De Venecia reports ‘significant progress’ in debt relief effort

Speaker Jose de Venecia Jr. reported yesterday that he has achieved "significant progress" in pushing for the Philippine proposal for a large-scale global debt-for-equity conversion program.

He said that during his two-week trip to the United States, he "touched base" with decision makers in the World Bank, International Monetary Fund, Asian Development Bank and other banks with substantial lending exposure in the country, and met with officials, including two US senators, of countries that could influence the decisions of these financial institutions.

"We are heartened by their positive response to our proposal," said the Speaker, who returned to the country last Saturday.

De Venecia presented the Philippine proposal to world parliamentarians during the concluding session of the conference of heads of parliament at the United Nations in New York on Sept. 8.

Though they did not specifically refer to the country’s initiative, the heads of parliament from more than 180 countries supported "creative approaches" to solving the debt problem of poor and middle-income nations, including the Philippines.

A few days later, it was the turn of President Arroyo to speak about the Philippine suggestion at the World Summit, also at the UN, which was attended by kings, presidents and prime ministers led by US President Bush representing the nearly 200 UN member-countries.

The UN, through Secretary General Kofi Annan and Assistant Secretary General Hafiz Pasha, has officially endorsed the country’s proposal.

In a letter to De Venecia, Annan has asked Philippine leaders to share the idea with other countries.

In New York, Pasha organized a forum attended by representatives of creditor banks and countries where De Venecia explained in detail the debt-for-equity conversion proposal.

Pasha, who is also director for Asia and the Pacific of the UN Development Program that handles about $4 billion in funds that the world agency spends for development projects, described the proposal as an "off-the-beaten-track" idea that should be welcomed.

He said the Philippine suggestion has begun to catch fire and "has found expression" in the declaration of world leaders in the World Summit and in the conference of heads of parliament.

Ambassador Lauro Baja, the country’s permanent representative to the UN, said the country’s debt relief proposal was now being tackled in various forums.

"Before, it was taboo to talk about debt relief or debt-for-equity conversion," he said.

In Washington, IMF officials cautiously told De Venecia that they would consider the Philippine proposal for a substantial debt-for-equity conversion program for poor countries.

IMF deputy managing director Agustin Carlsten said the IMF "welcomes new ideas on the debt issue."

However, he said as is the usual process, "we will have to look into the details" of the Philippine proposal.

"We hope to continue collaborating not only on the Philippines but on a broader scale on measures to achieve the (United Nations) Millennium Development Goals (MDGs)," he said.

De Venecia received the same cautious response from the World Bank.

The Philippine proposal aims to help poor and medium-income nations achieve the MDGs, which are focused principally on cutting world poverty in half by the year 2015.

Under the proposal, creditor-countries, banks and multilateral institutions like the IMF and the World Bank would convert half of their annual debt payment receipts into equity in MDG-related projects in debtor-nations.

The Philippines has a total external debt of about $55 billion, for which it makes an annual payment of roughly $4.5 billion for both interest and principal portions. Of the total debt stock, only $595 million is owed to the IMF and $1 billion to the World Bank.

Its biggest bilateral (nation-to-nation) debt or about $12 billion is with Japan.

De Venecia said the Philippine debt relief suggestion is the first concrete proposal from a UN member that is aimed to attain the MDGs.

"There have been a lot of motherhood statements, but ours is a concrete detailed proposal that will require no new money on the part of lenders," he said.

Besides UN officials, Italian Prime Minister Silvio Berlusconi and German leader Gerhard Shroeder and the Asian Development Bank have endorsed the country’s proposal.

De Venecia considers the Italian and German leaders’ endorsement as significant since Italy and Germany are part of the G-8 group of rich nations that controls the IMF and the Paris Club group of creditors. The US, on the other hand, holds a large influence on the World Bank.

While the Speaker was working hard in the US capital and financial center pushing for debt relief, some economists at home derided his effort and the Philippine proposal, claiming these won’t work since much of the country’s debt is now in the form of bonds that are held by private investors, including wealthy Filipinos.

These investors won’t part with their bonds unless they make a profit, the economists assert.