Bam on the 2016 Budget Hearing Day 1

Sen. Bam: This is my question practically every year. If we look at Secretary Balisacan's presentation on poverty incidence, currently, the 2013 poverty incidence is at 24.6%.

For 2014, we have 25.8%. We don't have the numbers yet for 2015. What do we need to do to bring this down to, firstly, 20 to 23, which is the 2015 target, and 18 to 20, which is the 2016 target?

Because, it's quite optimistic to bring this down by 5 percent but I'm sure it's doable. What are the main programs and activities of government that we need to do to bring the poverty incidence to the target that we've set for ourselves?

Secretary Balisacan: Let me just point out what contributed to the increase from the first half of 2013 to the first half of 2014. That's what's largely the impact of food inflation. We had high inflation during that period.

In fact, if not for that inflation, if food prices would have behaved the same way as for the other commodities, poverty could have actually come down. The growth without that inflation would have been very inclusive.

The prices of rice, in particular, which constitutes about 20% of spending of the poor, rose to double digits. That's a major lesson for us moving that food prices and management of food supplies is crucial for poverty. If not managed, it can wreck havoc in the economy.

Moving forward, based on what we know from evidence and experiences in many places, the only way to sustain the progress in poverty reduction is investment. Investment that will create high quality employment opportunities, not only in agriculture but outside of agriculture.

Ang problema ho, 1/3 ng labor force ay na-trap sa agriculture because we have never managed our industry moving forward and create good quality jobs. Normally kasi, in many successful dynamic countries, the labor in agriculture find good quality employment outside of agriculture.

Iyan ang problema natin in the past three decades. We're not able to get that transition. So the program that we have set since 2010 is addressing that particular problem, moving jobs from low quality sectors to high quality sectors.

The rate we're going, even as we managed to achievement five percent of GDP for infrastructure, that's still low compared to our neighbors.

In the next 10 years, we just have to continue building infrastructure that will support the private sector.

Sen. Bam: Secretary, you're saying that to reach the target for 2016 to go from 25.8 to eventually maybe as low as 18, you're saying that we need to focus on developing more jobs that are high paying and infrastructure which will make logistics. Are there anything else you would like to add key priorities?

Secretary Balisacan: There are more. In fact the entire development strategy and spending program is geared to address three major considerations - massive employment generation, poverty reduction and building resiliency in the economy.

Isa pang pinaka-crucial ay ang social sector, iyong investment natin sa human capital, health and education. That's why, in this administration, we have put emphasis on human capital dahil may studies na ang poverty is transmitted from one generation to another.

It turns out that human capital development is one of the most effective equalizers so that if you can get this addressed and the CCT is part of our tools to achieve that, we should be able to address effectively poverty in this country.

When I say effectively, we're talking about our children today would have better opportunities in the labor market, 10 to 15 years from now.

Sen. Bam: If you want to drive down poverty, we're focusing on human capital development and you see that in the budget for DepEd and DOH. We focus on infrastructure, which is the DPWH.

Iyong employment generation, what have we funded in the budget that is focused on employment generation?

Secretary Balisacan: A big part of that would be on ease of doing business. Secretary Abad mentioned what programs would impact in the ease of doing business in this country. At the end of the day, 88 percent of country is private sector. We need to get investment growing rapidly because only investment creates quality jobs.

A big challenge for us is to get small and medium enterprises linked with the bigger chain, the supply chain and the high value chain and I admit that there's much more to do there. A big part of the problem are also legislative in nature because of the access to finance, access to technology ang access to regulation.

In the end, kasi ang view ko, kung ang employment lang ang tinitingnan natin, mababa po ang unemployment rate natin na 6.8 pero ang problema ang under-employment natin napakataas. They really have to change the structure of the economy toward creating more quality jobs and that's something that we cannot do overnight.

Sen. Bam to BSP Deputy Governor Gunigundo: As you know, we're the ones filing the Credit Surety Fund Bill. Let me just ask a follow up question.

Sa micro, there are a lot of groups and many of them are working with Bangko Sentral. Commercial-wise, medium and large, I think you can easily get relatively low interest rates there days as long as you have track record and collateral.

In my estimation, being the Chairman of Committee on Trade, it's the small businesses, which don't have as many options.

Hence, the Credit Surety Fund program the BSP. Ito po iyong P500,000 to maybe about P5 million, not much of a track record, not much of collateral assets but maybe you have orders, you have high potential. How do you unlock that small business space to really have a full inclusive chain with regard to financing?

Deputy Gov. Gunigundo: When you talk of microfinance, these are loans granted by microfinance-oriented or microfinance banks. These are granted to small businesses, without collateral and without credit history. In 2014, about P7.8 billion was generated from that end.

With respect to the CSF, depending on the contribution of the cooperatives which are participating in the program, minimum of P100,000 but they can borrow ten times. If they contribute P100,000 to the fund, they can borrow P1 million from the participating banks.

This is some of the strength of the Surety Fund that has been put up on the basis of the counterpart funding given by DBP, Land Bank, IGLF and the local government units.

Sen. Bam: Are you saying that the Credit Surety Fund is our best bet to fund that missing middle space of a need of P500,000 to about 5 million?

Deputy Gov. Gunigundo: This is a promising program of the BSP. So far, we have done 40 CSFs all over the Philippines, 548 cooperatives are involves, around P1.8 billion has been granted and 14,607 beneficiaries have benefited from the program.

If this is replicated in other parts of the Philippines, we believe that is something that can make a difference in helping government address poverty incidence.