FREEDOM FROM DEBT COALITION (FDC)

Helping shape a people’s economic agenda

Who we are. FDC is an advocacy and campaign coalition composed

of four political blocs and 250 organizations and individuals
nationwide. The coalition members include various sectors such as
church, labor, women, farmers and peasants, youth and students, and
members of the academe and professionals. It maintains a National
Office where the National Secretariat, divided into campaign teams
and departments, works on the day-to-day needs of the Coalition. A Secretary-General
who is directly elected by the National Congress for a fixed term of three (3) years heads
the Secretariat. The Congress is the highest policy-making body of FDC and holds
session once every three years. In the absence of the Congress, the Board of Trustees is
the second highest policy-making and is tasked to implement the program of FDC
together with the Executive Committee.

FDC has presence in key regions and major cities in the Philippines through its
six chapter offices in the Visayas (Cebu, Iloilo and Leyte) and Mindanao (Davao, South
Cotabato-Saranggani-General Santos or SOCSARGEN, and Western Mindanao) islands.
These chapters were organized in areas that have regional and/ or national significance
and where there is a presence of interested groups and individuals to form an FDC
chapter. The chapters also have their own Board of Trustees and a secretariat, and
perform functions and tasks similar to that of the FDC National Office, such as, initiating
and organizing campaigns on issues that have an impact not only on their particular area
but also on the region where they belong and even up to the national level. Together with
its six chapters, FDC is leading efforts in organizing national and local campaigns on
areas such as the debt, water and energy privatization, budget and public spending,
structural adjustment programs, multilateral financial institutions and other economic
issues that impact on the lives and futures of the Filipinos.

The Chapters also conduct researches and

advocacy on local sectoral issues that affect
their particular constituents, among them,
establishment of “free economic zones and
growth areas” in key cities in Mindanao,
mining activities and its impact on indigenous
peoples and the environment, and the peace
campaign especially in areas affected by the
war between the military and rebel groups. In
all these campaign and advocacy efforts, the chapters are able to expand the reach of
FDC in terms of membership, and initiate the formation of bigger alliances and networks
to get broader support and action for its campaigns. FDC also depends on its chapters to
articulate and popularize positions on issues being taken up at the national level by
leading educational campaigns and mobilizations in their areas. FDC’s entire
constituency is also the coalition’s most significant target in terms of advocacy and
education.

FDC chapters in the Visayas (an island located in

Members of the Kuryente-
Visayas Alliance
southern Philippines) formed “Kuryente-Visayas Alliance”
(Electricity-Visayas Alliance) in August 2003 to collectively
address common issues and campaigns related to the power
industry in Visayas. During its launching, a COVENANT OF
POWER CONSUMERS was signed
advocating alternative solutions to the power industry situation
in the Visayas. The island is faced with a threat of power
shortage and the entry of Independent power producers similar
to the situation faced by the country in the late 80s up to the early
90s.

This is just one of the various activities the FDC

chapters conduct to strengthen the organizations and expand its
reach. Apart from alliance building and networking, the chapters
also do lobby work and conduct mobilizations to popularize the
issues and educate the public.

Covenant signing of FDC

chapters in the Visayas

Where we come from. When then President Corazon Aquino came into power in 1986
after a popular EDSA uprising, many Filipinos were anticipating that reforms and
changes would take place in a restored democratic setting. On top of the priority list was
the whopping $28 Billion foreign debt left by deposed President Marcos that needed to be
addressed. President Aquino proved to be a major disappointment when she made a
public announcement that she would honor all debts and that the country would pay for
them religiously. And the country paid for it dearly at the expense of the Filipinos and
the “dying” economy. It is in this context that 90 activist groups and individuals
representing different sectors of society (farmers and peasant groups, workers, academe,
professionals, political blocs, church) came together in 1988 to form FDC primarily to
denounce the scandalous foreign debt left by the dictatorial regime and to pressure
government to adopt economic policies that would address the debt burden. FDC tasked
itself to bring to public attention the debt problem and make it the concern of everyone.
FDC believed that it was through an education campaign that people will understand the
debt problem, and an informed public will be a bigger pressure for the government to
follow the proposals.

As most of the country’s debts were incurred from overpriced government

projects entered into by Marcos’ cronies and political allies at the behest of Pres. Marcos,
FDC proposed that government should not honor these debts, making the creditors also
accountable for lending huge sums of money to a known dictator who clearly did not use
them for the good of the economy. FDC also wanted the government to place a ceiling on
its debt payments of up to 10% of its export earnings so that other resources can go to the
rehabilitation of the economy including spending for much needed social services. And
to ensure that scarce resources should go to spending for economic and social services
and not to debt servicing, FDC proposed the repeal of Presidential Decree (PD) 1177
which allowed the automatic appropriation of a portion of the national budget to pay off
loans, regardless of whether the country can afford it or not. These proposals gained
support both within and outside government, that even Congress approved these bills in
1991. Pres. Aquino, however, threatened to veto the budget passed by Congress that
meant the “pork barrel” (funds that members of Congress get to finance their pet projects)
of the Congressmen and Senators would not be released in time for the elections the
following year. This threat proved effective because Congress junked the “debt” bills.
Without these measures in place, the country’s economy had little growth plunging the
nation into a vicious cycle or what FDC calls the debt trap where the Philippine
government continuously borrows money to pay for loans. When Aquino left office, the
foreign debt ballooned to $42 Billion; currently it stands at $56.3 Billion. Until now,
around 40% of the national budget is used for loan repayments at the expense of other
major expenditures like health, education, housing and other social services.

In the midst of all these battles, FDC was already contemplating on the issues
being taken up by the Coalition, and how these campaigns have evolved. In the past
years, for instance, the debt issue was not just confined to the loans and how much the
government is paying but more important were the impact of the conditions and policy
prescriptions, or the so-called Structural Adjustment Programs (SAPs), set by the
creditors like the International Monetary Fund (IMF) and the World Bank (WB) on the
government. Through SAPs, the government was pressured to cut back on expenditures
for social services and increase taxes so there would be enough money to pay for the
loans. FDC realized that these issues together with other equally pressing concerns need
to be addressed and that it was logical for the Coalition to face this daunting task. After
undergoing a series of consultation with the different organizational structures of the
Coalition – from the Board of Trustees and the Executive Committee to the members and
chapters – the Congress of FDC approved the proposal to broaden the mandate in 1995 to
cover Debt and SAPs. After three years, FDC once again broadened its mandate to
include other issues relating to economic development and the overall economy; it took
on issues such as budget and public spending and taxes, privatization and deregulation,
local government fiscal issues and the general critique of neo-liberal strategies and
globalization. The broadened mandate calls on the Coalition to reach consensus on
strategic issues such as a common stand on globalization, neo-liberal policies, and other
important concerns that affect how they will make positions in the future.

Our vision. People-oriented growth, social equity, sustainable development and a free
and democratic society where people can equitably share the fruits of their labor.

What we do. FDC employs a variety of

strategies and tactics in launching its
campaigns and doing its advocacy work. The
strength of the coalition lies in its ability to
influence policy in the executive and
legislative branches of government through a combination of lobby by either proposing
new bills or acting as resource persons during Congress hearings, and at the same time,
effectively using the arena of mobilizing people to go out in the streets. Lobbying and
initiating dialogues and debate with government while doing popular education and
mobilization activities constitute FDC’s parallel strategy of campaigning from top to
bottom. In addition, FDC facilitates conferences, forums and symposiums to stimulate
public discussions and generate greater knowledge on areas that surround its mandate.
Similarly, FDC strengthens its advocacy and popularizes its positions through publication
of newsletters and resource magazines, poverty situationers, policy papers and through
the conduct of research activities. The Coalition also engages and maximizes the media
through guestings in TV and radio programs to discuss positions taken by FDC on
economic issues, production of video documentaries that provide a graphic representation
of the issues, and printed articles such as letters to the editor, opinion pieces on important
issues of the day, and press releases on actions undertaken. To expand its reach using the
internet as a new medium of exchange, FDC undertakes information exchange through e-
groups on specific issues and maintenance of a website that aid in introducing FDC to the
national and international audience.

Major Programs. For 2005 to 2007, national campaigns on priority issues are the
following: (1) debt and fiscal crisis, (2) power privatization and related issues, and (3)
human right to water and the privatization of water services. Meanwhile, campaigns on
local issues include (1) local budget and public spending, (2) local government
borrowings and debts, (3) privatization of local water districts and (4) local issues related
to the privatization of the power industry.

FDC recently scored a victory when the Supreme Court

Filing of Petition for a Temporary
Restraining Order at the Supreme Court
decided in its favor by granting the petition for a
temporary restraining order (TRO) on the implementation
of the power rates increase starting January 2004 as
approved by the Energy Regulatory Commission (ERC).
The Supreme Court decision orders the ERC to conduct
public hearings and consultation to hear the position of the
consumer groups, including FDC. Though temporary, the
victory gives relief to the already burdened consumers, and
at the same time, showing that the various strategies
employed by FDC in its campaigns, such as going to court,
prove effective in pushing for changes in government
policies and decisions.

Vital Gains. Over the years, FDC was a major force behind the changes in controversial
policy issues and reforms in government. In 1994, for instance, FDC initiated the
formation of a broad alliance called the Kilusang Rollback (KRB or the Rollback
Movement) demanding for the abolition of the oil levy or a tax of P1 imposed on fuel
prices as dictated by the multilateral financial institutions. FDC together with KRB
stopped its implementation and forced government to rollback oil prices, mainly through
intensive lobby work in the executive and legislative branches of government, street
mobilizations and even transportation strikes in key cities and provinces nationwide.
Another issue where FDC was a key player was during the deliberations of government
on a Comprehensive Tax Reform Program (CTRP) in 1997 that aimed to raise taxes on
various transactions. FDC raised the issue of giving a higher tax relief for low- income
groups by increasing the exemption level for single-parent households which are mostly
women, and fixed income earners. After much lobbying and debating with Congress and
the executive branch, the final version of the bill that was passed allowed for an increase
in exemption, a provision that was included only because there was strong pressure
coming from FDC.

In its early years, the Coalition was also part of the alliance that stopped the
defective Bataan Nuclear Power Plant (BNPP) from operating not only because of the
danger it poses to the country but also due to the fraudulent way it was acquired. FDC
initiated the exposure of loans that were given to the cronies of Marcos at the behest of
government, among them the BNPP debt, where Marcos and his close allies pocketed
millions of dollars by brokering the deal with Westinghouse, an American company who
won the bid to construct the power plant. (For details, please see discussion below:
Major Programs of FDC, Debt Campaign)

FDC has been relentless in its efforts to make government accountable and ensure
transparency in matters relating to debt management, leading them to continuously
sponsor debt reform bills in Congress through allied congressmen and congresswomen.
It was also successful in the gathering of almost a million signatures calling for the repeal
of the law that automatically allots a big share of public funds to debt servicing. In almost
every campaign, FDC has maintained strong links with concurring organizations in Asia,
Africa, Latin America, North America, Europe and Australia through its membership and
lead role in Jubilee South and other development networks.

FDC has also gathered the support of the

public through petition signing or
signature campaigns conducted
nationwide. In 2001, for instance, FDC
launched the “Vote Against the Debt”
signature campaign in time with the
national elections, and was able to get
almost a million signatures urging
Congress to repeal the automatic
appropriations law. This strategy
incorporates grassroots education work
and lobby through convincing the public
to take a stand and to act on it. Petitions Gathering signatures in one of
the booths located near a
and signatures are effective tools in
school
pressuring lawmakers and government
officials to take notice and institute
changes in policies.
 MAJOR PROGRAMS OF FDC

1. DEBT CAMPAIGN

“The Philippine Deep was once

ranked as the greatest known
ocean depth. It is dark,
nightmarish and hard to fathom.
Just like the Philippine debt.”

What is Philippine debt? The Philippine debt, or what is called the total debt stock,
consists of outstanding foreign and domestic debts of both the public (government) and
the private sector. The root of the problem is traceable to the Marcos regime that left an
outstanding foreign debt amounting to $28 billion in 1986. Of the 149 loan accounts that
were passed on to government, at least 130 amounting to P50.29 billion ($907.76 million
at current exchange rate of P55.60 = $1) were loans made at the behest of top government
officials. Upon ‘official’ endorsement, loans were easily secured even if projects were not
viable, unproductive, non-performing and the borrower not having enough collateral or
equity contribution. Loans were also characterized by the use of bribes, overpricing of
projects, abuse of power and violation of proper procedures and requirements. Similarly,
many of the 500 state agencies were in reality private ventures of Marcos’ friends and
associates. Most of them just exploited their firms and deposited their ill-gotten wealth in
secret bank accounts overseas. When companies started defaulting on payments, the
government readily assumed the loans consistent with government’s policy to “honor the
debt above all else.”

The Bataan Nuclear Power Plant (BNPP)

project is a classic example. In 1976, the Philippine
For every second, more
government borrowed from a US bank to purchase than P22,000 is automatically
BNPP at $1.1 billion, when, in fact, the real cost of the appropriated for both the
project was only half of that amount. The bid for the interest and
project was intentionally increased because the principal payments of the
supplier, Westinghouse, an American company, paid a national government’s P4
huge sum to Marcos crony Herminio Disini to get the trillion debt. This
deal. In the late 1980s, government was paying translates to a whooping P1.37
$300,000 a day for interest alone on the BNPP debts. million per minute. For 2005,
This plant was never utilized by the country and has the government allocated P1.2
million per minute for debt
service.
never produced a single kilowatt of power because it was too risky to operate since it is
located in an earthquake fault and near an active volcano. To this day, Filipinos are still
paying for this illegal and useless project while the banks, Westinghouse, and Herminio
Disini remain off the hook.

How much is the Philippine debt? As of December 2005, total debt stood at $77 Billion
which means that each of the 85 million Filipinos owes almost P91,000. Definitely, 70%
of Filipino households earn below this level. The continuing debt burden is mainly due
to the over-dependence of the government to borrowings to finance projects and
activities, and also to pay past loans. The amount of borrowings under President Gloria
Arroyo’s five-year stay in office is higher than the combined debts of former presidents
Aquino, Ramos and Estrada.

For almost two decades now, the Philippine

government has shifted its debt dependence from mainly
foreign sources in the 1970s to early 1980s to domestic
borrowings in the late 1980s up to the present. This was
mainly because foreign creditors have limited the amount the
government can access, forcing government officials to look
for sources locally. However, when government borrows
more domestically, it competes with other private businesses
which usually source their loans from local banks. And the local banks usually favor the
government, as there is zero default in payments while private business sometimes does.
If this trend continues, private investors will have a harder time doing business in the
country which means no jobs will be created and low growth for the economy.

Campaign Initiatives

A. Campaign for a comprehensive audit and investigation of public debt and

government guaranteed loans is the current focus issue of FDC on the debt campaign.
FDC has proposed to Congress through a House resolution signed already by 49
congressmen/women calling for a congressional inquiry and audit of public debt
including loans that have been guaranteed by the Philippine government. This effort
aims to make public all debt records of the country so that transactions made by the
government will be done in a transparent manner, and the public will know, for
instance, how much is the country paying, what debts are incurred, whether these are
legitimate loans, and the like.

B. Campaign for concrete government action against illegitimate debts which still
comprise a substantial figure in the total debts of the country. These illegitimate
debts are the subject of the court cases being pursued by the Presidential Commission
on Good Government (PCGG) which include the Marcos-created borrowings like the
Bataan Nuclear Power Plant, the Ramos-loans which comprised
many of the contracts given to the independent power producers
(IPP), loans extended by the World Bank for agricultural
 projects that purportedly were misused by government, and other debts which did not
benefit the Filipinos.

C. Lobby for “debt bills” in Congress from the drafting of the bill, the filing process to
the passage of legislation that would allow for progressive debt management policies
and free the country from its dependence on borrowings and, at the same time, use
freed resources for basic social and economic services. In 2003, Congress came out
with the most bills addressing the debt issue. Seven (7) bills and two (2) resolutions
were filed at the House of Representatives while the Senate had ten (10) bills, all
covering debt related issues such as repealing the automatic appropriations act,
putting a cap on borrowings and payments, and setting a limit on government
guarantees.

D. Link up the budget process to the debt issue by highlighting the inadequate resources
that budget items such as education, health and infrastructure share in the national
budget as a result of the automatic appropriation law that ties up a big portion of the
budget, ranging from 40% to as high as 60% of the total, to debt payments.

E. Jubilee South is a network of organizations working in three continents (Asia, Latin

America, Africa) addressing debt and development issues. It was established in
Gauteng, South Africa in 1999 where FDC was voted to sit in the International
Coordinating Committee. FDC is the coordinating organization for the regional
network of Jubilee South in the Asia-Pacific also known as the Asia-Pacific
Movement on Debt and Development (APMDD), formed in October 2000. Jubilee
South works on the global debt cancellation campaign and other development issues
such as privatization and pertinent issues around globalization affecting South
countries. Jubilee South participates in and sponsors international conferences to
network with other organizations all over the world to expand its reach.

Mobilizations and street protests are strategies used by FDC in their campaigns and
programs to strengthen lobby efforts and engagements with government.

The overwhelming impact of SAP and other conditionalities on domestic economies

cannot be overlooked. To illustrate, before creditors like the International Monetary
Fund and the World Bank release loans, they usually demand borrower countries to
undertake certain reforms in the economy such as the withdrawal of subsidies for farmers
and consumers, raise taxes and reduce budget deficit, surrender of government’s
authority over oil pricing to big multinational oil companies, opening up the economy for
foreign goods and services while reducing support for small producers, as well as
privatizing public utilities and allowing foreign companies to exploit natural resources.

Studies and Publications

a. Freedom from Debt Coalition (1999), The Philippine Deep or How Indebted is the
Philippines

b. The Illegitimacy of Debt, PAID!, Official Publication of FDC, December 2002,

Special Issue No. 3

c. Various researches of the Citizens’ Assessment of Structural Adjustment (CASA) as

printed in the October-November 2002 issue of PAID!

2. Human Right to Water and the Privatization of Water Services

“The privatization of the water industry

places barriers to universal access to
water by treating water as a commodity
traded for profit. FDC believes that the
right to water is a fundamental human
right. The organization and management
of the water industry must thus begin
from this perspective.”

Water Privatization in Metro Manila

The state-owned Metropolitan Waterworks and Sewerage System (MWSS)

owned and managed Metro Manila’s water supply since the late 1800’s. Until its
privatization in 1997, MWSS was tagged as corrupt and inefficient because of its
unreliable service, aging infrastructure and inability to pay its creditors. At the same time,
it served only two-thirds of the 11 million residents in the metropolis. This proportion
translates to 3.6 million people without access to piped water, who in turn, were forced to
buy water from peddlers who charge 10 times the normal rate paid by MWSS customers.
For these reasons, multilateral financial institutions like the World Bank and the Asian
Development Bank (ADB) pushed for reforms in the water industry sector by proposing
that the Philippine government allow the private sector to operate the areas of MWSS.
The Philippine Congress was then pressed to enact the 1995 Water Crisis Act and this
law gave the President the power to fast track the privatization of MWSS, touted as the
biggest privatization in the world.
 Before the bidding, the International Financial Corporation (IFC) of the World
Bank which served as government consultants, divided the metropolitan service area into
two: the east and the west zones. In a short time and without the benefit of public
consultations, two influential families won the bid. Manila Water Co. Inc., won the east
zone concession by promising a huge 74 % cut in water rates. It is a consortium of Ayala
Corp. (owning 48% of the shares), a leading family conglomerate of Spanish roots whose
business empire spans property development, shopping malls, banks, food and beverage,
as well as beer and telecommunications. Manila Water is in partnership with United
Kingdom's United Utilities Ltd. (19%) and BPI Capital (11.5%) to carryout its
operations. It plans to sell the rest of the 21.5% to the public, to infuse additional capital
for its expansion project.

On the other hand, the Maynilad Water Services Inc., won the west zone with a
promise to lower rates by 44 %. It is a consortium of the Lopez group (with 60%
ownership) and Ondeo Degrement, a subsidiary of the French company Suez Lyonnaise
des Eaux (with 40%). Similarly, the Lopez group of companies is a family-controlled
business that covers shipping, the power sector, newspapers, television,
telecommunication and cable television. In 2005, however, after almost three years of
court proceedings and non-payment of Maynilad of its loans to the government, the water
company is now under rehabilitation and the Philippine government owns the majority
shares (86%). The government plans to re-privatize it in 2006 through another bidding
process.

Both concessions would run for 25 years with the pledge that no rate increases
will be implemented in the first 10 years of operation unless under extraordinary
circumstances like disasters that caused damage to property and the like. This
commitment along with the promise to expand the coverage area led consumers to
welcome the prospects of better and cheaper services. FDC, on the other hand, was wary
of the entire privatization plan. They warned the public of the potential danger of the
entry of old oligarchs and foreign capital into such vital public utility as water. FDC
viewed this privatized set-up as another scheme of allowing monopoly of scarce
resources such as water by a few rich families. Because of these apprehensions and the
grave impact on the majority of the people, FDC decided to take on this issue as a major
campaign in 1998.

Campaign Initiatives

At the initial phase, FDC embarked on an education campaign to make the public
aware of their rights under the privatized set up. FDC also monitored and intervened in
the processes of MWSS and the concessionaires, ensuring that regulatory mechanisms are
put in place and consumers’ welfare is priority. FDC continuously engaged media and
government by releasing position papers, at the same time, reaching out to the public to
dispel the wrong perception that “private means cheap service.”

True enough, eight years after the Lopezes and the

Ayalas took over, water fees were increased five times
without corresponding improvements on water services and existing infrastructure. Water
charges tripled in 2001, and in 2003 rates increased 81% in the east zone and 36% in the
west. As services become more expensive and inefficient, they impact more heavily on
poorer households, especially women and children. Both companies still have to resolve
the problem that almost 50% of the water supply is lost due to leakage and theft. FDC
views this situation as clear evidence that water privatization has failed and has caused
poor Filipinos more problems than ever. Not only do they have to contend with higher
and increasing water rates, they have to deal with unsafe and contaminated water supply.
(For additional information, please see related link
http://www.freedomfromdebtcoalition.org and http://ipd.ph/bantay_tubig)

Another development was the threat of Maynilad Water to give up its concession
due to mounting debts incurred by the company. The threat came about after it was not
allowed to increase its rates to cover foreign exchange losses within a short period of
time. The case was brought to the International
Current Campaign Initiative Arbitration Court for decision, and the Court, in
October 2003, ordered Maynilad to pay its P6.77
FDC is set to file a case with the
Supreme Court against Manila
Billion in dues to the government and rejected its
Water Company Inc. petition to terminate their concession. But Maynilad
questioning the water decided to contest it once again by filing for
company’s computation of its rehabilitation in a court. The rehabilitation court
income taxes and its alleged froze the assets of Maynilad pending the resolution
violation of the profit ceiling set of the case. In 2005, a rehabilitation plan was agreed
by government for public upon by the government and the Maynilad’s
utilities creditors; the government ended up bailing out
Maynilad from its debts by buying shares in the water company. The government is set to
sell its entire 86% share to another private company (For an update on this, see related
link http://www.11.be/index.php?option=content&task=view&id=2220). To date, there
are three prospective bidders, one of which is the Ayala group that owns Manila Water. If
the Ayala group wins, water distribution in Metro Manila is virtually a monopoly.

As such, FDC is looking into ways on how consumers can have a voice in the
operations and management of the water industry, either through giving back the
concession to government (reversal of privatization) to ensure that water is not
considered a commodity for profit but as a service or through a set-up where consumers
become stockholders or democratization of ownership, or both.

As part of its networking and expansion, FDC joins other organizations to

constitute Bantay Tubig Network or Philippine Water Vigilance Network. The main goal
is to push an agenda for water provision based on the principle that water is a basic
human right, and that all citizens must have access to adequate, potable and affordable
water. Recent gains of Bantay Tubig include halting Maynilad’s attempt to once again
raise fees in order to recover foreign exchange losses in 18 months instead of the
remaining 22 years of the contract as originally agreed upon. Another gain was the
change of leadership in the office that regulates Maynilad and Manila Water where the
former head has shown his bias for the private companies at the expense of consumers.
 FDC was instrumental in the formation of two water
networks: the Philippine Freshwater Network (PFN) and the
Progressibong Alyansa ng Tagatangkilik ng Tubig sa
Kamaynilaan (PATTAK or the Progressive Alliance of Water
Consumers in Metro Manila). PFN tackles the issue of
freshwater as a scarce resource, and how different sectors can
play important roles in the conservation, efficient use and
intervene in questions of accessibility and affordability (for
additional information, please see
http://www.11.be/index.php?option=content&task=view&id=897). PATTAK, on the
other hand, is an alliance of urban poor communities who either remain waterless or have
no access to piped water or those that have already connection but who suffer from
inefficient services. International networking is also another strategy undertaken by FDC
to gather support and popularize its campaigns.

Water Privatization Outside Metro Manila

FDC is also looking into water privatization plans of the government at the local
level. With the insistence of the World Bank, the government through the Local Water
Utility Administration (LWUA) is forced to fast track the transfer of management and
operations of local water districts to private companies, through a similar set-up as the
MWSS model. LWUA is in-charge of managing water systems outside Metro Manila,
mostly in areas that are bankable and can sustain operations through its won water
districts. The same agency exercises an exclusive right to provide water and collect fees
from around 500 water districts nationwide. LWUA funds the construction of all water
facilities from fees collected from
consumers, loans from ADB and the World International Campaign against
Bank and official development assistance Water Privatization
(ODA). Local government units either on the
FDC joins Jubilee South, the NGO
provincial, city or municipal level appoint Forum on the ADB and other
LWUA Board Members for each water international organizations in the global
district. LWUA is not a profit-making agency campaign against the continued
being a government owned and controlled privatization of water systems, and the
corporation but its mode of operation is critique of the current privatization
commercialized in the sense that it is allowed program of international financial
to recover its investments at full cost. As a institutions. FDC presented its critique
consequence, LWUA only operates in urban and proposals in two recent international
areas where the population is substantial and conferences during the first half of 2006,
whose residents can afford to pay water the World Water Forum in Mexico and
the Annual Governors Meeting of the
services. For areas not covered by water
ADB in India.
districts and LWUA, water associations and
cooperatives take the initiative of providing water to the communities. In other areas
where these organizations do not exist, residents just buy their water from mobile trucks
that carry water tanks or travel a long way to the get to the nearest well or hand-pump.
 Currently, government is set to privatize Zamboanga City, Davao and Cebu with
other cities following suit. These three cities are the priority areas because of the
presence of interested foreign investors and Filipino counterparts. In Zamboanga City,
for instance, Vivendi, another French company, in partnership with the Aboitizes and the
Lobregats – two influential political families who have vast business interests in the
region, is eyeing the project. The privatization plan is currently on hold due mainly to the
intervention of the FDC Zamboanga chapter in the deliberation process. Cebu and
Davao, on the other hand, are next in line but the process is slower due to the delay in the
submission of the plans by the investors. Anti-privatization campaigns were already
launched in Cebu, Western Mindanao, Davao and Zamboanga. The FDC chapters in
these cities remain vigilant and continue to hold education campaign and lobby work
with their respective city councils to oppose the privatization plan.

Given this looming privatization scenario at the local level, FDC is in the process
of building a consensus and a common agenda with its constituents on this issue. Among
the issues that FDC will look into is the feasibility of existing alternative water provisions
like community-managed water systems, and the role of government in this set up.

Related Studies and Publications

a. FDC at the Water Front, PAID!, Official

Publication of FDC, Nov. 2002.

b. "Water: Our Life, Our Right, Our Future" in

Compact Discs (CDs) – a 15-minute audio-
visual production of the Freedom from Debt
Coalition on the water campaign “Oppose privatization of water,” is the
message of the streamer

3. POWER PRIVATIZATION

“The entry of private power

producers has failed to address
basic problems in the power
industry: inefficiencies, monopolies,
high costs and environmental
destruction. One result is that
electricity costs in the Philippines
are now the second highest in Asia.”

The early 1990’s were witness to the worst energy crisis in the country. Power
outages became daily occurrences with some areas experiencing 15-hour blackouts on a
regular basis. In addition, hydroelectric plants were rendered useless by severe drought
and there was very low power production from other run-down power plants. At the same
time, the government lacked funds to build and develop new sources of energy in the face
of massive increase in power consumption. To address the crises, Congress gave
emergency powers to the president so that quick decisions can be made without the need
for the approval of the legislature. As a result, Presidents Aquino and Ramos signed
executive orders that allowed for private sector participation in power generation.

In the Philippines, the leading player in electricity generation and transmission is

the state-owned National Power Corporation (NPC). Starting in 1991, the NPC entered
into expensive power supply contracts with private or independent power producers
(IPPs) whose terms of contract were mostly between 15-25 years. To encourage the
private sector to generate power in the country, the government provided major
incentives such as (1) guaranteed purchase of the IPPs’ available capacity whether or not
the power is actually generated or put into use, (2) guaranteed supply of fuel, and (3)
protection from exchange rate fluctuations of dollar denominated contracts whose
additional cost will be borne by government. As a result of these lavish incentives, NPC
started incurring debts upon operation of 45 IPP contracts under the Build-Operate and
Transfer (BOT) scheme. Under the BOT scheme in the power industry, private sector
will be allowed to do business for a specific period as stipulated in the contract (usually
for a minimum of 15 years and a maximum of 25 years) by building power plants in the
country and operating them by selling power to the government and other power
distribution companies. When the contract expires, the private company has to transfer
these assets to the government.

Since NPC’s income is less than its revenues,

Current Campaign Initiative it cannot pay for its loan obligations to its creditors,
forcing government to pay for them in NPC’s behalf.
Linking the campaign on the As of 1999, NPC owed the state more than P 460
cancellation of IPP contracts to
billion (almost 7 billion Euro at current exchange rate
the debt issue, to highlight the
impact of the biased contracts of Euro 1 = P66) from only P 35 billion (530 million
on consumers and the national Euro) in 1995. This amount is more than one half of
budget. FDC plans to intervene the NPC’s total liabilities of P 786 billion (almost 12
in concrete policy changes in billion Euro) in 1999. Given the huge debts of NPC
laws that are detrimental to the and limited resources of government to finance
consumers such as the BOT rehabilitation of power plants and other capital
Law. A video documentary is investments, the multilateral financial institutions
on the works as part of the through the World Bank and the ADB have once
information and education again targeted NPC for privatization. It is their
activities to keep the issue contention that government should no longer operate
burning, and popularize it to a NPC because of the big budget deficit. And so, in
bigger audience.
June 2001, after much public debate and controversy,
President Arroyo signed into law Republic Act 9136 known as the “Electric Power
Industry Reform Act (EPIRA). The law provides for the deregulation and privatization of
the power industry through opening up of the power industry to foreign investors and
local business interests without government interference. Another controversial feature of
the EPIRA is its declaration that power generation is not a public utility and therefore
removes the franchise and nationality requirement for public utilities as prescribed by the
Philippine Constitution. The Constitution requires that ownership and operations of
public utilities should only be by Filipinos, or in cases of partnership, majority of shares
must be owned by Filipinos. Clearly, EPIRA encourages the proliferation of foreign
monopolies in the power sector while effectively diminishing government’s
responsibility to provide efficient and affordable energy to the people.

The liberalization of the power sector was never an independent act of

government. With the backing of international financial institutions, proponents of
privatization argued that public sector monopolies were responsible for expensive
electricity rates, poor service, bad investment decisions and inability to innovate. In
contrast, private corporations have greater capacity to mobilize capital and with the
proper competition policy can provide electricity efficiently. For example, the WB in
1988 started highlighting the financial difficulties of NPC in its Philippine Energy Sector
Study and then pushed for the approval of various BOT schemes. In 1998, the ADB
provided $300 million loan for the power sector restructuring programs that culminated
in the passing of the EPIRA. Recently, the government is finalizing plans for the sale of
government assets in energy generation and transmission.

A recent study of the Philippine Center for Investigative Journalism (PCIJ)

reported that President Ramos himself facilitated the speedy approval of the most
expensive power contracts in the country. Most of the contracts with the IPPs were
signed during his term, and he continued to allow entry even after the crisis was resolved.
In 1994, the government still entered into contracts with IPPs even though the country
already had more than enough power capacity up to year 2000. It is reported that he
received a big amount for facilitating the smooth entry of these foreign investors in the
country. Individuals linked to Ramos were also beneficiaries of highly lucrative legal,
technical and financial consultancies.

In the case of the EPIRA, strong business

lobby groups also figured in its hasty passage in
Congress, without the benefit of thorough study and
debate. It was reported that big business and
influential families financed the lobby in Congress;
in fact, two members of the House of
Representatives admitted they were given money
from an unknown source to push the passage of the
Power Bill. However, the House of Representatives
did not investigate the expose.

Despite the intention to avert the power crisis and provide for electricity to
Filipinos nationwide, some IPPs only choose to operate in profitable areas. As a result,
very poor rural communities and other far-flung areas are yet to experience the benefits
of electricity. In fact, of the 42,000 barangays all over the country, residents of around
6,000 barangays still use candles in their homes.
Campaign Initiatives

Given the above context, FDC is leading efforts to challenge government policies
in the power sector and launched initiatives such as the following:

A. Electricity! Alliance (Kuryente! Alliance) is a citizens’ movement formed in March

2003 that monitors the implementation of the EPIRA and seeks to provide the public
with credible and full information of the power sector. It is composed of 13
organizations, of which FDC is the co-convenor. The Alliance’s tasks include the
following: a) review of the power industry and propose necessary policy changes and
reforms; b) monitor power rates and the pricing mechanism; c) together with CIRC,
look into the IPP contracts; and d) launch campaigns and education work to
popularize the issue.

B. Citizen’s IPP Review Commission (CIRC) is an independent review body composed

of activists, environmentalists, lawyers, professors, economists and accountants
pushing government to renegotiate, if not terminate the onerous contracts with IPPs.
CIRC has already reviewed the contracts entered into by government with California
Energy (CalEnergy), an American company engaged in power generation and
distribution, in the case of the Casecnan Project in Nueva Vizcaya in Luzon and the
Magellan Co-generation Inc. (MCI), a consortium of
Filipino and foreign companies dealing with power
production and distribution, in Cavite. Both contracts were
found onerous and one-sided, leaving consumers to pay for
higher electricity rates. CIRC members are also in the
process of reviewing six other IPP contracts that include the
investigation of the background and actual operations of the
IPPs. CIRC aims to inform the public on the social,
environmental, economic and legal implications of said
contracts, at the same time, pressure government to
renegotiate, or terminate the onerous contracts. Currently,
CIRC has been monitoring developments in the power industry and release position
papers and statements when the need arises.

Related Studies and Publications

a. Diokno-Pascual, Ma. Teresa and Shalom MK Macli-ing (August 2002), The

Controversial Casecnan Project, an FDC Resource Paper

b. ADB and the Privatization of the Philippine Power Industry: Issues and
Implications (26 June 2003), FDC Resource Paper
 4. OTHER PROGRAMS

A. Gender Program

FDC works on the effective integration of

FDC together with major women’s
feminist and gender perspectives in all aspects of groups and people’s organizations
the coalition’s work. As men and women assume organized the Welga ng
various economic roles in society, they also Kababaihan laban sa Kahirapan at
experience the impact of economic policies Globalisasyon (Women’s March
differently. In this light, FDC acknowledges the against Poverty and Globalization)
fact that knowledge expansion and consciousness- to put forward the women’s agenda
raising ought to be gender sensitive. At the same on critical economic issues
time, there is a need to increase women’s confronting the country. The
participation in the Coalition’s structures and launching activity was done in
programs. As a response, FDC has been April 2005 (for details, please see
http://www.11.be/index.php?optio
mainstreaming gender perspectives into the
n=content&task=view&id=1992).
organization by ensuring that campaigns and
programs integrate women and gender positions in all issues. It has introduced into the
organization the perspective of Feminist Economics as an analytical tool that will aid the
Coalition in its analyses and positions.

B. Publication and Information

At the same time, FDC continues to strengthen its education and capability
building work through the regular and timely release of the coalition’s publications such
policy papers, resource books, PAID!, economic reports, and
other special resource materials. It launched and maintains a
web page and electronic newsletter to provide members,
partners, and the public with easy access to FDC
information, campaign and initiatives. Succeeding editions
of the electronic newsletter will also be written in the local
language. In 2002, FDC started to publish the coalition’s
annual economic report based on official and in-house
analysis on macro-economic indicators, public spending,
impact of privatization and economic trends. These
initiatives are aimed to sustain well-timed discussions on critical issues of the economy
as well as stimulate opportunities for further research and build stronger unities among
the members.

FDC has come a long way in terms of promoting an economic agenda that is
humane, self-driven, equitable and sustainable. In the light of recent involvements and
future plans, FDC remains at the forefront of the nation’s struggles for a better future.
 For more information, please contact:

Ana Maria Nemenzo, President

Milo Tanchuling, Secretary General

11 Matimpiin St., Bgy. Pinyahan, Diliman, Quezon City, Philippines 1101

Tel. (632) 921-1985 TeleFax (632) 924-6399
Website: www.freedomfromdebtcoalition.org
E-mail: mail@freedomfromdebtcoalition.org