Q Has the impact of the international slowdown been more severe than expected?
A Yes, both in the effects on growth and inflation. We were hoping that the slowdown in GDP growth would not be as sharp as we saw during the first two quarters. We were hoping growth would still be between 5% and 5.2% but it was 4.6% during the first semester. We also reached double-digit inflation caused by high fuel and commodity prices, especially rice. The Philippines is sensitive to the price of rice.
What have you done to lessen the impact of high rice prices on the poor?
A Those below the poverty line spend 60% to 65% of their income on food. We maintained the price of subsidised rice at 18.25 pesos [$0.40 cents] a kilogram when commercial rice was fetching over 40 pesos a kilo. We channelled additional revenues obtained from higher oil prices to the poor by subsidising those consuming less than 100 kilowatt hours of electricity a month. We allocated 500m pesos to provide fluorescent bulbs in exchange for incandescent lights. We provided money for poor students under scholarship programmes.
We also provided cash to senior citizens who were not covered by the usual social security programmes. We helped farmers who were affected by the typhoons we have had.
You were criticised last year for failing to meet fiscal targets. Have you done better this year?
A As of July this year, both the Bureau of Inland Revenue [BIR] and the Bureau of Customs are cumulatively on track with their revenue collection targets. There have been improvements in the tax administration as well as in technology-based support, such as the use of more scanners to detect misdeclared goods at ports. The BIR is intensifying its audit programmes and is engaged in more dialogue with third-party sources of information such as the Philippine Securities and Exchange Commission and local government units to help in overall collection.
Are you making inroads on smuggling, which accounts for up to 40% of the economy, by some estimates?
A In the case of Subic port, where most of the smuggled cars were brought in, we believe this has reduced, but smugglers go ‘port shopping’ to find a port which is not so strict. We have the challenge of having too many private ports in the Philippines, so we need the help of other agencies to conduct surveillance in other ports.
Q How are overseas remittances and exports holding up?
A Of course, exports have been affected, especially with the slowdown in the US, and growth has slowed to about 4%, or half the target. But remittances remain strong. There is a cultural consideration as Filipinos tend to remit the same amount of pesos so their families can buy the same goods and services. For example, when the peso was strong, Filipinos had to remit more dollars. Also, there has been an increase in the number of Filipinos going abroad.
Q Why are unemployment and under employment high despite reasonable growth?
A Our population is 89 million, and grows at 2% a year, so the economy has to grow at between 7% and 9% to absorb 1.8 million new entries to the labour force every year. We have to find ways of sustaining 7% growth to address this issue. A key factor is population management but, unfortunately, the Catholic church has a very strong influence on policy-makers.
Q Are you investing enough on infrastructure?
A Not yet. We want to spend more, precisely because of the need to promote jobs and be competitive. We also need to improve our absorptive capacity to implement projects. We have a lot of room for improvement in these areas. As a proportion of GDP, we are spending only 2.7% on infrastructure compared to about 5% by our Association of South-east Asian Nations [Asean] neighbours.
Q What are the bright spots?
A Our business processing outsourcing sector is doing well and our mining sector should take advantage of high prices. Some of our manufactured goods, such as high-end garments, have good prospects. We can also take advantage of supply opportunities in the food sector because countries with large populations such as China and India need food.
2005Republic of the Philippines
2000Land Bank of the Philippines
President and CEO
1998Think Tank Inc
Chairman and CEO