Cheap money, anyone?

Who needs Charter change, when the bright boys in the Palace learn their history lessons all too well? In the last few days, Businessworld has run stories on a new and obscure Executive Order that has potential "pork barrel" uses. (It has another such story today, on its front page, but it’s hidden behind a subscriber’s wall.)

The Inquirer has a two-part series on EO 558 too. The opening paragraphs of the first part should give us a solid look at the issues involved:

After a six-year hiatus, the government is once more heading down the money-losing path of dole-outs and subsidized loans, thanks to a little-known order signed recently by President Gloria Macapagal-Arroyo.

More alarmingly, critics of the President believe, the timing of this 180-degree shift in government policy has "sinister" undertones, coming only months before the 2007 national and local elections, slated to be a litmus test of the Arroyo administration.

EO 558, signed last August, repealed EO 138 issued by President Joseph Estrada in 1999.

Back then, the Estrada order was received as a pleasant surprise by the business community, since it effectively put an end to the distribution of "behest loans" via government financial institutions (GFIs) and government-owned or controlled corporations (GOCCs).

Today, the Arroyo order — a sparse one-page memo that provides no explanation for the policy — is being received with raised eyebrows and sometimes amazement by the few people who are familiar with its implications.

"Potentially, I think this EO may be sinister," House Minority Floor Leader Francis Escudero said in an interview. "It could be related to the 2007 elections or ‘Cha-cha’ [Charter change — the Arroyo administration’s attempt to shift to a parliamentary form of government]."

The opposition stalwart opined that widening the government’s distribution channels for cheap loans was one sure way to win points with local government units and people at the grassroots level to support President Arroyo’s political agenda.

If we listen to the complaints of GFI executives, and we compare the documents at hand, and we consider what has taken place since the Garci scandal erupted, we’d think there was something sinister in this about-face on policy too.

President Arroyo’s EO 558 can be found here. Joseph Estrada’s EO 138 of 1999, which 558 repealed, can be accessed here. EO 138’s operating guidelines are here. In 1999, the Department of Finance wrote an overview of the 138 breakthrough. The first two graphs read:

The year 1999 was a milestone in so far as Government’s efforts to provide an efficient and effective credit delivery system to the disadvantaged sectors of the country are concerned. In line with its mandate, the National Credit Council, as chaired by the DOF, spearheaded the campaign toward the rationalization of all government directed-credit programs. This resulted in the issuance by the President on August 10, 1999, of Executive Order No. 138 directing all government entities involved in the implementation of credit programs to adopt the credit policy guidelines formulated by the NCC. The EO is anchored on the following basic policy principles:

  • Greater role of the private sector in the provision of financial services to the basic sectors;
  • Adoption of market-oriented financial policies by leveling the playing field to encourage a competitive credit environment;
  • Government to provide an enabling policy environment, critical support services and capability building services that will facilitate the increased participation of the private sector in the delivery of financial services; and
  • Non-participation of Government non-financial agencies and government-owned or controlled corporations in the implementation of government credit programs.

That last bullet point is where, amazingly, the Estrada administration bit the bullet.

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