Create pro-people measures, Aquino gov’t told

MANILA, JULY 21, 2010—As the new administration is now on the process of reviewing the current economic and political policies, independent think-tank IBON Foundation, Inc. had suggested to Pres. Benigno Simeon C. Aquino III to create economic policies that are pro-people or those which will not hurt the pockets of the poor.

Facing a huge fiscal deficit, the Aquino government is now looking into some possibilities of raising some money to finance government’s infrastructure, agricultural and social projects. Based on the latest statistics, the government’s 1st quarter deficit had reached a whopping 8.4 percent of the country’s gross domestic product (GDP), compared to seven per cent of the quarter 1 of 2009.

During the campaign period, then Sen. Aquino had told the public that if he wins, his administration will not impose new taxes or create new levies but strengthen the tax collections by going after tax evaders and smugglers.

IBON says, being a new administration, the Aquino government enjoys a measure of goodwill, and it can translate this to revenue generation measures that will not burden the public.

Restore tariffs in ’93 levels

IBON tells Pres. Aquino that among the measures that the his administration can implement—that will not affect the poor—is the restoration of the import tariffs to their 1993 levels, or at 5.6 per cent of the country’s GDP.

By doing so, says IBON, it will create an estimated revenue of P427 billion, instead of the P220 billion generated in 2009 (at 2.9per centof GDP).

IBON also suggested to Pres. Aquino to restore corporate income tax from 30 per cent to 35 per cent, explaining that it will generate an estimated revenue of P16 billion for the government.

“This is possible because top corporations saw a 20 per cent-increase in their 1st quarter 2010 profits. Moreover, the top 1,000 corporations registered a profitability rate of 11.7 per cent in 2007 from 3.2 per cent in 2001,” states IBON.

Moreover, the Aquino government can therefore look into increasing wealth taxes such as on high value real estate, luxury goods and services, IBON said.

“The Aquino government is in a good position to establish democratic instincts including implementing pro-poor measures in managing the fiscal crisis. This would be more productive instead of considering conventional approaches such as removing rice subsidies, increasing taxes, etc.,” says IBON.

Widening gap between poor and wealthy people’s income

IBON said that Aquino’s task is gargantuan, as statistics show that the gap between the rich and poor people’s incomes is getting wider and wider.

IBON explains that the widening poverty is also a pressing issue that requires comprehensive solutions beyond the ‘good governance’ approach.  “Using the approximate Php86 a day for the assumed international standard for moderate poverty would show that 79 out of 100 Filipinos were poor in 2006, and half of the population actually struggled on Php18-54 a day. This would have likely increased in the last four years especially with the fuel crisis in 2008, food crisis in 2009, and the climate disasters last year,” said IBON.

In 2006, citing government’s data, IBON had revealed that the share of the top 10 per cent families in the income pie was even higher at 36 per cent than the 35 per cent share of the bottom 70 per cent families.

Based on the 2010 Forbes Asia list, the net worth of just the 20 richest Filipinos– including Lucio Tan, Enrique Razon, Jr., Eduardo Cojuangco, Enrique Aboitiz and others–  have reached $20.4 billion, which is likely equivalent to the combined income of around 12 million Filipino families.

“The rich have gotten richer in recent years,” says IBON.

”For instance, Enrique Razon Jr., a known close ally of former Pres. Gloria Arroyo, is worth $975 million in 2010 from $285 million in 2009, highlighting his rapid accumulation of wealth in the past years. The net income of the Top 1,000 corporations in the country rose from P116.4 billion in 2001 to average P416.7 billion annually in the period 2002-2008. On the other hand, workers have seen the smallest increase in their real wages; the minimum wage in NCR increased just P5 in real terms over the almost decade-long Arroyo term,” furthered IBON.

On the other hand, the regional disparity of Philippine poverty is also glaring, says IBON

“More than half of the families in ARMM (55 per cent), 45.5 per cent in Caraga, and 43.7 per cent in Region IV-B were poor. In contrast, the National Capital Region (NCR) had 7.1 per cent poor families, followed far behind by Region IV-B (16.8 per cent) and Region III (16.7 per cent). Meanwhile, Regions VI and V had the biggest share (18.1 per cent) in the total number of poor families. An urban-rural differentiation of the official poverty statistics also shows that 14 out of 100 urban dwellers and 45 out of 100 rural people were poor in 2006. The rural areas accounted for 75 per cent of Philippine poverty,” IBON further explained.

Nevertheless, the past administration’s failed economic policies have caused the country’s broad income inequalities and poverty to grow even wider. The Aquino government should take steps to reverse these policies and arrest the unparalleled decline in the people’s welfare and escalation of widespread poverty in the country, the independent think-tank concluded. (See another version of the story in