Sunday, July 27, 2008

Macapagal's State of the Nation Address

As Gloria Macapagal-Arroyo prepares to give her State of the Nation (SONA) address today, we can examine how well she has delivered on some of her economic promises from last year and from earlier addresses.

One of the president's most noteworthy achievements is the reduction of the federal deficit from P200 billion in 2003 to P12 billion in 2006. This year the government has announced that it will balance the budget despite the worldwide inflation woes. The reduction of the deficit, though, has not come through drastic cuts in government expenditure. In fact, the national budget has gone up by about 80 percent over this period.

What has made this possible is the expanded valued added tax (E-VAT) on petroleum products.

Macapagal has delivered on building infrastructure. In fact, she is built more than any president since Marcos and without the same authoritarian powers to bypass the bureaucratic red tape of the current process.

The NAIA 3 terminal, for example, at Manila's international airport is already partially open and is expected to begin receiving international flights by around Aug. 8. The Subic-Clark segment of the Subic-Clark-Tarlac Expressway (SCTEx) opened on April 29, and has since collected daily tolls of about P550,000. Construction has started on both Clark North and Clark South and two Japanese contractors have agreed to build four SCTEx interchanges.

Refurbishment of airports in the Visayas and other parts of the Philippines is also well underway. A number of airports have just started receiving flights from major domestic airlines after years of absence.

The NorthRail project has been a subject of controversy but according to the administration the rail system is still scheduled for "substantial completion" by the original target date of Feb. 2010. We should bear in mind that the Northern Luzon rail line was not originally Gloria's baby. It was conceived many years before she came into office, but it has been this administration that has gotten the project off the ground.

Most of the anger directed at Macapagal in terms of her economic performance has been related to the current high price of fuel and food, both of which are due to external factors beyond the government's control. However, prices in the Philippines have still remained lower than those in other Asian countries, in no small part due to the funds provided by the E-VAT tax.