- The Washington Times - Wednesday, September 21, 2005

A top Philippine official said yesterday that his country’s proposal to let creditor nations invest in poorer ones as a way to solve the global debt crisis is gaining momentum among international lending institutions and policy-makers.

Jose de Venecia, speaker of the Philippine House of Representatives and an ally of President Gloria Macapagal Arroyo, said the debt-equity swap idea could erase more than $1 trillion in developing-country debt and prove a more effective way to meet the United Nations’ goal of cutting global poverty in half by 2015.

“This could be like the Marshall Plan times a hundred,” Mr. de Venecia said in a meeting with editors and reporters at The Washington Times.

“We applaud the offers of the United States and the [Group of Eight industrial] countries to forgive the debt for the poorest countries, but we think this idea can have a far larger impact for many more people,” he added.

Mrs. Arroyo pitched the idea in an address to the U.N. General Assembly last week, and the speaker said he has gotten a respectful hearing from the Bush administration, from top U.N. officials, and from senior analysts at the World Bank, the International Monetary Fund and the Paris Club of major creditor nations.

Under the Manila plan, the United States and other lenders voluntarily would convert up to half of the debt owed by about 100 lower-income countries into equity ownership in projects in those nations.

The investments could range from basic infrastructure and social projects — roads, schools and power grids — to more commercial deals in tourism, timber, housing and food processing.

As in private debt-equity swaps, the creditor countries would be entitled to a share of the profits from the ventures they help finance. Mr. de Venecia noted that the idea does not require the Western governments to provide new money and that all the investments would be voluntary.

The G-8 leaders at their July summit in Gleneagles, Scotland, agreed to write off about $40 billion in debts for 18 of the world’s poorest countries, 16 of them in sub-Saharan Africa.

But Mr. de Venecia said the debt-equity idea could be applied to nearly $1.2 trillion in debts owed by about 100 lower-income countries, including many in Asia, where hundreds of millions still live in what he called “grinding poverty.”

“We fully support the debt-forgiveness plan, but the effect of the debt-for-equity program could be so much larger,” he said.

He noted that 90 percent of the Philippines’ federal budget goes toward government expenses and toward paying principal and interest on $56 billion in sovereign debt.

Converting just half of the debt payments into equity investment would pump $2.25 billion annually into the domestic economy, with the United States and other lenders benefiting as growth increases, he said.

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