A simple assessment of the Arroyo Administration’s performance against what she planned for the country in the medium term yields both promising and disappointing results.

THE PLAN

The government’s socio-economic blueprint outlines strategies to support the basic tasks under the ten-point agenda of the Arroyo administration, originally included in her inaugural and state of the nation addresses in June and July 2004, respectively. The basic tenet of the 2004-2010 Medium-Term Philippine Development Plan is to cut poverty incidence to 17.9% — 19.8% of families by 2010 — from 24.4% in 2003. To address poverty incidence and high unemployment rates, government’s socio economic planning agency (the National Economic and Development Authority, NEDA) projects an average annual GDP growth rate of 7%. With this rate of growth, the economy is expected to generate an average of one million new jobs each year.

To achieve this macroeconomic performance, government needs, first of all, to balance the budget through fiscal reforms, without sacrificing spending priority on expanding access to education. While keeping a tight rein on spending, government, nevertheless, should continue to increase needed outlays for infrastructure projects to attract investments, improve farm incomes, cut transport costs, and promote tourism.

Infrastructure projects in the medium term plan are those aimed at widening access to electricity and potable water, interconnect islands through a network of nautical highways, decongest overpopulated Metro Manila, and develop the Subic freeport and Clark economic zones into a regional logistics and services hub. All these are embodied in the Comprehensive and Integrated Infrastructure Program, which requires combined public and private sector investments worth P2.02 trillion.

Beyond fiscal and macroeconomic stability, development cannot take place without national unity and social cohesion. This is an impetus for government to implement long-delayed electoral reforms, particularly on automated elections, pursue longstanding peace negotiations with Muslim secessionists and leftist insurgents, and put a just closure to divisive issues resulting from the three people power uprisings in the country ‘s recent political history.

TEN MILLION JOBS

The most important contribution of economic growth is the creation of ten million new jobs. The Plan targets a GDP growth rate of 7% by 2010 to generate 9.7 — 11.5 million new jobs from 2004 to 2010. Some of these jobs are seen to come from the following activities: tourism (3.0 million), agribusiness (2.8 million), housing (1.0 million), and ICT (800 thousand).

Though an improvement over the 4.9% growth in 2003 and 6.2% in 2004, the 5.0% growth in 2005 and 5.4% in 2006 were still clearly below the 7% target set out in the medium term plan. Less than a million new jobs each had been created in 2005 and 2006, against targets of over a million new employment opportunities generated per year. This disappointing performance illustrates “jobless” growth — significant GDP gains failed to generate corresponding new work opportunities.

From April 2004 to April 2007, the National Statistics Office recorded an increase of 2.19 million in the number of employed workforce. These figures are preliminary since the April 2004 labor force levels are based on the 1995 census, while the April 2007 labor force levels are based on the 2000 census. On the other hand, from July 2006 to March 2007 alone, the Presidential Management Staff has recorded 1.1 million jobs generated through the government’s microfinance development program.

Meanwhile, from 2004 to 2006, three million Filipino workers have been deployed abroad. This translates to an average of one million Overseas Filipino workers a year in accordance with Plan expectations.

Despite the disappointing growth in the number of new jobs generated, the National Statistical Coordination Board reported that labor productivity growth accelerated to 4.4% in 2006 from 1.3% in 2005, owing to the robust performance of the services sector.

Aside from rising labor productivity, another positive development was in the lower than expected jobless rates. The unemployment rate, based on the old definition, is also expected to drop to 8.9% in 2010 from 12.1% in 2004. The shift in the definition of unemployment to International Labor Organization standards brought the jobless rate into single-digit levels by excluding from the labor force those who were previously considered as unemployed and are not actively looking for work. In the first two quarters of 2007, the average unemployment rate was only 7.6%, compared to the jobless rate target of 11.1% for full year 2007, as embodied in the Plan.

Thus, despite the setback in job creation, the unemployment rates from 2005 and 2006 remain below expectations, thanks in part to the deployment of an average of one million OFWs abroad each year. Meanwhile, the slow expansion in the labor force spelled gains on labor productivity.

BALANCED BUDGET

The country needs to put its fiscal house in order by balancing the budget and reducing its level of debt. The fiscal deficit has been tagged as the country’s top economic problem, particularly as a result of poor revenue generation.

To raise P80 billion in revenues, President Arroyo asked Congress to pass eight revenue measures in 2004. However, so far, only five fiscal reform bills were enacted into law. These fiscal reform measures are: excise taxes on so-called sin products (RA 9334), lateral attrition (RA 9335), reformed value-added tax or RVAT (RA 9337), and tax amnesty (RA 9480). The president temporarily increased import duties on petroleum and petroleum products to 5% from 3% through Executive Order 336, later revoked through EO 440 upon passage of the RVAT law. Two bills have been dropped on account of their unpopularity among members of the business community and the public – a gross income tax system and a tax on windfall telecom income. Under the 13th Congress which ended in June 2007, two significantly different measures rationalizing fiscal incentives failed to prosper into law.

Under the medium-term plan, government’s target for a “zero fiscal deficit” is the year 2010. But the passage of the RVAT law (RA 9337) in February 2005 gave fiscal authorities confidence in meeting the target earlier, by 2008 — a target closely monitored by financial markets and international credit rating agencies. But recent developments point to roadblocks toward this new goal. Despite a fiscal deficit of P64.5 billion in 2006 – the narrowest in eight years — the first-half 2007 figure negated the gains of 2006. The fiscal shortfall of P41.0 billion already exceeded the P31.3 billion ceiling for the period. This performance reflected collection deficiencies posted by the Bureau of Internal Revenue and the Bureau of Customs.

To cover for the shortfall, the Department of Finance is hopeful to generate revenues from non-recurring items like privatization. Government expects at least P50 billion proceeds from the privatization of government shares in Meralco, PNOC-EDC, and San Miguel Corporation in the second-half of 2007.

For its part, the National Economic and Development Authority believes the fiscal deficit may even widen to P100 billion by end-2007 instead of closing in on the P63.0 billion end-2007 fiscal deficit target.

Nevertheless, a bright spot in the fiscal scene was the better than expected ratios in public-sector debt to GDP in 2004 to 2006. From 2004 to 2006, public debt to GDP ratio dropped to 81.9% from 108.9%, below targets of 116.0% and 136.0%, respectively.

EDUCATION FOR ALL

Investments in youth education have been proven to reduce poverty significantly. On the spending side of public finances, education continues to enjoy the highest budget priority in accordance with the Constitution’s mandate. Its share in the national budget has risen to 14.4% in 2007 from 13.9% in 2006 and 13.8% in 2005.

In this regard, the Philippines also committed to achieve one of the Millennium Development Goals of the United Nations — to ensure that children aged 6 to 12 be in school and complete primary schooling. To help achieve this commitment, the President even exhorted Congress to standardize curriculum in day care centers, an early intervention to ensure the building blocks for a more educated workforce — starting earlier than preschool age instead of an additional year in high school.

Still, only minor headway has been observed in the net intake of six year old students into Grade 1 in both public and private schools. This ratio rose to 49.7% in School Year 2004-2005, below the 52.4% target, from 47.1% in SY 2001-2002. On the other hand, the net enrolment ratio at the elementary level has been below the 91.0% target since SY 2004-2005. It actually decreased to 73.5% in SY 2005-2006 from 77.1% in SY 2004-2005. At the secondary level, net enrolment ratio rose to 44.5% in SY 2005-2006 from 42.5% in SY 2004-2005, short of the 67.5% target.

At the same time, the cohort survival rates at the elementary and secondary levels increased slightly in SY 2004-2005 from those in SY 2003-2004, but dropped in SY 2005-2006. These levels were lower than the target rates of 74% and 68.7%, respectively. With respect to dropout rates, both rose higher than the target rates of 5.3% and 10.6%, respectively in SY 2005-2006 from those of SY 2004-2005 at both elementary and secondary levels.

Public spending on education likewise focused on addressing the classroom shortage and on providing textbooks to each pupil in the public schools. The target classroom size is planned to be reduced to 33 from 50. At the elementary level, the number of pupils per classroom dropped to 37 in SY 2005-2006 and 2006-2007 from 38 in SY 2004-2005.

At the secondary level, the number of students per classroom dropped to 56 in SY 2006-2007 from 59 in SY 2004-2005 and 57 in SY 2005-2006. This probably assumes two classroom shifts per day. With respect to the number of textbooks per student at both the elementary and secondary levels, these have been maintained at 1:1 since SY 2004-2005.

Overall, the government’s accomplishments fail against targets in terms of net enrollment rates in primary and secondary education, which may partly explain why it could succeed in reducing the average number of students per classroom from 50 to 33 and in providing a 1:1 textbooks per student in public schools.

INFRASTRUCTURE

Access to electricity and water is needed to bring development and raise the quality of life to remote areas of the countryside. According to the medium term plan, all the country’s barangays should have access to electricity supply and services by 2008. In 2004, only 5% of the country’s villages lack access to power. This ratio furthered improved to 95.3% in April 2007. On the other hand, the Expanded Rural Electrification program targets to achieve 90% household connection by 2017.

Meanwhile, access to safe water supply has gone down to 82% of households in 2005 from 83% in 2004, a long way of the 2010 goal of 96% of households. This task is made difficult by cyclical and unusual dry spells in 2004, 2006, and 2007 and the increase in the number of families. According to the Plan, priority in providing potable water is focused on 200 waterless barangays in Metro Manila and on 200 waterless municipalities outside Metro Manila.

On water transport, since its launch in 2003, roll-on/ roll-off shipping terminals have brought down costs of transporting cargoes and passengers from Mindanao to Luzon compared to the load-on/load-off mode of water transportation. For instance, fresh fish now costs P14,000 per ton to move from Dapitan (Mindanao) to Batangas from a previous cost of P20,000. At least 74 in the country have been fitted with ro-ro ramps while at least 54 ports already have passenger terminal buildings. The system of nautical highways (western, central, and eastern) linking the country will also be complemented by a network of railroad and digital infrastructure, according to the Plan.

Projects to ease traffic in Metro Manila by improving adjacent infrastructure include the MacArthur Highway, North Luzon Expressway, North Rail, Metro Manila Skyway, MRT/LRT Loop, SLEX, South Rail, and STAR. These projects call for the transfer of informal dwellers along the North Luzon Railway and South Luzon Railway to Bulacan, Cavite, and Laguna. As of June 2007, 23,011 families out of 37,850 targeted families from along the North Rail have been relocated. In the same period, 13,585 families out of 42,929 targeted families from along the South Rail have been resettled.

As envisioned in the plan, development should spread away from Metro Manila to the countryside, mainly through the super-regions of the country. Almost half (P958 billion) of the capital investments among the five super regions under the Comprehensive Integrated Investment Program are devoted to the Luzon Urban Beltway. In this super region, the President wants the Subic freeport and Clark economic zone as the most competitive international services and logistics hub in Southeast Asia to attract foreign tourists and investments that will generate more jobs. Texas Instruments’ US$1 billion microchip plant and Hanjin’s US$1 billion shipbuilding facility are just examples that showcase Clark and Subic as prime location for industries.

The 93.8 kilometer Subic-Clark-Tarlac Expressway, one of the priority infrastructure projects under the Luzon Urban Beltway Super Region, is expected to be completed by November 2007. The highway will cut travel time between the two free port zones from two hours to half an hour.

PEACE AND UNITY

Aside from infrastructure, peace and social cohesion go hand in hand with development. President Arroyo promised complete computerization of elections, peace in Mindanao, integration of all insurgents into society, as well as a just closure to the divisive issues generated by EDSA I, II, and III “upheavals.” National reconciliation, however, remains as elusive as ever.

The government even faced more controversial issues which divided the country. A year after the May 2004 elections, questions on the president’s legitimacy surfaced as alleged wiretapped conversations with a COMELEC official had been made public. She also called on Congress to initiate discussions on charter change but resistance from various sectors doused cold water on this and other related initiatives.

Despite an election modernization law put into place over a decade ago, counting and canvassing of results of the 2004 and 2007 elections still remained under the fraud- prone manual system. Meanwhile, legislators sought amendments to the automated election law (RA 9437) but lack of time has postponed its pilot implementation to the 2008 polls in the Autonomous Region of Muslim Mindanao using appropriate technology. Officials of electoral watchdogs expect full automation only by May 2013.

Peace still remains an elusive dream in Mindanao. Talks with the Moro Islamic Liberation Front are hoped to start with the appointment of a new chair for the government peace panel in the person of retired army General Rodolfo Garcia. The pursuit of Abu Sayyaf terrorists by the military, however, could jeopardize the peace efforts and the ceasefire.

Also suspended are talks with the armed Left, primarily with the Communist Party of the Philippines/ New People’s Army/ and National Democratic Front. What worsened the situation are the alleged extrajudicial killings of left-leaning militant activists. The Plan’s goal is the permanent stop to armed hostilities by 2010.

In relation to the EDSA I issue on the pursuit of the ill-gotten wealth of the Marcoses, human rights victims of the martial law regime suffered setbacks when the 13th Congress failed to pass their proposed compensation. Another discouraging trend is the string of cases lost against the Marcos family and its cronies by the Presidential Commission on Good Government.

After the May 2007 elections, the administration even planned to offer sweeping political amnesty to its opponents, which may include renegade military officers from the 2003 Oakwood mutiny and former President Joseph Estrada who stood trial before the Sandiganbayan for plunder charges.

LEAVING SOLID MARKS

The government is on track in meeting its 2010 goals in the areas of fiscal balance, electrification of areas without access to power, building of roll-on, roll-off ports, decongesting Metro Manila, and developing the Subic and Clark corridor.

On the other hand, the administration is sorely underperforming in the area of reaching national unity. Major improvements are further needed to put an end to armed hostilities and heal the wounds of the three EDSAs.