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News
Commentary
Taxpayers To Pay Marcos
Debt Until 2025
When
Marcos assumed presidency in 1966, the foreign debt of the Philippines
stood below $1 billion. When he fled Malacañang in February 1986 during
the first People Power, the country had a foreign debt of $28 billion.
Following our loan schedule, Filipino taxpayers will pay for the foreign
debts of Marcos until 2025 - 59 years after he assumed office and 39 years
after he was kicked out.
By Arnold Padilla
IBON Senior Researcher
IBON features Vol X No. 42
Posted by Bulatlat
The current fiscal crisis challenges our policy makers to bring more
meaning to the country’s observance this year of the 32nd anniversary of
the Martial Law declaration. Aside from the countless victims of human
rights violations during this dark period of our recent history, the
Marcos dictatorship also had another notorious ‘legacy’-- the debt
burden.
Even as the Arroyo administration urges the people to have their share of
the burden through new taxes and other oppressive measures, Filipinos
continue to shoulder the burden of servicing the debts of the late
strongman Ferdinand Marcos, including his so-called illegitimate debts.
Borrowing
binge
When
Marcos assumed presidency in 1966, the foreign debt of the Philippines
stood below $1 billion. When he fled Malacañang in February 1986 during
the first People Power, the country had a foreign debt of $28 billion.
Following our loan schedule, Filipino taxpayers will pay for the foreign
debts of Marcos until 2025 - 59 years after he assumed office and 39 years
after he was kicked out.
The borrowing binge of Marcos set off the debt crisis that succeeding
administrations have had to endure. And lest we forget, it was also Marcos
who issued Presidential Decree (PD) 1177 or the Budget Reform Decree of
1977 that automatically appropriates for debt servicing regardless of how
much is left of the country’s resources to fund basic social services.
Former President Corazon Aquino (1986-1992) affirmed this policy through
Executive Order (EO) 292 or the Administrative Code of 1987. The automatic
debt appropriation remains in place until today, which explains why we
have so much for creditors and so little for the poor.
Martial
Law and fiscal crisis
As
of the latest Bangko Sentral ng Pilipinas (BSP) data, the country’s
foreign debt is now pegged at $56.7 billion. Among the last five
administrations, the Marcos regime amassed the largest foreign debt at
more than $25 billion during its 20-year rule (1966-1985) or an annual
accumulation of almost $1.3 billion.
The largest increases in the country’s foreign debt happened during the
Martial Law period. Between 1973 and 1982, the indebtedness of the
Philippines grew by 27 percent per year. From 1976 to 1982, BSP data show
that the foreign debt was swelling by an annual average of $2.8 billion.
In 1982, due to automatic debt service, payments reached $3.5 billion,
almost the same level of total foreign borrowing for that year and larger
than the total foreign debt before Martial Law was declared.
The debt level became unmanageable, forcing the Marcos government to
declare a moratorium on debt payments in 1983. The Philippines never
recovered from its fiscal woes ever since, in spite of painful
restructuring under the tutelage of the International Monetary Fund (IMF)
in exchange for the moratorium and additional funding. With drastically
shrinking revenues due to the implementation of globalization policies
especially in the 1990s, the debt and budget problems exploded into a
full-blown fiscal crisis we are confronted with today.
Corruption
and debt burden
Worse,
many of the debts of Marcos did not go to infrastructure development
projects or social programs of government. Based on one estimate, Marcos
pocketed around 33 percent of the country’s total borrowings during his
term. This amount translates to more than $8 billion.
According to the findings of the Presidential Commission on Good
Government (PCGG), Marcos’s loot reached between $5 billion to $10
billion. Later, former Solicitor General Frank Chavez claimed that Marcos
and his family have $13.4 billion deposited in Swiss banks. Comparing the
two estimates, a significant portion of Marcos’s ill-gotten wealth may
have come from foreign loans.
The country continues to shoulder the burden of these debts. Based on the
data of the Bureau of Treasury Debt Monitoring Analysis Division,
the outstanding balance of Marcos’s foreign debts, 18 years after he was
ousted, stood at almost $1.2 billion or more than P67 billion (at an
exchange rate of $1:P56). The country is projected to pay more than $183
million in principal of these debts this year, and another $45.3 million
in interest and other charges.
Most
expensive white elephant
The
single largest foreign debt (and most expensive white elephant) of the
country was also contracted by Marcos-- the $2.3 billion Bataan Nuclear
Power Plant (BNPP). This lone project comprised 9 percent of the total
foreign debt of the country when it was completed in 1984. Subsequent
investigations showed that the BNPP was overpriced by $600 million, and
that Marcos and his crony Herminio Desini, who facilitated the project,
were bribed with $80 million by the project contractor US-based
Westinghouse Corporation.
The BNPP was mothballed by the Aquino administration after it found that
the plant sits on a major fault line. It never got to produce a single
kilowatt of electricity, but all the Aquino government can do was to
accept a $188-million settlement with Westinghouse.
Thus, Filipino taxpayers were left with a huge debt to settle. Starting
this year until 2018, the country still has to pay around $118.3 million
to the banks that financed the BNPP which include the US Export-Import
Bank, Union Bank of Switzerland (among the Swiss banks where Marcos
allegedly put his ill-gotten wealth), Bank of Tokyo, and Mitsui & Co.
Private
debt, public burden
The
BNPP is only one of the numerous public loans contracted during the Marcos
regime that benefited the private interests of Marcos and his cronies.
Among the conditions of the Marcos regime’s 1984 standby arrangement
with the IMF was that the national government would assume private loans
to ensure their repayment. Many of these private loans belonged to the
cronies of Marcos. In fact, 10 of Marcos’s close pals already accounted
for $3.3 billion of these government-assumed loans.
A huge portion of government assumed loans went to the National Power
Corporation (Napocor) and enriched Desini who facilitated these anomalous
loans. In a 1989 study, it was estimated that government-assumed loans of
Napocor, which involved Desini, reached $795 million. The country may
still be paying for these debts considering that the outstanding balance
of Napocor’s debt contracted by the Marcos government is still pegged at
$260 million as of end-2003.
Illegitimate
debts
Various
international initiatives and movements campaigning for debt cancellation
have tried to define what are illegitimate debts. Broadly, illegitimate
debts fall on any or all of the following categories:
-
Debts
incurred by a despotic power not for the needs or interests of the
state but to strengthen its despotic regime or to repress the
population that fights against it. It also includes loans made by
members of government or persons or groups associated with government
for personal rather than state purposes. Such debts are also called
“odious debts.”
-
Debts
incurred under onerous terms such as usurious interest rates and
private loans converted to public debt in order to bail out lenders.
-
Debts
used for projects or programs that did not happen or did not benefit
the people as originally intended, or harmed the community or its
environment.
-
Debts
incurred through wrong policy advice or debts with conditionalities
that harmed the people of the borrowing countries.
-
Debts
that cannot be serviced without causing harm to people or communities.
Proposals
Clearly,
many of Marcos’s debts are illegitimate-- they harmed the Filipino
people while enriching Marcos and his cronies. Worse, we are forced to
bear the responsibility of repaying these debts at the cost of being
denied our right to access basic social services.
Instead of implementing new and higher taxes and other anti-people
measures to deal with the fiscal crisis, we strongly encourage the Arroyo
administration to instead pursue measures that would uphold the general
welfare and public interest. One such measure is to reform its debt
management policies and reduce government debt. It can start by reviewing
the debts incurred by the Marcos dictatorship to determine which debts are
illegitimate and therefore not the obligation of the current government
and the people.
The Arroyo government may consider the following:
-
Establish
a Marcos Debt Review Task Force composed of the Department of Finance
(DoF), the Presidential Commission on Good Government (PCGG),
Department of Justice (DoJ), concerned members of Congress, and
representatives from concerned non-government organizations (NGOs).
-
At
the minimum, the Task Force should determine how much of the
outstanding balance of Marcos’s foreign debts of $1.2 billion are
considered illegitimate and recommend the immediate suspension of
servicing these loans.
-
At
the maximum, the Task Force should determine how much of these
illegitimate debts have already been repaid. The Arroyo administration
should then negotiate with concerned creditors and seek appropriate
reduction in current outstanding balance on grounds that past loans
serviced by government are illegitimate and therefore payments should
be refunded (e.g. through reduction in present debts).
-
The
Task Force should investigate all past and present government
officials, institutions, companies, and other entities or individuals
involved in fraudulent loan transactions during the Marcos
dictatorship and prosecute those who are found guilty.
The
hardest part, of course, is negotiating with creditors and this is where
the political will of the Arroyo administration will be put to a test. But
the concept of illegitimate debt and its cancellation is now a campaign
that creditors and First World governments are forced to recognize due to
international pressure. The IMF, for instance, has already recognized the
unpayability and insolvency of some of the debts of poor countries. It is
also now looking into the issue of ‘illegitimacy’ of debt.
Reviewing Marcos’s debts should form part of overall efforts to reform
the country’s debt management, which indispensably includes repealing PD
1177 of Marcos and EO 292 of Aquino. At a time of fiscal crisis, it is
more necessary to impose a cap on borrowings and payments (instead of
automatic debt servicing) so government can have more flexibility in
managing the people’s money and protecting the people’s welfare.
These efforts require the country’s policy makers to reorient their
appreciation of debts and its role in economic and social development. A
pro-people debt management should make debts serve our needs and
interests, and not put unnecessary burden on the people. IBON Features
/ Posted by Bulatlat
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