Day of Global Action against International Financial Institutions (IFIs), Debt and Privatization
12 October 2008
– The collapse of the global financial system bared with it not only the major infirmities of the free and unregulated market but also the paradox of privatization scheme.
The Freedom from Debt Coalition believes that the massive US bailout of insolvent realty firms, mortgage companies, pension funds and investment banks, followed by the same rescue package being implemented in Europe and Japan, brought to the fore the biggest irony of the world’s free market capitalism: a privatization program done in reverse mode, or in short, a public bailout of bankrupt private firms. The paradox of privatization
Since the 1980s, international financial institutions like the International Monetary Fund, World Bank and the Asian Development Bank required the poor and developing countries to adopt the neo-liberal policies of liberalization, deregulation and privatization purportedly to enhance growth, promote transparency, and bring efficiency into the system. Accordingly, these policies became the bedrock of all economic programs in developing countries.
In the Philippines, the drift towards privatization and deregulation began under the post Marcos regime, with the entry of independent power producers in the power industry in the late 1980s and early 1990s, the privatization of MWSS in 1997, the deregulation of the downstream oil industry in 1998, and the full privatization of the power industry in 2001. The Department of Finance’s Privatization Council reports a total of 109 government-owned and –controlled corporations (GOCCs) fully privatized as of 2004.
The devastating impacts in privatizing the water and power sectors speak for themselves. The price of electricity doubled since privatization while the price of water under the MWSS area rose five times, thus, further denying the poor’s access to these essential services. A public bailout and ‘re-privatization’ was also implemented in the MWSS following the failure of a private concessionaire in the west zone.
Price manipulation had also been rampant due to weak regulation and the pervasiveness of monopoly practices among private firms. Deregulation of the oil industry, on the other hand, reduced the role of the State to mere monitoring in the face of the skyrocketing oil prices.
Worse, privatization did not rid the country of ‘toxic debts’ since onerous debts due to GOCC’s were merely transferred to the national government either under the cover of sovereign guarantees or through the national government’s assumption of liabilities as mandated by law.
In other words, even without the global financial crisis baring the free market’s inherent contradictions out, the Philippine experience is more than enough to say that this economic paradigm was not just a failure but more so, was anti-poor and anti-development. And the IMF-WB/ADB triumvirate has to be held fully accountable for what can be considered a hideous crime against the third world people.Hard lesson
FDC believes that it is time for the ADB and the World Bank to stop imposing their discredited line that the private sector holds the solution to the government’s inefficiencies. This belief has already been proven wrong, most recently in the US government’s bail-out debacle. Too much faith in the market to monitor and regulate itself has led us now to the financial crisis that we are facing. Private businesses, long being peddled as the miracle workers for inefficiencies in the public service sector, have now revealed the ugly truth that they are just as capable of such inefficiencies and scandalous extravagances. Worse, they are not publicly accountable. Hard decision
The Week of Global Action against Debt and International Financial Institutions is not only a challenge for the IFIs or our governments to reverse their policies, or ship out. It is also a challenge to Filipinos and to the world’s poor people to stand against these IFI policies and to work and decide for ourselves the better alternative to free market capitalism.
The government’s incessant refusal to channel public revenues to the provision of essential services keeps us locked in a vicious cycle of debt-dependency. Government agencies are being forced to depend on ODAs and IFI loans in order to augment their grossly insufficient budget allocations. This institutionalized dependence on debt places IFIs such as the ADB and the World Bank in the powerful position of shaping our economic and political policies as they see fit, regardless of the social and environmental costs. For the past decades these institutions have made use of our debt-dependency to force privatization into our economic agenda, thereby causing tremendous damage in the sector of essential services such as power and potable water provision.
For the longest years we were made to swallow a dose of medicine imposed upon us by the IFIs that made our economy more frail, and our people poorer. This is the time to say NO to them and the right moment to say YES to our decision to unlock ourselves from their chain.
It is clear that the only parties benefiting from the privatization of essential services are the international financial institutions themselves. Unless the government takes on the necessary political will to refuse the conditionalities and ill-fitted “solutions” being rammed on by international financial institutions such as the ADB, the Philippine economy will remain a blind captive to the whims and manipulations of these institutions.
We therefore call on the ADB, IMF-WB to stop pushing and funding privatization of essential services and commons such as power and water. We also challenge the government to deliver the most basic of services, specifically power and water, to the Filipino people, and to stop the privatization of these sectors. We likewise call on the government to reject the impositions to privatize other essential services and other loan conditionalities of these IFIs. -30-