Closer Than We Think
Closer than we think
Updated 00:46am (Mla time) Aug 26, 2004
By Conrado de Quiros
Inquirer News Service
Editor's Note: Published on page A10 of the August 26, 2004 issue of the Philippine Daily Inquirer
I'M glad the economists at the University of the Philippines (UP) themselves have begun furiously ringing the alarm bells on a ship that is headed straight for the iceberg. Unfortunately, the ship isn't the Titanic, built to withstand any peril at sea, but a battered craft that threatens to sink at the slightest downturn of the weather. Even more unfortunately, everyone, the captain included, is lost in a deep slumber.
Unbeknownst to most everyone, or ignored by them, the UP economists say, the country is headed for collapse in a couple of years, like the one that befell Argentina.
I wrote about this last week after reading and hearing several people warn about it over the past year. The figures are scary and the prospects exceedingly bleak. Asian Institute of Management president Roberto de Ocampo, a former secretary of finance, hit the nail on the head when he said you didn't have to believe in Gloria Macapagal-Arroyo (he doesn't, and did not vote for her) to want to pitch in to help in what is bound to be a mighty effort to stave off this impending catastrophe. To balk at this on partisan grounds is to cut off your nose to spite your face.
I myself can only hope the people who are issuing these warnings do not end up like Cassandra who can foretell the future but is doomed never to be believed. This country, with its notorious penchant for doing things in the "last two minutes," has a prodigious way of turning soothsayers into Cassandras.
The culprit in our case is our debt-foreign and local (the local is now as huge as the foreign) -- which has grown to a mind-boggling P3.36 trillion at the end of last year. To pay for that debt, government is currently spending 42.6 percent of its revenues. That is a crippling sum, up from 26.5 percent five years ago, which was only a little more than a fourth of the budget. This has caused, as Ben Diokno, who is one of the signatories of the paper produced by the UP economists, points out, spending on infrastructure to fall from P96.5 billion in 1999 to only P49.7 billion in 2003, and spending on health and education from 3.4 percent of GDP in 1999 to 2.8 percent of GDP last year. That means fewer roads and less educated minds in a country that cannot afford to lose either. Which means falling growth in the long term for a country that can afford it even less.
The solution to a problem like this is obvious, but is the hardest thing to do. As with a family facing bankruptcy from living a profligate lifestyle, spending more than it earns, and from having to deal with the motorcycle-riding neighborhood "five-six" [usurious lending] operator who is more stridently and threateningly demanding payment for his loans, the solution is to change the lifestyle. The solution is to earn more, spend less, and get everyone in the family, the black sheep included, to cooperate in the collective effort. That's the part that's not so easy.
The Inquirer's report a couple of weeks ago noting that the regional trial courts had dismissed a total of 15 cases against companies that had fraudulently acquired tax credit certificates for lack of the Bureau of Customs' interest in prosecuting them abundantly shows so. The cases amount to P2 billion, suggesting not just ineptitude on the part of Customs officials but outright corruption. That is just the tip of the iceberg, as proven by the fact that from 1997 to 2003, tax collection fell from 17 percent of GDP to only 12.5 percent. Juan Ponce Enrile may not be the favorite senator particularly of those who went through martial law, but he speaks for many Filipinos when he demands to know why, "if this is the way we are handling ... tax cheats, we just burden our people with new taxes."
I remember in this respect the dilemma faced by those who supported Raul Roco's candidacy in the last presidential election. His camp did not lack for those who lamented his refusal to accept campaign contributions from vested interests with big money, which appeared to doom his presidential bid for lack of finances and from the perception of powerbrokers that he did not have the backing of the rich and famous. But it did not lack either for those who thought it was a reasonable price to pay: there was no point in winning at the cost of being beholden to people whose first demand for return on investment would be to have their tax dues "lightened."
That was the price President Arroyo was not willing to pay. Her entire campaign rested on compromise at a level that had no precedent. Which raises questions about the first part of the solution, which is raising income. Whom does she tax to death to bring to life a dying economy?
As to spending less, the UP economists recommend among other things slashing to one-half the pork barrel funds. But as it turns out, even the party-list representatives themselves, who come from people's organizations and nongovernmental organizations, want to have "their due" in full.
My own worry, which I expressed last week, is that most of the current elected officials got to be elected by spending a fortune campaigning, not the least of them President Arroyo, who went through the Philippine Charity Sweepstakes Office and Philippine Amusement and Gaming Corp. with a vacuum cleaner. I cannot see how people would spend a fortune to become senator or congressman or governor or mayor just so they would have the privilege of serving the people. And I do not know that the first instinct of newly elected officials is to live austerely.
A catastrophe awaits us, and I for one would not mind seeing another round of people power to remove the incompetent and venal if that is what it will take to avert it. Our children's future is at stake here. The UP economists themselves calculate that it will take two years for disaster to strike, but we would do well to take it from the sign on the rearview mirror that says: "Objects are closer than they appear."
It's closer than we think.
Updated 00:46am (Mla time) Aug 26, 2004
By Conrado de Quiros
Inquirer News Service
Editor's Note: Published on page A10 of the August 26, 2004 issue of the Philippine Daily Inquirer
I'M glad the economists at the University of the Philippines (UP) themselves have begun furiously ringing the alarm bells on a ship that is headed straight for the iceberg. Unfortunately, the ship isn't the Titanic, built to withstand any peril at sea, but a battered craft that threatens to sink at the slightest downturn of the weather. Even more unfortunately, everyone, the captain included, is lost in a deep slumber.
Unbeknownst to most everyone, or ignored by them, the UP economists say, the country is headed for collapse in a couple of years, like the one that befell Argentina.
I wrote about this last week after reading and hearing several people warn about it over the past year. The figures are scary and the prospects exceedingly bleak. Asian Institute of Management president Roberto de Ocampo, a former secretary of finance, hit the nail on the head when he said you didn't have to believe in Gloria Macapagal-Arroyo (he doesn't, and did not vote for her) to want to pitch in to help in what is bound to be a mighty effort to stave off this impending catastrophe. To balk at this on partisan grounds is to cut off your nose to spite your face.
I myself can only hope the people who are issuing these warnings do not end up like Cassandra who can foretell the future but is doomed never to be believed. This country, with its notorious penchant for doing things in the "last two minutes," has a prodigious way of turning soothsayers into Cassandras.
The culprit in our case is our debt-foreign and local (the local is now as huge as the foreign) -- which has grown to a mind-boggling P3.36 trillion at the end of last year. To pay for that debt, government is currently spending 42.6 percent of its revenues. That is a crippling sum, up from 26.5 percent five years ago, which was only a little more than a fourth of the budget. This has caused, as Ben Diokno, who is one of the signatories of the paper produced by the UP economists, points out, spending on infrastructure to fall from P96.5 billion in 1999 to only P49.7 billion in 2003, and spending on health and education from 3.4 percent of GDP in 1999 to 2.8 percent of GDP last year. That means fewer roads and less educated minds in a country that cannot afford to lose either. Which means falling growth in the long term for a country that can afford it even less.
The solution to a problem like this is obvious, but is the hardest thing to do. As with a family facing bankruptcy from living a profligate lifestyle, spending more than it earns, and from having to deal with the motorcycle-riding neighborhood "five-six" [usurious lending] operator who is more stridently and threateningly demanding payment for his loans, the solution is to change the lifestyle. The solution is to earn more, spend less, and get everyone in the family, the black sheep included, to cooperate in the collective effort. That's the part that's not so easy.
The Inquirer's report a couple of weeks ago noting that the regional trial courts had dismissed a total of 15 cases against companies that had fraudulently acquired tax credit certificates for lack of the Bureau of Customs' interest in prosecuting them abundantly shows so. The cases amount to P2 billion, suggesting not just ineptitude on the part of Customs officials but outright corruption. That is just the tip of the iceberg, as proven by the fact that from 1997 to 2003, tax collection fell from 17 percent of GDP to only 12.5 percent. Juan Ponce Enrile may not be the favorite senator particularly of those who went through martial law, but he speaks for many Filipinos when he demands to know why, "if this is the way we are handling ... tax cheats, we just burden our people with new taxes."
I remember in this respect the dilemma faced by those who supported Raul Roco's candidacy in the last presidential election. His camp did not lack for those who lamented his refusal to accept campaign contributions from vested interests with big money, which appeared to doom his presidential bid for lack of finances and from the perception of powerbrokers that he did not have the backing of the rich and famous. But it did not lack either for those who thought it was a reasonable price to pay: there was no point in winning at the cost of being beholden to people whose first demand for return on investment would be to have their tax dues "lightened."
That was the price President Arroyo was not willing to pay. Her entire campaign rested on compromise at a level that had no precedent. Which raises questions about the first part of the solution, which is raising income. Whom does she tax to death to bring to life a dying economy?
As to spending less, the UP economists recommend among other things slashing to one-half the pork barrel funds. But as it turns out, even the party-list representatives themselves, who come from people's organizations and nongovernmental organizations, want to have "their due" in full.
My own worry, which I expressed last week, is that most of the current elected officials got to be elected by spending a fortune campaigning, not the least of them President Arroyo, who went through the Philippine Charity Sweepstakes Office and Philippine Amusement and Gaming Corp. with a vacuum cleaner. I cannot see how people would spend a fortune to become senator or congressman or governor or mayor just so they would have the privilege of serving the people. And I do not know that the first instinct of newly elected officials is to live austerely.
A catastrophe awaits us, and I for one would not mind seeing another round of people power to remove the incompetent and venal if that is what it will take to avert it. Our children's future is at stake here. The UP economists themselves calculate that it will take two years for disaster to strike, but we would do well to take it from the sign on the rearview mirror that says: "Objects are closer than they appear."
It's closer than we think.
posted by Dante at 8:34 PM
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