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4.5%

FIRST PERSON - Alex Magno (The Philippine Star) - June 5, 2021 - 12:00am

The Philippine Statistics Authority reported May inflation at 4.5 percent.

Most media outlets described this inflation number as “steady.” It does reflect the same rates of the previous months. It is well within the BSP’s expected inflation range of 4 percent to 4.8 percent for the month covered. But it is also above the target range of 2 percent to 4 percent our economic managers set for the year.

The full year inflation rate could still fall to within target range. This will happen if the price acceleration slows down in the second half of the year. A slower inflation rate, however, will be difficult to achieve if oil prices continue on their upward trend.

No one has yet described the inflation rate for the first five months of this year as “elevated.” That was the adjective widely used to describe the situation in late 2018 when the inflation rate hovered above 6 percent.

In 2018, the main driver of inflation was rice shortages. These shortages drove hoarding and price speculation in the market. Government responded decisively by liberalizing rice importation and subjecting imported rice stocks to tariffs like most other commodities.

Rice tariffication hit two birds with one policy act. It ensured ample supply of the staple product and raised a fund for agricultural modernization to make our farms more competitive.

Today, rice prices are not an inflation factor. Prices for the commodity declined after tarrification and remain low to his day.

Anticipating the consequences of ASF on our pork supply, considering the culling of millions of hogs, our economic managers tried to head off a surge in inflation by simultaneously increasing import volumes and dramatically decreasing tariffs for a limited period. This policy option was taken to preempt an inflationary spike.

The Senate, responding more to the protectionist demands of domestic hog raisers, opposed the policy option taken by the economic managers. The senators even threatened to take back the President’s tariff-setting powers.

A compromise was reached between the Duterte economic team and the senators. The reduction in tariffs and increase in import volumes were moderated to suit the senators.

As a result of this compromise, meat prices are inflating at over 20 percent. Meat and fuel prices push our overall inflation rate over the target range.

There is nothing we could do about crude oil prices. The price dynamics here are global.

But there is a lot more we can do about the other commodities. However, any policy option intending to blunt price increases will run into the gamut of our domestic policies and entrenched interests.

We saw that in the case of rice tariffication and then, more recently, in the case of ensuring ample supply of cheaper pork.

Procurement

There is a strange bill submitted for consideration at the House of Representatives. Enrolled as House Bill No. 8762, the bill is titled “An Act Further Amending Presidential Decree No. 334, as Amended, Otherwise Known as the Charter of the Philippine National Oil Company.”

On the face of it, the bill proposes enhancement of the PNOC’s charter so that it may better pursue its mandate of ensuring the security of the country’s oil supplies. That might seem a worthy cause indeed.

However, this objective will be pursued by two means: removing congressional oversight over the PNOC’s budget and the exemption of the state enterprise from the framework of the Procurement Law. Both are problematic.

Rep. Lito Atienza vowed to fight this bill. He thinks this will not only extinguish congressional powers over the PNOC, it will open the floodgates to corruption in the agency if it is taken out of the requirement for public bidding. If this bill ever finds itself into law, the PNOC will be a republic unto itself with no effective oversight over what it does.

True, the PNOC does not receive taxpayer money and operates on the basis of what it earns from its business. But it has that business precisely because it is a state enterprise. The company was created using public funds. All of its disbursements are public funds.

If the PNOC wants to operate like a private company, then it should be privatized. In this way, taxpayers will be able to claw back investments in the company.

The present practice requires the PNOC to submit its annual budget to Congress through the Joint Congressional Energy Commission. This bicameral commission oversees the nation’s energy situation and ensures national policy is executed by all agencies.

As a state enterprise, the Procurement Law governs all its purchases. This is, to be sure, not a perfect law. But the law does provide for unique and exceptional cases where open public bidding may not be the most workable option. The PNOC may apply with the Government Procurement Policy Board for what is called “alternative methods of procurement.” This is what other GOCCs do.

In a word, there is no necessity for House Bill No. 8762. It will only set an unhealthy precedent for other state enterprises to take advantage of. It will result in a weakening of the lines of accountability and undermine the enforcement of national policy. What we need in the interest of good government is precisely the strengthening of those lines of accountability.

This concern is ultimately the basis of Lito Atienza’s objections to the PNOC bill. Objecting to the bill defends congressional oversight over state enterprises. Allowing the passage of this bill, on the other hand, encourages state enterprises to secede from public control.

As more and more legislators come around to sharing Atienza’s view, this bill should soon be trashed.

PNOC PSA
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