IBON ON JPEPA RATIFICATION: GOV’T HAS CLEARLY NOT LEARNED ITS LESSON

It is not surprising but still disappointing that the government has clearly not learned its lesson. The current global turmoil and its impact on the Philippines underscore the vulnerability of our economy. The country is extremely vulnerable because of nearly three decades of reckless “free market” policies of globalization.

Progressive groups warned in 1994 about the damage that a World Trade Organization (WTO) deal would cause. Yet the government insisted on ratifying the deal and even implemented policies opening up the economy beyond what the WTO agreement required. The so-called safety nets were ineffectual and local industry and agriculture has been devastated causing unprecedented joblessness.

The economy’s fundamentals are very weak and will be weakened further by JPEPA and other such deals to come. The country’s historic jobs crisis will worsen, more Filipinos will be forced to try and find work abroad, millions more will suffer poverty and deprivation.

We condemn the surrender of the country’s sovereignty and patrimony by the government through JPEPA. The country’s negotiators have absurdly given up nationalist and protectionist policy measures that Malaysia, Indonesia and Thailand for instance held on to in their respective trade deals with Japan.

The only acceptable deal for the Philippines is one based on the principles of solidarity, mutual benefit and development for those who have long suffered poverty and backwardness. The JPEPA however is a treasonous deal that must be completely rejected.



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ACCRA ACTION AGENDA ON AID: LITTLE PROGRESS IN CHANGING DEEPLY FLAWED GLOBAL AID SYSTEM

The Accra Action Agenda (AAA) endorsed by ministers at the 3rd High Level Forum on Aid Effectiveness in Accra , Ghana makes little real progress towards making aid more developmental.

The AAA fails to address the most essential concerns with the greatest impact on development in the Third World : democratic ownership of aid, policy conditionalities, tied aid and the foreign debt burden. The AAA instead gives undue attention to technical procedures in aid delivery and management to divert from its glaring inattention to the development issues that matter the most.

The Paris Declaration of 2005 raised the promise of improving the global aid regime. However the AAA supposedly aimed at deepening implementation of the declaration underscores the deep-seated resistance of donors to genuine reforms in the aid system. Donors have effectively still reserved the right to set conditionalities. They have not committed to eliminating tied aid. They have avoided making concrete, measurable and time-bound commitments to building democratic ownership of aid and development policies. Donors have completely avoided the vital issue of crushing debt burdens.

Yet “free market” policy conditionalities have gravely harmed Third World agriculture, stifled industrial progress, and worsened poverty and unemployment. Tied aid has assured donor country benefits at the expense of local needs. Ownership has been claimed more by donors and recipient country elites than grassroots communities. And debt service by the Third World is many times the amount they receive in official development assistance (ODA)

It is an opportunity that the AAA has been compelled to at least acknowledge these issues and it is welcome that civil society organizations (CSOs) have an increased presence compared to previous years. However this opportunity will be meaningless and the CSO presence will be mere tokenism if there are no clearly defined and effective reforms in the aid system.

AidWatch Philippines and IBON Foundation are among the CSOs participating in the 3rd High Level Forum that demand clearly defined and time-bound commitments to accomplish various targets by 2010. At the minimum this includes: 1) a broad but clear definition of ownership such that citizens, CSOs and elected officials are central to the aid process at all levels; 2) measurable commitments on the predictability of aid flows by 2010; 3) elimination of tied aid by 2010, with food aid and technical assistance no longer donor-defined; 4) development and implementation of new standards for transparency by 2009 including making information available to the public; and 5) an end to policy conditionality.

ODA clearly remains donor-driven with the main objective of serving donor foreign and economic policy interests. Developmental outcomes, if any, are oftentimes just incidental and only to the extent that donor commercial, political and diplomatic interests are not threatened. In Accra for instance, the United States used its clout to dilute language on ownership and conditionalities while Japan opposed proposals to untie aid. Recipient governments in turn comply rather than jeopardize aid flows and possibly important resources for development.

The challenge remains for the people and governments of underdeveloped countries to reject false aid that does not genuinely reduce poverty, advance gender equality, uphold human rights and promote environmental sustainability. Aid must also not be a matter of charity from rich to poor countries but of people achieving their right to development with all the resources at the world’s disposal. (end)

AidWatch Philippines is a national network of grassroots-based non-government groups working on ODA issues in the country. It has over 150 members in more than 50 provinces nationwide, including 10 national networks, and regional formations.

AidWatch Philippines aims to deepen relationships and develop various levels of collaboration between NGOs on aid-related issues and concerns. It also looks forward to constructive engagement with official government and donor agencies on the basis of fundamental development principles.

Donor Governments Continue To Ignore Developing Country Demands For Aid Reform

Donor Governments Continue To Ignore Developing Country Demands For Aid Reform
Better Aid coalition calls for concrete commitments and timelines as negotiations stall

As ministers arrive in Accra for meetings of the reform of aid, donors continue to block Southern governments’ pleas for reform.

Governments have gathered at the High Level Forum on Aid Effectiveness in Ghana to agree an agenda for action for improving aid. New evidence from the OECD shows that donors in particular are not meeting their side of the bargain. Negotiations have stalled as some donor governments, particularly Japan and the United States , are refusing to agree real actions to meet the commitments.

“If developing country concerns are not genuinely addressed, then donors are paying little more than lip-service to the promises of partnership,” says Yao Graham of Third World Network Africa, “Once again we see global power relations being reinforced and the demands of civil society and developing country governments sidelined.”

All governments present in Accra accept that developing countries need to determine their own priorities if aid is to work. But the proposals made by developing country governments to reform aid are being ignored in last minute closed-door negotiations.

Developing countries have set out their key priorities where they want to see real action.

  • Removing harmful policy conditionality that undermines democratic processes
  • Ensuring aid doesn’t bypass domestic processes and scrutiny
  • Making aid much more predictable over the medium term so that they can plan effectively
  • Untying all aid from the purchase of rich country goods and services, including food aid and technical assistance. 75% of food aid comes directly from rich countries, undermining local markets and developing countries are often forced to contract expensive consultants from donor countries rather than drawing on their own expertise.

The Better Aid coalition of civil society organisations is calling for Ministers to agree concrete commitments and deadlines for delivering on these commitments. More fine words will not suffice.

Contacts (in Accra )

Henri Valot, Civicus: World Alliance for Citizen Participation, +233 (0) 240230273
Yao Graham, Third World Network Africa , +233 (0) 244577102
Lucy Hayes, European Network on Debt and Development, +233 (0)240230271

Editors notes:

Donors and developing countries agreed the Paris Declaration on aid effectiveness in Paris in 2005. The Accra High Level Forum on Aid Effectiveness is the first major review of the progress made in implementing those commitments.

Thursday 4th September is the final day of three day Forum, when Ministers arrive to agree the final Accra Agenda for Action, which will be the political agreement from the Forum. Government officials have been trying to make progress with last minute negotiations over the first two days of the conference (2ndand 3rd September).

Since January 2007, CSOs networks have worked in an International CSOs Steering Group (ISG) to coordinate CSOs’ analysis, proposals and plans for the Third High Level Forum on Aid Effectiveness. The ISG maintains a website, www.betteraid.org, as a portal for CSO initiatives on aid effectiveness, including a Policy Paper signed onto by more than 350 CSOs on aid and development effectiveness reform. The ISG have been meeting with the Working Party on Aid Effectiveness, based at the OECD DAC, setting out CSO concerns and proposals for the Accra HLF.

BREAKING MONOPOLIES, REVERSING LIBERALIZATION: A STEP TO END RICE CRISIS


The presence of a rice cartel is only part of the monopoly control of land and capital in Philippine rice production, trade, and marketing and aggravated by neoliberal policies adhered to by the Philippine government

By Jennifer H. Guste

IBON Features– As the government insists there is enough rice available for everyone, it is now looking at rationing rice to three kilos per family, and has secured the importation of around 2.2 million metric tons (MT) of rice from Vietnam, Thailand and the United States. This is the country’s biggest volume of importation since 1998.

From being a self-sufficient and rice exporting country in the 1980s, the country has become a net importer of rice since 1993. It is now the world’s top importer of rice, the country’s staple food crop.

Why this has become so can be traced to the backwardness of Philippine agricultural production and the exploitative relations of production, which are both exacerbated by globalization. Production tools are outdated, almost all farms are not mechanized, more than half are not yet irrigated, and most of all, seven out of 10 peasants are still landless. Despite three agrarian reform programs, land is still in the hands of few families who control not only land but also trade and marketing. Aggravating the condition are the globalization policies of trade liberalization, privatization and deregulation adopted by the government since the late 1980s.

Rice Production in Chronic Crisis

Philippine average rice yield per hectare is stagnant. Since the 1990s, the country’s rice yield has averaged at 3 metric tons per hectare even as it records yearly increases in production. According to the International Rice Research Institute (IRRI), the required yield for the Philippines to sustain food security is 5.4 metric tons per hectare.

Philippine rice lands is only four million hectares compared to its counterparts in Asia. For instance, Thailand devotes more than 10 million hectares for its rice production; Vietnam has more than seven million hectares planted to rice.

Rice production remains small-scale and productivity is low. This situation is even worsened by the increasing instances of conversion of rice farms to commercial uses and conversion of crops from rice to export winners, which has put the country in constant state of crisis in its rice supply.
Meanwhile, landlessness and the absence of government support through production and price subsidies leave millions of Filipino rice farmers at the mercy of big land owners and traders.

Even with the use of hybrid rice that promises a boost in rice production with minimal lands devoted to rice farming, rice supply in the country is still under threat of shortage and government will always find reason to resort to rice importation to fill in its buffer stocks. According to the National Food Authority (NFA), the country can only supply approximately 90% of its total rice consumption; the rest, according to the NFA, would have to be imported.

In reality, government has practically stopped subsidizing local agriculture for decades, and can be seen from the meager budget allocations received by the agricultural and fisheries sector. Worse, the funds intended for the sector are even reportedly siphoned off to corruption.

Even its much-hyped Agriculture and Fisheries Modernization Act (AFMA) did little in improving post-harvest facilities or even significantly increasing irrigated rice farms.

Reinforcing backwardness

Policies of globalization on rice, i.e. trade liberalization (allowing rice imports), privatization (clipping NFA powers), and deregulation (lifting of government production and price support), which the government started to implement in the 1980s, has reinforced the rice crisis.

The privatization of the NFA, for one, has been one of the conditions for the Philippine government to avail of loans from the World Bank and the Asian Development Bank (ADB). The NFA was once allowed to engage in grains procurement and distribution using government buffer stock and subsidized pricing system as main intervention instruments. But since the 1980s as a result of reforms adopted by the Philippine government to comply with the World Bank and ADB prescriptions, the role of the NFA in ensuring the country’s food security and price stabilization has been reduced to being a “facilitator” of the market forces– the big rice traders and retailers.

The NFA has increasingly relied on rice imports for local distribution. On the other hand, from an average of 7.95% of total palay production in 1977-1983, and 3.63% from 1984 to 2000, NFA rice procurement from 2001 to 2006 was barely 0.05% of total palay production. The NFA is originally mandated to procure at least 12% of total palay production.

Other than the World Bank and ADB conditionalities for minimized NFA intervention in grains procurement and trading, under the Agreement on Agriculture (AoA) of the World Trade Organization, the country has been compelled to import a minimum volume of rice from other countries whether or not it produces rice sufficiently. Rice importation has increased as a consequence, from 0 in 1994 to 257,260 MT in 1995 and consistently increasing to 1.7 million MT by 2006.

Yet, with the current rice crisis, private traders have still renewed calls for the full privatization of the NFA. Secretary Arthur Yap of the Department of Agriculture is even entertaining options to lower tariffs on rice importation to encourage greater private sector participation in rice importation and trade. Presently, licensed private traders are allowed to import a minimum of 300,000 MT of rice but this according to the NFA has been hardly utilized by the private traders due to the 50% tariff on rice.

Ironically, instead of re-considering government subsidy to farmers’ production, an increase in the subsidy given to the NFA is even being considered to allow the state agency to shoulder some of the import costs of private importers!

Yap said the scheme would call for the NFA to import rice “through a tax-expenditure-subsidy scheme and the volume that NFA brings can be sold to the private sector for it to distribute on the basis of an equalization fee that they will bid for.” Under this plan, the private sector will be allowed initially to bring in 163,000 tons of rice this year, with each importer given a maximum volume of 2,500 tons.

Rice Price Speculation

Peasant organization Kilusang Magbubukid ng Pilipinas (KMP), on the other hand, maintains that there is no need to import rice. According to the group, if the projected 7.2 million MT palay output for this season is met, combined with the total rice inventory as of March 25, then there should be enough rice available for every Filipino table until the first week of October, even without importation.

In an interview with IBON Features, KMP chairperson Rafael Mariano said that the government is importing rice because it has already committed rice importations earlier from Vietnam and the US.
He said the NFA is importing rice because it has persistently failed to perform even its minimal procurement of 12% of the total palay production. Mariano added NFA has only procured only about 1% of palay production in the last cropping season, leaving most of the tradeable rice into the hands of big rice traders, particularly the so-called Big Seven cartel who now dictates the price of rice in the market.

In fact, a few days after the DA wrote a memorandum to the office of the President warning of the threat of a tightening global rice supply and thus the need to secure rice imports, news of a rice shortage in major markets in the NCR and in the provinces broke out. Subsequently, rice prices skyrocketed and created panic among rice retailers and consumers nationwide.

The same thing happened during the rice crisis in 1994-1995, largely a result of the semi-privatization of NFA which then procured only 0.5% of total palay production. Private traders seized the opportunity to create an artificial rice shortage and jacked up prices by as much as 90% to 100 percent.

The monopoly control in the trade and marketing of rice through the so-called Big Seven manipulates rice price increases especially during rice crises. The reduced role and intervention of the NFA in the rice market allows private traders to control both the trade in inputs and produce, thus influencing the movement of prices in the trade and marketing of rice.

Despite its import injections, the NFA’s limited distribution because of its minimal palay procurement also prevents the NFA from influencing retail rice prices. In fact, the NFA has distributed an annual average of only 6% of the nation’s rice requirements, and much of the rice distributed is even imported.

Ending Monopolies

The presence of a rice cartel is only part of the monopoly control of land and capital in Philippine rice production, trade, and marketing. It is a manifestation of the chronic rice crisis in the Philippines, which is aggravated and reinforced by neoliberal policies adhered to by the Philippine government.

There are doable measures to solve the chronic rice crisis the country. One step that government should do is to regain control of the trade and marketing of palay and rice to break the monopoly control of cartels. The country should also break away from binding agreements that government made to the GATT-WTO and reinstate agricultural tariffs while increasing support to Filipino farmers. Ultimately the crisis could be resolved by implementing a genuine agrarian reform program that do not only provide free distribution of land to farmers, but also provides input and capital subsidies, and investments in post-harvest facilities that will help end land monopoly.

THINK-TANK: JPEPA USHERS IN ERA OF UNPARALLELED DEFEATIST POLICY MAKING

As the Senate prepares to conduct hearings on the ratification of the Japan-Philippines Economic Partnership Agreement (JPEPA), an independent think-tank called for the junking of the free trade pact, saying it marks the start of an era of unparalleled defeatist policy-making.

According to non-government research organization IBON Foundation, the JPEPA deprives the Philippines of vital economic policy tools it would need in its future development. IBON research head Sonny Africa cited Annex 1 of the Agreement, in which the Philippines named only two items for exclusion from immediate or future tariff reduction commitments. He pointed out that trade barriers are essential if domestic industry and agriculture are to develop, since such protection would allow them to gradually build up their capacity to produce.

The JPEPA’s investment provisions require Japan to be given favorable treatment on a national or most-favored-nation basis. Such provisions essentially prevent the government from favoring Filipino entrepreneurs over Japanese investors. Explicit “performance requirement prohibitions” in the economi c p act also hinder technology transfer by denying the state measures such as requiring Japanese manufacturers operating in the country to achieve a certain level of domestic content in their manufactures and to utilize goods and services available in their investment area in their operations.

Africa pointed out that the JPEPA is the country’s first full-fledged bilateral free trade agreement after colonialism, and as such is dangerous for setting precedents for liberalization that the country will have to concede in future trade negotiations. Its negotiating position in future trade agreements with other trading partners is compromised since it will have to grant to them what it granted to Japan, else it would be accused of unfair discrimination.

The end result of the JPEPA and other such free trade agreements will be to prevent any real Filipino agricultural and industrial development, he said, adding that such development is essential for overcoming mass poverty, achieving sustained and rapid economic growth, and attaining real economic independence

ARROYO’S STATE OF THE NATION 2007: A LEGACY OF ECONOMIC DECAY

In the face of its glaring failures, the Arroyo government continues to pursue the very same bankrupt economic policies that caused these in the first place

By Sonny Africa

IBON Features– Undoubtedly, President Gloria Macapagal-Arroyo will use her State of the Nation Address (SONA) to hype her achievements. Arroyo would likely claim that her greatest achievement and her legacy is to set the Philippines well along the road to progress and prosperity. To buttress her claims she will certainly roll out the familiar rosy economic indicators that she has consistently used to try and silence her critics: the fastest quarterly growth rate in nearly two decades, stock market indices soaring to all time highs, record international reserves, the “strengthening” of the peso and steady increases in foreign investment.

However, these claims would not hold up to even the most cursory scrutiny. The scores of homeless people living on the streets and sidewalks of Manila testify to widespread poverty and joblessness despite Malacañang’s claims that poverty has decreased. The more than 3,000 Filipinos who leave the country every day to seek work abroad belie the government’s claim that it has generated more than 800,000 jobs a year since it came into office in 2001.

Yet, even in the face of its glaring failures, the Arroyo government continues to pursue the very same bankrupt economic policies that caused these in the first place. In fact, it promises to pursue these policies even more aggressively and apply them to more areas of the economy.

Behind ‘Economic Growth’

One of the key economic indicators that the Arroyo government undoubtedly will be hyping is the continuous economic growth it has experienced. According to Palace Secretary Ricardo Saludo, the country has enjoyed twenty-five consecutive quarters of Gross Domestic Product (GDP) growth, with GDP hitting 6.9% in the first quarter of 2007, supposedly the highest in seventeen years.

But the GDP merely tracks the continued erosion of the country’s productive sectors. The share of the manufacturing sector has been steadily falling, from 25.7% of total domestic output in 1980 to 23% last year. Over the same period, agriculture fell from 25% of GDP to 14 percent.

Even if the economic growth could be taken at face value, it remains meaningless to the millions of poor Filipinos for whom its benefits have not “trickled down”. IBON estimates that some 65 million Filipinos or around 80% of the total population struggle to survive on the equivalent of P96 or less per day. This is substantially larger than the Arroyo government’s official poverty incidence figure of 24 million Filipinos.

Increased growth has also not reduced the gross income inequalities that continue to haunt the country. In 2000, the poorest 30% of families (some 3.8 million) accounted for almost 8% of total family income, while the richest 10% (1.3 million families) accounted for 38.4 percent. By 2003, inequality had barely softened, with the poorest 30% (now nearly five million families) accounting for 8.5% while the richest 10% (1.6 million families) accounted for 36.3 percent.

Meanwhile, the richest Filipinos continued to get richer. The wealth of the country’s three richest individuals/families (Henry Sy, Lucio Tan and Jaime Zobel de Ayala and family) grew in real terms from P177.4 billion in 2001 to P261.5 billion last year.

Speculation

The Arroyo government also continues to hype the peso’s all time highs and the booming stock market. But when looked at in an overall regional context, the seven-year high of the peso and the all-time high of the stock exchange are not even particularly impressive. They merely reflect an overall trend of appreciating currencies and exuberant stock markets.

A look at the trend from 2001 shows that Asian currencies, in general, have been appreciating against the US dollar especially since the middle of 2006. The US economy is heavily weighed down by its historic budget and trade deficits as well as by the wars it is unable to win in Afghanistan and Iraq . It is also widely expected to experience an economic slowdown this year.

Asia has also been receiving markedly higher inflows of speculative investment, many of which are going to the region’s stock markets, with the trend again being especially marked since the middle of last year. During the first quarter of the year, some US$2.8 billion or 78% of gross foreign portfolio inflows into the country went to the Philippine Stock Exchange. These inflows were equivalent to nearly half of gross inflows in the whole of 2006 and two-thirds of gross inflows in 2005.

The Philippines is also one of Southeast Asia ’s laggards in terms of economi c p erformance. Philippine economic growth of 5.3% last year was the third worst in Southeast Asia and even less than the ASEAN average of 5.8 percent. The country has the worst unemployment and is the fifth poorest country in terms of GDP per capita and national poverty rates. Although comparisons of this sort are problematic because of differing methodologies and measures, it should at least serve as a wake-up call for the administration.

Fiscal Hype

Another achievement that would surely be hyped in the SONA is how Arroyo succeeded in arresting the country’s fiscal crisis through “reforms” such as the implementation of the reformed value-added tax (RVAT). But the country remains vulnerable to another financial crisis, which could explode at any time.

The budget deficit has indeed gone down from the historic high it reached it 2002 when it peaked at 5.4% of GDP. Last year it was at 1.1% of GDP. But the deficit was addressed not through improved revenues or dealing with runaway debt service payments; instead, government cut spending on vital social services such as education, heath, and housing, whose combined share in the national budget fell to 15.6% in 2007 to 19.7% in 2001.

Meanwhile, the Arroyo administration is making the most debt payments of any administration in the country’s history. Foreign and domestic debt ate up a historic 87.3% of revenues and 14% of GDP in 2006. Total debt service last year on foreign and domestic debt was a colossal P854.4 billion in 2006. And public debt continues to increase, hitting P3.9 trillion as of March 2007. National government debt was 65% of GDP in 2006.

Although the RVAT netted P76.9 billion in 2006 and P18.7 billion in the first quarter of 2007, it was not enough to make up for revenue losses from trade liberalization, corporate tax evasion and corruption. The government’s tariff reduction program has resulted in import duties as a share of total revenues falling to 19% in 2006 from 36% in 1993.

Meanwhile, corporate tax evasion may cost the government some P54 billion in lost revenues annually (according to a 1998-2002 survey by the National Tax Research Center ) and some P146 billion may have been lost to corruption in the 2007 national budget (based on the 13% estimate of the 2001 budget by the United Nations). This means that as much as P200 billion may be lost this year due to corruption and tax evasion.

In fact, government recently reported that its half-year deficit had already reached P41 billion or 65% of the year-end target of P63 billion.  Its only hope now of achieving its deficit target is the privatization of some of its remaining assets, such as its stakes in San Miguel Corp. and the Manila Electric Co. (Meralco), which could fetch as much as P105 billion. But this represents a one-time boost in revenues. Thus, higher taxes on the scale of the RVAT are likely inevitable despite government denials.

Unsound fundamentals

The Philippines ’ weak productive sectors are ultimately what underpin its financial vulnerability. Its declining agriculture and manufacturing sectors result in chronic trade deficits because the country is dependent on imported inputs and finished products, while having a limited capacity to export genuinely Philippine-made goods. This in turn increases the dependence on foreign sources of financing and capital. The local economy thus becomes unduly sensitive to the fluctuations of global markets.

The country’s problems are essentially due to liberalization policies enacted under an economic globalization framework. These policies have eroded incomes and destroyed livelihoods, undermined domestic productive sectors and created the conditions for financial crisis. Trade liberalization destroys local agriculture and manufacturing while reducing tariff revenues. Liberal investment regimes have given generous incentives to foreign corporations while reducing the benefits to the domestic economy to nothing.

Pres. Arroyo, a staunch believer in so-called free market economics and was instrumental in the country’s membership to the World Trade Organization, will likely continue her adherence to neoliberal policies, which will reinforce the country’s structural inequities and weaknesses.

For example, she will undoubtedly continue to pursue liberalization through the various WTO agreements and free-trade agreements such as the Japan-Philippine Economic Partnership Agreement (JPEPA) and liberalization of the mining sector and privatization of the power generation and transmission sector in order to further encourage foreign investment.  And then there is the removal of economic sovereignty provisions in the Constitution through Charter change.

With these policies, it is clear that Arroyo’s legacy will not be that of a prosperous Philippines but rather an economy that is ripe for another bout of financial and fiscal crisis.

BALLOONING BUDGET GAP UNDERLINES FLAWS IN ARROYO’S ECONOMIC POLICIES

The steadily growing budget deficit highlights the flaws of Arroyo’s so-called economic reforms, particularly the implementation of the reformed value-added tax and its continued adherence to liberalization policies, according to independent think-tank IBON Foundation.

The Department of Finance recently reported that the government had incurred a P41 billion budget deficit in the first half of the year, representing 65% of the P63 billion ceiling set by Finance officials for the entire year. The above-target deficit was attributed to lower than expected tax revenues.

The worsening fiscal situation underlines how revenue losses from trade liberalization, corporate tax evasion and intractable corruption have outpaced revenues from the RVAT, said IBON research head Sonny Africa.

He pointed out that as a result of government’s tariff reduction program, import duties as a share of total public revenues have fallen to 19% in 2006 from 36% in 1993. The RVAT generated P76.9 billion in revenues in 2006 and P18.7 billion in the first quarter of the year.

Africa added that a study by the National Tax Research Center showed that between 1998 and 2002, corporate tax evasion resulted in an average of P54 billion in unpaid taxes during the period studied. Further, the United Nations estimated that in 2001 corrupt officials pocketed 13% of the national budget, or some P100 billion. If this percentage was applied to the 2007 budget, then as much as P146 billion could have been lost to corruption. This means that at least P200 billion may have been lost that could have been channelled towards vital social services such as health and education.

More than the mentioned losses due to liberalization is the debt payments policy. In fact, the Arroyo government is making the most debt payments of any government in the country’s history. Total debt service for 2006 was P854 billion even as the national government debt hit P3.9 trillion as of March 2007.

Africa said that contrary to government claims, the growing deficit is not just due to inefficiencies in tax collection but a manifestation of the Arroyo administration’s policy failures, which have made the economy vulnerable, caused incomes and livelihoods to collapse, undermined domestic productive sectors and created the conditions for financial crisis.