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Repeal of a repeal

(Article published in the Sept 27, 2006 issue of Manila Standard Today)  

It looks like Congressman Teofisto Guingona III, better known as “Tootsie”, has found his niche.  Last week, he spoke as one who knew what he was talking about.  In a television interview, he dissected Executive Order No. 558 (EO 558) recently signed recently by still President Gloria Macapagal Arroyo, clearly and methodically explaining why its repeal of Executive Order No. 139 (EO 139)), issued in 1999 by then President Erap Estrada, was bad economics.  This man, I must say, is ready to fit into his father’s shoes.

 Both Guingonas are true blue Ateneans, schooled by the Jesuits in their youth and hewing to the Ignatian party line even after receiving their diplomas.  Both are in their element as outsiders, shinning as members of the opposition but unconvincing as supporters of those in power.

 Except for the scorching fire in Tito’s famous eyes and the contorted lines in Tito’s tortured face (born of several oratorical stints in the “Voice of Democracy” speech contests) which are replaced by the winsome smile he took from his charming mother, Tootsie’s mien exudes the same intensity of his father’s passion for his causes even if, in some instances, an advocacy or two sounds too extreme for the more conservative in their social circle.

 Congressman Tootsie seeks to overturn EO 558 by filing House Bill No. 5788 that proposes to make it illegal for government non-financial agencies (GNFIs) such as the Department of Agriculture and other government-owned and controlled corporations (GOCCs) to directly lend to the general public. In effect, Tootsie proposes the return to the regime of delivering credit to the poor that was set up by then President Erap, in my view, the country’s only chief executive who was truly the poor people’s president, at least in the beginning of his tenure.  His EO 138 enlisted the heavy engagement of the private sector by giving to it the micro decision of actually selecting of specific beneficiaries and relegated the public sector to the macro role  of providing the supportive environment and infrastructure for the financial system of extending credit to the needy.

EO 138 actually was primarily a repealing issuance.  Its most significant feature was that it set aside an even prior regime where government agencies, which are non-financial institutions, extended credit either directly to beneficiaries, or indirectly through directed credit programs.  Section 3(a)(3) of EO 138 prohibited such direct lending and required the GFNIs and OGCCs to channel funds they are administering through government financial institutions (GFIs) who are then required to do assume the credit risk  on their choice the  institutions they lend the money to. The GFIs were, further told to provide wholesale funds to private financial institutions engaged in retail lending (Sec. 3(b)(1)), EO 138).

 The common understanding is that Gloria Macapagal Arroyo’s EO 558, in repealing Erap Estrada’s EO 138, restored to life what the latter had put a stop to, namely, non-financial government agencies and government-owned and controlled entities directly, or, through directed credit programs, indirectly extending credit to the beneficiaries.  Hence, the reported scrambling of the Presidential Management Staff (PMS) to draw up implementing guidelines on how the purportedly resuscitated powers by the non-financial government institutions are now to be exercised.

Tootsie’s response, to stop the return to the pre-EO 138 era, is to override EO 558 with legislation.  The legislative route is, normally, a logical one and perhaps most effective.  As Tootsie was taught as a freshman in the same law school his father went to, executive acts are valid only when they are not contrary to the laws or the Constitution (Art.7, Civil Code).

 But the situation is certainly far from normal and that makes Tootsie’s solution typically Guingona--a grand gesture imbued with nobility but with very little chance of moving people to action.  In the light of the reality of the legislative mill under the control of the President’s allies, Tootsie’s bill has as much chance of becoming law as the man from La Mancha had of victory in his battle with the windmills.

 Nevertheless, Tootsie’s opposition to EO 558 resonates with the concern of the finance community.  FINEX leads the attack with a position paper that recalls that “the main lesson learned which formed the impetus to establishing EO 138 was that direct lending by government non-financial agencies to the agricultural and micro-enterprise sectors is costly in the form of huge fiscal costs from subsidized interest rates.” 

 FINEX continues: “In addition to this, there were poor repayment rates given the beneficiaries’ dole out mentality, high administrative costs, unsatisfactory outreach and a distortive impact on financial markets caused by subsidized interest rates.”  Keeping politically neutral, FINEX does not mention what the opposition shout out loud: it is likely to be a channel for the use of government money to buy votes in the coming elections.

 In addition to Tootsie’s economic arguments, EO 558, in my view, suffers from two legal infirmities.

 As pointed out by Tootsie, EO 558 is (despite its two sections) really a one-liner which states, “Executive Order No. 138 dated August 10, 1999 is hereby repealed.”  The repeal is absolute, total and complete. 

 EO 138 had four major parts.  The first was a statement of principles on which was founded the policy of providing the basic sector, i.e. the poorest of the poor, access to financial services.  The second was the articulation of the two policies arising on those principlies, i.e. the policy of savings mobilization and of charging market rates for the interest to be collected on loans to be granted.  The third was composed of specific mandates to GNFIs and GOCCs  to stop direct involvement in extension of credit, particular instructions to GFIs on how to involve the private sector, and clear standards to follow in dealing with donor agencies and using external funding.  And, finally, there was the necessary administrative mechanism and structure to implement the policy.

 Since EO 558 repealed EO 138 in toto, the first question that obviously has to be asked is whether the repeal involved the abandonment of all the principles articulated by EO 138.  A freshman law student would point out that since the repeal admitted of no exception, then the intended effect was to repeal them all.  But then, a number of those principles are statutory, if not constitutional.  Hence, there is a need to sort out what was swept away and what remained.

 My classmate Finance Secretary Teves, who is charged with determining the parameters of the EO 558 regime, has indicated perhaps the silliest way of going about constructing to the replacement of EO 138, namely, “consensus”.  Among whom and on what points, my good classmate does not say.  At any rate, what all this uncertainty indicates is a chronic constitutional vagueness on the intent of EO 558.

 But, even if the PMS were to focus only on the power of NGFIs and OGCCs to lend directly, it is still a debatable question whether such power was in fact restored. It is important to note that the repeal by EO 558 of EO 138 is an express repeal.  The repeal by EO 138 of the policy of direct lending by GNFIs and OGCCs was likewise express.  In such a situation, jurisprudence, articulated as early as 1917, holds that what EO 138 repealed is not revived unless it was so expressly provided in EO 558 (vide US v. Soliman, 36 Phil. 5).In short, had the still President intended to revive the pre-EO 138 regime, she should have said so expressly.

 Why Secretary Toting Bunye did not point this out to the drafters of EO 558 is beyond me.  We were both present in our evening class at the Ateneo Law School when Professor Miguel Zarraga explained that.  But then, maybe he was then sleeping, like some of his co-workers in Malacañang seem to be now.