CHAPTER 6: ECONOMICS

At the end of this topic, the student must be able to:

1. identify the different economic transactions;

2. determine the relationship of income to quality of life; and
3. appreciate the importance of life.

Topic 2: Economic Transactions

Economic transactions refer to those transactions which involve transfer of the title or
ownership of goods, services, money and assets. They are broadly categorized as: Visible
items, Invisible Items, and Unilateral Transfers
1. Visible items: These include all types of physical goods which are exported and imported.
These are called visible items as they are made of some matter or material and can be seen,
touched and measured. The movement of such items is open and can be verified by the custom
officials.
Visible trade, in economics, exchange of physically tangible goods between countries,
involving the export, import, and re-export of goods at various stages of production. It is
distinguished from invisible trade, which involves the export and import of physically
intangible items such as services.
Countries lacking various raw materials will import needed substances such as coal or crude
oil from nations able to export such materials. Sometimes raw materials will be partially
processed or converted into producer goods within the country from which they originate.
Goods may also be processed into consumer goods prior to export or import and prior to the
ultimate purchase by the buyer. These consumer goods may be durable (consumed over a
period of time), as are appliances or automobiles, or nondurable (consumed almost
immediately), as is food. Visible trade also includes the export and import of goods used
directly in the production of other goods and services (capital goods) such as industrial
machinery and equipment.
The relationship of visible trade exports to imports is reflected in a country’s balance of trade
or visible balance. A surplus in the balance of trade occurs when exports exceed imports and a
deficit occurs when imports are greater than exports. The balance of trade is the major
component of a country’s balance of payments, which includes debits and credits resulting
from invisible trade.

2) Invisible Items: Invisible items of trade refer to all types of services like shipping, banking,
insurance,etc, which are given and received. These are called invisible items as they cannot be
seen, felt, touched or measured.
Invisible trade, in economics, the exchange of physically intangible items between countries.
Invisible trade can be distinguished from visible trade, which involves the export, import, and

ECOLOGY OF THE FILIPINO Chapter 6: ECONOMICS

reexport of physically tangible goods. Basic categories of invisible trade include services
(receipts and payments arising from activities such as customer service or shipping); income
from foreign investment in the form of interest, profits, and dividends; private or government
transfers of monies from one country to another; and intellectual property and patents.
Services account for the vast majority of invisible trade. Such services include freight and
passenger transport; banking, other financial services, and insurance; scientific-technical
exchange; and international tourism. Income gained by foreign investment is the second largest
contributor to invisible trade, and private and government transfer is the smallest.
In many developing countries, receipts for invisibles are exceeded by payments for them. This
deficit is closely tied to the foreign debt and interest payments often made by developing
countries to the developed countries. The growing external debt of some developing
countries—and their inability to repay the loans and interest—not only threatens the economies
of those developing countries but also threatens the foreign-investment sector of invisible-trade
earnings for many developed countries. Conditions such as these have brought calls for creditor
countries to offer debt relief to debtor countries.

3) Unilateral Transfers: Unilateral transfers include gifts, personal remittances and other one-
way transactions. Since, these transactions do not involve any claim for repayment, they are
also known as unrequited transfers.
Unilateral transfers is one part of the current account of the balance of payments. It tracks the
"one-way" transfer of funds from one country to another that are made without any counter
flow or exchange or goods and services. These payments are merely gifts from one country to
another. The gift might come from a person, business, or (frequently) government. Foreign aid
payments from one government to another are an important part of unilateral transfers.
Like the international trading of goods and services that can be either exported or imported,
unilateral transfers also flow in both directions. A given nation might give funds to one nation,
and receive funds from another. Funds that flow to a nation are positive values in the unilateral
transfer category (and balance of payments), and funds that flow from a nation are negative
values.
Unilateral transfers are the one part of the current account that are not included in the
calculation of the balance of trade. The balance of trade includes both the balance on services
and the balance on merchandise trade and is officially termed the balance on goods and services
in the balance of payments account. In addition to the current account, the balance of payments
also includes the capital account, which tracks the flow of investment payments in to and out
of a country.

Topic 3: Income and the Quality of life

The quality of life and poverty in the Philippines

ECOLOGY OF THE FILIPINO Chapter 6: ECONOMICS

Poverty is a daily problem for the majority of the population. Although social spending has
increased steadily in recent years, every day remains a struggle for survival for many people.
Hardly accessible education, malnutrition, immense population growth, dirty water and a lack
of state infrastructure create a difficult livelihood. In addition, a large part of the Philippine
population remains untouched by the state’s fight against poverty.
With 103.8 million inhabitants, the Philippines is one of the most densely populated countries
in Southeast Asia. It is said that those who do not own land are poor. A small part of the
population has the majority of the country. This is accompanied by a high proportion of
poverty: according to the World Bank, around a quarter of the population (25.2 percent) will
be considered poor in 2018. Around 24 million Filipinos fall below the national poverty line
and have to live on less than €1.65 per day. The NCSB notes, however, that around 86 percent
of the people do not have sufficient income to “live under reasonable conditions”. 2.3 percent
of adults cannot read or write.
Malnutrition Between 15 and 25 percent of all Filipinos suffer from hunger. More than four
percent of the population “often” or “always” do not have enough to eat. 26 percent of all
children under the age of 10 are considered malnourished. As a rule, it is the mothers who skip
a meal so that their children and men get enough to eat, or that the money for fuel, light and
water is enough. Many poor families cannot afford a side dish with their food. They eat pure
rice without vegetables, fish or meat and use salt, soy sauce, brown sugar or coffee instead.
The result of such a menu is permanent malnutrition. The adequate medical care of a person
often exceeds the monthly income of a family.

Social Family
Poverty and poor or no social assistance make the family the most important social unit: work
is often found through family contacts. Children are considered life insurance: they often work
at a young age and, depending on the region, support the family by selling small items, working
in the mining industry or separating and reselling garbage. If possible, the older children go
abroad as guest workers to provide their families with a better income. There they often work
as nurses or as household helpers and can thus help sick or unemployed family members.

Income of the Filipinos

The average income of a worker is about 5,000 P. and in Manila about 7,000 P. Teachers earn
8,500 to 12,000 P. An employed lawyer earns about 21,000 P. and a bank director about 40,000
P. (about 600€). The bank director usually has his own house, drives a car and the children go
to good schools.
Where you live and how you live influences the cost of living. You don’t need a car and it is
not worth buying one if you have a supermarket nearby and a bigger city can be reached by
bus or taxi in about 30 minutes. Expensive is an apartment in a condominium, also called
residential park or “village”. In addition there are running costs for security guards and
entertainment etc. These costs can also increase later.

ECOLOGY OF THE FILIPINO Chapter 6: ECONOMICS

How do Filipinos live?
Let’s take a look at a Filipino family in Compostela, a small town with about 40,000 inhabitants
north of Cebu-City, so it’s not a big city but also not a province.
The father works as a driver for a higher employee and only comes home on Sundays. He earns
6,000 pesos a month. The mother has a small food stall near a school and earns about 5,000
pesos a month. They have 2 sons of 18 and 19 years old. One son studies computer science in
Cebu. Since they have no money for travel expenses, the son lives with an acquaintance of the
family in Cebu and works as a waiter in a hotel in his spare time. The other son goes to a
language school and learns German.
Sometimes the father still works as a taxi driver on Sundays. They have a living space of about
20 square meters in a stone house with a sitting area and a small kitchen area. They have a
television set, a big fan and a refrigerator. Cooking is done with gas. In the room a small
staircase leads up to the sleeping area. The family has 3 mobile phones (cellphone), but phone
calls are rare, everything is only by messenges. Once the mother had to go to the hospital and
the operation cost 5.000 Peso (approx. 85€). Since they have no financial reserves, all friends
and relatives have joined together and the costs could be paid. Everybody gives something,
because this is again their own health insurance. He lives in the community and they will help
him too if necessary. When money is so scarce, this is the most effective system you can
imagine, no wastage in administration, commissions and taxes. With this description I do not
want to say that they lead a decent life, but they are cheerful and do not complain.

Where the Philippines ranks in quality of life

MANILA - The Philippines ranks 64th in the world in terms of social progress, a new report
showed.
The Philippines, which ranks 102nd in terms of gross domestic product (GDP), has a social
progress index score of 65.46 (medium low), putting it in 64th place worldwide. The social
progress index score is an average across three dimensions: basic human needs, opportunity,
and foundations of wellbeing. It considers 52 indicators, which include access to water, shelter,
medical care, safety, knowledge, information, education, personal rights, and freedom. The
index includes 133 countries covering 94% of the world's population, plus 28 countries with
partial data, according to The Social Progress Imperative.
Among the three dimensions of the index, the Philippines is highest in ranking in opportunity
(44th), with a score of 59.30. It is "strongest on personal freedom and choice and has the most
room to improve on access to advanced education," the report said. In the basic human needs
dimension, the Philippines ranks 83rd with a score of 68.23. It "performs best on nutrition and
basic medical care and has most opportunity to improve on the personal safety component." In
the foundations of well-being dimension, the Philippines ranks 70th with a score of 68.86. It
"scores highest on access to basic knowledge but lags on the ecosystem sustainability
component."
According to the report, compared to other countries with similar GDP per capita, the
Philippines "possesses a relative strength" on the following elements: homicide rate, traffic
deaths, freedom of assembly/association, freedom over life choices, early marriage, tolerance

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for homosexuals, years of tertiary schooling, inequality in the attainment of education, and
globally ranked universities. However, it scores poorly in the following measures: level of
violent crime, perceived criminality, political terror, press freedom index, premature deaths
from non-communicable diseases, obesity rate, water withdrawals as a percentage of resources,
tolerance for immigrants, and discrimination and violence against minorities.
The top three countries in the social progress index are Norway, Sweden and Switzerland with
closely grouped scores between 88.36 and 87.97, the report said. Norway ranks 1st on the
foundations of well-being dimension with a score of 88.46 and 9th on basic human needs and
opportunity. Sweden, which the report said registers a more balanced portfolio across the index,
ranks 3rd on foundations of well-being (86.43), 5th on opportunity (82.93) and 8th on basic
human needs (94.83). Switzerland, meanwhile, is 2nd on both basic human needs (95.66) and
foundations of well-being. Aside from Norway, Sweden, and Switzerland, the top 16 include
Iceland, New Zealand, Canada, Finland, Denmark, the Netherlands, Australia, Britain, Ireland,
Austria, Germany, Japan, and the United States.

ECOLOGY OF THE FILIPINO Chapter 6: ECONOMICS