Assessment of Paul Romer’s Charter City Concept and its Applicability in Ending RP Poverty

       A charter city is a new type of special reform zone, which extends the concept of a special economic zone by increasing its size and expanding the scope of its reforms. It must be large enough to accommodate a city with millions of workers and residents. Its reforms must extend to all the rules needed to support exchange in a modern market economy and structure interactions in a well-run city. The concept allows for cross-national government partnerships that facilitate the transfer of working systems of rules to greenfield locations. By adhering strictly that the new rules apply only to people who choose to live under them and that they apply equality to residents, rules can be copied from elsewhere and still achieve a high degree of local legitimacy. 

Paul Romer, an economist and expert on economic growth, is the man behind The Concept of Charter Cities.

            In the 1990s, Paul Romer revolutionized economics. He became rich as a software entrepreneur. Now he’s trying to help the poorest countries grow rich – by convincing them to establish charter cities within their borders. Romer’s idea is unconventional, even neo-colonial – the best analogy is Britain’s historic lease of Hong Kong. And against all odds, he might just make it happen.

Paul Romer’s charter cities share the following characteristics:

• A vacant piece of land, large enough for an entire city.
• A charter that specifies in advance the broad rules that will apply there.
• A commitment to choice, backed by voluntary and free exit for all residents.
• A commitment to the equal application of all rules to all residents.

Each charter city requires one or more nations to play three distinct roles:

• The host country provides uninhabited land.
• The source country or countries provide residents.
• The guarantor country or countries ensure that the city’s charter is respected.

A critical lesson of today’s world is that it is not enough to have a set of rules that work now, but there must be a dynamic that lets the rule of law change overtime in response to the circumstances. An important historical example is King Charles II’s use of the charter in 17^th-century England, which has proven it successful in adapting such law. Consequently, Paul Romer have raised the idea of new start-up politics, specifically new start-up nations, that is so pressing because much of the world today lives in places with bad rules that are difficult to change.

There are primary benefits that may occur in developing charter cities. It may not just be for the people who will occupy them but for the rest of the world. Looking at the raw numbers, the enormity of what the world faces today is overwhelming. Billions of people are going to move into cities in this century and challenges arise on how to feed those people to avoid mass starvation. That may actually happen because of mutually beneficial exchange. Everybody does things mostly out of self-interest but, it turns out to good outcomes, such as feeding everybody. However, some kind of structure of rules is needed and this is where the concept of charter cities is applied. If people can create the right rules, they can help bring about the massive switch to urbanization around the world. All participants will share their benefits. First, people who move to cities will get the benefit of modern life in the city. And second, investors who finance the infrastructure in these cities will get high returns on their investments. So, this is a true opportunity for a win-win solution.

           

The charter city concept also comes at an unusual and potentially unexpected time in the global economy because the macroeconomic challenge the world faces right now is an insufficiency of investment demand. The rich countries all want to save more, and the only way for everybody to save more is if the world invests more. The world as a whole has to invest more if everybody wants to save. Moreover, if there’s just going to be less production in consumption of goods, then, there should be more production of durable things that will produce income in the future. The problem right now is that the world doesn’t know where to put this investment where there will be high returns. Accordingly, the answer could take place in building infrastructures that will create successful, livable, productive, modern cities to which billions of people are going to move.

            In contrast, if charter cities are such a good idea, why don’t they exist and applied to all poor countries already? Also, questions were raised since in the charter cities concept, it is implied that the fundamental reason for poverty was lack of progress and growth, jarred with conception of poverty as a function of inequality. Issues questioned if there’s really definitive evidence that poverty is always lessened by growth and if charter cities really promote equality. Also, it is argued that poverty would remain despite economic growth at any rate because it’s not what you can get that matters, but what others can obtain. Thus, the solution is actually not coming from the concept of charter cities, but from asset redistribution from the better-off to the worse-off.

            Different arguments and several questions took place in the charter cities concept of Paul Romer, some have affirmed and some have argued. But what’s important is the applicability of this concept especially to poor countries and developing countries, if it would be beneficial and of help or not.

Now, let us assess the applicability of such charter city in ending RP Poverty. As we all know, a lot of things were tried to alleviate and improve the conditions of the poorest of the poor in the Philippines. Activities include conditional cash transfer program, free trade, foreign investment, and charity. All of these were able to help, to some extent, in easing the poor’s living conditions. However, up to now, these activities were not able to do much as the poverty incidence in the country remains high. A lot are below the poverty line. Many Filipinos are living subsistence lives. A lot die due to hunger, thirst, lack of shelter, and lack of opportunities in life. When all else have failed to improve the poor’s conditions, the idea of Paul Romer which is the establishment of charter cities came into light. This offers considerable hope for everyone, especially the poor Filipinos that it is possible for them to see better light in the years to come.

The ideas of Paul Romer show that charter cities are made between two countries – the border, so to say. In the Philippines, this is impossible because the country is surrounded by water. So, to this respect, the formation of a charter city is impossible. Nonetheless, a charter city can still be formed inside the country (A country can be the host, source and guarantor all at the same time). A typical charter city as described by Romer should at least be 1,000 square kilometers, roughly the size of Singapore and Hong Kong. As far as we know, the territorial area of the Philippines is 300,000 square kilometers. The problem here again is that the country is an archipelago. Even though its area totals to 300,000 square kilometers, it is divided into more than 7,000 islands. Most of the islands do not even have an area of 1,000 square kilometers. Of course, the goal is not to turn the whole country into many charter cities but to make some charter cities that will be centers of improvement and well-being for many Filipinos especially the poor ones. So a few charter cities will surely do to help the poor Filipinos and other Filipinos who wish to live in a place where there is equality and equal opportunities to grow. Places in Luzon, Mindanao, Panay, Negros and other major islands of the country may be the site where charter cities will be built. A charter city with a size of 1,000 square kilometers can house a maximum of 10 million Filipinos. This would certainly be of good help to the poor Filipinos.

Of course, the three distinct roles which are the host country, source country and guarantor country may all be played by the Philippines. But for the group, we recommend that the Philippines should of course be the host country as well as the source country but that it should choose another nation to be the guarantor country. We actually want Japan to be the guarantor country because it is near the country, wields considerable power and can ensure that the charter will always be followed and upheld in the charter city. Also, much help can be given by Japan to the charter city especially on the technological aspects. Aid can also be given by Japan in the form of investments.

In a charter city, all residents would have access to utilities like safe municipal water at costs below those that they would pay in slums. They would not be subject to arbitrary relocation by predatory officials or gang leaders. They would live in a place with no tolerance for violence and crime, a place where people have to follow formal rules, rules that prevent harmful activities like dumping garbage on the streets or building unsafe structures.

All of these assessments are being done, of course, with a view of ending poverty in the Philippines. Just the same, no one is precluded from entering the charter city including the affluent and middle class Filipinos. Charter cities are not gated communities for the rich. The goal is to establish rules to maximize employment opportunities for workers, regardless of the level of experience and education. The charter must ensure that basic services like housing and transportation are affordable even for those who have just started in an entry-level job.

Even without building charter cities, the Philippines was already able to form places inside the country where a different set of rules apply. These are the special economic zones like Clark and Subic. Their charters are different from the rules that prevail in the rest of the country. So special economic zones may serve as examples on what kind of charters to implement – ones that promote health, well-being, equal protection, employment, education, equality and many other things that we all aspire for.

A charter city is a charter city by virtue of its equal application of the charter – all are equal on the eyes of the law. The charter is expected to be strict, one that does not tolerate crime, where one who is walking in the middle of the night is not afraid of robbers who might still his or her belongings. It should also promote health, especially one that is better than what the poor Filipinos will leave behind. The charter should not be exhaustive, the government should not recommend what kind of food and other articles are to be produced to ensure that the charter city will govern itself in the best way it and the charter deem fit.

These things are attainable but there are also drawbacks that go with them. First, the government may not be willing to finance the construction of such charter cities even at the expense of the poor Filipinos. There is no politicking inside the charter city. After its formation, its charter will govern almost all things. Corruption will never be tolerated inside the charter cities. That is why for political reasons, they might not push through. Second, it is hard to overcome nationalism. They say that there is no way for countries to work together to extend the reach of good rules. Many said to Paul Romer that his idea is great but it will never happen. As he said, “People always think that the unfamiliar is impossible. Many times, all that holds us back is a failure of imagination.”

Yes, charter cities are possible in the Philippines with the help of the government. Many years may pass before they can be formed but they will be surely named as centers of development and equality in the country when such time comes. The thing here is that there is not much profiteering in charter cities because everyone is equal. No one benefits from hoarding of goods because they will be kicked out of the city. No one will break the rules or they risk being thrown out of the city. Crimes are no-no. Health becomes the wealth of the citizens. Education becomes vital for their improvement. And finally, poverty is erased from the picture.

More on Cesar Hidalgo's Works

Cesar Hidalgo’s research focuses on the dynamical aspects of social and biological phenomena. He specialized in the analysis of large data sets in an empirically driven approach to understand the interplay between the structure and the dynamics of the networks defined by systems. His current research agenda at Harvard University focuses mainly in the study of economic development from the perspective of complexity and network science. In particular, he studies the evolution of countries’ productive structures, both empirically and theoretically, by looking at how the development process is shaped by the similarity between a country’s products and the capabilities that go into producing them.

The CID Working Paper No. 201 of Ricardo Hausmann and Cesar Hidalgo entitled Country diversification, product ubiquity, and economic divergence studies the characteristics of the relationship between products and countries that make them. They were able to document a new stylized fact in the global pattern of exports: that there is a systematic relationship between the diversification of a country’s exports and the ubiquity of its products. Such relationship cannot be explained simply by distribution of diversification of countries or by the distribution of the ubiquity of products, but speaks to a more fundamental link between the two. This fact, according to them, is not implied by current theories of international trade. They provided a model for such link which assumes that each product requires a varied and potentially large set of different complementary non-tradable inputs called capabilities.

Countries differ in the number of capabilities that are present in their territory while products differ in the number of capabilities they require. As a consequence, countries with more capabilities will be more diversified, and products that require more capabilities will be accessible to fewer countries, and hence will be less ubiquitous. The model also implies that the return to the accumulation of new capabilities increases exponentially (2^Na to be exact) with the number of capabilities already available in a country.

Moreover, they found out that the convexity of the increase in diversification associated with the accumulation of a new capability increases when either the total number of capabilities that exist in the world increases or the average complexity of products, defined as the number of capabilities products require, increases.

This convexity defines what they termed as quiescence trap, or a trap of economic stasis: countries with few capabilities will have negligible or no return to the accumulation of more capabilities, while at the same time countries with many capabilities will experience large returns – in terms of increased diversification – to the accumulation of additional capabilities.

The model is calibrated to three data sets. It showed that the derived functional forms reproduce the empirically observed distributions of product ubiquity, the relationship between the diversification of countries and the average ubiquity of the products they export, and the distribution of the probability that two products are co-exported. This calibration shows that the global economy is composed of a large number of capabilities – between 23 and 80, depending on the level of disaggregation of the data – and that products require on average a relatively large fraction of these capabilities in order to be produced. The conclusion of this calibration is that the world exists in a regime where the quiescence trap is strong.

CESAR HIDALGO AND HIS WORKS

              Who is Cesar Hidalgo? To tell you frankly, we do not have even any idea regarding Cesar Hidalgo. But after typing the twelve letters on the search engine Google, we were amazed by what we learned. So, if you also want to learn more about this remarkable person, continue readingJ. We strongly suggest that you try to check the works of Cesar Hidalgo.

The Man behind the Complexity, Evolution and Network Science

            Cesar Hidalgo was born in Santiago de Chile, on the 22^nd day of December in the year 1979. He entered the Physics program at the Pontificia Universidad Catόlica de Chile starting 1998 and graduating in 2003, under the advisory of Francis Claro, PhD. On August 2004, he entered the Physics PhD Program at the University of Notre Dame and joined the Center for Complex Network Research (CCNR) directed by Laszlo Barabasi. As a member of CCNR and a Notre Dame grad student, he worked at the Center for Cancer Systems Biology at Dana Farber Cancer Institute from Harvard University, between September 2005 and July 2006. On the fall of 2007, the CCNR moved to Northeastern University, yet he remained a Notre Dame student and he finished working on his dissertation from Boston. He defended his dissertation at Notre Dame on July 2008, with Laszlo Barabasi being his PhD thesis advisor. In September 2008, he joined the Center for International Development at Harvard University as a research fellow. In September 2009, he was appointed Adjunct Lecturer in Public Policy at the Harvard Kennedy School. In August 2010, he joined the Massachusetts Institute of Technology Media Laboratory as an Assistant Professor in Media Arts and Science.

            Hidalgo’s work focuses on improving the understanding of systems by using and developing concepts of complexity, evolution, and network science; his goal is to improve understanding of the evolution of prosperity in order to help develop industrial policies that can help countries raise the living standards of their citizens. His areas of application include economic development, systems biology, and social systems. Hidalgo is also a graphic art enthusiast and has published and exhibited artwork that uses data collected originally for scientific purposes.

            And in the field of research, this man has done some fascinating stuff which others may consider impossible. Thanks to him and his colleagues, we are able to see the global economy and mobility of networks by applying the science of networks. By looking at Hidalgo’s work, you will notice the incorporation of art to every network. His works encompasses the boundary between art and science; it is indeed a combination of the two.

            Try to look at the image below, what is your initial description of it?

            Is it an art? Is it a graphical illustration?

            The answer is both. Probably, most people who will see the diagram above will say that it is an excellent work of art. Indeed, it is an art that is worth a thousand words. Technically, it really is. But only few people will notice that it is not only an image made by imagination but also an image crafted through long periods of scientific studies. This art can be of great help in solving our present economic problems.

            Cesar Hidalgo is recently focusing on development economics. He argues that the best predictor of an economic future is the diversity of its production capacity rather than its magnitude. And an economy which uses more inputs in their production adapts better to any changes in the world economy. And by using his mathematical tools, Hidalgo concluded that products which use a lot of inputs are scarcer than those which do not. He is also able to quantitatively assess the diversity of a country’s input by analyzing the economy’s products and the number of other economies capable of producing the same products.

            In every work of this exceptional man, science, mathematics, and visual arts are embraced effectively especially in studying the complexity of our economies and other various issues. He has shown the ability of man to incorporate his ideas and perceptions of the world in calculative and beautiful ways.

Effects of the US Economic Condition on the Philippine Economy

              The credit downgrade of the world’s largest economy heightened global fears. Being the biggest economy, the US economic crises will surely have repercussions in the world economy. The US credit rating downgrade has sent a global tremble in Asia and also in our own country, the Philippines, where the stocks tumbled.  In September 2010, Philippine Stock Exchange (PSE) breached the 4,000 mark and was at its all time high since then. What will be the effect of the US economic crises on the stocks traded at PSE? During the Global Financial Crisis of 2008, the Philippine economy was kept afloat by the dollar remittances from the Overseas Filipino Workers (OFWs). Would the remittances now continue in keeping us afloat? The products sold in the country are possibly not that affected, but exports surely are. Bangko Sentral ng Pilipinas (BSP) has investments in US securities. Will these investments be affected by the crises?

                 Senator Francis Escudero said, “The Philippine government should strengthen its economic ties with world economic giants like China in order to absorb the shock.” He urged the government’s economic managers to take concrete steps to cushion the negative effect of the US downgrade.

            The stocks tumbled. Before the September 2010 benchmark, the highest historic figure for the Philippine Stock Exchange Index (PSEi) was recorded on October 19, 2007 which closed at 3819.75. As of posting time, the PSEi closed at 4,305.56 (August 26, 2011). But during the first few weeks of August, PSEi fell 2.4% or 106.31 points. According to Hans B. Sicat, PSE President, it was the biggest drop in over a year.

            The global debt crisis will further blunt OFW remittances. Global alliance of OFWs and Migrante International sees the recent US debt crisis as an “irreparable damage that will further blunt OFW remittances and consequently place the Philippine economy in a deeper quagmire.” Our remittance-dependent economy is in a very vulnerable and dangerous place. There are two major effects on OFWs: the massive displacement in the crisis-laden host countries and the direct effects of the peso appreciation on remittances. Fewer and fewer workers are deployed in other countries because of protectionist measures and nationalization policies as a result of the global financial crisis. The appreciation of the peso will have negative effects on the families of OFWs since the exchange rate is getting lower and lower. Ironically, the strong peso will have negative effects to OFWs and their families. Nonetheless, the OFW remittances are still expected to surge this semester mainly due to the upcoming enrollment and holiday seasons.

            Amado Tetangco, BSP governor, downplayed the effects of the credit rating downgrade on the Philippine financial market. The investment of the BSP in US securities totaling to $23.6 billion may be affected by the crisis but the BSP governor assured that the Philippines is resilient enough to survive the effects of the downgrade. He also added that the US market is not likely to experience a huge sell-off because it remains as the most liquid and the deepest market in the world.A lot of people still see that the US treasury market is a safe haven.

            Philippine exporters are sticking to their target growth of 10 percent for the year despite the US credit downgrade. According to Philexport president Sergio Ortiz-Luis Jr., our exports will likely be less affected. This is due to the fact that the US market’s share in the country’s total exports is diminishing. He said that the US used to account for 34 percent of the country’s exports. It has gone down to 12 percent. According to the June export data of the National Statistics Office (NSO), the US accounted for 14 percent of the country’s total exports with earnings of $572.28 million, a decrease of 21 percent from the $744.59 million reported a year ago. Exporters are now diversifying their products in markets other than US. And soon, the US market will be replaced by China as the biggest market for Philippine exports and other countries in Asia.
        According to Benjamin Diokno, a noted economist, the public private partnership (PPP) program, the centerpiece of the economic policy of the administration of P-Noy, would suffer from the US downgrade fallout. The United States is the country’s biggest trading partner and leading source of foreign investments. This would surely have a negative impact on investments from foreign countries.

        Low Dollar to Peso Exchange Rate. The value of our country’s currency is strong because the dollar is weak. The main reason for the dollar to have a lower value is because Federal Reserve Bank (Fed) is creating money in the hope of stimulating the US economy. This situation have different stand regarding the state and its people. Strong currency value for a state means it has a good economy and that it is sufficient and growing. As for the common people of the Republic of the Philippines, this condition is not so beneficial. Strong peso value can also lead to Americans having to import lesser Filipino products and may also reduced their vacation in our country which results to low tourism revenues.

          Finally, we are a resilient people. As a poet once said: “A Filipino is pliant like a bamboo. Neither typhoons nor monsoons could break the Filipino spirit; like the bamboo, it sways and bends with nature’s relentless onslaughts, but it refuses to yield or die.” During the global financial crisis of 2008, Malacanang boasted that the Philippines had escaped the effects of the global recession - thanks to a resilient economy and a resilient people. Everyone is hoping for the same to happen in this period of global crisis - that we remain resilient despite the adversities that come.

AAA to AA+: The Causes and Effects of USA's Credit Rating Downgrade




      Out of control national debt and spending deficit are some of the major reasons why United States is encountering the threatening crisis nowadays. It was said that the economy is slowing but not falling. The incompetent political leadership most likely triggered the current downturn to be a full blown crisis. In the past the world could look to the United States for leadership and financial stability. Unfortunately that very option is no longer applicable. The current occupant of the White House does not even have a clue except to find a way to win reelection through obfuscation and class warfare, while promoting his fiscally disastrous policies. The Federal Reserve, having essentially printed trillions of dollars to no avail, is out of options except to reprise the same policy, thereby worsen an already precarious situation.

      The President, Mr. Obama and the Congress reached an agreement to lift the so-called debt ceiling and cut the $14.3 trillion national debt. President Obama urged Congress to do the right thing by approving the agreement. This is a sign of progress and it may be a time of international economic uncertainty, whether in the United States or in the Eurozone or from commodity prices, so agreement will help build stability across the global economy.
      But the promised cuts were not enough to satisfy S&P. Credit rating agency Standard & Poor's on Friday lowered the nation's AAA rating for the first time since granting it in 1917. It's the first time in this nation's history that anyone anywhere has ever considered the creditworthiness of the United Stares anything less than iron clad. They had warned that during the budget fight that if Congress did not cut spending far enough, the country would face a downgrade. One fear in the market is that a downgrade would scare buyers away from U.S. debt. If that were to happen, the interest rate paid on U.S. bonds, notes and bills would have to rise to attract buyers. And that could lead to higher borrowing rates for consumers, since the rates on mortgages and other loans are pegged to the yield on Treasury securities.

 S&P said that in addition to the downgrade, it is issuing a negative outlook, meaning that there was a chance it will lower the rating further within the next two years. It said such a downgrade, to AA, would occur if the agency sees smaller reductions in spending than Congress and the administration have agreed to make, higher interest rates or new fiscal pressures during this period.
      The number of Americans claiming new jobless benefits fell to a four-month low, a sliver of hope for an economy battered for days by a credit rating downgrade and falling share prices. The jobless claims data released by the Labor Department eased concerns that the economy was heading back into recession as feared by investors, and buoyed U.S. stocks. Initial claims for state unemployment benefits fell 7,000 to seasonally adjusted 395,000, the Labor Department said the lowest level since April. Economists had expected a reading of 400,000.
      The US downgrade will force the reassessment of the entire concept of risk in the global economy. And while ratings for the world's safest haven for investment is downgrading, the same way that the high-powered markets like Indonesia had been rising. In other words, the downgrade will alter the way investors decide on what is safe and what is not and will allocate their money accordingly. Another implication of the S&P downgrade would be fast efforts for the replacement of the U.S. dollar as the world's number one currency. We all know that countries like Russia and China are calling for a new reserve currency several years ago, and due to the downgrading the calls might get louder.
      There are worries that a sharp sell-off in stocks and the nasty fight between Democrats and Republican over raising the government's debt ceiling could dampen employers' enthusiasm to hire new workers. The dominant effect is that, Standard and Poor's didn't downgrade the United States' financial system, but it downgraded the United States' political system.

Is the West Drifting Away from the USA?

                The era of Western domination of human history is over. The world is in a transitional phase. The West no longer drives prosperity. It is Asia that is the key mover for global economic growth.

In the series Percy Jackson and the Olympians, it was mentioned that Mt. Olympus (home of the gods) can be found in the City of Olympus (JJJ). But Olympus has steadily moved west, following the center of power of “Western Civilization” over the centuries and is now in the USA. In the series, Olympus is currently located far above the Empire State Building (600^th floor) while the original mountain remains in Greece. USA is still one of the most powerful countries in the world.

But what is the West? It roughly refers to the United States of America and Europe. Before, when we speak of the Occident (or the West as opposed to the Orient [the East]), we do so on high terms. And actually, we still hold a high regard for the Occident. The West has been very powerful and wealthy. Up to now, the countries comprising it still wield great power and influence. But something has happened that has never happened in the past in one of the countries that comprise it. And this is the first downgrade of the U.S. credit rating from AAA to AA+. A downgrade from Standard and Poors (S&P), one of the Big Three really means a lot especially for the world’s largest economy. This cut of the credit rating by one notch is due to the fact that the budget deficit reduction plan passed by U.S. Congress was not able to stabilize the situation there. Before, people believe that they can invest their money safely in US treasuries but now they think that countries like Japan and Switzerland are safer when it comes to investment opportunities.

The world’s largest economy is in trouble. The measure which raises the debt ceiling until 2013 will result to $2.4 trillion reduction in government spending. The US government will do this for the next ten years so as to ensure that its long-run fiscal trajectory is compatible with the AAA rating of the other two major credit rating agencies (Moody’s and Fitch). This involves a lot of work for the government. Further measures should be taken to maintain this course of action.

The dollars reign is coming to an end. For decades, the dollar has served as the world’s main reserve currency. But soon, it will have to share that role. The dollar is about to have rivals for the first time in 50 years – euro and China’s yuan. Fire is catching and China is getting more powerful.

USA has a lot of troops all over the world. We are wondering why the USA always intervenes in every eventuality that is happening across the globe. Maybe because it has a stake in everything that may happen. For instance, Secretary of State Hilary Clinton said in a statement that the USA will support Philippines, its ally, in the campaign for a peaceful settlement with the ongoing dispute over claims of the Spratly Islands. It also sends troops to places where there is unrest like in Libya, on the demilitarized zone between North and South Korea, in Mindanao and in many other places. Thinking of the money it spends to keep its influence in the world, that must be really big. The effort may have strained the country.

Some say that the United States of America is not really united. Before the Republicans and the Democrats agreed to raise the country’s debt ceiling, President Barack Obama called for unity between the two political parties. “What’s clear now is that any solution to avoid default must be bipartisan. It must have the support of both parties that were sent here to represent the American people – not just one faction,” he said. Good thing, they were able to beat the August 2 deadline.

Perhaps the West is moving to China and to other Asian nations. Last February, China overtook Japan’s position of being the second world’s largest economy. This speaks of something – that finally, Asia is starting to rise and come up to match with America and Europe. And India is in rank #4 (EconomyWatch, 2011). The power is starting to get distributed to other nations. After being a superpower for so long, America is starting to slow down. It may not be too late but we can’t be so sure of anything in this world.

Validations of the Alleged Achievements of P-Noy

It all started with P-Noy's favorite topic... WANG-WANG. For him, it symbolizes the abuse of authority by our government officials. They promise to do away with the use of it. He added that eradicating this mindset becomes the symbol of change, not just in our street, but even in our collective attitude.

               

For the last one year and a month of assuming his presidency the wang-wang system isn't out of the topic. Being with it, we can see that there was a minimization of this act. Although it was not that evident by this time, we must admit that somehow the mindset of entitlement has been reduced. According to Aquino's Administration, due to serious fighting of wang-wang their efforts have yielded positive results. 

               

To end the wang-wang culture in government, P-Noy's Administration employed zero-based budgeting to review programs. For this year and the last, zero-based budgeting has allowed them to end many wasteful programs.

               

For example, they uncovered and stopped an ill-advised plan to dredge Laguna Lake. They would have borrowed 18.7 billion pesos to remove 12 million cubic meters of silt—which would have re-accumulated within three years, even before the debt could be fully paid. We also uncovered a food-for-school program with no proper targeting of beneficiaries, and other initiatives that were funded without apparent results. All of these were discontinued, and the funds rechanneled to more effective programs.

               

Even though our government acts as a wang-wang buster, still this attitude exists in some private sector.  According to the BIR, they have around 1.7 million self-employed and professional taxpayers: lawyers, doctors, businessmen who paid a total of 9.8 billion pesos in 2010. This means that each of them paid only an average of 5,783 pesos in income tax—and if this is true, then they each must have earned only 8,500 pesos a month, which is below the minimum wage which is so hard to believe.

               

When it comes to figures according to P-Noy’s SONA, the Philippine economy has improved. Aquino cited as one of the gains of his government the decline in self-rated hunger from 15.1 percent in June from 20.5 percent in March. This is equivalent to one million families who no longer experience hunger, said Aquino. The figures are from the second quarter 2011 hunger survey of the Social Weather Stations (SWS). But if we take a look at the state of our country a lot of people are still poor and have no food to eat. 

Aquino said, "As for business, who would have thought that the stock market would reach seven record highs in the past year? At one time, we thought that for the PSE Index to reach 4,000 points would be, at best, a fluke. We now routinely exceed this threshold."

               

He also added about where taxes go, as he quote "Today we can see that our taxes are going where they should, and therefore there is no reason not to pay the proper taxes. I say to you: it’s not just the government, but our fellow citizens, who are cheated out of the benefits that these taxes would have provided."

Unemployment worsened in Aquino's first year of his administration. This was according to the latest survey of the Social Weather Stations, commissioned by the BusinessWorld daily.  But as far as Aquino is concerned, jobs are being created. In his SONA, he mentioned that the unemployment rate in April went down to 7.2 percent in April 2011 from 8 percent during the same period last year, crediting the efforts of his administration. Some 1.4 million jobs have been supposedly created in his first year. The numbers are from the Labor Force Survey (LFS) of the National Statistics Office (NSO).

The 1.4 million jobs supposedly created between April 2011 and April 2010 could not be attributed to government intervention. In the first place, the only job generation program that the Aquino administration has so far initiated is the Community Based Employment Program (CBEP). This program has only created 170,000 jobs out of a target of 1.1 million. About 63% of these jobs are in infrastructure/construction, of low quality, and highly temporary. The 170,000 could even be deceitful because a worker can avail of more than one CBEP job.

Looking at the NSO data, more than 456,000 jobs of the 1.4 million additional jobs are classified as those who worked for private households (domestic help, etc.), self-employed without any paid employee (vendor or sari-sari store owner, etc.), employer in own-family operated farm or business, and worked without pay in own-family operated farm or business. In other words, a significant part of the additional employment in the past year was due to the people’s sariling diskarte and not because of any meaningful job generation program of government.

                                    Figures in '000

Because of such distortions, the number of jobless according to the April 2011 LFS of the NSO is just 2.9 million workers. In contrast, adult unemployment rate as measured by the SWS in its own survey was pegged at 27.2% or 11.3 million workers in March 2011. Based on SWS data, the average adult unemployment rate under Aquino is 23.2%, a continuation of the deteriorating domestic jobs situation. Under Arroyo, it was just 19.77%; Estrada, 9.66%; and Fidel Ramos, 9.66%.

Aquino cited as one of the gains of his government the decline in self-rated hunger from 15.1 % in June from 20.5% in March. This is equivalent to one million families who no longer experience hunger, said Aquino. The figures are from the second quarter 2011 hunger survey of the Social Weather Stations (SWS).

But quarterly hunger surveys are sometimes volatile (e.g. self-rated hunger fell from 21.1% to 15.9% in Aquino’s first 100 days) so it is important to look at the long-term trend. In the first year of the Aquino administration, quarterly self-rated hunger averaged 17.4%. During the nine years of the Arroyo government, it averaged a lower 14.58% and just 9.96% under deposed President Joseph Estrada. These numbers indicate that the country is still on the path of worsening hunger.

Aquino also claimed that in his first year as President, the Philippines got upgraded four times by credit rating agencies. Compare this, said Aquino, to the lone credit upgrade and six downgrades the country had in the nine and a half years of the Arroyo administration. A high credit rating means lower interest payments. According to Aquino, the country spent P23 billion less in interest payments from January to April 2011 compared to the same period last year. This amount can supposedly already cover the 2.3 million families in target beneficiaries of the CCT program until the end of the year.

But the credit rating upgrades came at a high cost for the people. To obtain the upgrades, the Aquino administration ensured that debt obligations are being paid dutifully and at the same time resorted to massive under-spending. The result is that an ever increasing portion of spending by the national government went to debt servicing. Since Aquino became President, total debt servicing has already reached P668.65 billion (from July 2010 to May 2011). Until April this year, 49.3% of what the Aquino administration has spent went to debt servicing.

Compare these figures to those under Arroyo, who has been criticized as a heavy borrower and payer. Monthly debt servicing during the Arroyo administration was P48.18 billion while in the first 11 months of the Aquino presidency, it went up to P60.79 billion.  As a percentage of total government spending (including principal payments), the average during the Arroyo administration was 41.5% while under Aquino, it has increased to 49.3% (until April 2011).

Despite the bigger debt servicing, the total outstanding debt of government (including contingent debt) still rose from P5.19 trillion in June 2010 to P5.23 trillion as of April 2011. The P40-billion rise in government debt includes $400 million (about P18 billion) in loans from the Asian Development Bank (ADB) approved last September 2010 to help bankroll the expanded CCT program. This means that the P23 billion mentioned by Aquino as savings from lower interest payments will just be used to pay for the rising debt obligations of government, including those incurred for the CCT.

The credit rating upgrades were also achieved due to the improvement in the national budget deficit, another indicator closely watched to determine a country’s creditworthiness. From an all-time high (in absolute terms) of P314.5 billion in deficit in 2010, the Aquino administration has been able to substantially reduce the shortfall so far this year. From January to May 2011, the fiscal deficit was pegged at just P9.54 billion or 94.1% below the deficit during the same period in 2010. It is also way below the programmed deficit of P152.13 billion for the first half of the year. This lower deficit was made possible by higher revenues and lower spending during the period. As compared to the first five months of 2010, revenues are higher by P81.5 billion while spending is down by P71.08 billion. Furthermore, monthly collections are more than P1.89 billion higher than expected while monthly expenditures are almost P21.55 billion lower than programmed.

Facts and figures that truly matter to the people have been ignored in Aquino’s SONA – P125 or the amount of legislated minimum wage hike workers have long been demanding to help them cope with ever rising cost of living; 6,453 hectares or the size of Hacienda Luisita lands that should have long been owned and controlled by farmers and farm workers; 556,526 or the number of families living in informal settlements in Metro Manila and face the threat of forced eviction; 27 or the number of times that diesel prices have gone up since Aquino became President; and 48 or the number of victims of extrajudicial killings in his first year as Chief Executive, among others.

Satisfaction on Aquino’s administration was down in terms of disaster preparedness, and also in fighting terrorism and crime, although non-government organizations have already challenged the newly sworn-in president to prioritize disaster-preparedness. But as far as Aquino’s administration is concerned, there were improvements on weather forecasting by PAG-ASA. Same is true with PHIVOLCS and NDRRMC.

By using numbers, the President hoped to be objective in presenting his administration’s supposed achievements during the SONA. But he ended up ignorant of the numbers that truly matter.