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Stimuli, only P75B, may come too late — Diokno

02/22/2009

The much vaunted spending package to stimulate the economy which, according to President Arroyo, would be worth P330 billion is actually worth P75 billion and programs for it may only take off the ground near the May elections next year which will be already too late, UP School of Economics professor Benjamin Diokno said.

Diokno, who is also a former Budget secretary, challenged government claims that the so-called stimulus package is P330 billion, when the only incremental amount tacked into the recently approved national budget is P75 billion. He said that much of that figure is bloated, redundant and recycled.

“With a P75 billion amount to work on, the government should now line up infrastructure projects that create jobs now, not next year,” Diokno said during an international conference on the impact of the global crisis sponsored by the quasi-government Philippine Institute of Development Studies (PIDS).

He said projects to be funded under the stimulus plan should be labor intensive and high-impact like road construction and maintenance repair, not the capital intensive projects that need very few workers.

He said jobs are being lost, incomes are going down and hunger stalks the land as a result of the raging economic crisis. And yet, at the rate the government is dilly-dallying, the bandied P330 billion government stimulus package may get off the ground only before the May elections next year which will be too late to serve its purpose, he said.

“I concede that the banking system is not affected. It is the real economy that is taking the hit,” Diokno said.

To avoid a repeat of the charges made in a World Bank

report leading to the blacklisting of three Philippine construction companies and four Chinese builders, he said that the national government should involve local governments in project implementation and post in the internet the status of each of the on-going projects for public monitoring, Diokno said.

The National Economic Development Authority (NEDA) earlier broke down the stimulus package as consisting of P160 billion in incremental budget; P40 billion for corporate and individual tax breaks; P100 billion infusions for government-owned and controlled corporations (GOCCs), government financial institutions (GFIs) and private sector and P30 billion for temporary additional benefits to Government Service Insurance System (GSIS), the Social Security System (SSS) and PhilHealth members.

Cagayan de Oro Representative Rufus Rodriguez said in a recent House hearing that the P160 billion cited by Neda was the increase from the 2008 to the 2009 national budget while the P40 billion tax relief was approved in the middle of 2008. “These were hardly part of a stimulus package,” he said.

Recto insisted that the stimulus plan, which Malacañang had repackaged as the Economic Resiliency Plan (ERP) was a responsible fiscal stimulus which will not induce swelling of the national debt, worsening of inflation or crowding out of private initiatives.

“I would call it a responsible fiscal stimulus because we don’t have the same foot size like the United States. They may afford to have a deficit of eight or 10 percent of their gross domestic product (GDP), but it is not necessary in the Philippine context,” he said.

One size does not fit all. In the case of the Philippines, a maximum of two to 2.5 percent of gross domestic product (GDP) (for the value of the package) will be more realistic, he said.

“It is a fitting balance between expansionary public spending and tax cuts. We do not want spending to swell our national debt, worsen our inflation or crowd out private initiatives,” Recto said in a speech at the recent induction of officers of the Economic Journalists Association of the Philippines (EJAP).

The measures under the ERP also include programs assisting overseas Filipino workers (OFWs) and vulnerable domestic workers such as the seafarers and land-based OFWs, he said.

“The Department of Labor and Employment and the Overseas Workers Welfare Administration will establish a stand-by fund for displaced seafarers and land-based OFWs,” Recto added.

“A program is being carried out to help expatriate workers who might return home from host countries now buffeted by the crisis. This program is being made available as well to workers being laid off in export-oriented industries,” Recto added.

Recto added those he mentioned were running projects and there will be more added “as we get other minds into the loop.”

He stressed that the ERP, a combination of a push for infrastructure and protecting the vulnerable is a result of strong macroeconomic fundamentals.

“The Asian Crisis of 1997 was a blessing of sorts, for it led to reforms that have made our financial system more resilient. The banking system has remained adequately capitalized: its capital adequacy ratio of 15 percent is well over the Bangko Sentral ng Pilipinas’s minimum of 10 percent and the global standard of 8 percent. Asset reforms have led to a continuing drop of the ratio of non-performing loans (NPL). The NPL ratio, once at 18 percent, is now down to less than 4 percent, or at pre-Asian crisis levels,” he explained.