Are Ph Mining Contracts Fair ?
No!
Phil mining contracts in favor of 6 foreign corporations and about 30 locally incorporated firms with foreign investors provide for no share to the State as resource owner. They give away our patrimony, leave our ecology a mess our foreign debt unpaid. I will show why.
Every Filipino born today is indebted by almost a thousand US dollars. There will be no hope that a Filipino born a generation from now will be born without a sizable per capita foreign debt if contracts under the 1995 mining law are not reviewed.
The mining law today is a betrayal of public trust! It worsens our Debt Trap and Resource Curse,both coined by George Soros to describe the irony of resource rich third world countries that remain indebted to first world countries’ banks and whose peoples remain dirt poor despite those rich resources.
It continues with the claim and concession system in dispensing mineral wealth, in disregard of the basic law requiring the State to retain control and ownership of resources that are, by Constitutional fiat, supposed to be inalienable. Mineral reserves are the sovereign patrimonial property for the present and future generations to equitable benefit there from. However, once exploration permits and service contracts, as approved under the 1995 Mining Act (RA 7942), are granted, mineral reserves become "properties" of the contractor. The State loses effective control and ownership.
Service contracts, called Foreign Technical Assistance Agreements (FTAAs) and Mineral Production Sharing Agreements (MPSAs), signed under RA 7942, are blatantly unconstitutional, says the petitions in Hontiveros et al. vs. DENR Secretary et al. (SC en banc GR Nos. 181702, challenging the FTAAs awarded, and 181703 the MPSAs signed by the national government). I agree with the petitions and so should you. They are grossly unfair to the Filipino people. They conform to the Constitution only in name, but are actually still concessions grossly disadvantageous to us.
Our Supreme Court, in La Bugal vs. DENR Secretary already said so in January 2004. But a retiring Chief Justice changed his vote to join other justices in a new majority to reverse the en banc decision. By December 2004, Ph Supreme Court upheld the validity of the proposed Open Pit mine in Tampakan, South Cotabato under an FTAA granted originally to Western Mining Corporation, whose rights were assigned to Sagittarius Mines Inc. (SMI), a consortium of foreign mining companies. Since December 2004, Ph signed 5 more FTAAs. To date, about 30 MPSAs have been approved.
The voting in January 2004 was 7-5 to invalidate what on its face is a surrender of State control and ownership of the mineral reserves. The incumbent Ombudsman's, Justice Carpio-Morales’ponencia was joined by “Davide, Jr., C.J., Puno, Quisumbing, Carpio, Corona, Callejo, Sr., and Tinga” while Vitug, Panganiban, Ynares-Santiago, Sandoval-Gutierrez and Austria-Martinez, dissented. Azcuna, recused as a party was his client.”
The December 2004 reversal was penned by J. Panganiban, joined by Davide Jr., C.J., Sandoval-Gutierrez, Austria-Martinez, Garcia, Puno, Quisumbing, and Corona, with Tinga and Chico-Nazario writing separate concurring opinions. Justices Ynares-Santiago and Callejo concurred with the dissenting opinions of J. Antonio Carpio & J. Conchita C. Morales. The final vote became 10-4, with J. Azcuna inhibiting from the case. Justices Davide, Puno, Quisumbing and Corona changed their minds. They joined the dissenters in January 2004 Decision as to now uphold the law valid. Justice Ynares-Santiago changed her vote to join the minority opinion holding the law is unfair and constitutionally flawed.
In fewer words, Article XII Sec. 2 of our Constitution says : The State must, as owner of its natural resources, have full control over its EDU (exploration, development and utilization). It may not anymore grant concessions or franchises but may enter into service contracts (joint venture, co-production or production sharing agreements), retaining full control as owner.
Congress enacted RA 7942, as lobbied for my big mining companies out to make more money at the expense of what is fair for all. This 1995 law allows 100% foreign corporations, or 60% Filipino owned companies, to enter into service contracts that stipulate, as government's share, only excise taxes due under the Internal Revenue Code. We all hope La Bugal settled only the question of FTAAs being valid because 100% foreign owned corporations, as our basic law provides, may enter into service contracts to explore and tap our oil and other mineral reserves. It never settled the issue on fair revenue sharing!
A former Mines Bureau director calls RA 7942 the most unpatriotic act passed by Congress. The executive branch was implementing the new constitution using President Cory Aquino’s Executive Order 279 (1987 Law) requiring service contracts to provide for 60% government share, of which income and excise taxes paid were chargeable to the government’s share.
Please read the links below -
http://opinion.inquirer.net/58521/worse-than-the-pork-barrel-scam [1]
http://opinion.inquirer.net/15761/%E2%80%98zero%E2%80%99-share-from-mining-wealth[2]
http://www.reuters.com/article/2013/08/13/us-philippines-glencorexstrata-tampakan-idUSBRE97C04820130813[3]
In sum, Prof. Monsod says the mining law is the biggest scam to be perpetrated by our government. For a paltry sum, it sells our patrimony and future to benefit only a few investors.
The Reuters story says:
Question : Is it worth the possible damage to the environment for government to collect only 2% - 5% in excise tax as government share from the USD850B worth of non-renewable gold/copper reserves, without anything more shared to the government?
Is Prof. Monsod not right in saying our leaders, in approving the FTAAs and MPSAs, sold our patrimony to foreigners in exchange for a measly share of what the State owns? “Imperial Manila” sold us down the river! No wonder rebellion persists.
South Cotabato Governor Daisy Fuentes opposed the Tampakan project on fears the vital watersheds of her province will be endangered. To this day, the FTAAs/MPSAs are very controversial and most unpatriotic act of the government. They are downright UNCONSTITUTIONAL because the State surrenders control and effective ownership. They are still concessions which the Constitution has abandoned.
What happens to the future generations of Filipinos born indebted? How will they ever get to pay our foreign debt? As au pairs, caregivers, domestic servants and sex professionals abroad? These mineral reserves we are blessed with is key to paying off our foreign debt, if our leaders could be more patriotic?
Current Ph foreign debt is USD59B.
http://www.philstar.com/business/2013/06/22/956661/foreign-debt-down-59b [4]
With the Tampakan gold/copper mineral reserves estimate of USD850B alone, this State owned property could be used to pay off our external debt burden. Our external debt eats up about a third of total public debt burden, which is about half of yearly national budget, or one sixth of total budget.
Of the total external debt, total Ph public debt is half our Gross Domestic Product (GDP)
http://www.indexmundi.com/philippines/public_debt.html[5]
As of 2011, total debt burden (Interest and Principal amortization paid to creditors, local and foreign) was P823B or 38.9 per cent of the P1.6T 2011 national budget.
http://arnoldpadilla.wordpress.com/2010/09/01/2011-national-budget-reducing-the-debt-burden/[6]
By end of 2013, total public debt will be P6 Trillion. Two-thirds is local debt, while a third or about P2.4 Trillion (or USD59B) is foreign debt. This will still be about half of our GDP (gross domestic product).
http://business.inquirer.net/74637/govt-debt-burden-seen-nearing-p6t[7]
Could the Honorable Senators and Congressman not prioritize a better Mining Law to require the executive branch to improve the term and conditions of service contracts awarded to foreign corporations? Could the Honorable Justices in the Supreme Court not sooner invalidate RA 7942 (the 1995 Mining Act) as to require a fairer share from mineral wealth to go to a fund to pare down foreign debt? This fund could be used to preserve the ecology for future generations to inherit, without the onerous per capita foreign debt each unborn Filipino is at present condemned.
Think of the many hungry homeless street kids. What will happen to our future as a country if our leaders not act sooner to apply the Constitutional directive for the State to retain control of what it owns for the benefit of Filipinos?
Foreign debt burdens Ph national budget, eating up a sixth of total budget. A big portion of that should go to education and social services.
Local public debt is not as onerous. The external debt burden is what should worry our DENR-DOF-DBM regulators. Internally generated debt increases money supply without a cash flow out of our borders. Hence, it will not reduce our foreign and international reserves.
Things look better for us in coal, petroleum and gas service contracts. The Department of Energy awards service contracts providing for sixty per cent share for the government. The Malampaya fund promises to pay off our foreign debt. A brief primer on the Energy related laws, principally R.A. 7638 (1992) creating the Department of Energy, presented by Fatima Alvarez Castillo, can be viewed in this link.
Oil and Gas Production in the Philippines 091412.pdf
(http://bantaykita.ph/pdfs/Oil%20and%20Gas%20Production%20in%20the%20Philippines%20091412.pdf)
Service contracts awarded by the Department of Energy apply the Constitutional dictum of full control, ownership and a fair share of the resource tapped.
To quote the primer: “The sharing system adopted by the Philippine government is such that it is entitled to 60% of net proceeds, i.e., after the recoverable operating costs have been deducted. The government has the option to receive its share in kind or on cash. The Contractor is entitled to retain 40% of the net proceeds, sale and purchase of the gas produced from the Camago-Malampaya”
If our Supreme Court does not reverse the Panganiban opinion in La Bugal as it decides on the Hontiveros petitions, it will go down in history as having failed to stop congressional abuse of power. God forbid it from stamping its approval to the grant of concessions over our gold and other mineral reserves to a few mostly foreign owned companies for a song. The law allows the investor to get away with more than 200 times windfall profit for every dollar invested, without a share paid to the owners, without safeguards for vital watersheds, without guarantee that our forests will be there for the next generations to enjoy.
If we do not demand responsible and accountable governance from our leaders, we will condemn ourselves to live in a 3rd World country.
Shame!
Get Real
Worse than the pork barrel scam
By Solita Collas-Monsod Philippine Daily Inquirer
9:16 pm | Friday, August 9th, 2013
Public attention is now focused on the pork barrel scam, as well it should.
. x x x x x.
Alas, there is an even greater scam that is being perpetrated on the Filipino people, beside which, in terms of orders of magnitude, the pork barrel pales in comparison. A scam that allows the rich to get richer, and the poor to get screwed coming and going. A scam that affects not just the present generation, but also generations to come. A scam that has the imprimatur of all branches of government: Congress, the executive branch, and the judiciary (Supreme Court). In total contravention of inclusive growth, social justice, sustainable development.
What humongous scam is this? That foisted by the Philippine Mining Act of 1995 or Republic Act 7942.
Why is it a scam? Because the Filipino people, as owners of the minerals, receive, under RA 7942, only TWO Percent of the value of the mined ore, as their share of the proceeds from the mining development enterprise. Period. And for so-called FTAAs (financial and technical assistance agreements), our share would consist of 50 percent of the net income of the operation after taxes—from which would be deducted all taxes paid to the government. Which effectively reduces that 50 percent to, as former Environment Secretary Angel Reyes commented, “zero or nil,” and which Supreme Court Justice Antonio Carpio termed a “sham.”
One way to understand how grossly disadvantageous this sharing arrangement is to the Filipino people (the Constitution, by the way, provides for equitable sharing) is to compare it with the sharing agreement that is now in place with respect to the Malampaya project (an agreement during the term of Cory Aquino). In the latter, the Filipino people get SIXTY PERCENT of the production value of the output, after exploration and production costs are deducted. In other words, 60 percent of the gross profit. The other party (Shell) gets the 40 percent—from which it then pays the government income and other taxes. In other words, the government, as owner, gets its (60 percent) share of the profits, aside and distinct from the revenues that it collects arising from its sovereign power to tax.
What is the magnitude of this scam? Here’s one way of comparing the orders of magnitude involved: About 10 or so years ago, the value placed on the metallic minerals in the country was something like $900 billion. Assuming an exchange rate of P40=$1, we’re talking P36 trillion. Subtracting development and production costs assumed to be 60 percent of that value, the gross profits before tax would be P14.4 trillion.
Using the Malampaya formula, the share of the government/Filipino people would come out to P8.64 trillion. Using the 2-percent formula of the Philippine Mining Act, our share is P720 billion—or eight hundredths of one percent (0.08 percent) of what we would have gotten using Malampaya. In effect, if all those mineral resources had been extracted, under RA 7942, the loss to the Filipino people would be P7.92 trillion. And this does not even take into consideration the cost of the adverse environmental effects of mining.
Let us assume that the entire pork barrel is P50 billion a year (pork barrel for the legislature is actually P27 billion, and the executive pork barrel cannot possibly be P23 billion, but I just want a good round number), and that all this ends up in the pockets of the corrupt. It would still take 158 years of pork barrel scamming to match what is being cheated from the Filipino people by the Philippine Mining Act. That’s where the “pales in comparison” description comes from. (Up next: How the Philippine Mining Act of 1995 got past the executive branch and the Supreme Court)
Get Real
‘Zero’ share from mining wealth?
By Solita Collas-Monsod Philippine Daily Inquirer
9:35 pm | Friday, October 21st, 2011
27 1598 1539
“All …minerals … and other natural resources are owned by the State….” That is part of Section 2, Article XII of the 1987 Constitution, and is a reiteration of the so-called regalian doctrine (“all mineral wealth was the prerogative of the crown or the feudatory lord”) which is reportedly followed by mining countries in the world except the United States.
The Philippines claims to be the fifth most mineralized country in the world, and to hear Gary Teves tell it (quoting DTI/BOI), our reserves of gold, copper, nickel and chromite are second, fourth, fifth and sixth largest in the world, not to mention silver, coal, gypsum, sulfur, clay.
What is the value of these mineral resources? In 2004, then Neda Director General Romulo Neri cited the amount of P47 trillion to the Supreme Court (as quoted in Justice Antonio Carpio’s dissenting opinion in the La Bugal case, where the high court reversed an earlier decision and upheld the constitutionality of the Philippine Mining Law, RA 7942 and its implementing rules and regulations) as the “potential mining wealth” of the Philippines.
Since the state owns these mineral resources, how much should its share be of the profits (revenues minus costs) from their exploitation? At least 50 percent, wouldn’t you say? Or 60 percent, if the government goes into some form of joint venture with a foreign corporation. In any case, something that represents a “fair share” of the profits.
Certainly not a zero share. But that is exactly what the government’s share is of the income from the mineral resources it owns. Zilch. Nada. This, Justice Carpio pointed out in his dissenting opinion.
Only consider. There are some 30 large commercial mining operations in the country today, all apparently operating under so-called Mineral Production Sharing Agreements (MPSAs) entered into with the government.
Section 80 of the Philippine Mining Law, titled “Government Share in Mineral Production Sharing Agreement,” provides the following: “The total government share in a mineral production sharing agreement shall be the excise tax on mineral products as provided in Republic Act No. 7729, amending Section 151 (a) of the National Internal Revenue Code, as amended.”
And how much is the excise tax on mineral products? Two percent on metallic and non-metallic minerals.
But isn’t 2 percent greater than zero? Excuse me. As Carpio explains, “The excise tax is imposed not only on mineral products, but also on alcohol, tobacco and automobiles produced by companies that do not exploit natural resources owned by the State. The excise tax is not payment for the exploitation of the State’s natural resources, but payment for the “privilege of engaging in business.” Clearly, under Section 80 of RA 7942, the State does not receive as owner of the mineral resources any income from the exploitation of its mineral resources (emphasis his).
Thunders Carpio: “Natural resources are non-renewable and exhaustible assets of the State. Certainly, no government in its right mind should give away for free its natural resources to private business enterprises, local or foreign, amidst widespread poverty among its people.” And further on, “Under the 1987 Constitution, the State must receive its fair share as owner of the mineral resources, separate from taxes, fees and duties paid by taxpayers. The legislature may waive taxes, fees and duties, but it cannot waive the State’s share in mining operations.”(emphasis his)
So how come the majority opinion didn’t see it his way? A non-lawyer’s (but one who understands English) take: it looked to me like a weaseling operation—the reason was that the MPSA wasn’t the issue at bar, but rather the FTAA, which is also provided for in RA 7942.
FTAA stands for Financial or Technical Assistance Agreement, where private companies act as contractors of the State (and in the particular case, a foreign private company, although it has since sold 60 percent of its shares to a Filipino company). Presumably, the difference between the MPSA and the FTAA is that in the latter, it is the State that is directly exploiting the natural resource, but using the contractor and paying it a share of the income from the exploitation of the resource.
Well, does the government get its fair share under the FTAA? Here is where Carpio goes to town. He points out that the State doesn’t begin to get its share until after the contractor has fully recovered its pre-op, exploration and development expenditures—for which there is no time limit (!). And then, the State’s share consists solely of taxes, fees and duties. Zero share of profits again, this time, says Carpio, because the conditions in the implementing rules and regulations (DAO 56-99) are impossible to fulfill (this in the dissenting opinion to the motion for reconsideration on the case).
What conditions? Well government will get an additional “share” (to the taxes, etc), only if the contractor’s net income after tax amounts to more than 40 percent of gross output, for two successive years. Carpio, using data from the six largest Philippine mining companies, shows that the highest net income after tax/gross output ratio was only 25 percent, with the average ratio being 16 percent over a nine-year period.
Carpio then cites data from the mother company of the FTAA contractor (average ratio of 10 percent), as well as the world’s largest mining companies (largest average ratio was 13 percent). Clearly the 40-percent “trigger” will never be reached.
So who benefits? Not the government. While the people are left to deal with a devastated land.
Glencore cuts budget for $5.9 billion Philippine project
By Erik dela Cruz
MANILA | Tue Aug 13, 2013 5:07am EDT
(Reuters) - Glencore Xstrata (GLEN.L) will cut up to 920 jobs and slash spending at its $5.9 billion Tampakan copper-gold project in the Philippines, one of several future mines under review since the company was formed in a record-breaking takeover.
Tampakan, a challenging project in a restive region of the southern Philippines, has not been officially put up for sale.
But, like many of the big-ticket mining projects previously held by Xstrata, it is under review by its new owners and is one of four projects Glencore has said it could sell to appease Chinese regulators' concerns over its dominance in copper - if it is unable to sell the Las Bambas mine in Peru.
Sagittarius Mines Inc, which is 62.5 percent-owned by Glencore, said on Tuesday it had revised its work plan as the project still faced "substantial development challenges" - including a ban on open-pit mining in South Cotabato province.
That means it is unlikely to hit an already revised 2019 target for first production.
"No investment decision can be made until the current project challenges are resolved and necessary approvals obtained," Sagittarius spokesman John Arnaldo said.
The fresh delay to what could be the biggest single foreign direct investment in the Philippines also reflects a challenging environment for investors looking to develop untapped mineral wealth in the country worth an estimated $850 billion.
Although the Southeast Asian country has won investment-grade ratings from Fitch Ratings and Standard & Poor's, policy uncertainty continues to hound the Tampakan project.
Australian miner Indophil Resources N.L. (IRN.AX), which has a 37.5 percent interest in the project, remains optimistic.
Chief Executive Richard Laufmann said Indophil was still in talks with trader and miner Glencore Xstrata over the revised work plan, and ruled out a shutdown of the Tampakan project.
"This modification of activity at what is a world-class minerals deposit is temporary and every effort will be made to restore the work program to its original plan," he said in a statement.
DOWNSIZING
Glencore has made no secret of its lack of appetite for costly greenfield projects - mines built from scratch - but local difficulties have long held back Tampakan.
A provincial ban on open-pit mining has been in place since 2010, although it runs counter to the national mining policy, compounding the difficulty of getting necessary approvals.
The revised work plan and budget will result in an 85 percent reduction of the workforce, affecting about 920 jobs. Monthly expenditure will be cut to $1 million from $4 million, Arnaldo said. To date, Sagittarius has spent more than $500 million for the initial phase of the project, he said.
Discovered in 1992, the Tampakan mine is predicted to have a 17-year lifespan with estimated deposits of 15 million tons of copper and 18 million ounces of gold.
In December last year, Sagittarius announced it was pushing back the target date to start production at the Tampakan mine by three years to 2019 as it struggled to win regulatory and community approvals.
Three months later, Sagittarius was granted an environmental compliance certificate by the government, removing just one of the hurdles delaying work on the project.
Foreign debt down to $59B
By Prinz P. Magtulis (The Philippine Star) | Updated June 22, 2013 - 12:00am
MANILA, Philippines - The country’s foreign debt stock declined in the first quarter of the year, indicating more capacity for the Philippines to meet its obligations.
The Bangko Sentral ng Pilipinas (BSP) reported the country’s external debt decreased to $59 billion in the first quarter of the year from $61.6 billion a year ago. The figure was also down from $60.3 billion as of end last year.
Philippines Public debt
(WWW.INDEX MUNDI.COM)
Public debt: 50.6% of GDP (2012 est.) 50.9% of GDP (2011 est.) note: data cover central government debt, and includes debt instruments issued (or owned) by government entities other than the treasury; the data include treasury debt held by foreign entities; the data include debt issued by subnational entities, as well as intra-governmental debt; intra-governmental debt consists of treasury borrowings from surpluses in the social funds, such as for retirement, medical care, and unemployment; debt instruments for the social funds are not sold at public auctions
Definition: This entry records the cumulative total of all government borrowings less repayments that are denominated in a country's home currency. Public debt should not be confused with external debt, which reflects the foreign currency liabilities of both the private and public sector and must be financed out of foreign exchange earnings.
Source: CIA World Factbook - Unless otherwise noted, information in this page is accurate as of February 21, 2013
See Also
2011 national budget: reducing the debt burden
By Arnold Padilla
http://arnoldpadilla.wordpress.com/2010/09/01/2011-national-budget-reducing-the-debt-burden/
The House of Representatives today (September 1) started its review of the P1.645-trillionnational budget submitted by Malacañang. X x x
Increased debt burden
But the spending plan submitted by Pres. Noynoy Aquino to Congress even increased the debt burden and like his predecessors, effectively marginalized resources for the poor. In fact, almost 77.5 percent of the P104.4-billion increase in the 2011 budget came from the huge P80.88-billion rise in interest payments for government’s debt. While personal services grew by P47.24 billion, maintenance and other operating expenses (MOOE) fell by P10.92 billion and capital outlays and net lending, by P12.8 billion. The said declines reflect the avowed policy of the Aquino administration of turning over to the private sector vital functions of government, including the provision of services and undertaking infrastructure development. Public infrastructure, for instance, fell by P21.13 billion in the 2011 budget. This policy will ultimately take its toll on the poor and marginalized in the form of, among others, exorbitant user fees. (See Table)
The Aquino administration is proposing interest payments of P357.09 billion in the 2011 budget, or 21.7 percent of its planned spending program. But the total debt burden for 2011 could actually reach P823.27 billion if the principal amortization of P466.18 billion is added to interest payments. Thus, debt burden (interest payments plus principal amortization) represents 38.9 percent of what the Aquino administration is willing to spend in its 2011 budget. (See Table)
Such a heavy debt burden means that fewer resources are available to spend for social and economic services badly needed by the people. What makes it doubly unjust is that many of the projects and programs funded by these debts did not benefit the people, or worse, even made life more difficult for them while private contractors, corrupt government officials, and the creditors rake in billions of pesos in taxpayers’ money.
Anomalous projects
Many of these anomalous and questionable loans can be easily identified. Take the case of the notorious bridge projects undertaken by the previous administration. In June 2008, the Commission on Audit (COA) released its findings on selected bridge projects undertaken by the Arroyo administration from 2002 to 2006, which were funded by various loan agreements with foreign creditors.
The COA noted a number of “lapses in the process of implementation” of these bridge projects such as uninstalled and unaccounted construction materials, use of expensive materials despite the availability of a cheap alternative, project delays that resulted in commitment penalties, construction of bridges in inappropriate places, overlapping of bridge projects, poor quality of constructed bridges, projects overshooting the approved budget, etc.
Based on the COA findings, I tabulated below some of these foreign debt-funded bridge projects to give an idea how much in taxpayers’ money are being wasted on debt servicing. Five questionable projects alone already cost $62.93 million in principal amortization and interest payments for 2011. That’s around P2.83 billion (at an exchange rate of P45 per US dollar) in funds that could be used for more meaningful and beneficial purposes. If the policy of automatic appropriation for debt servicing is not repealed soon, these onerous and questionable loans will continue to drain our budget and resources for many more years to come. (See Table, click to enlarge)
To be sure, these foreign debt-funded bridge projects exposed by the COA are just a small sample of the many anomalous loans incurred by government and unjustly being passed on the people. Not included in the table above, for instance, is the First National Roads Improvement Project (NRIP) in which the Philippines borrowed $150 million from the World Bank. The loan closed in March 2007 and we have already been servicing our debt to the World Bank when the country learned that five Filipino and Chinese contractors that participated in the project were involved in bid-rigging. For 2011, we will pay the World Bank $14.74 million (about P663 million) in principal amortization and interest payments for the anomaly-ridden NRIP and the country will continue to service the loan until 2020.
Debt for neoliberal reforms
Aside from infrastructure projects, there are also programs bankrolled by foreign debt that introduced neoliberal structural reforms in the Philippines. One example is the ongoing power sector restructuring program that will supposedly address high electricity cost and power supply insecurity through privatization and deregulation. But after many years of restructuring, what we have are frequent brownouts and monthly increases in our electricity bills while the auction of state-owned power assets has been repeatedly marred by irregularities (the latest case is Angat Dam privatization) and industry participants again and again manipulate electricity rates. Worse, taxpayers have been paying for the debts used to implement these anti-people power reforms.
The power sector restructuring program, which included the bribery-ridden railroading of the Electric Power Industry Reform Act (EPIRA) in 2001, has been mainly funded by the Asian Development Bank (ADB) and the Japan Bank for International Cooperation (JBIC). For 2011, the Aquino administration wants us to shell out $121.34 million to service the principal amortization and interest payments of four loan accounts with the ADB and JBIC for the implementation of power sector reforms. (See Table) The amount is on top of the debt servicing, worth $151.07 million in 2011, for the loans incurred by the National Power Corporation (NAPOCOR).
A more meticulous review of Philippine debts will certainly yield more anomalous transactions ranging from loans associated with the privatization of water utilities, loans for the mandatory importation of agricultural goods including rice from the US, loans used in infrastructure projects fraught with corruption, etc.
Challenge Congress, Noynoy
Our resources are indeed limited, constantly undermined by a fundamentally weak and backward economy and systemic corruption. Thus, lawmakers, as they review the 2011 budget proposal of the Aquino administration, must be pressured to take a serious look into these questionable and anomalous debts. We must compel them to at least suspend payments for these debts (and later work towards their complete repudiation). Congress can pass a 2011 budget stipulating that certain debts must not be serviced due to unresolved issues of corruption, program failure, etc. This move will also challenge President Aquino – will he veto such a budget and choose to honor his predecessors’, including Gloria Arroyo’s, illegitimate debts?
Servicing debts that did not benefit the people and the country amid chronic poverty and hunger and severe lack of social services is not only immoral and unjust. It is also inconsistent with genuine and sustainable development since it deprives government the capacity and the resources to invest in its people and spur the economy.
Gov’t debt burden seen nearing P6T
Economic execs expect decline in borrowing cost
By Ronnel W. Domingo Philippine Daily Inquirer
1:10 am | Thursday, August 2nd, 2012
Economic officials of the Aquino administration said Wednesday the national government’s outstanding debt was expected to approach the P6-trillion mark by the end of 2013 after breaching P5 trillion just recently.
Finance Secretary Cesar V. Purisima and Budget Secretary Florencio B. Abad, representing the Development and Budget Coordination Committee in a briefing for the House committee on appropriations, said the debt stock would hover at P5.78 trillion to P5.91 trillion within a year and a half.
As of last May, the debt stock reached P5.15 trillion and, based on the 2012 fiscal program, this will reach P5.52 trillion by year’s end.
In his presentation, Abad said that under the proposed national expenditures program for 2013, the debt stock would continue to rise although this would represent an even smaller part of the domestic economy.
Abad said P5.91 trillion would account for 49.5 percent of gross domestic product in 2013, a lower ratio than the expected 50 percent this year and the recorded 50.9 percent in 2011.
On the other hand, Purisima put the expected debt stock at P5.78 trillion, noting that international credit-rating agencies have given the Philippine positive moves eight times since the Aquino administration came into power in mid-2010.
Malacañang officials have bandied about this, saying that improving credit standing would mean less financing costs for the country.
According to the Bureau of the Treasury, the government spent P362.19 billion in the first semester to pay its debt, down 11 percent from the P408.77 billion settled in the same period last year.
The government continued to spend less for debt servicing compared with the previous year as principal payments fell during the period.
From January to June, the government settled P212.18 billion in principal, including P181.38 billion in domestic debt and P30.8 billion in foreign loans. Total principal payment in those six months was 23 percent lower than the P274.27 billion posted in the year-ago period.
The government paid P150.01 billion in interest, covering P96.8 billion in domestic debt and P53.21 billion in foreign borrowings.
[1] See Monsod’s 9 August 2013 Inquirer Column reproduced above
[2] See Monsod’s 21 October 2011 Inquirer Column above
[3] Please read Reuters 13 August 2013 news report above
[4] Please see 22 June 2013 Philstar story above
[5] Please see www.indexmundi.com/philippines/public_debt.html above
[6] Please see Arnold Padilla’s Analysis above
[7] Please see 12 August 2012 News Report above
Phil mining contracts in favor of 6 foreign corporations and about 30 locally incorporated firms with foreign investors provide for no share to the State as resource owner. They give away our patrimony, leave our ecology a mess our foreign debt unpaid. I will show why.
Every Filipino born today is indebted by almost a thousand US dollars. There will be no hope that a Filipino born a generation from now will be born without a sizable per capita foreign debt if contracts under the 1995 mining law are not reviewed.
The mining law today is a betrayal of public trust! It worsens our Debt Trap and Resource Curse,both coined by George Soros to describe the irony of resource rich third world countries that remain indebted to first world countries’ banks and whose peoples remain dirt poor despite those rich resources.
It continues with the claim and concession system in dispensing mineral wealth, in disregard of the basic law requiring the State to retain control and ownership of resources that are, by Constitutional fiat, supposed to be inalienable. Mineral reserves are the sovereign patrimonial property for the present and future generations to equitable benefit there from. However, once exploration permits and service contracts, as approved under the 1995 Mining Act (RA 7942), are granted, mineral reserves become "properties" of the contractor. The State loses effective control and ownership.
Service contracts, called Foreign Technical Assistance Agreements (FTAAs) and Mineral Production Sharing Agreements (MPSAs), signed under RA 7942, are blatantly unconstitutional, says the petitions in Hontiveros et al. vs. DENR Secretary et al. (SC en banc GR Nos. 181702, challenging the FTAAs awarded, and 181703 the MPSAs signed by the national government). I agree with the petitions and so should you. They are grossly unfair to the Filipino people. They conform to the Constitution only in name, but are actually still concessions grossly disadvantageous to us.
Our Supreme Court, in La Bugal vs. DENR Secretary already said so in January 2004. But a retiring Chief Justice changed his vote to join other justices in a new majority to reverse the en banc decision. By December 2004, Ph Supreme Court upheld the validity of the proposed Open Pit mine in Tampakan, South Cotabato under an FTAA granted originally to Western Mining Corporation, whose rights were assigned to Sagittarius Mines Inc. (SMI), a consortium of foreign mining companies. Since December 2004, Ph signed 5 more FTAAs. To date, about 30 MPSAs have been approved.
The voting in January 2004 was 7-5 to invalidate what on its face is a surrender of State control and ownership of the mineral reserves. The incumbent Ombudsman's, Justice Carpio-Morales’ponencia was joined by “Davide, Jr., C.J., Puno, Quisumbing, Carpio, Corona, Callejo, Sr., and Tinga” while Vitug, Panganiban, Ynares-Santiago, Sandoval-Gutierrez and Austria-Martinez, dissented. Azcuna, recused as a party was his client.”
The December 2004 reversal was penned by J. Panganiban, joined by Davide Jr., C.J., Sandoval-Gutierrez, Austria-Martinez, Garcia, Puno, Quisumbing, and Corona, with Tinga and Chico-Nazario writing separate concurring opinions. Justices Ynares-Santiago and Callejo concurred with the dissenting opinions of J. Antonio Carpio & J. Conchita C. Morales. The final vote became 10-4, with J. Azcuna inhibiting from the case. Justices Davide, Puno, Quisumbing and Corona changed their minds. They joined the dissenters in January 2004 Decision as to now uphold the law valid. Justice Ynares-Santiago changed her vote to join the minority opinion holding the law is unfair and constitutionally flawed.
In fewer words, Article XII Sec. 2 of our Constitution says : The State must, as owner of its natural resources, have full control over its EDU (exploration, development and utilization). It may not anymore grant concessions or franchises but may enter into service contracts (joint venture, co-production or production sharing agreements), retaining full control as owner.
Congress enacted RA 7942, as lobbied for my big mining companies out to make more money at the expense of what is fair for all. This 1995 law allows 100% foreign corporations, or 60% Filipino owned companies, to enter into service contracts that stipulate, as government's share, only excise taxes due under the Internal Revenue Code. We all hope La Bugal settled only the question of FTAAs being valid because 100% foreign owned corporations, as our basic law provides, may enter into service contracts to explore and tap our oil and other mineral reserves. It never settled the issue on fair revenue sharing!
A former Mines Bureau director calls RA 7942 the most unpatriotic act passed by Congress. The executive branch was implementing the new constitution using President Cory Aquino’s Executive Order 279 (1987 Law) requiring service contracts to provide for 60% government share, of which income and excise taxes paid were chargeable to the government’s share.
Please read the links below -
http://opinion.inquirer.net/58521/worse-than-the-pork-barrel-scam [1]
http://opinion.inquirer.net/15761/%E2%80%98zero%E2%80%99-share-from-mining-wealth[2]
http://www.reuters.com/article/2013/08/13/us-philippines-glencorexstrata-tampakan-idUSBRE97C04820130813[3]
In sum, Prof. Monsod says the mining law is the biggest scam to be perpetrated by our government. For a paltry sum, it sells our patrimony and future to benefit only a few investors.
The Reuters story says:
- Tampakan gold copper reserves are estimated to be worth USD850B.
- Sagittarius Mines Inc. (SMI) total project cost for Tampakan Project will be USD5.9B.
- Glencore, Xstrata and Indophil, the foreign investors, have decided to downsize this project cost from USD4M monthly to USD1M, after so far investing USD500M.
Question : Is it worth the possible damage to the environment for government to collect only 2% - 5% in excise tax as government share from the USD850B worth of non-renewable gold/copper reserves, without anything more shared to the government?
Is Prof. Monsod not right in saying our leaders, in approving the FTAAs and MPSAs, sold our patrimony to foreigners in exchange for a measly share of what the State owns? “Imperial Manila” sold us down the river! No wonder rebellion persists.
South Cotabato Governor Daisy Fuentes opposed the Tampakan project on fears the vital watersheds of her province will be endangered. To this day, the FTAAs/MPSAs are very controversial and most unpatriotic act of the government. They are downright UNCONSTITUTIONAL because the State surrenders control and effective ownership. They are still concessions which the Constitution has abandoned.
What happens to the future generations of Filipinos born indebted? How will they ever get to pay our foreign debt? As au pairs, caregivers, domestic servants and sex professionals abroad? These mineral reserves we are blessed with is key to paying off our foreign debt, if our leaders could be more patriotic?
Current Ph foreign debt is USD59B.
http://www.philstar.com/business/2013/06/22/956661/foreign-debt-down-59b [4]
With the Tampakan gold/copper mineral reserves estimate of USD850B alone, this State owned property could be used to pay off our external debt burden. Our external debt eats up about a third of total public debt burden, which is about half of yearly national budget, or one sixth of total budget.
Of the total external debt, total Ph public debt is half our Gross Domestic Product (GDP)
http://www.indexmundi.com/philippines/public_debt.html[5]
As of 2011, total debt burden (Interest and Principal amortization paid to creditors, local and foreign) was P823B or 38.9 per cent of the P1.6T 2011 national budget.
http://arnoldpadilla.wordpress.com/2010/09/01/2011-national-budget-reducing-the-debt-burden/[6]
By end of 2013, total public debt will be P6 Trillion. Two-thirds is local debt, while a third or about P2.4 Trillion (or USD59B) is foreign debt. This will still be about half of our GDP (gross domestic product).
http://business.inquirer.net/74637/govt-debt-burden-seen-nearing-p6t[7]
Could the Honorable Senators and Congressman not prioritize a better Mining Law to require the executive branch to improve the term and conditions of service contracts awarded to foreign corporations? Could the Honorable Justices in the Supreme Court not sooner invalidate RA 7942 (the 1995 Mining Act) as to require a fairer share from mineral wealth to go to a fund to pare down foreign debt? This fund could be used to preserve the ecology for future generations to inherit, without the onerous per capita foreign debt each unborn Filipino is at present condemned.
Think of the many hungry homeless street kids. What will happen to our future as a country if our leaders not act sooner to apply the Constitutional directive for the State to retain control of what it owns for the benefit of Filipinos?
Foreign debt burdens Ph national budget, eating up a sixth of total budget. A big portion of that should go to education and social services.
Local public debt is not as onerous. The external debt burden is what should worry our DENR-DOF-DBM regulators. Internally generated debt increases money supply without a cash flow out of our borders. Hence, it will not reduce our foreign and international reserves.
Things look better for us in coal, petroleum and gas service contracts. The Department of Energy awards service contracts providing for sixty per cent share for the government. The Malampaya fund promises to pay off our foreign debt. A brief primer on the Energy related laws, principally R.A. 7638 (1992) creating the Department of Energy, presented by Fatima Alvarez Castillo, can be viewed in this link.
Oil and Gas Production in the Philippines 091412.pdf
(http://bantaykita.ph/pdfs/Oil%20and%20Gas%20Production%20in%20the%20Philippines%20091412.pdf)
Service contracts awarded by the Department of Energy apply the Constitutional dictum of full control, ownership and a fair share of the resource tapped.
To quote the primer: “The sharing system adopted by the Philippine government is such that it is entitled to 60% of net proceeds, i.e., after the recoverable operating costs have been deducted. The government has the option to receive its share in kind or on cash. The Contractor is entitled to retain 40% of the net proceeds, sale and purchase of the gas produced from the Camago-Malampaya”
If our Supreme Court does not reverse the Panganiban opinion in La Bugal as it decides on the Hontiveros petitions, it will go down in history as having failed to stop congressional abuse of power. God forbid it from stamping its approval to the grant of concessions over our gold and other mineral reserves to a few mostly foreign owned companies for a song. The law allows the investor to get away with more than 200 times windfall profit for every dollar invested, without a share paid to the owners, without safeguards for vital watersheds, without guarantee that our forests will be there for the next generations to enjoy.
If we do not demand responsible and accountable governance from our leaders, we will condemn ourselves to live in a 3rd World country.
Shame!
Get Real
Worse than the pork barrel scam
By Solita Collas-Monsod Philippine Daily Inquirer
9:16 pm | Friday, August 9th, 2013
Public attention is now focused on the pork barrel scam, as well it should.
. x x x x x.
Alas, there is an even greater scam that is being perpetrated on the Filipino people, beside which, in terms of orders of magnitude, the pork barrel pales in comparison. A scam that allows the rich to get richer, and the poor to get screwed coming and going. A scam that affects not just the present generation, but also generations to come. A scam that has the imprimatur of all branches of government: Congress, the executive branch, and the judiciary (Supreme Court). In total contravention of inclusive growth, social justice, sustainable development.
What humongous scam is this? That foisted by the Philippine Mining Act of 1995 or Republic Act 7942.
Why is it a scam? Because the Filipino people, as owners of the minerals, receive, under RA 7942, only TWO Percent of the value of the mined ore, as their share of the proceeds from the mining development enterprise. Period. And for so-called FTAAs (financial and technical assistance agreements), our share would consist of 50 percent of the net income of the operation after taxes—from which would be deducted all taxes paid to the government. Which effectively reduces that 50 percent to, as former Environment Secretary Angel Reyes commented, “zero or nil,” and which Supreme Court Justice Antonio Carpio termed a “sham.”
One way to understand how grossly disadvantageous this sharing arrangement is to the Filipino people (the Constitution, by the way, provides for equitable sharing) is to compare it with the sharing agreement that is now in place with respect to the Malampaya project (an agreement during the term of Cory Aquino). In the latter, the Filipino people get SIXTY PERCENT of the production value of the output, after exploration and production costs are deducted. In other words, 60 percent of the gross profit. The other party (Shell) gets the 40 percent—from which it then pays the government income and other taxes. In other words, the government, as owner, gets its (60 percent) share of the profits, aside and distinct from the revenues that it collects arising from its sovereign power to tax.
What is the magnitude of this scam? Here’s one way of comparing the orders of magnitude involved: About 10 or so years ago, the value placed on the metallic minerals in the country was something like $900 billion. Assuming an exchange rate of P40=$1, we’re talking P36 trillion. Subtracting development and production costs assumed to be 60 percent of that value, the gross profits before tax would be P14.4 trillion.
Using the Malampaya formula, the share of the government/Filipino people would come out to P8.64 trillion. Using the 2-percent formula of the Philippine Mining Act, our share is P720 billion—or eight hundredths of one percent (0.08 percent) of what we would have gotten using Malampaya. In effect, if all those mineral resources had been extracted, under RA 7942, the loss to the Filipino people would be P7.92 trillion. And this does not even take into consideration the cost of the adverse environmental effects of mining.
Let us assume that the entire pork barrel is P50 billion a year (pork barrel for the legislature is actually P27 billion, and the executive pork barrel cannot possibly be P23 billion, but I just want a good round number), and that all this ends up in the pockets of the corrupt. It would still take 158 years of pork barrel scamming to match what is being cheated from the Filipino people by the Philippine Mining Act. That’s where the “pales in comparison” description comes from. (Up next: How the Philippine Mining Act of 1995 got past the executive branch and the Supreme Court)
Get Real
‘Zero’ share from mining wealth?
By Solita Collas-Monsod Philippine Daily Inquirer
9:35 pm | Friday, October 21st, 2011
27 1598 1539
“All …minerals … and other natural resources are owned by the State….” That is part of Section 2, Article XII of the 1987 Constitution, and is a reiteration of the so-called regalian doctrine (“all mineral wealth was the prerogative of the crown or the feudatory lord”) which is reportedly followed by mining countries in the world except the United States.
The Philippines claims to be the fifth most mineralized country in the world, and to hear Gary Teves tell it (quoting DTI/BOI), our reserves of gold, copper, nickel and chromite are second, fourth, fifth and sixth largest in the world, not to mention silver, coal, gypsum, sulfur, clay.
What is the value of these mineral resources? In 2004, then Neda Director General Romulo Neri cited the amount of P47 trillion to the Supreme Court (as quoted in Justice Antonio Carpio’s dissenting opinion in the La Bugal case, where the high court reversed an earlier decision and upheld the constitutionality of the Philippine Mining Law, RA 7942 and its implementing rules and regulations) as the “potential mining wealth” of the Philippines.
Since the state owns these mineral resources, how much should its share be of the profits (revenues minus costs) from their exploitation? At least 50 percent, wouldn’t you say? Or 60 percent, if the government goes into some form of joint venture with a foreign corporation. In any case, something that represents a “fair share” of the profits.
Certainly not a zero share. But that is exactly what the government’s share is of the income from the mineral resources it owns. Zilch. Nada. This, Justice Carpio pointed out in his dissenting opinion.
Only consider. There are some 30 large commercial mining operations in the country today, all apparently operating under so-called Mineral Production Sharing Agreements (MPSAs) entered into with the government.
Section 80 of the Philippine Mining Law, titled “Government Share in Mineral Production Sharing Agreement,” provides the following: “The total government share in a mineral production sharing agreement shall be the excise tax on mineral products as provided in Republic Act No. 7729, amending Section 151 (a) of the National Internal Revenue Code, as amended.”
And how much is the excise tax on mineral products? Two percent on metallic and non-metallic minerals.
But isn’t 2 percent greater than zero? Excuse me. As Carpio explains, “The excise tax is imposed not only on mineral products, but also on alcohol, tobacco and automobiles produced by companies that do not exploit natural resources owned by the State. The excise tax is not payment for the exploitation of the State’s natural resources, but payment for the “privilege of engaging in business.” Clearly, under Section 80 of RA 7942, the State does not receive as owner of the mineral resources any income from the exploitation of its mineral resources (emphasis his).
Thunders Carpio: “Natural resources are non-renewable and exhaustible assets of the State. Certainly, no government in its right mind should give away for free its natural resources to private business enterprises, local or foreign, amidst widespread poverty among its people.” And further on, “Under the 1987 Constitution, the State must receive its fair share as owner of the mineral resources, separate from taxes, fees and duties paid by taxpayers. The legislature may waive taxes, fees and duties, but it cannot waive the State’s share in mining operations.”(emphasis his)
So how come the majority opinion didn’t see it his way? A non-lawyer’s (but one who understands English) take: it looked to me like a weaseling operation—the reason was that the MPSA wasn’t the issue at bar, but rather the FTAA, which is also provided for in RA 7942.
FTAA stands for Financial or Technical Assistance Agreement, where private companies act as contractors of the State (and in the particular case, a foreign private company, although it has since sold 60 percent of its shares to a Filipino company). Presumably, the difference between the MPSA and the FTAA is that in the latter, it is the State that is directly exploiting the natural resource, but using the contractor and paying it a share of the income from the exploitation of the resource.
Well, does the government get its fair share under the FTAA? Here is where Carpio goes to town. He points out that the State doesn’t begin to get its share until after the contractor has fully recovered its pre-op, exploration and development expenditures—for which there is no time limit (!). And then, the State’s share consists solely of taxes, fees and duties. Zero share of profits again, this time, says Carpio, because the conditions in the implementing rules and regulations (DAO 56-99) are impossible to fulfill (this in the dissenting opinion to the motion for reconsideration on the case).
What conditions? Well government will get an additional “share” (to the taxes, etc), only if the contractor’s net income after tax amounts to more than 40 percent of gross output, for two successive years. Carpio, using data from the six largest Philippine mining companies, shows that the highest net income after tax/gross output ratio was only 25 percent, with the average ratio being 16 percent over a nine-year period.
Carpio then cites data from the mother company of the FTAA contractor (average ratio of 10 percent), as well as the world’s largest mining companies (largest average ratio was 13 percent). Clearly the 40-percent “trigger” will never be reached.
So who benefits? Not the government. While the people are left to deal with a devastated land.
Glencore cuts budget for $5.9 billion Philippine project
By Erik dela Cruz
MANILA | Tue Aug 13, 2013 5:07am EDT
(Reuters) - Glencore Xstrata (GLEN.L) will cut up to 920 jobs and slash spending at its $5.9 billion Tampakan copper-gold project in the Philippines, one of several future mines under review since the company was formed in a record-breaking takeover.
Tampakan, a challenging project in a restive region of the southern Philippines, has not been officially put up for sale.
But, like many of the big-ticket mining projects previously held by Xstrata, it is under review by its new owners and is one of four projects Glencore has said it could sell to appease Chinese regulators' concerns over its dominance in copper - if it is unable to sell the Las Bambas mine in Peru.
Sagittarius Mines Inc, which is 62.5 percent-owned by Glencore, said on Tuesday it had revised its work plan as the project still faced "substantial development challenges" - including a ban on open-pit mining in South Cotabato province.
That means it is unlikely to hit an already revised 2019 target for first production.
"No investment decision can be made until the current project challenges are resolved and necessary approvals obtained," Sagittarius spokesman John Arnaldo said.
The fresh delay to what could be the biggest single foreign direct investment in the Philippines also reflects a challenging environment for investors looking to develop untapped mineral wealth in the country worth an estimated $850 billion.
Although the Southeast Asian country has won investment-grade ratings from Fitch Ratings and Standard & Poor's, policy uncertainty continues to hound the Tampakan project.
Australian miner Indophil Resources N.L. (IRN.AX), which has a 37.5 percent interest in the project, remains optimistic.
Chief Executive Richard Laufmann said Indophil was still in talks with trader and miner Glencore Xstrata over the revised work plan, and ruled out a shutdown of the Tampakan project.
"This modification of activity at what is a world-class minerals deposit is temporary and every effort will be made to restore the work program to its original plan," he said in a statement.
DOWNSIZING
Glencore has made no secret of its lack of appetite for costly greenfield projects - mines built from scratch - but local difficulties have long held back Tampakan.
A provincial ban on open-pit mining has been in place since 2010, although it runs counter to the national mining policy, compounding the difficulty of getting necessary approvals.
The revised work plan and budget will result in an 85 percent reduction of the workforce, affecting about 920 jobs. Monthly expenditure will be cut to $1 million from $4 million, Arnaldo said. To date, Sagittarius has spent more than $500 million for the initial phase of the project, he said.
Discovered in 1992, the Tampakan mine is predicted to have a 17-year lifespan with estimated deposits of 15 million tons of copper and 18 million ounces of gold.
In December last year, Sagittarius announced it was pushing back the target date to start production at the Tampakan mine by three years to 2019 as it struggled to win regulatory and community approvals.
Three months later, Sagittarius was granted an environmental compliance certificate by the government, removing just one of the hurdles delaying work on the project.
Foreign debt down to $59B
By Prinz P. Magtulis (The Philippine Star) | Updated June 22, 2013 - 12:00am
MANILA, Philippines - The country’s foreign debt stock declined in the first quarter of the year, indicating more capacity for the Philippines to meet its obligations.
The Bangko Sentral ng Pilipinas (BSP) reported the country’s external debt decreased to $59 billion in the first quarter of the year from $61.6 billion a year ago. The figure was also down from $60.3 billion as of end last year.
Philippines Public debt
(WWW.INDEX MUNDI.COM)
Public debt: 50.6% of GDP (2012 est.) 50.9% of GDP (2011 est.) note: data cover central government debt, and includes debt instruments issued (or owned) by government entities other than the treasury; the data include treasury debt held by foreign entities; the data include debt issued by subnational entities, as well as intra-governmental debt; intra-governmental debt consists of treasury borrowings from surpluses in the social funds, such as for retirement, medical care, and unemployment; debt instruments for the social funds are not sold at public auctions
Definition: This entry records the cumulative total of all government borrowings less repayments that are denominated in a country's home currency. Public debt should not be confused with external debt, which reflects the foreign currency liabilities of both the private and public sector and must be financed out of foreign exchange earnings.
Source: CIA World Factbook - Unless otherwise noted, information in this page is accurate as of February 21, 2013
See Also
- Public debt by year chart
- Public debt rank chart
- Public debt - comparative map
- External debt stocks, public and publicly guaranteed (PPG) (DOD, current US$) - thematic map - World Bank indicator
- External debt stocks, public and publicly guaranteed (PPG) (DOD, current US$) - country comparison - World Bank indicator
2011 national budget: reducing the debt burden
By Arnold Padilla
http://arnoldpadilla.wordpress.com/2010/09/01/2011-national-budget-reducing-the-debt-burden/
The House of Representatives today (September 1) started its review of the P1.645-trillionnational budget submitted by Malacañang. X x x
Increased debt burden
But the spending plan submitted by Pres. Noynoy Aquino to Congress even increased the debt burden and like his predecessors, effectively marginalized resources for the poor. In fact, almost 77.5 percent of the P104.4-billion increase in the 2011 budget came from the huge P80.88-billion rise in interest payments for government’s debt. While personal services grew by P47.24 billion, maintenance and other operating expenses (MOOE) fell by P10.92 billion and capital outlays and net lending, by P12.8 billion. The said declines reflect the avowed policy of the Aquino administration of turning over to the private sector vital functions of government, including the provision of services and undertaking infrastructure development. Public infrastructure, for instance, fell by P21.13 billion in the 2011 budget. This policy will ultimately take its toll on the poor and marginalized in the form of, among others, exorbitant user fees. (See Table)
The Aquino administration is proposing interest payments of P357.09 billion in the 2011 budget, or 21.7 percent of its planned spending program. But the total debt burden for 2011 could actually reach P823.27 billion if the principal amortization of P466.18 billion is added to interest payments. Thus, debt burden (interest payments plus principal amortization) represents 38.9 percent of what the Aquino administration is willing to spend in its 2011 budget. (See Table)
Such a heavy debt burden means that fewer resources are available to spend for social and economic services badly needed by the people. What makes it doubly unjust is that many of the projects and programs funded by these debts did not benefit the people, or worse, even made life more difficult for them while private contractors, corrupt government officials, and the creditors rake in billions of pesos in taxpayers’ money.
Anomalous projects
Many of these anomalous and questionable loans can be easily identified. Take the case of the notorious bridge projects undertaken by the previous administration. In June 2008, the Commission on Audit (COA) released its findings on selected bridge projects undertaken by the Arroyo administration from 2002 to 2006, which were funded by various loan agreements with foreign creditors.
The COA noted a number of “lapses in the process of implementation” of these bridge projects such as uninstalled and unaccounted construction materials, use of expensive materials despite the availability of a cheap alternative, project delays that resulted in commitment penalties, construction of bridges in inappropriate places, overlapping of bridge projects, poor quality of constructed bridges, projects overshooting the approved budget, etc.
Based on the COA findings, I tabulated below some of these foreign debt-funded bridge projects to give an idea how much in taxpayers’ money are being wasted on debt servicing. Five questionable projects alone already cost $62.93 million in principal amortization and interest payments for 2011. That’s around P2.83 billion (at an exchange rate of P45 per US dollar) in funds that could be used for more meaningful and beneficial purposes. If the policy of automatic appropriation for debt servicing is not repealed soon, these onerous and questionable loans will continue to drain our budget and resources for many more years to come. (See Table, click to enlarge)
To be sure, these foreign debt-funded bridge projects exposed by the COA are just a small sample of the many anomalous loans incurred by government and unjustly being passed on the people. Not included in the table above, for instance, is the First National Roads Improvement Project (NRIP) in which the Philippines borrowed $150 million from the World Bank. The loan closed in March 2007 and we have already been servicing our debt to the World Bank when the country learned that five Filipino and Chinese contractors that participated in the project were involved in bid-rigging. For 2011, we will pay the World Bank $14.74 million (about P663 million) in principal amortization and interest payments for the anomaly-ridden NRIP and the country will continue to service the loan until 2020.
Debt for neoliberal reforms
Aside from infrastructure projects, there are also programs bankrolled by foreign debt that introduced neoliberal structural reforms in the Philippines. One example is the ongoing power sector restructuring program that will supposedly address high electricity cost and power supply insecurity through privatization and deregulation. But after many years of restructuring, what we have are frequent brownouts and monthly increases in our electricity bills while the auction of state-owned power assets has been repeatedly marred by irregularities (the latest case is Angat Dam privatization) and industry participants again and again manipulate electricity rates. Worse, taxpayers have been paying for the debts used to implement these anti-people power reforms.
The power sector restructuring program, which included the bribery-ridden railroading of the Electric Power Industry Reform Act (EPIRA) in 2001, has been mainly funded by the Asian Development Bank (ADB) and the Japan Bank for International Cooperation (JBIC). For 2011, the Aquino administration wants us to shell out $121.34 million to service the principal amortization and interest payments of four loan accounts with the ADB and JBIC for the implementation of power sector reforms. (See Table) The amount is on top of the debt servicing, worth $151.07 million in 2011, for the loans incurred by the National Power Corporation (NAPOCOR).
A more meticulous review of Philippine debts will certainly yield more anomalous transactions ranging from loans associated with the privatization of water utilities, loans for the mandatory importation of agricultural goods including rice from the US, loans used in infrastructure projects fraught with corruption, etc.
Challenge Congress, Noynoy
Our resources are indeed limited, constantly undermined by a fundamentally weak and backward economy and systemic corruption. Thus, lawmakers, as they review the 2011 budget proposal of the Aquino administration, must be pressured to take a serious look into these questionable and anomalous debts. We must compel them to at least suspend payments for these debts (and later work towards their complete repudiation). Congress can pass a 2011 budget stipulating that certain debts must not be serviced due to unresolved issues of corruption, program failure, etc. This move will also challenge President Aquino – will he veto such a budget and choose to honor his predecessors’, including Gloria Arroyo’s, illegitimate debts?
Servicing debts that did not benefit the people and the country amid chronic poverty and hunger and severe lack of social services is not only immoral and unjust. It is also inconsistent with genuine and sustainable development since it deprives government the capacity and the resources to invest in its people and spur the economy.
Gov’t debt burden seen nearing P6T
Economic execs expect decline in borrowing cost
By Ronnel W. Domingo Philippine Daily Inquirer
1:10 am | Thursday, August 2nd, 2012
Economic officials of the Aquino administration said Wednesday the national government’s outstanding debt was expected to approach the P6-trillion mark by the end of 2013 after breaching P5 trillion just recently.
Finance Secretary Cesar V. Purisima and Budget Secretary Florencio B. Abad, representing the Development and Budget Coordination Committee in a briefing for the House committee on appropriations, said the debt stock would hover at P5.78 trillion to P5.91 trillion within a year and a half.
As of last May, the debt stock reached P5.15 trillion and, based on the 2012 fiscal program, this will reach P5.52 trillion by year’s end.
In his presentation, Abad said that under the proposed national expenditures program for 2013, the debt stock would continue to rise although this would represent an even smaller part of the domestic economy.
Abad said P5.91 trillion would account for 49.5 percent of gross domestic product in 2013, a lower ratio than the expected 50 percent this year and the recorded 50.9 percent in 2011.
On the other hand, Purisima put the expected debt stock at P5.78 trillion, noting that international credit-rating agencies have given the Philippine positive moves eight times since the Aquino administration came into power in mid-2010.
Malacañang officials have bandied about this, saying that improving credit standing would mean less financing costs for the country.
According to the Bureau of the Treasury, the government spent P362.19 billion in the first semester to pay its debt, down 11 percent from the P408.77 billion settled in the same period last year.
The government continued to spend less for debt servicing compared with the previous year as principal payments fell during the period.
From January to June, the government settled P212.18 billion in principal, including P181.38 billion in domestic debt and P30.8 billion in foreign loans. Total principal payment in those six months was 23 percent lower than the P274.27 billion posted in the year-ago period.
The government paid P150.01 billion in interest, covering P96.8 billion in domestic debt and P53.21 billion in foreign borrowings.
[1] See Monsod’s 9 August 2013 Inquirer Column reproduced above
[2] See Monsod’s 21 October 2011 Inquirer Column above
[3] Please read Reuters 13 August 2013 news report above
[4] Please see 22 June 2013 Philstar story above
[5] Please see www.indexmundi.com/philippines/public_debt.html above
[6] Please see Arnold Padilla’s Analysis above
[7] Please see 12 August 2012 News Report above
