The Philippine Political and Economic Assessment & Trends

1. The Philippine Political and Economic Assessment & Trends IBON Foundation, Inc. January 21,2005 Andres Bonifacio Integrated School

2. 10 Prominent Issues (1) OIL * local oil prices increased more than once a month in 2004 gas – 13x by P7.45/liter diesel – 15x by P7/liter kerosene, LPG – steep increases recorded

3. What the people demanded: Rollback fuel prices Scrap Oil Deregulation Law What the government granted: Delay the implementation of increased taxes on petroleum products Promise to study Oil Deregulation Law P. 50 discount on diesel

4. 10 Prominent Issues (2) POWER • Napocor increased rates 4x in ’04 (+ 1 in the offing) • Meralco increased rates 3x (+1 this Jan.’05) > to refinance its debts

5. Cost of the Sweetheart Deals between Napocor and the IPPs, 2001-2002 (in billion pesos)Take or pay 37Forex guarantee 17Fuel cost guarantee (2002) 29 Total 83* 42% went to Mirant Sual CorpSource: National Power Corporation.

6. 10 Prominent Issues (3) WATER • MWSS privatized in 1997 East: Manila Water (Ayala, US,UK, Japan) West: Maynilad (Lopez, Suez) • Water rates increased by 226% (Maynilad) & 350% (Manila Water)

8. 10 Prominent Issues (4) FISCAL CRISIS • Budget deficit reached P141.9 B by Sept. 04 • Consolidated Public Sector Deficit (CPSD) reached P167.31 B – 25% higher than in 2003

9. Bayan Muna estimates of govt. losses annually • Tariff reduction P170.8 Billion • Incentives to foreign investors P100 B • Tax evasion P 54 B • Corruption P160 B ______________ TOTAL P484.8 B

11. 10 Prominent Issues (5) TAXES • Sin taxes on tobacco and alcoholic drinks • Increase in EVAT rate from 10% to 12% • P2 specific tax on petroleum products • Shift to gross from net income taxation • Franchise tax for telecommunications companies • Lateral attrition – system of rewards and penalties on BIR & BOC • Amnesty for tax evaders • Rationalization of fiscal incentives

12. 10 Prominent Issues (6) PRICES • Inflation rate of 7.6% highest in 5 years • Peso plunged to historic low of P56.56:$1 in Sept. • Daily cost of living in NCR: P602.31

13. 10 Prominent Issues

14. 10 Prominent Issues (8) WAGES • Wage levels stagnant for past 5 years • Minimum wage accounts for only 42% of DCOL • Clamor for P125 across the board ongoing for 5 years now

15. 10 Prominent Issues (9) POVERTY • Poverty incidence increased to 88% of Filipino families • PGMA allotted P6 B worth of food coupons to 5 M “qualified” families

16. 10 Prominent Issues (10) MINING • Supreme Court decision to uphold 1995 Phil. Mining Law • To make the country the world’s 5th mining power again

17. “The price for me will be stiff. My popularity ratings will continue to slump as we suffer transient constraints and take the bitter pill to cure structural poverty and clean up the fiscal, economic and political mess we inherited.”-PGMA statement before the FOCAP

18. Some Doable Policy Proposals • Rollback oil prices by P2 per liter • Repeal the Oil Deregulation Law • Rollback power rates • Stop Napocor privatization • Cancel onerous IPP contracts • Cancel fuel cost guarantees of IPP plants • Write off debts due to onerous IPP contracts

19. Some Doable Policy Proposals 8. Rescind the EPIRA Law 9. Rollback water rates 10. Take over Maynilad & kick out Suez, Benpres 11. Draw entire $120 M performance bond 12. Get from Maynilad $180 M in unpaid concession fees 13. Refund P7.5 Billion to consumers 14. Stop collection of foreign currency differential adjustments & extraordinary price adjustments

20. Some Doable Policy Proposals 15. Increase tariff levels 16. Crack down on corruption 17. Reduce incentives given to foreign and big local corporations 18. Institute debt cap policy 19. Repeal Automatic Appropriation Law 20. Cancel Marcos debt & restructure foreign debt

21. Some Doable Policy Proposals 21. Re-allocate budget for social services 22. Institute price controls 23. Increase wages by P125 24. Junk the Mining Law