Mar 012013
 

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Volume No. 51

March,  2008

 

FOREIGN LOAN AGREEMENTS ARE INTERNATIONAL AGREEMENTS

                                                  by

                                    Roland G. Simbulan*

 

A few years ago, I remember how, after the Spanish government decided to grant the Philippines its largest overseas development assistance in the form of the Sentro Ophthalmologico Jose Rizal (Jose Rizal National Eye Referral Center) at the Philippine General Hospital (PGH) , the implementation of the project still went through  the most rigid bidding procedures. All suppliers and services, whether local and foreign had to go through Philippine procurement processes, to assure competitive and transparent bidding.  It went, so to speak, by the book, which means its strict compliance to Philippine procurement laws and regulations though it was a grant negotiated with a foreign government.

 

Negotiated loan agreements with foreign governments should not be be treated as exempted from our local procurement procedures. Moreso, because first,  these are really huge projects and they impact so heavily on the national budget which greatly reduces the allocations for basic social services. The people are already burdened with so many direct and indirect taxes which are not perceived as going back in the form of services especially to the poor and marginalized. Second, is that  they are not subjected anymore to congressional and public scrutiny as they are normally negotiated secretly as the ZTE/NBN project, the Southrail and Northrail Projects, the Fuhua Agricultural Projects, the Cyber Education Project, among others. Taxpayers and citizens who are burdened with the payment of these odious debts never even get to see the loan agreement contracts.

 

China in particular, has mostly state enterprises for supplies and services which are made as part of the negotiated deals in loan agreements and  which are not anymore  subjected to our procurement laws, particularly bidding procedures.  This brings us to a more fundamental question: why should international agreements, especially those affecting the economy and natural resources, be exempted from the Philippine Senate’s legislative ratification?

 

While it is true that existing Philippine procurement laws do exempt negotiated loan contracts/agreements with foreign governments, and cover only those with the private sector, there is another way to subject negotiated state-to-state loan agreements to public scrutiny and  evaluation. Remember, it is us the public,  who will eventually pay for these loans for decades so that even the presently unborn will also be made to shoulder the burden of payment.

 

One way to prevent secret deals with state-negotiated loan agreements for large-scale projects is to treat these as international agreements under the 1987 Constitution. The Constitution provides, “No treaty or international agreement shall be valid and effective unless concurred in by at least two-thirds of all the Members of the Senate.” ( Art. VII, Sec. 21)  Obviously, in letter and spirit, these are obviously refering to agreements with other foreign governments.  Then , state-to-state loan agreements such as the ZTE/NBN should have been treated as “international agreements” under the Constitution as they are after all agreements negotiated with a foreign government. Furthermore, they have, after all a greater impact on our national life in the form of the tax burden that we all – including the poor –  have to shoulder for repayment.

 

Subjecting this kind of international agreement with a foreign government to ratification by the Philippine Senate will allow institutional transparency and debate through the public hearings as to first, whether we really need this project, and second, whether the project is too costly to further burden the Filipino people.  Will these have the highest economic and social returns to the community and nation? Are these projects well conceived and not just “prestige” but poorly conceived projects as in our past experience of white elephant projects through fraudulent loans especially during the Marcos dictatorship when there was not even an independently fiscalizing legislature? Should these be our priority projects? Greedy and kleptocratic officials in the executive branch (or even from the legislative) who are acting as “fixers”, will find it almost impossible to engage in under-the-table deals especially when taxpayers are being informed how their money is to be spent, how much and at what terms.

 

In the Bicol region, the city of Naga has become a model for its transparent governance by putting online (“I-Governance”) and making available to  constituents information about all services, contracts, transactions, collections, and the names of accountable officials and employees of the city. At the very least, those affected communities and the taxpayers who will eventually shoulder the costs of major public investment projects should be given the opportunity to intervene and have a role in the shaping of the project, before it is approved, not after, as what often happens when they are merely notified during the latter implementation stage.

 

Still, the most ideal situation is to subject all public investment projects financed thru foreign loan agreements & negotiated by the government with other states and multilateral financial agencies , to Senate ratification. These form the greater bulk of our foreign indebtedness for projects that we hardly even know of or benefit from. We cannot allow a few officials and their families and cronies the privilege of  further bleeding  our national budget to the crucifix of foreign indebtedness and destitution.

 

There should be no more secret negotiations for foreign loans that only contribute to our nation’s impoverishment and human underdevelopment. In some Latin American countries, they do not allow foreign loan negotiations in the hands of unaccountable finance officials who are dreaming of eventually joining the World Bank or International Monetary Fund as economists. In some progressive Latin American countries today, foreign loan negotiators include leaders from trade unions, peasant organizations and consumer groups.

 

There can be no other institutional remedy to this especially in handling international agreements of this nature. NEDA’s Investment Coordinating Committee (ICC), which has the reputation of being so  strict in evaluating foreign-assisted projects,  is under the Office of the President who appointed its Director General with full cabinet rank. Indeed, they can be very strict and meticulous with line agency projects proposed for foreign assistance. But what if, for a major foreign-assisted public investment project with a foreign government to be financed with loans from its Export-Import Bank , the pressure to approve no matter at what cost to the Filipino people, comes from the appointing power and Commander in Chief ?

____________________________________________

 

* The author is a former Vice Chancellor for Planning and Development of U.P.Manila/PGH who in his official capacity, oversaw the implementation of the largest Spanish overseas development project in the Philippines, the Sentro Ophthalmologico Jose Rizal at the Philippine General Hospital. He is Full Professor in Development Studies and Public Management at the University of the Philippines,  former Faculty Regent of the U.P. System. and U.P. Centennial Professorial Chairholder.

* Article by Roland G Simbulan – For a full professional background of Professor Roland G. Simbulan (Click Here)

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