SONA 2017: What’s in it for China in Duterte’s ‘Build, Build, Build’?

Big infrastructure lenders like China and Japan profit not only from the interests accruing from their loans to build rails and roads. The larger gains they make are from the conditionalities they tie to these loans.

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President Rodrigo Duterte with President Xi Jinping of China (Photo from Etienne Oliveau/Reuters, Aljazeera)

In his second State of the Nation Address (SONA), President Duterte as expected mentioned his grand infrastructure plan. There was special mention of China that Duterte said generously offered money for his “Build, Build, Build” program.

“If your Congress has no money, we will give you money” was what the Chinese supposedly told him, the President said in his speech.

Duterte in his SONA made the Chinese offer look like simple altruism and generosity. But in reality, on top of making Chinese imperialism appear benign, using soft power by bankrolling the country’s hard infrastructure profits China’s economy in various ways.

No debt crisis?

The concerns that Duterte’s infrastructure plan would result in a heavy debt burden are valid. After all, the price tag of what economic managers call as the “boldest infrastructure development program” in recent history is a whopping Php8 to 9 trillion.

Economic managers, however, assure the public that they have everything figured out. The plan is that government appropriations, not debt, will mainly fund the so-called “golden age of infrastructure”. The Finance department’s tax reform package aims to raise Php157 billion in additional revenues a year; the version passed by the House could generate Php130 billion.

At Php8 to 9 trillion, the annual cost of building infrastructure from 2017 to 2022 would be Php1.6 to 1.8 trillion. Clearly, the additional revenues from the tax package will not be enough even as it bleeds the poor dry.

In reality, the infrastructure program would be mostly debt-funded. But again, the public is being told that a debt crisis will not rear its ugly head. In fact, the Budget department expects that by the end of President Duterte’s term, the debt-to-GDP ratio would even fall to 38.1% from 40.6% in 2016.

Such optimism hinges on the economy not only sustaining its expansion but posting even more rapid growth. To outpace debt, the gross domestic product (GDP) must grow by 6.5 to 7.5% this year and 7-8% between 2018 and 2022.

It is tough to be as upbeat as administration officials given the structural weaknesses of the economy and amid a global crisis. For this year, debt watchers and creditors put Philippine GDP growth at 6.4 to 6.8% – below the range being hoped for by the economic managers. That’s the most bullish the projections could get.

Whatever rate the GDP grows by, the budget deficit is sure to increase as government ramps up infrastructure spending. The plan is to let the budget shortfall climb to 3% of GDP as infrastructure spending reaches as high as 7.4% of GDP.

While a bigger deficit means greater borrowing, there is supposedly no need to be anxious as the Budget department claims they will borrow in a fiscally sustainable way. Eighty percent of the deficit would be funded by domestic debt and only 20% foreign. Such borrowing mix lessens foreign exchange risks that could cause public debt to balloon.

Chinese and Japanese loans

But a review of what the Duterte administration has identified as its flagship infrastructure projects tells a different story. To be sure, the flagships – numbering 75 as of June – are just a fraction of the more than 4,000 infrastructure projects that government plans to do. They nonetheless represent the largest ones in terms of cost and are the top priorities for implementation.

Of the 75 flagship projects listed by the National Economic and Development Authority (NEDA), 48 will be funded by foreign debt or official development assistance (ODA). Only 14 will be bankrolled through the national budget or General Appropriations Act (GAA). Just two projects are planned to be implemented via public-private partnership (PPP) while 11 have yet to be identified which mode to use.

As of June, only 53 out of the 75 flagships have estimated costs totaling PhpPhp1.58 trillion. Of the 53, 41 are ODA-funded projects worth Php1.40 trillion. The remaining Php181 billion would be funded through the GAA. In other words, almost 89% of the total cost of projects with already determined amounts will be paid for by foreign debt. (See Tables below)

Flagship infra summary

Notes: ODA – Official Development Assistance; GAA – General Appropriations Act; PPP – public-private partnership; TBD – to be determined (Based on data from NEDA) 

Just nine of the 41 ODA-funded flagship projects have identified donors/creditors, based on NEDA’s June list. These are Japan with three projects worth Php226.89 billion; China, three projects (Php164.55 billion); South Korea, two projects (Php14.06 billion); and World Bank, one project (Php4.79 billion).

The Chinese and Japanese are backing the Duterte administration’s largest mega-projects, an indication of how the two economic behemoths see “development cooperation” as one of the key arenas of their competition in the region. Japan is funding the Php211.46-billion PNR North 2 (Malolos-Clark Airport-Clark Green City Rail); Php9.99-billion Cavite Industrial Area Flood Management Project; and the Php5.44-billion Malitubog-Maridagao Irrigation Project, Phase II.

Meanwhile, China is bankrolling the Php151-billion PNR Long-haul (Calamba-Bicol); Php10.86-billion New Centennial Water Source – Kaliwa Dam Project; and Php2.70-billion Chico River Pump Irrigation Project.

Although not yet identified in the latest NEDA list, various media reports also link Chinese and Japanese loans to other big-ticket rail projects. These include the Php134-billion PNR South Commuter Line (Tutuban-Los Baños); the Php230-billion Manila Metro Line 9 (Mega Manila Subway Project – Phase 1); as well as the Mindanao Rail Project, of which the first phase (Tagum-Davao-Digos) costing Php35.26 billion will be funded via the GAA. (See Table below)

ODA flagship 1

ODA flagship 2

ODA flagship 3.png

Source: NEDA

Download NEDA’s entire list here

Gains beyond interests

Over-reliance on debt is obviously problematic but by itself tapping concessional loans to build much needed infrastructure is not a wrong policy. Sadly, ODA is shaped not by genuine development cooperation but by the narrow agenda of lending governments and the corporate interests they represent. Thus, potential economic and social development gains for a borrowing country are greatly weighed down by bloated costs of ODA-funded infrastructure.

Big infrastructure lenders like China and Japan profit not only from the interests accruing from their loans to build rails and roads. The larger gains they make are from the conditionalities they tie to these loans such as requiring the Philippines to exclusively source from Chinese and Japanese firms the goods and services needed to build the rails and roads.

Lenders dictate the technology, design and construction of the infrastructure to accommodate their own suppliers and infrastructure firms. As such, Chinese and Japanese contractors are also favorably positioned to corner operation and maintenance contracts once the rail systems and other infrastructure are privatized under the Duterte administration’s hybrid PPP scheme.

Lastly, creditors also favor the development of infrastructure in areas where they have business interests. This explains the concentration of Japan-funded infrastructure in Central and Southern Luzon where export zones with Japanese investments are concentrated. China’s interest in building infrastructure in Mindanao is tied to its plantation and mining interests in the region.

All these make the cost of infrastructure development in the Philippines more expensive and the debt burden onerous. Tied loans for infrastructure development creates commercial opportunities for Japanese and Chinese companies that are otherwise not available to them. In China’s case, infrastructure lending in poor countries is even used to create employment for their own workforce at the expense of local labor.

At a time of prolonged global recession and slowdown in profit rates of the industrial economies, these opportunities become even more important. Alas, these opportunities only arise by undermining the debtor’s own development needs. ###

(This is a slightly revised version of an article first published as IBON Features)

Trump builds ‘legitimacy’ thru bombs and war-making

trump_nuke_65478534
Photo from trofire.com

When Donald Trump surprisingly clinched the US presidency, the legitimacy of his regime has been challenged from the onset. Rival Democratic Party, with the apparent help of the Central Intelligence Agency (CIA), immediately launched a campaign to delegitimize Trump.

Even within his Republican Party, there seems to be mistrust on Trump to pursue traditional US foreign policy, which since 9/11 has been largely defined by the neoconservatives (i.e., advocates of preemptive wars, among others).

The reason? Trump’s stance on Russia and his overtures of normalizing relations with the US’s longtime adversary during the campaign. Trump’s position reflects the agenda of the monopoly capitalist clique he represents such as a faction of Big Oil that is willing to cooperate more with Russia for its vast oil and gas resources.

One of them is Exxon Mobil, which has a mammoth $500-billion oil deal with Russia. President Barack Obama blocked the deal as one of the sanctions against Russia for its role in Ukraine. Improved US relations with Russia would allow Exxon Mobil to exploit oil from almost 26 million hectares of Russian land, said to be five times the size of what America’s largest oil company has in the US.

But normalized US-Russia relations aren’t as simple, of course. It requires a shift as well in US foreign policy towards Russia’s biggest allies Iran and China, something that even Trump himself is unwilling to do. A policy shift in Iran would greatly compromise the US long held agenda to remain in control of Middle East oil while it will not give up Asia Pacific and its massive market, vast resources and strategic sea-lanes to China.

De-escalating a lucrative New Cold War amid a prolonged economic crisis also doesn’t sit well with the military-industrial and security complex, which profits out of war and the threat of war that is constantly driven by the endless competition among monopoly capitalists to divide the world.

The controversies and predicament that Trump faces simply show the deepened contradiction among the competing big interests in the US and imperialism’s increasingly convoluted geopolitical agenda.

Picking up the momentum of the Democratic Party’s propaganda that Moscow hacked the US elections to benefit Trump, the billionaire President has been depicted as a Kremlin stooge by the CIA-fed corporate mass media. A leaked wiretapped conversation with a Russian diplomat of Trump’s national security adviser Michael Flynn, who was since forced to resign, further fired up anti-Moscow hysteria as the Federal Bureau of Investigation (FBI) and several congressional bodies investigate the alleged Trump-Russia collusion. Trump knew that the campaign to destabilize his fledgling regime was real; that a domestic CIA “regime change” operation is likely already ongoing.

In this regard, Washington’s swift decision to drop 59 Tomahawk missiles on a Syrian airbase is more about Trump trying to preserve his presidency than retaliating (in the name of “small children and beautiful babies” killed) against a supposed chemical attack by the Russia-backed Assad regime. The message that the Trump retaliatory attack (which reportedly killed nine civilians, including four children) tried to convey was clear: explicitly, the “bromance” with Vladimir Putin is no more and implicitly, the happy days for the lucrative war making business are far from over.

Trump’s self-serving intention in directly bombing Syria only serves to amplify the brutal criminality of US military intervention and war of aggression in that country and region that has already claimed thousands of innocent lives. In March alone, there were reportedly 1,472 innocent civilians killed in Syria by US-made and delivered bombs.

Amid the corporate media hysterics, a more reasonable action by Trump – like supporting Moscow’s call for a prompt and serious probe even as it claims that Assad’s opponents were the ones in possession of the nerve gas – could be easily interpreted as further proof that a Kremlin puppet is in the White House. Instead, Secretary of State Rex Tillerson hints that a regime change in Syria is now back on the agenda even if it aggravates the tension with Russia.

Trump is on the offensive to reverse the campaign to undermine his presidency by rallying the entire monopoly capitalist state machinery behind a campaign to reassert US global power and dominance, including through reckless saber-rattling and military adventurism that court all-out nuclear war.

He followed up his action against Syria with the much publicized bombing of an ISIS cave and bunker complex in Afghanistan with the so-called “Mother of All Bombs”, the largest non-nuclear weapon in the US arsenal. It was a “shock and awe” display and ruthless projection of US firepower, which is meant to send the message that it is business as usual for US imperialism and that Syria, North Korea, China, Iran, even Russia and others that threaten US interests should take notice.

After bombing Syria and Afghanistan, Trump then deployed the nuclear-powered USS Carl Vinson aircraft carrier and its group of battle warships off the coast of the Korean peninsula in an attempt to bully North Korea to stop its recent missile tests.

It remains to be seen how Trump’s more aggressive military posturing abroad will favorably impact on his shaken legitimacy at home. What is clear is that this will increase the stake for the US to meddle more in countries that play a key role in promoting its interests and agenda in the region and the world.

How such greater foreign intervention would translate in the Philippines is something that must be closely watched as the Duterte administration tries to negotiate a peace pact with the revolutionary groups that pose the biggest threat to US imperialism in the country – the Communist Party of the Philippines (CPP), the New People’ Army (NPA) and the National Democratic Front of the Philippines (NDFP) –– and starts to forge closer bilateral ties with US rivals China and Russia.

Already, pro-US forces, including several of President Rodrigo Duterte’s own men, have been relentlessly undermining the peace talks with the Left while ensuring that US military presence in the country remains strong.

But the situation also presents a good opportunity for Duterte to show that his independent foreign policy is beyond mere rhetoric by asserting national sovereignty and interest over the US’s imperialist agenda. ###

Obama and the US Cha-cha lobby

Photo from here
Photo from here

Malacañang announced that defense and security would be on top of the agenda during US President Barack Obama and President Benigno Aquino III’s meeting on April 28. This, of course, is expected. In time for the visit, negotiators have rushed a new defense accord that will facilitate greater US access to and use of Philippine military facilities amid the country’s continuing territorial row with China. Obama and Aquino may sign the controversial Agreement on Enhanced Defense Cooperation next week as one of the concrete results of the highly anticipated meeting.

But another controversial topic may be discussed when the two presidents meet – Charter change (Cha-cha). Obama may discreetly push Aquino to give his open support to ongoing efforts to amend the 1987 Constitution.

Note that the US government and American corporations are among the long-time advocates of removing the constitutional restrictions on foreign investment. In fact, the Obama administration is more direct in its lobbying for Cha-cha compared to its predecessors.

Behind the cover of development assistance and promoting good governance, the Obama administration is quietly propping up the Cha-cha campaign through its so-called Partnership for Growth (PFG). The PFG is a signature inter-agency effort of Obama’s Presidential Policy Directive on Global Development, which claims to “elevate economic growth in countries committed to good governance as a core priority for US development efforts”. It supposedly aligns with policy reform areas outlined by the Aquino administration in its Philippine Development Plan (PDP).

The PFG is defined by the active participation and coordination of more than a dozen US government agencies led by the State Department, US Agency for International Development (USAID) and the Millennium Challenge Corporation (MCC), as well as multilateral donors like the World Bank, International Monetary Fund (IMF), United Nations (UN) agencies and even non-government organizations (NGOs) and private corporations.

In the Philippines, among the initiatives being supported by the PFG through the USAID is the Cha-cha lobby, which is being led by US companies under the American Chamber of Commerce (AmCham). In February 2013, AmCham and USAID launched The Arangkada Philippines Project (TAPP). This initiative pushes for the implementation of the policy proposals contained in the comprehensive advocacy paper “Arangkada Philippines 2010: A business perspective” prepared by the Joint Foreign Chambers of Commerce in the Philippines (JFC) where AmCham is a key member. Among the numerous policy proposals of the Arangkada initiative is addressing the 60-40 constitutional restrictions on foreign investments as well as other reforms for liberalization, deregulation, privatization and denationalization.

Meanwhile, even before the TAPP, the US government has been advocating Cha-cha through the Office of the US Trade Representative (USTR), which regularly brings attention to policy makers the restrictive economic provisions of the Constitution and the implicit message to remove them because they are barriers to US trade and investment. In March this year, the USTR released the 2014 edition of its National Trade Estimate Report on Foreign Trade Barriers covering 58 countries and trade partners of the US. The report is an inventory of the most important foreign barriers affecting US exports of goods and services, US foreign direct investments (FDI) and protection of intellectual property rights (IPR).

For the Philippines, the USTR identified the 30% constitutional limit on foreign ownership in advertising; 40% limit on foreign investment in the operation and management of public utilities (water and sewage treatment, electricity distribution and transmission, telecommunications and transportation); ban on foreigners to practice law, medicine, nursing, accountancy, engineering, architecture and customs brokerage; and restrictions on foreign ownership of land, aside from existing national laws, as among the barriers to trade being implemented by government.

Providing the backdrop to the US Cha-cha lobby is the Trans-Pacific Partnership (TPP), a potential free trade agreement (FTA) to create more profit opportunities for American businesses. The TPP is a key component of the so-called US pivot or rebalancing to Asia, which is the overarching agenda of the Asian tour of Obama that aside from the Philippines also includes Japan, Malaysia and South Korea. Obama’s former national security adviser called the TPP the centerpiece of US economic rebalancing to Asia and platform for regional economic integration. Aside from their territorial disputes with China, another common thread among the four Asian countries that Obama will visit is the TPP where Malaysia is already a negotiating party while Japan and South Korea are expected to join soon, and the Philippines pushing for its inclusion.

While the TPP and US-PH bilateral economic ties are not as controversial as the rushed and secretive new defense agreement between Manila and Washington, these items in Obama’s agenda during his meeting with Aquino do have far-reaching implications, such as Charter change and its impact on Philippine sovereignty and economic development. Several US officials have declared – and admitted by some of Aquino’s Cabinet secretaries – that Philippine membership to the TPP will require amending the Constitution given the highly ambitious liberalization that the US-led FTA is aspiring for.

Obama’s discussion with Aquino on TPP will further heighten persistent US pressure to implement Cha-cha. Last month, a top official of the USTR was in the Philippines and met with Trade, Agriculture and Tariff Commission officials to discuss the country’s possible participation in the TPP. In January last year, a “powerhouse” trade mission composed of executives from US giants Citigroup, Chevron, Coca Cola, General Electric, Procter & Gamble and JP Morgan Chase, among others, also met with Aquino to lobby for Cha-cha and the TPP. The US trade mission was facilitated by the US-Philippine Society (USPS), a business lobby group co-chaired by Manny Pangilinan, a perceived Cha-cha supporter whose businesses are bankrolled by substantial foreign capital (beyond constitutional restriction, such as PLDT).

Do not expect Obama’s Cha-cha lobby to land in official press statements after the visit because the US is not supposed to meddle in the Philippines’ internal affairs and violate its sovereignty. We may just notice, however, a Cha-cha campaign that is more energized than ever. ###

Read more on US-Philippine relations under the Obama and Aquino presidencies

US-PH Partnership for Growth: Greater economic intervention

Obama’s victory: the fallacy of lesser evil and illusion of choice

“2+2” equals more secret US bases in PH

Obama’s dreaded drone war arrives in PH

US agenda in Asia and the risks that Aquino is courting

Tubbataha grounding: expect more abuses as US pivots to Asia

IBON infographic: US military operations in PH, 2001-2011

US-PH “Partnership for Growth”: Greater economic intervention

While much of the discussion about the pivot and renewed PH-US relations centers on the military aspect, there is also the equally crucial, if not even more far-reaching, economic dimension of the pivot (Photo from bulatlat.com)
While much of the discussion about the pivot and renewed PH-US relations centers on the military aspect, there is also the equally crucial, if not even more far-reaching, economic dimension of the pivot (Photo from bulatlat.com)

Despite US President Barack Obama’s absence, State Secretary John Kerry’s visit still underlines the increased bilateral engagement between the Philippines and the US. It comes at a time when US foreign policy is increasingly focused on the region under its so-called pivot to Asia Pacific. The visit, which follows a series of high-profile exchange of visits between top Filipino and American Executive and Defense officials since 2010, is controversial amid ongoing talks between Manila and Washington to increase rotational presence of American troops in the country or basing privileges and the still ongoing territorial spat with China.

While much of the discussion about the pivot and renewed PH-US relations centers on the military aspect, there is also the equally crucial, if not even more far-reaching, economic dimension of the pivot. Under the Obama and Aquino presidencies, mechanisms to facilitate further reforms in the economy that promotes US economic interests are steadily being set up through US foreign assistance programs such as the comprehensive, multi-donor Partnership for Growth (PFG) initiative. Silently, the PFG and other US efforts are setting the stage for an even more wide-ranging and systematic US intervention in the country’s internal policy making.

PH dependence on US economy

The US has been able to perpetuate Philippine dependence on the US economy. American investors remain the biggest source of net foreign direct investments (FDI) in the Philippines. From 1999 to 2012, net FDI from the US reached $4.52 billion, accounting for 19.8% of the total during the said period. Last year, US net FDI was pegged at $784.74 billion or 38.6% of the total, and 248.9% higher than the figure in 2011, at a time when investments from Japan, the European Union (EU), Asean and others have sharply declined.

Similarly, the US continues to be the number one buyer of Philippine exports and biggest supplier of its imports. Direct Philippine-US trade for the period 1999-2012 was $218.64 billion or 17.5% of the total. During the same period, the US accounted for 19.4% of Philippine exports and 15.8% of imports. Certainly, the figures are much higher when one considers that a portion of Philippine trade with Asean and East Asia actually ends up with the US.

Finally, the US also accounts for the largest source of remittances from overseas Filipinos (OFs), including overseas Filipino workers (OFWs). From 1989 to 2012, total OF remittances reached $205.71 billion, of which $108.30 billion or an overwhelming 52.6%, come from US-based migrant workers. Preliminary data for 2013 covering the months of January to July show that remittances from the US reached $5.54 billion or 43.9% of the total during the said period. Since the 1980s, OF remittances have become the largest source of foreign earnings for the Philippines and practically keeping the backward economy somehow afloat. The figures from the US are bloated a bit by the practice of remittance centers in various cities abroad to course remittances through correspondent banks that are mostly US-based. But consider also that based on the latest (2009) stock estimate of OFs, US-based OFs account for 2.88 million of the 8.58 million Filipinos abroad, or 33.6% of the total.

Through the decades, the US has spent substantial amounts to sustain and deepen its clout. Disbursements of bilateral official development assistance (ODA) from the US for the Philippines from 1999 to 2011 reached $1.12 billion, 20.9% of total disbursements during the said period and the second largest behind Japan. However, while ODA disbursements from Japan have been considerably falling since the 2008 global financial and economic crisis, bilateral US aid during the same period has steadily increased, growing by an annual 18.5% from 2009 to 2011. Under the Obama administration and its announced pivot to Asia Pacific, disbursements of bilateral US economic aid have substantially increased. From an annual average of $108.12 million and a yearly growth of 4.6% from 2001 to 2008, US bilateral economic aid to the Philippines jumped to an annual average of $152.23 million and a yearly expansion of more than 18% from 2009 to 2011.

More US intervention, neoliberal reforms

While already expanding, US assistance to the Philippines is anticipated to further increase with the introduction by the Obama administration of new initiatives that facilitate greater US intervention in the country. Requested US aid for the Philippines for fiscal year 2014 is pegged at $188 million, 17.1% higher than the base appropriation for fiscal year 2013.

One such new initiative is the Partnership for Growth (PFG), a signature inter-agency effort of Obama’s Presidential Policy Directive on Global Development, which claims to “elevate economic growth in countries committed to good governance as a core priority for US development efforts”. The PFG supposedly aligns with policy reform areas outlined by President Aquino in the Philippine Development Plan (PDP). The PFG is defined by the active participation and coordination of more than a dozen US government agencies led by the State Department, USAID and the MCC as well as multilateral donors like the World Bank, International Monetary Fund (IMF), United Nations (UN) agencies and even non-government organizations (NGOs) and private corporations.

A Statement of Principles was signed by both countries during the November 2011 Manila visit of then State Secretary Hillary Clinton. The document reflects the two governments’ supposed mutual goal to place the Philippines on a path to sustained, more inclusive economic growth, and elevate it to the ranks of high-performing emerging economies. For the US, the PFG will better position the Philippines in its objective of joining the TPP in the future.

Under the PFG, the US intends to deepen its role in national policy making such as through the five-year Joint Country Action Plan (JCAP) which identified priority areas for policy reforms in the Philippines, including trade and investment liberalization, deregulation, effective enforcement of contracts with private business (such as those engaging in PPP) as well as fiscal and judicial reforms. (See Box)

box - pfg action plan

An example of how US steers internal policy making is the PFG’s centerpiece program in the Philippines, which is the $433.91-million grant from the Millennium Challenge Corp. (MCC). The MCC is a highly conditional aid and requires the Philippines to, among others, maintain so-called “economic freedom” to continue receiving the grant. For instance, one of the indicators of economic freedom, as designed by the MCC, is the Trade Policy Indicator which measures the country’s openness to international trade based on average tariff rates and non-tariff barriers (e.g. trade quotas, production subsidies, government procurement procedures, anti-dumping, local content requirements, etc.) to trade. The “Compact” or agreement between the Philippine government and MCC is that the latter may suspend or terminate the grant if the country fails to reverse its policies that are inconsistent with the Trade Policy Indicator and other indicators designed by the MCC.

Also, the MCC grant does not only facilitate further liberalization of the economy but serves as a tool as well for US intervention in counterinsurgency. Aside from the the $214.4-million Samar Road project, which targets communities in Samar that are considered strongholds of the New People’s Army (NPA), the MCC grant also includes the $120-million Kapit-Bisig Laban sa Kahirapan – Comprehensive and Integrated Delivery of Social Services (Kalahi-CIDSS). Kalahi is essentially the “social development” component of the military’s counterinsurgency campaign in Mindanao and in areas considered as stronghold of the NPA. Another project funded by the MCC grant is the $54.3-million Revenue Administration Reform Project (RARP) which aims to raise tax revenues, reduce tax evasion and revenue agent-related corruption. The rest of the grant is allocated to program administration and oversight.

“Arangkada”

Early this year, USAID and the American Chamber of Commerce (AmCham) launched the The Arangkada Philippines Project (TAPP) as part of the implementation of the PFG. Through the USAID-funded TAPP, AmCham will push for the implementation of the policy proposals contained in the comprehensive advocacy paper “Arangkada Philippines 2010: A business perspective” prepared by the Joint Foreign Chambers of Commerce in the Philippines (JFC), of which AmCham is a key member.

The JFC paper listed 471 specific recommendations that promote the interest of foreign corporations in the country through greater liberalization, deregulation, privatization and denationalization while intensifying the attack to the rights and welfare of the people.

Among others, their proposals are to: amend the Labor Code to allow subcontracting and easier termination of employees; promote IT-BPO curriculum in colleges and education reform, adopt K+12 model; lift restrictions on foreign ownership in media and advertising; promote tie-ups with foreign firms; protect PPP investors from political (i.e. regulatory) risks including TROs from courts; scrap ‘unwarranted’ taxes on foreign carriers; lift restrictions on foreign equity in power projects; privatize Agus and Pulangi dams; build more transport infrastructure through PPP; review policy disallowing “take-or-pay” and sovereign guarantees; promote PPP in the water sector; establish an export development fund to promote exports and investment; allow manufacturing industry to operate with less government interference such as price controls; liberalize importation of capital equipment; liberalize shipping industry; fully implement Mining Act; allow foreign ownership of land and retail facilities; allow relief from minimum wages; review the Foreign Investment Negative List (FINL); apply ‘creative solutions’ to the 60-40 foreign ownership restriction pending Charter change (Cha-cha); privatize or close down government-owned and controlled corporations (GOCCs) to reduce fiscal burden, among others; use advisers (amicus curiae) when Supreme Court (SC) is ruling on issues that adversely affect the investment climate; promote labor flexibilization schemes; reduce corporate income tax and raise the value-added tax (VAT) and fuel excise taxes; and expand the conditional cash transfer (CCT) and Kalahi-CIDSS programs; encourage PPP in healthcare-related services.

With assistance from the TAPP, the JCF started producing Legislation Policy Brief, which identifies broad recommendations for Congress and the Executive. Among the many proposals of the JFC is the lifting of constitutional restrictions on foreign investments, which the AmCham has long been openly advocating. Thus, while Charter change (Cha-cha) is not explicitly identified in the PFG, its implementing components such as the TAPP provides pressure on the Philippine government to liberalize the Constitution.

Meanwhile, just recently, the USAID announced a $24-million Philippine-American (Phil-Am) Fund, another component of PFG implementation in the country, intended for civil society organizations (CSOs) working on projects in the areas of entrepreneurship and promotion of new businesses, governance, fighting human trafficking, technology-driven adult literacy and biodiversity conservation.

“Powerhouse” lobby group

Complementing and reinforcing the PFG is the establishment of lobby group US-Philippine Society (USPS), a private sector initiative which claims to broaden and expand interaction and understanding between the two countries in the areas of security, trade, investments, tourism, the environment, history, education and culture. The group intends to create a new and timely mechanism to elevate the Philippines’ profile in the US by bringing its longstanding historical ties fully into the 21st century when American policy interests are increasingly focused on East Asia. It was officially launched on 7 June 2012 during President Aquino’s official visit to Washington.

Its leadership includes John D. Negroponte, a former US Ambassador to the Philippines (1993-1996), first Director of National Intelligence (2005-2007) and former Deputy State Secretary (2007-2009), as co-chairman with Filipino business tycoon Manuel V. Pangilinan. Honorary chairmen are Maurice Greenberg, former chair and CEO of insurance and financial giant American International Group (AIG), and Washington Z. Sycip, founder of the Philippines’ largest multidisciplinary professional services firm SGV & Co. Current Ambassador to the US Jose L. Cuisia, Jr. is an ex-officio Board member.

Aside from them, the Board of Directors of USPS is also comprised of the top executives from some of the largest American corporations, namely: Citigroup, General Electric, Procter and Gamble, JP Morgan, Chevron and Coca Cola, among others. Prominent Filipino businessmen like Jaime Augusto Zobel de Ayala, Ramon del Rosario and Enrique Razon are also members of the Board. The group’s current president is John F. Maisto, a former Political Officer of the US Embassy in Manila (1978-1982) and Director of Philippine Affairs at the State Department (1982-1986). The executive director, meanwhile, is Hank Hendrickson, a retired US Navy officer and former Foreign Service Officer at the US Embassy in Manila. On 21 January 2013, Negroponte led a so-called “powerhouse” delegation of the USPS in visiting the country, bringing with him officials of the American corporations belonging to the lobby group and held discussions with Aquino and top economic and defense officials as well as SC Chief Justice Lourdes Sereno to update on key economic and judicial reforms, including those under the PFG.

Defending PH sovereignty

The US pivot and Aquino’s subservience to US interests are creating conditions for increased US intervention in the country not only militarily but also in terms of economic policy making and governance. A new era in the more than a century old colonial and neocolonial relations between the Philippines and the US is indeed being ushered in by the Aquino and Obama regimes.

The serious implications on national sovereignty, human rights, regional peace and stability and even on the environment of greater US military presence and intervention are well-documented and widely discussed. However, there is a big challenge for advocates of national sovereignty and patrimony to deepen and widen the public discourse on US intervention and the Asia Pacific pivot to equally underscore how the US, in its desperate efforts to abate its latest economic crisis, is increasingly and systematically laying the groundwork to further steer the national economy towards serving its monopoly capitalist interests.

There is a need to draw and highlight how Philippine-US colonial and neocolonial ties and decades of neoliberal restructuring and reforms have stunted national development and destroyed industries and livelihood, perpetuating chronic poverty and the permanent economic crisis in the country.

Sabah crisis: Is Aquino siding with Malaysia to protect relatives’ business interests?

Presidential cousin and funder Tonyboy Cojuangco's AirAsia pals transport Malaysian army reinforcements to Sabah. (Photo from Borneo Inside)
Presidential cousin and funder Tonyboy Cojuangco’s AirAsia business pals transport Malaysian army reinforcements to Sabah. (Photo from Borneo Inside)

The “journey home” to Sabah of some 200 followers of the Sultanate of Sulu more than a month ago has escalated into a full blown humanitarian crisis. More than a thousand Filipinos have fled Sabah that for decades they called home. Men, women and children took any boat available in a frantic and perilous voyage away from the brutality of Malaysian forces. The number of refugees in Tawi-Tawi from Lahad Datu and other affected towns in Sabah is expected to grow in the coming days.

Those who fled recounted the atrocities that Filipinos suffered in the disputed territory. “Malaysian policemen ordered Filipino men to run as fast as they could and shot them,” said a report by the Philippine Daily Inquirer. “Even pregnant women and children have been hunted down and killed as the Malaysians fire mortars and embark on a house-to-house search,” according to the Philippine Star. These people are not part of the armed followers of Sultan Jamalul Kiram III. They just happen to be Filipinos.

Some are baffled while most are enraged by the attitude of the Aquino administration towards the Sabah crisis. From the onset, President Benigno Aquino III took a hardline stance against the Sulu royal forces. Jamalul’s brother Rajah Mudah Agbimuddin Kiram and his men must surrender before any talks can happen, Aquino insisted. Charges are being prepared versus the Kirams, claimed the Justice department. They may also be turned over to Malaysian authorities to face prosecution. Malacañang sowed intrigues to cast doubt on the motive and legitimacy of the Sultanate. The National Bureau of Investigation (NBI) is probing the alleged conspiracy between the Kirams and certain politicians. All these even as Aquino ignored appeals by the Sultanate and the United Nations (UN) to stop the Malaysian military assault and for parties to talk.

Palace and Foreign Affairs spokespersons, of course, expressed concern over the reported human rights abuses in Sabah. But their statements are meaningless amid the brutal military offensive launched by Prime Minister Najib Abdul Razak that Aquino practically sanctioned with his reckless position. The public perception is that Aquino abandoned his own people, surrendered the country’s rightful claim to Sabah and sided with Malaysia. Thus Aquino, like Razak and his forces, is responsible for the carnage of Filipino men, women and children in Sabah.

But why is Aquino siding with Malaysia? One plausible explanation noted by analysts is the ongoing peace talks with the Moro Islamic Liberation Front (MILF) where Malaysia plays a key role as facilitator. Aquino does not want to displease Malaysia and risk undermining the negotiations.

However, it is also notable that since taking over in 2010, Aquino’s relatives who bankrolled his presidential bid have inked business deals with Malaysia. Could these business interests be another possible explanation for the administration’s handling of the Sabah crisis?

What are these business deals? One involves San Miguel Corporation (SMC) of Aquino’s uncle Eduardo “Danding” Cojuangco Jr. In August 2011, SMC acquired three subsidiaries of US oil giant Exxon Mobil’s downstream oil business in Malaysia. Worth $610 million, the transaction included the purchase by SMC of Esso Malaysia Bhd, Exxon Mobil Malaysia Sdn Bhd and Exxon Mobil Borneo Sdn Bhd. In its website, SMC said that the three companies form an integrated business engaged in refining, distribution and marketing of petroleum products. The physical assets include the 88,000 barrels per day Port Dickson refinery; seven fuel distribution terminals; and about 560 refilling stations.

SMC’s entry into the Malaysian downstream oil industry could be just the initial steps. Ramon S. Ang, president of the giant conglomerate, recently disclosed that SMC is eyeing big oil and natural gas field overseas. “If we were able to buy one of those, it would be like printing money forever,” Ang was quoted as saying. SMC is so serious about the plan that Ang said they are willing to let go of longtime core business San Miguel Brewery Inc. and new assets in power generation to raise funds. With its acquisition of Exxon Mobil’s downstream assets, SMC is in a strategic position to also corner upstream deals in oil-rich Malaysia.

The disputed state of Sabah itself is abundant in oil and gas resources. An article by the Philippine Star, quoting a 2012 study by Singapore-based FACTS Global Energy, reported that Sabah has reserves of about 11-12 trillion cubic feet of gas and at least 1.5 billion barrels of oil. The figures represent 12% and 15% of Malaysia’s natural gas and oil reserves, respectively, according to the report. Another article, by the Centre for Research on Globalization, noted that Sabah has 15 oil wells that can produce as many as 192,000 barrels a day. Also, four new oil fields have been discovered in its territorial waters in the past two years further increasing Sabah’s potential as oil producer.

Is Aquino avoiding displeasing Malaysia over the Sabah dispute so as not to undermine the grand multibillion dollar oil and gas ambitions of SMC and uncle Danding?

Another business deal involves AirAsia Philippines, the local affiliate of Malaysia-based AirAsia Bhd, the largest budget carrier in Southeast Asia. In November 2010, the Board of Investments (BOI) approved the formation of AirAsia Philippines as a joint venture between Malaysian investors and Filipino businessmen led by the President’s cousin Antonio “Tonyboy” Cojuangco Jr. Tonyboy and his Malaysian partners are aggressively expanding their operation in the Philippines with their recent acquisition of at least a 40% stake in local rival Zest Airways Inc.

Does Aquino fear that the contentious Sabah issue could somehow complicate the blooming Malaysian business partnership of his cousin Tonyboy?

Aquino could not just ignore the interests of his rich relatives. He won’t be President without their vital support.

Tonyboy was the biggest campaign donor of Aquino in 2010, based on the President’s official declaration to the Commission on Elections (Comelec). Out of the P440 million in campaign funds declared by Aquino, Tonyboy’s contribution accounted for almost a quarter with P100 million. While Danding was not officially listed as a campaign donor, it is widely known that the tycoon and Marcos crony also supported the candidacy of his nephew.

If these business interests of his relatives played a key role in Aquino’s handling of the crisis, then the slaughter of our men, women and children in Sabah becomes much more revolting and enraging than it already is. (End)

Obama’s victory: the fallacy of lesser evil and the illusion of choice

In the just concluded US elections, Americans actually had no choice. Maybe this explains why the race was so tight. (Photo from foxnews.com)

Written for The Philippine Online Chronicles

President Barack Obama’s re-election cemented the stability of the deepened military relations between the US and the Philippines. But even a Mitt Romney victory would have little impact, if at all, on the bolstered American interest in the country. From the onset, it was clear that the strategic US agenda of “pivot to Asia Pacific” transcends the tightly fought presidential race.

Malacañang knows this, noting that whatever the results of the elections will not affect the stepped up military cooperation between Manila and Washington. As noted by Presidential Communications Development and Strategic Planning Office (PCDSPO) Secretary Ricky Carandang, “(the Aquino administration) would expect that the current thrust of US-Philippines defense cooperation would remain essentially unchanged regardless of whether Mr. Obama or Mr. Romney wins the elections.”

To be sure, Democrats and Republicans both see the need for deepening traditional alliances, like the one with the Philippines, and forging new “friendships” in the region. Obama and Romney both grasp what Pentagon operators see as new strategic challenges facing the US amid the country’s harsh economic realities.

To some observers, Obama’s victory is a consolation, pointing out the argument of the incumbent president being the so-called lesser evil. Romney would have preferred a more hardline stance against China to supposedly reassure allies and friends, and to certainly advance American agenda. Concretely, that would have meant more US ships, including new ones, being deployed to the region and further stoking instability. Perhaps, it also would have meant an increased number of US nuclear ships and submarines docking more frequently in Subic and Manila Bay.

But such “consolation” is an illusion — that Obama is the lesser evil is a fallacy. For one, the concept of US pivot to Asia Pacific by itself is creating friction with China, escalating regional anxiety and reviving sovereignty issues among neocolonies like the Philippines. In other words, whether it’s boosting the US fleet to 300 ships (as planned by Obama) or to at least 350 (as proposed by Romney), rebalancing a majority of those warships to Asia Pacific in order to contain China and assert American hegemony will still have the same impact. It will still stoke tension with the Chinese, will still endanger the region, and will still undermine the sovereignty of the Philippines and other small countries that the US conveniently uses as pawns in its self-serving and risky geopolitical scheme.

Indeed, the perception peddled by most mainstream media in the US that the just concluded elections is a battle between two candidates with starkly opposing visions for the world’s most powerful country is largely a fantasy. Sure there were nuances of difference here and there, like how each candidate offered to address the stubbornly high unemployment rate (currently pegged at almost 8%); the massive federal budget deficit (above $1 trillion in each of the last four years); and ballooning debt (presently at more than $16 trillion and has already reached the 100% mark of the national GDP or gross domestic product).

But both are, for all intents and purposes, staunch defenders of big corporate interests – with Obama harping on his bailout of giant car manufacturers (estimated to cost American taxpayers some $25.1 billion) to supposedly save jobs as a campaign pitch to win over the swing state of Ohio and Romney pushing for deregulating Wall Street to supposedly stimulate economic activity.

The overall direction and vision are the same not only in terms of economic bias but, as already mentioned, more especially in terms of foreign policy orientation. For the Philippines and other countries, the candidates’ foreign policy is the more important issue that they closely monitor during the campaign because of its direct impact on them. The last presidential debate underscored the lack of a meaningful distinction in the foreign policy approaches of the contending presidential bets, with Romney mouthing Obama’s stance on Afghanistan, Iran, Syria, China and pretty much everything else on the issue of foreign policy.

Both candidates appealed to the Americans’ sense of a “great nation”, that despite the state of the US national economy and its relatively limited resources should continue to preach and enforce around the world the American brand of “democracy and freedom”. What is unsaid is the truth that US projection of its military might abroad and its undiminished readiness and willingness to use force are being driven not by democratic ideals but by imperialist desire to control the world’s resources and weaken possible competitors like China. All these in the name of keeping corporate America profitable, of which both Obama and Romney stand for. Unfortunately for us, it translates to even greater US intervention and along with it further violation of our sovereignty, increased human rights abuses and more conflict.

Obama’s victory did not put the White House in the hands of the lesser evil, if his track record in the past four years is anything to go by. His brutal campaign of targeted assassination of suspected key terrorist leaders through the use of remote-controlled airborne killing machines called drones, for instance, is something unseen even during the time of the militarist Bush regime. American citizens, meanwhile, will have to confront in the next four years Obama’s regressive social agenda of reducing social security and health services as well as his continuing failure to create jobs while bailing out giant corporations and Wall Street banks.

It is amusing how the local media in the Philippines often depict the US elections, with newsmen reporting in awe how the debates supposedly define the candidates and help American voters wisely choose their next president. That’s how democracy should work, unlike in the Philippines, some local commentators and so-called pundits exclaim. In reality, however, Americans, much like Filipino voters, were compelled to choose leaders between candidates who offer fundamentally the same policies and serve essentially the same interests. In the last elections, Americans actually had no choice. Maybe this explains why the race was so tight. ###

Anti-ADB protest in Manila: Photo slideshow

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On May 4, activists from the multisectoral group Bagong Alyansang Makabayan (Bayan) trooped to Roxas Boulevard in Manila to protest the ongoing 45th meeting of the Asian Development Bank (ADB).

(Read Bayan’s news release here, and more about the ADB and its role in Philippine maldevelopment here and here)