Bayanihan II is as good as passed although not everyone appears to be happy with it.
To be sure, the special spending bill is prudent. It involves about P160 billion to be spent for our economic recovery. The Constitution prohibits Congress from legislating a spending bill with no identified sources of funding.
A large portion of Bayanihan II will be in the form of additional capitalization for LandBank, the Development Bank of the Philippines and the Philippine Guarantee Corporation. They will then be lent out to our small and medium enterprises to help them restart their businesses, rehire workers and hopefully get our domestic economy going again.
In addition, Bayanihan II allows for a 60-day moratorium on outstanding loans owed our banks. That will cost our banks – although they find this a lot more acceptable than the original 365-day moratorium contemplated by our legislators.
In a word, Bayanihan II will not deliver a bonanza of subsidies that some may hope for. Such a bonanza might force us to borrow more than might be convenient for our long-term fiscal stability. That will be a drag on the ability of our economy to grow further down the road.
Rep. Stella Quimbo estimates that the lockdowns cost our economy about P2.3 trillion. She seems disposed to see public spending replace a large part of that. This is why she supports a much larger stimulus bill possibly to supplement the 2021 national budget.
There are two stimulus proposals being considered by the House of Representatives. Covid-19 Unemployment Reduction Economic Stimulus Act (CURES) proposes a P1.5-trillion spending package. The Accelerated Recovery and Investments Stimulus for the Economy Act (ARISE) proposes a P1.3-trillion package. Both will likely be reduced as the deliberations proceed and fiscal reality bites.
NEDA chief Karl Chua has a higher estimate of our economic losses. He says the economy lost about P1.5 trillion each month that large parts of the country were put in lockdown. But he has not proposed a larger spending bill.
Our fiscal managers, however, point out the size of the spending package does not necessarily produce better results. Malaysia deployed a large stimulus package equal to 18.2 percent of their GDP but her economy still contracted by 17.1 percent in the second quarter. The UK had a massive stimulus program amounting to 23.4 percent of GDP but her economy contracted by 21.7 percent nevertheless.
By all means, we should debate the viability of spending more to spur domestic activity. But we should take great care that the larger spending bill does not transform into a huge pork barrel that benefits the politicians more than the poor.
Tourism Investments
With no tourists coming in during the period of pandemic, it might seem ridiculous to invest in new tourism infrastructure. But the proposed investment in tourism infrastructure proposed as part of Bayanihan II did have some basis in existing long-term plans.
The National Tourism Development Plan projected that by 2022, there will be 12 million international tourist arrivals and 89 million domestic tourists. That projection is not at all outlandish. For 2019, before the virus caused our economy to go haywire, we registered 8.2 million tourist arrivals.
Perhaps tourist inflow might not bounce back in the near future to the extent the existing industry plan projects. Still, our existing tourism infrastructure is already stretched. This is the reason, for instance, why Boracay Island had to be shut down for rehabilitation. This case illustrates our failure to invest enough in our major tourist destinations to ensure proper drainage and sewage treatment systems.
When things begin to open up, we can expect a huge flood of tourists from China particularly. This large country, whose economy was only partially dislocated by the pandemic, has a wealthy middle class of about 80 million.
During the bicameral conference to finalize Bayanihan II, a bit of a spat broke out between Sen. Franklin Drilonand the House delegation led by Rep. LRay Villafuerte. The senator favored cutting the tourism infrastructure fund, describing this fund as involving the construction of toilets. He wanted the tourism fund redirected to save existing tourist oriented businesses.
Drilon apparently continued to demean the House delegation when he returned to the Upper Chamber. This drew a rebuke from Sen. Pia Cayetano, sister of the House Speaker.
The House delegation, for their part, denounced Drilon’s “myopic” grasp of infra investments in tourism. Tourism infra is not limited to constructing public toilets. In involves far-sighted investments such as rehabilitation of existing tourist hotspots, boosting digital infra to cover remote areas, improving sewage treatment and ensuring quality water and power supply.
The congressmen disagree with Drilon’s position that the Department of Tourism be given control of the diverted infra funds so that they can allot this to the big tourism stakeholders. They think this will only favor the big players who have access to bank financing.
The House delegation found it odd that Drilon would now hold such a low view of infra investments in tourism. He pushed hard for the investment of P800 million in the Iloilo Convention Center as well as P8.8 billion for modernizing the Iloilo International Airport. He is said to be one of the driving forces behind the 8.1 kilometer Iloilo River Esplanade that doubles as a flood control project.
Among the items in TIEZA’s list of infra projects are: the rehab of the Jaro Belfry, the construction of a Tourism Information Center and Sunburst Park in Esplanade 3, and the restoration of the Arevalo, Molo and La Paz plazas.