Sinking Deeper into Crisis


It is true that the financial crisis affecting the US and the other centers of capitalism, including Germany, UK and Japan, would not bring the country down into a recession and crisis. The Philippines is already in a state of crisis, in the first place. What it would do is to sink the country deeper into crisis as the main factors propping up the economy would weaken, and the advanced capitalist countries would accelerate the plunder of the country through ramming through agreements and policies that would help mitigate the impact of the crisis in their own countries while worsening it in ours.

BY BENJIE OLIVEROS
ANALYSIS
Bulatlat

When the series of bankruptcies began on September 15, 2008, the Arroyo government told the public that the exposure of local banks to Lehman Brothers was too small to affect the local economy. Later, President Arroyo assured the people that contingency plans and safety nets are being readied just in case. But now the Arroyo government is talking about “staying the course” as rougher times are ahead.

It is true that the financial crisis affecting the US and the other centers of capitalism, including Germany, UK and Japan, would not bring the country down into a recession and crisis. The Philippines is already in a state of crisis, in the first place. What it would do is to sink the country deeper into crisis as the main factors propping up the economy would weaken, and the advanced capitalist countries would accelerate the plunder of the country through ramming through agreements and policies that would help mitigate the impact of the crisis in their own countries while worsening it in ours.

Loans would be hard to come by as credit tightens. There is currently an international credit freeze as banks refuse to lend even to each other. This credit squeeze is supposedly the target of $700 billion bailout plan of the US and the UK’s £500 billion bailout package. But these would merely keep their banks afloat and would not increase the amount of money available for lending, especially to other countries. The Arroyo government already announced that it would stop its practice of prepaying loans before their dates of maturity as the value of the peso is sinking, and perhaps in anticipation of the tightening of credit.

Remittances of overseas Filipinos would likewise be affected as the job situation in the US worsens. The US has shed 760,000 jobs from January to September 2008, and this would definitely affect Filipinos residing there. The US is the single biggest source of remittances from overseas Filipinos at 49 percent of the total.

Even the temporary source of dollar reserves, portfolio investments is already affected with a net outflow of $636 million during the first half of the year.

The so-called sunshine industry of local employment Business Process Outsourcing, which is current employing around 200,000 graduates and is perhaps the only industry that has still been aggressively hiring before the crisis erupted, would also be affected as 90 percent of its contracts are from US companies.

Passing on the crisis

The timing of the passage of the Japan-Philippines Economic Partnership Agreement (JPEPA) by the Senate was not only insidious – as it was passed late Wednesday night on the last day of session before the Senate goes on a one month recess- it also shows the urgency by which Japan wanted it passed.

Aside from containing unconstitutional provisions, the JPEPA is more for the benefit of Japan than the Philippines. It is aimed at liberalizing trade and investments between both countries. But the trade relations that would be intensified favors Japan more than the Philippines.

According to data gathered by IBON Foundation, in 2003, Japan’s exports to the Philippines amounted to ¥1.0419 trillion, consisting mainly of machinery and industrial goods. On the other hand, Philippine exports to Japan amounted to ¥815.5 billion, consisting mainly of bananas, mangoes, and other fruits and farm products, which are mainly produced by TNCs (Transnational corporations) such as Del Monte and Dole. This translates into a negative trade balance for the Philippines in the amount of ¥226.4 billion. Intensifying trade between both countries would only worsen the country’s trade deficit more.

In terms of investments, Japan wanted to do away with foreign equity limitations. In 2007, Japan was the second biggest investor in the Philippines, with direct investments amounting to P38.587 billion ($836,157,579 at the 2007 average exchange rate of $1=P46.148) . But cumulatively, it is the biggest investor at $3.9 billion as of 2005. With the various tax holidays, fiscal incentives, and the right to repatriate profits freely, Japanese corporations gain more out of investments than the Philippines, which, at most, gains from the foreign exchange they bring in and the minimal employment generated by their corporations. Also included in the agreement, is a provision for “Performance Requirement Prohibitions”, which disallow the Philippine government from setting requirements or conditions to Japanese investors, such as requiring them to use or purchase domestic goods and local services.

The Philippine government is hyping about the supposed opening up of Japan to nurses and other health workers. But they have to undergo language training and qualification requirements. While acquiring these skills they can be hired as apprentices who are reportedly overworked and underpaid in Japan.

This is the first bilateral agreement entered into by the Philippines. With the slow pace of agreements at the World Trade Organization – mainly caused by resistance and disagreements regarding removal of protectionist policies and subsidies being maintained, ironically, by advanced capitalist countries – and the world economic crisis, it is expected that the Philippines would be pressured to enter into more disadvantageous bilateral agreements by other advanced capitalist countries that are likewise frantically searching for fields of investment, which would enable them to take advantage of cheaper costs, including labor, and penetrate more markets to generate higher profits to help them stave off the crisis.

These, on the other hand, would result in higher current account deficits for the country, more bankruptcies of local firms and agricultural producers who would lose out in the competition with giant TNCs, more extraction and destruction of the country’s natural resources, more landlessness and displacements as TNCs grab the land of farmers and indigenous peoples, and more exploitation of workers, all adding up to a worsening of the crisis of the Philippines.

Staying the course

Amid the crisis, the Arroyo government is determined to “stay the course” of high taxes, liberalization, deregulation, and privatization. But for whom?

While the government is pushing forward with the privatization of the remaining assets of the government, such as in the power and energy sectors – as it tries to sell its remaining assets in power generation and transmission and its 40 percent stake in Petron- the US, UK, Germany, Netherlands, and other advanced capitalist countries are taking over their banks and investments houses, and mortgage lending firms.

As the Arroyo government refuses to compel oil companies to rollback pump prices consistent with its policy of deregulation, advanced capitalist countries are talking about regulating their financial sector, even to the extent of setting ceilings on the salaries and benefits of executives, and regulating lending activities.

While the Arroyo government is further opening up the country to the entry of imports and investments to the detriment of local manufacturing and agriculture, advanced capitalist countries are pushing for bilateral agreements favoring their own TNCs.

And as the Arroyo government refuses to repeal the VAT even in the face of high prices, the US has included in its bailout plan, tax rebates for its citizens and the UK is compelling banks that avail of its own bailout plan to extend normal credit lines to homeowners and small businesses.

In justifying the UK bailout plan, Prime Minister Gordon Brown was quoted as saying “This is not a time for conventional thinking or outdated dogma but for the fresh and innovative intervention that gets to the heart of the problem.” (Funny how the same argument was used against those opposing globalization.)

More repression

The course that the Arroyo government is stubbornly taking is bringing it in direct confrontation with the Filipino people who are already suffering from the crisis, and are being asked to take more. This would surely make the people more restless and would most probably result in a strong protest movement.

Consistent with its dictatorial ways, the Arroyo government would respond to this with more repressive measures and human rights violations. And it would get ample support from the US, which would also expectedly intensify its “war on terror” to prop up its ailing economy by giving business to its military weapons industry, to impose its will on developing countries to get greater concessions for its TNCs, and to assert its political-military hegemony amid the crisis in the world.

This would only sharpen the contradictions between the oppressed peoples of the world versus the advanced capitalist countries and its client states. Bulatlat

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One Response to “Sinking Deeper into Crisis”

  1. Managed Forex Rankings Says:

    Managed Forex Rankings…

    One of my favorite quotes about stock market investing is by Benjamin Graham: Wall Street people learn nothing and forget everything….

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