Confusing economic views and directions

First posted 01:01am (Mla time) July 14, 2006
Inquirer

http://news.inq7.net/archive_article/index.php?ver=1&index=1&story_id=9684

Editor's Note: Published on Page A14 of the July 14, 2006 issue of the Philippine Daily Inquirer

THERE’S no way the country’s economy can move forward until and unless our economists and economic planners get their act together or make sense of themselves.

Consider this: Every time the peso strengthens vis-à-vis the dollar, the economists would caution against a very strong peso, which they say would impact adversely on the competitiveness of our export industry, one of the country’s engines of economic growth.

Just recently, when the peso was about to hit the P50-$1 rate, it was reported in the newspapers that the central bank was forced to intervene in the exchange market to prevent the peso from gaining further strength versus the dollar.

Also recently, there were news reports that billions of pesos in potential government revenues were being squandered because of the indiscriminate granting of tax incentives or tax holidays to industries. Such incentives are turning out to be unnecessary and redundant, because the grantees, such as Smart Communications and Globe Telecom, will invest anyway without those incentives.

And as if to add insult to injury, Lafayette Philippines Inc., a cause of environmental pollution in Sorsogon province, was reported to have been given P4.5 billion in tax breaks. One doesn’t have to be a rocket scientist, or have a postgraduate degree from Harvard, to figure out that it would be better to give these billions of pesos worth of redundant tax breaks to the export industry while allowing the peso to freely appreciate or strengthen to the highest level possible.

Common sense tells us that a strong peso is very good for the country for a hundred reasons, such as a lower debt burden, lower oil prices that mean lower production costs and lower prices of goods and electricity, lower fares in public transport, etc.

Congress, especially the Senate, should investigate the indiscriminate grant of tax incentives as it is clearly disadvantageous to the government and may, in fact, be a source of graft. The environmental groups opposed to mining, together with the commission that investigated the Lafayette incident, should study whether it is appropriate to ask the courts to stop the operation of Lafayette, given the huge tax breaks extended to this firm which is clearly inimical to the interest of the public.

It is downright absurd and inconceivable to grant so much favors to a company that is out to exploit the country’s resources and whose track record in caring for the environment has been proven wanting.

ROBERT DEFENSOR (via e-mail)