Press Briefing by Secretary of Communications Ramon A. Carandang:

On the 45^th Annual Conference of the Asian Development Bank, the government’s conditional cash transfer (CCT) program, estimated GDP growth, the declined proposal for the minimum wage hike, and other topics

Philippine International Convention Center
May 2, 2012

COMMUNICATIONS SECRETARY RAMON A. CARANDANG: I’ll make a brief, general statement about how the Philippines is hosting this conference, and then I’ll go straight to questions.

The Philippines is proud to be host of the 45th Annual Conference of the Asian Development Bank. One of the themes that will be underlying the discussions that the ADB will have will be inclusive growth and good governance. This is a very timely topic. If you look around the world, from North Africa to the Middle East to even North America and Europe, the questions of inclusive growth have become top of mind in global economic and political discourse. So, the ADB conference which will talk about that at different levels is very timely. This is a very timely discussion that we’re having right now. I’d also like to point out that it’s a good thing that it’s happening here in the Philippines because, as you know, in the last two years the Philippines has embarked on a massive program on social spending—unprecedented—in an effort to bring about exactly what people around the world are clamoring for: inclusive growth and better opportunities for the poor. So, the Philippines again is proud to be hosting the latest ADB conference, and we look forward to many productive discussions among the delegates.

Now I can take your questions.

STAFF: I am opening the floor for questions now.

Q: Sir, what’s in it for the Philippines [to host this conference]? Do we expect to also get investors?

CARANDANG: Well, that’s not something that’s on the agenda, but I am aware that there will be business delegations from different countries who are in town. They are meeting with their counterparts here in the Philippines—just on their own and of their own initiative. The private sector has organized a series of interactions with businessmen and policymakers from around the world who are here. Over the next two or three nights, I can tell you that there will be informal gatherings which many people from the international community will be attending, along with local businessmen and local policymakers. So, that’s not exactly a goal of the conference [to get investments for the Philippines] but the fact that they’re [international delegates] here talking and they’re interested, we’re hoping it will lead to something down the road.

What else is in it for the Philippines? I think, the Philippines, for the last couple of years, if you look at the way people are beginning to perceive the Philippines, is changing. The coverage of the international media of the Philippines is: they’re describing it as a country that’s moving towards inclusive growth—on the cusp of inclusive growth. Some even call it an economic revival so it’s a good time for the Philippines to, as [Finance Secretary] Cesar Purisima says, “Come out.” We’re hoping that the publicity generated through the ADB conference will show, as [Finance Secretary] Cesar Purisima likes to say, “the Philippines is open for business.”

Q: As I understand, I think way back in 2010, the ADB infused funds to improve the social service programs that we have here, particularly the conditional cash transfers (CCT). Now have there been improvements?

CARANDANG: Absolutely. Not just [through] the ADB, although we thank the ADB—a lot of multilateral organizations including, for example, the World Bank, have been very supportive of our social spending programs. The conditional cash transfer, which is probably at the center of our government’s efforts to promote inclusive growth, now has over 3 million families enrolled. These 3 million families before the end of the year will be receiving monthly cash stipends, on the condition that their children are kept in school and that they undertake regular visits to the public health clinics. We believe that this is a program that began in other countries like Brazil, Mexico, Bangladesh. It has proven to be a very effective long-term tool in reducing extreme poverty, and the Philippines has undertaken a very massive program which includes the conditional cash transfer to help alleviate severe poverty.

Q: Sir, how about leakages? Have we addressed the problem of leakages and tried to target the beneficiaries of this program?

CARANDANG: Yes, we have, and we’re constantly evaluating the conditional cash transfer program. When you’re administering a program like this and we’re hoping to reach 5 million families by 2016, you do have to make sure that the controls are in place so that it doesn’t get abused. What we’re trying to avoid and what other successful programs have avoided is politicizing the program. What we do is we take a survey of the poorest communities. The DSWD calls it a mapping and they’ve done that regardless of what political affiliation a certain district has. You identify the number of the poorest of the poor and you provide the service to them. Technology has also helped in preventing the leakages. There are different ways to distribute that cash to the poor families and one of the most efficient and least susceptible to corruption is that they get transfers through bank accounts. In some cases, that’s not always possible but where it’s possible for electronic transfer of these stipends, that’s done. Of course, we’re talking about the poorest of the poor, so not all of them will have bank accounts but where there are areas that we can employ that then we do it. I think you’ll see that the results have been pretty good.

Q: Based on your evaluations, how effective is the conditional cash transfer program in addressing inclusive growth and is the government thinking of other measures to address this problem?

CARANDANG: Let me just start by saying, a conditional cash transfer program is not something that you see results for overnight or not even three or six months. In the case of Brazil, they had a conditional cash transfer program, which if I’m not mistaken continues to this day and it took a few years before you could actually see the long-term benefits of reduced poverty. They measured it by looking at the Gini coefficient. There are other ways of looking at it, but we believe that a sustained and growing conditional cash transfer program combined with increased spending on education and health care (which is what we’re doing) will ultimately lead to a reduction in extreme poverty by the end of President Aquino’s administration. We’re hoping to see a noticeable change in that. Again, you aren’t going to see things happen overnight. That kind of long-term, systemic poverty does not get eradicated in even one or two years so it’s going to be a sustained program.

Q: Are there livelihood programs to complement conditional cash transfers, so they get taught how to earn for themselves?

CARANDANG: In certain areas where that’s possible, that’s being done and we’re experimenting with that. I’ll give you an example. There are certain communities where you have a lot of naturally grown trees. Some of the people receiving these conditional cash transfers are being hired in part to help watch the trees—forest guards and the like. Obviously that’s not applicable in all areas. You’ll have some urban areas where that can’t be done. But the main thrust of the CCT program is really—the minimum—is to keep your kids in school. If you’re able to provide them some kind of employment opportunity, that’s well and good; but the CCT in itself is really just meant to keep the poor children in school to give them the skills later on so that they can have employable skills. The thing about the poorest of the poor, the president likes to say: When a man is drowning, you don’t give him swimming lessons, [instead] you throw him a life raft. So, [to] the poorest people, that’s what we’re doing. We’ll get to that and we’re aware that this is not something that you can do on its own but this is what we’re doing for those who are most in need.

[Editor's Note: Read testimonials from two CCT beneficiaries from Roxas City.]

Q: Clarification please, sir. You have mentioned 5 million. So did you change the target? I thought it’s just 4.2 million families/households?

CARANDANG: By the end of the President’s term, we’re hoping it’s about 5 million. The target hasn’t changed. I may be citing the actual wrong figure but whatever the figure was for the end of 2016, it hasn’t changed. What I do know is that as of the end of February, we had 3 million enrolled, which was our target for the end of the year. So, before the end of the year, they should be receiving the monthly stipends.

Q: How much did the government spend for sponsoring this ADB event?

CARANDANG: I don’t have the exact figures for that but I can probably get that for you.

Q: Sir, were you able to get the estimated GDP growth based on the first quarter?

CARANDANG: I understand that the GDP figures will be released in the next few days. I know that there has been a lot of speculation as to whether or not the GDP figures hit the target. Our official estimate is 5-6%. There has been some skepticism, I’m aware, that we have made those targets but if you look at what we’re doing as far as infrastructure spending is concerned, those of you who are visiting or those of you who live here will know that there’s more traffic because you’re seeing visibly the construction of the roads and bridges. We believe that that’s going to kick-in and provide a kicker for GDP growth for the first quarter.

I don’t have the figures yet but let me, if it’s interesting to you, let me tell you a little bit about the discussion I had [two days ago] with Secretary Rene Almendras of Energy and [Trade and Industry Secretary] Greg Domingo, in anticipation of the GDP numbers coming up. The three of us made a bet [during] lunch. What’s the GDP growth going to be? Secretary Almendras [mentioned] 6.5-7%. He’s basing that on electricity consumption which is growing [and has grown] double digits in the first quarter. Secretary Domingo was more modest, he said something like (if I’m not mistaken), 5.8-6.2% growth. We were given a half percentage point range so he’s looking at 5.8-6.2. I personally was looking at 5.2-5.7. I’m the conservative one but even if you look at the most conservative figure and I’m looking at 5.2, you can see that there’s a lot of confidence about growth prospects coming from the people who have some basis for saying that. I’m personally looking forward to [seeing] those numbers coming out so that I can have a free lunch.

Q: Sir, what would be the drivers for this [growth]?

CARANDANG: Drivers. Number one: we’re seeing the increase in infrastructure spending. A lot of the pending bottlenecks that we experienced last year as a result of the spending reforms have been resolved and we’re seeing an acceleration of (if I’m not mistaken) over 80% of the DPWH budget has been allocated already so we’re going to see spending on infrastructure. Number two: we’ve increased spending on agriculture by over 50% this year. That’s going to go to seeds, farm-to-market roads, irrigation systems–our target is to become rice self-sufficient by 2013. Secretary Alcala has been working very hard. I think you’re going to see the agriculture output increase in a big way this year. Third, of course, is tourism. In January, we had over 400,000 tourist arrivals in that month alone, which is a bigger figure than we’ve seen in a long time. There are seasonal factors that [lessen] it to around 370,000 in February but [those are] normal seasonal factors. But just the early indication of [tourist] arrivals seems to suggest that those three factors are going to fuel economic growth this year.

Q: It was reported a couple of weeks ago that [there was an attempt] to cover up eyesores in Manila in preparation for the arrival of the delegates. So, what can you say about this? There’s an area [in particular] in Pasay wherein there were billboards that were put up to hide the garbage along the…

CARANDANG: I think that’s normal. You know when you have guests who come to your house, you fix up the house a little bit. I don’t think anyone will begrudge us that. There are certain things we can’t hide. The infrastructure spending is causing a bit of traffic and I do apologize to the delegates for that. I think it’s something that we promised we would do. We spend on infrastructure and make sure that it was improved so I think that, in [one] sense, it’s a forgivable eyesore, this infrastructure that you’re seeing. Again, you clean up before your guest comes so I don’t think that’s anything negative.

Q: [On another note], what’s your comment on the miscalculation of the President regarding the wage increase, because he pegged it at 40M whereas Bayan is saying that above 15M are the formal wage earners?

CARANDANG: First of all, I think the President was trying to make a point that it’s easy over the short-term to say that we’re going to raise minimum wage by 125 pesos a day, but at the end of the day you’re the one who’s going to have to decide what kind of impact that’s going to have on the economy. The president was, in his figures, (and I believe that they’re more correct than Bayan’s figures) trying to illustrate the kind of impact a legislated wage hike of that number would have on inflation, employment, and other things. It’s not a question of quibbling on the exact number. What’s their calculation? They’re saying 15M minimum wage earners. Well, I studied economics and I can tell you that (and you can look this up yourself), when minimum wage goes up, there is a tendency for other wage levels to get increases as well. So, I think when you say the numbers are wrong, you’re quibbling… you’re losing the point of what the President was trying to say. [And] I will dispute those figures anyway.

Q: Sir, how about the taxes? Are we growing our taxes fast enough so we can [pay] for things like CCT?

CARANDANG: Yes, we are. We have a couple of things on the table this year which we are hoping to get passed: the rationalization of fiscal incentives (which we hope will bring in additional revenue for us especially in light of the increase in foreign direct investments we’re seeing), the rationalization of sin taxes (which are revisions in taxes for alcohol and tobacco products). The DOF estimates that we can raise something like 50-60 billion pesos in additional revenues annually, just on the sin taxes. So we are doing things to make sure that the social spending programs are sustainable.

Q: But has Congress given a timetable as to when these things will actually happen, because some of the bills are in quite early stages still and could still be blocked? The recent development is [that] DTI negotiators have managed to find some time so that excise taxes can be passed with finality [sometime] next year… that also puts in question any votes of any upgrade in the credit rating. It all depends on how fast congress can act on these bills so do they have any firm commitment?

CARANDANG: You’re partly right [in saying that] an upgrade will take into account the speed at which these reforms are passed by Congress. We don’t have a definite date. Congress has not come to us and said, “By this specific date we will have passed these measures.” As you know, it’s difficult to get an exact date from Congress but they know how important it is. They know how important the social spending programs are. [And not just for the social spending programs], as mentioned, the credit ratings, that’s going to have something to do with whether or not we can pass those taxes. The urgency [for] that, I think, has been properly communicated to Congress and we’re still confident that those can get passed before the end of the year.

Q: How about getting more taxes from the self-employed professionals? Any progress there?

CARANDANG: Yes. There are two things we’re talking about: legislation (which we just talked about) and you’re talking now about tax administration. If you talk to Kim Henares (and I don’t have the figures on me), we’re seeing something like (and again, don’t hold me to this—I just had a chat with her, you can check the actual figures with her), she said, there’s something like a 20% increase in voluntary tax compliance. [This means that] without having to file a case or send a letter of authority, people are actually offering to pay more taxes in order to avoid the taxman running after them. You’re seeing an increase in voluntary compliance. You’re seeing an increase in tax revenues over the first quarter (and again, I don’t have the exact figures but)—it’s somewhere between 15-20%. The tax administration efforts are proceeding and I think they’re doing quite well.

Q: Going back to the minimum wage, if we are to reduce the numbers to 15 million, is it possible for the government to support the wage hike?

CARANDANG: That’s not going to happen. Again, look at it empirically, when you raise minimum wage, wage levels in areas where you didn’t intend to [increase] also tend to go up. So it isn’t something you can control. It’s the market that decides that. At the end of the day, what are you trying to determine? Society, when it says minimum wage should be this or that, is making two very painful decisions: do you employ less people at a higher wage or do you employ more people at a lower wage? That’s ultimately the question with minimum wage and you have to find a balance between finding a decent wage and employing the most number of people. Again, the fear is, if you raise minimum wage arbitrarily by too large an amount, you will cause dislocation in many workers. So the guy who’s working in the factory who gets the raise is very happy but the guy [who’s] standing next to him who just lost his job is not going to be very happy. That’s what you’re trying to balance.

Q: But if we’re just trying to talk about the computation of the President, can we say that it’s forgivable?

CARANDANG: I don’t even think it’s wrong. Again, I dispute their figures. The President’s figures are more accurate. Again, the final figure, we’ll never know because we’re not going to do the 125 [peso] increase, but we’re taking into account the possible effects—multiplier effects—this will have. I don’t think it’s important what the number is. I think what’s important here is that you have to find a balance… some people think arbitrarily raising minimum wage is going to do good. We don’t think it’s going to happen, we don’t think it’s good. That’s why the President has taken that position.

Q: Given that minimum wage cannot be increased arbitrarily, what can you say about unemployment insurance? Aside from the programs of TESDA?

CARANDANG: There’s no unemployment insurance per se in the Philippines. [There’s] SSS, which will provide you some support during periods when you’re unemployed for as long as you’re a member of good standing. But there’s no massive unemployment program [similar to] the one you have in Europe or in the [United States] right now. What we’re trying to do, as the President says, is to protect the jobs that exist now and increase the number of jobs that are available and help workers move higher up the value chain, in order for them to have jobs that are of higher quality. Let me give you an example. Tingnan niyo yung call centers. Entry level in a call center has you answering phones, talking to customers, right? But call center agents, BPOs are now moving higher up the value chain. Instead of just answering phone calls, they’re doing backroom accounting services for financial institutions. If we can help migrate more of our call center employees and companies to that rather than simply answering phones, then that’s one of the things we’re working on… Also through the TESDA program that you mentioned.

STAFF: Okay, that’s it for today. Thank you all for coming.

CARANDANG: Thank you.

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