A brief cost-benefit analysis of the Philippines’ recent arms purchases

By JOSEPH BAYANA**
April 19, 2014

Most Filipinos, and both the United States and Chinese governments, are being taken for a ride by the Noy Aquino administration. The only group benefitting from an American military visitation agreement and the purchase of boats, planes, and helicopters for the Philippine military is the Aquino/Cojuangco political dynasty. This can be proven by a simple cost-benefit analysis. Defined as a comparison and breakdown of a project’s price tag and its worth as a private or public good, a cost-benefit analysis is a simple way to know if a plan should push through or not.

Consider the price of two US Coast Guard boats named Hamilton and Dallas. They were refurbished for $10 million each and then bought by the Philippine government to become the BRP Gregorio del Pilar and BRP Ramon Alcaraz. Who earned the $10 million? The American shipbuilding company Huntington Ingalls Industries of the state of Virginia. This means jobs and money for American workers and businesses, the most important benefactor of the American defense industry. Yet even this $10 million is nothing compared to the hundreds of millions of dollars the American taxpayer is spending for Balikatan and other joint exercises with the Philippines military. The cost to the Noy Aquino is a nod and a signature but the benefits for his family extend beyond his lifetime. To the American taxpayers, the costs are tens of millions with the benefits limited to a few thousand people in Virginia. At least they get something.

Who paid almost 1 billion pesos for these boats? Of course, the Filipino taxpayer who will not reap any benefits from the cost of buying ships. Since no jobs or businesses were created in the Philippines after the purchase of these vessels, it is a bad investment that will only benefit the Aquino/Cojuangco political machinery. It can be argued that $10 million was spent to prepare the Philippines Coast Guard for natural calamities and typhoons. But the boats do not create jobs for Filipinos. Buying them was more for the emotional satisfaction of the nation’s population. If diminishing returns were to be considered, the cost-benefit analysis for Filipinos would even be worse.

Then there’s the $184-million loan from Japan extended to the Philippines to buy 10 waterborne vessels. A well-known practice by banks all over the world is to lend consumers money to purchase a house, a car, or to set up a business. Filipino-Americans and Filipinos in the US know this, the Americans know this, the Japanese financial system understands the processes, but the Filipino government asks for money to buy boats from the same lender and seller. With an exchange rate of $1 to P43, the cost to the Filipino taxpayer is more than P7.9 billion. All benefits go to the Japanese shipbuilding and financial industries while Filipinos are left with boats that do not create jobs or businesses in the Philippines. Again, it can be argued that boats are for natural calamities and typhoons but buying them was still for the emotional satisfaction of Filipinos. They feel good so money is not a problem even if the government does not have it. Of course, at the forefront of this pursuit of hedonism is the Aquino administration.

Added to these costs is another $100 million to buy eight helicopters from Canada, $116 million to France for five patrol boats, and $420 million for 12 FA-50 fighter jets from the Korea Aerospace Industries. The benefits to Canadians and South Koreans are immeasurable because their industries create communities – housing, schools, libraries, commercial centers, etc. – for their workers who build helicopters and planes. The cost to the Filipino taxpayers is a whopping half a billion dollars, which is about P22.3 billion. The benefit yet again is more emotional satisfaction than job generator or industry developer. Score another political gain for the Aquino/Cojuangcos.

All told, an estimated $10 billion will be spent by the Philippine government and military over the next few years. None of these expenses for the nation’s military will directly benefit the uneducated and poorest of the poor Filipinos. Unlike the shipbuilding, helicopter-making, and airplane-constructing industries of the US, Japan, Canada and South Korea, respectively, whose populations will benefit from the filter-down effects of Philippine spending, the vast majority of Filipinos will remain poor and ignorant.

How do we then solve the problem of Juan de la Cruz if the vernacular does not have anything that will translate to a cost-benefit analysis?

The answer is nothing. Since the ordinary Filipino voter is ignorant of what the Aquino administration is actually doing, Noy can use government resources to prepare for the 2016 elections. Filipinos will never know what hit them. After all, Noy Aquino needs funds to prop up his chosen successor and to prepare for his many years in retirement from politics after 2016.

Where does China get into the picture? The Filipino-Chinese Aquino/Cojuangco clan can make China look bad because they have nothing to lose. Just bombard the media with anti-China sentiments. That is cheaper and less controversial than an outright boycott of Chinese-made goods or any economic sanctions. Besides, no one in the United States, the Philippines, Canada, Japan, South Korea or France wants to consider that the combined populations of these countries amounts to only half that of China, which means they need less resources than 1.3 billion people. A cost-benefit analysis of 13 Chinese in McDonald’s or Walmart, for example, will show that the demands are far more than those for seven other customers. That’s just plain business and economic sense.

The Philippines military’s purchases are a huge cost for a country with tens of millions mired in poverty. The cost to Noy Aquino is absolutely nothing. Everything is shouldered by the Filipino taxpayer because the benefit entrenches the Aquino/Cojuangco family’s political dynasty for at least another generation.