05 May 2008
Debt & Public Finance
Today, the Asian Development Bank (ADB) marks its 41 years of existence. Since its inception and creation in 1967, the Philippines has been the home of the ADB, as a testament of ADB and the Philippine government’s partnership for progress and development.
Among multilateral lenders, the Philippine government owes ADB the largest. As of April 2007, the country’s outstanding debt to ADB amounts to US$ 3.04 billion, US$ 1.18 billion of which had been transacted and implemented directly by the Department of Finance. All in all, ADB debts amount to 9.19% of the total national government foreign debt.
With the ADB as a partner to so-called development, however, the Philippines only experienced massive economic problems. Poverty continues to be unabated, made worse even by skyrocketing prices in electricity, water, and food. Yet ADB’s reaction to the problems it itself caused is simply barefaced indifference, betrayed by statements like “the era of cheap food may be over”.
Given this, the Freedom from Debt Coalition (FDC) believes that ADB’s legacy to the Philippines can be summed up in four words: “more debts, less development” FDC insists 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.ADB’s Vision: Privatize Philippines by 2020
In its recently released Long Term Strategic Framework (LTSF) for 2008-2020, also known as “Strategy 2020”, ADB gears itself towards greater support for “stronger private sector involvement in development”, promising to scale-up its private sector operations from 12% in 2007 to 50% by the year 2020.
For Asian governments like the Philippines, this means only one thing: accelerated privatization of government services and utilities.
In its 41 years of operation, ADB already contributed to the privatization of some of the country’s most basic utilities. 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$300 million for the Power Restructuring Program (PSRP) Loan in 1998 and 2001 to ensure the passage of the Electrical Power Industry Reform Act (EPIRA), which mandated marketization and open access of the whole electrical industry. At the present, we are in debt by as much US$ 192.7 billion because of the PSRP, having already paid a part of the loan.
The water sector has also been victim to ADBs sinister policy reforms. 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. One of the eight water projects funded by the ADB, the Umiray-Angat Transbasin Project (UATP) has 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 has not escaped ADB’s relentless vision. In 2000, an agreement between the government and ADB took effect under the presidency of Joseph Estrada and Agriculture Secretary Edgardo Angara 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 state-owned National Food Authority, liberalizing grain trading and encouraging greater private investment in the food and grains sector. As conditionality, it forced the compliance of the government to all international trade agreements on corn-tariff reduction.
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 grains sector. After 41 years of harmful existence, ADB remains unrepentant and continuous in is pursuit for a privatized Philippines.41 years of Privatization: Didn’t Work, Won’t Work
Unfortunately for all Filipinos, ADB’s privatization schemes have only led to misery and to a continuing crisis. 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 the world at about PhP 11/kwh as of July 2007.
After it was privatized, the price of water jumped from Water’s PhP 2.61 for Manila Water and PhP 4.96 for Maynilad in 1997 to PhP 19.73 and PhP 32.93 respectively. 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 and the rice export market left consumers vulnerable to the price shocks.
No wonder ADB knew that cheap food is over – they are partly to blame for our rice dependence. From being a net exporter of rice in 1968, a year after ADB was setup in the Philippines we have been reduced to importing about 2.1 metric tons this year.
All of these ADB-caused crises now made their full circle. After 41 years of pushing for damaging neo-liberal reforms and poverty-inducing, 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. Abandon ADB, Audit All ADB Debts
The direction ADB decided to take is the biggest irony of all – while it is the government that gave mandate to the bank, it is now deciding to move away from funding Asian governments. This is of course, the only logical direction for the ADB after it is already registering gains for its main mission – that of dismantling barriers to private sector control of the public utilities once controlled by the government.
FDC calls on the Philippine government to abandon ADB, an institution which only managed to compromise and clip governments’ regulatory and provisioning powers and render 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.
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 that are found to be illegitimate or damaging should be stopped.
41 years is enough. Let us free ourselves from ADB and the debt.