Non-solutions and unanswered questions

Weeks after President Arroyo made the uncharacteristically forthright pronouncement that the government was broke (i.e. in a fiscal crisis), after UP (University of the Philippines) economists issued a paper purporting to give the real score on deficits and the public debt, a plethora of "solutions" have been offered. This, alongside the increasingly doomsday scenarios by Mrs. Arroyo's finance managers that the public is being made to feel increasingly anxious about.

On Malacañang's part, the approach has been to heap the blame on everyone except the President, call on everyone to implement austerity measures except the President, railroad the new regressive tax measures in Congress worth PhP80 billion that will then be entrusted to the President to solve the crisis that she, in her first three years in office, had the biggest hand in exacerbating and triggering in the first place.

Mrs. Arroyo's spin masters must be chortling with glee on how they pulled a fast one on the lawmakers who were made to appear as the major villains with regard to the budget deficit. Their PhP20-billion pork barrel -- PhP200 million per senator and PhP70 million per representative -- was denounced to a public fed up and disgusted over the lavish lifestyles and scandalously corrupt ways of the honorable congressmen. Everyone, from bishops to editorial writers to the legislators themselves and even the man on the street, decried the sinful "pork."

Asked about her own pork barrel in the form of an understated PhP1 billion a year social fund from PAGCOR (Philippine Amusement and Gaming Corp.), PhP2 billion in calamity funds, and another PhP1 billion in unaudited intelligence funds, Arroyo belittled the amounts and even pointed to her predecessor, President Estrada, as having started the business of presidential intelligence funds with PhP500 million allotted and entrusted to Gen. Panfilo Lacson, then PNP (Philippine National Police) and PAOCTF (Presidential Anti-Organized Crime Task Force ) chief.

Speaker de Venecia, not to be outdone in the public relations department, has announced all sorts of drop-in-the-bucket but feel-good and look-good measures by legislators: Contribute their one month's salaries of PhP30,000 each; for the multi-millionaires and billionaires among them, donate PhP100,000 each; and for the wealthy of the land to contribute PhP1 million each to help stave off the crisis.

Nonetheless, Budget Secretary Emilia Boncodin had to hastily clarify that even if the CDF (Countryside Development Fund) allotments were to be completely done away with, that would make up only 2% of next year's proposed budget and could still not take the place of the new taxes Malacañang wanted enacted into law.

Next to come under attack was the Internal Revenue Allotment (IRA) of the local government units (LGUs), with Malacañang again hoisting up the specter of wasteful and corrupt expenditures by LGUs as well as their supposed overdependence on the national government to provide public funds to serve their constituents.

Lost in the debate is the fact that, years ago, many vital government services like health care, had already been devolved to the LGUs. In fact, such services have continuously deteriorated since then primarily because of inadequate funding despite the legally mandated IRA.

Malacañang is poised to declare a state of unmanageable fiscal deficit to force cutbacks in IRA should the resistance by the LGUs continue. After all, the elections are over and the time for wooing the LGUs is also over.

On the other hand, Rep. Andaya, chairman of the House committee on appropriations, is vociferously opposing the proposal of Sen. Ralph Recto, chairman of the Senate ways and means committee, to cut PhP106.7 billion from the proposed PhP907-billion budget. Recto charges Malacañang of not disclosing unprogrammed and other hidden expenditures in the 2005 budget amounting to PhP106.7 billion, thus hiding the fact that the actual budgetary outlay would amount to more than a trillion pesos.

Andaya says that would be tantamount to firing people (which the government already plans to do), close schools and hospitals (which is already happening de facto because the budget for these have been drastically going down under the Arroyo administration) and telling the Army to "go home and plant kamote" (which isn't such a bad idea as the government's human rights record may improve and the peace process with the NDFP [National Democratic Front of the Philippines] and MILF [Moro Islamic Liberation Front] may move forward).

Even some of our venerable Churchmen have joined the fray with catchy sound bytes, tokenism and band-aid solutions that derive from a misunderstanding of the true nature, dimensions and underlying causes of the fiscal crisis.

There is the headline-grabbing call of the CBCP (Catholic Bishops' Conference of the Philippines') head, Archbishop Fernando Capalla, who one remembers to be the Church official who blithely and overeagerly absolved the Arroyo camp from any and all charges of cheating and otherwise immoral conduct during the last elections. Once more quickly coming to the aid of the beleaguered Arroyo administration, Capalla now calls on the clergy and the faithful "to give up their monthly allowance for one month or two and give it to the President." One wonders whether the good archbishop realizes that "allowances" for students and other ordinary people usually mean what they use on a daily basis to survive and not excess disposable income.

Thus, questions remain, begging to be asked and answered, first and foremost by the very people who should know and who are responsible for this fiscal and financial mess we are in.

Can President Arroyo please explain how, under her watch, the Filipino people are making the most debt payments in Philippine history -- PhP470 billion paid in 2003, equivalent to 75% of national government (NG) revenue and 11% of GDP; PhP542 billion payments in 2004, equivalent to 80% of NG revenue; and a whopping PhP695 billion in 2005, equivalent to 92% of NG revenue?

Can she also explain why her government is the most indebted government in Philippine history? How did the NG incurred PhP3.4 trillion in total debt as of end-2003 (equivalent to 77.4% of GDP) that has reportedly risen to PhP4.1 trillion by end February 2004?

What about the outstanding debt of the public sector as a whole (including the bailouts of the Central Bank, the DBP [Development Bank of the Philippines], the PNB [Philippine National Bank] and GOCCs [government-owned and -controlled corporations] like Napocor [National Power Corp.], MWSS [Metropolitan Waterworks and Sewerage System] and LRTA [Light Rail Transit Authority], the Public Estates Authority [PEA of the PEA-Amari scam and the overpriced President Diosdado Macapagal Avenue], the GSIS [Government Service Insurance System] and SSS [Social Security System]) amounting to PhP5.4 trillion by September 2003 and running to more than 130% of GDP?

And yet the Arroyo government is still borrowing heavily: Indeed, the last two years saw the highest sustained borrowing in 2-1/2 decades. NG financing is rising steeply, from a net payment of PhP27.1 billion in 1997 to net borrowing of PhP286.8 billion in 2003.

So many questions, so few honest answers.

BusinessWorld
Sept. 3-4, 2004