an empty victory: rating upgrades in the time of widespread corruption and poverty

there was a time when the blinking christmas lights outside the walls of the central bank complex along roxas boulevard highlighted the country's impressive economic statistics -- faster growth, slower inflation, etc. now, it's just plain giant lights greeting everyone a joyous christmas.

still, it's ironic that just outside of its well-guarded gates, the scene is distressing and far from merry: malnourished street children either begging or selling sampaguita garlands, homeless people sleeping on pavements, tricycle drivers waiting and calling for passengers, thereby contributing to traffic congestion, and other depressing sights.

we are not blaming the central bank, tasked among others to chart the course of the philippine economy along with other economic planning agencies, for the widespread poverty in the country.

poverty in the philippines is just so malignant that it will probably take a hundred years, hundreds of billions of funds, focused programs and projects aimed at helping the poor find decent jobs and other means of supporting themselves other than dole outs, and joint efforts among the government, other sectors of society, and various international agencies to find a cure for it.

according to the government statistics, the incidence of poverty in the country remained high at around 25.2 percent of the total population as of 2012, though slightly down from the previous year's 26.3 percent, even though the economy has been growing steadily and strongly, making it one of the most robust economies in asia alongside china.

the unresolved poverty situation spawns other socio-economic problems that equally need government's urgent and utmost attention such as malnutrition, squatting, illiteracy, overpopulation, congestion, pollution, prevalence of diseases, flooding, traffic, and the overall degradation of the environment, specially in urban areas such as the cities in metro manila.

if you roam around the streets of manila, for example, homeless people, beggars, and the stench of filth and the sight of garbage are almost everywhere.

what's worrisome is that the poor in the philippines usually have families with six or more members, and majority of the households are headed by someone with a minimal education -- elementary or below, according to a usaid article (http://www.usaid.gov/frontiers/2014/publication/section-1-extreme-poverty-philippines). that's the reason why malnutrition, hunger, illiteracy, etc stay high among the underprivileged.

the same usaid article also estimated that in 2012 about 18.4 million filipinos (about 19.2 percent of the population) lived in extreme poverty based on the international poverty line of $1.25 (about 55 pesos, which is quite low) a day. 

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there are many reasons why poverty remains unresolved. one of them is corruption.

in the face of the unabated poverty is the widespread corruption in the government through under-the-table transactions, bribery, overstated prices of government supply, services and contracts (and in some cases perpetuated by the private sector through tax evasion and smuggling). it was estimated that the government lost around $50 billion a year to corruption.

corruption in the philippines is so rampant that even the lowly barangay officials are said to be pocketing money from illegal gambling, illegal parking, and other deplorable activities.

the poor filipinos are of course the biggest victims of corruption. had these funds been spent (and spent honestly without overpricing) on programs to help the poor such as livelihood projects, the building of schools, farm-to-market roads, low-cost housing, hospitals, then the incidence of poverty in the country would have been much, much lower considering that the philippines has among the highest tax rates in asia (assuming of course that the government spends wisely the revenue collected from taxes to spur growth) and receives regularly a sizable amount of cash from filipinos working and living overseas.

(in the first ten months of the year, remittances from filipinos abroad reached nearly $20 billion, with a record $2.2 billion posted in october, latest statistics from the central bank showed. that's a lot of money, don't you think? ever wonder where those funds go and who benefits most from them apart from the families and relatives of those working abroad? why, those owners of super shopping malls, for one.)

sadly, it is the poor, uneducated filipinos who keep on electing into office those politicians that have been tainted with corruption, or those who contribute nothing to lawmaking as well as in elevating their lives such as movie stars, sports men, comedians, and other celebrities (with nothing to celebrate about them). in exchange for a few hundred pesos, these voters are ready to sell their and their children's future. if you ask me, it's a very vicious cycle that needs to be stopped right away.

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several days ago, the aquino government trumpeted another achievement.

the philippines won a rating upgrade from moody's investors service (take note, the "s" is on investorS not on service). the international debt rater raised the country's so-called credit rating to baa2, a notch above the lowest investment grade. this was the second time that moody's upgraded the debt rating in a year. in october last year, moody's raised the debt rating to baa3, the lowest investment grade.

now what does it mean to the ordinary, poor filipinos? never mind the businessmen, investors, and other sophisticated citizens. they are already benefitting from it in the form of lower interest on their borrowings overseas, gains from the continued rise in stocks, bonds and other philippine assets, higher pay, bigger bonuses, among other perks.

a higher credit rating means that the government (and the private sector too) can now ask or negotiate for lower interest rates from creditors abroad such as commercial banks, institutional investors, fund managers. never mind the multilateral financial creditors such as the world bank, asian development bank, they are already extending cheaper loans to the country even when we were still categorized as a junk borrower, or with a rating below the minimum investment level.

for the government, lower borrowing costs will translate to lower interest payments, freeing up more money for other purposes such as implementing projects that will benefit the poor. as of last year (when the country won its first investment grade rating), the country's interest expense (the money that goes to pay the interest on the government's local and foreign debts) eased to around 17.2 percent of total government spending from 17.6 in 2012, according to the bureau of the treasury. this is expected to continue to fall if these positive developments will continue in the coming years.

because of the lower interest rates (also a function of cheaper borrowing costs abroad as the united states and other rich countries cut their interest rates to stimulate the global economy, apart from the country's improved debt ratings), the government saved P8.8 billion in interest payments last year. it was not clear if these funds were used for other purposes including building new or rehabilitating existing infrastructure facilities.

with lower rates and better credit ratings, the government was also able to retire or repay or exchange its expensive debts both owed from domestic and foreign creditors with cheaper debts with longer repayment period.

most importantly, lower debt payments, among other factors, drove down the government budget deficit, another factor that investors look at when they want to put money into the country. the deficit narrowed 32 percent in 2013 from 2012.

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for the private sector, the higher debt ratings will give them access to cheaper credits with longer maturities to finance expansion and other investment plans that will create more jobs and raise demand for goods and services. this in turn will result in better economic performance in the form of faster growth. a virtuous cycle, if you ask me that should be encouraged.

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these developments augur well for the economy, which had often been described as the basket case in asia in the past owing to the soaring economies of its newly-industrialized neighbors such as south korea, taiwan, singapore and malaysia, while we were caught in the boom-and-bust cycle.

but we should not be complacent. we should not be blinded by the blinking economic indicators that the central bank had rightfully displayed on its giant christmas decorations in previous years. 

the truth is a lot of our citizens remain oppressed, homeless, poor. those who are able to escape the clutches of poverty at home and found jobs abroad are not better off as well -- they suffer loneliness from being away from their family and friends, endure long working hours, deplorable working and living conditions, and sometimes become victims of cruelty in the hands of their employers.

but the biggest problem really is poverty and hunger, which should have been eradicated given the massive amount of funds that are stolen from the government's coffers every year in the form of pork barrel funds that ended up in the bottomless pockets of dirty politicians and their cohorts in the private sector. though some of these corrupt people are already languishing in jail waiting for the verdict from the court, there are still a number of them that continue to enjoy the fruits of their evil ways.

here's another sad fact so you will hopefully stop posting photos of your newly purchased expensive gadgets (iphone six, anyone?) and pricey food on facebook: according to a september survey by social weather stations, 4.8 million families nationwide are hungry. that's up from 3.6 million families in its june poll. take note, families. so that's about 28.8 million filipinos if every family consisted of six members (parents plus four children).

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also, these achievements are modest when compared to our neighbor countries.

the world bank estimated that the country's gdp per capita stood at around $2,587 in 2012, the lowest among the original five countries that founded the association of southeast asian nations or asean. indonesia came in fourth with $3,557; then thailand at third with $5,480; and then malaysia with $10,381. the philippine statistic paled in comparison with singapore, a tiny country with barely enough natural resources to fuel its sizzling economy, with $51,709. imagine that?

of course, singapore is known for its ironclad rules against corruption. so there is really a co-relation between creating more wealth (and spreading the riches among the citizens) and reducing corruption down to zero. now, if only the philippines can learn a thing or two from the city state.

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so what am i trying to say here?

simple.

while these debt rating upgrades bode well for the economy's future, at the moment, they mean nothing to the majority of filipinos who are poor, hungry, oppressed, uneducated, and could not even understand what's the hullaballoo is all about. unless the government does something about it, then this sad, depressing, vicious cycle will continue until we are all dead.

(the photo above was taken from internet. no copyright infringement intended. pls inform the blogger if you want your photos removed from this post and other entries. thank you.)