What is to be done? Restitution to the dispossessed

THE PHILIPPINES, a nation of a little over 100 million people and growing relatively fast, has been afflicted by widespread poverty for a long, long time now.

When this article was being written, poverty incidence was estimated by the Philippine Statistics Authority (PSA) to be at 26.3% of total population in the first semester of 2015.

As it turned out, the final rate for 2015 as released by PSA recently is 21.6%, a very surprising significant drop in six months.

In any event, this poverty rate, equivalent to more than 22 million Filipinos which is larger than the total population of many countries, is still very high. With this magnitude of poverty all around us, one would think that we should have already embarked on a Marshall Plan to reduce this very high incidence of poverty. But no, we haven’t and there is no such large scale plan in sight.

We still do not have a holistic goal-oriented, fixedly focused, well-organized, well-managed program to combat poverty. All that I have been hearing about is that: drive the economic growth high enough and poverty will go down. I have been thinking about this asserted relationship for a long time now because it implies a cause and effect relationship that I could not figure out myself. I had asked a few economists about the mechanics of any cause and effect in this equation, but I still cannot get an answer that I can understand. Or, is it the other way around? Deal frontally with poverty which helps expand the economy, and then ride this relationship into a virtuous cycle. I am not an economist but I can see an understandable logic in this latter cause-and-effect relationship, at least under Philippine conditions where economic activities that employ unskilled and semi-skilled labor are low and the unemployed and underemployed do not have adequate education or training, under an environment where the two main drivers of the Philippine economy are offshoring work into the Philippines and OFW opportunities outside of the Philippines where the educational requirement for employment for both opportunities is complete high school education or higher.

That said, there are two big things where I see we have to engage in frontally to reduce poverty substantially -- basic/secondary education and housing. I will dwell with housing first as it will require a great deal of money. I will cover education in another opportunity.

I have read recently some estimates of housing needs of the Filipino poor.

In a speech by the vice-president two months ago, she said that there were 2.2 million informal settler families in 2015 and a housing backlog presently of 5.7 million units. I will use this number, although it is higher than the 3.75 million families at poverty level as recently reported by PSA. Anyway, this appears to be the right approach as total housing needs would necessarily exceed the number of families at poverty level. At P400,000 per housing unit composing of lot and house, to provide shelter to 5.7 million poor families will cost a total of P2.3 trillion. (The P400,000 estimate is a number I derived from some statistics about socialized housing. A few months ago, a well-known property housing developer awarded the Filipina Olympic weightlifting silver medalist with a house and lot which was reported to have a value of P450,000. Considering that public socialized housing is very large scale and this activity does not incur selling costs, the P400,000 estimate appears reasonable.)

Let me segue a bit.

I wrote some time ago that almost all of our ancestors were dispossessed of their use of the land by the Spaniards who gave ownership of the land to their cohorts, the Church and the powerful. I will not dwell in detail on this assertion. What I want to express is that the descendants today of those dispossessed Filipinos, who are now poor, deserve a modest restitution -- in the form of highly subsidized housing for each poor family.

Of the estimated cost of P400,000 per unit (stand-alone, linked, or mid-rise unit), the state will pay much of it, except for a repayment of P50,000 or P100,000, over a sufficiently long period of time, interest-free, with all the safeguards, etc. It is important that a modest repayment for the unit is required and the unit not given wholly free, in order for the housing recipients to feel that they bought the units and as such will very likely take good care of it.

Going back to the P2.3-trillion estimate, a 20-year program may be able to do it. On this basis, the total cost translates to P110 billion annually, or 3.3% of the recently proposed 2017 national government budget. Priority should be given to the informal settlers of 2.2 million families and those who live on the sidewalks, along riverbanks and under bridges which could be fully covered in 8 years. Housing should be built near the place where the beneficiaries have their existing shelter or work to avoid any substantial infrastructure development.

In terms of economic development, 20 years is not a long time; it is equivalent to the terms of 3 1/3 Presidents. Since Marcos, we have had 6 Presidents. On this basis, sad to say, we have already wasted a lot of time.

I know the budget requirement is large, but I believe we need to embark on a serious, determined, but doable program to deal with this housing problem of the poor. The needed annual national budget allocation can be significantly reduced in many ways: reallocation to this housing program of all pork barrel allotments; use of idle government land; reallocation of PAGCOR’s profits and sweepstakes earnings; redirection of the Malampaya funds; donations from concerned rich Filipinos; coordination into the program of the activities of Gawad Kalinga and Habitat for Humanity, and of course, repayments by the beneficiaries of the program.

Moreover, the early success of the program will help economic growth and together with other economic drivers, the program cost over time will not be big anymore in relation to the total annual national budget and GDP. As such, the program may be accelerated and can accommodate within the program period families that may become homeless in the future, the number of which is expected to substantially diminish over time as the economy expands.

Let’s get the political will to do this program. We can make it happen by putting in place the right organization, getting the right management people and installing the right systems. Given a strong will and determination, I have no doubt we can do this program successfully.

Benjamin R. Punongbayan is the founder of Punongbayan & Araullo, one of the Philippines’ leading auditing firms.

As published in Business World, dated 4 November 2016