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OFFICIAL
development assistance (ODA) may have been one of the
main contributors to the country’s huge debts, but
without it many of the country’s infrastructure being
used today may not have been built at all, a former
Estrada Cabinet member said.
Felipe
Medalla, professor at the University of the Philippines
School of Economics, said last week that as a rule in
all loans, ODAs included, the longer-term interest
payments will always exceed the principal amount, which
is the current problem of the country.
“It’s
not what is borrowed that will hurt you but the interest
payments,” he said during the Asia Regional Consultation
on Financing for Development organized by German
political arm Friedrich Ebert Stiftung and nonprofit
group Social Watch Philippines.
Medalla,
who served as director general of the National Economic
and Development Authority (Neda) and socioeconomic
planning secretary during the time of President Estrada,
said that almost three-quarters of the country’s
national debt have been caused by the “failures” of some
institutions to use these funds to develop the country.
These
include, among others, the Marcos-era behest loans
extended to save financial institutions such as the
Development Bank of the Philippines and Philippine
National Bank, the mothballed Bataan Nuclear Power
Plant, and restructuring of loans of the old Philippine
Central Bank, now Bangko Sentral ng Pilipinas.
ODA is a
loan or a mix of loan and grant which must meet some
criteria, such as spending it with the objective of
promoting sustainable social and economic development
and welfare of the Philippines.
“Just
the restructuring of Central Bank in 1994 cost the
government P330 billion….At that level with 8 percent
compounded interest, you will now have P1 trillion
[debt]. You mismanage the economy, you mismanage the
banks; their failures become our failures,” Medalla
said.
“In
simple terms, many institutions are too important to
fail.”
Medalla,
however, said that without these ODAs, with the current
situation of politicians of just funding projects to get
votes, some of the country’s main infrastructure may not
be established.
These
include all the three lines of the elevated railway
systems in Metro Manila, which at the moment are still
incomplete; all phases of the Batangas Port; and the
recently inaugurated Subic-Clark-Tarlac Expressway.
Medalla,
who admitted that he sits as consultant to Japan Bank
for International Cooperation (JBIC) , the largest
source of funds of the Philippines for various
infrastructure projects, said ODAs have not changed the
total picture of the economy compared before, but these
major infrastructure projects will never be realized if
not for the assistance of other countries.
As of
end-2006, total loan amount reached $9.5 billion for 141
active loans, composed of 135 project loans supporting
123 projects, and six program loans, according to Neda
figures.
Project
loans accounted for 86 percent or $8.2 billion of the
portfolio, and program loans, 14 percent or $1.3
billion.
Japan
is the biggest source of the ODA (almost 50 percent of
total), followed by the Asian Development Bank (19
percent) and the World Bank (16 percent).
On the
other hand, government debt increased by P19.5 billion
to P3.732 trillion as of January this year from December
last year’s P3.712 trillion. Of the amount, 40 percent
is owed to foreign creditors and the rest from the
domestic market.
Domestic
debt increased by P26 billion or 1.2 percent to P2.227
trillion from the end-December 2007 level, arising from
the net issuance of government securities made by the
government. |
