Naysayers

America-lovers are not happy the country appears to be moving ever closer to both China and Russia. They are trying very hard to push a counter-narrative, spurious as it may be, arguing that our newfound friendships are bad for our future.

This effort to push a counter-narrative escalated after the high-profile One Belt, One Road Forum held in Beijing. President Duterte attended that forum, along with 27 other heads of state. The Chinese-led trade initiative has been described as a game-changing initiative which will change the way the global economy works.

 One element of that effort to picture China’s offers of assistance as some sort of Trojan Horse that will eventually bring us to debt enslavement. Anders Corr, a US defense consultant, peddled this line based on highly questionable numbers. Nevertheless, both American and Filipino commentators echoed this line.

Corr, in a widely quoted commentary, warned that accepting China’s financing offers for our own infra program will inflate our debt to 197 percent of GDP. That is based on the assumption that Chinese lending will charge about 10 percent interest. The US defense consultant also insinuates, without any basis, that the Filipino leader and  his friends stand to earn hefty commissions from the borrowing.

This is fake news. There is no other way to describe it. It is a scandal that anti-Duterte commentators in the Philippine media swallowed these numbers hook, line and sinker.

At the moment, our debt-to-GDP ratio has been brought down to 42 percent. This is the lowest it has been since the debt meltdown of the early eighties. GDP growth of about 7 percent and a comprehensive tax reform package that will ensure government revenues are both robust and recurrent will further shrink that ratio.

Our closest reference for Chinese financing support for our infra program is the $5.3 billion Jakarta-Banding rail project. The Chinese loan covering 75 percent of the project cost is both in US dollars and Chinese yuan. Sixty percent of the loan package is in US dollars and carries an interest rate of only 2 percent. The remaining 40 percent, in yuan, carries interest charges of 3.4 percent.

Corr’s computation based on a 10 percent interest rate is way off the mark. By a sleight of disinformation, Corr manages to label Chinese financing “expensive.” On the basis of disinformation, he raises the specter of a Chinese debt trap being laid out for the Philippines.

His commentary insults the intelligence of our economic managers. By extension, he insults the intelligence of all Filipinos who stand to benefit immensely from rapid improvement of our long-neglected infrastructure base.

Grandstanding

For better or for worse, the task of keeping Bayan Muna’s propaganda presence is left to someone like party-list representative Isagani Zarate.

Zarate was in the news lately for withdrawing his endorsement of the comprehensive tax reform package. His reasons for changing his mind are clouded at best. We will deal with that at a later piece on the bankrupt positions taken by the leftist groups.

Before that, Zarate served as grandstander-in-chief of the leftist group’s strange effort to block the approval of the power supply agreements (PSAs) of seven projected power plants. The affected PSAs include 3,551 MW of baseload power supply meeting the needs of over five million consumers in the next three to five years.

It takes at least four years to build a power plant. The more Zarate exhausts legal means to delay the construction of new energy capacity, the more he puts Mindanao in peril of power shortages that will foreclose the economic development of the area. He tried to petition the ERC to reverse its position on the issue. Failing in that, he tried to secure a TRO from the Supreme Court to stop the new generating capacity from being installed.

We should have learned vividly from past experience that there is nothing more costly than having no power. Yet Zarate’s maneuvering to stall the power supply agreements will have the effect of undermining our energy security. That will cause our projected seven percent annual growth rate to hit the ceiling of energy shortages.

Zarate says he is doing what he does, stalling the construction of new baseload plants, because he thinks they will put millions of Filipinos in a “disadvantageous position.” Hearing all the other questionable economic pronouncements emanating from him, this motive does not come across clearly.

If he were truly against Filipino consumers being disadvantaged, he should have taken an adamant position against the increase in feed-in tariff allowance (FIT-All) recently approved by the ERC.

The recent hike will force all Filipino consumers to pay an additional 18.3 centavos per kilowatt-hour. That hike is 5.90 centavos more than the provisionally approved rate of 12.4 centavos per kilowatt-hour approved last January and since reflected in our electricity bills. The increased tariff will reflect on our bills effective June.

FIT is an onerous tariff. It collects billions from consumers in order to subsidize the companies that produce renewable energy. Its effect is to free the rich investors in newfangled and unreliable energy sources from business risks and ensure their profitability. All consumers shoulder this tariff regardless of how they source their energy.

  Onerous as it is, FIT has not attracted the ire of those who see themselves as “politically correct.” They find nothing wrong in cross-subsidies than penalize consumers even if renewable energy sources cannot ensure our baseload power needs.

Perhaps, as Zarate seems to think, it is preferable to block baseload plants essential to our energy security to ensure the profitability of investors in “renewables.”