EVAT's toll in 2006

DIE HARD III
Herman Tiu Laurel
12/5/2005



The pressure on the country to continue escalating the EVAT from the 10% today to 12% is being sustained by the major multilateral financial agencies like the World Bank and the ADB. Officials of the Gloria regime have been parroting this call, like the Ayala-man Gary Teves now heading the finance department. Gloria Arroyo herself has tried to hitch the Evat’s reputation on the momentarily rising Peso; but what is the real score? An indication can be seen in some global finance firm’s assessment of the Philippines’ GDP growth rate this year and next.

JP Morgan last week announced its estimate of the Philippines’ GDP growth rate at 4.6%, which is significantly lower that the over 5-6% targeted by various pronouncements of Gloria’s economic trumpeters. Many factors go into the growth rate, but taxation policy is certainly a major part that impacts heavily. The drastic fall of the GDP rate this year reflects the impact of the EVAT sucking out money from the people and consumers’ pockets out of the internal market and out to the coffers of the IMF-EB and international bankers in terms of debt payment.

The most worrying part of the EVAT impact is yet to come, especially after the increase from 10% to 12%. The headline of the JP Morgan report reflects this worrying aspect, “Philippines may grow 4.6% in 2005, slower in 2006”. As Dr. Alejandro “Ding” Lichauco always says, the passing grade of a country’s GDP is 7%; anything below that is deserving of the “kalabasa award”. This year’s 4.6% is bad enough, but JP Morgan’s projection that next year’s economic performance will be slower than this is depressing information. This space is not surprised.

Another ratings agency echoes the gloomy projection for the Philippines next year. Fitch ratings agency says “RP sole problem in Asia by 2006”. It said the country would remain grappling with economic and financial problems next year. Domestically even my arch-nemesis of economic neo-conservative and liberal thinking, the University of Asia and the Pacific (UA&P), has publicly said that “The planned hike in the value-added tax rate and higher oil prices may cause consumer spending to decline next year…” If the Vatican of Philippine pro-IMF economists is saying this, who should doubt that the additional EVAT will add fuel to fire.

I can only pity the country and the people, so far there seems to be no relief from this onerous burden being imposed by Gloria. All classes of Filipinos, from traders and businessmen who are facing a massive contraction of the economy to the ordinary workers and employees many of whom will face dislocation or termination from their jobs as companies tighten up. There is no choice for those who want to cope to shift strategies and make drastic adjustments in lifestyles; but that’s only good for the middle class up, the masa has no more backing room.

Contrast what’s happening in the Philippines with another country that took a different route in the past four years: Argentina, which expects a GDP growth of 8-10%. They have successfully renegotiate the private bonds for a 65% discount, and now President Kirchner has reorganized his economic and financial team, firing the neo-liberal Roberto Lavagna who’s been replaced by a protectionist minister Felisa Miceli, apparently preparing to take on its IMF debt and then bolting from the IMF. It could also be psywar to prepare for negotiations with the IMF – the advantage of having a leadership that is free and pro-people and not puppets.

I received a text that former Neda chief Ciel Habito is appearing Monday, four in the afternoon at the Manila Polo club to discuss the true state of the economy and the “real deal in E-vat”. Anybody who knows his or her economics can see the writing on the wall, that disaster that will accompany the additional EVAT. Habito is with Eddie Villanueva, but that’s okay now so long as they give an accurate picture of the impact of EVAT. While Villanueva has been very cooperative in the anti-Gloria exposés, but persistent rumors of his ambition is self-defeating as the Catholic Church, El Shaddai and INC will be hostile.

The only hopeful proposition for my readers and the nation about the deepening crisis and desperation of the people is that change of government and policies to pro-people economics is imperative, and a government of unity against the prevailing policies must be established. Leaders in such a unity government must all be pro-people, in the spirit of President Joseph E. Estrada’s advocacy of the masa agenda; because frankly, the political “middle forces” like the Black and White are actually extensions of the multi-lateral financial agencies like the WB and transnational corporations operating with the Makati Business Club.

The “opposition” was maneuvered into obfuscating its identity by politics of addition incorporating these latecomers which are really intended to subtract from the credibility built up by the Estrada forces. Estrada is still the only true opposition, in policy direction and in political spirit. There is no doubt that in the coming months this will surface as the single political force against the status quo, and whatever diversionary strategies Gloria-FVR and others have (be it Cha-cha and parliamentary-federal system) Estrada will be back in the halls of the parliamentary fora.

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