|
By Alecks P. Pabico,
Philippine Center For Investigative Journalism
Editor’s note: The first part
reported how history might remember the President—as less popular
than her predecessors and as a leader who incurred the most debts.
Part one cited figures mainly from the Freedom from Debt Coalition.
Last of two parts
Not enrolled in the Congress list
are the recent concessional loans from the Export-Import Bank of
China for projects deemed illegitimate, as these were contracted
under allegedly unfair and onerous provisions, and attended by
bribery and overpricing.
These consisted of the North
Luzon Railways Project, South Luzon Railways Project, the already
scrapped National Broadband Network Project, and Cyber Education
Project. Including the $330-million broadband project, the Chinese
loans amount to $2.2 billion (or P91.1 billion).
President Gloria Arroyo has
maintained that the constitutionality of treating debt service as
automatically appropriated is both established and unequivocal.
“Servicing of public debt, whether foreign or domestic is
automatically appropriated to ensure that the required amounts are
available when they become due.”
But while legislators expected
the veto considering the continuing effectivity of automatic
appropriation for debt service, Albay Rep. Edcel Lagman, chairman of
the House of Representatives Committee on Appropriations, laments
how the Executive forfeited the “strong political endorsement from
Congress for the renegotiation or condonation of odious and wasteful
loans.”
Justifying the provision, Lagman
said these loans are “in the improvident league of the Bataan
Nuclear Power Plant indebtedness, which the government has fully
paid despite the mothballing of the nuclear facility which was
errantly supplied and installed from a tainted loan.”
The mothballed nuclear plant cost
the country a total of P64.8 billion—P43.5 billion as principal
amortization and P21.2 billion in interest payments—from 1986 up
to last year.
‘Spending
compression’
With the huge amounts flowing out
of the country in debt-service payments, it is therefore no surprise
that in the last seven years there has been what Diokno called a
spending compression—the underfunding of education, health and
public infrastructure.
Education, which should receive
the highest budgetary allocation as mandated by the Constitution,
only got more than a fourth (P164.1 billion) of what the Arroyo
government automatically appropriated for debt service (P612.8
billion) in 2007. Spending on health was even more atrocious—at
P18.4 billion, this corresponded to only 3 percent of what the
government paid for debts.
For this year, the education
budget was even lower at P138.2 billion, while health got only a
meager increase at P19.8 billion.
Many are wont to blame President
Arroyo, an economist, for the problems besetting the economy, but
Dr. Walden Bello, Freedom from Debt Coalition president, would
rather put things in perspective.
President Arroyo, Bello said, is
“not the problem, but part of a bigger problem that extends far
into the recent past.”
A noted critic of the current
economic globalization model, Bello assigns collective
responsibility on the last five administrations for the country’s
economic malfunctioning, noting the stark difference between the
economic growth record from 1990 to 2005 and the rest of Southeast
Asia.
Within that period, the
country’s GDP per capita growth averaged 1.6 percent a year,
according to the latest Human Development Report of the United
Nations Development Program.
“[It’s] the worst in the
region,” Bello said, pointing out how even all the so-called
lower-tier Asean (Association of Southeast Asian Nations) countries
have significantly outstripped the Philippines —Vietnam (5.9
percent), Laos (3.8 percent), Cambodia (5.5 percent) and Myanmar
(6.6 percent).
Bello rejected overpopulation,
corruption, strong protectionist policies, and the issue of higher,
non-competitive labor wages as explanations advanced by some
analysts for the country’s continuing underdevelopment. Instead,
he said the real culprit is the crisis of investment that begun in
the mid-1980s, out of which the economy has never really recovered.
The ratio of investment to GDP
plunged to 17 percent during that period, from nearly 30 percent in
the early 1980s, and stayed at 20 percent to 22 percent in the early
part of 2000. The impact of the World Bank and International
Monetary Fund-imposed structural adjustment programs in the 1980s
and 1990s—decades of global recession—marked by radical tariff
liberalization coupled with monetary and fiscal tightening measures
further led to the downward spiral of private investment.
But instead of picking up the
investment slack, the fledgling government of then President Corazon
Aquino succumbed to pressure from international creditors to a
“model debtor strategy” in order for the country to continuously
enjoy access to the global capital markets.
By virtue of Executive Order 292,
Aquino affirmed “automatic appropriation” for foreign-debt
service from the government budget every year as laid out in
Marcos’ Presidential Decree 1177.
Aquino’s executive order
institutionalized the said policy in the Revised Administrative Code
of 1987, in particular, Section 26 (B) Book 6, allowing payments for
both principal and interest on public debt to be automatically
appropriated without any comprehensive review to determine if these
debts were legitimate.
Bello could only describe the
huge financial resources—amounting to $30 billion (8 percent to 10
percent of GDP) between 1986 and 1993—that flowed out in debt
service payments as a “catastrophic failure.” This, Bello said,
made the country a “net exporter of capital to the North.”
From 7 percent in 1980, interest
payments as a percentage of total government expenditures rose to 28
percent in 1994. Under Mrs. Arroyo, the share of interest payments
has hardly changed, averaging 27 percent and registering highs of
31.1 percent in 2005 and 29.7 percent in 2006.
If payments for principal
amortization, which are off-budget items, are included, debt-service
payments actually have taken up almost 60 percent of national
government expenditures in the last seven years.
Why paying off principal
amortization of our debts does not form part of expenditures boggles
the minds of anti-debt advocates. In President Arroyo’s
“perverted logic,” according to the Freedom from Debt Coalition,
what she is telling the public is that the government has to
refinance its old debts through more borrowings.
To the detriment of social
spending, post-Marcos governments from Aquino to Mrs. Arroyo have
made debt servicing the topmost national economic priority, but
which has taken a more vicious turn under the present dispensation.
Argentina’s choice
Given such priority, President
Arroyo has accorded to repaying the foreign debt amid an economy in
crisis. Bello could only look to Argentina with marvel and envy for
President Nestor Kirchner’s “courageous act of essentially
defaulting on most of that country’s foreign debt and channeling
the money saved to domestic investment.”
In his first year in office in
2003, Kirchner declared that Argentina was defaulting on its
external debt (about $93 billion), regarded as the largest sovereign
debt default in history. The government’s firm stance consigned
the country to a pariah in the global-financial markets but
eventually paid off as it allowed the restructuring of 76 percent of
the defaulted principal, offering about 30 cents per dollar face
value of old debt to its creditors, said to be the largest sovereign
restructuring in history.
In 2005, the Argentine president
announced the cancellation of the country’s debt owed to the
International Monetary Fund (IMF) by issuing a one-time payment of
$9.8 billion—an act that was meant to gain independence from the
structural reform impositions of the lending institution.
As a result of these tough
measures, Argentina was able to reduce its external debt burden to
$118 billion by September 2007. Moreover, the Latin American country
of 41 million people has been enjoying a remarkable surge in real
GDP growth—8.8 percent in 2003, 9 percent in 2004, 9.2 percent in
2005, 8.5 percent in 2006, and 8.7 percent in 2007—after the
crippling recession years of the late 1990s up to 2002.
Of the Philippine policy of
automatic debt appropriation coupled with weak revenue generation
(particularly in Customs collections) as a result of its adherence
to trade liberalization measures as radical tariff reductions, Bello
said: “It requires no special intelligence to realize that the
massive amounts of money that have gone to paying our creditors to
service our constantly mounting external debt was money that could
not go to development.”
As such, anti-debt advocates like
Freedom from Debt Coalition have been clamoring for nothing less
than the repeal of the automatic appropriation law. The coalition
has also been pushing for the creation of a congressional commission
on debt audit that would investigate all public-sector debts and
contingent liabilities, as well as review all government policies
regarding borrowings and payments of debts.
The proposals have the support of
legislators like Rep. Lagman, who led Congress in reducing the debt
service several times and allocating the reduced amount to social
development during the Aquino administration. The Bicolano
congressman has also been filing bills to repeal or amend the
automatic debt servicing provision as far back as the time of the
Ramos administration.
As it had done on many occasions
past, Congress failed to assert its power of the purse more
forcefully with respect to the debt problem.
Confronted with a presidential
veto the last time, anti-debt legislators have been consigned to
hoping that the Executive will conduct a thorough audit of loans
challenged as fraudulent, tainted, and useless before effecting
payments for principal amortizations and interest payments.
Hence, with this “suffocating
policy framework” in place, Bello can only concede: “As long as
it remains this country’s basic paradigm, it is difficult to see
the Philippines emerging from its long night of stagnation.”
|
