Debt watchdog claims the Bank suffers from crisis of legitimacy

MANILA, Philippines—Despite the call of various civil society groups to stop its privatization policy, the Asian Development Bank will still push for more private sector participation in the Asia and the Pacific region following the release of its new long-term strategic framework (LTSF) from 2008-2020 during the Bank’s 41st Annual Governors’ Meeting in Madrid, Spain.

In a creative protest outside the Bank’s main headquarters here, members of the Freedom from Debt Coalition, Jubilee South-APMDD and Task Force Food Sovereignty today echoed the opinion of civil society groups participating in Madrid, calling on the ADB to junk the LTSF, also called Strategy 2020, because it would only lead to a bleak future for the country’s poor.

Beckie Malay, FDC vice president, said that with the LTSF, the ADB is virtually giving away the country in the hands of the profit-oriented private sector, a consistent violator of human rights and environment.

“Instead of helping our government strengthen its institutions, the ADB, through this Strategy 2020 and using our debts as leverage, pushes for more aggressive private sector participation. It is ironic that while it is governments which gave mandate to the Bank, it is now deciding to move away from funding Asian governments,” Malay lamented.

In its LTSF, ADB gears itself towards greater support for “stronger private sector involvement in development,” promising to scale-up its private sector operations from 12 per cent in 2007 to 50 per cent by the year 2020.

RP’s privatization experience

In its 41 years in operation, ADB already contributed to the privatization of some of the country’s most basic utilities.

FDC explained that, for the power sector, ADB dangled what is to be one of the largest loans of a multilateral lender to the Philippine government just to reform the power sector towards total private sector control. ADB released US$300 million for the Power Restructuring Program (PSRP) Loan in 1998 and 2001 to ensure the passage of the Electric Power Industry Reform Act (EPIRA), which mandated marketization and open access of the whole industry.

“At present, we are in debt by as much US$ 192.7 billion because of the PSRP, having already paid a part of the loan,” said Malay.

The water sector had also been victim to ADBs “sinister” policy reforms, FDC added.

“For the past years, the ADB, through its lending, has played a fundamental role in making sure that the Metro Manila’s water supply and sanitation system is privatized and remains to be so,” said Malay.

One the eight water projects funded by the ADB, the Umiray-Angat Transbasin Project (UATP) had an accompanying advisory technical assistance (TA) grant amounting to US$ 582,000 to introduce private sector participation in the operation and management of Metropolitan Waterworks and Sewerage System (MWSS) activities.

Even the food sector had not escaped ADB’s relentless vision, FDC continued.

In 2000, an agreement between the government and ADB took effect for the Grains Sector Development Program (GSDP), which is an integrated package of policy and institutional reforms, sectoral investments and advisory Technical Assistance aimed at pushing for the privatization of the state-owned National Food Authority, liberalizing grain trading and encouraging greater private investment in the food and grains sector.

Malay said that the loan forced the compliance of the government with all international trade agreements on corn-tariff reduction, as conditionality.

“ADB moved to other sectors as well, from education, to environment, to local government, also to push, with as much unwavering zeal, the same neo-liberal reforms it had pushed in the power, water, and grain sectors. After 41 years of harmful existence, ADB remains unrepentant and continuous in its pursuit for a privatized Philippines,” said Malay.

41 years of crisis under ADB

“Unfortunately for all Filipinos, these privatization schemes only led to crisis after crisis after crisis,” said the debt watchdog, adding “It didn’t work before; it won’t work in the future.”

FDC explained that the reforms pushed by PSRP, for example, only contributed to the rising prices of electricity in the Philippines, now known to be one of the highest in world at about P11/kWh as of July last year.

Further, the group said that since the MWSS privatization, the price of water jumped from P2.61 for Manila Water and P4.96 for Maynilad in 1997 to the present P19.73 and P32.93, respectively.

In addition, the subsidy gap in NFA and the agricultural production owing from ADB’s policy prescription of leaving the affairs of agriculture to the whims of the private sector left the Philippines vulnerable to the rice price shocks in the rice export market. From being a net exporter of rice 1968, a year after ADB had been setup in the Philippines; the country had been reduced to importing about 2.2 metric tons this year.

Crisis of legitimacy

“All of these ADB-caused crises now made their full circle,” said FDC. “After 41 years of pushing for damaging neo-liberal reforms and gap-widening market-driven governance models, the ADB is now suffering from a crisis of legitimacy. Its policy prescription proved wrong by disastrous experiences and now resisted by governments, ADB now turns to the private sector to salvage it from steep descent towards irrelevance.”

More debts, less development

At present, the Philippine government owes ADB the largest among all the multilateral lenders. As of April 2007, the country’s outstanding debt to ADB amounted to US$ 3.04 billion or 9.19 per cent of the total national government foreign debt, according to FDC.

“With the ADB as a partner to so-called development, the Philippine’s GDP growth rate dropped from an average of 8.26 per cent annually from 1947-1966 to an average of only 3.95 per cent from 1967-2007. Poverty continues to be unabated, made worse even by skyrocketing prices in electricity, water, and food,” said Malay.

“Given this, we believe that ADB’s legacy to the Philippines can be summed up in four words: more debts, less development,” stressed Malay, adding that ADB’s continuing existence will only result to greater misery and poverty, as neo-liberal reforms ADB proposed years back are now being suffered by all Filipinos.

Abandon ADB, audit all ADB debts

“We call on the Philippine government to abandon ADB for endangering the lives of poor Filipinos and rendering citizens vulnerable to market volatilities. Instead of relying on multilateral lenders like ADB, the government must begin to develop and tap alternative sources of financing that will uphold national sovereignty and ensure genuine development with social justice,” FDC said.

“Moreover, the government must scrutinize and audit all loans from the ADB funding programs and projects which are known to have ill effects in the country’s economy and people’s well-being. Policy prescriptions made must be reversed, and payments for ADB debts which are found to be illegitimate or damaging should be stopped. Its 41 years is enough,” FDC stressed. -30-

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