Warning on P8-t buildup ignored
MORE than 12-million jobs will be created over the next five years when the administration starts rolling out its ambitious P8-trillion infrastructure development plan, Labor Secretary Silvestre Bello III said Monday even as an analyst warned that the additional spending might sink the country into “virtual debt bondage.”
“After listening to my co-workers, they picture a golden age of infrastructure, which to the Department of Labor is the golden age for employment. It’s a golden age for build, build, build. To the Department of Labor that means the golden age of jobs, jobs, jobs,” Labor Secretary Silvestre Bello told an audience of mostly Chinese businessmen and the foreign press in Beijing.
“With $164-billion infrastructure projects for the next five years, we are talking of not less than 12-million jobs for our countrymen,” he added.
The January 2017 Labor Force Survey from the Philippine Statistics Office shows that the employment rate is at 93.4 percent, underemployment is at 16.3 percent, while unemployment is at 6.6 percent.
While the administration creates more than a million jobs every year, increased infrastructure spending in the country would likely double the number of jobs, particularly in the manufacturing and infrastructure sector, economic managers said.
The administration’s infrastructure plan will spend P3.6 trillion from 2018 to 2020, mostly funded through domestic and foreign borrowing.
Anders Corr, founder of Corr Analytics, however, warned that the Philippines’ plan to spend P8.2 trillion or about $167 billion on infrastructure projects may sink the country deeper into debt, mostly through foreign loans funded through China’s Belt and Road initiative.
“Dutertenomics, fueled by expensive loans from China, will put the Philippines into virtual debt bondage if allowed to proceed,” Corr said.
Corr said that the fund that will be used for the Duterte administration’s infrastructure program will bring the total national government debt of the Philippines from $123 billion to $290 billion or P14.4 trillion.
“More likely according to my analysis, at 10-percent interest the new debt could go to $452 billion, bringing Philippines’ debt-to-GDP ratio to 197 percent, second-to-worst in the world,” he said in a Forbes article Sunday.
“That understates the burden to the Philippines, as existing national government debt would also accrue interest over that time, and such interest was not included in the analysis,” he added.
Corrs warned that the once the Philippines’ debt to GDP ratio balloons to 296 percent, the country will no longer be able to repay China.
“Without much needed transparency from the Duterte government and China on the rate, conditionality, and repayment terms of $167 billion of new debt for the Philippines, the public should assume, to forestall a worst-case scenario, that the rate would be somewhere between 10 percent and 15 percent,” Corr said.
“The Philippines will have to give political and economic concessions to China in order to repay annual interest, or renegotiate such a large quantity of debt,” he said.
While economic managers said that most of the 30 big-ticket projects would likely be funded by taxes, Budget Secretary Benjamin Diokno said that China’s loan offers may be complemented with a 10 and 15-percent interest rate for debt repayment.
Diokno also said that the country will “outgrow” its debt to enable it to increase its domestic spending.
“We plan to outgrow our debt, our GDP will grow much faster than our foreign debt as I said because we plan to borrow more domestically,” he said in the same conference.
“Despite the three-percent deficit to GDP ratio that we are planning to pursue, our debt to GDP ratio will continue to go down ... our debt to GDP ratio right now is 40 percent,” he added
Trade Secretary Ramon Lopez brushed aside worries that the Build-Build-Build Infrastructure Plan would be fueled by loans from China that would later put the country in a debt trap.
He said 80 percent of the loans would be sourced domestically, and only 20 percent would be foreign.
Lopez also emphasized the need for Congress to pass the tax reform legislation sought by the administration because that would be a source of funding for the infrastructure program.
Incoming Foreign Affairs Secretary Alan Peter Cayetano meanwhile, said China’s Belt and Road Initiative would complement the administration’s Build-Build-Build-Infrastructure Plan.