‘Billed-billed-billed’ debt problem ahead – IBON

Opinion & Analysis Philippines Aug 10, 2018 at 2:57 pm
Photo: Adam Ang/Bulatlat

Photo: Adam Ang/Bulatlat

The national debt is equal to 48 percent of the 6.8-percent GDP in the first quarter of this year.

By Adam Ang
Bulatlat.com

MANILA–Taxpayers would have to subsidize private profits and shoulder debts incurred through domestic and foreign borrowings due to the Build, Build, Build (BBB) infrastructure program of the Duterte administration, an independent economic think-tank said.

In the mid-year Bird Talk forum hosted by Ibon Foundation last week, the research firm said taxpayers will have to subsidize profits for the private sector in a “hybrid Public-Private Partnership system” undertaken for the US$160-billion mega-infrastructure program.

“The administration will use a hybrid Public-Private Partnership system. The government will construct utilities while, the private sector will operate, maintain, and profit from it. It will subsidize private profits using public funds,” Ibon Foundation executive director Sonny Africa said.

In the March 2017 status report of the Public-Private Partnership Center, there were 15 awarded PPP projects worth US$5.8-billion. These went to the country’s richest and most influential oligarchs.

The San Miguel Corporation group cornered 45.9 percent of the total cost of these PPP projects, Manny V. Pangilinan (MVP) and the Ayala group 21.5 percent, not including MVP’s own projects that covered 18.9 percent. Meanwhile, 18 PPP projects worth US$7.5-billion are up for bidding. (Read: ‘Dutertenomics’: golden age of oligarchic and foreign interests in infrastructure?

Unsolicited proposals from the private sector are up for consideration in construction of facilities under the BBB.

Africa cited the construction of the US$ 1.540-billion MRT 7 which came from the unsolicited private proposal of Universal LRT Corporation BVI, a subsidiary of San Miguel Corporation. “BBB will indeed attract unsolicited proposals from the private sector… It is not for the poor but for investors.”

Ibon Foundation found out that of the 61 projects under BBB, 25 were included in the national budget; 19 projects were funded under official development assistance; 11 under PPP; one locally-funded; while there are 5 projects still up for funding deliberations.

While among the 75 big-ticket projects, 48 are under foreign loans – 35 from China, eight from Japan, two from Korea, one from the World Bank, and two have yet to be targeted. Meanwhile, the national budget funded 14 projects; two under PPP, and 11 are under deliberation.

‘Looming debt problem’

Amid the Philippine peso at its 12-year low, closing at P52.95:$1 last June, taxpayers would also have to bear debts that would be incurred to fund BBB. As of May 2018, the outstanding national government debt was at P6.8-trillion (US$127.5-billion).

Peso depreciation was brought about by enormous importation. Imports rose to 22.2 percent in April 2018, while export revenues deescalated to 8.5 percent.

In 2017, importation of metalliferous ores and metal scraps rose to over 3,500 percent, while there was a 28-percent increase in iron and steel imports. This year, the importation of miscellaneous manufactured articles and plastics, raw materials for transportation, oil and lubricants, industrial machines, and iron and steel rose anew, which made up 63.4 percent of the total increase in the country’s importation. This is a direct result of President Duterte’s BBB, the Ibon Foundation said.

Since 2016, foreign loans and grants for infrastructure increased by 1,268 percent, from US$540-million to US$7.38-billion.

“The Duterte administration is borrowing more than double,” Africa said. The administration is borrowing faster per month compared to the whole six years of the Aquino administration.

The national debt is equal to 48 percent of the 6.8-percent GDP in the first quarter of this year.

According to the Bureau of Treasury, 65 percent of the debt came from domestic borrowings, while the other 35 percent were from foreign loans.

Next year, the government announced that it pegged its borrowing at P1.2-trillion (US$22.5-billion). “We are anticipating a wider budget deficit,” Africa said.

An apparent economic crisis is expected within five to ten years if uncorrected. According to the research group, this will be triggered by a global economic crisis, less jobs, and weakening remittances of overseas Filipino workers and the Business Process Outsourcing companies in the country.