Financing development/restructuring government

The need to establish regional Central Banks.

The previous article on the proposed regionalization of the Central Bank elicited reactions from some readers that this cannot be done without amending the Constitution. The Constitution mandates that "Congress shall establish an independent central monetary authority... The authority shall provide policy direction in the areas of money, banking and credit" (section 20, Article XII). It is submitted that while, indeed, the fundamental law provides for the establishment of an independent central monetary authority, there is no prohibition on the creation of regional central banks.

To obviate, though, any constitutional doubt, regional branches of the Central Bank can instead be set-up in the meantime that the Constitution has not been amended to expressly provide for the establishment of regional central monetary authorities. The regional branches of the Central Bank can then manage the money supply within its jurisdiction both as to the determination of the level of money in circulation and the direction to which the funds shall be channeled. The branches can then see to it that the requirements for the infrastructure and utilities development of each region will be financed with new money through long-term, low-interest local credit facilities as the present appropriations cannot meet each region’s demands for development money through tax collections alone.

Borrowing against future taxes

Government must, to stress, finance all the region’s development needs by borrowing against future taxes through the floatation of 30-year bonds with a seven-year grace period which the regional branch of the Central Bank shall buy by creating the new money. Government can easily retire the bonds after 37 years through the generation of taxes from transaction taxes from the newly created money.

Financing training and education

Equally essential, government must support our schools and training institutions by giving them access to long-term, low-interest credit facilities using local currency in order for them to properly educate our people to be productive members of society.

Many of our poor are really in financial want as they did not commit themselves to studying during their school age so much so that they become unemployable in their adult life. Invariably, they blame their poverty for their inability to have access to education and training programs.

This need not be. Parents and the government must work closely to see to it that all school-aged children are kept in school, regardless of the economic status of the family, through a "study-now-pay-later" program financed through borrowings against future taxes. The student can pay his educational loan as he is able to once employed or self-employed. This way, poverty shall be no excuse for not obtaining an education and being unemployable in one’s productive years.

The need for a Federal system of government

It has been advanced that the Philippines is at such an ungovernable stage owing to the conflicts and varied self-interests among the different cultures of the regions of the country. More telling in seriousness is the conflict that is wrought by religious differences and undertones. The Muslim areas in Mindanao has been such a constant trouble spot.

Amending the Constitution to transform the system of government from unitary to federal would be a step in the right direction as the various regions, each with its own indigenous culture, language, customs and traditions would be in a more effective position to chart their own development concomitant with their way of life.

More importantly, the setting-up of independent States through a Federal set-up make each State a self-reliant economic unit responsible for the use, exploitation and development of its own natural resources without depending on the whims and dictates of an imperial Manila. Each State can then have its own Central Bank to determine for itself the amount and direction of flow of its money that will finance its own development needs for infrastructure, utilities and human resource development.

The need for a parliamentary form of government

A serious flaw in a presidential form of government, especially for a country, such as ours, that is as yet economically backward with the majority of its people living below the poverty line, is that it elects its national officials by a direct vote of the people. The elections have progressively become so expensive and costly that it takes an exorbitant amount of money to successfully mount a national campaign on the senatorial level, let alone the presidency.

Needless to state, to vice money from drugs, prostitution and gambling, among others, commonly fund the campaign of many candidates for national office. In turn, when they win, as they do win, these corrupt officials naturally cater to the vested and illegal interests of their vice-lord and syndicate supporters if only for them to recover their "investment".

For as long, then, as elections are costly as in a presidential system such as is the Philippines, corruption shall be endemic from the highest echelons of public office. This can be stopped by shifting to a parliamentary form of government where the election of the prime minister is much less expensive and, therefore, the monetary influence of the vice syndicates become more resistible.

(You may write your comments/suggestions at 15/F Equitable Bank Tower Paseo de Roxas, Makati City or through e-mail at [email protected])

(Editor’s note: Atty Roxas is writing a limited series of article dealing with financial matters and other important business topics.)