By Ted Aldwin Ong
Saturday, September 08, 2007
I FIND some sense in the statements of Albay Representative Edcel Lagman, chairman of the House Appropriations Committee, when he said that “”If we want to sustain and enhance the economic gains we have achieved and ensure that our people will truly reap the benefits of economic growth, we have to first resolve the twin problems of a ballooning population and huge debt service.”
Debt servicing has been eating almost 50 percent of national budget through automatic appropriations. The Arroyo regime is considered the run away winner as far as debt accumulation is concerned in financing its government among post 1986 EDSA administrations The Arroyo is also the record holder in terms of debt payments. In such a short period of time Mrs. Arroyo has borrowed a total of P2.82 trillion in while paying a total of P2.83 trillion.
While Representative Lagman expressed a significant point on the impact of debt servicing to economic growth, it needs to take an important step by looking into the legitimacy or illegitimacy of government debts especially the contracts entered by the Arroyo regime.
It is undeniable that the national government has entered into numerous projects which proved to be disadvantageous to the Filipino people. At the end, it is the people – the taxpayers, who bare the responsibility of paying anomalous projects. Ultimately, it is also the people who suffer the lack of appropriations for social services because debt servicing automatically absorb a big chunk of the national budget.
Let us look into the concept of the illegitimacy of debt in order for us to fully understand why some projects are by nature illegitimate, thus it must not be paid by taxpayers.
Lidy Nacpil, coordinator of Jubilee South-Asia Pacific Movement on Debt and Development who is also the vice-president of the Freedom from Debt Coalition-Philippines, has thoroughly discussed the concept of illegitimate debts.
The concept of legitimacy is a broad concept that touches on the principles of human rights and sustainable human development, justice and fairness, accountability and responsibility, sovereignty of people’s and nations, democratic rights and processes.
Loans which violate these principles are deemed to be illegitimate – or unacceptable. This violation occurs in the elements necessary in the acquiring of the debt and its impact, which includes, illegitimate processes, illegitimate terms and contractual obligations, illegitimate purposes and illegitimate use of the funds, illegitimate origins, illegitimate impact of debt servicing and illegitimate practice of using debt, debt relief, and access to credit as leverage for imposing conditionalities.
So much of the word “illegitimate” but numerous projects fall under this concept and category like the Social Studies textbooks and teachers’ manuals for public elementary and high schools, the Austrian Medical waste Projects, the North Luzon Railways Project, the Small Coconut Farms Project and the Power Sector Restructuring Program. (To be continued)
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By Ma. Elisa P. Osorio Updated December 30, 2008 12:00 AM
The Free Trade Alliance (FTA) is urging the government to revise its policy on the payment of foreign debt and instead use the money for projects that would create jobs for Filipinos especially the overseas Filipino workers who are expected to be displaced because of the global recession.
“We also demand that the government immediately put a halt to the senseless automatic appropriation of two-thirds of the national budget for debt servicing,” the FTA.
“We should instead adopt the Argentinian budgeting system, which makes allocation for debt servicing only after urgent adequate allocations have been made for urgent and priority social spending,” the group said.
In a resolution signed during the recently concluded national forum on “Bailing out the Philippine Economy” the FTA said the country, like other nations, need a stimulus package in order to help pump prime the economy.
The government must increase its spending especially on infrastructure and job creation projects in order to spur the economy.
“The Philippines need a large stimulus package directed at the domestic market to preserve and create millions of jobs,” the group said.
“The government should be able to spend as much as it can on productivity-raising infrastructures such as school buildings, renewable energy, communal irrigation projects, farm-to-market roads, harvest silos, barangay health clinics, public transport systems and so on,” FTA said.
Likewise, the FTA said the government must re-think its policy of opening up the local market to imported products.
Earlier the government removed the duty for the importation of certain products like cement.
FTA said this is not the time to allow cheaper products to enter the country. Instead, the government must help protect local industries in order to keep local jobs.
“We urge our government and policy makers to immediately put in place the much-needed safety nets for our working people, including our industrialists and entrepreneurs. One effective safety net, to preserve jobs and industry, is to adjust our industrial and agricultural tariffs toward our maximum bound tariff commitments to the WTO (World Trade Organization),” the group said.
NUMEROUS projects have become possible because of financial assistance through debt. This is where we get acquainted with the roles being played by financial institutions like World Bank in the country’s economy.
While the Arroyo administration have claimed that our economy has reached unprecedented growth and displayed infrastructure projects being undertaken everywhere as evidence, the debt toll has also reached unimaginable levels. Various projects likewise serve as evidence that best describe why we as people do not feel the growth that this government has been bragging about.
This is happening because the Arroyo economy is debt-ridden. Not only that the debts of this administration have been accumulating because of numerous debt financed projects were reduced as milking cows.
Take for instance the case of the SEMP2 Textbook Anomaly. The loan meant to fund 17.5 million Social Studies textbooks and teachers’ manuals for public elementary and high schools – had been allegedly riddled by high-profile fraud and power-play issues.
The project amounts to $100-million from World Bank. In the bidding process, the World Bank allegedly pressured the Inter-Agency Bids and Awards Committee (IABAC) to reverse its earlier decision to disqualify Vibal Publishing Group despite being ineligible due to “conflict of interests”.
Not only was Vibal, who had been able to monopolize DepEd textbook publication in recent years, able to qualify, the publishing company later secured the contract for the project, fueling suspicions of corporate-government collusion and manipulation on the part of the World Bank.
The more ominous thing about the project, however, comes with its output. Opposition Senator Panfilo Lacson exposed that at least 60,000 textbooks funded by the projects were found to have inverted and erroneous pages. It is thus not hard to imagine that the defective textbooks were ultimately the product of defective processes of textbook procurement.
Another World Bank funded project is the Small Coconut Farms Development Project (SCFDP) amounting to $121.8-billion.
In 1990, the World Bank extended a loan to the Philippines supposedly to address rural poverty, especially among small coconut farmers, through distribution of free farm inputs like fertilizers. However, the project had been beset with wide-spread corruption among government officials and the private contractors involved in the project.
The irregularities range from complete non-delivery, to the sale of fertilizers to private companies engaged in trading or manufacturing fertilizers, and non-deliveries due to default by principal contractors in their obligation to pay the intermediary warehouses or contractors hired.
It is estimated that at least 40 percent of the funds intended for the project’s fertilizer deliveries had been malversed. Ultimately, the SCFDP failed to accomplish its objective of rehabilitating the country’s struggling coconut industry. Surprisingly, the World Bank hailed the project as successful, in the process condoning the anomalies that hounded its implementation.
What makes these projects illegitimate debts are the issues of transgression of sovereignty, monopolistic corruption and mal-education as the case of SEMP2 Textbook anomaly. As in the case of the SCFDP, there was obvious negligence on the side of the creditor, incompetence of implementing agencies and more glaring is the failure of the loan to reach its target beneficiaries – the farmers.
What is the impact of these loans to our economy and people is the fact that the national government are forced to pay for debts of these projects which turned-out to be useless.
Under the principle of the illegitimacy of debts, our national government could have stopped wasting people’s money for these projects. We could have utilized these funds in achieving genuine development goals and improving social services. (Comments to firstname.lastname@example.org)
Author: Ted Aldwin Ong