Business World, 24 April 2012


The Filipino people’s public approval of the Aquino III administration has been seriously eroded. And they have a clear message to their elected Chief Executive: shape up, and focus on easing poverty, creating more jobs, managing well the swelling population, and moderating prices.

Once upon a time, the Filipino people were euphoric with the exit of an unpopular and overstaying president and the entry of a new, promising one. The public mood was one of hope and great expectations. That mood was captured by the Pulse Asia’s October 2010 survey results.

Fast forward to March 2012. Compared with the Pulse Asia’s October 2010 survey results, the March 2012 survey results show the erosion of the Filipino people’s approval of the new (actually 17-month-old) administration.

The erosion of the approval ratings and the swelling of the disapproval ratings are unmistakable. They cannot be interpreted any other way: 17 months ago, President Aquino III received majority (50+ and above) approval rating in eight of 10 national concerns; today, he received majority ratings in only four of 10, and only one (fighting graft and corruption in government) has rated among the top five most urgent national concerns.

Filipinos are smart. They know what issues are more important, and these are mostly those that affect their own survival. They have identified the top five leading national concerns: controlling inflation (68%), increasing the pay of workers (62%), fighting corruption in government(53%), creating more jobs (53%) and reducing poverty (52%).

The next five concerns are: increasing peace in the country (39%), stopping the destruction and abuse of our environment (37%), enforcing the law to all, whether influential or ordinary people (37%), fighting criminality (31%), and controlling fast population growth (22%).

Let’s just focus on the five most important issues of the day. On controlling inflation, the approval rating fell by 13 percentage points (from 45% in October 2010 to 32% in March 2012). At the same time, the disapproval rating has more than doubled — from 18% to 40% or by 22 percentage points. Those who disapproved exceeded those who approved on the way the administration is reducing the poverty of many Filipinos (40% less 28%, or by 12 percentage points). Every percentage point is equivalent to about one million Filipinos.

Some analysts, including many government executives, find this result puzzling. How can people lose faith in the government’s success in controlling inflation, when headline inflation rates have been relatively tame? Headline inflation rates are 4.0%, 2.7% and 2.6% in January, February and March 2012, respectively.

There are at least two plausible explanations. First, while headline inflation rates maybe mild, the inflation rates for housing, water, electricity, gas and other fuels in recent months have been relatively high. Inflation rates for this category are 5.2%, 4.6% and 4.5% in January, February and March, respectively. With wages relatively fixed, these levels of inflation are not tolerable.

The second explanation is that many Filipinos — I estimate about one in four workers — do not have a decent job. For the unemployed and underemployed, even constant prices are burdensome.

The second most urgent issue of national concern is increasing the pay of workers. The approval rating has fallen by 18 percentage points — from 59% in October 2010 to 41% by March 2012. The disapproval of the way the administration is handling the issue has doubled: from 11% to 21%.

The third most urgent issue of national concern is fighting graft and corruption in government, the lone governance issue among the top five urgent national concerns. The people’s rating has remained constant. From an approval rating of 57% in October 2010, it edged up slightly to 60%, or by three percentage points. This is not much of an improvement since the disapproval rating has increased by the same level — from 13% to 16%. In addition, the improvement is within the study’s margin of error.

The result is surprising in a way. Despite the high-profile impeachment trial of Chief Justice Corona and the arraignment for electoral fraud of former president Arroyo, there has been no improvement in the Filipino people’s rating of success of the Aquino administration in its fight against graft and corruption in the government.

The failure to create more jobs is the fourth major issue of national concern. The disapproval rating on the government’s programs to create jobs soared from 11% in October 2010 to 21% in March 2012, or a difference of 10 percentage points. The number of citizens who disapproved of the administration’s performance on job creation has nearly doubled. Worse, those who approved fell by 18 percentage points — from 59% in October 2010 to 41% in March 2012.

The fifth most important issue of national concern is poverty reduction. Here the erosion of public support has been quite dramatic. In less than two years, the approval rating has declined by 19 percentage points, from 47% to 28%, while the disapproval rating has more than doubled, from 18% to 40%.

I will put the blame for the erosion of public approval, and rising disapproval, on the weaker economic growth, from 7.6% economic growth in 2010 to 3.7% growth in 2011, and the lack of progress in creating enough good jobs for an expanding labor force. But wasn’t the government guilty of shooting itself in the foot by under-spending massively at a time when faster spending was needed?

I can understand why Filipinos have become increasingly unhappy with the state of the economy. With the promise of a new administration, the expectations were high. Yet the economic expansion slowed significantly: from 7.3% growth in 2010, the economy grew by only 3.7% during President Aquino’s first full year in office. This year, the economy would probably expand by around 4.2%. This is much lower than the government’s forecast of GDP growth of between 5% and 6%.

In the absence of an aggressive job creation program, economic expansion will continue to be weak and unevenly distributed. Many more poor Filipinos will fall through the cracks into extreme poverty.

When the economy grew by 3.7%, it does not mean that the state of economic well-being of every Filipino improved by 3.7%, across-the-board. The reality is that for some big industrialists and rich stockbrokers, their incomes may have increased 100%; for some, their economic well-being may have improved modestly; for a great majority, their economic well-being may remain unchanged; and for many, their economic well-being may be negative.

In the meantime, in the neighborhood two million Filipino babies are born every year. The tragedy is that the poor who can least afford to have large families are having more babies.

For many Filipinos, perhaps as many as half, their lives are going to get worse before they get better. While the world economy is edging forward, serious risks remain.

Overseas employment as a window of opportunity is closing. Merchandise exports will continue to face an uncertain future as world trade shrinks.

Public under-spending last year provides opportunities for the Aquino administration to ramp up spending this year. But the size of public infrastructure spending remains limited. The promise of public-private partnership initiatives might remain, by and large, just a promise. PPP projects won’t have a significant contribution to economic growth in 2012, as the awarded PPP projects this year are expected to take off only in 2013. The solution to the PPP problem goes beyond preparing feasibility studies and bid documents. Pushing the PPP program forward requires competent leadership, hard work, and policy credibility.

The Bangko Sentral has a role to play too. It might cut interest rates or reduce reserve requirements further in order to spur private investments. These measures are easy to do and should be done (if only to discourage the entry of the destabilizing “hot money” into the system). But will investors invest in the face of growing uncertainty and slowing economy? You can lead the horse to water, but will it drink?