Lawyer Manuel M. Serrano, CREBA founder-chairman, said that CREBA has always been supportive of the labor sector’s call for wage increases provided that production costs are stabilized through an interest rate cap.
With the current minimum wage of only P250 and the prices of basic commodities, transportation, electricity and water as they are now, a family with a single breadwinner would survive only under subhuman conditions, Serrano said.
CREBA stressed that a nine percent interest rate ceiling on bank loans – from the present range of 14 percent to as high as 21 percent – will substantially lower production costs and thus enable the business sector not only to absorb wage hikes but also stabilize, if not reduce, the prices of goods and services.
The combined impact of the wage hike and stabilized prices will, in turn, raise purchasing power and effective demand, thus providing the necessary spark to revitalize business activity and the entire economic spectrum, and to propel the economy towards recovery and robust growth, CREBA said.
The reduction in production costs owing to reduced interest rates will also enhance the global competitiveness of the country’s producers, particularly the export sector, CREBA said. It would even provide greater impetus to the housing and construction activity which are the most highly capital-intensive among all businesses and from which 65 other industries derive their business opportunities.
The banking system itself, CREBA said, will gain rather than lose from an interest rate cap. The reduced production costs will energize the business sector and result in greater demand for loans and less prospects of non-performing loans, even as the increase in consumer purchasing power will also result in hiked savings.
CREBA cautioned, however, that in order to preclude any undue pressure on bank viability, the interest rate cap should be augmented by the exemption of bank lending transactions from the gross receipts tax (GRT), the value added tax (VAT), the documentary stamps tax (DST) and the tax on interest income.
The government will not be prejudiced by these tax exemptions, CREBA said, since any potential revenue loss will be more than offset by (1) greater revenue from expanded business activity throughout the entire economy, (2) reduced interest burden on its domestic borrowings, and (3) enhanced foreign exchange earnings from a more competitive export sector.
Considering that the interest rate cap has been tried and proven successful for decades under the regime of the Anti-Usury Law, these measures thus cannot by any means be considered radical, novel, or experimental CREBA said.
Serrano stressed that the lowering of interest rates is the primordial factor in enabling the domestic economy to attain self-reliance and self-sufficiency, in a manner that would considerably minimize the ill-effects of global economic downturns such as now prevailing.
CREBA also said that while economies worldwide have been constantly striving to reduce interest rates to the barest minimum in order to spark their economies, the Philippines – whose economy has remained stagnant for the past several years – still maintains its interest rates at exorbitant levels.
The country’s present abnormal production structure of high cost of money, high cost of power, high cost of raw materials but cheap labor, not only prevents the country from attaining an "independent economy effectively controlled by Filipinos," but also perpetuates the situation where the country’s poor continue to get poorer, while the rich continue to get richer, CREBA said.