The Philippines spurns EU
It was clear who was spurned for whom.
The Department of Foreign Affairs was not the first to know. The EU delegation in the country confirmed on Wednesday, May 17 that the Philippine government will no longer accept new EU grants the (Rappler, 05.18.2017).”
EU Ambassador Franz Jessen said the Philippines’ decision to cut aid from the EU would mean the loss of about € 250 million ( P13.8 billion) worth of grants starting this year until 2020, mostly allocated to Muslim communities ( ABS- CBN, 05.19.2017). The EU has given the Philippines a total of € 2.3 billion ( P127.8 billion) since 1992, including support for projects in conflict- stricken Mindanao. It granted €130 million in development assistance between 2007 and 2013, and, after a peace deal with rebels in March 2014, the Philippines received a pledge of €325 million ( P18.03 billion) for over four years financing of projects in Muslim Mindanao (Ibid.).
Socioeconomic Planning (NEDA) Secretary Ernesto Pernia “complained” that President Duterte did not consult his economic team ( Rappler, op. cit.). Presidential Spokesman Ernesto Abella said it was the Department of Finance ( DoF) that relayed this decision to the EU…” it’s not entirely accurate that they ( NEDA) were not consulted ( Ibid.).” “I’ll tell you the truth, it was not my idea initially, it was the decision of ( Finance Secretary) Carlos Dominguez III,” President Duterte said in a speech in Davao City (ABS-CBN News, 05.20.2017). Dominguez clarified that Duterte declined the aid because it “would involve ( a) review of our adherence to the rule of law… That specific grant is considered interference in our internal affairs ( Ibid.).”
NEDA’s Pernia still hopes the President will change his mind, reasoning that he has changed his mind before, and perhaps was just sensitive to the criticisms of the EU ( The Philippine Star, 05.19.2017). “The Philippines’ relations with the EU took a turn as the bloc criticized President Duterte’s war on drugs, drawing sharp retort from the toughtalking leader. The EU had earlier expressed concern over alleged extrajudicial killings in the administration’s anti- drug campaign, even raising the matter before the United Nations Human Rights Council in March, (Rappler, op. cit.).”
Remember that back in October 2016, Duterte boldly challenged the EU: “If you think it’s high time for you guys to withdraw your assistance, go ahead. We will not beg for it, Rappler pointed out (Ibid.).” In January, the EU warned that the Philippines may lose trade incentives tied to compliance with international commitments, including those involving human rights (ABS-CBN News, 05.20.2017).
Still, the European Chamber of Commerce of the Philippines
(ECCP) is surprised, and laments the rejection of this “totally free” grant of the EU, which would have gone to the poorest communities of Mindanao ( Philippine
Daily Inquirer, 05.20.2017). At first the ECCP thought that there might have been some confusion with the Generalized System of Preferences Plus (GSP+) or the ongoing free- trade agreements ( purely commercial transactions) with the EU. No, we are rejecting only the grants, we’ll keep the GSP+, says Trade and Industry Secretary Ramon M. Lopez (Ibid.).
But even the GSP+ scheme, under which over 6,000 local products have been exported tariff-free to the EU since 2014, compliance with 27 international conventions ( which include a commitment to never reinstate the death penalty) is a critical requirement ( BusinessWorld, 05.19.2017). In late-January, EU sent a team to the Philippines to ascertain the government’s compliance with the condition as talks for a prospective bilateral free trade agreement (FTA) were ongoing ( Ibid.). How now, and where now?
Spoiling for a fight with the EU on a proffered grant seems untimely, to say the least. The rejection is confusing, just when the government is pushing for implementation of its Comprehensive Tax Reform Program, with its much-debated pros and cons for the economy vis- à-vis seemingly skewed- to- the- rich benefits. Why reject a grant for the poor at this time? It is alarming, that the DoF itself admits that “reforms in the personal income tax (PIT) regime would lead to revenue attrition estimated at P63 billion in the second half of 2017; P138 billion in 2018 and P152 billion in 2019 ( interaksyon.
com, 05.13.2017).” Projected revenue shortfalls from the PIT can be more real than the anticipated offsetting with collections from the removal of value- added tax exemptions, increased excise and other taxes which, according to social activist groups, would burden the poor more than the rich (Ibid.). And on top of the revenue shortfall, some P8 trillion will be needed for President Duterte’s “Build, build, build” infrastructure program, mostly to be sourced from the national budget, but would also need a huge foreign component (ABS-CBN 05.19.2017). Analysts say China is the most likely lender, as one warned that given China’s prevailing interest rates, the current Philippine national government debt of approximately $123 billion could rise to over a trillion US dollars in 10 years (Ibid.).
Four agreements were signed during President Duterte’s last visit to China, including a grant of 500 million yuan ($72.5 million) for feasibility studies of infrastructure projects in the Philippines and construction of a drug rehabilitation center. Also signed were memorandums of understanding on cooperation in human resources development and personnel exchanges, energy cooperation, and enhancing government capabilities in communication and publishing. ( The
Washington Post, 05.16.2017) It is clear who was spurned for whom, in the courtships and flirtations of politics.