BEYOND POVERTY MEASURES, INEQUALITY GROWS

IBON Features/May 2007

The Philippine Poverty Situation
BEYOND POVERTY MEASURES, INEQUALITY GROWS

In 2006, the US$12.4 billion net worth of the Philippines ’ 10 richest is equivalent to the combined annual income of the poorest 9.8 million households.

By Rosario Bella Guzman

IBON Features—In the Philippines, not only is poverty increasing, so are income inequalities. As the old line goes, the rich are getting richer while the poor are sinking deeper into poverty-- and this has proved especially true under the Arroyo administration.

Based on various years of the Family Income and Expenditure Survey (FIES), income distribution is skewed and has worsened since 1985. Over the period, the share of the poorest 60% of families in the national income decreased by 1.8 percentage points while the top 20% were able to increase their share by 1.2 percentage points.

According to the 2003 FIES, the richest 20% of the population account for 53% of total national income while the bottom 20% get only 4.63 percent. The income of the richest 10% of households is 21 times that of the poorest 10 percent.

Such inequality cannot be explained by simply attributing it to differences between regions and economic sectors (i.e. incomes of families in Metro Manila are higher than those in the Autonomous Region of Muslim Mindanao).

Income inequality is primarily due to the differences in the ownership and control of the country’s resources within the regions, provinces, urban or rural areas, and economic activities. In short, inequality is still the result of a few foreign and local elite monopolizing the country’s resources and employing the rest of the people, as shown by examining the country’s agriculture and industry sectors.

Dominated by a few families

Agriculture is still the country’s major economic activity, directly and indirectly accounting for around three-fourths of the gross domesti c p roduct (GDP) and 40% of transactions in the market while employing 70% of the labor force. Yet the majority of the country’s poor still live in the countryside, precisely because land remains concentrated in the hands of a relatively few land-owing families.

Based on the latest census of agriculture, less than one-third of total landowners still own more than 80% of the country’s agricultural land. Fifty two percent of the farms in the country covering 51% of total farm area remain under tenancy, lease, and other forms of tenurial arrangements. The average farm size is two hectares– subsistence and household level– while 49% of the farms still use primitive technology such as plows and carabaos. Forty-two percent of these farms are not even owned by the farmers.

The dominant families in the country are the land-owning ones whose interests also extend to trade, banking and finance, real estate, as well as manufacturing. The country’s regions can virtually be subdivided into fiefdoms according to the ownership of lands by these families, who include Danding Cojuangco who owns 19,000 hectares all over the archipelago; the Roxases with 8,500 hectares in Batangas; the Cojuangcos (of Cory Aquino) who own the 6,000-hectare Hacienda Luisita in Tarlac; and others such as the Floirendos of Southern Mindanao, Dys of Northern Luzon and the Zubiris of Bukidnon.

To defend their land monopoly they have also stuffed the legislature with representatives from within their own clans. According to a study by the Philippine Center for Investigative Journalism, some 60% of the membership of the 12th Congress (2001-2004) came from the land-owning families or represent their interests in legislation.

On the other hand, foreign and local capitalists dominate local industry and services. Transnational corporations (TNCs) are concentrated to a large extent in manufacturing, followed by wholesale and retail trade and financial intermediation. In manufacturing, TNCs account for the bulk of the revenues derived by the top 1,000 corporations.

The largest TNCs operating in the country include the likes of Texas Instruments, Royal Dutch Shell, Toshiba, Chevron-Texaco, Nestlé, Fujitsu, Philips, Zuellig and Panasonic. By nationality, over half of the TNC revenues are accounted for by Japan (29.4%) and the US (23.8%), distantly followed by the Netherlands (7.3%), Great Britain (6.8%), Switzerland (3.5%) and Germany (1.6%).

The largest transnational banks (TNBs) operating in the country are Citibank, Hong Kong and Shanghai Banking Corporation (HSBC), Standard Chartered and Deutsche Bank, and ING Bank, with the top five TNBs net income reaching P5.5 billion in 2004.

Local family conglomerates are owned and controlled by the country’s biggest landlords and businessmen. The top ten conglomerates in 2004 were those owned by the Cojuangcos (San Miguel Corporation); Gokongweis (JG Summit); Ayalas (Ayala Corporation); Henry Sy (SM Investments); Lopezes (Benpres Holdings); George Go and family (Equitable PCI, which has lately merged with Banco de Oro owned by the Sy family); Concepcions (RFM Corporation); Villars (Filinvest); Pangilinans (Metro Pacific); and Andres Soriano and family (A. Soriano Corporation). Their revenues in 2004 totaled P334 billion.

No Trickle-Down

There has been increasing poverty and inequality under Arroyo despite much-hyped economic growth. This only serves to underscore the distorted character of the economy during her watch.

Late last year, the government as well as private economists claimed that per capita income or the share of every Filipino in the country’s wealth as measured by the gross domestic product (GDP) would hit $1,400 (approximately P71,834) by the end of 2006. But even government economi c p lanners had to admit that the national wealth was not shared equally.

In fact, if the shares to total income defined in the 2003 FIES were used to allocate the 2006 GDP, the poorest 10% would have a per capita annual income of just P2,781 while the richest 10% would have a per capita income of P56,695 (based on an average family size of five).

This inequality is further reflected in the huge gap between the wealth of the country’s richest individuals and families and the poorest Filipinos. The US$12.4 billion net worth as of 2006 of the country’s 10 richest is equivalent to the combined annual income of the poorest 9.8 million households (i.e. P625 billion in 2003).

Hence, more than ever, economic growth under Arroyo continues to measure the growing profits and wealth of a few rather than the welfare of the many. But in the context of a Philippine economic system that favors the rich and powerful, it should not be surprising that while poverty increases in the country, so does inequality. IBON Features