Statement of Prof. Walden Bello

29 07 2008

President of Freedom from Debt Coalition
On the Occasion of the State of the Nation Address
28 July 2008

Today is Mrs. Gloria Macapagal-Arroyo’s eighth State of the Nation Address. Again, she will be reviewing her performance in the past year and set the policy agenda for the next year. According to her staff, will tackle the issues of a national social welfare program addressing the crisis, value added tax, family planning and other policy statements.

After eight years in power you would think she would have been able to set the conditions for economic growth. Being an economist, you would expect her to have come up with an integrated and strategic development plan that would support the different economic sectors. Instead Arroyo has been more concerned about dodging political controversies, covering up for anomalies in government transactions and sometimes even resorting to theatrics to save her own skin from the issue of electoral fraud. Meanwhile, the lack of attention and investments in important economic sectors such as energy and agriculture has made the country vulnerable to crises.

Mrs. Arroyo would have us believe that the current crisis is not of her making, that external factors like the rise in the international prices of rice and oil are to blame, that before early this year, the country’s economic fundamentals were good.

The administration claims that in 2007 the recorded growth rate of the GDP was a high 7.3%. But that figure has been discredited by business consultant Peter Wallace and even the World Bank as a statistical fluke that masks a 5.4% decrease in imports. Instead, the real picture as painfully experienced by Filipinos every day does not look good at all.

The reality is indicated by the same brutal numbers: more poor people in 2007 than in 2000, more people without jobs, a real decline in average family income, the shrinking of the middle class as more people jump ship and swim to other shores.

The World Bank chimes in, with data illustrating an increase in poverty incidence between 2003 and 2006 with the level of poverty incidence very closely approximating the year 2000 levels. In 2006, 27.6 million out of 84 million Filipinos have fallen below the poverty line. So after eight long years, what has this administration really achieved?

For the past 25 years the record of the Philippines in terms of economic growth has been terrible, the worst in Southeast Asia. Second-tier ASEAN states such as Laos, Cambodia and Myanmar are faring much better with average GDP per capita growth rates ranging from 3.8 to 6.6 % in the past fifteen years or so. Compare that with the measly 1.6% for the Philippines.

So what has ailed the Philippine economy for so long? The usual culprits international financial institutions point to are protectionism and high wages. However as we will go to show, these are not the things weighing the economy down but the chronic inability to invest on economic infrastructure with annual budgets eaten away by debt service payments and the negative impacts of trade liberalization and debt conditionalities.

One scapegoat is the alleged protectionist policies and high wages. Contrary to the usual; claims, the Philippines, to its detriment, has pursued a more profound liberalization program compared to its Asian neighbors beginning in the 1980s. As for the high wages argument, High wages also benefit the Philippine economy because it stimulates consumption. In a situation where there is a dearth of capital investments, an increase in wages will lead to a higher level of aggregate demand that will result in a utilization of current excess capacity in industry, leading to faster growth and more employment.

So if those identified are not the culprits of the stagnation we are currently experiencing, then what are? Bad economic decision-making since the mid 1980s. Why do we focus on key policy decisions? The reason is that these decisions—in particular the fateful decision to channel government financial resources to debt repayment instead of capital expenditures—go a long way towards explaining why our neighbors leaped forward as we stagnated.

Owing to pressure from international creditors, the fledgling democratic government of President Corazon Aquino adopted the so-called “model debtor strategy” in the hope of continuing to have access to international capital markets. This approach was cast in iron by Executive Order 292, which affirmed the “automatic appropriation” from the annual government budget of the full amount needed to service the foreign debt. What this has achieved is channeling of government revenue to debt servicing. In 1986-1993 around $30 billion went to paying off interests to creditors, money which should have gone into public investments on infrastructure and social services that would eventually lead to attracting higher levels of private investments. Succeeding administrations have, including the current one, have followed the model debtor strategy.

As of December 2007, Philippines has an accumulated external debt of $61.83 billion, which amounts to 55.8% of the GDP. Apart from Marcos administration, Arroyo’s has incurred the highest levels of borrowing. Debt incurred by her administration between 2001-2005 totaled P2.44 trillion compared to the combined borrowings of the Aquino, Ramos and Estrada administrations which stood at P1.46 trillion.

After making the decision to religiously service our debts at the expense of public investments, beginning 1994 our economic managers decided to pursue a radical program to unilaterally reduce all tariffs to zero to five percent by 2004. If the hemorrhage of payments on the foreign debt blew a hole on the expenditure side, trade liberalization, by reducing a very critical source of government revenues, blew a hole on the revenue side. Aside from crippling local industries owing to the entry of cheap foreign products, trade liberalization resulted in a radical decrease in customs collection. The overall result of this double punch was a state that could not invest because it had so little to invest—a government that could not act as an agent of development. As with the model debtor strategy, the Arroyo administration has not broken with the policies of trade and financial liberalization.

The Philippine experience has shown how important economic decision-making is in determining economic success and failure. When coupled with massive corruption, such as that which pervades Malacanang today, wrong policies can condemn a country to permanent stagnation. This corrupt and unimaginative administration that is compliant with foreign financial interests is one that most Filipinos would like to put behind them.



GMA, eight years hence…

26 07 2008

As Gloria Macapagal-Arroyo recites her litany of superficial achievements and elusive promises on Monday, Student Council Alliance of the Philippines will certainly watch her with a critical eye.

The Past is the Present

SCAP believes that GMA has been merely placing band-aid solutions on the real problems of the society, much more she has failed, time and again to address problems that concern her very office.

The past is the present. Poverty, corruption, electoral fraud, diminishing democracy, traditional politics, betrayal of public’s trust, etc; the past is the present. What we saw eight years ago is the same thing that we are seeing here today. There is nothing new and we expect nothing new from Ms. Arroyo.

The Real State of the Youth

Ms. Arroyo will definitely embrace the youth sector once more as she delivers her eight State of the Nation address. She will be bragging about the millions of pesos that her government has placed on different scholarship programs, about the additional budget that was allotted to the sector.

Apparently, the Alliance sees these as desperate attempts to pacify the unyielding youth.

CHED stated that the standing growth rate of college enrollees in A.Y. 2004-2005 in both the Private and Public sector is a disturbing -0.8 %.

The percentages of grade school and high school dropouts have increased dramatically from 7.67 % and 8.5 % respectively in A.Y. 2000-2001 to 10.57 % and 15.81 % correspondingly in A.Y. 2005-2006. Less and less of our students make it to the finish line. Additional figures show that only 56.76 % of elementary students and 54.14 % of high school students are able to graduate from their particular courses, a great decrease from the 66.13 % and 70.62 % completion rates of grade school and high school students in A.Y. 2000-2001. [i]

As of 2004, only 27% of Filipinos aged 25-64 years old are able to attain a college diploma.[ii]

The Philippine Higher Education has also lagged behind our neighboring countries in terms of its quality. It ranked no. 62 within 2007-2008, a notch lower from that of 2006, according to the World Economic Forum.[iii]

If Ms. Arroyo is saying that her government has been spending more for the education sector than any other past administration, well, SCAP evidently believes that no government has spent enough. At least, no Philippine administration has met the international standards for education spending which is supposedly pegged at 6% of our Gross National Product as prescribed by the Delors Commission of the UNESCO.[iv]

In addition to all these, the education sector remains to be deregulated and commercialized. Educational institutions are mere idle bodies which cannot address the real problems of the sector.

The Quest for Truth, Accountability and Reform Continues…

SCAP joins the civil society and the progressive bloc in calling for truth, accountability and reform in all the democratic processes in our country.

Demanding for Truth…

If Ms. Arroyo is sincere with her war against corruption and fraud, she should begin by coming out clean and by commanding all officials who were involved in the controversial ZTE-NBN deal to speak out instead of circumventing constitutional provisions such as the “Executive Privilege” to protect political interests.

This is not the first illegitimate debt that our country has incurred. Moreover, Ms. Arroyo should recount all our country’s illegitimate debts and pressure the legislators to push for a congressional debt audit.

This, time and again, shows that while majority of our people are suffering from price hikes in all forms of commodities, some people have the knack at getting billions from government procured contracts at the expense of the greater poor.

This should rattle if not enrage the conscience of our government knowing fully well, that corruption is happening beneath Ms. Arroyo’s nose, if we even consider giving her the benefit of the doubt.

Exacting Accountability…

Ms. Arroyo, above all else, should stop blocking the impeachment process in Congress. Her administration is too immersed in scandal and controversy that coming out from an impeachment trial is the only constitutional mechanism that could vindicate her, if she’s not proven guilty that is.

This SONA, once again, will be a venue to exact accountability from Ms. Arroyo and her government.

Sustainable Reforms…

SCAP unites with all those who are pushing for the extension and reform of the Comprehensive Agrarian Reform Program. Millions of farmers are at the brink of losing their lands once more while others would never have the chance of owning their own lands. The odds are great when we talk about Agrarian Reform; the elements of warlords threaten this progressive bill. SCAP therefore renews its challenge to Ms. Arroyo to urge congress to pass CARPER and to subject their (Arroyo’s) lands to the program, which she should have done years ago.

Aside from AR, SCAP also challenges the Arroyo administration to seriously engage a transparent electoral reform agenda to redeem the already degraded Commission on Elections which Ms. Arroyo herself has damaged. As the national polls near, SCAP is again wary of confronting a disenfranchised youth sector. The COMELEC, more than anything else, should be at the forefront of pursuing a conscientious voter’s education program. The government should revive the people’s trust in democratic institutions such as the COMELEC; otherwise, our country will certainly go to the dogs.

Above everything else, the government should focus on creating more equitable economic policies/solutions to resolve our country’s economic problems instead of incurring more unfair trade deals and illegitimate loans from foreign powers.

The Present is OUR Future

With our present state, SCAP sees a bleak future for the youth. It is very appalling to learn that the youth will inherit a very damaged government. It is even more alarming that we are being honed in this kind of society.

As always, SCAP demands for truth, accountability and reform.

We demand to repeal the Education Deregulation Act 0f 1982.

We demand for the immediate passage of the Students Rights’ and Welfare Bill.

We join with Youth Against Debt in calling for an Automatic Appropriations law  on Education allotting 6% of our GNP to the Education Sector instead of diverting the large bulk of our budget to debt servicing.

We join People Against illegitimate Debt in demanding for a Congressional Debt Audit.

We support all mechanisms that will exact accountability from all the wrong doers in our government, including, Ms. Arroyo.

We stand hand in hand with the farmers in pushing for the passage of the Comprehensive Agrarian Reform Program Extension with Reforms (CARPER).

We demand for a genuine electoral reform agenda.



Venue: St. Peter’s Church 10 A.M.

Date: July 28, 2008; Monday

Student Council Alliance of the Philippines Official Statement on GMA’s SONA

Media Person: 09052403585 Alvin Quintans

[i] Benjamin Diokno, Real State of the Nation, 20 July 2007 , citing DepEd

[ii] UNESCO/UISWEI(; OECD countries: OECD 2006 (

[iii] …this (higher education and training) pillar measures secondary and tertiary enrolment rates as well as the quality of education as assessed by the business community. The importance of vocational and continuous on-the-job training, neglected in many economies, cannot be overstated, as it ensures a constant upgrading of workers’ skills to the changing needs of the production system.

[iv] Youth Against Debt Six Will Fix Campaign