The Philippines stands on the precipice of an unraveling. Experts from the University of the Philippines School of Economics confirm a dire warning earlier issued by the chief of the London-based Standard Chartered Bank – the Philippines is going by the way of Argentina, that is, it is a ticking time bomb, precipitating towards an economic collapse.
It is to be remembered that Argentina defaulted on its $88 billion debt payment in 2002, causing an unprecedented economic crash which caused unemployment to soar to 22% and a million people to fall under the poverty line. Many opine that it is because of its government’s inability to live within its means; that Argentine government simply issued money to cover its deficits which led to rampant inflation and to make matters worse, borrowed money abroad to cover its deficits, graft and corruption being at the root of it all. Others opine that the IMF (International Monetary Fund) was to blame, causing developing nations, like Argentina, to open their economies wide to foreign investment, which, on other hand, is subject to fads and whims. But all agree that the years 2001 and 2002 was a time of turmoil for Argentina who saw a succession of five presidents in two weeks, the devaluation of the Argentine peso, and life for its people reduced to basic survival.
These warning signs can be seen in present day Philippines.
I came home and saw for myself: Gloria Macapagal Arroyo was recently proclaimed president amidst claims that she spent government money to ensure (and insure) her reelection (Argentina’s Carlos Saul Menem reportedly also had the same ambition to cling to the presidency and tried to spend his way to an unconstitutional third term). Graft and corruption was still an everyday living for many as proven by the more than 15 tax fraud cases that the trial courts dismissed because of government’s failure to prosecute (amounting to 2 billion pesos). Tax collection too has fallen from 17% of the GDP to only 12.5% (from 1997 to 2003). As a result of this collective mismanagement”, the Philippines now faces $3.36 trillion in foreign debt.
This debt is causing a snowball effect to make certain the predicted economic decline: more than 43% is allotted to debt payment, when in 1997, it was merely 23%; the budget deficit is expected to grow to P200 billion this year; and, the infrastructure fund was sliced from 19% to 12.5%. Minimal infrastructure means minimal growth and to the Philippines, which is considered one of the slowest developing Asian countries, this is a death blow. At this stage, more than 12 million Filipinos, or 15.2% of Filipinos, are already living in extreme poverty (living on less than $1 a day). If the economy collapses, the figure may be staggering to even contemplate.
The U.P. School of Economics has the following prescription to stave off or hopefully reverse this “unraveling”: indexation of specific taxes on tobacco and alcohol, closing off tax leaks coupled with additional effort by the Bureau of Internal Revenue on tax collection, increase of value-added tax rate from 10 to 12 percent and expansion of coverage, reduction of internal revenue allotment to 30 percent, halving or abolition of pork barrel allocations (also known as Countryside Development Fund given to congressmen and senators to fund their pet projects, said to be a major source of graft and corruption), and other austerity measures that in no simple terms exact heroism of epic proportions from the Filipino government and its people.
One important finding made by the UP economists, and one that concerns Filipinos abroad, is that the above dire scenario is being fended off only by the fact that the country continues to earn more foreign exchange than it was spending as a result of remittances by overseas Filipino workers.
There may be a light at the end of the tunnel. However, liberation from this “threat” may only be possible through a strong political leadership, an enlightened populace and continued liberal support from its citizens abroad. It is within the power of the Filipinos of San Diego and the rest of the world, then, to help the one island they used to call, or still call, home.