Wednesday, May 30, 2007

One Big Fight

From Inquirer: “The government spent P300.89 billion from January to April -- representing close to 90 percent of the total revenue collected during the period -- to service maturing debts, data from the Bureau of the Treasury showed.

The government collected P338.50 billion in revenues, such as from taxes and privatization of assets, during the four-month period.

Treasury data showed January-April debt service payments consisted of P191.74 billion of principal debts and P109.119 for interest.

Domestic debt accounted for P227.715 billion and foreign debt, P73.145 billion”

Now tell me if this is good news or what. The treasurer thinks this is good news because the figures already show a reduction in payments because of the improving deficit (which is primarily from the strengthened peso arising from vigorous overseas remittances). But 90% of total revenue? This is the ultimate human rights violation. Whenever our dynastic leaders allow this to happen and focus on impeachment, charter change and other self-serving topics that further their political entrepreneurial fortunes.

Anyone who runs a household knows that this form of credit-card living makes very poor economic sense. And who do you think pays taxes around here? Certainly not those big tobacco firms who always have the law suspiciously on their side when it comes to tax matters. Hardest hit are the industrious and law-abiding employees and those families relying on remittances. Meanwhile, educational opportunities dwindle further and healthcare, well there wasn’t anything much to begin with.

But why can’t we negotiate for interest payment deferments and reductions? Why can’t we automate the election process? Why is it that even the simple task of counting votes has become so complicated and corrupted? Why can’t I negotiate with the banks? Why can’t I take charge of the vote-counting system knowing I can do a better job than Abalos? Why am I not allowed to even ask these questions?

Because if you stay too long, your mind becomes conditioned to the passive acceptance mode that prevents us from moving forward. At the end of all our rants, we meekly take. We stop asking, we don’t do anything. Our country deserves so much more than what we have. We have millions of children who eat one inadequate meal a day. We tolerate pollution and we enable dishonest cops and government bureaucrats.

Get behind me, anonymous. I am not giving up. I have only just begun to fight.


r.g. lacsamana, m.d. said...

Indeed, a lot of sensible questions demanding answers, but likely with none coming soon, perhaps never.

On the question of those huge payments (90%) relative to the revenues to service both local and foreign debts, I'm a little puzzled, not being an economist, on whether there is an advantage in deferring those payments, or any way that the government can negotiate for discounts.

I have always thought deferring payments would just be postponing the inevitable, since they will need to be paid later, while negotiating for discounts may be impossible. Maybe Dr. Bautista can explain this better to us.

The other issues the good doc has posed have nagged at our leaders for sometime, apparently neglected despite the rhetoric that we hear constantly. It's all talk, but no action.

My main interest, as a physician like Dr. Bautista, is how to provide adequate health care to our countrymen. There appears to be a two-tier system in place, one for the rich, and another for the indigent. It's easy to assume that with the surfeit of doctors and nurses, there should be easy access to good medical care. That, in fact, is not the case, particularly in rural areas where medical resources are quite scarce.

The main culprit, of course, has been the medical brain drain, a phenomenon that started in the 60s and still surging. When more than 10,000 doctors have left their profession to switch to nursing, with many more expected to follow,
and then go abroad for better opportunities, that's a sure-fire formula for a medical crisis that Health Secretary Duque warned Filipino-Americans about
while on a trip to the U. S. last year.

But this brain drain is not limited to doctors and nurses. We are also losing teachers, engineers, scientists, and all sorts of professionals. If a survey conducted last year is correct, one out of four Filipinos would love to go abroad, which reflects how we have lost confidence in our country. Losing our best and brightest, with most of them never to come back, is one of our worst national tragedies.

Tackling this challenge of reversing this brain drain should be one of the government's top priorities. It's not an easy task, as Dr. Bautista himself would acknowledge, but we need to seriously start thinking of what to do before it's too late. Otherwise, the Philippines will keep educating millions of its young men and women, but only to lose them to other countries.

While the yearly remittances of over $20 billion by Filipinos abroad have propped up the economy, that may not always be the case. It's true there have been signs of a strengthening economy, but unemployment remains high, as does the poverty level. Industrialization, which has made economic tigers of our Asian neighbors, is nowhere to be seen. Outsourcing of labor to the Philippines, ah, that is a poor substitute for what Japan, Korea and Singapore have been able to do for sometime.

I'm not trying to act like Cassandra, but the outlook for our country appears bleak from any angle. The challenges are vast, the time is ticking, and this is where the need for good leadership remains as compelling as ever. If the last elections are any indication, where voters rejected overwhelmingly all the actor-candidates, there is hope that Dr. Bautista, should he decide not to go back to the U.S, can revive his candidacy to the Senate one more time in 2008, with excellent chances that he would win at that time.

How about it, Doc?

Martin D. Bautista, M.D. said...

Our country desperately needs to elect a "Chief Negotiator for Debt with Rank of President"--someone with the mandate to play hardball with our creditors. This job will require more than a smiling, urbane, well-educated cabinet official. Very difficult choices will have to be made. Way I see it though and I totally agree with you Doc Lacsamana is we are running out of time. We can never attract our best prepared, most competitive professionals to stay given the horrible peace and order situation, the corruption and poverty, the lack of educational opportunities and the absence of healthcare....again we go back to how we are going to pay for all our dreams.

This is the mentality that has kept us down all these years--utang-import. We have become so unproductive because of this mindset. This is what frustrates me to no end here. Very few seem to care to learn all they can about the debt and international economics and simply choose to be led like lemmings by our pied piping politicians.

Discounting, deferment even outright repudiation of odious loans can be done if we had the right leader with the proper credentials and most importantly backed with the full faith and confidence of the Filipino people.

larri said...

Renegotiating our debt is not impossible. Two countries have done it in the last five years -- Argentina and Nigeria. Argentina, in fact, declared bankruptcy, to the consternation of the U.S. and the Paris Club of sovereign creditors.

But let's be realistic. There's a huge difference between these two countries and the Philippines. Argentina is one of the largest economies in South America, while Nigeria is Africa's leading supplier of crude oil. The Philippines? Well, we're just the leading exporter of laborers, which hardly amounts to anything in the negotiating table.

We can't play hardball with our "legitimate" debt because to do so will put our economy in serious trouble. Like it or not, we now rely on overseas remittances, which in turn is valuable because of the favorable foreign exchange. Try to play hardball for a second and you can kiss this delicate balance goodbye.

Be that as it may, the idea of renegotiating our debt deserves serious consideration, especially in relation to our Westinghouse loan taken by Marcos to build the mother of all white elephants in this country -- the Bataan Nuclear Power plant.

In many parts of the world, debt campaigners are pushing (and some have already succeeded) in getting odious debt canceled. The Westinghouse loan is clearly one of them and anyone who braves to seek its cancellation should get our full backing.

Scholar Feng said...

Let me start off by noting that the absolute size of the debt is meaningless. For instance, a loan of 1 billion dollars is carried by the United States is very different from a loan of the same amount carried by Bangladesh. Obviously, some relative measure must be used.

One such measure is the debt-to-GDP ratio, since GDP is bound to vary among countries. GDP is the measure of the national income, and using the debt-to-GDP ratio enables you to compare the debt taken with the country's ability to pay out of its income.

Using such measures, the Philippines would have debt that is 61.6% of GDP. For comparison, Japan has a ratio of 176.2%; Singapore, 100.6; Israel, 89%; United States, 64.7%; Malaysia, 46.7%; Indonesia, 43.8%.

From the figures, it would seem that some more well-off countries have relatively more debt than the Philippines, and some less well-off countries have relatively less debt.

This means that even the relative amount of debt does not mean much. What is meaningful is the management of debt.

For example, suppose that you purchased a one-million-peso house with a help of a housing loan from SSS. With an annual interest rate of 9%, 30 years to pay, and a downpayment of 10%, you pay 7,241.60 pesos in amortization.

Even with a debt ratio of 90%, if you can find someone to rent the house at any price higher than the 7,000+ amortization, you'd be better off.

For instance, Japan isn't nuts if it borrows more than its national income if it can grow more than the interest service.

Of course, this brings us to the problem of management. Has our government been up to the task? I'd just let the historical record speak for itself.

Some related rants:

On Inflation
If inflation has been present, it does harm to the creditor and good to the borrower. The presence of persistent inflation makes it easier for our government to borrow money and pay the interest.

Unfortunately for the average saver, it is also in the government's interest to keep inflation positive even if it eats away our savings and income.

On Government's Borrowing Power
The separation of the different branches of government has contributed to our present level of debt. The power to tax and distribute revenues is the province of the legislature, but borrowing is a purely executive act. This means that if Congress is reluctant to increase budget allocation, the president can suddenly borrow huge sums of money. Besides, it is easier to borrow money than to tax it out of the people. This has been the path of every president since Marcos, and I'm not surprised at the present level of debt.

Personally, I agree that some of these odious loans should be given debt relief. In addition, I would prefer that government borrows more money locally from small investors.

Next Stop Wonderland said...

Because if you stay too long, your mind becomes conditioned to the passive acceptance mode that prevents us from moving forward. --- I agree. I was optomistic once but it seems nothing really changed. I have given up a long time ago. Kung mamatay mamatay. No use in doing CPR. But then you guys came along then maybe a good dose of the right medicine is all it takes. Good to know there are guys like you around.

Martin D. Bautista, M.D. said...

I am grateful for the discussion but can we all agree that the debt problem will require a political solution meaning negotiations will be conducted in behalf of the Filipino people by an elected politician? There are so many ways to solve this mess if only we industriously study the problem and try other methods in dealing with it.