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Sep 28th
Home Sections I2D2-International Debt & Development The Philippines’ Foreign IOUs Are Beyond "Debt Management" But . . .
The Philippines’ Foreign IOUs Are Beyond "Debt Management" But . . . PDF Print E-mail
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Sections - I2D2-International Debt & Development
Tuesday, 25 September 2007 02:16

Part Two of "How to Prevent the Philippines from Becoming an ‘IOUgoslavia,’ the Asian Version of Yugoslavia"  Series


1.0 Introduction.

      1.1 The matter of the foreign debts of the Philippines and the Third World is beyond "debt management."


      1.2 The World Bank and the International Monetary Fund (IMF) have tried solutions after solutions. They tried the Baker Plan. They created the Brady bonds, named for former U.S. Treasury Sec. Nicholas Brady, which are actually repackaged that were made to emerging nations by banks in the 1980s. They became tradable after the United States government guaranteed a portion of their principal and interest. The WB and IMF touted a few years back their formula to solve the economic problems of Mexico and again the plan did not work. Following the disruption to the financial markets triggered in mid-1997 by the so-called "Asian crisis," the economic weakness and difficulties spread to other regions in 1998.

      1.3 On Sept. 29, 1999, then President Bill Clinton pledged in a speech at the annual meeting of the IMF an initiative to forgive all the debt owed the United States by 36 of the world's poorest countries. President Clinton lamented that "unsustainable debt is helping to keep too many poor countries and poor people in poverty." He said that the United States could not in good conscience ask impoverished nations to choose between making interest payments on their debt or investing in their children's education.

      1.4 Hilton L. Root, a senior fellow and head of the global studies at the Milken Institute, an economic think tank based in Santa Monica, California, echoed the opinion of leading experts. He said, "Debt relief alone will do little to alter the plight of the world's most impoverished nations. A successful turnaround requires civil service capacity, budgetary supervision and political accountability. Unless the plan for debt relief leads to fundamental reform of these Third World states, redemption simply will be the source of empty self-congratulations among the world's rich-and a tax holiday for kleptocrats." (Roots' article appeared in the Los Angeles Times, Dec. 23, 1999, issue.)

2.0 A Solution.

      2.1 There is a way to pay off the Philippine foreign debts in a matter of 10 to 15 years. The way out is to offer the Philippines as the pilot project of the so-called "I2D2" project of James D. Robinson III, an American captain of industry and former chairman-CEO of the American Express. Reyes has painstakingly pursued the "I2D2" concept since March 1988 and invited the attention of the then Corazon C. Aquino administration of Mr. Robinson's proposal. President Aquino or her cabinet members did not bother to reply to Robinson or Reyes. He has interviewed four times Robinson at his New York City office. The "I2D2" concept, as amended by Bobby Reyes and his friends, reiterated the Robinson's proposal of organizing an Institute of International Debt and Development. The "I2D2" will receive all the payments for debt servicing from the Less-Developed Countries (LDCs) like the Philippines and issue bonds and stocks to their bilateral, multilateral and commercial creditors.

      2.2 The complete proposal of Reyes was submitted on Nov. 21, 1993, to Philippine President Fidel V. Ramos, who did not even acknowledge receipt of the proposal. On June 6, 1994, Reyes accompanied the Honorable Edgardo J. Angara, who was the president of the Philippine Senate at that time, to see Robinson at his New York City office. But nothing came out of the visit.

      2.3 The Reyes' position paper, "IOUgoslavia," which discussed the "I2D2" concept was eventually submitted to the Joseph Ejercito Estrada administration on Dec. 4, 1998, in Los Angeles, California, through the visiting First Lady. On May 28, 1999, Reyes submitted again the same proposal to visiting Philippine Trade & Industry Sec. Jose T. Pardo during the annual convention of the Federation of Philippine-American Chambers of Commerce in Anaheim, California. Secretary Pardo, while he answered a second letter from Reyes on another topic, has not replied on the "I2D2" proposal. Secretary Pardo was later reassigned to the Department of Finance.

      2.4 In all his proposals Reyes said that the annual interests paid by the Philippines to service its foreign debts would remain in the country to be invested in new industries by the "I2D2." The Philippines now spends annually more than $7.0-billion to service its foreign debts. Reyes said that the economic impact of more than $7.0-billion (even if it came in Philippine pesos) in fresh investment capital per year would make a major impact on the day-to-day lives of the Filipino people. (In fact for 2008, the Philippine government has budgeted 624-billion pesos or $12.48-billion to service both its domestic and foreign debts.) In a five- year time frame, that would amount to more than $35-billion in capital expenditure. That would be more than enough to turn the Philippines from an economic purgatory to a financial Mecca, if not an economic Utopia.

      2.5 Reyes further proposes that the "I2D2" invest only in the fields of tourism and agriculture. These investments will generate foreign exchange so that eventually the "I2D2" will have the foreign currency to pay dividends or pay off the foreign obligations. He proposes also investments in new industries such as ceramic factories that will provide materials for the building of the infrastructures that are necessary for the proposed tourism and agriculture industries.

3.0 How to Implement the Solution.

      3.1 A political lobby is needed to get the support of the United States to approve the "I2D2" solution for the external debts of the LDCs and its adoption of the Philippines as a pilot project. Reyes says that the Filipino Americans have the resources and the rapport with the American private and public leaders to wage an effective lobby. He stated in his memorandum to President Ramos the mechanics of organizing the Filipino Americans into a potent lobby organization.

      3.2 A short cut to obtaining the support of the American political leadership is for the Texas-based Americans of Philippine ancestry and their political leaders to persuade President George W. Bush to issue an executive order calling for a federal initiative to evaluate the "I2D2" proposal.

      3.3 Perhaps President Bush may even be asked to head this new international endeavor to finally solve the LDCs' staggering problems of hundreds of billions in foreign debts.

4.0 Conclusion.

      4.1 The recovery of the Philippine economy is a major concern to the United States. It is the home country of more than 3.0-million naturalized Americans, immigrants and contract workers. The Philippines also occupies a special place in the hearts and minds of so many Americans. It is in the best interest of the United States to help the Philippine economy make a dramatic recovery.

      4.2 As Reyes states in his essay, "IOUgoslavia," there is a bigger threat to the security of the world than the present crisis that is the former federation of Yugoslavia. This threat consists of the inability of the Less Developed Countries (LDCs) like the Philippines and Mexico to service their foreign debts.

      4.3 The case of the Philippines, which is a former colony of the United States, should be alarming especially to the American people. The Philippines can be Balkanized due to the failure of the Philippine government to provide the basic requirements of the Filipino people on account of the staggering debt-servicing requirements. If this happens, Reyes and his friends believe that the United States will become more involved in the Philippines that it was in Bosnia-Herzegovina. He offers the following arguments: the number of Filipino Americans is more-than twice the number of Bosnian, Serbian or Yugoslavian Americans. There is no substantial American investment in the former Yugoslavia while there are more than $5-billion in American investments in the Philippines. There are more than 100,000 American citizens who are residents of Metro Manila, the Philippines, alone. There are few American civilian residents in Bosnia, Croatia or even in Serbia.

      4.4 This writer argues that it may be cheaper for the United States to assist now the Filipino Americans and the well-meaning Filipinos help turn around the Philippine economy. If the predicted Balkanization of the Philippines occurs primarily because of economic reasons, it may be costlier to America in the long run. The United States may be forced to intervene in the Philippines and it may cost more in American taxpayers' money. The American military may also suffer so many casualties in the Philippines. While the Philippine nation is like in purgatory, its economy is still afloat despite the inherent difficulties brought about by the detrimental factors as discussed in this position paper. It is, therefore, advisable for the United States to exercise its moral persuasion and logistical capabilities to initiate the socioeconomic, structural reforms that many Filipinos and Overseas Filipinos have been demanding. To wait and let the social cancer ravage further the moral fiber of the Filipino nation will condemn America's most trusted allies in Asia to a fate worse than purgatory. After all, as Stanley Karnow said, the "Philippines was molded after America's image." The United States can do no less but help its former ward, the Philippines, achieve a Pacific version of the American Dream.


(To be continued . . .)

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