BOO CHANCO:  'DECLARE A  STATE  OF  FISCAL  CRISIS'

MANILA
, July 7 , 2004
 (STAR)
DEMAND AND SUPPLY By Boo Chanco  -  Joey’s right about fiscal crisis .

Glaringly absent in Ate Glo’s inaugural speech is a blunt and straightforward recognition of our current state of crisis, specially in the government’s fiscal sector. Luckily, the day after the inaugural, Rep. Jose Salceda of Albay called on the President to declare a state of fiscal crisis.

If the call were made by just any two bit congressman, it would be easy to dismiss it. But Joey is very high up there in terms of influence on the President on economic issues. Joey has been named head of the Palace’s Economic Management Group.

Also named in this high power group were Tommy Alcantara, another very influential adviser on economic matters, and Finance Undersecretary Eric Recto. In fact, the creation of the group caught NEDA chieftain Romy Neri by surprise when he was asked about it in a television interview. It is a real slap on Romy’s face, an expression of Ate Glo’s loss of confidence in the NEDA Chief.

Anyway, Joey said last Friday that a fiscal crisis could be declared under Republic Act 7160. That would allow the suspension of the release of internal revenue allotments to local government units. The LGUs should then agree to lend P20 billion of their IRAs payable in 18 months through zero coupon bonds, Salceda said.

Joey also proposed that Congress commit its pork barrel funds to support Mrs. Arroyo’s six-point pro-poor agenda so that the executive department need not allocate new funds that could widen the fiscal deficit. Joey is concerned that government is struggling to reduce the deficit, which has ballooned to P77 billion from January to May of this year, putting the country just P2.6-billion short of its six-month deficit target of P79.6 billion.

The declaration is part of a "fiscal compact" or a list of austerity measures that would drastically cut government spending and increase revenues to avert a fiscal crisis that could paralyze the entire bureaucracy and put the country’s economy in danger of a tailspin.

Under the proposed "fiscal compact," government officials and employees must hold back on their foreign travels and overseas seminars; board directors of state corporations must forego their salaries and perks; local government units must lend a slice of their funds to the National Government; lawmakers must commit their pork barrel to vital government projects, and businessmen must dutifully pay their taxes. It should include a ban on rowdy parties by the First Gentleman on Malacañang grounds.

Budget Secretary Emilia Boncodin has also raised the alarm bells, saying the government needed to do something "drastic" immediately to avoid falling deeper into debt over the next six to 18 months. Salceda agrees: "The next 18 months is very crucial so we must share the burden of balancing the budget."

Joey and Boncodin make sense, but I guess other officials will fight to keep their perks. There is still no sense of crisis among most bureaucrats. They have heard about the fiscal deficit problem but they have always assumed some other sector of government will have to sacrifice and not them.

The other reason there is reluctance to admit a state of fiscal crisis exists is the worry that such a declaration may impact negatively on our international credit rating. To address this concern of BSP Governor "Paeng" Buenaventura, maybe a special effort can be made to explain to our international creditors that the declaration of fiscal crisis is largely a domestic measure necessary to give the legal basis to take drastic steps necessary to address the fiscal deficit problem. It does not mean we will default on our obligations any time soon, including that of the useless nuclear plant.

I guess it would be worse if we went on with business as usual. Two international rating agencies have already warned that we are due for a downgrade and higher borrowing rates for us. It is just a matter of time.

In fact, I think they may even take such a declaration in a positive light if only because there is now official recognition of the problem and the political will to implement an action plan to deal with it. Mere assurances that we are far from being another Argentina are no longer credible to the international credit rating agencies. Talk is cheap and easy. Ate Glo must put up or face the consequences.

Winners And Losers

Speaking of Joey Salceda, the reason he is so credible now with Ate Glo is not only because he makes sense but also because he helped deliver Albay to the Ate Glo column in the May election. Joey managed to produce this welcome miracle in the face of Bicol’s traditional support to its native sons, in this case, Raul Roco.

Actually, I am told that the Cebuanos, the Ilonggos and the Kapangpangans are the only ones who have the right to strut and share the sweet smell of victory, as far as Ate Glo is concerned. The so-called political strategists in the Palace have mostly dismally failed to deliver. Take Gabby Claudio for instance, who is supposed to be the top political strategist. I am told he failed to make even his own candidate win in his district, much less make Ate Glo win in his province of Samar.

Gabby Claudio’s real boss, Speaker Joe de V is also in the same predicament because he failed to deliver Pangasinan. Speaker Joe redeemed himself by delivering Congress, through that tempestuous final canvassing and proclamation. Defense Secretary Ed Ermita who reportedly was a key campaign strategist failed to deliver Batangas. Joey Lina also promised Laguna but miserably failed to deliver. That’s probably why he resigned before the President could ask him to. At least he had the decency to take responsibility for his failure.

I am told that the real hero of Ate Glo’s successful campaign is a very low key academic, a former SWS pollster with the appropriate name of Junie Laylo. He laid the scientific basis of the campaign strategy of concentrating effort in the areas where Ate Glo was strong in order to win big. But he continues to lie low, happy in having delivered and letting the undeserving high profile characters take the credit.

On the opposition side, the biggest loser is Ed Angara. He was riding high on his kingmaker image, running roughshod over Ping Lacson and forcing the selection of Loren Legarda as the vice presidential candidate of KNP. Now it seems Ping Lacson and Lito Banayo are better campaign strategists. They can say what they want about Ping but he is a winner too in my book. He managed a well organized campaign and when it was clear he lost, he conceded. He will be a force to deal with the next time around.

It is difficult to say if Boss Danding was a winner or a loser in the last election. His two sons and nephew were clearly supporting Ate Glo and that is an obvious positive factor. But the Palace reportedly saw the fingerprints of a close Danding executive at San Miguel in a dastardly black propaganda campaign against Ate Glo and in support of FPJ. I am told her displeasure may soon be seen in what happens in San Miguel soon.

Based on the rumor mills, there are other winners and losers I cannot understand. Like why should Tong Payumo be replaced by a controversial police officer as Subic Metro head? It is obvious whoever heads Subic should be acceptable to the business community, local and foreign. The credibility of the Subic head is important. Subic must not be dispensed as just one more political plum to pay political debts with.

The other thing I cannot understand is the reported replacement of Cito Lorenzo by one of his undersecretaries who happens to be a brother of a top government official. This is ironic because Cito’s experience, network and credibility are precisely what the agriculture department and the country needs now. The undersecretary in question had even been one of his headaches during his stint.

Anyway, we will see through the nature of her appointments if Ate Glo means business or if it is politics as usual. The re-appointment of the two bypassed Comelec commissioners is already a bad sign that Ate Glo is still intent on paying back political debts rather than appointing the best available talent.

Boo Chanco’s e-mail address is philstar_chanco@yahoo.com


Reported by: Sol Jose Vanzi

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