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?
Saturday, October 11, 2008
Friday, October 10, 2008
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.
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.
Wednesday, October 8, 2008
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."
--------------------------------------------------------------------------------
Kevin Morrison is a Research Analyst at ODC.
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."
--------------------------------------------------------------------------------
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.
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)
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 Debt Watch
Debt Service 2007 is TWICE the combined expenditures for Education, Health, Environment, Agriculture, Social Welfare, Housing and the Military.
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