A Tale Of Two Cities

“It was the best of times, it was the worst of times” – Charles Dickens


On July 22 President Aquino will deliver his State of the Nation address.

In fact the SONA is a tale of two nations: The first, Nation A, belongs to the 1% of the population who own 99% of the country; the second, Nation B, belongs to the 99% who own the rest. Which one will the President address?

The President could talk about the successes of Nation A of which there are many. In the last 3 years it has grown by 7% p.a. –the highest in the region-, it has been awarded an investment grade, its stock market has risen by 94%, urban real estate has rocketed, inflation is in the low single digits, the budget deficit has been reduced from over P300 billion to P250 billion, tourism is up 10% and the peso has strengthened by 6.5%. Nation A has been cited as the new economic tiger. In Nation A inhabitants easily pay P25,000 –twice the country’s average monthly wage- for a ticket to JLo’s concert. Yes, the 1% are happy campers. I should know, I am one of them.

The President could talk about the disappointments of Nation B of which there are many. Unemployment has increased to 7.5% -the highest among our neighbors-  from 6.9% a year ago. There are over 9 million households living below the poverty line of P5,560 a month, the same figure as in 2006 and 2009. The U.N. Human Development Index ranked the Philippines 114th of 187 countries in health, education and infant mortality, down from 105 in 2007. In Nation B 98% of applicants are unqualified for call center jobs, a position manned by high school graduates in the U.S. In Nation B, Kristel Tejada, a UP scholar, took her life because she could not afford P6,300, her share of her tuition fee.

President Aquino has reason to brag. His Daan Matuwid is the single largest reason for our achievements. Hopefully, however, he will also define the depth of our problems not as an admission of failure but as a recognition of the work that still needs to be done. It is important 99% of Filipinos know he understands their plight and will do all within his means to address them.

Item One is livelihood. By NEDA’s own admission, the country’s growth has not created any meaningful employment outside of urban construction. Industry grew 10% in the last year but this was driven principally by a 34% increase in construction, principally if one looks at the metropolitan landscape, in residential condos and malls. Exports are down by 11% while agriculture barely kept up with population growth. The absence of local jobs has driven over 7 million Filipinos offshore, 17% of the work force. The social impact of the exodus is already being felt in families and loss of dignity in our female OFWs.

Item Two is to broaden the economic base to agriculture, tourism and exports. The country needs an Agro-Industrial Grand Plan that will cover infrastructure, market access, financing and know how. This will reverse the rural migration to cities which is straining their capacity with consequences on crime and social unrest. The cost of one month’s urban congestion is estimated at P72 billion or 1.6 times our annual education budget.

Item Three is social justice. Despite the reforms in the Supreme Court, very little has been done to correct the corruption in the lower courts and prosecution process. The Supreme Court must now deliver its share of nation building and fulfill the promise upon which the Chief Justice was selected.

Item Four is a redistribution of the nation’s wealth. The country’s growth is not sustainable unless it is inclusive. This not only involves jobs but also adequate health care, shelter and education, the cornerstones of the human condition. The education budget is now only 2.4 % of the national budget compared to three times that figure in developed nations. Other items for review should be the Conditional Cash Transfer program, universal healthcare, affordable housing and student loans.

Item Five is political reform. There is something wrong when the top 18 Senatorial candidates spent an average of over P100 million to run for office. That marginalizes new leaders and reinforces the power of family dynasties, entrenched interests and the rich in national decision making. There is something wrong when a President must annually dole out P25 billion in pork barrel just so he can govern. The President should mount a viable political party which can pursue his efforts beyond 2016.

This country cannot subsist as two uneven nations in one. The challenge of the President in the next three years –which he should lay before us on July 22- is how to unify these two states, so we are one, one Republic of equal opportunity and common purpose.


About Leo Alejandrino

The blog is principally a commentary on Philippine politics and economics.
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8 Responses to A Tale Of Two Cities

  1. andoyb says:

    Per your quote “There are over 9 million households living below the poverty line of P5,560 a month” , just curious, does the 9 million households = 9 million X an avg say of 6 per household which would – 54 million people, or is that 9 million households = a total of 9 million people?

  2. Joe America says:

    I had to laugh, Leo. I did not copy your blog, but I am pretty much finished today writing one called “The Divided Philippines”.. I break the nation into three parts, Manila, Clan Country and Muslim Country. I also tout the importance of manufacturing and agribusiness to the creation of job growth. And I liken judges to “court jesters”, inclined to do what royalty desires, rather than what the law demands. The one area I may or may not disagree with you is how wealth is distributed. It would be better if the capitalistic system were simply made to hum, then wealth would get distributed naturally. Good strides are being made now, as the years of consistent growth under President Aquino is now pushing money out here to the provinces where I live, and a firmer middle class is emerging nationwide. I think investing in manufacturing plants has more long term benefit than cash handouts.

    Look for the blog on Friday.

  3. The Lotus says:

    I don’t think the 1% is willing to unify with the 99%. The reality of our Filipino culture stems from
    our being under the Spanish and the Americans for the longest period of time. We may have to begin with ourselves and hope for the best.

  4. Floro R. Francisco says:

    We have a very weak industrial base to begin with, when we want to address employment issues. The commercial sector that focuses on trade and retail can-not provide sustainable employment more so because the government turns its blind eyes to violations of core labour standards where there is no security of tenure and decent wages. Our capitalist elite would not be willing to invest in rebuilding our industrial sector as this is more expensive and takes a longer gestation period, prone to competition and subservient to the global trend of reducing tariffs and opposing any acceptable level of protectionism. These capitalists feel more secure in just repacking and repackaging low cost imports of consumer goods and retailing of consumer durables. These create greater profits and faster turn-around of their investments and capital. They have now branched out to more Supermarkets and Hypermarts which are basically real estate businesses selling or renting out spaces for retailers. They now prefer to build Condos to a growing young middle class from the service sector and offer office spaces for rent to the BPO companies. Food companies like San Miguel have even gone to power and electricity production.
    To address Industrialization, it is the government who should now invest or should provide more incentives to investors in rebuilding our industries. It must use the current excess liquidity in our capital markets in building more infrastructures to support the reconstruction of our industries. It must provide subsidies to agricultural production so that we can produce raw materials we need for our consumer products. IF NEED BE IT MAY EVEN DECIDE TO ORGANIZE OR REORGANIZE STATE OWNED ENDTERPRISES FOR THIS PURPOSE BUT WITH STRATEGIC GOALS IN MIND. It must address and resolve the environmental debate on mining so that we can mobilize our mineral resources for our own industrial production, but ensuring environmental protection and minimizing environmental damage to the best technological level possible that we can afford without undermining our own ecological balance.
    The Service Sector is prone to the volatility in the markets and the recent impact of the US Feds about Quantitative Easing in the bonds markets as well as for example the policy pronouncement of China in an attempt to punish the banks and address its liquidity crunch creates impacts on our own markets. If we do not rebuild our own Industrial base and ensure sustainable production for our own local consumer demands and conversion of our agricultural products and mineral resources into finished products through industrial processes, I feel we will never be able to address our unemployment problem. We will continue to send our skilled workers abroad and we will continue to subsidize the education of the manpower requirements of our neighbours such as Singapore, Malaysia, Hongkong, and even Korea and Japan. And if our capital continue to remain as paper money instead of buildings and machinery, such capital can be easily wiped out in a prolonged recession. And if we continue to have massive unemployment and a high population growth rate where majority will be below poverty level, then the two Worlds or two cities in our dual society will continue to persists and may even go far lower and deeper. In another 3 years my forecast will be that Pnoy’s “Daang Matuwid” was only reserved for his friends, relatives, town-mates, playmates, classmates and other forms of mates who lived in the better city. As to the rest of the population, I believe more will cross over to the poorer city if we do not address the structural problems of our economy even as the much avowed fundamentals of our financial markets appear to still be investment grade. The Bubble will eventually burst if your engine of growth is only money making money. For a more sustainable economy, we need machines and people producing product that convert into long term source of money for a more dynamic economy! WITH DECENT EMPLOYMENT AND WAGES, our population size can provide the economy of scale to sustain our own dynamic consumer markets and industrial production. If you have higher wages, you can have higher disposable income then you can have more consumers and buyers of local produce…. Then you can have your own dynamic market demand and revitalized economy.

    And to make the above changes in the economy we need political reform where the political leaders should not be one and the same families that manipulate the local capital and businesses in the provinces nor should they have close links and comfortable relationships with the business elite.In addition we need reforms in the Civil Service and the Government Bureaucracy where those who will become Government Executives are from the Career Service not political appointees with longer learning curves that ends after the the next President is sworn to power!

  5. I tend to disagree with any implication that the division between the 1% and the 99% can be traced solely to colonial experience, but I can agree that it can be a factor to our current social structure. Our pre-Westernized forefathers (and mothers) had hierarchical structures based on power, blood and wealth. One only has to see our modern-day Muslim societies in the South to see this structures. The point is, this narrative of economic chasm between the rich and poor is the same in many societies all over the world. We can look at the UK and US to see the great discrepancies in wealth and political power between these dichotomized societies of the haves and have-nots. The question that has been haunting our country for so long is, how do we bridge the gap between rich and poor? We always knew the problem but we couldn’t seem to get the solutions right. We have always relied in trickle-down economic policies, but the gap remains wide. Since the rich has always had the upper-hand with regards to economic and political power, should we create affirmative action laws as well in order to spur social mobility for the underprivileged? In the current social, political and economic climate in Brazil, what can we learn from the Brazilians?

    • Joe America says:

      Good points, all. Two thoughts. (1) The U.S. does have certain groups working to promote equal rights for the poor, if not equal wealth, the Civil Liberties Union being most prominent. And equal employment laws at least provide a path up and out of poverty for those who apply themselves. The Philippines lacks these groups and the concept of OPPORTUNITY as the great equalizer of social advantage. (2) Rather than affirmative action, mandating the hiring of the poor, perhaps it would be better simply to open the pathway for the capable and hard working – from any social group – to aspire toward a career by having a Fair Employment Law that mandates hiring and promoting only on the basis of capability. End the favoritism that squeezes OPPORTUNITY from the Philippine employment scene. Mandate the law for any organization having more than 50 workers. Let everybody who applies themselves move up a notch now and then, providing slots at the bottom for the rich and poor alike. If that doesn’t change things, then, yes, the tougher law requiring larger companies to hire a certain share of poor people might be put in place. . .

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