Nation building on IOUs
By Juan Mercado
Philippine Daily Inquirer
Come June, Benigno Aquino, Gilbert Teodoro or Manuel Villar will be president. Whoever is elected will inherit three “inevitables,” Viewpoint asserted earlier. These are: death, taxes—and nearly 93.9 million Filipinos.
Please make that four “inevitables.” To the first three, kindly add a fourth: utang or debt.
Philippine foreign debt amounted to just $1 billion when Ferdinand Marcos pledged, at his 1965 inauguration, that he would make “this country great again.” “Bisag niwang bastang walang utang,” says the old Visayan proverb. No matter if you are skinny, provided you have no debts.
Marcos & Co. didn’t heed that counsel. When People Power drove him into exile, the IOUs had bloated to $28 billion. Much of that was squandered.
Export-Import Bank bankrolled the Bataan Nuclear Power Plant. Constructed by Westinghouse, it straddled an earthquake fault. It never generated a single kilowatt. But cronies, like pseudo Austrian “count” Herminio Disini, made a killing.
Dirt poor Filipinos paid for this mothballed plant until 2007, when the last installment fell due. “Sumin utang kay ambayaran,” Zamboangueños say. There is no debt that is not paid.
Ferdinand Marcos Jr. is running for the Senate. He has taken a sabbatical from his consuming avocation: tracking down debts of welshing presidential buddies.
These IOUs are assets parked by the dictator with cronies. After the Edsa Revolt, most denied squirreling such windfalls. Their ill-gotten wealth were ours to start with, Bongbong and family gripe.
Don’t look at me, snaps taipan Lucio Tan. All his assets were whistle-clean.
Today, total external debt towers at P1.93 trillion. About 10 percent of gross domestic product services those debts. Out of very peso in debt payment, 45 centavos will go to foreign creditors, says Rep. Teofisto Guingona III. Domestic lenders claim 55 centavos.
Every man, woman and kid here today is strapped with an IOU of P47,968. That reflects a population that quintupled since the eve-of-World War II census tallied 20 million Filipinos
There were 88,574,614 of us as of August 2007, the census claims. But this seven-year late head count is seriously flawed. Gunslingers dictated tallies in Maguindanao and much of the Autonomous Region in Muslim Mindanao. There were serious undercounts in other places.
President Gloria Macapagal-Arroyo signed the census proclamation in April 2008. That made statistical fiction official. The data are used for just about everything—from allocating schoolhouses, gerrymandering congressional districts, slicing slabs from the Internal Revenue Allotment to computing IOUs.
Unless the next census is conducted more reliably, the incoming president and his team will have an unreliable policy tool. Yet, from day one in Malacañang, the new president will be burdened by inherited debts.
The Philippines won’t wail “Don’t cry for me, Argentina” anytime soon. Remittances from overseas workers provide, for now, a safety net against default like Evita Peron’s country did on $140 billion in foreign debts.
The World Bank classifies us as a lower middle income country. That may soothe some egos. But it slams the door to access to, for instance, the Heavily Indebted Poor Countries Facility or the Multilateral Debt Relief Initiative. Look, meanwhile, at the pinched features of malnourished kids in slums or barangays.
The New Economics Foundation calculates that “the Philippines requires 63 percent debt cancellation.” Only then can government wipe out the backlog in unmet basic needs of its citizens, such as health, education and infrastructure.
Typhoons sapped tax collections by notoriously corrupt agencies like the Bureau of Internal Revenue and Bureau of Customs. We’ve also been peddling assets. That patches financial gaps but offers no long-time solution. And how do you tax four out of every 10 Filipinos who scrounge “below an ethical poverty line of $3 a day”?
Move beyond “motherhood statements,” the Freedom from Debt Coalition prods candidates. Sketch out, instead, concrete fiscal plans that will tamp down festering IOUs and address hunger, joblessness, etc. On her way to the exit, President Arroyo will leave a P290-billion budget deficit.
Fat chance. This remains a country where voters gawk at candidates warbling or dancing on the stage. FDC’s 12-point agenda won’t be debated in this campaign. The earliest these proposals will be dusted off is when the next debt crisis hits.
For now, the FDC proposals, like many thoughtful programs presented by NGOs and religious groups, can only be readied.
Among other things, FDC proposes a legislative overhaul, ranging from spiking automatic debt servicing, by repealing the Foreign Borrowings Act of 1966 and passing an alternative Official Development Assistance Act to regulating borrowings by local government units.
It suggests “automatic allocation measures”: six percent of GNP for education, as suggested by UNESCO; five percent of GDP for health, as recommended by the World Health Organization; and five percent for mass housing and settlement projects for the poor.
Other suggestions: Conduct an official debt audit. Scrap the R-VAT law. “Repudiate blatantly illegitimate debt cases.” “Rescind onerous contracts entered into by the national government.”
A country can’t be built on unpaid IOUs. “Never stand begging for what you have the power to earn,” the author of Don Quijote counseled.