

The government is also building landing stations, which will accommodate international submarine cables, whose operators are expected to provide inexpensive internet service.

Despite the pace at which DICT secretaries are replaced, continuity in its programs are expected in the next three years. This was promised by former Sen. Gringo Honasan, the department’s third secretary in as many years.

ICT advocates are waiting to see if Honasan will pursue or support additional reforms. These include the Open Access in Data Transmission Act, the Spectrum Management Reform Act, the CATV Industry Development Act, amendments to the Public Telecommunications Act and the Public Service Act.

AGRICULTURE AND FOOD SECURITY

What was promised

Provide modern agriculture

infrastructure and establish

modern harvest and postharvest

facilities (2016).

Optimize agricultural production (2016).

JOB CREATION

Promises (When made)

Attract investments and generate jobs for the poor and less skilled, and attract investments for labor-intensive industries (2016).

Relax restrictions on the economy so more investments can come in and develop labor-intensive industries, such as manufacturing, agriculture and tourism. Institute mandatory reforms to ensure competitiveness and promote ease of doing business (2016).

Invest in human capital and ensure equal access to economic opportunities (2016).

Never cease to provide every Filipino worker with full, dignified and meaningful employment as they deserve no less than decent and comfortable lives.   (Labor Day, May 1, 2018).

Pass legislation ending the practice of contractualization (2018)

What has been delivered

The Philippine Center for Postharvest Development and Mechanization ( PhilMech) aims to increase the level of farm mechanization to 4 horsepower per hectare, in order to put the country’s agriculture sector at par with Asian neighbors. At present, the country’s mechanization level is at 2.31 horsepower per hectare.

Under the Rice Tariffication Act, a Rice Competitiveness Enhancement Fund of P10 billion will be allotted annually for the next six years. This fund intends to finance machinery and equipment (50 percent), technological development on rice seeds (30 percent), credit assistance (10 percent) and extension services (10 percent).

Delivered/Accomplished/Updates

Based on the Philippine Statistics Authority’s (PSA) quarterly Labor Force Survey (LFS), the net number of jobs created in the first two and a half years under President Duterte stands at 394,000.

A Social Weather Stations survey conducted March 28-31, 2019, found the joblessness rate at 19.7 percent or an estimated 9.4 million adults.

PSA’s April 2019 Labor Force Survey (LFS) showed unemployment rate at 5.1 percent.

In 2018, the country’s rank in terms of ease of doing business as evaluated by World Bank fell to 124 that year, from 113 in 2017 and 99 in 2016. That’s below the country’s long-term average ranking, which was 120.73 from 2008 until 2018;

In April 2019, the Philippines bagged $12.16 billion worth of new investment and trade deals with Chinese partners—including big-ticket and labor-intensive energy, petrochemical, industrial park and infrastructure projects.

In May 2019, Japanese investors signed 26 agreements with Filipino businessmen worth $5.5 billion (P289 billion), projected to create more than 82,000 jobs.

In June 2019, in an effort to shift more investment to the countryside, Malacañang imposed a moratorium on new ecozones in Metro Manila, leaving room only for project proposals that are already pending President Duterte’s approval. More than 130 proposals to put up buildings for IT-BPM companies in Metro Manila might now be stuck in limbo.

Congress has yet to pass a law ending contractualization.

On May 1, 2018, the President signed Executive Order No. 51, which prohibits illegal labor contracting but allows some forms of contractualization. Labor groups were unhappy with the EO, saying they were “taken for a ride.” The President himself admitted that his EO prohibiting certain labor contracting schemes had “no teeth” as he did not have the power vested in Congress to impose penal sanctions for those found violating the EO.

On May 1, 2019, the President asked Congress to pass measures that would protect workers’ right to security of tenure and self-organization.

What works, what’s wanting, what’s next

FOOD SECURITY

FARM SECTOR AWAITS LIFELINES AMID FLOOD OF IMPORTS

By Karl R. Ocampo

@kocampoINQ

Given the current state of agricultural production, the government still has to rely on imports to ensure food security. The Rice Import Liberalization Act and Sagip Saka Act are intended to liberate farmers, backyard livestock raisers, and fisherfolk from inefficient practices and help them compete on a global scale, especially since the administration plans to open its doors to more agricultural imports.

These measures will bear fruit if the government hurdles the initial problems stalling their implementation. Economists say the P10 billion in subsidies under the new rice policy, for example, may even go up depending on the import duties that could be collected from rice shipments.

The benefits of the Sagip Saka Act have yet to be felt by the industry. In recent months, an oversupply of mangoes, cucumbers and onions has hounded producers, causing prices in some areas to drop by half.

Prices of copra, one of the country’s major agricultural exports, have dropped by as much as 60 percent this year, also because of a glut, according to the Philippine Coconut Authority.

Since the rice import liberalization measure was enacted in February, it has so far succeeded in dealing with the supply problem, with prices indeed going down but at rates that seemed to be already hurting local farmers.

The farmgate price of palay has since dropped to its lowest in almost three years at P17.85 a kilo. In Davao and Surigao, it has plummeted to P14 and P15 a kilo, respectively.

As for the  Philippine Center for Postharvest Development and Mechanization (PhilMech), its task of modernizing an antiquated sector is made even more daunting by the fact that the country’s population grows annually by 1.7 percent. Delays in the disbursement of funds have set back programs prepared by the agency, and farmers have to wait till next year to receive aid, according to PhilMech chief scientist Roy Estigoy.

The Department of Agriculture earlier said it was looking to reposition food resources to regions that need them the most, but this program has failed to gain traction. It is currently focused on jumpstarting a P44-billion banner program to install irrigation systems across the country with an Israeli loan.

“Even the administration is not satisfied with the performance of agriculture,” said Bong Inciong, president of United Broilers Retailers Association. “I hope this administration will have a greater ambition for Philippine agriculture, we cannot rely on importation forever.”

Danny Carranza, chair of the Kilusang Magbubukid ng Pilipinas, said his group had yet “to hear a concrete platform from the President. We want to know how he plans to help these farmers. Because right now, all we have are plans for liberalization. That may be good for consumers but how about the producers?”

All these are happening against the  backdrop of aging farmers who are earning below the poverty line. According to the Philippine Statistics Authority, farmers earn P100,000 a year on the average, and the amount is expected to drop further with the arrival of more imports.

Bruce Tolentino, monetary board member and former director of the International Rice Research Institute, said the government must find ways to bring agricultural wages similar to those in other sectors if it wanted to encourage more people to go into farming.

“Young people and farmers need to be able to earn competitive incomes from farming,  he said. “There are no magic bullets, and the results will need at least five to 10 years to emerge.”

With no immediate relief in sight, farmers continue to be tied to movements of the market that remains beneficial to consumers and importers, but not to them.

WHERE’S THE PROMISED ‘GOLDEN AGE’?

By Roy Stephen C. Canivel

@roycanivel_INQ

In 2017, one of President Duterte’s Cabinet officials declared an ambitious target: by the end of the current administration, there should be 12 million new jobs.

After all, the “golden age” of infrastructure should also come with the “golden age of jobs,” according to Labor Secretary Silvestre Bello III.

But halfway into Mr. Duterte’s term, the actual number of jobs created has not even come midway of the target. It has actually created the least number of jobs compared to the first three years of the two previous administrations.

When Mr. Duterte came to power in mid-2016, there were 40.95 million employed people in the Philippines, according to the Philippine Statistics Authority (PSA). The most recent PSA data as of April this year bring the figure to 42.24 million, which means some 1.3 million jobs were created in the first 12 quarters under this administration.

Nearly 1.6 million jobs were created in the first half of President Benigno Aguino III’s term, and 3.4 million during the same period of Gloria Macapagal-Arroyo’s presidency.

Another way to measure employment generation is to get the yearly average, but even here, the Duterte administration lags behind its predecessors.

Mr. Duterte’s first two years created an average of 81,000 jobs per year, according to think tank Ibon Foundation. On the other hand, Aquino’s first two years created 783,000 jobs per year, while the Arroyo administration created 1.31 million jobs in the same period, said Ibon’s top researcher, Rosario Bella Guzman.

The scale of job losses tells another story. In the first two years of the Duterte administration, the agriculture sector lost 1.1 million jobs, a rate that Guzman called “unprecedented.” The figure was based on PSA data, which compared the yearly averages for the sector in 2017 and 2018.

Some of the usual suspects that are mainly to blame are the reduction of areas for cultivation—due to land conversion and even land-grabbing—and farming itself losing its viability as a livelihood as imported agricultural products flood the markets.

The government removed nontariff barriers and streamlined procedures for the importation of agricultural products in 2018 as a way to curb the spikes in inflation that year.

Guzman said Ibon did not factor in the weather phenomenon in its analysis since this is cyclical. “It’s really when you look at it, [it’s] three years of continuous bleeding. It’s really a crisis beyond weather disturbances,” she said.

The construction sector, meanwhile, has created 487,000 jobs in the last two years, a performance that Guzman still considered “tepid,” considering the way the administration had been trumpeting its “grandiose ‘Build, Build, Build’ [program].”

Presidential spokesperson Salvador Panelo earlier maintained that the government created 826,000 jobs in 2018 alone. He arrived at this figure apparently by subtracting the number of workers in the whole  of 2017, as per PSA data, from that of the following year.

But both Ibon and Malacañang are right. While the labor force survey does not provide any data on new jobs created, this could be computed by making the right comparisons. Both Ibon and Malacañang did just that.

Making the same comparison in the start of the Duterte administration would show that the country lost 664,000 jobs in 2017 compared to 2016. This was taken into account when Ibon computed the yearly average of 81,000 new jobs for 2017 and 2018.