Spins about the supposed 7.8% growth

ALAN JAZMINES
Consultant, NDFP Negotiating Panel1
09 July 2013

Softened and weakened a lot by “free market” neoliberalization since the 1990s, the Philippine economy under the present semi-colonial and semi-feudal ruling system has more and more become like a wimp of a kitten that has long been noted to be one of the sickest and most laggard in Asia.

The Benigno S. Aquino III regime meows all over with a bullhorn in an effort to appear to be roaring before the nation and the world, and has been boasting as hype to its third State of the Nation Address about its having achieved such “great economic success”: that, with the "stunning” 7.8% year-on-year growth rate of the country's Gross Domestic Product (GDP) in the first quarter of this year, it has beaten even if just by the tip of a nose that of the region's “mightiest tiger” and also the world's second largest economy at present -- that of China.

Compared to China's $1.9 trillion, the mere $63 billion (P2,656 billion) 1st quarter 2013 Philippine GDP is only a pittance, a mere 3% of China's.

It would thus take more than 30 hurried steps for the sick, frail, limp kitten of the present Philippine economy to really match every single stride of the incomparably giant Chinese economy.

And yet the sick, frail, limp kitten is now thumping its breast to boast that it has outperformed the giant of a tiger, as the first quarter's 7.8% GDP growth rate of the former at a very low scale happened to be a wee bit bigger than the 7.7% GDP growth rate of the latter at a much, much higher scale.

The comparison across scales so very wide apart is actually meaningless. There is no sense at all in comparing the puny pace of the miniscule, ill-managed, backward, shallow, volatile economy of the Philippines at present with that of China.

Quite importantly, varied multifaceted contexts of the decimally apparently close growth rates also need to be considered:

For one, the Benigno S. Aquino III regime has glossed over the fact that for the last decade, China's GDP growth rate was always been higher than 9%, many times went up to more than 12%, and occasionally even more than 14%. The present dip has been a new development brought about by much reduced exports as a result of the long festering crisis of the world capitalist system that has turned into a prolonged Great Recession since 2008, hitting first the US, triggered by the subprime and housing crisis; followed by a prolonged slump, grave deficits and severe austerity measures in the European Union, that have all worsened and worsened up to now; and has this recently been inducing its worst effects on the Chinese economy.

The effects of all these on the more advanced and more industrialized economies have been more immediate. However, the backward, pre-industrial, agrarian economies -- like that presently prevailing in the Philippines, subserviently clutching on to the fringes of the monopoly capitalist and other more industrialized and more advanced economies -- are not exempted, but eventually will be suffering more from the dragging effects of the current crisis of the world capitalist system.


Even as there is no real basis for comparison, the regime's spin meisters have been projecting such a big, boastful roar about having bettered China's current GDP rate, that really is only a mirage -- actually just a continuation of the mirage that had initially showed up in the last quarter of last year.

The regime described the 7.8% growth rate as “the largest in a non-presidential year in recent history”. Indeed, the GDP growth rate had artificially shot up to the second highest then at 8.4% during the partial height of the presidential electoral campaign in the first quarter of 2010 and reached its peak, again at an artificial 8.9%, in the second quarter of 2010 at the very height and eve of the electoral campaign. All this took place in the last few months of the Gloria Arroyo regime.

On the other hand, right after, in 2011 -- the first full year of the Benigno S. Aquino III regime -- the GDP annual growth rate dived to 4%.

The current regime's propagandists are now only vainly trying to hide the fact that renewed height in public and private election campaign spending for this year's mid-term senatorial, congressional and local elections has been one of the principal reasons behind the once again temporary artificial rise in the first quarter 2013 GDP growth rate.

The regime poured out an unprecedented increase of 45.6% in the budget for public infrastructure in the first quarter, as a big boost to the electoral campaign of its candidates from national to local levels. The surge of public infrastructure expenses and additional electioneering expenses, squeezed from here and there out of the state coffers, has boosted by 13.2% overall state spending in the first quarter.

Aside from easily tapping government funds and resources by various means, most politicos also tapped their own, their allies and their backers and financiers' private funds and resources for their election campaigns.

Notably, many among those who won in the senatorial election last May reportedly spent more than P100 million each in their campaigns, and many others spent close to that (the unofficial expenses were actually much more), not only in the senatorial race, but also in many of the governatorial, mayoral and congressional races.

All this has resulted in the temporary big rise in consumer purchases, a phenomenon that has not failed to take place every election campaign period, whether presidential or non-presidential.

Further, on the part of the private sector, as it was in the last quarter of 2012, the biggest boost -- 32.5% -- has again come from private construction, mainly the construction of new buildings and offices, especially as the massive transfers of call centers and other business process outsourcing (BPO) from the USA to the Philippines have recently left commercial buildings and offices with an all-time average low of 3% to 4% in vacancy -- across Metro Manila. This recent phenomenon has resulted in private construction contributing to overall GDP at least three times more than the rise in public construction.

The influx of transfers to the Philippines of BPO and other labor-intensive, non-core and peripheral business activities (like J.P. Morgan's move to transfer 17,000 labor-intensive, non-core call center jobs from the USA or about seven percent of its 258,965 global workforce, and thus generate for the company at least $1billion in annual labor cost savings) has increased so much, such that total income from BPO -- principally call center -- operations has now replaced remittances of overseas Filipino workers (OFWs) as the No. 1 boost to the present Philippine economy. The country has now actually become the new call center capital of the world, replacing India, as the cost of labor is much cheaper here and the English accent of Filipinos is closer to the American accent or is at least “neutral”, unlike in India.

Still, OFWs' remittances have remained a strong second and has now reached more than $21 billion per year, amounting to 28% of the Gross National Product (GNP) -- 33% of the GDP -- of the country.

OFWs, who now number more than 10 million documented (plus about 2 million more undocumented) migrant Filipinos, comprise more than 28% of the labor force and more than 31% of the total of both the employed and underemployed in the country. Their remittances have been the main support that more than a third of the population in the country has now become quite dependent on. OFWs' remittances have for several years now continued to be the single biggest boost to private consumption of commodities and services in the country.

Aside from direct remittances to their families left behind in the country, a large part of OFWs' enormous other earnings has also been directly funneled into purchases of condominium units by the more high-income among them, accounting for the bulk of the 6.1% increase in international sales last year. The recent surge in the construction of new condominium units has also contributed to a large part in the recent increase in private construction -- although now second only to the putting up of new buildings and offices to accommodate the rise of BPO transfers to the country.

What used to be leading the Philippine economy in the past decade has been the re-exports (after applying cheap, sheer assembly labor to imported parts) of semiconductors and other semimanufactures of electronic parts (chips, capacitors, resistors, integrated circuits, among others) for completion in more advanced and industrialized countries.

The face value (without subtracting the cost of imported parts) of the re-exports of semiconductors and other electronic semimanufactures used to have risen to more than 60% of the country's total exports about a decade ago. But even the face value of the re-exports of these semimanufactures have for sometime continually been dropping (from $2.33 billion, amounting to 39.7% of total exports a year ago, down to 36% in February this year -- the steepest since the 36.6% drop in October 2011). This has resulted in a total drop of exports by 12.08% year-on-year.

The declining re-exports of semiconductors and other semimanufactured electronic parts have been due to several long festering and worsening major problems, especially of late.

For one, the worsening crisis of the world capitalist system -- with a prolonged Great Recession running for more than half a decade now -- has resulted in a slump in the world market for semiconductors and other electronic semimanufactures, which used to be the lifeblood of this country's exports and the entire Philippine economy.

The Philippines has also been increasingly losing in competitiveness even in the mere assembly of semiconductors and other electronic semimanufactures, as other countries in a similarly backward state have adapted more and more advanced technologies, while the backward state of technology and industry in the Philippines has more and more been left behind by other increasingly industrializing countries.

The spurts in the seeming growth of the present Philippine economy from time to time without real basis, but only artificially spiked by false boosts such as election campaigns and externally dependent income generators -- such as the massive influx of BPO operations, OFWs' remittances and re-exports of semiconductors and other assemblies of electronic parts -- indicate the shallowness and lack of real solid grounding of the country's present economy.

What can we really expect in solidly reliable terms from an economy that is stimulated more by splurgings during election campaigns; pretending to be American staffs answering phone inquiries mostly to US companies; working abroad as domestic helpers, staffs or some other kind of assistants; doing cheap, technologically low-level, labor-intensive assembly work on electronic parts initially produced by and to be completed by more professionally skilled workers in more industrialized and more technologically advanced countries?

The hype about the peripheral 7.8% growth rate, without ever mentioning its temporariness and where it actually came from, only tries to gloss over and hide the many deep-seated, long-standing, and present problems in the utterly backward basic economic structure and situation in the country, and the dire and further worsening effects of these on the long-suffering and more and more miserable Filipino people.

The gloating over the present Philippine GDP growth rate of 7.8% surpassing China's by a wee bit and even more so those of other Asian economies (Indonesia's 6%, Thailand's 5.3%, Vietnam's 4.9%, Japan's 3.5% and South Korea's 1.5%) only hides the fact that the Philippine economy actually has one of the most backward and weakest economic base and development in the whole of Asia.

Industrialization and the downfall of feudalism have become sine qua non in modern economy since the breakthrough of the world's industrial and antifeudal revolution more than a century ago. Yet, the Philippine economy has remained pre-industrial and semifeudal up to now.

Except for a couple of “emerging Asian tigers” such as Singapore, the countries in the Southeast Asian region remain among the most backward in the world. Among these, it is the Philippines which has long been the sickest and most laggard. While Singapore is far more advanced, even the other countries in the Association of South East Asian Nations (ASEAN), which are closest to the Philippines, have already left the Philippines far behind in industrial development. Industry's share in the 2012 GDP was 48.1% in Indonesia; 47.4% in Malaysia; 41.5% in Vietnam and 40.1% in Thailand. Far below these, it was only 30.3% in the Philippines in the 2012 GDP, down from 31-35% during the last two decades.

One simple illustration of just how utterly backward the Philippines has been compared to these neighbors of ours, is that they all already are now in the manufacture of cars and other motorized vehicles, while the Philippines still keeps on just importing or assembling imports of these.

One big problem that keeps Philippine “industrialization” stunted, very low-level and highly inadequate is that it has developed very little terms of strategic, technologically advanced and heavy industries. Actually, not even in terms of medium-level industries.

It has failed to really develop, for one, even just the required basic steel industry -- which for several decades and up to now has remained a crippled failure -- so much so that mining products continue to be mostly simply exported in bulk in their raw forms to monopoly capitalist and other more industrialized countries, and various finished products from these are just brought back in trickles for sale in the country.

There is actually very little real industrialization and manufacturing -- in the full sense of these terms -- in the country. Much of Philippine manufacturing is backward, and actually just consists of cheap, low-value added, labor-intensive cottage industry, sweat shops, and the local assembly of some parts to be returned to the mother industrial centers in technologically and industrially advanced countries for essential completion before being sold to various markets, including the Philippine market.

Bulk of such local assembly for re-export is done in secluded special economic zones, where practically all the materials are imported and there is practically no other added local content except labor. There is thus not much interconnection -- much less, integration -- with the rest of the local economy, as the production is linked more with their real industrial centers elsewhere.

Thus, there is not much basis -- least of all is there real effort -- in the comprehensive planning and actual strategic development of industrialization and technological development in the country. This, especially so, as the present Philippine government has no real interest and has not actually been doing much in this regard.

Philippine industry -- and in fact, the entire Philippine economy -- has only been adopting to new ways of serving monopoly capitalist and other economies much more advanced and richer than ours. From being just “hewers of wood and drawers of ore” for foreign masters for a long time up to now, the Philippines has now also become as subserviently the assemblers of electronic parts, telephone attendants, and domestic servants of the monopoly capitalist and other economies more well-to-do than ours.

With the mass of our tillers still remaining essentially under feudal and semifeudal bondage, and even more and more of them now than ever before having become landless, virtually without work and comprising the biggest bulk of the country's unemployed and underemployed -- given the many loopholes, inadequacies and general failure of the ruling state's “Comprehensive Agrarian Reform Program” (CARP) -- the Philippines' backward agriculture has also been deteriorating more and more. Its share in the GDP, in fact, has consistently been going down from more than 22% during the last two decades to now below 12%.

Further indicative of how distorted and underdeveloped the Philippine economy is at present has been the overly large chunk of GDP eaten up by the services sector, which has risen from 45% in the 1990s to 57% to date, thus now actually dominating the Philippine economy and drowning the industrial and agricultural sectors.

The accelerating upsurge of BPO services (catering mainly to US businesses) and the big increases in financial transactions and the consumption of commodities and other services have greatly been escalating the scale and share of services in the country's present economy, dwarfing and all the more keeping underdeveloped the industrial and agricultural sectors.

But the more principal cause of the underdevelopment of the industrial and agricultural sectors has been the long-standing policy of successive monopoly capitalist and big landlord dictated ruling regimes in the country to put their thumbs down against giving determined support and prioritization to the development of these sectors.

The long standing and festering underdevelopment especially of the industrial and agricultural sectors, and of the overall economy of the country, for that matter -- despite much prated ephemeral illusions of growth -- have actually been resulting not in the lifting of the socio-economic conditions of the people or in what is now popularly called “inclusive growth”. Instead, these illusions of “stunning growth” have ironically been accompanied only by bigger and bigger increases in unemployment and poverty among the people.

According to National Statistics Office (NSO) figures, contradicting the supposed 7.8% economic growth in the first quarter of the year, unemployment in the country reached its recent peak at 7.5% and breached the three-million mark last April, from 6.9% in the same month last year and from 7.1% in January this year. Aside from this is the ever increasing underemployment (actually, disguised unemployment) that is additionally three times as large. Joblessness has actually been festering and worsening since more than a dozen years ago, when the implementation of neoliberalism and “labor flexibility” had been starting to escalate. Since then, average unemployment rate in the country has remained high at 7.6% and additional underemployment has been three times as large.

Pathetically, unemployment and underemployment in the country have for sometime been the lowest in the region.

Meanwhile, Social Weather Station (SWS) survey results showed that self-related poverty affected 5.2% of the population (10.6 million families) in March 2013, and that hunger among Filipinos rose from 15.1% in June to 18% in December 2011, to19.3% in March 2013, and to 23.8% in May.

About 20% of the poorest of the people have to scrimp with only 6% of the total national income while, as culled from Forbes Asia statistics, growth in wealth, amounting to $13 billion or the equivalent of 76.5% of the country's GDP growth in 2010-2011, was amassed by just the 40 richest families in the country. There is just some difficulty in obtaining official data to determine explicitly how much of the GDP growth was amassed by big foreign monopoly capitalists, as such is usually hidden in costs of operations, in export and import prices, in capital and in financial transactions.

All these only show how the rotten, backward, semicolonial and semifeudal socio-economic and political system prevailing in the country has been making the mass of the people suffer all the more, while the big foreign and local exploiters have been amassing the bulk of the country's wealth.

The full development from a subservient, backward, pre-industrial, agrarian, exclusive economy to a self-reliant, modern, industrialized, inclusive one would urgently require first priority policy, decisive action, and all-out support to independent, full-scale national industrialization, genuine agrarian reform, rural development and other fundamental socio-economic, cultural and political reforms against the impositions, maneuvers and resistance of foreign monopoly capitalists and local big compradors, big landlords and big bureaucrat capitalists.

By ALAN JAZMINES
NDFP peace consultant
detained at BJMP-SICA
Camp Bagong Diwa
Bicutan, Taguig City