GMA’s ten-point program: How to achieve it

In her inaugural speech, President Arroyo unfurled her "10-point legacy" to uplift the economy and unify the nation.

In the next six years the GMA government is aiming for: (1) the creation of six to ten million jobs by tripling loans for small business owners and development of one to two million hectares of land for agricultural business; (2) education for all or the construction of new schoolbuildings, classrooms, provision of books and computers for students, and scholarships to poor families; (3) balance the national budget in view of the country’s debilitating deficit woes; (4) decentralization of progress and development across the country through the development of transportation networks like the roll-on, roll-off ferries and digital infrastructure (5) provision of power and water supply to all barangays; (6) decongestion of Metro Manila by forming new cores of government and housing centers in Luzon, Visayas and Mindanao; (7) development of Clark and Subic as the logistics center in Asia; (8) automation of the electoral process; (9) peace agreements with rebel groups; and, (10) "closure of wounds" caused by divisions due to EDSA 1, 2 and 3.

In the "10-point legacy" above-listed, it is observed that item numbers 9 and 10, that is, peace agreements with rebel groups and closure of wounds borne of EDSA 1, 2 and 3 do not entail financial cost. The rest, however, items 1 to 8 involve tremendous outlays of money and capital for their successful implementation. Huge investments are needed for the creation of millions of jobs, education for all, balancing the national budget, decentralization of progress and development across the country, provision of power and water supply, decongestion of Metro Manila, development of Clark and Subic and automation of the electoral process.

The primordial question, then, is where will all the money come from? There are two ways of raising the money to fund GMA’s "10-point legacy". One is through foreign sources in the form of foreign borrowings and the other is through local sources. The President has not disclosed her manner and method of funding which is the more important aspect of the program than the "10-point legacy" itself.

Previous, if not all, government national programs and projects have been financed through borrowings from foreign investors and funders. Our continued dependence on this mode of raising money and capital has caused our national foreign debt to balloon to a whopping $56 billion. Should the Arroyo government continue the practice of relying on foreign borrowings to finance our development needs, in this particular instance to finance her "10-point legacy", the country shall ever more sink into the foreign debt quagmire beyond our capacity to extricate ourselves through debt payment.

Equally detrimental is that reliance on foreign borrowings will be counterproductive to our local businessmen and companies as, invariably, the business opportunities in the pursuit of the projects will go to the foreign companies whose country funded them. Our local enterprises would thus be deprived of the golden opportunities to grow and expand. Midgets as they shall remain to be, the local companies cannot stand the competition from their giant foreign counterparts. In the meantime, it will be the foreign companies and investors who will benefit greatly from the pursuit of local projects financed through foreign credit.

While the country welcomes foreign investments, we must not overly rely on them as foreign investors are fickle and volatile and whose actuations depend significantly on the local political stability, peace and order situation, stability of government policies as well as the level of infrastructure and utilities development which factors we do not as yet have a favorable report card to show. In the end, it will always be the local investors and local investment who and that will be willing to take the risks in spite of the conditions existing in the country, which brings us to the other mode of funding GMA’s six-year agenda, that is, through local financing.

In this envisioned mode, government, both national and local, will be at the forefront of development by borrowing money secured against future taxes, which loans shall be used for investment. This is achieved through the process of long-term and low-interest bond floatations of government which shall be bought by the central bank via the issuance of the corresponding new money. The new money thus created shall be the investment seed money that government will pour into the productive sector of the economy to spur and rev-up its growth consistent with the Keynesian theory that in times of economic slump and stagnation it is government that must do the investment spending.

With this active intervention by government in the country’s economic affairs through direct local funding, vital infrastructure and utilities projects could be undertaken such as the construction of roads, highways, bridges, ports, airports, schools, markets and hospitals as well as the establishment of power, water and telecommunications facilities. As economic activities are catalyzed by government spending, so will there be increases in employment, productivity and taxes. As well, local businessmen and companies could be supported with long-term, low-interest credit facilities and can be given the opportunities of undertaking local development projects themselves enabling them thereby to expand and grow and be competitive with their foreign counterparts.

In all this scenario it is vital to point out that the central bank plays a key, if not most important, role as it is the sole government agency authorized to print the needed new local money. Indeed, while by law the Bangko Sentral is mandated to be independent, this independence refers merely to its insulation from political interference but does not and could not refer to its independence and separation from the integrated government structure itself. Indeed, the Bangko Sentral must work in tandem and cooperation with the executive branch so that the requisite funds for the government’s development initiatives will be amply supplied and met.

The appreciation of the true meaning of the independence of the Bangko Sentral notwithstanding, government’s ten-point program cannot be funded locally unless and until extant restrictive provisions of the Charter of the Central Bank that prohibits our premier bank from buying government securities such as bonds are immediately repealed and amended. Specifically, there is an urgent need to change section 117 of the law so that, instead, the central bank will be mandated to buy long-term government bond floatations that are secured against future taxes through the bank’s issuance of the corresponding new money. This way, instead of ever-relying on foreign borrowings, we can raise the money locally ourselves and fund the President’s "10-point legacy" without being tied and shackled to the dictates and impositions of foreign entities and interests. We could, then, by doing so gain true economic independence.

We, therefore, challenge the new administration to try alternative and tested ways of doing things instead of being imprisoned in our traditional ways of thinking. We challenge the GMA government to think out-of-the-box by financing its "10-point legacy", not through the traditional manner of foreign borrowings, but through the alternative of local funding that has after all been the successful formula of the advanced countries the world-over.

You may write your comments / suggestions at 15/F Equitable Tower, Paseo de Roxas, Makati City or through e-mail at HYPERLINK "mailto:[email protected]" [email protected]

(Note: We beg the indulgence of our leaders who are at times tasked to read a lengthy piece. The purpose of our writings, however, being advocacy and not merely commentary in nature, compels us to dissect a given problem, analyze its causes and effects, and offer studied solutions. The length of the article should be irrelevant to such an approach.)