SONA 2013 in Perspective

President Benigno Simeon Aquino III delivered his fourth State of the Nation Address (SONA) at the 16th Congress regular session in Batasang Pambansa Complex, Quezon City last July 22.

Throughout its 1 hour and 42 minute runtime, the SONA boasted economic performance, efforts for better governance, improved services and increased infrastructural projects. Some fiscal policy revisions in effort to free government resources for additional services were also mentioned.

Aquino preludes the epic by recognizing that guiding a developing country like the Philippines, mired in widespread poverty and corruption, is no easy feat, and the multifaceted nature of these issues may not be easily solved within a President’s six-year term.

With half of his presidential term left, Aquino holds that his primary objective is societal transformation.

 

Attracting foreign investors

If transformation is the goal, it initially seems that Aquino is on the right path. One of the tenet achievements of Aquino’s term so far is the Philippine’s economic takeoff, ranking it the most successful “rising tiger” between its ASEAN neighbors.

Aquino states, “In a period of lethargic global economic activity, we registered an astounding 6.8 percent GDP growth in 2012. We surpassed this in the first quarter of 2013, when we reported growth of 7.8 percent—the highest recorded GDP in East and Southeast Asia. Special mention must be made of the 28.5 percent contributed by the manufacturing sector to the growth of our economy.”

The ASEAN region is a hot target for foreign investors while the global economy remains in its dour state.

With improved fiscal management, and the consequential investment grade upgrades from international rating firms like Fitch Ratings and Standard & Poor, the Philippines has become attractive for foreign investors to expand business opportunities in the Philippines—particularly as a manufacturing hub for high-end value-added products, according to Trade Secretary Gregory Domingo in February’s Philippines Year-end Economic Briefing.

In light of economic opportunity, state-funded thinktank Philippine Institute for Development Studies (PIDS) urged the administration to push for industrial reforms due to the manufacturing sector’s weak performance, an underutilized industry with high job generation.

Senior Research Fellow Rafaelita Aldaba stresses that the Philippines’ manufacturing industries capitalize on exports like automotive and electronic components, garments and textile, machinery and transport equipment. These are low quality, labor-intensive industries reliant on imports. She recommends medium-term investment in other core sectors like metals, to keep the manufacturing sector engaged in production networks.

Some business groups were satisfied to hear that several legislative measures were to be enacted in the following years. These include the Cabotage Law, the Fiscal Incentives Rationalization Bill and the Land Administration Reform Bill.

Other business groups were dismayed as the President failed to address concerns regarding key business reforms such as the Customs Modernization and Tariffs Act, Land Use Code and Mining Act amendments, wherein the government and mining industry are clashing on whether to raise taxes for mining operations.

The enactment of these bills, according to Atty. Miguel Varela of the Philippine Chamber of Commerce and Industry, would drastically improve the country’s economic growth.

However, the President lambasted the Board of Customs (BOC) in his SONA over the poor control of smugglers and smuggled goods into the country.

Other primary driving forces of the country’s economic growth include the growing inflow of remittances from Overseas Filipino Workers, consistent consumer expenditure and government investment in state infrastructure development.

 

Internal infrastructure

NEDA chief Arsenio Balisacan has identified infrastructure as one of the Aquino administration’s focuses. The Philippines currently spends 2.6 percent of its GDP on infrastructure in comparison to its ASEAN neighbors, and the government seeks to boost this to the standard 5 percent by 2016.

Aquino lists a string of infrastructural accomplishments, and groundwork for better disaster and risk management through multihazard mapping  in high-risk areas. By 2014, the same should be accomplished for Greater Manila, and the rest of the country by 2015.

Torrential downpours and typhoons wrought floods across Metro Manila last year. Aquino explains, “When Ondoy hit, an estimated 3,600 cubic meters per second of rainfall flowed down from the Sierra Madre. But the capacity of the channels through which these flowed can only support 1,000 cubic meters per second.”

Aquino explains the additional problem of drainage congestion with trash bourne from surrounding communities,  and the administration’s coordination with LGUs to relocate informal settlers around Metro Manila from high-risk areas.

To mitigate this, Aquino announces the government’s Php 2.6 billion allocation for flood prevention in Metro Manila. “This includes the construction of the Blumentritt Interceptor Catchment area,” he cites. The project began March 2013, with plans to finish construction by next year.

Traffic is another problem that plagues Metro Manila’s roads, costing the country Php 2.4 billion in economic productivity, according to the Japan International Cooperation Agency. To help address this, Aquino elaborates on the Integrated Transport System, which aims to decrease traffic volume through introducing bus terminals in less dense transport areas.

Aquino praises an increase in active Public-Private Partnerships (PPP). He refers to a list of infrastructural projects, the Laguindingan Airport, the upgrading of Tacloban Airport, the Bicol International Airport, the New Bohol Airport, the Mactan Airport, and the Puerto Princesa Airport. He highlights the Daang Hari-SLEX link road as one of the fastest PPP projects.

Though with a long way to go, tourism is a potential hotspot for the Philippine economy, especially with its recent foreign publicity. Aquino acknowledges the urgency of renovating Ninoy Aquino International Airport Terminal 3, which serves as the main international port.

 

Inclusive growth, agriculture

Internally, foreign investments have merited little on the country’s poverty incidence rate and unemployment/underemployment rate. Latest data from the National Statistics Office (NSO) records 4.6 million unemployed and 7.3 million underemployed Filipinos amid the GDP boom, which give way to the paradox of a nation with ‘jobless growth’.

The Philippines relies on the agricultural sector for employment; yet continued neglect, relatively low investment  and intensified rains and typhoons have weakened the agricultural sector and its workers, where poverty incidence remains high.

The agricultural sector saw a  productivity raise, as President Aquino cites the consistent decrease in rice imports since 2011, the first  year of Aquino’s presidency. However, the high incidence of rice smuggling in Subic and Cebu ports are estimated to be higher than the imported 350,000 metric tons that Aquino mentions.

To supplement farmers’ livelihoods, Aquino pushes for intercropping solutions, wherein two different crops are grown within close proximity of one another, therefore maximizing land space and heavily increasing their income.

In 2012, the Aquino government utilized 5,500 hectares of land for intercropping in 90 different locations in the Philippines. The 2013 target that the government had set is an additional 434 sites for coconut intercropping.

Complementing this development is the completion of the beneficiary list of Hacienda Luisita last February, in which formal turnovers will proceed next month, September.

 

Social services, hikes

The administration recognizes the need to focus on long-term health and education, and hopes that investment in state infrastructure and services will assist the less fortunate sectors of society.

PhilHealth coverage expanded from 62 percent in 2010 to 81 percent in 2013. Those not included in the list of beneficiaries include indigenous people and informal settlers that the government is seeking to formally identify.

The Pantawid Pamilyang Pilipino Program (4P), from its 700,000 beneficiaries at the beginning of Aquino’s term, has grown to almost 4 million in three years. 4P is a conditional cash transfer welfare program aimed to alleviate families suffering from extreme poverty through health and education investments for children ages 0-14. Aquino adds that by next year, 4P will accommodate families with children up to 18 years old to avail of the educational benefits.

Addressing the backlog of educational facilities, Aquino proudly states, “We have finally erased the backlog we inherited in books and chairs.” For 2013, 19,402 classrooms have been constructed. He furthers that the administration will continue to dwindle the backlog of classrooms to accommodate more students.

Since 2010, the government has built 33,956 classrooms. The total backlog mentioned in the 2010 SONA was 66,800 classrooms. Aquino made no mention of the persistent lack of chairs, state-funded teachers, and the continued reliance of local schools on volunteers and contractual teachers.

Even with the backlog, Aquino is optimistic that the signage of the K-12 law, which adds two more years to school curriculums, will capacitate the country’s graduates to be on par with international standards.

However, Aquino calls for the hike of Social Security System (SSS) contributions, citing a 2011 study that warned the total depletion of the funds. He says, “If we add 0.6 percent to the contribution rate, it will immediately deduct 141 billion pesos from the unfunded liability of the SSS. If we begin to invest in our future today, no further problems will be handed down to the next generation of Filipinos.”

Following Aquino’s warnings of a MRT/LRT fare hike, the mass transit system fares have increased by Php 10 starting July 24. He explains that the actual cost of a single ride is Php 60, and the government shoulders P25. He reasons, “Perhaps it is only reasonable for us to move the fares of the MRT and LRT closer to the fares of air-conditioned buses, so that the government subsidy for the MRT and LRT can be used for other social services.”

 

Governance

The Aquino administration had preached an anti-government corruption crusade termed Daang Matuwid or ‘straight path’. The government has reacted to serious allegations of high-ranking public officials and units over the course of Aquino’s term.

While Aquino praised those who have served the country well through simple random acts of kindness or in their line of work (like policemen), many strained their ears to hear key policy decisions that the President has yet to tackle. Instead, they heard the president calling out those who have been dishonest.

In the 2013 SONA, Aquino’s focus on the Bureau of Customs (BOC) prompted the resignation of BOC chief, Raffy Biazon. Yet, the same way Biazon’s offer to resign was rejected, Aquino chose to keep quiet about pork barrel scams, to the urgent need for the implementation of laws vital to his anti-corruption crusade.

He promotes that Government-Owned and Controlled Corporations (GOCC) are beginning to turn in dividends once more.

He reports the strengthening of the police force. Despite incidents that taint the name of the Philippine National Police, Aquino assures the nation that the Atimonan and Ozamiz massacre killing incidents is still undergoing investigation.

Aquino implores the audience, “Another example of transformation in government: haven’t vital bills languished in Congress? In the previous year, the Sin Tax Reform Law and the Responsible Parenthood Law were finally signed into law.”

 

Other pressing points

University of the Philippines sociologist Nicole Curato was disappointed Aquino had dodged the discussion on the need for the FOI bill or even an anti-political dynasty bill which would have been key to paving a way from corruption.

Senator Miriam Defensor Santiago asserts, “There should have been a specific discussion on the problem of corruption and telescope it to the anomalies connected to the pork barrel.”

Aquino also evaded from the water income tax issue. Arnold Padilla, Public Information Officer at New Patriotic Alliance, wonders if this is a trace of Aquino’s neoliberal bias since it  is  incidentally tied to the PPP venture.

Lawmakers, bishops, and analysts alike noted that the 2013 SONA was noticeably lengthy.

To address the complaints, Deputy presidential spokesperson Abigail Valte explained that the limited amount of time prompted Aquino to prioritize the issues he was to tackle in his speech. She furthered that topics left unmentioned are not in anyway less important compared to those mentioned.

For former Partido ng Manggagawa party-list representative Renato Magtubo, one major thing Aquino missed was discussing why inequality increased as the economy improved, as well as going into detail about who, in fact, benefits from the country’s  surprising economic growth.

Defensor Santiago adds that a speech with a duration of two hours is useless unless Aquino understands that the SONA’s “purpose is to make the man on the street understand his message.”

She was further disappointed at how unemployment and underemployment were issues that remained untouched.

For 2014, President Aquino keeps an optimistic outlook. In addition to the plans mentioned above, his administration will continue its nationwide infrastructural developments, its flood prevention programs in Metro Manila. Aquino will also launch a massive intercropping program and continue the expansion of social services, particularly health services.

The proposed National Budget for 2014 is Php 2.268 trillion.

 

*Quotes taken from the official English transcription of the 2013 SONA.