The LBP Loan to Romblon: Reply from Vice Governor Fonte

There appeared reports concerning the loan secured by the Province of Romblon from the Land Bank of the Philippines. Permit me to speak to you about this loan-as gathered from the listening post of the Presiding Officer of the Provincial Board as its members debated on the issues.

Purpose of the Loan
On top of the priorities of the administration are the improvement of our provincial roads, the expansion and improvement of our hospitals and the achievement of closer coordination between the Provincial Government and the national agencies operating in our province. Obviously these are objectives that no one can quarrel with.

If we were to rely alone on the normal inflow of funds into the Provincial Government from the National Government through our internal revenue allotment (IRA), it will take the province more than 10 years before it can realize the high priority projects that have already been identified as of immediate importance.

A First for the Province
When the Local Government Code was passed in 1991,that law gave more autonomy to local governments. It was emphasized in this law that it shall be the basic policy of the state that any local government unit may create indebtedness and avail of credit facilities to finance local infrastructure and other socio-economic development projects. The policy is a necessary measure to hasten local development. And because of this empowerment, many local government units have availed of loans to finance their infrastructure and socio-economic development projects. Romblon alone has become a notable exception.

In order therefore to hasten the realization of the top priority projects of the Province, Governor Madrona proposed that the province secure a loan. This proposal was extensively deliberated upon by members of the Sangguniang Panlalawigan both among themselves and with Governor Madrona based on the offers of two prestigious banks of the country. One dominant argument was that infra benefits, that may come only in the next ten year (if normal trickle of funds are relied on), can actually be advanced to today with a loan package.

Where will the Money be Used?
The first consideration that was examined was the use to which the loan will be applied. Are the projects of pressing need to our constituents? The answer to this question is YES, and the they have in fact already been specified in the Ylagan initiated Provincial Physical Framework Plan which updated the previous Madrid initiated Comprehensive Development of the Province. We need better roads, better hospitals. And,more importantly, we need them NOW. Governor Madrona was emphatic when he said that he does not want roads where people plant bananas during the raining season.(If desired , an enumeration of the projects can be provided under a separate cover.)

Quite apart from the immediate use by the public of these facilities, there is the added economic benefit of employment during the implementation of these projects that will redound to our people, not to mention the additional market demand for constructions materials and the concomitant multiplier effect this will have in other sectors of the provincial economy.

Can We Pay the Interest?
The second consideration was: Can we afford the interest? Based on the offers of the two banks that I mentioned and the subsequent improvement of the terms and conditions as a result of negotiations made by Governor Madrona we concluded that the Province can afford the interest as well as the repayment on the principal of the loan. As it finally turned out the average interest as well as rate on the loan will come out at 9% per year. (Interest payments started October 2002 at 7.67 per annum. The interest rate as of June 2003 is 8.3%)

The third consideration was: Will the repayment of the loan deprive the Province of future development funds for other projects. The answer is NO. Our present annual development fund is 45 million of which only an average of 18 million per year will be used to amortize the loan. Out of the 227 million borrowing capacity of the Province, the Provincial Government will borrow only 130 million and only the amount needed to finance the top priority projects. Considering further normal increases in our internal revenue allotment of 5 million every year, the Province will continue to have adequate funds for future development purposes even while it is
amortizing the loan.

And lastly, there was the matter of inflation. We all know that the value of one peso today will not be the same as the value of one peso one year from today. By doing the projects now, we will avoid the higher prices in later years.

Requirement for Public Hearing
There were other issues raised in some reports which to my mind were irrelevant because they have no factual or legal basis. One of them is the issue of a public hearing.

A public hearing is not required by the law authorizing local government units to borrow money to finance their developmental projects. It is the elected officials who were vested by Congress with the power to decide whether or not the local government unit shall avail or make use of credit to finance its development projects within the limits provided by law. The elected officials cannot shirk this responsibility and pass off the decision to a public hearing since that would constitute an abdication of their fiscal responsibility, an offense against their oath of office. In any case, this particular loan was positively endorsed by all the Mayors of the Province of Romblon.

And then there was the partisan observation that the loan shall extend beyond the term of the present Governor and the other elected officials of the Province. There are many other contractual obligations that a local government unit enters into which extend beyond the terms of incumbent elected officials. The test for the wisdom of such decisions is not the duration of the contract but their contribution to public benefit and welfare.

I have explained these matters to you to disabuse your minds from the scurrilous reports. I note that you are one of the many who harbour sincere interests in the welfare of the Province. Such interest might bring you fatefully to its management in the future. and in that future capacity you will find yourselves to make vital decisions concerning the welfare of our people. When your time comes it is my hope and prayer that you will have the moral courage to make the decisions that you sincerely believe are right and not be intimated by fear of criticism from quarters whose only agenda is to obstruct the progress of our Province.

Release of Loan Proceeds
Also let it be mentioned that Land Bank of the Philippines, the lender has stipulated that the P130 million loan will be remitted to the Province not in lump sum but rather that releases are made project and only upon submission of contract documents and verified project accomplishment reports. As of December 31, 2003, LBP has already released P89 million equivalent to actual accomplishments.

I hope this clarifies the issues. And why must critics ascribe ulterior motives to what provincial administrators decide on?