Congressional Actions on Constitutional Amendments

Issue: Amendments to Article 12: Economy
CONSTITUTIONAL AMENDMENTS House Bills and Resolutions Query

SUMMARY
14th Congress (Filed 07/01/2007 - present) 4
13th Congress (Filed 07/01/2004 - 06/30/2007) 24
12th Congress (Filed 07/01/2001 - 06/30/2004) 18

TOTAL BILLS FILED OVER 7 YEARS 46
TOTAL RESULT 0

Its not as if our current and past 3 congress is not doing anything about constitutional amendments. There is a consensus. There's just too many wise guys that are out of touch with reality, civil society is included. The minority rules and the strategy is if you push the issue, you dont get the street votes.

Is the Philippines too democratic or can we not put our act together? Should we learn from how fast America did the $700B bailout plan? Is NOW the perfect time to do it as we need to compete for foreign investments amid a global financial crisis?

Has street rule become the norm? Has People's Power become part of the problem and not the solution?

Competitive Power Rates for Ecozones Toward Competitive Power Rates for All

Competitive Power Rates for Ecozones Toward Competitive Power Rates for All

AIM Policy Center
Carlo Francis V. Raymundo
Anna Mae T. Tuazon
July 2007

Electricity rates in the Philippines have been a deterrent to the competitiveness of local firms, which bear higher power utility costs than their counterparts in other countries. In the 2007 World Competitiveness Yearbook, the Philippines ranks 29 th out of 44 countries in terms of electricity costs for industrial clients. In order to create an enabling environment for business, quality electric power should be made available and affordable.

Among the hardest hit by the steep electricity rates in the Philippines are the large industrial users, which allocate millions of pesos in operating costs to cover power usage. A number of such organizations are located in the public and private economic zones across the country. While they are able to viably operate and significantly contribute to the country’s economy, many economic zone enterprises have continuously appealed for relief from the burden of high electricity rates in order for them to be more productive. The Philippine Economic Zone Authority (PEZA), the government agency which oversees the successful operation of economic zones, for its part, is committed to address this issue, especially in the wake of a legal opinion issued by the Department of Justice, affirming PEZA’s regulatory function over its estates.

Understanding Debt Relief

ODC Issue Brief


Understanding Debt Relief
Kevin Morrison, ODC

August 1999


The debt initiative announced during the G7 Summit in Cologne in June of this year has received extensive press coverage, yet the casual observer could be forgiven for wondering exactly what is going on. Articles reporting on the Summit have carried headlines like "G7 Agrees to Write Off $ 71bn of Debt Owed by World's Poorest Nations" (Irish Times), "Leaders Approve New Debt Relief Plan Worth $70BN" (The Independent, London), and "Poor Nations To Get Debt Relief, G-7 Agrees to $70 Billion in Reductions" (Chicago Tribune). All of this sounds quite good, so why are so many developing countries and nongovernmental advocates of debt relief unhappy with the Summit plan? This ODC Issue Brief provides some clarification and explanation of the issues involved in the Cologne Debt Initiative (CDI).

The official line from the Summit was catchy and to-the-point: debt relief will be "deeper, faster, and broader."

Nominal vs Net Present Value
There are two ways to measure debt, and figures are reported both ways. "Nominal" is the actual face value of the money owed. "Net present value" (NPV) is the amount of money that would be required to pay off the debt immediately. NPV is the sum of all future debt-service obligations (interest plus principal), discounted at the market interest rate. This is lower than nominal debt when the money has been lent on "concessional" terms (that is, below market rates), as NPV reflects the "grant" element of the loans. It is estimated that NPV is about 54% of nominal debt for the HIPCs.
Deeper: If everything goes well, the CDI would combine with earlier debt relief commitments to relieve up to 70 percent of the approximately $127 billion owed by the highly indebted poor countries (HIPCs). This is roughly $65 billion more in debt relief (in nominal terms–see box) than under the original HIPC Initiative endorsed by the World Bank and International Monetary Fund (IMF) in 1996. About $25 billion of that is relief of bilateral nonconcessional loans and multilateral loans; about $20 billion is bilateral official development assistance (ODA) from members of the Development Assistance Committee (DAC) of the OECD; and about $20 billion is bilateral non-DAC official development assistance.


Faster: In contrast to the earlier HIPC Initiative, in which debt forgiveness was only given after two successfully implemented IMF structural adjustment programs (SAPs), the CDI provides "interim relief" after the first SAP has been implemented. This basically means that debt service payments (as opposed to debt stock-see below) can be reduced after the first SAP. Furthermore, there is now a "floating completion point," which means that debt stock may actually be reduced before the completion of the second SAP if the country does very well in meeting certain "ambitious" targets and policy reforms.

Eligibility Criteria
There were two main criteria for eligibility under the first HIPC initiative: one export-based and one fiscally based. With regard to exports, the most common way to define "debt sustainability," the target debt/exports ratio was in the 200-250% range. The CDI lowers this target ratio to 150%. Under the first HIPC Initiative, the fiscal definition of sustainability was applicable only to countries with certain structural characteristics: an exports/GDP ratio of 40% and a tax revenue/GDP ratio of 30%. For these countries, debt sustainability was defined as having a debt/government revenue ratio of 280%. The CDI has lowered all of these figures. Now the minimum exports/GDP ratio is 20%, and the minimum tax revenue/GDP ratio is 15%. With these criteria, debt sustainability has been lowered to a debt/government revenue ratio of 250%.

Broader: The number of countries that are expected to qualify for the CDI is 33, up from 26 under the original HIPC Initiative. This is due to looser eligibility criteria (see box). Of these HIPCs, under the new Cologne terms, about 24 are expected to have some debt cancellation promised (not necessarily delivered) by the end of the year 2000.

This all sounds fair enough, but the CDI may not end up being as generous as the G7 suggests. For example, it is somewhat misleading for the G7 to say that the CDI will, when added to previous debt reduction commitments, relieve up to "70 percent of the total debts for these countries." First, the $127 billion figure cited by the ministers corresponds to only the 33 countries expected to qualify for the initiative, not the 41 countries defined by the World Bank as HIPCs. Second, the $127 billion figure excludes short-term debt and publicly guaranteed private debt (these are both small in any case). The total debt for the 41 HIPCs is about $207 billion.

It should also be noted that a significant portion (at least $20 billion) of what is being touted as a 70 percent reduction of debt is non-G7 ODA, which the G7 is asking other countries to forgive. It is not clear that this will in fact happen. For example, Eveline Herfkens, Junior Foreign Minister of the Netherlands, said, "The G8 has trailed a string of initiatives for which Dutch financing is essential. But in spite of that we were not involved in the decision-making process. I have since made plain that the Netherlands will no longer finance decisions in which I have not been involved."

But debate about the numbers is only a small part of the debate surrounding debt relief. To understand the problem better, one must understand three key issues: conditionality, debt service vs. debt stock, and financing.

Conditionality

The rationale for debt relief for the poorest countries is that servicing this debt, much of which was incurred many years ago, often by corrupt governments no longer in power, imposes an overwhelming burden on countries already short of resources. Instead of spending more money on much-needed social services, governments must spend large sums of money servicing debts to countries that are, ironically, often giving them aid to support those same social services. Nongovernmental organizations (NGOs) and creditor countries agree that forgiving this debt would theoretically release more funds for education, health, and poverty reduction. Where they disagree is on the question of how to ensure the money made available by debt relief is well spent.

The G7 argues that implementing IMF structural adjustment programs is the best indication of effective policy. In Cologne, they bolstered this with an explicit call for debt relief proceeds to be spent on social expenditures and for civil society assistance in designing how the debt relief is used. This is what they called a "new focus on poverty." NGOs argue, however, that SAPs are too difficult, take too long to implement, and are not focused on poverty reduction themselves. Some NGOs advocate faster debt relief (one to two years), conditional on a government's agreement to spend a significant amount of the resources made available on social spending (an approach Oxfam calls the Human Development Window). Most NGOs also argue for civil society involvement in decisions on terms and conditions of debt relief, including how to spend the money. Therefore, both NGOs and G7 governments want to use debt relief to leverage certain policies in developing countries. The debate is over which policies, and how quickly to give up that leverage.

Debt Stock vs. Debt Service

In addition to the pace of debt relief, there is also debate about what exactly debt relief should target. One of the biggest complaints about the HIPC program was its exclusive focus on debt stock (the total amount of debt owed) as opposed to debt service payments (the amount of the budget actually taken up every year by servicing the debt). The difference is that the debt of many of these countries is so high that they only service part of it (that is, debts to certain donors), and donors acknowledge that much of it will never be repaid. Therefore, "forgiving" it is essentially an accounting exercise. But if debt that is not being serviced is forgiven, debt service payments do not decrease at all. This is one of the reasons that the World Bank and IMF found that, in the initial HIPC program, "for the first seven countries to reach the decision point [that is, finished with their first SAP], estimated scheduled debt service payments after receiving HIPC assistance are not dramatically different from the actual debt service paid for the period prior to the decision point…. In absolute terms, the [HIPC] Initiative may not be significantly reducing debt service from current levels paid." Enter Cologne. The target is still debt stock and not debt service, but the argument is that by simply cutting so much more debt out, payments would be reduced.

However, the presumed connection between debt stock and debt service might not be so direct. As noted above, if the debt stock is not being serviced in the first place, clearing the stock has no effect on debt service payments. Which debt gets forgiven is therefore a key variable. In addition, Jubilee 2000 (an international coalition advocating debt relief by 2000) reported that during the British government briefings in Cologne, the spokesperson said that the degree of debt service reduction depended "crucially" on reducing much of the stock of debt very soon after the completion point. This "front-loading," the spokesperson said, was in turn dependent on how much money ends up in the Millennium Fund, a fund to which the private sector can contribute in order to help finance debt relief. In other words, debt stock reduction does not necessarily equal debt service reduction.

Furthermore, even if debt service payments are reduced, the question is whether or not they are reduced enough. The U.S Treasury has reported that Mozambique's annual debt service payments were $153 million before the first HIPC program and $98 million after. Under the CDI, Mozambique debt service should drop to $73 million. Obviously, these are significant decreases, but $73 million is still more than Mozambique spends on basic health and education services combined. Oxfam and other NGOs believe debt service payments should be lowered to 10% of government revenue.

Financing

Finally, there is the real linchpin of debt relief: funding. As the Finance Ministers' report issued in Cologne said, "these changes will entail significant costs." The Ministers called on the multilateral development banks (MDBs) to continue to "identify and exploit innovative approaches which maximise the use of their own resources." Furthermore, the Ministers will "consider in good faith contributions to an expanded HIPC Trust Fund" (the HIPC Trust Fund was set up to help all MDBs finance debt forgiveness). And there is the Millenium Fund mentioned above, whose size will be determined by private sector generosity. These two latter funding options will be key to lowering debt service payments.

In addition to these funding mechanisms, the G7 agreed to sell up to 10 million ounces of the IMF's gold reserves, invest the proceeds, and then use the interest to finance debt relief. Members of the U.S. Congress have come out against the sales, however, and the United States can effectively veto the sale of the gold by the IMF. Some members of Congress oppose the gold sales on the grounds that they will not only finance debt relief but also help the IMF's Enhanced Structural Adjustment Facility (ESAF) in its transition to self-sustainability. This self-sustainability will make ESAF less accountable to donor governments. Furthermore, there is concern in Congress that the sale of gold reserves will decrease the price of gold on world markets, hurting profits of U.S. gold-mining companies, not to mention a number of gold-exporting developing countries.

The fact is that the money for debt relief has to come from somewhere, and G7 governments hope the IMF gold sales will mean they do not need extra budget allocations to cover it. If gold sales are rejected, the debt initiative will have to be financed directly through government contributions, which will most likely mean one of two things: either it will not be financed at all, or it will be financed at the cost of many governments' normal aid budgets.

Bottom Line

"Concrete proposals" on how to implement the Cologne Debt Initiative are due from the World Bank, IMF, and the Paris Club (the group of leading bilateral donors) by the time of the next Annual Meetings of the IMF and World Bank in September. How they resolve these debates will determine their success. As of now, if it were fully financed and everything went according to plan--e.g., the Millenium Fund received large amounts of money, IMF gold sales were approved, all donors agreed to forgive outstanding official development assistance, and all HIPCs successfully implemented structural adjustment programs--the Cologne Debt Initiative would offer significant debt relief to a number of poor countries. But these are big "ifs."





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Kevin Morrison is a Research Analyst at ODC.

Beginners' guide to debt

Beginners' guide to debt--------------------------------------------------------------------------------


Beginners' guide to debt

"Debt is tearing down schools, clinics, hospitals and the effects are no less devastating than war," Dr Adebayo Adedeji.

A child dies in an obscure Third World country clinic. Another suddenly drops out of school. One's future dashed in infancy, the other's hopes and dreams crushed before they could even begin to unfold.

But they have something deeper in common - both are victims of the effects of the crushing debt burden facing the Third World.

The debt burden is the biggest single barrier to development in the Third World, the most powerful tool that western nations use to keep whole countries in bondage.

It is estimated that the Third World pays the developed North nine times more in debt repayments than they receive in aid. Africa alone spends four times more on repaying its debts than it spends on health care.

It is therefore not surprising that most of the 32 debt-distressed countries in the world are in Africa

How did Africa and other poor regions of the world end up with such a colossal debt burden?

In order to understand the debt crisis and the struggle to cancel the debts of the poorest countries, we must understand how it all started.

We need to look at the huge impact on the economies of developing countries; how the West and Third World have responded to the crisis.

We also need to examine the nature of debt relief being offered and administered. This Guide concludes with a description of the various types of debt and the campaigns for debt cancellation.



The start of the crisis

The early 1970s saw the United States government overspending and printing more dollars to make up for it, resulting in a sharp fall in the value of the dollar all over the world.

This in turn affected the price of oil, a vital commodity that has always been priced in dollars. Oil-producing countries reacted by raising the price of their commodity in 1973. Much of the world felt the pain of this sharp oil price rise, while the oil producers made billions of dollars and deposited them in western banks.

This created another crisis in the banking sector as interest rates crashed. To avert total disaster, banks started lending out money to Third World countries that wanted to maintain development and meet the rising cost of oil at the same time. For more see this Oneworld partner site: http://web.archive.org/web/20041013223801/http://www.jubilee2000uk.org/debt.html



Debt relief

The West's response to the growing debt crisis has been to hatch up plan after plan, initiative after initiative, fearing that the Third World would not be able to pay back much of what it owes.

None of these plans have adequately addressed the whole problem and the bulk of the crisis remains unresolved.

The Brady Plan: was devised in 1989 when it became very clear that debts to commercial banks were becoming worthless because the banks had theoretically written off huge chunks of it under the assumption that they would never be paid back.

Brady encouraged commercial banks to cut the actual value of the outstanding debt so that they would have less to pay back. Writing off some of the debt did this with some funding from the IMF and World Bank. The remaining debts were rescheduled by converting them into what became known as the Brady Bonds that were sold on the secondary market.

Trinidad Terms: Former British Prime Minister John Major mooted a plan which proposed to cancel 50 per cent of debts owed by the lowest income countries while rescheduling the rest, shelling out a net relief of about £18 billion to the poorest countries.

Sixty-seven per cent debt write-off was eventually agreed to at the 1994 G7 summit, but this was only applied to a small number of poor countries' debts.

HIPC (Highly Indebted Poor Country) Initiative: In 1996 the IMF and World Bank pulled a major surprise when they produced an initiative that `contemplated' debt cancellation for the first time.

The initiative also included a strategy that would enable debtor countries to get out of unsustainable debt. Visit these sites for more information on HIPC:http://web.archive.org/web/20041013223801/http://www.oneworld.org/eurodad/hipc.htm; http://web.archive.org/web/20041013223801/http://www.worldbank.org/hipc/; http://web.archive.org/web/20041013223801/http://www.imf.org/external/np/hipc/hipc.htm

1999 Cologne Debt Initiative: otherwise known as (HIPC2), was really much ado about nothing. It was touted as a positive development by the world media as it promised to write off $100 billion of debt owed by poor nations.

Why then were debt campaigners and NGOs unhappy with this initiative? Visit http://web.archive.org/web/20041013223801/http://www.odc.org/commentary/ibaug99.html to learn why.

Mauritius Mandate: In September (2OOO?) the British government tried its best to breathe some fire into the flickering embers of HIPC at the Commonwealth Finance Ministers' summit in Mauritius. It demanded that most of the 21 HIPCs quickly reach decision point by the end of the year 2000.

Campaigners believe the number of such countries could very easily be raised to 50 but what shocked them was that even Britain's limited proposal was met with severe hostility by other creditor countries.

Delays in granting relief to Nicaragua and famine-prone Ethiopia are clear examples of donor reluctance to effect deeper debt relief

******************

However to get a grip on the problem of the debt burden, one must move away from the figures and understand three key issues eloquently explained by Kevin Morrison on this site: http://web.archive.org/web/20041013223801/http://www.odc.org/commentary/ibaug99.html:




Conditionality


Debt service Vs Debt stock


Financing




Types of debt

Multilateral Debt: is money owed to international financial organisations such as the IMF and World Bank, as well as regional development banks such as the African Development Bank. Forty-five per cent of HIPC debt is multilateral.

Bilateral Debt: is money owed to individual governments like the United States, Britain, Japan and France. These governments meet in two groups, the Paris Club (US, Japan and European countries) and the non-Paris Club group (Asia and Eastern Europe). Forty-five per cent of HIPC debt is bilateral.

Commercial Debt: is money owed to international commercial banks like Citibank. Commercial debt accounts for 10 per cent of HIPC debt.



The campaigns

Jubilee 2000: has been by far the leading debt campaign organisation. It is a coalition of like-minded NGOs and faith-based organizations and charities that drew its inspiration from the Biblical concept of the Year of Jubilee, described in Leviticus 25, during which slaves were to be freed and all debts and obligations cancelled.

Together with organisations like Christian-Aid (http://web.archive.org/web/20041013223801/http://www.christian-aid.org/), Oxfam UK (http://web.archive.org/web/20041013223801/http://www.oxfam.org.uk/), World Development Movement (http://web.archive.org/web/20041013223801/http://www.wdm.org/), CAFOD (http://web.archive.org/web/20041013223801/http://www.cafod.org.uk/), Tearfund (http://web.archive.org/web/20041013223801/http://www.tearfund.org/) they raised the issue of debt on the agenda of G8 countries, multilateral and bilateral donors.

They underscored debt as one of the biggest barriers towards the attainment of global economic justice and have pledged to continue to fight until sufficient strides are made to cancel debts of the poorest nations.

Jubilee 2000 called for:


Definitive cancellation - not just reducing or rescheduling debt service.


Cancellation of all UNPAYABLE debts NOT all debts, although for the poorest countries, cancellation of unpayable debt would naturally mean canceling all debt!


Removal of stringent policy reform conditionality demanded by most adjustment programs that worsen poverty.


Recognition of the responsibility of both lenders and borrowers in the crisis and joint action in the recovery of all resources stolen by corrupt regimes.


Cancellation that benefits ordinary people and negotiated on terms that are agreed to in a transparent and participatory process that will break the never-ending cycle of debt.

Civil Society is very active in its massive campaign to repeal automatic appropriation of the debt service

My apologies to Civil Society for my earlier acidic remarks. They are very active and they are ON THE FLOOR with a massive campaign to repeal automatic appropriation of debt service in the national budget!


By Liling Magtolis Briones
From ABS-CBN Interactive
October 15, 2007



More than twenty years ago, Rep. Edcel Lagman teamed up with Freedom from Debt Coalition in a massive campaign to repeal automatic appropriation of the debt service, and cancel payments of illegitimate debt. The FDC president was a professor named Leonor Magtolis Briones.

During the Cory Aquino Administration, Edcel successfully led Congress in reducing the debt service several times and allocating the reduced amount to social development. President Aquino immediately vetoed these congressional initiatives.

When President Ramos came into power, Edcel Lagman succeeded in convincing his colleagues in Congress to create a Committee of the Whole just to discuss the matter of debt. In an unprecedented move, Professor Briones and Professor Winnie Monsod addressed the entire Congress and explained why it was necessary to repeal automatic appropriation of the debt service. There were no questions asked.

Freedom from Debt Coalition lobbied with individual congressmen and conducted briefings and dialogues. The latter promised support. The day before the voting, Speaker de Venecia called for a caucus of administration Congressmen. The next day, Congress was filled to the rafters with students, peasants and labor union members. Thousands more waited outside. One by one Congressmen cast their vote. Those who rejected the Lagman bill far outnumbered those who favored it. Many supporters disappeared for one lame reason or another.



Now, Edcel is himself Chair of the Appropriations Committee. With full support of his colleagues in Congress particularly the Minority Group, the Liberal Party, Freedom from Debt Coalition, and Social Watch which called for suspension of debt payments in its alternative budget , the national budget was passed on October 12, 2007.

According to the Inquirer the debt service was reduced by P17.3 billion.

Yes, the Debt Jedi have returned. This time, they are stronger and have much broader support. They have the support even of administration representatives.

Kudos to the 48 civil society organizations who joined forces with Social Watch Philippines and Freedom from Debt Coalition! Thank you to the champion of alternative budgeting, Teofisto “TG” Guingona III, Minority Group led by Reps. Ronaldo Zamora, and Darlene Antonino-Custodio, Rufus Rodriguez, as well as the Liberal Party group led by Reps. Lorenzo Tanada III, Hermilando Mandanas, Joseph Emilio Abaya and Liwayway Vinzons-Chato. A round of applause for the Appropriations Committee headed by Rep. Edcel Lagman and members like Cong. Eduardo Gullas, Carmencita Reyes and Thelma Almario.

For the first time in a long, long while, Congress is asserting its power over the purse. Even as it is dominated by the majority, it has refused to be a stamping pad of the Executive and has signaled that it intends to maintain the balance of power between the Executive and the Legislative. This is as it should be in a democracy.

Now, the debt issue is laid at the door of the Senate who can either stand by the original debt service or support the initiative of Congress. Eventually this issue will land with the Executive. Will history repeat itself? Abangan!

From a distance. Being away is an excellent opportunity to view the Philippines from a distance. I am here to attend the meeting of the Coordinating Committee of Social Watch which is composed of individuals from fifteen different countries. A global viewpoint certainly helps in analyzing Philippine developments from a larger perspective.

For example, the Alternative Budget Initiative organized by Social Watch Philippines is considered very significant in terms of the global movement for participatory budgeting. The united action of Congress on the debt service which was initiated by civil society, is a source of inspiration to other countries who are still struggling with heavy debt burdens.

Truly, the Philippines is a trailblazer in effective civil society action.

(Ms. Leonor Briones is a former National Treasurer of the Philippines. She is currently teaching public administration at the National College of Public Administration and Governance, University of the Philippines. She is also a Co-Convenor of Social Watch Philippines . She also writes a column for the Business Mirror)

Philippine External Debt as of Sept 2007

Philippine Debt Watch

Debt Service 2007 is TWICE the combined expenditures for Education, Health, Environment, Agriculture, Social Welfare, Housing and the Military.

A reader on Proposed Amendments to Article 12

Again, we do not need to reinvent the wheel. There is a learned consensus positively inclined to our cause since 1999.

Prepared by the Congressional Planning and Budget Department
February 2003

PROPOSED ECONOMIC REFORMS

In 1999, President Joseph Estrada issued Executive Order 43 to create the Philippine
Commission on Constitutional Reforms (PCCR) to "facilitate the study of proposals on
economic reforms that can be accomplished through constitutional amendments." President Estrada’s administration recognized that the economic provisions of the 1987 Constitution were very restrictive stifling government’s flexibility to formulate economic policy and to attract investments.

The findings and recommendations of the PCCR are discussed below.

Economic Policy Formulation.

1. The restrictive provisions of the 1987 constitution have limited the ability of our country to compete in the global economy. PCCR submits that “the basic legal framework of the (1987)Constitution presents practical and philosophical difficulties in approaches to economic,trade and investment policies.” It has limited the flexibility of the government to respond to the changes in the global environment, hence adversely affecting the economy’s capacity to achieve higher growth.

2. These restrictive provisions can be found in Sections 9 & 19 of Article II, Declaration of Principles and Article XII on the National Economy and Patrimony.

3. Section 19 of Article II needs to be reviewed because of ambiguity in language. The phraseology aspiring for “independent” national economy “effectively controlled” by Filipinos taken together with other provisions in the Constitution gives rise to controversial policy decisions that affect investments. A concrete example is the Supreme Court decision on the choice of site for a proposed petrochemical complex. When the decision was made in 1990, investments from Taiwan fell from P3.4 billion in 1990 to P329 million in 1991.

4. The provision of Section 1 Article XII dictates that the economic base of the country shall be agricultural development and agrarian reform. This precludes a shift to other economic models for development. Note that in other countries the share of agriculture to total GNP ranges only from 5-16% as compared to the Philippines' 20%. This provision together with other provisions in the Constitution “prevents responsive government action to address problems in the
management of economic affairs”. It is proposed by PCCR that the constitution give
Congress and other government institutions the flexibility to craft and formulate policies responsive to the changing economic environment.

Removing Equity Restrictions on Foreign Investments

5. We need to attract foreign capital badly needed to finance economic growth. The study cited that to achieve a growth rate of 5.2 – 5.8%, the Medium Term Development Plan for 2000 – 2004 estimates an additional investment requirement of P31.7 billion a year (US$826 million). To reach a growth rate of 8%, the additional capital resource requirement will increase to P618.3 billion per year (US$15.3 billion).

6. Compared to other Asian countries it is only in the Philippine Constitution where restrictions on foreign investments are expressly stated. In other countries, foreign investment polices are regulated by legislation. There are no provisions prescribing citizenship or foreign investment equity ratios in their constitutions. The only exception is the constitution of Thailand which restricts foreign ownership in mass media companies. Some quarters say that this kind of provision in the Philippines' and Thailand's Constitution is no longer relevant because of mass access to foreign satellite television and the internet.

7. The Commission recommended that the following restricted areas in the 1987 Constitution be liberalized and subjected to regulation by law. The arguments for liberalizing these sectors are given below:

7.1. Public Utilities, Franchises and Infrastructure

PCCR recommended that foreigners be allowed to invest in and manage public utilities,
transportation, communication, power and water supply based on a policy of nondiscrimination and merit. The power granting franchises should be given to specialized regulatory agencies, which would result in greater efficiency and expertise in the supervision of the industry.

7.2. Mass Media and Advertising

The equity restrictions in the Constitution has denied Filipinos access to new
technological innovations which require huge investments that local companies find
difficult to raise. Certain sectors oppose the liberalization of mass media because of the fear of foreign influence. However this is unfounded because foreign media is already accessible to Filipinos through cable television and the Internet. In the case of advertising the arguments for liberalizing this sector are the need for new
capital, technology and expertise. It has been noted by the study that the ten top
advertising firms are already partly owned by foreign entities.

7.3. Educational Institutions

The educational sector in the Philippines is also being left behind because of lack of funds for new technology, basic facilities and infrastructure. The latest techniques in education need greater use of information technology and alternative media, which require huge investments. There is a need therefore to open up this sector to foreign investors to give our students access to better education and raise educational standards up to par with other countries. Sectors opposed to this proposal cite the possible influence of foreigners shaping the students patriotic values. The PCCR study however contends that the curricula will still be controlled by the Department of Education. At present, the Constitution already allows foreigners to own and manage educational institutions but only through religious
orders and mission boards.

7.4. Land Ownership

The recommendation of the PCCR is to liberalize the ownership of industrial and
commercial land, which represents less than 1% of the total land area of the Philippines, in order to attract more investments and increase job opportunities.

Those against this proposal advocate that liberalizing land ownership would make
Filipinos lose control of their land. Also there is lack of evidence that land ownership would improve attractiveness of Philippines as an investment site and the current law allowing long term lease is sufficient to attract investors to the economic zones. (Some countries like China and Vietnam do not even allow private land ownership but are receiving huge amounts of foreign investment.)

7.5. Natural Resources

The huge capital requirement to develop our natural resources particularly the energy, mining, fisheries and forestry sectors is the main argument to liberalize these sectors. Likewise, the entry of foreign investors into these areas of the economy is expected to bring in not only capital but new technology and expertise in operating these industries. The PCCR recommended that these sectors be regulated by law and not through the Constitution.

Ø The capital needed to develop the country’s energy resources to meet the energy requirements of the economy is estimated at P486 billion for a five year period 1999 – 2004. (Medium Term Development Plan)

Ø The mining industry’s performance has been on a steady decline since 1993. This
sector used to be a significant contributor to the national economy in 1980,
generating 20% of the country’s export earnings. To revive this sector there is a need to infuse huge investment capital. To develop and operate a single copper or gold mine requires around US$200 million to US$ 300 million.

Ø Fisheries production in the country hardly grew to meet the needs of the population. The growth of the sector from 1997 to 2000 averaged 1.97 % compared the
population growth of 2.4%.To revitalize the fisheries industry we need to develop
capacity for distant water fleets, exploit new fishing grounds, strengthen policing and surveillance of fishing grounds, and establish new infrastructure facilities. Equally important in this program is the strengthening of government regulations against illegal fishing and environmental measures to restore the ecology of Philippine waters.

Ø The country’s forest cover has been reduced to 18% of total land area of the country or around 5.4 million hectares. Forest denudation has cost the economy P10.6 billion a year in terms of losses in productivity and utility of infrastructure. It has brought about environmental disasters such as flash floods and drought, causing more damage to the country. Forest Master Plan estimates a total expenditure of P35 to P40 billion a year to counter damage and depletion of our forests. To do this, we do not only need capital but also foreign technology and expertise.

Reference:

Proceedings of the Preparatory Commission on Constitutional Reforms, 1999.

Fil-Am PAG Directions

Fil-Am PAG outlined current and immediate past materials on Article 12 of the Philippine Constitution to establish basis. Among the materials included were transcripts of meetings of the Committe on National Patrimony and Economy. Hence, readers are transported inside that session were it was shown that in general, there is a positive inclination to consider what we espouse.

Surprisingly, even the Trade Union Congress of the Philippines supports changing Article 12. Proposed changes were captured from other blogs also. An AIM speech by Girardo Sicat in favor of changing Article 12 was also highlighted. There is even a report from the Philippine Development Forum's Working Group on Growth and Investment Climate participated by mainstream businessmen like Don Jaime Zobel de Ayala among others, who needs no introductions.

But since Fil-Am PAG espouses mainstream politics and advocates critiques not via short smarty quips but via Memorandum of Arguments and SOLUTIONS, on the premise that its webpresence shall be read by policy makers and taken in a positive context, it shall remain rooted to such strategy. We can discuss less formal quips here in EPIC25, for example. But, Fil-Am PAG should become as trustworthy to be read in a joint session of Congress - if it would mature and have that aspirations in the future.

We have read a lot of negative statements espousing retention in toto of Article 12 or retention partial. Most of them, however, are not as eloquent as the one made by Justice Isagani Cruz in the article A Test of Resilience for the Constitution. Hence, that was the only one posted in Fil-Am PAG.

Fil-Am PAG has closed its academic presentation on other articles as it feels it has enough basis material and the others are just redundant noise. It is now time for everyone else to post their Memorandum of Arguments and SOLUTIONS, pros or cons.

As everyone else, the administration, mainstream politicians and mainstream businessmen seem to be aligned with what we espouse there is nothing else perhaps we should do but wait. In short, they have jumped the gun on us already demonstrating deep concern for the Philippines' growth and whatever we add if not of equal eloquence would just be redundant noise, tinkling cymbals.

What is derailing these right now is the widespread perception that any changes in the constitution (Article 12 included) is synonymous to the infamous cha cha, or con con, con ass, synonymous to the president's alleged wishes to perpetuate herself in power. This is where it stopped. Who is to blame? Civil Society, that chic group that we are all dying to be identified with as identification to it is social climbing that needs no apologies as it retains social relevance. Hmmp! Certainly, it would be political suicide for the president to push the issue. We, civil society, do have the penchance to shoot ourselves on the foot!



And yet, Fil-Am PAG also cannot be bullied into a one-sided addition to the political noise that already have consensus. Civil Society, on the other hand, must walk their talk and not just talk their talk.


That being settled, we have to look at OTHER causes why the Philippines is not yet tigerizing.

One of these causes is the issue of debt, worldwide debt for that matter. In the Philippines, payment on INTEREST (that word again!) is the single biggest item in the national budget. In 2003, it ate up more than 28% share of the budget. The following year, allocations for interest payment took up more than 33% of the budget - bigger than allocations for all social services combined.

In 2004, actual payments on interest and principal combined exceeded the total tax collections at 100.6%. This represents 86.2% of national government revenues (tax and non-tax) for the year. In 2005, it may have been 85% of total revenues also. This means that only 15% of NG revenues can be spent on everything else. HOW DO YOU RUN A COUNTRY WITH THAT and the Holier than the Pope Civil Society breathing down your neck? Add the league of local governments advocating federalization (including budget).

An opening line was earlier posted, i.e., Interests, WHAT KEEPS US RICH WHAT KEEPS US (AND OUR COUNTRY AND THE REST OF THE WORLD) POOR.

The next punch is to analyze advocacies on dealing with debt. And here is an opening proposition critiquing debtor nations:

Debt is an efficient tool. It ensures access to other peoples’ raw materials and infrastructure on the cheapest possible terms. Dozens of countries must compete for shrinking export markets and can export only a limited range of products because of Northern protectionism and their lack of cash to invest in diversification. Market saturation ensues, reducing exporters’ income to a bare minimum while the North enjoys huge savings
— Susan George, A Fate Worse Than Debt, (New York: Grove Weidenfeld, 1990), pp. 143, 187, 235

[I]f a society spends one hundred dollars to manufacture a product within its borders, the money that is used to pay for materials, labor and, other costs moves through the economy as each recipient spends it. Due to this multiplier effect, a hundred dollars worth of primary production can add several hundred dollars to the Gross National Product (GNP) of that country. If money is spent in another country, circulation of that money is within the exporting country. This is the reason an industrialized product-exporting/commodity-importing country is wealthy and an undeveloped product-importing/commodity-exporting country is poor. Developed countries grow rich by selling capital-intensive (thus cheap) products for a high price and buying labor-intensive (thus expensive) products for a low price. This imbalance of trade expands the gap between rich and poor. The wealthy sell products to be consumed, not tools to produce. This maintains the monopolization of the tools of production, and assures a continued market for the product. [Such control of tools of production is a strategy of a mercantilist process. That control often requires military might.]
— J.W. Smith, The World’s Wasted Wealth 2, (Institute for Economic Democracy, 1994), pp. 127, 139.


And so Fil-Am PAG need not beam its banter only on the Philippines and the administration. It must also allow consensus and bright ideas on how to discuss debt and how can David twist Goliath's hand and hit the Illuminatis right on the eye - that we, too, are part of the godhead.

And so must we eat cake and let Rome burn?

PDF: Working Group on Growth and Investment Climate

PDF is the Philippine Development Forum

Under the Government's updated 2007-2010 Comprehensive Infrastructure Investment Program (CIIP), total investment is estimated at about P2.1 trillion ($52.5billion), 59% of which is expected to come from the national government, 28% from the private sector, 7% from government corporations and government financial institutions, and the rest from other sources.

Click on the Title above to get the latest accomplishment report on this working group.

Hidden Economy of the Philippines

Done in 2006

Excerpts:

The study finds a positive relationship between the degree of regulation and the incidence of public corruption. As strictness of regulation was not observed to relate to low product quality or a greater degree of environmental degradation, the study contradicts public interest theories of regulation and supports public choice models in that the primary benefactor of regulation appears to be the bureacrats.


Size of the Shadow Economy (As Percentage of GDP)
Bolivia 65.6%, Peru 57.4%, Costa Rica 23.2%, Argentina 21.8%, Chile 18.2%, Thailand 71%, PHILIPPINES 50%, Sri Lanka 40%, Egypt 68%, Nigeria 76%, Morocco 39%, Ukraine 53.7%, Croatia 38.2%, USA 8.8%...


The Informal Workforce and Gender: Percentage of Non-agricultural workforce in the Informal Sector 1991-1997

Philippines, Women 64%, Men 46%

Major Causes: Corruption of Bureaucrats, Lack of access to credit

EXPORT PROCESSING ZONES: PAST AND FUTURE ROLE IN TRADE AND DEVELOPMENT

Organisation de Coopération et de Développement Economiques
Organisation for Economic Co-operation and Development
OECD Trade Policy Working Paper No. 53
23-May-2007

PART IV CONCLUSIONS

111. Export processing zones (EPZs) as a policy tool for development and export-oriented growth has proliferated over the last four decades. More than 100 countries have currently implemented some form of zone policy for the supply of goods and services to foreign markets. EPZs have had mixed impacts on countries’ economic development. While in some countries it has led to export diversification and growth,
employment creation, and foreign exchange generation, in others results have been disappointing.

112. In this paper, we reviewed the evolution of EPZs and reviewed EPZs from and economic and trade rule perspective. The analysis in this paper indicates that:

• EPZs are a suboptimal policy from an economic point of view. Improvement of the business environment through trade and investment liberalisation, establishment of good infrastructure, rule of law and administrative simplification remains the optimal policy option to promote investment, employment and growth.

• EPZs however can provide an interim solution to developing countries with poor business environments where bridging deficiencies at a national level is not possible. This type of policy – with resources and market incentives focused on a subset of the economy– may be less timeconsuming and require less political capital in the short term as it allows for continued protection of domestic industry.

• As an interim solution EPZs should not be considered a substitute for general economic reform. While incentives may make up for certain deficiencies, governments should bear in mind that such incentives are provided by taxing other parts of the economy, and thus should provide commensurate benefits to the economy.

• EPZs and similar policy instruments can logically serve as a stepping stone to trade liberalisation on a national basis. They reduce anti-export bias of high tariffs by allowing an exporting company to access inputs at global prices, and thus may facilitate the creation of an export industry and improve a country’s trade balance.

• Governments should consider all available policy options when examining strategies for export promotion, including general trade liberalisation, bonded warehouse schemes, duty drawback schemes, zone type EPZs and enterprise type EPZs. Each scheme has its advantages and disadvantages. In some cases countries have pursued a combination.

• In designing an EPZ policy, a government should set realistic expectations and conduct a thorough cost/benefit analysis. In conducting such an analysis, it should bear in mind that benefits are dependent on private investment which are unpredictable and rely on external factors. Thus governments should minimise upfront costs (e.g. infrastructure costs) whenever possible.

• Choice of location is critical for zone type EPZs. Companies look for, among other things,reliable infrastructure (energy, logistics, telecommunications), adequate supply of labour, and a TD/TC/WP(2006)39/FINAL 53 well-functioning legal environment. A good location will minimise the costs of putting these
requirements into place. Tax incentives provided to compensate for deficiencies are costly and unsustainable. More importantly, access to local suppliers is the key to promote technology transfers from foreign companies to domestic companies.

• While the use of financial and other incentives to attract foreign investors may be necessary in the short term, such incentives have government revenue implications and do not provide a substitute for policy measures towards a sound investment environment. Such incentives should be minimal and time bound. Long-term commitments create equity problems by discriminating an EPZ company and non-EPZ company which both are inherently equally important for the economy and go against the “temporary” nature of EPZs.

• Improved legal services, enforcement of the rule of law – even designated courts for dispute settlement - and streamlined procedures can significantly reduce business risk and help attract investors. Bearing in mind that FDI may pull out when incentives phase out, improvements in the business environment should be made expeditiously. EPZs can be a first step to such improvements by providing an avenue for consultation between governments and businesses. Improvements in the business environment thus achieved should be extended on a national basis.

• Exemptions or relaxation of labour rules and other regulations have often been detrimental by creating differential standards within a country which may disadvantage certain classes of workers and contribute to economic distortions.

• Interaction of EPZs and regional trade agreements may also lead to MFN tariff cuts. Phase out provisions for EPZs and duty drawback schemes often contained in regional trade agreements to avoid circumvention may force governments to respond in different ways. Governments can either phase-out tariff exemptions on inputs for exports to RTA partners and risk losing FDI, or allow continued access to inputs at global prices by cutting tariffs on an MFN basis.

Philippines at the Crossroads of Competitiveness

Philippines
GLOBALLY COMPETITIVE
SERVICES/INDUSTRIES

1. Tourism
2. Electronics
3. BPO ( Outsourcing/Offshoring)
4. Health & Wellness including Retirement
5. Supply Chain Logistics value-added
6. Agri-industries
7. Mining
8. Vehicles/Shipbuilding/Parts

2008 State of Philippine Competitiveness

Philippine THINK TANKS

NIRA's World Directory of Think Tanks


Asian Institute of Management - Policy Center (AIM Policy Center)
--------------------------------------------------------------------------------
Eugenio Lopez Foundation Bldg., Joseph McMicking Campus, 123 Paseo de Roxas, Makati City 1260, The Philippines
tel:63-2-892 4011 (ext 2108) fax:63-2-751 9182
e-mail:aimpolicycenter@gmail.com
URL:http://www.policy.aim.edu
--------------------------------------------------------------------------------

Organizational Status: Non-profit, Educational Institution, founded in 1996

General Description: The AIM Policy Center is one of the five Centers for Research and Management Excellence that the Asian Institute of Management houses. It is the public-policy think-tank of the Institute. AIM conducts research and advocates for policies that promote a business environment fostering a level playing field, globally competitive industries and sustainable economic development. Recommendations are presented to the government as "private sector solutions to public problems".

Staff: 13 research, 4 administrative / support, 2 visiting, 1 intern

Executive Officers:
Dr. MACARANAS, Federico (Executive Director)
Ms. TECSON-JIMENEZ, Corazon (Associate Director)
Ms. DENOPOL, Rommella (Program Manager - Global Competitiveness Program)
Mr. RAYMUNDO, Carlo Francis (Program Coordinator - Infrastructure and Energy Program)
Mr. CARTAGENA, Ronald (Program Manager - City Competitiveness Program)

(As of August, 2007)



Philippine Institute for Development Studies (PIDS) --------------------------------------------------------------------------------
4th floor, NEDA sa Makati Building, 106 Amorsolo Street, Legaspi Village Makati City 1229, The Philippines
tel:63-2 893 9591/9578/5705 fax:63-2 816 1091
e-mail:publications@pidsnet.pids.gov.ph
URL: http://www.pids.gov.ph

--------------------------------------------------------------------------------

Organizational Status: Governmental institute, founded in 1977.

General Description: PIDS engages in long-term, policy-oriented research. PIDS was established in response to a critical and growing need for systematic and comprehensive studies that can guide and support decision-making in the government. It is envisioned to be a development policy think tank for planners and policy and decision-makers, specifically those in the Cabinet, the Legislature, and the network of agencies that make up the National Economic and Development Authority (NEDA), the country's development planning office. PIDS's activities are aimed at expanding research on social and economic development in order to assist policymakers and leaders in their decision-making, serving as a common link between the government and existing research institutions, and establishing a repository for economic research information and other related activities. To carry out its mandate, PIDS has maintained its Research Program, Outreach Program, and Dissemination and Research Utilization Program as basic programs.

Annual Budget: USD 1.2 million (2003)

Staff: 100 (56 research, 44 administrative/support)

Executive Officers:
Dr. LAMBERTE, Mario B. (President)
Dr. LLANTO, Gilberto M. (Vice President)
Mr. FERANIL, Mario C. (Director for Project Development and Services)
Ms. LIGUTON, Jennifer T. (Director for Research Information)
Ms. AGCAOILI, Andrea S. (Director for Operations and Finance)


Public Relations:
Ms. LIGUTON, Jennifer T. (Director for Research Information)
Ms. SIAR, Sheila V. (Division Chief for Publications and Circulation)
Mr. MARTIN, Edwin S. (Division Chief for Public Affairs)


(As of November, 2004)

4 Presidents, 1 first lady tell it like it was

By Marinel Cruz
Philippine Daily Inquirer
First Posted 04:55:00 09/29/2008

What's in $700-B plan for Filipinos?

ANALYSIS
By Cielito Habito
Philippine Daily Inquirer
First Posted 05:15:00 10/02/2008

Protectionism That Endangers

MORE THINK TANK TOWN...
By Rod Hunter
From the Hudson Institute
Tuesday, July 8, 2008; 12:00 AM

This week G-8 and African leaders meet in Hokkaido to discuss how to respond to rising prices for commodities such as food. The food crisis highlights the need for farmers in developing countries to become productive participants in the global economy. One of the most important steps to achieve that goal would be for members of the World Trade Organization to to liberalize their agricultural markets.

Prices of staples have risen by more than 80 percent since 2005. The sharp price rises are driven by the failure of the world's farms to keep up with food demand powered by global growth. Years of strong growth has lifted millions out of poverty and led to a shift to diets richer in animal protein. It takes a lot of grain to produce a little meat, and as more people eat more meat, grain demand rises.

The world's food supply has not grown as quickly. Farms in developed countries have increased productivity and production, but farms in developing countries haven't kept pace. In 2006, U.S. cereal yields reached nearly 6,500 kilograms per hectare, while Asian and Latin American yields were less than 3,500, and African yields were less than 1,500.

To be sure, other factors contribute to rising food prices. High oil prices and biofuel policies are sucking agricultural commodities into the energy market. Loose monetary policy is spurring inflation and may be encouraging investors to seek refuge from inflation in commodity markets. As always, weather plays a fickle role.

Why aren't farmers in developing countries keeping up? The World Bank's Word Trade Indicators, which combine information on countries' tariffs on imports, tariffs paid by their exporters, logistics and trade costs, and ease of doing business, provide telling insights and suggest a path forward.


High tariffs correlate with poverty. WTI data demonstrate a strong negative correlation between tariffs and prosperity, with the poorest countries having the most restrictive tariffs and the wealthiest having the least restrictive.


Farm tariffs have not fallen as fast as other tariffs. There has been a trend toward tariff reduction in recent years. But countries have liberalized less in the farm sector than elsewhere.


Poor countries have the highest farm tariffs. Trade restrictiveness of agricultural tariffs among developing countries is highest in the Middle East and North Africa (equating to tariffs of 21 percent), South Asia (21 percent), and Sub-Saharan Africa (15 percent).


Countries with better trade logistics integrate faster. The World Bank assessed countries' trade logistics services, including efficiency of customs services, ease and timeliness of transport, etc. Logistics rankings are influenced by countries' ports, raid and road infrastructure. Countries with better logistics saw more rapid increases in trade. The Middle East and North Africa and sub-Saharan Africa ranked worst in logistics, as well as in ease of doing business.

In light of these data, one might expect broad support for improving developing countries' logistics, infrastructure and ease of doing business, and for liberalizing agricultural trade. The focus of donors and multilateral development banks on agricultural infrastructure is promising. Unfortunately, India, which purports to speak for the G-77 of least developed countries, has been hawking a perverse agricultural mercantilism. Indian commerce minister Kamal Nath rightly points out that the U.S. and E.U. need to cut farm subsidies. But he deflects requests to open his market by arguing that developing countries need a "special dispensation" allowing them to make "lower or no cuts" of tariffs for "sensitive" products.

A glance at India's WTI profile should be enough to dissuade others from wanting to emulate its approach. Indian farmers face low tariff barriers in other countries (the equivalent of 4.7 percent tariffs). India does a poor job, however, on trade logistics and is a notoriously difficult place to do business (ranked 120th out of 178 countries), thus lowering productivity of Indian farmers. India maintains highly restrictive agricultural tariffs (54 percent), compounding the food crisis for India's urban poor.

Agricultural tariffs cuts are only part of the solution for increasing the production of farmers in developing countries. Donors need to follow through on aid aimed at improving agriculture and rural development; many poor countries need to improve their business environments; and farmers need biotech crops adapted to local conditions. But tariff reductions are an important part of the solution.

The author is a senior fellow at the Hudson Institute and was senior director of the National Security Council under President George W. Bush.

Political maturity remains elusive in Philippines

International Herald Tribune
By Carlos H. CondePublished: MONDAY, JULY 18, 2005

MANILA: When Fidel Ramos, the former president, showed up at the presidential palace a little more than a week ago to express support for Gloria Macapagal Arroyo, who was going through the most trying 24 hours of her administration, he not only lent his weight to the president's efforts to calm a country on the brink of damaging political turmoil. He also underscored the reality here that the same old faces, the same old families and the same old interests continue to hold sway over the political life of this country.To the outside world, it might seem confounding that people like Ramos, who was president from 1992 to 1998, or Corazon Aquino, who replaced the dictator Ferdinand Marcos in 1986, still feel morally obligated to weigh in on national political events.But the reality is that this country of 84 million people, which once boasted an intelligentsia that was deemed the most sophisticated in Southeast Asia, is still going through what one Filipino columnist recently called "the most drawn out political adolescence in modern history."Why do a few oligarchic families continue to dominate the political life of this former Spanish colony, in a pattern once familiar in many Latin-influenced countries?If there is any consensus coming out of the current political crisis, which began with allegations that Arroyo rigged her election last year, it is that the system has to go, says Manuel Quezon 3rd, a political analyst and historian.

"The problem is, no one agrees whatsystem to replace it with," Quezon said.Experts on politics and governance do agree, however, that the families and politicians who have a lock on government here have been the bane of Filipinos, thriving on so-called patronage politics that keeps democratic processes in a state of dysfunction.The result is a faulty electoral system, a low level of political awareness among the populace and a degree of corruption that has seriously damaged Philippine society and hobbled economic development.All of these factors conspire to push the country near the edge of chaos in a kind of cyclical pattern that has decayed what was once among the region's most promising democracies.Worse, the few new and young leaders who emerge are frequently co-opted by traditional politicians. These new leaders then establish political dynasties themselves or fortify existing ones, perpetuating a vicious circle.Clarita Carlos, an expert on governance and politics at the University of the Philippines, said she believed that Philippine politics merely facilitated the "circulation of elites, people who have mastered how to be economically and socially mobile by taking advantage of the limitations of the system."As a result, the Filipino political class "has become so inbred that they've become detached from the concerns of the majority," said Quezon, who is himself the grandson of a former president.In a healthy political environment, Quezon said, the oligarchy would relinquish power to a new political class. "Sadly, this is something most Filipino oligarchs never did," he said.Steven Rood, the country representative here of The Asia Foundation and an expert on local governance, thinks it is not so much a question of why Philippine politics has the same faces but why the situation has not changed over many decades."I would say that the basic fundamental reason is that the people who run the system are the ones benefiting enough from it that they're worried about change," Rood said.The American anthropologist Brian Fegan, writing in "An Anarchy of Families," a book published in the 1990s, said that "the Filipino family is the most enduring political unit and the one into which, failing some wider principle of organization, all other units dissolve."Filipinos look at political continuity as merely the transfer of power among family members, Fegan said. Thus, they also look at political competition in terms of rivalry between families. "A family that has once contested an office, particularly if it has once won it, sets its eye on that office as its permanent right," Fegan said.That has been the case for decades and, as Rood of The Asia Foundation explained, "there's an enormous amount of historical continuity at play" in the present crisis. Rood traces this back to the period of Spanish colonization and the American colonization that followed it.The Americans, Rood says, did not change the Filipino social structure. "They imposed a political system that allowed this social structure to gain political power," he said. "It's been the marriage of social position and political power ever since that produced essentially the same state that we have now."Luis Teodoro, the executive director of the Center for People Empowerment in Governance, a political research institute in Manila, said the Americans had a hand in this predicament. They supported regimes led by powerful political families who, in turn, furthered American interests and helped suppress the nationalist politicians who tended to undermine them.Without U.S. support, he said by way of example, the regime of Ferdinand Marcos would not have lasted as long.Marcos persecuted the oligarchs who went against him and befriended those who were willing to cooperate with his regime. While he used these families to prop up his regime and amass the wealth for which he would later be infamous, these families went on to exploit their ties with him, widening and strengthening their political bases and enriching themselves even more. Marcos, in turn, used these power bases, particularly in the provinces, to keep himself in the presidential palace.After Marcos was toppled in 1986, the political families that he cultivated werereplaced by new ones allied to the next regime, that of Corazon Aquino. As if that were not enough, the lines that at first separated Marcos and anti-Marcos politics became so blurred that it is not surprising today to find a former Marcos foe hobnobbing with the scions and friends of the former dictator.Switching sides thus became widespread. Filipino political parties had intermarried to such an extent that, today, it is difficult to know which party is allied with whom. "We're paying for this damage now," said Nereus Acosta, a congressman.

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