EDSA 25: Economic legacy of the first Aquino administration

EDSA taught us that changing Presidents does not end poverty unless structures that perpetuate poverty are also dismantled (Photo by Lyn Rillon)

The P-Noy administration has drawn up a series of activities to commemorate the silver anniversary of EDSA People Power. It started last week and will continue until Feb. 27 highlighted by exhibits, concerts, and a freedom tour and boodle lunch along EDSA, among others.

Amid the planned revelry, the Filipino people are faced with the same social ills that fueled a popular uprising against the Marcos dictatorship 25 years ago. Poverty remains widespread, corruption chronic, and human rights violations rampant. Thus, for the common folk who see the prices of almost every basic good and service shoot up while military generals pocket millions of pesos in pabaon and poor Filipinos are forced to become drug mules and death convicts in China, it is quite hard to make sense of the EDSA celebrations.

To be sure, ousting a strongman who ruled for two decades was not a mistake. But EDSA 1986 as well as its repeat in 2001 taught us three invaluable lessons about change. First, a regime no matter how fascist is no match against a determined and united people. Second, forcing out a dictatorship without overhauling the decaying political and economic system that propped it up will create more corrupt and oppressive rulers in the future. And third, changing Presidents does not end poverty, only the dismantling of the structures that perpetuate poverty does.

Automatic debt servicing, VAT

Cory Aquino, whose untimely death in 2009 turned son P-Noy from a mediocre politician into a presidentiable, was not only the reluctant plain housewife forced to stand up against Marcos. She was also the President who honored the foreign debts of Marcos no matter how odious they were like the Bataan Nuclear Power Plant (BNPP). Cory did not use the rare opportunity created by EDSA to scrap the country’s illegitimate debt and give Filipinos a fresh start. As pushed by the International Monetary Fund (IMF) and World Bank, she instead affirmed through Executive Order (EO) 292 (see Book VI, Chapter 4, Sec. 26), issued on Jul. 25, 1987, the Marcos-era Presidential Decree (PD) 1177 that automatically appropriates for debt servicing.

Automatic appropriation doomed the Philippines to perpetual debt bondage that debilitated the economy, with the country borrowing more from foreign creditors to pay for old debt. Cory reduced the foreign debt by $4 billion during her term but in the process amassed $9 billion in new debt. Total foreign debt thus increased from $26 billion in 1985 to about $30 billion in 1992 and today has swelled to almost $60 billion. To show how automatic debt servicing squeezes the country dry, consider that between 2000 and 2009 (the most readily accessible historical data), the outstanding debt of the national government grew by P2.23 trillion despite shelling out P5.31 trillion to pay the creditors during the same period.

This also explains the perennial budget shortfall faced by all administrations after EDSA. P-Noy is currently facing a record budget deficit of an estimated P309.8 billion. But like his mother, P-Noy adheres to the model debtor strategy as he relies on more debt to address the revenues-expenditures gap. In fact, Aquino vetoed a provision in the P1.645-trillion 2011 national budget that capped government borrowings to 55 percent of the gross domestic product (GDP).

As advised by the IMF-World Bank, Cory also rushed EO 273 imposing a 10 percent Value Added Tax (VAT) on basic commodities in order to assuage creditors’ fear on the capacity of government to raise revenues and service its huge debt. Cory issued EO 273 on Jul. 25, 1987 just before the 8th Congress opened, ensuring the swift implementation of the IMF-World Bank prescription by bypassing the legislature. The VAT was later expanded and increased by the Ramos and Arroyo administrations. P-Noy, for his part, did not only hire the architect of Arroyo’s notorious 12 percent VAT as his Finance chief but also tried to further widen the VAT’s coverage to include toll roads. Fortunately, he was stopped by a temporary restraining order (TRO) issued by the Supreme Court (SC).

Privatization and deregulation

Using the budget and debt crisis she inherited from Marcos as justification, Cory embarked on the country’s first major privatization campaign. On Dec. 9, 1986, she issued Proclamation 50 which allowed the sale of government assets – including sequestered assets of Marcos cronies – to the private sector and eliminated subsidies and support to state-owned firms. Many of the crony assets were heavily indebted and guaranteed by the Marcos regime.

To make them saleable, Cory infused government funds and sold them free of liabilities. In cases where assets were sold to previous owners (like in the case of Meralco), government’s unbooked exposure (interest on loans) was not included. As a result, Cory sold state assets at a net loss of around P4.2 billion from 1987 to 1990.

On Jul. 10, 1987, Cory issued EO 215 that deregulated the power industry and allowed the private sector to build and operate power plants through the build-operate-transfer (BOT) scheme. Cory approved 13 power deals with independent power producers (IPPs) worth $2.4 billion during her term. These BOT contracts contained “take-or-pay” provisions in which the Cory administration assumed market risks by assuring the IPPs that whatever is produced will be bought by government even in conditions when there is less demand for power. Many more similar contracts followed especially during the subsequent Ramos administration. These sweetheart deals caused the financial hemorrhage of the National Power Corporation (NAPOCOR) and bloated its debts, which the taxpayers and consumers are forced to shoulder until today.

Cory’s EO 215, which she later expanded through Republic Act (RA) 6957 or the first BOT Law (1990), sowed the seeds of the so-called public-private partnership (PPP), which is today the centerpiece program of the P-Noy administration. If Cory introduced the take-or-pay scheme, P-Noy has introduced regulatory risk guarantee wherein government will compensate the revenue losses of private investors arising from judicial, legislative, or regulatory interventions. To attract investors in his PPP projects, P-Noy has also been pushing for a fare hike of as much as 100 percent in LRT and MRT.

Hacienda Luisita

And then there is Hacienda Luisita, which remains the most solid testament to one of EDSA’s lessons – that changing Presidents does not end poverty unless structures that perpetuate poverty are also dismantled. Landlord domination is one of these structures but Cory, who belonged to one of the country’s most influential landlord clans, even further reinforced it through the bogus Comprehensive Agrarian Reform Program (CARP).

Like his mother, P-Noy has clearly shown that he is not above the interest of the landlord class he represents. All he can offer is the narrow “kung walang corrupt, walang mahirap”, distorting the fact that 75 percent of the poor live in the countryside where 80 percent of the tillers are landless. (Read more on Hacienda Luisita and the Aquino administration at


Cory had started many other policies that until today continue to impact harshly on the people and the economy.  She implemented the Investment Liberalization Program (ILP) under the country’s first Structural Adjustment Loan (SAL) worth $200 million from the World Bank. It was launched in 1980 (in 1983, the World Bank approved an additional $302 million for the SAL II) but interrupted by the economic and political crises facing the Marcos dictatorship. In 1987, Cory received her own Economic Recovery Loan (ERL) from the World Bank to the tune of $300 million in exchange for fiscal reforms (including the VAT), privatization, and trade liberalization.

Under the ILP, the Cory administration liberalized 2,472 items aside from the tariffication of quantitative restrictions.  These policies eventually led to the influx of imported agricultural goods and other commodities to the local market, destroying domestic livelihoods in the process.

Celebrating People Power

By the end of Cory’s term, 65 percent of Filipinos were considered poor ; unemployment was 10 percent; and inflation at a skyhigh 17 percent, said a New York Times report. It noted that Six years after the ‘People Power’ revolution, what people expected next – release from the poverty, corruption, cronyism and disorganization that plagued the country through decades of dictatorship – has yet to come to pass”.

Almost two decades have passed since the New York Times made this observation but the country which gave birth to People Power in 1986 remains mired in ever deepening economic and political crises.

The Filipino people, however, must still celebrate EDSA for ousting a hated dictator. EDSA, after all, remains a testament to what we can do as a people. That said, we must also learn from the lessons of EDSA and continue building a society that is truly democratic, just, free, and able to provide for the basic needs of the people. (end)


4 thoughts on “EDSA 25: Economic legacy of the first Aquino administration

  1. Pingback: 25th Anniversary of the 1986 People Power Revolution « Victor Villanueva

  2. Hello,

    I’m currently taking up Pol Sci 11 and we are tasked to report on comparing VAT (Cory’s time), EVAT (Ramos’ time) and the 12% tax (GMA’s time). Do you have any suggestions were we can find resources of the topics online? Graphs and figures would be helpful too. Hope to hear from you soon. Thanks!

    • arnold padilla says:

      hi. i advise that you visit ibon foundation, they maintain a databank of secondary materials and original researches and i’m sure you’ll find what you need about vat over there. online, you can try the pids website but not all materials are downloadable. you can also try browsing the online law library of chan robles to compare the vat laws from cory to gloria. hope this helps.

  3. Pingback: The Chronicles of EDSA: The Death, the Rebirth and the Presidency | scribblesofalostkid

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