Solon says debt-for-equity bound for UN veto (full article)

Manuel T. Cayon
September 20, 2005

A senator said there was no cause for excitement over the government’s debt-for-equity proposal to the international community saying that the United Nations was certain to veto it.

“Don’t get too excited on it,” said Sen. Manuel Villar, saying that the debt-for-equity scheme proposed by House Speaker Jose de Venecia was not likely to prosper with foreign creditors.

He said that the World Bank was “not excited over it, and maybe the IMF [International Monetary Bank] too.” The WB and the IMF’s evaluation of the country’s credit worthiness were often considered as the imprimatur for lending countries and institutions to deal with debtor countries,

“The United Nations usually entertain any proposals, including the Philippines’s debt-for-equity scheme but [because of the WB and IMF posture] it is certain the [UN] will veto this proposal,” Villar said.

The scheme was formally presented before the meeting of the UN Security Council, which President Gloria Macapagal-Arroyo presided last week.

Certain with the UN veto, Villar cautioned the administration “not to make this a caper to divert the nation’s attention from the woes it is facing.”

He said that the country was “already facing crisis, interest rates are moving up and oil prices are going up, and expect them to get worse.”

“I think the country has to be managed,” he said.

He said that the country’s foreign debt and budget deficit problem were the primary burdens that the administration has to bear. The country has a standing debt of almost P4.1 trillion, “eating up a big chunk of the budget of about one-third just to pay its interest.”

“I am concerned also, when the impeachment complaint was junk by the administration congressmen. I am apprehensive that the administration may have succeeded in defeating the opposition by not allowing the proceedings to take place, but I would expect the opposition to return again next year with another impeachment complaint. And the trouble continues,” he said.

He said that “there is a perception that the Arroyo administration has a hand in preventing a proceeding where the people could have been given a chance to let her prove her innocence.”

“It was unlike that with Pres. [Joseph] Estrada who did not prevent the proceedings to go on,” he said.

The private research group, Ibon Databank, said that government should implement “a sound debt management plan that would include cancellation of odious and illegitimate debts and stopping automatic appropriations for debt service is a more logical step in solving the debt crisis.”

Ibon Databank warned that De Venecia’s debt scheme may push the country deeper in debt than what it intended to achieve.

“The plan does not call for debt forgiveness or cancellation, but will instead convert half of the debt-service receipts of multilateral lending institutions and multinational commercial banks such as the IMF and the World Bank to equity development and anti-poverty projects that poor countries are undertaking to meet their national Millennium Development Goals (MDG) goals over 2005-15,” the Ibon Databank said in its posting.

The group said that that proposal would recognize “that all debts are legitimate, including those deemed as onerous, [such as] the mothballed Bataan Nuclear Power Plant (BNPP), which Filipino taxpayers will have to pay almost $76,000 daily until 2007.” The BNPP was built in Morong, Bataan during the time of former Pres. Ferdinand Marcos but it was mothballed over fears that the earthquake faultline running over it may cause more trouble than benefits.

Instead of the debt-to-equity scheme, Ibon Databank said that government should exclude its obligation on fraudulent loans incurred under Marcos, “the BNPP debt in particular” as an option “that government should seriously consider if it is looking for a doable solution to ease its debt problems.”

The national government incurred an obligation of P601.7 billion in 2004 to service or pay the almost P4.1 trillion. The servicing alone last year was more than half of the national government expenditures, it said.

But Ibon Databank believed that the WB may approve the proposal “using the MDGs [ Millenium Development Goal] as an end-goal.”

“[This] makes the debt-for-equity scheme a shrewd strategy to promote neoliberal globalization The MDGs, through the World Bank’s Poverty Reduction Strategy Papers (PRSPs), promote a package of neoliberal reform policies that developing countries must implement if they want to avail of concessional lending or poverty reduction assistance from the World Bank,” it said.

Ibon Databank said that the PRSPs “may require developing countries to privatize state-run utilities or reduce spending on social services to pave the way for private sector participation.”

Categories: Asia, Odious Debts, Philippines

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