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Sunday, July 22, 2007
2 economists downplay Arroyo’s claim of economic progress
MANILA -- Two former economic managers and the president of the Freedom from Debt Coalition (FDC) have branded as “false” the claims of President Gloria Macapagal-Arroyo that the economy is improving even as they slammed her debt pre-payment scheme, which they said, is miring the country further in debt.
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Professor Benjamin Diokno of the University of the Philippines (UP) School of Economics, Professor Leonor Briones of the UP National College of Public Administration and Governance, and FDC president Ana Maria Nemenzo were the presenters in the UP Forum “Gloria’s Economy: More than Meets the Eye,” which was held in anticipation of Arroyo’s seventh State-of-the-Nation Address (Sona) on July 23.
Diokno was the budget secretary and Briones was the national treasurer of detained former president Joseph Estrada.
Diokno, in his presentation on “The Real State of the Nation,” said the country’s real per capita growth in the past six years is “not enough to make a significant difference in the lives of most Filipinos.
He said the Arroyo administration “has consistently failed to meet its own gross domestic product (GDP) growth target except in 2004 and that further reforms are “highly unlikely” considering how weak government is.
“Definitely, she (Arroyo) is a failure,” he said.
He said Filipinos are paying more taxes but most of these are being spent by government on debt service while it is spending less for education and basic health care.
Diokno said the Arroyo administration incurred the highest budget deficits in recent history, as measured in terms of National Government deficit, public sector borrowing requirements and consolidated public sector deficit.
He said debt servicing has become the government’s top priority, with interest payments at 26.8 percent of government spending from 2001 to 2004 and rising to 31 percent lately compared to 19.5 percent during the Estrada administration and 20.7 percent in the Ramos administration.
Diokno said interest payments as percentage of GDP rose to 4.8 percent in 2001 and peaked at 5.5 percent in 2006. He said the amount needed to service the government’s debt, both interest and principal, in 2006 is “almost equal” to the P785.2 billion in taxes that it collected from January to November.
He said social services in 2001 to 2004 dropped to 29.8 percent as compared to 32.2 percent in the Estrada administration and 28 percent during the Ramos administration.
Diokno said Arroyo neglected education and basic health care, spending only P5,467 per pupil in 2001-2004 (based on 2000 prices), as compared to Estrada’s P5,830. He said public expenditure on education in the Philippines is only slightly better than Indonesia.
He said the high school dropout rate peaked at 15.81 percent and at 10.57 percent for elementary in school year 2005 to 2006 and the completion rate is dropping. He also said Indonesia has outpaced the Philippines in terms of quality of high school education.
Diokno said more kids are dying young, at a mortality rate of 34 percent for those under five years old and 26 percent for infants, a rate which is second lowest only to Indonesia.
He said child immunization for one-year-olds is falling for measles, hepatitis B and diphtheria, pertussis and tetanus (DPT). “What profit would it be to balance the budget if you are killing kids and neglecting education and infrastructure?” he asked.
Diokno, citing figures from the Asian Development Bank (ADB), said domestic investment declined in 2006 at 14.8 percent, which is the worst investment record among Asian countries. He said foreign direct investments are also shying away and government is only touting the entry of “hot money” in the stock market.
He said the Philippines also fared poorly compared to other Southeast Asian countries in terms infrastructure, governance, political stability, government effectiveness, regulatory quality, rule of law, corruption, and global competitiveness.
Briones, for her part, said government’s fiscal program for 2008 does not augur well for 2008 because government plans to balance the budget at the expense of social services, which is not good for achieving its Millennium Development Goal (MDG) targets.
She said the 2008 budget is only higher than the 2007 budget by P90.3 billion, and disbursements will drop to 4.6 percent from 13.1 percent last year.
Nemenzo, meanwhile, likened Arroyo’s scheme of pre-paying debts to the pyramiding or Francswiss scams, because debts are being paid in exchange for new loans with longer maturity such as the Brady bonds.
She said the reduction in the government’s debt to GDP ratio was also achieved through the decreased availment by agencies of direct loans and by the unplanned resurgence of the peso.
Nemenzo said pre-payment is “highly unsustainable and harmful in the long run.” “No economy achieved real growth and development by prioritizing debt payments or by simply remaining in the debt trap,” she added. (JMR/Sunnex)For more Philippine news, visit Sun.Star General Santos. (July 22, 2007 issue)
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