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Saturday, March 14, 2009

DREAD (Debt Rising, Employments Are Dwindling)


Alexander Nahum Sack, a former minister of Tsarist Russia who after the Russian Revolution became a law professor in Paris is an authority on the obligations of successor systems specifically on the issue of public debts incurred during a former regime. Although these debts are obligations of the new state, there are debts which should not be incurred by the incoming government he called these “odious debts”. Thus he stated:

If a despotic power incurs a debt not for the needs or in the interest of the State, but to strengthen its despotic regime, to repress the population that fights against it, etc., this debt is odious for the population of all the State. 

This debt is not an obligation for the nation; it is a regime's debt, a personal debt of the power that has incurred it, consequently it falls with the fall of this power. 

The reason these "odious" debts cannot be considered to encumber the territory of the State, is that such debts do not fulfill one of the conditions that determine the legality of the debts of the State, that is: 

the debts of the State must be incurred and the funds from it employed for the needs and in the interests of the State. 

"Odious" debts, incurred and used for ends which, to the knowledge of the creditors, are contrary to the interests of the nation, do not compromise the latter — in the case that the nation succeeds in getting rid of the government which incurs them — except to the extent that real advantages were obtained from these debts.

The creditors have committed a hostile act with regard to the people; they can't therefore expect that a nation freed from a despotic power assume the "odious" debts, which are personal debts of that power.

Even when a despotic power is replaced by another, no less despotic or any more responsive to the will of the people, the "odious" debts of the eliminated power are not any less their personal debts and are not obligations for the new power....One could also include in this category of debts the loans incurred by members of the government or by persons or groups associated with the government to serve interests manifestly personal — interests that are unrelated to the interests of the State.
However, Sacks also added that in order to nullify such debts the new government must prove that the creditors or the financial institutions are aware that theses debts were not used for the benefit of the state.
The Compulsive Borrower
The Philippines' staggering debt load is largely attributed to economic policy under the corrupt administration of former president Ferdinand Marcos. According to the Philippine Daily Inquirer, foreign loans were a "rich source of funds" for Marcos and his cronies who used monies generated in loans to line their own pockets. The Inquirer estimates that when Marcos was first elected president in 1966, the country's debt stood at just under $1 billion. When he fled the Philippines in 1986, the total had soared to more than $28 billion (odiousdebt.org March 4, 2005). 

 A Landmark of our Debt
The reality of this really stings my heart to know that we are paying for something we haven’t had any benefit. The newest issue I have recently seen in the television is about the Bataan Nuclear Power Plant (BNPP) which they say they are proposing to utilize for our power consumption. This plant has long been lying unused in Morong, Bataan while we still pay for our debts in constructing it. According to the Ibon Foundation, the BNPP is the single largest foreign debt in the country’s history.
The final construction cost for BNPP was apparently US$2.3 billion. Construction companies and insurance firms associated with Marcos were some who benefited from it. Westinghouse (the firm who got the contract) apparently won the contract through the intervention of Marcos aide Herminio Disini who, the corporation admitted, was paid US$17.3 million in “commissions” through a variety of channels. Marcos himself may have received up to US$80 million in BNPP-related bribes and kickbacks (notobnpp.org)

IBON further reported that the project’s creditors that knowingly financed the overpriced and questionable power plant are the US Export- Import Bank (US$889 million), American Express (US$278 million), Bank of Tokyo (US$269 million), Union Bank of Switzerland (US$186 million) and Mitsui & Co. (US$35 million); Citicorp, Sumitomo Corp., and Morgan Guaranty also provided US$261 million in commercial loans. Furthermore, the Filipino people paid the BNPP creditors US$1.9 billion, ¥23.0 billion and CHF107.1 million over the period 1986 to 2006. Aside from debt servicing, the national government has reportedly been annually paying PhP50 million, or about US$1 million at current exchange rates, for the plant’s maintenance. 

IBON further stressed that The BNPP project is imbued through and through with fraud, deceit, bribery, overpricing, abuse of power, and violations and circumventions of proper procedures and legal requirements.

We Borrow so we can Pay
Why am I so concerned with figures? Well, I sure do hope this are just mere figures, but I believe this figures reveal that as a taxpayer, I am part of the one’s presently paying for these nonsense expenses. I didn’t benefit from any of this. Though I am not generalizing that I haven’t benefited from any of this financial assistance however, there are things which are just too large that I cannot live with and this is one of them. I cannot accept the Bureau of Treasury’s explanations of depreciation and all the other technicalities being the reason that our debt stocks rose. I mean, in layman’s terms we are just paying more for something less.
The fact that we are continuing to borrow in order to pay for these debts makes me think less of our legislative personnel in our houses. Are they just too intelligent to lose touch of reality that their policies regarding our public and external debts are just perpetuating our poverty and in fact their so-called pro-poor agenda are really for the few ones on top of the ladder which includes them?


The Department of Labor and Employment cited four reasons for our increasing unemployment rate, these are the following:

1. Philippine education and training institutions are plague with problems such as over-subscription of certain courses, particularly business courses, and under-subscription in certain priority courses; low survival/graduation rate; and low performance in licensure examinations;

2. The tendency of the industrial sector to be selective in their hiring practices, which delimits the opportunities of most graduates in finding better careers that pay well;

3. The prevalent practice among graduates to proceed to graduate school after college believing that no work is available anyway, which makes them a candidate for the pool of educated unemployed; and

4. Underutilization of career guidance counseling, resulting to students’ deprivation on information regarding skills, courses or specialization required by industries, which consequently leads them to take courses considered as over-subscribed.

However, in an IMF paper entitled “Why is Unemployment High in the Philippines?” by Ray Brooks (2002) revealed that Employment growth was not sufficient to reduce unemployment because of rapid population growth and increased labor force participation. Furthermore the paper’s states that Philippine employment growth and unemployment declines were positively correlated with real GDP growth and, to a lesser extent, negatively with the real minimum wage. Thus Brooks concluded that higher economic growth and moderation of increases in the real minimum wage are required to reduce unemployment.

These realities made me think where we have actually gone wrong which led us into a trap of producing unemployment. I believe that our policies are never geared towards the uplifting the lives of the ordinary citizen of this country. Unemployment is just a result of a much larger conspiracy. The collaboration of the rich and the powerful towards gives them more opportunity to grow by limiting the opportunities of others who are not rich and are not powerful.

Take for example the DOLE report which cites the problems in our educational system. Why haven’t the so called legislative servants of our country been able to regulate schools into producing more graduates every year when in fact they know these courses won’t give a chance for these graduates to be employed? They just let these schools operate and accept more enrollees each year without thinking of the feasibility and marketability of a certain course.

On the other hand, the IMF paper cites that increase in the minimum wage is a factor in the decrease in employment. I believe this could just be a propaganda which makes us confused about the matter. Although we all know that an increase in minimum wage leads to retrenchment thus creating more unemployed, I believe this is not the real reason. I believe that policies should be geared towards the poor. Politicians seem to be talking too much about being pro-poor that they have forgotten how it is to be pro pro-poor. This just doesn’t show up in their policies.
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