AN economist from the University of the Philippines described the first three years of the Arroyo administration as a “waste of opportunity.”
In his presentation entitled “The Gloria 1 economy: In the midst of fiscal crisis,” Emmanuel S. de Dios also referred the first part of the Arroyo presidency as “a puzzle that needs to be explained.”
He cited low global interest rates and low oil price as some opportunities lost during the Arroyo administration.
De Dios noted that while the prevailing fuel prices were $30 to $35 a barrel, remittances of overseas Filipino workers (OFWs) were very high.
Moreover, the country had low rates of inflation and low domestic interest rates, which were compatible with the stable currency.
“To summarize the records of those three years of the Arroyo presidency, that was the time it was a very favorable world environment in that the economy was on autopilot,” he said.
Even at present, de Dios said that the present administration is hesitant to make unpopular decisions because of the question on whether or not the elections were legitimately won. “If you are not sure about the genuineness of your mandate, then you should be very wary of making unpopular decisions.”
He also chided the President for shunting the burden to other people. “If you’re shunting the burden to your Cabinet members, to your heads of corporations, you sort of criticize them. But at the same time you don’t exactly crack the whip.”
Since Mrs. Arroyo was preoccupied on winning the 2004 election, de Dios perceived that she was not also prepared on what should be done to set the groundwork for the next term.
“President Arroyo did not do it in the past because she was running for reelection and besides, the administration may have been lulled by a sense of complacency that world conditions were very favorable, that they would continue that way. Of course, to some extent that is true. Some of the adverse effects could now have been controlled like the sudden rise in oil prices,” he said.
Nonetheless, de Dios still criticized the government for its failure to amend the declining revenue efforts, politicization of the rate setting of the National Power Corp. and the absence of efforts to vigorously pursue the privatization of GOCCs.
He noted that in 2003, debt payments took as much as 70 percent total net or as big as 75 percent of total revenue. By end of 2004, it is estimated to be up to 88 percent of total revenue. “This is just the national government’s debt. So, it does not include all the sector.”
“The privatization [of Napocor] has been delayed and putting in new power plants are no guarantee that they will be put up soon enough to avert a power shortage,” de Dios said.
“The results of course were that the country is now in a fiscal bind. That’s where we are now. We are unable to really make headways in infrastructure,” he added. “We are already facing the debate over whether and by how much taxes to pay and power rates to raise.”
De Dios reiterated the warnings of other economists on the prospects of poor ratings.
“This matters a lot because we’re still due to borrow in the future. And ratings downgrades will ultimately mean we’ll pay more in terms of interest,” he said.
To explain the current situation, de Dios cited a Southeast Asian neighbor. “If Thailand were paying 1 percent more than Libor [London Inter-Bank Offered Rates], the Philippines is paying 5 percent.”
His preferred solution would be that the President should just take the lead by using all her powers to tell Congress the direction the country is heading if nothing is done.
“[It is] important that the President should use her all-persuasive power to deal with the country’s fiscal problems and there is a need of urgency to pass tax measures and focus on corruption,” de Dios said.
As for the reforms of the government corporations, he said there’s nothing that should prevent the executive from actually doing what is necessary.
“There’s nothing that would have kept the President from having done that in her first term. There’s still nothing keeping her from doing that in her second term. Congress need not even be involved in this matter.”