Honeyman: Change we can believe in

WE ARE not effectively addressing the problem of poverty. Approximately 30 percent of the population is deemed to be suffering from poverty in 2001. Approximately 30 percent of the population is deemed to be suffering from poverty now. No change!

One of the millennium goals, to which the Philippines cheerfully subscribed in 2001, is to reduce poverty by half by 2015. To achieve this, therefore, we would require only the 15 percent of the population to be poor within the next five years. We estimate that our population by mid-2015 will be around 102 million. If 30 percent will still be poor, this will amount to 30.6 million. If only 15 percent are poor, this will be 15.3million.

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To achieve the millennium goal, therefore, over 15 million people need to be dragged out of the poverty trap. Nobody is saying that we can achieve this. But are we being defeatist? Possibly.

Brazil, between 2001 and 2008 achieved their Millennium goal. 50 percent of poor people in 2001 were deemed not to be poor by 2008.

How was this achieved? President Lula, a leftist, but with sufficient sense to embrace capitalism, can take much credit. He introduced extremely extensive microfinancing schemes. Millions availed of the opportunities. They hauled themselves and their small businesses from bare survival to, sometimes, flourishing concerns. In so doing, they generated employment for others.

Brazil’s growth rate was an average of 4.4 percent per annum. Our growth rate is similar. The enormous difference is that Brazil was successful in redistributing wealth whereas we merely consolidated it to those who already had it.

According to Albay Governor and Economic Adviser to the President, Joey Salceda, the profits of the country’s top 1,000 corporations jumped 21 percent a year, while their return on equity on investments increased 15 percent per annum since 2001. Their total earnings amounted to P3.1 trillion to which P2.1 trillion was distributed as dividends to stockholders. Only P1 trillion was reinvested.

The problem with the rich is that a large proportion of their expenditure is allocated to imported goods. This means that much of the P2.1 trillion leaves the country, thereby providing minimal benefits to our economy. Our economy depends on the low and middle income people who buy Philippine goods and services.

What to do?

We rely on the private sector to generate employment to enable our burgeoning population earn a living. We need to encourage the successful corporation to grow more rapidly. How? Larger tax breaks on investments would help by encouraging companies to plow more profits back into the business.

But we don’t have enough tax income as it is. That is because for one reason or another, we are grossly inefficient at tax collection. We lose over P30 billion per annum from losses in petroleum imports, for example.

If companies generate more jobs we would have not only at least 4.4 percent average annual growth rate but we would distribute the growth more equitably through the whole population. At the moment, and for the past decade, we have only been successful in helping the already well-to-do become even more comfortable. We don’t need to be leftists to believe that we should spread the benefits of growth throughout the whole population.

A grotesque counter-example.

BDO is a bank with over four million account holders. Most of these are poor and/or middle class.[Many people who categorize themselves as middle-class, school teachers for example, are by many standards, classifiable as poor].

Banks are in the business of collecting deposits, providing money transmission services and making loans. These loans can and often do help our economy, as well as helping bank customers lead happier and more fulfilling lives. They can be used to assist small and non-so-small businesses to implement projects which enable the enterprise to flourish. More jobs can be created.

So it is disappointing when BDO, in conjunction with Porsche, advertises, under the meaningless caption: ‘Why reach for the stars, when you can have a dream in your garage’. The obvious question-mark is omitted. Perhaps the advertisers do not consider Porsche owners to be of a contemplative disposition or to have enquiring minds.

Perhaps I am too cantankerous, but I do not find it reasonable for rich people from a poor country, using poor people’s hard-earned savings, to obtain a bank loan to purchase a vehicle requiring P888, 000 down payment and 48 monthly payments of P158, 000. I cannot believe that Henry Sy, majority stockholder of BDO, whilst building up his net worth to $4billion, frittered any of it away on buying new Porsches.

In any event, it seems of doubtful value to prop up the economy of Stuttgart, Germany by buying its expensive trinkets when the German Chancellor, poor but honest Angela Merkel, is still not speaking to our rich but not-so-honest President over the Fraport/NAIA debacle.

Some years ago, there was a well-publicized event whereby some high-end cars were smuggled into the country only to be intercepted and impounded by our ever vigilant Bureau of Customs. Some vehicles were ostentatiously destroyed but others escaped such harsh treatment. One of these was a fine, though esoteric, Lamborghini. Who has it now? Is it Luli’s Lambo? Mikey’s?

I think we should be told!