Bu-lat-lat (boo-lat-lat) verb: to search, probe, investigate, inquire; to unearth facts
Vol. IV, No. 34 September 26 - October 2, 2004 Quezon City, Philippines
Philippine Financial Crisis and the Neo-Colonial State
Filipino masses have seen one president after another come and go without
the least improvement in their lives even in times of government budget
surplus and supposed economic growths of GDP and GNP. In fact, the plight
of the masses has worsened through the years. Thus, one fiscal crisis
after another - and there had been several in the past, though the present
is the most severe - have become of no concern anymore to the
Edberto M. Villegas
fiscal crisis that the Philippine government is presently undergoing is
the worst ever in the history of the country, and is caused by its own
doing. And yet the government would pass the burden of solving this crisis
to the people, with increases in taxes and prices like those for electric
power and petroleum. It has even put up a so-called Bayanihan Fund so that
ordinary citizens can contribute their shares for the government to
weather the storm.
1. Outstanding National Government Debt
Bureau of Treasury
heavy debt of the government has thereby brought about its current huge
fiscal crisis, with budget deficit nearing P200 billion, since revenues
from taxes and other non-tax sources have been greatly largely overtaken
by its galloping debts to foreign and local creditors. Even with the heavy
budget reduction for social services through the years, mandated by
memorandums of agreements with the IMF 
to assure debt payments, the continuous increase of the national debts,
especially during the Arroyo administration, has made all the cost-savings
measures of the government meaningless but debilitating to the Filipino
people, who have to suffer poor government social services such as in
education, health and housing.
Real Per Capita National Government Expenditures on Social Services,
Rosario G. Manasan, Fiscal Reform Agenda: Getting Ready for the Bumpy Road
2, p. 5.
debt of the national government has already reached 78 percent of GDP at
the end of 2003. And if you add the debts of the government-owned and
-controlled corporations, (GOCCs), the
GFIs (government financial intermediaries), LGUs, projects under
BOT, and those of the SSS and
the government assumes, total consolidated public debts at end of 2003
amount to P5.9 trillion or 137 percent of GDP! This indeed is alarming and
is creating grave apprehension to the country’s foreign creditors and
potential investors. In fact, Standard and Poor, an international credit
rater for countries, has downgraded the Philippine long-term currency
rating by a notch to BBB-minus. The Philippines has already surpassed all
other countries in Asia in the size of its consolidated public debts.
The Napocor Debt
where do all the money go? A great portion of these debt go to the payment
of the interest and principal of the national debt, for instance, 49
percent, 33 percent interest, 16 percent principal for the year 2004, and another big chunk is lost
to corruption of bureaucrat capitalists. Among such big cases of
bureaucratic corruption is the sweetheart deal that Napocor made with
independent power producers (IPPs). Under Executive Order (EO) 215, the
IPPs were funded by foreign loans secured by a government guarantee and
most contracts with the IPPs even included a “take or pay” onerous
(but profitable to the bureaucrat capitalists) provision, which required
Napocor to pay for 70 percent to 100 percent of the output of an IPP
whether or not the electricity is actually used by the public. For 2004,
Napocor will pay to the IPPs P19 billion worth of power which is not yet
consumed. On the average, Napocor only utilized 20 percent
to 40 percent of the power it buys from the IPPs. Such shady goings-on of
course enriched former President Ramos and his cohorts but Napocor is now
saddled with a $7.4 billion debt which the government through the
so-called Electric Power Industry Reform Law (EPIRA) has the gall
to allow power distributors like Meralco to pass on to the ordinary
consumers. Meralco owes Napocor P13 billion but was allowed by the Arroyo
government to rescind its contract with Napocor and to purchase power from
its own IPPs. In order to defray its past obligations to Napocor, Meralco
has been allowed by the government to pass these debts to the consumers.
Notice the Purchased Power Cost Adjustment (PPA), the Fuel Cost Adjustment
(FCA), and other such euphemistic terms in your monthly electric bill.
All these nefarious deals within Napocor, including its infamous contract with Westinghouse during the Marcos regime to build the now defunct Bataan Nuclear Power Plant, which has not produced a single watt of electricity, has pushed its debts to $23.5 billion (P1.3 trillion) more than a third of the national debt of P3.32 trillion as of October 2003. And now the national government has the temerity to ask the people to practice austerity and contribute their small pittance to the “Bayanihan” Fund, when all the fat cats in the bureaucracy together with their foreign partners have already long been feasting on the blood of the people. And when we consider other anomalies at other government corporations, Public Estates Authority (Amari scam, Diosdado Macapagal Boulevard scam, Expo Filipino scam) and the GSIS (BestWorld scam), no one will wonder anymore where a great bulk of all the borrowings of the government are disappearing to.
and the Group of 11 UP Economic Professors’ Proposals to Solve the
confront the magnitude of the fiscal crisis, the Arroyo government is
again resorting to transferring the burden of solving it to the people by
introducing eight new tax measures to raise an additional P84 billion. As
usual, these follow the prescriptions of the IMF which is constantly
worried that the Philippine government may not be able to pay its foreign
loans. Among these onerous tax measures which will hit the lower-income
middle-income classes more adversely are an increase of value-added-tax or
sale taxes (note that it was the IMF that imposed on the Philippines the
adoption of VAT during the Aquino regime) and an increase in petroleum
taxes. Malacañang also would reduce the IRA for local
governments, but refuses to cut its huge pork barrel, the so-called
presidential discretionary fund, which amounts to a hefty P3 billion.
government is especially alarmed with the current fiscal crisis because
foreign credit analysts have started downgrading the Philippines as an
investment destination and new foreign loans may not be forthcoming if
government deficit keeps on increasing. This may lead to a defaulting by
the Arroyo administration of its foreign loans since new loans are spent
to pay for old loans in a vicious cycle that again hikes total loans. The
new taxes that will be imposed by the government have been referred to
Congress for legislation since members of Congress are also reluctant in
giving up their pork barrels, P70 million annually for each congressman
and P200 million for each senator. Everyone is ganging up on poor Juan de
la Cruz, as most of the taxes being considered are regressive in nature
like the VAT and taxes on petroleum, the latter causing a chain reaction
of an increase of prices of basic commodities.
group of 11 UP economics professors have also come out with their
proposals to hurdle the fiscal crisis of the government. In a paper
entitled “The Deepening Crisis: The Real Score on Deficits and the
Public Debt,” recognizing the unprecedented and the seriousness of the
fiscal crisis, they recommend that the government should increase its
surplus by 3.5 percent of GDP ( using the nominal value of P4300 billion
as of 2003) from its present 0.6 percent to maintain current debts and
support the budgets for vital infrastructure and education.
According to this group of professors, the government must also limit the
servicing of the off-budget liabilities (items not stated in the annual
government budget or the General Appropriation Allocation, called
off-items, the most notable of which are debts of the GOCCs) by 1.5
percent of GDP.
how to do these? This group of professors (GP for short) advised measures
which are mostly along the vein of the government’s proposals and which
reiterate the usual IMF policy recommendations for the Philippines and
other Third World countries to confront their debt problems. These
recommendations adopt the free-market framework (called neo-liberal
reforms) under the aegis of globalization or a policy of open economy,
especially promoted by the United States under the Uruguay rounds of
talks, which established the WTO, but which is not taken seriously by even
the U.S. itself and the leading capitalist countries (members of the
European Union and Japan), who have become more protectionist in their
economies starting in the late 1990’s.
GP’s policy recommendations include: privatization, especially of
Napocor; deregulation, or what the group calls the abolition of the
“politicization of prices” (p.24); and liberalization of tariffs. For
liberalization of tariffs, the GP is particularly against increasing the
tariffs on oil imports, because, according to them, “international
commitments prevent significant tariff adjustments” (p.19), a
shortcoming which is not, however, “encountered when the tax is
domestic.” (Ibid) With this self-assurance, the GP therefore recommends
an additional two-peso domestic tax (called excise tax) on petroleum,
purportedly to control air pollution (!), a two percent increase in VAT
and its expansion to cover finally all professionals like lawyers and
doctors, an increase of 10 percent tax on new cars and an indexation (or
continuous adjustment of taxes, which often go up) on the so-called sin
products like tobacco and alcohol, this latter tax along the comprehensive
tax reform program, first advocated by the IMF in the 1992 memorandum of
agreement of the Philippines with this institution. To reduce the
servicing by the government of its off-budget liabilities by 1.5 percent
of GDP, the GP advises price and fee-adjustments (especially higher power
rates for Napocor to pay off its debts) of government corporations.
Another measure backed by the GP that will hit the poor mostly, is the
reduction of IRA releases to 30 percent from its current 40 percent. Aware
of the corruption in the government, which the WB solely singles out as
the main cause of the Philippine fiscal deficit, the GP is also for
plugging tax leakages and the reduction of the salaries of management in
It must be noted that an IMF post program monitoring team visited the Philippines in June 2004 to find out how the Philippine government is abiding by its commitments to balancing its budget. The team was particularly worried about the growing budget deficit of the government and warned that it was in a “crucial juncture” (Arroyo used the same term “crucial juncture” when she announced that the country is in fiscal crisis last Aug. 23, 2004). The IMF team recommended, among other things: government assuming Napocor debts and fast tracking its privatization, increases in taxes like that of VAT and on petroleum, and a more efficient tax administration. Soon afterwards, Arroyo announced her eight tax measures during her State of the Nation Address and the GP came out with their position paper. Notice the pattern.
could be seen that the main brunt of the GP’s proposals to solve the
fiscal crisis is anti-people. It is primarily concerned with restoring
investor’s confidence, with an eye for a favorable foreign credit rating
as an investment destination for the Philippines, in the country’s
capacity to pay off its foreign loans and to become an attractive place
for good profits. (p.22-23) The GP is also worried of the eroding
competitiveness of the Philippines in the world market (p.16) and an
increase in interest rates for credits extended to the country due to an
escalating budget deficit (p.22). Though the GP also recommends a cut in
the pork barrel of Congress by one half and the reduction of the pay of
management in government corporations, most of its policy proposals would
cut deeply on the livelihood of the ordinary people like the introduction
of new taxes and the increase of prices. The GP claims that there should
be an equitable share of meeting the fiscal crisis both from the
government side and the people, and that the government must be “first
in the line of fire.” However, its proposals would squeeze the meager
money of the people more thoroughly, following the regular medicines of
the IMF-WB in demanding greater stringent measures from its client
governments when they get into a fiscal rut.
it has been proven time and time again that abiding by the malodorous
prescriptions of the IMF-WB to cure its patient only makes the patient
sicker. A study by the UNICEF of 56 countries (26 from Africa, 19 from
Latin America, 8 from Asia, including the Philippines, and 3 developing
countries in Europe), which had undergone so-called stabilization programs
and structural adjustment programs of the IMF-World bank from 1980 to 1985
to hurdle their budget and trade deficits, found that the poverty
situations of these countries have only worsened through the application
of the IMF-World Bank programs. The UNICEF study concludes: “ The
urgency of finding new solutions is especially pressing when considering
the poverty-inducing effects that the current approach (the IMF-WB programs) tends to have, and
the direct negative effects that some macro-economic policies have on the
health and nutritional status of the poorest, and of children in
particular….” (Parenthesis ours) 
In the 1990’s one can only remember the economic crises that wracked the
former USSR, Brazil, Mexico, Argentina and Indonesia , which have been
likewise victims of the policies of privatization, deregulation and
liberalization peddled by the Big money-baggers of the world and their
local subalterns in the Philippines, including the group of professors at
the UP school of economics. It can be said that dire lessons in history
are not learned by those who benefit from them.
Privatization and Deregulation
the Philippines with the introduction of more aggressive liberalization
policies in 1995 through the entry of the country into the WTO (closely
synchronizing its policies with the IMF-WB), thousands of farmers became bankrupt because of
the influx of agricultural goods, particularly from the United States,
into our economy. Around 25,000 farmers became deprived of their
livelihoods at the second quarter of 1995, and thousands more are
continuously being thrown into the streets, many migrating to the cities
and hawking for any jobs available. Also during the third quarter of 1995, the
Philippines suffered a rice shortage with the price of one ganta of rice
increasing from P10 to P20.22 as a result of the closing down of many
small farms, aggravated by the lowering of the farm gate price of rice
paid to the small farmers by the NFA. The reduction of the farm gate price of rice by
the NFA is part of the conditions of WTO for governments to gradually
remove subsidies to farmers. A direct effect of the liberalization policy
on the budget deficit is that the foregone revenues of the Bureau of
Customs due to various tariff rates reductions amount to P100 billion
annually from 1994 to 2001.
The policy of privatization of government corporations, also a condition of the IMF for new loans from it and its consortia of banks, has affected thousands of government workers and the quality of service formerly offered by the government. Thousands of government employees have lost their jobs when this policy was first started in 1989 after the implementation of the MOEFA of the Aquino government with the IMF. At the PNB, 3,500 workers lost their jobs and at the MWSS, 3,000 more suffered the same fate. And as part of the cost-saving measures by the Arroyo government to meet its present fiscal crisis, it is also planning to reduce government personnel by another 30 percent.
quality of service of government GOCCs does not improve at all after
privatization; as a matter of fact, it even worsened at Maynilad, the
portion of MWSS controlled by the Lopez group. Because it could not
maintain good services and with its debts accumulating, Maynilad appealed
to the government to bail it out from its $180 million loan, which the
latter agreed to do. In the
first place, Maynilad should be taking care of its own and providing
quality service at affordable price of water to the public. But instead
Maynilad together with Manila Water (the east portion of the privatized
MWSS and majority-owned by the Ayala family) reneged on their contracts
with the government not to raise the price of water within five years and
the former now has the audacity to ask for government assistance, which
was duly given. Talk about the alliance of the bureaucrat capitalists and
the komprador bourgeoisie, in which latter category the Lopez family
belongs to (the Lopez family is likewise the majority-owner of Meralco,
another favorite cow of the government).With regards the deregulation of
prices, as also advocated intensely by the GP, need we say anything more
concerning its debilitating effects on the populace? The almost weekly
increase in the price of petroleum products, which the GP will aggravate
with their proposal of a P2 petroleum tax, is testimony enough to this
kind of callous policy to solve the fiscal crisis of the government
proposed by the IMF-WB and its local cohorts.
Fiscal Crisis and the Economic Crisis
one understands the difference between a fiscal crisis and an economic
crisis one will realize the magnitude of the callousness of the government
to the plight of the people. A fiscal crisis is characterized by an
unmanageable budget deficit, with government spending more than its
revenues, which in the case of the Philippines is due to its heavy debt
servicing. An economic crisis, on the other hand, is the growing
impoverishment of the majority of the people.
Philippine society has long been suffering from a worsening economic
crisis from the year 1975 up to the present. Filipinos living below the
poverty line have increased from 57 percent of total Filipino families in
1975 to 70 percent in 1998 then to 85 percent in 2003.
The purchasing power of the peso has dropped to P0.56 in 2004, with 1994
as the base year. The minimum wage has been pegged at P250/day but the
income required to enable a family of six (the average size of a Filipino
family) in 2004 to live on a subsistence level (poverty level) is P479.06
per day. Unemployment has also grown from 8.1 percent in 1990 to its
highest ever at 13.7 percent in the first quarter of 2004. But in spite of
the deteriorating conditions of the majority of the people, the budget for
social services continues to be cut by the government through the years to
accommodate the payment of foreign debts.
2. Purchasing Power of the Peso
Yearbook, National Statistics Office
3. Unemployment and Underemployment Rates
Yearbook, National Statistics Office & Current Labor Statistics,
Bureau of Labor Statistics
implications of the government defaulting its debts because of the fiscal
crisis are horrendous for the upper class of Philippine society to
contemplate. Government treasury bills (TBs) and bonds held by local
banks, corporations and rich individuals may become worthless and this
situation may force many banks to declare a holiday (hold the withdrawal
of deposits). With the unavailability of new dollars, which have been the
oxygen tank of our dependent economy, from local and external sources,
factories and other business concerns may not able to finance their import
of capital goods and other inputs. Since the Philippines is unable to
produce its own heavy machinery and other vital facilities for
industrialization and is forced to rely on imports, a scarcity of dollars
to buy these imports will deal a heavy blow on our economy. Government
guarantees of new dollar loans to the private sectors will likewise not be
honored anymore by foreign creditors, if especially the IMF-WB brands the
Philippines as a risk for the extending of loans from its consortia of
banks under the Paris Club and the London Club.
1983, when new loans from the IMF ($630 million) to the Marcos regime were not granted, Philippine industrial
production went down by 40 percent, average interest rate shot up to 31
percent and inflation rate by 60 percent.
Such a scenario is most feared by the local bourgeoisie and this is the
reason why they are one in asking the people to help the government in
solving the fiscal crisis with some of them even doling out P1 million
(including the billionaire Lucio Tan, who has a pending charge of tax
evasion of P12 billion) to the “Bayanihan” Fund. Like the IMF-WB,
which salvage the big TNBs when they get into financial trouble by
imposing more austerity measures on a people, the komprador bourgeoisie
have also no compunction in appealing to the people to bail out the
government from the latter’s own self-made fiasco.
New-Colonial State and the Semi-Feudal Agricultural Economy
root of the present fiscal crisis and the economic crisis of our society
is the neo-colonial status of the Philippine state. A neo-colonial state,
though it is not directly governed by another country like the Philippines
under American rule from 1899 to 1946, is, however, dependent on external
sources for its economy to function. In the Philippine case, the country
is dependent on loans and investments supported by U.S. monopoly
capitalism or imperialism, for its economy to survive. It is a situation
where the subservient economy is forced to abide by agreements and other
treaties in favor of foreign business allied with imperialism. For
instance, the conditions set by the IMF-WB-WTO are made to be religiously
followed by the Philippine state in order for the latter to be assured of
new loans. But as we have seen, since the people can only produce so much,
even including the remittances of OFWs to the Philippines, which have
precariously propped up the Philippine GNP for many years, and that corruption of the bureaucrat
capitalists also eats up a substantial amount of government money, the
deficit of the government continues to grow at the consternation of its
foreign creditors. Thus, the government is constantly sinking in
its own neo-colonial quagmire and its profit-seeking foreign creditors may
altogether halt granting new loans unless the government squeezes more
sweat and blood from the toiling masses. For who else will it squeeze if
not the hapless and often unknowing masses. While the government is quick
to deregulate prices of the leading TNCs in the Philippines, particularly
in the oil industry, it refuses to increase the wages and salaries of
government employees and legislate an increase of a measly P125 of the
minimum daily wage, due to the dictates of the IMF. 
since the Philippines became an American colony in 1899, the Philippine
government has always placed first its obligations to U.S. business over
and above its social responsibility to the Filipino people. This is
especially exemplified in the notorious Presidential Decree 1177,
formulated during the martial law regime of Marcos and re-enacted
as Executive Order 292 by President Aquino, which requires the government
to pay for its foreign debts before any other expenditures. In principle,
the annual budget allocations for all other operations of the government,
most particularly for social services, can become zero if nothing is left
after meeting the country’s debt obligations, especially now with our
ever increasing debts. Such a
law is unique in the Philippines, and has been called a classic example of
an exploitative neo-colonial policy. While many oppressive laws enacted by
the dictator Marcos through presidential decrees (note that monarchs once
issued laws known as monarchical decrees) have been rescinded, PD 1177 has
been retained under the pressure of the IMF-WB by the Aquino government
and all other successive Philippine administrations.
1177 is just an extreme manifestation of neo-colonial laws vis-à-vis the
United States that our supposedly independent government has been forced
to abide by since 1946 (when the Philippine state became a member of the
IMF-WB). Another example of an unabashed U.S. neo-colonialism policy in
the Philippines was the threat of not granting to the latter a $430
million loan in 1946 for war damages incurred during the Second World War
(it was U.S. planes and guns that actually wrought extensive damage in the
Philippines), if the Philippine government does not amend its 1935
constitution with the incorporation of Parity Rights for U.S. business in
the Islands. Parity Rights would extend the same privileges to exploit the
natural resources of the Philippines to U.S. business as enjoyed by
Filipino nationals. Though Parity Rights was gradually phased out in 1974,
it was nevertheless substituted by equally liberal investment laws during
the Marcos era. Other neo-colonial laws enacted in the Philippines are:
the Bell Trade (free trade) law in 1949, the 1962 decontrol law (which
devalued the peso for the first time) of Diosdado Macapagal, and the
various very liberal investments laws of Marcos (Investment Incentive Act
of 1967, Export Incentive Act of 1970, PD 1034, the latter allowing
offshore banking units in the Philippines, etc.), all compiled under the
Omnibus Investment Act, the Labor Code of 1974 (disallowing strikes in
so-called vital industries) and the laws
under various structural adjustment programs of liberalization,
privatization and deregulation, implemented by the Aquino up to the Arroyo
regimes. Most of these laws since 1949 have been commitments under various
letters of intent with the IMF, now called Memorandum of Economic
Agreement. Such agreements are made to appear as if they
embody reforms formulated by the Philippine government itself, though they
are in fact based on recommendations from various studies conducted
by IMF-WB survey
missions before such economic reforms are adopted by the Philippine
government. Thus, there were the industrial reforms of 1956 and 1979,
financial reforms of 1972 and 1980, agricultural reforms of 1980 and 1996
and educational reforms of 1982, 1997 and 2001 implemented in the
Philippines following the proposals of sundry IMF-WB survey missions, from
the Bell mission, Ranis mission and others.
laws are easily enacted in the Philippines due to the fact that Congress
is dominated by the upper classes of our society, composed mostly of the
landlord class and the komprador bourgeoisie or their representatives.
The komprador class basically favor a dependent trade relationship with
the U.S. since their business in cash crop exports, like sugar, coconut,
hemp, etc., benefit from this relationship. Thus free trade arrangements
like the Bell Trade Act and export incentive laws are to the great
advantage of the Philippine landed gentry. This is the reason why this
class supported the U.S. policy of not dismantling the semi-feudal
structure of Philippine agriculture when the country became an American
colony in 1899. A study of the U.S. Bureau of Labor in the first decade of
the century recommended to the U.S. government that the feudal
relationship of tenant to landlord already entrenched during the Spanish
regime must not be disturbed. Soon after, the U.S. passed the Payne-Aldrich
Act (or the first free trade law in the Philippines) in 1909. The
retention of semi-feudalism in the Philippines, “semi” since a great
part of the Philippine agricultural produce are exported, would reduce the
production costs of the komprador bourgeoisie in the countryside to their
advantage as well as their trading partners, since tenants and sacadas
(seasonal workers in haciendas many of whom are tenants) incur for the
komprador lower payments for labor and thus cheaper export goods. The
komprador bourgeoisie have also maintained the backward state of
technology in their haciendas since manual labor in the countryside is
plentiful and the acquisition of machinery in their farms will just
increase their cost of production. Thus, throughout the years even with
various land reforms, which are always diluted by a landlord-dominated
Congress, the tenancy and the sacada
systems persist in the countryside. In 1980 tenancy still existed in 26
percent of total farms in the Philippines and this further increased to 35
percent of all farms by 1996.
IMF Post-Program Monitoring Team
the IMF sends survey missions to the Philippines to monitor closely
whether the Philippine state is faithfully following its various
commitments under its programs with the Fund (the term commonly used to
refer to the IMF), especially with regards debt servicing. From June-July
2004, an IMF survey mission conducted a so-called post program monitoring
(PPM) on how the Philippine government is managing its deficit as we have
already discussed above. The Philippine government last entered into a
stand-by agreement (under a credit line called by the Fund as a
precautionary agreement) during the Estrada administration, which secured
a $1.3 billion from the Fund. The IMF survey team last June made sure that
all the commitments under this precautionary stand-by agreement are
complied with. The Arroyo administration is contemplating to borrow under
another new stand-by agreement with the IMF to meet the current fiscal
crisis. With the entry of WTO in 1995 to supervise more stringently the
observance of the trade liberalization policy (a continuing commitment
with the IMF) of the Philippines, the country has been more closely
integrated to serve the business agenda of the TNCs in the name of
the Philippine state deeply mired in foreign debts, which even forebodes a
closing of its government within the next two years, its foreign creditors
through the IMF can bring it down to its knees and impose such deadly
requirements for the economy that its people will bleed white. Such a
situation will bring ruin to all, including the banks and the business of
the komprador bourgeoisie, ever faithful but dispensable partners of U.S.
imperialism. But the lives of
majority of the people have long been ruined, forced to a hand-to-mouth
existence, with millions robbed of their human dignity, subsisting on
morsels thrown by the government and the rich and living in squalid places
only fit for animals. The masses have seen one Philippine president after
another come and go without the least improvement in their lives even in
times of government budget surplus and supposed economic growths of GDP
and GNP. In fact, the plight of the masses has worsened through the years
as we have seen. Thus, one fiscal crisis after another, and there had been
several in the past, though the present is the most severe, have become of
no concern anymore to the long enduring and suffering masses.
must be done?
Philippines must first and foremost re-negotiate all foreign loans, since
a great part of these are odious loans, particularly those incurred during
the Marcos regime, when our external loans ballooned from $599.5 million
in 1965 before Marcos to $28.2 billion after he was ousted in 1986. Marcos
incurred a total of $27.8 billion loan during his regime, including the
scandalous $2.3 billion for the mothballed Bataan Nuclear Power Plant and
other loans to his cronies.
The Philippine government still continues to pay for the interests and principals of many of the Marcos loans, which formed part of the total current
$57.8 billion foreign debt of the country. And there are other
questionable foreign debts like those incurred by Napocor from the Ramos
up to the Arroyo regimes that a tough and determined government mission
can negotiate with the country’s foreign creditors. Other countries like
Peru, Bolivia, Ecuador, Cuba, Ivory Coast, Nigeria, Tanzania and Zaire
have at one time or another unilaterally suspended or repudiated part or
all of their debt servicing. Even the United States repudiated some of its
debts, such as those that she incurred from British financiers in building
railroad networks in the 1800s. Several of the American allies also never
paid back debts to the U.S. acquired during World War I.
Corazon Aquino succeeded the dictator Marcos after EDSA I, she had all the
moral ascendancy at that time to repudiate Marcos’ debts of dishonor
since world opinion was behind the people’s movement that toppled the
dictatorship. Instead, Aquino promptly went to deliver a speech before the
U.S. Congress as an invited special guest to assure all the Philippine
foreign creditors that the country will pay all its external debts,
including the loot that Marcos had stashed away in foreign banks, mostly
in Switzerland, which is estimated to be around $13 billion to $20
billion. Indeed, this subservience and cowardice of Aquino is one of the
major factors why we are in our present crisis.
solution to our fiscal crisis is not for the people to carry its burden
since they had not been responsible for it in the first place. In fact,
the masses have long been subjected to the effects of the constant
scrimping of the national budget, mostly affecting the appropriations for
social services, in order to defray government debts. The solution is not
to increase all kinds of taxes, like what the government and the 11 UP
professors are clamoring for, which will just exacerbate the miseries of
the people, but for the government to have a strong political will to
renegotiate all debts, especially foreign.
way out from the fiscal crisis is to likewise renegotiate the
Philippines’ commitments under various trade agreements to lower down
and eventually eliminate its tariffs for all sorts of products,
particularly agricultural, which ridiculously include products that the
country has in abundance like vegetables.
Revenues foregone from custom dues, which are estimated at P100 billion
annually, for the entry of diverse products into the Philippines, have
contributed greatly to the escalation of the government deficit. Still
another alternative to confront this particular diminution of government
revenues is for the Philippines to withdraw from WTO as a member. Instead
the Philippines can enter into various bilateral trade agreements with
countries, whose products we need. Countries like Taiwan and Vietnam are
not members of WTO and yet they get along very well with their foreign
trade, compared to the Philippines with its richer natural resources.
drain of around 20 percent from the annual national budget due to graft,
patronage and tax evasion must also be eliminated. This massive leakage
from the national budget has been the focus of the mainstream media as the
supposed primary cause of the fiscal crisis.
In an effort to divert public attention from the need to
renegotiate the huge Philippine foreign debts, Malacañang has been
announcing vociferously complete with moral indignation for publicity’s
sake that the fat cats in the GOCCs and congressmen should trim their big
salaries and reduce their pork barrels. But this is like wishing that the
tiger shed off its spots since Malacañang is the leading scrounger of the
money of the people with its huge presidential discretionary fund of P3
billion which Arroyo refuses
road we are opening may be too demanding and risky for the present
government. We know that it will require great courage and the support of
the masses to enter this road, and the government does not have both these
strengths. In the final analysis, it is a true government of the people
who will traverse this road that can lead to the emancipation of the
people and prosperity for our country. Saving from foreign debts,
increases in government revenues from tariffs, and the final elimination
of bureaucrat capitalism, can generate funds to launch a genuine land
reform program, which will not this time be defeated by a
landlord-dominated Congress. An effective and successful land reform
program will lead to an effective national industrialization program for
the Philippines, one that is not geared toward the needs of foreign
countries but provide for the welfare of the Filipino people. Higher
revenues for the government can also subsidize substantially social
services like education, health for the people, housing, transportation,
etc. Greater capital outlay from the national budget can support
infrastructures for development, all planned for the advancement of the
greater good. We as an organized people must act immediately to travel the
road that we are showing for the time is fast ticking away before our
national wealth may be completely dissipated and the country brought into
great economic chaos. Bulatlat
Edberto M. Villegas, PhD, is chair, Development Studies Program of the University of the Philippines in Manila; author of several books, notably Studies in Philippine Political Economy, 1984; Japanese Economic Presence in Southeast Asia, 1992, and Global Finance Capital and the Philippine Financial System, 200. He is also a Fellow of the Center for Anti-Imperialist Studies and an economic analyst of Bulatlat.
 IBON Facts & Figures, The Economy in 2003, Mismanaging the Crisis, Vol. 27, No. 1, Jan. 15, 2004.
 Quoted from a speech of Senator Joker Arroyo, Philippine Daily Inquirer, Sept. 6, 2004, A4.
 Memorandum of Economic and Financial Agreements of the Philippine government with the IMF (MOEFA), 1989-1992, MOEFA, 1994-1997, and MOEA(Memorandum of Economic Agreement), 1998-2000.
 All these debts are not included in the statement of annual national budget, because they are considered off-item budget by the government.
 Rosario G. Manasan, Fiscal Reform Agenda: Getting Ready for the Bumpy Ride Ahead, PIDS, p. 2,
 From Department of Budget and Management (DBM) - only interest payment is included in the annual budget declared by the government, while payment for the principal is from data of the Bureau of Treasury, not stated in the annual budget of Congress. This is due to a dictum of the IMF regarding the manner of reporting the national debt.
 Business World, Jan.30-31, 2004.
 For a thorough discussion on the EPIRA , see “Power Sector Restructuring Under EPIRA”, IBON Facts and Figures, Vol. 27, No.12, June 30, 2004.
 The Bataan Nuclear Power Plant was built through a loan of $2.3 billion and the government up to the present is paying its creditors $170,000 daily as interest alone for this loan, which it conveniently passes to the public in the forms of taxes and fees. The consummation of the debts incurred for the nuclear plant will be up to 2018.
 Memorandum of Economic and Financial Agreement with the IMF, 1989-1992.
 Emmanuel de Dios, et al, The deepening crisis: the real score on deficits and the public debt, pp.14-16.
 De dios, et al, pp. 14 -24
 Statement by IMF Staff Mission to the Philippines, July 12, 2004, International Monetary Fund, Washington DC, and from Business World, June 30, 2004. With regards the debts of Napocor from World Bank, ADB, and Japan Bank for International Cooperation, IMF recommended that it be taken over by a newly created Power Sector Assets and Liabilities Mgt.(PSALM) of the government.
 Giovanni Andrea Cornia, “ Adjustment Policies 1980-1985: Effects on Child Welfare”, Adjustment with a Human Face, Protecting the Vulnerable and Promoting Growth, A Study by Unicef, Clarendon Press, Oxford, 1987, pp. 48-72.
 The tandem of the IMF-WB-WTO has been called the three musketeers of the international capitalist order. The IMF is widely known among NGOs in Africa as the Institute of Misery and Famine.
 Data from Kilusang Magbubukid ng Pilipinas.
 Gemma Luz Corotan, “The Rice Scam,” Betrayal of the Public Trust, PCIJ.
 Data from Bayan Muna party list.
 Memorandum of Economic and Financial Agreement, 1989-1992.
 We prefer to use the criteria of the increasing incomes of the majority of the people especially of the last three deciles of the populace and decreasing unemployment rate as measurements of economic growth rather than the mainstream economic measures of the growth of GNP and GDP. While, GDP may grow, as the Arroyo government is claiming that it grew from 4.1 percent in 2003 to 6 percent in the second quarter of 2004, yet unemployment continues to grow in 2004 and many more Filipinos are falling below the poverty level.
 Data in 1975 from US AID, Country Development Strategy Statement, Jan. 1980, p.2, and from 1998 and 2004 from IBON Philippines.
 The Paris Club, which relies on the IMF-WB good listing of a country as a reliable debtor, is composed of 400 transnational banks while the London Club, which is also advised by the IMF-WB, is composed of 700 TNBs.
 Data from the Center for Research and Communication (CRC), 1984, now the University of Asia and the Pacific.
 It has been estimated that Filipino OFWs’ remittances to the Philippines is 285 percent of foreign direct investment (FDI) and 1,047 percent of ODA, and 14 percent of export of goods and services in the Philippines (from a speech of former Finance Secretary Roberto Ocampo, BW, Jan. 16, 2004, p. 25).
 Standard Chartered Bank of London has warned of an Argentina crisis befalling the Philippines, Inquirer News Service, Aug. 8, 2004.
 Deregulation of
oil prices and other commodities and austerity measures by the
government, including a freeze on the wage and salaries of government
rank-and-file employees, and the control of the minimum wage are
contained in the MOEFA of Aquino, Ramos and Estrada with the IMF.
 At one time, in 1962 a governor of the Philipine Central Bank, Miguel Cuaderno, complained of the dictatorial policy of the U.S. state Department in influencing the IMF to make the Philippines shift drastically from a control to a decontrol policy (from Cheryl Payer, The Debt Trap, Penguin Books, 1976, p.59-60.)
 40 percent of the lower House of Congress come from the landlord class, while the rest have their families in various business like real estate, manufacturing, etc. Only a very few, around 1 percent, mostly from the party list, are from the lower middle class. In the Senate, all are multi-millionaires or millionaires, belonging to the landlord class or attached to business. (Rulemakers, Sheila Coronel et al, PCIJ, 2003, passim) Also see Dante Simbulan, A Study of the Socio-Economic Elite in Philippine Politics and Government, a doctoral dissertation, The Dept. of Political Science Research School of Science, Australian National University, 1965.
 “Labor Conditions in the Philippines,” Bulletin of the Bureau of Labor, Washington, Government Printing Office, p. 777.
 Data from the Agricultural Division, NSO.
 Edberto M. Villegas, Studies in Philippine Political Economy, Revised Edition, 1984, Silangan Publications, 1984, Chapters I-III, V; Global Finance Capital and the Philippine Financial System, Institute of Political Economy, 2001, Chapter 3.
Some of the fraudulent debts of the Marcos cronies are: Rodolfo Cuenca, CDCP, $323 million, Alfredo Montelibano, Planters Products, $150 M, Roberto Benedicto, Nasutra/Philsucom, $265 M, Benjamin Romualdez, Meralco/First Holdings, $370 M, Marcos/Jose de Venecia, Landoil, $165 M, Genonimo Velasco, PNOC, $123 M, Geronimo Velasco, Nobel Phil.,$14 M, Geronimo Velasco, Republic Glass, $2M, Herminio Disini, NPC, $795, Roberto Ongpin, NIDC, $795 M, Roberto Ongpin, NIDC, $157 M, Roman Cruz, PAL, $321 M, Conjuancos, PLDT, $654 M.(From data of NEPA and IBON data bank)
 The Philippine Debt Crisis, published by the Freedom from Debt Coalition, March 1989, pp.25-26.
 The lowering of tariff rates for cabbages, lettuce, string beans, tomatoes, etc., that farmers in Northern Luzon produce in abundance, has bankrupted these farmers after the entry of the Philippines into GATT.