Loren frowns on 'whimsical' foreign borrowings

Senator Loren Legarda warned yesterday that the Philippines must exercise prudence instead of "whimsically" trying to get a bigger slice of the ever-increasing investment pie currently being made available to emerging markets like Asia.

Citing a 2007 World Economic Outlook report that dollar investment flows to Asia have risen to levels twice as high as the previous peak in 1996, Loren said the Philippines must tap available investments and loans, but it must do so judiciously.

"We do not borrow money for the sake of borrowing, or just because someone has extra cash to lend to us," said Loren, who chairs the Senate Committee on Economic Affairs. "Capital inflows are sought for a clear-cut purpose, and that is to spur growth. In the private sector, that means funding to expand our industries, with the end view of making them globally competitive," she said.

Local industries, including micro, small and medium enterprises, need government support as they generate much-needed jobs, said Loren.

For the government, Loren said that the availability of investments and soft loans for its projects should not spur "mindless" spending, especially for projects that have the potential to become white elephants.

She pointed out that the Philippines is already mired in debt that Filipinos who are yet to be born are already saddled with the responsibility of paying loans incurred by the past and present generation.

Likewise, Loren stressed that Philippine industries should first tap locally available investments before sourcing their capitalization needs abroad. Government, on the other hand, must seek to increase its revenues to fund its projects.

"We have institutional lenders, as well as sectors that have the potential to shore up needed funds, like overseas Filipino workers," said Loren.

"OFWs have been remitting billions of dollars each year. Surely, they can be enticed to invest here, especially since work abroad is not a permanent thing for most OFWs."

The government can help OFWs become investors through information dissemination as to the risks involved in investing. She said informed investors make wise decisions.

"At present, a big chunk of our annual budget is allotted to pay foreign debts. This fact alone should bring us to our senses," she said. The Philippines has about P3.7 trillion in debt as of July this year.

For this reason, Loren said the Senate has always kept an open eye on loan-funded government projects that do not benefit Filipinos, but merely add up to the country's indebtedness.