Ateneo PolSci Bloggers

Under Debt, Underdevelopment

In Political Economy, Politics on June 26, 2009 at 9:58 pm

by Rosselle Tugade

Yesterday, a very alarming information tidbit was passively delivered as good news in one of the state-owned television networks: the Philippine government has yet again secured a staggering loan from the World Bank amounting to more or less $70 M as part of a fifteen-year “adaptable programme loan” primarily aimed at improving irrigation systems, which in turn is geared towards agricultural productivity and food security.

This new dubious transaction entered upon by the Arroyo administration touches upon several salient problems that constitute the flaws of the country’s economic policy framework. Ultimately, this move is a reminder that we are deeply mired in the poisonous wells of the neoliberal regime, and our top officials are all too happy to let the country sit in that position of utter stagnation.

On the shady side of things

The agreement is problematic both in its immediate as well as fundamental levels. Firstly, though the initial amount of the aforementioned figure is uniform in all salvageable reports that have made their way in mainstream media, the reported total cost of the project has been stated in varying details. One report pegs the project at about $413 M, while another one delivers a figure of about $113 M. Nevertheless, what is clear about the deal is that the particulars and terms are not subjected to public scrutiny.

The lack of transparency surrounding this new loan is manifest of how the government is grossly, intentionally exclusionary of public interest when it comes to entering into loans which the taxpayers will have the burden of paying off in the first place! However one may look at it, this agreement reeks of the hegemonic elitist discourse when it comes to matters pertaining to public policy formulation and governance. At this point, the State is already guilty as charged with the betrayal of the public trust and interest by jeopardizing what little resources we have in recovering from our decades-long condition of unproductivity.

A double imagery of sorts unfolds: the World Bank, run more as a Mafia of the First World rather than an institution for equitable international development is whopping out irresistible loans to countries marching onward to Fourth World status like the Philippines with the promise of increased productivity in the public sector. Meanwhile, the Philippine State–being mired in decades-old debt–trumps up the good-credit-rating card in adherence to such institutions perpetuating global injustice. One can surely bet on this: as the indebted middleman to the greatest loan sharks in the world, the State will squeeze blood out of its already-suffering Gross Domestic Product to service this new loan on top of the trillions’ worth previous ones. And more.

The Indefinite Reign of International Debt

Hence, going further into the core of the issue will inevitably hit the seabed of the interminable Philippine economic crisis: international debt. While it is admittedly a less-than popular explanation to what the country has been suffering for a quarter of a century, it is but undeniable that the mind-blowing amount of money being paid by the government to external creditors–up to more than 20% of national budget and more than a massive 70% plus of our GDP as of the start of the current decade [1]–has been a major source of development backlog for the country.

In the introduction penned by Rep. Walden Bello for the 2009 edition of his book “The Anti-Development State”, he lucidly asserts why debt servicing has been the scourge of the Philippine economy. He writes, “Yet it requires no special intelligence to realize that the massive amounts of money that have gone to paying our creditors to service our constantly mounting external debt was money that could not go to development. It cannot be otherwise given that resources are finite.” [2] What this truism highlights for the most of us is not the alarming rate at which the debt is ballooning nor the portion that debt servicing has in the national pie. Instead, the message being sent across is the perennial inability of the State to get its act together to reform its institutions, rethink its doctrinal approach, muster enough political will to centrally plan the economy and invest on fundamentals, restructure the country’s debt, and to ultimately do away with neoliberalism.

Loans such as this new $70 M one from WB are justified under the pretext of infrastructure development, yet no substantial infrastructure investment has been dramatically seen by the Filipino people for the past decades, save for the likes of telecommunications which are in themselves largely privately-funded. Even the excessive taxation on petroleum products are not going to its proper destination, which is the improvement of public transportation and roadways. The government has been milking the people dry of their hard-earned money instead on taking the initiative of favoring local trade more than international players and institutions.

Flawed Fundamentals

On a more particular note, among the articulated goals of the new loan is that of pumping the capacity of the National Irrigation Administration on executing its rural projects to reduce government reliance. This goes to show that the borrowing philosophy of the government is still nailed within neoliberal fundamentals of reducing central State power and its role into a mere managerial level. The pattern of such government decisions are visible throughout the past few decades, with rabid zeal, leaving the country still curled up in the claws of the hegemonic global financial institutions. In the contemporary era of fiscal turmoil, what the Philippines should least prioritize is jumping right smack in the middle of the pool of piranhas.

If the government truly wants to bring productivity to the countryside, it should review its overarching approach to agricultural development. While the administration has been quick to agree to a shady loan with a lot of logical negative consequences, it has on the other hand, been deaf to the 22-year call of farmers for genuine agrarian reform. Again, the absurd ideological leaning of the State is rendered visible in this contrast: that the State has a preferential option towards marginal elite and capitalistic interests and not the victimized tillers of the soil.

The fact that we are now the world’s biggest importer of rice despite of being home to one of the biggest rice research facilities in Asia and being endowed with hectares and hectares of viable agricultural land only speaks much of what the State has failed in doing. If agricultural development is propped up as the centerpiece of the country’s development project, then a commitment of concrete deeds and policies should complement the promise.

The stacked-up loans of the Philippines may contribute to the good creditor image that the government wants to project but ultimately, they all add up to a crumbling tower that is danger of effectively wrecking our economy apart. What the $70 M World Bank loan will achieve, if any, will be nowhere near assuring food security for the Filipino people. At this very moment while the ink which sealed the deal is just about drying up, generations of Filipinos will be left poor and starving–for food, for justice, for freedom from the tyranny of scheming institutions–all for the price of debt which we should not owe in the first place.


[1] Patricio Abinales and Donna Amoroso. State and Society in the Philippines. Pasig City: Anvil Publishing, 2005.

[2] Walden Bello, et al. The Anti-Development State: The Political Economy of Permanent Crisis in the Philippines. Pasig City: Anvil Publishing, 2009.


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