15 September 2008
Debt & Public Finance
– The Freedom from Debt Coalition (FDC) today identified the Department of Public Works and Highway (DPWH) and the Department of Transportation and Communication (DOTC) as top national government agencies with the most external debt coinciding with the ongoing deliberations of the proposed P1.4 trillion 2009 National Government Budget. The group also criticized the said agencies for initiating and implementing “illegitimate” loan agreements and projects.
In a statement, the debt watchdog challenged the House of Representatives’ Committee on Appropriations to rake through the foreign-assisted projects of the said agencies to avoid appropriating resources to loan agreements that are dubious, wasteful, and unnecessary if not illegitimate.
Edwin Chavez, FDC vice president, said that Congress must seriously scrutinize foreign-funded projects and programs in the appropriations bill by ‘perennial erring government agencies’—agencies, which have become common initiators and implementers of illegitimate projects.Biggest external debt
FDC said as of 2007, of the top six national government agencies incurring debts to finance its projects and programs, DPWH and DOTC had the biggest external debt amounting to $3.37 billion and $1.036 billion, respectively.
“In terms of share in the official development assistance (ODA), DOTC had the biggest share of the development funds which accounts for 27 per cent of the entire 2007 ODA portfolio,” Chavez said.
However, FDC was quick to point to the agencies’ record of incurring huge cost overruns.
“Based on the Commission on Audit (CoA) ODA Report for 2007, DPWH accounts for the bulk of cost overruns with 40 per cent (P13.279 billion) involving five roads, one bridge and four flood control projects. On the other hand, DOTC ranked second (20 per cent) with cost overruns amounting to P6.747 billion covering three airports and one feeder port projects,” Chavez explained.
FDC also identified questionable foreign-assisted projects being implemented by the said agencies which it said lawmakers must not appropriate funds for as these “exacerbate excessively the country’s heaps of illegitimate debts” which in effect constrict increased social spending.
In the deliberation of the proposed 2009 DOTC Budget, FDC together with some legislators assailed the Telepono sa Barangay Project and the Procurement of Search and Rescue Vessel for the Coast Guard as some examples of “illegitimate debts” being paid by the Filipino people. DOTC’s illegitimate debts
The Telepono sa Barangay Project, a predecessor of the ZTE National Broadband Network (NBN) project, was supposedly aimed to provide telephones to far-flung communities, and was seen by many as a white elephant project. It was reported that the project suffered from a lack of a thorough study which resulted, among many, to the project being outpaced by new communication technologies such as mobile phones. In July 26, 2006, Senator Miriam Defensor-Santiago accused the project of suffering from gross mismanagement.
On the other hand, the Search and Rescue Vessels were reportedly bought by DOTC without the necessary appropriation from Congress. In 2005, then Senator Franklin Drilon said the project was not appropriated in the 2002 and 2004 budgets but funds were released for it through unprogrammed funds as well as realigned funds from other DOTC projects.
It was also reported that the Australian firm that supplied the six search and rescue vessels over reports that the said vessels were of poor quality.Suspended in 2008 budget
The projects were part of a list of loan agreements in the 2008 Budget whose interest payments were suspended by Congress pending investigation, renegotiation and/or condonation. Congress challenged the said loan agreements as fraudulent, anomalous and wasteful.
However, this was vetoed by Mrs. Gloria Macapagal-Arroyo using the non-violation of contractual laws and protection of the country’s credit standing as pretexts. FDC described this as pure and simple “fiscal dictatorship” on the part of an incumbent president wielding enormous powers on the national coffers.Budget reforms
The debt watchdog said one of the best ways to correct this huge democratic deficit in the budget process is for Congress to reclaim its lost constitutional power of the purse by curbing the executive department’s unregulated fiscal powers.
FDC is calling for the clipping of presidential powers by amending the Revised Administrative Code of 1987 as instituted by Executive Order 292. The group specifically called for the removal of the automatic appropriations for debt service (Section 31-B) and the presidential powers of impoundment (Section 38) and realignment of savings (Section 39).
It is also calling Congress to put limits and parameters on the unilateral contracting of loans by amending the Foreign Borrowings Act of 1966 and the Official Development Assistance Act of 1996.
Likewise, the group is calling for the institutionalization of grassroots people’s participation and involvement in all stages (proposal, legislation, authorization, evaluation) and levels (agency-level, region-level, etc.) of budget development by decentralizing budget decision-making using LGU-level mechanisms.
The group is currently preparing its list of illegitimate loan agreements in time with the DPWH Budget Hearing this Wednesday. -30-