Foreign Debt ? ?

When the food and energy crisis came out in the open, a raging debate involving public institutions, big business, and key government officials, including President Arroyo exploded. Hitherto, while the exchanges were intense and sometimes dramatic, the substance of the discussions was rather superficial, if not one-dimensional. Fault-finding, mudslinging and populist posturing dominated the supposedly joint pondering for concrete proposals and solutions. I believe, at the very least, all parties wanted to wash their guilty hands of any responsibility regarding the current mess. At best, everybody wants to rake in huge profits, politically and economically, out of the predicament by cutting each other’s throats. Nowhere in the picture was any truthful search for the derivation of all these crises and economic maladies in order to arrive at sound proposals. Except for the social movements, cause-oriented groups and Ill-meaning economists, almost all were contented in throwing all sorts of prescriptions, proposals and recommendations without the benefit of a clear and thorough diagnosis of the problem.

People are asking, What caused this problem? Certainly, there are many legitimate causes and all must be dealt with decisively. But, truth be told, if I really want to seriously answer the question why I am in this mess in the first place, I assert that one just needs to look at the Philippines’ enduring debt problem in order to find out.

Due to the failure of succeeding post-Marcos administrations to concretely solve the compounding debt problem—an elemental social-justice issue before and after the fall of the dictatorship—today’s generation of Filipino citizens are paying for that historical disappointment with such tremendous consequences.

In the agriculture sector alone, succeeding administrations from the time of President Corazon Aquino had used borrowings as a major source of financing, heavily depending on debt to implement its programs and projects. The agricultural agencies themselves facilitated this by calling on lenders to finance domestic projects, labeled as foreign-assisted projects, usually through official development assistance and other forms of “concessional” financing, many of which were challenged as fraudulent or anomalous, if not illegitimate.

Why? Because a large part of the people’s resources are being allocated to debt payments instead of to social and economic services. Proof of this, the combined real national government expenditure for agriculture, agrarian reform and natural resources per capita dropped from a meager P 121.24 during the end of the Marcos years to an insulting P 194.91 under Mrs. Arroyo.

Moreover, the sector became increasingly vulnerable to the predicaments attached to many loans such as liberalization, deregulation and privatization. For example, in the Grain Sector Development Project of the Asian Development Bank (ADB) contracted in 1998, and which calls for the privatization of the National Food Authority. The government’s rice-procurement agency, which sets the prices for Palay, The Filipinos are still paying an average of $4 million a year until 2024. This is regardless of the fact that the project was already canceled. Due to these predicaments, foreign competitors came rushing in to the domestic rice market, thereby wiping out local producers whose value cannot compete with their cheap prices. Candidly put, I along with my family became dependent on imported rice.

Agricultural production is increasing; from 7.65 million metric tons in 1980, it jumped to 16.24 million metric tons in 2007. The policy predicaments simply pushed us to import more and more, from 192,020 metric tons in 1984 to 2.1 million metric tons in 2008. Accurately speaking, when international markets collapse, so does our food security. The same goes with the power sector. I remind the public, the eight- to 10-hour power outages during the early 1990s were caused by Marcos’s legacy of debt, exacerbated by Aquino’s “honor all debts” dictum which drained the national coffers of money to invest in added power-generating capacity.

Ramos’s own solution had been simple yet very damaging: rely on more debt. Using the build-operate-transfer law, he proceeded to dangle lopsided contracts to attract investments on the power sector. He issued sovereign guarantees for private loans and changes in exchange-rate and oil prices, and even promised, via take-or-pay schemes, to buy a stipulated amount of electricity from those who will generate, whether or not the electricity had been generated or used. With risk-free capitalism in place, independent power producers (IPPs) rushed in to take advantage.

As a result, the National Power Corp. (Napocor) ended up at the losing end of the contracts with IPPs, running on billion-peso deficits, which the government ended up assuming. Indebted, the government had no choice but to rely on multilateral lenders like the ADB and the World Bank, dangling loans with privatization of the power industry as primary predicament. In the end, Napocor is bailed out, and I as a taxpayers is paying for its debts.

Talk about full circle! Oppressive debt was the culprit of our power-generating incapacity, which was allegedly solved by additional indebtedness, and yet, today, I as a Filipino is not only indebted but I also have the second-highest electricity rates in Asia and one of the highest in the world.

Due to this stupefying somersault of debts and predicaments, the country’s power industry evolved into one of the most complex and esoteric cases of an enduring dilemma which have mutated into a multiple problem of corruption, mismanagement, endemic rent-seeking elite and a fundamentally flawed framework.

Ergo, if the Arroyo government is serious in structurally addressing the food, education, social services and energy crisis, then it must understand that photo-ops, selective reforms, political operations, cover-ups and “saintly” populist posturing will never in essence solve the problem. The Filipino people have paid for these debts many times over. To let our people and their children continue paying for debts they didn’t benefit from, have only caused them further poverty or which they don’t even owe in the first place is righteously and without disbelief the greatest sin of all.