MANILA, Philippines -- Faced with "pain now or more pain later," an economic adviser to President Gloria Macapagal-Arroyo is calling for a realignment of P33 billion in the 2009 budget from capital spending to direct subsidies for education, health services, and food.
Albay Governor Joey Salceda said the government should make "sacrifices'' to shield the country, specifically the poor, from global recession and financial meltdown that appeared to have no "quick fix solutions,'' despite the huge amount of cash thrown by developed countries to resolve them.
"At this stage, it is no longer events but how nation-states respond to them that will more significantly determine the gravity and duration of the crisis. The essential policy choice is pain now or more pain later. Simply, there is no escaping pain," he said.
"Only time will heal and the time needed to fix the excess is inversely proportional to the painfulness of the measures. The more painful, the less time. Less pain, more time,'' said Salceda.
This means aiming for more modest economic growth targets -- from 6-8 percent to 3-4 percent -- which Salceda described as a "lifestyle downgrading needed to create space for the world to regenerate resources.''
He said it would be futile to aim for higher growth when the economy would be vulnerable to an imminent drop in export revenues, slower overseas Filipino workers’ remittances, and more rapid repatriation of earnings or asset sales by multinational corporations to rescue their mother companies back home as exemplified by the sale of Philamlife's assets to save the bankrupt AIG.
Salceda said he junked a proposed economic stimulus, which would entail P75 billion to P94 billion in additional government spending but kept his goal of bringing funds directly to Filipinos who would need them most.
"The problem of our people is that no matter how much goods and services go down, they simply do not have the money to buy them. Which is why we have to give it to our poorest, in the form of subsidies in basic services,'' said Salceda.
While Salceda recommended that the proposed P1.4 trillion budget for 2009 be retained (including the projected deficit), he suggested that at least P33 billion of this amount be realigned for basic services that have a bigger impact on the lower class.
"It is in the spending mix where government can make the most impact on this difficult environment. Spending should shift from growth-inducing infrastructure [capital outlay] to poverty-relieving social programs [MOOE for social welfare], from expansion of productive capacity [new construction] to productivity enhancing measures [maintenance], more human capital formation [health and education] than physical capital formation,'' said Salceda.
This means increasing allocations for:
• Department of Social Welfare and Development from P5 billion to P15 billion to enable it to serve one million of the 4.7 million families below the poverty line;
• Scholarship budget from P3 billion to P15 billion to target the unemployed 15 to 24-year-olds who should have stayed in school for training;
• NFA to allow full access to the agency’s fixed price of P18.25 per kilo of rice;
• Philhealth from P7 billion to P12 billion to broaden its coverage.
Salceda also reiterated his previous proposal to shore up the country's "financial defenses'' to steel the country from any financial contagion.
"The virus is here ... Thus, the current complacency of markets and policymakers is misplaced and immediately must give way to a more proactive posture -- like a healthy person taking anti-flu vaccine in the midst of an epidemic in the village,'' he said.
Other aspects of the financial defense package:
• Infuse P40 billion in equity into the central bank;
• Infuse P10 billion into the Philippine Deposit Insurance Co. as investment;
• Increase deposit insurance coverage from P250,000 to P500,000;
• Establish a Financial Services Authority that would integrate oversight of financial products and institutions in order to close regulatory gaps exploited by innovative financial engineering to reduce the systemic risks, which have largely precipitated the global financial meltdown.
"Since we cannot rely on external markets, we must learn to depend on ourselves. Since we cannot over rely on markets, well-designed state interventions constitute the core of our crisis countermeasures,'' Salceda said.
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