[ANALYSIS] How ABS-CBN’s exit will hurt the PH economy

Make no mistake. Putting ABS-CBN permanently off-air will hurt not just press freedom but also our economy.

On Friday, July 10, the House of Representatives voted against bills seeking to grant a new franchise for ABS-CBN, the country’s largest broadcasting network. 

This comes after weeks of congressional hearings, and months after the media giant went off-air on May 5 by order of the National Telecommunications Commission (NTC).

It didn’t have to be this way. Although ABS-CBN’s 25-year franchise did expire on May 4, the Duterte government could still have allowed them to operate pending a new franchise – just like other media groups in the past.

Various sectoral groups have denounced the franchise denial as a blatant assault on press freedom. But given ABS-CBN’s singular place in the country’s media and economic landscape, it will have far-reaching effects on our economy, too.

Direct impacts

First and foremost, expect layoffs left and right. 

Although ABS-CBN still has presence elsewhere – like iWant.ph, TFC, ANC, various apps, and social media accounts – its exit from TV and radio airwaves could jeopardize the work of around 11,000 workers in its broadcasting business, subsidiaries, and foundation. Talents, writers, production crew, management, and many others risk losing their jobs.

But ABS-CBN’s operations rely heavily on services up and down supply chains, as well as outsourced industries. The jobs of thousands of visual artists, personal assistants, make-up artists, wardrobe crew, extras, caterers, accountants, drivers, and even restaurant owners and street vendors surrounding ABS-CBN’s headquarters will all be affected.

Because of this domino effect, total jobs in peril will go well into the thousands.

All this adds to the country’s already dire unemployment situation. From January to April our economy shed 8.9 million jobs due to the pandemic. Consequently, the unemployment rate skyrocketed to 17.3% in April, the highest on record. (READ: The alarming jobs report Duterte is ignoring)

As unemployment results in loss of income, consumption spending will also take a hit, deepening the recession we’re all in. From the supply side, ABS-CBN’s franchise denial is a major blow to the already embattled services sector, which so far lost the most jobs in the economy.

Although some of ABS-CBN’s workers will be able to look for new jobs or sources of livelihood – as Senator Bato dela Rosa would have them do – surely not all can manage this in the middle of a pandemic. Government might even face added pressure to dole out economic aid to the displaced workers.

By the way, ABS-CBN was also cited as one of the top non-individual taxpayers nationwide: the company paid a whopping P70.5 billion from 2003 to 2019. At a time when government is cash-strapped, they’re cutting off one more major source of tax revenues. It’s like they’re shooting themselves in the foot.

Speculative impacts

The closure of ABS-CBN could also reinforce negative perceptions on doing business and rule of law in the Philippines.

Evidently, nobody – not even the country’s biggest media organization – can withstand coordinated attacks from government. It will seem that our laws and regulations can be easily weaponized against certain business interests, at the President’s whim. 

Last year Duterte already spewed tirades against big business personalities like the Ayalas and Manny V. Pangilinan. (READ: Duterte’s foul attacks on big business: What is he up to?)

Rule of law and governance indicators figure in our international competitiveness rankings, which might suffer.

Although the Philippines’ global doing business ranking improved last year, our global competitiveness ranking slipped 8 places in 2018 according to the World Economic Forum. The Philippines also saw declines in economic performance, government efficiency, and business efficiency rankings based on a 2020 competitiveness report.

Investor confidence could also drop, even as Finance Secretary Carlos Dominguez III downplays the possibility. 

As things stand, inflows of foreign direct investment already contracted by 14.2% in the first quarter of 2020. Investments with the Philippine Economic Zone Authority (PEZA) also plunged by 32% due to the pandemic. PEZA Director-General Charito Plaza is in fact already pleading with investors, “Please don’t get out, don’t transfer.”

Our credit ratings might also fall. A recent report by Fitch Solutions Country Risk and Industry Research found: “The forceful termination of ABS-CBN and Sky’s broadcasts are highly politicized, and clearly linked to President Rodrigo Duterte’s opposition toward ABS-CBN.”

It also said, “The regulator’s apparent ability to be influenced by the government continues to be a key impediment to foreign investor sentiment, and has also made the telecoms landscape difficult for both new entrants and existing players.”

Competitive effects

ABS-CBN’s exit also means a lot for competition.

After decades of rivalry, GMA can now enjoy a lion’s share of the television and radio broadcast markets, making it the dominant player and thus eroding competition.

Already, as of July, GMA reportedly got a market share of 63%, a near doubling from earlier this year (TV5’s market share also climbed to 9.5%).

This may allow GMA to corner ad contracts, possibly raising ad costs, and attract displaced talents and workers. It might also stifle calls for innovation and creativity.

Worse, new competitors will be hard put to come in and compete given the industry’s high barriers to entry (think of expensive broadcast towers and other infrastructure, among other technical and legal requirements).

Are certain groups waiting in line? Party-list representative Rodante Marcoleta – one of the leaders of the franchise rejection – hinted that Congress might award ABS-CBN’s vacated frequencies to a “more deserving player.” (READ: Why Duterte’s attack on ABS-CBN reeks of double standards, desperation

Consumer welfare effects 

Finally – and arguably most importantly – ABS-CBN’s absence leaves millions of consumers with greatly diminished choices and welfare.

In many parts of the country, ABS-CBN was until recently the people’s only source of free media, not just for entertainment, but more importantly for news.

Recently, the NTC also shut down the satellite dish service of Sky Cable Corporation (an ABS-CBN subsidiary). This effectively turns off information access for as many as 1.5 million subscribers, especially in areas that cannot be reached by TV signals.

Denying timely information on topics like market prices, job opportunities, disaster response, and the current state of the pandemic will make life harder for millions of Filipinos.

Starving them of updates on public policies, elections, and investigations on corrupt and anomalous government practices could also curtail accountability and transparency – again leading to welfare losses.

Speaking of welfare, ABS-CBN is also heavily involved in charity and relief work, including Bantay Bata and Sagip Kapamilya. Government could have mobilized such programs to aid the pandemic response.

With its groundbreaking educational shows (such as the classics Sineskwela and Bayani) and unparalleled reach, ABS-CBN could also have been tapped by government as a valuable partner in remote or distance learning – especially with the impending resumption of classes in August.

Needless suffering

All in all, in the middle of a pandemic, ABS-CBN’s franchise denial will cause needless suffering and hardship for Filipinos and our economy.

Perhaps recognizing the impact on them, 3 in 4 Filipinos said in a recent survey that Congress ought to renew ABS-CBN's franchise. A majority said denying it would be a blow to press freedom. 

Unfortunately, Duterte knows no economics and can hardly be expected to be disturbed by the fallout of his order to pull the plug on ABS-CBN. Even his economic managers alarmingly see no problem with it.

Is it too much to ask for a government that cares about the economy and the millions of ordinary people who comprise it? – Rappler.com

The authors are members of Usapang Econ, a group of young economists aiming to popularize economics for Filipinos. Check out their podcast on Spotify and explainer videos on YouTube.

JC Punongbayan

JC Punongbayan is a PhD candidate and teaching fellow at the UP School of Economics. His views are independent of the views of his affiliations.

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