A financial twister

Let’s prepare for an even bigger typhoon than Pedring that hit us this week. This one promises to be even bigger than Ondoy. In fact, it threatens to be as disastrous as the tsunami that hit Japan. But unlike typhoons or tsunamis, this one is not to be brought upon us by nature. It is rather a result of uncontrolled greed of capitalists whose misdeeds caused us a near depression in 2008.

George Soros argues that the impending worldwide financial meltdown is still a consequence of the 2008 crisis. It was only recently that I finally understood what caused it, thanks to a documentary with Matt Damon in it. At a time when credit was cheap and cash in abundance, Wall Street traders devised a scheme by which home mortgages, secured by insurance companies, could be traded. This became known as collaterized debt instruments. It turned out that these debt instruments were worthless since many American borrowers had no ability to repay their loans. This then led to the bankruptcy of Lehmann Brothers, an investment giant that had dealt with these instruments, and the near bankruptcy of another giant of a company that secured such instruments, AIG. In fact, many other banks and companies would have gone under in 2008 had not the US federal government made the policy decision to rescue similar companies in distress. The ultimate enemy was panic. As bank and other financial intermediaries go under, depositors panic, interest rates rise, cost of manufacturing becomes more expensive, and consequently, economic activity slowed down.

Today, the cause of the panic may be the debt crisis in Europe. This time around, it is not just private financial companies that may go under. Even developed states such as Greece, Portugal and Ireland face the possibility of bankruptcy.

What complicates the financial woes in Europe is that the European Union established a common currency for a continent with diverse economic conditions. The traditional powerhouse in the continent has been Germany with a solid manufacturing base and a proven export record. But part also of the Union are countries such as Greece whose economy, and hence, local currency, was at least 30 percent less than that of Germany. Consequently, when countries such as Greece became part of the Euro, their governments have to rely on government borrowings through sovereign bonds to shore up their fiscal position relative to the rest of Europe. These are the bonds that the Greek government is now unable to pay.

Soros warned that the situation is more perilous than in 2008 because unlike the US, Europe does not have a Central Bank that can intervene to calm the nerves of edgy investors. The matter is made worse by the fact that as much as Germany would like to intervene, its Constitutional Court has ruled that it cannot do so without the consent of its Congress, the Bundestag. Soros then advised that the best recourse would be to allow Greece and other European states similarly situated to exit from the Euro zone rather than face the possibility of a full-blown meltdown. Soros writes: ” The fact that arrangements are made for the possible default or defection of three small countries does not mean that those countries would be abandoned. On the contrary, the possibility of an orderly default—paid for by the other eurozone countries and the IMF—would offer Greece and Portugal policy choices. Moreover, it would end the vicious cycle now threatening all of the eurozone’s deficit countries whereby austerity weakens their growth prospects, leading investors to demand prohibitively high interest rates and thus forcing their governments to cut spending further”.

The last time Soros wrote about a financial disaster, the 2008 crisis occurred. At the time he wrote his warning, leading financial policy planners belittled his words as being unduly “alarmist”. Well, Soros was proven right and the rest is history. If only because of his proven track record, his latest warning as published by the New York Times should be heeded by policy makers.

The question in my mind is this: What steps has our own government taken to prepare us for this meltdown? Sure, we should be not as affected as our neighbors who have successfully developed their economies through exports. But as a country almost wholly dependent on the export of manpower—with our seamen deployed in Greek vessels and an army of domestic helpers employed in countries that have benefitted from surplus capital which is expected to dry up—the Philippines should take steps now to minimize the impact of this looming crisis.

In the past three months, what has been apparent is that after a year in office, President Benigno Aquino III has finally realized that the way to the Filipinos heart is to hit the past administration for its many sins against the people. This explains why he has recovered the public trust as reflected in his improved standing in surveys conducted by Pulse Asia and SWS. But with this looming disaster in the horizon, I would hope that all efforts should now be focused on minimizing the dire effects of this impending financial twister.

South Korea Court Rules Failure to Espouse Claims of its Comfort Women is Unconstitutional

A top South Korean court said Tuesday that it is unconstitutional for the government to make no tangible effort to settle disputes with Japan over its refusal to compensate Korean women mobilized as sex slaves during its 1910-45 colonial rule of the Korean Peninsula.

The Constitutional Court ruled in a 6-3 vote that the government violated the basic rights of the former “comfort women” with its inaction. 

The ruling is expected to have strong diplomatic influence as it clarified the government’s duty to do all it can do to help its citizens get compensation from the Japanese government.

Former sex slaves and local victims of the nuclear bombing in Japan have consistently demanded an apology and compensation from the Japanese government, citing diplomatic documents showing that their issue was not addressed in the 1965 treaty signed between the two governments to normalize diplomatic ties.

Historians say more than 200,000 women fell victim to the Imperial Japanese Army, which coaxed or forced young girls to work in front-line brothels.

But the Japanese government has rejected the demand, sticking to its official position that the compensation for all individuals was already addressed in 1965 with the Treaty of Basic Relations between the two nations. Seoul received $800 million in grants and soft loans under the pact.

The South Korean government has taken a lukewarm position on the victims’ call for settling the compensation issue on behalf of them, saying it may hurt diplomatic relations with Tokyo.

“When there is a dispute between the two countries over the victims’ rights to claim compensation, it is the government’s duty to move toward solving the dispute,” the court said. “The government must settle this through diplomatic channels since there exists differing views on whether the 1965 agreement covers the former comfort women or not.”

A group of 108 former South Korean comfort women filed a petition against their government in July 2006, claiming that the government infringed on their rights to pursue happiness and property rights when it made no effort to settle the compensation dispute.

Also on Tuesday, the constitutional court made a similar ruling in a petition lodged by some 2,500 South Korean nuclear bomb victims in 2008.

The court said the government’s passive attitude toward solving the victims’ dispute with the Japanese government was unconstitutional.

Seoul’s foreign ministry said the government “humbly accepts” the court’s decision but maintains that the Japanese government has legal responsibility over the issue.

The government “plans to continue to use various diplomatic channels between Seoul and Tokyo, and the international stage to demand responsible action from Japan,” the ministry said in an e-mailed statement.

The ministry also claimed the government has until now prioritized giving “practical help” to the victims, considering the difficulties of quickly reaching a legal solution with Japan.

In light of the court ruling, the government will draw up its own comprehensive response, it added. (Yonhap News)

ICC: The road ahead

Evelyn Serrano of the Coalition for the International Criminal Court asked me to confirm my attendance in this year’s Assembly of State Parties of the ICC. I’ve attended many such assemblies in the past as a delegate of civil society, but never as a national of a state party. This year, the seat of the Philippines at the Assembly would no longer be empty as we are now a full pledged member of the Court. In fact, it promises to be a very hectic for the Philippine delegation with Senator Miriam Defensor-Santiago standing for election to be a Judge of the Court. Unfortunately, I could not readily confirm my attendance to the ASP since UP only pays for our transportation expense if we will deliver papers at conferences. Since the Assembly of State Parties is not an academic conference, there’s no way that I could turn to the university to shoulder my travel expenses. I hope the International Criminal Bar, which only recently received a substantial grant from the European Union, can include me in its official delegation.

Quite apart from Senator Santiago’s election, the task ahead for the Philippines as the Court’s most recent member appears to be gargantuan. While we have only recently enacted our own International Humanitarian Law which gives our courts primary jurisdiction over crimes falling under the jurisdiction of the ICC—to wit, war crimes, crimes against humanity, and genocide—we still have to promulgate a law against aggression after the definition of the said crime as the crime of waging war was adopted by the Assembly of State Parties last year. Beyond this, the Philippines is also obligated to facilitate cooperation with the Court in areas involving the ICC Prosecutor’s ability to conduct his own investigations within the country, should he want to; the ability of the court itself to sit and hold sessions in the Philippines; and cooperation in matters involving apprehension of individuals and procurement of evidence. Already, we have identified at the Institute of International Legal Studies of the UP Law Center a host of measures that Congress, the Department of Justice, and the Supreme Court will have to adopt to fulfill our state obligation to cooperate with the ICC.

For instance, the current rules on the conduct of preliminary investigation would have to be amended to provide the manner by which the ICC Prosecutor and his staff could conduct their own investigations in the country. An agency, most likely the DOJ, would have to be identified and tasked to cooperate with the ICC in this regard. The Supreme Court, likewise—since the ICC would be exercising judicial power in the Philippines, a first and I have to say, a possibility that I thought would not materialize—would have to amend its Rules of Court to provide the basis and the manner of the ICC sitting in session in our territory. The last time an international tribunal exercised jurisdiction in our country was the war crimes tribunal that convicted General Yamashita after World War II. The Philippine National Police and the National Bureau of Investigation will also have to shape up if they are to satisfy their obligation to cooperate with the ICC on the apprehension of individuals and the procurement of evidence. One positive result of our accession to the Rome Statute is the fact that whether they like it or not, our investigative agencies would now be constrained to modernize their capacity to enable them to cooperate with the Court.

But the biggest challenge, really, is to change the mindset of our countrymen that the commission of the most serious crimes against the international community, such as extralegal killings, torture and enforced disappearances, should be the subject of investigation, prosecution and punishment. In a country where a gunman could be hired for as little as P5 thousand, sometimes even less, the challenge is how to make the legal system work to ensure that all those who will commit these crimes will be punished. Full stop.

Even President Benigno Aquino III and all subsequent presidents should take heed that under our IHL Law and the Rome Statute, sitting presidents no longer have immunity for the commission of international crimes, a fact that Presidents Al-Bashir of Sudan and Muammar Gaddhafi only know too well.

Already, at least five journalists have been murdered under the Aquino administration, including my personal friend, Doc Gerry Ortega of Palawan. If PNoy should fail to prosecute and punish the perpetrators of these widespread killings, he himself may be the subject of a criminal prosecution under the principle of superior responsibility.

Unfortunately, the Court can only exercise its jurisdiction prospectively from November 1 of this year. This means that Gloria Macapagal Arroyo, Jovito Palparan, and the other notorious warlords of the country could not be held responsible for their acts before the ICC for acts committed prior to November 1 of this year. Hopefully, the fact that we are now under a positive obligation to reform our legal system to enable us to discharge the duty to cooperate will improve our own capacity to punish those whom we cannot try before the ICC.

As I ponder on the future of the Philippines as the latest member of the ICC, I look back to the 11 long years that took the Philippine Coalition for the ICC to finally convince the Philippines to be a member of the Court with melancholy and pride. Surely, though, we cannot afford to sit long on our laurels as the path ahead remains long and winding. Be as it may, the message has been sent: no more impunity!

NBN again?

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Thanks to Julian Assange, we have today the benefits of WikiLeaks. This is an anti-secrecy campaign that has enabled the public to read confidential cables on various topics sent by American diplomats to their home office in Washington, DC. While the American position is not to comment on the substance of these cables, the fact […] More →

Freedoms and the Spratlys

I’m still abroad as I write this column. I am currently in Bangkok, Thailand doing a training on freedom of expression for Burmese, Laotian, and Cambodian lawyers. It is a bit of an irony that while I am training members of civil society in Southeast Asia on the value of this freedom in creating a […] More →