Cognizant that Government’s socio-economic policies impact strongly on the industry and the homeless, CREBA has broadened the focus of its advocacies to embrace a comprehensive socio-economic reform framework. Read CREBA’s Framework for Economic & Social Advancement.
Among the major components of this reform framework are:
- Wage Hike & Lower Prices via an Interest Rate Ceiling.Since the Anti-Usury Law was rendered inoperative, the Philippines has had one of the highest levels of bank lending rates in the world. Because lending rates are allowed to be dictated by market forces ~ which, in the Philippine setting, is highly susceptible to manipulation ~ any temporary political or economic aberration results in a rate spike.And since cost of borrowing represents a major cost for all businesses, a rate spike triggers a chain of cost- and price- inflation across the entire economic spectrum, driving the economy into a tailspin.The high cost of borrowing is viewed as the primary reason for the inability of the business sector to raise wages; any government-imposed wage hike only results in retrenchment that further worsens unemployment. It is also seen as the reason for the abnormally high prices of goods and services which render local products and exports thereof uncompetitive.CREBA is of the view that if interest rates were to be stabilized at a 9% ceiling, all businesses will be able to generate savings (a) from which to draw the increase in minimum wage, and (b) by which to lower prices of goods and services. Even Government will benefit in terms of reduction in the domestic debt servicing burden.The compounded favorable impact on purchasing power is expected to revitalize all markets, and consequently improve investment levels, employment levels, global competitiveness and government’s revenue generation picture. A solution to some 70% – 80% of the country’s woes ~ including peace and order problems, political instability ~ should automatically follow.
The country’s 30-million labor force, being the principal beneficiary, is certain to embrace this move. So will the business sector. The banking sector should have no cause to oppose, since a 9% interest cap that is tax-free is roughly equivalent to 12% taxable, and considering that a revitalized economy will provide banks with much greater business opportunities and much lesser risk of non-performing loans.
It was during the Anti-Usury Law regime from 1916 to 1978, when bank lending rates were pegged to 12% per annum, that the Philippines outperformed its Asian neighbors in terms of economic growth and stability. A statistical review reveals that the country started experiencing economic reverses only in the early ’80s when the Central Bank was allowed, under PD 858, to lift the 12% rate ceiling.
CREBA’s proposal, in essence, is for the restoration of Anti-usury Law regime, but with one modification: from a 12% taxable ceiling, to a 9% tax-free ceiling. Read full text of CREBA’s Position Paper on Interest Rates.
- Regulation of foreign exchange rate and foreign portfolio investments, to stabilize the peso and prevent severe economic dislocations, by avoiding over-dependence on short-term foreign investments and insulating the economy from exploitation by foreign speculators, without hampering foreign direct investments.
