GOVT MAY END UP INCURRING P308 BILLION IN BOT DEBTS
MANILA, October 13, 2004 (STAR) By Paolo Romero - The government may end up incurring more debt to the tune of P308 billion from its guarantees of loans secured by private proponents for 18 build-operate-transfer (BOT) projects, the Department of Finance (DOF) told the House of Representatives yesterday.
In its report to the House committee on appropriations on the government’s contingent liabilities, the DOF said the P308 billion is the government’s "potential liability exposure" in the BOT projects, which is one of three major sources of government indebtedness.
The other two are the loans of government-owned and controlled corporations (GOCCs) and obligations to power firms.
Contingent liability or debt is an obligation incurred by a private entity or a state-run firm that will be assumed by the government in case the principal debtor is unable to pay its loans.
Camarines Sur Rep. Rolando Andaya, chairman of the committee, said the country’s contingent liability is estimated to exceed P3 trillion.
Aside from the P38.9 billion worth of private sector projects clothed in sovereign guarantees, the government also served as guarantor to P833 billion in loans of 26 GOCCs and government financial institutions, Andaya said.
Topping the DOF list of "private sector participated" projects that pose liability risks is the completed but not yet operational Ninoy Aquino International Airport Terminal 3 (NAIA-3) with a "maximum potential liability exposure" of P94 billion.
Andaya described the NAIA-3 as an "unused behemoth" that is valued at $1.7 billion, way above its published cost.
The airport facility is currently the object of a three-way dispute involving the government, German airport operator Fraport AG and its local partner, Philippine International Air Terminals Co.
Andaya said he hopes the potential income from NAIA-3 was accurately projected so the government will not end up paying for the difference as stipulated in its contract.
"I hope the terminal, once operational, will not be a departure point for private obligations that will migrate to the public debt stock," he said.
He cited the Metro Rail Transit 3 elevated railway, for which the government has so far paid over P11 billion because of losses.
Notwithstanding the loan payments made by the government, its potential liability exposure in the MRT project is P31 billion, the DOF said.
Faced with a looming fiscal crisis, President Arroyo has caved in to pressure from congressional allies to impose a cap on how much the government may borrow annually to ease the country’s debt burden.
Mrs. Arroyo has included limits on borrowings as part of her measures to revitalize the struggling economy and ease the plight of the nation’s poor.
Instead of borrowing, the Arroyo administration will now rely more on official development assistance (ODA) given by other countries.
She said the ODA is her "preferred source" of government financing for infrastructure projects that require large funding because ODAs have less stringent payment terms.
Mrs. Arroyo had previously opposed putting a cap on borrowings, which the government relies on heavily to fund the budget deficit, ironically, caused mainly by debt payments.
The President is struggling to rein in a burgeoning budget deficit, which economic analysts say could throw her anti-poverty program off track.
Mrs. Arroyo said in August that the Philippines was already in the midst of a fiscal crisis, prompting her to introduce a drastic austerity program — including scrapping parties and gift giving by government officers and most foreign trips for government officials.
Rampant tax evasion, corruption, bloated state subsidies and protectionism have been blamed for the government’s fiscal woes.
The President had vowed to take on "entrenched interests" as well as make tough and even unpopular decisions to avoid a possible fiscal crisis.
Reported by: Sol Jose Vanzi
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