November
11, 2018 | 11:45 pm
Introspective
By Romeo L. Bernardo
There has been much
hand-washing among our legislators on TRAIN 1. The unfortunate part about this
is they were responding to fake news.
Much of this is likely
limbic (also referred to as lizard and “fight or flight”) thinking which has
sadly characterized much of discourse lately, fanned by social media and live
news. Tweets, live feeds, and text messages or phone calls for instant
reactions. They discourage deliberate thought grounded on evidence and serious
research, which at the same time educate the public.
Though often together, this
shouldn’t be confused with the kind of more calculated political moves that
pander to voters, short-term fixes at the expense of more long-term public
good. The classic case of this is wasteful spending that leads to unsustainable
fiscal deficits, macro instability, hyperinflation, ultimately immiseration of
the people, especially the poor. We have seen such a sorry tale unfold in
Chavez’s Venezuela and Mugabe’s Zimbabwe.
Serious analysts observed
this may have been at play here with the passage of the costly P50
billion-a-year “free tertiary education” in the SUCs bill. Despite fact-based
research by government’s think tank, the Philippine Institute for Development
Studies, and the forceful well-argued opposition by the Secretaries of Finance,
Economic Planning, and Budget, and the head of CHED, this populist bill passed.
Evidence was disregarded
that this badly targeted, hugely costly bill is faulty use of public resources
for educating the young for future jobs, especially the poorest. This may also
corrode the quality of education and training systems as students and teachers
move away from private institutions to quality-challenged SUCs, some no more
than diploma mills (see the PIDS study and the economic managers’ statements.).
The folly of a bill costing
so much and so narrowly focused on free tuition in SUCs became even clearer to
me upon listening to a panel on “Technology and Inclusion in Asia” during the
recent Annual Conference of the Federation of ASEAN Economics Associations. The
panel consisted of PCC Chair Arsenio Balisacan, ADB Chief Economist Yasuyuki
Sawada, Professors Emmanuel Esguerra (UP), Erika Legara (AIM), Euston Quah
(Nanyang Technological University) and Ayala Corporation Chairman Jaime Augusto
Zobel de Ayala.
My key takeaway from them
is that to meet the challenges of technological disruption on our economy
(especially BPO and manufacturing ) and to find future jobs for our youth, “it
will be important for the private sector (industry and academia) to work hand
in hand with the government to plan out a roadmap to create both a national
upskilling program and to create a longer term educational reform program to
design education and training for a technologically enabled and digitally-led
economy.”
Similar observations as
that bill have been made of other inadequately studied and targeted programs,
e.g. free irrigation, increasing the pensions of SSS retirees, VAT exemptions
for senior citizens, more so-called pro-labor legislation that lead to rigidity
in labor markets, less investments and jobs. Contrast these to the Conditional
Cash Transfers program, started four administrations ago, which was well
studied, carefully piloted, and now showing good results in reducing poverty
and keeping children in school.
Election season is upon us,
however, and perhaps we should be more understanding of populist knee-jerk
moves. An appeal to our politicians: please study the premises; thrash the fake
news.
FAKE NEWS ON TRAIN
Fake News 1: TRAIN caused inflation
In September 2018, the top
10 contributors to inflation, largely raw food items, accounted for 5.5
percentage points (ppt) of the 6.7 percent inflation (see Figures 1 and 2). Of
these products, the DOF estimates that TRAIN contributed around 25% of personal
transport inflation, 5% of utilities inflation, 100% of non-alcoholic beverages
inflation, and 20% of tobacco inflation.
Overall, TRAIN’s
contribution to inflation is around 0.4 to 0.7 ppt. The Department of Finance
(DOF), National Economic and Development Authority (NEDA), and Bangko Sentral
ng Pilipinas (BS) all arrived at comparable estimates using different methods
to model the legislated tax increases.
In comparison, rice prices
alone accounted for 1.03 ppt of the 6.7% inflation rate.
Fake News 2: TRAIN has not
yielded collections as targeted.
“Falsehood flies, and the
Truth comes limping after it,” Jonathan Swift once wrote. It was hyperbole
three centuries ago. But it is a factual description of the post-truth society
we live in today, so much so that even conscientious media consumers can be
taken in by false information.
For example, in her column
last week, our much-loved favorite Prof. Winnie Monsod cited from some news
source that “revenues collected from TRAIN were 74.1 percent short of target.”
This is in stark contrast to a report given by DOF saying that in the first
half of 2018, where complete data is available, TRAIN revenue collection is on
the dot.
The target for the first
half is set at P30.1 billion. This is around 48 percent of the P63.3 billion
target for the full year. This is lower than the P89.9 billion reported in the
budget as the revenue from e-invoice (P6.6 billion) and fuel marking (P20
billion) were moved to succeeding years given that both projects needed more
time to prepare.
TRAIN revenue collection is
estimated at around PHP 33.7 billion or 12 percent above target.
HOW TO LICK RICE INFLATION
— END NFA MONOPOLYThere have
been an abundance of learned articles and studies over decades on why
Quantitative Restrictions/NFA monopoly on rice importation needs to go, and for
importation to be left to the private sector, subject to a tariff. And with
tariff collections to be used for investments in agri diversification, raising
productivity, and safety nets for affected marginal farmers. Most recently, the
following articles made the case blindingly clear, and recommended the way
forward.
1. FEF Statement on Rice
Policy, Foundation for Economic Freedom, 12 April 2017
2. Red flags in rice
tariffication, Ramon L. Clarete, Introspective, BusinessWorld, 8 October 2018
3. Rice policies and
fallacies, Cielito Habito, Philippine Daily Inquirer, 2 October 2018
4. Wanted: A new rice
industry road map after lifting of quantitative restrictions, Emil Q. Javier,
Manila Bulletin, 28 July 2018
5. NFA needs major role
change to remain relevant — PIDS, Philppine Daily Inquirer, 22 October 2018
The Department of Finance
has also issued an excellent summary in favor of passing this bill. It can be
read in this link.
As I said in my last
column: With our rice prices double or higher than our neighbors, this monopoly
has profoundly aggravated poverty, dampened manufacturing investments and job
creation through wage uncompetitiveness, and periodically inflation shocks our
macroeconomy, like now. The FEF’s position on this is well articulated in
various statements and columns over the years, most recently by Toti Chikiamco,
in his most recent Introspective column. “Abolish the NFA rice importation
monopoly and fully liberalize rice importation. The bill passed by the House is
defective: it allows the NFA to continue licensing and regulating traders. The
Senate should completely abolish the NFA’s rice import monopoly and remove its
regulatory and licensing functions”.
This bill has been in
Congress for over a year now. Legislators have an opportunity to do something
about inflation in the last few months of this session, and not just for now,
but for decades to come. And stop the corruption and accumulation in
government-guaranteed NFA debt and lift millions of our people out of poverty.
Dear legislators, please
act. “Never waste a good crisis”
Romeo L. Bernardo is a
Fellow of the Foundation for Economic Freedom and a Governor of the Management
Association of the Philippines. He was Finance Undersecretary during the
Corazon Aquino and Fidel Ramos administrations.
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