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A Term Paper on the

8- Point Economic Agenda


As a major requirement in
Econ 111 Intermediate Microeconomics Theory
Class of Mr. R.Lance Chua
Academic Year:
Summer Semester 2014-2015
Submitted by:
The Game Changers
Hanna Dominique H. Besa 3 BS LM
Mark John Paul V. Caeso 3 BS LM
Justin Luigi V. Hernandez 3 BS LM
Michaela Therese R. Manahan 3 BS LM
Eberlie Anne T. Sy 3 BS LM

LETTER TO PRESIDENT NOYNOY AQUINO


Benigno Simeon Cojuangco Aquino III
Malacaang Palace
Manila, Philippines
Dear President Noy,

Greetings!
We, a group of BS Legal Management students of the Ateneo de Manila
University, are taking up a course on Intermediate Microeconomics Theory
under the guidance of Mr. R.Lance Chua, MA. Our group, the Gamechangers,
would like to propose to you our 8-point economic agenda that we believe
will be beneficial to the betterment of our country and its economy.
Our groups proposal is entitled Boom Pinas: Road to a Booming Philippines,
Trending with the Global economy. We envision a Philippines that can stand
on its own beside a 1st world country as a 1st world country. This is not an
impossible feat.
With the different lessons and theories we have learned from our class, we
applied some of them to the different sectors and industries of our nation.
We looked through the different issues and problems our country is currently
facing and we used the knowledge that we learned from class in order to
provide a long lasting solution to it.
As young people of society, we are the future of this country. We would love
to see a better Philippines and a better tomorrow. With this 8-point economic
agenda, we believe that we can bring awareness and change to the
understated sectors of our country that just might be the key to a greater
development. We thank you for your time and consideration towards our
project.
The Gamechangers
I. Privatization of the MRT, LRT and public transportations alike that are mis
managed by the government. (Cost of Production)
In privatizing the MRT and LRT, the government will have lesser
problems. In the Philippines, most of the government run businesses fail or

are in poor condition due to rampant corruption. An example of a privatized


government owned agency would be Transco, a company who manages the
electrical transmission lines. The privatization of this company is probably
because of government mismanagement. So, like Transco, in order to stop
any further mismanagement problems, the government should probably
privatize the MRT and LRT in the meantime and just turn it back over in the
future.
In doing this, not only does it increase the production level of the
company, it also minimizes the opportunity loss that the consumers face
everyday. In terms of increasing the production level, the company who got
the deal for the MRT and LRT can turn the whole transportation business into
a whole lot more. With more investments and improvements, the privatized
MRT and LRT can accommodate more people and earn more as opposed to
when it was still in the hands of the government. The difference between
privatization and government handling is that the governments budget is
only limited with a certain amount and most of the time, the project falls into
the hands of corrupt officials. Instead of using the money for the
improvement of the MRT and LRT, the money goes into the pockets of those
officials. Thus, the project eventually fails.
In terms of the opportunity loss, everyday, the people who wish to ride
the MRT or LRT wait in line for 20 minutes just to go from one place to
another. This is a big problem since in the other countries, people just wait in
line for 2 minutes. Thus, this is such an opportunity loss for the consumer
because the consumer can do something more productive other than waiting
in line for the train. Thus, the problems in the MRT and LRT not only decrease
the productivity level of the people as a whole, but it also creates a lot of
opportunity losses as well.

II. Incentivize the companies to manufacture their products locally instead of


importing raw materials from other countries.

In doing this agenda, the government may reap a lot of benefits. First,
for example, if the government decides to incentivize the companies by
cutting up their taxes or subsidize the public utility expense (water expense,
electrical expenses, etc.) of the companies, the companies would think about
manufacturing their raw materials here. With this, they could minimize the
cost of production (lower taxes) because the cost of buying the raw material
would be equal or more than the cost of producing in the country. here is that
instead of importing its raw materials, the company would then hire more
laborers. When hiring more laborers, more people will have jobs. So if more
people have jobs, consumption will go up and money will be able to circulate
more in the economy.
Furthermore, according to example 7.4 of the book: (When the firm is
not charged for dumping its wastewater in a river, it chooses to produce a
given output using 10,000 gallons of wastewater and 2000 machine-hours of
capital at A. However, an effluent fee raises the cost of wastewater, shifts
the isocost curve from FC to DE, and causes the firm to produce at Ba
process that results in much less effluent.)
This example points out that if the cost were much higher, the
company would produce less. If the cost were lower, the company would
then produce more. So, if the government were to give them incentives, the
cost of producing would be lower and the company would be incentivized to
increase its production.
With this, not only can the government increase its GDP and GNP
because of the increase in production of the companies, it can also help a lot
of people by giving more job opportunities to the unemployed.

III. Increase of infrastructure spending and incentivize construction firms to


encourage businessmen to create or expand businesses. Thus, providing
more jobs and decreasing the unemployment rate.
Last January 2014, the unemployment rate rose to 7.5% from 6.5% in
the previous period and from 7.1% a year ago. As of today, there are about 3
million unemployed in the Philippines. One of the main reasons behind this is
that we have a growing population of unemployed professionals after
graduation due to the fact that there are simply no more jobs left for them to
do. Unemployment is a major problem that the country is facing for not only
does it lowers our GDP, it also contributes to the growing poverty of our
country.
The group believes that increasing infrastructures in the country will
solve a lot of its problems, one of which is employment. If the government
will increase infrastructure spending and incentivize construction firms to
lessen production cost, more businessmen would be more willing to create
and/or expand their businesses. In the short run, there will be a lot of
employment opportunities for the construction sector seeing as the
infrastructure

expenditure

will

increase

as

more

buildings

and

establishments are about to be created. In the long run, depending on the


kinds of businesses investors create, there will be an increase in the
employment opportunities for different sectors. In the long run, the goal of
this agenda does not only target to decrease drastically the unemployment
rate but also to alleviate our country of poverty seeing that unemployment is
one of its main causes.
However, studies should be made in order to look for strategic
locations that would have the least impact in our environment and current
living situations of our citizens as well as places where the unemployment
rate is high. If forestries and natural resources must be affected, the group
encourages that they pay a reasonable amount in the form of tax to make up

for the lost resources. The proceeds for this will then be used to enhance and
protect the remaining natural resources.
sources: http://www.tradingeconomics.com/philippines/unemploymentrate
IV. Government must invest in research and development for weather
forecast and disaster prevention measures for peoples safety and to prevent
possible future destruction of infrastructures that leads to increase in death
rate and unemployment rate in the long run.
Just last year, the country has suffered a major loss when a storm
surge affected Tacloban. A lot of people died and infrastructures were
destroyed. Disasters and its magnitude are not easy to predict. However,
developed countries have shown that it is possible for destructions to be as
minimal as possible, equipped with knowledge and proper preparation. The
group believes that disaster mitigation, can also be an economic booster in
such a way that not only will it prevent long run economic problems but it
will also solve some problems in the short run by employing people and
purchasing goods.
First, the government must continuously help in funding PAGASA in its
research and development as it tries to enhance its forecasting system. This
may include purchase of state-of-the-art equipment that is an investment in
the long run.
Second,

studies can be done in order to look for the most efficient

ways for disaster mitigation. This includes creation of permanent evacuation


centers, filled with emergency stock supplies in case of disasters and
employment of well-trained staff in case of emergencies. This way, schools
can immediately resume even after a disaster hit. Cities can also be
improved by laying down more drainage and flood controls as to avoid or
decrease future floods. Aside from this, constant environmental efforts such
as community tree planting in the mountains and shores would lessen future

disaster problems. These efforts hope to prevent any more infrastructure


destructions in the future.
These are just few of some ways for disaster mitigation. A team can be
properly assembled to think of better ways. The groups goal for this agenda
is to at least lessen the unemployment as this project would surely employ a
lot of people in the short run. While in the long run, preventing future
infrastructure destructions, would not add to the unemployment and costly
rebuilding of destroyed infrastructures.

V. The government should tax people so that it could provide subsidies to the
firms that produce vaccinations which bring out positive externalities.
When the government provides subsidies that will reduce costs for
these firms, these firms will be encouraged to produce more or supply more
of the good. These subsidies could be obtained from collected taxes from the
citizens.
There are about 16 million Hepatitis B carriers today. Our country is a
highly endemic area of this disease with about 12%-16% of its population
infected by it. In the Philippines, free Hepatitis B vaccinations in public health
centers are only given to infants and Children (Republic Act 10152:
Mandatory Infants and Children Immunization Act of 2011). If the
government subsidizes these firms, and the cost of the vaccine goes down,
more people (adults) could avail of the immunization. These people would be
encouraged to avail of the vaccine since its price may now be more
affordable. They would be able to have themselves vaccinated even in
private hospitals/ health centers.
If this agenda is done, it could also be a possible solution to the free
rider problem. Without knowing, citizens who are experiencing these positive
externalities are indirectly paying for the benefits they receive. For this to
happen, the government could tax its citizens to fund for the subsidy it could

give to firms who produce Hepatitis B vaccines. When the firm receives a
subsidy from the government, it could be able to produce/supply more
(therefore, there would be increase in supply) since production costs
decrease and the prices of the vaccines they produce could go down causing
its demand to also increase. So in the long run, when already a lot of its
citizens get vaccinated, even the ones who didnt get vaccinated will be
given protection. There is already a positive effect of the vaccinated
individuals not spreading the disease to others.
Source:
http://www.economicsonline.co.uk/Market_failures/Positive_externalities.html
http://www.doh.gov.ph/node/1067.html
http://www.pchrd.dost.gov.ph/index.php/2012-05-23-07-46-36/2012-05-2400-01-11/4760-prevent-hepatitis-b-consult-your-doctor-today
VI. The government should provide incentives for the youth for them to take
up farming/agriculture.
Less and less youth today are choosing to involve themselves in
farming. Studies show that the youth of today find farming less appealing,
and they would prefer to take up degrees in other fields such as medicine
and engineering. To solve this problem. the group believes that the
government could team up with certain agricultural firms that would be
willing to teach the youth modern techniques

as well as the science of

farming. According to the Department of Agriculture nearly 20% of our Gross


Domestic Product each year came from the agriculture and fishery sections.
With the decline of the youth wanting to take up farming and become
farmers, food production in the long run would also decrease. According to

Francis Pangilinan, this will serve as a threat in our countrys food security
efforts.
If the government together with the agricultural firms have seminars
and trainings introducing modern techniques of farming to the youth, the
youth may be enticed to give it a try. This will solve a lot of problems in the
long run. New techniques and science involved in farming, means that the
income of these farmers will increase. An increase in income will lure in
people to consider farming as a career. With more farmers, unemployment
will be reduced and an increase in production of crops will ensure stable food
supplies in our country. We might also be able to provide enough cavans of
rice to support our countrys needs so that we would not need to import rice
from other countries such as Thailand and Vietnam anymore. We could also
focus more on exporting rice instead. This will also be a good opportunity for
local rice manufacturers/producers since their production and sales could go
up. The countrys GDP and GNP would increase too.
Source:
http://business.inquirer.net/18611/philippines-is-running-out-of-farmers

VII. Problem: Need for Specialized Workers, Underemployment & Out of


School Youth
Solution: R&D Program for Jobs specific to community development
Many of our points such as farming, construction and disaster
prevention all require the same thing, which is labor, and aside from
unemployment, the country also suffers from underemployment. According
to the government census, our underemployment rate of the past year has
increased from 18.8% to 20.9%. What the government needs to accomplish
is creating job opportunities that are relevant to our society and to raise
concern for their relevance.
Nowadays people tend to enroll in vocational courses such as IT and
computer training because they are quicker and cheaper to attain. It is not
that this is an irrelevant course among many, but what we would suggest to
avoid is to overpopulate this course and avoid increase of underemployment
when competition increases in similar career paths. Jobs such as medical and
habitat rebuilding support that is required during disasters however, do not
always have immediate acknowledgement by people. What we are
suggesting is that the government invest in a sector of people who can be
called in immediately for disaster rehabilitation and rural community
improvement.
This program we suggest should be especially open to out of school
youths and people in lower class communities who desire to have jobs. The

research and development that would follow here would be in applying


modern and global methods in developing the livelihood of communities and
tailor fitting it further to the Philippine setting, such as building simple homes
for typhoon victims similar to the Small House Innovation while at the same
time using materials more suited to our environment. At the end of their
education, these volunteers are called to run down communities to
improve them, and they will be paid on pensions as though like the military.
In the short run, it will definitely cost quite a bit to initiate the
movement, but with the increase of demand for rehabilitation in several
areas of the country, the payoffs will also increase. By investing in an R&D
program that improves livelihood, we can direct the flow of
underemployment and education to ways that can improve the nation
through jobs that develop and rehabilitate rural and devastated
communities.
Source:
http://www.smallhouseinnovation.com/
http://www.census.gov.ph/content/employment-rate-january-2013-estimated929-percent-results-january-2013-labor-force-survey

8 JUSTIN -Oligopoly, Public Goods


Problem: lack of internet access especially in the lower-income brackets
Solution: The government, in collaboration with leading service providers,
should subsidize and provide affordable and available internet access to the
different sectors of the society in order to make it a public good
With the development of the different technologies of the world, the
internet is one, if not the most, important tool in our world today. In line with
this, the United Nations even proclaimed the access of internet as a human
right. The Right to Internet access or the Right to broadband is one of the
newest human rights that has been proclaimed recently. This right is directly
connected to a lot of other Human Rights namely the Right to Freedom of
Speech or the Right to the access of information.
In the Philippines, internet access is limited to the upper class or the
people who can afford it. The lower-income bracket has limited or no access
to the service. As of now we can consider internet as a private good for it
excludes people who cannot afford the access to it.

The main internet

service providers in the philippines which we can consider as an Oligopoly for


they have the power to collude and or compete with one another. The firms
have the power to control the prices of the internet service for only a few of
them consists of the market.
Given this we would like to propose the government to subsidize and
provide affordable internet access to all the different classes of the country.
This will then make internet a public good that is excludable and non-rival
rather than a private good that is excludable. According to our research, the
increase of access to the internet by 10% can boost up a countrys GDP by
1.28%-2.5%. In connection to employment rate, it increased the global
employment rate by 1-1.4%. The subsidy will also lessen the costs of

different firms which in turn will lead to a higher income for the companies.
With this, a higher consumption of other goods and services in the market.
The lack of internet access gives a disadvantage in terms of making
opportunities for themselves.The internet provides us with the ease to
communicate and to research. With this simple and effective way to
communicate and research about different information, it is easier to develop
different other products and services the different firms can produce and sell.
The increase in the access to the internet will also increase the productivity
of the people.

SOURCES:
http://ahumanright.org/
http://www2.ohchr.org/english/bodies/hrcouncil/docs/17session/A.HRC.17.27_
en.pdf