Groups call on RP, Austrian governments to annul “toxic debt”

Quezon City—Two broad coalitions of citizens’ groups today called on both the national government and the Austrian government to annul a half a billion peso “toxic debt” that financed a failed Department of Health (DOH) project involving the importation of twenty-six medical waste incinerators for DOH-run hospitals in the country.

The Ecological Waste Coalition of the Philippines (EcoWaste) and the Freedom from Debt Coalition (FDC) during the public launch of the “Stop Toxic Debt! Campaign” said that the loan, which was contracted in 1997 between Bank Austria and the Philippine Department of Finance (DOF), will have to be paid until 2014.

But the incinerators had all been retired in 2003 when the incineration ban promulgated by the Philippine Clean Air Act of 1999 (CAA) took effect. Said incinerators were substandard and did not meet the emission levels guaranteed by the supplier, which Greenpeace Southeast Asia claimed in an earlier report.

The loan financed the DOH’s project dubbed “The Austrian Project for the Establishment of Waste Disposal Facilities and Upgrading of the Medical Equipment Standard in DOH Hospitals.” It was originally intended to provide development assistance to Philippine hospitals in the area of medical waste management.

With capacities of 300-500 kg of waste/day, the incinerators were set up in 1997-1998in the various DOH-run hospitals throughout the country.

The payments on the loan’s principal have commenced in 2002 and the loan now represents a two-million dollar per year debt burden for the Philippines until 2014.

Toxic technology transfer

According to Von Hernandez, Campaigns Director of Greenpeace Southeast Asia, the incinerators exported by Austria to the Philippines were of such low quality that they would never have been allowed to operate in Austria. The incinerators, however, were granted an exemption from the Environmental Impact Assessment process by the Department of Environment and Natural Resources (DENR).

A subsequent assessment of the incinerators’ emissions, jointly conducted by the DOH and the World Health Organization (WHO), revealed extremely high emissions. According to Ronnel Lim, EcoWaste Coalition researcher: “Even if the incineration ban of the CAA never took effect, the incinerators’ emissions were outrageously high there was simply no way to defend them. In the joint DOH-WHO emission test conducted on one of the incinerators, the dioxin emission was a whopping 870 times the limit set by the CAA.”

Money to burn

FDC secretary-general Milo Tanchuling pointed out that the incinerator loan is a classic example of an illegitimate debt that was “incurred to finance an ill-conceived development project that posed danger to our environment and the people, rendering the project itself dissonant with the global call for the protection of Mother Earth.”

“Such debt is unacceptable and must not be honored. We call on the Austrian government to cancel and on the national government to repudiate the said loan,” added Tanchuling.

Hernandez also called for the deal to be rescinded: "Filipinos will not tolerate being at the receiving end of toxic technologies. It is totally outrageous that we are paying for an obsolete and deadly technology. We are being cooked in our own juice."

Bishop Julio Labayen, joining the two coalitions, also vowed to bring the campaign to cancel the incinerator debt to Austria.

The groups said that what makes the loan unconscionable is that the Philippine government is practically throwing money away at the same time that it is progressively cutting back on health outlays.

In the past 10 years, the DOH's budget as a percentage of the total national budget has decreased from about 2.53 percent in 1998 to just over 1 percent this year. Health expenditures have perennially lost out to debt service payments and national defense on the government's priority list.

About the loan

The total cost of the whole project amounted to ATS199,860,000 or PhP503,647,200 in 1996. The Waste Disposal Component of the project cost ATS95,904,076 or PhP241,678,000 in 1996. The incinerators, which amounted to PhP133,208,662 in 1996, were delivered and installed in 26 DOH-controlled hospitals in 1997-1998. The loan, with an interest rate of 4 percent per year, is to be paid off by the government until 2014 in 24 equal semi-annual payments.

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Gloria's Economy: NOT WORKING

Today, Gloria Arroyo will again address the Congress to give a report on the achievements of her government, and at the same time express her primary focus for the next year. As she did during her previous State of the Nation Address (SONA) speeches, she may yet again boast the economic feats of her administration, including the strengthening of the peso and the recent booming of the stock market.

But despite these pronouncements, despite the propaganda backing of Arroyo's economic team, the obvious truth cannot forever be hidden from the masses and economists alike – Arroyo's economy is not working.

The Freedom from Debt Coalition (FDC) continues to assert that Arroyo's economic governance is defective in all significant aspects of human development. Her so-claimed economic growth never really benefited the poor majority, and had only resulted into pushing the common Filipino further into a struggle for desperate survival.

Let us look at the features of Arroyo's economy:

Arroyo's economy is debt-driven

• Biggest borrower. As of March 2007, Arroyo already borrowed an amount of P3.24T, compared to the P1.51T combined borrowings of the Aquino, Ramos, and Estrada administrations.

• Most religious debt payer. As of 2005, Arroyo also achieved the record of being able to pay P2.38T in debt service, dwarfing P1.81T of the combined Aquino, Ramos, and Estrada administrations.

Spending Policy is Pro-creditor, Anti-development

• Debt service above all. Interest payments as percent of GDP grew to 5.5% during the last two years (2005 and 2006) from 3.6 % in 1999. In 2006, the amount needed to service government's debt (P784.5B) is almost equal to the tax collected (P785.2B, January to November). Debt service ballooned from an average of 19.5% of overall government spending in the time of Estrada to 26.8% under Arroyo.

• In the 2007 budget alone, P622B was earmarked for debt service (interest and principal) while education and health received merely P146B and P13B respectively.

• Mis-spending. This policy had only become possible through abject neglect of other sectors. Real per pupil spending (200 prices) dropped from P5,830 under Estrada to P5,467 under Arroyo. Real per capita health spending dropped from Ramos' P321 to Arroyo's P303.

Revenue Policy is Pro-rich, Anti-poor

• Regressive taxation and narrowing of the tax base. Since Arroyo failed to tax the rich due to massive tax evasion of corporations, Arroyo instead opted for consumption taxes (E-VAT, R-VAT) practically targeting the common man's income.

• Accelerated privatization as a palliative for poor revenue collection. Not being able to achieve its tax and revenue collection targets, the Arroyo regime resorted to the unabashed selling of government's assets, like the TRANSCO.

• Padding revenues through increased borrowings. Arroyo had been able to cheat her revenue reports by borrowing more than what was needed and reporting the resulting surplus as revenue.

Clearly, this kind of an economic policy only resulted to a decline of social development and consequently, of human productivity. Arroyo may have thought that she could "cheat" her way towards a "robust" economy

Result: Weak Economy, Dysfunctional Populace

• Poor investment record. Contrary to Arroyo's claim that her liberalization policies caused a healthy flow of foreign direct investments, our country actually has the worst investment record among Asian countries. Gross Domestic Investment is only 14.8% of GDP, compared to Vietnam's 35.4% or Indonesia's 24.6%. Consequently, our competitiveness ranking (World Economic Forum) fell from 48 in 2000 to 71 in 2006 under Arroyo's watch.

• ADB itself revealed that the domestic investment rate of the Philippines has dropped from 19% in 2001 to a record low of 14.8% in 2006 while those of its neighbors have continued to rank from 20% to 40%.

• Exodus-driven growth. During her campaign to be installed as president in 2004, Arroyo promised to generate 1-million jobs a year, but not once had she been able to achieve such target. Because of her failure to generate employment, or even create a business environment conducive for employment, she instead took as economic policy the wholesale exportation of our workers abroad. The government had thus become increasingly reliant to OFW remittances in propping-up our failing economy.

• Mal-educated. Completion rates for elementary and secondary levels dropped from 66.13% and 70.62% in 2000-2001 to 56.76% and 54.14% in 2005-2006. The Philippines was ranked only at 63 in higher education, according to the World Economic Forum, with Thailand and Indonesia at 42 and 53 respectively.

Arroyo's economic and fiscal strategies may impress some academics and technocrats, and may even be lauded by international creditors. But unless these strategies articulate the needs of the masses who she is bound to serve, then her so-called economic feats are as irrelevant as the booming stock market is for a fish-ball vendor struggling to budget his measly income for the day.