Press Release
September 28, 2012

Speech of Senator Miriam Defensor Santiago,
28 September 2012, Bacolod City


The role of policymakers in government is to make sure that strong growth and development takes place. But equally important, it is their responsibility to make sure that growth is inclusive and sustained. This means growth has to benefit the great majority of its people.

After a slow growth last year, the economy has shown some promise. It grew by a respectable 6.1% during the first half of the year. Yet, as of July 2012, a lot of Filipinos remain unemployed (about 2.8 million) and underemployed (about 8.5 million). About 1 of 3 Filipinos don't have jobs or are working part-time or unhappy with their present jobs.

And a lot of Filipinos --more than 1 of 4 households -- continue to live below the poverty threshold. A recent (August 24-27) Social Weather Stations survey found overall hunger rose by 3 points to 21 percent or 4.3 million families.

The growth of the Philippine economy is to a large extent driven by the economic health of the world economy.

Let there be no illusion that the Philippine economy can grow robustly without strong remittances from abroad and robust expansion of the BPO business at home. Saying so would be pure bravado.

Imagine if half of the total overseas remittances were lost. That would amount to P420 billion, more than one-fifth of the national budget. The direct effect would be disastrous. But what about the multiplier effect?

The world economy remains uncertain. Europe is expected to continue to struggle in the years ahead. This year and next, a recession in the euro area cannot be ruled out. The United States economy is expected to suffer from sluggish growth and high joblessness. China's economy is slowing while Japan's economy continues to teeter on the brink of recession.

With a weak world economy, growth of Philippine exports will continue to be lackluster. Overseas remittances will continue to struggle. And direct foreign investments will continue to trickle in.

This year the peso value of remittances has turned negative. From January to date, remittances grew 5.4%, but the peso appreciated by 5.8%. Hence while the dollar remittances has inched up, their value in pesos has gone down. This has negative impact on consumption and investment.

I'm sure this turn of events is affecting banking operations. Personal and commercial loans are slowing while delinquency rates are rising.

In brief, I have discussed with you some of the many problems we're facing.

What's the solution?

The Bangko Sentral should continue to limit the seemingly uncontrollable entry of "hot money" into the country. Because of the gloomy world economic outlook, and the rock-bottom or near zero interest rates in the developed world, investible short-term funds are in search of the best place or places where they can park their funds.

The Philippines happen to be an attractive place for such short-term funds. With its relatively high interest rates and the strong likelihood that the peso will continue to appreciate in value, it makes sense to park one's investible funds in the Philippines.

But while it's good for short-term foreign investors, it wreaks havoc on the domestic economy. Imagine how the strong peso has adversely affected the lives of many overseas Filipino workers and workers in exports businesses.

For OFW workers, the value of their remittances has gone down so they have to send more dollars to their families who live on peso budget. Either they draw on their savings from abroad or they borrow. Either way, the response is not sustainable. At some point, its going to reduce their lifetime income.

Given the threat of further appreciation of the peso, BSP may have to cut interest rates further. Their policy moves to date, including banning foreigners from accessing the special deposit account (SDA) have been ineffective. 'Hot money' continues to be attracted to the Philippines.

On the part of the national government, it has to show some restraint in borrowing from abroad. Borrowed funds from abroad increase the supply of dollars in the Philippine system and hence make the peso stronger.

The national government should commit to borrow from domestic sources to finance its deficit and service its debt. The BSP has offered to accommodate the national government's foreign exchange needs. It sits on an $80 billion gross international reserves which is equivalent to one year's import requirements. The national government is advised to take on BSP's offer. It's a win-win situation for both.

Borrowing from local sources will also help Filipino savers; on the other hand, borrowing from abroad will only help foreigners.

On the regional front, the people of Western Visayas should be happy where the region is right now. After correcting for inflation, the region ranked fifth in terms of its contribution to the country's gross domestic product (GDP).

It ranked fourth in terms of GDP growth rate -- after CARAGA, Central Visayas, and Central Luzon.

It's record in terms of unemployment is neither good nor bad. It ranked 6th or 7th (tied with Davao region) out of 17 administrative regions. It's unemployment rate of 6.4% (as of July 2012) is much lower than the national average of 7.0%.

In terms of underemployment (those who work part-time, underpaid and unhappy with their present jobs), Western Visayas ranked 8th out of 17 administrative regions.

For those from Western Visayas, their economic position relative to the rest of the Philippines does not provide reasons for despair nor rejoice. Things could be better but things could be worse too.

That's the role of the banks and financial institutions in the region. Growth can be improved, and more people will benefit from such growth, if only agriculture can be made more robust and productive.

The people of Western Visayas depends more on agriculture than on any other economic sectors. Agriculture and its related industries such as food processing and agro-industrial manufacturing should be the focus of lending in the region.

The risk of lending to overseas Filipino workers has increased -- first, because the peso value of remittances has declined, and second, the uncertainty in the jobs market has increased owing to the recent world recession and the political crises in the Middle East. Banks are advised to lend to this sector with heightened caution.

In closing, there are risks and but there are opportunities too. Our national leaders are faced with the problems of a weak world economy and the continuing strengthening of the peso.

Western Visayas, relative to other regions in the country, is neither booming nor backward. But it could improve its relative position, and make a difference in the lives of a lot of its people, by focusing on agriculture, food processing, and agro-industrial development.

News Latest News Feed