‘Economics doctor’

Department of Budget and Management (DBM) Secretary Benjamin Diokno is still fuming over the article that came out in the Forbes magazine on May 13 this year. The article that got Diokno riled up is: “New Philippine Debt Of $167 Billion Could Balloon To $452 Billion.” It was written by Anders Corr who claimed the “high interest loans from China would balloon Philippine debt to unsupportable levels.”

But why was Diokno so aghast at Corr’s article? This was because Corr’s analysis was very much quoted by a number of critics of President Rodrigo Duterte’s most recent trip to China. The administration critics in particular questioned the reported billions of soft loans extended by China to the Philippines during a latest official visit last month to Beijing where President Duterte participated in the One Belt, One Road Forum.

Who is Corr anyway? From my search of Google, Corr founded his own Corr Analytics Inc. that is engaged in providing their clients with strategic analysis of international politics. He is also the publisher of the Journal of Political Risk. He frequently appears in the press, including Bloomberg, CNBC, Nikkei Asian Review and is a regular article contributor at Forbes.

Corr graduated summa cum laude at Yale University where he took up Business Administration in 2001. He obtained his Ph.D. in Harvard in 2008.

Diokno vehemently argued against Corr’s analysis over our country’s foreign debt situation in relation to the package of soft loans being worked out with China. Diokno was among the economic managers of President Duterte who took part during the One Belt, One Road Forum held in Beijing.

“Here’s my reply to the May 13 Forbes False. The article is based on ridiculous assumptions,” Diokno fumed.

In particular, the DBM Secretary pointed to the erroneous take of Corr about the measurement of debt-to-GDP ratio of the Philippines. GDP refers to gross domestic product, or total products and services produced in the entire country.

Diokno noted in particular the assumption of Corr held the country’s GDP as numerator that is at constant level, or not changing – neither rising nor declining. On the other hand, Diokno argued, Corr wrongly used debts as denominator that kept growing through the years.

“The article is based on the wrong assumption that our borrowing costs is between 10 to 15 percent and that GDP (the numerator in the ratio is constant). On the contrary, we expect the debt-to-GDP ratio to decline from 40  percent in 2015 to 35  percent in 2022,” Diokno explained.

“Our borrowing costs will be in the neighborhood of 4 percent. Nominal GDP is likely to increase by 9 to 10 percent annually,”Diokno cited.

“Finally we intend to have an 80:20 mix in favor of local borrowing; this is to minimize the foreign exchange risk of foreign financing of the deficit,” Diokno pointed out.

“Comparing the Philippines, an investment grade country and one of the fastest-growing countries in the world, with Argentina and Venezuela is mindless. The relevant variable is the debt-to- GDP ratio, not the absolute level of debt,” Diokno stressed.

 Professor emeritus at the University of the Philippines (UP), Diokno wisecracked: “If he (Corr) is my student, I would have flunked him.”

Diokno was not being arrogant. He speaks from first-hand experience as economic manager. He certainly has impressive academic credentials, not to mention his long years of experience in key economic posts he served in the government for the past 30 years.

He finished his bachelor’s degree in Public Administration from UP in 1968. He earned his master’s degree in Public Administration in 1970, and Economics in 1974 from the same state university. He also holds a Master of Arts in Political Economy (1976) from the Johns Hopkins University in Baltimore, Maryland, and a Ph.D. in Economics (1981) from the Maxwell School of Citizenship and Public Affairs, Syracuse University in Syracuse, New York.

Diokno first served as DBM undersecretary during the term of the late President Corazon Aquino. He became full-pledged DBM Secretary during the shortened stint of former President Joseph Estrada. He went back to teaching economics at UP. He was among the first appointees in the Cabinet before former Davao City Mayor Duterte assumed the presidency in July last year.

Diokno lectured us about “Economics 101” during our Kapihan sa Manila Bay at Cafe Adriatico in Malate last Wednesday. Diokno stood us up last week because of much higher call of duty. He was summoned that day to take charge again as gatekeeper at Malacanang Palace.

This was after President Duterte named Diokno to co-head the “caretaker committee” along with erstwhile Armed Forces chief of staff and now as new Environment Secretary Roy Cimatu.

As co-heads of the “caretaker committee,” Diokno and Cimatu were tasked, among other things, to take charge of the day-to-day operations of the Executive Branch of government while President Duterte would be out of the country for six days last week.

The “caretaker committee” is actually the assigned role  of the Executive Secretary, Salvador Medialdea.  As the so-called “little president,” the Executive Secretary heads the “caretaker committee” that automatically gets activated whenever the President is out of the country on official travels abroad.

But Medialdea again joined the President on his official travel abroad. This is the fourth time that Diokno was designated to head the “caretaker committee.”

However, Diokno’s latest “caretaker” assignment was short-lived after President Duterte decided to immediately return to the country. President Duterte cut short his four-day visit to Moscow following the siege launched by Maute and Abu Sayyaf bandits in Marawi City in Lanao del Sur. Then the President placed the entire Mindanao under martial law and suspended the writ of habeas corpus for 60 days.

President Duterte hurriedly flew back to Manila along with 16 of his 23 Cabinet members and his top security, police and military officials who joined him in Moscow.

So before the President returned to Manila last Wednesday, it was Diokno and Cimatu who kept the government on top of the developing situation while Maute and Abu Sayyaf laid their siege in Marawi City.

At this second week of the Marawi siege and imposition of martial law all over Mindanao, Diokno reiterates his confidence to the economic fundamentals of the country could weather these temporary upheavals. As far as the “economics doctor” is concerned, things are looking up.