EVEN as the Senate has slashed billions of pesos in suspected Malacañang pork barrel funds in favor of additional funding for basic social services, the Freedom from Debt Coalition (FDC) thinks such efforts to introduce meaningful reallocations in the proposed 2006 national budget are piecemeal without the legislators seriously confronting the issue of the debt problem.

“Succeeding national budgets like in the past will simply become creditor budgets that are meant to appease international lending institutions,” said Ana Maria Nemenzo, FDC president. “In the end, these budgets subject our people to deeper poverty and misery.”

For this year’s proposed P1.053-trillion budget, interest payments alone, at P340 billion, account for 32 percent of the entire fiscal pie. With the amount for principal amortization at P381.7 billion, the total debt service bill is worth P723 billion.

Senator Panfilo Lacson is of the same mind and has urged Congress to take a closer look at the provision for debt servicing instead of approving the automatic appropriation.

“While not a high-profile issue, the debt burden robs Filipinos of much-needed basic services especially if the debts were acquired with onerous conditions,” Lacson said.

The national government’s total indebtedness has ballooned to P3.96 trillion as of end of February 2006, P2.17 trillion in domestic debt and 1.79 trillion in foreign debt. This amount does not include debts guaranteed by the government worth P575.25 billion — P48.15 billion in foreign debts and P527.1 billion in domestic debts.

Twenty years ago, the country’s debt stood at P472.5 billion. At its present aggregate value, the debt has increased by more than 725 percent, which corresponds to an annual average growth of 36 percent.

Of the post-Marcos governments, it is the Gloria Macapagal-Arroyo administration that holds the distinction of being the country’s highest single borrower. From 2001 to 2005, the Arroyo government has incurred additional debts amounting to P2.44 trillion, more than half of the current outstanding debt, for an average of P487.9 billion every year.

What is mind-boggling, FDC points out, is that the Arroyo administration’s debts far exceed the combined borrowings of its post-Edsa predecessors by almost P1 trillion. The Aquino (1987-1991), Ramos (1992-1997) and Estrada (1998-2000) governments incurred P338 billion, P401 billion and P725 billion, respectively, for combined total borrowings of P1.46 trillion.

National Government Outstanding Debt by Administration
(in million pesos)

AQUINO

YEAR
GROSS DOMESTIC BORROWINGS
GROSS FOREIGN BORROWINGS
TOTAL
1987
58,618
15,420
74,038
1988
47,339
17,290
64,629
1989
37,210
19,953
57,163
1990
30,096
24,406
54,502
1991
64,722
23,086
87,808
GRAND TOTAL
338,140

RAMOS

YEAR
GROSS DOMESTIC BORROWINGS
GROSS FOREIGN BORROWINGS
TOTAL
1992
148,146
34,143
182,289
1993
-16,992
38,223
21,231
1994
4,620
12,285
16,905
1995
58,653
16,833
75,486
1996
62,584
21,955
84,539
1997
-2,430
22,995
20,565
GRAND TOTAL
401,015

ESTRADA

YEAR
GROSS DOMESTIC BORROWINGS
GROSS FOREIGN BORROWINGS
TOTAL
1998
105,311
48,302
153,613
1999
160,450
120,354
280,804
2000
145,330
145,434
290,764
GRAND TOTAL
725,181

ARROYO

YEAR
GROSS DOMESTIC BORROWINGS
GROSS FOREIGN BORROWINGS
TOTAL
2001
206,358
68,482
274,840
2002
235,989
200,267
436,256
2003
290,283
240,122
530,405
2004
383,780
199,533
583,313
2005
396,819
217,908
614,727
GRAND TOTAL
2,439,541

Source: Bureau of the Treasury

Economist Maitet Diokno-Pascual, in her assessment of Arroyo’s economic strategies, attributed the lingering debt burden to the government’s reliance on borrowing — even overborrowing — to raise revenues and finance the deficit, including the international reserves of the Bangko Sentral. This, she said, is meant to “improve” the country’s fiscal condition so as to maintain the confidence of creditors who are only after the bottom line.

Pascual added that Arroyo is also engaging in a “Ponzi game” of borrowing to repay maturing principal.

By FDC’s accounting, these debts have not been used to propel real economic growth and development. Expenditures for capital outlay for productive public investments and services have consistently declined under Arroyo’s term, claimed Nemenzo, citing the dwindling capital outlay as a ratio of gross total borrowings, down from 27.2 percent in 2001 to only 10.5 percent last year.

YEAR
GROSS TOTAL BORROWINGS
(in million pesos)
CAPITAL OUTLAY
(in million pesos)
CAPITAL OUTLAY as PERCENTAGE of BORROWING
2001
274,840
74,793
27.21%
2002
436,256
70,728
16.21%
2003
530,405
81,274
15.32%
2004
583,313
63,240
10.84%
2005
614,727
64,469
10.49%

Source: Bureau of the Treasury; Proposed National Expenditure Program

So where did all the money go? A comprehensive audit of public sector debt and contingent liabilities is precisely the task of a congressional commission sought by Senate Joint Resolution No. 1. Unfortunately, since Senator Rodolfo Biazon filed the resolution during the first regular session of the 13th Congress, it has yet to be adopted.

31 Responses to The debt burden and Arroyo’s ‘borrowing addiction’

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Chabeli

June 3rd, 2006 at 4:02 pm

“…the Arroyo administration’s debts far exceed the combined borrowings of its post-Edsa predecessors by almost P1 trillion. The Aquino (1987-1991), Ramos (1992-1997) and Estrada (1998-2000) governments incurred P338 billion, P401 billion and P725 billion, respectively, for combined total borrowings of P1.46 trillion….So where did all the money go? Such a comprehensive audit of public sector debt and contingent liabilities is precisely the task of a congressional commission sought by Senate Joint Resolution No. 1. Unfortunately, since Senator Rodolfo Biazon filed the resolution during the first regular session of the 13th Congress, it has yet to be adopted.”

WOW! WELL, THIS IS THE RAMIFICATION OF HOLDING ON TO POWER. THE MORE PUKABLE YOU ARE, THE MORE YOU WOULD NEED TO PAY OFF PEOPLE TO SWALLOW YOUR SH*T. THAT’S PROBABLY WERE THE MONEY WENT.

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freewheel

June 3rd, 2006 at 7:52 pm

naintindihan ko ang punto ng FDC.

nuon pa man hindi nagpapaliw-paliw ang organisasyong ito. merong konsistensi, ika nga.

dangan nga lamang, natatandaan ng marami na si Dr Leonora Briones isang orihinal na kagawad ng FDC, naging matahimik sa isyung ito ng maupo bilang Ingat-Yaman ng Republika, DBM Secretary, etc.

ang tanong, sinu-sino ba talaga ang nagrerekomenda at nagtatakda ng porsyento ng taunang badgyet para sa ” servicing ” ng mga utang sa labas at loob ng bansa.

tama ba yung pagkaka-intindi ko na aabot sa 30% ng annual budget ay nakalaan para lang sa pambabayad ng mga utang, at yaon ay sa interes lamang, di pa kaakibat dito ang prinsipal?

maari po bang mahingan ng paliwanag ang DBM, NEDA, o ang FDC?

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Juan Makabayan

June 3rd, 2006 at 9:09 pm

freewheel,

covered ng Automatic Appropriations Act na nais i-repeal ng joint resolution 1. Aroung 30% of budget.

Delicate issue ang usapin tungkol sa re-examination ng debt payment policies. Dapat may paghahanda bago makipag negotiate. Dumating na ang punto na kailangan nang magpasiya ang pamahalaan at taombayan, hindi tayo handa. Ang taombayan ang luumubog sa kumunoy ng utang ng walang kalaban-laban.

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Toro

June 4th, 2006 at 8:12 am

Servicing the debt burden is a national commitment that has been compounded by foreign and domestic loans that continue to build up from one govt to the next for lack of revenue to finance what should have been the infrastructure projects, but sadly, such borrowings are replicated to liquidate maturing loans. Most of those loans carry mind-boggling interests for which new loans are sought in order to pay just the interests. This answers the question where did all those money go. This is a vicious cycle that will keep on repeating for as long as the economy remains dead in the water. Defaulting on the loans in favor of domestic needs can only make matters worse for the country. You know what the bank will do if you go tell them sorry, I don’t have enough to pay you today. In this time of crisis, don’t you wish we had an unselfish Congress that would give up their billions of pesos in pork barrel for the sake of the people instead of keeping it for their personal agenda?

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freewheel

June 4th, 2006 at 1:08 pm

Juan, at Toro:

Maselan at masalimuot totoo ang usaping utang lalo na kung kaharap mo ay mga dambuhalang institusyung pinansyal. Sabi nga, ang mga higanteng ito ay maaring magpa-bagsak ng hindi lang iisang gobyerno kundi ng isang bansa mismo.

Hindi nakinig ang mga nagdaang gobyerno sa mungkahi ng FDC, lalo na yung kay Aling Cory at Tabako, sayang ang mga pagkakataon. Nuon, bilib ang lahat (hindi lang tayo sa mga sarili natin) sa EDSA 1, at sa palagay ko, ang mga NAGPAPAUTANG handang makinig sa kung ano man ang sasabihin natin.

20 taon na ang nakalipas at hindi pa rin tayo handa? Aba, Wala naman tayong nasisilip na palatandaan na may paghahanda tungkol dito!

Anu- ano ba ang dapat paghandaan?

1. Na meron pangangailangan ng isang pag-uusap (gather and generate a consensus for the need to talk). Tingin ko, hindi mahirap gawin ito. Ipakita mo lang ang mga datos (data) -kahit sino, madaling maintindihan ito.

2. Pag-lalatag ng mga opsyon (options): pag-pili ng pwedeng gawin,
a.) moratorium o paghingi ng palugit at panahon, 1 taon? 3? 5? o 10? ;
b.) paghiling ng panibagong interest payment plans o dili kaya’y pagtigil dito at pag-tutok na lang sa prinsipal;
c.) selective debt repudiation or write-offs: pagpili ng mga matitingkad na utang na walang silbi at nakabalot sa mga misteryosong ugnayan, hal. ang 2 US dolyar na Bataan Nuclear Power Plant (BNPP) ;
d.) deklarasyon na tayo ay bangkarote (bankrupt) at sayonara na muna ang mga utang. (lubhang napakahirap na opsyon, pero hindi imposible).

3. Pag-hahanap ng ka-alyansa o isponsor, hinihikayat na kung maari, isa ito friendly foreign government(s). Hindi rin imposible ito, sa G-7 meetings, dahan-dahan nagiging mulat na ang mga bansang ito, na may malaking problema ang mga bansang katulad nating lugmok sa utang.

Tama ba ang tayming (timing) kung NGAYON natin gawin ito? Sa palagay ko, oo at bakit hindi?

Sa mga pag-uusap ng mga lider ng ibat-ibang bansa, ang mga katulad nina Pres. Clinton, namangha at nagulat sa epekto ng kasalukuyang kalakaran tungkol sa mga pautang at marami- rami na din ang nanawagang i-daan muli ito sa rebyuw.

Ang OFW remittances ay sinasabing ‘all-time high’ kaya masasabing nasa tamang posisyon tayo pagdating sa ‘bargaining sessions’.

Kasi, kung sasabihing wala tayong pera- eh, bakit patuloy ang pagpapautang sa atin?!

Meron na bang basehan o precedent ang ganito? Meron…

Kailan lang pumasok ang Rusya sa komunidad ng bansang nangungutang, pagkatapos ng siglo ng USSR. Maraming nagpautang at naniningil sa kasalukuyan. Nagkaroon ng malaki-laking pera ang Rusya dahil sa kanyang ga-as (gas) at pagsasapribado ng ilang state-owned enterprises.

At, eto na,- dumulog agad ito sa EU creditor nations para sa panibagong pagsasa-ayos ng mga utang. Pero ang sa kanila naman, ay naiiba: ‘early retirement of loans’ o pag-babayad ng MAS maaga! Isa ito sa mga isyung pinag-uusapan nina G.Putin at G. Angela Merkel. Bagamat hindi pa plantsado ang usapan, malinaw na may pag-uusap na nangyayari at malaki ang tsansa na ito ay positibong matutugunan, kahit hindi maiibigay ang lahat ng mga kahilingan.

Kung merong sanang ganitong pananaw ang ating gobyerno, mas marami sana ang maniniwala sa kanya at malaki ang posibilidad na tungo ito sa hakbang ng tunay na pagbabago.

Ang kasalukuyang walang humpay ng pagbabayad ng mga kwestiyonableng utang at kumakain ng malaking porsyento sa pera ng sambayanan ay nagdudulot pa ng isang malaking tanong, hanggang kailan ito?

Wala namang boluntaryo at malayang sagot tungkol dito ang namamalagi sa poder, kung kaya ay, hindi dapat pagtakhan kung patuloy ang pag-tanggap nila ng puna at batikos mula sa mamamayang nag-hihikahos at namumuting mga mata.

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freewheel

June 4th, 2006 at 1:14 pm

…ooopppsss… BNPP loan amounted to almost 2 billion US dollars.

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Toro

June 4th, 2006 at 8:50 pm

Only a robust economy can generate the revenue to pay all those loans. Until then this govt and the govt after next will continue borrowing. Repudiating the loans will only make matters worse because of sanctions that the World Bank and financial organizations will impose making this country like a pariah. Moratorium will open the door for others to interfere in the country’s internal affairs and eventually dictate on fiscal matters and financial management. There will be arbitrary conditions that may be difficult to meet at the expense of the people and chances are further loans will not be allowed while the country is in a state of debt moratorium. It’s better we resolve the problem without foreign intervention. But first things first, get the economy going.

The problems we have today are almost identical to the problems of Singapore when the new republic began in early 60′s. There was high unemployment rate, very low standard of living that resulted in high criminality and social unrest, a sagging economy and reliance on foreign borrowings. But when it decided to concentrate on economic growth and opened its door to foreign investors by offering them all kinds of incentives like 10 years tax holidays, etc., then focused its economic efforts on industrialization the result was a quick transformation to what it is today. With the economy booming, Singapore has since repaid its debt burden This country can do the same no less.

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lc

June 5th, 2006 at 10:59 am

The economy will not get going because more than 30% of the budget goes to servicing the debt. Another 30% then goes to government payroll. 20% goes to IRA, pork barrel. So only about 20% goes to government programs – like education and infrastructure which are the foundations of a strong economy (highly skilled workers, well-maintained roads, etc.). The recent ADB report for 2005 precisely noted that it is practically OFW money that propelled the economy as the government tightened its purse to pay for debt.

No one is calling for repudiation of all debt – but only those which were incurred through corruption and are onerous (the BNPP debt is a prime example). Plus, GMA must be stopped from guaranteeing debts – like NPC’s debts. Wala na ngang pera, walang tigil pa ring maging guarantor lalo na ng corruption-filled NPC.

With world-wide campains for debt cancellation – like Make Poverty History, etc. – this is the perfect time to cancel debt which have been incurred through corruption and are onerous to the people. These are illegal loans. I seriously don’t believe anyone would consider a country-debtor a pariah for ending an illegal loan. With the exception of the IMF, WB and their puppets of course.

Re Singapore – the Singapore government to attract foreign investors:
1) gave free skills education to their people because they knew they had no natural resources like their neighbors and their only wealth would be in the labor force so they made sure they were highly-skilled laborers
2) spent money to develop their infrastructure
3) made sure laws were implemented strictly. No wishy washy implementation – sometmes this contract is ok, sometimes its not, like in one country we know.
These are basically what Singapore did. The Philippines has not done anything close to what Singapore has done so economic growth will likely continue to be stunted (as there have been no major shifts in economic thinking).

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Toro

June 5th, 2006 at 1:45 pm

K, you cited the Bataan Nuclear Power Plant. It is a case in point with regard to dealing with foreign contracts. You will recall the Cory govt refused to honor the Westinghouse contract basically citing its major defects and the fact the $600 million project was graft-ridden which brought up the cost to $2.3 billion. Cory’s govt was proven correct when a study showed the plant had thousands of defects. Thus, Cory went to the US court and sued Westinghouse for overpricing and bribery of govt officials. Did the lawsusit prosper? No, it did not. The US court ruled in favor of Westinghouse because a contract is a contract and Westinghouse had no control over what the Marcos govt demanded. To this day the govt continues to pay the cost of the plant. The BNPP is the countries largest single debt today something like $300 million a year if I’m not mistaken. As you can see, even those projects that were saddled with corruption cannot be dismissed easily. By Philippine legal standards perhaps yes, like in the case of the Comelec election machine contract that was voided by the Supreme Court. But, it’s entirely a different ball game when you seek arbitration in foreign land.

The economy cannot move on because of so many political distractions. How I wish everybody got tired of politicking. Unless we focus on economic growth like liberalizing economic policies, encouraging foreign investments and concentrating more on industrialization and manufacturing, particularly with emphasis on small-medium scale enterprises of the middle class and creating more jobs in the process this country is going nowhere. That is the only way to generate the revenue with which to pay our debt burden. And we don’t need to impose more taxes just to raise govt funding.

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Toro

June 5th, 2006 at 4:06 pm

Correction, pls read that “The BNPP is the COUNTRY’S largest single debt …etc.
Sorry typo error. tks.

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lc

June 5th, 2006 at 7:26 pm

I don’t know where you got your facts but as far as I know -

1.The suit against Westinghouse was ordered for international arbitration which prompted Westinghouse to settle out of court.
2.The government does not owe Westinghouse but the banks which extended the loans for the BNPP. It is this debt that needs to be cancelled. This debt issue has never been raised in court.

Investment laws have already been so liberalized that there are now calls to limit the liberalization because multi-billion peso tax incentives have been given up to investors who would have invested here anyway with or without the tax incentives – like SMC, Globe, etc. (They do not need to be given incentives to come and invest here. They’re based here and are not likely to go anywhere else.)

“Encouraging foreign investments and concentrating more on industrialization and manufacturing, particularly with emphasis on small-medium scale enterprises of the middle class” are results of having a highly-skilled/educated work force, well-developed infrastructure, sufficient government subsidies/assistance, strong legal & judicial systems which are just some of the government programs that continue to suffer as the government keeps spending a big chunk of its budget on debt servicing. Which, by the way, is unlikely to end as GMA continues to borrow to pay for the debt.

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Toro

June 5th, 2006 at 9:05 pm

The case against Westinghouse was thrown out of the US court, whereupon the Cory govt agreed to work out a compromise with Westinghouse who offered to refurbish and upgrade the plant for another $400 million and operate it for 30 years. This never happened because in the end the govt decided to mothball the plant for good. Of late, the turbines and some major parts of the plant were dismantled and sold to foreign buyers.

It is not important to us if the bank or Westinghouse collects the payment. The fact remains that the debt – a product of corruption – was never cancelled and up to this day it is the Filipino taxpayers that absorb some $150,000 a day on interests alone. Check out this link for more info.

http://www.energybulletin.net/866.html

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freewheel

June 5th, 2006 at 11:13 pm

A problem is before us, and it is not difficult to see that it is for real and hard.

But we are in an impasse.

Shall we seek solace in Confucious’ adage, ” If you don’t know what to do, do NOT do anything! ” ?

Toro, in his posts beyond the above, is such a sagacious optimist -believes that sometimes problem, for some inexplicable reasons, seems to resolve itself.

Is it possible to be an optimist in this case, and still remain smart and realistic? Or better still, can we afford to dream that the problem will resolve itself?

I strongly think otherwise. In my little experience with traders from Oceania, N./S. Africas, S., Central and SE Asia, N.,S., and Latin Am, E. and W. Europe; notwithsanding differences in language, them guys all share the same passion-PROFIT (of course, everybody knew of this).

While the denominator is common, it is true, this is always tempered by the willingness to lend a hand to a good debtor in distress.

And disrespect and scorn is reserved for those who does not exercise an option when he has the upperhand.

The impasse, simply pertains to appreciating the possession of our cards (maybe wild, still it is good) and reading of existing geopolitical conditions. Translating them into a one concrete action, or inaction, is the question.

Am willing to argue, till blue, that the tide NOW is to our advantage.

Alright, we were outwitted by Westinghouse lawyers in N. Jersey, ‘successfully’ painted the picture for the jury that our system is so corrupt that it is impossible to do business in the country without doubling the cost of the project since the other half must greased the hands of the Marcoses.

Shall we remain impaired by the memory?

I say, use the experience of continue paying 2 Billion US$ for 20 years (as to until when, there is no end in sight) without producing a single watt of electricity to gather willing ears! To stress that we are a good debtor, indeed.

Besides, why it did not occur to our so-called leaders to at least contest the decision in the higher court? For fear of losing once more? You don’t contest a skewed decision is tantamount to admitting guilt.

Again, I join in LC’s calculation that the perfect timing is now; cards and conditions do change, and we may not have the same chance in the near future-hey, we keep on blowing away those hard to come by opportunities and allow our people to wallow in deep pain!

(and this is my earnest suggestion to GMA lovers out there… :)

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lc

June 6th, 2006 at 12:01 pm

Toro,

I really don’t recall the case being thrown out of court. Besides, if it were really thrown out of court, then there would not have been any reason for Westinghouse to settle. Even the link you posted does not lead to any report about the case not prospering or being thrown out of court. Please check out this link instead – http://www.endgame.org/dtc/w.html (just search for westinghouse)

It is important to make a distinction between the issue involving Westinghouse and the issue involving the banks. We are tackling the debt issue in this thread. The debt is owed to the banks. Debt cancellation is an issue that involves financial institutions who are lobbying very hard against it.

The debt has never been cancelled not because of any court order but because of our government’s decision not to cancel it (owing, I suspect, in no small part to US lobbyists).

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Toro

June 6th, 2006 at 12:29 pm

Freewheel, perhaps I was born to be an optimist because that has been my nature. This doesn’t mean I never had my darkest hours. I have had my share of nightmarish moments during my long stint doing commodity trading with a NY house that deals in futures and those experiences taught me to be strong, never to lose hope. There were times when problems appeared to be hopelessly insurmountable but it did not distract me from pursuing other important issues. On many occasions, with a little bit of patience and some heavenly blessings, the problem had solved itself. I don’t dream for the problem to solve itself, but rather size it up how it can be solved, and if none is forthcoming, I leave it on the back burner for awhile so I can attend to the more pressing matters where I may find a link to solving the problem. What do I mean by this?

Let’s leave out politics and talk about debts and debt relief. The govt knows the country is debt-ridden, but it also knows it cannot afford to be stymied by a debilitating debt problem because the economic wheels have to move on and a nation of people who are seeking emancipation from poverty cannot wait forever. Nobody wants to be hocked for life but in the absence of adequate revenue it becomes a necessary evil if we want to keep the economy going. Saddled with debts as it is, would we have an MRT and LRT today if the govt did not obtain foreign loans? And those airports, major roads and highways, shipyards, industrial, agricultural and manufacturing plants, etc., would all this be in place today had the govt not sought foreign loans? Would you not agree that driven with economic reforms all of these will contribute in developing the economy swiftly, provide employment, and ultimately generate the revenue needed to pay for the loans? Or would you just sit back and do nothing to improve the economic standards just because we are over-burdened by debts?

I have no issue against resurrecting the “odious” Westinghouse loans bequeathed to us by FM. The best legal minds studied the options for debt relief available to them at the time and, as I said earlier, they too were aware of the impossibility of success that they opted to pay up. But, may be you are right, times change and perhaps it’s worth trying again. The financial cartel Paris Club had dropped $18 billion off Nigeria’s $30 billion loan in exchange for $12 billion repayment and after undertaking tough drastic economic reforms.

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freewheel

June 6th, 2006 at 1:24 pm

LC:

Tackling this issue is like opening a drumful of worms, scorpions, parasites, snakes and live ghosts.

Solving the problem, given the current political and economic thinking of NEDA, BSP, DOF, Malacanan, etc., requires no less than a revolution, unless people shake off the stupor and try to begin thinking with clarity and sense.

Am not certain on the part ,”…in no small part to US lobbyists”, what I am sure of is that some past and present high-level officials of the land is working in tandem with these giant off-shore based banks in continuing to deceive us and bleeding the state coffers dry.

Unless they have changed their nationality, i still believe that some home-grown Pinoys shamelessly offer their ‘services and expertise’ at the expense of the other 83 million peoples’ interests.

Specifically, am referring to Cesar Virata and Jaime Laya. These 2 guys alone, should face charges of treason of the highest order.

There are others of course, suit yourself, and fill in the blanks…

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freewheel

June 6th, 2006 at 1:39 pm

toro:

fine points, really. too-shah…

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Toro

June 6th, 2006 at 1:59 pm

LC, try this link hope it will help: http://en.wikipedia.org/wiki/Bataan_Nuclear_Power_Plant.
Am trying to recall most of the facts from memory which hopefully serves me right.

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Juan Makabayan

June 6th, 2006 at 5:42 pm

Freewheel, lc,

“Solving the problem, given the current political and economic thinking of NEDA, BSP, DOF, Malacanan, etc., requires no less than a revolution, unless people shake off the stupor and try to begin thinking with clarity and sense.”

Revolution ? A revolution is underway. GMA is leading a revolution of the Trapos, destroying our institutions, breaking our laws, bulldozing our constitution, pillaging our patrimony, handing over our natural treasures to foreigners, burrying us in debts, mortgaging our children’s future, … our country is an occupied territory, under the agents of foreign interests..

Perhaps what you mean is that the people must wake up to wage a Counter Revolution, otherwise, GMA and the Trapos will bury us alive under a Mount Everest of Debts.

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freewheel

June 6th, 2006 at 8:07 pm

Juan M. said;

“Perhaps what you mean is that people must wake up to wage a Counter Revolution, otherwise, GMA and the Trapos will bury us alive under a Mount Everest of Debts…”

————-

not to disagree,

Alas!, ’tis not hard,

if you choose to,

lay it that way.

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Toro

June 7th, 2006 at 5:30 am

JM, your answer raises an enigmatic question rather than a logical solution. May I ask what is your sense of a counter revolution? And with limited revenue how do you propose to fund infrastructure projects and the industrial, manufacturing, and power plants, etc., which are badly needed as part of economic reforms without “burying us alive under a Mount Everest of Debts”?

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freewheel

June 7th, 2006 at 5:17 pm

Sabi ni Sen. Lacson, patungkol sa isyu, “… while not a high-profile issue, the debt burden robs Filipinos of much-needed services especially if the debts were acquired with onerous conditions…” Ang katagang ito ay tumpak at wasto.

Marami ng sinabi ang senador sa mga nagdaan, at aaminin ko, madalang ang pagsang-ayon ko sa kanyang mga tinuran. Subalit sa puntong ito, lubos ang aking pakikiisa.

Sa palagay ko, kaalinsabay sa mga karapatang pantao, ito ay napaka-importanteng bagay para balewalain ninuman. Labas dito kung sino ang nagsusulong nito.

Ito ay isang usaping may kinalaman sa kahirapang nararanasan ng taumbayan: sa edukasyon (o kamangmangan), kalusugan (o ang kawalan nito), hanap-buhay (o ang kawalan ng maayos na trabaho sa loob ng bansa), at marami pang iba.

Ka-akibat dito, ang isang importanteng bagay na hindi agad-agad napupuna at nararamdaman ng naghihikahos na sambayanan, ang kawalan ng dignidad at dangal para sa bansa.

Dignidad at dangal ?! Meron bang kinalaman ang mga iyan sa pangungutang?

Malaki ang relasyon ng 2 ito, sa mga paghihimay-himay kung anu-ano ang utang na bibigyan ng kaukulang *katatagan sa pagbabayad* at ang *madiin na pagtanggi* sa mga utang na nakabalot sa kahungkagan at misteryosong transaksyon.

Sa hinaharap, mahusay sana kung bulatlatin ang mga kwestiyonableng pautang at maimbestigahan ang pamumulsa ng ilang personal na pandarambong sa kaban ng bayan.

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INSIDE PCIJ: Stories behind our stories » Arroyo dared to exercise veto power vs budget cuts

June 7th, 2006 at 7:50 pm

[...] Under Arroyo, the country has incurred additional debts amounting to P2.44 trillion. This is almost P1 trillion more than the combined borrowings of the Aquino, Ramos and Estrada administrations which total P1.46 trillion. [...]

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freewheel

June 7th, 2006 at 8:31 pm

Ang usaping pag-kakautang ay kasing halaga ng karapatang pantao.

Ang karapatang pantao ay ang pag-bibigay dangal at dignidad sa isang mamamayan, samantala ang usaping mga utang ng bansa ay ang pagbibigay ayuda upang ang salaping nararapat sa serbisyong panlipunan ay maisa-katuparan.

Kumbaga, ang katagang ” man, doesn’t live by bread alone” ay pwedeng nating gawing analohiya (analogy) dito. Pabaligtag nga lang.

Ang kalagayan sa atin, kulang na kulang na nga ang tinapay, unti- unti pang kinukut-kot ang nalalabing karapatan. Kaya, kapansin-pansin ang kawalan ng direksyon para matugunan ang edukasyon kontra kamangmangan, kalusugan kontra kapig-hatian, hanap-buhay kontra sa kawalan nito.

Patuloy nawa ang pagpupursige ng bawat indibidwal at organisasyon para ganap na magkaroon ng kalutasan ang mga kwestiyonableng pagkalugmok ng Inang Bayan sa mga utang.

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lc

June 7th, 2006 at 8:51 pm

Toro,
I give up, if you google “westinghouse” “philippines” and “settlement”, there are so many links to reports of a settlement. I suppose googling “dismissal” and “lawsuit” with “westinghouse” “philippines” would also reveal reports of a dismissed lawsuit. Perhaps there were 2 cases.(?)

Juan Makabayan,
Perhaps you’re right. In any case, GMA and crew MUST be stopped.

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Toro

June 7th, 2006 at 9:38 pm

If you can get all Filipinos to unite then maybe GMA can be stopped.

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ProblemSolver

June 8th, 2006 at 2:56 am

SOLUTIONS TO PHILIPPINES ECONOMIC PROBLEMS, PART 2

CREDIT OR DEBT, WHICH ONE DRIVES AN ECONOMY?

Credit drives an economy, not debt! Credit and debt are opposite but not identical. Credit and debt operates in reverse relations. Credit requires a positive net worth and debt does not. One can have good credit and no debt. High debt lowers credit rating. When one understands credit, one understands the main force behind finance economy, which is driven by credit and stalled by debt. Debt distorts marginal utility calculations and rearranges disposable income. Debt turns corporate shares into Giffen goods, demand for which increases when their prices go up.

From a monetary economics viewpoint, a government-issued money as a sovereign debt instrument with zero maturity, historically derived from the bill of exchange in free banking is valid only for a specie of money, which is a debt certificate that can claim on demand a prescribed amount of gold or other specie of similar value. But a fiat money issued by a sovereign government is not a sovereign debt but a sovereign credit instrument. Sovereign government bonds are agency debt , but not sovereign debt, because local government, while they possesed the power to tax, cannot print money, which is the exclusive authority of the US Federal government. When money buys bonds, the transaction represents sovereign credit canceling private or corporate debt.

The relationship between assets and liabilities is expressed in credit and debt, with the designation determined by the flow of obligation. A flow from asset to liability is known as credit, the reverse is known as debt. A creditor is one who reduces his liability to increase his assets, which include the right of collection on the liabilities of his debtors. Sovereign debt is a fake game to make private monetary debts denominated in fiat money tradable.

The Philippine sovereign state, representing all her Filipino citizens, owns all assets of the nation not assigned to the private sector. This is true whether the Philippines operates on a socialist or capitalist principles. Thus, the Philippines’ assets is the national wealth less that portion of private sector wealth after tax liabilities, plus all other claims on the private sector by sovereign right. High wages are the key determinant of national wealth. Privatizations generally reduces the Philippines’ wealth, while it may increase tax revenue. As long as a sovereign state exists, its credit is limited only by the national wealth. If sovereign credit is used to increase national wealth, then sovereign credit is limitless as long as the growth of national wealth keeps pace with the growth of sovereign credit.

When a sovereign state issues money as legal tender, it issues a monetary instrument backed by its sovereign rights, which includes taxation. A sovereign state never owes domestic debts except by design voluntarily. When a sovereign state borrows in order to avoid levying or raising taxes, it is a political expedience, not a financial necessity. When a sovereign state borrows, through the selling of sovereign bonds denominated in its own currency, it is withdrawing previously-issued sovereign credit from the financial system. When a sovereign state borrows foreign currency, it forfeits its sovereign credit privilege and reduces itself to an ordinary debtor because no sovereign state can issue foreign currency.

Government bonds act as absorbers of sovereign credit from the private sector. US Government bonds, through dollar hegemony, enjoy the highest credit rating, topping a credit risk pyramid in international sovereign and institutional debt markets. Dollar hegemony is a geopolitical phenomenon in which the US dollar, a fiat currency, assumes the status of primary reserve currency in the international finance architecture. Architecture is an art the aesthetics of which is based on moral goodness, of which the current international finance architecture is visibly deficient. Thus dollar hegemony is objectionable not only because the dollar, as a fiat currency, usurps a role it does not deserve, but also because its effect on the world community is devoid of moral goodness, because it destroys the ability of sovereign governments beside the US to use sovereign credit to finance the development their domestic economies, and forces them to export to earn dollar reserves to maintain the exchange value of their own currencies.

Money issued by sovereign government fiat is a sovereign monopoly while debt is not. Anyone with acceptable credit rating can borrow or lend, but only sovereign government can issue fiat money as legal tender. When sovereign government issues fiat money, it issues certificates of its sovereign credit good for discharging tax liabilities imposed by sovereign government on its citizens. Privately-issued money can exist only with the grace and permission of the sovereign, and is different from sovereign government-issued money in that privately issued money is an IOU from the issuer, with the issuer owing the holder the content of the money’s backing. But sovereign government-issued fiat money is not a debt from the government because the money is backed by a potential debt from the holder in the form of tax liabilities. Money issued by sovereign government by fiat as legal tender is good by law for settling all debts, private and public. Anyone refusing to accept dollars in the US for payment of debt is in violation of US law. Instruments used for settling debts are credit instruments.

Buying up sovereign bonds with government-issued fiat money is one of the ways government releases more sovereign credit into the economy. By logic, the money supply in an economy is not government debt because, if increasing the money supply means increasing the national debt, then monetary easing would contract credit from the economy. But empirical evidence suggests otherwise: monetary ease increases the supply of credit. Thus if fiat money creation by sovereign government increases credit, money issued by sovereign government fiat is a credit instrument.

Economist Hyman Minsky rightly noted that whenever credit is issued, money is created. The issuing of credit creates debt on the part of the counterparty; but debt is not money, credit is. Debt is negative money, a form of financial antimatter. Physicists understand the relationship between matter and antimatter. Einstein theorized that matter results from concentration of energy and Paul Dirac conceptualized the by-product creation of antimatter through the creation of matter out of energy. The collision of matter and antimatter produces annihilation that returns matter and antimatter to pure energy. The same is true with credit and debt, which are related but opposite. They are created in separate forms out of financial energy to produce matter (credit) and antimatter (debt). The collision of credit and debt will produce annihilation and return the resultant union to pure financial energy un-harnessed for human benefit. The paying off of debt terminates financial interaction.

NEOLIBERAL GLOBALIZATION AND DOLLAR HEGEMONY ROOT CAUSES
OF GENOCIDAL PROPORTION OR ARE THEY MANKIND’S SALVATION?

The foreign-trade strategies of all trading nations in recent decades of neoliberal globalization have contributed to the destabilizing of the global trading system. It is not possible or rational for all countries to export themselves out of domestic recessions or poverty. The contradictions between national strategic industrial policies and neoliberal open-market systems will generate friction between the US and all its trading partners, as well as among regional trade blocs and inter-region competitors. The US engages in global trade to enhance its superpower status, not to undermine it. Thus the US does not seek equal partners as a matter of course. With economic sanctions as a tool of foreign policy, the US has been preventing, or trying to prevent, an increasing number of US transnational companies, and foreign companies trading with the US, from doing business in an increasing number of countries deemed rogue by Washington. Trade flows not where it is needed most, but to where it best serves the US national security interest.

Neoliberal globalization has promoted the illusion that trade is a win-win transaction for all, based on the Ricardian model of comparative advantage. Yet economists recognize that without global full employment, comparative advantage is merely Say’s Law internationalized. Say’s Law states that supply creates its own demand, but only under full employment, a pre-condition supply-siders conveniently ignore. After two decades, this illusion has been shattered by concrete data: poverty has increased worldwide and global wages, already low to begin with, have declined since the Asian financial crisis of 1997, and by 45 percent in some countries, such as Indonesia.

Yet export to the US under dollar hegemony is merely an arrangement in which the exporting nations, in order to earn dollars to buy needed commodities denominated in dollars and to service dollar loans, are forced to finance the consumption of US consumers by the need to invest their trade surplus dollars in dollar assets as foreign-exchange reserves, giving the US a rising capital account surplus to finance its rising current account deficit.

Furthermore, the trade surpluses are achieved not by an advantage in the terms of trade, but by sheer self-denial of basic domestic needs and critical imports necessary for domestic development. Not only are the exporting nations debasing the value of their labor, degrading their environment and depleting their natural resources for the privilege of running on the poverty treadmill, they are enriching the dollar economy and strengthening dollar hegemony in the process, and causing harm also to the US economy. Thus the exporting nations allow themselves to be robbed of needed capital for critical domestic development in such vital areas as education, health and other social infrastructure, by assuming heavy foreign debt to finance export, while they beg for even more foreign investment in the export sector by offering still more exorbitant returns and tax exemptions, putting increased social burden on the domestic economy. Yet many small economies around the world have no option but to continue to serve dollar hegemony like a drug addiction.

Japan provides the perfect proof that even a dynamic, successful export machine does not by itself produce a healthy economy. Japan is aware that it needs to restructure its domestic economy, away from its export fixation and upgrade the living standard of its overworked population and to reorder its domestic consumption patterns. But Japan is trapped into helplessness by dollar hegemony.

Japan sees its sovereign credit rating lowered by international rating agencies while it remains the world’s biggest creditor nation. Moody’s Investor Service downgraded Japanese government bonds by two notches recently to A2, or one grade below Botswana’s, not to mention Chile and Hungary. Japan has the world’s largest foreign-exchange reserves: $819 billion in July 2004; the world’s biggest domestic savings: $11.4 trillion (US gross domestic product was $11 trillion in 2003); and $1 trillion in overseas investment. And 95% of its sovereign debt is held by Japanese nationals, which rules out risk of default similar to Argentina. Japan has given Botswana, where half of the population is infected with the AIDS virus, $12 million in grants and $102 million in loans.

Why does the New York-based rating agency prefer Botswana to Japan? The Botswanan government budget is controlled by foreign diamond-mining interests to protect their investment in the mines. Botswana does not run any budget deficit to develop its domestic economy or to help its poverty-stricken people. Thus Botswana is considered a good credit risk for foreign loans and investment. Japan, on the other hand, is forced to suffer the high interest cost of a low credit rating because its responsive government attempts to solve, through deficit financing, the nation’s economic woes that have resulted from excessive focus on export. Dollar hegemony denies a good credit rating even to the world’s largest holder of dollar reserves.

The Asia-Pacific trading system has been structured to serve markets outside of Asia by providing low wage manufacturing. This enables the US to consume more without inflation and without raising domestic wages. All the trade surpluses accumulated by the Asian economies have ended up financing the US debt bubble, which is not even good for the US economy in the long run. Low-price imports allow the US to keep domestic wages low without dampening consumer power and contribute to a rising disparity of both income and wealth within the US where purchasing power comes increasingly from debt supported by capital gain rather than rising wages. The result is that when the equity bubble of inflated price-earning ratio finally bursts, wages are too low to keep the economy from crashing from a collapse of the wealth effect.

After thoroughly impoverishing the Asian economies by making possible financial manipulation of crisis proportions, dollar hegemony now works to penetrate the remaining Asian markets that have stayed relatively closed: notably Japan, China and South Korea. Control of access to its markets has been Asia’s principal instrument for its sub-optimized trade advantage and distorted industrial development. This strategy had been practiced successfully first by Japan and copied in various degree of success by the Asian Tigers. Protectionism will survive in Asian economies long after formal accession by these economies to the World Trade Organization (WTO).

Globalization is not a new trend. It is the natural policy for all empire building. Globalization under modern capitalism began with the British Empire, marked by the repeal of the Corn Laws in 1846, five years after the Opium War with China, and two years before the Revolutions of 1848. Great Britain embarked on a systemic promotion of free trade and chose to depend on imported food, which gave a survivalist justification to economic empire. France adopted free trade in 1860 and within 10 years was faced with the Paris Commune, which was suppressed ruthlessly by the French bourgeoisie, who put to death 20,000 workers and peasants, including children. Despite a backlash movement toward protective tariffs in Britain, Holland and Belgium, the global economy of the 19th century was characterized by high mobility of goods across political borders. As Europe adopted political nationalism, international economic liberalism developed in parallel, until 1914. World War I, the 1929 Depression and World War II caused a temporary halt of free trade. The US “Open Door” policy for pre-revolutionary China, proclaimed by John Hay in 1899, was part of a globalization scheme to preserve US commercial interests by preventing the partition of China by European powers and Japan, after the US became a Far Eastern power through the acquisition of the Philippines. The Open Door policy was rooted in the most-favored-nation clause in the unequal treaties imposed on China by Western imperialist powers.

Like the United States now, Britain was a predominantly importing economy by the close of the 18th century. Despite the Industrial Revolution’s expanded export of manufacturing goods, import of raw material, food and consumer amenities grew faster in value than export of manufacturing goods and coal. The key factor that sustained this trade imbalance was the predominance of the British pound, as it is today with the US dollar and its impact on the trade finance. British hegemony of sea transportation and financial services (cross-currency trade finance and insurance) earned Britain vast amounts of foreign currencies that could be sold in the London money markets to importers of Argentine meat and Canadian bacon. International credit and capital markets were centered in London. The export of financial services and capital produced factor income that served as hidden surplus to cushion the trade deficit. To enhance financial hegemony, the British maintain separate dependent currencies in all parts of the empire under pound-sterling hegemony. This financial hegemony is now centered on New York with the dollar as the base currency. When the Asian tigers export to the United States, all they get in return are US Treasury bills and corporate bonds, not direct investment in Asia. Asian labor in fact is working at low wages mainly to finance the expansion of the dollar economy.

Market fundamentalism, a modern euphemism of capitalism, is thus made necessary by the finance architecture imposed on the world by the hegemonic finance power, first 19th-century Great Britain, now the United States. When the developing economies call for a new international finance architecture, this is what they are really driving at. Foreign-exchange markets ensure that the endless demand for dollar capital by the poor exporting nations will never be met. British economist John A Hobson identified the surplus of capital in the core economies and the need for its export to the impoverished parts of the world as the material basis of imperialism. For neo-imperialism of the 21st century, this remains fundamentally true.

Then as now, the international economy rested on an international money system. Britain adopted the gold standard in 1816, with Europe and the US following in the 1870s. Until 1914, the exchange rates of most currencies were highly stable, except in victimized, semi-colonial economies such as Turkey and China. The gold standard, while greatly facilitating free trade, was hard on economies that produced no gold, and the gold-based monetary regime was generally deflationary (until the discovery of new gold deposits in South Africa, California and Alaska), which favored capital. William Jenning Bryan spoke for the world in 1896 when he declared that mankind should not be “crucified upon this cross of gold”. But the 50-year lead time of the British gold standard firmly established London as the world’s financial center. The world’s capital was drawn to London to be redistributed to investments of the highest return around the world. Borrowers around the world were reduced to playing a game of “race to the bottom” to compete for capital.

The bulk of economic theories within the context of capitalism were invented to rationalize this global system as natural truth. The fundamental shift from the labor value theory to the marginal utility theory was a circular self-validation of the artificial characteristics of an artificial construct based on the sanctity of capital, despite Karl Marx’s dissection that capital cannot exist without labor – until assets are put to use to increase labor productivity, it remains idle assets.

Mergers and acquisitions became rampant. Small business capitalism disappeared between 1880 and 1890. Workers and small businesses found that they were not competing against their neighbors, but those on other sides of the world, operating from structurally different socioeconomic systems. The corporation, first used to facilitate the private ownership of railroads, became the organization of choice for large industries and commerce, issuing stocks and bonds to finance its undertakings that fell beyond the normal financial resources of individual entrepreneurs.

This process increased the power of banks and financial institutions and brought forth finance capitalism. Cartels and trusts emerged, using vertical and horizontal integration to eliminate competition and manipulate markets and prices for entire sectors of the economy. Middle-class membership was mainly concentrated in salaried workers of corporations, while working class members were hourly wage earners in factories. The 1848 Revolutions were the first proletariat revolutions in modern time. The creation of an integrated world market, the financing and development of economies outside of Europe and the rising standards of living for Europeans were triumphs of the 19th-century system of unregulated capitalism. In the 20th century, the process continued, with the center shifting to the US after two world wars.

Friedrich List, in his National System of Political Economy (1841), asserted that political economy as espoused in England at that time, far from being a valid science universally, was merely British national opinion, suited only to English historical conditions. List’s institutional school of economics asserted that the doctrine of free trade was devised to keep England rich and powerful at the expense of its trading partners and that it had to be fought with protective tariffs and other devices of economic nationalism by the weaker countries. List’s economic nationalism influenced Asian leaders, including Sun Yatsen of China, who proposed industrial policies financed with sovereign credit. List was also the influence behind the Meiji Reform Movement of 1868 in Japan. Alexander Hamilton, by proposing the US Treasury using tax revenue to assume and pay off all public debts incurred by the Confederation in his 1791 Report on Public Debt, through the establishment of a national bank, provided the new nation with sovereign credit in the form of paper money for development.

The current breakdown of neoliberal globalized market fundamentalism offers Asia a timely opportunity to forge a fairer deal in its economic relation with the rest of the world. The United States, as a bicoastal nation, must begin to treat Asian-Pacific nations as equal members of an Asian-Pacific commonwealth in a new world economic order that renders economic nationalism unnecessary.

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freewheel

June 8th, 2006 at 8:45 pm

Problemsolver:

Thanks for the treat. Not since Isaac Asimov who provided the bridge; for us layman, to see, feel and appreciate phenomenom in the once closed sphere of physics- it is now possible too, to experience the same in the arcane world that is called economics.

Am glad it is presented taking into account historical nuances which made it such a good read, ala Michener.

It would be a bonus to acquire advance copy of the treatise as it might help and prove useful in forging an argument against the onslaught of lies and deception that has long become the fashion in this part of the world.

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Urgie F.

June 9th, 2006 at 1:50 pm

Philippines had never produced a leaders since our country granted independent kuno by US, who could stand and fight for making our country as true sovereign and independent nation. A leader never succumb to the wishes of foreign power particulary USA. As far I believe that our leaders have double allegiance; Allegiance to the Republic of the Philippines, and allegiance to USA. Our present leaders haave no spirit of nationalism and lack of principle as true Filipino. They just vow what IMF and World Bank whim which impose to us.

Today, especially the occupant of Malacanang is a puppet of US imperialism. When we produced a good leader? like Claro M.Recto, Lorenzo Tanada and etc who stood and fight against US imperialist domination of our country and to the whole world.

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pinoysites.org » How much is the debt of the Philippines?

July 12th, 2006 at 9:23 pm

[...] What is mind-boggling, (Freedom from Debt Coalition) FDC points out, is that the Arroyo administration’s debts far exceed the combined borrowings of its post-Edsa predecessors by almost P1 trillion. The Aquino (1987-1991), Ramos (1992-1997) and Estrada (1998-2000) governments incurred P338 billion, P401 billion and P725 billion, respectively, for combined total borrowings of P1.46 trillion. (http://www.pcij.org/blog/?p=977) [...]

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Norway’s historic illegitimate debt write-off shows way for creditor nations | Probe International

January 24th, 2011 at 11:28 pm

[...] agencies. It also dared the Senate to pass Joint Resolution No. 1 which calls for the creation of a Congressional Debt Audit Commission that will be responsible for the investigation and audit process of all public [...]

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