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Like It Is

A balanced view

/ 05:16 AM September 20, 2018

The government’s imposition of higher taxes on some products is hurting. But, as we’ve explained before, these taxes aren’t the principal cause of hurt. Other factors are, such as rice, through gross mismanagement and the consequent shortages (now unfortunately to get even worse after Typhoon “Ompong”); and oil, with higher world prices ($50 per barrel in July 2017 to $72 per barrel after a year) taking diesel from P34 per liter to P46 per liter, where admittedly the P2 to P3 per liter for diesel under TRAIN has hurt (unfortunate timing did that).

There’s also the poor harvest on other foods (the typhoon destruction of corn will worsen this), while the scarcity of fish has got everyone up in arms. The peso depreciation and dollar appreciation didn’t help, either.

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But people are better off. The first tax reform package (TRAIN 1) did impact inflation, but nowhere near the level people complain of. What I don’t hear is anybody thanking the government for putting more money in their pockets. If you were one of those people who earn less than P24,000 a month, you’ve gone from paying P1,800 in monthly tax to paying zero; that’s more than P20,000 in your pocket per year.

A call center supervisor earning, say, P30,000 a month, now has about P3,800 more to spend in a month, while a restaurant manager on P40,000 has about P4,400 more per month, and so on. Some basics now cost more, but much of it, if not all, is covered by higher net wages. Partly offsetting the pain, too, is that since President Duterte came to power, students are getting free education all the way up, farmers are getting free irrigation, and the conditional cash transfer program covers more poor people.

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Those that really got hurt are the unemployed, and those in the informal sector who are grossly underpaid, if at all. There, TRAIN mandated an unconditional cash transfer of P200 per month to help cover inflation. Unfortunately, implementation has been too slow. (Is anyone surprised? It’s a never-ending weakness of governments; they really do believe what they plan will happen as scheduled. It never does.) Time to put in formal fudge factors. But it is rolling out now, so there should be alleviation of the affected citizens’ very genuine plight.

One of the biggest complaints I get is on the cost of food, which has gone up, indeed. We have a hopelessly inefficient agriculture and delivery system for food, and we’ve had it for the past half-century I’ve been here. Government after government has given insufficient attention to this No. 1 aspect of our lives.

That includes this government. It is addressing part of the second factor in getting food and delivering it. That’s what “Build, build, build” is all about. But that’s just the hardware. The software—the avaricious middlemen—remains unperturbed by any impost on their lives. It’s time the Duterte government took a really hard look at what’s wrong with Philippine agriculture—and fix it, even if it hurts some.

Before some of you get angry with me for being heartless, think through what I’ve said. Higher prices are happening and they are hurting, but poor government policy and TRAIN aren’t to blame; external factors are. Couple this with the fact that we’ve suffered rising prices before, and you develop a more balanced perspective.

In President Cory Aquino’s day, inflation reached 19.3 percent. Under Ramos, it peaked at 10.4 percent, Erap at 9.2 percent, Gloria at 8.3 percent. Only in Noynoy Aquino’s term was it lower at 4.6 percent. But he was just lucky; it was after the global financial crisis that led to low inflation (and interest) rates globally. If considering just the peak is unfair, then here are the averages: Cory, 10.5 percent; Ramos, 7.6 percent;  Erap, 6.4 percent; Arroyo, 4.6 percent; P-Noy, 3 percent—and Duterte, so far 3 percent.

All the economists I’ve talked to agree that this 6.4-percent inflation rate is but a blip. We’ll be back in the 2-percent to 4-percent range next year.

This paper’s editorial said it last week: Relaxing controls on food imports is a good interim measure, but it doesn’t solve the inherent problem of what’s wrong with our agriculture sector.

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As the editorial so cogently put it: “Like many other challenges his administration faces, President Duterte is vaunted to have the ability to ram through obstacles that conventional wisdom had previously thought to be insurmountable.

“The current crisis presents a rare opportunity for the government to address the root of the country’s inflation problem that returns every few years: supply bottlenecks that are easily exploited by industry cartels, and by lumbering, corrupt government agencies with an aversion to unpopular, long-term bitter pills that could mitigate inflation early on.”

It’s time to take a far more serious look at Philippine agriculture. It’s way past time.

E-mail: wallace_likeitis@wbf.ph

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TAGS: inflation, Like It Is, Peter Wallace, Rice shortage, Rice supply, Rising prices, Rodrigo Duterte, tax reforms, TRAIN Act, Typhoon Mangkhut, Typoon Ompong
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