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06-02-2012, 07:21 PM
S&P says PH economy a ‘rare bright spot’
Asean reaffirms plan on economic integration
By: Michelle V. Remo
Philippine Daily Inquirer
11:40 pm | Friday, June 1st, 2012
The economic forecast for many countries these days ranges from shaky to dismal, especially among industrialized countries. Yet, the Philippines and Indonesia stand out as rare examples of emerging Asian economies with positive rating outlooks.
According to a report titled “Two Emerging Asian Economies Stand Out With Positive Outlooks Amid Sobering Economic News Elsewhere,” just published on RatingsDirect, Standard & Poor’s Ratings Services said that these two countries were among only 10 in the world that have positive rating outlooks, and none were industrialized economies.
Generally, the bond markets are treating the Philippines and Indonesia pretty well. And the cost to insure the two countries’ debt using credit default swaps also illustrates the favorable treatment the credit markets are giving the two countries.
Meantime, Southeast Asian countries have reaffirmed plans to integrate their economies by 2015, carrying hopes the move will make the region a key growth leader for the global economy.
At the end of the three-day World Economic Forum for East Asia held in Bangkok Friday, member-countries of the Association of Southeast Nations (Asean) committed to pursue the Asean integration plan as scheduled by 2015.
Under the economic integration plan, their financial systems and capital markets will be interconnected, trade will be easier through the elimination of many tariffs, and freer movement of labor across borders will be allowed.
In a statement released by the World Economic Forum (WEF), Southeast Asian leaders cited the benefits of an integrated region. “Leaders of four Asean countries reaffirmed the 10-member grouping’s commitment to form the Asean Economic Community as scheduled in 2015,” WEF said in the statement.
WEF said Asean members also raised hopes the group would be joined by other Asian countries in the future.
The economic integration by 2015 is expected to transform Southeast Asia into a major growth force in Asia and the world, together with China and India.
The Philippines is supportive of the region’s integration, saying doing so would help accelerate growth of member-economies. The country’s economic officials believe the integration will help member-countries pursue the goal of “inclusive” growth.
Economists said that while the Philippines and other emerging Asian countries were cited for their respectable growth rates despite problems hounding advanced Western economies, they continued to suffer from growth that was not inclusive.
“Inclusive” growth is one that actually translates to poverty reduction and does not benefit only the rich. In the Philippines, poverty incidence remains high even as the economy has consistently grown over the years. With a report from Reuters

Sam Miguel
06-06-2012, 08:54 AM
By Benjamin Pimentel

7:16 pm | Tuesday, June 5th, 2012

SAN FRANCISCO—Undoubtedly, the Corona verdict was a victory for Noynoy Aquino.

But it is an incomplete victory.

Now, P-Noy must now defend and build on what’s promising to be a compelling story.

The verdict shows that Philippine democracy may be flawed and highly imperfect, but it has matured to the point where even a top court official who abuses his powers can be removed through a legal process.

Yes, critics could nit-pick the process to death. But P-Noy clearly took a big gamble in pursuing the impeachment campaign.

Acquittal would have essentially ended his presidency. The guilty verdict strengthens his position politically.

Not only that. It can be argued that having the country go through a very public impeachment process may have been fraught with risk – but it was worth it.

People – especially young Filipinos – learned from it. And hopefully, people in government, drew important lessons from the exercise. One can imagine a judge or government bureaucrat thinking twice of taking that bribe, or yielding to some other temptation.

“Kung yong chief justice nadale, naku, paano pa kaya ako kung mabisto?”

No, it doesn’t mean the end of corruption. It probably won’t mean the beginning of the end.

Still, it’s a small step forward.

The New York Times report on the verdict also noted: “This was the first time that a high-level Philippine official had been removed from office after impeachment and conviction. Officials here are often removed through street protests.”

And that point is significant.

This was the outcome the country should have had in 2001 in that other dramatic impeachment drama involving Joseph Estrada.

Eleven years ago, when the focus was on a scandal-plagued administration of Erap, having an unpopular president forced out through a legal, transparent process would have achieved greater meaning.

EDSA 2 was exciting, even dramatic. But given what happened afterward, that uprising ended up derailing the growth of a more mature democracy.

The Corona verdict has, at least, put that process back on track to some extent.

The democratic system can be slow, wobbly, at times frustrating and inefficient.

It takes time to build on it, expand it, strengthen it. Shortcuts must be avoided. And forces advocating shortcuts, political players pitching quick fixes must be viewed with suspicion. Patience is key.

And patient belief in a democratic system, I hope, is what the Corona verdict will inspire among young Filipinos who will be the ones to build on this system.

And this is where Noynoy Aquino’s victory is incomplete. This is where a lot still depends on what he does with this victory.

This is where the issue of Luisita reemerges.

His critics will continue pounding away at the view that the impeachment trial was all about Luisita and the economic well-being of P-Noy’s clan.

It’s interesting to note that while P-Noy himself has offered only timid remarks accepting the Supreme Court ruling in favor of the Luisita farmers, internationally his government has gotten positive feedback for that development.

As I’ve argued in previous columns, I think Noynoy’s team has missed an opportunity to highlight the signifcance of the Luisita ruling.

For in a society where political power has typically meant economic power, something strange has happened in the Philippines under Aquinio. For the first time in Philippine history, the country has a president whose family ended up losing economic power – instead of gaining more – during his term.

In any case, the point has resonated internationally.

Take what David Pilling, columnist for the Financial Times, said in a recent op-ed piece on the Philippines.

“The fact that a sitting president can be stripped of land is a hopeful sign that the separation of powers enshrined in the constitution is being honoured,” he wrote,

Now, what would he and others say if, as his critics have argued, the whole impeachment process was simply payback for the Supreme Court decision?

Can you imagine the backlash any attempt to reverse that historic ruling would have not only on Aquino, but, more importantly, on Philippine democracy?

That would be an unexpected and unwanted twist in what’s turning into a pretty interesting story. Hopefully, we won’t even have to worry about it.

Hopefully, Noynoy Aquino will not only stick to the present narrative, and perhaps even make it an even more compelling story.

Sam Miguel
06-06-2012, 08:54 AM
^^^ When the New York Times and the Financial Times are saying good things about this country, that is certainly worth something to our economy.

Sam Miguel
06-06-2012, 09:10 AM
By: Michelle V. Remo

Philippine Daily Inquirer

12:56 am | Tuesday, June 5th, 2012

(First of three parts)

Smuggling, despite current efforts to at least curb it, continues to be one of the biggest headaches of the government and local industries.

While the government heavily relies on borrowings—domestic and foreign—to finance the cost of running the country, deliver social services and set up vital infrastructure, it is still losing potentially huge revenues yearly due to smuggling.

In a recent speech, President Aquino said oil smuggling alone would cost the state some P40 billion a year. Estimates of total revenue loss due to smuggling of goods into the country vary, but officials said the amount was so huge that, if collected, it could be more than enough to cover the government’s budget deficit, which could reach P200 billion this year.

Goods are brought into the country illegally or without paying the proper taxes either through outright smuggling or technical smuggling. The latter is done through misdeclaration or misclassification of goods imported or underdeclaration of the values of the products shipped in.

The list of smuggled products is long and the kinds of goods vary, from oil and vehicles to electronics and agricultural produce.

In a speech during the 110th anniversary of the Bureau of Customs (BoC), the President said smuggling was being perpetuated by the bureau, through its system and practices, and that instituting reforms there would be a difficult and complicated process. But Aquino vowed to step up the campaign against smuggling during his administration—offenders would be put behind bars and reforms set in place to end the culture of corruption in the bureau.

To date, however, no one has been put behind bars, although 44 cases have been filed against suspected offenders since August 2010.

Business hopeful

The Aquino administration’s promise to toughen its stance against smuggling failed to excite the people and the business sector, in particular. It was, after all, not the first administration to make such a promise. Still, businessmen hold to a glimmer of hope that, this time around, something more meaningful will be done.

Traders belonging to the Philippine Exporters Confederation (Philexport) and the Philippine Chamber of Commerce and Industry (PCCI) said smuggling not only deprived the government of much-needed revenue, it also posed unfair competition to local industries.

Although smuggling is a difficult problem and has deep roots in the economy, the business sector still hopes that the government will soon be able to make a dent in the campaign against smuggling, said Sergio Ortiz Luis, president of Philexport and chairman of PCCI.

Routinely, authorities and even business groups receive reports of smuggling activities, Ortiz Luis said. But the lack of manpower and resources, along with problems in governance, enabled smugglers to carry on with their activities.

There is also the lack of will power and resolve on the part of the government to eradicate smuggling, which allows this illegal trade to thrive.

“The problem , the Bureau of Customs does not have enough people to monitor smuggling in all the ports and airports in the country,” Ortiz Luis said.

One of the most common ways of bringing goods illegally into the country is through balikbayan boxes, which may contain commercial quantities of clothes, medicines, bags, shoes and even agricultural products. These goods are misdeclared “for personal consumption.”

“There are a lot of Chinese goods coming in through balikbayan boxes. Detecting smuggling is difficult when items come in through these boxes because they appear to be for personal consumption,” Ortiz Luis said.

In the Philippines, where at least 10 percent of households have family members working abroad, balikbayan boxes are a common thing to see in airports and seaports, and smugglers take advantage of this fact by making their goods appear to be for personal use.

[I]Oil, steel and food

In terms of value, oil accounts for the bulk of the estimated revenue loss due to smuggling, BoC estimates showed. Of the 44 smuggling cases worth P60 billion filed by the BoC’s Run After the Smugglers (RATS) team from August 2010 to September 2011, oil products accounted for about P47 billion.

“Oil is one of the most commonly smuggled items because it is very easy to dispose of,” a customs employee, who asked not to be named but who had worked several times in anti-smuggling operations, told the Inquirer.

Oil products are either smuggled in outright or are shipped legally with the values underdeclared.

Smuggling cases involving oil products are often difficult to investigate. When the goods are shipped in, most of the time with the aid of unscrupulous Customs people, they are quickly sold even before the investigation builds up, the source said.

Steel is another commonly smuggled product, the BoC source said. With steel products, profits are high due to the current boom in construction.

Food products, which account for the biggest share in household spending of average Filipino families, are also among smugglers’ favorites.

Permits to smugglers

In times of lean harvests, the government allows cooperatives to bring in food products from abroad to ensure that there is adequate supply. The Department of Agriculture issues import permits to cooperatives so they can import food products. However, some of these cooperatives sell their import permits often to smugglers.

“Some cooperatives do not have enough capital to do the importation themselves, so they just sell their import permits. What happens is that smugglers take advantage of the opportunity by buying those import permits,” the Customs source said.

Smuggling activities become rampant when farm outputs are low.

There are times when smugglers of food items are caught and are made to pay the necessary duties and taxes, but there are also cases when they escape punishment partly due to corruption in the BoC, the source said.

The business sector believes a significant part of the smuggling problem can be traced to the country’s unguarded coastlines. It does not help that the Philippines is an archipelago, making it easy for smugglers to slip goods into the country tax-free through ports not regularly watched by the Coast Guard or Customs personnel, said Ortiz-Luis.

A number of smuggling cases also occur in freeport zones. These enclaves can bring in duty-free goods for processing and re-exportation, or for consumption within the zone. But the importers often bring the goods to local markets for sale.

Difficult fight

Customs Commissioner Rozzano Rufino Biazon, appointed to the BoC’s top post in September last year, admits that the system and practices in the bureau make it difficult to curb smuggling.

“Customs’ problems are severe and deeply rooted,” Biazon said in Filipino.

A recent audit ordered by Biazon revealed that a significant number of the estimated 17,000 names of BoC-accredited importers turned out to be fictitious.

This does not only mean serious inefficiency but also corruption in the bureau, said Biazon, a former congressman.

Smugglers use fake company names to evade detection, he explained. Customs personnel who go after smugglers often return empty-handed because they chase after dummy companies with false addresses.

“The big question is, ‘How were fictitious companies with fictitious addresses able to get accreditation from the BoC in the past?’” Biazon said.

The fact that the BoC is still not fully automated also contributes to the problem of smuggling.

Whenever customs employees deal with importers or their representatives face to face, rather than electronically, illegitimate transactions may occur, Biazon said.

Simply put, the bureau chief said, the BoC provides an environment conducive to smuggling.

To make matters worse, legitimate businessmen have a difficult time operating in the same environment.

“There are instances when legitimate businesses are given a hard time by BoC personnel. The companies are not smuggling goods, but they find it difficult to have their imported good released by the BoC because they do not give something (to customs personnel),” Ortiz Luis said.

(To be continued)

Sam Miguel
06-06-2012, 09:14 AM
By: Michelle V. Remo

Philippine Daily Inquirer

2:58 am | Wednesday, June 6th, 2012

(Second of three parts)

For Customs Commissioner Ruffy Biazon, the abolition of the present Bureau of Customs (BoC) and creation of a new one may be the most effective way to get rid of corruption and put an end to smuggling. But since doing so is not legally possible at the moment, the Customs chief said he would have to make do with instituting reforms in BoC one step at a time.

But the reforms promised may not be carried out as planned because Biazon may leave his current post sometime soon as he is expected to run for the Senate next year.

President Aquino believes that the anti-smuggling efforts being carried out by his administration are gaining ground.

He earlier reported that the Run After the Smugglers (RATS) team of the Bureau of Customs had so far filed 44 cases against suspected big-time smugglers accused of shipping in some P60 billion worth of illegal goods.

But what the President failed to mention was that the government’s campaign was in troubled waters and could be set back because of some serious issues.

One issue involves members of the RATS team themselves and an importer accused of smuggling.

In January this year, eight members of the RATS team were dismissed from service on charges of extortion hurled against them by a company that the team had accused of smuggling.

Fate uncertain

The dismissed RATS members felt that the strong influence exerted by some companies and businessmen on the government obstructed the administration’s anti-smuggling drive.

On the other hand, the company claimed that unscrupulous Customs personnel had been using the anti-smuggling drive to “harass legitimate businessmen and extort money from them.”

All the dismissed BoC personnel were the ones who filed the 44 smuggling cases now pending in court. With their dismissal, many fear that the cases, and the government’s chances of collecting the P60 billion or so in unpaid duties, may vanish into thin air.

It is not clear whether the courts will still allow the dismissed BoC personnel to testify in these cases. Even if they are allowed, the extortion complaint against them may tarnish their credibility as witnesses.

‘Justice served’

The dismissed members of the Customs team are Christopher Dy Buco, Edgar Quiñones, Francisco Fernandez Jr., Alfredo Adao, Jose Elmer Velarde, Thomas Patric Relucio, Jim Erick Acosta and Gregorio Chavez, who is Customs deputy commissioner and RATS head.

Sanyo Seiki Stainless Steel Corp., an importer accused by the RATS team of “smuggling” P1.35 billion worth of steel products in 2010 alone, filed the extortion complaints—one with the Office of the Ombudsman and another with the Office of the President through Executive Secretary Paquito Ochoa Jr.

For Sanyo Seiki, owned by the Chan family and headed by its president Gregory Uy Chan, the dismissal of the RATS team members was justice appropriately served.

Claiming that the smuggling case against it was baseless, Sanyo Seiki said Customs officials were harassing the company and had asked for money in exchange for leaving it alone.

The company won the favor of the Office of the President. Saying that the claims of the steel importer had basis, Ochoa on January 26 issued the order on behalf of the President dismissing the eight members of the Customs team.

Frank Chavez, legal counsel of Sanyo Seiki, said the dismissal of the anti-smuggling personnel was a big relief. Since their dismissal, the lawyer said, Sanyo Seiki had been able to peacefully conduct its business.

He said the Customs personnel started asking for money in November 2010, when they seized 84 containers of steel products owned by Sanyo Seiki. Chavez insisted that the taxes on the goods had been paid.

Following the seizure, he said, anti-smuggling officials, through customs brokers, asked money from Sanyo Seiki and promised that they would leave the company alone.

Chavez said Sanyo Seiki was forced to “pay.” It issued two checks—in the amount of P5 million each—in two separate instances in late 2010.

A source claimed that the BoC team initially asked for P5 million, but later that year, it again sought another P5 million. The checks were both in the name of the company’s broker with the understanding that the money was intended for the RATS personnel.

“The company issued the checks not because it was guilty of smuggling but because it feared that the false accusations of smuggling could ruin its business,” the lawyer said.

But the “extortion” continued, Chavez said.

In January 2011, the RATS team again asked for more money, this time worth a staggering P179 million, he said.

“My client was appalled … [by the] huge amount of money,” Chavez said.

Sanyo Seiki did not pay up. Instead, the lawyer said, it issued a check worth another P5 million believing that it should be enough for the “extortion” to end.

However, Chavez said, the harassment continued. In June 2011, members of the RATS team went to the warehouse of Sanyo Seiki in Meycauayan, Bulacan, saying they would be checking whether import taxes and duties on steel products kept in the warehouse were properly paid.

In its complaint submitted to Ochoa, Sanyo Seiki said the RATS team did not have the necessary mission order to conduct the inspection.

“They were trying to fool the security guards. They presented a mission order that was addressed not to Sanyo Seiki but to a different company. The security guards were smart enough not to let them in,” the lawyer said.

The customs officers did not stop there, he said. “They, instead, lingered in the vicinity of the warehouse. It was distracting.”

While the customs officers were holding the stakeout, Chavez said, a truck containing steel products got out of the warehouse. The customs personnel stopped and seized the vehicle with the goods it contained.

Sanyo Seiki said that was done without any seizure order from the BoC. It also said the seizure was uncalled for because the goods were not imported but were bought from local suppliers.

“Clearly, what they did was harassment,” Chavez said.

‘Big fish’

But members of the Customs team are crying injustice over their dismissal.

Gregorio Chavez, the head of the team, said Sanyo Seiki was “a big fish.”

He said it was unfortunate and ironic that efforts of the members of the RATS team to pin down a suspected big-time smuggler led to their dismissal.

“We thought that with President Aquino’s matuwid na daan (straight path) campaign, the anti-smuggling drive would be strengthened. We thought he said he would be with us along the way. What happened to us is demoralizing,” the dismissed Customs official said.

He claimed that the P179 million Sanyo Seiki had asked to pay was not for bribe but for payment of unpaid taxes and duties the BoC was trying to collect for the P1.35 billion worth of steel products the company had imported.

This particular shipment, he added, was the subject of a Department of Justice case filed by the Customs team against Sanyo Seiki.

As for the visit of the Customs men to Sanyo Seiki’s warehouse, the team leader said the move was part of their job to foil possible smuggling activities. He added that the seizure of the truck and the goods it contained was necessary because the company could not produce the documents showing that the goods had been bought from local sources.

He claimed the RATS team had the appropriate mission order. The office of the Customs Commissioner, in fact, issued four mission orders all meant for Sanyo Seiki, although three of those were addressed to names different from Sanyo Seiki’s, the team leader said.

“The mission orders had to be in different names because the company was using different identities to evade detection by authorities,” he explained.

He also denied receiving three checks worth P15 million that Sanyo Seiki claimed to have issued.

“We did not get any of those checks,” he added.

Dismissal, not reward

The checks were actually in the name of Anabel Mozo, who was one of the customs brokers of Sanyo Seiki. Sanyo Seiki filed a separate case against Mozo and a few other brokers with the Office of the Ombudsman.

At the Ombudsman, the customs brokers admitted receiving P15 million worth of checks, but insisted that the amount was supposed to be used to settle unpaid taxes, duties and other customs fees that Sanyo Seiki had failed to pay in the past.

“Instead of being rewarded for doing our job, we were dismissed,” said Thomas Patric Relucio, a member of the Customs team who had been with the bureau for 11 years.

“We don’t know if the President is even aware of our case,” Relucio said. “He cited our achievements with pride during his speech in February (during the 110th anniversary celebration of the BoC), but his executive secretary had already dismissed us the month before.”

The Inquirer tried to get comments from the executive secretary, but his office begged off saying it could not make a statement on the matter since deliberations on the appeal of the Customs team was ongoing.

Relucio said their dismissal was not only a victory for Sanyo Seiki, but also for all other big companies that had been charged with smuggling by the former members of Customs.

“The smuggling cases we filed were all against large companies suspected of smuggling. We were supposed to serve as witnesses to those cases. Now, we have been taken out of the picture,” Relucio said.

(To be continued)

Sam Miguel
07-03-2012, 08:29 AM
By: Cielito F. Habito

Philippine Daily Inquirer

8:40 pm | Monday, July 2nd, 2012

Many reacted to my observation last week that the wealth increase of the richest 40 Filipinos is equivalent to 76 percent of the country’s overall increase in income (gross domestic product) in 2011. I must clarify that my choice of words—in saying “is equivalent to…”—was careful and deliberate. It is not the same as saying that the top 40 received the bulk of all additional income earned in the country as a whole in 2011. As pointed out by a couple of readers, the increased wealth of the top 40 reported by Forbes Asia was largely (though not necessarily mostly) due to the effect of booming stock markets, thus higher stock prices, on their equity portfolios. On the other hand, GDP measures income associated with production of goods and services. “Valuation income” as would result from market appreciation of one’s fixed stock holdings is not directly reflected there.

In making the comparison with the increase in GDP, I merely meant to put the growth in wealth of the richest 40 into some perspective, and have a basis for comparing our wealth concentration with neighboring countries. The inescapable fact is that wealth and incomes are much more skewed in the Philippines than in most of Asia. While it’s a fact that the whole region has been experiencing widening income inequalities, the challenge of inequality has been particularly more severe in the Philippines.

I was in Beijing last week to speak in a conference that focused on this issue of widening inequalities and the need for pro-poor growth. At the outset, it was pointed out that while the terms “broad-based growth,” “inclusive growth” and “pro-poor growth” tended to be used interchangeably, they do not exactly mean the same thing. In my earlier incarnation as the country’s chief development planner, I used to explain broad-based growth as having three dimensions. One is broadness in the sectoral sense, such that all sectors of the economy and society are participants and beneficiaries in our economic growth. Growth must be broad in the geographic sense as well, involving and benefiting all regions of the country, and both rural and urban areas. Third, growth must be broad in the temporal sense, such that the ability of future generations to meet their needs will not be impaired as we meet our own needs today—aka sustainable development, focus of the recent Rio+20 summit in Brazil.

The idea of inclusive growth, now the widely used term among development institutions, similarly came about in reaction to the perceived narrowness or exclusiveness of the benefits of growth seen in most of the world. The Asian Development Bank’s operational definition of it is simply “growth with equal opportunities.” It is about ensuring that all are equipped with or have ready access to needed human, natural, physical, social and financial capital to be able to pursue opportunities to uplift their lives. Under this notion, there are bad inequalities and good inequalities. Those arising from lopsided opportunities are bad inequalities that society must collectively address. But inequalities that arise from differences in human attitude, effort and initiative where opportunities are otherwise equitable are deemed to be “good” (or acceptable) inequalities.

One might argue that people who lack initiative should not reap the same rewards as those who work hard and are able to maximize use of their talents and capabilities. Indeed I have heard it said many times, often by poor people themselves, that many who are poor are such because they are “lazy” and have low aspirations in life. Some refer to it as “a culture of poverty.” Inclusive growth is better pursued, then, by providing equitable opportunities, not by redistributing wealth. This is done by improving access to quality education and health services for the poor; correcting historically or politically lopsided access to land and natural resources; ensuring equitable access to credit by small and large borrowers; a justice system that is blind to people’s social and economic status; and a competition policy that levels the playing field for both big and small enterprises.

What about pro-poor growth? In last week’s Beijing conference, it was clarified that beyond being broad-based or inclusive, growth is pro-poor when economic activities that involve and benefit the poor can grow faster than the overall economy does. It entails facilitating economic activities known to provide much employment, especially to lower-skilled or unskilled workers. Agriculture and agribusiness, construction, and services such as retail trade, repair and tourism are prominent examples of industries that are good drivers for pro-poor growth.

Pro-poor growth also happens when there is much economic activity being driven by smaller enterprises, rather than dominated by large enterprises and conglomerates. This means that microenterprises and small and medium enterprises are able to thrive on equal footing—and ideally in a synergistic relationship—with the large players. This is the case, for example, in Japan and Korea, where the zaibatsus and chaebols do not only coexist with, but also crucially depend, on SMEs as suppliers of raw materials and intermediate products such as parts and components.

Our own conglomerates—those owned by our top billionaires in the Forbes Asia list—would do well to consciously and deliberately foster such a synergy with small producers, and as many of them as possible, rather than be tempted toward vertical integration to assume control over the entire value chain. That way, we can assert that pro-poor growth need not be anti-rich growth.

Sam Miguel
07-05-2012, 09:17 AM
By: Peter Wallace

Philippine Daily Inquirer

9:34 pm | Wednesday, July 4th, 2012

Action. That’s what we need: action. This is a country where action is talked about, but too rarely done.

If you look back at what I’ve written over the years, you’d realize that much has happened and that, sadly, far too much more hasn’t.

The things that were promised then (is the Philippines, not Israel, the “Promised Land”?) remain promises today. Let me give you just one little example. In 2006, the Philippines and Australia agreed to a Status of Visiting Forces Agreement (Sovfa). In 2007, the Australian government signed it. In 2012, the Philippine Senate is discussing it. Six years to do what another country can do in six months.

So the most important promise President Aquino can make in his State of the Nation Address (Sona), which is what I’m going to talk about here and in my next two columns, is that this coming year will be one of action. This is a country that too often believes that when something is said it’s considered done. The promise is achievement enough.

Last year, the Sona was just that: a state of the nation. History is interesting and necessary to remember, but we’ll be living in the future. We need to know what to expect. So in the coming Sona, the President should list things to do—and make sure they’re done. His Sona next year should be able to declare a 90-percent success rate. Here are some suggestions on what he can get done.

First, clean up the government. You can’t grow an economy, create jobs, etc. if the bureaucracy blocks your every step and bribery hounds your every attempt to get things done efficiently. The President’s focus on corruption is the correct thing to do and should continue unabated. More of the “big boys” need to be caught, but the small guys, too. Corruption is institutionalized in the Philippines and will not be easy to eradicate, yet it affects almost everyone.

One way to eliminate it is to computerize all government services. You can’t bribe a computer. Passing a brown envelope under the table at lunch just doesn’t work; computers don’t go out to lunch. So computerizing all government services should be at the very top of the agenda. But the systems must be integrated and interconnected to each other with compatible systems. The Bureau of Internal Revenue and Bureau of Customs both have good, working computer systems, but they are different systems. So the name of a smuggler doesn’t automatically show up in the BIR system as a likely tax evader, as it should. Tied to that is a national ID system: It makes eminent sense, unless you’ve got something to hide. There’s no fear of “Big Brother” (unless you’re hiding something), the government has all the data already—on your birth certificate, marriage license, driver’s license, National Bureau of Investigation, Social Security System, and PhilHealth cards, etc., etc. So it’s all there, but on half a dozen different cards bulging in your wallet. There should be just one.

The volume of transactions in government can’t be handled manually anymore. Computers are essential. They can do in minutes what can take weeks by hand. And paper is saved. Trees remain in the forests (or what’s left of them). And tie it all into the cell phone. The Philippines is the world’s leader in imaginative use of cell phones. Let’s be the leader here and provide access to government services by cell phone. To do it in the next 12 months needs focused attention. A Department of Information and Communications Technology (DICT) is needed. Congress agrees, and it should be out soon. For some unexplained reason, the President doesn’t want it.

Here we have the fastest growing sector of the economy heading toward being the biggest sector of the economy, and there isn’t a department with the seniority, budget, and dedication this sector deserves. There should be one if the country’s leadership role in call centers is to extend into the other IT fields, as it’s beginning to. Let’s hope the President agrees. If he’s unconvinced, he should talk to experts in the industry, to analysts and businessmen. He’ll find almost universal support for a DICT.

Similarly, too, with mining. You need a body solely focused on the environment and the protection of it, not distracted with the need to support and encourage an extractive industry. Promotion and support of responsible mining should fall under the Department of Trade and Industry. The Mines and Geosciences Bureau and Minerals Development Council should be there. The DTI is well-experienced in supporting business activities. Focus the Department of Environment and National Resources on protecting the environment and regulating those extractive industries.

We also need “one-stop shops.” No government service should require going to more than one agency. That agency should be able to accept the application and process it through all other involved agencies. It should not be the task of the applicant. Whatever it is you need from the government, you’ll only need to go to one place, twice—once to file your application, once soon after to pick up the approval. The government will be responsible for forwarding the request to the other government entities involved and ensuring the action required is done, and comes back to the originator office to give to the applicant. As much as possible, it should all be online so even the two trips will not be necessary.

The International Finance Corp.’s Doing Business survey indicates that it takes 15 procedures and 35 days to secure business permits in the Philippines. Getting construction permits, in particular, requires 30 procedures. The construction firms have to wait 85 days before their permits get cleared. In Australia it takes two days and two procedures. To be continued

Sam Miguel
07-05-2012, 09:20 AM
Credit now just a notch below investment grade

By: Michelle V. Remo

Philippine Daily Inquirer

12:10 am | Thursday, July 5th, 2012

The Philippines’ image got a boost Wednesday after Standard & Poor’s (S&P) raised the country’s credit rating by a notch, citing the government’s declining debt burden and other favorable developments on the economic front.

S&P, one of the major international credit rating firms, raised the country’s long-term foreign currency rating from BB to BB+, just one notch below investment grade.

Long-term foreign currency rating is one of the guides used by foreign investors in making investment decisions, such as whether or not to buy bonds sold by a government or do business in a country.

S&P assigned a “stable” outlook on the latest credit rating. This means the rating is likely to remain the same within about a year until a new review is done.

In a report released last night, S&P said its decision was based partly on the government’s improving debt profile.

Over the years, the government has gradually been trimming its debt burden—the proportion of its outstanding debts to the country’s gross domestic product (GDP)—through measures that improve tax and revenue collection.

The debt-to-GDP ratio, one of the key indicators closely monitored by credit rating firms, improved from 84 percent in 2004 to only about 50 percent to date.

“The foreign currency rating upgrade reflects our assessment of gradually easing fiscal vulnerability, as the government’s fiscal condition improves its debt profile and lowers its interest burden,” S&P said.

Moreover, the credit rating firm cited the Philippines’ much improved level of foreign currency reserves, which it said made the country able to meet its liabilities to foreign creditors and bond holders.

Record reserves

The country’s reserves of foreign currencies, called the gross international reserves (GIR), reached a record high of about $77 billion earlier this year.

The GIR indicates a country’s wealth of foreign exchange and determines its ability to pay for imported goods, pay debts to foreign creditors and engage in other commercial transactions with the rest of the world.

The amount is enough to cover over 11 months’ worth of imports and is equivalent to about six times the foreign currency-denominated debts of government and private entities in the Philippines.

The country’s foreign exchange reserves have risen over the years, thanks to sustained growth in remittances from overseas Filipino workers, foreign investments in the country’s business process outsourcing sector and foreign portfolio investments.

“The rating action also reflects the country’s strengthening external position,” S&P said.

BSP pleased

Governor Amando Tetangco Jr. of the Bangko Sentral ng Pilipinas was pleased with the credit upgrade by S&P.

Tetangco said the move of S&P came with the improved appetite of foreign portfolio investors for peso-denominated stocks and bonds. Increased purchases of peso-denominated portfolio instruments led the peso to hit a four-year high of 41.72 to a US dollar on Tuesday.

He said the international financial community was recognizing favorable economic developments in the Philippines.

2nd fastest in Asia

In the first quarter of the year, the Philippine economy, as measured by the gross domestic product (GDP), grew by 6.4 percent from a year ago. This was faster than the 4.9 percent recorded in the same period last year.

The latest GDP growth of the Philippines was the second fastest in Asia for the first quarter after China’s 8.1 percent.

“We welcome the upgrade from S&P. The action of the market in the couple of days [that led to the appreciation of the peso] was a forth-telling,” Tetangco said in a statement.

The latest move by S&P makes its rating for the Philippines the same as that assigned by Fitch Ratings, its competitor.

Moody’s Investors Service, another major international credit rating agency and the most pessimistic about the Philippines, rates the country two notches below investment grade.

Philippine economic officials are pitching for improved credit ratings for the Philippines, claiming that the country’s economic fundamentals are in fact already comparable to those of some countries enjoying investment grade.

Indonesia, which the Philippines considers a contemporary, got an investment rating late last year.

Government economic officials said that an investment rating for the Philippines would help drive job-generating foreign direct investments, lift incomes, and reduce poverty.

Sam Miguel
07-06-2012, 07:28 AM
Credit upgrade to boost investments

By Norman Bordadora, Ronnel W. Domingo

Philippine Daily Inquirer

12:06 am | Friday, July 6th, 2012

President Aquino and his economic managers on Thursday voiced optimism that the upgrade of the Philippines’ credit rating to just a notch below investment grade would boost the country’s economic prospects and attract more foreign investments.

The Aquino administration is confident the Philippines will soon get an investment grade rating that will further lower the country’s borrowing costs, free more funds for government spending and widen the economy’s base of potential investors.

“We can now clearly make our case for an investment grade status,” Finance Secretary Cesar Purisima said in a text message to reporters.

While the Bangko Sentral ng Pilipinas had previously said an investment grade rating was possible this year, Aquino would not hazard a guess as to when a further credit upgrade would come.

“We have a saying that we shouldn’t say what we expect lest we jinx the whole thing (‘baka mausog’),” the President told Palace reporters. “(But) we definitely would work hard to get there.”

Standard & Poor’s Ratings Services (S&P) on Wednesday raised its credit rating on the Philippines to just one notch below investment grade, a move likely to boost bonds and currency trades and further lift an equity market that has hit new peaks this week.

PH peso strongest

Already, the upgrade has propelled the Philippine peso to 41.72 against the US dollar, the local currency’s strongest showing in four years. The peso is the best-performing currency in emerging Asia with a 5.2-percent gain against the dollar so far this year.

The Philippine economy grew by only 3.7 percent last year, well below the government target of 4.5 percent to 5.5 percent, but the S&P credit upgrade increases the likelihood this year’s figures will be better.

The ratings move by S&P puts the Philippines one rung below its Southeast Asian neighbor Indonesia, which bagged investment grade ratings from Fitch Ratings last year and Moody’s Investors Service early this year.

Stable outlook

S&P said it upgraded the Philippines’ long-term sovereign credit rating to BB+ plus from BB with a stable outlook, citing improved fiscal flexibility and strong external position.

Credit rating is one of the criteria foreign investors use in deciding whether to buy a government bond or invest in a particular country. Many foreign fund managers are restricted from holding debt below investment grade.

S&P said a further credit upgrade would depend on the Philippine government’s ability to generate more revenue or sustain fiscal reforms.

“The foreign currency rating upgrade reflects our assessment of gradually easing fiscal vulnerability, as the government’s fiscal consolidation improves its debt profile and lowers its interest burden,” the international credit rating agency said in a statement.

“The rating action also reflects the country’s strengthening external position, with remittances and an expanding service export sector continuing to drive current account surpluses,” it added.

S&P said the country’s high, although declining, interest expenditures and weak revenues were rating constraints, along with relatively high government foreign currency debt.

The Philippines is one of several Southeast Asian countries showing stronger signs of resilience to global turbulence as buoyant domestic spending offsets struggling exports.

More gov’t spending

Communication Secretary Ricky Carandang said the ratings move by S&P would allow the government to undertake public spending without jeopardizing its financial position.

Carandang noted that other heavily indebted countries were not as fortunate as they had to tighten belts to finance their massive borrowings.

“At a time when countries around the world are debating austerity versus stimulus, we have had the fiscal space to provide stimulus without weakening our fiscal position,” Carandang said.

In a separate statement, Budget Secretary Florencio B. Abad said S&P’s credit upgrade would result in a reduction in the government’s interest payments and an increase in government funds for socioeconomic development. A higher credit rating translates to lower interest payments on government debt.

“We remain committed to fiscal consolidation,” Abad said. “Due to our reform efforts, the national government incurred interest payment savings of P49.33 billion, or 11 percent of what was programmed for January 2011 to May 2012.”

For 2013, the government has set a target of bringing down the budget deficit to 2 percent of gross domestic product (GDP) from 3.5 percent in 2010, he said.

“We are also programmed to lowering our debt stock to 49.5 percent of GDP from 52.4 percent in 2010,” he added.

Market sentiment

In a separate statement, Purisima said the major credit rating agencies—S&P, Fitch and Moody’s—should “reflect market sentiment” in appraising the country’s creditworthiness.

S&P and Fitch both rate Philippine credit one notch below investment grade. Moody’s grades Philippine credit two notches below the coveted rating.

Purisima said earlier this year that the credit watchers’ market implied ratings index indicated that the country’s creditworthiness was underrated by four notches. “This means we should even be two notches above investment grade,” he said. With reports from Reuters and AP

Sam Miguel
07-31-2012, 08:58 AM
By: Doris C. Dumlao

Philippine Daily Inquirer

6:10 pm | Monday, July 30th, 2012

MANILA, Philippines—Most local stocks rallied sharply on Monday on the back of a good initial stream of local corporate earnings and upbeat global markets.

The main-share Philippine Stock Exchange index gained 58.35 points, or 1.12 percent, to finish at 5,277.90. The market was perked up by the earnings reports of several large-cap stocks alongside growing expectations across global markets of stimuli from the US Federal Reserve and European Central Bank.

All counters were up but the financial, property, holding firm and mining/oil counters boosted the main index the most, each rising by over 1 percent.

Among the day’s out-performers were Pepsi Philippines (+14.98 percent), SM Prime (+4.34 percent) and Ayala Corp. (+4 percent). SM Investments (+1.28 percent) even hit a new record high of P753 per share in intraday trade after SM Prime’s first-half results came in slightly ahead of market expectations.

Shares of BDO also surged by 1.94 percent after first-semester results were on track with the bank’s full-year guidance.

Meralco, Metro Pacific and PLDT shares were likewise up by 1.87 percent, 2.46 percent and 0.22 percent, respectively, after Meralco’s first-semester results prompted an upgrade of the utility firm’s earnings guidance for the full year.

Meanwhile, Pepsi’s shares surged and made it to the list of most actively traded stocks after the beverage firm reported a 436-percent jump in first-semester net profits as sales expanded while softer sugar prices tempered input costs.

Other stocks that contributed to the PSEi’s rise were Metrobank (+1.95 percent), ALI (+0.94 percent), URC (+0.86 percent), AGI (+0.87 percent), Globe (+0.59 percent) and DMCI (+0.88 percent).

GT Capital, Security Bank and Puregold also gained. Security Bank, for its part, estimated a hefty 29 percent growth in lending for the first semester.

On the other hand, shares of Semirara, FPH and Union Bank traded lower.

Union Bank grew its first-semester net profit by 42 percent to P4.07 billion but about 70 percent of the bank’s first-semester bottom line was chalked up during the first quarter. For the second quarter alone, Union Bank’s net profit declined by 43 percent to P1.22 billion year on year as trading gains fell (by 32 percent to P641.3 million) even as net interest income surged (by 16.3 percent to P1.89 billion). This was in line with market expectations of slower treasury gains in the second quarter.

“The market may continue base-building at 5,200. At this level, the market is trading at fair value of 15.5x, based on earnings growth of 19 percent. The rally will resume when the earnings outlook improves and/or price to earnings (ratio) is re-rated higher,” said Peter Raymond Lee, assistant vice president at IGC Securities Inc.

08-05-2012, 06:13 PM
2 US experts see PH under Aquino Asia’s next tiger economy
By Michael Lim Ubac
Philippine Daily Inquirer
1:55 am | Sunday, August 5th, 2012
1:55 am | Sunday, August 5th, 2012
President Benigno Aquino III. INQUIRER FILE PHOTO
The Philippines is now out of the doldrums and on the verge of an economic takeoff, according to two visiting foreign economists.
The Philippines under President Benigno Aquino III has the “best chance” of becoming a tiger economy in Asia as emerging markets led by China have started slowing down, while the debt crisis in the euro zone and the faltering United States economy continue to spook the markets, said Drs. Tyler Cowen and John Nye.
Cowen and Nye, who are both professors at the George Mason University in Washington, D.C., were two of several foreign speakers at the inaugural conference on Friday of the Angara Center for Law and Economics, a think tank founded by Sen. Edgardo Angara that will undertake economic research and innovative public policy solutions.
Nye, who has been named executive director of the Angara Center, is also research director at the Higher School of Economics in Moscow, Russia, a founding member of the International Society for the New Institutional Economics, and in 1997 became a National Fellow at the Hoover Institution in Stanford University.
Cowen’s most recent book, “The Great Stagnation: How America Ate All the Low-Hanging Fruit, Got Sick, and Will (Eventually) Feel Better,” was one of the most debated nonfiction books in 2011.
Economic liberation
“The Philippines has strong economic fundamentals,” said Cowen, citing the economic gains of the two-year-old Aquino administration, English proficiency and the Filipinos’ belief in education as the key ingredients for economic liberation.
“I would say, maybe, it has the best chance. It really depends on human agency and human volition and making [the] right choices,” he said.
“If you’re asking what should we look for in a country to be a future winner, I would say look for rising growth, look for a relatively stable fiscal situation. I think skills in English will become increasingly important, a belief in education even though a country’s educational institutions may have problems.
“And if I ask myself those starting questions, and then I look out there in the world, and I look at the globe and turn it around, guess which country my eyes stop on?” Cowen said.
Nye cited the “hot money flowing into the Philippines” and the rapid transformation of the country’s telecommunications industry—from very few telephone landlines in the 1980s to almost 80 to 90 percent of Filipinos owning cellular phones today.
Seize the moment
Recalling how he had witnessed the ebb and flow of the country’s economy as the longest-serving senator in the post-martial law era, Angara called on Filipinos to seize the moment.
He noted that successive governments after President Fidel Ramos failed to follow through on reforms that earned for the country the title of “Asia’s next economic tiger” before the advent of the Asian financial crisis in 1997.
“I remember very distinctly—I was Senate president in the mid-1990s—that because of close collaboration between the executive and the legislature, we pursued a common agenda and nearly made it,” said Angara.
“For the first time in history, we had a surplus because we introduced the value-added tax, we revamped the central bank, the education system, the health system and such. But in the end, the promise of the Philippines becoming the new tiger economy didn’t materialize because, I think, we dropped the ball at the last minute, and in many cases that has been the story of the Philippines,” he said.
“We were unable to sustain because we didn’t pursue the structural reforms that would have pushed it and would have sustained it and made us a true tiger. Now, we’re back to that potential, that promise. The potential can only be achieved by a series of key interventions,” he said.
The senator mentioned key reforms in the economy such as in human capital, health, education, science and technology, research, renewable energy and infrastructure as the areas to support to achieve the sustainable growth that would trickle down to the poor.
Angara singled out infrastructure development as the one that would speed up the “momentum of change” since this would connect economic zones and big islands in the country.
“Unless you provide mobility to labor, then you get stuck in Samar or Leyte, and they’ll do anything to get to Metro Manila and create those slums. Infrastructure is key. How many airports do we have that are unflyable because there are no connecting roads?” he said.
Poor policymaking
Angara personally invited Cowen and Nye, among other experts in law and economics, both foreign and local, to tackle global economic reforms and to identify the key factors for achieving economic growth.
“Now is an auspicious time to launch the center. President Benigno Aquino III is projecting a strong economic takeoff for the Philippines—and the center is in a position to contribute toward making growth sustainable,” he said.
“This is a small, initial step toward trying to open the Filipino mind to the outside world. As all the speakers have said, we try to create new ideas, new insights so that we can join the global conversation,” he said.
Angara said he had seen the “poor quality of policymaking in this country.”
Opportunities in recession
“We have really good research and researchers, but we have no organized research on strategic areas—research that will support lawmaking and administrative and executive policymaking.”
The conference tackled wide-ranging issues such as global investment, human capital, corruption, international arbitration and enforcement, dispute settlements, and public policy issues in international trade and investment.
Cowen, ranked one of the world’s most influential thinkers by Foreign Policy magazine, led the panel discussion on “Globalization, Innovation and Economic Growth.”
He enumerated the current economic opportunities for developing countries as well as the issues on institutional reform and how to take advantage of the slowdown in the largest economies.
“Recession creates opportunities. What is it you are doing now to move forward?” he said.
According to Cowen, the Philippines has joined the ranks of a select group of emerging economies that global fund managers and investors are seriously taking notice of. The others are Indonesia and a few sub-Saharan countries.
Cowen’s plenary address was followed by lectures from eminent scholars in the field.
Focus on 2 areas
Nye explained the interaction among human capital, social norms and the creation of institutions, and the importance of simple and consistent rules that are clearly enforced to address corruption.
To achieve long-range changes, he said the Philippines should focus on two areas: simplify the rules and further open up the market.
“The most important change is the mindset of protection and nationalism. There are good reasons to protect the Philippine economy, but there are also bad reasons,” he said.
“Isn’t there some compromise where we loosen up these laws a little bit? I’m not talking about removing these laws, just opening up enough to attract more investments, more development, more decentralization so we can hire more of those workers here in the Philippines,” Nye said.
He talked of ways to “transition” the agriculture industry.
“If you look at China’s development, a lot of their developments over the past 40 years boils down to helping more people move from the countryside to the city and turning more cities into development areas,” he said.
He ended with a question better answered by President Aquino and his economic advisers: “How do you make the policy good and credibly consistent?”

08-05-2012, 06:13 PM
2 US experts see PH under Aquino Asia’s next tiger economy
By Michael Lim Ubac
Philippine Daily Inquirer
1:55 am | Sunday, August 5th, 2012
1:55 am | Sunday, August 5th, 2012
President Benigno Aquino III. INQUIRER FILE PHOTO
The Philippines is now out of the doldrums and on the verge of an economic takeoff, according to two visiting foreign economists.
The Philippines under President Benigno Aquino III has the “best chance” of becoming a tiger economy in Asia as emerging markets led by China have started slowing down, while the debt crisis in the euro zone and the faltering United States economy continue to spook the markets, said Drs. Tyler Cowen and John Nye.
Cowen and Nye, who are both professors at the George Mason University in Washington, D.C., were two of several foreign speakers at the inaugural conference on Friday of the Angara Center for Law and Economics, a think tank founded by Sen. Edgardo Angara that will undertake economic research and innovative public policy solutions.
Nye, who has been named executive director of the Angara Center, is also research director at the Higher School of Economics in Moscow, Russia, a founding member of the International Society for the New Institutional Economics, and in 1997 became a National Fellow at the Hoover Institution in Stanford University.
Cowen’s most recent book, “The Great Stagnation: How America Ate All the Low-Hanging Fruit, Got Sick, and Will (Eventually) Feel Better,” was one of the most debated nonfiction books in 2011.
Economic liberation
“The Philippines has strong economic fundamentals,” said Cowen, citing the economic gains of the two-year-old Aquino administration, English proficiency and the Filipinos’ belief in education as the key ingredients for economic liberation.
“I would say, maybe, it has the best chance. It really depends on human agency and human volition and making [the] right choices,” he said.
“If you’re asking what should we look for in a country to be a future winner, I would say look for rising growth, look for a relatively stable fiscal situation. I think skills in English will become increasingly important, a belief in education even though a country’s educational institutions may have problems.
“And if I ask myself those starting questions, and then I look out there in the world, and I look at the globe and turn it around, guess which country my eyes stop on?” Cowen said.
Nye cited the “hot money flowing into the Philippines” and the rapid transformation of the country’s telecommunications industry—from very few telephone landlines in the 1980s to almost 80 to 90 percent of Filipinos owning cellular phones today.
Seize the moment
Recalling how he had witnessed the ebb and flow of the country’s economy as the longest-serving senator in the post-martial law era, Angara called on Filipinos to seize the moment.
He noted that successive governments after President Fidel Ramos failed to follow through on reforms that earned for the country the title of “Asia’s next economic tiger” before the advent of the Asian financial crisis in 1997.
“I remember very distinctly—I was Senate president in the mid-1990s—that because of close collaboration between the executive and the legislature, we pursued a common agenda and nearly made it,” said Angara.
“For the first time in history, we had a surplus because we introduced the value-added tax, we revamped the central bank, the education system, the health system and such. But in the end, the promise of the Philippines becoming the new tiger economy didn’t materialize because, I think, we dropped the ball at the last minute, and in many cases that has been the story of the Philippines,” he said.
“We were unable to sustain because we didn’t pursue the structural reforms that would have pushed it and would have sustained it and made us a true tiger. Now, we’re back to that potential, that promise. The potential can only be achieved by a series of key interventions,” he said.
The senator mentioned key reforms in the economy such as in human capital, health, education, science and technology, research, renewable energy and infrastructure as the areas to support to achieve the sustainable growth that would trickle down to the poor.
Angara singled out infrastructure development as the one that would speed up the “momentum of change” since this would connect economic zones and big islands in the country.
“Unless you provide mobility to labor, then you get stuck in Samar or Leyte, and they’ll do anything to get to Metro Manila and create those slums. Infrastructure is key. How many airports do we have that are unflyable because there are no connecting roads?” he said.
Poor policymaking
Angara personally invited Cowen and Nye, among other experts in law and economics, both foreign and local, to tackle global economic reforms and to identify the key factors for achieving economic growth.
“Now is an auspicious time to launch the center. President Benigno Aquino III is projecting a strong economic takeoff for the Philippines—and the center is in a position to contribute toward making growth sustainable,” he said.
“This is a small, initial step toward trying to open the Filipino mind to the outside world. As all the speakers have said, we try to create new ideas, new insights so that we can join the global conversation,” he said.
Angara said he had seen the “poor quality of policymaking in this country.”
Opportunities in recession
“We have really good research and researchers, but we have no organized research on strategic areas—research that will support lawmaking and administrative and executive policymaking.”
The conference tackled wide-ranging issues such as global investment, human capital, corruption, international arbitration and enforcement, dispute settlements, and public policy issues in international trade and investment.
Cowen, ranked one of the world’s most influential thinkers by Foreign Policy magazine, led the panel discussion on “Globalization, Innovation and Economic Growth.”
He enumerated the current economic opportunities for developing countries as well as the issues on institutional reform and how to take advantage of the slowdown in the largest economies.
“Recession creates opportunities. What is it you are doing now to move forward?” he said.
According to Cowen, the Philippines has joined the ranks of a select group of emerging economies that global fund managers and investors are seriously taking notice of. The others are Indonesia and a few sub-Saharan countries.
Cowen’s plenary address was followed by lectures from eminent scholars in the field.
Focus on 2 areas
Nye explained the interaction among human capital, social norms and the creation of institutions, and the importance of simple and consistent rules that are clearly enforced to address corruption.
To achieve long-range changes, he said the Philippines should focus on two areas: simplify the rules and further open up the market.
“The most important change is the mindset of protection and nationalism. There are good reasons to protect the Philippine economy, but there are also bad reasons,” he said.
“Isn’t there some compromise where we loosen up these laws a little bit? I’m not talking about removing these laws, just opening up enough to attract more investments, more development, more decentralization so we can hire more of those workers here in the Philippines,” Nye said.
He talked of ways to “transition” the agriculture industry.
“If you look at China’s development, a lot of their developments over the past 40 years boils down to helping more people move from the countryside to the city and turning more cities into development areas,” he said.
He ended with a question better answered by President Aquino and his economic advisers: “How do you make the policy good and credibly consistent?”

08-06-2012, 11:19 PM
PH one of the best performers in Asia: ANZ Bank

Posted at 08/06/2012 6:11 PM | Updated as of 08/06/2012 7:12 PM

MANILA, Philippines - The Philippines is seen as one of the best performers in Asia, according to the chief economist of Australia-based ANZ Bank.

In an interview with ANC's Coco Alcuaz, ANZ's chief economist for Asia Pacific Paul Gruenwald said the Philippine economy is "quite in a sweet spot."

"We're quite positive on the Philippines. I just got back from a trip to New York. Investors are interested. We see an economy that is quite in a sweet spot. We've got (Philippine) growth very strong at 5-6% and inflation under control," he said.

Gruenwald cited the Aquino government's efforts to improve public finances and expenditures, as well as the booming business process outsourcing industry.

"(The Philippines) has two structural developments, which are quite positive. The Aquino government is very keen on improving public finances and we've seen a good deal of expenditure restraint and a bigger improvement in the government balances," he said.

"Second is the BPOs, business process outsourcing, which seem to be providing a good spark for the domestic economy. So when you put them all together,we see the Philippines as one of the best performers in Asia."

However, the Philippines is not entirely insulated from any fallout from the euro zone debt crisis and a slowing global economy.

Gruenwald said the Philippines won't be as less vulnerable as Indonesia and India, which are domestic-driven economies.

But the country may be stronger than the more open economies of Singapore and Hong Kong.

"The Philippines is kind of in the middle of the pack. It's certainly important to see the euro debt crisis resolved. Europe is Asia's biggest trading partner, it's an even bigger trading partner than the US," the economist said. With ANC

08-12-2012, 09:09 AM
By: Melba Padilla Maggay

Philippine Daily Inquirer

11:28 pm | Saturday, August 11th, 2012

President Aquino’s latest State of the Nation Address was remarkable in a number of ways, not the least of which was its going for the visceral: He delivered it completely in Filipino, in an effort to communicate to those of us whose intelligence resides primarily in the stomach. Instead of abstract measures like GDP growth, the achievements detailed were concrete and to the point—more jobs, more classrooms, more roads, more rice production, achievements made more impressive because contrasted with the long and maleficent record of the past administration.

It is tempting to dismiss these as a mere list of to-dos for a normal administration. It is easy to fault it for what was missing: a larger sense of vision, an overarching principle, or even just a programmatic framework behind the touted statistics.

It could be argued that there was in fact a bigger frame that held all the discrete facts presented: the idea of “inclusive growth,” of enlarging the economy while first putting the basic needs of the poor—jobs to keep their heads above water, education to break the cycle of poverty for the next generation, roads and market accessibility for the poor farmer and trader, food security for all, and the promise of regional airports and better infrastructure for tourism, which happens to be one of the fastest ways of generating jobs for those whose only asset is the labor of their hands.

The President himself summed these all up as the social and economic dividends of his “daang matuwid.” It is truly cause for rejoicing that corruption can be punished, that justice can now be had by both the poor and the powerful. One psychological gain of the will to put power behind good governance is what the Italian Camilo Cavour once said about a necessary trait for a statesman: “a sense of the possible.” Given the kind of governance we have been used to, it is indeed a novelty to believe that what used to look impossible before can now be done.

But a hint of a cloud shadows this upbeat picture of what is ahead. Like the low-level discomfort of off-stage noise, it comes to the fore when things like modernizing aircraft and other military hardware get mentioned, or when so much is made of our credit ratings and standing abroad. While we must certainly defend our territorial waters and provide our soldiers decent pay and equipment, one wonders where the money for these big-ticket items is coming from, and at what price. More debts loom, our confidence to borrow boosted by our newfound standing as a lender to the European emergency rescue fund.

Similarly, while we do not despise “the day of small things”—the many little changes that are happening, wrested inch by inch, from the recalcitrant forces that have beset us since the dismantling of martial law—we sense that something has yet to change fundamentally in the way we approach the problem of growth and poverty.

It has been more than half a century since US President Harry Truman inaugurated the “development age” and the Bretton Woods institutions that would preside over it. The optimistic projection that poverty, injustice and ignorance shall inevitably get wiped out as societies clamber up this train of evolutionary progress as prophesied by Walt Rostow has yet to show up.

Past globalization and the economic meltdown, the rise of underclasses in Europe and the unrest in Wall Street, even western economies are discovering that enlarging the pie will not necessarily have a “trickle-down” effect for the poor. We all have been lured into this unilinear idea of “development,” thinking that the way the West has developed can be universalized, and the problem of the poor solved by technology and merely market forces.

Certainly, the crumbling of socialist economies tells us that imperfect market mechanisms are better than imperfect governments in creating wealth. But recent experience also tells us that growth can exist alongside increasing hunger.

In much of the past decade, from 2003 to 2009, for instance, the economy grew by an average of 4.8 percent, but the poor increased from 19.1 million to 23.1 million. Mahar Mangahas of the Social Weather Stations has observed that the Philippines’ economic crisis is not so much in terms of finance, which mostly threatens the rich, as in the form of hunger, which is suffered by the poor. This has prompted the searching question raised at a Philippine Development Forum by the international donor community: “How come there is rising poverty and hunger in the midst of growth?”

Part of the complex answer is the type of development we have been pursuing. Modernization is not always good for the poor. Even when government-sponsored growth results in unequivocal good, this still tends to bypass the poor. As an expert observes:

“The benefits of economic growth in the formal sector of Third World economies tend to bypass the poor because modern-sector development projects, even those that are designated projects of national significance, do little to improve the productivity of the poor. A new power plant, a new hospital, improved seaport facilities, a new airport terminal, or a new timber mill may augment the standard of living of bureaucrats, the captains of industry, skilled workers and professionals in the formal work force, but will make barely a difference to the value-added generated by the firms that employ the poor, produce for the poor and sell to the poor.”

Clearly, in a context where great social and economic imbalances exist, development initiatives will tend to benefit only a thin layer of the elite classes. Long ago, Gunnar Myrdal, speaking out of the caste system in India, already found that no amount of technical solutions can work within the disincentives posed by systemic inequality. “Greater equality,” he said, “is a precondition for lifting a society out of poverty.”

It was once said, quite prematurely, that we are at the “end of history”; the once deadly ideological battles that used to preoccupy us are over. What is before us are only boring technical questions of how to make economies grow.

No, the massive poverty that surrounds us demands a fresh paradigm that restores the poor at the center of our vision. We sense the seriousness of the Aquino administration in wanting to see to it that no one gets left behind. But this will not happen unless it has a clear and fresh sense of where we should be going and how to get there, apart from the development path others have marked out for us. This is the framing element we have been missing, and wish to hear, in future Sonas. Sana…

Melba Padilla Maggay, Ph.D., is a social anthropologist and the founder and president of the Institute for Studies in Asian Church and Culture. E-mail her at melbamaggay@isacc.org.ph.

08-18-2012, 08:24 PM
Why the Philippines can be a 'breakout nation'

by Cathy Rose A. Garcia, ABS-CBNnews.com
Posted at 08/16/2012 5:17 PM | Updated as of 08/17/2012 1:12 PM

MANILA, Philippines - The Philippines can become one of the so-called "breakout nations," according to Ruchir Sharma, author of "Breakout Nations" and head of Morgan Stanley Emerging Markets Asset Management.

"Breakout nations" are defined by Sharma as countries that have been beating growth expectations. Sharma noted the Philippines is one example since the economy has been exceeding expectations, albeit low expectations.

"In the case of the Philippines, after being a laggard in Asia and an economy that was reduced to being a bit of a joke, expectations are being systematically exceeded. When I came back to Manila in 2010, after a long period of time, we could see the potential for that. Expectations were very low and there was a positive change going on in the Philippines," Sharma told ANC's News Now.

One of the positive changes, Sharma said, is the Aquino administration's focus on good governance and anti-corruption campaign.

"In Philippines, it is a combination of factors, starting with low expectations and a change in leadership that was much more focused on improving governance and the other faultlines in the Philippines such as corruption and cronyism," he said.

The Philippines is expected to once again exceed growth expectations this year, but Sharma noted if the government pushes with its public private partnership program and mining reforms, it can grow even more.

"(The Philippines) seems to be on course to grow at 6%, which is a very good growth rate at a time when the global economy is so weak. Just imagine the potential when it gets a couple of economic things right, whether PPP, geting the power or mining sector sorted out, if it manages to get a couple of things right from here, the Philippine economy can do even better," Sharma said.

There may be a lot of skepticism right now whether the Philippines can actually become a "breakout nation."

"As investors and market observers that's what we almost like, you want skepticism because once a story is well-known to people, it's almost too late," Sharma said.

"The Philippines has been an economy that has disappointed for a long period of time and I think there's a long way for the Philippines to go before it can convert many people and by the time many people are converted, you know its time to get skeptical. I think we are far away from that point right now."

As for the so-called BRIC economies (Brazil, Russia, India and China), Sharma does not believe in the hype.

"What happened with a lot of these BRIC economies is that hype has surrounded these economies and disappointment vis-a-vis expectations. Take the case of India, the growth rate during the boom was 9% and now it has fallen to 6%. It's not bad but versus expectations, that's a real disappointment. Same thing going on in China," he said.

However, Sharma warns that economic success can be fleeting, as the star economies of one decade are rarely the stars of another decade.

"That has to be the big lesson, looking back at Philippine history, in 1960s the Philippines was 2nd richest in Asia after Japan and supposed to be the next East Asian tiger with Burma and Sri Lanka and you know what happened to all of them - for the next 30-40 years, all those three economies systematically disappointed... Success is transient, it can last for a few years but it can be hard to sustain," he said.

09-01-2012, 12:38 PM
Home › Business ›
PH is Asia’s 'new darling of investors' - report

Posted at 08/30/2012 6:39 PM | Updated as of 08/31/2012 9:31 AM

MANILA, Philippines - The Philippines is emerging as "Asia's new darling of investors," according to a report on Thursday.

CNBC Asia published the article "Who Is Asia’s New Darling of Investors?" on Thursday, as the Philippines reported a 5.9% GDP growth rate in the second quarter, bringing its first half GDP growth to 6.1%.

The Philippines' services-led growth has impressed several regional economists, especially since the second quarter GDP figure is one of the highest in Asia, next only to China and Indonesia. The Philippines' 5.9% GDP growth in the second quarter bested Malaysia (5.4%), Vietnam (4.4%), Thailand (4.2%) and Singapore (2%).

Barclays Regional Economist Prakriti Sofat called the country as "Asia's rising star." Sofat also expects a credit ratings upgrade for the Philippines in the second half of the year.

The CNBC article also quoted Medha Samant, Investment Director at Fidelity Worldwide Investment, as saying the Philippines is the "new market darling" for foreign investors. He cited the Philippines' "reduced fiscal deficit, strong domestic demand and high overseas foreign worker remittances."

Aside from remittances, the country's business process outsourcing sector continues to experience strong growth.

"The Phillippines BPO sector employs almost the same number as bank workers today…there are opportunities in this market that we are quite excited about," Medha said.

The Philippines is the world's biggest call center hub, with $7.6 billion in voice service exports as compared to India’s $7 billion, according to US-based research firm Everest Group.

The CNBC report comes on the heels of an article* "A Youthful Populace Helps Make the Philippines an Economic Bright Spot in Asia" published on The New York Times on August 27.

Sam Miguel
09-06-2012, 08:29 AM
First time country is in top 50% of world ranking

By Michelle V. Remo

Philippine Daily Inquirer

11:47 pm | Wednesday, September 5th, 2012

Enjoying a favorable economic performance and having a government that claims to put premium on its anticorruption drive, the Philippines leaped 10 notches in the global competitiveness ranking for the year to 65th spot out of 144 countries.

The country’s latest performance followed a similar 10-notch jump to the 75th spot last year, resulting in an overall 20-notch jump so far under the Aquino administration.

“The Philippines makes important strides this year in improving competitiveness—albeit often from a very low base—especially with respect to its public institutions,” The World Economic Forum (WEF) said in its 2012-2013 Global Competitiveness Report, which was released Wednesday worldwide.

The WEF said the Philippines was one of the few countries that registered a double-digit improvement in ranking this year.

The Philippines landed on the 65th spot after it registered an overall score of 4.23 points (out of 7 points) across all 12 categories considered by businesses as major areas for determining a country’s competitiveness.

Guillermo Luz, cochairman of the Philippines’ National Competitiveness Council (NCC), said at a press conference Wednesday that this year was the first time the country landed on the upper 50 percent of countries ranked in the global competitiveness survey.

He said the NCC was targeting the Philippines to join the upper one-third of the global competitiveness rankings by 2016, the end of the Aquino administration.

12 pillars

The survey on global competitiveness, which taps businesses as respondents, grades countries based on the following 12 categories or “pillars.”

These are the following: [government] institutions, infrastructure, macroeconomic environment, health and primary education, higher education and training, goods market efficiency, labor market efficiency, financial market development, technological readiness, market size, business sophistication, and innovation.

Luz said the Philippines registered improvements in 11 out of the 12 categories.

Huge gain in institutions

The Philippines gained the most in the “institutions” category, where it jumped 23 places to the 94th spot from last year’s 117th.

In the “infrastructure” category, the country improved its ranking by seven places to 98th; for “macroeconomic environment,” up 18 places to 36th; for “higher education” and training, up seven places to 64th; for goods market efficiency, up two places to 86th; for labor market efficiency, up 10 places to 103rd; for financial market development, up 13 places to 58th; for “technological readiness,” up four places to 79th; for “market size,” up one place to 35th; for “business sophistication,” up eight places to 49th; and for “innovation,” up 14 places to 94th.

Drop in health, primary education

The only category where the Philippines registered a slippage was in “health and primary education,” where it fell six places to 98th.

The country’s favorable performance in the “institutions” category reflects the success of the Aquino administration in convincing the business sector that there has been an improvement in governance, Luz said.

Of the 15,000 businesses that responded to the global competitiveness survey for this year, 132 came from the Philippines.

On macroeconomic environment, Luz attributed the country’s improved ranking to the country’s favorable economic performance.

The Philippine economy grew 5.9 percent in the second quarter from a year ago, making the country one of the fastest-growing economies in Asia. This brought its average growth rate for the first semester to 6.1 percent, making the government’s full-year growth target of 5 to 6 percent attainable.

Infra spending low

But Ramon del Rosario Jr., chairman of the Makati Business Club, said a lot of work still had to be done in several areas to help ensure that the Philippines reaches the upper-third rankings in 2016.

To reach the upper upper third, the country must improve significantly on infrastructure development and market efficiency, particularly labor market efficiency, Del Rosario said.

Despite increases in government spending on infrastructure this year, infrastructure investment in the Philippines remains one of the lowest in the region.

Infrastructure spending in the country is estimated to be equivalent to less than 3 percent of its gross domestic product, below the 5 percent average for Southeast Asia.

“Despite these very positive trends, many weaknesses remain to be addressed. The country’s infrastructure is still in a dire state, particularly with respect to sea and air transport, with little or no progress achieved to date,” Del Rosario said at the press conference.

He said businesses considered infrastructure a vital area in deciding whether to invest in a country.

With its improved performance this year, the Philippines has beaten Vietnam, which enjoyed better rankings in the previous years. This year, Vietnam ranked 75th.

The Philippines, however, continues to lag behind other major Asian economies in the competitiveness rankings.

Hong Kong ranked 9th, Taiwan 13th, South Korea 19th, Malaysia 25th, China 29th, Thailand 38th, Indonesia 50th and India, 59th.

Singapore remained the highest ranking among Asian countries, landing on the second spot, the same as its last year’s ranking.

Switzerland was again named the most globally competitive country.

Sam Miguel
09-06-2012, 08:47 AM
By Peter Wallace

Philippine Daily Inquirer

1:00 am | Thursday, September 6th, 2012

The second-quarter GDP growth of 5.9 percent was unexpectedly strong and boded well for the full-year growth outcome. For the first time in many years, what’s happening in the world is of more concern than what is happening in the Philippines. Among the world’s countries, the Philippines now stands out as a stable, growing economy in a sea of doubt for the Western world and turmoil for the Middle East. Plus a China that’s beginning to show cracks.

The growth rate even compares quite well to other Asian countries for the first time in a long while. It is better than Malaysia’s 5.4 percent, Vietnam’s 4.4 percent, Thailand’s 4.2 percent and Singapore’s 2 percent. Only Indonesia (6.4 percent) outpaced the Philippines among comparable economies in Southeast Asia.

It was a bit slower than the 6.3-percent growth in the first quarter, which could indicate a worrying trend. But the average growth of 6.1 percent in the first half of 2012 was still a significant improvement from 4.2 percent in the same period last year. The projected growth of 5-6 percent now seems more certain of attainment. But this means it will decelerate in the second half as the sluggish world economy will have its inevitable impact on exports, and the effect of the low base particularly in infrastructure spending in 2011 will begin to dissipate (the second half of 2011 was stronger than the first half). Something more toward the middle of the range can be expected, with a continuance into 2013 when growth will in part be driven by money finally being spent on public-private partnership projects.

But the government is still not spending anywhere near enough on infrastructure, and this remains not only a drag on the economy but also a severe deterrent to investment. I spent nine hours on the road last Saturday going to a village in the near north—a trip that should have taken three hours max. Six hours wasted. You can’t do business like that.

And this is beginning to stand out to me: Infrastructure with all its high leverage impact must be built at a much, much faster rate. It is hoped that the importance of that will be recognized by the new secretary of the Department of Transportation and Communications, where so many of the PPP projects reside. But the real recognition of urgency must be at the very top—the President.

P-Noy must put all the weight of his enormous powers behind building. Roads, airports, seaports, railroads, power plants and water systems must be built, not just planned or promised, with extreme urgency. The government must spend a minimum of 5 percent, preferably 8 percent (yes, 8) not the historic 2-2.5 percent of GDP, and PPP must add another percentage point. And that must be in 2013, not in some lazy time in the future.

Too much of the economy is still on the consumption side. It is not driven as a healthy economy needs to be—by supply. The 7-percent+ sustained growth needed to include the poor has to be driven by strong production of goods and services. Services alone can’t do it. The less educated need factory jobs. Manufacturing must be vastly expanded to create those jobs. That has yet to occur, and won’t occur without change.

Something that will help that to occur is opening up the economy. The ill-considered restrictions in the Constitution need to be lifted. And they may be if the President can be convinced of the need and, importantly, be convinced that a scurrilous Congress won’t hijack the debate and lengthen term limits, too. It’s a legitimate fear given the reputation of politicians, but we think in this case an unwarranted one. There’d be enough public opposition to temper their ambitions.

Opening up the economy will go well beyond those sectors that will directly benefit; it will change perception (and perception drives decision). It will say: Everyone is equally welcome here, come in and be fairly treated. We believe the President will be convinced; Congress leaders already are. So a fully open economy by the second half of 2013 (a plebiscite may be held together with the May midterm elections) is now in the cards. Let’s hope the President agrees to it.

On the other hand, the President’s single-minded focus on addressing corruption may be starting to have a life of its own. But it’s a life that needs a decade to mature, and that means a leader equally determined beyond 2016. That means that the cleanup should be institutionalized so that it will be hard to reverse. That will be difficult to do, and I give the President less than a 50-percent chance of doing so.

What will help is to fully computerize in an integrated fashion all government services (as I’ve said before, it’s hard to pass a brown envelope under the table to a computer). The creation of a Department of Information and Communication Technologies will be an important step in achieving that. A bill has been approved on third and final reading by both the House and the Senate. The measure is currently up for bicameral committee approval. But then the President may veto it if he can’t be urgently convinced of its need (it’s not among his priorities).

It highlights a problem with the presidential system, which is that it panders to the hierarchical nature of the Philippines. There’s a reverence for the boss (I like that) at a level not common elsewhere. A Philippine president is almost royalty. A parliamentary system somewhat levels the field. A prime minister is a first among equals, and may be taken out by a simple vote of confidence if he doesn’t perform. That alone is a good reason to fully review the Constitution, but perhaps too risky now. Let the country settle down to a more stable course first.

But let’s get moving.

Sam Miguel
09-06-2012, 09:43 AM
By Louella Desiderio

(The Philippine Star) Updated September 06, 2012 12:00 AM

MANILA, Philippines - The Philippines was among the countries showing the most improvement in terms of competitiveness as its ranking went up to 65 this year from 75 last year, the World Economic Forum (WEF) said.

The WEF said in its Global Competitiveness Report released yesterday that the country placed 65th out of 144 countries in the survey conducted from April to June.

Makati Business Club (MBC) chairman Ramon del Rosario said at the report’s launch yesterday this is the second straight year the country climbed 10 places up the competitiveness ladder.

The country placed 75th last year, an improvement from the 85th spot in 2010.

Del Rosario noted that as the Philippines got a record-high global competitiveness index score of 4.23, it is now in the upper 45 percentile of economies assessed by the WEF, better than the previous high of 53 percentile in 2008 and 2011.

“The sustained and rapid advance of the Philippines in the global competitiveness index owes a lot to improvements in 11 out of the 12 pillars of competitiveness considered by the Global Competitiveness Report,” he said.

He said the institutions pillar went up 23 places to the 94th spot, while the infrastructure pillar jumped seven places to the 98th spot.

The macroeconomic environment pillar went up 18 places to the 36th spot, while higher education and training also improved by seven places to rank 64th.

Other pillars which showed improved rankings were good market efficiency which placed 84th from 86th; labor market efficiency which went up 10 places to 103; financial market development which rose to 13 places to 58; technological readiness which climbed four places to 79; market size which was up to 34 from 35; business sophistication which increased by eight places to 49; and innovation which was up 14 places to 94.

The only pillar which did not see an improved ranking was health and primary education as none of the indicators under that category posted gains.

Out of the 11 indicators listed by the report, the Philippines placed 50 and below in 25 indicators.

The indicators considered as the country’s competitive advantages are HIV prevalence, available airline seat kilometers, degree of customer orientation, willingness to delegate authority, domestic market size, extent of staff training, affordability of financial services, government budget balance, financing through local equity market, cooperation in labor employer relations, reliance on professional management, state of cluster development, quality of management schools, foreign direct investment and technology transfer, foreign market size, soundness of banks, extent of marketing, quality of the educational system, ease of access to loans, regulation of securities exchanges, firm level technology adoption, gross national savings, local supplier quantity, intensity of local competition and availability of financial services.

Despite gains, the report cited that there are still many weaknesses that needed to be addressed.

“Corruption, inefficient government bureaucracy, and inadequate infrastructure still remain the top three problematic factors for doing business in the Philippines,” Del Rosario said.

He noted though that the weaknesses have been cited by fewer survey respondents, showing that the perception corruption has not been stamped out is being addressed.

Compared to seven other countries in the Southeast Asian region, the MBC noted that the Philippines is now two steps above bottom from next to bottom last year.

The Philippines is ahead of Vietnam, which placed 75th and Cambodia which ranked 85th.

Guillermo Luz, private sector co-chair of the National Competitiveness Council, said in the same event that they are relatively happy with the improvements in the rankings.

He noted though that more action still needs to be done in areas which remain to be top concerns of the business community in order to achieve the goal of being counted among the top 30 percent most competitive by 2016.

“Work in progress no longer counts... The business community is looking for results,” he said.

Meanwhile, Malacanang expressed elation over the Global Competitiveness Report that showed the Philippines climbing another 10 notches to 65th out of 144 economies.

According to Presidential spokesman Edwin Lacierda these significant gains in the competitiveness of the Philippines were concrete affirmations of the success of the reforms that government continued to implement and foster.

“Notable gains were made with respect to Philippine public institutions (94th, up 23 places) and public trust in politicians (95th, up 33). This represents a steady renewal of social trust and the strengthening of our institutions as a result of the reforms the Aquino administration has pursued since 2010,” Lacierda said.

“Contributing to this favorable ranking are strong scores in transparency in policy formation (up 23) and fairness in awarding of contracts (up 19). Improvements were also noted in minimizing the following: diversion of public funds (up 27), wastefulness of government spending (up 23), and irregular payments or bribes (up 11),” he added.

Although the judicial situation remains at 111th rank, Lacierda noted that the new court leadership is expected to address the quality of judicial decisions. – With Aurea Calica

09-27-2012, 09:30 AM
By Peter Wallace

Philippine Daily Inquirer

1:08 am | Thursday, September 27th, 2012

I want to plagiarize today, except that I’ll give credit so I suppose that exonerates me. I’m going to summarize an article in The Economist of Sept. 15. It seems that with the positive business attitude now prevailing, the Department of Trade and Industry-Board of Investments has a great opportunity to go out and sell. But the first thing it must do is gain recognition that the Philippines even exists.

Here’s The Economist discussing Vietnam: “Now, with slower growth, huge business debts and more competition from places such as Cambodia, Indonesia and Myanmar, the problems loom large.”

Why isn’t the Philippines even mentioned? Is Burma (Myanmar) really that attractive, or Cambodia? Aung San Suu Kyi is out, but surely there’s a very long way to go before you’d feel secure investing there. I find this a lot. It’s not that the Philippines is relegated to an also-ran position; it’s that it’s not mentioned at all when investment comparisons are made. I’ve never figured out why. The realities here are as good as elsewhere—and improving, if a true comparison is made.

The Economist also had this to say on Vietnam: “The whole episode (a bank scandal) reminded investors that after years of sloppy management and exuberant lending, Vietnam’s banks are in dire shape; and that corruption and waste pervade the economy. This was never a secret, but during the boom years in the middle of the past decade, when the economy was growing by 8 percent a year and foreign investment was pouring in, nobody much cared.” Philippine banks are in excellent shape, with a nonperforming loans ratio of a little over 2 percent, an annual average profit and asset growth (2008 to 2011) of 18 percent and 9 percent, respectively, and more money than they can lend out (mind you, they can be a bit more adventurous here and lend to more small entrepreneurs).

“…[C]onfidence in the Vietnamese economy, especially among Western investors, is tumbling. Foreign direct investment into Vietnam, at $8 billion for the first seven months of the year, is a third lower than a year earlier.”

Confidence is tumbling? That $8 billion is juxtaposed against a mere $1 billion here. That’s a “tumble” we’d welcome.

The Economist continues: “The privileged place of the state enterprises—accounting for two-fifths of the country’s output—is chiefly responsible for all the graft, misallocation of resources and mad spending that drags Vietnam down. Foreign executives say it is a nightmare doing business there.”

“As in China, the Communists cling to the state enterprises as a means of keeping political control over the economy. Yet it means that politically connected but incompetent managers have been allowed to build up sprawling empires.”

Now, is that a better place to do business in than here? Why do so many think so when, as the numbers show, $42 billion went into Vietnam in the past decade, and $16 billion here? There’s a huge disconnect between perception and reality. Certainly, the Philippines is no idyll when wanting to start or do business, but others are little better. We’ve just read about Vietnam, but what about Thailand or Indonesia? (I’ll concede Singapore, Hong Kong, even Malaysia.)

My perception (and anecdotal evidence) is that the subsidiaries of multinationals here do as well as, or better than, subs of the same companies elsewhere. I’d like to research it but no one seems interested in funding that research.

Yet new business doesn’t come. There are a number of reasons, and I and many others have highlighted these interminably. Let me focus on just one in this column: consistency. You don’t invest for six years, you invest for 50 or 100 or even more (Nestlé has been here for 101 years, Coke 100). But Philippine administrations seem to think they must change the rules of the game to prove they are different.

What’s happening in mining today is a perfect example of that. The rules were there. They were reasonable, understood, and accepted. Now they’ve been capriciously (that’s the correct word) changed. Even companies with existing operations have been affected as the furor over contract renewals surfaced with the release of EO 79’s implementing rules and regulations.

Contract sanctity is inviolate. It is a party’s word of honor to uphold an agreement; it cannot be unilaterally changed or, worse, cancelled. Corruption is the only valid reason to question a contract. Yet Philippine administrations, including this one, have shown themselves willing to change contracts for “the good of the nation.” And maybe such changes would be, but YOU CAN’T DO THEM. You have a contractual obligation to honor.

And don’t pretend it will be by mutual agreement. There’s nothing “mutual” about a government negotiating, just ask the independent power producers during GMA’s reign.

Even if the administration backtracks on the conditions of EO 79—and it certainly should, not just on the 25-year lease renewal, but on much else—the damage has been done: The Philippine government’s word can’t be trusted. Just ask Thales-Sumitomo, whose contract, signed by the government, has been in abeyance for over a year. Or BDC, who is suing the government for the cancellation of its contract to dredge Laguna de Bay. Maybe it wasn’t the best solution, but it was a signed contract. If there were valid reasons to cancel—and they’d have to be very strong—then full and immediate recompense must be made. There was no such thing.

It’s not just contracts, it’s all aspects of business. If you register to do business here, you are in effect entering into a contract with the government. You promise to operate ethically and honestly, to pay your taxes, to look after your employees, and service your customers. The government in return promises to provide you a fair, decent environment within which to operate, where the rules are known and consistent.

Otherwise, you go to Vietnam.

09-27-2012, 11:05 AM
By Lawrence Agcaoili

(The Philippine Star)

Updated September 27, 2012 12:00 AM

MANILA, Philippines - With economic losses from traffic congestion reaching P137.5 billion last year, the government is launching several infrastructure projects, including modernizing and expanding the country’s rail system to make commuters depend less on road transport.

In his opening address at the 2012 Philippine Energy & Infrastructure Business Meeting, Transportation Undersecretary Rene Limcaoco said the projects being readied – once completed – would greatly help decongest roads and reduce transport costs.

“This drives home a strong point for us in the government,” Limcaoco said, referring to the huge economic cost of traffic congestion as shown in a study published by the National Center for Transportation Studies.

He said there is a need to improve the country’s railway system to entice more Filipinos to use the mass transit system.

He said only four percent of Filipinos use the railway system compared to 32 percent in South Korea, 30 percent in New York, and 20 percent in London.

Rail projects in the pipeline include the Light Rail Transit 1 extension from Baclaran to Cavite, as well as the LRT extension from Santolan along EDSA to Masinag Junction in Antipolo.

He said losses over the past 11 years in terms of productivity have reached P1.5 trillion. Fuel losses, meanwhile, reached P4.5 billion.

The losses may even be higher since the NCTS study covers only five groups – government officials, professionals, technicians, clerical workers, and service workers.

Limcaoco also revealed that the Department of Transportation and Communications is set to bid out a P1.7-billion contract for an automated fare collection system to replace the current magnetic stripe being used in LRT1, LRT2, and Metro Rail Transit (MRT) 3.

Another project to help decongest traffic, Limcaoco said, is an integrated transport system involving the construction of two bus terminals in the south and one terminal in the north. He said about 8,000 provincial buses enter Metro Manila every day.

The project, he added, would be undertaken jointly with the Department of Public Works and Highways (DPWH) and the Metropolitan Manila Development Authority (MMDA).

Other infrastructure projects being undertaken are the P10.2-billion Mactan-Cebu International Airport, P7.4-billion new Bohol Airport, P4.5-billion Puerto Princesa Airport, P4.7-billion Bicol International Airport, P7.9-billion Laguindingan Airport, P7.9- billion Tacloban Airport, and Clark International Airport.

Sam Miguel
10-09-2012, 09:48 AM
By Cielito F. Habito

Philippine Daily Inquirer

8:37 pm | Monday, October 8th, 2012

My wife Pilar celebrates her birthday as I write this, so I thought I’d dedicate this piece to her (and all women) by updating an article I wrote almost exactly 10 years ago.

When our family goes out for dinner, when we hire a woman to do our laundry and iron our clothes, or when my grandchildren’s schoolteachers teach them their lessons in school, these activities have a corresponding economic value that enters into the nation’s reported gross national product (GNP).

When my wife cooks our family dinner, does the laundry and ironing, or spends time teaching the grandchildren, none of her efforts ever gets to be valued and entered in any economic accounts. Outside our family and household, her true worth to the economy will never be fully appreciated. This is because productive activities done outside the market economy are never captured in the national income accounts that measure the nation’s economic output.

Women contribute to the economy vastly more than what most people recognize and what are recorded in the country’s economic accounts. Partly as a consequence of this, their status in the economy has always been and has continued to be lower than that of men. Fortunately, the evolution of the modern economy has been changing all of this. Key trends shaping the nature of the economy at the global, national and local levels are impacting the economic role and status of women in both positive and negative ways. These major economic trends include globalization, increased prominence of the so-called knowledge economy, and the increasing focus on small enterprises.

Over time, globalization has been reshaping the relative roles of women and men in economic life. The globalization process has brought about greater worker mobility and widened employment opportunities. Accompanying this is a growing proportion of women workers in nonstandard work such as temporary, casual, multiple, contract and home-based employment. Thus, while globalization is raising the quantity of women’s contribution to economic life through the labor force, the quality of their participation needs serious consideration.

In particular, women dominate labor migration, with domestic workers, nurses and caregivers making up a substantial portion of such labor movement coming from Asia, especially the Philippines. This has in turn led to changes in the host countries, where the consequent restructuring of household work from unremunerated work by housewives to a more formal economic activity undertaken by foreign domestic workers has increased the labor force participation by women in general. This may be seen as a positive trend from the point of view of the host economy, but comes at the cost of fracturing the families of the women migrant workers, often with tremendous social costs at home.

The second major economic trend is the dominance of information and communication technology (ICT) in the knowledge economy of the 21st century. The modern economy has seen dramatic change in the basis for wealth creation—from the traditional “bricks and mortar” to “clicks and portals.” The more successful firms and individuals in the knowledge-based economy are those who have better access to information and knowledge, no longer those endowed with greater fixed capital including real estate. For women, this could be a positive factor, given the fact that they now dominate tertiary education, as statistics in European and Asian countries show. In the Philippines, 56.1 percent of college and university students are female, and the ratio has been growing (10 years ago, the figure was 53.2 percent). Provided that there is no gender gap in access to ICT, women would thus appear to have the advantage in numbers to cash in on the knowledge economy.

The third economic trend, which has to a large extent been facilitated by the second, is the renewed focus on small enterprises. With rapid developments in ICT, modern societies have seen a widespread resurgence of small, even home-based enterprises. Small firms providing products that range from services to manufactured products are proliferating. This is because e-commerce provides them virtually equal access to markets relative to their much larger counterparts, with savings in overhead costs compensating for their lack of economies of scale. This particular trend has created wider opportunities for integrating formal economic activities with unremunerated domestic work, whether for men or women, but especially for the women. Having to devote time for rearing children and managing the household need no longer deprive women of the opportunity to become entrepreneurs. But the same trend also implies that men are increasingly able to participate more equitably in child rearing and home management, while still engaged in gainful enterprise.

What’s needed is to overcome traditional cultural biases against women taking a more active role in formal economic life, and men taking a more active role in home and family management. A “gender divide” in ICT must also not be allowed to arise or expand. In general, there is need to eliminate the unfair wage differentials between men and women that still persist in many contexts.

My wife runs a community school and associated community welfare initiatives, balancing all these with managing our home, seeing to our family’s welfare, and responding to my sometimes unfair demands as a husband. She earns nothing from all of that. Given what she contributes to our economy and society, I often feel she should be earning a lot more than I do.

10-11-2012, 09:16 AM
Action speaks louder than words

By Peter Wallace

Philippine Daily Inquirer

9:24 pm | Wednesday, October 10th, 2012

In the past, according to CNN, the United States spent 4 percent of GDP on infrastructure and was the envy of the world with its roads and expressways, airports and seaports. It was the leader. Today, it spends 2 percent and is falling rapidly behind.

China, on the other hand, is leaping ahead. Its expressway network of 74,000 kilometers is now the second largest in the world after the United States. Its highway system connects all provincial capitals and cities. China’s high-speed trains, running at a maximum speed of 220 miles per hour, are at par or even faster than their European counterparts. Its high-speed rail network of 4,600 miles is the largest in the world. China’s investments in ports, highways, railways, etc. grew more than twofold from US$41.5 billion in 2000 to $103.4 billion in 2006.

In the 2012-2013 Global Competitiveness Report, China ranked 69th (the Philippines 98th) in terms of quality of overall infrastructure. It placed 22nd in terms of railroad infrastructure (PH 94th); 54th in quality of roads (PH 87th); 59th in terms of port infrastructure (PH 120th); and 70th in quality of air transport infrastructure (PH ranked 112th). The World Bank noted that one primary contributor to China’s “outstanding achievements in economic growth and poverty reduction over the last 15 years … has been the development of its transport infrastructure.” One of the outstanding NON-achievements of the Philippines has been its NON-development of its transport infrastructure.

In the past three decades, the Philippines has annually spent an average 3 percent of GDP on infrastructure. Elsewhere in Asia, the average was nearly 6 percent: Thailand 4.8 percent, Malaysia 5.4 percent, and Indonesia around 7 percent. We have the worst systems in Asia, they have the best. Why? my wife asked.

There are a number of reasons, but two stand out: revenues and attitude. The government doesn’t get enough money; only 14 percent of GDP is paid in taxes versus 17 percent in Malaysia. Too many people cheat, they get rich at our expense, they should be ashamed of themselves (needless to say, they’re not). That’s part of this culture the President is trying to change.

The other is what I’ll call the “loser syndrome.” At the London Olympics, the Philippines’ brightest hope for a medal was Mark Anthony Barriga, a most promising boxer. He lost in the Round of 16. His team’s immediate reaction was to file a protest before the International Amateur Boxing Association, disputing the referee’s decision. In Australia, the loser congratulates the winner, warmly and genuinely, and try harder next time to be the winner.

When a government project is put up for bidding in the Philippines, the loser doesn’t accept his fate, learn how the winner won, and then make every (honest) effort to win next time. He challenges the winner and government in court for supposed anomalies in the bid. The project is delayed. No wonder nothing gets done.

Then we have a namby-pamby government (all of them) that doesn’t have the balls to do what the Constitution mandates: take over land needed for a national project. The Constitution gives the government power of eminent domain. It can acquire the necessary right-of-way. As I’ve argued before, what it should do is give double the market value (independently appraised). It will be cheap compared to the cost of the current years of delay. And who will refuse? They can have my house tomorrow—today, if they want to rush it. As to squatters, it’s just (and “just” is the correct word) a matter of compassionately relocating them. There’s plenty of land available, there just isn’t plenty of political will.

The cost of not-built infrastructure is incalculable: nonproductive time spent in traffic, wasted fuel, cost of delayed goods shipment, loss of tourists (getting there is too difficult, etc.).

All of this has been talked about, and promised. None of it gets DONE. I’m convinced that when a government official promises something will be done, he considers it as having been done. I was most impressed when Secretary Cesar Purisima promised me a document the other day, and it arrived two hours later. The late Secretary Jesse Robredo was like that, too. Twice, things I requested action on got done. While I’m in a praise mode, Secretary Rene Almendras also came through on promised action. But these are the exceptions. Too often it’s a land of promise, in the wrong way.

We need action now. Under the proposed 2013 budget, some P410 billion will be set aside for infrastructure projects and capital outlay. The funds will be used to continue the full paving of arterial/secondary roads and bridges; preserve the existing road network; construct and rehabilitate access roads to tourist spots; and construct and rehabilitate 15 airports and nine seaports and wharves. If these are accomplished, we’ll definitely see dramatic changes. But will these promises turn into reality or, as before, gather dust on a desk of promises?

The much-vaunted Public-Private Partnership program will help solve the funding problem, but it will get mired down in litigation and right-of-way takeovers if change is not made. Eight PPP projects were promised this year. It is now Oct. 11 and only three have been put on the auction block: PPP for Schools, LRT-1 South Extension, and Naia Expressway Phase 2 (may go up to four if the invitation for the Modernization of the Philippine Orthopedic Center is published). Of these, only the PPP for Schools has been awarded; the two others are still in the prequalification phase. Can Cosette Canilao, a most effective lady, get through the bureaucratic jungle, and the determined blockages by some, to get the others signed into beginning?

Or will words conquer action again?

Sam Miguel
10-15-2012, 11:45 AM
‘Daang matuwid’ strategy scrutinized

By Amando Doronila

Philippine Daily Inquirer

1:42 am | Monday, October 15th, 2012

(First of two parts)

CANBERRA—The Aquino administration’s primary thrust in eradicating corruption through its matuwid na daan (straight path) strategy came under rigorous academic scrutiny at an international forum of Philippine specialists at Australian National University (ANU) in Canberra.

A paper presented by Desiree Desierto, an assistant professor of the University of the Philippines’ School of Economics, demonstrated that the straight path is not always the shortest route to economic growth and sustained economic development.

Desierto presented the lead paper, titled “Reforming Institutions and Building Trust to Achieve Sustained Economic Development,” at the 2012 Philippines Update conference at ANU School of International, Political and Strategic Studies, headed by Prof. Paul Hutchcroft, author of several books on the Philippines.

The forum reviewed the first 26 months of the Aquino presidency in the frame of the theme: “Moving Forward but for How Long?”

The paper, presented on Friday, made a critique of the contradictions between the strategy of what is sometimes spelled out by another slogan, “Kung walang corrupt, walang mahirap (If there’s no corruption, there’s no poor),” and producing sustained economic growth.

Critical juncture

Summing up the theme of her paper, Desierto wrote: “The Philippines may … finally be on the cusp of what other scholars call ‘critical juncture’ that can push its trajectory toward the development of more ‘inclusive’ institutions, enabling continued increases in productivity and sustaining economic growth.”

However, she argued that “focusing solely on anticorruption for its own sake may also undermine lasting institutional reform, if property rights, credibility and stability are weakened in the course of enforcing against anomalous transactions. What may be an optimal strategy is to treat anticorruption as part of a larger framework of building trust in society.”

The forum also centered on “Peace Prospects in Mindanao” and “Political Reforms.”

Less than spectacular

The Desierto paper started with an overview of the Philippine economy in the last two decades, painting a less than spectacular performance highlighted by, among other things, the fact that the Philippines recently posed an “impressive” 6.4-percent growth in the first quarter of 2012, up from 4.9 percent in the same period last year.

The economy has experienced a surge in merchandise exports and “now appears on its way toward the first investment boom since the 1997 Asian financial crisis.”

Such a boom is “likely to come from large infrastructure projects and further development of the services, especially business process outsourcing,” the paper added.

Unlike other countries

The country has also weathered the recent economic crisis “with rising overseas remittances continuously fueling strong consumer demand.”

The paper added: “At the same time, however, most of the growth has come from the service sector, while growth in agriculture and industry have decreased. Investments in the form of public-private partnership (PPPs) and investments in special trade zones … have slowed down. Net foreign investments have gone up, but the capital and financial accounts are down despite the opportunities from the global downturn and massive capital flight from abroad and the country’s improvement in credit (S&P) ratings.”

Unlike the experience of many Asian countries, the paper said, “economic growth has not been export-driven, largely fueled by domestic consumption,” which is a technocratic variation of Napoleon Bonaparte’s battlefield maxim that an army “runs on its stomach.”

In fact, between 1990 and 2010, net exports have mostly been negative, the paper said. “Hence, capital formation has not been a priority—while the share of gross domestic product (GDP) growth even grew from 73.8 percent in 1990 to 79 percent in 2010, the share of net capital formation dropped from 24 percent (in) 1990 to 18 percent in 2010.”

OFW remittances

“Strong consumption demand has been maintained even after the 1997 Asian financial crisis and even the more recent global crisis, mainly because of sizeable and sustained remittances from overseas Filipino workers, which have propped up gross national product (GNP) over gross domestic product (GDP),” the paper said.

“Such remittances have helped increase national savings to more than 30 percent of GDP since 1999, (with) remittances themselves contributing to over 10 percent of GDP.

“It thus appears that the Philippines has not taken full advantage of this low-lying fruit from its labor export. While in 2010 it received the fourth largest foreign remittances at $21.3 billion (following India, China and Mexico), investments have not grown and exports have been left behind.

“Not surprisingly, then, the manufacturing industry and industrial production (have) remained low, compared with services, which have been expanding in the last decade due to the business process outsourcing (BPO) sector that has been growing over 20 percent each year. There is no evidence that OFW (overseas Filipino workers) remittances are used by recipients to invest in micro-enterprises, unlike in other countries.”

Global uncertainty

Desierto cited a recent study by EA Tan (2012) casting doubt on the resiliency of remittances to global downturns and arguing that, while the global recession had so far had a minor impact on remittances, “the ongoing uncertainty in the United States and Europe might yet eventually decrease demand for OFWs.”

This factor is likely to affect political and social stability in the Philippines.

The Desierto paper quickly shifted focus to the section that takes aim at the pursuit of the Aquino administration of its “inclusive growth” strategy and the nexus between it and the anticorruption reform efforts. (To be continued: The next part examines the downsides of this piggyback strategy of good governance.)

Sam Miguel
10-15-2012, 11:47 AM
Recto’s shell game

Philippine Daily Inquirer

12:27 am | Monday, October 15th, 2012

The watered-down sin tax bill Senator Ralph Recto revealed last week did not only propose a revenue goal on the low end of expectations; it represented a new low, period. Bandying fancy terms like “equilibrium,” Recto, the chair of the Senate committee on ways and means, deceived both the administration he is allied with and the people he is supposed to serve with a rationalization that only the tobacco companies could love.

We can get a sharper sense of Recto’s deceptiveness by studying his well-written, even witty, sponsorship speech.

He begins with an unexpected and—on further reflection—even astonishing claim: “To every overture of a new tax, [the Senate’s] reply has never been of ratification but of restraint. The Senate’s role has always been to temper, not top, executive proposals.” He goes on to make the assumption behind this supposed role explicit: “while paying taxes may be the first duty of citizenship, ordering more of it should be Congress’ last.”

This all sounds vaguely right, but in fact we are being deceived. Recto does not refer to the middle ground between ratification and restraint, between tempering and topping. Where did all that go? In truth, this startling assertion is meant only to frame the issue in a particular way; even the supposed principle he offers is meant to introduce the absurd idea, which he later explicitly makes, that taxation is equivalent to, is as dangerous as, belongs to the same last-resort category of, the government’s power to wage war. Nonsense.

Recto then coins a new word, “intaxication,” to refer to the “historical addiction” of all governments, “whether ruled by despots or democrats,” to depend on so-called sin taxes. “The reason for this is simple: a government in need of money would always prefer a taxable vice, like drinking, to a tax-exempt virtue like staying sober.”

Again this sounds vaguely right, but in fact we are being deceived, because all the political science behind the use of government powers such as taxation to meet reasonable policy goals has been thrown out the car window—like a used cigarette. Indeed, Recto himself referred to the link between tax power and policy agenda early in his speech: “The measure… poses a deterrent that will keep people from being sick and will generate revenues that will treat them when they get sick.” But after he pays the policy lip service, Recto disregards it.

Perhaps the most startling of all of Recto’s pronouncements is his populist idea that the tobacco and other companies are “just collecting agents of the government” and that therefore the proposed new sin taxes will not really impact on the companies but on the companies’ customers. He paints a poignant portrait: “The ones who will ultimately bear the additional tax burden are ordinary folks, like the worker who likes to cap his day with a cocktail of rum and [Coke] or the call center employee who grabs a bottle of ice-cold beer before he hits the road.”

Nice touch, but selective to the point of dishonesty. He could also have sketched in other ordinary folks, like the bus driver who smokes a pack a day because of the stress of work, or the security guard who acquired the habit to stay awake on the job, or the traveling salesman for whom nicotine has become a way of life—the very people who, together, incur, by the government’s own estimate, P144 billion a year in smoking-related health care costs.

What is Recto doing with his people-not-companies-will-pay line? First, he is using images from the less-controversial public vice of drinking to camouflage the social and healthcare costs of smoking. Second, he is rejecting the administration policy to discourage people from smoking—surely, given all the evidence of smoking-related cancer, a reasonable policy goal. Third, he is reframing the issue as though companies are stupid or inflexible or helpless enough to pass on every single additional cost to their customers.

Recto could not stop himself from offering an argument from the extreme: “[I]f sin products indeed carry a misery index so high that it can’t be assuaged by high revenues, then the solution is not to tax them severely but to ban them completely.” Nice try, but if Recto thinks a total ban on tobacco products is politically feasible, let him be the first to cast the first bill. In the meantime, in the real world where 17.3 million Filipinos are classified as smokers, we must make do with a “severe” tax. It is a challenge Recto has failed.

Sam Miguel
10-18-2012, 09:06 AM
Health, revenue, fairness (1)

By Peter Wallace

Philippine Daily Inquirer

9:08 pm | Wednesday, October 17th, 2012

On Dec. 21, Congress closes down for the year. That’s the day when the sin tax law must be voted upon. By Jan. 21, when Congress resumes, politicians will be consumed by thoughts of winning again. And raising taxes is not a way to win votes. So it must be now.

And it must be the administration or, at worst (note “at worst”), the House bill of Jun Abaya. The Senate bill that came out of the ways and means committee is totally unacceptable. It’s capitulation to the cigarette industry disguised in platitudes of “good intentions.” It’s nothing of the sort, and the President must step in now and make his sensible wishes very, very clear. It’s a matter, literally, of life and death, the unnecessary death of 90,000 Filipinos annually (or 240 daily). It’s not about the livelihood of a few farmers, but the life of Filipinos.

So much has been written, much of it passionate, some of it ever so clearly biased to suit vested interests (read Malaya sometime). Let me try and bring the whole thing into proper perspective by reviewing the issues raised to date, in as factual a manner as I can.

It all hangs around three things: health, government revenues, and fairness. For me, the most important by far is health. Smoking isn’t just “dangerous to your health,” it kills. There have been more than enough reputable, independent studies done to confirm this. And some of the more responsible governments in the region—such as those of Singapore, Malaysia, Thailand and Vietnam—have mandated the warning “SMOKING KILLS” on cigarette packs, even required gruesome pictures of the harm done. So how can any politician not want to stop this pernicious habit if he/she has the power to do so? Does he/she want Filipinos to die? Is that a way to reduce the population rather than pass the RH bill?

Governments can ban smoking, but none has because it’s seen, rightly, as an infringement on a citizen’s freedom to choose, an imposition on the free market that democracies are built upon. And prohibition never works, only leads to crime. So they do it another way: They raise prices. Marlboro sells for P32 a pack here. Look what it sells for elsewhere: Singapore (price of pack of 20s: $8.30, increase over Philippine price: 1,217 percent); Malaysia ($3.32/pack, 427 percent); Thailand ($2.36/pack, 275 percent); Brazil ($2.16/pack, 243 percent); India ($1.83/pack, 190 percent); Egypt ($1.53/pack, 143 percent); Indonesia ($1.24/pack, 97 percent); Cambodia ($1.19/pack, 89 percent); Vietnam ($0.96/pack, 52 percent); Philippines ($0.63/pack).

If the original Abaya bill is passed, Marlboro would cost P60, or $1.44, putting it still at the low end of the pack in our neighborhood. In the United States, Marlboro costs $15, in Australia $15.40—two of the more enlightened countries on looking after their people’s health. The Philippines is obviously out of step with the world; it is living on distorted taxes set 16 years ago (1996) with lower-than-inflation increases (up 88 percent versus 120 percent inflation).

Have high prices worked? Yes. In the United States when federal taxes were raised from 39 cents to $1.01 per pack to expand health care for children, 3 million people stopped smoking, yet the government generated $30 billion more in tax revenues. Smoking by young people, the ones we most want to stop, fell 10 percent to 13 percent and other smokers smoked less. Thailand has also been successful in raising revenues after adopting a unitary tax structure in 1990. The price of a cigarette pack in Thailand is now five times its price 20 years ago, and revenues have grown almost fourfold.

It worked, health was protected, government got more money.

The best thing is it deters the people we’d most like to save: the kids. Young people have limited money. So people smoke less or don’t smoke when prices are high. According to Department of Health estimates, smoking-related illnesses cost the economy some P177 billion last year in the form of healthcare costs, productivity losses, and premature deaths. That money could have been used to raise the abjectly low salaries of government employees by a fifth. Maybe they’d then not be so tempted to ask for “transaction fees.”

Recent articles say the DOH shouldn’t be given more money because it can’t spend all the money it’s already given. Have you ever heard such nonsense? Everyone agrees the Philippine health service has to be massively expanded and improved.

As to revenues, studies have conclusively shown that raising prices raises revenues even with the fall in volume. In our own study that measured the impact of the earlier proposed sin tax bills, results showed that additional revenues can reach as high as P68 billion. Even though volume falls, total revenue rises; the examples mentioned earlier confirm this.

The government is desperate to achieve an investment level credit rating, and rightly so. If that level is granted, the Philippines will enjoy lower rates when borrowing abroad and a signal will be sent to investors that this is a safe place to invest. We get jobs created. International credit rating agencies have been monitoring the progress of sin tax reforms, for the revenue-generating impact and message that this is a government making tough decisions and doing the right thing is necessary if they are to upgrade. Choosing the bill to pass will be a crucial decision.

The Department of Finance estimated an additional P60 billion into government coffers if the original Abaya bill (HB 5727) backed by the administration passed into law, or P30 billion in the case of the amended version that the House passed. Sen. Ralph Recto’s recommendation would have given a miserable P15 billion. It’s a relief this is now out the window. Let’s hope Sen. Frank Drilon moves quickly to issue a new, more responsible committee report. I feel sure he will. More next week

Sam Miguel
10-18-2012, 10:29 AM
Stocks shine as Thais, Filipinos nurture stability

By Pamela Sampson

Associated Press

7:57 am | Thursday, October 18th, 2012

BANGKOK —The two Asian nations with the region’s best-performing stock markets in the past year are unlikely havens for investors: Thailand and the Philippines. Both are better known for troubled politics and natural disasters, but have outshone higher-octane neighbors as new leaders nurture relative calm.

The PSE benchmark in the Philippines has soared 29 percent in the last 12 months and Thailand’s SET index is up a whopping 33 percent. By contrast, an index compiled by MSCI that tracks stocks in 12 Asian countries is up a ho-hum 2 percent. The Shanghai Composite Index in rising power China has sunk nearly 14 percent.

The Philippines, long regarded as an economic backwater blighted by a succession of deeply corrupt governments, has gained a measure of credibility due to the stability ushered in by the 2010 election of President Benigno Aquino III. Analysts credit him with boosting investor confidence by cracking down on corruption and living up to his promises of openness and good governance.

Thailand too has benefited from an improvement in its politics, although it’s unclear whether the current stability will be enduring. The country seemed to be veering toward civil war in 2010 when deadly street battles raged in Bangkok between the army and loyalists of Thaksin Shinawatra, the populist prime minister ousted in a 2006 coup.

Local stock brokers were resigned to the Thai market lagging its potential but the landslide election victory in 2011 of a pro-Thaksin party and the popularity of the country’s first female prime minister, Thaksin’s younger sister Yingluck, have boosted confidence. Lately, Thai stocks have also got a fillip from big-spending government policies that include efforts to overhaul flood defenses after a widespread inundation wrecked industry last year.

For both countries, the perception abroad that they have become a bit less risky has drawn renewed attention to their selling points.

One of the high notes for the Philippines is its newly minted status as a creditor nation, the first time in 40 years. Its foreign currency reserves total $80 billion, while foreign debt is about $65 billion. Theoretically, the country could pay off all its foreign obligations and still have $15 billion in cash left over, said Alfred Dy, head of Philippines research at CLSA Asia-Pacific Markets.

“It’s the opposite of the countries in the West, where there’s a lot of external debt,” Dy said.

The country’s accumulation of foreign exchange is driven by two sources: remittances, or money sent home to the Philippines by citizens who work abroad, and the dramatic growth in outsourcing.

The remittance trend began as early as the 1960s, when Filipino nurses traveled to the US to work the night shifts at hospitals—hours that American nurses didn’t want to work. Today, more than one in 10 Filipinos out of a population of 95 million lives abroad for work. They sent home $20 billion in 201—more than double the amount in 2004.

The fact that they are spread across the world—in the Middle East, in America, throughout Asia—also spreads the risk if a particular region goes into an economic slump.

Meanwhile, a boom in business outsourcing, enabled by the high level of English proficiency in the Philippines and its young workforce, racked up $14 billion in 2011—soaring from $3 billion that was earned just seven years ago. The Philippines now rivals India as a global outsourcing giant.

These trends have insulated the Philippine economy from the export-reliant doldrums being experienced elsewhere in Asia.

“We don’t rely as much as other countries on exports,” Dy said. “It’s really more of a service economy, it’s sending people abroad and getting contracts on business outsourcing, which makes the Philippines a bit unique.”

“Even if the global economy slows down, we think these two items will be relatively resilient compared to traditional exports,” he said.

In Thailand, the government’s drive to boost investment and growth after massive flooding decimated industry last year has helped to make it a favorite of stock investors.

Thailand’s economy shrank 10.7 percent in the last quarter of 2011 after the country’s worst flooding in more than half a century disrupted operations at more than 1,000 factories, bringing the country’s key automotive and computer parts industries close to a halt.

But ever-resilient Thailand is bouncing back. The Asian Development Bank predicts Southeast Asia’s second-biggest economy will grow 5.2 percent this year and 5 percent in 2013.

Investors view positively measures Thailand has taken to increase domestic consumption, such as raising the daily minimum wage to 300 baht ($10) and offering rebates to first-time car buyers.

“It’s enabled households to have more disposable income and spend more,” said Frederick Gibson, associate economist at Moody’s Analytics. “I think the market has taken that as a positive sign, that households will have the ability to spend and that hopefully will have a positive impact on growth.”

Thailand’s public debt load as a percent of the economy—relatively low at 40 percent—means the government has the leeway to undertake expansionary fiscal policies, such as corporate tax cuts and other measures, said economist Eugene Leow of DBS Bank Ltd. in Singapore.

The country also has mapped out major infrastructure projects, including flood prevention measures, in the next few years.

“There are a lot of projects in the pipeline,” Leow said. “All these projects will cushion any slowdown.”

So of the two stock markets, which might be the better bet for investors wanting to take the plunge into Southeast Asian equities?

Herald van der Linde, head of equity strategy for Asia Pacific at HSBC, said he believes the Philippines stock market has become one of the most expensive in the world.

Van der Linde especially likes Thai banks since demand for financial services is growing fast. Like elsewhere in Asia, Thais have begun to invest in their own local markets and investment products, breaking from the traditional way of stashing wealth into houses and land, van der Linde said.

“Thailand, coming from a low base, is not that expensive yet. So if I had to put my money somewhere, I would put it in Thailand,” he said.

Sam Miguel
10-18-2012, 10:31 AM
Pangilinan eyes investments in Vietnam

3-day mission seeks ventures in toll road, water

By Doris C. Dumlao

Philippine Daily Inquirer

12:37 am | Thursday, October 18th, 2012

Businessman Manuel V. Pangilinan is on a three-day business mission to Vietnam to scout for investment opportunities, particularly on toll road and water services.

Inquirer sources said Pangilinan flew to Ho Chi Minh with a high-powered team to join a big group of Filipino businessmen looking for expansion opportunities in the Southeast Asian neighbor.

Apart from toll road and water services, sources close to Pangilinan said the Filipino chief executive of First Pacific Co. Ltd. was also looking for opportunities in mining, hospitals, power, media, food and agribusiness in Vietnam.

Pangilinan met with the Philippine Business Group Vietnam (PBGV) on Tuesday to discuss investment opportunities in a forum co-organized by First Metro Investment Corp., the sources said. PBGV is a business association that serves as a voice of Philippine businesses in Vietnam.

Joining Pangilinan in the three-day Vietnam trip that ended Wednesday were Metro Pacific Investments Corp. president Jose Ma. Lim, MPIC chief finance officer David Nicol, Philippine Long Distance Telephone Co. vice president Rafael Bejar, Metro Pacific Tollways Corp. president Ramon Fernandez, Manila North Tollways Corp. president Rodrigo Franco, Maynilad Water Services president Victorico Vargas and Maynilad senior vice president Patrick Gregorio.

As part of his itinerary, Pangilinan met over dinner Le Hoang Quan, chair of the Ho Chi Minh City people’s committee, which acts as the executive arm of the provincial government.

Pangilinan was expected to relay First Pacific’s investment philosophy and market presence in the region. The sources said the growing demand for basic services in Vietnam prompted First Pacific to look closely at developing infrastructure partnerships there, particularly in toll roads and water services.

According to the PBGV website, the first Philippine company to set up shop in Vietnam was Unilab in 1990. Among PBGV member companies are United Pharma (Vietnam) Inc., San Miguel Brewery Vietnam Inc., San Miguel Phu Tho Packaging Co. Ltd., San Miguel Yamamura Haiphone Glass Co. Ltd., Univeral Robina Corp., San Miguel (Vietnam) Co., Jollibee Foods Corp., Jollibee Foods Corp., Splash International and Century Food group.

The Ayala group has also entered the Vietnamese market with the acquisition of a significant minority interest in a leading infrastructure company and a bulk water supply company both based in Ho Chi Minh City. Ayala Corp. and subsidiary Manila Water Co. earlier announced a deal to buy a 10-percent stake in Ho Chi Minh City Infrastructure Investment Joint Stock Co. (CII) and a 49-percent stake in Kenh Dong Water Supply Joint Stock Co. (Kenh Dong). In addition to water infrastructure, CII holds toll road concession agreements such as the 15.7-kilometer expansion of the existing Ha Noi Highway which connects the northeastern part of Ho Chi Minh City to Bien Hoa, an industrial center located in the southern part of Vietnam.

Sam Miguel
10-23-2012, 08:35 AM
Preserve investor trust

Philippine Daily Inquirer

7:38 pm | Monday, October 22nd, 2012

Money goes where it grows. This is a fundamental tenet among investors, and the move of Manuel V. Pangilinan to look for investment opportunities outside the Philippines hews to it. It’s interesting that the decision of the high-profile businessman and sports patron to lead a high-powered team on a three-day visit to Vietnam last week came at a time when he is experiencing a series of unfortunate events, whether involving business or not, at home.

On the business front, MVP’s latest setback was the breakdown in talks to acquire GMA Network, a P52-billion deal that could have fit well into the convergence strategy of his telecom units PLDT and Smart/Piltel/Sun Cellular. Then there was the matter of the tailings leak from Philex Mining Corp.’s Padcal mine in Benguet, which has finally been plugged. There is likewise the issue on the connector road project to link the North and South Expressways. MVP’s group had submitted an unsolicited proposal to the government to undertake the project, but then came another connector road proposal from his chief rival in business, San Miguel Corp.’s head honcho Ramon S. Ang. To avoid accusations of favoring one over the other, President Aquino instructed all concerned departments to allow the two connector road projects to proceed.

Earlier, MVP suffered a setback in the Supreme Court, which decided that PLDT had exceeded the constitutional limit on foreign ownership. The high court only recently ruled with finality on the matter, rejecting the motion for reconsideration submitted by the MVP group. PLDT now has to issue more voting preferred shares to bring down the ownership of foreigners in the telecom giant to the constitutional limit of 40 percent.

Outside of business, MVP also had a falling out with Ateneo de Manila University, which he had supported financially through the years. In a statement, he cited his differences with his alma mater on two critical issues—the controversial Reproductive Health bill and the equally controversial mining industry.

The Metro Rail Transit 3 project is quite another business issue that has saddened the MVP group. Through Metro Pacific Investments Corp., the MVP group offered more than $1 billion to the government to acquire and expand the mass transport system. After months of studying the matter and saying it wanted transparency in all its undertakings, the Aquino administration instead approved early last month a bidding for the P8.6-billion MRT 3 capacity-expansion project.

Perhaps the biggest issue that posed a big influence on MVP’s desire to look elsewhere for business growth involves the SCTEx. In November 2010, his Manila North Tollways Corp. (MNTC) won the 25-year contract to operate and maintain the 94-kilometer Subic-Clark-Tarlac Expressway, subject to the approval of the Office of the President. But such an approval never came as Mr. Aquino’s economic officials said the government needed to gain more money from the SCTEx project. Subsequent negotiations prompted the MVP group to submit a revised proposal.

Last week, the President said he had not yet signed the SCTEx concession agreement with MNTC because the government was still reviewing the terms. But as he announced this, some of his officials indicated that Malacañang would soon issue an order to rebid the SCTEx contract as the revised MNTC offer was supposedly still insufficient to address the government’s desire to get more out of the Philippines’ longest expressway.

The MVP group, in effect, stands to lose the SCTEx toll project after going through two administrations and two rounds of negotiations. Imagine its disappointment at this changing of the rules. An official from the MVP group had warned that if Malacañang would indeed order a rebidding, the transaction would not sit well with the group’s creditors. A rebidding of SCTEx will also be seen as an opportunity for MVP’s main business rival—San Miguel’s Ang—to snatch the SCTEx contract.

It is certainly the duty of the government to maximize the benefits to the country of any project that it hands over to the private sector. This, however, should not be at the expense of losing the trust and confidence of investors in the regulatory framework of the Philippine economy.

Sam Miguel
10-23-2012, 08:36 AM
What is driving the economy?

By Cielito F. Habito

Philippine Daily Inquirer

7:34 pm | Monday, October 22nd, 2012

It is remarkable that the Philippine economy has been showing dynamism this year so far, even with a sluggish world economy. This implies that the energy driving our economic growth lately is coming from within. Indeed it is internal demand—that is, we Filipinos ourselves purchasing our goods and services—that has provided the current impetus for heightened economic activity, thereby providing increased jobs and incomes for Filipinos. I will explain some of the evidence on this below.

In basic economics, we are taught that the products and services produced in the economy are bought by four major sectors: private consumers for their consumption needs; businesses and firms for their real investment requirements such as structures, equipment and materials; government for public infrastructure and services, and for its own consumption requirements like office supplies and equipment; and foreigners who buy our products and services as we export them abroad, or buy them here as tourists. Growth in spending by any or all of these would propel growth in the economy as a whole, as increased demand for goods and services would certainly draw a response of greater production on the part of the economy’s producers.

What’s more, any rise in spending by any of these four sectors of the economy provokes a multiplier effect that leads to even more growth in economic activity. This is because any new spending leads to a chain reaction of new incomes and consequent new spending. If a company spends P100 million on a new factory, this turns into P100 million in total incomes received by contractors, engineers, construction workers, suppliers of equipment and construction materials and others. But that’s not the end of it. Those various people now have more money to spend or save as they choose. If people save P20 out of every additional P100 income they receive on the average, then the original P100 million of investment spending turns into a new round of P80 million in spending on various things such as food, clothing, appliances, etc. that those construction people normally spend their incomes on. And since anyone’s spending turns into someone else’s income, that second-round P80 million in incomes turns into a third round of spending amounting to P64 million. This becomes yet another round of incomes spurring yet another round of spending, and so on down the line.

Ultimately, the P100 million originally spent by the investing firm will actually create five times as much (P500 million) total production and incomes. The mathematically inclined can figure out that if the saving rate is 20 percent or 0.2, the multiplier works out to be one divided by that, or five. So if people tend to save less, say 10 percent, every spending gets multiplied by even more (that is, 10) and generates 10 times more production and incomes in the economy. And even more so if those savings are kept within the country, so that the banks receiving them could further put that money to work within our domestic economy, say by lending the savings to a company that would invest it in a new factory—thereby repeating the same story above.

Official data suggest that there is indeed more domestic spending by consumers, investors and government lately, even as foreign purchases of our products (especially in Europe) had slowed down due to their own homegrown difficulties. In particular, government spending for both its consumption requirements and for public construction has dramatically swung around from a negative performance last year. In the first half of the year, government consumption spending grew 12.3 percent, a dramatic turnaround against the 4.6-percent drop in the same period last year. Government construction spending jumped 55.4 percent after falling 51.1 percent last year. The government, stung by criticisms that it directly dragged down the economy last year with reduced spending as it worked to plug corruption loopholes, has now come back with a vengeance. And this time, having done what it did last year, it has greater confidence that the money it spends goes (mostly?) to the intended purposes, rather than be siphoned off to bank accounts abroad and killing the usual multiplier effect. (Remember the question on why a neighboring country that appears to have as much corruption as we do manages to have its economy grow faster than ours? The explanation offered has been that their corrupt officials keep the money at home, while ours stash the money abroad.)

The data show that firms’ investment spending on durable equipment, breeding stock and orchard development and on intellectual property products have likewise sped up significantly from last year’s pace. Private consumption growth is similarly brisk at 5.7 percent. Interestingly, among the strongest sources of growth in people’s spending are communication (with our continuing fascination for ever more sophisticated smart phones), restaurants and hotels, and recreation and culture. These suggest to me that domestic tourism has been a particularly important driver of our growth. One only needs to experience the now common flight delays and overcrowded airports to be convinced that Filipinos are traveling a lot more—and perking up the economy in the process.

The good news is that spending by foreigners on our products—i.e., our exports—has lately resumed growth after contracting last year. Even then, the latest figures suggest that the export turnaround may be tentative. But I wouldn’t lose sleep over this one. After all, our economy is now speeding along on its own steam, through the Filipinos’ own spending, multiplier effect and all.

Sam Miguel
10-23-2012, 08:39 AM
Economic crisis shakes old paradigms

By Walden Bello

2:01 am | Monday, October 22nd, 2012

The world will soon enter the 6th Year of the Great Recession, and there is no end in sight. In the United States, stagnation continues to reign and some 23 million Americans remain out of work, are involuntarily employed part time, or have simply dropped out of the work force in frustration. This is a condition that now threatens to result in President Barack Obama’s replacement by a Republican candidate whose program, if implemented, is likely to worsen the crisis.

In Europe, draconian austerity programs now blanket the economic landscape, threatening to impact on the continent’s few remaining healthy economies, like Germany’s. The third quarter was reported to be German industry’s worst in the last three years owing to plunging exports to the austerity-ridden countries. Many analysts had been warning that the German government’s insistence on imposing barebones budgets on its neighbors to ensure German banks got repaid would eventually have a blowback effect on the European Union’s largest economy.

The BRICS sputter

2012 marked China and East Asia’s being drawn, definitively, into the global maelstrom, along with India and Brazil. In late 2008 and 2009, the recession in Europe and the US brought down growth rates in East Asia, but this was only for about a year. By 2010, East Asia and the big “newly emerging economies” known as the BRICS (Brazil, Russia, India, China, South Africa) appeared to have recovered. A big reason was China’s $585 billion stimulus program—the world’s largest relative to the size of the economy–which not only pulled the country but also its neighbors in East Asia from recession.

The BRICS were regarded as bright spots in the global economy, exhibiting resiliency and growth even as the North stagnated. Indeed, to economists like Nobel laureate Michael Spence, “With growth returning to pre-2008 levels, the breakout performance of China, India, and Brazil are important engines of expansion for today’s global economy.” In a decade, the share of global GDP by the emerging economies would pass the 50 percent mark, he predicted. Much of this growth would stem from “endogenous domestic-growth drivers in emerging economies, anchored by an expanding middle class.” Moreover, as trade among the BRICS increased, the future of emerging economies is one of reduced dependence on industrial-country demand.”

Recent trends, however, appear to show that the idea that the fate of the BRICS had become decoupled from that of the US and Europe was an illusion. The BRICS’ economies have slowed down, with India’s growth rate this year falling to its level in the early 2000’s. Brazil’s growth on 2011 was under three per cent—lower, as the Economist noted, than sickly Japan’s. China’s second-quarter growth this year plunged to 7.5 per cent, its slowest pace in three years. The main reason for the great BRICS slowdown appears to be the continued great dependence of these economies on Northern markets and their inability to institutionalize domestic demand as the key engine of the economy.

Neoliberalism versus Keynesianism

With the eruption of the financial crisis in 2008, two approaches from the establishment have competed to address the crisis.

In the immediate aftermath of the crisis, the neoliberal University of Chicago Nobel laureate Robert Lucas said, “Every economist is a Keynesian in the foxhole.” By 2010, however, the neoliberals had left the foxhole. But their solution was no solution inasmuch it did not address the issue of ending unemployment and restarting growth. From the neoliberal view, a deepening of the crisis was, in fact, part of the natural order of things, whereby the “excesses” and distortions created by government intervention were wrung out of the system.

What the neoliberals managed to do was to change the narrative or the discourse, playing on the American middle class’ traditional distrust of government, deficit spending, and taxes. Here they were supported by the propaganda machinery of Wall Street, which sought to move the public focus away from financial reform. Instead of unemployment and stagnation in the short and medium term, the “real problem” they said was the debt and the deficit. Massive deficits financed by debt, they warned would ensure a future of debt slavery for coming generations.

Whether in the United States or in Europe, this road offers nothing to the people but more unemployment and stagnation. But with the economic crisis creating an atmosphere of desperation and confusion, the right wing, with its determined attack on government intervention, often succeeded in presenting government rather than unregulated capital as the problem. This was certainly the case in much of Europe in the last three years. Despite initial expectations that the results of the French elections last May would initiate a pro-spending wave, the Socialists recently unveiled an austerity program.

The Keynesians sought to step in the driver’s seat with the eruption of the crisis in 2009. Keynesians like Paul Krugman saw unemployment as the key problem, and it was to be banished by massive deficit spending, low interest rates, and loose money policies. The high point of Keynesianism came in 2009, when President Obama, supported by a Democratic Party majority in both the Senate and the House of Representatives, passed a $787 billion stimulus program, while internationally the G20, which brought together the world’s biggest economies, endorsed deficit spending to speed up global recovery.

Obama’s cautiousness, however, proved to be his undoing. To appease the right, the administration proposed a smaller stimulus than what some Keynesians, such as the head of the Council of Economic Advisers, Christina Romer, saw was necessary to ignite a sustained recovery, which she estimated at $1.8 trillion. The $787 stimulus compromise created what would become Obama’s “Bridge too Far”: it was enough to prevent the situation from getting worse but not enough to trigger a healthy recovery. As Krugman has pointed out, this half-measure discredited Keynesianism and prompted a vigorous right-wing offensive that has forced Obama to effectively give the right-wing agenda–sharply reducing the debt and the deficit–a prominent place in his economic program for reelection.

Disaffection with Obama was further stoked by the failure of serious financial reform, which had been promised after the huge bank bailout “to save the economy,” as its promoters had put it. The Dodd-Frank reform did not have the minimum conditions for a reform with real teeth: the banning of derivatives, a Glass-Steagall provision preventing commercial banks from doubling as investment banks; the imposition of a financial transactions tax or Tobin tax; and a strong lid on executive pay, bonuses, and stock options. As the New York Times saw it, “[N]early four years after the crash, and nearly two years since the passage of the Dodd-Frank law, the multitrillion-dollar derivatives market is still dominated by a handful of big banks, and regulation is a slow work in progress.”

Sam Miguel
10-23-2012, 08:41 AM
^ (Continued)

Beyond Keynesianism

Bur as the neoliberals and the Keynesians battle it out, there are those that say that the intersection of the economic crisis and the ecological crisis means that not only neoliberalism but also Keynesianism, with its focus on restoring rapid and high economic growth, no longer suffices as a viable response. Climate change, for one, is changing the terms of the discussion around recovery and growth. This transformation has been speeded up by the urgent statements even of establishment figures, such as World Bank President Jim Yong Kim who recently said that the facts about climate change are “far more frightening than what we think they are.”

Progressive environmentalists are steadily making inroads in terms of convincing people that the crisis should be located in the much broader context of a growth-oriented, fossil-fuel addicted mode of production. To analysts like Richard Heinberg, the intersection of the financial collapse, economic stagnation, global warming, the steady depletion of fossil fuel reserves, and agriculture reaching its limits is a fatal one. It represents a far more profound crisis than a temporary setback on the road to growth. It portends not simply the end of a paradigm of global growth driven by the demand of the center economies. It means the “end of growth” as we knew it. It is, in short, the Malthusian trap, though Heinberg understandably avoids using the term.

The gyrations of the finance economy, he says, do not simply stem from the dynamics of capital accumulation but from an all-encompassing ecological disequilibrium:

Perhaps the meteoric rise of the finance economy in the past couple of decades resulted from semi-conscious strategy on the part of society’s managerial elites to leverage the last possible increments of growth from a physical, resourced based economy that was nearing its capacity. In any case, the implications of the current economic crisis cannot be captured by unemployment statistics and real estate prices. Attempts to restart growth will inevitably collide with natural limits that simply don’t respond to stimulus packages or bailouts. … Burgeoning environmental problems require rapidly increasing amounts of efforts to fix them. In addition to facing limits on the amount of debt that can be accumulated in order to keep those problems at bay, we also face limits to the amounts of energy and materials we can devote to these purposes. Until now the dynamism of growth has enabled us to stay ahead of accumulating environmental costs. As growth ends, the environmental bills for the last two centuries of manic expansion may come due just as our bank account empties.

The next few decades, Heinberg asserts, will be marked by a transition from expansion to contraction, a process “characterized by an overall contraction of society until we are living within Earth’s replenishable budget of renewable resources, while continually recycling most of the minerals and metals we continue to use.” The future points in the direction of decentralized eco-communities marked by more manageable participatory decision-making, powered by low-energy systems, reliant on cooperatives for production and other economic functions, dependent on organic farming for food, and using non-debt-based currencies for exchange.

Heinberg’s vision of the future is one that has similarities to those laid out in other related paradigms such as Degrowth, Deglobalization, and Food Sovereignty. Such approaches still have to gain traction beyond activist and epistemic communities but as the global economy sinks deeper into stagnation and the climate nightmare takes holds, these paradigms may increasingly inspire movements that will make them a reality. Out of sheer necessity.

Sam Miguel
10-25-2012, 08:26 AM
Budget gap widens to P106B in 9 months

Gov’t spending remains lower than planned

By Ronnel W. Domingo

Philippine Daily Inquirer

1:14 am | Thursday, October 25th, 2012

The national government’s budget position went back to a deficit of P34.8 billion in September as revenues barely increased while expenses showed a double-digit jump.

Documents from the Bureau of the Treasury showed that the deficit in September brought the shortfall for the first nine months of the year to P106.1 billion, which was just 58 percent of the P183.3 billion that the government intended to spend beyond what it had for the period.

However, the nine-month deficit was twice the P53 billion that was recorded in the same period of 2011.

January-September spending reached P1.22 trillion, 9.5 percent short of the program for the first three quarters but 14.5 percent higher year on year.

Budget Secretary Florencio B. Abad on Wednesday said that while spending was still lower than planned, the shortfall was “significantly narrower” than the 16.1 percent recorded in the same period last year.

“With the higher expenditure growth due to improving absorptive capacities of departments and agencies, we are again confident that government spending will contribute significantly to economic growth in the third quarter,” Abad said.

Even then, he said there was much room for improvement in the capacity of agencies to implement programs and projects and to disburse released funds.

Nine-month revenues reached P1.12 trillion, which was 95.6 percent of the goal for the period but 10 percent higher than year-ago actual take.

In September alone, expenditures reached P140.2 billion, 14.1 percent higher than the P122.8 billion spent in the same month last year. Revenues reached P105.3 billion, an increase of 0.9 percent from P104.3 billion a year ago.

Finance Secretary Cesar V. Purisima said both major revenue agencies—the Bureau of Internal Revenue and Bureau of Customs—have consistently exceeded the previous year’s collections.

“Our aggressive efforts to improve tax compliance have consistently generated fiscal space to provide funding for the Aquino administration’s spending priorities,” Purisima said.

Sam Miguel
10-25-2012, 08:27 AM
PH ranking in ‘ease of doing business’ slips

Asean countries show better ratings

By Michelle V. Remo

Philippine Daily Inquirer

2:20 am | Wednesday, October 24th, 2012

While many positive developments have been happening to the country and the economy since the Aquino administration took over in 2010, the area of how easy—or how difficult—it is to do business in the Philippines deserves more government attention.

The Philippines slipped two notches in the global rankings of the ease in doing business—to 138th from 136th—due to the absence of significant reforms to speed up dealings of enterprises with various government agencies.

The “Doing Business 2013” report, published by the World Bank and its investment arm, International Finance Corp., and released Tuesday, showed that the Philippines registered slightly poorer rankings in almost all categories related to the ease in doing business in the period covering June 2011 to June 2012 compared with those recorded in the previous one-year period.

The report said the Philippines’ performance essentially was unchanged, explaining that the two-notch fall was due to the entry of two more countries in the global rankings. There were 185 countries covered in the latest survey following the entry of Barbados and Malta.

“While the Philippines continues to improve its macroeconomic environment and sets pace-setting growth in gross domestic product, it lags in the implementation of regulatory reforms that would make it easier for local entrepreneurs to conduct their businesses,” the report said.

Except for Laos, which ranked 163rd, all other Southeast Asian countries beat the Philippines in the ease in doing business rankings.

Singapore again grabbed the top spot, being recognized by the World Bank and IFC as having the most favorable environment in the world in terms of helping enterprises do business. Malaysia ranked 12th; Vietnam, 99th; Brunei Darussalam, 79th; Indonesia, 128th, and Cambodia, 133rd.

Countries were ranked according to various factors or categories affecting the ease in doing business. For instance, the “starting business” category indicated how long it took for an enterprise to start operations, how many procedures it had to undergo and how many documentary requirements it had to accomplish.

The following were the categories where the Philippines registered a drop in rankings: starting a business (from 158th to 161st), getting electricity (from 53rd to 57th), registering property (from 120th to 122nd), getting credit (from 127th to 129th), protecting investors (from 124th to 128th), paying taxes (from 136th to 143rd), and enforcing contracts (from 109th to 111th).

Sam Miguel
10-25-2012, 08:29 AM
Country’s first mine town should have been richest in PH

By Vincent Cabreza

Inquirer Northern Luzon

10:43 pm | Saturday, October 20th, 2012

BAGUIO CITY—The Benguet town of Itogon will not strike most people as the richest in the country. Its paved, narrow roads lead to a quiet town center that is bereft of establishments and modern buildings expected from a wealthy community.

But Itogon Mayor Oscar Camantiles calls his home the “Golden Town,” given its legacy as a mining enclave that had obsessed Spanish and American colonizers.

The late historian William Henry Scott opens his book, “The Discovery of the Igorots,” with this detail: “Igorot gold fields [were] regularly referred to in 16th century accounts as the wealthiest in the archipelago.”

At the start of the 20th century, Itogon became the birthplace of the mining industry. The very first mining firm, Benguet Corp., was established in Itogon in 1903 by Nelson Peterson and Harry Clyde under the name, Benguet Consolidated Mining Co. (BCMC). It was followed by mines that made up the industry’s pioneer companies.

Baguio City has credited much of its growth to these mining enterprises, but Camantiles says Itogon alone can claim another title, as the “land of golden opportunities.”

Itogon is Benguet’s largest town, spanning 49,800 hectares and inhabited by 55,960 people as of the 2010 census.

Camantiles says the town remains the base of Benguet Corp.’s Antamok gold operations, the Itogon Suyoc Resources Inc. which recently partnered with IndoPhil, and the Atok Big Wedge Mining Co.

Philex Mining Corporation’s Padcal mine, which straddles Itogon and neighboring Tuba town, was the only mine to thrive during the mining slowdown in the 1990s.

Recently, however, the Itogon government has taken an aggressive stance towards its benefactors.

Town officials have been sending out collection notices to the mining firms for back taxes or to secure new revenues dictated by Itogon’s latest tax ordinance.

Gold and copper giant Philex, whose tailings dam accident on Aug. 1 has cost the company more than P1 billion in fines and damage compensations, also owes Itogon P1.6 billion in back taxes and penalties dating back to 1992.

This is because of a municipal mine tax (computed as two percent of the gross earnings of a mine operation) imposed by the Itogon tax code, Camantiles says.

Philex officials are contesting the local mine tax, describing it as double taxation in lieu of the excise taxes it already pays, says lawyer Eduardo Aratas, Philex legal officer in its Padcal operations.

Camantiles says his administration has been described as anti-mining for going after the mining firms, but he prefers the description “pragmatic.”

“Inevitably, minerals will be depleted,” he says.

Itogon, he says, must prepare for a future without mining or confront an economic nosedive.

Unlike other mining zones in the country, some of Itogon’s pioneer mining firms have reached the end of their lifespans. Padcal, for example, was due for decommissioning in 2011 until a profitable world metals trade extended its life until 2020.

Camantiles says the local government has been asking the mines to fulfill their obligations “so the new revenues can help us build a future in real estate development, tourism and farming.”

In a 2010 report, the Mines and Geosciences Bureau said mining’s economic contribution to the Cordillera amounted to P196.5 million in excise taxes and P513.02 million in national and local taxes, for mineral production in 2009 that was valued at P10.4 billion.

Itogon operates with a 2012 spending plan of P150 million, and Camantiles believes the town can raise that budget to P200 million by 2013 now that it has improved its mine tax system.

He says more than a century of mining affected farming in Itogon as a major trade, but three villages could be turned into the town’s commercial vegetable center using mine taxes while promoting its tourism spots.

But gold is still part of Itogon’s economy, Camantiles says.

A unique feature of mining in Itogon is that many of the first American mines own patents to their lands, and not lease arrangements that would revert to the government like other mining ventures, says Lomino Kaniteng, president of the Benguet Federation of Small Scale Miners Inc.

Camantiles says many of the mines will remain part of the landscape even after they end their operations. “I have asked them to provide us with decommissioning plans that will tell us what they plan to do with these lands,” he says.

Benguet Corp., he says, has proposed to build an economic zone for the town. Philex is developing a meat processing facility as part of its decommissioning plan and has developed its brand name, PX.

In his 2010 state of the municipality address, Camaniles said: “Since gold is our One Town One Product (OTOP), we shall enhance and promote it through the establishment and institutionalization of a livelihood project that shall make use of gold as raw material in the production of goods … such as jewelry making.”

He said it would be promoted through a festival, called “Balitok” (local term for gold), being planned by the town.

Sam Miguel
10-25-2012, 08:45 AM
Health, revenue, fairness

By Peter Wallace

Philippine Daily Inquirer

12:25 am | Thursday, October 25th, 2012

(Concluded from last week)

As to protecting farmers and workers in tobacco factories, do we care more about someone’s job than someone’s life? One would certainly hope not. But that’s what Philip Morris Fortune Tobacco Corp. (PMFTC) and the Philippine Tobacco Institute (PTI) are claiming. They consider jobs more important than life.

Despite that, the threat to jobs is nonexistent, anyway; it’s a distortion by vested interests. Take manufacturing first. Cigarette companies pay taxes based on 1996 prices (with a below-inflation increase) but make 2012 profits. Is it any wonder they are fighting so vociferously to maintain the status quo, or close to it? But they of course dissemble by using other arguments. For instance, PM has a plant in Batangas and claims workers will lose jobs as volume falls. But a third of that plant’s production is for export, and with PM’s international access, markets can easily be increased. So jobs don’t have to be lost, PM can just export more.

As to tobacco farmers, they used to earn P74-95/kilo for tobacco leaves, but after PM combined with Fortune Tobacco in 2010, the price fell to P68/kilo. Now PMFTC argues that prices were high prior to the merger only because there was a worldwide shortage of tobacco and an increase in costs of farm inputs. And when the market normalized, the decline in price was expected. But it certainly doesn’t look good, does it? It looks more like the action of a monopoly, doesn’t it?

The PTI claims that the tobacco industry employs 840,146 farmers (it later said that number is farmers plus dependents). As Winnie Monsod points out, given that tobacco farming covers 32,235 hectares, that would mean 26 farmers would share the P80,000 in annual revenues per hectare. That, of course, is absurd because that will just be about P3,000 for each farmer per year.

Government statistics say there are 54,000 tobacco farmers. If you assume the national average of four dependents in a family, that equates to 270,000 people (equal to three years of dead Filipinos). A far cry from what the PTI claims. Where did they get their number? Perhaps they’ll tell us.

Look at some numbers. A study done in 2006 by the Southeast Asia Tobacco Control Alliance among farmers in North Luzon showed that with enough resources and assistance from the government, they were willing to shift to other crops that yield higher returns than tobacco. The survey results showed that farmers of Virginia tobacco only earned P51,642/hectare. Meanwhile, those who planted bitter gourd and tomato earned P158,640/hectare and P116, 204/hectare, respectively.

The government will allot P4.7 billion (if the revised Abaya bill is passed) to supporting the farmers. This will be on top of the 15 percent of tax collection on locally manufactured Virginia-type cigarettes that go to cooperative, agro-industrial (postharvest, secondary processing) and infrastructure projects for farmers in tobacco-producing provinces (mandated by Republic Act 7171). Under RA 8240, provinces producing burley and native tobacco also get 15 percent of the incremental revenue collected from the excise tax on tobacco products depending on their level of tobacco leaf production. Thus, tobacco farmers will be well protected.

Then there’s the argument of fairness. Some quarters are saying that the Abaya bill favors imports over local production, that it threatens local production because the price of imported premium brands will almost be equal to local cigarettes, thus edging out local manufacturers from the market. I fail to see how. Are they saying local manufacturers produce an inferior product, so the customer must pay more to support them? That goes against the government’s primary policy—to create a level playing field, where tariffs are minimal, ideally nonexistent. And that is the trend. And anyway tariffs are the way to differentiate, not distortions in a tax law.

As it now stands, the law is so grossly distorted to favor a couple of local manufacturers it’s incredible it took this long to do something about it. If you were here in 1996, you pay one tax; if you come in later, you pay a much higher one. Marlboro pays a tax of P12, Lucky Strike (of British American Tobacco) pays P28.30 for an equivalent quality cigarette. Is that fair? And based on what? Purely the date at which you entered the market. If that’s not unfair discrimination, I don’t know what is.

The version released by Sen. Ralph Recto’s committee would have also imposed a new distortion as it pushed for three tiers instead of only two. This would have allowed many high-priced brands to move to the medium-price bracket. Thus, premium brands would have been taxed even lower than they are now. Is that a way to discourage smoking? Is that a way to raise revenues?

There’s another issue that should be raised: monopoly. The Constitution says: “The State shall regulate or prohibit monopolies when the public interest so requires. No combinations in restraint of grade or unfair competition shall be allowed.” Philip Morris joint-ventured with Fortune Tobacco to capture 94 percent of the market. If that’s not a monopoly, I don’t know what is. Why is it allowed? Why do those two companies violate what the Filipino people wanted when they voted their Constitution? They shouldn’t need a law to force them to act with a social conscience.

This is a law that must be passed, preferably in its original Abaya form alternatively as approved by the House. Only in that form will it save lives, raise revenues, and create a fair market.

My apologies for writing much of what I’ve written before. But this is far too important an issue and it’s now under threat by unscrupulous characters. The true situation must be repeated.

Sam Miguel
10-29-2012, 09:24 AM
New face of public service: DFA in malls

By Tarra Quismundo

Philippine Daily Inquirer

1:44 am | Sunday, October 28th, 2012

The Department of Foreign Affairs (DFA) is striving to change the face of public service.

From short tempers and forgers to migrant workers with the tightest deadlines, challenges are a daily fare for the staff and officials of the DFA’s passport center at SM Megamall, the largest mall-based consular office in the country.

But cool heads prevail at the office known as the DFA National Capital Region (NCR) East, one of the DFA’s frontline offices, which is sleek, clean, airy and well lighted.

“We tell the public that the government is trying its best to improve the service, so that we can be world-class. That’s why you have to give us a chance,” Merly Puruganan, DFA NCR East officer-in-charge, told the Inquirer.

“We just remain patient in dealing with them because we understand where they are coming from… My staff here, they are young people. Give them the chance. We cannot improve if we’re not given the chance,” she said.

30 mall centers in two years

In hopes of giving the public better access to government service, the DFA has embarked on a two-year program to open up to 30 mall-based passport centers across the country by 2014 through partnerships with major mall chains.

Since opening on separate dates in recent months, the DFA’s mall passport centers have already attracted a large clientele of applicants, decongesting the crammed main office in Pasay City.

The three Metro Manila passport centers alone absorb half of the regular daily volume of 5,000 passport applications at the main DFA Consular Office at Aseana Business Park, Ledda said.

The Aseana center caters to 2,500 applications a day, half its usual load, as the mall centers at SM Megamall and Robinsons Galleria in Ortigas, and SM City Manila already receive an average of 2,500 appointments a day, Ledda said.

Total Metro Manila applications account for roughly 40 percent of the daily passport application volume of 11,000 from across the country and in foreign posts.

Another 40 percent of the total are applications in provinces while appointments in Philippine embassies and consulates around the world account for 20 percent.

Roughly the same number of electronic passports are released every day, Ledda said, and there is no backlog even as passport printing remains centralized at the Bangko Sentral ng Pilipinas (BSP).

Service uniformity

Mall centers are open during business hours—from Monday to Saturday (10 a.m. to 8 p.m.)—and also release passports for half the day on Sundays.

“The idea is to bring services closer to the people… By also moving to the malls, we want uniformity of service in that the kind of service we provide in Metro Manila is also the same service we provide in Davao, for instance,” said DFA Assistant Secretary for Consular Affairs Jaime Victor Ledda.

Ten mall-based consular office have opened this year: In Baguio; San Fernando and Angeles City in Pampanga; Lipa City in Batangas; Cebu City; General Santos; Davao, and three in Metro Manila.

Ledda said the DFA is also planning to move its existing regional consular offices in the cities of Legazpi and Puerto Princesa into malls and open new mall branches in Dumaguete City, Ilocos Norte and a second one in Batangas.

Partner companies include SM Malls, Robinsons Malls, the Ayala and Gaisano groups, each with their own public-private partnership (PPP) terms, Ledda said.

“This PPP is a cooperation, hosting arrangement where they provide the space, we have a consultation on the layout, we inform them of the procedures we need and we share expenses. The uniformity we want is in the ease in the flow of people,” the official said.

“Generally, it results in savings on the maintenance and operating costs. It’s more cost-effective for the DFA,” said Ledda.

Not perfect

The system is not perfect though, officials admit, as there would be delays during times the machines at the BSP need maintenance or upgrading (passport applicant data from all DFA consular centers in the Philippines and around the world are electronically sent to the BSP).

“Now, people have a choice where to go. They will feel that public service is all within reach. They’re (mall centers) light, spacious, evokes a smooth flow of process and people,” Ledda said.

“That adds to the credibility and integrity to that standard of service we want to give the people,” he said.

At the 1,300-sq. m. Megamall branch alone, almost 1,000 people from around Metro Manila and even provinces like Tarlac, Pangasinan and Laguna show up every day to file applications.

One-stop shop

Envisioned to be a one-stop shop, the Megamall passport center offers notarial and courier services for applicants and also operates a separate authentication center for documents required overseas.

“When you say Megamall, everybody knows where it is. But when you say Aseana, people would still need directions,” said Chester Omaga-Diaz, DFA NCR East administrative officer.

“We’d ask people from Tarlac and Pangasinan why they decide to come here instead of applying in our centers in Pampanga. They would say it’s more convenient for them in terms of the commute,” he said.

Manned by a staff of 58, including officials, encoders, processors, security and utility personnel, the Megamall center serves up to 80 appointments every 30 minutes, with a separate line for senior citizens, minors and children.

Saturday’s family affair

The volume of applicants peaks on Saturdays, when entire families take time out from strolling in the mall to apply for passports.

“On Saturdays, it’s like a family affair because the kids, they don’t have to skip school just to apply. So they bring their families. It’s like family bonding also,” Puruganan said.

“And they are inside the mall so it’s a more relaxed atmosphere and there are many amenities. If they go hungry because of waiting, they can always refresh. They can eat, shop; they can go to the movies,” added the official.

For working student Gretchen Sy, renewing her passport at the mall center was an experience far improved from her previous encounter at the old consular center at the DFA main office, where applicants had to line up in a basketball court.

“It’s better and more convenient now. It’s faster. I already finished in less than an hour,” said Sy.

Maximum tolerance

But just like in any other public office, not a day passes when hot heads do not flare up. The staff faces such instances with “maximum tolerance”—lots of smiles and patience.

“One time, I told one applicant, ‘I give you my word, if they don’t deliver your passport tomorrow, I’ll resign from this post.’ I tell them we have to be extra careful about their documents, but still, they keep on saying things. It’s so hard to please the public, that’s what I’m saying,” said Puruganan.

“Just yesterday, I felt like one applicant was going to shoot me. He told me, ‘You give me back my money…’ Then there was an applicant who kept on cursing me, complaining about our service… But I tell them that this office is trying its best to change that,” said the diplomat of 30 years, who had just returned from a six-year posting at the Philippine Consulate in New York.

Deep breathing

Processor Rey Bron, a DFA employee for five years, said he starts his day with deep breathing, an exercise he swears calms his nerves and gives him the patience to deal with the quick-tempered.

“I have to prepare before I start to work. I inhale, exhale… Because if I start my day upset, I will be like that the whole day,” said Bron, who serves the walk-in window for senior, minor and child applicants.

For Omaga-Diaz, the gift of extra patience always comes in handy.

“We just explain to them why, what happened, what’s the process. And eventually, we become their friends. Some people can be rude. But then, you cannot solve the problem if you’re also rude,” he said.

Sam Miguel
10-30-2012, 09:16 AM
Cooling on coal

Philippine Daily Inquirer

9:04 pm | Monday, October 29th, 2012

Environmentalists and investors are again at loggerheads over two proposed coal-fired power plants in Palawan, the last frontier for conservationists. The conflict though is not exclusive to that island. It is also taking place in Davao, Subic, Iloilo and Bataan. It does seem that while many countries are moving away from “dirty” fuel (like coal) toward clean or “green” energy, the Philippines is going in the opposite direction.

On Nov. 5, GN Power Ltd., a joint venture between Filipino and American investors, is set to start the testing and commissioning of a 600-MW coal-fired power facility in Bataan. Full commercial operations is scheduled in early 2013. In Sarangani, a P19-billion, 200-MW coal-fed plant is also rising, and a 100-MW facility, also using coal, will be built in Zamboanga—both owned by partnerships led by the Alcantara family.

In Subic, Redondo Peninsula Energy Inc., a venture among Aboitiz Power Corp., Manila Electric Co. and Taiwan Cogeneration Corp., will put up a 600-MW coal-fed plant. Another coal-fired facility, with a 300-MW capacity, will be built by Korea Electric Power Corp. to supply the power needs of the Korean-owned Hanjin Heavy Industries, the biggest locator in the economic zone.

Ayala-led AC Energy Holdings Inc. and A. Brown Inc. are spending P12.5 billion to put up a 135-MW coal-fired power plant in Iloilo. Commercial operations are targeted to start in 2015.

In Negros Occidental, Cadiz City Mayor Patrick Escalante is fully supporting coal-fired power plants in his area, saying two firms have proposed to reclaim 50 hectares near the Cadiz port to serve as a site for a 100-MW facility and as an economic zone.

The rush to build several of these facilities—which proponents insist are cheaper and faster to put up—followed the warning from outgoing Energy Secretary Jose Rene Almendras of a major power shortage by 2015 if no new baseload plants would be built.

But why coal? The ill-effects of this “dirty” fuel have been chronicled here and abroad. Take the case of the 600-MW Masinloc coal-fired plant in Zambales. Pushed to its completion in 1998 although everyone seemed to be against it, the harmful effects of the plant’s operation became evident several years later, affecting mostly farmers and fishermen, complained Masinloc Mayor Desiree Edora. “The fruits of trees, specially mango trees for which we are well known for, have been stunted. They do not grow as big as before. Fishermen report less catch,” Edora lamented, adding that aside from the ash that fell on the town, the power plant discharged its waste materials directly to Oyon Bay.

Before the Masinloc plant was acquired by the US-based AES Corp. from Napocor in 2008, an Asian Development Bank report had pointed out that “the operating performance of the plant has declined since 2001 because of inadequate maintenance and insufficient capital investments. The plant’s operations have been characterized by low capacity, poor availability, low reliability, and violations of environmental, health and safety conditions. The plant’s emissions are unable to meet dust emission limits at any load.”

Proponents of coal-fired power facilities reason out that new technologies now lessen the plants’ harmful impact on the environment and that the renewable energy option is too costly. However, Pete Maniego, chair of the National Renewable Energy Board, points out that the proposed feed-in tariff (FIT) rates for hydro and biomass power at P6.15 and P7 per kWh, respectively, are already lower than the approved electricity rates for coal plants in 2011. Maniego notes that coal advocates usually emphasize the price advantage of coal, “but that cost advantage does not factor the ill effects of carbon in the atmosphere… hidden costs [that] are not borne by the electricity or transport payer, but by those in the community whose health are affected.”

The Philippine Environment Monitor estimates that, annually, due to air pollution the Philippine economy wastes $1.5 billion and the Philippines spends more than $400 million in direct costs on health expenses. The World Bank says that 5,000 annual premature deaths in Metro Manila may be due to respiratory and cardiovascular diseases from exposure to pollution.

It is difficult to understand how the Aquino administration can push the construction of so many coal-fired power facilities after launching the National Renewable Energy Program, an initiative to lower carbon dioxide emissions.

A moratorium on coal-fired power plants would be in order.

Sam Miguel
10-30-2012, 09:19 AM
Yes, PH can attract more tourists, but …

By Marlet D. Salazar

Philippine Daily Inquirer

11:06 pm | Saturday, October 27th, 2012

The country’s tourism line that “It’s more fun in the Philippines” is boosted by new data from the World Tourism Organization.

The date shows international tourist arrivals worldwide grew by 5 percent or 467 million tourists this year with the Asia-Pacific region posting the strongest gains.

The gains are affirmed by a study conducted by global travel market research company PhoCusWright which states that Apac is set to gain $357 billion in travel and tourism in 2013.

The optimism in the Asian travel and tourism industry was shared by industry leaders and movers during the annual TravelRave 2012 held in Singapore recently.

Neeta Lachmandas, Singapore Tourism Board’s assistant chief executive officer, sees that by the year 2020, the global spend on tourism whether inbound or outbound will grow by 40 percent.

“It is important for us to create a platform for travel industry leaders and players and harness the goodness in Asia,” she says during the first-day press conference. “It is equally important to embrace the challenges and because Asian tourists are different in their own ways, we have to start strategizing and collaborating.”

Growth in SEA

Southeast Asia reported a strong start this year with a growth of 9 percent and an increase of 3.1 million additional international visitors. Most of these visitors come from the Americas, Europe and Asia which account for 90 percent of international arrivals.

TravelRave 2012 was also the venue for the annual ITB Asia’s Trade Show for Asian Travel Market running on its fifth year. The dynamic travel market is evident with a significant increase of 15 percent from last year among participants from 72 countries.

“We saw a double-digit growth in all segments of the show,” says Martin Buck, vice president, Messe Berlin Singapore (MSB), organizer of ITB Asia.

The Philippines’ Department Tourism (DOT), together with a couple of travel agencies participated in the travel expo held at The Sands Expo and Exhibition Center, Marina Bay Sands. The agencies, Ang’s Travel and Tours, Pan Pacific Travel Corp., and Shroff International Travel Care Inc., hoped to attract the wholesale and retail market.

However, if the Philippines wants the share of the pie of Asian tourism’s multibillion dollar earnings, the government needs to work on having direct flights to prime tourist destinations. Majority of the foreigners randomly asked by SundayBiz the reason why they don’t visit the Philippines replied, “You don’t have direct flights to Cebu, or Palawan, or Boracay. It’s a bit of a hassle to go to Manila then change planes.”

ITB Asia posted 865 exhibiting companies that needed an increase of 13 percent in gross floor space and 17 percent increase in net floor space compared to last year which was held in Suntec, Singapore.

Visa simplification

Buck also reported that ITB Asia had already sold out as early as five months ahead of the schedule with the top four industry sectors well-represented in the show: hotels and resorts, tour operators, tourism organizations and associations, and travel agencies as well as business travel and MICE (meetings, incentives, conventions and exhibitions).

David Scowsill, president and CEO of World Travel and Tourism Council (WTTC), says “WTTC is forecasting growth for the overall region of almost 6 percent in 2012 which is triple the growth of Europe. There are variations within the region with strength in China, India, Indonesia and the Philippines compensating for the weaker growth in Australia, New Zealand, Singapore and Thailand, but the overall picture is one of dramatic growth over both the short-term and long-term.”

He added that in 10 years, there shall be a 9- to 10-percent growth in the industry creating about 328 million jobs. For the travel industry to flourish even more, governments and players need to focus on addressing challenges such as taxation, visas and sustainability.

He encouraged government agencies to simplify visa applications. “We want electronic visas and visas on arrival,” he says. “The United States lost $600 billion (in tourism) in the last 10 years due to visa refusal.”

MAC drives growth

Lachmandas adds that the mass affluent class (MAC) or high-end mass market especially those from China, India and Indonesia generate more outbound travel posting $300 billion. “There is a huge appetite for travel,” she says. “And this opens for more opportunities.”

TravelRave 2012 also provided a venue for movers and players to engage in dynamic conferences that tackled the challenges, changes, and even evolutions concerning the travel industry.

The high-level “Asia Travel Leaders Summit” saw industry leaders from hotel groups and business travel sharing insights on how they as competitors make the industry more vibrant to lure more and more visitors in Asia. The “Tourism Destination Investment Conference” explored the development of tourism infrastructure in the region with special conference on “Hotel Technology.”

The fifth annual “Aviation Outlook” focused on market opportunities especially now that budget airlines provide opportunities for more travelers who could not travel before because of steep cost of airfare.

TravelRave is an annual travel festival initiated by the Singapore Tourism Board. This year’s week-long expo is in partnership with Messe Berlin Singapore, Pan Pacific Hotel Singapore and Questex Media Group.

Sam Miguel
10-30-2012, 09:20 AM
Peso falls in wake of BSP move to cut interest rates

By Michelle V. Remo

Philippine Daily Inquirer

9:48 pm | Monday, October 29th, 2012

MANILA, Philippines—The peso fell on Monday, following the move of the Bangko Sentral ng Pilipinas last week to cut interest rates to new record lows.

The local currency closed at its intraday low of 41.275 against the US dollar, down by 6.5 centavos from Thursday’s finish of 41.21:$1 (markets were closed on Friday).

Intraday high hit 41.16:$1. Volume of trade amounted to $595.10 million from $794.438 million previously.

The depreciation of the peso came with the view that the move of the BSP to cut its key policy rates to new historic lows would influence a reduction in yields from securities.

The BSP cut its overnight borrowing and lending rates by another 25 basis points last Thursday, thus bringing these to just 3.5 and 5.5 percent, respectively. It was the fourth time in 2012 that the BSP cut its key policy rates. The three previous rate cuts done earlier in the year also amounted to 25 basis points each.

The rate reductions were meant to influence a cut in bank lending rates, thus spur demand for loans. The BSP said higher demand for credit should boost consumption and investments.

Higher domestic demand would help cushion the ill-effects of an anemic global economic performance on the growth of the Philippines, the BSP said. With the lackluster demand from crisis-stricken eurozone and sluggish US economy, export earnings of the Philippines and other emerging markets are seen to remain weak.

Traders said cuts in interest rates were often immediately followed by an easing of demand for portfolio assets, such as peso-denominated stocks and bonds, thus causing a depreciation of a currency.

The decline of the peso came with the drop in the Philippine Stock Exchange Index (PSEi) by 7.74 points to 5,397.42.

Sam Miguel
10-30-2012, 09:21 AM
Philippines gets credit upgrade from Moody’s

By Michelle Remo

Philippine Daily Inquirer

12:38 am | Tuesday, October 30th, 2012

An international agency has raised the credit rating of the Philippines from two notches to just one notch below investment grade, a positive development for the country amid global economic woes.

With a new rating from Moody’s Investors Service, the Philippines expects to make the last step toward investment grade soon.

An investment rating is expected to allow the country to attract more job-generating foreign direct investments.

As a result of Moody’s decision, the country’s credit ratings from all three major international credit watchdogs are now all at one notch below investment grade.

Fitch Ratings and Standard & Poor’s earlier raised their own ratings for the Philippines to just a notch below investment grade, citing encouraging economic developments.

In a decision announced yesterday, Moody’s said the improved assessment of the creditworthiness of the Philippines was based on its healthy pace of growth, improving fiscal performance of the national government, stable banking sector and projected ability to keep a robust pace of economic expansion over the medium term.

“Despite the head winds from softening external demand, the Philippines has demonstrated considerable economic strength and fiscal resilience,” Moody’s said in a statement.

Good governance

Finance Secretary Cesar Purisima said the upgrade in the credit rating by Moody’s was proof that “good governance is good economics.”

Purisima noted that Moody’s decision was the ninth positive action that the Philippines got from various credit rating agencies since President Aquino took office in 2010.

“This is another affirmation of the economic agenda of President Aquino. Good governance is indeed good economics. This is the ninth positive ratings action since [the President] took office and has brought us on the cusp of investment grade rating,” Purisima said.

Tetangco delighted

Gov. Amando Tetangco Jr. of the Bangko Sentral ng Pilipinas said Moody’s favorable decision would fuel hopes that an investment rating may come “sooner rather than later.”

“We are delighted with Moody’s recognition of the Philippines’ strengthened macroeconomic fundamentals and growth prospects,” Tetangco told reporters.

He said the country’s banking system became strong with the implementation of various regulatory reforms over the years.

“Investment grade is certainly within sight,” said Eugene Leow, an economist at DBS Bank in Singapore.

“This does not come as a surprise given the structural improvement in GDP (gross domestic product) growth and debt management dynamics over the last few years,” he added.

He said a broadening of the revenue base, such as reforms on taxes on alcohol and cigarettes, would probably be needed before the major rating agencies upgraded Philippine debt again.

Stable outlook

Moody’s said the latest credit rating of the Philippines, which applies to debts denominated in local and foreign currencies, was assigned a “stable” outlook.

Such an outlook indicates that a credit rating is likely to remain the same within the short term unless unexpected developments dampen existing favorable economic trends.

In the first half of the year, the Philippine economy grew by 6.1 percent from a year ago, one of the fastest growth rates in the region.

The encouraging growth rate of the Philippines came even as the euro zone suffers a recession and as the United States faces slow growth and high unemployment levels.

“In addition, cyclical features support improved prospects for growth in the medium term,” Moody’s said.

Infrastructure, remittance

The agency said the factors supporting prospects of a healthy pace of growth in the next few years included rising government spending on infrastructure and the still strong remittances from overseas Filipino workers.

Because of remittances, consumption by Filipino households is expected to remain robust.

The fact that banks in the country are profitable and strong indicate that they are capable of providing credit support to businesses and to the government, according to Moody’s.

$82-B forex reserve

Rising foreign exchange reserves, now at a historic high of about $82 billion, was also cited for the country’s improved credit rating.

With the reserves, higher than the combined foreign debts of private firms and government entities, the Philippines can pay debts to foreign creditors as they come due.

The reserves are boosted mainly by remittances, foreign portfolio investments and inflows in the country’s business process outsourcing sector.

Peso, interest rates

“Taken together, these strengths have contributed to the appreciation of the peso and lower interest rate costs for the government. These have in turn helped accelerate the process of debt consolidation, thus addressing the relatively high stock of debt, a constraint on the Philippine rating,” Moody’s said.

The national government’s debt stock—the proportion of its outstanding debts to the country’s gross domestic product—has fallen over the years to just about 50 percent from a high of over 70 percent in the middle of the last decade.

The rise of the peso and the decline in interest rates, both of which are credited for improved investor sentiment, helped cause the decline in the government’s debt stock over the years, according to finance officials.

Efforts to improve revenue collection and measures to discourage tax evasion were also helpful in improving government’s fiscal condition, the officials added.

Peace deal

Moody’s also said that the latest peace agreement between the government and Moro rebels would further boost the country’s economy.

“Over the longer term, the landmark peace agreement signed between the government and the Moro Islamic Liberation Front may have wider beneficial effects on investment and economic growth in Mindanao… which has untapped agricultural and mining potential,” Moody’s said.

The upgrade in credit rating came following the 10-notch jump in ranking—from 76th to 66th out of 144 countries—by the Philippines in the global competitiveness report that the World Economic Forum released last month.

Sam Miguel
10-31-2012, 08:51 AM
PH consumers among world’s most bullish

Very optimistic about jobs, personal finances

By Daxim L. Lucas

Philippine Daily Inquirer

12:42 am | Wednesday, October 31st, 2012

Filipino consumers continue to have one of the highest confidence levels to spend in the third quarter of the year among residents of 58 countries surveyed by media research firm Nielsen.

Despite this, the latest results of the Consumer Confidence Index showed that spending remained “restrained” and that saving was the top priority for those surveyed.

Just like in the previous quarter, the Philippines was ranked third, behind Indonesia and India, in consumer confidence levels, with a score of 118, up from 112 in the same quarter last year.

“This paints a positive picture for the third quarter of 2012,” Nielsen Philippines managing director Stuart Jamieson said in a statement. “The high confidence can be attributed to the positive perception regarding local job prospects in the country for the next 12 months, which at this point is the second-highest worldwide.”

He added that “expansion plans in the energy, transportation, telecom industries and largely the BPOs (business process outsourcing), are helping to create this positive perception in the country.”

The Nielsen global survey of consumer confidence and spending intentions, established in 2005, measures consumer confidence, major concerns and spending intentions among more than 29,000 Internet consumers in 58 countries. Consumer confidence levels above and below a baseline of 100 indicate degrees of optimism and pessimism.

The study also showed that Filipino online consumers felt positively about the state of their personal finances, ranking second among the most optimistic about their personal finances in the world.

For the third quarter of 2012, perceptions of Filipinos on whether it was a good or a bad time to buy things that they wanted and needed over the next 12 months showed a slight improvement in confidence with 7 percent saying that it was an excellent time to do so as compared to 5 percent a year ago. Thirty-nine percent of the respondents said that it was a good time to buy compared to 42 percent in the third quarter of 2011.

When there was spare cash available in the household, 67 percent of Filipino respondents said they would rather put this into savings, while 34 percent would buy new technology products. Some 32 percent would purchase new clothes while 28 percent would pay off debt, credit cards or loans, and 27 percent would spend it on holiday or vacation.

“The Philippines is among the top 10 countries which prioritize savings when there is spare cash in the household,” Jamieson said.

Among the major concerns of those polled over the next six months, job security remained at the top of the list as it did in the same quarter last year. It was followed by work/life balance, health, welfare and happiness of parents, and education and/or welfare of children.

“This is a true mirror of the Filipino culture, which is very focused on the family,” the Nielsen chief said. “These five major concerns are all related to the family, whether it is for the parents’ or children’s welfare. If you look at it worldwide, the Philippines is number one among the top 10 countries who said that they are concerned about their parents’ welfare and happiness.”

In the third quarter of last year, Filipinos’ concern about the economy was part of the top five concerns but for this year, it ranked number six.

While recessionary sentiment increased seven percentage points in the Asia-Pacific to 52 percent, Filipino sentiment toward the economic state of the Philippines improved with 56 percent. This was a big difference if compared to Korean and Taiwanese respondents, 86 percent of whom were of the opinion that they were in a recession.

The report shows that to save on household expenses, Filipinos have lessened their expenses on new clothes, saving on gas and electricity, delaying their upgrades on technology like computers and mobile devices, switching to cheaper grocery brands and cutting down on take-away meals. Should economic conditions improve, the respondents said that they will continue doing these actions.

Sam Miguel
10-31-2012, 08:52 AM
Address lack of policy stability, gov’t urged

Industry groups cite case of Pandacan oil depot

By Amy R. Remo

Philippine Daily Inquirer

12:39 am | Wednesday, October 31st, 2012

Various business groups are urging the national government to resolve not only the Pandacan oil depot issue but the more important underlying concerns regarding the seeming lack of stability and consistency in government policies and regulations.

In a joint statement, the Management Association of the Philippines, the Makati Business Club, the Philippine Chamber of Commerce and Industry and the Employers’ Confederation of the Philippines noted that there was growing anxiety over what the Pandacan oil depot case had come to illustrate.

“The Pandacan oil depot’s case is but one of various instances where unclear policies and the midway changing of rules by government agencies and local government units have led to reduced or even lost opportunities that would have benefited the economy, host communities and the public,” the statement read.

“Though the Philippines continues to improve its competitiveness rankings, the World Economic Forum’s Global Competitiveness Report 2012-2013 still lists policy instability as the fourth most problematic factor for doing business in the country,” it added.

The groups pointed out that the “lack of stability and predictability in policies and regulations can only serve to erode the renewed confidence and trust in our governance institutions that President Aquino has painstakingly built under his administration.”

The three oil companies—Petron Corp., Pilipinas Shell Petroleum Corp. and Chevron Philippines—have since been under pressure to move their operations out of the densely populated area where the Pandacan oil depot in Manila is located due to safety concerns raised by various cause-oriented groups and the Church.

The move was supported by the City Council of Manila, which overruled only last September Manila Mayor Alfredo Lim’s decision to veto Ordinance 8283, which would have effectively mandated the relocation of the oil companies’ depot operations out of Pandacan.

Early this month, Lim decided to veto Ordinance 8283 for the second time, which meant that the groups seeking to shut down the Pandacan oil depot would now have to bring their petition to Malacañang.

Lim said he was against the closure as it might be taken “as a sign of political immaturity and would [make] a bad impression [on] businesses and investors who rely on stability and predictability of government actions.”

MAP, MBC, PCCI and Ecop all pointed out that there was a possible emergence of a new set of concerns should the relocation of the Pandacan oil depot outside Metro Manila push through.

“We will have to contend with increased risk of road accidents, product spills and threats to security for the tankers and the public. It will also mean higher logistical costs, which must, in fairness, be passed on to consumers,” they explained.

“We note that apprehensions over the security of the facility and the safety of the surrounding residential community are at the forefront of the decade-long debate over the Pandacan oil depot. While our primary role is to create economic wealth, we also give the highest regard to the responsible and sustainable conduct of our business,” the groups added.

Pandacan is considered the largest and most important depot in the country, supplying 70 percent of the needs of the country’s shipping industry, 90 percent of the transport sector’s lubricant requirements, 75 percent of all aviation fuel needs and 25 percent of the demand for chemicals.

Sam Miguel
11-05-2012, 10:34 AM
PPP project changes may cost gov’t P500M

Daang Hari road has yet to start 11 months after award

By Daxim L. Lucas

Philippine Daily Inquirer

12:32 am | Monday, November 5th, 2012

The government’s proceeds from the Daang Hari link may be cut in half after it was revealed that the Department of Public Works and Highways approved a last-minute change in the project’s interconnection design without the consent of the operator of the South Luzon Expressway to which the tollway will connect.

Due to the snag, work on the 4-kilometer tollroad—won by the Ayala group with a P902-million bid—has yet to begin almost 11 months after the project was awarded, according to official documents obtained by the Inquirer.

More importantly, a source involved with the project said the new design proposal approved by the DPWH would cost anywhere between P250 million and P500 million—a so-called “variation order” that would have to be shouldered by the government. The variation order would reduce the government’s net proceeds from the Daang Hari project to as low as P400 million from the original winning bid of the Ayala group.

The source explained that instead of using the rotunda design that was bid out by the DPWH, the Ayala group submitted two construction plans, which the DPWH accepted shortly before the financial bids were opened late last year.

“The new design that DPWH accepted is very different from the one they originally approved,” the official said. “Instead of a roundabout, there will now be a bigger toll plaza, while the connection to [the northbound lanes of] SLEx will require a longer tunnel under it.”

The official explained that the Ayala proposal approved by DPWH was meant to connect to the existing SLEx design without taking into account the highway’s upcoming expansion, which would increase its number of lanes from eight to 10 to accommodate growing vehicular traffic volume—a provision built into the original concession of SLEx’s operator, South Luzon Tollways Corp. (SLTC).

SLTC is the concessionaire for the 36-kilometer expressway from Alabang, Muntinlupa City, to Sto. Tomas, Batangas, and is majority-owned by Atlantic Aurum, a partnership between Citra of Indonesia and San Miguel Corp.

Upon the request of the DPWH, SLTC earlier issued a “no objection” letter to the project on the condition that its future expansion plans would not be jeopardized. Upon learning of what it described as “material changes” made by DPWH, however, SLTC withdrew its consent and was now being blamed for the delay in the project.

The source explained that the Ayala group was now in a bind since DPWH has not informed bidders that SLTC’s consent was limited to the rotunda design. “But DPWH accepted Ayala’s design changes so DPWH also has to shoulder the variation costs of as much as P500 million,” the official said. “I don’t think Ayala will agree to shoulder it, and neither will SLTC.”

Last year, 18 bidders expressed interest in the Daang Hari PPP project, but only two entities—the Ayala and San Miguel groups—were pre-qualified by the government.

The official revealed that some disqualified bidders were now questioning the process adopted by the government because of two major changes made during tender process.

After the submission of the prequalification documents, DPWH raised the tariff for the project by 25 percent and lengthened the concession period from 25 to 30 years, issued through a bid bulletin, together with the revised draft concession agreement.

“But there were bidders who opted out of the project earlier because of the low tariff and short concession period and they didn’t know that these parameters were adjusted,” the official said.

Sam Miguel
11-05-2012, 10:34 AM
Peso big gainer against greenback as of October

PH currency rose by 6.1%, closing at 41.18 as of end-Oct.

By Michelle V. Remo

Philippine Daily Inquirer

12:29 am | Monday, November 5th, 2012

The peso further appreciated against the US dollar in October, thus posting one of the biggest gains against the greenback among key Asian currencies in the first 10 months.

Market data showed that the peso rose by 6.1 percent against the dollar at the end of the first 10 months, faster than the 4.9 percent registered at the end of September.

The peso closed at 41.18:$1 on the last trading day of October, from 41.70 on the last trading day of September.

Jonathan Ravelas, chief market strategist for Banco de Oro, said the continued appreciation of the peso against the dollar made it one of the strongest among major Asian currencies.

The rise of the peso is attributed partly to the Philippine economy’s growth so far this year—at 6.1 percent in the first semester from a year ago—that helped gain the favorable sentiment of the international financial community.

Citing the country’s growth story amid the prolonged recession in the euro zone, Moody’s Investors Services upgraded its credit rating for the Philippines to just one notch below investment grade.

Ravelas said the peso, which closed at 43.84:$1 on the last trading day of 2011, is expected to stay mostly in the 41-to-a-dollar territory throughout the rest of the year due to the favorable market sentiment on the Philippine economy.

He said, however, that there was a chance that the peso would decline a bit in the coming weeks and months as concerns over the “fiscal cliff” in the United States make foreign exchange markets jittery.

The so-called fiscal cliff refers to the beginning of spending cuts in observance of the debt ceiling and various fiscal reforms provided under the Budget Control Act of 2011.

Some of the reforms include the end of certain tax breaks for businesses and imposition of new taxes related to the health care law of the Obama administration.

Although spending cuts and tax reforms are meant to put the US fiscal house in order, economists said these could take a toll on growth of the US economy, which is still struggling to shake off the debilitating effects of the global economic downturn.

“When there are causes for uncertainty, such as the US fiscal cliff, investors tend to go for the safe haven, and for many of them, the US dollar is still the most liquid currency,” Ravelas told the Inquirer.

He added that the peso was likely to end this year at 41.70 against the US dollar.

Ravelas also said the Bangko Sentral ng Pilipinas may be prompted to implement additional measures to prevent an even sharper rise of the peso should appreciation pressures become more pronounced.

He said the BSP may have to intervene at some point considering the adverse effects of a strong currency on the income of exporters and of households dependent on remittances.

Last October 25, the BSP cut its key policy rates for the fourth time this year by another 25 basis points, bringing those to new record lows of 3.5 percent for overnight borrowing and 5.5 percent for overnight lending.

The cut in the key policy rates, which influence commercial interest rates, is expected to cause a reduction in yields from portfolio instruments.

A decline in yields is seen to temper demand for such assets, and thus ease dollar inflows and slow down the appreciation of the peso.

Sam Miguel
11-05-2012, 10:35 AM
With peace at hand, Mindanao seen to grow faster than Luzon

By Ana G. Roa

Philippine Daily Inquirer

12:28 am | Monday, November 5th, 2012

Mindanao’s economy may grow faster than that of Luzon once the government works out the peace and order problem on the island, a Cabinet official said.

“If we succeed in solving this problem, Mindanao will boom. It will grow faster than Luzon,” said Economic Planning Secretary Arsenio Balisacan, noting that the peace and order problem is hampering development in Mindanao.

President Aquino recently signed the Framework Agreement on the Bangsamoro with the Moro Islamic Liberation Front (MILF), moving a step closer to a permanent peace deal.

Data from the National Statistical Coordination Board showed that Mindanao’s economy grew 3.2 percent in 2011 while Luzon (excluding Metro Manila), Metro Manila and Visayas posted economic growth rates of 3.9 percent, 3.5 percent and 5.9 percent, respectively.

Also, Mindanao accounted for 14.1 percent of the country’s total domestic output while Luzon (excluding Metro Manila) contributed 37.5 percent.

Metro Manila accounted for 35.7 percent of the country’s output while Visayas contributed 12.8 percent.

Potential growth sectors in the region include agriculture and tourism, backed by the country’s fertile land and rich culture, Balisacan said. Industries in the area can also be tapped to expand agri-based production.

A Philippine Development Forum in Davao is planned for January to discuss in concrete terms the plan for Mindanao.

“We will make sure this time it will really bring development,” said Balisacan, stressing the need to coordinate efforts of the government and its line agencies.

Sam Miguel
11-05-2012, 10:38 AM

‘We did things nobody dared to do’

By Marge C. Enriquez

Philippine Daily Inquirer

10:33 pm | Saturday, November 3rd, 2012

“Dapat … Whappak! (It should be … whappak),” exclaims the legendary screen villainess. A dolled-up Bella Flores explains how to slap the opponent in the short film “Kontrabida 101 (Villainy 101).

A production of Benchingkofilms and directed by Joey Reyes, “Kontrabida 101” is a cheeky discourse on the villain’s intimidation savvy, the stare and the raised eyebrows that keep people trembling even if the villain is wearing sunglasses.

Flores’ monologue sounds like a metaphor for Bench’s mind-set amidst the competition. The film thrives on the irony that an 84-year-old actress stars in a digitized medium. Although Flores is a stranger to the millennial generation, no one in Philippine cinema has taken after her. Likewise, Bench underscores, albeit exaggeratedly, that the brand gets stronger over time.

Going global

Indeed, if there is a local fashion brand that tells its story loudest, it has to be Bench. Since its inception in 1987, the brand has won awards in marketing, advertising and retailing. Amid the 25th anniversary activities that were marked with pomp, glamour and camp, Bench merited with the Agora Awards for Export Marketing. The Philippine Marketing Association recognized its operations in 62 branches overseas.

“We export not just products or raw materials, but a brand. The Bench brand stands for an entire vision and the Filipino lifestyle, specifically. This is a marketing feat, since it is one thing to sell to a domestic market, while it is a completely different ball game overseas, alongside the world’s biggest and best brands. The winning strategy is to think, act, and look global, wherever you are,” explains Benito Chan, chair of Suyen Corporation, the mother company of Bench.

“We enter the foreign market by infusing a Filipino flavor to our designs but still making it adaptable globally. This has been one of our strengths which we will continue to build on in the future.”

Strategies differ in various countries, naturally. In the Middle East, it targets the Filipino population although it has been attracting more non-Filipinos to its stores. On the other hand, Bench has become a direct competitor to major underwear brands in China since it entered the market 10 years ago.

Undoubtedly, Bench has created a credible match with the Hollywood and Korean endorsers. It has forged a bond with consumers and pumps up sales.

“To establish a true global brand, we are trying to create a Bench family of endorsers from local celebrities to international ones. A Hollywood endorser brings in a different flavor to the brand, as would a Korean. When you put together the entire stable of Bench endorsers, who are all from different backgrounds, ages, nationalities, styles, body types, it really paints a picture of a brand that embraces the world. It boosts the brand’s image because Bench clothes look good on all of them. There is universal appeal.”

Clearly, the tender ages of Adam Levine, Lucy Hale and Lee Min-Ho and their brisk casualness are expected to resonate with kids who live in jeans and t-shirts worldwide.


Aside from export marketing, Bench received an Agora Award for Entrepreneurship in 2000 for building itself as a “maverick” brand. The media has gushed over out-of-the box strategies and its verve in pushing boundaries.

“We did things nobody dared to do. That is what the word ‘entrepreneurship’ connotes—making initiatives and taking risks,’” declares Chan.

“You have to know the right time to launch or sell it. Timing is the key, and that is the beauty of it, because you can never be complacent, and you are always learning no matter how experienced you are or how much you have already achieved. ”

One of Bench’s biggest stunts was putting excitement in the underwear and making a private item very public. Its biannual underwear fashion show not only drove more sales but also catapulted the brand’s image.

“Through the show, it is easier for us to market our brand in the international scene. Just recently, Fox International covered the Bench Universe 2012 underwear show and made a special which will air in Star World this December. This will definitely help in strengthening the brand equity in the Asian region,” says Chan.

Unknown to the public, Bench has also been producing merchandise that has social relevance. To create awareness on the preservation of endangered species in Calauit sanctuary, Bench came out with a safari collection. Four years ago, it supported the I am Ninoy campaign by printing Ninoy Aquino t-shirts, the proceeds of which went to charity.

Kris Aquino partnered with Bench for the Freedom cologne to commemorate 25th anniversary of People Power. Part of the sales went to Aquino’s charity for classroom building

Bench has always been an early adaptor even in green trends. Two years ago, it initiated the Green Wednesdays in which customers are encouraged to use their shopping bags. It’s arguably the first local brand to use bamboo fiber in its line called Envi (short for Environment).

“We wish to raise awareness on bamboo fiber, since bamboo is a very sustainable resource. It is much more sustainable to grow and harvest than cotton, using less water and energy, and as a fabric it is softer, more durable and comfortable,” says Chan.

To cater to the savvy millennial consumer, Bench has embraced ways of creating dialogue through social media. Chan is amazed at the quick reactions from Twitter.

“Customers tweet me and I can respond immediately. For example, we used to ban picture-taking inside the store. Now, with Twitter, we encourage it. A customer can take a picture of anything they find interesting in our merchandise and then a few minutes later it is ‘trending.’ Or, they can Tweet me directly if they have comments or suggestions. This is very empowering for a customer—the ability to directly communicate with the chairman of the company and to feel that they have been acknowledged. It is empowering for me too— because I can stay focused on the bigger picture without losing sight of the details that can make or break a customer’s experience,” says Chan.

Enduring family ties

Although Chan has been the front liner, he credits the success to the family which runs Suyen Corporation. His sister Nenita, vice president of finance, keeps a sharp eye on the cash flow. Her husband, Virgilio Lim, Suyen president, is a math whiz and management savvy. The family dynamics is described as synergistic with constant check and balance.

“Nenita and I know the ins and outs of business just from watching our parents run Liwayway cornstarch—from instinct and learning by osmosis. The next generation is different. They now have business degrees and are more scientific about it. Nenita and Virgilio’s eldest son Bryan, my nephew and godson, got his MBA from AIM and is thriving in the Business Development department of Suyen. He is in charge of our expansion, including brand acquisition. Their two daughters, Kristine and Suyen, are in charge of Brand Management. Each one got a degree in fashion merchandising, one from New York and the other from London. They maintain the standards in terms of product quality and merchandising,” he says.

Chan adds that the culture of family has extended to the employees, suppliers and endorsers. Some long-term relationships began with Chan’s eye for spotting talent.

He discovered Richard Gomez’s photograph in Jun de Leon’s studio in 1987. It has been arguably the longest celebrity-brand alliance. Although likes of Richard Gutierrez have a natural fit with Bench’s market today, Gomez’s enduring presence embodies the company’s values of loyalty, friendship and stability.

In the early ’90s, Chan was impressed with the Italian look of designer Gina Yupangco during a fashion show at the Manila Polo Club. He then tapped her for Herbench. “She was like a fixture at the office that had a very unique and interesting way of dressing up. She gave that personal touch to HerBench,” recalls Chan.

When she died of a lingering illness, Chan acknowledged that she was a tough act to follow.

As of this writing, Chan is traveling through Israel and Jordan. Living on a suitcase, he travels five months in a year.

“I am still discovering and learning things,” he says.

Sam Miguel
11-06-2012, 08:30 AM
Senate showdown on sin tax bill looms

By Cathy Yamsuan, Michael Lim Ubac Maricar Brizuela

Philippine Daily Inquirer

2:18 am | Tuesday, November 6th, 2012

Senators with varying positions on how much sin taxes should be raised appear headed for a showdown as the Senate begins debates on the controversial measure this afternoon.

In one corner rests Franklin Drilon, acting chair of the Senate ways and means committee, who is set to overhaul the committee report sponsored by resigned panel head Ralph Recto and work on raising sin taxes from tobacco and liquor to “at least” P24 billion.

In another is Recto, who said he was prepared to question all figures and data that Drilon and other senators favoring higher sin taxes would propose during the debates.

Then there’s Sen. Miriam Defensor-Santiago, whose bill seeks to generate P60 billion in additional revenue from tobacco and liquor products.

Recto was widely criticized for submitting a report that proposed incremental increases of between P15 billion and P19 billion in sin taxes over a period of several years.

The House of Representatives has passed its own version of the sin tax measure, which slashed in half the P60-billion original target revenue from sin taxes.

More realistic

Recto, however, insisted that his numbers were “more realistic and responsible” because jacking up the taxes on sin products to what he perceived to be unreasonable levels would cause the collapse of the affected industries and result in job losses and subsequently lower tax collections.

The senator remained wary of the Department of Finance’s (DOF) revised endorsement of P40 billion in additional sin taxes, down from its original proposal of an additional P60-billion collection from tobacco and liquor.

Recto resigned as chair of the ways and means committee three weeks ago after complaining that the DOF, Department of Health (DOH) and Bureau of Internal Revenue (BIR) refused to support his committee report.

The senator said he had requested that his signature be removed from the committee report that Drilon planned to use during plenary debates.

“All the studies and efforts I made when I put the report together would go to waste if I do not defend my (original) position (although I admit) that my report has its flaws. That’s why I am prepared to submit my own amendments,” Recto said in an interview.

Not an ‘obstacle’

Recto said he would not be an “obstacle” to the Senate debates on the sin tax measure.

Some observers questioned the plan of Drilon to use the committee report submitted by Recto since the former favored the DOF’s endorsement of higher sin taxes and, reportedly, the sin tax bill filed by Santiago that targets P60 billion in additional revenue from tobacco and liquor products.

Drilon said he would use the committee report filed by Recto under the following premises:

The need to increase the taxes.

The sin tax bill is a health measure “more than a finance or tax measure” because it declares that smoking is a major cause of mortality in the country.

Excise tax is an effective tool in reducing smoking in the country.

DOH, PhilHealth funding

In a separate talk with reporters, Drilon said the Senate needed to approve a sin tax version that would raise the collection by a minimum of P24 billion because the 2013 budget of the DOH and the PhilHealth program for indigents was only P54 billion.

Drilon said the health sector would actually need P77.5 billion next year so it could go ahead with its plan to enroll additional members from 5.2 million of the poorest Filipino families in the PhilHealth program.

Farmers’ safety net

Drilon said the minimum P24 billion did not yet include the 15-percent increment in the budget allocation for safety net to protect workers in the tobacco industry as provided by law.

“We need more revenue for our health sector. The health sector budget is P54 billion under the 2013 budget. It really needs about P77.5 billion and therefore, there is a funding gap of P23 billion to P24 billion,” Drilon said.

“That is why we have to pass the sin tax bill in order that we can fill the financial gap of this sector. We intend to pass the sin tax bill before the 2013 budget,” he added.

Drilon said approving a sin tax bill in which the collection was lower than P24 billion would hinder the enrollment of more poor Filipinos in PhilHealth.

Get act together

Malacañang wanted the Senate to get its act together and pass the sin tax bill.

“There is a budget gap that we need to fill. And we’re hoping that the revenue to be generated by the sin tax measure will be able to fill that gap,” deputy presidential spokesperson Abigail Valte said on Monday.

She said the executive department had no Plan B should Congress fail to pass the revenue measure. “At this point, we’re not looking at other contingencies yet,” she said.

Warning of consequences, Valte said that some of the medical facilities may not be able to get the much-needed upgrade or repair without an assured revenue source. This could also affect funding for PhilHealth premiums, she said.

PhilHealth now gives 100-percent coverage for indigents and treatment for various stages of cancer falling under “Case Type Z benefits,” which are as follows: Standard risk acute lymphocyte (lymphoblastic), leukemia (all cases) in children, early stage breast cancer, low to intermediate prostate cancer and end stage renal disease requiring kidney transplant (low risk).

Recto belied reports that the additional revenue from higher sin taxes had been factored in the 2013 national budget. Recto said he learned this during a joint hearing of several Senate committees on Monday morning.

Recto said the imposition of excise or uniform taxes on both local and foreign products would be disadvantageous to domestic business.

“I have already studied these issues. That’s why I have to defend these facts on the floor,” Recto said.

Tobacco farmers’ rally

As the debates on the sin tax measure heated up, more than 500 tobacco farmers from four northern Luzon provinces picketed in front of the Senate building in Pasay City on Monday morning.

Carrying banners with the message “Local tobacco industry will die,” the farmers from Ilocos Norte, Ilocos Sur, Abra and La Union hoped to hold dialogues with some senators whom they believed could help them in proposing a lower sin tax increase.

Ernesto Calindas, chair of the National Federation of Tobacco Farmers’ Associations and Cooperatives Inc. said that his group had already met with Senate President Juan Ponce Enrile and that the senator had agreed to help them.

Calindas said the farmers would put up tents and stay on Senate grounds until their issues were given resolution.

Sam Miguel
11-06-2012, 09:11 AM
Opportunity to prosper

Philippine Daily Inquirer

8:46 pm | Monday, November 5th, 2012

THE ADMINISTRATION of President Aquino deserves praise for the credit-rating upgrade by Moody’s Investor Service, which brought the Philippines’ ratings from all three major international credit watchdogs to just a notch below investment grade. (Fitch Ratings and Standard & Poor’s raised their own ratings for the Philippines earlier this year, citing encouraging economic developments.)

The upgrade in the credit rating by Moody’s was proof that “good governance is good economics,” according to Finance Secretary Cesar Purisima, who noted that the decision was the ninth positive action for the Philippines from various credit-rating agencies since Mr. Aquino took office in 2010.

Moody’s said the Philippines’ improved credit rating was based on its healthy pace of growth, improving fiscal performance, stable banking sector, and projected ability to keep its economy growing over the medium term. The economy grew 6.1 percent in the first half of 2012, surpassing the government’s goal of 5-6 percent for the year. The peso is hovering at a little above 41 to a dollar, better than the P42-45:$1 exchange rate assumed by the central bank for 2012. Foreign exchange reserves hit a record high of $81.9 billion in end-September, beating the full-year forecast of $78 billion. Inflation also eased to 3.2 percent in September, the lower end of the Bangko Sentral’s target of 3-5 percent. On the fiscal side, the budget deficit stood at just P106.06 billion as of September, a third of the P279.1-billion ceiling for the year.

A higher credit rating can mean a lot even to ordinary Filipinos because it will lower the interest rate on obligations of the government, which remains burdened with a P5-trillion debt. A reduction of one percentage point in the interest rate on these loans can translate to about P50 billion in savings a year for the government. The savings can mean higher funds for infrastructure, health and education. Building more roads, schools and airports will mean more jobs. Better infrastructure, in turn, will lead to more private investments, and more investments will mean even more jobs. The cycle goes on.

Moving forward, a lot still needs to be done to get the much desired investment-grade rating. Investments do not automatically come in with a credit-rating upgrade. The government must continuously lay the groundwork for the easy entry of investments.

And there lies a problem. Despite the many positive developments under the Aquino administration, doing business here remains difficult. The Philippines slipped two notches in the global rankings of ease in doing business—to 138th from 136th—due to the absence of significant reforms to speed up dealings of enterprises with various government agencies. The “Doing Business 2013” report, published last month by the World Bank, showed that the Philippines registered slightly poorer rankings in almost all categories related to ease in doing business for the period June 2011-June 2012.

“While the Philippines continues to improve its macro-economic environment and sets pace-setting growth in gross domestic product, it lags in the implementation of regulatory reforms that would make it easier for local entrepreneurs to conduct their businesses,” the report said. The problem seems to be at the level of local government units, where corruption remains rampant to this day.

Except for Laos, which ranked 163rd, all other Southeast Asian countries beat the Philippines in the rankings on ease in doing business.

There are other critical issues that require action. Credit-rating officials have long cited reform in the “sin” tax system as a key component in boosting the government’s fiscal position, but the proposed reform remains embroiled in controversial debates in Congress. Another crucial issue is the easing of the restriction on foreign ownership, which is enshrined in the Constitution and therefore needs action again from Congress. Intended to protect national interests against predatory foreign investors, the ownership restriction has become a protector of uncompetitive local businessmen and a deterrent to investment flows.

It has been 10 years since the Philippines has had this kind of credit rating of one notch below investment grade. The previous administration squandered the chance to translate a good credit standing to a prosperous economy and a better nation. Today, the Aquino administration enjoys the benefit of hindsight for it to avoid the pitfalls of its predecessor. It better not waste this golden opportunity.

11-08-2012, 11:10 AM
Time running out on ‘sin tax’ bill—Drilon

By Norman Bordadora, Cathy Yamsuan

Philippine Daily Inquirer

12:38 am | Thursday, November 8th, 2012

After deliberations on Wednesday in which only two senators interpellated him on his new substitute “sin tax” bill aiming to generate at least P40 billion in additional revenues from the proposed tax, Sen. Franklin Drilon reminded Senate colleagues that they have only until Nov. 19 to pass the measure.

Senate Majority Leader Vicente Sotto III said most of the senators that have expressed their intention to question Drilon on his bill have asked for more time to study the measure.

“We want to give everybody a chance to raise questions so we can explain this measure. We just hope that we can keep within our deadline of having this approved by the 19th of November so that we can go on the floor on the budget on the 20th of November,” Drilon told Sotto.

Drilon said he was ready to answer the questions of those senators who would wish to interpellate him on the bill.

“[But] if they would not be present for some reason or another, we regret that if we have to meet the deadline then we would have to consider that opportunity as having been waived, in fairness to everyone,” he said.

Sotto said he would try his best to have all the senators ready by Monday.

P46B more

Only Senators Ramon Revilla Jr. and Panfilo Lacson interpellated Drilon Wednesday. Answering Lacson’s questions, Drilon said that if his proposed measure is approved, there would be P46 billion in additional revenues from the sin taxes.

If that was added to the P48 billion in sin taxes collected in 2011, the total collection for the first year would be P94 billion, he said.

Sen. Ralph Recto, the resigned chairman of the Senate ways and means committee, on Wednesday warned that the P40 to P46 billion that Drilon, his replacement, wants could result in job losses in the tobacco and alcohol industries.

Recto was widely criticized for submitting a “weak” committee report on the sin tax bill that only provided for an increase of P15 billion in taxes. He resigned the committee chairmanship as a result.

Recto said he could agree to an increase of P20 billion in sin taxes if the Department of Finance would provide the economic assumptions indicating that the figure was workable.

Target too high

He said the Drilon substitute bill’s target additional revenues was “too high” given that the local tobacco and alcohol industries have a gross annual earning of only P210 billion.

“I agree with the plan to raise taxes to curb consumption of tobacco and alcohol. But if we add P45-billion additional taxes, these industries need to sell P255-billion worth of products. How do you collect that with fewer packs and fewer bottles? So, I see that as a big problem,” Recto said.

The two industries would be forced to lay off workers if their profits can no longer compensate for higher taxes to be paid to government, he said.

This could translate into job losses and a trickle-down effect that would adversely affect even the underground economy, he said.

11-08-2012, 11:11 AM
Forex reserves climb to $82.09B

Due to BSP dollar purchases to temper peso rise

By Michelle V. Remo

Philippine Daily Inquirer

12:58 am | Thursday, November 8th, 2012

The country’s foreign exchange reserves hit a new record high in October, fueled largely by the central bank’s dollar purchases to help temper the appreciation of the peso.

The gross international reserves (GIR) stood at $82.09 billion as of the end of October, up 8 percent from $75.83 billion a year ago and slightly higher than the previous month’s $82.03 billion.

The latest amount of reserves was enough to pay for 11.9 months’ worth of the country’s imports and 6.6 times the country’s foreign currency denominated debts maturing within the short term.

The Bangko Sentral ng Pilipinas said in a statement that its foreign exchange operations were one of the major reasons why the GIR rose further during the month. Another was its income from investments, which are mainly in US treasuries.

If not for the central bank’s dollar purchases, market players said the peso could have appreciated beyond the 41-to-$1 level.

The BSP said that while its policy was to allow the peso’s value to be largely market determined, it should intervene from time to time to avoid excessive volatility in the market.

The peso, which hovers in the 41-to-a-dollar territory, has risen by about 6 percent since the start of the year. This has elicited complaints from the export industry, which said its growth target for the year would likely be missed due to a difficult environment brought about by anemic global demand and a rising peso.

BSP Governor Amando Tetangco Jr. said the rise of the peso was a natural consequence of the country’s growing economy. With the positive sentiment on the Philippines, he said the country was attracting foreign portfolio investments.

“The peso has been strong in large part due to inflows, which are market reactions to our positive macro fundamentals,” Tetangco said.

Aside from foreign portfolio investments, other drivers of dollar inflows to the country are remittances and foreign investments in the business process outsourcing industry.

The BSP said it would continue to help temper any excessive rise (or fall) in the value of the peso, but added that it would not buy dollars to deliberately weaken the local currency against the greenback.

The BSP said there were adverse consequences on the economy of deliberately weakening the peso. While an appreciation of the peso makes Philippine-made goods more expensive and the export sector less competitive, it helps reduce the cost of imports.

11-09-2012, 10:02 AM
About face on public float rule

By Raul J. Palabrica Jr.

Philippine Daily Inquirer

12:24 am | Friday, November 9th, 2012

The clock is ticking on the order issued by the Bureau of Internal Revenue in 2010 directing companies listed on the Philippine Stock Exchange to comply with the minimum public ownership requirement, or public float, by the end of the year.

Public float refers to the company’s stocks that are owned by people other than its directors, officers and controlling investors. Or people outside that circle who want to invest in the stocks for long-term or speculative purposes.

At present, listed companies are required to maintain a certain public float (computed on a percentage basis) depending on their market capitalization, with 10 percent as the minimum. The bigger the capital, the more stocks should be made available to third parties to invest in.

The public float is the cachet that gives a company the character of a publicly owned or traded corporation that entitles it to certain tax privileges.

When the stocks of that company are sold or bought through the stock exchange, the transaction is subject only to a stock transaction tax of 1 percent of the gross selling price or gross value in money of the stocks sold.

This tax is in lieu of the capital gains tax that is normally imposed on the sale of property based on the difference between its original cost and selling price.

Come Jan. 1, 2013, stock transactions that fail to meet the public float requirement will be slapped a 5 percent capital gains tax on gains that do not exceed P100,000 and 10 percent if in excess of P100,000.


The rationale behind this tax measure is simple: If a listed company’s public float falls short of the public ownership benchmark, it forfeits its “public ownership” status. Therefore, its transactions should not be treated any different from ordinary business deals where the capital gains tax is applicable.

PSE contested the legality of the BIR’s order and threatened to bring the matter all the way up to the Supreme Court.

No dice. The feisty Revenue Commissioner, Kim Henares, stood her ground and brushed aside PSE’s doomsday scenario on the enforcement of the public float rule.

By way of concession, though, the BIR agreed to give the affected companies a one-year reprieve, or until the end of this year, to comply with its directive.

Based on this compromise, PSE advised the listed companies that failure to meet the public float benchmark would cause the suspension of trading of their shares for up to six months. If the defiance persists, their shares may be delisted from the bourse.

As PSE appeared serious in enforcing compliance with the BIR order, the affected companies immediately took the appropriate measures to avoid the adverse consequences of noncompliance, from both PSE and BIR ends.


Some companies increased their capital stock or made adjustments in their mix to allow the issuance of more shares for the public float.

For companies that do not have that flexibility, either because their major stockholders are not willing to dilute their holdings, or increasing their public float will not translate to additional capital infusion, or the cost of maintaining their listing on the stock exchange is not worth it, the only option available is to voluntarily delist their shares from the exchange.

Thus, First Pacific and Eton Properties, for example, offered to repurchase the shares of their minority stockholders in preparation for their eventual delisting.

The buyback offer enables the minority stockholders to cash in on their investments before the company becomes a private, or nonpublic, again.

Once delisted, the market for their shares, in case they want to unload them, is practically limited to the existing stockholders and at the price the latter may offer.


Just when the road to genuine public ownership is being cleared of obstacles ahead of the deadline, comes the report that PSE is poised to recommend to the Securities and Exchange Commission the exemption of some listed companies from the minimum public float requirement.

According to PSE president Hans Sicat, “if circumstances would warrant it, companies might be allowed to stay listed and have their shares traded on the local bourse without penalties.”

Big deal! The public float requirement is a tax measure issued by the BIR in the exercise of its revenue raising authority which the SEC cannot indirectly countermand through the exemption process being sought by PSE.

When taxes are involved—which are considered the lifeblood of the government—exemption from their payment is strictly construed against the claimant, and hiding behind the coattails of a government agency for that purpose will be fruitless.

It is doubtful if the BIR would take sitting down PSE’s attempt to run rings around its tax collection efforts, more so after foregoing one year of uncollected stock transaction taxes.

PSE’s sudden turnaround on the public float order it committed to implement more than a year ago raises certain questions about its sincerity in its earlier talks with the BIR.

Why was the issue of “justifying circumstances” not raised at that time? It is not as if the alleged differences in conditions of listed companies that prevent compliance with the public float requirement were only known today.


So what circumstances would warrant a listed company’s exemption from the public float requirement?

Economic slowdown in Europe? That problem has been festering for the past three years and economic data show that it has minimal effect on the country.

Lack of interest by investors in the public float may depress stock prices? Something is wrong with a company if investors think that buying its shares is like throwing money in a sink hole. It’s better off going private again.

Assuming selective exemption is allowed, what will happen to the companies that have already initiated efforts (and incurred huge expenses in the process) to buy back minority shares preparatory to their delisting from the exchange?

Will they be allowed to undo the repurchase and compel the selling stockholders to return their shares?

The flip-flop on the public float issue shows that the “old boys” network at PSE remains entrenched.

11-09-2012, 10:05 AM
DA budget and agriculture performance

By Ernesto M. Ordoñez

Philippine Daily Inquirer

12:29 am | Friday, November 9th, 2012

As the Senate deliberates this month on the budget of the Department of Agriculture, we should look at the DA’s budget impact on agricultural performance. The chart below shows this over a nine-year period.

The 2013 DA Budget of P64 billion is 4.6 times the P14 billion of 2004. From 2009 to 2012, the average DA budget was P4.1 billion. This is 52 percent higher than the average P27 billion from 2004 to 2008. However, the much higher DA budget over the last four years has an average agricultural growth of only 1 percent compared to the 4 percent of the prior period. But isn’t a higher budget supposed to result in higher growth? We should do better in 2013, when the DA budget with attached corporations reaches P74 billion.

2025 vision

What should drive the DA 2013 budget is the Agri-Fisheries 2025 (AF2025) vision crafted by a tripartite group in a two-day conference last Feb. 11, 2011. This was led by the executive branch (Agriculture Secretary Proceso Alcala), the legislature (agriculture committee chairs Sen. Francis Pangilinan and Rep. Mark Mendoza), and the private sector (the Alyansa Agrikultura with its 42 federation organizations and the Philippine Chamber of Agriculture and Fisheries with its 34 agri-business experts).

“Agriculture is the backbone of our economy, with the vibrant rural sector demonstrating strong production and purchasing power, thus serving as a solid foundation for economic development.

“Our farmers and fisherfolk are prosperous, well organized, and youthful, providing the strongest link in an efficient seed-to-shelf agricultural supply chain, and where an empowered rural women sector catalyzes rapid economic development because of its high return of investment potential.

“A public private partnership (PPP) approach is used in governance, especially at the lower government level, that promotes integrity as an antidote to corruption, and competence as an antidote to ignorance, to make the Philippines a premier competitive agricultural force in the global economy.

Budget implications

Does the DA 2013 budget proposal contain provisions that will achieve this vision? The private sector AF2025 participants have recommended such provisions so that the DA budget will result in better agricultural performance. They have suggested items such as sectoral road maps (what: to do the right things) and management systems such as ISO 9000 (how: to do these things well).

But the most important provisions in the budget should address the third part of the AF2025 vision: PPP in governance. This will be both defensive (prevent corruption) and directional (recommend the right programs). Significant budget support should be given to the legally mandated public-private Municipal Agriculture Fisheries Councils (MAFCs). They should be actively used by the municipal mayors so that the DA budget will actually result in agricultural growth.

Projects at the local level with public-private sector governance should also be supported. An example is Sagip Saka, which operationalizes the AF2025 vision in local communities. This is featured in 20 Bombo Radyo provincial stations that demonstrate the best development PPP models and agricultural practices. Private sector sponsors like Emperador Light have made this possible in true public-private partnership fashion. Past episodes can be seen at the Sagip Saka Radio Drama in the www.kiko.ph website.


Higher budgets should result in more, not less, agricultural growth. But just as it takes a village to raise a child, it takes more than top DA officials to accelerate agricultural growth.

To achieve the AF2025 vision, Congress must pass a DA budget that will result in agricultural growth. The private sector must then work with and fully support the admirable efforts of Secretary Alcala in making this DA budget an effective and indispensable tool for agricultural development.

(The author is chairman of Agri-watch, former Secretary for Presidential Flagship Programs and Projects, and former Undersecretary for Agriculture, Trade and Industry. For inquiries and suggestions, e-mail agri-watch_phil@yahoo.com or telefax (02) 8522112.)


2004 14 5%
2005 15 2%
2006 16 4%
2007 19 5%
2008 28 4%
2009 48 0%
2010 50 0%
2011 35 2%
2012 53 2%
2013 63

11-09-2012, 10:06 AM
US, EU ban on Philippine carriers seen to be lifted

By Paolo G. Montecillo

Philippine Daily Inquirer

12:35 am | Friday, November 9th, 2012

The government is confident that Philippine airlines, whose operations in the United States and Europe are now restricted, will be able to expand in those countries next year, citing significant progress in domestic aviation safety.

In its most recent assessment on the Philippines, the International Civil Aviation Organization (ICAO) said it recognized steps taken by the Aquino administration to conform with global air travel best practices.

“There was a validating mission by the ICAO. The purpose was to check on our progress. I heard a lot of positive adjectives being used, but we still have lots to do,” Transportation Secretary Jose Emilio “Jun” Abaya said.

In 2010, the ICAO raised several “significant safety concerns” over the Philippine aviation sector, in particular, the poor state of the industry’s regulatory environment.

The European Union used ICAO’s findings as basis to ban Philippine carriers from operating in the continent. Philippine airliners were also barred from entering the continent’s airspace.

Out of the ICAO’s original 89 points of concern, Abaya said only two remained unaddressed. These involve the registration of aviation companies and regulations covering the training of pilots and other industry personnel.

Also cited by the ICAO report were countries like Angola, Bangladesh, Cambodia, Djibouti, Kazakhstan, Guinea-Bissau, Malawi, Rwanda and Zambia.

In 2007, the United States Federal Aviation Administration (FAA) lowered the status of Philippine carriers to “category 2 and effectively imposed restrictions on the operations of local airliners. The FAA cited the Philippine government’s poor oversight capabilities, and banned local airlines from expanding operations in the United States.

As a result, flag carrier Philippine Airlines (PAL) is not allowed to fly to other destinations apart from San Francisco and Los Angeles. Speaking to reporters, Abaya said the ICAO had agreed to help the Philippines address the two remaining concerns, in time for the scheduled final audit in February.

“We have the tools and policies, we just have to show that we can implement it,” Abaya said.

“They committed to have a person from ICAO to hand-hold us until February,” Abaya said. “What we can realistically expect from ICAO is that they will remove the SCCs.

11-09-2012, 10:06 AM
Gov’t issues global peso notes worth $1B

By Michelle V. Remo

Philippine Daily Inquirer

12:34 am | Friday, November 9th, 2012

The Philippine government has issued $1 billion worth of global peso notes, the proceeds of which will be used to buy back existing bonds in an effort to better manage its liabilities, the Investors Relations Office announced Thursday.

The government wants to buy back around $1.5 billion worth of bonds from holders.

Assuming that the government is able to sell all the global peso notes for $1 billion, it will need to raise $500 million more by other means so it can buy back all the bonds as planned.

To plug the gap, the government is considering buying $500 million from the Bangko Sentral ng Pilipinas, said an official privy on the matter.

The BSP, which manages about $82 billion in foreign exchange reserves, has offered to sell dollars to the government. It said the government could save much by buying dollars from the BSP instead of turning to foreign creditors.

The recently issued government bonds have a 10-year maturity. On the other hand, the bonds that the government intends to buy back are expected to fall due in less than 10 years, the source said.

The government, therefore, will be able to extend the average maturity of its liabilities with the buyback initiative.

Also, the government expected the bonds it issued to fetch interest rates lower than that of the debt notes it hoped to buy back. As a result, the repurchase will enable the government to generate savings.

11-09-2012, 10:07 AM
Strong economy boosted trust funds held by banks

By Michelle V. Remo

Philippine Daily Inquirer

11:58 pm | Thursday, November 8th, 2012

Funds held by trust departments of universal and commercial banks grew at a double-digit pace in the first semester, according to the Bangko Sentral ng Pilipinas. PHOTO BY RICK ALBERTO

MANILA, Philippines—Funds held by trust departments of universal and commercial banks grew at a double-digit pace in the first semester, as the expanding economy prompted more people to engage in portfolio investments.

Data from the Bangko Sentral ng Pilipinas showed that funds placed in and managed by trust departments of large banks amounted to P2.94 trillion by the end of the first semester, up by nearly 18 percent from P2.5 trillion as of the same period last year.

Officials said the rise in the amount of money placed in trust departments indicated rising incomes within the economy, as well as sustained confidence of the public in the country’s banking sector.

Universal and commercial banks registered a total net income of P55.15 billion in the first half, up by nearly 19 percent from P46.47 billion in the same period last year.

11-09-2012, 10:08 AM
Pag-IBIG clarifies CA decision


6:32 pm | Thursday, November 8th, 2012

MANILA, Philippines–Pag-IBIG Chief Executive Officer Darlene Marie Berberabe on Thursday responded to news reports saying that the Court of Appeals found her and the members of Board of Pag-IBIG liable to Globe Asiatique Realty Holdings Corporation.

“This is a gross distortion of the decision of the Court of Appeals. The court never said that Pag-IBIG or any of its officers is liable to Globe Asiatique,” Berberabe said in a statement e-mailed to media organizations. “The CA simply said that the RTC Judge of Makati did not abuse his discretion when he denied Berberabe’s motion to dismiss the case filed by Globe Asiatique against the Pag-IBIG Fund and its Board.”

In her petition, Berberabe claimed that the Board cannot be sued because it has no legal personality of its own. This specific case was never about the merits of the civil case filed by GA against the Fund.

Clarifying further, Berberabe said that the case filed by Globe Asiatique is still pending before the Makati court. She also said that she has already filed a motion asking the CA to reverse its decision.

It will be recalled that Pag-IBIG Fund earlier filed a non-bailable syndicated estafa case against Globe Asiatique’s owners Delfin Lee and Dexter Lee where warrants for their arrest have been issued, in connection with a P6.6 billion loans Globe Asiatique obtained from the Fund.

In retaliation, Globe Asiatique filed a case for damages before the Makati trial court against the Pag-IBIG Fund and its officers to force the continued implementation of the loans.

11-13-2012, 01:04 PM
Santiago: Too late to fight sin tax bill

By Cathy Yamsuan

Philippine Daily Inquirer

3:42 am | Tuesday, November 13th, 2012

All your complaints against higher taxes on cigarettes are for naught, a senator known for her bluntness said Monday.

Sen. Miriam Defensor-Santiago warned the Philippines would be violating a commitment made in 2005 as a signatory to the Framework Convention on Tobacco Control (FCTC) if it fails to raise the so-called sin taxes on cigarettes.

Santiago pointed out the FCTC specifically requires all signatories to raise sin taxes on tobacco products and reduce the prevalence of smoking.

According to Santiago, the Philippines also risks being branded a “rogue state” if it does not comply with the FCTC obligation.

Santiago said all the noise being made by local tobacco companies against higher sin taxes was unnecessary at this point.

“It is too late for industry leaders to raise their objections now. They should have raised their objections in 2005 when the Philippines was about to ratify the FCTC,” she said.

Santiago was apparently reacting to a threat made by the president of the PhilTobacco Growers Association that its members would campaign against six reelectionist senators who would vote in favor of higher sin taxes on tobacco products.

In her interpellation during the Senate discussion on the sin taxes yesterday, Santiago said the FCTC had already “morphed into international law” since the Senate ratified it in 2005. Santiago was the one who sponsored the FCTC on the floor at the time.

Up to P45B in revenue

The FCTC was the first treaty negotiated by the Philippines under the World Trade Organization in response to the global tobacco epidemic in the last decade.

“I challenge every single member of this chamber to read the FCTC because that is international law. It binds our Philippine government,” Santiago said.

The Senate intends to raise sin taxes from both tobacco and alcohol products to generate P40 billion to P45 billion in revenue next year.

The senators have agreed to extend session hours from 2 p.m. to 8 pm. from Monday to Wednesday this week to accommodate all those who may want to engage acting Senate ways and means committee chairman Franklin Drilon in a debate over the proposed taxes.

Outside the Senate building Monday, members of the National Federation of Labor Unions (Naflu) reiterated warnings of possible massive unemployment in the tobacco industry should Congress pass the sin tax bill.

Naflu president Hilario Punzalan said his group still supported the sin tax report initially filed by resigned Senate ways and means chair Ralph Recto that only imposes a “moderate” increase in taxes on tobacco products.

“But the best solution is to temper tax increases so that workers will get to keep their jobs. We are not against a tax hike, but we want it to be moderate and reasonable enough so that employees in the tobacco and alcohol industries would not have to join the growing ranks of the unemployed,” Punzalan said.

The FCTC’s objective in raising sin taxes on tobacco products is to eventually decrease government spending on healthcare costs from tobacco-related diseases.

11-13-2012, 01:09 PM
Unnecessary delays

Philippine Daily Inquirer

8:58 pm | Monday, November 12th, 2012

The entanglement of development projects in judicial wrangling has a tremendous impact not only on the economy but on the overall investment climate as well. The most recent proof of this is the dispute on the privatization of the Angat hydroelectric power plant in Bulacan.

In April 2010, Korea Water Resources Corp. (K-Water) offered $440.8 million for the 246-megawatt facility. The bid bested those of local groups including the Lopez family’s First Gen Corp., the Aboitizes of Cebu and San Miguel Corp. A month later, or on May 25, then newly appointed Chief Justice Renato Corona issued a “status quo ante” order preventing the state-run Power Sector Assets and Liabilities Management Corp. (PSALM) from awarding the contract to operate Angat’s hydroelectric power plant to K-Water. Organizations led by the Freedom from Debt Coalition (FDC) and the Akbayan party-list group had filed a petition for a temporary restraining order on the awarding of the contract, claiming that PSALM committed grave abuse of discretion when it conducted the bidding “in disregard of the people’s right to information, right to water and in violation of its mandate and the Constitution.”

According to the groups’ petition, PSALM abused its discretion when it allowed a foreign company to participate in the bidding in violation of the constitutional provision requiring companies engaged in the exploration and utilization of natural resources to be 60-percent-owned by Filipinos. FDC secretary general Milo Tanchuling had also claimed that the sale of the hydroelectric power plant to a foreign company put at risk Metro Manila’s main source of drinking water. (Angat Dam meets 97 percent of the water needs of some 12 million residents of Metro Manila and irrigates about 31,000 hectares of farmland across Bulacan and Pampanga.) Tanchuling warned that K-Water might sacrifice the people’s drinking water and irrigation needs to generate electricity to quickly recover its investment.

Last Oct. 9, after more than two years, the Supreme Court declared that the sale of the Angat power plant to K-Water was valid. In its decision, the high court said the sale did not violate the 40-percent foreign ownership limit required by the Constitution. Through Associate Justice Martin Villarama, the high court said “the construction, rehabilitation and development of hydropower plants are among those infrastructure projects which even wholly owned foreign corporations are allowed to undertake under the Amended Build-Operate-Transfer Law.”

The high court noted, however, that National Power Corp. could not transfer its water rights to K-Water as this would violate the Constitution and the Water Code. It pointed out that Napocor’s water rights remained an integral part of the state-owned utility firm’s jurisdiction and control over dams and reservoirs.

Unappeased, the petitioners filed in the high court last week a “motion for partial reconsideration,” asking it to reverse its ruling that effectively allowed a foreign company to own, operate and manage the Angat power plant.

This is difficult to understand. The Supreme Court had ruled that the bidding did not pertain to the water component, but only to the power plant, which even wholly owned foreign companies could own. Many existing power facilities have in fact been owned and operated by foreign companies since the Ramos administration in the 1990s.

The Supreme Court’s position regarding the water component of Angat has likewise been manifested by PSALM from the beginning, when it offered to prospective investors only the power component of the Angat complex. Also, shortly after the bidding in 2010, it said that as soon as K-Water had been officially declared the winning bidder, it would be obliged to operate and maintain the Angat hydroelectric plant at no cost to the government, and that the ownership of Angat Dam would remain with the government.

The Angat power plant has been generating less than its rated capacity; it is among the oldest power facilities, being commissioned in the 1960s. If not for the delays in its privatization due to the protracted court litigation, it could have been rehabilitated and made to generate more electricity. Given that the Philippines’ power supply remains critical, there should be no more delays like this one in the implementation of vital development projects.

Sam Miguel
11-15-2012, 08:51 AM
‘Sin tax’ bill favors imports—Enrile

By Cathy Yamsuan

Philippine Daily Inquirer

2:00 am | Thursday, November 15th, 2012

The sin tax bill being debated in Congress tends to favor imported cigarettes as it appears the proposed tax increases on tobacco products do not cover foreign brands, Senate President Juan Ponce Enrile said Wednesday.

According to Enrile, the problem is a question of equity. “My impression is that the bill tends to favor the entry of foreign manufactured tobacco products to the detriment of local products that use material grown in the country,” he said.

Enrile cited a statement made Sen. Franklin Drilon, the acting chairman of the ways and means committee, during the plenary debate on the bill.

“We are not certain at this point whether a higher tax rate for imported cigarettes would be in compliance and consistent with (the country’s) obligations under GATT (the General Agreement on Tariffs and Trade),” he quoted Drilon as saying.

Under GATT, the international trade agreement that the Philippines signed in 1994, all signatories automatically became members of the World Trade Organization (WTO) and are required to adhere to provisions that some of its critics claim are unfavorable to Philippine agriculture.

Drilon said the members of the ways and means committee “[had] not studied” whether the WTO provisions allowed higher taxes to be imposed on tobacco products imported into the country.

WTO rules require members to allow more liberalized trading arrangements among fellow members.

Sen. Edgardo Angara was the first to warn about this scenario even before the start of Senate debates on the sin tax bill. Angara was the Senate President when the chamber ratified the GATT.

Enrile clarified that he is “in favor of enforcing [an] additional tax” on sin products if the aim is to provide funds for the government’s health-care program.

However, he observed that it was unclear whether imported cigarettes would be covered once the unitary scheme of P32 additional tax per pack of cigarettes takes effect.

As it is, the entry of imported cigarettes cannot be stopped because “we have to comply with the WTO,” he said.

“What would be the rate of increase, if any, for imported cigarettes to be marketed in the country when we put in place unitary rate?” he asked.

Drilon earlier explained that “gradual increases” in taxes on tobacco products would make a pack of low-priced cigarettes cost P14 more while a higher-end brand would cost P28 more if the sin tax bill is approved.

In two to three years, the bill provides that the Bureau of Internal Revenue impose a unitary rate of P32 per pack for low- and high-end cigarettes.

The Aquino administration is aiming for a 60-percent increase in taxes of sin products once Congress passes the measure aimed at curbing alcohol and cigarette addiction among Filipinos and, at the same time, increasing revenue.

The Senate is racing against time to pass the measure, with Drilon reminding his colleagues that they have until Nov. 19 to approve it.

Meanwhile, Malacañang yesterday disputed an advertisement by local tobacco growers that claimed the sin tax bill could increase taxes on popular cigarette brands by more than 1,000 percent.

“The appearance of that ad would imply that upon the passing of the sin tax bill into law the increase will be immediately 1,000 percent. That is incorrect,” said presidential spokesperson Edwin Lacierda.

“The rate right now is P2.72 (per pack of cigarette). Next year, it will be P12. That’s hardly 1,000 (percent). After that, P22, until it reaches in 2016 to P32,” said Lacierda, without specifying any particular brand.

Even with the passage of the law, cigarettes in the country will still have the lowest price in Asia, he said.

A pack of the lowest-priced brand in Thailand is sold at P72, P26 in Vietnam, and P48.50 in Indonesia, Lacierda claimed. With Michael Lim Ubac

11-19-2012, 09:18 AM
Drilon bill: Money splendored thing

By Conrado Banal

Philippine Daily Inquirer

12:42 am | Monday, November 19th, 2012

IMF managing director Christine Lagarde, who according to reports is in the Asean region on a three-country swing, has this to say about good taxation: One, the tax must have a broad base and, two, it must only be a small rate.

Surely, Lagarde was not referring to the hotly contested “sin tax” bill in the Senate, sponsored by Sen. Franklin Drilon as chair of the ways and means committee, who by the way is also chair of the finance committee.

It is just that the Drilon bill, which fully adopted the version certified as “priority” by the Aquino (Part II) administration, complete with the many-splendored things like health benefits and truckloads of money for the government to come up with economic miracles, precisely seeks to impose an increase in the excise tax on low-priced cigarettes of more than 1,000 percent in the next four years.

Thus, as is evident in the plenary debates in the Senate on the bill so far, other senators agreed that, like the proponents of the 1,000-percent tax increase, they also wanted Filipinos to stop smoking.

It was just that, well, they questioned the means espoused by the administration to get rid of the vice, which precisely would be “excessive” taxation—even at the expense of the small guys in the tobacco industry, none other than the tobacco farmers.

Incidentally, from what I gathered, the farmers already pleaded with our leader Benigno Simeon (aka BS) to block the Drilon bill, mainly because 1,000-percent tax increase would hurt the farmers. Why? Well, for the simple reason that the low-priced brands make up more than 60 percent of the local tobacco market—the same market served by the farmers.

Anyway, other senators were saying that the Drilon bill would certainly wipe out the market for the low-priced cigarettes that, in fact, account for the biggest revenue collection of the BIR from the tobacco excise tax.

Yet the proponents—mainly the boys and the girls of our leader BS—insisted that their version would generate an additional P40 billion in revenues. This, of course, other senators found incredulous.

Really, the government collected a negligible amount of revenues from the so-called premium brands that had the highest tax rates.

Sen. Ralph Recto, the former chair of the ways and means committee who resigned after the Palace boys and girls lambasted him in media, noted, for example, that the Drilon bill assumed that smokers would still buy the low-grade cigarette brands even after the 1,000 percent tax increase.

Official figures seemed to support Recto, such as the excise tax collection in 2011 showing that low-priced brands accounted for 2.97 billion packs of cigarettes sales, or more than 60 percent of the market, mid-priced brands at 451 million packs, or only 10 percent, and the high-priced brands with 1.1 billion packs, or 25 percent. The rest of the market share was the “premium” brands. It thus was practically nothing.

Yet in their version, the Palace people assumed that, from out of the blue, the “premium” brands would generate sales of 955 million packs, enabling the government to collect fresh revenues of P27 billion, or more than half of their P40-billion target.

And so Recto found the bill dubious. For one, how could anyone assume that smokers would “upgrade” to the more expensive brands because the bill inflated the tax on low-grade cigarettes by more than 1,000 percent? Recto called the assumption … well, overly optimistic.

Now the tobacco-growing area in the country has always been the Ilocos region, and so the gentleman from Ilocos Norte, Sen. Ferdinand Marcos Jr., also stood up to question the validity of the revenue projections in the Drilon bill.

According to Marcos, the trend showed that smokers were going for cheaper brand equivalents, and not the other way around, from cheap to premium, particularly in the years 1997 to 2011.

Those were the years, by the way, when the cigarette excise taxes were increased.

Saying that he had the data on the tobacco industry collated in the past 14 years, Marcos noted that the market share of low-priced, low-taxed cigarettes increased by more than 50 percent, while the sales of high-priced, high-taxed brands dipped.

To Marcos, if the tax would make the brand expensive, the users would always find the cheaper equivalent. And this would most likely be served by—dandararan—the smugglers.

Marcos also pointed out that, based on actual figures in the past several years, the majority of smokers belonged to the “D” and “E” market segment–yes, low-income class. For instance, even in the high-priced brands, about 84 percent of smokers belong to the low-income class, and it was higher at 92 percent for the mid-priced brands.

Meaning, of course, that even if the cigarette tax were raised up to another galaxy, the low-income class would still try to find ways to smoke. And so how could the administration bill be said to be a “health reform measure?”

On the side of the proponents, nobody could come up with facts and figures to counter the points raised by Marcos, even including the back-ups sent by the Department of Finance and the BIR.

The Palace version of the bill, in other words, seemed to be flawed with wrong assumptions, projecting collections of huge revenues straight from dreamland.

Implication: the government would fail to realize its tax goals under the Drilon bill, and so because of the shortfall, the government would have to impose new taxes or increase existing taxes some more … and on and on and on.

Such was the warning issued by the NGO called Caucus for Philippine Competitiveness (CPC), noting that the promise of higher government revenues from the cigarette tax increases would only hold true for the first year, but the collection would already decline by the second year.

Why is that? Well, the CPC feared that, like in other countries that imposed too high taxes on cigarettes, apparently to discourage smoking, in this country smuggling of imported cigarettes would also become rampant.

Because of the failed expectations of high revenues from the “sin tax” bill, the CPC noted that the government would then have to increase income taxes, for instance, or impose new taxes like the proposed “text tax.”

By the way, to the IMF head Lagarde, the tax on text messages may not be a bad idea at all. She reportedly said that the government might also want to look into such a tax.

And, aside from her suggestion that tax should have a broad base and that it should be done at small rates, she left us with another bit of precaution: when the Aquino (Part II) administration tries to raise revenues, it should also do so “one step at a time.”

Truly, if there is such a thing as “donor fatigue” in raising funds for charity, there is also this thing known as “exhausted taxpayer,” particularly the honest guys who must shoulder every new tax imposition of the government, while the crooks just keep on avoiding the new imposition.

11-19-2012, 09:33 AM
Genuino ‘bagman’ got $5M for casino project

Pagcor: New finding bolsters plunder case

Philippine Daily Inquirer

12:15 am | Monday, November 19th, 2012

State-owned Philippine Gaming Corp. (Pagcor) on Sunday welcomed the discovery of what it said was new evidence of alleged corruption involving Rodolfo Soriano, a former consultant of the agency and a close associate of then Pagcor chairman Efraim Genuino.

According to an exclusive Reuters report, US gaming regulators are investigating millions of dollars paid by affiliates of Japanese billionaire Kazuo Okada’s Universal Entertainment Corp. to Soriano around the time Okada’s company was lobbying to win concessions for a $2-billion casino on Manila Bay.

A Universal subsidiary made a $5-million payment in May 2010 to Soriano, according to a Reuters examination of bank records, corporate filings, court documents and records prepared by Universal’s staff.

The $5-million payment was made via a shell company in Hong Kong and was part of the $40 million in transfers made by Universal’s US affiliate Aruze USA. The fund transfers are now a focus for US investigators.

The document trail connecting Soriano to the $5-million payment has not been previously reported. Soriano allegedly served as Genuino’s bagman, according to an investigation report.

Reacting to the Reuters report, Pagcor legal counsel Jay Santiago said the new revelation “will help Pagcor further strengthen the plunder case filed against Genuino and his associates, including Soriano.”

“We will refer this matter to Justice Secretary Leila de Lima and to the National Bureau of Investigation, and wait for their recommendations,” Santiago added.

It’s not clear, however, whether the 70-year-old Okada, ranked 18th among Japan’s wealthiest by Forbes, personally approved the payments.

Universal, more than 66-percent of which is controlled by Okada and his son through Okada Holdings LLC, has filed a suit against three former employees, saying they acted without proper authorization in channeling $5 million through Hong Kong-registered Future Fortune Ltd.

Latest twist

The revelation of the contested payments is the latest twist in a bitter falling out between Okada, who made his fortune making and marketing pachinko (a mix of slot and pinball machines), and Las Vegas casino magnate Steve Wynn.

Okada was Wynn’s partner and largest investor until Wynn charged this year that Okada had broken compliance rules—and possibly US law—by paying some $110,000 in entertainment and other expenses for gaming regulators from the Philippines and South Korea.

The investigation of the much larger payments by Okada’s company threatens to complicate Universal’s attempt to get a US federal court to reverse Wynn’s decision to redeem Okada’s Wynn Resorts shares at a discount.

The probe could also complicate Universal’s push to complete the casino on Manila Bay that it began building in January and has promoted as a VIP destination resort for China’s newly rich.

“I don’t have any illusions that it is going to be stopped, but there has to be accountability,” said Bayan Muna Rep. Teodoro Casiño, who has urged the Philippine government to suspend the Universal project.

Universal referred questions to Yuki Arai, the lawyer who is representing the company in lawsuits against former employees. Arai’s office had no comment as of Friday.


Soriano could not be reached for comment. A woman at his home in Manila said he no longer lived there. She declined to say how Soriano could be reached. An attempt to reach Soriano at a Manila business operated by the family of his wife was also unsuccessful.

The Nevada Gaming Control Board has been looking into payments by Okada-controlled companies to Soriano, a consultant to Pagcor, which regulates gambling in the Philippines, according to a person with knowledge of the matter.

The control board has sent agents to Japan and elsewhere to investigate claims that potentially improper payments were made to Soriano, according to the source who asked not to be named as the process is going on. The source added the payments were also part of an audit by Nevada authorities of Universal in Japan that began in August.

If Nevada authorities determine there is evidence of wrongdoing, state gaming regulators can limit or restrict gaming licenses or impose other sanctions. Universal, which also makes slot machines, is one of two public Japanese companies that are registered with and report to the Nevada Gaming Commission.

At least two former Universal employees have discussed the payments to Soriano with the Federal Bureau of Investigation (FBI), according to people with knowledge of those talks. Any FBI investigation would be for a potential criminal case, separate from the regulatory probe. A spokesperson for the FBI office in Las Vegas, which handled the interviews, declined to comment.

The disclosures deepen questions about compliance and controls at Universal at a time when those issues are already under scrutiny because of revelations it paid to entertain Philippine and Korean gaming officials at the Wynn casino resort in Macau and the Wynn resort in Las Vegas.

Those revelations were first made public by Wynn after he commissioned an investigation by former FBI Director Louis Freeh.

11-19-2012, 09:34 AM
( ^ Continued)

Money trail

Records reviewed by Reuters show the $5 million transferred from Nevada-incorporated Aruze USA was sent first to Future Fortune, which was set up in Hong Kong in 2008 and run by a succession of Universal employees. From that Future Fortune’s HSBC bank account, the money was sent to People’s Technology Holding Ltd, a firm established in 2009 and wholly owned by Soriano.

The payment was part of the $40 million that moved from Aruze USA’s accounts through Future Fortune in the first half of 2010, just as Universal sought tax and ownership-related concessions in the final months of the administration of then Philippine President Gloria Macapagal-Arroyo.

Universal also sought to resolve road use issues that risked complicating its casino development, according to people involved in the project.

The remaining $35 million was paid in January-May 2010 to a firm called Subic Leisure and Management, according to records. Subic Leisure was registered in the British Virgin Islands in September 2008, weeks after Universal acquired reclaimed land on Manila Bay and announced plans to build Asia’s largest aquarium, a Ferris wheel and a 2,050-room hotel and casino.

Under corporate laws in the British Virgin Islands, Subic Leisure does not have to disclose its directors or investors. HSBC said it had no comment.

Universal has looked to Asia for growth to offset a decline in its home market for pachinko. It won a provisional license to operate a casino in the Philippines when it paid about $300 million for land as part of the Manila Bay project.

But Universal continued to lobby for its casino to be exempt from corporate tax and for an exception to rules requiring that Philippine investors own 60 percent of the venture, according to three former employees involved in the project.

Universal, which has a market value of around $1.7 billion, announced it won those concessions in April 2010, a few months before Arroyo left office.

“The incumbent Pagcor management has no knowledge about the said transfer of funds,” Pagcor said in an e-mailed response to questions from Reuters for this article.


Soriano, a confidante of then Pagcor chairman Genuino, frequently visited Universal offices in Tokyo and hosted Okada on his visits to Manila, according to former associates.

Widely known by his nickname “Boysee,” Soriano operated at the nexus of business and politics in Manila and often networked over rounds of golf at the Wack Wack Country Club, one of the country’s oldest golf courses, according to people who worked with him.

Manuel Camacho, 79, a Manila-based lawyer who formerly represented Universal in the Philippines, said it was understood that Soriano was an agent for Okada on the Manila casino project even as he worked for Pagcor as a consultant.

“This guy Soriano—that is Okada himself. He is acting for Okada,” Camacho said.

According to a Freeh investigation report posted on the website of the US Securities and Exchange Commission, Camacho also tagged Soriano as a “bagman” of Genuino.

Camacho, who also spoke to investigators, claims money he was paid by Universal was diverted by his former law partner, Genuino’s son, Erwin, and sent as a payoff to local officials to win clearance for road building. Erwin, his father Efraim and their lawyers could not be reached for comment.

Okada side

Okada has defended himself against accusations of misconduct in the Wynn case in part by saying he was not directly involved in running Universal.

He has also argued he was pushed out as a Wynn shareholder for raising concerns as a director about a $135-million donation approved to a foundation aligned with the University of Macau.

Okada told Reuters in an interview in Hong Kong last month he would also file lawsuits against former Universal employees whom he accused of negligence that contributed to the crisis for his company in its relations with Wynn.

“Once we started looking back at things in 2011, I realized I had been deceived all along,” Okada said. “To be honest, I feel like an idiot for trusting people.”

At the time of that interview, the payments to Soriano had not come to light.

Chain of command

In a lawsuit filed by Universal on Aug. 20 in Tokyo District Court, the entertainment company claims Mitsuo Hida, 65, then president of Aruze USA’s Japan branch, made an unauthorized debit of $5 million from the company’s Bank of Tokyo-Mitsubishi UFJ account in May 2010.

Records show the money was transferred via Future Fortune, where Hida was a director, to Soriano’s People’s Technology.

In his rebuttal to the lawsuit, Hida, who led the effort to win concessions for Universal’s Manila casino from the Arroyo administration, says he was operating under Okada.

“Kazuo Okada is the president of Aruze USA in its entirety,” he wrote in his statement filed with the court. “I was operating under his chain of command in conducting business.”

Hida declined to comment further when contacted by Reuters. His lawyer also declined comment, citing the pending legal case.

A second lawsuit accuses three former Universal employees, including Hida, of acting without authorization in sending $10 million to Subic Leisure and Management. That lawsuit has been filed with a Tokyo court, but remains partly sealed.

Internal Universal documents reviewed by Reuters describe the series of payments to Future Fortune as both “consulting fees” and, in one case, an “increase in capital.” The $5-million payment to Soriano’s People’s Technology was described as an “advance payment” in one internal document.

It was not immediately clear how the payments were treated in quarterly financial reports or in mandatory disclosures to Nevada gaming regulators. An e-mail from a member of Universal’s compliance unit shows the company staff sought guidance on how to account for the $40 million paid to Future Fortune in mid-2010.

Sponsored guests

Both Soriano, Genuino and 16 other former officials of Pagcor are facing plunder charges for alleged malversation of public funds and goods amounting to more than P100 million.

Among the charges listed by the Department of Justice were allegedly illegal cash advances amounting to P44 million that Pagcor donated to the Batas Iwas Droga Foundation where Genuino served as a board member.

Both Soriano and Genuino were also guests at Wynn resorts with their expenses paid for by Universal when Okada was a major Wynn shareholder and Genuino was Pagcor chairman. The Freeh report first disclosed those payments.

Universal has acknowledged both men, and other officials from the Philippines and South Korea, were guests sponsored by the company. Universal has maintained the free lodging and expense payments did not violate the Foreign Corrupt Practices Act, a US law against paying bribes.

For his part, Okada said that the arrangements were made by employees no longer with the company, and that he was not aware of the payments.

Wynn said the payments uncovered by Freeh were evidence that Okada was “unsuitable” to serve as a director of the Las Vegas-based company, and prompted the forcible redemption of Okada’s 20-percent stake in Wynn Resorts for $1.9 billion, a 30-percent discount to the market value.

Wynn Resorts, however, had no comment about the $5-million payment to Soriano when asked by Reuters.

Soriano and his wife stayed free at Wynn resorts five times between 2008 and 2010, records show. On a June 2010 trip, Soriano traveled with Efraim Genuino to Wynn Macau where Universal covered their expenses of $2,974.70, including $25 for Soriano to watch a movie.

Genuino resigned as Pagcor chairman in June 2010 while Soriano quit as Pagcor consultant a day later.

President Aquino then remarked that Genuino’s resignation meant “one less problem for me.” Reports Daxim Lucas and Inquirer Research

Sam Miguel
11-20-2012, 08:05 AM
Tax on text bucked

By Marvin Sy

(The Philippine Star) | Updated November 20, 2012 - 12:00am

MANILA, Philippines - Sen. Francis Escudero yesterday objected to the renewed proposals to collect tax on text, primarily because this was supposedly pushed by International Monetary Fund (IMF) chief Christine Lagarde during her recent visit to the country.

Escudero said the proposed tax on text would hit a sizable portion of the population, especially those belonging to the lower socio-economic strata.

He said around 90 percent of mobile phone users in the country are pre-paid subscribers, the usage of which is heavy on texting. “Instead of providing relief to the public, this twisted idea of taxing text is an additional burden to the masses,” he said.

The proposed tax on text has been made before and was met with widespread opposition from various sectors.

Escudero said that he would personally block the proposal if ever it is introduced or taken up in the Senate.

“If at all, why not set our sights on taxing luxury goods such as motor vehicles and jewelry instead of taxing text messages?” he said.

But more than the revival of the proposal, Escudero expressed his resentment over the statement issued by Lagarde that the tax on text is a good revenue measure because it has a very broad base.

Sam Miguel
11-20-2012, 08:10 AM
Senators OK sin tax target of P40B

By Gil C. Cabacungan

Philippine Daily Inquirer

1:51 am | Tuesday, November 20th, 2012

Senators on Monday agreed to adopt the compromise P40-billion revenue target of the sin tax bill, with tobacco products shouldering 60 percent of the incremental revenue and alcoholic drinks contributing 40 percent.

Sen. Franklin Drilon, acting chairman of the ways and means committee, said the compromise was reached during a 45-minute caucus in the Senate following a three-hour debate on the reproductive health (RH) bill that threatened to throw off the sin tax measure from its targeted approval date.

The P40-billion revenue goal in the first year of implementation of the sin tax has been touted as the middle ground between Sen. Ralph Recto’s target of P20 billion per year and the maximum P60 billion earlier sought by Finance Secretary Cesar Purisima and Bureau of Internal Revenue Commissioner Kim Henares.

Senators decided to hold a caucus after Senate President Juan Ponce Enrile held back the sin tax debates by nearly four hours after insisting on taking up his amendments to the reproductive health bill.

The caucus allowed the senators to shorten the debate and reach a consensus much quicker than on the floor.

“This agreement was ratified at the plenary. And therefore, tomorrow, we will present and vote on second and third reading a revised version that will reflect those aggregates that we described on record,” Drilon said.

“We will present a formula that will arrive at P40 billion,” he added.

Drilon said there would be individual amendments “but the critical portion of the bill on how much incremental revenue must be generated from the so-called sin products is already agreed upon. That is the crux and the meat of the sin tax bill.”

Drilon explained that the 60 percent of the total target, or P24 billion in annual revenue contribution from cigarettes, would be divided among tobacco classes, while the 40 percent, or P16 billion from alcoholic drinks, would be shared between fermented liquor and distilled spirits.

The senators also agreed to adopt a unitary tax starting in the fifth year of implementation of the new sin tax rates. The original target was to implement the unitary tax in the fourth year.

Enrile’s proposal to compel cigarette manufacturers to use at least 20 percent of local Virginia tobacco blend was also adopted.

This was seen as a small victory for local farmers who were bracing themselves for a 1,000-percent tax hike in locally manufactured cigarette brands.

Drilon, however, said that senators should study Enrile’s proposal carefully as favoring local manufacturers could run against the Philippines’ commitment to the World Trade Organization, which frowned on giving subsidies or preference to local over foreign manufacturers.

Recto said he would abide by the decision of the Senate.

“What is important to me is where will we spend the money,” Recto said. But Drilon said determining how to spend was easier than agreeing on a fixed number for sin taxes.

Drilon expressed confidence that the sin tax would be ratified on second and third reading soon in time for the budget deliberations.

But he said he could not say the same for the RH bill as the senators did not reach a consensus to take it up after approving the sin tax.

Sam Miguel
11-20-2012, 08:11 AM
Aquino urged to intervene in P70-B coco levy fund

By Fernando del Mundo

Philippine Daily Inquirer

1:49 am | Tuesday, November 20th, 2012

After an epic 26-year struggle, coconut farmers may be back to square one, unless President Benigno Aquino listens to calls that he intervene in the management of P70 billion in recovered state assets acquired with the use of taxes imposed on them during the martial law years.

The same mantra the Ferdinand Marcos regime used to exact a levy on copra is being raised once again—that the farmers will have to sweat it out to enjoy the benefits of a favorable Supreme Court decision on Jan. 24 that became final on Sept. 4.

Agriculture Secretary Proceso Alcala told reporters on Nov. 9 that the P70 billion in shares of stock redeemed by San Miguel Corp. (SMC) last month, plus dividends and interests, would not be returned to the farmers.

“We develop the industry, not the individual. Because if we make it individual, we won’t be able to use the money until Judgment Day’s eve,” Alcala said. “Once the coconut industry begins to thrive, it will be felt by the coconut farmers.”

The Alcala prescription, said Sen. Joker Arroyo over the weekend, “is exactly the same as the evil that the martial law government promised the farmers when they collected the levies.”

Arroyo’s blast came amid calls by industry reformists for the President to form a council composed of respected leaders that would formulate a program that would use the assets solely for the benefit of the farmers who paid the levy.

Omi Royandoyan, executive director of the policy group Centro Saka, suggested the inclusion of former Sen. Wigberto Tañada and former Quezon Rep. Oscar F. Santos in the council. Tañada, 74, son of the late nationalist Lorenzo Tañada, and Santos, 84, have been at the forefront of a crusade for reforms in the industry for decades.

A presidential task force led by the National Anti-Poverty Commission in its so-called road map has proposed the use of the fund in its programs.

The Philippine Coconut Authority, by law authorized to handle the fund that it had mishandled during the martial law years, wants to undertake massive replanting as coconut trees across the country have become senile, unable to sustain demand. This has been nixed in the Senate as a recipe for “shenanigans.”

Joey Faustino, executive director of the Coconut Industry Reform Movement, warned that the release of the fund before the elections next year as a component of the government dole program, called conditional cash transfers, could result in the “further exploitation” of the farmers.

Uncomfortable silence

“We have told Alcala in our farmers conference that it is most important to set up management and utilization policies for the P70-billion funds and keep up efforts to recover other portions as well,” Faustino said.

“We honestly believe this can be done within the time period before the 2013 election, so that actual implementation comes after the election,” he added.

“Unfortunately, there has been an uncomfortable lull and silence after the funds were remitted to the Bureau of the Treasury over a month ago,” said Marco Sardillo III, spokesperson of a coalition of farmer groups.

“I hope that this does not mean that the purported claims for advances and reimbursements by the coco levy companies—UCPB (United Coconut Planters Bank), Cocolife and the Oil Mills Group—in the amount of approximately P15 billion are quietly being settled,” he said.

Danny Carranza of the peasant group Katarungan called for the urgent creation of a trust fund to prevent the dissipation of the assets and manage them in an efficient and transparent manner.

Carranza noted that pending bills that would create such a trust fund were unlikely to be passed as the current session of Congress neared the homestretch and lawmakers got preoccupied with the elections next year.

“It is, therefore, incumbent upon the President to issue an executive order for this purpose,” he said. “The farmers are, of course, asking: What happened to the Sept. 20 commitment of Malacañang, through Secretary Ricky Carandang, that it will meet with farmers group to present the government’s plan where small farmers are the main beneficiaries?”

In a series of decrees, the Marcos regime clamped the taxes on copra beginning a year after the declaration of martial law in 1972.

For whose benefit?

The decrees resulted in the setting up of a coconut consumers stability fund, a disastrous coconut seedling farm, and later a coconut industry investment fund (CIIF), among many other enterprises.

The initiatives made some of the Marcos cronies rich beyond their wildest dreams but the 3.5 million coconut farmers and their families, comprising a quarter of the nation’s population, remained impoverished.

One night, Representative Santos pored over stacks of presidential issuances and counted the phrase “for the benefit of the farmers” in the documents until he fell asleep.

The CIIF led to the acquisition of UCPB, the oil mills and the concoction of an elaborate scheme to acquire the majority shares in SMC through 14 holding companies and various enterprises set up by lawyers of businessman Eduardo “Danding” Cojuangco.

An audit conducted after the 1986 Edsa Revolution that ousted Marcos showed the fund also was used to hold a Miss Universe contest, an international film festival and the setting up of the Coconut Palace for the visit of Pope John Paul II in 1981. The pontiff refused to stay in the opulence amid grinding poverty besetting Filipinos.

The night the Marcoses fled, shares of SMC in blank stock certificates were found in the Palace vault. This led to the hunt for illegally acquired wealth during the dictatorship and the seizure of the SMC shares. Acquired in 1983 for P2 billion, the shares had ballooned in value.

Joke of the century

In April last year, the Supreme Court, in a ruling derided by a dissenting justice as the “biggest joke to hit the century,” awarded a 20-percent bloc of SMC shares worth P54.4 billion to Cojuangco, SMC chairman and uncle of President Aquino.

Early this year, the court decided that another 24-percent bloc of SMC shares—whittled down from an original 27 percent as a result of SMC’s expansion—belonged to the government to be used for the benefit of the farmers and development of the industry. Even before the decision was handed down, the farmers had already lost some P25 billion when the package was converted from common to preferred shares.

A third bloc of the sequestered SMC shares, worth P15 billion, is in treasury warrants. The high court has been asked to direct SMC to release the amount to the government.

The militants have vowed to recover all of the SMC shares related to the coconut levy. But first, they have to see to it that the first package they had won from the court last month would go to the farmers, not for the rehabilitation of the industry that they say should be funded by the government.

Sam Miguel
11-20-2012, 08:23 AM
Sin tax bill: Flagging some constitutional issues

By Francis Lim

Philippine Daily Inquirer

11:11 pm | Monday, November 19th, 2012

The proposed legislation seeking to impose higher excise taxes on liquor and tobacco products, more popularly known as the sin tax bill, is one of the most controversial pieces of legislation that ever crossed the halls of Congress.

One of the main issues is whether the sin tax law should apply a unitary rate on alcohol and cigarette products, regardless of their retail price.

Let us assume, for example, that the unitary rate is P10 and the cheapest cigarette or alcohol brand costs P1 while the premium brand costs P10. Since the rate is unitary, both classes will be subjected to the P10 unitary rate.

In practical terms, the unitary rate means that the poor man (who will cater to the cheaper brand) will have to pay P11, 91 percent of which is excise tax, while the rich man (who will cater to the expensive brand) will pay P20, only 50 percent of which is excise tax.

In tax parlance, although the absolute value of tax collected is the same, there is a higher burden of taxation on the less fortunate members of society due to the higher percentage of tax relative to their ability to pay.

Some constitutional considerations

Definitely, the government has laudable objectives behind the proposed tax legislation, but given the vigorous opposition to the tax measure, the debate will not likely end up in Congress but in the halls of the Supreme Court.

On its face, the tax measure, in its current form, appears to have discriminatory effect against the poor who will bear the larger tax burden. It appears regressive in nature, and seeks to impose higher burden on those who are in the lower brackets of economic class and status.

As far as I can recall from my law school days, one of the principles of a sound tax system, based on Adam Smith’s Canons of Taxation, is “theoretical justice,” which means that the tax system “should be fair to the average taxpayer and based upon his ability to pay.” (Vitug & Acosta, Tax Law and Jurisprudence, 2006)

Our Constitution now embodies this basic principle of taxation when it expressly provides in Article VI, Section 28, par. (1) that: “[t]he rule of taxation shall be uniform and equitable. The Congress shall evolve a progressive system of taxation.”

Is it equitable to require the underprivileged to pay the same amount of tax as the rich? Is the proposed tax measure really germane to its regulatory objective when the wealthy and their children can continue smoking even with the higher tax rate? Is this not really discriminating against those belonging to the lower-income bracket of the population? Is it not unfair, unjust or oppressive to pass a tax measure that will kill or, at the very least, substantially put at a disadvantage the local tobacco industry, which has been part of the national patrimony since time immemorial?

Is the proposed tax legislation consistent with our Constitution’s “Declaration of Principles and State Policies” to “promote comprehensive rural development” and “develop a self-reliant and independent national economy”? Will it violate the constitutional directive that “all sectors of the country shall be given optimum opportunity to develop”? Will it run against the constitutional objective to have an “expanding productivity as the key to raising the quality of life for all, especially the underprivileged”?

Indeed, in Central Bank Employees Association v. BSP (G.R. No. 148208, 15 December 2004), the Supreme Court said, “If the challenge to the statute is premised on the denial of a fundamental right, or perpetuation of prejudice against persons favored by the Constitution with special protection, judicial scrutiny ought to be more strict.”

Otherwise stated, statutes that discriminate or disadvantage those of lower economic class and status (like the poor) would be met with strict scrutiny by the courts.

And, when the strict scrutiny test is applied, the challenged measure “is presumed unconstitutional, and the burden is upon the government to prove [1] that the classification is necessary to achieve a compelling state interest, and [2] that it is the least restrictive means to protect such interest.” (Serrano v. Gallant Maritime Services Inc., G.R. No. 167614, 24 March 2009).

Or is the nature of the tax as an excise tax and the regulatory objective of the tax measure (i.e., protect and promote public health) as well as the safeguards that are being contemplated (e.g., 6 Billion Peso subsidy to the tobacco industry) sufficient to make it hurdle constitutional scrutiny?

Whatever it is, I fervently hope that our legislators will act with constitutional prudence and circumspection before finally passing the proposed tax measure into law, lest their gallant efforts to put it in place after all these years will be for naught.

(The author is the co-managing partner and head of the corporate and special projects department of ACCRALAW and a law professor at the Ateneo Law School. He may be contacted at felim@accralaw.com.)

Sam Miguel
11-20-2012, 08:24 AM
Risk perception of financial community on PH improving

Moody’s expects key debt ratio to fall below 50%

By Michelle V. Remo

Philippine Daily Inquirer

11:10 pm | Monday, November 19th, 2012

Moody’s Investors Services has projected that the Philippines’ key debt ratio this year will fall below the 50-percent threshold, from a peak of 74.4 percent eight years ago, due to efforts to shore up revenue collection and reduce liabilities.

The credit watchdog also took note of the improving risk perception of the international financial community on the Philippines as a result of improving credit indicators.

The debt-to-GDP ratio—the proportion of the national government’s outstanding debts to the country’s gross domestic product—is a closely watched indicator of a country’s creditworthiness.

Based on international standards, a ratio of a maximum of 50 percent is considered “manageable.”

“Prudent fiscal management has combined with the solid performance of the balance of payments and economic growth to result in the steady improvement in key debt ratios [including the debt-to-GDP ratio],” Christian de Guzman, vice president and senior analyst for the sovereign risk group at Moody’s, said in a statement issued by Moody’s Monday.

As the country’s debt burden declines, Moody’s said, the government enjoys warm reception of the international market for the bonds that it sells.

For instance, Moody’s said, the $750 million in global bonds sold by the Philippine government this month indicated the significant appetite that investors have for instruments from the country.

The proceeds of the sale were used to partly finance the buyback of nearly $1.5 billion in outstanding debt paper.

Moody’s recognized the prudence of the buyback program, saying it helped the government trim its interest liabilities (given that the interest rate on the freshly issued bonds is lower than the rates of bonds repurchased) and extended the average maturity of its total debt (given that the freshly issued bonds have a longer maturity).

“The Philippines is exploiting favorable financing conditions to accelerate its ongoing debt liability management program,” De Guzman said.

Just this month, Moody’s raised the credit rating for the Philippines from Ba2 to Ba1, or from two notches to just one notch below investment grade.

Government officials hope the country will be given an investment grade by next year.

Meantime, Moody’s Analytics, a research firm and a sister company of the credit watchdog, said in a separate statement that it expects the Philippines to post a GDP growth of 5.2 percent for 2012 from 3.7 percent last year.

The government’s official growth target for this year is between 5 and 6 percent.

A 5.2-percent growth for the full year, however, indicates a slowdown in the second half from the 6.1-percent growth registered in the first semester.

“The Philippines’ economy likely decelerated mildly in the third quarter from the second quarter’s 5.9-percent year-on-year growth pace. This will keep 2012 growth above potential at 5.2 percent,” Moody’s Analytics said.

The projected slowdown on a quarter-on-quarter basis is due to adverse effects of bad weather on agricultural output, it said.

Meantime, the projection of a faster GDP growth for this year compared with last year is attributed to higher government spending, sustained rise in household consumption, and increased investments by domestic firms.

Sam Miguel
11-21-2012, 09:14 AM
Text overcharging bared

Smart, Globe, Sun ordered to refund subscribers

By Paolo G. Montecillo

Philippine Daily Inquirer

12:06 am | Wednesday, November 21st, 2012

The National Telecommunications Commission (NTC) has ordered the country’s top telecommunications firms to refund millions of subscribers after finding that the telcos have been overcharging customers for text messages.

The order, one of the three directives issued by the NTC Tuesday, is effective immediately.

“These orders are immediately executory upon receipt, but the telcos have the right to appeal,” Dennis Babaran, NTC legal director, on Tuesday said at a press briefing.

Estimates by the Philippine Daily Inquirer showed that Smart Communications, affiliate Sun Cellular and Globe Telecom may have to return at least P1.42 billion to their subscribers.

The telcos have been collecting 20 centavos more (P1 instead of 80 centavos) for each off-net text message, or those sent from one network to another, since December last year, the NTC said in a ruling.

Text messages between subscribers of the same network and those under unlimited or “bucket-priced” offers are not covered by the order.

About 20 million off-net messages are sent every day, based on 2010 records, which are the latest the NTC has. This is just 1 percent of the 2 billion text messages that were sent daily on average that year in the Philippines, for years considered the world’s texting capital.

Assuming that daily text message volumes have not changed since 2010, the telcos stand to pay at least P1.42 billion to refund 20 centavos for every regularly-priced off-net text message.

100M subscriber base

Globe, Smart and Sun Cellular had a combined subscriber base of 100.65 million at the end of September 2012. This translates to about one active SIM for every Filipino, although a growing number of users now carry at least two accounts at the same time.

Smart and Sun refused to comment on the matter, but said the companies would explore possible legal remedies.

End of ‘unli’ service

Globe said the NTC move could spell the end of unlimited services, which in the company’s opinion had made text messages affordable more than any government-mandated reduction in rates could.

“Since the very beginning of the case, we have clearly stated that SMS is a deregulated service and telcos have the right to set the retail price of this service,” said Froilan Castelo, head of Globe corporate and legal affairs.

“In fact, this has worked for the benefit of the consumer because the prices have gone down drastically with the advent of customization, bucket and combo promos, and unlimited services,” Castelo said.

Extra prepaid credits

Refunds for prepaid subscribers could be given in the form of extra prepaid credits that could be used for calls, text messages, and data services, the NTC said. For postpaid users, the telcos could offer rebates to cover the refund.

In three separate orders, the NTC directed the telcos to reduce the maximum price of text messages from P1 to 80 centavos each, stemming from the reduction of interconnection charges to 15 centavos from the previous 35 centavos.

The reduction of interconnection charges was ordered by the NTC in December last year. The telcos agreed to reduce interconnection charges but refused to pass on savings to consumers, the NTC said.

This meant that text message prices remained at P1 each, instead of the NTC’s intent of reducing it to 80 centavos.

Apart from the refund, the telcos were also ordered to pay a fine of P200 per day from Dec. 1, 2011, until the companies lower their text message charges by P20 per off-net text message.

Circular order defied

The NTC said the telcos had defied Memorandum Circular No. 02-10-2011, which took effect on Dec. 1 last year. The circular was aimed at making text messaging more affordable to the public, pursuant to directives from the Office of the President.

While text messaging was considered a value-added service (VAS), which the telcos technically are not required to deliver, nothing in the law prohibited the NTC from regulating text message rates, the industry regulator said.

A ruling to order refunds, this time covering off-net voice calls, may also be released within the year, said Edgardo Cabarios, head of the NTC’s Common Carrier’s Authorization Division.


Rexmond Fang, a sales executive at a multinational dairy company operating in the country, said the NTC decision was a welcome relief for subscribers who have been paying P1 per text message for over a decade.

Despite the popularity of alternative modes of communications such as social networking sites, profits from text message services make up the bulk of telecom company earnings in the Philippines.

“It’s really about time that the government flexes its muscles against telecom firms,” Fang said.

But Fang, 44, said he was worried about the financial strain that the NTC order might have on telcos.

“There’s been a lot of talk in the news about bad service by companies. But can telcos still push through with their upgrades if they have to pay these refunds?” he said.


Anthony Ian Cruz, president of consumer group TXTPower, shared Fang’s sentiments, saying it was refreshing to see the NTC finally enforcing its own rules.

“Those interconnection charges are the biggest stumbling block for lower text message rates. They have been charging us P1 for more than a decade,” Cruz said in an interview.

“The next logical step is for inter-network messages to be cheaper,” he said. “This should be the last straw to number portability,” he added, referring to one of the group’s previous initiatives for companies to allow subscribers to switch from one network to another without changing numbers.

Japan Airlines passenger service agent Janina Amonte, a frequent subscriber of unlimited promos offered by telcos, said the NTC’s order would have little impact on her.

“It’s not a big deal for me because I’m used to unli promos. But I wish they did this before because I used to text my friends a lot and there weren’t any unli promos then,” she said in an interview.

The 25-year-old said she was spending much less every month on cell phone bills, but was still able to stay in touch with friends and relatives.

Providing cellular phone service is a profitable business.

Philippine Long Distance Telephone Co. (PLDT), the parent firm of Smart and Sun, posted a net income of P28.7 billion in the January to September period. Globe’s net income for the period was at P8.7 billion.

In 2011, PLDT’s wireless revenue amounted to P102.1 billion, of which P99 billion was accounted for by Smart. Globe’s revenue reached an all-time high of P67.8 billion last year and its net income rose to P9.8 billion.

Sam Miguel
11-21-2012, 09:15 AM
Time to act more like a President, Aquino urged

By Tina Arceo-Dumlao

Philippine Daily Inquirer

1:48 am | Tuesday, November 20th, 2012

It’s time to act more like a President and less like P-Noy (President Aquino’s nickname).

According to consultant Peter Wallace, head of The Wallace Business Forum, President Aquino deserves high marks for his administration’s consistent fight against graft and corruption that has enhanced business confidence and made him a highly popular leader.

But much more needs to be done if the Philippines is to break through the poverty trap, and unfortunately, Mr. Aquino does not seem committed and enthusiastic enough to see these needed reforms through, putting his considerable political capital to waste, Wallace said.

According to Wallace, Mr. Aquino’s consistently high net satisfaction rating—at 68 percent as of end-August, according to the Social Weather Stations—has made him a very popular figure, and that popularity translates into coveted political capital.

“President Aquino can use that political capital to make tough, unpopular decisions. Why doesn’t he?” Wallace said at yesterday’s meeting to mark the business forum’s 30th anniversary.

Not enough

Wallace said during his presentation to business and government leaders that Mr. Aquino should realize that leadership was a full-time job, not just from 9 a.m. to 5 p.m.

“It is time for him to do two jobs. He is the President, not P-Noy,” Wallace said.

According to the group’s latest Quarterly Perception Survey, while 68 percent of respondents said the President was doing a good/excellent job and that he was making tough decisions needed for reforms, 41.7 percent said the efforts “were not enough.”

There were also respondents who said the President was only giving a “moderate effort” to support business and only “somewhat” aggressive in pushing for reforms needed to improve business conditions.

Wallace recommended that Mr. Aquino exercise his considerable political will to get vital infrastructure built; spend the money the budget department had disbursed to spur economic growth; resolve the open-pit mining ban that had put a damper on mining activity; and upgrade the air safety ranking of the Philippines.

It is also important to quickly resolve the Maguindanao massacre case and other cases of extrajudicial killings.

Record jump

“Except for a couple of changes, the political will to get things done is lacking,” Wallace said.

Wallace, however, said that despite some shortcomings, business confidence and optimism that weren’t there under former President Gloria Macapagal-Arroyo were now present and policy changes had taken place.

Bidding for government projects is now more transparent and competitive; handling of government-owned and -controlled corporations has been reformed; the budget for the conditional cash transfer (CCT) program has increased; and pocket open skies has been implemented, allowing airlines to freely land in airports outside Metro Manila.

Wallace also cited the improvement in the ranking of the Philippines in the Global Competitiveness Report of the World Economic Forum by 22 places since 2009; an improvement in the ranking of the Corruption Perception Index; the record jump in the stock exchange composite index by 64 percent from the time Aquino came to power; credit rating upgrades; the increase in tourist arrivals; and an increase in rice output.

Trickle of investments

Improvements in the business environment, however, have been found wanting. The Philippines does not rank high in ease of starting a business, global perceptions and trade logistics.

“It is business that is not getting the attention needed,” said Wallace.

This is reflected in part in the trickle of foreign direct investment (FDI). The Philippines so far only recorded $2.3 billion worth of FDI from 2011 to the first half of 2012, compared to

$57.4 billion in Singapore, $27.5 billion in Indonesia and $10.6 billion in Thailand.

Mr. Aquino is doing more reforms on the social front.

Wallace said the successful impeachment of Chief Justice Renato Corona had “strengthened him considerably” and that “could be the beginning of a true cleanup of many other scandals by his many other people.”

Mr. Aquino’s no “wang-wang” policy has also brought about important societal change.

Unsolicited advice

Wallace, however, stressed that sustaining the high approval rating could not be ensured as there were many factors that could bring it down.

These include the rise of hunger and poverty incidence; failure to address unemployment; disappointing implementation of the flagship public-private partnership (PPP) program; failure to address the Mindanao power shortage; and the defeat of administration candidates in the 2013 senatorial elections.

Former President Fidel Ramos, who was the guest of honor at the meeting, offered similar “unsolicited” advice to President Aquino, saying a president should work 25/8 and not just 24/7 because of the demands of the job.

“You have to juggle 10 balls at the same time and make sure that you do not drop any,” the 84-year-old Ramos said. “You have to do multitasking and you have to go down to the grassroots. You also have to market our economy abroad. That is my humble suggestion. At this point, it is take it or leave it.”

Ramos told the Inquirer that Filipinos should rally around Aquino to make sure he succeeded.

“The way I look at it, he is the skipper of our one and only ship, the MV Pilipinas, and we are all on board. So we must help the skipper and the crew,” Ramos said. “First we have to make sure the ship is seaworthy and going in the right direction and then strong enough to compete against other ships.”

Ramos said he would like Mr. Aquino “to act like a skipper and lead by example” as he seemed to be lacking in terms of motivation and commitment.

He said, however, that he was confident and optimistic about the country’s prospects under

Mr. Aquino. “Kaya natin ito! (We can do this),” Ramos said, flashing his familiar thumbs-up sign.

Sam Miguel
11-21-2012, 09:18 AM
Philippine stocks rise to new all-time high

Philippine Daily Inquirer

1:51 am | Wednesday, November 21st, 2012

The local stock market rose to unprecedented heights on Tuesday, bringing the main index to the 5,500 mark on rosy domestic economic prospects for 2013 alongside fresh hopes on the US economy.

The main-share Philippine Stock Exchange index gained 51.03 points, or 0.94 percent, to close at 5,500.58. A new intraday peak of 5,510 was also recorded.

“The stock market’s charge to new highs further validates the strength of the Philippine economy. We welcome the good news from overseas as a catalyst of investor confidence in the country,” PSE chief operating officer Roel A. Refran said.

The day’s upswing was led by the financial (+2.11 percent) and holding firm (+1.73 percent) counters. Value traded amounted to P6.83 billion. There were 89 advancers versus 76 decliners while 46 stocks were unchanged. JG Summit (+5.25 percent) and BPI (+3.21 percent) were the outperformers among index stocks. First Gen, AC, Jollibee, AGI, Semirara, SM Investments and Metro Pacific also significantly contributed to the PSEi’s gains. BDO, Metrobank, Meralco and EDC also traded higher.

“The spark in the PSEi looks fairly broad-based. Investors were picking up conglomerates that reported an acceleration in earnings growth in the third quarter 2012 such as JG Summit, SM Investments and Ayala Corp.,” said Jose Mari Lacson, head of research at stockbrokerage Campos Lanuza & Co.

Lacson noted that JG Summit saw its net profit jump 106.1 percent year on year in the third quarter on the back of dividend income from its PLDT stake while Ayala’s net income improved 10 percent over the same period as many of its noncore subsidiaries recovered. Net profit of SM Investments increased 14.9 percent with a recovery in retail sales and higher contribution from its banks.

Among second-liners, the outperformers were PNB (+11.69 percent) and Security Bank (+2.55 percent).

On the other hand, the PSEi’s gains were tempered by the decline of PLDT, Megaworld and URC.

Paul Joseph Garcia, senior vice president at Bank of the Philippine Islands, said the local stock market had more room to go up and target 5,600 by the end of the year and further to 6,500 by 2013.

“We expect the (Philippine) economy to grow higher next year and there may be a rebound in global economic growth led by China. With its new leadership in place, China’s growth may pick up pace,” Garcia said.

For 2013, Garcia said average corporate earnings in the Philippines might rise by at least 15 percent, supporting a further jump in the PSEi.

Investors also took their cue from an upbeat Wall Street trading overnight due to favorable US housing data, hopes that the United States would be able to address the so-called “fiscal cliff” and a series of mandated tax increases and spending cuts that could drastically reduce the US deficit but increase risks of recession in 2013.

Sam Miguel
11-21-2012, 09:21 AM
Senate OKs lower cigarette tax by 2017

By Cathy C. Yamsuan

Philippine Daily Inquirer

2:08 am | Wednesday, November 21st, 2012

Tobacco companies gained a minor victory Tuesday night after senators agreed to lower the unitary tax on cigarettes from P32 to P26 per pack by 2017, the fifth year of implementation of the proposed higher taxes on sin products.

The amendment was made just before the Senate, on a vote of 15-2, approved on second and third reading the so-called sin tax bill certified as urgent by Malacañang. Sen. Francis Escudero and Sen. Joker Arroyo voted no.

‘Distorted model’

The change was accommodated after Senate President Juan Ponce Enrile and Sen. Ferdinand Marcos Jr., both from the tobacco-producing North, objected to what Enrile called a “distorted and disproportionate model” of tax increases proposed by the Department of Finance from 2013 to 2017.

Enrile said the Senate version of the sin tax bill would preserve the “old system of classification” of cigarettes to low, middle, and high-class varieties that would be taxed different amounts from 2013 to 2016.

Only at the start of 2017 would all classifications impose a unitary tax of P26 per pack as agreed Tuesday night, Enrile said.

While a clear explanation was not given for the reduction in unitary tax, observers noted that it was announced after the Senate suspended discussions on the sin tax bill after Enrile accused the bill’s sponsors of presenting a “distorted and disproportionate model” that would force tobacco companies to pay more taxes than their counterparts in the alcohol industry.

Higher burden

Enrile had complained that based on assumptions made by the DOF, the tobacco industry could end up shouldering as much as 69 percent of the tax burden meant to be shared with alcohol products.

Enrile, waving what looked like a copy of the DOF report, said that while this ratio might be applicable in 2013, the DOF model also showed that the tobacco industry would shoulder a higher burden of 68 percent in 2014, 69 percent in 2015, 67 percent in 2016, and 66 percent in 2017.

He noted that in 2011, the tobacco industry’s share of sin taxes was only 57 percent.

“There is a definite bias (in) this proposal in favor of alcohol against tobacco farmers of the North. This is against tobacco. Why?” he asked with some irritation.

Marcos supported Enrile’s observation. Marcos earlier took the floor and noted the distortions in burden sharing.

Still committed

“I think the (senators) who do not believe in this distribution deserve an explanation from the secretary of finance,” Enrile said.

On Monday night, Sen. Franklin Drilon, the acting chairman of the ways and means committee, announced that the senators had agreed during a caucus to a 60-40 burden sharing between the tobacco and alcohol industries on the P40-billion incremental tax to be imposed on sin products.

Enrile said the Senate was still committed to its promise to Malacañang to approve the sin tax bill.

More time

“There might be a misunderstanding. I want to put it on record so we would not be blamed that we are derailing the sin tax. But we (have to) push it according to the agreement,” he said.

Drilon asked that he and his staff be allowed to “recompute” the burden-sharing ratio starting 2014.

“We wish to have a little more time… We are requesting that we suspend consideration of this measure and take it up again tomorrow,” he said.

Early during Tuesday’s discussion, Sen. Joker Arroyo complained that the bill did not specify the appropriations that would be given to healthcare.

The sin tax bill proponents had said that the additional revenue from the sin taxes would be used to fund healthcare needs, particularly the repair of government hospitals and paying the Philippine Health Insurance Corp. (PhilHealth) premiums of poor Filipinos.

Sam Miguel
11-23-2012, 11:00 AM
PH 2nd-fastest growing bond market in East Asia as of Q3, says ADB

By Michelle V. Remo

1:43 am | Friday, November 23rd, 2012

The bond market in the Philippines was the second-fastest growing among emerging economies in East Asia as of the third quarter, as the country’s buoyant economy boosted appetite for peso-denominated instruments.

The Asian Development Bank said in a recent report that outstanding bonds in the local bond market registered one of the fastest growth rates in the region as of end-September, as economic problems in Europe and the United States prompted investors to seek higher yields in Asia.

The Philippines was one of the most preferred sites for portfolio investments given a favorable outlook on its economy, the ADB said.

According to the ADB report, the outstanding amount of local currency-denominated bonds from the Philippines reached a dollar equivalent of $91 billion as of the end of September, up by 21.8 percent from that in the same period last year.

Only Singapore posted a faster growth rate of 25.8 percent.

In absolute terms, however, the amount of outstanding bonds in the Philippine market was lower than that for most countries in the region.

Industry players admit that the country’s capital market remains small compared with its regional counterparts.

Growth rates and outstanding amounts of bond markets in the region are as follows: Vietnam, 21.1-percent growth to $21 billion; Malaysia, 20.7-percent growth to $318 billion; South Korea, 16.2-percent growth to $1.37 trillion; China, 12.5-percent growth to $3.65 trillion; and Hong Kong, 3.7-percent growth to $176 billion.

Contradicting the trend in the region, the bond market of Indonesia fell by 0.6 percent to $110 billion.

For the entire region, the outstanding amount of bonds thus stood at $6.24 trillion, rising year on year by 13.9 percent.

“Volatility spillover was directly transmitted to Asian local bond markets during the US and eurozone crises,” said the ADB as it noted the shift in investor appetite to instruments issued from emerging Asian markets.

It said the appetite for portfolio instruments from emerging Asian economies was also reflected in the increase in demand for equities, currencies and money market instruments in the region.

Data on the Philippines also showed that of the P3.8 trillion (or $91 billion) in outstanding bonds by the end of September, about P3.3 trillion was accounted for by government securities while corporate bonds accounted for the balance of P500 billion.

The outstanding amount of Philippine government securities represented a year-on-year growth of 14.7 percent, while that of corporate bonds marked an annual growth rate of 26.1 percent, the ADB said.

Although the increase in foreign portfolio investments is a welcome development, monetary officials said excessive amounts and steep increase could be destabilizing to an economy.

They said these can cause sharp and sudden appreciation of the local currency against the US dollar, adversely affecting exporters.

This is why the Bangko Sentral ng Pilipinas has implemented several measures against excessive inflows.

Sam Miguel
11-23-2012, 11:06 AM
Discredited credit rating

By Raul J. Palabrica Jr.

Philippine Daily Inquirer

1:34 am | Friday, November 23rd, 2012

While the business community may have thought that credit ratings agencies have successfully dodged their liability for erroneous ratings that contributed to the near financial meltdown of the United States in 2008, an Australian court recently doused that impression.

Early this month, the Federal Court of Australia ordered Standard & Poor’s (S&P) and investment bank ABN Amro to pay the equivalent of US$31 million to several Australian towns that bought securities from ABN earlier rated by S&P as AAA.

This rating means the issuers of the securities are financially stable and can be relied upon to pay the promised interest, and repay the principal, when they fall due.

The securities, described as “constant proportion debt obligations,” are by-products of the billions of dollars in mortgage housing loans that many US banks gave out to borrowers and homeowners with dubious credit standing.

ABN packaged and sold these securities in Australia in 2006, with the S&P credit rating bandied as a “seal of good housekeeping” for them.

Unfortunately, the US financial market unraveled in 2008 and the Australian towns were left holding the proverbial empty bag. The securities were not even worth the paper on which they were printed.


The Australian towns sued S&P for damages on grounds that it negligently and misleadingly granted the “AAA” rating on the securities when a “junk rating” (i.e., there is a high risk of default on the notes) should have been issued.

S&P raised the “opinion defense” or the argument that it gave the subject credit rating after a fair, reasonable and independent evaluation of the merits of the securities and, therefore, cannot be faulted if their appraisal later turned out to be wrong.

At the trial, however, it was proven that several errors and omissions were committed by S&P during the rating process and that it had relied on the calculations and projections submitted by ABN to justify the issuance of the triple-A rating.

Thus, the Australian court ruled that S&P’s rating was “misleading and deceptive and involved the publication of information or statements false in material particulars and otherwise involved negligent misrepresentations to the class of potential investors in Australia.”

It stressed that the AAA rating “conveyed a representation that, in S&P’s opinion, the capacity of the notes to meet all financial obligations was ‘extremely strong’ and that S&P had reached this opinion based on reasonable grounds and as a result of an exercise of reasonable care when neither was true and S&P also knew not to be true at the time made.”


This is the first time in the world that a court has found a ratings agency liable for giving a good credit rating on a financial instrument that is otherwise undeserving of that endorsement.

Until the Australian court’s ruling, S&P, Fitch Ratings and Moody’s Investor Services (the top three credit ratings companies in the world) have been able to elude or tie down in litigation the suits filed by the US Securities and Exchange Commission and several state governments against them for their role in the subprime housing mortgages scandal.

S&P and Moody’s tried, but failed, in August, to have a case filed against them in a US court dismissed based on the “opinion defense.”

The judge in that case said that “… if a rating agency knowingly issues a rating that is either unsupported by reasoned analysis or without a factual foundation it is stating a fact-based opinion that it does not believe to be true.

“Ratings are actionable if they both misstated the opinions or beliefs held by the rating agencies and were false or misleading with respect to the underlying subject matter they address.”

The Australian court’s ruling is expected to open the floodgate for the filing of similar suits against S&P and ABN (now the Royal Bank of Scotland) in Europe and the US where the same securities were rated and sold by the same parties.


Although long in coming, the judgment against S&P, and the rest of the rating agencies, in general, is fitting and proper. It’s time these companies are held accountable for their conspiratorial relationship with issuer of securities that resulted in the once-in-a-century financial maelstrom whose adverse effects are still being felt up to now.

The rating companies gave the credit rating the securities issuers wanted for their instruments, otherwise the latter would go to their competitors that would be willing—for the right price—to give the desired credit rating.

Since rating companies are profit centers, not charitable institutions, the due diligence and critical evaluation required of honest-to-goodness credit assessments were conveniently ignored.

When the roof fell and their involvement in the events that led to the financial crisis were exposed, the rating companies were quick to wash their hands of any culpability and claimed they merely gave opinions that the investors were free to accept or reject.

At present, issuances of securities by Philippine companies customarily carry credit ratings issued by domestic ratings agencies. Whether or not the rating issued adds value to or makes the securities attractive to investors is a big question mark.

The reputation of the people behind the securities offered to the public, not the rating given, determines the success or failure of the offering.

Sam Miguel
11-23-2012, 11:28 AM
Bicam on sin tax set next week

By Christina Mendez

(The Philippine Star) | Updated November 23, 2012 - 12:00am

MANILA, Philippines - The Senate and the House of Representatives will begin their bicameral conference committee meeting on the sin tax reform bill next week, Sen. Franklin Drilon said yesterday.

“We’ll start the bicam at the end of the month because I expect to finish the budget under our schedule by Nov. 28,” Drilon, Senate finance committee chairman, said at the weekly Kapihan sa Senado yesterday.

He said the bicameral conference meeting on the sin tax would coincide with the one for the 2013 national budget.

“Anyway, the bicam on the sin tax will be both easy. Well, I don’t say easy but I foresee a substantial agreement and I underscore substantial on the cigarette tax because the cigarette tax, we have projected it at about P23.5 billion as against the House version of P26 billion,” Drilon said.

Drilon said he is confident the bicameral conference meeting on sin tax will proceed smoothly, citing the House leaders’ declaration that they are amenable to following the Senate version, at least with regard to cigarette tax rates.

“It is on the alcohol side which I expect some difficulty because we have assigned about P16 billion for the alcohol excise tax to achieve the 60-40 ratio,” he said.

The House version projects P5-billion additional revenues from alcohol.

For a sin tax reform advocacy group, the bicameral conference committee is a battleground “shrouded in mystery” where surprise amendments can emerge.

“We are fighting three wars. We won in the Lower House and Senate and we have to win in the bicameral conference committee,” Action for Economic Reforms (AER) coordinator Filomeno Sta. Ana III said.

“Any change in the consolidated bill should not deviate from what was already approved and instead, should incorporate the best features in both bills,” he said.

Jo-Ann Latuja, AER senior economist, lauded Drilon for pushing for provisions like the removal of the price classification freeze, imposition of a unitary tax rate for cigarettes of P26 by 2017, annual tax increases of no less than four percent, imposition of higher tax rates for alcohol and earmarking of funds for universal health care, particularly for tobacco farmers and workers.

“Despite the attempts to water down the bill, we are very grateful for Sen. Drilon’s success and being able to pull the tax rates up. Instead of P22 (per pack at a unitary rate), it became P26,” Latuja said.

Sta. Ana said legislators who sided with the tobacco industry should be excluded from the bicameral meeting.

He said Sen. Ralph Recto even copied the Philip Morris proposal for his committee report.

Dr. Antonio Dans of the UP College of Medicine, for his part, said the passage of the sin tax measure is a “major health victory from any point of view.”

“This is not our first sin tax bill, but it is our first substantial sin tax bill,” Dans said.

Ready by January

Malacañang, for its part, said it expects the measure to be ready for implementation by January.

Secretary Manuel Mamba, head of the Presidential Legislative Liaison Office, said the foremost concern of the government in pushing for the immediate passage of the measure is the promotion of public health by making sin products unaffordable, especially to the youth.

He told radio dzRB there are “still provisions to be threshed out” during the bicameral conference committee meeting.

Mamba expressed confidence the P40-billion target revenues of the Senate could be achieved and that the rates would comply with the World Trade Organization (WTO).

He also squelched fears of huge economic cost for tobacco farmers, saying subsidy for them could even reach up to P10 billion and could help them shift to other products or improve tobacco farming.

Mamba further said monopoly in the tobacco industry would be gone because prices will be competitive. “They (farmers) have everything to gain,” he said.

He also allayed fears of possible rampant smuggling or the proliferation of black market cigarettes and alcohol because of more expensive sin products.

“That will be difficult because (our products) will still be the cheapest compared to neighboring countries… I believe that is a question of enforcement,” Mamba said.

In the bicameral meeting, Recto said a disagreement may arise over where to use the revenues raised.

The Department of Finance and the Department of Health said the additional revenues would go to boosting funds for public health insurance and services.

Recto pointed out that while the Senate had clearly stated that the health sector would get more funds, the House did not make any recommendations.

Still hopeful

As lawmakers prepare for their bicameral conference committee meeting on the sin tax bill, Philip Morris Fortune Tobacco Corp. (PMFTC) said it is still seeking a reduction in the tax rate for cigarettes.

“I think that the increase in the first year is still very high and obviously, we have concerns in terms of the impacts, in terms of purchasing tobacco and related impact on the market and so forth,” PMFTC president Chris Nelson told reporters in a chance interview yesterday. “We are hoping it (rate) can still be reduced.”

Earlier this week, Senate Bill 3299 which is seen to generate P40 billion in revenues from higher taxes imposed on alcohol and tobacco, was approved on third and final reading.

Under SB 3299, hand-packed cigarettes shall be subject to an excise tax of P12 per pack effective Jan. 1, 2013.

The excise tax rate shall rise to P15 per pack in 2014, P18 in 2015, P21 in 2016 and P26 per pack in 2017.

The same tax rates shall apply to machine-packed cigarettes with current excise taxes amounting to less than P7.56.

For machine-packed cigarettes currently subject to excise tax rates of between P7.56 and P12, the new tax rate shall be P16 in 2013, P18 in 2014, P22 in 2015, P24 in 2016 and P26 in 2017.

As for machine-packed cigarettes with a current excise tax rate of more than P12, the new tax rate starting next year shall be P20 per pack, increasing to P21 in 2014, P22 in 2015, P24 in 2016 and P26 in 2017.

Nelson declined to specify his desired tax rate reduction but said he is hoping for “further moderation.”

For his part, Trade Undersecretary Adrian Cristobal, Jr. said the approved Senate version appeared to have already shed off discriminatory features of the old law in terms of taxes on distilled spirits.

The Philippines needs to enact reforms in liquor taxes by next March in compliance with the WTO and in response to a WTO case raised by the US and the European Union against the Philippines.

The EU and US claimed the Philippines’ excise tax regime greatly favors local distilled spirits.

“We think it (bill) is compliant with WTO,” Cristobal said.


Organized labor, meanwhile, condemned yesterday the passage of the sin tax bill, saying it would lead to more financial burden for workers.

The Kilusang Mayo Uno (KMU) said the sin tax measure is part of a package of policies that aims to legitimize hikes in power rates, transport fares, and fees for government services.

“The sin tax bill should not be taken in isolation from other government measures that are increasing the hardships of workers and the poor. It will further reduce the hard-earned incomes of workers and the poor and should be junked,” KMU chair Elmer Labog said.

He said the measure would reduce workers’ real income, adding its real purpose is to generate additional revenues for the government and not to discourage the poor from buying alcohol and tobacco products.

“Judging from the Aquino government’s record, these taxes will not go to improving the country’s health services or other social services. These will go to foreign lending institutions in the form of debt payments and to big bureaucrats in the form of corruption and perks,” he said.

He said the government is using the sin tax bill to cover up its uncaring attitude toward poor people’s health as shown by its plan to privatize public health institutions.

“Scaring people with deadly hospitalization fees so they will lead healthy lives is not the best way to promote the public’s health. The Aquino government cannot claim to be championing the public’s health when it goes full swing in privatizing public hospitals,” he pointed out.

If the government is sincere about improving the health of the poor, it should approve measures that will enable them to buy enough food. With Iris Gonzales, Louella Desiderio, Aurea Calica,Mayen Jaymalin

Sam Miguel
11-28-2012, 08:51 AM
Why we don't need the Kasambahay and Solo Parents bills

By: Nonoy Oplas

November 25, 2012 2:29 PM

State welfare is sometimes defined as “the politicians are well, taxpayers pay the fare.” This is true for taxpayers’ funded welfare and subsidy programs for the poor, like the conditional cash transfer (CCT), education and healthcare, housing and credit, train subsidy and tractors, or condoms and pills.

But there are other state welfare programs that are not funded by taxpayers. Instead, the government forces private enterprises and employers to provide mandatory price discounts to consumers, or mandatory high wages and other benefits to workers. Those caught violating will penalized. Examples of this type of welfare are the minimum wage law and mandatory discounts to senior citizens and persons with disabilities.

There is a measure that is expected to become a law soon - the “Kasambahay Bill” or “Domestic Workers Act” lodged as Senate Bill No. 78 and House Bill No. 6144. The bicameral conference committee has already approved a common measure this week. Among the provisions of the unified bill are:

- Monthly minimum wage of P2,500 in the National Capital Region, P2,000 in chartered cities and first class municipalities, and P1,500 in other municipalities;

- Kasambahay entitled to other social benefits such as Social Security System, Philhealth, and Pag-Ibig Fund, with employers shouldering the premium payments if the helpers receive a monthly salary below P5,000; and

- Kasambahay should have a written contract specifying the terms of employment, a pay slip, daily and weekly rest periods, service incentive leave of five days with pay, 13th month pay, and so on.

The premise is that domestic workers are generally exploited by their employers and so must be protected by the state. This logic can be faulty. Hiring of domestic helpers is a private and often intimate contract with workers who often live in the house of the employers and know many confidential and sensitive information about the household.

It is hardly possible for employers to maltreat their kasambahay as they will be exposing themselves and other family members to danger when the kasambahay will not do their work properly. Like a nanny who fails to attend just for a minute to a baby who climbs the stairs or a high chair, then falls down.

Employers often grant salaries and other perks more than necessary to inspire their kasambahay to do their work well, and make them stay long with the family. There are many instances when a yaya would take care of a baby until he/she becomes an adolescent. The employers no longer treat them as ordinary domestic workers but as extended family members.

Lazy, inefficient or rumor-mongering workers are usually fired by their employers, rendering the mandated welfare moot and useless. In the same vein, abusive employers also lose their good workers in just a few days or months. This is a penalty worse than government-mandated penalties and fines as the household heads can hardly work in their offices since they have to take care of the kids, suffering a steep decline in productivity.

The bottom line is legislative measures like the Kasambahay Bill are generally unnecessary.

Then there are two Senate bills that want to give various mandatory discounts to solo parents. SB 2563, which Senator Manny Villar introduced, seeks to amend Republic Act No. 8972 or the “Solo Parents Welfare Act of 2000,” giving additional benefits to solo parents, including a 20 percent discount on all purchases of milk or formula products, diapers, medicines and supplements, other necessary infant items for children 0-4 years old.

SB 1439 by Sen. Loren Legarda provides the following additional benefits to solo parents:

- 10 percent discount on all purchases of clothing materials for children 0-2 years old;

- 15 percent discount on all purchases of baby’s milk, food and food supplements for children 0-2 years old; and

- 15 percent discount on all purchases of medicines and other medical supplements/supplies for children 0-5 years old.

There are serious flaws in these two bills forcing companies to give mandatory discounts.

One, they assume that all solo parents in the country are poor or financially distressed. This is not true. Some solo parents are rich or have rich family members who can give them assistance in cash or kind.

Two, the bills assume that all shops, manufacturers and traders that produce or sell these goods are rich or financially stable and hence, can afford to give such discounts without adversely affecting their financial conditions. Again this is not true. While some companies are financially stable, others are not or may even be on the brink of bankruptcy due to various financial, economic and social challenges here and abroad.

Three, the bills assume that even financially unstable shops, manufacturers and importers of these products will continue selling these goods. This is wrong. One result of the implementation of RA 9994 or the “Expanded Senior Citizens Act of 2010” - which requires 32 percent discount on medicine purchases - is that small drugstores that cannot afford to keep selling medicines at a loss have stopped selling essential medicines to senior citizens. Senior citizens living in small and rural municipalities have to travel farther to bigger cities so they can buy at Mercury or other large chain pharmacies.

This proves again that Newton’s third law of motion - “For every action, there is an equal and opposite reaction” - can also apply in economics. This can be aptly restated thus: “For every government intervention to force welfare, there is an equal and opposite reaction that results in dis-welfare."

The economic tensions in Greece, Spain and other European economies that are limping from heavy public debts are additional proof that heavy welfarism can create more long-term harm than benefits. The bills on Kasambahay and Solo parents, as well as many other welfarist programs should be abandoned. Government should focus on promulgating the rule of law, protecting property rights and the citizens’ basic freedom, instead of forcing equality among people.

Sam Miguel
11-29-2012, 11:13 AM
Greed, need, ignorance and stupidity

By Ma. Ceres P. Doyo

Philippine Daily Inquirer

12:36 am | Thursday, November 29th, 2012

Was it greed, need, ignorance or stupidity?

On the part of the schemers-scammers it was, above all, greed. But on the part of the victims, it could be all or some of the above.

It is puzzling—or perhaps not—how 15,000 people or more were gypped into believing that their money, if placed in this “wonder” of an investment scheme, could be doubled in a few weeks. Oh, but indeed, it was deliberately made to work for a few—they who were the living proofs that would entice even more people to put their lifetime’s savings and borrowed cash into this “magical” scheme that eventually crashed and crushed the greedy, needy, ignorant and stupid (GNIS).

But it is shocking that those who knew better did not raise early warnings while the double-your-investment rush was going on so openly. The clever dupers behind Aman Futures and the Rasuman group were not doing hush-hush business underground or in the back streets of Mindanao. Word of mouth was their best advertising ploy. How could anyone have missed it?

The places in Mindanao that were badly hit by the scam were not wanting in financial wizards or straight-thinking people who could have stopped the GNIS from bundling their hard-earned and/or borrowed cash and taking these to the Aman/Rasuman agents who promised them instant wealth and fast and double returns on their investments.

Where were the local government officials (they are among those being investigated now), civil society groups, academics, professionals (lawyers, CPAs) and even church people? If they knew something was wrong, why didn’t they grab megaphones or use the pulpit and speak out? Or were many of them also GNIS?

Call in the parapsychologists. Was this a case of altered states of consciousness (ASC), a kind of budol-budol at work on whole communities? ASC might be it, else why did so many fall for this uncle of all scams? This phenomenon can make it into the Guinness Book of World Records, but what a humiliating record it is for this country which has had several of these scams.

On how their money could grow that big and fast, what were the GNIS victims made to believe? Was their money supposed to be invested in mining explorations, transportation and communications, biotech, drugs, energy, food, real estate, etc.? Even in the so-called “5-6”? Or were they aware it was a pyramiding scheme (and went for it, anyway), which allows those on top to cash in first, while those below wait for their turn to go up the pyramid as the clueless base of investors spreads out?

Of course, a pyramiding scheme will crash—eventually and inexorably—but not before the schemers-scammers have stashed away their loot, changed their identities, acquired new noses, and bought villas, yachts, and paradise islands somewhere. That is, if they didn’t get caught on time.

Is there a law against pyramiding schemes done outright or disguised as direct selling of token merchandise? How about making Charice’s birit hit song “Pyramid” the anthem of antipyramiding?

In yesterday’s news, the investigating panel said: “By their modus, respondents, who are closely related to each other, showed unity of design and purpose in defrauding the public, including herein complainants.”

It is not polite to blame victims or call them names, I always say, but some things have to be said. The victims may be needy, ignorant and/or stupid (okay, gullible), but greed cannot be factored away. They were salivating for so much money, and they were prepared to borrow to meet minimum requirements. There is a chasm of a difference between need and greed, but maybe when one is in a money-induced ASC, the divide is blurred.

I think some financial savvy should be taught in school early on. If good manners and right conduct, patriotism, kawanggawa, living chaste lives and even how not to get pregnant are taught in school, why not some basic financial management? Some things learned in kindergarten survive through adulthood. I know. I was a Girl Scout and I never forgot “Do a good turn daily” and “Be prepared.”

I was at a bookstore the other day, and I saw a good number of how-to books by some best-selling Filipino authors who want to teach people how to save, invest wisely, and make money, not instantly, but slowly, steadily and over a period of time. A noted and trusted one is Francisco Colayco.

Even popular Catholic “preacher in blue jeans” Bo Sanchez has written easy-to-read books on investing wisely, which compete with his other bestsellers. We featured him in the Sunday Inquirer Magazine last October, and to write the feature I listened in at his well-attended “How-to-get-rich” seminar, which was about, not how to quickly get rich, but how to do long-term investing (not trading or gambling), say, five to 10 years, in the stock market. Better than saving in the bank where your money shrinks because of inflation. I have learned the ropes, by the way. Easiest way is online, via the Internet.

Sanchez’s “My Maids Invest in the Stock Market” is a runaway bestseller. He preaches the good news of the easy investment plan (EIP) or investing in publicly-owned, stock-exchange-listed companies and participating in their growth and earnings. His www.trulyrichclub.com provides regular stock updates, suggestions and Bible-inspired messages.

Sanchez, whose Light of Jesus group holds weekly praise-and-worship “feasts,” stresses that the goal is not to become multimillionaires: “As I teach [people] to build their financial wealth, I also teach them to build their spiritual wealth. They need to grow in their character to handle big money, or it will destroy them. Use your wealth to serve God.”

Sam Miguel
11-29-2012, 11:14 AM
^^^ I'll go with stupidity, the sheer kind.

Sam Miguel
11-29-2012, 11:16 AM
Confronting the Continuing Power Crisis

By Walden Bello


4:08 am | Thursday, November 29th, 2012

Power rates in the Philippines are the highest in Asia and rank fifth in the world. Brownouts lasting several hours a day have plagued Mindanao during the last few months and the Department of Energy (DOE) warns of disruptions and shortages in the near future in Luzon. Thus, it was not surprising that at the hearings on the 2013 budget at the House of Representatives, DOE received the most intensive interpellation of all the executive agencies–far more intensive, in fact, than the Department of Social Welfare and Development, which had been expected to draw most of the legislators’ attention owing to the P44 billion allocation for its Conditional Cash Transfer (CCT) program.

What was surprising, though, was unlike last year, the DOE declared itself open to reexamining the most controversial mechanisms that have, in the opinion of consumer watchdog groups, contributed to the unending ascent of power prices.

Delaying Open Access

One of these mechanisms is “Open Access” in the retail energy market. Originally scheduled for implementation this October, an Open Access Regime would allow electricity end-users with an average monthly peak demand of one megawatt (MW) to choose their electricity service supplier. Labor and consumer groups have charged that with electricity distribution highly monopolized, the power providers will still be able to informally set prices even under open access, thus defeating the purpose of power sector reform, which is to bring down the cost of power. Moreover, whatever profits they might have to forego in the case of the big industrial users (which will be the users primarily served by an open access regime) can be regained from residential consumers who will not have the same freedom of choice.

Interestingly, I was able during the hearings to extract a promise from the DOE that it would consider the deferment of Open Access during the budget deliberations. After the DOE budget sponsor, Rep. Jun Abaya, made this concession in the formal exchange, then Secretary Rene Almendras went up to me and told me, “We have the same fears about open access. It won’t work in a captive market.” And then the most pleasant surprise of all: shortly after the budget hearings, the Electricity Regulatory Commission (ERC) informed the public that it was postponing till June 2013 the introduction of Open Access.

The postponement of Open Access was a victory, though a partial one. The objective must be to eliminate it as an option altogether.

Questioning Performance-based Regulation and Indexation

The Open Access issue was one of the controversial issues on which the DOE made concessions during the budget hearings. The DOE also promised to review “Performance-based Regulation” (PBR), a regime for calculating electricity charges under which massive rate increases have been made in the last few years. During the hearings, the DOE revealed that a study was being conducted of PBR and “if the study shall produce a conclusion that it should be scrapped or amended, or modified, then ERC is open to such an idea.”

A third issue of concern on which the DOE retreated was the indexation of natural gas from the Malampaya Fields to international oil prices and geothermal steam from Leyte to international coal prices. Consumer groups have complained that this practice has kept up the local price of natural gas and geothermal energy. At the budget hearing, DOE disclosed that the government “has partnered with New Zealand and Indonesia to come up with a study and come up with a totally different framework and hopefully, they could come up with an indexing much lower than coal.”

Time to Replace EPIRA?

Open Access, PBR, and Indexation have been key parts of the Electric Power Industry Reform Act (EPIRA), which was passed in 2001. EPIRA privatization program has been extremely controversial. The passage of state assets to the private sector, for one, has been criticized as a giveaway. In fact, during the hearings, the DOE agreed with my charge that National Power Corporation assets such as the Masinloc coal plant in Zambales and Transco, the power transmission facility, were sold at very attractive terms to the private sector. The department budget sponsor, the Rep. Jun Abaya, said, “I would say probably that we sold these for a song…but these were activities done by the previous department, previous administration.”

Consumer and labor groups such as Nagkaisa!, the biggest labor coalition in the country, have charged that instead of a free market in energy generation EPIRA has created an oligopoly, instead of lower prices it has triggered higher prices, and instead of efficiency it has brought about more inefficiency.

It is difficult to contest these claims.

EPIRA was supposed to bring about massive investment in and creation of electric generation capacity. Yet there has been only a 2,223 MW net increase in installed generating capacity, and this was mostly committed before EPIRA took effect. Given the fact that the country may need a total additional capacity of 14,400 MW in the next few years, many say this speaks badly of the private sector’s ability to meet the country’s needs under the framework of EPIRA. Indeed, 10 years after the process of privatization began, the DOE’s 19th Status Report on EPIRA Implementation asserts, “The government may need to involve itself once again in power generation to avoid power shortages in the future and keep hold of the current momentum being enjoyed as an investment attractive economy. “ If this assessment of the failure of the private sector is correct, then we face a major problem. Getting government involved again in energy generation is going to be a real challenge since only some 10 per cent of the NPC’s former assets remain in its hands.

A key aim of EPIRA was to bring about a free market in the power market. Instead, it has resulted in shifting energy generation from the original monopoly structure to an oligopoly structure. For instance, generating capacity in the Luzon grid is now highly concentrated among three major groups, San Miguel 30 per cent, Aboitiz, 17 per cent, and Lopez, 15 per cent. It is estimated that these groups control 52 per cent of energy generating capacity in the whole country. Moreover, the cross-ownership provision of EPIRA allows for vertical integration of generation and distribution, resulting in an even more monopolized structure of energy provision in this country.

After nearly 11 years, EPIRA has not brought about the efficiency in power distribution and lower electricity rates that its sponsors promised. Like most other neoliberal schemes that sought to expand the reach of the private sector and dismantle the state sector in the belief that this would allow the market to “work its magic,” it has brought about the worst of all possible worlds: skyrocketing power prices and a powerful oligopoly that cares nothing about gouging the consumer.

Former Energy Secretary Almendras was frank about his doubts about the different mechanisms of privatization, as a result of which he postponed the planned launching of Open Access to the middle of 2013, with a hint that this might be scrapped altogether since, as he admitted, it “won’t work in a captive market.” The new DOE chief, Carlos Jericho Petilla, would do long suffering power consumers a big favor not only by scrapping Open Access altogether but, equally important, hitting the drawing board to design a new power paradigm to replace the failed EPIRA paradigm. This need not mean a return to the old paradigm of the state virtually monopolizing energy generation but a hybrid system where the state plays some role in directly generating power and distributing it but where its main thrust is effective regulation of the private sector in coordination with consumer groups.

Sam Miguel
11-29-2012, 11:29 AM
Time to vote, save lives

By Peter Wallace

Philippine Daily Inquirer

12:35 am | Thursday, November 29th, 2012

There are posters put up downtown by some heartless monsters that say, “NO TO SIN TAX, JOBS NOT TAXES,” as it is “Anti-laborers, anti-farmers, anti-poor.”

I wish to fund a poster to plaster over them that says, “YES TO SIN TAX, LIVES NOT JOBS,” as it is “Pro-youth, pro-health, pro-revenues.”

As the full-page ad in this paper two Sundays ago so eloquently said: “HOW MUCH IS ONE FILIPINO LIFE WORTH?” It added: “The undisputed fact is, no amount can equal the value of a single life that can be saved from the harm caused by smoking.” It was an ad placed by doctors and former patients of smoking-related diseases—people who should know of which they speak.

I can understand some senators wanting to protect the jobs of their constituents. But they aren’t the “senator from such-and-such province,” they are senators of the people of the Republic of the Philippines. Their responsibility is to the nation, not to their hometown—that’s the congressman’s role.

The national good requires smoking to stop. Quite simply, it kills. I am sure all senators want to save lives, and will sacrifice a few jobs to achieve that—if jobs were lost. I and others have argued quite logically why there won’t in fact be any job loss. It’s a red herring being propagated by people who put profit over life. I wonder if they sleep well at night.

Cigarette smoking is finished; it’s only a matter of when. Watch the old movies, where everyone smoked. It was the chic thing to do, and the harm it does was not known then. Today few smoke, and do it outside, no longer in romantic conviviality over an after-dinner drink. Countries are getting closer and closer to an outright ban, but it may not be necessary. Cost will do it, as taxes rise astronomically (they’re at 63 percent of the cigarette’s cost in Australia, 69 percent in Singapore) and ever more stringent limitations get applied: Plain packaging will be done in Australia in December and gruesome pictures are now standard on packs in many places, all of which means fewer and fewer will smoke, and, more importantly, fewer will start.

So if I were Philip Morris or British American Tobacco, or Fortune Tobacco, I’d be doing a Ramon Ang and shift to other businesses. Buggy-whip manufacturers don’t exist today. Kodak is bankrupt, from its pinnacle in film. Paper manufacturers are in decline, cigarette producers won’t have a market down the road.

Save lives, gentlemen, not jobs. Save 240 Filipinos from dying every day, pass the Abaya bill in the bicameral committee, not the Senate’s watered-down version that will continue to protect the Philip Morris Fortune Tobacco monopoly. Show the statesmanship you’re capable of. Otherwise, we must ask: Are you really willing to sacrifice lives to save a few jobs? I don’t think you are; prove me right. Consider national health over the incomes of a few. Incomes they won’t lose, anyway, because the sin tax law will mandate that P6 billion be allotted to ensuring this doesn’t happen. So stop the red herrings, act to save your fellow Filipinos.

And do the same with the Reproductive Health bill, too. Save lives. Save the 11 mothers who die daily from childbirth complications, the 20 infants (per 1,000 live births) and the 25 children (per 1,000 live births) who die before they reach 5, because they had no access to assistance and were too poor to feed their brood and keep them healthy.

According to the 2008 National Demographic and Health Survey, some 54 percent of married Filipino women do not want an additional child, and another 19 percent want to wait at least two years before their next birth. The desired fertility rate in the country is 2.4 children, or a child less than the actual fertility rate of 3.3.

Surely they have the right to be informed of their options, and make their own decisions as their conscience dictates. They are the ones who have to answer to God. They have the right to decide on what they do. Priests can only guide; they have no right to dictate. Yet that, I’m reliably told, is what they are doing.

The people want family planning (71 percent of respondents in an SWS survey are for the approval of the RH bill). The government has the responsibility to meet that want. That responsibility applies equally to Congress, the people’s representatives. And as representatives of the people, they should vote as 71 percent (a winning voting number )of their people want.

I’ll accept that some of the people’s representatives will still not be swayed, and will vote on their personal beliefs. Let them do so. But the time to vote is now. Those who still try to block through interpellation (after 13 years, there’s nothing left to argue) or denying a quorum by not showing up should be kicked out in 2013 (or 2016, for some) for not doing their job of representing the people.

I don’t like writing about the same subject more than once. Worse, I don’t like making the same arguments all over again. But I must, as these two bills are far too important for the protection of human life to be not addressed now. It is time to vote—for the health, for the life, of the people.

11-30-2012, 10:02 AM
Gov’t budget gap declines by more than half
Expenditure grew rapidly, but tax take rose even faster
By Michelle V. Remo

Philippine Daily Inquirer

11:57 pm | Thursday, November 29th, 2012

The government reduced its budget deficit by more than half in October after it stepped up collection of taxes and import duties to boost the state’s coffers, the Department of Finance said.

Finance officials also said the government did not even have to undertake massive expenditure cuts to significantly reduce the budget gap.

DOF data showed that the budget deficit for the month amounted to P9.67 billion—down by nearly 55 percent from the P21.26 billion reported in the same month last year.

Finance Secretary Cesar V. Purisima said increased revenue collection allowed the government to spend more on anti-poverty projects and programs without causing the deficit to balloon.

He said the Aquino administration is bent on attaining “inclusive growth”—where growth of the economy could be translated into poverty reduction, while the deficit remained within manageable levels.

“While the current fiscal space continues to be an opportunity for the judicious use of public funds for projects of high and inclusive growth, the finance department continues to push for revenue-generating reforms that will allow for sustainable and resilient fiscal consolidation,” Purisima said.

The government spent about P144 billion in October—up by 15 percent from 125.2 billion in the same month last year.

While expenditures grew rapidly during the period, the DOF said the increase in revenue collection was even faster. Revenue collected during the month reached P134.32 billion—up by 29 percent from P104 billion.

The DOF said the increase in revenue collection was largely due to higher taxes collected by the Bureau of Internal Revenue and the increase in import duties collected by the Bureau of Customs.

But from January to October, the government registered a significant increase in the cumulative budget deficit. The finance department, however, said the increase was well within the official fiscal program of the government for this year.

The government intended to increase spending for infrastructure and social services this year. Thus, it was expected to post a higher full-year deficit in 2012 compared with that recorded last year.

The deficit for the first 10 months amounted to P115.74 billion, rising by about 56 percent from P74.25 billion in the same period last year.

This came about as revenues reached P1.25 billion, while expenditures amounted to P1.37 billion.

Revenues marked a year-on-year increase of about 12 percent, while expenditures rose by nearly 15 percent.

According to Purisima, the deficit as of October indicated that the full-year figure could stay well below the official ceiling of P279 billion.

Last year, the deficit stood at P197.8 billion.

Officials said the government intended to spend much more this year than last year, thus registering a higher deficit. This will enable the domestic economy to maintain a decent pace of growth even as the global economy stumbles.

Boosting domestic spending is needed, they said, to counter the drag caused by weaker export earnings on the country’s economic growth.

Sam Miguel
12-10-2012, 08:55 AM
Business groups warn SEC on foreign equity rules

Strict interpretation of SC order to cause stock selldown

By Daxim L. Lucas

Philippine Daily Inquirer

1:39 am | Monday, December 10th, 2012

The country’s biggest business groups, led by the influential Makati Business Club, have urged the Securities and Exchange Commission to change its proposed rules on foreign ownership limits in Filipino firms, warning that the draft regulations in their current form would lead to a massive outflow of capital.

The country’s biggest business groups have urged the Securities and Exchange Commission to change its proposed rules on foreign ownership limits in Filipino firms, warning that the draft regulations in their current form would lead to a massive outflow of capital.

In a position paper, the organizations led by the influential Makati Business Club said that some P383 billion worth of stocks would have to be sold by overseas investors if the corporate regulator implemented the 60-40 foreign ownership limit on each class of company shares instead of tallying compliance cumulatively per firm, regardless of share type.

“This will drive down stock market prices to the grave prejudice not only of the listed companies, but worse, of the investors,” said the position paper submitted to the SEC last Friday.

The paper comes after the Supreme Court ruled recently that Philippine Long Distance Telephone Co., under its present shareholder structure, exceeded the 40-percent foreign ownership limit as stated in the 1987 Constitution.

In reaction, PLDT decided to issue a new type of “voting preferred shares” to its own employees’ retirement fund to increase its number of Filipino shareholders—a move that would still fall short of the rules under the SEC’s current draft.

Apart from the MBC, other business groups that are trying to convince the SEC to ease its interpretation of the Supreme Court ruling are the Management Association of the Philippines (MAP), the Financial Executives of the Philippines (Finex), the Foundation for Economic Freedom, the local chapter of the Asia-Pacific Real Estate Association, the Shareholders’ Association of the Philippines, the Trust Officers Association of the Philippines and the Investment House Association of the Philippines.

The business groups backed the SEC’s assertion that the draft rules were not formulated in response to the Supreme Court’s ruling on the PLDT issue, but were merely meant to implement the Corporation Code, the Securities Regulation Code and the Foreign Investments Act of 1991.

As such, they stressed the powers of the corporate regulator to formulate rules and implement laws “as it may consider appropriate in the public interest.”

“Under the Constitution, the exercise of executive power, such as the promulgation of rules to implement rules of the Constitution, is left to the discretion of the Executive,” the groups pointed out, citing previous jurisprudence to clarify the SEC’s role vis-a-vis the Supreme Court decision on the PLDT issue.

The business groups also urged the SEC to make the new rules applicable only for prospective transactions instead of having it applied retroactively.

“These shareholders [who bought their shares before the effectivity of the circular] purchased their shares in good faith on the strength of the longstanding interpretation of our government on the constitutional provision issue,” the business groups said.

“Applying the proposed circular to the prejudice of the investors will not only be constitutionally unacceptable, but will constitute [a] change of rules midstream to the prejudice of the investing public,” they added.

The business groups stressed that they believed in finding a balance between making the country open to foreign capital and the need to maintain control of certain areas of economic activity.

“It results in a double win for the Philippines as it gives us capital without giving up control,” they said.

Sam Miguel
12-10-2012, 09:06 AM
Manila among top property markets

International survey notes big leap in just 3 years

By Doris C. Dumlao

Philippine Daily Inquirer

1:28 am | Saturday, December 8th, 2012

ONCE a laggard in the region, Manila is rising to be one of Asia-Pacific’s most appealing property markets amid escalating concerns over high property prices in China’s core markets.

Based on a research published by Urban Land Institute (ULI) and PwC “Emerging Trends in Real Estate 2013,” Manila ranked 12th out of 22 regional markets ranked in terms of investment prospects and ninth in terms of development prospects, marking a rapid rise from near the bottom of the rankings in previous years’ polls.

Manila was ranked 18th in the outlook for 2012 and 20th two years before that. This is the 7th edition of the trends and forecasts publication, which is based on the opinions of more than 400 internationally renowned real estate professionals, investors and other stakeholders.

Colin Galloway, principal author of the report, said in a presentation Thursday night that he was surprised that the Philippine did not rank even higher given the number of positive updates from this market. But he said as it would usually take time for all recent developments to be digested by the market, next year’s edition would likely show even more favorable results, even catapulting the Philippines to a leading position.

Manila has fared well in specific property segments, specially in the secondary or rental apartment residential segment where it ranked second to Jakarta. The ranking was based on the percentage of “buy” recommendations of survey respondents as opposed to “hold” or “sell.” Jakarta had a “buy” rating from 43.62 percent of respondents while Manila had 36.46 percent. The residential rental segment was where Manila got its best rating in the report although it also ranked high in office (6th) and hotel (8th) property segments.

Jakarta was named by the report as the top property market in terms of investment prospects. Other cities that ranked higher than Manila were Shanghai (2nd), Singapore (3rd), Sydney (4th), Kuala Lumpur (5th), Bangkok (6th), Beijing (7th), China secondary cities (8th), Taipei (9th), Melbourne (10th) and Hong Kong (11th).

On the other hand, the cities edged out by Manila in terms of investment prospects were Tokyo, Seoul, Guangzhou, Shenzhen, Auckland, Ho Chi Minh, Bangalore, Mumbai, New Delhi and Osaka.

“Markets in Manila have performed well in the past couple of years as a result of the growing economy, a transparent and business-friendly government and the country’s ongoing success—an eye-opener—in attracting foreign corporate clients to its business process outsourcing (BPO) facilities,” the report said.

“Bureaucracy has declined and transparency has improved considerably over the past few years. As a result, Manila’s appeal as an investment destination climbed from the near-bottom of the rankings in previous years’ polls,” it said.

The report also noted that a large casino development has provided impetus to property development and was expected to boost tourist arrivals when completed in phases over coming years.

But while investment prospects appeared bright, the report also noted that government regulations that bar foreigners from holding majority landownership continued to deter international investment.

“What is more, local developers have little incentive to partner with foreigners given the availability of ample liquidity from domestic sources. Foreign opportunities, therefore, are likely to remain restricted to the gaming and BPO sectors. Admittedly, both present large opportunities, with the latter currently accounting for some 70 percent of new office take-up in Manila,” the report said.

Judith Lopez, chair and senior partner at Isla Lipana & Co., PwC member firm, commented: “Manila is in the midst of a property boom. It’s the best that we’ve seen in decades—clearly a sign of the increasing confidence in our economy.”

Sam Miguel
12-10-2012, 09:12 AM
Exporters air concern over gov’t move to increase charges

By Riza T. Olchondra

Philippine Daily Inquirer

3:18 am | Monday, December 10th, 2012

MANILA, Philippines—Exporters are urging the government to rethink its recent decision to increase fees and charges levied by various agencies, believing that this will hamper their competitiveness just as the global economy is slowing down.

Industry group Philippine Exporters Confederation Inc. (Philexport) said Administrative Order No. 31 authorizing the increase in government fees and charges could drive exporters’ production costs up by 7 to 10 percent. The new AO signed by President Aquino last Oct. 1 will be implemented in January 2013.

Philexport president Sergio R. Ortiz-Luis Jr. said in a phone interview that his group has already submitted “a position paper to the Office of the President asking for a review.”

Ortiz-Luis noted that AO 31 effectively repealed a previous memorandum circular that directed the heads of agencies to seek clearance from the National Economic and Development Authority (Neda) before authorizing the imposition of new fees or an increase in existing fees. As such, exporters are also recommending that the Neda board continue to approve increases or changes in fees.

Exporters in the handicrafts sector are among those that could be hit hard by the order, said Dennis Orlina, president of the Philippine Chamber of Handicraft Industries Inc.

“In our sector, most will be affected because our raw materials [come from] the countryside,” Orlina said, explaining that AO 31 also covers barangay (village) fees and other local charges. “We are already facing unabated increases in power, water, freight costs.”

Orlina also stressed that exporters could not pass on to their buyers the additional costs brought on by the increase in government fees and charges.

“The margins are very small, and the buyers are not changing their [buying budget]. So, you lose business because you are already less competitive,” he said.

In a copy of the order posted by the Office of the President at the online Official Gazette, President Aquino had directed the heads of state agencies to review their existing fees and charges. The agencies could then increase rates and impose new fees and charges if necessary.

Sam Miguel
12-10-2012, 10:46 AM
Investing for ordinary Pinoy

By Riza Mantaring

Philippine Daily Inquirer

10:20 pm | Saturday, December 8th, 2012

“IF SOMETHING sounds too good to be true, it probably is!”

Nowhere is that adage more true than in investing. Yet, every so often, I would hear of more people being victimized by yet another Ponzi scheme promising to double their money in six months, three months or even a month!

Unsound investments aren’t necessarily scams. Some years back a friend of mine asked me whether she should buy an educational plan for her daughter, and I cautioned her about the ability of the company to pay the plan’s benefits.

Two years later, she came back to me, extremely distressed about the collapse of the issuing company and worried about how she would pay the tuition of her daughter.

I asked her why she had bought the plan. She said she had calculated the returns based on the actual increase in tuition over the past years, and there was no investment available that could give her anywhere near those same returns.

I couldn’t help but think silently to myself, “Precisely!” If no investment could give those types of returns, how could the issuing company possibly accumulate enough funds to pay her benefits?

Whenever it comes to making money, we often get caught in the trap of wanting to get rich quickly, either through need, greed or simple ignorance, making us easy prey for scams such as Aman Futures.

Understanding how to make your money work for you is critical to protecting your future and that of your family.

Expected, unexpected

You need to plan for the expected, such as retirement and old age, and the unexpected, such as sudden death and sickness. The sad fact is that only

2 percent of Filipinos are independent at retirement.

Most will be dependent on relatives or charity or will be forced to continue to work. And when illness strikes, many end up depleting their savings or going into debt to pay their bills.

Review situation

Start by taking stock of your situation and your required cash flows. Do you need to prepare for your kids going to college in 10 years? Is there a wedding in the family on the horizon? Are you nearing retirement and need steady income from whatever money you’ve saved? Or do you simply want to save up for that dream vacation next year?

Depending on your investment objectives, time horizon, risk appetite, investment experience, age and income, there will be investments suited for you. You also need to determine your cash or liquidity requirement, which is the amount of money you need to set aside for emergencies such as major car repairs.

A rule of thumb is generally to set aside three months’ income for emergencies. All these taken together would be called your “risk profile.”

Generally, the younger you are, the longer the time horizon before you need the money and the more stomach you have for temporary declines in the values of your investments. The more investment experience you have and the bigger your disposable income, the more you can invest aggressively.

STOCKS would be a good instrument in which to put your money. They generally provide better returns over a long period and you can tolerate the fluctuations, or “volatility” in the value of your investment.

You will need a fairly large amount of money to invest, however, as the key to successfully investing in stocks is diversification, or having a basket of stocks rather than just a few stocks.

But if you need your money in the next year or so and are not really investment-savvy or have retired and are living off interest, you would be better off putting your money in safer instruments such as special deposit accounts (SDAs) of Bangko Sentral ng Pilipinas, time deposits and bonds.

SDAs provide lower returns but their values don’t fluctuate as much, and some have guaranteed returns, so you’re more certain that when you need the money, the value wouldn’t be any lower. Remember though that people are living longer, so even if retired, do set aside a small amount in higher-yielding instruments.

You will need this to beat inflation, as over time, the value of your nest egg could decline significantly—i.e. your P100 in 2012 may be able to buy only P50 worth of goods in a few years.

Higher return, higher risk

In general, investments which can give you higher returns also pose more risks. During the tech boom of the ’80s and ’90s, you would hear many stories of startup companies whose values went up a hundredfold after going public.

But for every such story, there were probably nine, or even 99 more which went bust, taking all their investors’ money down with them.

Study financials

Investing in stocks requires time to study the financials of the company with whom you are investing, their growth prospects, the quality of their earnings, etc.

Investing based on gut feel or tips rarely works and as mentioned earlier, you need to spread your money among a basket of stocks in order to spread your risk.

GOVERNMENT BONDS, on the other hand, are considered among the safest instruments as a government is always expected to be able to pay its debts, but the yield on such bonds tends to be relatively low. You will sometimes hear the term “risk-adjusted return” or “risk-return ratio.”

This refers to the fact that when assessing the returns you can get from an investment, you need to also look at the risk you are assuming, and make sure that the rewards are commensurate to the risk!

MUTUAL FUNDS and UITFs (unit investment trust funds) are a great alternative to investing in stocks, bonds or some combination of both. They allow you to invest for as little as P5,000 by buying shares of a fund, which pools the money of its fund holders and invests it according to the investment objectives outlined in its prospectus.

The fund can be a more aggressive one such as an equity fund, or a more conservative one such as a bond fund, and will be invested in a wide variety of instruments.


A typical equity fund will have 30 or more stocks, which gives you the diversification you need. It may also have bonds or other fixed-income instruments, and in a down market, the fund manager could opt to increase the proportion of bonds and even cash to cushion the impact of the market downturn.

I have never met a casual investor who has been able to beat the performance of professional fund managers over an extended period. Looking at the available tools, such as extensive research reports, sophisticated programs to analyze market movements, even international resources for multinational corporations, it is not difficult to see why they are able to make much more informed decisions.

By putting your money in a professionally managed fund, you are able to take advantage of its managers’ knowledge and get the benefits of diversification even with a small amount of money.

Regularly investing in MFs (mutual funds) or UITFs also allows you to take advantage of “peso cost averaging.”

If you put in a fixed amount every month, you will almost always end up ahead in the long term than if you tried to time the market.

When the market is down, you can buy more shares for the same amount. So as the market goes up, the extra shares also give you extra gains. Some companies offer salary-deduction services where you can have a fixed amount deducted from your salary every month and invested directly into a mutual fund. Check if yours can do it!

VARIABLE UNIT-LINKED INSURANCE products allow you to put your money in a professionally managed fund while at the same time protecting your family with insurance. Insurance is one of the most basic components of any financial plan, yet often the most overlooked.

When a P1-million insurance policy is issued to you after you pay the first premium of P30,000 (premiums depend on your age, the plan you choose and other factors), should something happen to you the next day, your family gets P1 million.

All other financial products will still be worth P30,000 the next day and in many cases even less due to fees deducted. Remember, if you are the breadwinner and have dependents, making sure they are secure is your first priority.

Sam Miguel
12-10-2012, 10:47 AM
^^^ Continued

Financial advisor

There are many types of insurance products and a good financial advisor can help you choose the right one.

In fact, for most of us, getting a financial advisor is important to developing a proper financial plan. A good one will sit with you and thoroughly understand your needs, determine your risk profile, explain the products he or she is recommending and make sure you understand all the risks attached to what you are buying, rather than simply try to sell you a product.

What about REAL ESTATE? I remember our elders saying real estate was the safest investment, because you have the land. In reality, real estate is considered one of the riskier investments as it is illiquid—you cannot easily dispose of it— and if its value goes down, it can take more than 10 years for its value to go back up.

If you have a large amount of money, real estate which generates income, such as apartments and office space, can be a good investment, but do remember it has a life span and you do need to maintain it. If you are banking on its value to appreciate, be prepared to wait a looong time!

Track record

Lastly, make sure you research the company you are dealing with. Make sure it has a solid reputation and track record, is trustworthy and provides good service. For financial services companies, bigger is generally better. But cheaper is not!

Remember that they may be holding your money for a long time. A company that is making little profit may no longer be around when you need your money.

And remember that a fund which gives you the highest returns will also most likely crash the most in a bad market— make sure you can tolerate that crash. And if anyone promises to double your money in 10 days, run away as fast as you can!

(Riza Mantaring is the president of Sun Life Financial Group of Companies in the Philippines.)

Sam Miguel
12-11-2012, 12:07 PM
Foreign investments down 60% in Sept.

Many structural issues still hinder flow of FDIs

By Michelle V. Remo

1:27 am | Tuesday, December 11th, 2012

The Philippines suffered a big drop in foreign direct investments (FDIs) in September in what officials claimed was due to global economic problems.

The decline was also attributed to lingering issues adversely affecting the business climate in the country. Economists said a growing economy alone would not be sufficient to generate a higher amount of FDIs, noting the need for efforts to solve structural issues that discouraged more foreigners from doing business in the country.

The Bangko Sentral ng Pilipinas reported Monday that the net inflow of FDIs amounted to only $55 million in September, down 60 percent from $138 million in the same month last year.

Gross inflow amounted to $100 million, falling by 41 percent from $170 million from a year ago, while total outflow during the month amounted to $45 million.

Sectors that benefited the most from the gross inflow in FDIs during the month were wholesale and retail trade, real estate, transportation, and storage and manufacturing.

For the first three quarters of 2012, however, the net inflow of FDIs was up 40 percent at $1.09 billion from $782 million in the same period last year.

Government economic officials said the prolonged crisis in Europe was causing volatility in risk appetite among foreign businesses, eventually leading to a drop in FDIs in September.

But economists said that outstanding domestic problems related to insufficient infrastructure, the tedious process in setting up a business, restrictions on foreign ownership and high power cost adversely impact on the ability of the Philippines to attract FDIs.

Although there was risk aversion globally, they said the ability of neighboring countries to attract investments was less affected than that of the Philippines.

“There is also a local component affecting the drop in FDIs. There are still issues that remain hanging in the balance,” economist Victor Abola of the University of Asia and the Pacific told the Inquirer.

He said the implementation of infrastructure projects lined up under the public-private partnership (PPP) program must be hastened and that investments in power plants should increase to address problems on insufficient infrastructure and high electricity cost.

“There is no room for complacency. A lot of work still has to be done to attract more investors and create jobs,” Abola said.

Sam Miguel
12-12-2012, 10:19 AM
Philippines faces bright prospects for 2013

Citi, HSBC raise growth forecasts for 2012

By Doris C. Dumlao

Philippine Daily Inquirer

2:51 am | Wednesday, December 12th, 2012

The Philippines continued to generate positive economic forecasts from foreign institutions following a surprise third-quarter growth.

For this year, Citigroup raised its gross domestic product (GDP) growth forecast to 6.3 percent from 5 percent and to 6.1 percent from 5.3 percent in 2013, citing accelerated government spending and stable domestic demand.

British bank HSBC also revised its 2012 forecast to 6.2 percent from 5.7 percent although for 2013, the forecast was pared down to 4.9 percent from 5.7 percent given the continuing external headwinds.

Both Citi and HSBC expected the Bangko Sentral ng Pilipinas to keep its key interest rates on hold at 3.5 percent for the next policy rate-setting.

Minda Olonan, head of Philippine equity research at Citi, said the Philippines would benefit from more pronounced growth drivers such as excise tax reforms, accelerated bidding of key public-private partnership (PPP) projects and a credit-rating upgrade. She said public infrastructure could be the medium-term “game changer.”

“Better fiscal health is enabling the government to be more proactive in stimulating the economy. Aside from the PPP infrastructure agenda, the government is embarking on a P325-billion multi-year flood works and drainage program, a spending that is larger than the P233-billion cost of the PPP projects. We believe this may lift the country’s investment/GDP ratio that will eventually accelerate economic growth,” she said in a Dec. 7 research.

Citi believes that banks, property, consumer, utilities and conglomerates will benefit from the investment spending dividend. The bank’s top picks on a 12-month view are Ayala Land, SM Investments, Philippine Long Distance Telephone Co., Ayala Corp. and Puregold Price Club Inc.

HSBC economist Trinh Nguyen said a major force behind this year’s growth has been the country’s strong institutions, specially the BSP.

“Monetary officials have alleviated price pressures by successfully sterilizing capital inflows to contain money supply growth. Closely monitoring rice supply as well as bolstering food sufficiency policy has also helped,” she said.

“A slowdown of inflation to 2.8 percent year on year in November in spite of accelerating growth reflects the institution’s sound management of the economy,” Nguyen said, adding that benign inflation has given monetary officials the space to cut rates by 100 basis points in 2012.

But Nguyen said the BSP was not the only champion behind the country’s strong performance. “President Aquino’s efforts to increase efficiency of fiscal spending and revenue collection gave the government the room necessary to counter-balance the global slump with increased expenditure. A look at the breakdown of growth shows that private consumption, government spending and investment have contributed to growth thus far in 2012,” she said.

While external headwinds persist and likely drag down the Philippines’ electronics exports, HSBC expects growth to remain robust in 2013 on the back of strong fiscal spending, low interest rates and resilient remittances.

She said monetary officials would likely hold rates at the next meeting to assess the impact of the recent acceleration in growth as well as the 100-basis-point cut so far this year. “Inflation will likely be benign in first half of 2013, thanks to contained food and oil prices, allowing the BSP to support growth,” she said. “Though external conditions remain weak, strong domestic demand will keep the BSP vigilant and hold rates.”

Sam Miguel
12-12-2012, 10:52 AM
Congress ratifies sin tax bill

By Christina Mendez

(The Philippine Star) | Updated December 12, 2012 - 12:00am

MANILA, Philippines - Prices of cigarettes will soon go up substantially after the Senate and the House of Representatives ratified the sin tax measure last night.

Voting 10-9 with no abstention, senators ratified the measure restructuring the taxes on tobacco and alcohol products. The House later followed with its own ratification.

The measure now awaits President Aquino’s signature.

Those who voted in favor of the bicameral report were Senators Edgardo Angara, Franklin Drilon, Panfilo Lacson, Pia Cayetano, Miriam Santiago, Serge Osmeña, Francis Pangilinan, Manuel Lapid, Aquilino Pimentel III and Antonio Trillanes IV.

Those who voted against the measure were Senators Joker Arroyo, Jinggoy Estrada, Francis Escudero, Ferdinand Marcos Jr., Ralph Recto, Vicente Sotto III, Gregorio Honasan, Ramon Revilla Jr. and Senate President Juan Ponce Enrile.

Senators Manuel Villar, Loren Legarda, Alan Cayetano and Teofisto Guingona III were absent yesterday.

Prior to the voting, senators took turns voicing their concerns about the measure.

Enrile sought an explanation on why the aggregate target revenue was reduced to P35 billion. Enrile also wanted to know whether the reduction was cleared by President Aquino.

Marcos said the discussions on the measure were “rushed,” and that “we were put in a position to take it or leave it.” He said the bill will effectivelydestroy the tobacco industry.

Recto said he did not sign the bicam report because the panel did not agree with his proposal to earmark specific funds for health-related concerns.

“When these were removed, we are now not assured that the generated revenue will indeed be used for health,” Recto said.

Drilon explained that they needed to “bargain” during the bicameral meeting, which is why the target revenue is now lower than the Senate version of P40 billion, and way below the initial P60-billion target of the finance department and the Bureau of Internal Revenue (BIR).

“Let me just state that the secretary of finance and the BIR commissioner were fully aware,” Drilon said.

“Let me state for the record that the resulting P33.96 billion as the final figure has the approval of the secretary of finance, and the BIR,” Drilon added.

Enrile also questioned the computation used by the bicameral panels in coming out with the rates and figures in the measure.

“There have been moves to kill the tobacco industry… it was a calibrated mechanism,” Arroyo noted. “I have been bothered by the bill because it was introduced as a health measure.”

“What has never been really understood is that: is it a health measure for the entire health problem of the country or a health measure for the tobacco-related (diseases)?” Arroyo asked.

Drilon argued that the sin tax measure is a health measure, noting that Filipinos smoke 10.7 million sticks per day, including children as young as 13.

“The entire increment would go to the health sector except for RA 7171 and 8424. In general, this is a health measure,” Drilon said.

Arroyo also asked why there was no general figure in the earmarking of the revenues in the measure.

“I am against lump sum allocations,” Arroyo said, adding that lack of specific allocation makes the measure a lump sum appropriation for the Department of Health.

Drilon argued that once Congress appropriates the exact amounts, then there would be a problem if the government misses the target.

Drilon noted that it would be difficult to set specific amounts for some provincial and district hospitals because it is hard to pinpoint their needs.

“We cannot live in that kind of mystery that you give just such amounts and give percentages… why can’t we put the amounts? Otherwise, we are kidding ourselves that this measure will raise such amount, and then we could not,” Arroyo said.

Shortly after the measure’s ratification, Zambales Rep. Mitos Magsaysay said the proposed law on higher sin taxes would hurt tobacco farmers.

“The tax increase for tobacco products will be at least 1,000 percent by 2017. This is ridiculous. I have never seen this kind of tax increase in my entire career as a lawmaker,” she said.

She said it would be the consumers who would absorb the huge tax increase since an excise tax is a pass-on levy.

“There are 2.9 million Filipinos dependent on the tobacco industry. If we increase the taxes excessively, they will lose their livelihood. Without any income, our tobacco farmers and their families will starve to death. Are we really willing to do this?” Magsaysay asked.

On the other hand, Bayan Muna Rep. Neri Colmenares said the approved bill is a “regressive, anti-Filipino form of taxation that favors imports over local brands and jeopardizes the job security of small farmers and workers in the tobacco and alcohol industries.”

“These tax hikes are too much for our farmers and small local manufacturers to bear. They are the ones being punished even though they are the ones who are investing here in the country, and toiling hard to sustain the tobacco industry as a stable, steady source of revenues for the government,” he said.

He said the huge adjustments could result in unabated smuggling of sin products.

BIR chief Kim Henares, who witnessed the signing of the bicam report, said she is happy that the measure obtained congressional approval.

“For us those are the structural reforms that we were really pushing for. We’re happy in that sense,” Henares said.

“But of course when we went in, we were targeting P60 billion. It went down to P 31.5 billion, it went up to P34 billion, P39.5 billion, it came down to P 34.5 billion but that is part of the legislative (function), you cannot get everything that you go in for,” she added.

The approved measure also mandates the Department of Labor and Employment to identify and create the mechanism for the displaced workers in the two industries.

On the recommendation of Lacson, the measure also provided a definition on what is considered as major supermarkets, which can be subjected by the BIR to price surveys on cigarettes and alcoholic beverages.

The final version excluded the proposal of Enrile on the earmarking of P2 billion for the government’s tax administration program.

However, to protect the local tobacco producers, the lawmakers placed a provision that “of the total volume of cigarettes sold in the country, any manufacturer and/or seller of tobacco products must procure at least 15 percent of its tobacco leaf raw material requirements from locally grown sources, subject to adjustments based on international treaty commitments.”

According to Drilon, the revenues from the new sin tax reform measure aim to benefit an initial 5.2 million Filipino families next year under the government’s Philhealth program.

The 5.2 million beneficiaries are in addition to the 5.2 million families already covered under the General Appropriations Act for 2013.

“In 2014, the entire budget of about P25 billion for PhilHealth premiums to cover 10.4 million families will now come from the sin tax. I think also in 2015, there will be an increase in the premium so that there can be more benefits,” Drilon explained.

Drilon added that the tobacco farmers will get the 15 percent of the total revenue to be generated by the sin tax in accordance with Republic Acts 7171 and 8240.

– With Jess Diaz

12-20-2012, 08:39 AM
From The Economist ___

Bangladesh and development

The path through the fields

Bangladesh has dysfunctional politics and a stunted private sector. Yet it has been surprisingly good at improving the lives of its poor

Nov 3rd 2012 | DHAKA AND SHIBALOY, MANIKGANJ DISTRICT | from the print edition

Villagers are doing it for themselves.

On the outskirts of the village of Shibaloy, just past the brick factory, the car slows to let a cow lumber out of its way. It is a good sign. Twenty years ago there was no brick factory, or any other industry, in this village 60 kilometres west of Dhaka; there were few cows, and no cars. The road was a raised path too narrow for anything except bicycles.

Now, Shibaloy has just opened its first primary school; it is installing piped water and the young men of the village gather to show off their motorcycles at the tea house. “I have been a microcredit customer for 17 years,” says Romeja, the matriarch of an extended family. “When I started, my house was broken; I slept on the streets. Now I have three cows, an acre of land, solar panels on the roof and 75,000 taka ($920) in fixed-rate deposits.”

Bangladesh was the original development “basket case”, the demeaning term used in Henry Kissinger’s state department for countries that would always depend on aid. Its people are crammed onto a flood plain swept by cyclones and without big mineral and other natural resources. It suffered famines in 1943 and 1974 and military coups in 1975, 1982 and 2007. When it split from Pakistan in 1971 many observers doubted that it could survive as an independent state.

In some ways, those who doubted Bangladesh’s potential were right. Economic growth since the 1970s has been poor; the country’s politics have been unremittingly wretched. Yet over the past 20 years, Bangladesh has made some of the biggest gains in the basic condition of people’s lives ever seen anywhere. Between 1990 and 2010 life expectancy rose by 10 years, from 59 to 69 (see chart 1). Bangladeshis now have a life expectancy four years longer than Indians, despite the Indians being, on average, twice as rich. Even more remarkably, the improvement in life expectancy has been as great among the poor as the rich.

Bangladesh has also made huge gains in education and health. More than 90% of girls enrolled in primary school in 2005, slightly more than boys. That was twice the female enrolment rate in 2000. Infant mortality has more than halved, from 97 deaths per thousand live births in 1990 to 37 per thousand in 2010 (see table). Over the same period child mortality fell by two-thirds and maternal mortality fell by three-quarters. It now stands at 194 deaths per 100,000 births. In 1990 women could expect to live a year less than men; now they can expect to live two years more.

The most dramatic period of improvement in human health in history is often taken to be that of late-19th-century Japan, during the remarkable modernisation of the Meiji transition. Bangladesh’s record on child and maternal mortality has been comparable in scale.

These improvements are not a simple result of increases in people’s income. Bangladesh remains a poor country, with a GDP per head of $1,900 at purchasing-power parity.

For the first decades of its independent history Bangladesh’s economy grew by a paltry 2% a year. Since 1990 its GDP has been rising at a more respectable 5% a year, in real terms. That has helped reduce the percentage of people below the poverty line from 49% in 2000 to 32% in 2010. Still, Bangladeshi growth has been slower than India’s, which for most of the past 20 years grew at around 8% a year. Nevertheless the gains in its development have been greater. The belief that growth brings development with it—the “Washington consensus”—is often criticised on the basis that some countries have had good growth but little poverty reduction. Bangladesh embodies the inverse of that: it has had disproportionate poverty reduction for its amount of growth.

How has it done it?

Four main factors explain this surprising success. First, family planning has empowered women. If you leave aside city states, Bangladesh is the world’s most densely populated country. At independence, its leaders decided that they had to restrain further population growth (China’s one-child policy and India’s forced sterilisation both date from roughly the same time). Fortunately, Bangladesh’s new government lacked the power to be coercive. Instead, birth control was made free and government workers and volunteers fanned out across the country to distribute pills and advice. In 1975, 8% of women of child-bearing age were using contraception (or had partners who were); in 2010 the number was over 60% (see chart 2).

In 1975 the total fertility rate (the average number of children a woman can expect to have during her lifetime) was 6.3. In 1993 it was 3.4. After stalling, it resumed its fall in 2000. After one of the steepest declines in history the fertility rate is now just 2.3, slightly above the “replacement level” at which the population stabilises in the long term. When Bangladesh and Pakistan split in 1971, they each had a population of 65m or so. Bangladesh’s is now around 150m; Pakistan’s is almost 180m.

Because of this Bangladesh is about to reap a “demographic dividend”; the number of people entering adulthood will handsomely exceed the number of children being born, increasing the share of the total population that works.

In giving women better health and more autonomy, family planning was one of a number of factors that improved their lot, and by so doing did much to reduce poverty. The spread of primary education was one of the others (the government has been better than many at helping women this way); the proportion of girls who get schooled has increased much more than the proportion of boys. And both the boom in the textile industry and the arrival of microcredit have, over the past 20 years, put money into women’s pockets—from which it is more likely to be spent on health, education and better food.

Second, Bangladesh managed to restrain the fall in rural household incomes that usually increases extreme poverty in developing countries. Between 1971 and 2010 the rice harvest more than trebled, though the area under cultivation increased by less than 10%. This year the country once supposedly doomed to dependence on food aid could be a small exporter of rice. One-sixth of the population remains undernourished, which is a blight; but it is an improvement on 20 years ago, when more than a third of the population was underweight or stunted.

Yield alone is not the whole story. The new crops of the Green Revolution allowed rice growers to move to two harvests a year. The rice of the Ganges delta used to be monsoon, or aman, rice; it was planted before the annual rains and harvested after. Now boro rice, planted and harvested in winter, is the main crop. For people just above the poverty line, the sort of event most likely to plunge them into extreme poverty is a sudden external shock, such as an illness or a harvest failure. By expanding the winter crop, boro rice reduces the risk of a harvest failing in a way that shocks a household into abject poverty. Between 2007 and 2012 Bangladesh went through three global food-price spikes and two cyclones. Almost everyone expected a spike in poverty to follow. It did not.

The villages have also found resources from beyond agriculture—and, indeed, beyond Bangladesh. Around 6m Bangladeshis work abroad, mostly in the Middle East, and they remit a larger share of the national income than any other big country gets from migrants. In the year ending in June 2012 they sent back $13 billion, about 14% of annual income—more than all the government’s social-protection programmes put together. The majority of migrant workers send their remittances back to family members in the village they came from. Because emigrants are more likely to come from better off families, those families benefit most. But knock-on effects on rural wages benefit landless labourers. The World Bank calculates that between 2000 and 2010, real agricultural wages rose 59%, compared with 42% for all sectors. Most countries have seen a reduction in rural living standards, and a resultant increase in extreme poverty. Bangladesh has not.

12-20-2012, 08:39 AM
^ Continued

Remittances and family planning have not attacked extreme poverty directly. That is where the government comes in.

Bangladesh comes 120th (out of 183) on the “corruption perceptions index” kept by Transparency International, a think-tank in Berlin. It has had episodes of military rule interrupting periods of democracy in which the “battling begums” (daughter and widow of two early presidents) engaged in a sort of Judy and Judy show of vicious political infighting.

Yet despite the political circus, the country’s elite has maintained a consensus in favour of social programmes. Bangladesh spends a little more than most low-income countries on helping the poor. About 12% of public spending (1.8% of GDP) goes on social safety-nets to protect the poorest: food for work, cash transfers and direct feeding programmes, which most poor countries do not have. As well as spending more on the poor, the state also focuses more than many on the role of women.

That said, the amounts that go on education (2.2% of GDP) and health (3.5%) in Bangladesh are below the average for low-income countries. And even that spending might well have been wasted but for one further influence: the extraordinary role played by non-governmental organisations (NGOs) in the country. Without the state’s schools, clinics and cash-transfer schemes, says Rehman Sobhan, the head of the Centre for Policy Dialogue, a think-tank, other interventions would not work. It is the things which NGOs do, though, that make Bangladesh’s way of fighting poverty unique.

BRAC (which originally stood for Bangladesh Rehabilitation Assistance Committee, but now is the only name the organisation needs) invented the idea of microcredit, that is, tiny loans to the destitute. Then another NGO, Grameen Bank, made them work by targeting them on women and holding weekly meetings of borrowers who would identify and support anyone who was falling behind on repayments. Their growth since has been explosive. Grameen has 8.4m borrowers and outstanding loans of over $1 billion; BRAC has 5m borrowers and loans of $725m. The poor account for roughly a fifth of the total loan portfolio of the country, an unusually high proportion.

Since their establishment, microcredits have spread around the world. Their benefits have been both exaggerated and attacked. The backlash has shown that microcredits have not, as some claimed, led to a surge of entrepreneurial activity. In some cases they have left borrowers worse off than before. Their impact in the land of their birth, though, has been mostly positive. Mohammad Razzaque of Dhaka University looked at two groups of people with similar incomes and household assets, one of which contained regular borrowers from a variety of microfinance institutions and the other of which did not, to see whether microcredit helped. Among the first group the poverty rate fell ten percentage points, from 78% in 1998 to 68% in 2004. Among the second, poverty still fell, but only half as much, from 75% to 70%.

The magic ingredient

The real magic of Bangladesh, though, was not microfinance but BRAC—and NGOs more generally. The government of Bangladesh has been unusually friendly to NGOs, perhaps because, to begin with, it realised it needed all the help it could get.

BRAC began life distributing emergency aid in a corner of eastern Bangladesh after the war of independence. It is now the largest NGO in the world by the number of employees and the number of people it has helped (three-quarters of all Bangladeshis have benefited in one way or another). Unlike Grameen, which is mainly a microfinance and savings operation, BRAC does practically everything. In the 1980s it sent out volunteers to every household in the country showing mothers how to mix salt, sugar and water in the right proportions to rehydrate a child suffering from diarrhoea. This probably did more to lower child mortality in the country than anything else. BRAC and the government jointly ran a huge programme to inoculate every Bangladeshi against tuberculosis. BRAC’s primary schools are a safety net for children who drop out of state schools. BRAC even has the world’s largest legal-aid programme: there are more BRAC legal centres than police stations in Bangladesh.

The scale is a response to one of the biggest challenges of development: that solving one problem leads to others. This happens in economic development as well as the social kind. In the 1950s South Korea’s Samsung had a big woollen mill. It found that to expand, it had to make its own textile machinery; then, to export, it built its own ships; and so on. Samsung now has around 80 companies and is the world’s largest information-technology firm. BRAC is a sort of chaebol (South Korean conglomerate)for social development. It began with microcredit, but found its poor clients could not sell the milk and eggs produced by the animals they had bought. So BRAC got into food processing. When it found the most destitute were too poor for micro-loans, it set up a programme which gave them animals. Now it runs dairies, a packaging business, a hybrid-seed producer, textile plants and its own shops—as well as schools for dropouts, clinics and sanitation plants.

The innovative NGO now has 100,000 health volunteers with mobile phones (mobile-phone coverage is widespread in Bangladesh). When a volunteer finds a woman is pregnant, she texts the mother-to-be with advice on prenatal and, later, postnatal care. This is helping BRAC build up a database of maternal and child-health patterns in remote villages.

BRAC goes out of its way to involve everyone. When it set up a programme for the ultra-poor in Shibaloy, the whole village gathered to decide who should be eligible. They drew a map of the households in the dirt so everyone could see who was involved and ensure that nobody was missed (the same process, in a different village, is pictured below). BRAC argues that such things encourage a sense of ownership of the programmes and reduces waste and corruption.

A balance-sheet

Bangladesh still has formidable problems. Its nutritional standards are low and stalled for a few years in the early 2000s. While the government has managed to increase school enrolment, the quality of education is abysmal and the drop-out rate exceptionally high (only 60% of pupils complete primary school, much less than the regional average). Only a quarter of eleven-year-olds have reached the required standards of literacy and numeracy.

Most of the big improvements have taken place in rural areas, but Bangladesh is urbanising fast, which will bring a different suite of problems. Dhaka is one of the ten largest cities in the world, but has the infrastructure of a one-buffalo town.

Villagers are doing it for themselves

And as if all that were not enough, the government seems intent on killing one of the geese that lays the golden eggs. Incensed that the founder of Grameen Bank, Muhammad Yunus, should have had the temerity to start a political party, the prime minister, Sheikh Hasina, has hounded him from his position as the bank’s managing director and is seeking to impose her own choice of boss on the bank, overriding the interests of the owner-borrowers. This is sending a chilling signal to other NGOs.

But Bangladesh’s record is, on balance, a good one. It shows that the benefits of making women central to development are huge. It suggests that migration is not just the result of a failure to provide jobs at home but can be an engine of economic growth. India’s rural-development minister, Jairam Ramesh, said recently that “Bangladesh’s experience shows…that we don’t have to wait for…high economic growth to trigger social transformations. Robust grass-roots institutions can achieve much that money can’t buy.”

Bangladesh is still poor and crowded. With the lowest labour costs in the world (textile workers make about $35 a month) it should be growing faster than China, not more slowly than India. It is badly governed, stifled by red tape and faces severe environmental problems. But in terms of the success of its grass-roots development, it has lessons for the world.

12-20-2012, 08:45 AM
From The Economist ___

Central banks’ power

The grey man’s burden

Politicians need to set clearer goals for central banks—then leave them alone

Dec 1st 2012 | from the print edition

BEFORE the financial crisis, central bankers were backroom technocrats: unelected, unexciting men in grey suits, who adjusted interest rates to keep prices stable on the basis of widely agreed rules. There were a few stars (such as Alan Greenspan) and a few controversies (whether to prick asset bubbles). But most central bankers operated below the public’s radar and above the political fray. Politicians seldom questioned how they did their job, and virtually never challenged the wisdom of their independence.

The suits are the same these days, but not much else is. Central bankers have become the most powerful and daring players in the global economy. By providing massive liquidity to the financial system, they saved the world from economic collapse in 2008. They have propped up the recovery since, not least by buying boatloads of government bonds; and they have rewritten the rules of global banking. All this has brought rock-star status: witness the excitement over this week’s appointment of Mark Carney, the head of Canada’s central bank, to run the Bank of England (see article). But it also brings big risks. More power for central bankers means less for politicians. Hardly surprising, then, that a backlash is starting.

Central-bank independence is a big issue in Japan’s election campaign. Shinzo Abe, the leading opposition candidate, has attacked the Bank of Japan for acting too timidly against deflation. He wants to force it to adopt a higher inflation target and has flirted with the idea of making it buy more government bonds. Some German lawmakers are furious that the European Central Bank has promised “unlimited” purchases of government bonds from the euro zone’s peripheral economies. In America Republicans gripe that the Federal Reserve’s programme of quantitative easing—buying Treasury bonds—is a recipe for high inflation. The squalls will get worse when central bankers start selling the bonds on their balance-sheets or tightening lending rules to prevent a new housing bubble. That is why central bankers’ autonomy needs rethinking.

Who will guard the guardians of the printing press?

Societies give unelected technocrats power over monetary policy because they think they will do a better job than politicians with an eye on the next election. Some countries with memories of painful inflation (notably Germany) reached that conclusion decades ago. But in many places it is a more recent idea. Generally, politicians set the goal (usually an inflation target). Central bankers have wide latitude in how to achieve it, but the toolkit is well known and has been well tested.

The sharp lines of that bargain have blurred since the financial crisis. Price stability is now widely considered insufficient to ensure overall economic stability. Central bankers have also been told to preserve “financial stability” (ie, make sure there is not another crisis). Inflation is no longer seen by all as the best target for monetary policy: many wonks argue that stabilising nominal GDP growth would be better.

Setting the central banks’ goals is the politicians’ job. It is therefore reasonable for Mr Abe to argue that the Bank of Japan should have a higher inflation target. The decision over whether central banks should target inflation or nominal GDP should be made by politicians, not central bankers alone. It is not good enough for politicians to call vaguely for “financial stability”: they need to give central bankers more concrete guidance, defined in terms of avoiding asset bubbles, excessive borrowing and large concentrations of risk.

But setting clear goals does not solve all the problems, because some of the tools that central bankers are using are experimental. Plenty of clever people fret that quantitative easing does more harm than good for instance (see article).

Politicians should leave central bankers to choose their tools: it is, after all, what the bankers are good at. So Mr Abe would be wrong to exhort the Bank of Japan to buy specific bonds, and America’s Republicans are wrong to carp at quantitative easing when the Fed has, as instructed, kept inflation close to its target. Politicians can intervene by changing either those goals or the central bankers themselves (when their terms are up for renewal).

For their part, central bankers need to become more open—to explain to investors, politicians and voters the logic behind their actions and the trade-offs between their goals. Transparency will help protect them from political meddling.

Maintaining central-bank independence was a lot easier when monetary policy was simpler. But that doesn’t mean the effort should be abandoned. The more important central banks become, the more important it is for politicians to keep their noses out of the bankers’ business.

Sam Miguel
12-26-2012, 08:12 AM
A good year

Philippine Daily Inquirer

11:39 pm | Tuesday, December 25th, 2012

The upgrade in the Philippines’ credit outlook done last week by Standard and Poor’s was a fitting tribute to cap a very positive year for the economy. The year 2012 is indeed one that bolstered the hope in many that the nation is headed toward genuine and lasting progress.

Topping the string of good news was the surprising 7.1-percent growth in the economy as measured by the gross domestic product (GDP) in the third quarter, a significant jump from the 3.2-percent expansion in the same period last year and the fastest economic growth in the Asean region. This put the Philippines’ 9-month growth at 6.5 percent and on track to surpass the full-year target of 5-6 percent set by the National Economic and Development Authority.

The country’s gross international reserves (GIR) also hit an all-time high of $84.1 billion as of end-November, exceeding the $83-billion revised forecast of the Bangko Sentral ng Pilipinas. The GIR is an indicator of a country’s ability to pay its foreign obligations and imports.

Latest data from the National Statistics Office likewise showed that exports grew 22.8 percent in September—the fastest pace in nearly two years—to $4.78 billion from $3.89 billion a year ago. The Bangko Sentral has also noted that exports were expected to pick up in the coming months as indicated by the big increase in the sector’s build-to-book ratio, which indicated that new orders were much higher than before. Amid concerns of a global economic slowdown, Philippine exports for this year have remained resilient, with the cumulative merchandise exports for the first nine months of the year growing 7.2 percent to $40.07 billion from $37.38 billion in the same period in 2011.

Inflation as of November was also at an 8-month low of 2.8 percent—a significant decline from the previous month’s 3.1 percent. “The predominantly stable price regime so far this year augurs well for our economy that has been growing faster than anticipated. It also bodes well for the state of public spending, for this means that each peso the government spends is able to create more impact,” noted Budget Secretary Florencio B. Abad.

The country’s balance-of-payments (BOP) surplus as of end-November topped $2 billion, or nearly five times the $364 million posted a year ago. The BOP summarizes a country’s transactions with the rest of the world.

Foreign portfolio inflows reported by the Bangko Sentral for November also breached $1 billion, the highest level in two years and more than double the previous year’s $490.35 million. This has pushed the peso to nearly four-year highs of below 41 to a dollar. Last Dec. 6, the local currency posted its strongest close of 40.85 to $1 since 2008. The peso has so far gained about 7 percent against the greenback.

The Bureau of Internal Revenue, which has always been on the infamous list of agencies where corruption is rampant, also had a milestone: preliminary and unofficial tax collection as of Dec. 17 has exceeded the P1-trillion mark.

There was also $1.09 billion in net foreign direct investments (FDI) during the nine months to September. This figure is the more important investment indicator as these funds go to the so-called brick-and-mortar businesses that generate jobs and stay in the country for a long time. The 9-month level was about 40 percent higher than the $782 million generated last year.

On the investment front, it is worth mentioning that the Department of Trade and Industry has tallied 25 inbound business delegations from various countries so far this year from only 12 business missions that were welcomed by the Philippines in 2011.

But the year that is ending is not without its downside. An acute lack of infrastructure persists. The government needs to spend more on roads, bridges and ports. As an archipelago, the Philippines should have long had a modern transport system to make trade and commerce and travel to and from the different islands convenient for the people.

Still, the biggest challenge is how the Aquino administration can make economic growth truly inclusive, for the impoverished masses and the toiling middle class to feel the benefits of a prospering economy. Inclusive growth should go beyond giving cash to the poorest of the poor. It is about an employed citizenry enjoying the fruits of its labor—a peaceful community, adequate healthcare, convenient transport system, etc. This remains an elusive Christmas gift to the people.

Sam Miguel
12-26-2012, 08:14 AM
Sen. Arroyo stalls ‘dirty-money’ law changes

By Norman Bordadora

Philippine Daily Inquirer

2:40 am | Wednesday, December 26th, 2012

An attempt to hasten the Senate deliberations on the third set of amendments to the country’s Anti-Money Laundering Act (Amla) was side tracked before the Christmas break when one of its opponents moved that it be returned to the period of interpellation.

Taking the Senate floor on the last session before the congressional recess, Sen. Joker Arroyo stressed his opposition to the amendments, saying Philippine banks—unlike everybody else involved in the laundering transactions—are not penalized for accepting funds from dubious sources.

Senate Bill No. 3123 seeks to expand the covered transactions and to increase the predicate crimes that would necessitate inquiries by the Anti-Money Laundering Council.

Last set of amendments

It is the third and last set of amendments the Paris-based Financial Action Task Force wants included to keep the Philippines’ from getting blacklisted in the international finance community.

“[My] opposition to this bill is that there can be no dirty money laundered unless there is a bank that will accept dirty money,” Arroyo told his colleagues after asking why Committee Report No. 145 on Senate Bill No. 3123 was already in the period of amendments in the Senate agenda.

Arroyo was told that the senators’ staff, including his own, were asked if it was OK to move the measure from the period of interpellation to the period of amendments without prejudice to the lawmakers who still wish to pose questions.

Senators question the bill’s sponsor on the provisions of the measure during the period of interpellation while the lawmakers propose changes to the bill during the period of amendments.

Sparing the banks

“In short, dirty monies are deposited with banks, but our Amla law does not punish the banks for accepting dirty money. So they accepted dirty money and who is the one made liable? Everyone else except the banks,” Arroyo told his colleagues.

Arroyo said he has shown the bill’s sponsor, Sen. Teofisto Guingona III, a news report of the Hong Kong Shanghai Banking Corporation getting penalized by the US treasury and justice departments “to the tune of $1.2 billion.”

“That is almost P80 billion. That is the penalty for accepting dirty money. We do not have that here, there will be no money-laundering here if the banks do not accept dirty money. And then we will just forget it,” Arroyo said.

Arroyo had an outburst after he was told that a member of his staff gave what was supposedly his approval of the Senate moving the committee report on SB 3123 to the period of amendments.

12-30-2012, 07:41 AM
Top CEOs bullish on Philippines

Investment upgrade, faster growth expected

By Tina Arceo-Dumlao

Philippine Daily Inquirer

12:39 am | Sunday, December 30th, 2012

The Aquino government has described 2012 as one of the best years ever for the Philippines with economic growth expected to surpass the targeted 5 to 6 percent and the stock market ending the year on a 38th record high, making it the second best performing market in Asia behind Thailand.

But 2013 promises to be even better, according to the CEOs of some of the country’s largest corporations who are already looking forward to even faster economic growth and the Philippines finally getting investment-grade status, which is expected to pave the way for more foreign investments to pour into the country.

“This year’s good economic fundamentals—benign inflation, high foreign exchange reserves and low interest rates—provide a good springboard for a rosy 2013 outlook. Hopefully, this translates into another credit rating improvement that would put the country to investment grade, something we haven’t seen in at least the last three decades. Having this upgrade could help change people’s perception outside the country on the Philippines as a place to put in their investments, which is the only economic indicator that we are not doing as well,” said Holcim Philippines CEO Ed Sahagun.

Benign growth fairies

An equally optimistic Antonio Moncupa Jr., president and chief executive officer of EastWest Bank, noted that the “growth fairies seem to be favoring the country.”

“We made our plans for 2013 on the premise that the Philippine economy will do well. And we believe we stand on good foundation. We hear, feel and see our loans-and-deposits customers on how well their businesses are doing. We expect the macro numbers—gross domestic product growth, loans-to-GDP ratio, the fiscal deficit, government revenue collections—to continue showing good numbers,” Moncupa said.

“Overall, we expect the momentum of domestic demand and the country’s good macroeconomic numbers to outweigh the uncertainties in Western economies. Given our positive economic outlook, we will proceed with our expansion programs,” he said.

2013 election boost

According to Moncupa, the 2013 midterm elections should give the economy—which the government expects to grow by between 6 and 7 percent—an added boost as it will provide another opportunity to pump-prime the economy with increased expenditures.

Jose Concepcion III, CEO of food and beverage giant RFM Corp., and Partho Chakrabarti, president of Pepsi-Cola Products Philippines made the same prediction.

Concepcion said 2013 would be a “super year” for the Philippines, partly because elections will help boost consumption. As a result, the stock market should hit even more records in 2013, he said.

Chakrabarti said the overall optimism of the population would result in increased investment and spending, by both companies and individuals.

“Confidence will continue to increase in 2013 and should be higher than 2012. The increased activities around the elections will further stimulate the economy in the first half,” said Chakrabarti, who also predicted that the beverage industry will grow at a faster rate in 2013 than has been seen over the past two years.

Riza Mantaring, CEO of Sun Life Financial Phil., gave a similarly rosy projection for the Philippines in 2013, saying that the economy would continue to “grow strongly” because of strong domestic consumption.

“It is already the third largest of the $1 trillion-plus Asean consumer market, and we expect to continue to move up as we have a young and still growing population with growing purchasing power,” she said.

San Miguel Corp. president Ramon Ang said the economy will continue to become strong mainly because “investors believe in our President and his good image.”

Continuing investor interest

The Philippine Chamber of Commerce and Industry (PCCI), the largest umbrella organization of more than 30,000 enterprises in the country, also projected a stronger Philippine economy in 2013 because of two significant events in 2013—the midterm elections next May and the start of the second term of US President Barack Obama in January.

“The Philippine economy in 2012 has shown resiliency and strength amid the economic crisis in Europe and territorial disputes in the region. This is mainly due to our government’s effective fiscal management policies which created a stronger-than-expected investors’ interest in the Philippines,” said PCCI president Miguel Varela.

The United States will still influence the Philippine economy as it remains among the biggest sources of investments and also among the biggest markets for Philippine goods, the PCCI said.

Varela said now would be the perfect time to pursue more reforms and start developing domestic industries.

The PCCI stressed the need to fine-tune policies to support programs that will revive a weakening industrial sector. It urged the government to carry out more support in terms of infrastructure, incentives and market linkages in the agriculture sector. It also pushed for the implementation of various public-private partnership(PPP) projects, which are supposed to anchor government and private sector cooperation in important development programs.

Overall, the PCCI sees brighter prospects in 2013 in the face of the continuing interest of fund managers and investors alike in the Philippines.

“Given the significant milestones we have achieved in assisting potential investors in the country and if we are to base on the various delegations and missions we received or organized this year, coming from countries like India, China, Russia, Bahrain, Turkey, Taiwan, Korea, Japan, among others, we definitely see a string of investment interest and opportunities in the country. Our assessment is that the economy is headed toward the right direction,” it said.

Continue reforms

Maynilad Water Services CEO Ricky Vargas also stressed the need to continue the reforms and to pursue projects to maintain growth, especially the PPP infrastructure projects.

“Our country needs infrastructure investments that will support businesses and improve lives. If the government can fast-track PPP projects next year, then we may see an even more vibrant Philippine economy in 2013. We are already on the right path. We just have to stay on track and move faster so more Filipinos can experience firsthand what progress feels like,” said Vargas, adding that 2013 marks the start of its “expansion era” for Maynilad.

“Additionally, while the daang matuwid (straight path) strategy of the government has been successful in curbing graft and corruption in the bureaucracy, there is a need to further strengthen the implementation of this strategy. Otherwise, the gains achieved in the last few years could be undermined or negated,” Vargas stressed.

Guarded optimism

Manila North Tollways Corp. CEO Ramoncito Fernandez looks forward to 2013 with “guarded optimism.”

“The national economy is poised to repeat its growth but to sustain that growth, the country needs more foreign direct investments and infrastructure spending,” he said.

Mantaring said there were external factors to watch out for as these could derail growth in 2013.

“In terms of risk, a growing economy usually attracts inflation, but we feel the government has put in place enough measures to mitigate this risk at the moment. An abrupt appreciation of the peso is also a threat to the business process outsourcing sector as it lessens its competitiveness.

“External threats such as the US fiscal cliff, the lingering euro debt crisis and an economic slowdown in China can also negatively impact our economy, particularly the export sector,” she said.

However, Mantaring expects that the Philippines, Thailand and Indonesia would not be as affected by a global economic slowdown as their economies are consumption-led. The expected increase in government spending will also help support growth, she said.

Sam Miguel
01-02-2013, 11:32 AM
New Year’s revelers gripe after ‘sin tax’ takes effect

Agence France-Presse

5:22 am | Wednesday, January 2nd, 2013

MANILA, Philippines–A “sin tax” on cigarettes and alcohol—part of a government bid to boost finances—dampened the New Year spirit when it took effect throughout the country Tuesday in the midst of celebrations.

Many stores started selling tobacco and alcoholic products at inflated prices before midnight, ahead of the official implementation of the tax hikes on Jan. 1, hitting party-goers in the pocket.

The tax on cigarettes will gradually be raised to P30 per pack by 2017, roughly doubling the current price to around P52.

The duty on alcohol will also increase gradually until 2017, raising the price of a bottle of beer by P23.50, with varying levels for other drinks, including wine and spirits. It will be further increased by four percent each year thereafter.

“The new prices compared to other countries, like Singapore for example, are still low but for ordinary Filipinos they are expensive,” said Laudemer Angeles, a 33-year-old store owner in Bacoor, Cavite.

“Many of my customers were complaining about the higher prices and were not too happy when they bought their liquor and cigarettes for their parties last night,” Angeles said.

But for antismoking campaigner Emer Rojas, he hoped the new taxes would lead to a gradual decline in the number of people suffering from tobacco-related illness.

“I think the sin taxes should be raised even higher,” he told AFP. “But we commend President Aquino for showing his resolve in signing the law.”

The government has said that the country of 100 million has the highest incidence of smoking in the region, with tobacco-related diseases costing the country P177 billion last year.

The new taxes aim to raise P33 billion this year alone, gradually increasing over the coming years.

A large percentage of the money will go towards the government’s health care program.

The government first asked Congress to raise taxes on “sin” products as far back as 1997, but a strong lobby by tobacco manufacturers blocked any measures.

The lobby included members of Congress who represented tobacco-growing regions as well as powerful cigarette companies that enjoyed one of the lowest tobacco taxes in Southeast Asia.

Sam Miguel
01-02-2013, 11:32 AM
Cebu airport off limits to groups with airline stakes

By Paolo G. Montecillo

Philippine Daily Inquirer

2:26 am | Wednesday, January 2nd, 2013

Two of the country’s top conglomerates have been automatically disqualified from bidding for the contract to expand and manage the new Mactan Cebu International Airport—one of the Aquino administration’s key infrastructure projects.

In the project’s prequalification terms of reference, published recently for interested bidders, all groups with minority or controlling interests in airline companies are being banned from bidding for the P17.5-billion Cebu project.

As a result, San Miguel Corp. and JG Summit Holdings, both of which had expressed interest in the deal, would not get a chance to vie for the contract under the government’s public-private partnership (PPP) scheme.

The project’s terms of reference, a 71-page document posted on the Department of Transportation and Communications (DOTC) website, said that a company vying for the deal “cannot be an entity providing air transport services in the Philippines, be they domestic or international.”

Having a stake in an airline, direct or indirect, and however minute, would also be grounds for disqualification.

“Any entity providing air transport services in the Philippines, be they domestic or international, for the duration of the Concession Period: cannot be the Facility Operator; cannot have any interest, direct or indirect, in the Project or the Facility Operator; or cannot be owned by the Project SPC or the Facility Operator,” the terms read.

The published terms did not give a reason for the exclusion of companies with investments in the airline industry.

The provision banning companies with airline investments was also included in the final terms despite the absence of local anti-trust legislation.

Other terms included a minimum capitalization of P2 billion and having adequate personnel with at least 10 years of experience in similar projects.

Asked to comment on the project’s published terms, San Miguel president and chief operating officer Ramon Ang said he had not yet seen the document, adding that he “hopes” his firm will not be prematurely disqualified.

San Miguel last year acquired majority control of flag carrier Philippine Airlines (PAL), the country’s oldest carrier and the largest in terms of revenue.

Apart from controlling PAL, San Miguel, through unit TransAire Development Holdings Corp., currently operates the Godofredo P. Ramos airport in Caticlan, the country’s gateway to tourist hotspot Boracay Island.

Officials from JG Summit, which owns the country’s leading budget carrier Cebu Pacific, were not available for comment.

Other firms that have expressed interest in the project are the groups of Manuel V. Pangilinan and Ayala Corp. The latter partnered with Cebu-based Aboitiz family to make a bid for the Cebu airport facility.

A DOTC source, who spoke on condition of anonymity due to the sensitivity of the issue, admitted that the terms were published without consulting industry stakeholders and prospective bidders.

The existing Mactan Cebu International Airport is the country’s second-largest air passenger facility.

In 2011, the airport handled more than 4.74 million domestic passengers and 1.47 million international travelers.

Passenger numbers have grown at the facility at a compounded annual rate of 14.47 percent for domestic traffic, and 11.02 percent for international traffic over the last five years.

Sam Miguel
01-02-2013, 11:41 AM
Biz Buzz: Cartel breaker

the staff

2:18 am | Wednesday, January 2nd, 2013

Some big players in the gaming industry are somewhat peeved by the aggressive recruiting tactics of Bloomberry Resorts Corp. of ports tycoon Enrique Razon Jr.

According to our sources, the well-funded Bloomberry has been poaching staffers left and right from some of the country’s best leisure and entertainment establishments, including the booming hotel industry.

Bloomberry, as we know, will be the first to operate its hotel-casino complex among the four investors in the $4-billion Entertainment City development of the state-owned Philippine Amusement and Gaming Corp.

And since it has announced that it will open its doors by March 2013, Bloomberry has been on a hiring binge to make sure that it will be 100-percent ready in three months.

One of the richest poaching grounds for Bloomberry is rival Resorts World Manila casino of tycoon Andrew Tan, which is also an investor in Entertainment City.

“In fact, Andrew Tan is a little piqued because of the poaching,” said our source, adding that gaming and hotel industry players had been complaining that the pirating activities had distorted pay scales across the board.

In many cases, Bloomberry has offered to double the salaries of key staffers just to lure them into its new Solaire hotel-casino operation.

“It’s so difficult to compete with them since they have money to burn,” the source said.

Even casino-hotel operators in Macau and Singapore have been targeted, we hear, with Bloomberry luring home hundreds of experienced casino professionals by at least matching (and sometimes topping) their overseas wages.

Locally, Bloomberry has also gone on a series of “recruitment road shows” around the country to attract the best and the brightest—and most visually attractive, we hear—staffers for its casinos.

The road shows are packaged as exclusive parties where the prospective hires come in their best partying attires. The most… uhmm… compelling candidates are asked to report to a separate room where the formal recruitment process is made. Nice.—Daxim L. Lucas

Old flame

Beyond speculations of rivalry among local banking titans for control of Philippine National Bank—especially now that the exclusivity period on the talks with Bank of the Philippine Island has lapsed—the latest buzz is that the Lucio Tan group is likely to rekindle discussions with an old banking flame.

Chinese banking giant Industrial and Commercial Bank of China (ICBC), which has had discussions with Kapitan’s group as early as 2010, is expected to make a new move, stock pundits say.

ICBC previously considered taking over 30 branches of Allied Bank. In exchange, the Lucio Tan group was supposed to get 10 branches on the mainland.

This prospective partnership, however, was overtaken by thorny political issues, especially with the escalation of territorial tension between the Philippines and China.

But since Kapitan has big projects in his land of birth, particularly in property development, getting a Chinese partner in the banking business is not farfetched.

If and when ICBC enters the picture, it will spice up the PNB-Allied Bank play.

As to how much bearing the still ongoing Philippine-China brawl could have on this, the jury is still out.—Doris C. Dumlao

BOC takeover

Four months after striking a deal to buy a controlling stake in a local commercial bank, Bank of Commerce, Malaysian banking giant CIMB is expected to consummate its takeover this month, industry sources said.

Money will finally change hands, translating to a windfall of about P12.2 billion for San Miguel Corp., in exchange for the 60-percent stake ceded to CIMB.

As earlier reported, CIMB has found a local guy to run Philippine operations: investment banker Simon Paterno, erstwhile managing director and head of the Philippine office of Credit Suisse.

Although CIMB is entering the Philippine market much later than its closest rival back home, the acquisition of Bank of Commerce will give it a much bigger footprint of 122 branches—more than double Maybank’s local network.—Doris C. Dumlao

Who’s afraid of integration?

The Asean’s economic integration in 2015 is fast approaching. And while most sectors are waxing optimistic, industry leaders are cautioning that not everything is as rosy as it seems, and domestic firms must prepare to do battle in a bigger, more competitive arena.

“With what is happening in Europe, people are beginning to doubt Asean integration,” Philippine Exporters Confederation Inc. president Sergio R. Ortiz-Luis Jr. said.

“While everyone is talking integration positively, it is difficult to implement given that we are more diverse than Europe in terms of varying degrees of economic and technological development, we are not one contiguous land mass, and the fact that there are different religious and political orientations per country.”

The leaders of other sectors had earlier weighed in the pros and cons of integration.

Fastfood giant Jollibee, for example, expects regional expansion and job creation. But it also sees an increase in importation once tariffs are taken out from 2015 onwards, company chief financial officer Ysmael Baysa said during a forum.

The finance sector is vulnerable, too, said BDO Unibank Inc. president Nestor Tan.

Unless local banks build more strength in the small and medium enterprise segment where they already have an edge, they may be hurt by regional integration harder than they expect, Tan explained.—Riza T. Olchondra

Gangnam Globe

When Globe Telecom Inc. posted the Oppa Gangnam Style video featuring its top brass doing the popular horse-riding dance moves during the holidays, it revealed some details about the Ayala-controlled telco’s top honchos.

It also revealed some interesting items about the company’s future moves.

For one, it revealed a lighter side to CEO Ernest Cu, who can sometimes be a demanding and short-tempered boss, we hear.

It was Cu’s wife, Arlene, who convinced him to agree to do the video, insiders say. (The other Globe brass… well… they had little choice after Cu agreed to do it.)

It also revealed how the Globe chief is a car lover.

His two favorites—a white Audi R8 (featured as the favorite ride of the character Tony Stark in the “Iron Man” movie) and a blue Porsche 911—were used in making the video.

More importantly, the video—shot at Globe’s present headquarters on Pioneer Street in Mandaluyong City—may be the last time the venue will be featured in a company undertaking.

Bought from DMCI unit, Universal Rightfield, in the aftermath of the 1997 financial crisis, the current Globe building has definitely seen better days.

Next year, Globe will move to a spanking new building in Bonifacio Global City, Taguig.

The new futuristic-looking edifice (currently in its final stages of construction) is located near St. Luke’s Medical Center and will be an LEED-certified “green building.”

And since company employees are obliged to promote their own products, all their transactions at the building’s cafeteria and parking lots will be made with Globe’s G-Cash mobile system. Daxim L. Lucas

Sam Miguel
01-04-2013, 08:46 AM
PSE index continues record-breaking climb

Peso closes at its strongest level in nearly 5 years

By Doris C. Dumlao, Michelle V. Remo

Philippine Daily Inquirer

11:10 pm | Thursday, January 3rd, 2013

The local stock index continued its record-breaking climb as it went past the 5,900 level on Thursday, buoyed by the upbeat sentiment of global markets that welcomed budget developments in the United States.

Also, the peso strengthened to its highest level in nearly five years as improved outlook on the global economy and favorable sentiment on the Philippines raised investors’ appetite for assets in emerging markets.

The local currency closed at 40.77 against the US dollar, up by 9 centavos from the previous day’s finish of 40.86:$1.

The last time the peso closed stronger than that of Thursday was on March 5, 2008, when it settled at 40.76 against the greenback.

The peso also hit an intraday high of 40.76:$1 Thursday, while the lowest recorded was 40.825.

Volume of trade amounted to $983.7 million—up from the previous day’s $931.8 million.

At the Philippine Stock Exchange, the main-share index surged by 73.06 points, or 1.25 percent, to close at a new high of 5,934.05. A new intraday peak of 5,960.74 was also reached.

Investors snapped up shares of PLDT, AC, BDO, SMIC and Megaworld.

Although PLDT rose at a faster pace, SM Investments kept its bragging rights as the most valuable stock in the bourse, with a market capitalization of P560 billion. PLDT ended Thursday with a market cap of P553.10 billion.

There were 121 advancers against 47 decliners while 43 stocks were unchanged.

“Events in Washington have played out pretty much exactly as we expected, with Congress compromising on a deal at the very last minute. The deal focused on the revenue side and did not address spending or, most importantly, the debt ceiling. This means there is much to do in the New Year,” said BofA Merrill Lynch in a commentary.

“The [fiscal] cliff is behind us, but now ‘three gorges’—the sequester, the debt ceiling, and the continuing resolution for the 2013 budget—all lie ahead,” it said.

The US budget deal, messy and protracted as it was, may have provided an immediate boost for financial markets, but it may spell over the long term for some Asian assets that are coming off a stellar 2012.

Investors may start to shift some money out of overpriced or crowded Asian investments in favor of the United States on the view that the fiscal deal has allowed the US to avoid a recession while it boosts the prospects for American stocks.

“In the short term, US risk premium will come down now that a deal has been struck and might trigger some reversal of flows from Asia back to the US,” said Hong Hao of Bank of Communication International Securities.

Analysts do not expect a major reversal of funds, but more of a subtle shift as some money managers rebalance their portfolios by taking profits on Asian positions and moving those funds into prospective bets in the United States.

The S&P 500 fell 1 percent from September through December last year in the buildup to the presidential election and the so-called fiscal cliff. At the same time, Asian markets rallied. Japan’s Nikkei rose 17.2 percent and the MSCI Asia Pacific ex-Japan index went up by 5.6 percent.

Southeast Asian markets such as Thailand and the Philippines were top performers last year, but a flood of funds has pushed valuations to levels that look less appealing now on a relative basis.

“There are a lot of great companies in Asean. But as a market, the region is looking pretty fairly valued,” said Bill Maldonado, who oversees about $80 billion as chief investment officer in Asia-Pacific for HSBC Global Asset Management.—With a report from Reuters

Sam Miguel
01-04-2013, 08:47 AM
Ongpin: Amla prone to abuse

By Daxim L. Lucas

Philippine Daily Inquirer

10:42 pm | Wednesday, January 2nd, 2013

Businessman Roberto Ongpin has urged lawmakers to consider amending the current law against money laundering, saying that the law, in its current form, can easily be abused for political ends.

In a letter to Sen. Joker Arroyo, the former Marcos trade minister said that the freeze order issued by the Anti-Money Laundering Council on his local bank accounts had resulted in “reputational damage,” despite the fact that he has been neither charged nor convicted of any crime.

According to Ongpin, the Anti-Money Laundering Act needs to be amended so “that it cannot be misused or abused, as in my case, because of political vendetta.”

The businessman, who chairs Internet gaming firm PhilWeb Corp. and real estate developer Alphaland Corp., among others, also said that his publicly listed companies had lost “several billions” worth of market capitalization as investors, worried by the reports of the freeze order on his funds, sold down his stocks.

“As you are aware, the freezing of one’s bank accounts is, in most jurisdictions around the world, a most serious matter and clearly infers that the person whose accounts have been frozen has committed or has been convicted of a most serious criminal act,” he said.

Ongpin stressed, however, that his P510 million in loans from the Development Bank of the Philippines were nowhere near the definition of “behest” as alleged by his critics, especially since these had been fully repaid ahead of time, and helped the state-owned book substantial earnings in the process.

Critics of the deal alleged that Ongpin, known to be close to former First Gentleman Jose Miguel Arroyo, obtained the loan from DBP in record time, without the requisite lending safeguards in place—an accusation he has denied.

Sam Miguel
01-04-2013, 08:52 AM
Fooled a fast one

By Conrado R. Banal III

10:41 pm | Wednesday, January 2nd, 2013

Just when everybody thought that the Aquino (Part II) administration would not only pay lip service to its slogan about the straight and narrow path, some brilliant guys at the DOTC just pulled a fast one in the bidding for a fat P10-billion government contract.

That is of course the Department of Transportation and Communications, now headed by a former congressman, Joseph Emilio “Jun” Abaya, who took over from a former senator, Manuel “Mar” Roxas, who in turn became head of the politically strategic DILG.

Under Roxas, the DOTC set in motion a project to build a new airport terminal in Cebu, where the existing terminal could only handle some five million passengers a year, while the volume of passengers was already between six and seven million.

In short, the Cebu airport is a pretty crowded place. So, the Aquino (Part II) administration wanted the Cebu airport terminal to be one the shining examples of business-government partnership under its program called PPP.

Three private groups already announced interest in the project, namely, the Ayala-Aboitiz consortium, the Metro Pacific group and the San Miguel conglomerate.

All of a sudden, on Dec. 27, just when everybody was on a relaxed mode during the Christmas season, the DOTC released a bombshell in the bidding rules on the Cebu project.

Under the new rule, with its impossible name “instructions to prospective bidders,” the DOTC disqualified bidders with interest in any airport transport business in the country.

The new rule should eliminate one of the most serious contenders, the San Miguel conglomerate, which recently injected $500 million into the struggling national flag carrier, PAL, thus acquiring 49-percent ownership.

From what I gathered, the DOTC really targeted the San Miguel conglomerate in the disqualification rule, apparently to favor the Ayala-Aboitz consortium.

According to earlier reports, the consortium partnered with a Canadian firm, ADC & HAS, to bid for the Cebu project. It was none other than ADC & HAS that first brought up the disqualification rule.

Word went around business circles that the Canadian company approached the head of the PPP Center, Cosette Canilao, to propose the disqualification rule to the DOTC.

As everybody knows, our leader, Benigno Simeon (aka BS), created the PPP (public-private partnership) Center to speed up projects in its infrastructure modernization drive.

If the disqualification rule came from PPP Center, and it was not initiated by the DOTC itself, the move is simply known in business as SYA—you know, “save your ass!” Look, boss BS, it was the PPP Center!

But nobody can say whether the DOTC really thought it was about to fool anybody in that fast-one disqualification rule.

Word has it that the career guys in the DOTC were against the rule, except two officials—Undersecretary for planning Rene Limcaoco and his subordinate, assistant planning secretary Jaime Raphael Feliciano, both appointed by our leader, BS.

Anyway, it has been known in business that the most serious competitor of the Ayala-Aboitiz-ADC-HAS consortium should be the San Miguel conglomerate.

The Metro Pacific group merely announced its interest in the project in media, but it did not give visible signs of seriousness in getting the P10-billion contract.

Anyway, the disqualification rule immediately eliminated the toughest competitor of the Ayala-Aboitiz-ADC-HAS consortium in the bidding, San Miguel, which is not only the biggest conglomerate in the country today but also the biggest food and beverage company in the entire region.

Moreover, of all the various business conglomerates in the country today, San Miguel is the only well-established group that has an existing airport project, the one in Caticlan, which will serve the huge tourism market of Boracay island resort.

And the DOTC targeted San Miguel for disqualification in the Cebu project?

From the looks of it, the disqualification rule was the handiwork of the DOTC alone, since the department never consulted the business groups. Moreover, it never consulted the Neda, which was supposed to be on top of huge government projects.

On Dec. 17, of course, the DOTC sent out word of invitation to the airline industry to attend a meeting regarding the Cebu airport project. The department issued the invitation via e-mail. And here’s the thing: The DOTC sent out the invitation less than 24 hours before the scheduled time. Naturally none of the airlines were able to attend.

Because nobody in the airline industry could attend the last-minute meeting, the DOTC simply did not make even just any feeble attempt to reschedule the meeting.

From what I gathered, the terms of reference of the Mactan airport project were already done by that time. And for sure San Miguel was the target.

Question: Is the disqualification a well-established practice in Canada or other countries? Another question: Does Canada have strict rules against Canadian companies taking part in hanky-panky deals with foreign governments.

And still another question: What is the legal basis of the DOTC’s brilliant rule to disqualify San Miguel?

Earlier rumors already went around in business that two former lawmakers who joined the Cabinet already ordered the head of the Mactan airport authority to work on awarding the contract to the Ayala-Aboitiz-ADC-HAS consortium by eliminating San Miguel from the bidding.

Unfortunately, the weird invention of the DOTC immediately removes big groups with interest in airlines from taking part in any future airport projects, which are aside from San Miguel, the Lucio Tan group, the Summit group of taipan John Gokongwei, cash-loaded Antonio “Tonyboy Cojuangco,” and emerging taipan Freddie Yao (banking and beverage manufacturing), who recently bought Zest Air.

Final question: How can the government get the best bid?

Sam Miguel
01-04-2013, 08:53 AM
Ongpin leaves PBCom

By Doris C. Dumlao

12:34 pm | Wednesday, January 2nd, 2013

MANILA, Philippines–Former Trade Minister Roberto V. Ongpin has stepped down as director and co-chair of commercial bank Philippine Bank of Communications.

PBCom disclosed to the Philippine Stock Exchange a letter from Ongpin quitting these posts dated Dec. 28 effective immediately.

This leaves Ongpin’s nephew Eric Recto in full control of the bank. In May, Recto was named as chair of the bank albeit Ongpin who was then still co-chair.

Recto sits on PBCom concurrent to his post as president of oil refiner Petron Corp.

Ongpin is currently in the midst of a legal battle against the new board of the state-owned Development Bank of the Philippines due to alleged anomalous lending transactions to the former during the previous administration.

Sam Miguel
01-04-2013, 09:23 AM
BSP buying more dollars to temper peso rise

By Prinz P. Mzagtulis

(The Philippine Star) | Updated January 4, 2013 - 12:00am

MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) vowed yesterday to continue buying more dollars to temper the peso’s strength even as its top central banker admitted the country’s foreign reserves are “enough.”

As the peso reached a new 58-month peak of 40.77 to a dollar yesterday, BSP Governor Amando Tetangco Jr. said the central bank – which has generally kept a market-determined exchange rate – “reserves the right to participate in the foreign exchange market.”

This is to “ensure exchange rate movements are not destabilizing” to businesses and the economy, in general, Tetangco said during the Rotary Club of Manila membership meeting.

The local unit’s closing yesterday was the strongest since March 6, 2008 when it ended trading at 40.56 versus the dollar. Total transactions amounted to $983.70 million, up from Wednesday’s $931.80 million.

A strong peso trims the value of dollar export and business process outsourcing earnings, two of the country’s top industries. It also slashes the amount of remittances families of overseas Filipinos receive, affecting their capacity to spend, save and invest.

“This is still on the back of optimism due to the resolution of the US fiscal cliff. It is a risk-on,” a trader at a local bank said in a phone interview. Risk-on pertains to investor sentiment of acquiring risky assets in other territories on top of those from the US.

US President Barack Obama yesterday signed into a law a bill that would pull off the world’s superpower from the fiscal cliff, a combination of spending cuts and tax increases said to be enough to put the US back into recession.

Tetangco, in the event yesterday, said this has resulted into volatility in the financial markets, especially since the deal reached will only hold off spending cuts for two months. He said the market will be looking at a “permanent solution” to the budget problem.

That volatility was characterized more by more capital inflows flooding emerging markets such as the Philippines, resulting into a bull run of the Philippine Stock Exchange index (PSEi) and the peso. The main PSE index closed to a fresh record-high of 5,934.50 yesterday.

“There have been surges in capital flows, manifesting volatility… The market must be aware that flows which come quickly into the economy can come out quickly. This is more known sudden stop or sudden reversal,” Tetangco explained.

Sam Miguel
01-04-2013, 09:30 AM
Get PPP going this year


By Boo Chanco

(The Philippine Star) | Updated January 4, 2013 - 12:00am

Cosette Canilao, executive director of the PPP Center, is one patient, hardworking and competent bureaucrat. I admire her dedication to the mission given to her. But PPP will move only if the Cabinet Secretaries on top of the proposed projects move. That has been the stumbling block so far.

When Cosette made a presentation of what her unit is working on before a group of economists, she didn’t betray any feeling of frustration which should be normal for someone in her position. There is no doubt the background work is going on smoothly. Cosette’s group even wrote manuals on how to do PPP projects.

At least Cosette now has an ally in NEDA director general Arsenio Balisacan. When he attended his last meeting with the Foundation for Economic Freedom (FEF) before he assumed his NEDA post, Arsi promised to push harder to get those projects going.

But even Arsi had to admit late last year that the roll out of the PPP projects will take more time than they thought. Nevertheless, Arsi said the government is “not giving up on PPPs. We will push harder [even if] we had some hiccups in implementation and unexpected problems. We’ve learned a lot from the last 12 months [so we will be] able to move faster next year,” he reassured.

Of course we are skeptical of government’s so called flagship economic thrust called the Public Private Partnership for needed infrastructure. By the time Cosette made her presentation before the FEF, government had missed all of its set targets for getting PPP projects going. P-Noy’s economic managers did him a disservice by making him prematurely launch PPP without much due diligence.

Of the original projects, only one was actually awarded… the short Daang Hari expressway connection to the SLEX. But even that project is now delayed and the winning bidder, Ayala, could very well give it up. DPWH didn’t study the project well enough, changed some bidding parameters after the fact and didn’t make proper coordination with the SLEX concessionaire.

The only significant PPP award that is making progress is the school building project and it isn’t even one of the originals. DepEd successfully awarded the first phase of the project. The company of former MMDA chief Bayani Fernando won the public bidding and is now implementing it.

Many of the pending DOTC projects are in the original list, but are not in any danger of being implemented soon. Why am I not surprised? When I asked Cosette if she could furnish me with an implementation schedule of the PPP projects, she said she will seek clearance from the departments involved. I never got that schedule.

Now they are talking of expanding the scope of potential PPP projects to include the relocation of informal settlers from waterways considered danger zones. Cosette said she had met with officials of the National Housing Authority and the Department of Public Works and Highways to discuss how this could be done.

Another possibility for the PPP approach that Cosette is pushing has to do with tourism infrastructure. She is thinking about a public-private partnership in the redevelopment and restoration of heritage structures like the Old Manila Post Office and the Manila Metropolitan Theater.

Tourism Secretary Mon Jimenez broached that possibility to me too over a year ago. Sec MonJ said some Singaporean investors want to convert the old Post Office building into a hotel.

I guess that’s where Cosette got the idea when she told newsmen that “It’s been done in other countries like Singapore.” The luxury Fullerton Hotel was once the General Post Office of Singapore.

Tourism Sec MonJ is also thinking of PPP as a way of restoring Intramuros to its old colonial glory and more. It is an ideal project for many of our top property developers who have made theme parks out their developments.

If Megaworld can replicate Venice on McKinley Hill with a fake canal, why not Intramuros in Intramuros with its authentic walls?

Maybe the Intramuros Administration, which is the agency responsible for the project, is not moving fast enough. Of course the problem there is formidable. Still, they should show some movement. The last I heard, Gawad Kalinga is now helping deal with the informal settlers.

The only agency that seems serious about PPP is DepEd. Last week, it published an invitation to prequalify bidders for the second phase of the school building project. That’s reason enough for P-Noy to be confident that he will be able to meet the target number of new classrooms to wipe out the shortage before his term expires.

A sense of urgency could do wonders, I think. In the meantime, good luck to Cosette. Her persistence ought to be given due recognition. Maybe just because she tirelessly pursues these possibilities, she could get lucky and this administration may actually surprise us all with accomplishments on the ground.


Some administration allies in Congress were reported to have urged Pinoys to be more positive about our country’s state of affairs. Actually, SWS recently showed survey figures that Pinoys are optimistic enough… maybe even too hopeful about their future than reality would justify.

Ninety-two percent of adult Filipinos are entering the new year with hope rather than with fear, according to the SWS Fourth Quarter 2012 Social Weather Survey conducted from Dec. 8 to 11, 2012.

The 92 percent hopeful of the coming 2013 is just three points below the record-high 95 percent which was first achieved in 2002. Hopefulness of the new year is widespread across all areas, SWS found out, but is noticeably lower in Mindanao than in Metro Manila, balance Luzon and Visayas.

Four out of five (85 percent) in Mindanao are hopeful of the coming 2013, slightly lower than 96 percent in balance Luzon, 93 percent in Metro Manila, and 93 percent in Visayas. But it also turns out that new year hope is highest among classes ABC. Compared to 2011, new year hope increased among classes ABC but declined among classes D and E.

All (100 percent) of those who belong to middle-to-upper classes ABC are hopeful of 2013, higher than the 93 percent among masa class D and 89 percent among very poor class E. The decline aside, even the masa registered very high levels of hopefulness.

This means despite the seeming cynicism of opinion leaders and media, the general public is unaffected enough to keep them highly optimistic. Knowing this sentiment, the administration cannot afford to disappoint. It must deliver on expectations this year, or at least make it visibly clear that they are starting to do so. Otherwise, there could be a backlash with dire political implications for 2016.


Speaking of tourism, it looks like we are off to a good start for 2013. The prestigious Conde Nast listed us among the top in their list of hot destinations to watch in 2013. Credit P-Noy and Sec MonJ for creating the right environment to grow our tourism industry.

According to cntraveller.com, the Philippines is “still not the most obvious beach-holiday destination, but it soon will be.” It went on to report that we are “becoming particularly popular among serious divers, who come for the incredible underwater life, unspoilt coral gardens with rainbow-bright fish, green sea turtles and dugongs.”

Conde Nast cited Palawan: “the archipelago of Palawan ticks all the boxes: palm-fringed white-powder beaches, crystal-clear turquoise waters, natural lagoons for wild swimming on Miniloc Island – all of it protected by UNESCO. Its Bacuit Bay is something like Halong Bay in Vietnam, only without all the tourists – for the time being, at least.”

For surfers, it pointed out the “super-stylish new opening is Dedon Island, on Siargao; it’s owned and designed by contemporary furniture brand Dedon.” It also cited new hotels rising in Metro Manila… “the Philippines capital of Manila is also having a moment. Among its new openings – another one in December 2012 – is the Fairmont Makati City.”

I like how Conde Nast ends its review: “Sorry, Maldives... We love you, but we’ve got a new flame.”

Way to go! It is really starting to be more fun in the Philippines!

Fiscal cliff

A last minute deal averted the US falling into a fiscal cliff for now. But not too many Americans I met during my recent visit know what it is or why they should worry.

Here is how Jay Leno tried to explain the fiscal cliff: “Are you sick and tired of hearing the term ‘fiscal cliff’? People don’t understand it. It doesn’t tell you how serious the situation is. They need more colorful metaphors.

Here’s how to explain it: “It’s 4 a.m. for our economy and Lindsay Lohan is behind the wheel. That says danger. People understand that.”

Sam Miguel
01-08-2013, 09:23 AM
Forex reserves end 2012 at all-time high of $84.25B

By Michelle V. Remo

Philippine Daily Inquirer

10:04 pm | Monday, January 7th, 2013

The country’s foreign exchange reserves hit an all-time high of $84.25 billion at the close of 2012, buoyed by the central bank’s dollar purchases that were meant to temper what could have been a sharp appreciation of the peso.

The country’s foreign exchange reserves hit an all-time high of $84.25 billion at the close of 2012, buoyed by the central bank’s dollar purchases that were meant to temper what could have been a sharp appreciation of the peso.

The yearend gross international reserves (GIR) were enough to cover a year of the country’s import requirements and were nearly six times the combined foreign currency-denominated debts of the government and private entities maturing within a year.

The latest amount of GIR was up by about 12 percent from $75.30 billion the previous year.

The BSP admitted that it had been buying dollars from the market to prevent a steep rise in the value of the peso against the greenback.

Officials said that under its policy, the BSP allowed the exchange rate to be generally determined by the market, but intervened through currency trading in cases of significant volatility pressures. They said the sharp and sudden rise or fall of the peso was disruptive to businesses and to the economy.

The peso closed at 41.05 against the dollar at the last trading day of 2012, gaining nearly 7 percent since the start of the year. The peso was the second-fastest appreciating Asian currency against the dollar last year after the Korean won, which rose 7.17 percent.

Exporters said the rise of the peso has made Philippine-made goods more expensive in dollar terms and less competitive. The appreciation of the local currency has also reduced the peso value of the dollar remittances sent by overseas Filipinos.

The BSP has sufficient dollars to buy from the market given the robust inflow of remittances, foreign investments in the local business process outsourcing (BPO) sector and external portfolio investments.

Officials said foreign portfolio investments were substantial in 2012 because the favorable performance of the Philippine economy fueled the appetite for peso-denominated securities.

The heavy dollar purchases by the BSP pushed its expenditures and led to a net loss of about P68 billion in the first three quarters of 2012, its latest income statement showed.

Nonetheless, the BSP said it would not hesitate to continue buying dollars if appreciation pressures on the peso remained significant this year.

The BSP said the accumulation of dollars has its benefits to the economy. The increase in the GIR reflected the improving capacity of the Philippines to pay its dollar-denominated debts. This, in turn, has led to improved credit ratings for the country.

Sam Miguel
01-08-2013, 09:24 AM
Special Report: New wave of confidence in local energy sector

By Amy R. Remo

Philippine Daily Inquirer

10:02 pm | Monday, January 7th, 2013 First of two parts

The time for scrutiny and investigation of past blunders is over. With windows of opportunity opening up, concrete action must now be taken to realize the ambitious goals for the energy sector.

Energy Secretary Carlos Jericho L. Petilla, in the few media briefings he has conducted since his appointment in late October 2012, has committed to move forward the programs and policies laid out by his predecessor to help achieve the targets of the Aquino administration, primarily those concerning the power generation and downstream oil sectors.

“We will follow what [Cabinet Secretary Jose Rene D.] Almendras has started because if I reinvent the entire wheel, it will take me months again of setting the directions. The directions are there, all we have to do is carry them out and improve them if we can,” he said in his first media briefing on November 5.

Renewed interest

Notably, the Aquino administration was able to usher in a new wave of investor confidence for the country. This benefited all sectors, including energy.

The optimism resulting from this resurgence in investor interest—most notably from globally renowned energy firms—has since fueled numerous proposals for projects covering the exploration and development of the country’s indigenous fuel and power sources, renewable energy generation, traditional fossil fuel generation, alternative fuels, natural gas and the downstream oil industry.

Existing energy players in the country have likewise moved forward their once-stalled projects in support of the government’s target to diversify energy sources and to ensure long-term energy security.

Among the more notable projects that materialized in 2012 were the $1-billion additional investment for phases 2 and 3 of the Malampaya gas field project off Palawan to ensure sustained production over the next decade, Royal Dutch Shell’s move to study the feasibility of putting up a floating liquefied natural gas facility in Batangas to the tune of $1 billion and the upgrading of its 110,000-barrel-a-day refinery located in the same province, worth an estimated $150 million.

A publicly listed investor group from Dubai is also looking to pour in huge investments to set up what could be a refinery or a petroleum facility inside an industrial park in Bataan to serve as its hub in the region, while Petroleum National Brunei is keen on putting up an LNG facility in Mindanao.

Renewable energy developers are now battling for a share in the limited 760-megawatt installation target set by the government, while other firms are proceeding with their respective projects, even without the benefit of the feed-in-tariff (FIT) rates, which could have assured them of fixed cash flows over the next 20 years.

There is also a more aggressive push to complete natural gas projects, 13 of which have been deemed as priority projects that must be put in place by 2030, as these are expected to encourage more widespread use of natural gas for the power and transport sectors.

Of these projects, the first that may become reality is the $2.1-billion, 105-kilometer Batangas-Manila (BatMan 1) pipeline, which is targeted for completion by 2017.


On the part of the government, certain milestones have also been achieved.

For one, the much-awaited FIT rates were issued by the Energy Regulatory Commission, a development seen to finally move forward the local renewable energy industry, while contracts to explore and develop coal blocks under the Philippine Energy Contracting Round 4 are set to be awarded.

Also, more renewable energy service contracts were awarded last year. As of Nov. 2012, the government has awarded 325 contracts for projects that can generate close to 5,700 MW. There are 190 pending applications for roughly 2,500 MW in additional capacity.

The government was also able to secure a $300-million loan from multilateral lender Asian Development Bank, as well as a $100-million loan and a $5-million grant from the Clean Technology Fund, to finance the rollout of 100,000 energy-efficient and environment-friendly electric tricycles across the country.

Despite these developments, critics say that efforts are still not enough.

For instance, the issuance of the FIT rates, some said, was merely the first step as there are a number of hurdles that have yet to be threshed out such as the oversubscription to the limited installation target and the FIT-allowance (a universal levy to be collected among all power consumers using electricity generated from RE sources) as well as its collection, administration and disbursement.

Other mechanisms under the Renewable Energy Law such as net metering and renewable portfolio standards have yet to be implemented.

The DOE has yet to address the regulatory deficiencies hounding the implementation of open access, which will allow large power users to choose their suppliers. The final rules, which will provide the legal ground, have yet to be issued.

It was noted that the commencement date of Dec. 26 only meant the start of a transition period. One full year will be needed to complete the transition, finalize commercial arrangements among parties, and lay down the necessary infrastructure. Full implementation is expected by December 2013.

The allocation of money from the Clean Technology Fund for the e-trike project also drew flak from certain civil groups as they claim that the amount was originally set aside for solar-power projects.

No immediate relief is in sight for Mindanao power consumers, who continue to bear with power interruptions. They may even endure longer outages by summer this year because of the projected supply deficit of 200 MW.

Petilla said that the DOE was banking primarily on the private sector to help ease this shortfall, as the agency’s earlier plan to privatize and transfer the three 32-MW diesel fired power barges from Visayas to Mindanao did not materialize.

The DOE also plans to encourage large commercial firms in Mindanao like the SM group and Dole Philippines to run their respective fuel-fired generator sets at certain times, instead of acquiring their needed capacities from the Mindanao grid.

This way, the capacities they will give up can be used to power up other areas in Mindanao. At the same time, these companies that will voluntarily give up their loads will be compensated under the Interim Mindanao Electricity Market (IMEM).

State-run Power Sector Assets and Liabilities Management Corp. also failed to dispose of government-owned power assets and contracted capacities this year. But it was able to secure a favorable decision from the Supreme Court, which declared as legal and valid the sale in 2010 of the 246-megawatt Angat hydropower facility to Korea Water Resources Corp. (K-Water), the leading water resources and power firm in South Korea.

Sam Miguel
01-09-2013, 09:51 AM
Special Report: More secure energy sector, less power intensive economy seen

By Amy R. Remo

Philippine Daily Inquirer

10:53 pm | Tuesday, January 8th, 2013 (Last of two parts)

While some have remained critical of the supposed “slow pace” of developments in the energy sector, a greater number of stakeholders have expressed optimism, noting that the Department of Energy is moving in the right direction.

Alfredo Ramos, chairman of the Petroleum Association of the Philippines, said participants in the upstream oil and gas industry were “keenly anticipating” the resurgence of upstream exploration and development given the expected significant developments in 2010.

“We look forward to the new leadership in the DOE to continue the momentum toward more petroleum exploration in the Philippines. As before, the Petroleum Association of the Philippines will continue to work with the government in pursuing the goal of energy security and independence through the search for, discovery and development of indigenous petroleum resources,” he added.


Reynaldo P. Bantug, president and CEO of Japanese-backed ethanol producer Green Future Innovations Inc., added that under the present administration, “we have gone a long way.”

“We have some major accomplishments for 2012. We have actually settled a lot of issues as far as policies are concerned—we were able to come up with FIT rate … We think these are major milestones that boost the confidence of investors. We are happy that all these uncertainties have been addressed,” he said.

Fernando Martinez, chairman of independent player Eastern Petroleum and of Independent Philippine Petroleum Companies Association (Ippca), noted that the local downstream oil industry had moved a “step further to maturity.”

“Intensified competition benefited the consumers and proved the merits of a deregulated, open and transparent market. The downstream oil industry is the least of DOE’s concerns,” Martinez said.


Over the next few years, the DOE targets to implement several medium- and long-term measures to ensure the country’s energy security.

Recently, the DOE launched the Philippine Energy Plan 2012-2030, which indicated that at least P3 trillion in fresh investments will be needed by the energy sector between 2012 and 2030.

Petilla said the latest version of the PEP was anchored on the Energy Reform Agenda, which is focused on providing “energy access for more.”

Under the PEP, the energy sector will be guided by the following policy thrusts:

– Ensure energy security or the availability of energy supply at a reasonable price;

– Expand energy access focused on providing electrification to the countryside to usher economic growth;

– Promote low carbon future in response to global calls on mitigating the environment;

– Climate-proof the energy sector to ensure that energy facilities and infrastructures are resilient to climate change;

– Promote investments in the energy sector considering that nearly 90 percent of the funding requirements will come from the private sector; and

– Develop regional energy plans to complement regional development thrusts and objectives.

The DOE wants the country’s renewable energy-based power generation capacity to increase threefold with the addition of 9,931.3 MW by 2030.

The National Biofuels Board is expected to help the DOE achieve its biofuel blend targets over the planning horizon.

“Biofuels as we said will be used as blends. More than what the law requires, our aspiration is to reach 85 percent bioethanol blend in 2030,” Energy Secretary Carlos Jericho L. Petilla said.

Through the continued implementation of the Philippine Energy Contracting Rounds and monitoring of the performance of the service contractors vis-à-vis their development programs, the DOE sees a modest increase in the production of indigenous fuels.

The DOE is also enticing investors to invest in power generation facilities.

Generation capacity

“With the expected economic growth of the country to reach over 7 percent at the end of the planning horizon, we will need an additional capacity of 11,400 MW, based on our Power Development Plan,” Petilla said.

The DOE also aims to realize its “One Grid, One Nation” goal by interconnecting Mindanao and the Visayas. The grids of Luzon and Visayas are already interconnected.

As the energy sector’s contribution to the poverty reduction goal of the Aquino Administration, the DOE and National Electrification Administration vow to provide electricity to 32,441 sitios (settlements) from 2012 to 2015. This will bring sitio electrification level to 100 percent by 2015.

Likewise, between 2012 and 2017, about 6.1 million households will be energized to realize 90 percent household electrification by 2017.

As part of promoting a low carbon future, the DOE aims to achieve 10-percent energy savings by 2030. It also hopes to see 30 percent of all public utility vehicles running on alternative fuels by 2013.

Petilla committed that the DOE would ensure the smooth flow of energy investments by working closely with concerned agencies and institutions in harmonizing energy laws with other national laws.

Given these policy thrusts, the DOE is envisioning “a more secure energy sector, less energy-intensive economy, more efficient and sustainable energy systems and facilities, and reduced dependence on oil importation.”

“A more secure energy sector would mean the realization of our targeted increase in power generation capacities, an interconnected transmission system, a reliable distribution network through electric cooperatives and the timely implementation of downstream energy infrastructures particularly for natural gas,” Petilla explained.

Sam Miguel
01-10-2013, 10:18 AM
QC, Subic next growth areas for developers, outsourcers

By Charles E. Buban

Philippine Daily Inquirer

9:26 pm | Friday, January 4th, 2013 (First of two parts)

Who doesn’t want to be in Bonifacio Global City, Makati or Ortigas? With highly developed infrastructure, competitive operational costs and opulent surroundings, these areas have become prime destinations for various local and international firms.

“But slots are filling up fast and if you are a newcomer you have to look elsewhere,” said Melo Porciuncula, Capital Markets and Business Operations head of KMC MAG Group, a commercial and residential real estate services provider that furnishes business process outsourcers their own offshore corporate services here; represents tenants wanting to locate in Metro Manila, Bacolod, Cebu, Clark, Iloilo and Davao; provides capital market support as well as extends residential real estate services.

Porciuncula sees Quezon City and Subic as the next growth areas as these places already possess developed infrastructure as well as world-class telecommunications services with redundant international connectivity (submarine fiber optic cable networks complemented by satellite systems).

Road networks, runways

“Apart from the fact that Subic is now under two hours’ drive from Metro Manila via the North Luzon Expressway and the Subic-Clark-Tarlac Expressway, the place boasts one of the world’s finest road networks and runways (Subic Bay International Airport used to serve as an emergency landing site for the National Aeronautics and Space Administration’s space shuttle) and is now in the process of developing a dedicated BPO district called the Subic BPO City,” Porciuncula said.

Subic BPO City is being set up like the Ayala Techno Hub, the 20-hectare information technology center located in Quezon City (but as an added incentive, the Subic Bay Metropolitan Authority will be providing housing for the information and communications technologies professionals and call center agents who will work in the district).

But aside from the Ayala Techno Hub, Quezon City also has the pioneering 17-hectare Eastwood Cyberpark in Libis, the 12-hectare Eton Centris located at the Quezon City Triangle, the newly revitalized 35-hectare Araneta Center in Cubao (including the 9-hectare Araneta Center Cyber Park), and around 30 more ICT parks registered with the Philippine Economic Zone Authority.

“These areas will keep on expanding (including the North and East Triangles, on Commonwealth and on Edsa) as the Philippines already surpassed (previous industry leader) India in the BPO industry. The BPO here in the Philippines is growing about 25 percent annually and is remitting $13 million (P530.5 million) to the economy. Outsourcing in the Philippines has provided more than 700,000 seats for call center agent services and business process services, a trend that will go on for years as our economy improves and financial uncertainties trouble the United States and Europe,” Porciuncula observed.

Close to home

He also added that the reason developers and outsourcers are setting up in these locations is to be closer to the ICT professionals who are mostly residing in Quezon City, Marikina City and in the provinces of Rizal and Bulacan.

“Moreover, quality graduates continue to swell the ranks every year due to the presence of many tertiary-level schools in Quezon City, including learning institutes that specialize in call center training,” Porciuncula said.

Interestingly, he also added that as KMC MAG Group attracts several clients from Australia, New Zealand and those based in Europe, the firm has also set up its own residential team that works closely with their corporate clients to find them housing within the vicinities of their workplaces.

“Our brokers are skilled in reasonably negotiating buying, selling and leasing residential properties on their behalf. Our extensive listings of residential properties ensure that every location and housing option is covered,” he said adding that KMC MAG Group also handles corporate relocation as well as individual needs for condominiums, prestige homes and international properties.

(Next: Growing knowledge process outsourcing market to spur home building)

Sam Miguel
01-11-2013, 08:58 AM
Bank liability in Amla cases

By Raul J. Palabrica Jr.

Philippine Daily Inquirer

11:19 pm | Thursday, January 10th, 2013

The clock is ticking on the deadline set by the Financial Action Task Force on Money Laundering for the Philippine government to further amend the Anti-Money Laundering Act and plug perceived loopholes in the law.

Among others, FATF wants to widen Amla’s coverage to include casinos, real estate agents, dealers in precious metals and stones, foreign exchange corporations, money changers and pre-need companies.

If placed under Amla’s oversight authority, these businesses will have to report all transactions in excess of P500,000 (or its equivalent in foreign exchange) within one banking day and, even if below that benchmark, are suspicious in character.

FATF is apprehensive that terrorist organizations may be able to get hold of “dirty money” through these entities that have been left out from Amla’s coverage in the two instances that Congress amended the law to meet FATF’s requirements.

If the demands of the Paris-based financial watchdog are not met, the Philippines may be placed on the blacklist which could result in delays in the processing of international financial transactions or imposition of higher fees.

At present, the bill that seeks to address FATF’s concerns is stuck in the Senate. Sen. Joker Arroyo has opposed its passage unless it includes a provision that penalizes Philippine banks for accepting deposits from dubious sources.

He has cited the case of HSBC, a London-based bank that traces its roots to Hong Kong, which paid $1.2 billion to the US government to settle money laundering charges.


Under the existing law, Philippine banks or financial institutions that are authorized to receive cash deposits and other monetary instruments have it easier, compared to others, in case they violate the law.

If a person, for example, transacts money that comes from a covered unlawful activity (or predicate crime), or facilitates the commission of money laundering acts, he can be imprisoned from seven to 14 years and ordered to pay a maximum fine of P3 million.

Prison terms and fines of varying lengths and amounts are also imposed for failure to keep records, malicious reporting on money laundering, failure of a public official to testify in Amla cases and breach of confidentiality.

In the case of malicious reporting, if the offender is a corporation, association, partnership or any juridical person, the penalty is imposed on the persons who participated in the commission of the crime.

But the corporation or juridical entity may go scot-free because the law merely provides that “the court may suspend or revoke its license.”

Outside of this slap-on-the-wrist sanction, the law is silent on the penalties imposable on corporations or other juridical entities that violate its other provisions.


This oversight (deliberate or otherwise) was later cured by way of the Revised Implementing Rules and Regulations issued by the Anti-Money Laundering Council.

Rule 14.1.d of the said rules states that “after due notice and hearing, the AMLC shall, at its discretion, impose fines upon any covered institutions, its officers and employees or any person who violates” the Amla and the rules, regulations and orders issued in relation to it. The fines shall not be less than P100,000 but in no case exceed P500,000.

In what appears to be a face-saving move, the rule ends with the statement that “the imposition of the administrative sanctions shall be without prejudice to the filing of criminal charges against the persons responsible for the violations.”

Under this rule, if a bank is found to have accepted for deposit, say, P100 million worth of dirty money, either knowingly or for failure to observe the proper measures to prevent that deposit, the most that it can be held liable for is the measly sum of P500,000.

That amount is a pittance compared to the profits it could gain from lending that tainted money to third parties or investing it in lucrative financial transactions.

In the hands of skillful (read: scheming) lawyers and considering the snail pace of justice in our country, the proceedings against the bank for that offense can take from five to 10 years. By the time the fine is paid, if at all, the fine would be just spare change for the bank.


It is no consolation that the bank officer who authorized or participated in the money laundering activity may be jailed or fined for the offense he committed on behalf of or for the benefit of the bank.

He can be easily replaced by another employee and it’s business as usual for the bank. Its public image may be temporarily tarnished but, with the right PR campaign, including a change of name, and considering the Filipinos short memory, the incident would be easily forgotten.

Unless a bank gets slapped with a hefty fine or subjected to severe administrative sanctions, such as close scrutiny of its transactions, downgrading of its banking status and stricter application of the fit-and-proper rule for its directors and officers, acceptance of deposits or investments from questionable sources would be considered one of the risks of the banking business in this country.

Aside from HSBC, the list of iconic banking institutions that have been slapped fines for violation of anti-money laundering rules include The Royal Bank of Scotland (£1.25 million), American Express International Bank ($65 million) and Coutts, the bank of the Queen of England, (£8.75 million).

After getting hit where it hurts most—their pockets—these banks have committed to adopt and implement the appropriate measures to make sure dirty money never gets into their coffers again.

Our local banks must have such a strong influence (or intimidating presence) over Congress that they have successfully fended off efforts to make them directly accountable for willful or negligent involvement in money laundering activities.

Sam Miguel
01-15-2013, 10:05 AM
Perils of public office

Philippine Daily Inquirer

8:57 pm | Monday, January 14th, 2013

The filing of criminal complaints last week against ranking officials of the Bangko Sentral ng Pilipinas and the Anti-Money Laundering Council again illustrates the risks that public officials face. It’s not that all those in government are scrupulous. It’s just that complaints against public officials are not that common and many are intended to harass the accused.

Businessman Roberto Ongpin has haled BSP Deputy Governor Nestor Espenilla Jr. to court for allegedly violating the Antigraft Law. In a complaint filed at the Office of the Ombudsman, Ferdinand Marcos’ trade minister assailed Espenilla for signing the AMLC resolution in September 2012 that sought a freeze order on his bank accounts. The Court of Appeals’ freeze in December of some 100 bank accounts linked to Ongpin caused the value of the shares in his companies to plunge. His lawyer claimed that nearly P9 billion in the market value of his shareholdings in Philweb Corp., Alphaland Corp., Atok-Big Wedge Co. Inc. and Philippine Bank of Communications had been wiped out. The complaint alleged that the freeze order damaged Ongpin’s reputation and ruined a potential $1-billion investment deal.

Ongpin, ranked by Forbes Magazine as the 9th richest Filipino, said Espenilla “acted recklessly and in clear bad faith” when he signed the AMLC resolution. Ongpin’s basis was what he termed Espenilla’s “contradictory” position—the BSP official allegedly cleared the businessman’s transactions with the state-owned Development Bank of the Philippines during the Senate hearings in 2011. “He acknowledged under oath during a Senate probe that from the point of view of the BSP as the regulator of banks, the sale by DBP of its 50 million Philex shares to a company beneficially owned and controlled by Ongpin was a ‘prudent’ and ‘positive’ transaction that resulted in ‘trading gains’ for the bank,” Ongpin said. Yet last November, Espenilla signed the AMLC petition for a freeze on Ongpin’s accounts. This was in connection with inquiries into P660 million in alleged behest-loan deals between Ongpin and DBP officials in 2009, when the businessman was reportedly in the good graces of the Arroyo administration.

The BSP has expressed concern that Ongpin was “singling out” Espenilla; the AMLC resolution was also approved by the heads of the Securities and Exchange Commission and the Insurance Commission who sit as members of the AMLC board. BSP Governor Amando Tetangco Jr. chairs the AMLC, but because he was abroad on official business when Ongpin’s issue was tackled, the freeze order was authorized by Espenilla, the BSP chief’s alternate.

The central bank has also pointed out that the AMLC freeze order was issued after the Court of Appeals found probable cause to act against Ongpin.

The case began as a “word war” between Ongpin and the BSP, after the businessman resigned as director of PBCom when the central bank “deferred” his confirmation. The deferment, in turn, was due to legal questions on Ongpin’s purchase of Philex shares using loan proceeds from DBP. Ongpin has subsequently sold his stake in

PBCom, citing the need to make a “financial sacrifice” and spare the bank from any backlash that could arise from his legal battle with “a ranking central bank official.”

Ongpin has wisely steered clear of waging war with the BSP itself, emphasizing that he had “no rancor whatsoever” against it as an institution. The BSP had earlier described Ongpin’s allegations of partiality as “unwarranted and patently unfair,” saying that the central bank “has the responsibility to ensure that careful evaluation of critical elements is made before final decisions are promulgated.”

The BSP has long pushed for an amendment to its charter to exempt its officials from legal actions while in the course of performing their functions. This followed the numerous court cases filed against BSP executives by owners and officers of shuttered banks or financial institutions in trouble.

The central bank has noted that some of its officials were wasting much time attending court hearings, even in the provinces where some of the cases were filed. Worse, it said, its hands were often tied by restraining orders issued by various courts, prohibiting it from taking action against erring banks and their owners and officers. Perhaps it’s time to take a serious look at the BSP’s plea for immunity from suit.

Sam Miguel
01-17-2013, 09:46 AM
Bangko Sentral losses balloon to P78.43B

By Michelle V. Remo

Philippine Daily Inquirer

11:17 pm | Wednesday, January 16th, 2013

Losses of the Bangko Sentral ng Pilipinas nearly trebled as of October last year as its heavy dollar purchases, which were meant to temper the appreciation of the peso, and huge interest payments bloated its expenditures.

Based on its latest income statement, the BSP incurred a P78.43-billion net loss in the first 10 months of 2012, which was nearly three times the P27.29 billion registered in the same period of the previous year.

Documents showed that P41.38 billion of the loss resulted from the central bank’s foreign exchange operations wherein it buys or sells currencies to ease the volatility of the exchange rate. In case of sharp appreciation pressures on the peso, the BSP buys dollars from time to time to temper the local currency’s rise against the greenback.

BSP Governor Amando Tetangco Jr. earlier said the central bank maintained the policy of allowing the value of the peso to be largely determined by the market, but with a flexibility to intervene in some instances to avoid a sharp and sudden rise or fall of the local currency. Extreme volatility of the peso has adverse consequences on businesses and the economy, Tetangco noted.

About P37.05 billion of the BSP loss came as revenues fell short of expenses, mainly interest payments that amounted to P76.84 billion during the 10-month period.

The BSP pays interest on deposits placed by banks such as the overnight and special deposit account (SDA) windows. The acceptance of deposits is a way to help siphon off excess liquidity from the economy to prevent runaway inflation.

Deposits in the SDA facility alone stood at about P1.7 trillion last year.

The sharp rise of the peso last year has elicited complaints from the export sector. Exporters said the significant appreciation of the peso made Philippine-made goods more expensive for foreign buyers and therefore less competitive.

Sam Miguel
01-17-2013, 10:52 AM
How to create jobs

By Peter Wallace

Philippine Daily Inquirer

12:43 am | Thursday, January 17th, 2013

I think it’s been fairly well established that free, open markets work best. The world’s successful economies show that even well-meaning diktats invariably do more harm than good, even frustrating instead the intended good.

Take minimum wage. Labor groups argue for higher wages on very reasonable grounds that P456 ($11.12) per day is not a decent, living wage. I agree. But zero, which is what close to 3 million Filipinos (or 11.7 million—a more realistic and, sadly, more believable figure, based on SWS’ latest survey) get is even less acceptable. They get zero because they have no jobs. They have no jobs because businessmen aren’t investing here. Foreign businessmen aren’t investing here because they can get cheaper labor in China, Vietnam and Cambodia. Even in Thailand and Indonesia.

Our daily minimum wage is $11; it’s $9.75 in Thailand, $8 in China, $5.30 in Indonesia, and $3.20 in Vietnam. The Philippines gives twice or thrice more than Indonesia and Vietnam, respectively.

Now look at the foreign direct investments over the past six years: China—$1,047 billion; Indonesia—$58 billion; Thailand—$51 billion; Vietnam —$41.7 billion; the Philippines—$13.6 billion.

Do you see the link? High minimum wage isn’t the only factor that is driving foreign investors away from the Philippines, although all surveys and anecdotal discussions indicate it’s a major one. Do you want a low-paying job or a no-paying no-job?

Instead of getting P456 in daily wage, around 11 million Filipinos who want a job get nothing. In the informal sector in the provinces a daily wage of P230-P280 is common, and people there somehow live on that. Now I’m not suggesting that’s an acceptable wage, it’s not. But what I am saying is that people can survive on far less than P456. But they can’t survive on nothing. And conditional cash transfers, helpful as they’ve been, are only an interim solution. Eventually—the sooner the better—people must have jobs.

Local businessmen don’t invest in new businesses because the cost of labor makes the cost of local products higher than the cost of imported ones. And consumers won’t buy out of the spirit of nationalism; they’ll buy, all things being equal, driven by price. In today’s highly interactive world you have to be competitive.

Also, high minimum wage drives small businesses to go into the informal sector where employees earn less and are less protected because of the absence of certain benefits (e.g., social security, home development, PhilHealth) that responsible companies provide. Equally important is the fact that government loses the taxes and controls it should have.

Meanwhile, the security of tenure is probably one of the worst prolabor laws you can imagine. If there’s one thing it’s not, it’s security of tenure. It deters, instead of encouraging, job creation. You think twice, three times before hiring anyone because of the huge cost and difficulty of terminating. Or you hire for five months, and then kick the employee out in the most hurtful fashion.

If a job is necessary, when you fire someone, you just hire someone in his place. There’s no reduction in the available job statistics. Someone lost, someone else gained. The “loser” works harder next time to ensure he retains the job, the “winner” works harder to ensure he keeps it. Productivity goes up, cost goes down. Demand for the product shoots up, more workers are needed.

If the job is no longer needed, why keep the worker? There’s no sense to it. It provides guaranteed passage to bankruptcy. One of my clients closed down one of his company’s departments when he outsourced its tasks. He was forced by the labor department to rehire the workers, who now just sit there daily with nothing to do. Where’s the sense in that?

It’s an example of shallow thinking, something that sounds good, until you look into it more closely. Great for campaign speeches, lousy for the unemployed. You should be able to terminate, even without cause, as long as you give notice and adequately recompense based on present salary and length of service.

Bills proposing a P125-per-day increase across-the-board and a stronger guarantee of an employee’s security of tenure have been filed in Congress. (They are currently pending in their respective committees and are not likely to be approved in any of the remaining days of the 15th Congress.) These measures were filed because they are popular, though they are not what’s actually best for employees. But if ever passed, these will result in fewer jobs. Now I know this view will be disputed given the fact that, as I said earlier, there are other factors that determine where one will invest. But do you really think an investor will choose a place where labor costs are higher and labor regulations are more rigid compared to elsewhere? You’d have to offer some other really attractive factors to get that investment. But the Philippines has nothing more attractive to offer. If there are any, most of them are worse turnoffs: higher electricity (our rates are already the second highest in Asia), a convoluted bureaucracy, inconsistent policies, more corruption, poor infrastructure, etc. These do not make the Philippines a particularly attractive place to invest in; yet it could be, if it offered lower labor cost and a more open market policy for the employment of labor. A more competitive wage and more flexible working conditions aren’t the only factors, but they are significant ones. These are the changes the law needs to facilitate.

The politicians would do better for the country and their people if they explained this to the people and put in place policies that attract, not deter, job-creating investments. It’s an area President Aquino should focus on as well. We need to create jobs.

Sam Miguel
01-17-2013, 11:08 AM
^^^ I've always been a pro-management guy, and I'm sure everyone here knows where I stand with "organized labor".

That being said, I do not think removing the security of tenure of workers will actually entice more investments and thus lead to more business and more jobs.

Instead of looking for a way to remove a worker, why not make him improve himself so he does not have to be removed at all? Make him undergo yearly up-training, or even new training, so his skill set is continually expanding.

There is already a model for this: the Armed Forces of the Philippines, where all officers (equivalent of managers / supervisors in the business world) have to undergo across the board training in human resources (J1), intelligence (J2), operations (J3), logistics (J4), planning and programs (J5), comptrollership (J6), civil-military relations (J7), communications and electronics (J8 ). Of course over the course of their careers they will eventually specialize in a field or two (normally intelligence and operations), but they have the skills to be assigned anywhere.

Workers can be treated in similar fashion. That way, failure to improve becomes the basis for removal, not merely because the job is "no longer needed".

Plus, longer-tenured workers become the institutional memory of any business, and they ensure that new hires imbibe the culture and sociology of the business, apart from its nuts and bolts operations. Yes, there are some veterans who will teach nothing but shortcuts, bellyaching and other such shit to the young'uns, but that happens everywhere everytime. That still leaves some who can show the ropes as it were to the new guys. And we all know how valuable continuity is.

Sam Miguel
01-17-2013, 11:10 AM
Agrarian reform and the urban illusion

By Walden Bello


9:10 pm | Friday, January 11th, 2013

There can be no doubt that the administration of President Benigno Aquino III has made significant strides in terms of reform. The Responsible Parenthood and Reproductive Health Act was a major breakthrough, not only for women’s rights but also for development, owing to the central importance of our country’s having a sustainable rate of population growth. The anti-corruption campaign is creating that confidence in government that is an indispensable ingredient of an economic climate that would encourage investment, both local and foreign. The conditional cash transfer (CCT) program, which now reaches over three million families, is the country’s most successful anti-poverty program, one that the Asian Development Bank has toasted as a model for other countries.

Unfortunately, these successes have not been matched by advances in agrarian reform. Some one million hectares still have to be distributed. DAR figures show that the average number of hectares distributed under the current administration yearly came to 103,732 hectares, the lowest of the last five administrations. At this pace, it will be hard for the administration to complete land redistribution by the date mandated by law, June 2014, since to achieve that goal, from January 2011 onwards, the DAR would have to distribute 320,242 hectares per year. It is difficult to see how president can live up to the promise he made at a meeting with farmers over six months ago that all lands covered by Comprehensive Agrarian Reform Program with Reforms Act of 2009 (CARPER) will be distributed to all qualified agrarian reform beneficiaries by the target date.

Who the president places at the helm of the agrarian reform effort is undoubtedly critical, and with the program in the doldrums, it might be time for the president to evaluate the performance of his top land reform aides. But the problem is, in our view, more profound. Undoubtedly, there are people in the administration that believe in agrarian reform, some of them passionately. However, there are also those who either do not consider it central to the program of reform or see it as a “sakit ng ulo,” one that one must pay attention to, but largely with palliative rhetoric rather than energetic commitment. Unfortunately, the latter tendency is dominant, and this is the reason the land reform program has lost the dynamism it regained when the CARPER law was passed in 2009.

It seems that the dominant view in the administration is that agricultural development is principally a productivity issue and not a social justice concern, that what is important is making the investments in physical infrastructure, marketing, and credit that will unleash the potential of agricultural entrepreneurs. The problem with this perspective is that production cannot be separated from justice. The main element that would unleash the productive potential of our millions of farmers is security of tenure over their land. Moreover, poverty-stricken tenant farmers and rural workers who have long been in the chains of feudal relations need assistance from government to be transformed into vibrant small farmers responding to market incentives. You do not create farmer entrepreneurs overnight. This is why Section 13 of CARPER provided that at least forty percent (40%) of all appropriations for agrarian reform during the five (5) year extension period would be immediately set aside and made available for support services. If there is one thing we can learn from the experiences of successful agrarian reform in Taiwan, Korea, and Japan, it is that land redistribution, secure property rights, and production assistance or subsidies for support services make up the formula for a dynamic agricultural sector. The absence of one of these factors is what torpedoed many other land reform efforts in the Philippines and elsewhere.

But the problem goes beyond a narrow focus on productivity on the part of some administration technocrats. Much development thinking in the country today is centered on improving the atmosphere for business activities in the city, promoting the dynamism of the real estate industry, supporting the growth of financial services, and attracting more investment in Business Process Outsourcing (BPO’s) activities. It is on servicing the needs of a growing globalized middle class. In this mindset, agriculture is an afterthought, and food security is one that can be met with increased imports. In this paradigm, the over 50 per cent of the people that live in the countryside are not regarded as a dynamic source of development, the main engine of which is seen to lie in urban economic activities fuelled by foreign investment and OFW remittances. From this perspective, the bulk of the population that remains in agriculture is “excess baggage” constituting a drag on economic takeoff.

But the neglect of agriculture is not simply a development paradigm problem. The truth of the matter is that the most dynamic sectors of our economic elite have lost interest in agriculture as a source of wealth. As sociologist Kenneth Cardenas argues, “Filipino capitalists are going back to land as a source of wealth, but instead of using it as a base for a rural, cash-crop-oriented economy, it is being used for urban development.” The highest rate of returns on investment come from shopping malls, office buildings, and middle and upper class housing. Yet even as the most energetic sectors of the upper class have moved into urban real estate development, seeking to capture demand for housing fueled by the billions of dollars in OFW remittances, their less enterprising brethren cling on to rural land, less and less for production and more and more for speculation or security. Increasingly, it is mainly small producers and rural workers that have an interest in making a living from farming, and even large numbers of them are abandoning the countryside for what they see as the lack of opportunities owing to continuing inequalities and the absence of incentives. Their logic is compelling: better to take your chances in Saudi Arabia than scratch a living from land from which you can get evicted any time.

It is a big mistake to write off the countryside instead of seeing it as a central source of economic dynamism–one that can be a key engine of our economy if its base were a population of prosperous small farming families. The aim of agrarian reform, one must remind our production-oriented policymakers, is not only to achieve social justice but to creative the incentives that will make agriculture a vibrant trigger of economic development and avoid the emergence of a lopsided urban-driven economy. Indeed, one can go further and say that without a just settlement in the countryside, not only will urban-driven development be economically unsustainable; it will continually be threatened by political instability spawned by protracted injustice in the countryside. The generation of farmers that won the struggle for CARP and CARPER may be succeeded by a younger generation angered by the failure of its implementation.

It is an illusion to think that the countryside will remain quiet for long.

Sam Miguel
01-17-2013, 11:20 AM
^^^ The countryside will remain quiet precisely because of the OFW option, Congressman Bello. And besides, ayaw ng gulo ng Pilipino, hanapbuhay nga naman daw ang hanap nila, hindi hanap-gulo.

Sam Miguel
01-21-2013, 08:25 AM
Bullish PH economy to rouse real estate industry

By Tessa R. Salazar

Philippine Daily Inquirer

11:20 pm | Friday, January 18th, 2013

First in a series

What’s in store for the country’s property industry this year?

Going by the fearless forecast of five property analysts, the outlook for 2013 is rosy.

Julius Guevara, associate director for advisory services and head of consultancy and research of Colliers International, said that in general, “the bullish performance of the economy is seen to continue” in 2013. He said 2012 “proved to be a very good year for the Philippine economy and specifically for real estate.” He continued that “an end-of-year GDP (gross domestic product) growth rate between 6 and 7 percent has been forecast by various analysts, and we saw the stock market hit all-time highs during the past few months.”

Guevara added, “the residential condominium market has also exceeded historical sales levels this year, as low interest rates and record overseas remittances continue to fuel the housing boom.”

Colliers International recently released 10 forecast statements on the economy and property sectors for 2013—a collection of insights from various industry experts and Colliers.

“Similarly, the business process outsourcing (BPO) industry continued to drive the office property sector, and current vacancy rates in the major CBDs are in low single digits. The retail sector has also done tremendously well; occupancy rates in regional and superregional malls in Metro Manila are in the 90s. All in all, 2012 exceeded most of our expectations,” Guevara added.

Best real estate market

Rick Santos, CBRE founder and chair, noted: “We are now experiencing the best real estate market in the Philippines in the last 20 years. The Philippine real estate sector will have bright prospects in 2013. We see sustained growth in the BPO/office, residential, gaming and leisure sectors.”

Enrique Soriano, Ateneo program director for real estate and senior adviser for Wong+Bernstein Business Advisory, said: “Five years after the financial crisis triggered by a housing bubble, the global economy is convalescing. The Philippine economy is poised to move up. Real estate markets in all segments will grow. Some developers will fail and others will do better because they have a strategy and they have found exactly the right position.”

Claro dG. Cordero Jr., Jones Lang LaSalle’s head for research, consulting and valuation, said an estimated 11,200 units is expected to be completed within 2013 for the residential segment. He also explained that, though “the residential demand will stay strong across all subsegments, there are also various externalities which may challenge the growth of demand over the near- to medium-term.”

The first indicator cited by Colliers showed the Philippine economy would grow by around 6 percent in 2013. The forecast was made by Japanese financial services group Nomura and the World Bank. The World Bank raised its forecast for the Philippine GDP in 2013 to 6.2 percent, up from 5 percent. Nomura also raised its forecast for the GDP to 6.6 percent in 2013. “Growth is expected to tick even higher in 2013 because of the impact of the elections, fiscal improvement and governance reforms in private investments,” Nomura said.

Karlo Pobre, Colliers International’s analyst for research and advisory services, explained that the recent growth in GDP indicates that economic activities in the country have further expanded.

“The higher the GDP is, the more attractive we become, specifically to foreign investors. Investment opportunities should reflect on the property industry, considering the recent developments in the market. This should preferably materialize in the office and industrial sectors,” he said.

Sector contribution

Pobre added that currently the construction sector contributes roughly about 8 to 9 percent of the GDP, while real estate services is at 11 percent.

Soriano said: “the long anticipated growth trajectory will happen this year; something that we have not felt for a long time. We have had growth spurts in the past years but never a real, sustained momentum. This time it’s for real. Our economic fundamentals are getting better. The housing and construction market has assumed the lead role in this trajectory, domestic demand is growing, PPP (public-private partnership) infrastructure will continue its aggressive pace and the midyear local elections will boost spending.

“Overseas remittance will grow as the US economy continues to improve, albeit at an annualized rate of 1 percent and Europe’s crisis is apparently showing some signs of remission. With this I expect the economy to pick up steam and grow to 6.8 percent.”

(Next: Residential demand to stay strong across all segments)

Sam Miguel
01-22-2013, 08:32 AM
‘Powerhouse’ US trade mission coming to Manila

11:35 pm | Monday, January 21st, 2013

Trade and business leaders in the Philippines are preparing investment pitches ahead of the arrival of a “powerhouse” American trade mission to Manila this week.

With a lot of “heavyweights” visiting Manila, it is a good chance for Philippine leaders to pitch various investment options, officials said.

The Philippine Embassy in Washington, D.C., said in a statement that a “powerhouse” American trade mission—composed of representatives from Citigroup, Chevron, Coca Cola, General Electric, JP Morgan Chase, Procter & Gamble, Peregrine Development International, CV Starr & Co., the US Education Finance Group, McLarty & Associates, Federal Express and Spence & Co.—was visiting Manila from Jan. 23 to 25 to promote greater trade and investment between the United States and the Philippines.

Trade Secretary Gregory Domingo said in a text message that the visit of the trade mission was facilitated by the US-Philippine Society (co-chaired by businessman Manuel V. Pangilinan) and Philippine Ambassador to the US Jose L. Cuisia Jr. on the Philippine side.

“The Apec business advisory council has been here since this weekend. Lots of heavyweights,” Domingo said.

Outgoing Trade Undersecretary Cristino Panlilio, who is in charge of trade promotion, said that among the scheduled activities of the trade mission included a visit to the Center for International Trade Expositions and Missions (Citem) pavilion in Pasay City. “We will ‘sell’ investments in all major sectors of the Investment Promotions Plan,” Panlilio said in a text message.

The Philippines aims to generate some P400 billion in investment commitments this year from P360 billion in 2012.

The US-Philippines Society is a non-profit independent organization that seeks to raise the profile of the Philippines in the US. The Society, which was formally established during the visit to Washington last year of President Aquino, is co-chaired by former US Ambassador to the Philippines John Negroponte.

“The delegation will participate in a dynamic program aimed at strengthening ties with political and business leaders, fostering discussion of strategic issues, and promoting business and investment opportunities,” said Cuisia in a statement.

Cuisia said the delegation will call on President Aquino and Supreme Court Chief Justice Maria Lourdes Sereno and participate in a policy forum with Foreign Affairs Secretary Albert del Rosario, Defense Secretary Voltaire Gazmin, Finance Secretary Cesar Purisima and Domingo.

The program also includes a meeting with US Ambassador to the Philippines Harry Thomas Jr.; a dialogue with business leaders organized by the Makati Business Club; and visits to the Global Gateway Logistics City at the Clark Freeport in Pampanga and the Asian Institute of Management.

The Policy Forum will also feature Ambassador Negroponte and two other former ambassadors to Manila—Thomas Hubbard and Richard Murphy—who will discuss the strategic environment in the region and the outlook for policy directions as the second term of President Barack Obama begins in Washington, Cuisia said.

Cuisia said the delegation would also attend the second regular meeting of the Board of Directors, composed of civic and business leaders from the US and the Philippines.

The other members of the board, aside from Pangilinan and Negroponte, are Washington Z. Sycip and Maurice Greenberg, honorary co-chairs; Cuisia, ex-officio board member; Ambassador John Maisto, president; Ambassador Hank Hendrickson, executive director; and lawyer Leo Canseco, legal counsel.

Sam Miguel
01-22-2013, 08:43 AM
Mindanao’s underground economy

By Cielito F. Habito

Philippine Daily Inquirer

8:16 pm | Monday, January 21st, 2013

The underground economy, a.k.a. the informal economy, makes up an estimated 40 percent of our reported gross domestic product (GDP) nationwide, and about the same percentage of total employment. These cover economic activities that have been variously described as hidden, parallel, clandestine, black, gray, alternative, shadow, illicit, illegal, subsistence, unregulated, nonmonetized, criminal, and so on. The International Labor Organization suggests the following as distinguishing attributes of the informal economy: mostly unregistered and unrecorded in official data; have little or no link to organized markets and credit institutions; not recognized, supported or regulated by government; and often operating outside the framework of law.

In Mindanao’s conflict-affected areas, the underground economy is likely to be even more prevalent and significant than it is nationally. With violent conflict long having been a deterrent to formal investment, much of the local populace has been pushed into various economic activities that provide for the peculiar range of needs and wants in its internal and external markets, whether explicit or hidden, legal or illegal. Among the notable ones are the illicit trade in guns and prohibited drugs, kidnap for ransom, informal land markets, illicit cross-border trade, pyramid scams, human trafficking and informal credit. Most of these can be extremely lucrative for those who engage or work in them, hence tend to be associated with conflict and violence spawned by the very activities themselves. For some, like the illicit gun trade, it’s the other way around: prior conflict and violence in the area due to political rebellion and clan feuds may have provided the impetus for its active market.

With large sums of money changing hands in the course of these underground economic activities, a thorough understanding of the peace and development challenges in Mindanao cannot be complete without understanding this real economy at play on that island. And yet, most of the scholarly analyses on the Mindanao problem have largely overlooked this informal economy and its relationship to violent conflict. A new book published by International Alert edited by Francisco Lara Jr. and Steven Schoofs seeks to fill this gap. “Out of the Shadows: Violent Conflict and the Real Economy of Mindanao” represents the first formal attempt to document this underground economy that has long operated in Mindanao’s conflict areas, and yet has seemingly been ignored like the proverbial elephant in the room—for understandable reasons.

Indeed, it took courage on the part of the various case study authors, all Mindanao scholars, to take on the task of examining such activities where they happen, and interacting with shadowy figures involved in enterprises where knowing the truth can be hazardous. Their observations and analyses range from enlightening to startling.

For example, Eddie Quitoriano’s examination of the illicit gun trade came up with the finding that wider gun ownership, albeit illegal, can actually lead to lower incidence of gun-related violence—something the National Rifle Association in the United States, and opponents of gun control in general, would be delighted to play up. Talayan, a town in Maguindanao that hosts three armed groups with a cache of at least 500 rifles each, and about 5,000 households that possess at least one gun each, has seen few gun-related crimes over the years. This is in contrast to many other parts of the country where gun ownership is far more restricted and mostly licensed. Quitoriano asks: “Is this a case of bad governance (i.e., of gun ownership in this case) leading to good results (i.e., in terms of relative peace)?” (Not quite, he notes, as Talayan has failed miserably in most other measures of governance outcomes, including local taxation, poverty reduction and service delivery.)

Rufa Guiam saw the fragility of the subnational state in Muslim Mindanao as the key determinant of the region’s thriving drug economy, which she observed to be relatively peaceful, devoid of open war among drug groups, or between them and the state. She attributes this to the protection offered by colluding public officials and politicians. That the so-called Lucky 7 Club (of mayors) in Lanao del Sur operates with impunity “shows how criminal entrepreneurs derive their power and protection from capturing public offices across Muslim Mindanao.” She ruefully notes: “Somewhat paradoxically, enforcing the law may lead to an increase in violence, whereas an accommodation between the state and criminals can pacify the illicit drug market.”

The kidnap for ransom industry in Mindanao is found by Eric Gutierrez to be segmented into three types of kidnap groups, best described as bandits, villains and bosses, who use kidnapping as a political weapon or to raise money, or both. Judy Gulane examines how informal land markets have thrived where the government has failed to create the conditions for formal systems of land administration and registration. Starjoan Villanueva notes that the unofficial and unrecorded shadow trading economies of Sulu and Tawi-tawi, built on commerce, with nearby Malaysia, have expanded to a point that they can grow well beyond the official regional economy. Jamail Kamlian examines how the pagsanda informal credit system in Tausug society has persisted and proliferated in the void left by the largely absent formal financial system, and how it is intricately intertwined with conflict and violence in the area.

The book makes interesting reading for anyone interested in how “shadow economies” operate. Grab a copy before they run out.

Sam Miguel
01-23-2013, 08:16 AM
Biz Buzz: Lobbying for the Philippines

By the staff

Philippine Daily Inquirer

11:33 pm | Tuesday, January 22nd, 2013

Former US ambassador to the Philippines John Negroponte, who co-chairs the US-Philippine Society think tank with businessman Manuel V. Pangilinan, is coming to town to discuss with key policymakers and the business community recent local developments affecting economic, political and security ties between the two countries.

This includes issues on foreign ownership in partly nationalized companies like utilities and real estate, an offshoot of a recent Supreme Court ruling on PLDT’s foreign ownership. At present, this has become less of a concern given pronouncements from the Securities and Exchange Commission that it would not impose the 60-40 percent local-foreign ownership cap on all classes of shares.

Another juicy topic that Negroponte’s visit will touch on is the West Philippine Sea conflict, which has been a hot issue in both the Philippines and China for several months now. He is also expected to discuss developments in the mining industry as well as the country’s major infrastructure programs.

Negroponte, who will lead an American delegation made up of top business and government officials, is set to meet with President Aquino Wednesday morning before the chief of state leaves for Davos, Switzerland, to attend the World Economic Forum (for the first time under his presidential term).—Doris C. Dumlao

Speaking of which…

After meeting with the President, the Negroponte-led delegation will also meet with Chief Justice Ma. Lourdes Sereno for the American businessmen to get a feel of how legal issues will play out in the Philippines over the next few years (something foreign businessmen have always complained about in the past).

The kickoff dinner will be hosted by US-Philippine Society board member Washington Sycip, while dinner for the following evening will be hosted by MVP.

On the final day, Friday, the business delegation will be given a tour of the Clark special economic zone in Pampanga to highlight its prospects as an investment site and as an attractive alternative to the Ninoy Aquino International Airport.

Apart from Negroponte, other former US ambassadors to Manila will also be present, including Thomas Hubbard (the Philippines traditionally being a post given to rising stars in the US State Department).

Speaking of which, word on the street is that current US Ambassador to Manila Harry Thomas will be heading back to Washington, D.C., soon (slightly ahead of schedule) to make his presence felt in Foggy Bottom. No word yet on who will replace the capable, affable and Tagalog-speaking diplomat.—Daxim L. Lucas

Bias in defense contracts?

The drive to modernize the Armed Forces of the Philippines (AFP) has now been delayed by a year, no thanks to a Department of National Defense official and his vested interests, according to our source.

To recall, no less than Defense Secretary Voltaire Gazmin in January of last year committed to “ensure the approval and signature of the contracts for all the 138 projects for the AFP modernization and capability upgrade program not later than July 31, 2012.”

Well, the last thing we heard is that in early December, the negotiation for the acquisition of 21 UH-1 helicopters failed. A separate deal for the purchase of 10 helicopters also failed to advance.

The military is supposed to acquire fighter jets, helicopters, support aircraft, radar and communications systems and modern equipment to monitor the country’s vast territorial waters and effectively coordinate defensive forces such as the navy and air force.

Our source says the delay is caused by a DND official who behaves more like a “commissioner.” The official’s preference for certain suppliers have caused delays and complications in the equipment procurement process, we’re told. Supposedly, this official is the brains behind the move to source defense equipment from non-traditional sources, despite the assistance for materiel readily being offered by the US. Tsk tsk.—Daxim L. Lucas

Positive mining news

When mining hits the news, it’s usually something negative. But Rio Tuba Nickel Mining Corp. is trying to change all that.

On top of the TV ad campaign of its sister firm Taganito Mining Corp. that highlights the good that miners have done for the community, the subsidiary of Nickel Asia Corp. will launch a coffee table book on Thursday at the Ayala Museum in Greenbelt Park, Makati City.

The private event will be led by Rio Tuba’s chair, Manuel Zamora, and its president, Gerry Brimo.

The book is expected to showcase the good that mining can do, in contrast to the way the industry’s critics love to portray it.—Daxim L. Lucas

Sam Miguel
01-28-2013, 08:17 AM
Davos disease blurs reality on ground

By Amando Doronila

Philippine Daily Inquirer

1:37 am | Monday, January 28th, 2013

Speaking from the Alpine heights of Davos, Switzerland, President Aquino spun a stupendous tale at the World Economic Forum (WEF) of the dramatic transformation of the Philippines from being the “sick man of Asia” into a dynamic country swimming against the current of global economic downturn in a record time of three years.

In the past three decades since Edsa I in 1986, this reporter finds it hard to recall any developing country in Southeast Asia that has transformed itself from an economic basket case into a “tiger economy” (using the regional buzzword) within such a brief period.

In a speech at one of the roundtable meetings in Davos, Mr. Aquino said: “What we offer you today is a Philippines where change has set in. That, perhaps, is the single most compelling reason to come and invest in our country.” He was making a pitch at a meeting with business executives on the periphery of the forum on Friday.

The President invited investors to participate in three rapidly growing sectors of the economy—agriculture, tourism and infrastructure.

“Those who have already bet on the Philippines have not been disappointed; they have the sincerity of our commitment to restoring integrity and leveling the playing field. This is a commitment we keep with all who wish to conduct honest, fair business in the Philippines,” he said.

At the end of the three-day forum, Mr. Aquino summed up the results of his participation in the WEF with an exuberant claim that the Davos experience had bolstered the Philippines’ confidence in joining global events.

“We can participate on the world stage and not feel like a second-class citizen. It’s no longer shameful for us to participate because we have something to be proud of,” the President said.

P49-M junket

He did not specify what is that “something” we can be proud of because there was nothing to quantify in terms of pesos and centavos worth of committed investments to justify a junket originally reported as a 63-person delegation with a budget of P49 million. Conference fee is $20,000 per head.

The question keeps on popping up: What did the country gain from the participation? The government has responded by stonewalling behind generalities. The President reported at the end of the forum that he had lined up “a new stream of prospective institutional investors” and that the Philippines would host the WEF’s East Asia Summit next year.

Mr. Aquino attended a number of top-level meetings in none of which he played a pivotal role or was a keynote speaker. There were up to 2,500 participants, known as the world “shakers”—heads of government, elite leaders in politics, in business, industry and finance and bankers, diplomats, the cream of the academic community and scholars, nongovernment institutions and journalists.

That he was thrown in the company of this circle of eminent persons from around the globe could be an intoxicating experience for a first-time Davos man, such as

Mr. Aquino, which could disorient or overwhelm his sense of proportion of his vision or importance.

The President said: “We were not on the radar screen of so many entities for the last five years or so, but now we are, so they want to know better. We received universal praise from so many countries. (Now) we can put in more substance.”

Relegated to sidelines

He said one of the prospective investors had indicated plans to send a mission to the Philippines to explore fresh investment possibilities. He didn’t identify the prospective investor. Translated to reality, the “possibilities” are still up in thin air.

There were 200 sessions at the WEF. The main concern was the sluggish global economic recovery and its ramifications in the United States and the European Union. Hence, the keynote speakers were German Chancellor Angela Merkel, the Italian prime minister, International Monetary Fund (IMF) Managing Director Christine Legarde and European Central Bank President Mario Draghi.

Thus, Mr. Aquino was relegated to the sidelines of the forum with the topic “Partnering Against Corruption Initiative,” which gave him the platform to amplify his favorite anticorruption theme—the nexus between governance and economic growth.

However, he talked with Legarde after the IMF upgraded its growth forecasts of 6 percent and 5.5 percent next year for the Philippines, representing an upgrade from its 3.8-percent growth for both years. But the upgrade came with a warning. In an interview with CNBC in Davos, she said officials have to “consider the leading role played by the US economy” in any global upturn.

In the world, she said growth could be undermined if uncertainty persists over the issue of the US debt limit that has yet to be settled in the US Congress. “Confidence is something that is really fragile, can be eroded gradually, or broken down,” she said.

In his sick man statement of the Philippine economy,

Mr. Aquino recognized the vulnerability of the growth rate “in a world increasingly dominated by uncertainty and pessimism.” In regard to the exuberant claim of Mr. Aquino on the fantastic transformation of the economy from the basket case, this needs to be examined against certain information published ahead of the Davos summit.

Trust barometer

According to the Economist magazine, as the “movers and shakers” head for Davos, their credentials as global leaders look anything but resilient. Their official theme will be “resilient dynamism,” but what they ought to be talking about is the “low level of trust of the public in their ability to do or say anything useful.”

The Economist cited the annual “Trust Barometer” survey published by Edelman, a public relations firm, which reports widespread skepticism about the ethics practiced by political and business leaders. Edelman asked people in 26 countries which institutions and business sectors they do (or do not) trust and what information they believe.

Edelman pointed out that if you look at levels of trust in the world today, on a five-year review, or since the 2008 financial crisis, there had been a sharp downturn in the level of credibility commanded by western institutions. Confidence in banks, for example, has tumbled sharply, while faith in government, and business has eroded, too. The media have also suffered.

A couple of decades ago, when Edelman asked people who they looked up to for guidance, they gave a high ranking to traditional “authority” figures, such as chief executives and political leaders. That is not the case now. These days, academics and technical experts are still trusted. But CEOs, government officials and regulators are at the bottom of the list. People put more trust in their peer group, defined as “person like me.”

Why the big gap between the trust in leaders and institutions they lead? Edelman suggests, according to the Economist, that leaders have been slow to adapt to the requirements of the world “in which top-down is no longer the best way to lead.”

Sam Miguel
01-28-2013, 08:17 AM
^^^ And if our President had not gone to Davos this year I am sure the peripatetic and crusty Amando Doronila would still have found fault with that.

Sam Miguel
01-28-2013, 08:27 AM
Declaring dollar deposits would lead to double taxation, says former BIR exec

By Christian V. Esguerra

Philippine Daily Inquirer

10:13 pm | Saturday, January 26th, 2013

MANILA, Philippines—Declaring foreign currency deposits as required in the new Statement of Assets, Liabilities and Net Worth (SALN) form may not be a good idea for government officials and employees, a veteran tax collector claimed Saturday.

Estrella Martinez, an accountant and lawyer who spent 32 years with the Bureau of Internal Revenue, said a declarant would expose himself to “double-taxation” in the event he includes foreign currency deposits, stated in peso equivalents, in her or his SALN.

“You will be digging your own grave,” she told the Inquirer in a phone interview, the day after the Civil Service Commission released its new guidelines for the filing of SALNs for 2012.

Martinez said foreign currency deposits are already subject to a 7.5-percent final withholding tax under the Tax Code. Another provision in the same law imposes a separate 32-percent tax on the “increase in net worth,” she said.

Under the new CSC guidelines, “cash on hand and in bank, as well as stocks and the like, denominated in foreign currency shall be converted into the corresponding Philippine currency equivalent.”

The conversion rate will be based on the “rate of exchange prevailing as of December 31 of the preceding calendar year.”

“At this juncture, the government employee is exposed to double-taxation under the Tax Code,” Martinez warned.

“Lamentably, if (foreign currency deposits) will be converted into peso denomination, there will be a tsunami of tax evasion (cases) since any increase in net worth is always taxable. Anybody can ask the old-timers in the BIR. Ignorance of the SALN law excuses no one from the tax consequences thereof.”

Martinez said requiring government employees to reveal dollar accounts in the SALN would also go against the Foreign Currency Deposit Act.

She cited a Supreme Court ruling that “enunciated a principle that if there are doubts in upholding the absolute confidentiality nature of bank deposits versus affirming the authority to inquire into such accounts, then such doubt must be resolved in favor of the absolutely confidential nature of foreign currency deposits.”

“Any exception to the rule of absolute confidentiality must be specifically legislated,” she added.

During his impeachment trial last year, former Chief Justice Renato Corona used the same argument in explaining why he did not declare some $2.4 million in bank deposits in his SALN. But senators sitting as judges in the quasi-political proceedings did not buy his arguments and convicted him.

Martinez said a declarant could “waive his right to absolute confidentiality” on his foreign currency deposits. But she said they should be included in the SALN only as a “parenthetical disclosure” so it would not unnecessarily jack up his net worth.

“If you convert the foreign currency deposit, your net worth will skyrocket,” she said.

Martinez said her position on the matter should not be misconstrued as assisting government officials in hiding ill-gotten wealth. “I’m just explaining the law. The law is there to be implemented,” she said.

All government workers, from President Benigno Aquino down to the lowest administrative aide, are required to submit their latest SALN on April 30 this year.

Sam Miguel
01-28-2013, 08:28 AM
IMF: Let peso rise vs dollar

Bigger inflow of foreign investments, remittances

By Michelle V. Remo

Philippine Daily Inquirer

11:47 pm | Sunday, January 27th, 2013

The International Monetary Fund has urged Philippine monetary authorities to allow the peso to appreciate with the expected increase in the inflow of dollars this year and avoid measures to reverse market trend.

This is particularly if the foreign-exchange inflow would come in the form of foreign direct investments and an increase in remittances from overseas Filipinos.

“The exchange rate should move in line with structural flows,” Rachel Van Elkan, chief of the IMF mission to the Philippines, told reporters last week following the visit of IMF officials to assess the country’s economic conditions.

The IMF believed that efforts to keep currencies artificially weak or measures against currency appreciation have adverse consequences on the global economy.

Economists said efforts aimed at making currencies artificially weak cause the so-called “global imbalance.”

In particular, if emerging markets like the Philippines would make their currencies artificially weak and thus make their goods, labor and capital cheap, industrialized countries could further lose in the competition for exports and investments. Moreover, full recovery of industrialized countries could take much more time.

The IMF said the continued weakness in the advanced economies such as the United States and the eurozone could eventually have a more significant impact on emerging economies given the interrelation of economies.

Commonly criticized for making its currency artificially weak is China, which last year overtook Japan to become the world’s second-biggest economy after the United States.

Based on the IMF’s view, Van Elkan said the Bangko Sentral ng Pilipinas has so far not resorted to implementing measures aimed at reversing the trend of a rising peso.

The IMF said it would be prudent for the BSP to keep its current stance on the exchange rate amid an environment of rising foreign-exchange inflow.

“Policymakers [in the Philippines] have responded in a timely and flexible manner to the difficult global conditions. We commend the BSP for utilizing a variety of instruments to help insulate domestic monetary conditions from the abundant liquidity abroad,” Van Elkan said.

The peso, which closed at 41.05:$1 in end-2012, was the second-fastest appreciating Asian currency against the dollar last year.

BSP officials have said that the central bank would allow the peso to strengthen further against the dollar, but only if the appreciation pressures would be due to structural inflow like FDIs and remittances. Officials said, however, that the BSP would move against a potentially excessive rise in the value of the peso, saying too much volatility of the exchange rate was bad for the economy.

They also said the BSP would not tolerate appreciation pressures brought about by portfolio investments.

Some of the measures done by the BSP so far to avoid an excessive appreciation of the peso and to curb currency speculation were the imposition of a higher capital requirement on banks’ holdings of nondeliverable forwards (NDFs), setting a limit on banks’ NDF exposure; and prohibition of investing foreign funds in the BSP’s special deposit accounts.

Sam Miguel
01-28-2013, 08:29 AM
The Philippine story: ‘Sick man of Asia’ now transforming, revitalized, dynamic

12:03 am | Saturday, January 26th, 2013

President Aquino keynotes the World Economic Forum (WEF) activity, “Partnering Against Corruption Initiative-Private Reception,” in Davos, Switzerland, where he said transparency and a level playing field remain his administration’s priorities. It is Mr. Aquino’s first time at the WEF.

DAVOS—President Benigno Aquino III has pitched to the international investor community the Philippine story of transformation from being a “sick man of Asia” into one dynamic country bucking a global economic downturn.

“What we offer you today is a Philippines where change has set in. That, perhaps, is the single most compelling reason to come in and invest in our country,” Aquino said in a roundtable meeting with global business executives at the World Economic Forum on Friday.

The President invited investors to participate in three rapidly growing sectors in the country—agriculture, tourism and infrastructure.

“Those who have already bet on the Philippines have not been disappointed; they have seen the sincerity of our commitment to restoring integrity and leveling the playing field.

“This is a commitment we intend to keep with all who want to conduct honest, fair business in the Philippines,” he said in the business forum organized by Credit Suisse.

Mr. Aquino told prospective investors he couldn’t promise a completely risk-free environment, noting that any worthwhile endeavor was not without its risks.

Nevertheless, he said the “sick man of Asia is now revitalized, more dynamic than it ever was in its history, marching toward equitable progress.”

Contrasting his administration from that of his predecessor’s, when he said decisions were based on political factors—mainly, on the desire to stay in power—he said the government was now earnestly refocusing efforts toward leveling the playing field, minimizing regulatory risks and investing in people.

He said the government was empowering the Filipino through health, education and conditional cash transfer programs that would aid their transition from being below subsistence living toward gainful employment.

“We already know that, given the right environment, the Filipino is able to thrive; how many of you have ridden cruise ships or stayed in hotels manned by Filipinos? How many have been awed by the creativity, loyalty and professionalism of our workers in the business process outsourcing industry?”

PH full of optimism

“In a world increasingly dominated by uncertainty and pessimism, is it not refreshing to witness a country full of optimism, experiencing positive, meaningful change and inviting everyone in to ride its momentum?”

The President again referred to his administration’s thrust of eliminating corruption as a means to drastically reduce poverty and open opportunities for both the Filipino people and business, thereby allowing the Philippines to achieve inclusive growth.

On efforts to level the playing field, the President said that when contracts are no longer awarded arbitrarily, and when the rule of law applies to all, a sense of justice and fairness naturally takes over. “Among investors, in particular, this instils confidence: That the Philippines is worth the price of admission,” he said.

In the first three quarters of 2012, the domestic economy has grown by an average of 6.5 percent, much faster than the 4.9-percent trend growth during the nine-year Macapagal-Arroyo administration. The stock market has trebled in the last four years to record highs.

“These are truly exciting times for our country. We are realizing the long-untapped potential of our country and we are here to invite you to join us,” he said.

3 priority areas

On the priority areas for investment, Mr. Aquino said tourism and agriculture were crucial because they play into the key strengths of our country—an abundance of natural resources—and because they tend to spur growth all over the archipelago, not merely in urbanized areas.

Since he came into office, he said the government had been working towards rice self-sufficiency by going back to the basics and helping our farmers through improved irrigation systems and a genuine certified seeds program.

“As we focus on the basic needs of our farmers, we have not lost sight of the value of innovation, and of moving up the value chain,” Aquino said.

“For example, coco coir and coco water used to be considered as waste. Today, they are the reasons behind the revitalization of our coconut industry,” he said.

In 2009, Aquino said the Philippines exported a total of 483,862 liters of cocowater.

By 2011, this has increased exponentially to more than 16.7 million liters of cocowater.

“Coco coir fiber, transformed into geotextile materials, has among others, been found effective in erosion control,” he said.

The Department of Publics Works and Highways (DPWH) is already using this technology in their projects, and investments into the coco coir industry reached P293.75 million pesos or around $7.34 million in 2012.

On tourism, the President mentioned the Department of Tourism’s “It’s More Fun in the Philippines” campaign and noted favorable tourism reviews from publications like Conde Nast Traveller, the New York Times, and Travel + Leisure Magazine.

In 2012, he said there were 4.3 million tourists that visited the country, a little short of the 4.6 million target which he said was a consequence of some political tension in the region, referring to the territorial dispute between the Philippines and China.

“In spite of this, though, China’s Oriental Morning Post named my country the ‘Best Tourist Destination’ in its annual World Travel – Special Trips awards, and the Shanghai Morning Post identified the Philippines as the “Most Romantic Destination” in the world—an award surely inspired by the magnificent sunsets over our numerous white sand beaches, or the pristine, secluded coves dotting our many islands,” he said.

The hotels that have been sprouting up around the Philippines in the past two years are proof positive of the tourism boom, Aquino said, noting that an additional 1,599 rooms have been built in Boracay. “So, whether you want to come to the Philippines for business or for leisure, we will gladly accommodate you,” he said.


Infrastructure is also seen as a prority in attracting investments. The President acknowledged that this was the key to further growth and development in tourism and agriculture, among other sectors.

“For example, a lack of paved roads or even adequate transportation hubs redounds to longer traveling time: imagine how much the quality of produce will suffer in two to three days of road travel, or even the difficulty that tourists will have in reaching the more far-flung parts of my country,” he said.

Aquino cited the World Economic Forum’s Global Competitiveness Report which showed that the Philippines was lagging behind Southeast Asian neighbors in terms of quality infrastructure, including the quality of roads. “This presents an opportunity, because we are committed to closing this gap and increasing our competitiveness,” he said.

Last year, Aquino said disbursements for infrastructure reached $4.9 billion and another $5.7 billion is allotted for this in 2013.

“Part of this allotment will go to the complete paving of our national road network by 2016. Since 2010, our DPWH has already completed 28 percent, or 2,006 kilometers, of the 7,256 kilometers of national arterial and secondary roads that needed paving,” he said.

National connectivity

The President added that the country was seeking to boost connectivity all around our country through the following: train systems in Metro Manila; expressways that cut across the National Capital Region and reduce travel time drastically; the construction improvement of both domestic and international airports, as well as the exploration of a new nautical highway that could cut travel time between Luzon to Mindanao, from three days to 15 hours.

“We are exploring opportunities for the private sector to join us in these endeavors, and we hope that you will consider partnering with us in the future, towards our mutual benefit,” Aquino said.

Sam Miguel
01-29-2013, 08:23 AM
Pragmatic rating

Philippine Daily Inquirer

9:39 pm | Monday, January 28th, 2013

The Aquino administration has received much praise from foreign and local institutions for the “spectacular” performance of the Philippine economy in 2012. The International Monetary Fund, World Bank, Asian Development Bank and private think-tanks have all been bullish on the Philippines. Thus, many were surprised by the release last week by Malaysian credit-watcher RAM Rating Services of its inaugural sovereign ratings for five leading Southeast Asian countries. In brief, it showed the Philippines as the laggard among the region’s major economies.

In an 80-page report titled “Leading Asean Sovereigns,” RAM gave the Philippines a rating of “BBB” on its long-term borrowings, meaning that it had only “moderate capacity to meet its obligations.” The Philippines was also given a short-term rating of P2, also the lowest in this category, meaning that it had “adequate capacity to meet its short-term financial obligations.” Malaysia and Singapore got the highest ratings of “AAA” and P1, respectively, meaning “superior capacity” to pay long-term debt and “strong capacity” to settle short-term obligations. Indonesia and Thailand got “AA” and P1, the former indicating “strong capacity” to meet long-term obligations.

RAM was incorporated in 1990 and listed among its shareholders Fitch Ratings, McGraw-Hill Asian Holdings (Singapore), and the Malaysian subsidiaries of Bank of America, Bank of Tokyo-Mitsubishi UFJ, Deutsche Bank, Citibank, HSBC, JP Morgan Chase and Standard Chartered.

In explaining the ratings for the Philippines, RAM noted the country’s strengths in terms of sustained current-account surpluses, rising foreign currency reserves and improving economic conditions. But it said these pluses were being watered down by a “heavy government debt burden, mostly in foreign currencies; a small revenue base and hefty interest expenses [that] strain the fiscal profile, and a weak institutional framework.”

“Our assessment of the Philippines’ fiscal profile reveals persistent deficits due to the government’s weak revenue-generating capacity; tax revenues are its main source of income. As a percentage of GDP, government revenue averaged 15.3 percent from 1990 to 2011 and is the lowest among its peers in the region,” it said.

RAM observed that Philippine budget deficits had largely been narrowing because of better tax administration and collections. “There is also noticeable improvement in its debt ratio, from more than 70 percent of gross domestic product a decade ago to 50.8 percent as of end-2011,” it said. But it added that “the government’s debt load is still hefty and its sizeable foreign-currency-denominated borrowings amplify foreign exchange risk.”

“While the Philippines’ recent economic performance is noteworthy, we are also mindful that much more needs to be done to reposition its misaligned identity—from a remittance-dependent economy to one powered by investments and stronger industries,” RAM said. And while it noted that the Aquino administration was laying the foundation by focusing on upgrading infrastructure and enhancing human-capital development, “the Philippines’ ability to attract FDI still pales in comparison to its regional peers at this juncture.”

Achieving inclusive growth is also being made difficult by the Philippines’ burgeoning population, the world’s 12th highest at more than 95 million. RAM noted the mass poverty that continued to affect about a quarter of the population, as well as the national unemployment rate that stood at 6.9 percent in the second quarter of 2012, and underemployment remaining widespread at 19.3 percent. The “educated unemployed” as a percentage of the total unemployed labor force exceeded 40 percent, highlighting the problem of labor mismatch that has forced Filipinos to work overseas.

RAM’s assessment is the most pragmatic compared with those of Moody’s, Standard & Poor’s and Fitch Ratings. Many in the Aquino administration and in the private sector will cast doubt on RAM’s assessment and point out that the three biggest credit watchdogs are in fact bullish on the Philippines. But it may be well to recall that about four years ago, Moody’s and S&P were criticized for their role in the global credit crisis that saw the fall of the venerable investment house Lehman Brothers in September 2008, leading the world to a sharp economic decline that persists today. Then, the likes of Bank of America, Citi and Merrill Lynch had sterling credit ratings, yet all reeled from the effects of the subprime crisis. Those glowing ratings appear to have been flawed.

Sam Miguel
01-29-2013, 08:48 AM
The lady certainly knows her economics...

Arroyo has best growth in full term; Aquino tops 1st year growth among presidents – NSCB

By Riza T. Olchondra

Philippine Daily Inquirer

9:33 pm | Monday, January 28th, 2013

MANILA, Philippines — Among the Philippine leaders from 1986 to present, President Benigno Aquino III posted the fastest growth in his first year in office while President Gloria Macapagal-Arroyo posted the best average economic performance among those who completed their respective terms, the National Statistical Coordination Board (NSCB).

In a report published Monday, the NSCB noted that such observations were based on gross domestic product (GDP) growth, influenced by external factors such as regional and global financial crises as well as the political climate at the time of each presidency. As such, the NSCB said, GDP growth could not be fully attributed to a certain president or his/her economic team.

The term of President Joseph “Erap” Ejercito Estrada was short-lived and Aquino is only in his tenth quarter of service. “If we focus on the three Presidents that completed their terms of office, (President Cory Aquino, President Fidel “FVR” V. Ramos, and Arroyo) we would observe that the domestic economy performed best during the time of President [Arroyo],” NSCB secretary-general Jose Ramon G. Albert said.

During her term, Albert said, the GDP average annualized growth rate hit 4.1 percent, mainly driven by the services sector.

The NSCB data showed that the highest GDP annual growth rate in Arroyo’s term was recorded in 2004 with 6.7 percent while the lowest was posted in

2009 with 1.1 percent. Services had an average growth of 4.9 percent.

The services sector hit a high of 8.3 percent in 2004 while the lowest was only 3.4 percent registered in 2009. Industry contributed an average growth of 3.3 percent. The highest growth rate for industry was posted in 2007 with 5.8 percent and the lowest was a contraction by 1.9 percent registered in 2009. Agriculture, Hunting, Forestry and Fishing (AHFF) posted an average growth of 2.8 percent. The highest growth rate for the sector was 4.7 percent posted in 2007 while the lowest was a contraction by 0.7 percent in 2009.

On the other hand, during President Cory Aquino’s term, the economy averaged only 2.8 percent with the services sector contributing an average growth of 3.5 percent; industry, 2.6 percent; and AHFF, 1.5 percent. It should be noted, however, that she led amid the volatile, post-Martial Law political environment. The highest GDP growth rate during Cory’s time was recorded in 1988 at 6.8 percent while the lowest was negative 0.6 posted in 1991. The highest growth rate recorded by the services sectors was 6.9 percent in 1988 while the lowest was 0.2 percent in 1991. Industry’s peak was in 1988 at 8.4 percent while the ebb was negative 2.6 percent. AHFF, on the other hand, had a recorded high of only 3.7 percent in 1986 and the lowest at 0.2 percent in 1990.

To include Estrada and Aquino, NSCB said, it might be interesting to look at the performance of the economy in the first eight quarters of service of each president of the Fifth Republic. That is, to see who of them is “the fairest of them all,” Albert said.

Among the Philippine presidents from 1986 to present, Aquino got the highest GDP growth rate in his first year of presidency with 5.4 percent while Estrada got the lowest with 0.1 percent, Albert said. It should be noted, however, that Estrada’s first year as president was in the aftermath of the effects of the Asian Financial Crisis.

Aquino also got the highest GDP growth rate in his second year of service with 4.9 percent, while Ramos got the lowest with 3.4 percent (Ramos had to deal with a power crisis during that time).

“With regard to our two lady presidents who were catapulted to power via popular uprisings, the domestic economy of Cory and Arroyo both accelerated in their second year with 4.3 percent from 3.4 percent and 3.6 percent from 2.9 percent, respectively,” Albert said.

Comparing specific major sectors of the economy, Albert observed that Aquino got the highest growth rates for the services sector in his first year with 5.8 percent and accelerated to 6.7 percent in his second year. Cory followed with 4.2 percent and 5.1 percent in her first and second year, respectively. Ramos got the lowest with 1.6 percent in his first year and 3.4 percent in his second year, respectively.

Aquino topped the industry sector in his first year of service with 5.3 percent while Estrada’s industry growth rate contracted by 4.5 percent. In the second year, Ramos was at the top with 4.3 percent while Arroyo was the tail ender with 2.9 percent.

Aquino got the highest growth rate for AHFF in his first year with 3.7 percent while Erap got only 1.6 percent growth rate. In their second year, Estrada rebounded with 5.6 percent while PNoy Aquino got only a measly growth of 0.1 percent.

If the presidents of the Fifth Republic were to compare their first nine quarters of service, Aquino would be ahead with 4.5 percent annualized rate of GDP while Ramos would be the lowest with 3.4 percent. In AHFF, Estrada tallied highest with 6.9 percent while Cory got the lowest with 1.1 percent. For industry, Cory Aquino got the highest rate with 4 percent while Arroyo got the lowest rate with 2.5 percent; and, for the services sector, Aquino got the highest with 5.4 percent while Ramos got the lowest with 3.3 percent.

In broad terms, an increase in GDP is one indication that the economy is doing well, according to the NSCB. “Consequently, some analysts suggest that the changes in GDP mirror how Philippine presidents and their economic managers manage our economy. Of course, other analysts would think that this may be far too simplistic given that the starting conditions and other factors, including the external environment, were not the same across the periods of these presidents,” Albert said.

Sam Miguel
01-29-2013, 09:28 AM
So near, yet so far

By Cielito F. Habito

Philippine Daily Inquirer

9:36 pm | Monday, January 28th, 2013

Consider the following issues that persistently hound us and get in the way of our ability to move toward more inclusive growth and development:

One: Conflicting or inconsistent provisions of national laws pertaining to land use constantly lead to confusion and tension, often turning violent, regarding how specific land areas should be utilized and whose prior claims or mandates should prevail in deciding such. These clashing laws include the Agriculture and Fisheries Modernization Act, National Integrated Protected Areas System, Comprehensive Agrarian Reform Law, Indigenous Peoples Rights Act, Urban Development and Housing Act, Fisheries Code, Mining Act and Local Government Code (LGC). Each being sectoral in approach, these laws cannot provide any basis for resolving conflicting sectoral demands for land.

Two: Even as most local government units (LGUs) now undertake some semblance of land use planning and zoning in compliance with the LGC, the resulting plans tend to be limited in scope and usually do not cover the entire territory of an LGU. Existing land use plans are largely outdated, and zoning ordinances tend to be poorly implemented.

Three: Multiple claimants to the same areas of land, hence unclear ownership and tenure, have been a traditional impediment to both domestic and foreign investments, especially for enterprises where land is a key resource such as in agribusiness. In turn, our economy’s ability to generate adequate jobs for our rapidly growing labor force is significantly compromised, and our unemployment rate is among the highest in Asia.

Four: Huge unmet demands for low- to medium-cost housing lead to a persistently huge public housing backlog worse than in some of the poorest nations in Asia, and resulting in large informal settler (aka squatter) communities, many of them in hazardous areas.

Five: Climate change and rising sea levels have rendered traditional land use allocations outdated and inappropriate, especially in and near coastal and other environmentally sensitive areas. Partly as a result of this, natural disasters have become more severe and destructive to human lives and livelihoods, and to the environment.

In countless forums I have been in where such issues are tackled, the discussion invariably leads to our lack of a comprehensive and coherent national land use policy as a fundamental impediment.

It was still under my watch as head of the National Economic and Development Authority

(Neda) in the early 1990s when we first began to push for legislation of a national land use policy. As chair of the interagency National Land Use Committee (NLUC), it fell on Neda to champion the cause. Chito Sobrepeña, then my deputy for regional development, actively shepherded Neda’s efforts to assist lawmakers toward the crafting of a proposed National Land Use Act, which was filed in the 9th Congress in 1994. Little did we expect then that this measure would languish in the legislature for two decades, all the way to these last few days of the 15th Congress. On hindsight, hardly anyone need be surprised, given that many landed interests who would rather have unhampered disposition over areas they control are leaders or members of Congress, or if not, wield strong influence therein. Under such realities, it seemed to be—just like the long-missing enabling law on the constitutionally mandated ban on political dynasties—a legislative measure inherently doomed to fail.

What is the measure all about? The proposed National Land Use and Management Act (NLUMA) would institutionalize land use and physical planning as a mechanism for identifying, determining and evaluating appropriate land use and allocation patterns in the country. It is premised on the need for a rational, holistic and just allocation, utilization, management and development of our country’s land and resources therein. The bill provides for the crafting of a National Physical Framework Plan defining the national strategy and objectives of the country’s urban, rural and regional development. This plan shall provide broad spatial directions and policy guidelines on the four broad uses of land, namely: protection land use, production land use, settlements development and infrastructure development. The mandated process would employ an effective combination of bottom-up and top-down approaches.

To carry this out, a National Land Use and Policy Council (NLUPC) will be created to combine the functions of the NLUC (now a full Neda Board committee) and the Housing and Land Use Regulatory Board. Similar mechanisms at the regional, provincial, city and municipal levels shall also be created. NLUMA would also institutionalize people’s participation in defining the framework of land utilization and management, mandating participation of the various key stakeholders in the above multilevel mechanisms for land use policy. Understandably, certain landed interests would feel uncomfortable about all this, and are at work to resist the passage of NLUMA, as they have been over the last 20 years.

In this 15th Congress, it has already passed the House of Representatives as House Bill No. 6545. Its counterpart bill in the Senate (Senate Bill No. 3091) awaits approval on second reading; with 22 senators having authored it, I see no reason it cannot fly through. It is one extremely important measure now being hostaged by the ongoing Senate squabble over what the Scriptures describe as the root of all evil. We are so near, after waiting 20 long years … and yet seemingly so far. With a few legislative days left, will evil step aside for good in the Senate this time?

Sam Miguel
01-30-2013, 08:02 AM
PH economy seen to expand 6.5%

By TJ Burgonio and Riza T. Olchondra

Philippine Daily Inquirer

12:30 am | Wednesday, January 30th, 2013

“All of us will be impressed,” President Aquino said Tuesday of the report on the full-year economic growth rate in 2012, which the government planning agency is set to release Thursday.

Still exuberant over renewed investors’ confidence in the country, the President echoed pronouncements by officials of the National Economic and Development Authority (Neda) that the growth of the economy will surpass the official target of 5-6 percent for the past year.

Mr. Aquino, however, declined to prematurely disclose figures of the fourth quarter and full year growth in 2012.

“All of us will be impressed,” Mr. Aquino said on the sidelines of the Neda’s 40th anniversary celebration in Pasig City when asked about full-year growth prospects for 2012.

Socioeconomic Planning Secretary Arsenio Balisacan also said economic growth in 2012 was expected to exceed the target range of 5 to 6 percent.

“The first three quarters averaged 6.5 percent, so exceeding 6 percent for the whole year is very easy,” Balisacan said, noting that it was “possible” the economy grew by 6.5 percent in the fourth quarter.

The fourth quarter usually benefits from Christmas spending, Balisacan said.

Combined with very little “shocks” and the minimal effect of flooding on agriculture and other sectors, the Philippines is in for a robust fourth quarter performance.

The economy grew 6.3 percent in the first quarter of 2012, followed by 6 percent and 7.1 percent in the second and third quarters, respectively.


Hitting a growth rate of more than 6 percent for the full year would be “impressive” considering the target range, the persistent uncertainty in the global community, and the challenges faced by the country’s neighbors, said Balisacan, who is also the Neda director general.

The Philippines, like most of its neighbors in Southeast Asia, has stayed resilient in the face of the European debt crisis and weak growth in key trading partners such as the United States, with strong private and public spending offsetting weaker exports.

The economy needs to become more diversified to complement consumption with exports and investment, Balisacan said.

“We have a lot of problems in infrastructure from transport to power, ports, airports. We are paying very strong attention to all these infrastructure issues. This year and next year, there’s a strong focus on infrastructure development,” he added.

Even up to mid-August of last year, there were some doubts that the economy would perform well. “People were saying we can only grow at 4 to 5 percent. We have to have more confidence in ourselves,” Balisacan said.

Spreading opportunities

The Philippines aims to chalk up an average of 7-8 percent annual growth from 2010 to 2016 in order to curb poverty and spread income growth opportunities to the countryside as part of its thrust for “inclusive growth.”

In his speech at the Neda, the President, fresh from his attendance at the World Economic Forum in Davos, Switzerland, continued to rave about resurgent investors’ confidence in the country that he said was an offshoot of sound economic policies.

“The good news we shared with the businessmen and world leaders we met with during the recently concluded World Economic Forum are results of your efforts to align the work of agencies: From our economic growth averaging 6.5 percent for the first three quarters of 2012, to the fact that the previous year’s average inflation rate was kept within our targets, to the developments we have made in our three priority sectors, namely, agriculture, tourism, and infrastructure,” he said.

Inclusive growth

Citing government data, Mr. Aquino said the economy was “growing” and this was proof of the “work we have put in.”

“The data also remind us of the need to ensure that this growth is sustainable and broad-based, so that we can sooner achieve our goal of inclusive growth. This is why we are continuing our efforts to level the playing field, to weed out corruption, and to step up our competitiveness in the global market,” he added.

In spontaneous remarks after his speech, the President said he held meetings with CEOs in Davos, and recounted how eager they were to expand their business in the country after decades of operation.

“There were companies that were over a hundred years in the Philippines; the youngest had logged in 66 years. Modesty aside, they were very eager to expand their business here. And then those who have no business here are scrambling to bring a delegation here to take a look at the opportunities,” he said.

Turned upside down

Relatedly, Mr. Aquino said a large business delegation called on him with a strong pitch for its products and services, years after he had met them and short of begged them to invest in the country during a visit by his mother, then President Corazon C. Aquino.

“Now, they’re asking us to patronize their products. It’s as if the world has turned upside down,” he said, drawing applause.

Facing reporters later, the President stood by the country’s economic growth following a survey by the Malaysian credit-watcher RAM Rating Services showing the Philippines as the laggard among the region’s major economies.

“I think the Neda will be answering it on our behalf. It’s a new organization to me. (It’s the) first time I’ve heard of it. I haven’t had the occasion to look at it. But I think that even they will agree that our performance vis-à-vis their own economy is very, shall we say, very much in our favor,” he said.

Then responding to a survey by the Legatum Institute in which the Philippines ranked 67th among 144 countries in its Prosperity Index, Mr. Aquino said: “I’m sure the one conducting that is also human. Just like in the expression, beauty is in the eye of the beholder…. Those data are a little obscure to me. I’m trying to compare apples to apples.”

Sam Miguel
01-30-2013, 08:26 AM
6.5% GDP growth seen in 4th quarter of 2012

By Michelle V. Remo

11:34 pm | Monday, January 28th, 2013

Benefiting from robust consumer spending and improving investment climate, the Philippine economy was expected to have maintained a robust 6.5-percent growth in the fourth quarter of 2012 and remained one of the fastest-growing economies in the region.

This was according to Moody’s Analytics, which said in a report released Monday that the healthy pace of economic expansion that the Philippines registered in the first three quarters of 2012 was likely maintained in the last three months of the year.

A 6.5-percent growth was deemed higher than the Philippine economy’s potential growth, which economists placed between 4 and 5 percent. Potential growth is normally measured as the average growth for the past several years, usually a decade.

For 2012, the government’s official economic growth target was 5 to 6 percent.

Moody’s Analytics said one of the drivers of growth in the fourth quarter was strong consumer spending, which has been backed by remittances from overseas Filipinos. Investments by local firms were also cited by many economists as a growth driver for the fourth quarter and the entire 2012.

“Remittances continue to flow in, supporting consumer demand. Business confidence has been trending steadily higher as the outlook is rosy and the government has provided a more business-friendly setting,” Moody’s Analytics said.

The government will release the official gross domestic product (GDP) growth figure for the fourth quarter and the full year of 2012 on Thursday.

Sam Miguel
01-31-2013, 08:01 AM
‘Sin’ taxes seen to boost BIR collection to P1.25T

Agency projects 44% growth in revenue from excise taxes

By Ronnel W. Domingo

Philippine Daily Inquirer

12:58 am | Thursday, January 31st, 2013

The Bureau of Internal Revenue aims to collect P102.4 billion in excise taxes this year and boost total revenue collection for the year to P1.25 trillion.

BIR data show that the 2013 excise tax goal is 43.8 percent higher than the P71.2 billion targeted in 2012.

The share of excise tax in the total collection goal rises to 8.2 percent this year from 6.6 percent last year.

Income taxes still accounted for the bulk of the BIR’s revenue goal at P759.2 billion, or about 61 percent of total.

The value-added tax collection goal for this year of P268.6 billion is about 21 percent of the total target of the BIR.

Finance officials have regained footing on their revenue outlook for the coming years with the passage in December of the sin tax reform law.

Finance Secretary Cesar V. Purisima said last month the new law, which increased the excise tax rates on tobacco products and alcoholic beverages, was expected to raise some P34 billion in additional revenue during the first year of its implementation. Even then, the difference between this year’s and last year’s excise tax goal is only P31 billion.

The targeted additional collection from “sin” taxes is less than both the P60 billion that Malacanang had wanted to generate and the P40 billion that state economic managers said was the minimum amount that would enable excise tax reforms to achieve their goals.

Purisima had said that over the succeeding four years of implementation, the law would turn in P184.31 billion in additional collection from so-called sin products.

This year’s overall collection target of the BIR is 17.6 percent higher than the P1.066 trillion set for 2012.

Also last month, the BIR said it had breached the record P1-trillion collection for any given year on Dec. 17.

Earlier in December, the agency reported a yield of P969.34 billion for the first 11 months of the year.

“Considering projections of collections from other sources that were unaccounted for as of (Dec. 17), the BIR could have hit the P1-trillion mark much earlier,” the BIR said in a statement.

Sam Miguel
02-01-2013, 08:02 AM
Stellar economic growth at 6.6%

Palace: Good governance means good economics

By Riza T. Olchondra, TJ Burgonio

Philippine Daily Inquirer

12:12 am | Friday, February 1st, 2013

Living up to President Aquino’s advance information that the numbers would impress, the Philippine economy expanded 6.8 percent in the fourth quarter of 2012, lifting full-year growth to 6.6 percent.

The figures that government economists and statisticians announced Thursday beat their targets and analysts’ expectations.

Socioeconomic Planning Secretary Arsenio M. Balisacan said that on hindsight, the government’s 5- to 6-percent growth target for the past year seemed conservative.

Median forecasts from the World Bank and other institutions were 5.9 percent for the fourth quarter and 6.4 percent for the full year.

Compared with the latest available data from other Asean countries, the Philippines’ fourth quarter growth in gross domestic product (GDP), the value of goods produced and services rendered in a given period, was higher than Vietnam’s 5.4 percent and Singapore’s 1.1 percent.

China’s economy expanded by 7.8 percent in the last quarter. Other countries still do not have available data for the full year.

Unsurprisingly, the GDP announcement by the National Economic and Development Authority (Neda) and the National Statistical Coordination Board (NSCB) was trending on Twitter, earning kudos from industry groups, such as the Makati Business Club.

Private economists, however, were not as impressed, noting that the lingering question was whether such figures could be sustained and translated into better incomes for many Filipinos.

Expectedly, Malacañang cheered the “exceptional” growth rate, trumpeting it as proof of the country’s ability to move toward “equitable progress” on a policy of good governance.

“It is a resounding affirmation of the Aquino administration’s fiscal strategy, backed as it is by our robust macroeconomic fundamentals and more importantly, the principles of good governance,” Budget Secretary Florencio Abad said in a statement.

Presidential spokesperson Edwin Lacierda attributed the economic growth to private sector activity goaded by the administration’s policy reforms.

While it was initially driven by government stimulus, the economic growth was now increasingly being driven by private sector activity, including investments, which grew by 8.7 percent in 2012, Lacierda said in a briefing.

“This means growth is becoming more sustainable from a fiscal and macroeconomic perspective. Private sector activity has been enabled by the Aquino administration’s dedication to positive reform. Without doubt, good governance means good economics,” he said.

Not quite impressed

Benjamin E. Diokno of the University of the Philippines School of Economics, however, was not impressed.

Diokno said that under President Corazon Aquino, the economy grew by 6.8 percent in 1988 after a weak growth in 1987, while under President Gloria Macapagal-Arroyo, the economy grew 6.7 percent in 2004 after a weak growth in 2003, and again by 7.6 percent in 2010, after a near recession in 2009.

“I agree it’s a strong growth. Considering its long-term growth potential and growth higher than 6 percent might be considered strong. Is it sustainable? That remains to be seen. We’ve seen this kind of growth before and they were not sustained. Is it inclusive? I’m afraid not,” he said.

Diokno said the contribution of agriculture to GDP continued to shrink, posting the lowest growth among the three major sectors.

“Based on the October labor statistics, the recent growth may be characterized as labor-shredding growth. Close to 1 million jobs were lost,” Diokno said. Most Filipinos still depend on agriculture and related sectors for a living.

NSCB Secretary General Jose Ramon G. Albert said industry and services led economic growth on the supply side (sources of goods and services).

On the demand side (where goods and services are used), growth was still largely driven by household consumption and external trade.

Industry grew 6.5 percent, more than twice the 2.3-percent growth in 2011.

The Neda said the expansion in public and private construction, and the electricity, gas and water sector led the growth.

In the first two quarters of last year, it was public construction that took up the slack in construction, but the private sector took over beginning the third quarter.

“This is what we mean by the private sector upping its stakes in the economy,” said Balisacan, who is also the Neda director general.

“Equally remarkable was the growth in the electricity, gas and water sector, growing by 5.1 percent, a far cry from its growth of 0.6 percent in 2011. No doubt this was in support of the increased economic activity in 2012,” he said.

The service sector also beat expectations with a 7.4-percent growth from trade, transport and communications, real estate, renting and business activities and other services.

Trade grew by 7.5 percent in 2012, more than twice the figure in 2011. Growth in transport and communications accelerated at 9.1 percent compared with 4.3 the previous year.

“We had expected a slower growth for the real estate, renting and business activities, which includes the IT-BPO, owing to the continued slowdown in the global economy. And yet the sector still managed to grow faster than expected at close to 8 percent,” Balisacan said.

There were also notable gains in other services, particularly, tourism-related subsectors, such as hotels and restaurants, and recreational, cultural and sporting activities. These subsectors grew 13.3 percent, compared with only 7.1 percent in 2011.

Balisacan said he was also pleasantly surprised with the growth in agriculture (2.7 percent).

“We only expected a 2.2-percent growth from the sector owing to weather disturbances forecast for the year,” he said.

In the first two quarters of 2012, it looked like the sector would underperform with a contraction in the fisheries sector. However, the turnaround happened beginning the third quarter and especially in the fourth quarter when the sector grew by 4.7 percent.

“We are also pleased to note that the output in the fishery sector had gone up by 3.3 percent, from eight consecutive quarters of contraction if not stagnant growth,” Balisacan said.

Household consumption

On the demand side, household consumption remained the largest contributor to growth in 2012, growing by 6.1 percent. Although the growth was slower than the 6.3 percent in 2011.

Balisacan noted that the growth had been on the increase coming from 5.1 percent in the first quarter up to 6.9 percent in the fourth.

Growth was supported by the higher level of economic activity, low and stable inflation, inflows of overseas Filipinos’ remittances and government subsidy mainly through the conditional cash transfers.

“Note, however, that remittances of overseas Filipinos increased by 8 percent in dollar terms, but only by 2.8 percent in peso terms in October and November 2012,” Balisacan said.

Exports of goods recovered with a growth of 8.7 percent for the year from a contraction of 4.2 percent in 2011. Exports of services grew by 9.8 percent, more than twice the growth the previous year.

“However, this growth was actually slower than expected. Perhaps the sector is already feeling the pinch from the combined impact of the global economic slowdown and the appreciating peso,” Balisacan said.

Fixed capital formation also improved to 8.7 percent in 2012 as growth in investments for public and private construction and durable equipment registered significant increases.

In spite of the country’s achievements in 2012, Balisacan said the government would not be “lulled” into complacency.

“It is our immediate task to put in place policies and implement programs that will sustain our economy’s growth over the medium term. We shall continue planting the seeds of a structural transformation in our economy to make it more investment and industry-led. This, in turn, will mean more jobs and employment opportunities of high quality for Filipinos, thus ensuring that growth is inclusive and benefits all sectors of society,” he said.

Raise productivity

Cid L. Terosa of the University of Asia and the Pacific said the growth level of at least 6 percent could be maintained as long as the Philippines kept building up productivity.

So far, Terosa said, the fourth quarter and full year 2012 growth rates were impressive but the question remained whether those numbers could translate into better income for many.

“Employment and continuous structural changes are keys to economic growth over the medium-term,” he said.

02-03-2013, 05:24 PM
BPO sector needs more college grads

By Jess Diaz

(The Philippine Star) | Updated February 3, 2013 - 12:00am

MANILA, Philippines - The business process outsourcing (BPO) industry will need more college graduates for its expansion projects, Pasig City Rep. Roman Romulo said yesterday.

“We have to churn out more college graduates at a faster rate in the years ahead. Our college-educated English-speaking labor force is our biggest advantage. We have to work very hard on this asset if we want to capture a bigger chunk of the global outsourcing market, estimated to be worth some $280 billion by 2017,” he said.

As of now, only two in 100 Filipinos in the prime employable age bracket of 20 to 34 are college graduates, he said.

Citing Commission on Higher Education figures, Romulo pointed out that college graduates increased by only 2.9 percent to 481,862 in 2010, and comprised just two percent of those inside the best employable age range of 20 to 34.

The Pasig congressman has authored a bill seeking to enable the country to produce more college graduates via a bold new student loan program.

Under the program, an eligible student may obtain a low-cost bank loan to pay for the tuition. The money may also be used to pay for miscellaneous fees, books, food, transportation, and other necessities.

The loan would have an effective interest rate pegged to the benchmark 91-day Treasury bill rate.

The bank may apply an add-on three to five percent annual interest rate. However, instead of the borrower paying for the extra interest expense, the bank may claim the corresponding amount as tax credit. The lender may then use the credit to pay for or offset its tax obligations.

Romulo also said the strengthening peso poses “some risk” since some multinational BPO firms might be driven to branch out to other locations outside the Philippines.

“The risk of a rising peso is somewhat being heightened by the fact that the currency of our chief competitor in the global BPO market, India, is doing the opposite and falling against the dollar,” he said.

Like exporters, the Philippine operations of multinational BPO firms earn dollars, but spend for their operations here, such as the wages of their staff, in pesos, he said.

02-03-2013, 05:25 PM
ADB cautiously optimistic on developing Asia’s growth

By Ted P. Torres

(The Philippine Star) | Updated February 3, 2013 - 12:00am

MANILA, Philippines - The Asian Development Bank (ADB) said it is “cautiously optimistic” on prospects that developing Asia will remain the global growth leader this year.

ADB president Haruhiko Kuroda said in the face of the troubled global economy, he remained “cautiously optimistic that Asia will keep on leading global growth despite the daunting tasks we are facing.”

Speaking before the Federation of Indian Chambers of Commerce and Industry in New Delhi, Kuroda also expressed concern that as the slowdown in the major industrial economies drags on, growth in developing Asia could be affected.

“We estimate regional growth cooled to six percent last year, and will pick up slightly to 6.6 percent in 2013. Despite recent signs of stabilization, downside risks remain,” he said.

A positive sign is that China, the strongest Asian nation, is rebalancing with growth forecast at over eight percent in 2013.

India is also taking positive policy measures and is expected to grow 6.5 percent this year.

“Quite remarkably, ASEAN countries are showing good performance despite the difficult external environment. The subregion’s prospects are positive, particularly as ASEAN moves toward economic integration by 2015. Myanmar is undertaking reforms, the Philippines improves its governance and investment climate, and other Southeast Asian economies continue to bolster domestic demand,” the ADB president said.

But the weakening of the euro zone, Japan and the US will likewise place strong downward pressure on China and India. The three major industrial economies are likely to expand collectively by only 1.3 percent in 2013--about the same rate as last year.

Yet, Kuroda said the slowdown in Asia’s two largest economies is not just due to the weak global environment.

“In India, for example, fixed asset investment rose by only 2.3 percent in the first half of fiscal year 2012, compared to nine percent in the same period in the previous year. Consumption in both economies is also stagnating,” he noted.

ADB nonetheless cautioned that weak external demand from the euro zone, Japan, China and the US will continue to weigh down strong growth prospects in the Asia as a whole.

However, Southeast Asia continues to move forward, particularly Malaysia and the Philippines, which relied more on domestic demand and private consumption.

The Philippines beat expectations with a full year growth of 6.6 percent last year. Public and private spending, particularly in the construction and infrastructure sector, were among the growth drivers.

Overall growth in Southeast Asia is forecast at 5.5 percent in 2013, from an anticipated 5.3 percent in 2012.

Sam Miguel
02-04-2013, 10:05 AM
Open telecoms to foreign competition


By Boo Chanco

(The Philippine Star) | Updated February 4, 2013 - 12:00am

How come the telecom services my children get in California and Singapore are infinitely superior to what we have in this country?

When I visit my son in Singapore, SingTel’s home market, I drool with envy at the quality of his broadband and cell phone service. When I visited my daughters in San Francisco and Anaheim during the holidays, I experienced service on both broadband and cell phone I didn’t even know was possible. Now, I know I am home.

Frankly, I don’t know how we could be the world’s call center capital given the low quality telecoms service we have. I can only assume our telecoms companies give preferential world class service to call centers and let ordinary consumers suffer.

While it is true that local telecoms service today is incomparably better to what we had during the PLDT monopoly days, it seems to me that ordinary consumers are still getting the short end of the stick. The worse part is that NTC, the government regulatory agency supposedly mandated to protect consumers, has been captured by the industry instead.

What really gets me these days is the fact that I get almost no broadband service from my telecom service provider of many years. The only time I can access the Internet from my Apple iPhone is when I am at home or at the office where there is a strong WiFi connection. So why am I paying almost a thousand pesos for iPhone Internet connectivity if I hardly get that service anyway?

Of course I am repeatedly told that my telecom provider is upgrading its system and will be all done in 2013. But as one of their customer service agents told me, 2013 is up to December. Shouldn’t I and every aggrieved subscriber be entitled to a rebate for as long as they are unable to deliver the contracted service? Shouldn’t NTC be telling them to do that?

I was thinking that perhaps the telecoms industry would be more mindful of its subscribers if there was a more vigorous competitive environment. The current duopoly is simply too comfortable with current rules that protect them from real competition to go out of their way to ensure customer satisfaction.

Given that the telecoms industry has a high barrier to entry in terms of capital investments needed, only foreign owned companies can really give them a run for their market. But the locals are protected by a constitutional provision that reserves the right to do business in the telecom industry to Filipinos.

The framers of the Constitution may have the best intention of carving out a lucrative business position for Filipinos. But in practical day-to-day terms, the policy benefits foreigners and our local oligarchs and works against the majority of Filipinos --- namely us. Thus, a supposedly pro-Filipino Constitutional provision is in reality, very anti-Filipino. I hope P-Noy gets that nuance.

The irony is… the Constitution is actually now being used to protect what according to the latest Supreme Court ruling are really foreign owned companies. These are not Filipino telecom companies. The Constitution is protecting telecom companies owned by Indonesians, Japanese and Singaporeans with a sprinkling of Ayala and the traditional local elite. We need to end the charade.

Why not just let SingTel, the company that actually owns a majority of Globe’s shares, run the local subsidiary instead? That way, SingTel will be compelled to protect its brand name and Singapore’s national honor. After all, it was Lee Kuan Yew’s insulting remarks on PLDT service that shamed FVR to break the monopoly.

We can also benefit from some of SingTel’s practices like not locking its phones. In Singapore, users can freely change from one provider to another, thereby keeping the telcos on their toes in terms of service quality.

If Japan’s NTT was not just a passive shareholder but actually running PLDT, it will protect its brand by providing world class service. At the very least, respond to consumer complaints.

And if we let other foreign telcos to come and give our local duopoly some real competition, the common Pinoy consumer will get more respect. Once there is real competition in our telecoms industry, we can save taxpayers a bundle of money by abolishing the useless NTC and let market forces regulate the industry.

Another local industry that needs waking up is domestic shipping. Opening it to foreign competition will likely remedy the ridiculous situation where it is more expensive to ship cargo from Davao to Manila than it is to ship to Los Angeles. Breaking the government protected local shipping industry will benefit the country more as farmers from Mindanao can more easily and profitably send their goods to Manila.

The telecom and domestic shipping industries are but two examples why P-Noy must consider amending the restrictive provisions in the Constitution. Well run local companies have nothing to fear from foreign competition.

There was a lot of foreboding when Congress was considering relaxing the Retail Trade Nationalization Law. But years after the law was relaxed, Walmart and Carrefour and other large foreign retailers didn’t come. That’s probably because SM, Rustans and Puregold, among others, are already providing adequate service to the local retail consumers.

Look what open skies and the relatively vigorous competition in the local aviation industry is doing by way of lowering air fares and giving better service. Even our kasambahay who has never flown an airplane before is now flying to Leyte on CebuPacific for her vacation and because she books early enough, is paying less than bus fare too.

Government must stop over regulating because it only results in inefficiencies and abysmal customer service. We simply have to get rid of our protectionist mindset. That is at the root of our inability to become a regional tiger.

In the meantime, I guess we will all have to suffer our telecom duopoly mandating anti-consumer policies with NTC approval. Thus, consumers must bear with prepaid cards having expiry dates and dropped calls charged as normal.

Investor fear

A reader has an idea why investors are afraid to come here.

I am reading on your column today on a PAL flight after regular swing through the ASEAN countries as part of my regional job. Let me add another roadblock: CRIME

I deal with some businessmen who own medium-sized corporations in the neighboring countries. They are looking for investment opportunities beyond their borders. They have read a lot of positive news about our investment climate. They have seen the tourist ads even. And they think that we are near enough for them to monitor the business and visit often.

But the people I’ve spoken are not coming over. They are all afraid of either being robbed, kidnapped or shot. They just get to read the occasional foreign dispatches about both locals and foreigners falling victim to some senseless crimes. And the flavor of the month is the Atimonan shoot-out - with police officers on one side and military types on the other - and a gambling lord in between.

My Singaporean partner was so shocked to learn that massacres still happened in this day and age. He asked me last week what sentence the Ampatuans received. He was so amazed to learn the formal trial hasn’t started. “Why, can’t the authorities tell that the Ampatuan dudes did it, lah.”

Indonesia, Thailand and Vietnam (our peers) are no safe havens from the usual crimes. But the news that comes out of the Philippines scares them a lot more.

These are not the multinational and bank CEOs who don’t walk the streets and even manage a courtesy call with our top officials. But these are the very businessmen who have contributed to the success of their own countries.

So despite the credit upgrades and positive financials, our next door neighbors fear for their lives and won’t invest here.

For them, it’s more safe - and fun - to bring their business to Vietnam, Cambodia and perhaps Myanmar.

Congratulations once again for continuing to churn smart and amusing (so we will laugh instead of cry) columns. Keep up the good work.

Say goodbye, say hello

Raffy Alunan posted this one on Facebook.

His wife packed his bag, and as he walked out the front door, she screamed, “I wish you a slow and painful death, you bloody bastard.”

“Oh,” he replied, “so now you want me to stay!”

Sam Miguel
02-05-2013, 08:28 AM
Blast from the past

By the staff

9:34 pm | Sunday, February 3rd, 2013

If there’s an industry bountifully harvesting from the local stock market boom, it’s luxury car dealerships, based on anecdotal evidence.

A Filipino fund manager with regional responsibilities at a large financial institution, for instance, recently attended a “fun run” upon the invitation of his stockbroker-friends. The fun run itself was a non-event, but not the display of toys for the big boys that overwhelmed the now Hong Kong-based fund manager that weekend. Mr. HK-based chief investment officer was surprised to see the parking lot at the fun run akin to a plush showroom of cars preferred by discerning folks—Maserati, Ferrari, Lamborghini and Porsche, leaving his new sports utility vehicle totally outclassed.

“I looked like their bodyguard, and these guys are only earning commissions from me,” he said in jest.

Another fund manager confirmed that stockbrokers were now buying a lot of hot cars, some opting for European brands like BMW, Audi and Range Rover. For the fund manager, this was like a “blast from the past.” Before the 1997 Asian currency crisis, stock brokers likewise spent on plush cars like there was no more tomorrow. What this means, though, is that talent management is getting to be more challenging for the portfolio management or “buy” side of the business, given that the commission-based stock brokerage or “sell” side is becoming very tempting.

One large local fund manager said he recently lost key traders to the “sell side.” Indeed, how can one resist a triple salary increase? Some financial institutions also face a drought of people for the research side. So if you see a lot of fresh grad-looking analysts out there, it’s because they really are fresh grads.

“We’ve been in a bear market for so long that we weren’t able to train enough analysts so we have no choice but to hire fresh grads,” the local fund manager said. Doris C. Dumlao

Independence not welcome

A LOT of things have changed for the better under the current administration. But, apparently, some “non-Daang Matuwid” habits die hard—like the habit of replacing government appointees (regardless of his or her performance) just because the person doesn’t belong to the posse of a Cabinet member.

Word on the street is that some top honchos of government-owned or -controlled corporations (GOCCs) are on their way out despite doing commendable work for the agencies they now head. One such “on-his-way-out” official, we hear, is Luis Sison, who heads Philippine National Construction Corp. Sison—a longtime ally and supporter of the Aquino family—has been instrumental in keeping the financially troubled PNCC on an even keel in recent years.

His efforts (along with that of Sen. Franklin Drilon) helped preserve some P18 billion worth of PNCC assets that would have otherwise been turned over to a foreign shell company called Radstock under questionable terms. But apparently, Sison has been doing too well of late as a fiscalizer at PNCC, pointing out weaknesses in the policies of some higher-ups and refusing to swallow poor policy prescriptions hook, line and sinker. So yes, he’s on his way out, we hear.

Another GOCC head on her way out, we’re told, is Land Bank of the Philippines president Gilda Pico. A career official, Pico became Landbank president under former Finance Secretary Gary Teves. The government bank is doing well, no doubt. But maybe she’s not viewed to be “part of the team” since she was appointed under the Arroyo administration.

We hear that both Sison and Pico have run afoul of a Cabinet official because of their… ehem… independent views. So expect more loyal replacements in the coming weeks. Daxim L. Lucas

‘Policy statement’

UNLIKE in the recent past when the stock market would fall on profit-taking whenever Mr. President talks about equities, the market is now taking to heart Aquino’s market pronouncements. “It’s like a policy statement,” a fund manager said, adding it would not be a surprise if the market would hit the 6,500-level that Aquino cited during his visit to Zurich as wishful thinking for his birthday on Feb. 8. Is it going up too fast and too soon? Maybe, but stock experts say the volume is going up as new investors are just starting to come in.

And Aquino also said during his Swiss visit that the 7,000 milestone was possible within the year. If so, BPI Odyssey and Macquarie Group can claim credit as the first to proclaim that the index could approximate the number of islands in archipelagic Philippines (7,100). Doris C. Dumlao

New York TV Fest

OUTSIDE of major TV networks’ rating wars, Kapamilya ABS-CBN has secured bragging rights for getting eight finalist slots in various categories in this year’s New York Festivals, beating Kapuso GMA’s three and Kapatid TV5’s one. This made Kapamilya—riding on its entertainment and current affairs programs—the most nominated TV network in New York Festival’s World Best Television and Films competition, which honors programming from more than 50 countries.

Congratulations! Doris C. Dumlao

Sam Miguel
02-05-2013, 08:38 AM
Sustain growth

Philippine Daily Inquirer

9:05 pm | Monday, February 4th, 2013

The mixed views on the higher-than-expected economic growth for 2012 announced by the Aquino administration last week indicated that much has to be done to make development sustainable and its fruits available to all.

President Aquino knew days before the official announcement that the numbers would impress, and they did. The Philippine economy grew by 6.8 percent in the fourth quarter of 2012, bringing full-year growth to 6.6 percent. This topped the government’s target and the analysts’ expectations. The median forecasts of the World Bank and other institutions were 5.9 percent for the fourth quarter and 6.4 percent for the full year. The Philippines’ economic growth in the fourth quarter of 2012 can very well be the second fastest in Asia after China’s 7.8 percent. It was also higher than Vietnam’s 5.4 percent and Singapore’s 1.1 percent.

Malacañang said the “exceptional” growth rate was proof of the country’s ability to move toward “equitable progress” on a policy of good governance. Budget Secretary Florencio Abad described it as “a resounding affirmation of the Aquino administration’s fiscal strategy, backed as it is by our robust macroeconomic fundamentals and, more importantly, the principles of good governance.” Mr. Aquino’s spokesperson Edwin Lacierda said that while the growth rate was initially driven by government stimulus, economic growth is now increasingly being driven by private-sector activity, including investments, which grew by 8.7 percent in 2012. “Private-sector activity has been enabled by the Aquino administration’s dedication to positive reform. Without doubt, good governance means good economics,” he said.

But some private economists observed that the lingering question was whether the high growth in the fourth quarter and the whole of 2012 could be sustained and translated into better incomes for many Filipinos. One reason for their tepid response may be the “low base effect,” meaning that the growth in 2012 was computed from a very low base in 2011. Economist Benjamin Diokno of the University of the Philippines, a former budget secretary, provided interesting data: Under President Corazon Aquino, the economy grew 6.8 percent in 1988 after weak growth in 1987; under President Gloria Macapagal-Arroyo, the economy grew 6.7 percent in 2004 after weak growth in 2003, and again by 7.6 percent in 2010 after a near-recession in 2009.

Diokno agreed that growth was strong in 2012, but said it remained to be seen if this would be sustainable. “We’ve seen this kind of growth before and [it was] not sustained. Is it inclusive? I’m afraid not,” he said, noting that agriculture’s contribution to GDP continued to shrink, posting the lowest growth among the three major sectors (industry and services are the two others). Citing October labor statistics, he said “the recent growth may be characterized as labor-shredding growth [as] close to a million jobs were lost.” Most Filipinos still depend on agriculture and related sectors for a living.

This is not to downplay the governance and economic achievements of the Aquino administration. But as Economic Planning Secretary Arsenio Balisacan said, the government should not be “lulled” into complacency by the economic achievements in 2012. “It is our immediate task to put in place policies and implement programs that will sustain our economy’s growth over the medium term. We shall continue planting the seeds of a structural transformation in our economy to make it more investment- and industry-led. This, in turn, will mean more jobs and employment opportunities of high quality for Filipinos, thus ensuring that growth is inclusive and benefits all sectors of society,” he said.

Cid L. Terosa of the University of Asia and the Pacific reiterated what economists had been advising previous administrations: The growth level of at least 6 percent can be maintained as long as the Philippines keeps building up productivity. Terosa also said the fourth-quarter and full-year 2012 growth rates were impressive, but it’s unclear whether those numbers will translate into better incomes for many in the years ahead. “Employment and continuous structural changes are keys to economic growth over the medium term,” he said.

Everyone seems to know this. It is, after all, a basic economic principle. Yet administration after administration has struggled—and failed—to keep the growth momentum going. The President and his economic team have a lot of work to do to change the pattern.

Sam Miguel
02-05-2013, 08:39 AM
Breaking out, taking off and lifting all

By Cielito F. Habito

Philippine Daily Inquirer

9:01 pm | Monday, February 4th, 2013

Since Monday, top officials and leaders of government, business, civil society, academe and external donor agencies have been meeting in Davao City for the regular Philippines Development Forum (PDF). The PDF, according to its website, “is the primary mechanism of the government for facilitating substantive policy dialogue among stakeholders on the country’s development agenda.” With the choice of this year’s venue, government seeks to highlight Mindanao as a key focal point for national development. With the theme “President Aquino’s Social Contract: Moving Forward in Achieving Inclusive Growth and Good Governance,” the 2-day gathering will conclude today with a speech by President Aquino, who will be presented with the forum’s resolutions and a shared agenda for action crafted by the forum’s multistakeholder participants.

Some 25 years ago, when it was the mother of the current President at the helm, this meeting was commonly known as the annual “Pledging Session” of the various donor agencies extending official development assistance (ODA) to the country. Formally known then as the Consultative Group (CG) Meeting, it was keenly watched particularly for the amounts committed by the various donor agencies in soft loans or grants for projects they were to fund in the year(s) ahead. The headline news coming out of the CG meetings, which were always held abroad then (in Europe or Japan, i.e., in the donors’ own turf), was the bottom-line figure giving the total amount pledged by our donors, usually adding up to around $1.5 billion-$2 billion a year at the time.

Times have since changed. What was then a donor-pledging session is now termed as a development dialogue. “Development partners” is now the favored term over “donors,” who remain focal participants in the gathering. No longer is the meeting held primarily to solicit foreign funding support for development projects that we don’t have enough funds for. With stronger government finances, our officials can assert that the need for external funding assistance is no longer as critical as it had been in the past. Hence, the forum’s wider objective is now to “develop consensus and generate commitments among different stakeholders toward critical actionable items of the Government’s reform agenda”—with ODA pledges being secondary.

This year, the government has gone a step further and dropped the customary prepared statements from foreign ambassadors and heads of multilateral development agencies from the program, giving way to more open and interactive discussion. The only prepared statements are presentations by senior government officials to showcase recent achievements and trigger discussion on imperatives for further action.

In this PDF, our economic managers have a proud story to tell. Recent developments suggest that we are breaking out of an extended period of inferior economic performance relative to our neighbors. Our 2012 gross domestic product (GDP) growth of 6.6 percent is second fastest within the entire Asian region, eclipsed only by China’s 7.5 percent. My own calculations from the data confirm that our economic performance in the last three years (2010-2012) represents a clear break from our average performance in the previous six years (2004-2009). Applying my usual “PiTiK” test (for presyo, trabaho and kita— prices, jobs and incomes), I find that recent annual inflation rate has averaged 3.8 percent, after averaging 5.8 percent in the previous six years. Net new jobs generated now average 856,000 per year, against 766,000 a year in the six years prior. Annual GDP growth averaged 5.9 percent in 2010-2012, from only 4.9 percent in 2004-2009.

I find it particularly heartening that growth in manufacturing and in fixed domestic investment has broken away from previous sluggishness and stagnation, and this to me signals a structural strengthening of our economy. From a lackluster average annual growth rate of 3 percent in 2004-2009, manufacturing output has surged at an average of 7.5 percent in the last three years. If this keeps up, we may yet resume the industrialization that we missed in the last two decades as China assumed the role of factory of the world—a role now compromised by rapidly rising wages. Meanwhile, domestic fixed investment (aka fixed capital formation) grew at an annual average rate of 9.3 percent in the last three years, a great departure from only 1.8 percent in the previous six. Investments in durable equipment in fact fell by an average of 1.8 percent annually in 2004-2009; in the last three years, it has surged with an average 12.1-percent growth. Similarly, private construction has jumped 12.4 percent annually, whereas it only managed to average 4.3 percent in the previous six years. Export growth, averaging 10 percent annually since 2010, is making a clear break from the previous six years when it only grew at 3.5 percent per year on average.

Where we have yet to break away from past trends is in our inability to translate economic growth into commensurate job generation, hence poverty reduction. The 3-year average job generation figure cited above conceals the fact that the impressive 7.2-percent third-quarter GDP growth actually came with the loss of nearly a million (882,000) jobs! This is the first time I’ve seen jobs actually decline in a particular quarter—at such large numbers at that. Seeing not only jobless growth but even job-killing growth in our midst, the PDF needs to come up with more creative approaches if we want an economic takeoff that also lifts the lives of all Filipinos.

Sam Miguel
02-05-2013, 08:40 AM
It’s the people, stupid

By Conrado de Quiros

Philippine Daily Inquirer

9:04 pm | Monday, February 4th, 2013

The newspapers said pretty much the same thing rather amusedly: Finally. Gloria Macapagal-Arroyo had something good to say about P-Noy. After several years of finding his governance execrable, indeed after writing a paper entitled “It’s the economy, student,” where she flunked her student for failing to learn his lessons in her Economics 101, she finally complimented him for managing more than pasang awa.

“It’s welcome news,” she said. “He is on track (to) restoring the growth of 7.9 percent where it was before the first half of 2010.” But she’d like it better, and support it, if P-Noy could “translate (it) into poverty alleviation.” Indeed, she’d like it better, and support it more, if he would go on to have some respect for due process. Such as in her case, for example…

Of course the newspapers had reason to be amused. It wasn’t just that it was amusing to see the former leader and current jailbird turning a new leaf, it was also that it was amusing to see the former leader and current jailbird not turning a new leaf. The praise isn’t really for P-Noy, it is for herself. What Arroyo is saying is that P-Noy has just managed to preserve her “legacy”—she actually uses the word—instead of frittering it.

Prison seems to have failed to dim the hubris. I was just wondering last week how she saw P-Noy’s performance in Davos, how he spoke of the Philippines rising after being the sick man of Asia for a long time. If I remember right, Arroyo went there herself a few years ago under a cloud of doubt about her legitimacy, which was not lost on the other leaders. But which did not particularly faze her: Her press releases in this country had her being the toast of Davos, the one person whose opinion the world’s most powerful leaders solicited, having rescued her country from the jaws of misery under conditions—the American recession chief of them—that had pitched most of the world into it. Like I said, prison seems not to have dimmed the hubris.

I did wonder a few months ago, when news first broke of economic growth exceeding expectations for the third quarter last year, how the Arroyo camp would react to it. It was a complete refutation of their tack. That tack had been to say that P-Noy’s preoccupation, obsession, fixation with fighting corruption had led to the criminal neglect of the economy. The suggestion was clear: Better in Arroyo’s time when we had decent growth rates. Honesty you cannot eat, food you can. Integrity you cannot eat, rice you can. Morality you cannot eat, the economy you can.

Well, P-Noy has just proven, and in record time, the opposite is true.

It’s good that Arroyo should draw attention to how she handled the economy and how her student, P-Noy, has. It reveals a couple of fundamental truths.

The first is that growth means nothing if the people do not feel it and do not benefit from it. Arroyo’s remark about P-Noy still needing to transform the growth into alleviating poverty isn’t just hubris, it is gall. If I remember right, she got sore when a reporter asked that very question—when will the purported growth trickle down to the poor?—after she delivered a glowing report of her economic feats in a press conference. Not least because of its implication that with corruption, any growth, even if real—and that regime was dedicated to substituting illusion for reality—had as much possibility of trickling down as nectar on a sieve.

It hasn’t happened even to this day—not yet. But the possibility at least exists. And it is slowly being felt, if the surveys about the people’s sense of wellbeing, or their reckoning of the future, are anything to go by. That’s what makes this economic growth real, that’s what makes this growth meaningful.

But more than that, as I keep saying again and again, the economy doesn’t just have to do with numbers, figures and statistics, it has to do with people. True enough, as Mark Twain quipped, there are three kinds of lies: big lies, little lies and statistics. P-Noy had every reason to be bullish at Davos and say what he did: The country is rising, the country is soaring, and nothing shows that more than the universal confidence in it. The confidence of the world as much as the confidence of the people.

At no time since the country overthrew martial law has it drawn the acute interest of foreign investors. Enough for them to be jostling to be first in line? Well, we can forgive the hyperbole, but even if we scale that down a little, or a lot, there are still the unmistakable signs of money pouring in. Growth is above all about investment, and investment is above all about trust. It’s a far cry from the days when the country languished in the lowest rungs of surveys on business preferences. But of course you can eat honesty, you can eat transparency, you can eat trust.

Even in the United States, whence comes Bill Clinton’s famous campaign line against George Bush Sr., “it’s the economy, stupid,” there’s an acute recognition that the economy is not an arcane, alien, fetishistic thing that governs our lives without us being able to do anything about it, it is the sum of what people do, it is the net effect of what actors do. That has been hammered home by the recession, a catastrophe wrought in great part by the bean counters of Wall Street. Specifically, by the greed shown by its powerful financial crooks, which spawned the movement “Occupy Wall Street.” Greed does play a humongous part in the economy, corruption does play a humongous part in the economy, trust and confidence do play a humongous part in the economy.

It’s the economy, student?

It’s the people, stupid.

Sam Miguel
02-05-2013, 08:55 AM
^^^ Truly unbelievable. The minute I saw that headline over the weekend I just knew the woman was once again going to have an epic PR fail. She does not want to accept the fact - fact, mind you - that this current president truly is getting the job done, whether by design (as stressed by his own mouthpieces) or by sheer luck or even by some profound destiny. His Daang Matuwid is no longer mere sloganeering but actually coming to the fore. On the other hand, the lady seems to just want the entire nation to forget who she married, and what they both spawned, and what the lot of them had done to this country over nearly 10 years of her presidency. Yes, she inherited shit, but she had a fresh start almost as good as the current president's mother, and she did not even blow the chance. She just plain let her family do as they friggin' pleased. THAT more than anything is what prevented her from becoming the great president all of us knew she had it in her to become. She showed throughout her reign that she could give less than two shits about this nation when it came to the whims and caprices of her family. On just the ZTE NBN and the Fertilizer Fund fiascos she has chosen to hide behind lawyers and loopholes. And now every time she comes out with these ridiculous press releases, when Len Bautista mouthpieces for her, no one believes her. I'd bet not even Mitos Magsaysay and Danilo Suarez actually believe her 100%, and that they are merely doing it to remain in her good graces. Elections are expensive you know. What could have happened to that brilliant, feisty, shrewd yet caring leader that she had in her DNA to become?

Sam Miguel
02-05-2013, 10:59 AM
Transfer mis-pricing: Regulations to address


By Rey Taduran Llesol

(The Philippine Star) | Updated February 5, 2013 - 12:00am

Intra-related transactions – transactions between related parties or associated enterprises – are a common practice in the globalization of trade. These transactions apply to a parent company and a subsidiary, or two or more companies controlled by a common parent (directly or indirectly and whether or not legally enforceable). When said parties establish a price for the above transactions, they are engaging in Transfer Pricing (TP).

TP can be considered to be the most significant tax issue emerging from globalization confronting tax administrations worldwide. This is because related companies are more concerned in their income as a whole rather than as individual corporations, and as such, there is likelihood of manipulating the transfer price by taking advantage of the loopholes in the tax system. As a result, income reported from intra-related transactions decreases. Hence, revenue collection also decreases. And so transfer pricing may really be called transfer mis-pricing!

Please note, however, that decrease in the transfer price should not at all times be attributed to manipulation by the related parties. The Organisation for Economic Cooperation and Development (OECD) Transfer Pricing Guidelines provide that the tax administrators should not automatically assume that associated enterprises have sought to manipulate their profits as they may truly experience difficulty in accurately determining a market price, in the absence of market forces or when adopting a particular commercial strategy. OECD TP Guidelines are the motherhood guidelines after which most, if not all, TP guidelines of different jurisdictions have been patterned.

By way of addressing the TP issues, a standard for TP between or among associated enterprises has been recognized. In international language, this is called the Arm’s Length Principle. This requires the transaction with a related party to be treated as a transaction with an independent party. For example, if trading would be made by unrelated parties, a market price would generally result. Market price (also known as the arm’s length price) is a product of genuine negotiation. Such price should also be the price for intra-related transactions.

Just recently (or maybe belatedly), the Philippines, through the Secretary of Finance officially issued Revenue Regulations No. 02-2013 (RR No. 02-2013) that cover the guidelines in applying the arm’s length principle for TP.

Scope – RR No. 02-2013 applies to cross-border and domestic-related party transactions. The Bureau of Internal Revenue (BIR) recognizes that while the TP typically applies to cross-border transactions, it can also occur in domestic transactions. Accordingly, there is a domestic TP issue when income is shifted in favor of a related company that has special tax privileges, such as enterprises registered with the Board of Investments or Philippine Economic Zone Authority. This also applies when expenses of a related company with special tax privileges are shifted to a related company subject to regular income taxes. Simply put, a TP issue arises when income or expenses are transferred to a related party in order to minimize tax liabilities for the group.

Methods to be Used – RR No. 02-2013 states that the most appropriate of the TP methods under the OECD TP Guidelines can be utilized. Whichever method that produces the most reliable results, taking into account the quality of available data and the degree of accuracy of adjustments, should be the one to use. The methods are as follows:

• Comparable Uncontrolled Price Method

• Resale Price Method

• Cost Plus Method

• Profit Split Method

• Transactional Net Margin Method.

The use of the methods will provide a number of comparables companies/transactions for the related-party transactions.

Allocation of Income and Deductions – RR No. 02-2013 also recognizes the authority of the Commissioner of Internal Revenue (CIR) to make TP adjustments. The CIR’s authority to distribute, apportion, or allocate gross income or deductions between or among related parties is pursuant to Section 50 of the Tax Code which aims to ensure that taxpayers clearly reflect income attributable to related-party transactions and to prevent the avoidance of taxes with respect to such transactions.

Optional Remedies – RR No. 02-2013 provides for optional remedies for taxpayers engaged in cross-border transactions with related parties located in tax jurisdictions having tax treaties with the Philippines. Accordingly, an Advance Pricing Arrangement (APA) may be entered into between the taxpayer and the BIR to determine in advance an appropriate set of criteria (e.g. method, comparables, and appropriate adjustments thereto) to determine the transfer prices of controlled transactions over a fixed period of time. The use of APA by taxpayers reduces the risk of TP examination and double taxation.

On the other hand, if a taxpayer does not choose to enter into APA and its transactions are subject later on to TP adjustments, it may still invoke the Mutual Agreement Procedure (MAP) provided in the tax treaties. The MAP is a means under the tax treaties, together with other tax jurisdictions, through which tax administrations consult each other to resolve disputes regarding the application of these tax treaties. It is also a mechanism for eliminating double taxation issues arising from TP adjustments.

Separate guidelines will be issued for the availment of the APA and MAP.

Documentation Required – Under the said regulations, taxpayers should be able to prove that efforts were exerted to determine the arm’s length price for related party transactions. Such proof is by way of documentation. The taxpayers are to maintain adequate documentation for purposes of:

• defending their TP analysis

• preventing TP adjustments arising from tax examinations

• supporting their applications for the MAP.

Documentation, however, is not required to be submitted upon filing of tax returns. However, it should be retained by the taxpayers within the period provided under the Tax Code. It should also be submitted to the BIR when required or requested to do so.

Further, the documentation should be contemporaneous (existing or is brought into existence at the time the related parties develop or implement any arrangement that might raise TP issues or review these arrangements when preparing tax returns).

Effectivity – RR No. 02-2013 will take effect after 15 days following publication in a newspaper of general circulation. Considering that said RR was published in Manila Bulletin on Jan. 25, 2013, therefore it should take effect on Feb. 9, 2013.

Now that the TP regulations are in place and will nearly come into effect, the BIR may have to issue circulars clarifying matters regarding the implementation of RR No. 02-2013. These clarifications become necessary since various concerns have been raised. Here are some of the most common concerns:

1. Are taxpayers required to have a TP study? Presumably, yes, as the taxpayers are required to retain said documentation. (Although said documentation is not required to be submitted). What will happen if during the TP audit, no documentation has been submitted by the taxpayer?

2. Regarding TP audit, will the TP examination have its separate auditing procedures just like the VAT audit program? Or will it be part of the regular audit since the issues covered by TP pertain to income tax. And will the TP adjustments impact also other tax types (e.g. VAT)? From which taxable period will the TP examination/audit be pegged?

3. Concerning the TP adjustments, are the taxpayers required to amend their returns after said adjustments? Under which item in the financials will the adjustments be lodged?

4. It is stated that the TP documentation is contemporaneous, that is, if it exists or is brought into existence at the time the associated enterprises develop or implement any arrangement that might raise TP issues. Are related parties required to have TP documentation for the arrangements concluded prior RR No. 02-2012 but are still standing?

5. How could RR No. 02-2013 impact the industry standard set in the benchmarking of taxpayers under Revenue Memorandum Order (RMO) No. 005-2012? RR No. 02-2013 in way, also set an industry standard. But one possible scenario is when comparables for intra-related party transactions arrived at under RR No. 02-2013 are not confined locally and, therefore, not included in the entities used by the BIR for benchmarking under the said RMO No. 005-2012.

Well, more of these can be expected to arise in the absence of a more detailed guidelines implementing RR No. 02-2013. The primordial concern here is that no room for subjectivity shall be left to either the BIR or to the taxpayers in interpreting RR No. 02-2013 because otherwise, the noble objectives of the new regulations to manage the opposing interests of both parties will not be achieved.

Rey T. Llesol is a supervisor from the tax group of Manabat Sanagustin & Co. (MS&Co.), the Philippine member firm of KPMG International.

02-05-2013, 05:09 PM
How to create jobs

In the informal sector in the provinces a daily wage of P230-P280 is common, and people there somehow live on that.

Actually, they can't. That's why there are plenty of people coming to Manila as factory workers, househelps, labandera, etc. because life is very very difficult living with that kind of income (and then you have that problem of over-congestion in Metro Manila which is another issue all together).

Anyway, economic policy is a tricky issue and I respect Mr. Wallace's suggestions. In this regard I agree with Ben Diokno that the key is making agriculture more productive (easier said than done of course with all the details that have to be addressed such as farmer's credit, irrigation, land reform, etc.). I believe this is what Deng Xiaoping did with China when he took over as Premiere(?) of China. It made people more productive per hectare of land, which freed up labor for other purposes. The excess labor, in turn, drove down labor costs, which was one of the attractions for investors to set-up businesses in China, thereby creating more jobs.

Sam Miguel
02-07-2013, 08:32 AM
Senate, House OK new version of Anti-Money Laundering Act

By Matikas Santos and Karen Boncocan


7:03 pm | Wednesday, February 6th, 2013

MANILA, Philippines – The Senate has ratified the bicameral conference committee report on the chamber and the House of Representatives’ reconciled bills that aim to strengthen the Anti-Money Laundering Act (Amla) Wednesday.

Congress is under pressure to pass amendments on the Amla or else face being black listed by the international Financial Action Task Force (FATF), before Congress goes into recess to give way to the May 2013 election campaign.

Senator Teofisto Guingona III however said that what they passed was not an assurance the Philippines will not be blacklisted.

“On February 18 we will know whether what we have passed is enough for us to get out of the dark grey list [either] upwards or go down to the blacklist,” he told reporters.

“FATF might just say: ‘sorry but what you passed, though you did pass something, is not enough,’” Guingona said.

The new version will require money changers, jewelry and precious metals dealers, real estate and pre-need firms to submit data on suspicious transactions to the Anti-Money Laundering Council but has waived off such a requirement for casinos.

The measure will make its way into the hands of President Benigno Aquino III, to be signed into law, after both chambers of the 15th Congress have ratified it.

On the removal of a provision requiring casinos to report to the AMLC when a suspected money launderer was in the premises, Senator Teofisto Guingona III said that they no longer argued against it because they were running out of time and must pass the law to avoid being blacklisted.

“It’s better to have a law than no law at all. Otherwise, we would end up in the blacklist,” Guingona had previously said. “It was a choice between being blacklisted for sure and the possibility of being blacklisted.”

He however said that the deletion of the provision on casinos was a big loss. “Ang laki ng butas na naiwan,” Guingona said.

He said that the Philippine Amusement and Gaming Corporation (Pagcor) did not want the provision on casinos. It was also seen as a deterrent to investors, Guingona said.

If ever the country would be placed in the blacklist, it would make it harder for overseas Filipino workers (OFWs) to send remittances into the country.

“Any money going to the Philippines or coming out of the Philippines, will have to be proven that it’s not dirty money [and] to prove it’s not dirty money [a lot of] requirements [would need to be complied with],” Guingona said.

Sam Miguel
02-08-2013, 11:38 AM
Big business can help fight poverty


By Boo Chanco

(The Philippine Star) | Updated February 8, 2013 - 12:00am

UP economist Noel de Dios has a good idea on how to get more inclusive growth: get big business deeply involved in the fight against poverty. Since the bulk of our poverty stricken population are in the rural areas, get big business involved in agriculture.

Noel, in a recent Business World column, argues his point: “A leap in productivity and incomes among today’s poor can come only by linking them with those who already possess exceptional access to knowledge and resources. If one speaks of agriculture, for example, this cannot be done without inducing major corporate businesses – those already inserted in national and global value-chains – to enter agriculture in a big way and include the poor in their plans.”

Indeed, all the Corporate Social Responsibility activities of the large corporations are only self serving feel good press releases unless the outcome makes dramatic transformations in the lives of those at the bottom of the pyramid. As Noel puts it, “only large infusions of capital, technology, and market intelligence from the private sector can transform the conditions of the poor today.”

But Noel knows things are always easier said than done specially in this country. Thus, he points out that “for all this to occur, difficult questions must first be answered: What policies and regulations hinder the entry of private capital and technology in agriculture? (Here one must wonder what hinders conglomerates like Metro Pacific, San Miguel, SM, and Ayala from becoming more involved in commercial agriculture rather than in malls, condos, airlines, and toll ways.)

“What feasible production and trading arrangements in agriculture can reduce transactions costs and yield scale-economies for major companies? How can massive corporate entry into agriculture be facilitated without undermining the spirit and reversing the gains of a completed agrarian reform?

“What organizational preparations are needed to build trust between small holders and large corporate ventures? What facilitative role should local and national governments play? None of these questions admits of an easy or quick answer, although each of them is urgent. The answers required are not only intellectual but also political.”

Among the major conglomerates, only San Miguel has experience in working with farmers as part of their supply chain. But even with San Miguel, they had big problems in the case of the Sumilao farmers in Bukidnon. Church and some influential lay leaders took San Miguel through the wringer and accused the conglomerate of using its clout to dispossess farmers of their land.

What San Miguel had was a plan to integrate the farmers with their supply chain. San Miguel will buy their produce and thus give them a ready and steady market. Some of their children will also have employment opportunities in the on-site processing facilities of San Miguel. But San Miguel was demonized.

In the end some compromise agreement was reached. But the drama of farmers walking all the way from Bukidnon to Manila damaged the corporate reputation of San Miguel. It probably discouraged similar forays of other conglomerates into agriculture, which almost always necessarily means getting into problems with land reform.

Indeed, we may have to reconsider our concept of land reform. We have failed to use it as a means to uplift our farmers out of poverty for many decades now. But we still insist on this same tired concept anyway.

Economist Noel de Dios observes that we are forcing the farmer to be an entrepreneur under our current land reform concept and I guess we should know by now that assumption is simply faulty. Says Noel: “a major reason that interventions in behalf of the poor have been small in scale and limited in scope: the poor are improperly and indiscriminately shoe-horned into the unrealistic role of entrepreneurs…

“From this misconception flow the many well-meaning but ultimately feckless small credit schemes for ‘livelihood projects’ such as the ineluctable sari-sari stores, jeepney and tricycle purchases, food-stalls, and precarious small-scale subsistence agriculture.”

Noel continues: “No doubt, individual success stories can always be told. But to think that the poor can systematically lift themselves up en masse by such means is a pipe dream.”

I suppose this is where leadership from Malacanang comes in. Will P-Noy be bold enough to break out from proven past failures to try new approaches towards inclusive economic growth?

I realize doing something on land reform is politically tricky for P-Noy given the Luisita problem. But there should be enough Filipinos willing to go with a bold plan that offers a greater promise for success than the approach we are now taking.

We missed some past opportunities to improve efficiency in the agricultural sector because it is just too bloody (sometimes literally so) to deal with land reform issues. We have one other deadline we need to take note of and that is 2015 when Asean becomes one big market. By then, we simply have to be competitive in agriculture, or be eaten up by our Asean neighbors.

We just have to be constantly innovative in our approaches to fight poverty. Dump old concepts that didn’t work. Try new ones. We may fail with some new approaches too but we may also succeed with some. We will never know unless we try. Trying is what P-Noy should be all about. I hope he is up to it.

Year of the Snake

Gong Xi Fa Chai!

Southeast Asia is celebrating this week the Chinese Lunar New Year. Even if we are a Latin American country trapped in this region, this is an annual celebration that is gaining more and more importance through the years.

Before going on Christmas break, the Senate passed on second reading a bill that would make the day on which the new lunar year falls a non-working holiday. Sen. Edgardo Angara, sponsor of Senate Bill No. 3323, said making Chinese New Year a non-working holiday was meant to be a sign of “goodwill and amity between the Philippines and China.”

Oh well… I like the tikoy that comes with the holiday except that the Mandarin carp tikoy my friend Ed Yap sent me looks too beautiful to eat… I simply had to post its picture on Facebook. Other than that, all the talk about tigers, snakes and dragons elude me.

Nevertheless, Z, my astrologer friend decided to educate me on what my “birth animal” means. I am supposed to be a Metal Tiger or Tiger Descending the Mountain. Apparently, not all tigers are created equal in the Chinese calendar.

As a Metal Tiger, I am supposed to be tough, hard working and generous. Like most tigers, I am supposed to be prone to mood swings and will complain vigorously if I feel insulted or deceived (no wonder I am a columnist!). But my anger is supposed to be short lived and I am naturally forgiving, rarely holding grudges for long (unless I can’t update my FB status while on the run due to my erratic internet service, haha!).

A feng shui expert (Dr. Andy Tan, a medical doctor who has practiced feng shui professionally) spoke before the Philippine Chapter of the International Association of Business Communicators and had this to say about tigers: The tiger born from 12 midnight to 4 a.m. is a hungry, voracious tiger; always fighting for his/her space. The tiger born later in the day (after 4 a.m.) is a nice, cute feline (tame cat). Hmm… have to check my birth certificate what time I was born.

Z has this take on what the Year of the Black Water Snake has in store for tigers like me: “It will be an anxious year for one used to getting what you want when you want it. You’re accustomed to working at warp speed; blocks in your path which slow you down test the limits of your patience (not that you have much, if any). Friends and family make undue demands on your resources. Think positive; avoid worry lest your health suffer.”

Dr. Tan’s take: cash is king, therefore, save-save-save; avoid lending, you can borrow; avoid arguments, avoid confrontation. Now I have a good excuse when people try to borrow money from me… sorry but that’s bad feng shui. I like that.

Oh well… this tiger believes we are masters of our fate. We shouldn’t blame our situation on the stars or some ancient Chinese animal tales. If we are at peace with our God and we discern that through our conscience, we should be doing well.

Gong Xi Fa Chai!


As in any holiday, people go out of their way to be beautiful. Here’s a timely reminder.

Beauty comes from within. Within jars, tubes, bottles and compacts.

02-09-2013, 09:33 AM
The uncommon sense of tax law

By Ricardo J. Romulo

Philippine Daily Inquirer

11:53 pm | Friday, February 8th, 2013

As a young lawyer, I used to complain to my mentor, Allison J. Gibbs, that often tax laws defy common sense. He would reply that tax laws and their implementation are simply exactions of the state to which logic or common sense take a back seat.

Common sense certainly did that in the tax case over an artwork, “Canyon” by Robert Rauschenberg, as related in an article by Patricia Cohen in the July 23, 2012, issue of the International Herald Tribune.

The Internal Revenue Service of the United States and the heirs of art dealer Heana Sonabend, who died in 2007, were in disagreement on how much value to attribute to “Canyon,” for purposes of determining the tax on Sonabend’s estate.

“Canyon” is a sculpture that is admittedly a 20th-century masterwork of Robert Rauschenberg. The IRS, on the advice of its art advisory panel that is made up of experts from the private sector, valued the artwork at $66 million. The heirs of Sonabend insisted on valuing it at zero because mounted in a part of the sculpture is a dead bald eagle.

Laws in the United States, such as the Bald and Golden Eagle Protection Act and the Migratory Bird Treaty Act, make it illegal to possess, sell, purchase, barter, transport, or export any bald eagle, whether dead or alive.

Sonabend’s heirs thus contended that “Canyon” had been legislated out of the purview of the market and therefore had no value for purposes of the estate tax. The US federal estate tax, like that of the Philippines, is imposed on the net estate of a decedent which is arrived at, in general, by subtracting a short list of allowable deductions from the “gross estate.” The “gross estate,” in turn, is the total fair market value of the items in the estate’s inventory at the time of the decedent’s death.

“Canyon,” because of the bald eagle, could not even be placed in the market; therefore, logically, it had zero fair market value, argued the heirs.

Speaking for the IRS’ advisory panel, Stephanie Barron, however, explained why the art experts could not concede the value of zero to “Canyon.” Barron, the senior curator of 20th-century art at the Los Angeles County Museum of Art that exhibited “Canyon” for two years, said that for them, the value of an artwork is its artistic worth. “The ‘Canyon’ is a stunning work of art and we all just cringed at the idea of saying that this had zero value. It just didn’t make any sense,” she said.

Common sense dictated to Barron and her coadvisers that something as magnificently artistic as “Canyon” had to have substantial value. But common sense also appears to be also on the side of the Sonabend heirs, who argued that, by the operation of the relevant laws that make it illegal to sell or dispose of the bald eagle, dead or alive, the artistic value which the panel saw in “Canyon” had no worth at all in the market.

I have no update on how the US tax court resolved the controversy. But on the local front, our own tax laws and regulations are not wanting in the lack of logic and/or common sense.

A quick instance is the taxation of the income of collective investment funds which are formed by pooling together moneys of many investors, usually individuals. The income of mutual funds is treated as corporate income and taxed at 32 percent on the net. However, the income of a common trust fund, commonly known as a unit investment trust fund, is subject to only 20 percent, but on the gross. Yet the two methods of pooling funds are substantially the same.

We need go no further for another example: the “long-term deposit or investment certificate.” Section FF of the Tax Code says the term “refers to certificate of time deposit or investment certificate in the form of savings, common or individual trust funds, deposit substitutes, investment management accounts and other investments with a maturity period of not less than five (5) years, … issued by banks … in denominations of Ten Thousand pesos (P10,000)…”

Jumping out of the page is why time-deposit accounts are treated in the same way as trust funds and investment management accounts. Time and savings deposits are borrowings of a bank from the public and are therefore correctly described as issued by banks. But common or individual trust funds and investment management accounts are of a different nature. Instead of being debts of a bank, these accounts simply are funds under the bank’s management.

Hence, accounting-wise, time deposits are recorded in the books of a bank as actual liabilities; trust and investment management accounts are only contingent liabilities.

But tax law disregards the common sense of treating different things differently: Time deposits, on the one hand, and trust and investment accounts, on the other, that are contracted for five years are taxed on their income similarly.

Such lack of logic in tax law makes us scratch our heads, but not too much lest we end up like a bald eagle.

02-10-2013, 06:12 AM
The same S&P that gave AAA ratings to MBS' that went kaput. I trust these guys. Max Keiser is very happy.

Sam Miguel
02-12-2013, 09:04 AM
Actually, they can't. That's why there are plenty of people coming to Manila as factory workers, househelps, labandera, etc. because life is very very difficult living with that kind of income (and then you have that problem of over-congestion in Metro Manila which is another issue all together).

Anyway, economic policy is a tricky issue and I respect Mr. Wallace's suggestions. In this regard I agree with Ben Diokno that the key is making agriculture more productive (easier said than done of course with all the details that have to be addressed such as farmer's credit, irrigation, land reform, etc.). I believe this is what Deng Xiaoping did with China when he took over as Premiere(?) of China. It made people more productive per hectare of land, which freed up labor for other purposes. The excess labor, in turn, drove down labor costs, which was one of the attractions for investors to set-up businesses in China, thereby creating more jobs.

The puzzle of the lost jobs

By Cielito F. Habito

Philippine Daily Inquirer

11:48 pm | Monday, February 11th, 2013

I heard that President Aquino had members of his Cabinet look closely into how the economy lost nearly a million jobs last year in spite of an exceptional 7.2-percent gross domestic product (GDP) growth in the same period. I called attention to the disturbing statistics at the Philippine Development Forum held in Davao last week, as a panelist in the session where Secretaries Balisacan, Abad and Purisima had summarized the Aquino administration’s economic achievements so far. The President was heard saying that the economist in him found it hard to reconcile such massive job losses with such impressive economic growth.

The alarming employment data had actually been out since mid-December, when the National Statistics Office (NSO) released the results of the quarterly Labor Force Survey taken last October, the final report for the year. The question that naturally comes to mind is: Where did we lose all those jobs? Closer examination of the data yields some observations that partly shed some light, but also seemingly deepen the puzzle of “job-reducing growth” that the data appear to suggest.

On a sectoral analysis, agriculture, fishery and forestry accounted for the bulk of the jobs lost, with 669,000 jobs less, around 100,000 of which were in fisheries. Natural calamities would seem to be a plausible explanation, but the labor data were for October—well before Typhoon “Pablo” devastated large areas of farmlands in Mindanao. In fact, detailed GDP data for the third quarter show hefty year-on-year increases in the production of major crops. Rice, corn and sugarcane production actually grew at double-digit rates, with pineapple, coconut and banana also posting good growth. How can agriculture lose hundreds of thousands of jobs and yet grow the way it did, then? Did labor productivity on our farms suddenly improve? A senior Cabinet member told me that they are still scratching their heads on this one. I am, too.

The services sector recorded a loss of more than 300,000 jobs, with wholesale and retail trade losing nearly half a million jobs. But this was offset by around 170,000 new service jobs created in hotels and restaurants, showing that the tourism boom has been a bright spot in the overall jobs picture. Around 122,000 new jobs were also recorded in the public sector, apparently associated with government construction projects that were substantially hiked in 2012 after a somewhat debilitating spending cutback in 2011. The rest of the services industries posted either slight increases or slight to moderate job losses.

How could wholesale and retail trade lose hundreds of thousands of jobs when a number of large new shopping malls actually opened around the country in 2012? Are the job numbers more due to informal tiangge traders and ambulant vendors getting out of business by the hundreds of thousands last year? The GDP data show trade to have actually grown by 8.2 percent in the third quarter, and 7.5 percent for the whole year. So I’m scratching my head on this one as well.

It’s in the industry sector where the jobs data show a positive overall gain, with around 100,000 net new jobs created. The data show a gain of some 118,000 jobs in construction and 34,000 jobs in mining, offset by several thousands of jobs lost in utilities and manufacturing. The picture is consistent with the double-digit growth in both public and private construction last year. But it doesn’t seem to square with the 3.7 percent drop in mining output and the 5.1- and 5.4-percent growth posted in utilities and manufacturing, respectively. In mining, we see jobs going up where output actually declined. A case of falling productivity this time? This seems questionable in an increasingly mechanizing industry, so the puzzle remains.

Where sectoral and occupational analysis fails to shed light on the puzzle, analysis based on labor categories provides a more plausible story. It turns out that the lost jobs were entirely in the unpaid family labor and self-employed categories. In fact, wage and salary workers increased by more than 400,000, which is good news. The NSO defines unpaid family labor as members of the family who assist in the operation of the family farm or business enterprise and who do not receive any wage or salary for their work. The data show more than 700,000 of these plus some half a million self-employed workers having dropped out. Through all this, labor force participation rate had dropped significantly from 66.3 to 63.9 percent, translating to almost 800,000 leaving the labor force, either to go back to school or concentrate on household chores. This explains why unemployed workers only went up by 120,000 even as the number of jobs shrank by nearly a million.

And so, the story one can piece together from all these is this: Large numbers of young people—who comprise the bulk of the unemployed in the data—stopped working as unpaid workers in family farms and businesses or as informal traders. Many of them went back to school. My Cabinet-member friend told me that their education colleagues affirmed significant increases in enrollment in the past year. Their departure had little impact on recorded output, as they had either been highly underemployed or previously undetected by the GDP data, anyway. Meanwhile, full-time and wage/salary-paying jobs actually increased by hundreds of thousands—the silver lining in the otherwise troubling jobs data.

The jobs data may not be as alarming or as puzzling as they initially look, then. Still, P-Noy and his Cabinet have a lot more work to do to get the inclusive growth that we all want.

Sam Miguel
02-14-2013, 08:53 AM
Sin tax law effects: Smokers find way to scrimp on cigarettes, share sticks with friends

By Allan Nawal

Inquirer Mindanao

7:13 am | Thursday, February 14th, 2013

DAVAO CITY, Philippines—Forgot to buy your cigarette or did you suddenly run out of a stick to light?

Think twice before asking somebody to hand you one. More likely, fellow smokers would tell you they have run out of sticks, too.

While smokers would readily share a stick or two to an acquaintance in the past, these days, smokers have become stingy with their cigarettes, due to higher retail prices brought about by the sin tax law.

Prices of cigarettes across all brands have increased by more than 50 percent because of the sin taxes applied to tobacco and alcohol products.

Smokers have become more disciplined in consuming their supply.

Fidel, who has since shifted from Marlboro to Mighty Filters, said he would not mind sharing a stick to a friend, if it happened once.

But he said he would tell a friend he had run out of cigarettes, if his friend kept on asking for a stick.

According to Fidel, a stick of Mighty Filters now costs P2 at retail stores, much higher than what a stick of Marlboro cost in December.

“Marlboro was only P1.75 a stick then (before the sin tax law took effect), Fidel said, adding that the popular brand has been selling for P4 per stick at sari-sari (variety) stores.

Bernie, another smoker, said he used to ask for a spare stick of cigarette from friends whenever he ran out of one but now, he would be ashamed to bother them.

“I understand that cigarettes now cost much higher than before so I could not muster the word to ask a friend if I run out. It’s akin to molesting them already,” he said.

Bernie admitted that he himself had become “kuripot” (stingy) and would even hide the rest of his cigarettes when in a group of acquaintances.

“It’s better this way than flatly turning down somebody if he asks for a stick," Bernie added.

At the corner of Sandawa street here, a group of tambays had found another way to keep their cigarettes and their friendship.

One of them was overheard telling his three companions that they should pool their P1 together so they could buy two sticks of Fortune menthol, being sold at P2 per stick at the nearby store.

A few minutes later, the Inquirer saw the man returning to where his friends stood and gave the second stick to one of them.

After a few puffs, they handed—almost simultaneously the half-consumed cigarettes to their two other companions.

“Fifty lang ta bay kay mahal ang yosi (Let’s just share the halves, friend, because cigarettes have become too costly),” one of the men said as he handed over what was left of the stick he had lighted earlier.

Sam Miguel
02-14-2013, 08:54 AM
Cagayan port defies SC

New car shipment arrives in Port Irene

By Melvin Gascon

Inquirer Northern Luzon

12:01 am | Thursday, February 14th, 2013

BAYOMBONG, Nueva Vizcaya—A shipment of more than 200 used cars and vans arrived on Monday at Port Irene in Santa Ana town in Cagayan province, despite a Supreme Court ruling that affirmed the ban on vehicle importation, a local official said on Wednesday.

“This is an outrage because residents here are fully aware of the Supreme Court ruling. Yet, they hear the news of a shipment [of used cars] arriving [at the Cagayan Special Economic Zone and Freeport] as if there is no ban,” Santa Ana Mayor Darwin Tobias told the Inquirer.

The Cagayan Economic Zone Authority (Ceza), which runs the free port, confirmed the arrival of the shipment.

“There was this shipment of more than 200 vehicles from Incheon in (South) Korea that just arrived, but it was covered by an import permit that was issued before the (issuance of) the Supreme Court decision,” said Nilo Aldeguer, Ceza senior deputy administrator.

He did not give the date of the new shipment’s import documents.

Aldeguer said it would be up to the Bureau of Customs and the Land Transportation Office if Ceza would be allowed to process the papers for the vehicles.

“I was told they are still waiting for guidelines from their central offices on what to do next, considering the Supreme Court decision. But as far as Ceza is concerned, we will not allow the vehicles to be driven out of the [Cagayan Special Economic Zone and Freeport]; they can only be used within the free port,” he said.

In a Jan. 7 ruling, the Supreme Court affirmed the constitutionality of Executive Order No. 156 banning the importation of used vehicles.

The EO was issued by then President Gloria Macapagal-Arroyo on Dec. 12, 2002. (See “What went before…”)

The high court also ruled that Forerunner Multi-Resources Inc., the company which challenged EO 156, did not have a “clear legal right to import used motor vehicles” into the country.

‘Display of arrogance’

Aldeguer said Forerunner, which had the sole Ceza license to import used vehicles, planned to file a motion for reconsideration and to take other legal remedies.

According to Tobias, importers off-loaded their shipment on Monday.

“Locals are aghast by such display of arrogance by these [used-car traders], which, to our people, indicates how highly placed their protectors in government are,” he said.

More shipments are expected to arrive within the month, he said, citing official sources.

Aldeguer said the used-car importer continued to trade at its 5-hectare car stockyard in Barangay (village) Casambalangan in Santa Ana.

“There are vehicles whose [registration] papers have already been completed before the SC decision. So, these vehicles are not covered and are still being sold,” he said.

The Inquirer tried to get in touch with Senate President Juan Ponce Enrile, who shepherded in Congress the law that created the Cagayan Special Economic Zone and Freeport before he became the head of the Senate, through his staff late Wednesday afternoon to get a reaction.

The Inquirer talked to Lizette Nepomuceno of the Office of the Senate President and briefed her about the story. As of 7:45 p.m., however, Enrile had not given a reaction either through Nepomuceno or any other member of his staff.—With a report from Cathy Yamsuan

Sam Miguel
02-14-2013, 08:55 AM
Cagayan port defies SC

New car shipment arrives in Port Irene

By Melvin Gascon

Inquirer Northern Luzon

12:01 am | Thursday, February 14th, 2013

BAYOMBONG, Nueva Vizcaya—A shipment of more than 200 used cars and vans arrived on Monday at Port Irene in Santa Ana town in Cagayan province, despite a Supreme Court ruling that affirmed the ban on vehicle importation, a local official said on Wednesday.

“This is an outrage because residents here are fully aware of the Supreme Court ruling. Yet, they hear the news of a shipment [of used cars] arriving [at the Cagayan Special Economic Zone and Freeport] as if there is no ban,” Santa Ana Mayor Darwin Tobias told the Inquirer.

The Cagayan Economic Zone Authority (Ceza), which runs the free port, confirmed the arrival of the shipment.

“There was this shipment of more than 200 vehicles from Incheon in (South) Korea that just arrived, but it was covered by an import permit that was issued before the (issuance of) the Supreme Court decision,” said Nilo Aldeguer, Ceza senior deputy administrator.

He did not give the date of the new shipment’s import documents.

Aldeguer said it would be up to the Bureau of Customs and the Land Transportation Office if Ceza would be allowed to process the papers for the vehicles.

“I was told they are still waiting for guidelines from their central offices on what to do next, considering the Supreme Court decision. But as far as Ceza is concerned, we will not allow the vehicles to be driven out of the [Cagayan Special Economic Zone and Freeport]; they can only be used within the free port,” he said.

In a Jan. 7 ruling, the Supreme Court affirmed the constitutionality of Executive Order No. 156 banning the importation of used vehicles.

The EO was issued by then President Gloria Macapagal-Arroyo on Dec. 12, 2002. (See “What went before…”)

The high court also ruled that Forerunner Multi-Resources Inc., the company which challenged EO 156, did not have a “clear legal right to import used motor vehicles” into the country.

‘Display of arrogance’

Aldeguer said Forerunner, which had the sole Ceza license to import used vehicles, planned to file a motion for reconsideration and to take other legal remedies.

According to Tobias, importers off-loaded their shipment on Monday.

“Locals are aghast by such display of arrogance by these [used-car traders], which, to our people, indicates how highly placed their protectors in government are,” he said.

More shipments are expected to arrive within the month, he said, citing official sources.

Aldeguer said the used-car importer continued to trade at its 5-hectare car stockyard in Barangay (village) Casambalangan in Santa Ana.

“There are vehicles whose [registration] papers have already been completed before the SC decision. So, these vehicles are not covered and are still being sold,” he said.

The Inquirer tried to get in touch with Senate President Juan Ponce Enrile, who shepherded in Congress the law that created the Cagayan Special Economic Zone and Freeport before he became the head of the Senate, through his staff late Wednesday afternoon to get a reaction.

The Inquirer talked to Lizette Nepomuceno of the Office of the Senate President and briefed her about the story. As of 7:45 p.m., however, Enrile had not given a reaction either through Nepomuceno or any other member of his staff.—With a report from Cathy Yamsuan

Sam Miguel
02-15-2013, 08:01 AM
BOC stops car shipment

Miriam seeks Senate probe of Port Irene

By Leila B. Salaverria, Michael Lim Ubac, Norman Bordadora, Philip C. Tubeza

Philippine Daily Inquirer

12:07 am | Friday, February 15th, 2013

Customs Commissioner Ruffy Biazon on Thursday ordered customs personnel in Port Irene to stop the release of more than 200 used cars and vans that arrived on Monday at the free port in Sta. Ana, Cagayan province.

The importation of the vehicles into the free port for resale in the country, apparently in defiance of a Supreme Court ruling, gave Sen. Miriam Defensor-Santiago the opportunity to draft a resolution seeking to investigate what she called “contumacious” operations in the Cagayan Special Economic Zone and Freeport (CSEZF).

The CSEZF was created by a 1995 law authored by Senate President Juan Ponce Enrile, with whom Santiago has been feuding over the “misuse” of Senate funds, when he was a member of the House of Representatives.

Biazon said the Bureau of Customs (BOC) would respect the Supreme Court decision affirming the validity of Executive Order No. 156 banning the importation of used vehicles, except for trucks, buses and special purpose vehicles.

“We’re just enforcing the law …. I have instructed all BOC officials assigned at the [CSEZF] not to process any vehicle importation pending the clarification on the finality of the Supreme Court’s decision affirming the constitutionality of EO 156,” Biazon said.

He said investors in the CSEZF could import vehicles for their use within the special economic zone and free port but these could not be taken out of the zone.

Certificate of finality

“We will seek a certificate of finality on the Supreme Court ruling on EO 156, and we will enforce whatever provisions and implementing rules the EO provides,” Biazon said.

Nilo Aldeguer, senior deputy administrator of the Cagayan Economic Zone Authority (Ceza), said on Wednesday that the shipment of more than 200 vehicles came from Incheon, South Korea.

Aldeguer said the shipment was covered by an import permit that was issued before the Supreme Court issued its decision.

He said it would be up to the BOC and the Land Transportation Office (LTO) if the Ceza, which runs the free port, would be allowed to process the papers for the vehicles.

Slump in sales

Then President Gloria Macapagal-Arroyo issued EO 156 in 2002 after members of the local car manufacturing industry complained of a slump in sales due to the importation of used cars at free-port zones like the CSEZF.

Claiming that the EO was unconstitutional, the Automotive Rebuilding Industry of Cagayan (Aric) obtained a temporary restraining order (TRO) from a regional trial court (RTC) in Cagayan but the RTC in Aparri later affirmed the ban.

The case reached the Court of Appeals, which decided in September 2010 to lift the ban on the importation of used cars.

But in January 2013, the Supreme Court Second Division set aside the appellate court decision and affirmed the ruling of the Aparri court.

Open defiance

“The continued importation of used cars at Port Irene constitutes an open defiance of a decision of the Supreme Court,” Santiago said.

Santiago said the Supreme Court ruled that vehicles imported from abroad “may only be stored, used or traded, or exported out of Philippine territory, but cannot be imported into the Philippines outside of the secured fenced-in former Subic Naval Base area.”

“In effect, the Supreme Court ruling barred the importation of vehicles by the Cagayan Special Economic Zone,” Santiago said.

Santiago cited reports claiming that the Ceza refused to abide by the Supreme Court’s order because the permits were issued before the decision.

Santiago, in response, said that the date when the receipts were issued was immaterial since the constitutionality of EO 156 banning the importation of used cars was sustained by the Supreme Court in its decision in the Southwing case in 2006.

“It is absurd for the Cagayan Economic Zone Authority to claim that it could still import used vehicles for permits prior to the decision of the Supreme Court last Jan. 7,” Santiago said.

“Ceza has no authority to process import permits whether issued prior to the decision of the court last Jan. 7 or thereafter, since the court already upheld the constitutionality of EO 156 as early as 2006,” she added.

Prime mover

Santiago said she would call for a Senate probe to include Senator Enrile’s role in the importation of used cars in Cagayan.

“Mr. Enrile was the prime mover behind the CSEZF. Several years ago, he even arrogantly claimed that President Arroyo’s ban on the importation of used vehicles was unconstitutional, and with constant hubris, he also sharply criticized the Supreme Court for upholding the ban,” Santiago said.

Culture of impunity

Santiago said Enrile’s actions concerning the Cagayan port “seeks to bolster the culture of impunity,” or exemption from punishment.

Malacañang is ascertaining whether Ceza officials could be held liable for allowing the entry of the 200 second-hand vehicles on Monday into the free-port zone.

In a phone interview, presidential spokesman Edwin Lacierda said the Department of Justice had taken notice of these smuggling allegations at Port Irene.

A government-owned and -controlled corporation, Ceza was created by virtue of Republic Act No. 7922, otherwise known as the “Cagayan Special Economic Zone Act of 1995,” during the Ramos administration.

Enrile relative

Ceza is headed by Jose Mari B. Ponce, a relative of the Senate President.

Ceza’s website said Ponce was a career executive service professional with more than 20 years “of solid experience in the government service with expertise in resource mobilization and negotiations for Official Development Assistance, project development and management, agribusiness, integrated area development and rural development.”

Ponce previously served as acting agrarian reform secretary during the Arroyo administration.

Lacierda did not talk much about the implications of Ceza’s defying a Jan. 7 Supreme Court order that affirmed the constitutionality of EO 156 banning the importation of used vehicles.

Lacierda, however, forwarded a text message from Justice Secretary Leila de Lima.

De Lima’s take

“The issue involved is a legal issue. From the limited facts as reported in PDI’s (Philippine Daily Inquirer) banner story (Thursday), the issue appears to be this—whether or not the imported vehicles whose papers have allegedly been completed prior to the SC decision are covered by such a decision,” De Lima said.

“But then again, we need to get more facts/information on this, including a study of the SC decision itself,” De Lima added in the text message.

Biazon said the car importation issue at the CSEZF was “complicated” but the BOC would be guided by the final Supreme Court ruling.

“We will uphold the recent Supreme Court ruling and enforce all the provisions of EO 156 regarding restrictions on the importation of used cars,” he said.

“I advise car buyers to be sure of the vehicles they are buying and to get them only from legitimate sources and dealers,” he added.

The LTO will wait for its own formal copy of the Supreme Court decision before it implements any policy changes, agency chief Virginia Torres said.

“We haven’t received any formal communications from the court. We are waiting for that,” Torres said in an interview on Thursday. “We cannot make an official memo yet. We want to know if there are any exemptions,” Torres said.

She said that once the agency received a copy of the decision, the LTO would refer the matter to the Department of Transportation and Communications.

“We will forward the decision to them and they will advise us on what to do,” she said.

Sam Miguel
02-15-2013, 08:02 AM
^^^ (Cont'd )

Jack: Follow SC ruling

Cagayan Rep. Juan “Jack” Ponce Enrile Jr., the son and namesake of the Senate President, said the Supreme Court order banning the importation of used cars in the country must be followed.

Those who have a problem with the Supreme Court ruling can contest it, but any such importation must stop in the meantime, said Enrile, a senatorial candidate of the United Nationalist Alliance.

“The Supreme Court has already issued an order, now it is up to the locators to find legal remedies. But since the order is already in effect, that must stop,” he told reporters in an ambush interview at the Tagbilaran airport, before his flight to Manila.

He said those found to be defying the order not to import used cars must be arrested.

Asked if he thought the importers were being bold because of possible protection from high officials, Enrile said he did not think that was the case.

If there were instances of importations in defiance of the ban, backed with documentary proof, such matters should be taken directly to the customs officials, to the mayor or to the governor, he said.

“If there is any documentation, I myself would have that stopped,” he said.

No defiance

A leader of the regional automotive industry and a lawyer for the car importation firm involved in the case said no defiance of the Supreme Court happened when more than 200 motor vehicles arrived early this week in Port Irene.

Jaime Vicente, president of Aric, said the shipment that came in was not imported by Forerunner Multi Resources Inc., the party to the case for which the high court lifted the TRO on EO 156.

Vicente, former president of Forerunner, said the cars were imported by another company, Fenix International, under the provisions of EO 418 that supposedly allowed the entry of second-hand motor vehicles.

“At no point in time did any company defy a Supreme Court ruling. When we were allowed to import, we imported. When we were disallowed, we stopped,” Vicente said in an interview in Makati City.

Marforth Fua, one of the legal counsels for Forerunner, added in the same interview that the Jan. 7 ruling of the Supreme Court had yet to decide on EO 156’s constitutionality.

“If you read the dispositive portion, it only rules on the issue of the injunction [on the EO] issued by the Court of Appeals. The main issue on the constitutionality is still with the RTC,” Fua said.—With a report from Paolo Montecillo

Sam Miguel
02-20-2013, 08:28 AM
Gov’t urged to improve energy regulatory framework

By Amy R. Remo

Philippine Daily Inquirer

11:57 pm | Tuesday, February 19th, 2013

British Ambassador Stephen Lillie is urging the Aquino administration to improve the regulatory framework for the local renewable energy industry as limitations in foreign ownership and the slow progress in implementing critical policies are “complicating investments.”

Lillie explained on the sidelines of the UK Renewable Energy Systems and Solutions forum Tuesday that there were a lot of opportunities in the renewable energy sector in the Philippines as the country’s growing electricity demand dictated the need to invest in all kinds of energy sources.

“Unfortunately, there are limitations in Philippine law that complicate investments here such as the 40-percent equity cap [on foreign ownership], which is unhelpful. And also, the very slow progress in the [implementation of the] feed-in-tariff (FIT) is impeding progress,” Lillie noted.

“The business sector has made many submissions to the government to make clear its view that [foreign ownership cap] is one of the regulations that needs to be tackled to create a better business environment in the Philippines,” he pointed out. “Fundamentally, the Philippine government needs to take some steps to improve the regulatory framework. But I think, if we can [address those issues], then there’s a lot of interest from British companies.”

Despite these limitations, however, Lillie affirmed that many British companies remained interested in contributing to the growth of the Philippine renewable energy sector through their expertise and technology.

Following the passage of the Renewable Energy Law in 2008, only the FIT mechanism has so far been firmed up with the issuance of the rates for each renewable energy source. But while the rates have been issued, other regulatory policies have yet to be settled, particularly those concerning the collection and administration of these fees.

Recently, the Department of Energy also announced that it was adopting a “first come, first served” policy in allocating the limited 760-megawatt installation target for renewable energy projects. This means that renewable energy developers must take the risk of building the power plant first before securing from the government an allocation from the installation target for their projects.

The first developers to build their facilities and pass the criteria upon checking by the DOE will be qualified under the installation target—which refers to the total capacity of renewable energy projects that will be allowed to be constructed within a three-year period. This also means that their projects will be eligible for the FIT rates, which assure developers of fixed cash flow over a 20-year period.

Sam Miguel
02-20-2013, 08:31 AM
Enrile flies to Cagayan; Biazon to check used-car import trade

By Melvin Gascon

Inquirer Northern Luzon

1:23 am | Wednesday, February 20th, 2013

STA. ANA, Cagayan—A day before Customs Commissioner Ruffy Biazon was scheduled to have a firsthand look at the used-car importation trade at the free port here, Senate President Juan Ponce Enrile on Tuesday visited the coastal town of Lal-lo to test its new runway.

This is going to be the runway of a new airport being built where Chinese tycoons reportedly will park their private planes instead of the crowded Hong Kong hangars.

The visit of Enrile, who sponsored the creation of the Cagayan Special Economic Zone and Freeport (CSEZFP) here, fueled speculation that his trip was in connection with the problem besetting the used-car importation industry at the free port.

A source, who asked not to be named for lack of authority to speak on the matter, said Enrile arrived with a small group from Metro Manila on an eight-seat plane at 11 a.m. They landed on the strip of the unfinished airport in Lal-lo town, about 40 km from here.

From the airstrip, Enrile’s convoy of at least seven vehicles motored to the senator’s private resort at Gotan beach in San Vicente village here.

Nilo Aldeguer, Cagayan Economic Zone Authority (Ceza) senior deputy administrator, however, dismissed speculations that Enrile’s sortie was in connection with the problem confronting the used-car trade here.

“Pahinga lang (Enrile is there only to take a rest),” Aldeguer said in a telephone interview.

Biazon order, visit

Enrile’s visit came a day before the scheduled arrival of Biazon at the CSEZFP on Wednesday, who is set to inspect the activities at the free port after issuing an order to the agency’s field office here to stop the processing of the latest shipment of more than 200 imported vehicles that arrived here on Feb. 11.

A second shipment of about 400 vehicles is set to arrive on Feb. 22 or 23, officials said.

Biazon issued the order after the Supreme Court, in a Jan. 7 ruling, upheld the validity of Executive Order No. 156, which imposed a ban on the importation of used cars, except for buses, trucks and multipurpose vehicles.

A group of used-car traders, the Automotive Rebuilders of Cagayan Inc. (Aric), has protested the ruling and insisted that its operations cannot be stopped because the verdict is not final and executory.

Aric president Jaime Vicente said he was not aware of Enrile’s visit. “I have no way of knowing because I am here in Manila right now,” he said.


Enrile said he stayed all day Tuesday in Lal-lo town where he and a representative of the Civil Aviation Authority of the Philippines inspected the runway under construction.

Enrile sent word to the Inquirer through Senate President Pro Tempore Jinggoy Estrada that Lal-lo was neither in Port Irene nor on the premises of Ceza.

Senate old-timers are aware that Enrile spends time in Cagayan when Congress is in recess.

Officials of Forerunner Multi Sources Inc., one of only two Ceza-licensed car importers, as well as owners and managers of car trading firms were not in their offices when the Inquirer visited the car lot in Casambalangan village here on Tuesday.

Prospective buyers

But it was business as usual for personnel, who were working on the imported units while prospective buyers roamed from one car lot to another to pick the best vehicles to buy.

A group of Australians who, sources said, were officials of a drilling company at a natural gas exploration project in Gattaran town, was seen checking on Mercedes SLKs and Hummers that were on display at the car lot occupied by New Apollo International Trading Inc.

In another lot, a family of five from Aparri town was looking around for a used van.

Hangars were occupied by busy workers performing repairs, conversion, cleaning and refurbishing of Japanese and Korean cars and vans.

Vicente said used-car importers were continuing their business operations because they believe that the Supreme Court decision was not yet final, and that it did not have any impact on the legality of their trade.

“We go on because we believe we do not have any reason to stop,” he said in a phone interview, noting that his group is considering seeking legal action against Biazon.

Guarded caution

But unlike in the past, those involved in the used-car trade here showed a sense of guarded caution, especially in dealing with strangers, mostly aware of the controversy that hounded the industry the past several days.

“It’s not safe talking these days. We can get fired,” said a worker when asked about the work he was performing on a Hyundai Starex van.

The mood here contradicted pronouncements of Ceza officials that their operations were transparent. They belied charges that they were allowing the smuggling of used cars following the Supreme Court ruling that upheld EO 156.

Sales slowed

Most of the workers declined to be interviewed, while others answered questions but did not reveal their identities.

“Sales have been quite slow since news broke out that some officials want this [used-car trade] stopped. But we’re still here. When they tell us to stop working, then we’ll go home,” said a mechanic.

At the gates, security guards said reporters were banned from the fenced yard. The taking of pictures was also prohibited.

Vicente said the workers feel agitated these days that their main source of livelihood was threatened.—With a report from Cathy C. Yamsuan

Sam Miguel
02-21-2013, 08:03 AM
Provisional clearance

Philippine Daily Inquirer

12:31 am | Thursday, February 21st, 2013

The mining project often described as the biggest foreign investment in the Philippines has been granted an environmental clearance certificate on the third attempt, prompting praise from the Chamber of Mines and provoking fury among environmental activists. The Department of Environment and Natural Resources carefully limited the grant by attaching “certain conditions,” but not even full compliance can guarantee that the controversy over the $5.9-billion open-pit copper-gold project in Southern Mindanao will be resolved to everyone’s satisfaction.

Last week’s accident in the Semirara coal mine on Semirara Island in Antique—another open-pit mine—has only heightened public apprehension about the true costs of mining. The tailings leak in Philex Mining’s Padcal facility last August has resulted in the payment of a whopping P1-billion fine, but it also ensured continuing coverage of the mining industry’s spotty safety record.

It is still possible to say that many Filipinos will consider an outright ban on mining counterproductive. Even though the younger generations have grown up much more conscious of environmental issues, the fate of the economy-vs-environment debate remains open-ended.

But the development of “one of the world’s largest undeveloped copper-gold deposits,” by the Swiss mining giant Xstrata and its Philippine affiliate Sagittarius Mining Inc. (SMI), will not provide a definitive answer. (The quote above is from the SMI website.) The issues surrounding the project are more complicated; they reach beyond purely economic or environmental questions. In other words, even if the project proves to be an unqualified success, it will not put paid to the controversy.

The SMI project is often referred to by the name of its main mining site, Tampakan, in South Cotabato, but in fact the project area straddles four towns in four provinces. Aside from Tampakan, the project covers Malungon, Sarangani; Columbio, Sultan Kudarat; and Kiblawan, Davao del Sur.

But it is South Cotabato where the main source of opposition is found. In 2010, the provincial board disallowed open-pit mining and just last month it issued a resolution reaffirming the ban. SMI’s first two applications for an ECC were rejected precisely because of the provincial ban; a recent Department of Justice opinion, however, emphasized that national laws take precedence over local regulations. The Mining Act of 1997 allows open-pit mining.

“The DOJ opinion was very clear to us. It was a major factor in our decision,” Environment Secretary Ramon Paje said the other day, in explaining the grant of the ECC. The DENR issued the ECC “subject to the implementation of certain conditions,” and Paje offered a summary of the conditions: “SMI should make public the feasibility of the project, ensure that the area does not cover those where mining is prohibited and ensure social acceptability through consultations with stakeholders.”

The last condition, about social acceptability, is the toughest to meet, partly because of the following factors:

Political. The South Cotabato governor who put the law into effect, Rep. Daisy Avance Fuentes, is running for the governor’s post again. The incumbent, Gov. Arthur Pingoy, is running for reelection. Both are on the record as supporting the ban; in recent weeks, however, Pingoy has come under fire from environmental activists in his province, including Marbel Bishop Dinualdo Gutierrez, for entertaining the possibility of hiring German consultants to review the project’s impact.

Tribal. Some influential leaders of the B’laan tribe have opposed the SMI project since it started, essentially for desecrating areas the tribe considers sacred. Last October, a tribal leader’s wife and two of her children were killed when an Army unit raided the leader’s home; he, together with other relatives, are being pursued by the military for their role in the deaths of several SMI consultants and staff members.

Local. Some of SMI’s P10-billion initial investment has gone into “community development programs,” making an undeniable improvement in residents’ lives. As Mindanao journalist Edwin Espejo has noted, this kind of impact has led fierce political rivals in Tampakan to set aside differences and support SMI.

Legal. Pingoy and some provincial board members have said they will follow any Supreme Court ruling on the constitutionality of the open-pit mine, but not a single party in the controversy has bothered to file a case.

Like we said: complicated.

Sam Miguel
02-25-2013, 09:14 AM
Biz Buzz: Energy shakeout

By the staff

Philippine Daily Inquirer

2:52 am | Monday, February 25th, 2013

An organizational restructuring at the Department of Energy is apparently leaving some employees “demoralized to the point of wanting to resign.”

The latest movement was the appointment of a lawyer Rino E. Abad as director of Energy Resources Development Bureau (EDRB)—a move that, some disgruntled employees claimed, had sidelined longtime employees like ERDB assistant director Ismael Ocampo. What made matters worse was the Feb. 20 memorandum issued by Energy Secretary Carlos Jericho Petilla stating that Ocampo would be the new “In-Charge of Office” (ICO) for the ERDB, and named an alternate, Nenito Jariel Jr. The ICO title, it was alleged, refers to one in charge of mainly administrative work of signing attendance slips and leave forms.

Ocampo, a geologist who has worked with the DOE since 1979, confirmed by phone such realignment and the nature of his new work as ICO, further admitting to being demoralized. “Kami ang magtratrabaho. Sila ang tatanggap ng allowances (We are the ones working, but others will receive the allowances),” he said.

One informed observer noted that the appointment of Abad was made by the new DOE management without any consultation with the ERDB personnel, thus not taking into consideration the technical demands of the position. “The ERDB deals with upstream coal, oil, and gas operations, which can only be led by a person who has technical background and who has earned years of expertise in energy exploration, development and production,” the observer said.

The Inquirer sought to get Petilla’s side on the matter but repeated calls and texts were unanswered.

Another DOE employee said: “It would have been OK if [Abad was appointed] to a lower position, but they’re putting people in very sensitive positions—people who do not have a background at all in energy.”—Amy R. Remo

Finance superstars

After a jampacked investment forum featuring “playboy” economist Nouriel Roubini late last month, the Metrobank group’s investment banking unit First Metro Investment Corp. has grand plans for its next forum. FMIC aspires to pluck three “rock stars” out of the global financial world to bring to town sometime in the foreseeable future.

These rock stars include American investment gurus Warren Buffet and George Soros. Buffet, the idol of many fund managers, is deemed as the most successful investor of the 20th century while Soros is a hedge fund billionaire (some say currency speculator) a.k.a. “the man who broke the Bank of England” who bagged a $1-billion windfall from the UK currency crisis of 1992.

The third keynote speaker that FMIC aspires to bring to town—which is increasingly becoming a favored playground for portfolio managers—is no less than US Federal Reserve Chair Ben Bernanke. But Bernanke may only be able to fly if his term—which ends in January 2014—will not be extended. There are reports in the United States that Bernanke will not accept a third term despite Obama’s reelection. If so, his schedule may just open up for a trip to the Far East and speak before a discerning Filipino audience.

You can guess that any of these three rock stars may command a much higher price per head to listen to over lunch than most other foreign speakers who have recently set foot on Philippine soil.—Doris C. Dumlao

Free rare earth elements

It may be entangled in a legal dispute with businessman Roberto Ongpin, but Norwegian-based Intex Resources ASA is trying to take the initiative by winning plus points with the public.

The company, which operates Mindoro Nickel Mining, says that it can produce much-coveted rare earth elements (REEs) for the country for—get this—free.

The announcement came on the heels of reports that the Philippines was dead-set on exploring REEs to take advantage of China’s move to cut REE production for the global market. REEs are a group of elements used in a wide range of everyday products including hard drives, Ipods, wind turbines, hybrid cars, fiber optics and energy-efficient fluorescent bulbs, among others. Their properties, notably as lightweight magnets, make them key to the miniaturization of electronics and the growth of green technologies.

Last year, the country’s plan to produce REEs was stalled after Beijing reneged on earlier commitments to help Manila despite several “reminders” by the Mines and Geosciences Bureau (MGB). This followed a dispute between Manila and Beijing over the Panatag Shoal in the West Philippine Sea.

The Philippines is conducting its own exploration surveys in Nueva Vizcaya and Palawan, where rare earth deposits were found to be close to copper-gold mines. The MGB said the Aquino government has earmarked P20 million for the development of REEs.

Intex chief Jon Steen Petersen says that REEs like the element scandium can be produced by Mindoro Nickel without additional mining costs, as a byproduct that can provide 100 tons of scandium a year and similar amounts of other REEs. This may open up new opportunities as the supply of scandium today is constrained by its prohibitive price of $150 a gram.

As the mining and transport costs are already paid by other metals, scandium and REEs come as a bonus, in addition to the fertilizer and other premiums that Mindoro Nickel already is offering.

This makes economic sense and can also put the Philippines on the map as a major producer of scandium and REEs. Interesting proposition. Now, will the government take the offer? That’s the million-dollar question.—Daxim L. Lucas


A high-profile CEO is receiving flak for recent public remarks described by many who heard it as “uncouth,” “tactless,” and undeserving of his rank as an official from one of the country’s top conglomerates.

Taking the stage in a high-end club in Taguig during a product launch, this CEO took a potshot at his competitor in a way that raised more than just a few eyebrows.

“I don’t know a lot of good-looking people that are their customers,” the CEO said, implying that most of his rival’s patrons were ugly. The CEO, of course, has had a reputation for “shooting from the hip,” so to speak.

In all fairness, the CEO probably felt that he was among good friends, and for the most part, he was. His media handlers were also strangely absent. It also probably didn’t help that the open bar at the event’s VIP section was stocked with bottles of Johnnie Walker Blue Label.

Commenting on the CEO’s remark, one blogger said “this gives me the impression that the company is desperately struggling against their competitors. When I heard it, my jaw dropped.”—Paolo Montecillo

Sam Miguel
02-26-2013, 08:33 AM
Beating the power rates

Philippine Daily Inquirer

11:33 pm | Monday, February 25th, 2013

Obviously, because the power sector is very complex for the ordinary consumer to understand, every increase in electricity rates is met with criticism. The cost should simply be generation expense plus transmission cost plus distribution charge, but there are various taxes imposed by the government on electricity. To complicate matters, there are the so-called universal charge for stranded contract cost (UC-SCC), universal charge for stranded debts (UC-SD) and, in the near future, the feed-in tariff (FIT) rates designed to help developers of renewable energy.

Thus it was a great relief for consumers when the Energy Regulatory Commission (ERC) rejected the petition of the state-run Power Sector Assets and Liabilities Management Corp. (PSALM) to collect another P65 billion worth of so-called stranded debts. Earlier in the week, though, the ERC had ruled that PSALM could collect P53.58 billion of UC-SCC, which is a new component in electricity bills, from all consumers.

Metro Manila residents already bear the highest electricity rates in Asia, according to a 2011 survey of the region by the Japan External Trade Organization, the second survey by an international agency showing the Philippines as having the most expensive electricity in Asia. In 2010, Australian consulting firm International Energy Consultants found that Manila’s residential rates had surpassed those of Tokyo’s. Of the total retail electricity price, Manila Electric Co.’s distribution charges account for 16 percent; generation charges, 65 percent; transmission cost, 9 percent; and the balance of 10 percent, VAT and other taxes.

Not a few businessmen have complained that the high cost of electricity in the country could be one of the major reasons foreign investments have been avoiding the Philippines. In a summit in 2006 to identify factors why the Philippines was not very competitive in attracting investors, the high cost of electricity was cited as one of the biggest hurdles. It was pointed out that while some progress on issues like professionalizing public offices, improving access of SMEs (small and medium enterprises) to finance, improving quality of human resources and ease of doing business has been achieved during the last five years, there has been no improvement in making the cost of electricity competitive.

At that time, the Management Association of the Philippines and other business groups, through the National Competitiveness Council (NCC) then headed by former Trade Secretary Cesar Bautista, suggested that the cost of power could be reduced by addressing four low-hanging fruits.

First was for open access to be started immediately to achieve a free-market competition environment that will encourage new private companies to participate in generation. (This, to this day, remains delayed.) Second, for the restructuring of the electric cooperatives to achieve good governance and more economic aggregation. (This part of the power industry remains problematic.) Third, for the high cost of fuels not to be further burdened with additional levies, taxes or royalties. (The scrapping of any tax though is hard to implement because of the current state of government finances.)

However, the country can focus straight away on the fourth proposal: a national energy conservation movement to be imposed by the government with the private sector as partner, and with clear metrics (for example, 10-percent savings in 18 months) and a clear system of “incentives” for those who save and “penalties” for those who do not. NCC noted that this was institutionalized by Energy Secretary Geronimo Z. Velasco during the Marcos years. It said Japan employed such a program during the Fukushima nuclear accident, achieving 19-percent savings quickly. The objective was to maximize the use of existing facilities by reducing wasteful consumption. This is the low-hanging fruit that the Aquino administration can address today to ease the burden caused by high electricity prices.

In the meantime, consumers can do a lot of other things to lower their electric bills. They can replace lighting with energy-saving bulbs that consume less energy and last much longer, retire inefficient and old appliances such as air-conditioning units and refrigerators, put skylights in their houses where possible, unplug electric items that are not being used, including laptop and mobile phone chargers.

Reducing wasteful consumption of electricity should begin at home.

Sam Miguel
02-26-2013, 08:41 AM

By Cielito F. Habito

Philippine Daily Inquirer

11:30 pm | Monday, February 25th, 2013

We have come a long way, no doubt, with President Aquino’s “daang matuwid” and “no wang-wang” policy and all they symbolize. But the pursuit of good governance is far from complete. So far, the focus has dominantly been on people in public service, especially those in positions of authority where having the wrong people can do the most damage. Even then, numerous people with questionable motivations remain in positions of power—some entrenched due to political entitlement in our deeply flawed political system, others by virtue of proximity to the powers that be. Cleaning up the bureaucracy to a satisfactory and irreversible level will take much more time than a presidential term of office allows. Indeed, many of us dread the very real prospect of backsliding on our governance improvements, with the possible election in 2016 of a president who may throw us back to the old ways that had perennially held us back as a nation.

This is all the more reason why fixing government and fixing our governance must now go beyond people but also address the nature of governance institutions themselves, particularly their mandates and functions. We need our institutions to have mandates, functions and processes that minimize, if not eliminate, opportunities for graft and corruption, and that are conducive to achieving maximum effectiveness. A basic flaw I have seen is our propensity to have the roles of planning, development, operations and regulation all combined in the same government entity. The regulatory role in particular tends to be incompatible with the rest, and the combination begets an institution that is conflicted and consequently ineffective. A government agency with developmental and operational roles cannot be expected to exercise effective regulation as well, as the aims of these respective functions tend to run counter to one another. As a general rule, then, regulatory bodies must be independent not only of private entities they must regulate, but of government entities involved in the regulated activity as well.

In the case of the Local Water and Utilities Administration (LWUA), the conflict of functions has become all too real, further complicated by the additional and prominent role it has as financier to local water districts. The conflict has impinged on the development of water and sanitation services at the local levels, a very basic need of communities that forms part of the United Nations’ Millennium Development Goals. Created by Presidential Decree No. 198 in 1973, LWUA was mandated to be a specialized lending institution to promote development of local water districts (WDs) around the country. It was also tasked to prescribe minimum standards and regulations on water supply materials and construction, maintenance, operation, personnel training and fiscal practices for local water utilities, and to provide institutional and technical assistance.

Subsequent executive orders enhanced or modified LWUA’s functions and operational guidelines. Among others, Executive Order No. 123 (in 2002) transferred the agency’s authority to regulate the WDs’ water and sewerage tariffs to the National Water Resources Board (NWRB), an interagency body chaired by the Department of Environment and Natural Resources. While a conceptually sound move, I’m told that it has remained inoperative due to NWRB’s resource constraints, and LWUA has maintained a de facto economic regulatory role over WDs. Hence, the conflict between its developmental and regulatory roles appears to persist.

In another reform, EO 279 (2004) redirected LWUA’s financing policies for the water and sewerage sector, and rationalized its organizational structure and operations. In particular, it confined LWUA’s lending to weaker (and less credit-worthy) WDs, allowing the more capable ones to borrow funds from government and private banks. Conceptually, this would facilitate integration of the WDs in the financial market, and effectively expand the financial resource base for developing water supply facilities nationwide. All this should help accelerate expansion and improvement of water services around the country, which is basic to LWUA’s institutional mission.

Well, not quite. For a WD to borrow funds elsewhere, it needs a waiver from LWUA that would put its loans from other sources on equal footing with its outstanding LWUA loans. But LWUA, giving precedence to its own financial standing, makes it extremely difficult even for the most credit-worthy WDs to obtain such waiver, contravening a key aim of EO 279. And its previous leaders flatly refused to grant such waivers in 2009-2011. Thus, even as a Philippine Water Revolving Fund was created to combine resources from private banks with funds from donor agencies like USAID and Jica, WDs find difficulty accessing it. LWUA is hard-pressed balancing its financial, developmental and regulatory roles. Meanwhile, the development of the water supply and sanitation sector especially in our poorest areas is held hostage, impeded by this institutional flaw.

LWUA’s example is not at all unique. The Philippine Ports Authority, Civil Aviation Authority of the Philippines, various bureaus under the Department of Agriculture and others are in similar conflicted situations owing to combined developmental, operational and regulatory roles. The resulting identity crisis provides fertile ground for inefficiency and corruption, begging for a revisit of institutional mandates. In his final three years, P-Noy would do well to train his guns on this needed next phase of governance reform, as it well complements the first phase. And we all know even that is far from completed.

* * *

Sam Miguel
02-26-2013, 08:42 AM
Bidding for $2.1B BatMan 1 project delayed anew

By Amy R. Remo

Philippine Daily Inquirer

2:58 am | Monday, February 25th, 2013

The bidding for the first phase of the $2.1-billion Batangas-Manila (BatMan 1) natural gas pipeline project may be delayed anew as the state-run Philippine National Oil Co. (PNOC) has yet to conduct a study to determine the most feasible mode for the project.

According to Zenaida Y. Monsada, director of the Oil Industry Management Bureau at the Department of Energy, PNOC is now preparing for a feasibility study that will look into the merits of various options being considered by the government.

One option is to bid out the BatMan 1 project, a critical infrastructure that can boost the Philippines’ natural gas industry, under a public-private partnership (PPP).

Another mode being considered, according to Monsada, is through an official development assistance (ODA), which is defined as a “loan or a grant administered with the objective of promoting sustainable social and economic development and welfare of the Philippines.”

Under the law, ODA resources must be contracted with governments of foreign countries with whom the Philippines has diplomatic, trade relations or bilateral agreements, or which are members of the United Nations, their agencies and international or multilateral lending institutions.

“There are prospective volunteers who can conduct the feasibility study and we’re studying [their proposals],” Monsada told the Inquirer.

“Their offers differ in terms of the timetables as to how long the study will be conducted and the scope of the study. There are groups that have offered to conduct the feasibility study for free but we have to look into their proposals first.”

Once the study is completed, PNOC may already be able to proceed with the bidding for the first phase of the BatMan 1 project, which will involve the construction of the 100-kilometer pipeline.

PNOC has yet to announce whether it will still create a separate subsidiary to be called PNOC Pipeline Corp. (PNOC PC) to handle the operations of the natural gas pipeline.

Based on previous plans, the PNOC PC is expected to bid out the engineering, procurement and construction contract, as well as the technical and maintenance agreement this year. It will take about three years to finish the pipeline.

The second and third phases of the Batman 1 project will involve the construction of the receiving terminal and power plant, respectively.

The Philippine government is bent on pursuing the use of alternative fuels, such as natural gas, given the current global oil price volatility, to which the Philippines is highly vulnerable.

The country sources more than 90 percent of its fuel requirements abroad.

Natural gas has been deemed to be among the more feasible alternatives that will allow the Philippines to diversify its energy and transport fuel sources.

Sam Miguel
03-01-2013, 08:26 AM
Nido Petroleum to invest in 4 exploration wells off Palawan

By Amy R. Remo

Philippine Daily Inquirer

9:32 pm | Thursday, February 28th, 2013

Australian firm Nido Petroleum Ltd. is expected to invest $75.5 million—roughly P3 billion at the prevailing exchange rate—for its share in the planned drilling of exploration wells within four oil and gas service contracts off northwest Palawan.

In a report, global investment bank Canaccord Genuity disclosed that Nido Petroleum’s “net share” in terms of prospective resources in these four wells alone would reach 995 million barrels of oil and approximately 1 trillion cubic feet of gas.

“Nido has a strong portfolio of development options going forward. In the success case, Nido will hit production of 1.5 million barrels per year in 2014 (equivalent to 4,040 barrels per day),” noted the Canaccord Genuity report.

Nido and its partners are expected to drill within the Apribada prospect, which is covered by Service Contract 63; Lawaan prospect, within SC 54A; Pawikan prospect, SC 54B; and the Balyena prospect within the SC 58 block.

The planned investment for these four wells is on top of Nido’s expected investment in the Galoc oil field off Palawan, where partners are embarking on the Galoc Phase II development plan. Under this plan, partners are looking to drill two wells to extend the life of the field and increase daily production up to 12,000 barrels of oil per day.

A third well may likewise be drilled by Nido and its partners in Galoc, within the so-called Galoc northern exploration prospect. A decision is expected by end-March.

“The Galoc northern exploration prospect is an exciting opportunity that has the potential to double Galoc field reserves. It provides significant upside to Nido beyond the Galoc Phase II development. With the operator, Otto Energy Ltd., currently completing subsurface work with volumetrics and risking, we anticipate a drilling decision by end of the first quarter 2013,” the report further stated.

Nido Petroleum and its partners are also looking to redevelop the West Linapacan site, covered by SC 14C2.

“The company has strong production from its existing Philippine operations, Galoc Phase I and we see significant short-term production growth from the Galoc Phase II expansion and West Linapacan. Nido also has a large inventory of exploration assets and we see the company’s high working interests and independently certified estimates as attractive to potential farm-in parties,” the report stated.

Sam Miguel
03-01-2013, 09:37 AM
We’re moving but it’s not arangkada


By Boo Chanco

(The Philippine Star) | Updated March 1, 2013 - 12:00am

“Unfortunately, it’s really difficult to get the bureaucracy to work on all of these details, as anybody who has tried to lead a change initiative can tell you. It’s really like pushing on a string. You can really just try your best and hope to get as much in as you can.”

That was the reaction of a former senior official to posts on an e-mail group about how slowly government is moving on reforms. I know this official to be well meaning and he tried to do his share towards accelerating our nation’s development. I can understand his frustration and plea for understanding from his private sector peers.

It is indeed difficult but it doesn’t mean we should give up trying. Many of us have been encouraged by recent gains in good governance from a determined P-Noy. We are happy to note international recognition of these efforts even as we worry that P-Noy and his economic managers are tempted to rest on early laurels. If so, we can realistically assume this is the best it is going to be… an aborted take off again.

But John Forbes and the guys at the Joint Foreign Chambers behind Arangkada don’t give up easily. The faith of these foreigners in our country’s ability to become a tiger economy often amazes me. They produced a roadmap for development they called Arangkada, which details what could be done to maximize the contributions of various sectors of the economy to a growth offensive.

Last Tuesday, the Arangkada guys convened at the Makati Shangri-la to assess progress so far. The assessment folder which is very detailed contained a mixed bag of good news, bad news and “same old” news. Overall, we have moved but it is still at a pace far from what could be called arangkada.

Even the normally diplomatic Arangkada guys had to be honest about it. The theme for their assessment this year is “Growing Too Slow”. The theme of last year was “Moving Twice as Fast.” Disappointment is obviously starting to set in, as Paco Sandejas warned two weeks ago during the Roubini presentation.

“The biggest challenge facing the Philippines is to move the economy to a higher level of growth and job creation,” the first sentence of this year’s report declares. It sure is.

In his speech at the Arangkada conference, former Finance Secretary Bobby de Ocampo emphasized that the three most important priorities to enable sustainable and inclusive growth to take place namely, job creation, job creation, and job creation.”

Bobby emphasized that “the financial economy by itself despite the stellar performance of the stock market and the prospect of an investment grade credit rating cannot pull that off.”

The Arangkada report then talks of “high population growth and boom and bust cycles shaped by intermittent political turmoil and costly lapses in economic management.” That’s why, the report suggests, why we have lagged our peers in the high performing ASEAN-6 group for the past five decades.

But the Arangkada report also noted that things are changing for the better. Last year, we became “the fastest growing economy of ASEAN-6 economies, just ahead of Indonesia.

It is an extensive report and I only intend to take up some points in the first chapter due to limited space. This should give us an idea of where we are.

Recommendation 1 – Double the GDP growth rate to nine percent supported by a clear long-term industry policy. In 2011, this was rated a regression. But in 2012, it rated substantial progress.

Arangkada noted that the 6.6-percent growth last year surpassed expectations. “Growth in 2012 came in spite of global economic weakness and was the highest of the large ASEAN economies. The Philippine Development Plan continues to target seven percent to eight percent growth in order for it to be inclusive.”

But it noted that “increasing infrastructure spending must be sustained to encourage high gross capital formation, including FDI, which remains anemic for an economy the size of the Philippines.”

Arangkada recognized efforts of DTI to prioritize manufacturing by encouraging industry groups to prepare roadmaps set to be completed this year.

Recommendation 2 – Job creation by the private sector should receive extremely high priority. This didn’t move, Arangkada reports.

Arangkada noted that “while more jobs are a priority, they are not being created fast enough to reduce the seven percent unemployment rate in the 40 million work force, the world’s 16th largest…

“Success at accelerating manufacturing and tourism sector growth and reforming the long underperforming agribusiness sector could provide millions of new jobs. Construction and consumption from remittances comprise a sizeable part of the economy, but jobs in these sectors are low-paying and often temporary. Underemployment remains very high at over 18 percent.”

Recommendation 3 – FDI should be targeted to reach over $7 billion a year in three to four years. It noted that nothing is ongoing in this area for the past two years.

Indeed, I have heard a BOI official rationalize why we lag in FDI compared to our neighbors. Foreign investors like P&G, Nestlé, Unilever have been here for decades, I was told, unlike in places like Vietnam and Indonesia where they have to put up basic facilities. Of course they are ignoring the fact that Colgate moved its toothpaste manufacturing to Thailand and P&G is doing that in Indonesia.

Arangkada observed that net FDI remained below $2 billion last year, significantly lower than the investment inflows to our ASEAN peers. It also noted the $4-billion net foreign portfolio investment that flowed into the stock market last year.

Recommendation 4 – Export target of $100 billion in five to six years.

“The export target for the private sector of $100 billion represents a doubling from 2010. Based on BSP’s data, exports of goods and services from January to September 2012 increased by 9.5 percent in 2012 to $52.7 billion (estimated to $67.8 billion for full year) versus the $48.1 billion in the same period in 2011 and $48.4 billion in 2010.”

Recommendation 5 – Adequate funds should be made available for international promotion. Arangkada noted that this is ongoing, an improvement over 2011. Still Arangkada complains that “aggressive overseas promotion remains weak… The Department of Tourism launched its “More Fun in the Philippines” campaign but its National Tourism Development Plan has not been released over 12 months after final draft…”

Recommendation 6 – Remittances channeled into productive investments. Nothing moved for this suggestion.

Arangkada observes that “at $22 billion in 2012, remittances are mostly spent on paying debt and basic consumption needs of families… Only 6.8 percent are spent on investments, according to the Commission on Overseas Filipinos.

“Financial education for OFWs and their families is needed. The Personal Equity Retirement Account law (RA 9505) that creates new savings vehicle for OFWs has yet to be implemented four years after its signing. The introduction of Exchange-Traded Funds in PSE in 2013 could be helpful.”

Recommendation 7 – Double funds for growth-promoting expenditures through less waste in government spending, more effective tax collection, and selectively increasing taxes.

Arangkada recognized growth in revenue collection through administrative reforms in the BIR but “the Bureau of Customs still underperforms and is challenged by corruption.”

Arangkada noted improvements in procurement procedures and increased transparency have reduced corruption.

Recommendation 8 – Organize a Special Experts Group to recommend key reforms to make the economy grow at least nine percent.

“No Special Experts Group advises the president or his Cabinet,” Arangkada observed. It noted the work being done by the National Competitiveness Council where public and private experts interact but few reform proposals from the NCC to the Economic Cluster are being made.

Actually, if the Economic Cluster just used the Arangkada outline to guide its reform agenda, they should do just fine.

I get the impression that the private sector is trying is best to be patient about the reforms being demanded by our current situation. But patience may just run out soon and if it does, our economic growth will slow down as well.

Even those gung-ho folks in Arangkada may lose hope and start looking elsewhere for investment. Manny Pangilinan has said as much as his companies, including Meralco, are now looking to invest abroad.

The local business community cannot be blamed if they do go abroad to invest their capital simply because the local environment is still less than hospitable. As I have said here in this space, capital has no sense of nationalism… just an affinity for the highest return on investment.

It’s the season

Fair warning during this campaign season!

It’s useless to hold a person to anything he says while he’s in love, drunk, or running for office.

03-06-2013, 08:21 AM
The Lopez Family’s environment war

Wednesday, 06 March 2013 00:00


‘Gina, the pseudo eco-warrior, and her bunch of noisy allies are now meek as lambs.’

SAGITTARIUS Mines Inc. (SMI) waited three years for an Environmental Clearance Certificate (ECC) before it could start its $5.9 billion copper-gold mine project in Tampakan. This, despite the fact that SMI was the country’s single largest foreign direct investment ever. SMI is already two years behind schedule, and still no one knows when it can expect to start operations in Tampakan, a small, impoverished town in South Cotabato.

When a portion of a mining pit in Semirara Island collapsed and left five workers dead and five others missing last February, the President told the Department of Energy (DOE) to suspend the operations of Semirara Coal and Mining Co.

When a typhoon-induced accident led to a non-toxic leak in one of the tailings ponds of the Padcal mine in Benguet last August, DENR Secretary Ramon Paje ordered its closure and directed the operator, Philex Mining, to pay over P1 billion in fines. The Pollution Adjudication Board (PAB) also dunned Philex another P92.8 million in fines for violations of the Clean Water Act for a non-toxic leak!

Clearly, this government is not large-scale mining’s best friend!


So, why is government being soft on the Energy Development Corp (EDC)? A landslide last week in its geothermal power facility in Leyte left at least five of 45 workers dead and nine others missing.

A statement issued by EDC, a corporation of the Lopez family, says that a landslide occurred in its Upper Mahiao geothermal project in Barangay Lim-ao, Kananga, Leyte where its contractor, First Balfour Inc., was doing civil works.

First Balfour is also a Lopez-controlled firm. The dead and injured were employees of First Balfour’s subcontractor.

The Upper Mahiao plant is one of four production wells belonging to EDC’s Leyte Geothermal Production Fields, considered to be the biggest wet steam field in the world with a geothermal reservation spanning 107,625 hectares. EDC’s three other wells are Tongonan 1, Malitbog and Mahanagdong.

Acting Leyte Gov. Mimiette Bagulaya, albeit indirectly, implies that force majeure could not have been the cause of the EDC landslide.

She says that the province will investigate to find the real cause of the landslide. She says that the area is not landslide-prone and points out that “this is the first time” for the area.


If Government, as it should, cracks down hard on EDC, civil society groups should also join in with their fiery rhetoric usually reserved for companies they demonize as scourges of the environment.

The incidents in Padcal and Semirara brought out “pro-environment” groups denouncing these accidents as the latest evidence of Big Mining’s being a bane to the environment. Even when the DENR finally issued an ECC to SMI, they still accuse SMI not only of destroying the environment but also of dislocating indigenous communities and sponsoring military atrocities in the area.


Using outdated or skewed data and misleading information, left-leaning activists, with lots of support from civil society groups led by self-styled “eco-warriors,” go against the mining sector as its favored bete noir.

Human rights violations and military bashing being no longer in vogue, militants need whipping boys to bash during their street protests to justify the continued flow of foreign funds to their so-called “foundations” and “civic organizations.”

But intriguingly, these armies of activists and eco-warriors are now silent on the Kananga landslide when they should be marching on the streets denouncing the EDC.

Five people died and nine other workers are still missing. Why don’t we hear one peep from this army of “eco-warriors?” Could it be because among these “eco-warriors” is Gina Lopez of the powerful Lopez clan, which owns the EDC?


If Gina, the pseudo eco-warrior, and her bunch of noisy allies are now meek as lambs, can we, at least, expect something from the Senate, considering that Sen. Sergio Osmeña III had earlier called for an exhaustive probe of the mine tailings spill in Padcal? Right?

Wrong? The Senator is married to a Lopez–Isabel “Bettina” Mejia Lopez. So, maybe not!

Even in the Lopez-controlled ABS-CBN network, the EDC landslide has not merited the reportage the network gave other similar disasters with human casualties. On its website, ABS-CBN posted just one story per day on the EDC landslide compared to as many as two to three stories daily on the Semirara incident immediately after the landslide in Antique.


The government should not hesitate to impose a heavy fine on EDC, as it did with Philex.

EDC can well afford a hefty fine. After all, its revenues continue to grow at a steady pace, despite the Kananga incident and the temporary closure of its 150-megawatt Bacon-Manito plant in Bicol. “We know there will be steady growth until 2017,” EDC finance officer Nestor Vasay proudly proclaimed last weekend as he projected EDC’s gross revenues to soar to an aggregate of P30 billion this year from P26 billion in 2012.


Government regulators ought to watch EDC like a hawk on this matter in view of the Lopezes’ dismal record in ecological protection despite Gina Lopez’s image as a poster girl for the environment..

Consider the following examples:

1. The Northern Negros Geothermal Power Plant (NNGPP) in Mt. Kanlaon, another firm managed by EDC cut down thousands of trees and dislocated wild flora and fauna in the area.

The Save Mt Kanlaon Movement has asked the President to order the closure of NNGPP!

2. Then, there is the continuing nightmare of occupants of the West Tower Condominium in Bangkal, Makati City due to a blunder of yet another Lopez-owned company–the First Philippine Industrial Corp. (FPIC).

FPIC says that the fuel leak in its pipeline buried under the condominium is now down to “contaminant plumes”, even as the building’s residents claim otherwise.

FPIC’s claims are prominently reported by ABS-CBN and FPIC has made it appear that there is now nothing to worry about.

An expert, Dr. Carlo Arcilla of the UP Diliman National Institute of Geological Sciences (UPNIGS) says otherwise. While the FPIC commissioned a third party to clean up the contaminated water underground, 25-30 percent of the leaked fuel remains as a gas cloud of contaminants that cannot be easily removed. (Makati City sought the help of UP-NIGS as consultants in handling this environmental disaster). Dr. Arcilla describes the residents’ situation as a case of “what-you-cannot-see-could-really-hurt-you.”

Even as the leak occurred three years ago, the leak continues to pose a threat to the health and safety of the unit owners in West Tower Condominium and other residents of Bangkal. This even becomes a bigger threat in the future because the “principal causing force” in this disaster is still present even if remediation and cleanup are ongoing.

3. Brooke’s Point in Palawan is yet another example of the Lopez double standard.

Gina Lopez has been ranting about protecting our environment from mining firms, yet her own ABS-CBN Foundation Bantay Kalikasan has been accused of illegally occupying an area considered as sacred tribal ground in Brooke’s Point. Gina’s resort in Sabsaban Falls has cut down trees to build cottages without the consent of the indigenous peoples in the area.

At least four lodging structures have been put up in Gina Lopez’s resort, which she calls a Glamping (glamour camping) project. The ABS-CBN Foundation, of which Lopez is managing director, has reportedly been charging P25,000 for a day’s stay in the resort, on top of collecting fees for crossing a bridge that tribal groups built long before Gina and the Lopez foundation invaded Brooke’s Point.

Gina claims to have secured the appropriate local government permits to desecrate Brooke’s Point and turn it into a socialite’s idea of a camping site.

The Palawan Council for Sustainable Development (PCSD) disagrees and wants Gina’s resort padlocked because of the absence of a permit from the Council. Republic Act 7611 which created the PCSD, mandates that a Strategic Environment Plan (SEP) clearance from the PCSD is required for any private or government project in Palawan’s forest areas.

The DENR has ordered a probe into the reported tree cutting and takeover of ancestral lands in Brooke’s Point without the approval of the National Commission on Indigenous Peoples (NCIP), but that’s the extent of the national government’s action in protecting the environment against the likes of Gina and the family Lopez’s environmental misdeeds.

03-06-2013, 08:51 AM
What BIR’s new guidelines mean for us


By Tony Katigbak

(The Philippine Star) | Updated March 6, 2013 - 12:00am

To say that the tax system in our country is flawed is putting it mildly. For as long as I can remember, my entire life probably, our tax collectors were corrupt in some way or at some stage of the collection, and taxpayers in turn cheated them for fear their hard earned money would end up lining someone’s pocket, as opposed to going to the government for proper use and funneling back into society for the gain of the multitudes.

This has been pretty much the way tax collections have remained in the past years and it just seems that there can never truly be a beneficial compromise between tax collectors and taxpayers. This is because there is no trust. We don’t trust tax collectors are charging us properly and they don’t trust that we are declaring our true income. What that means is an equally flawed system of doubt and suspicion, one that is challenging, if not seemingly impossible, to change.

Which brings me to yet another new system the Bureau of Internal Revenue (BIR) has decided to implement to help them meet their boosted amount of income tax collections of P258 billion this year. They are setting down new guidelines which they claim will help stop tax cheats from underdeclaration of their income.

Through these new guidelines, deposits and advances made by professional partnerships such as accountants, consultancy firms, law firms, and other taxpayers will now be recorded and taxed. According to Finance Secretary Cesar Purisima, this will put an end to taxpayers’ practice of using out-of-pocket expenses to avoid paying taxes.

This means that whenever a general partnership or taxpayer receives a deposit or advance from a client, the taxpayer is required to issue an official receipt for such payment. This will be seen as income and subject to value-added tax or percentage tax. The client who gave the deposit can also deduct the same as an expense.

To me, this is just another plan to collect more money from marginalized citizens. These are the ones that will feel the backlash of this new additional bureaucratic step. The major money players and corporations who are financially “protected” from higher taxation whether through legitimate or not-so-legitimate means won’t even feel the changes, whereas the small to medium enterprises who are working hard to make ends meet and earn from their businesses will definitely be burdened by the new systems.

It honestly troubles me greatly when I think about how the government is always looking for ways to generate more money from the citizens (and again, usually the marginalized ones at that). They claim they need these funds (through taxes and other forms of collection) to help build roads and other government infrastructures and help and benefit the country. But I honestly don’t see it. With such high goals for taxation, where does the money really go? Does it go to the government coffers or the pockets of officials? It has become increasingly difficult for citizens to gladly pay their taxes when they can’t see the effects of their hard-earned money in the country.

And if money is truly needed for the benefit of many, then why not use the excess money that senators distribute among themselves at the end of the year and funnel it back into the country? After all, they are there to serve the people not to earn buckets of cash. So why not find ways within the government itself to come up with the “missing funds” that the government always seems to blame on the citizens.

Another perfect example of collections come in the form of customs collections at the post office. Although all completely above board and legal (not always the case when it came to these types of collection), now there is an entire long computation that comes with just collecting your package, one that was usually sent as a gift from loved ones abroad.

My granddaughter was recently sent a package from her Ninang in California, and when my daughter and her husband went to the post office to collect the package, they were asked to pay all sorts of fees. These include percentage of the total declared value of the package, the shipping cost (already paid by the sender of the package). This is then converted to the current exchange rate and taxed dutiable value and customs duty along with other taxes and fees such as BIR stamps, import processing fee, fixed charges, and so on and so forth. Once all are added up, you get the total amount you have to pay to get a package that was once a gift, but has become something you have to “buy” to be able to receive.

I can clearly understand customs taxes on bringing in goods that you plan to sell for profit or even large gift packages with big numbers of items contained therein. However, this is also applied to small packages with only a few personal items intended to be given to someone as a present. Even a package of used clothes and personal items will be taxed if sent together — like a used tee-shirt, an old belt, a pair of jeans, and a toothbrush for example.

It makes it very discouraging for loved ones abroad to send gifts to friends and family here.

* * *

I stand alongside several of our countrymen who mourn the death of Lolong, the world’s biggest saltwater crocodile. He brought the Philippines honor and pride around the globe. While I am saddened by his death, I am also relieved that he is no longer suffering. Other than the restrictions of his captivity, the necropsy showed that Lolong had lesions on his major organs and intestines.

According to Director Mundita Lim of the Protected Areas and Wildlife Bureau (PAWB), Lolong died of fungal pneumonia. She said the fungus affected his lungs and was aggravated further when he was taken out of his natural habitat at Agusan marsh. He was already not feeling well and being taken out of his natural habitat only made it worse. Although people were only truly trying to help, sometimes we have to remember that nature can take of itself and sometimes getting involved only makes things worse.

I am glad that Lolong is now in a better place and finally resting. I’m sure he was not happy in captivity after having lived freely for so long. Not to mention all the attention and all the people poking and prodding him. Maybe in the future, we will find another Lolong in our country. Hopefully then, we will be better equipped. For now, the National Museum is in charge of preserving this amazing crocodile.

Sam Miguel
03-07-2013, 09:44 AM
$86B in forex reserves seen excessive, costly, beyond optimal

By Michelle V. Remo

Philippine Daily Inquirer

2:56 am | Thursday, March 7th, 2013

The country’s nearly $86-billion foreign exchange reserves, which are projected to rise further due to robust inflow of remittances and portfolio investments, were deemed excessive, costly and beyond optimal.

This is the opinion of Philippine Institute for Development Studies (PIDS), which said in one of its latest research notes that the economy might be missing out on prudent investment opportunities as it kept more than enough foreign exchange liquidity.

PIDS also said the Bangko Sentral ng Pilipinas (BSP), which manages the gross international reserves (GIR), was incurring huge interest expenses as it continued to build the reserves.

It explained that the central bank’s dollar buying activities—which boosts the GIR—resulted in the infusion of peso liquidity into the economy. Financial institutions that earn from selling dollars to the central bank, in turn, park a significant portion of the proceeds in special deposit accounts (SDA) with the BSP.

The BSP accommodates funds in its SDA facility and pays interests on these to avoid excess liquidity in the economy as this can fuel higher demand and rise in inflation.

SDA funds were estimated at P1.8 trillion and the central bank pays an annual interest rate of 3 percent on it.

PIDS cited three general means to measure whether foreign exchange reserves were either within or beyond optimum levels.

“Based on these three criteria, the foreign exchange reserves of the Philippines have been determined to be higher than the optimal level,” PIDS said in the commentary titled “Rapid Accumulation of Foreign Exchange Reserves: Boon or Bane.”

The first is the ratio of the reserves to the country’s outstanding, short-term foreign currency-denominated debts. According to PIDS, an ideal ratio is 1:1. In the case of the Philippines, its foreign-exchange reserves are about 6 times its short-term external debt.

Second is the ratio of the reserves to total liquidity in the economy measured in terms of M2 (M2 includes currencies in circulation and bank deposits). PIDS said an optimal level of reserves is one that is equivalent to between 5 and 20 percent of M2. However, the country’s foreign-exchange reserves are even slightly higher than M2.

Third is the number of months of import cover. PIDS said a comfortable GIR should cover imports requirements for three to four months. The Philippines’ current foreign exchange reserves, however, can cover one year worth of imports.

“Hence, the BSP should explore measures on how to minimize the costs associated with holding foreign exchange reserves,” PIDS said.

PIDS urged the central bank to study the proposal of pulling some money from the GIR to form a sovereign wealth fund, which will be used for various developmental investments.

“The more elaborate proposal for managing foreign exchange reserves is to establish a sovereign wealth fund such that the strategic focus of using surplus reserves will shift from passive liquidity management to active profit-seeking investment,” PIDS said.

Sam Miguel
03-07-2013, 09:49 AM
^^^ Here we go again with the same types of idiots and their other ill-informed ilk that brought about the last two global financial crises once again towing that damn line: If you are liquid you aren't making money.

What galactically arrant nonsense.

If I had a dime for everytime I heard these famous last words I'd probably be in the Forbes Top 40 list by now, or at least Top 40 in Asia.

Foreign currency reserves are called reserves for a reason. For once we have plenty of it. Are we now going to act like hobos who have become lottery winners and spend every friggin' dime of it because "we're missing out"?

The last time people took that type of advice we had the subprime housing implosion. And we're all still feeling that one aren't we?

03-09-2013, 10:14 AM
S&P warns of reversal of capital flows

Flight of funds seen with recovery in US, Europe

By Michelle V. Remo

Philippine Daily Inquirer

11:41 pm | Friday, March 8th, 2013

Standard & Poor’s has cautioned emerging markets in the Asia-Pacific region, including the Philippines, against a potential flight of capital back to the United States and Europe once these advanced economies show more solid signs of recovery.

In one of its latest reports, S&P said the reversal of the current trend of surging foreign portfolio investments to the Philippines and its neighbors was a possibility facing those countries.

“Highly expansionary monetary policies in advanced economies are spurring very strong capital flows into Asia Pacific, which can just quickly exit if conditions improve closer to home,” the credit-rating firm said in the report on its outlook for Asia Pacific.

S&P said the problem with a sudden and sharp reversal of flows was that it could create significant volatility in the exchange rate, which could affect prices and the competitiveness of an economy. In particular, sharp and sudden outflows could cause a steep depreciation of the peso against the dollar.

Documents from the Bangko Sentral ng Pilipinas showed that gross inflow of foreign portfolio investments hit $2.8 billion in the first month of the year, more than double the $1.2 billion registered in the same period last year.

In terms of net inflow (gross inflow less total outflow), foreign hot money reached $1.27 billion, also more than double the $586 million recorded a year ago.

The growth in foreign portfolio investments was welcome, according to the BSP, but this posed the challenge of proper liquidity management. In a bid to avoid a much faster inflation and an even sharper appreciation of the peso resulting from the surge in inflows, the BSP has implemented measures to tame these effects.

For instance, the BSP has prohibited investments of foreign funds in its special deposit accounts (SDAs) and has slapped a higher capital requirement for banks’ holdings of non-deliverable forwards (NDFs), which are hedging instruments meant to shield exporters and importers from foreign-exchange risks but were reportedly being used by some banks and investors for currency speculation.

Sam Miguel
03-12-2013, 08:25 AM
PH losing the best and brightest students – DepEd chief

By Karen Boncocan


3:43 pm | Wednesday, November 14th, 2012

MANILA, Philippines — Education Secretary Armin Luistro on Wednesday lamented how some of the “best and brightest” Filipinos who are given opportunities to study abroad never came back to the country.

He said that compared to the earliest Filipino scholars who received education in Europe but came back and became heroes, many of the recent Filipino students educated abroad “never came back.”

“We lost our best and brightest students,” he said during his speech at the opening of the European Higher Education Fair at the Manila Peninsula Hotel in Makati City.

“We need to transform this vicious cycle of our best and brightest going abroad and never coming back,” he said.

But Luistro pointed out that he was still hopeful that Filipinos given the chance to study under the European Union’s Erasmus Mundus scholarship and mobility programme will come back to share what they have learned abroad.

“I think we are more than ready to engage again in a new mode that will allow us to become real partners with the European Union in terms of competitiveness,” he said, boasting of the Philippines’ taking “great strides in showing we can be at par with the world in terms of education standards.”

And with the recent implementation of the K-12 program, Luistro said that “at this stage, the country is rethinking what we mean by excellent education.”

European Union Ambassador Guy Ledoux said that the fair was significant because it was being done in celebration of the 25 years of the Erasmus Mundus scholarship and mobility programme and marks “a milestone with furthering our relationship with the Philippines in terms of higher education.”

Chairperson for Higher Education Patricia Licuanan told reporters that exposure to education systems abroad will benefit Filipino students as it is a venue for them to “expand their horizons.”

But Luistro stressed that it was important for Filipino students given opportunities to be educated in European universities to come back and bring their foreign friends over to the Philippines to experience its education system.

“We have something to share, too,” he said.

The European Higher Education Fair: Brighter Prospects is open to the public from 2 to 8 p.m.

Participating during the symposium are 22 European Higher Education Institutions from Austria, France, Germany, Italy, The Netherlands, Spain, Sweden and the United Kingdom.

Sam Miguel
03-13-2013, 09:32 AM
Don’t change rules in the middle of the game

By Neal H. Cruz

Philippine Daily Inquirer

11:06 pm | Tuesday, March 12th, 2013

A brewing legal battle between two giant corporations in the Philippines and Indonesia is in the offing—a classic manifestation that in the business world, no matter how small or large the deal, there is what they say in local business parlance, “onsehan,” a situation where one party pulls a fast one on the other.

The looming legal battle is between PT Citra Marga Nusaphala Persa Tbk or CMNP (a former minority stockholder of Citra Metro Manila Tollways Corp. or CMMTC) and infrastructure, food and beverage giant San Miguel Corp. (SMC). CMMTC or Citra is a leading Indonesian infrastructure company whose core business includes expressway development and toll road operations.

Last week, the business newspaper Bisnis Indonesia published a story that the board of directors of CMNP is keen on forming an investigation team to look into its divestment-of-shares transaction at CMMTC.

Jusuf Hamka, president of CMNP, was quoted by Bisnis Indonesia that “there were unnatural transactions in the selling of 11 percent of CMNP shares to PT Mana Sarana Arsitama in the amount of US$3.25 million in July 20, 2010.”

Citra is the concessionaire and operator of the Skyway project, the elevated toll road that connects the capital to areas south of Metro Manila. The Skyway is a six-lane, elevated expressway built above the South Luzon Expressway (SLEx).

SMC holds a 46-percent stake in Atlantic Aurum Inc., the corporate vehicle of the Citra group that has control in CMMTC. SMC has been building up its infrastructure portfolio, and it has the option to increase its stake in Atlantic Aurum to 51 percent at a later date. It has been aggressively moving away from its core food and beverage business and is going into heavy and high-growth sectors including telecommunications, oil refinery, power and infrastructure.

SMC and Citra have been building up a war chest worth some $1 billion for infrastructure projects in the Philippines and Indonesia, with the aim of becoming Southeast Asia’s biggest toll road player. SMC and Citra hope to develop Skyway stage 3 and 4, worth $590 million and $670 million, respectively; SLEx phase 4 which is worth $230 million; and potentially the widening of the Southern Tagalog Arterial Road, which the group intend to acquire before the end of the year. Skyway stage 3 will link the elevated highway to North Luzon Expressway while stage 4 will run from Buendia to Bulacan. SLEx phase 4 is a 57-kilometer road from Batangas to Lucena, Quezon.

According to Bisnis Indonesia, Jusuf revealed that the 25-percent shares owned by the Citra Group at CCMTC has been sold to SMC for $135 million. This is where, Jusuf said, the suspicion started, prompting them to conduct an investigation. The legal team will be composed of lawyers from the Philippines and Indonesia since the investment involves the two countries with different legal and business policies.

This possible legal battle should not be taken for granted by the current administration. Jusuf’s interview with Bisnis Indonesia sends a wrong signal to foreign investors looking into the Philippines’ PPP (public-private partnership) scene. The Philippines has been getting a lot of good news lately, even being put “among the emerging tiger economies in Asia. This positive news can turn sour when investors start whispering about shenanigans going on in big infrastructure projects managed by the Philippine government.” Jusuf’s statement to Bisnis Indonesia was that CMNP’s divestment from Citra (21 percent of shares in the toll road consortium) was done because the company believed that the toll road business was “not profitable.”

The President must look into this negative impression voiced by an investor. The government has lined up several big infrastructure projects on toll ways. In fact, the administration is on a roll when it comes to encouraging big and reputable local and foreign companies to participate in big ticket infra projects via its PPP scheme or ODA (official development assistance) funding. But the government has been weak in implementation. A repeated complaint: The government changes its rules in the middle of the game.


• The Department of Transportation and Communications disallowed airlines to participate in the bidding for the Cebu-Mactan Airport project, due to a supposed “conflict of interest.” Later, the DOTC changed the rules and allowed two airlines to participate in the project.

• MRT 3 has been in the news due to its questionable ownership. A private company offered to maintain and operate the system, but the government opted for a buyout scheme that will cost taxpayers more than P40 billion.

• LTO license plates have not been delivered to buyers of new vehicles for almost six months now. The reason: The government awarded to different suppliers the deals for the material, production and car stickers. It would have been better had government awarded this project to a single entity via transparent bidding.

• Now, a foreign investor is saying that toll way operations have become unprofitable.

Besides the declining income, there are also claims by contractors of CMNP of losses reaching $40 million—a valid reason for the company to pull out of the toll-road consortium.

Sam Miguel
03-18-2013, 09:43 AM
P10B refund to Meralco customers looms

ERC finalizing order on PSALM’s overcharging

By Amy R. Remo

Philippine Daily Inquirer

2:18 am | Monday, March 18th, 2013

Customers of Manila Electric Co., the country’s biggest power distributor, can soon expect refunds from the P10 billion worth of transmission line costs that were overcharged by the state-run Power Sector Assets and Liabilities Management Corp. (PSALM) starting in 2006.

Francis Saturnino Juan, executive director of the Energy Regulatory Commission, told reporters that the hearings on the case have been completed last December and that a decision could be issued in a matter of weeks.

However, Juan declined to disclose whether Meralco’s more than five million customers would be refunded the whole P10 billion in double-charged transmission costs, as computed by the distribution utility, or whether it would be lower or higher than this amount.

“There will definitely be a refund because in the main decision of the Commission, it already found that there is [double charging]. The question now is how much should be refunded, and by who, to whom and how will it be flowed through the end consumers who actually paid these amounts,” Juan explained.

There is a draft of the decision that will be finalized once all the commissioners have signed it.

Meralco earlier complained about being double charged because of the 2.98-percent transmission loss recovery (or line losses) included in the transition supply contract (TSC) between National Power Corp. and the distribution utility, and in the line rental charges, which comprised congestion cost and line losses, being collected by Philippine Electricity Market Corp. since the wholesale electricity spot market (WESM) started operating in June 2006.

In a decision dated March 10, 2010, ERC found a “double charging in transmission line costs.” But compliance by various parties involved was incomplete as some of the data needed for the computation were no longer available. Since the ERC has ruled that there was indeed “overcharging” by PSALM, the point of contention now was the amount that was overcharged.

Meralco earlier said the overcharging amounted to P9.1 billion, but later raised the figure to roughly P10 billion after further computations.

PSALM earlier contested the amount, stressing that the overcharging should be lower than P9.1 billion or the initial amount issued by Meralco. The state agency, however, never gave its own computations, according to Juan.

In a separate interview, PSALM president and CEO Emmanuel R. Ledesma Jr. commented: “PSALM has submitted its memorandum to ERC hoping that the March 10, 2010, decision of the Commission be implemented as worded.”

Sam Miguel
03-19-2013, 01:04 PM
‘A bad doing good’

By Cielito F. Habito

Philippine Daily Inquirer

11:19 pm | Monday, March 18th, 2013

I am personally impressed at how the Department of Budget and Management under Secretary Florencio “Butch” Abad is now taking politically unpalatable but long-warranted reform directions. As such, he demonstrates strong political will and firmly grounded principles, qualities now seemingly rare in public service. For these, he has been awarded the Metrobank Foundation Professorial Chair on Good Governance at Ateneo de Manila University. He recently delivered his professorial chair lecture titled “Pursuing the Aquino Administration’s Agenda for Empowerment Through Public Expenditure Management” to an appreciative multisectoral audience—so appreciative that some declared him a worthy “presidentiable” in 2016.

Backed by President Aquino’s strong political capital from consistently high public trust ratings, Secretary Abad is in a unique position, which most of his predecessors didn’t enjoy, to push for meaningful budget reform. He recognizes that “public trust can only be sustained if the people see that budget reforms indeed result in more services that lift them from poverty and vulnerability, and more investments in their capacity to participate in the economy.” Indeed, with brisk economic growth still not permeating down to the wide majority of Filipinos, and if leadership changes are seen not to change the wide inequities in our society, no amount of voter education will alter the voting habits of the average Filipino voter. President Aquino must convincingly show that matuwid na daan translates into umaangat na buhay for most of his “bosses.”

As the man tasked to ensure the greatest and widest benefits from taxpayers’ hard-earned money, Secretary Abad knows that the budget can be a potent instrument toward this end. He takes to heart sound public expenditure management principles that rest on spending prudently (“within our means”), spending effectively (“on the right priorities”) and spending efficiently (“with value-for-money”).

The first is all about fiscal discipline, which he saw was set aside when political survival, rather than genuine developmental considerations, determined budget allocations and releases under the previous president. Case in point is how the debt of the National Food Authority ballooned to a staggering P177 billion at the close of the previous administration from only P18 billion when it started, with P128 billion incurred just in its last two years. Abad also cited government’s cancellation of projects entered into by the previous leadership that were found “wanting in economic viability and credibility,” even in the face of displeasure from certain donor partners and business interests. From these and more, he is convinced that government can spend substantially less without sacrificing the desired results.

Spending effectively requires that the budget be spent in a way consistent with national priorities. Abad is doing away with certain “budget traditions” that gave undue discretion to the chief executive and key influential bureaucrats at various levels. One such tradition is the frequent reenactment of the prior year’s budget due to late or nonapproval of the General Appropriations Act. Noting how no GAA was approved on time and had to be fully reenacted three times in the 10 years before the current administration, Abad moved the budget timetable forward to ensure timely budget approval.

Another tradition Abad has done away with is the preponderance of lump sum funds in various agency budgets. DBM now requires disaggregation of all lump sum funds, with clear indication of their intended uses. Predictably, this has met with fierce, even violent, resistance from “patronage interests” in government, which lost a key tool for gaining political mileage from their electoral constituencies. For the same reason, he says, many politicians have opposed government’s conditional cash transfer program, which has supplanted dependency ties between the poor and their traditional patrons. In classic “if you can’t beat it, join it” style, some politicians have tried to insert themselves in the program, prompting the Department of Social Welfare and Development to mount an “anti-epal” campaign. But fully cognizant that dependency ties could merely transfer from local patrons to the national government (now the “national padrino”), he stresses the importance of graduating beneficiaries after five years and ensuring their strengthened human capital before then.

Still another old tradition Abad has courageously sought to break, at great political risk, is the untouchability of the budgets of the “sacred cows”: the judiciary and the military. Fiscal autonomy in the case of the judiciary and national security in the case of the Armed Forces can no longer be excuses to evade transparency and accountability, he declares.

Abad’s insistence on spending with measurable results highlights the management dimension in the third element, spending efficiently. DBM’s Organizational Performance Indicator Framework (OPIF) aims at stronger performance management and budgeting in all government entities. Under Abad, DBM has further refined the various agencies’ defined outcomes and major final outputs in the OPIF, ensuring their alignment with government’s priority outcomes. Many more key reforms are forthcoming with the 2014 budget.

Against past experience when the budget was used more as a political tool than as the developmental tool it ought to be, Secretary Abad is a welcome breath of fresh air in the government. Here is a case where A bad (minus the space) is doing much good for all of us.

* * *

Sam Miguel
03-21-2013, 09:39 AM
Sovereign wealth fund mulled

Central bank stands ready to supply gov’t with dollars

By Michelle V. Remo

Philippine Daily Inquirer

8:11 am | Thursday, March 21st, 2013

MANILA, Philippines—With an improving fiscal situation, the national government is considering establishing a sovereign wealth fund that it can use for various investments, the profits of which can be tapped for various development projects.

This was according to Governor Amando Tetangco Jr., who said the Bangko Sentral ng Pilipinas would be willing to sell dollars to the national government should the creation of the fund be pursued and should foreign currency-denominated assets be considered among the investment options.

“The government is looking into it [creation of the fund]; it is very much on the drawing board right now,” the BSP governor told reporters on Wednesday at the sidelines of the annual convention of the Chamber of Thrift Banks.

He said the Department of Finance, headed by Secretary Purisima, has begun a study on the merits and feasibility of creating the proposed sovereign wealth fund.

The proposal for the establishment of the said fund came amid the country’s growing foreign exchange reserves, which currently stand at about $84 billion.

The BSP, however, is not allowed by its charter to invest the foreign-exchange reserves in risky assets and undertakings, and is confined to investing in conservative assets, such as US treasuries.

But Tetangco said the national government can create the fund and then buy dollars from the BSP in the event it decides to invest in foreign currency-denominated assets or projects offshore. He said that given the Philippines’ substantial foreign-exchange reserves, the BSP has flexibility to sell dollars to the government.

“Right now there are legal constraints for the BSP to go into something like creating the sovereign wealth fund. So if the government decides to put up this fund, the BSP can sell them dollars, which they can use to fund their investment operations, particularly abroad,” Tetangco said.

According to Tetangco, the country’s gross international reserves (GIR) exceed all benchmarks for adequacy.

The GIR of $84 billion is enough to cover for nearly one year worth of its import requirements. It was also equivalent to 6.6 times the combined short-term, foreign currency-denominated debts of private and government entities in the Philippines.

Based on international standards, a country’s GIR is said to be adequate if it can cover three to four months’ worth of its import requirements, or if it is equal to the short-term debts to foreign creditors.

The buildup of the country’s foreign-exchange reserves is attributed to strong inflow of remittances, foreign portfolio investments, and foreign investments in the business process outsourcing (BPO) sector.

The inflows have allowed the BSP to buy dollars from the foreign exchange market—an activity that it does if it sees need to temper appreciation pressures on the peso.

03-24-2013, 09:46 AM
Noy tax speech before Tsinoys a gentle reminder – Palace

By Aurea Calica, Marvin Sy

(The Philippine Star) | Updated March 24, 2013 - 12:00am

MANILA, Philippines - While President Aquino found it unnerving and shocking that a number of Filipino-Chinese businessmen belonging to the Federation of Filipino-Chinese Chambers of Commerce and Industry Inc. were not paying correct taxes, a Palace official described the chief executive’s move in calling FFCCCI’s attention on the matter as a mere “gentle reminder.”

The President made the call during FFCCCI’s biennial convention Friday night at the Mall of Asia, where he was invited as guest of honor and speaker.

Deputy presidential spokesperson Abigail Valte at first said the government, particularly the Bureau of Internal Revenue (BIR), was not being soft on these businessmen even as the figures used by the President were culled from 2011 to 2013 records.

Valte, however, denied over radio dzRB yesterday that the government was quick to file charges against Filipinos but slow on Chinese businessmen like those from the FFCCCI.

“If you can see, among all those charged by (BIR) Commissioner (Kim) Henares, there is no discrimination. There is no such thing as being selective, as the cases with strong evidence are the only ones filed by Commissioner Henares before the DOJ,” Valte said.

She said the President took the opportunity to discuss the matter before a big audience, but it did not mean the government was acting only just now.

Asked if charges would be filed against these alleged tax cheats, Valte said there are processes to be followed.

“The President’s gentle reminder does not mean the BIR is not doing its job. We are going to review the cases filed by the BIR before the Department of Justice and those under litigation, and we can see there is no discrimination in the filing of those cases. Those were purely based on evidence,” she said in Filipino.

The Palace official refused to comment if the Filipino-Chinese businessmen were donors for the Team PNoy campaign. She said the BIR would check on all reports about people not paying taxes, including those who do not issue receipts.

In his speech, the President said he wanted to bring up a “more sensitive topic” from the report of Henares that was, to say the least, “a bit unnerving.”

“These are the facts as we understand them. Based on your own 2011 to 2013 directory, I understand that your federation includes 207 firms and organizations as members. Only 105 of these have a tax identification number. Of these 105 firms, only 54 filed tax returns. To make matters worse, 38 firms and organizations actually filed returns with zero tax due. This means that only 16 out of the 207 ‑ or only around eight percent - of your member-organizations paid taxes,” Aquino said.

The President added that of 552 FFCCCI individual members, only 424 have tax identification numbers, and only 185 of these members with TINs ‑ or almost 44 percent ‑ filed income tax returns.

“Of those that filed tax returns, 14 filed returns with zero tax due. What this means is 354 out of 552 members ‑ or 64 percent of you ‑ did not pay taxes for the same reasons: no TIN, no tax due, or nothing filed at all,” the President said, adding among those who filed and paid income taxes, a lot “paid less than P100,000” while there were some who paid less than P1,000 in taxes.

Sam Miguel
03-25-2013, 09:45 AM
Tax talk

Philippine Daily Inquirer

4:54 am | Monday, March 25th, 2013

President Aquino gave three major speeches last Friday, but only one of them will be remembered years from now, as a pitch-perfect example of how to talk tough with the utmost tact. He not only told influential Chinese businessmen to pay the right amount of taxes; ever so gently, he told them off.

At the 29th Biennial Convention of the Federation of Filipino-Chinese Chambers of Commerce and Industry, Mr. Aquino regaled his audience with his frequent acknowledgment of the Chinese business community’s generous contributions to the nation. And then he said:

“Based on your own 2011-2013 directory, I understand that your federation includes 207 firms and organizations as members. Of this 207, I am told, only 105 have a Tax Identification Number. I wonder what happened to the others…. Of these 105 firms, only 54 filed tax returns. To make matters worse, 38 firms and organizations actually filed returns with zero tax due. This means that only 16 out of the 207—or only around 8 percent—of your member-organizations paid taxes. The 6.6 growth did not seem to affect your members.”

He continued, turning the focus from institutions to individuals: “Now, there are also 552 of you who are individual members. And of this number, 424 of you have Tax Identification Numbers. It is interesting to note that of that number 185, or almost 44 percent, filed income tax returns. Of those that filed tax returns, at least only 14 filed returns with zero tax due. What this means is 354 out of 552 members—or 64 percent of you—did not pay taxes for the same reasons: no TIN, no tax due, or nothing filed at all.”

It would have been difficult for his audience to contest the President’s data, which he said he got directly from the Bureau of Internal Revenue. It would have been even harder to complain about Mr. Aquino’s tack, because he phrased his request in positive terms: “… this was truly unexpected news, especially since you have always been so willing to give generously to our countrymen. In terms of actively reaching out to our countrymen, your contributions have always been clear. But perhaps it is time to ask ourselves: Am I contributing in the right way—not just through corporate social responsibility, but also through my personal obligations—through contributions to the policies that have helped us build our success?”

Am I contributing in the right way? Not exactly a Kennedyesque challenge to citizenship—but the right, potent question to ask.

Lyricist of the Court

ISAGANI A. CRUZ, associate justice of the Supreme Court for eight years and columnist of the Philippine Daily Inquirer for 15, passed away last Friday, at the age of 88. A true legal luminary, the path he lit continues to guide lawyers and civil libertarians alike.

Many tributes have been laid at his feet; to the chorus of sincere praise, we wish to add a simple note, about the power of his prose.

He had a gift for narrative; his ponencias were famous among law students and lawyers for the lyrical way he narrated the circumstances of the case. “The initial reaction of the people inside the compound was to resist the invasion with a burst of gunfire. No one was hurt as presumably the purpose was merely to warn the intruders and deter them from entering.” (Alih v Castro, 1987)

He had a way with images: “I do not consider a person a criminal, until he is convicted by final judgment after a fair trial by a competent and impartial court. Until then, the Constitution bids us to presume him innocent. He may seem boorish or speak crudely or sport tattoos or dress weirdly or otherwise fall short of our own standards of propriety and decorum. None of these makes him a criminal although he may look like a criminal.” (Dissent, in People v Malmstedt, 1991)

But his legal acumen also found exact expression in his aphoristic phrase-making. “It has become increasingly clear that the grandiose description of this Court as the bulwark of individual liberty is nothing more than an ironic euphemism. In the decision it makes today, the majority has exalted authority over liberty in another obeisance to the police state, which we so despised during the days of martial law. I cannot share in the excuses of the Court because I firmly believe that the highest function of authority is to insure liberty.” (Dissent, in NPC v Comelec, 1992)

He, and his powerful pen, will be missed.

Sam Miguel
03-25-2013, 09:56 AM
Filipino-Chinese vow to toe line on taxes

By Daxim L. Lucas

Philippine Daily Inquirer

2:01 am | Sunday, March 24th, 2013

A day after being chided by a “shocked” President Benigno Aquino III about the incredibly low taxes—or sometimes none at all—that affluent Filipino-Chinese businessmen were paying, the leaders of the community said they would toe the line and vowed to get their members to pay the right amount in taxes.

As this developed, the Bureau of Internal Revenue (BIR) said the businessmen only had until April 15 to pay the correct amount in taxes, after which the authorities would declare “open season” on tax delinquents.

“In light of the good governance program led by our President, the federation will ask the entire Chinese community to be very diligent in paying their tax obligations,” said businessman Francis Chua, relaying a message to the INQUIRER from Federation of Filipino-Chinese Chambers of Commerce and Industry Inc. (FFCCCII) president Tan Chin.

President Aquino’s admonition to tax-evading Filipino-Chinese businessmen was made on Friday evening at the annual meeting of the FFCCCII in Pasay City, eliciting strained laughter, awkward reactions and knowing glances from the group’s members who were present, according to people at the event.

Chua, himself a past president of the FFCCCII, said the group—the umbrella organization of all Chinese-Filipino business associations nationwide—had been conducting regular tax seminars for its members to improve their tax compliance.

“We fully support our President in this tax campaign,” Chua said, while adding that many FFCCCII members were nonstock, nonprofit organizations that, by the nature of their activities, were usually engaged in activities that required little or no tax payments.

In his speech, President Aquino expressed shock upon learning earlier from the BIR that only 105 of the FFCCCII’s 207 member firms and organizations had tax identification numbers (TINs).

Despite 6.6 growth

“I wonder what happened to the others,” the President said. “Of these 105 firms, only 54 filed tax returns. To make matters worse, 38 firms and organizations actually filed returns with zero tax due. That means that only 16 of the 207—or only around eight percent—of your member organizations paid taxes. The 6.6 [percent economic] growth rate did not seem to affect your members.”

The President was alluding to the unprecedented growth rate achieved by the country last year.

“Of the FFCCCII’s 552 individual members, only 424 of you have TINs. Of that number, only 185 filed income tax returns, Aquino noted.

File taxes before deadline

“Of those that filed tax returns, only 14 filed returns with zero tax due,” he said. “What this means is 354 out of 552 members—or 64 percent of you—did not pay taxes for the same reasons: No TIN, no tax due or nothing filed at all.”

“In fact, of those who filed and paid income tax, many paid less than P100,000,” an incredulous Aquino said. “There were some who paid less than P1,000 in taxes,” he added.

Interviewed by the INQUIRER, BIR Commissioner Kim Jacinto-Henares said she was urging members of the business community to file the proper tax returns before the deadline next month.

“The President’s speech was an appeal to them,” Henares said. “The message basically was: We recognize that you’ve been helping the country and contributing to charitable work, but can you please pay the right taxes by April 15?”

Henares said the tax bureau was indeed looking into possible cases of tax evasion among local businessmen, but stressed that there was “no witch hunt” among specific ethnic groups.

She declined to reveal the identities of the persons or businesses being investigated or the amount in taxes they owed, saying the information was confidential.

Not a racial thing

“This is not a racial thing,” she said. “We are not targeting the Chinese-Filipino community. You’re a citizen of this country, you must pay the right amount of tax.”

The BIR chief explained that her agency was looking at data collected from all over the country in trying to detect patterns of potential tax evasion concentrated in specific groups and areas.

“We’re not targeting or threatening them. This is not because they’re the FFCCCI,” she said. “We’re looking at our database and this is what we see.”

The revenue chief also said that businessmen who underdeclared their tax liabilities in previous years must rush to file amended tax declarations before they are found out by the BIR’s examiners.

“About the past years’ liabilities, while we’re not investigating them, they can go back and amend their tax declarations,” Henares said. “They should report the right thing now. Then they can still go back to previous years to correct their returns.”

“Otherwise, they are taking a big risk. It will be the point of no return,” she warned. “Unahan na lang tayo niyan (Let’s see who gets to the other first).”

Sam Miguel
03-26-2013, 08:17 AM
Consumer protection

Philippine Daily Inquirer

10:58 pm | Monday, March 25th, 2013

Bangko Sentral ng Pilipinas Governor Amando Tetangco said something truly important at the gathering last week of the Chamber of Thrift Banks. In his speech, Tetangco said the BSP was drafting rules that would compel banks to improve on the ways they protect consumers. He said it would formalize “specific standards for consumer protection, including how banks should handle consumer complaints,” the goal being “to elevate consumer protection to a stature of a core bank function, and not simply an ancillary advocacy.”

Specifically, the BSP is looking into how to assess banks’ consumer protection practices, similar to the Camels rating system (which grades a lender based on its capital adequacy, asset quality, management, earnings and liquidity). “We are still looking at the appropriate metrics for this. But the idea is to ensure that banks have the adequate framework for consumer protection,” Tetangco said. “This will be embedded in the assessment of the performance of the banking institution. The BSP will have a rating system as far as consumer protection is concerned.”

In the meantime, Tetangco advised bankers to tighten the safety standards in their credit operations given the sustained expansion of consumer-related financing. He urged banks to strengthen their credit underwriting standards, especially for their real estate loans, which constitute a big chunk of their loan portfolio. It is worth pointing out here that banks should also be urged to tighten their standards in granting credit card loans, or the issuance of the credit card itself. Everyone knows how easy it is to get even multiple credit cards, with some issuers flooding shopping malls with their marketing people or employing telephone brigades to call random targets.

There are an estimated four to five million holders of credit cards in the country. The latest BSP data on credit card loans that turned bad put the amount at P18.35 billion, or 11.1 percent of the P165.3 billion in outstanding credit card loans as of end-June 2012. The figure is up from P145.2 billion in the same period of the previous year. Nonperforming loans, as defined by the BSP, are past-due accounts whose principal or interest is unpaid for 30 days or more after due date.

The percentage may be considered prudent in banking standards, but the absolute amount remains big no matter how one looks at it. In fact, this amount has a direct bearing on the interest rate charged on all other credit card loans. Because banks hold no collateral for the credit card loans that have turned sour, it has to recover that amount from all the other card holders through higher interest charges. The current rate of 2.5-3.25 percent a month for credit card loans is equivalent to an interest charge of 34-47 percent a year.

Interest rates on credit card loans in the Philippines are among the highest in the world because high-quality borrowers are shouldering the cost of the bad credit card debts. Ideally, one who has diligently been paying his/her credit card bills on time for the past five or 10 years should be charged a lower interest rate than one who has just been employed or is holding a credit card for the first time. But despite available bank data that can easily determine the credit standing of individuals and allow lenders to determine the quality of borrowers and set different rates, banks simply charge high interest rates on all credit card debts.

The BSP should require credit card issuers and the banking sector to address this issue. They should devise a way in which the good borrowers are rewarded with a lower interest rate. These lenders should be required to impose graduated interest rates on credit card borrowers; the more risky individuals (those with no track record of payment) should shoulder higher interest rates, with the rate declining as the quality of the borrowers improves.

This is a more palatable solution than a cap on interest rates, which certain legislators proposed in 2011, following mounting complaints from card holders against the “usurious” rates charged by banks.

The Philippines can follow what the United States did when it adopted the Credit Card Act of 2009, which puts more emphasis on the protection of consumers in terms of unwarranted increases in fees and charges. Monetary authorities can start by prodding banks to help consumers by classifying or ranking their credit card holders, in the process rewarding their good clients with lower interest charges.

Sam Miguel
03-26-2013, 09:47 AM
Wisdom from the grassroots

By Cielito F. Habito

Philippine Daily Inquirer

10:56 pm | Monday, March 25th, 2013

As we commemorate Christ’s suffering this Holy Week, I am led to revisit anecdotes I have written in past articles on the wisdom one can find by talking to those who suffer the most from our society’s inequities. Through the years, I have found some of the richest insights in conversations with common folk expressing their aspirations in ways that made me see their plight more clearly, and rethink old preconceived notions and ideas shaped by ivory-tower analysis.

My favorite such anecdote is about a visit some years back to Barangay Lopero, high on the hills of the town of Jose Dalman in Zamboanga del Norte. My team was visiting some of the poorest communities in the country, and Lopero was one of our poorest barangays on record then. The only way we could reach the place was partly on foot, partly by habal-habal, motorcycles modified to accommodate as much as 6-7 riders in tandem (the word itself comes from the Visayan term for the reproductive act of farm animals, which the position of the riders is reminiscent of). Having been in government once upon a time, I like to ask people what would be the one thing they would request from government, if given the chance to ask. The answer I got from an old man: carabaos. With carabaos, he said, they could till the fertile land around them, which I noted to be cultivable yet idle in an area where rainfall comes evenly all year round. I pressed on and asked what they were getting from government. His answer: fertilizers and hybrid seeds. Asked what they do with them, he replied: “We have no use for them without the carabaos, but we take them anyway and just try to sell them.”

With us was the local government extension worker, an energetic and highly motivated young lady who worked closely with the community and clearly had their best interests at heart. Asked if she had not communicated the more prior needs of her client communities to her superiors, she insisted that she had done so countless times, but her calls seemed to fall on deaf ears. “These programs all come to us from Manila, and they had already decided that it’s fertilizers and hybrid seeds they want to give,” was her almost tearful reply.

On another trip, I was with a group that took a tortuous ride through several kilometers of what would hardly qualify to be called a “road” winding up a mountain in Sarangani to a small upland farming community surrounded by lush forests. I posed my usual question to the barangay captain, a farmer. Given our difficult trip to their village, I was almost certain that he would point to their access road that was badly in need of repair. But I was surprised—and wised up—when he simply replied: “Horses. We could use a few horses to bring our produce down to the market.” The wisdom in his answer quickly dawned on me. First, he entertained no illusion that money would be forthcoming to fix a few kilometers of a narrow mountain road to a tiny farming community with too few voters to matter. Second, he must have realized, as I did, that fixing their road would only help put the still lush forests around them within reach of loggers’ trucks—and the forests could be gone in no time.

On a tour of island barangays in the capital town of Bongao in Tawi-Tawi, our group met “Barrio” (the customary title for barangay captain) Julficar Ladjahali of Barangay Pababag, who led the “Bantay Sanctuary” effort in his barangay fishing grounds. His steadfastness in safeguarding the sanctuary was truly admirable, in the face of initial strong resistance and resentment from the local fishers, many of them his own people. And yet he and his volunteers remained firm through the years. Their efforts have paid off well. The sanctuary has clearly helped sustain and multiply the fish population: the average catch per fisher of 1.5 kilos before the establishment of the marine sanctuary some six years ago has since tripled to 4.5 kilos.

I asked him my usual question. His reply: buoys. He would like to be able to clearly mark the boundaries of the marine sanctuary that he and his volunteers are tasked to protect from fishers, to remove any doubt when apprehending encroachers into the protected waters. How much would they cost? Made from discarded liter-size plastic soft drink bottles and nylon rope, they would cost about P21 per buoy, he said, or about P15,000-P20,000 in all. My companions noted that it was just equivalent to the cost of convening a typical interagency meeting. And yet, Barrio Ladjahali found no support from any government entities within his reach.

Since then, I have constantly pointed out that meeting the needs of some of our poorest communities need not be costly. In certain situations, the appropriate technology could be the cheapest ones. It seems to me that all we need to do is listen more. Our poor communities know what they need only too well, more than any well-meaning government or NGO worker, and certainly more than any bureaucrat sitting in an air-conditioned office in Manila. And yet, despite all the lip service for devolution, decentralization and subsidiarity, detailed decisions affecting the futures of even the remotest poor are still made in the central offices of government agencies. And in so doing, the fixes that have invariably been favored are those involving large procurements, for such things as subsidized fertilizers, imported hybrid seeds, piglets, goats and, yes, farm-to-pocket—er, -market—roads. And we all know why.

If we truly want to help the poor, perhaps we simply need to listen to them more. They are much wiser than many of us tend to think—and indeed wiser than many of us, period.

* * *

Sam Miguel
03-27-2013, 08:36 AM
‘PCSO, DAR balked at Magna Carta’

By TJ Burgonio

Philippine Daily Inquirer

1:56 am | Wednesday, March 27th, 2013

In their rush to approve the Magna Carta of the Poor, lawmakers put in funding provisions that raised questions from the Philippine Charity Sweepstakes Office (PCSO) and the Department of Agrarian Reform (DAR), President Benigno Aquino III said on Tuesday.

But what mainly cost its enactment was their failure to reflect in the magna carta a key principle, “progressive realization,” in their model, the International Covenant on Economic Culture and Social Philippines, officials said.

While the President has come under fire for vetoing it, this won’t result in a backlash against his handpicked Team PNoy senatorial candidates, they said.

Talking to reporters on the vetoed measure for a second day, Mr. Aquino said that even the PCSO and DAR had balked at the provisions identifying their earnings as major sources of funding for the magna carta’s implementation.

Funding will come from 50 percent of the national government’s share in all lotteries conducted by the PCSO; 50 percent of the national government’s share in proceeds from the sale of sequestered assets; 50 percent from the proceeds of sale of goods forfeited by the Bureau of Customs, and 20 percent of the share of the national government in the earnings of the Philippine Amusement and Gaming Corp.

“The PCSO has said that 55 percent of what it takes in it pays out as prizes. How can it give 50 percent to this fund?” Mr. Aquino told reporters at the Victory Liner bus terminal in Pasay City, the final stop of his Holy Week inspection of sea ports, airports and bus depots.

The DAR, for its part, pointed out that there was an existing law specifically stating that it would be funded from the proceeds of the sale of sequestered assets, Mr. Aquino said.

“Now lawyers—and I’m not a lawyer—are saying that you can’t amend without making a reference to the law that is being amended,” he said.

P300-B administrative fee

The President vetoed the measure because the government couldn’t come up with at least P3.044 trillion to provide food, homes, jobs, quality education and health services to the country’s 25 million poor immediately. Failure to comply with this requirement could prompt suits against the government.

He said that five million social housing units alone would cost P2.320 trillion, way more than this year’s P2.006-trillion national budget.

Had the lawmakers put in the phrase “progressive realization,” it would have been a different matter, he said.

On Tuesday, Mr. Aquino said that the P3 trillion also came with a 10-percent “administrative fee” or some P300 billion to administer the projects, making the proposed law’s implementation more costly.

Then speaking on the measure’s proposed administrative sanctions on officials, Mr. Aquino said: “We should pity the government employees. You’re giving them mission impossible, then you file charges against them if they fail to do the impossible. That’s why I was obliged to veto it.”

Mr. Aquino also bristled at Alagad Rep. Rodante Marcoleta’s claim that he could have vetoed certain provisions, not the legislation in its entirety.

Holding up a copy of the Constitution, he cited provisions that state that the President could “line veto” revenue, tariff or appropriation measure, but not other types of legislation.

Poor Pangilinan staff work

“That’s nice if that’s allowed by law. But under the Constitution, which Congressman Marcoleta should know if indeed he said what he had said being a member of legislature and a third-termer, [that’s not allowed],” he said.

Marcoleta, one of the main proponents of the bill, blamed Sen. Francis Pangilinan for the veto, saying the senator had insisted on his version of the measure that he said lacked pertinent details.

A Cabinet official, who asked not to be named, also blamed poor work by the senator’s staff for the veto.

The official said Pangilinan came up with a consolidated version of the Senate bills and managed to convince his House counterparts to adopt his version.

His staff, however, forgot to insert the phrase “progressive realization” and included provisions that were questioned by funding agencies.

“Had they included the phrase ‘progressive realization,’ the President would not have found anything objectionable,” the official said.

Congress approved the measure in early February before it adjourned for the official start of the campaign period for senatorial elections.

The President directed Socioeconomic Planning Secretary Arsenio Balisacan and Social Welfare Secretary Corazon Soliman to draft a substitute measure in the hope that it would be approved by the 16th Congress.

03-29-2013, 10:41 AM
Phl now investment grade

By Prinz Magtulis

(The Philippine Star) | Updated March 28, 2013 - 12:00am

MANILA, Philippines - What it means for Phl: An investment grade rating means the Philippines has a strong ability to meet its financial commitments fully and on time.

While credit ratings do not indicate investment merit, credit risk is one of the factors taken into consideration by businessmen. An investment grade sends a message that the Philippines is a safe place for investments, including big-ticket ones that generate much-needed employment.

Borrowing costs will also go down for debtor nations seen as unlikely to default. The Philippines, whose debt payments eat up the largest chunk of the annual national budget, can then channel savings to development efforts and improvement of basic services.

More investments, more jobs, and more funds for social services are expected after the country bagged yesterday its first-ever investment grade rating.

Debt watcher Fitch Ratings lifted the country’s credit rating to BBB- from BB+, with a stable outlook, less than a month after its team visited the Philippines for a diligence review of the country’s macro fundamentals.

New York-based Fitch made the move ahead of its rivals Moody’s Investors Service and Standard & Poor’s Ratings Service.

Both agencies put the Philippines one notch below the coveted status, with S&P having a “positive” outlook.

President Aquino welcomed the credit upgrade yesterday, saying it represented the “reclamation of our national pride” and showed that “the perennial laggard of Asia is taking off.”

“This means much more than lower interest rates on our debt and more investors buying our securities,” Aquino said in a statement. “Greater access to low-cost funds gives us more fiscal space to sustain and further improve on social protection, defense, and economic stimulus, among others.”

He said more investments and jobs would foster “a virtuous cycle of growth, empowerment, and inclusiveness that will redound to the benefit of Filipinos across all sectors of society.”

Like his predecessor, Aquino has been criticized for the failure of economic gains to trickle down to the masses.

Critics have also sniffed that positive economic growth under his watch has been fueled largely by remittances from overseas Filipino workers rather than job-generating foreign direct investments (FDI).

The Philippines lags behind many of its neighbors in FDI levels. Consistently high business confidence in the Aquino administration has failed to translate into any significant increase in FDI.

In his statement, the President said the credit upgrade “is an institutional affirmation of our good governance agenda: sound fiscal management and integrity-based leadership has led to a resurgent economy in the face of uncertainties in the global arena. It serves to encourage even greater interest and investments in our country.”

The Aquino government has enjoyed 11 positive credit rating actions before yesterday’s upgrade.

Gov’t execs hail upgrade

Government officials were quick to welcome Fitch’s decision.

“President Aquino’s matuwid na daan has led us to investment grade rating, another historic first under the President’s stewardship,” Finance Secretary Cesar Purisima said in a statement.

“The Philippine government remains determined to pursue the matuwid na daan and to ensure that these reforms are irreversible. This is the only way we can maintain inclusive economic growth over the long-term and achieve our developmental goals,” he added.

Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco Jr. said the “landmark” upgrade is proof that structural gains, coupled with “good governance reforms,” have been effective.

“The investment grade upgrade should inspire the entire government bureaucracy and the Filipino people to capitalize on the opportunities that will arise from the rating upgrade,” Tetangco said.

Budget Secretary Florencio Abad noted that the upgrade came as the administration is preparing for the second half of the Aquino administration.

“Over the next three years, we can expect the certain revival of the country’s manufacturing sector – especially its agri-based industries – toward more inclusive and far-ranging growth,” Abad said.

Resilient economy

In upgrading the Philippines, Fitch cited the country’s “strong” external payments position, good inflation management and fiscal consolidation efforts that kept the budget deficit in check.

“The Philippine economy has been resilient, expanding 6.6 percent in 2012 amid a weak global economic backdrop. Strong domestic demand drove this outturn,” the agency said in a statement.

Fitch expects the economy to grow 5.5 percent this year.

“The Philippines has experienced stronger and less volatile growth than its ‘BBB’ peers over the past five years,” it added.

Sustained remittance inflow, on the other hand, helped the country gain resources to meet its trade obligations and foreign debt payments.

Fitch credited the BSP for managing inflows well and for keeping inflation within target.

Furthermore, government efforts to improve its balance sheet, which began during the Arroyo administration, have started to pay off, Fitch said. It cited, among others, lower foreign liabilities and longer debt payment terms.

“Improvements in fiscal management begun under President Arroyo have made general government debt dynamics more resilient to shocks,” it explained.

Fitch also cited the enactment of the excise tax reform law, which it said would lead to “some increment” in revenues to help fund more government projects. It noted, however, that the country’s revenue take remained far lower than its similarly rated peers.

Good governance

Aquino’s good governance agenda was also welcomed. Fitch said making this a “policy priority” until 2016 would help improve the country’s governance standards to promote more reforms.

“The agency assumes the Aquino administration will persist with its fiscal, governance and social reform agenda,” Fitch said.

Purisima said the Aquino administration remains committed to eliminating corruption, investing in the people, and enhancing infrastructure and the overall business climate.

“We have already done so much in the past three years. With greater cooperation from our people, we can do so much more,” Purisima said.

A further credit rating upgrade will hinge on sustaining growth and fiscal gains. A downgrade is possible in case of budget slippage and reversal of reforms.

“The ratings incorporate an assumption that the Philippines is not hit by a severe economic or financial shock sufficient to cause a significant contraction in GDP and trigger stress in the financial system,” Fitch explained.

Fitch noted that among the “severe risks” to global financial stability, which could affect emerging market economies, are the breakup of the euro zone and “severe economic crisis” in China, the world’s second largest economy.

Seal of good housekeeping

In a press briefing, presidential spokesman Edwin Lacierda said share prices in the Philippine Stock Exchange hit a new high of 6,847.47 with news of the rating upgrade.

“This is the 85th overall high for the Aquino administration and the 24th high for 2013. The previous high was 6,835.21, which was last March 6,” Lacierda said.

“It’s really a seal of good housekeeping and a resounding vote of confidence in the Philippine economy,” he said.

“While we expect an investment grade rating to open new opportunities for the Philippines, it also poses a challenge to all of us to maintain it. Hence, the Philippine government will continue to focus on sustaining the progress that we have achieved both in terms of economic growth and institutionalizing good governance reforms,” Lacierda said. – With Zinnia dela Peña

03-29-2013, 10:45 AM
Tsinoy businessmen cry foul over ‘tax cheat’ tag

By Edu Punay

(The Philippine Star) | Updated March 28, 2013 - 12:00am

MANILA, Philippines - A group of Filipino-Chinese businessmen cried foul yesterday over President Aquino’s statement branding some of their colleagues as tax delinquents.

Rosendo So, president of Rosales-Eastern Pangasinan-Filipino Chinese Chamber of Commerce (FCCC), disputed the President’s claim that many of them do not pay taxes correctly.

“It’s unfair for President Aquino to say we do not pay taxes. Our members pay their taxes diligently and correctly as part of their conscious responsibility in helping the government fund programs and projects to alleviate poverty,” So told reporters in Manila.

He said the top 100 individual and corporate taxpayers in their province are mostly members of their chamber.

The businessman, whose group is a member of the Federation of Filipino-Chinese Chambers of Commerce and Industry Inc. (FFCCCII), said many of his fellow Fil-Chinese businessmen were offended by the President’s pronouncement.

He said some officers of their organization do not pay taxes because they are retired or 60 to 70 years old, and have passed on the management of their business to their children.

So admitted he was surprised by the President’s speech delivered before the FFCCCII’s national officials, whom he said religiously carry out civic-oriented programs.

In fact, he said, the FFCCCII has built two-classroom buildings at a cost of only P400,000 compared to the P1.4 million that the Departments of Education, Public Works and Highways, and the Philippine Amusement and Gaming Corporation spent for the same project.

Still, So said their chamber will continue to support the programs of FFCCCII, whose president Tan Ching vowed to continue policing their own ranks.

Tan also called on his fellow Filipino-Chinese entrepreneurs to pay their taxes correctly and diligently.

The FFCCCII made this pronouncement following the challenge posed by President Aquino during their 29th biennial convention last Friday.

The President said the government would not think twice in going after delinquent businessmen who evade paying the right taxes.

Sam Miguel
04-01-2013, 11:20 AM
Much ado about sin tax reform

By James Michael Lafferty

(The Philippine Star) | Updated April 1, 2013 - 12:00am

MANILA, Philippines - As a business leader, there is nothing more humbling than to stand on a soapbox, passionately defend a position, and then find out later on you are wrong. Nobody is perfect. I can think of the multiple times in the past where I was sure of a given outcome, and then only later was proven to be way off. It’s all part of the learning process of self-improvement.

History is full of cases of the business community, in the throes of overt self-interest, professing “doom and gloom” if a given law passes. “The end of the world is coming!” And then the world finds out that, frankly, nothing negative really happened at all.

There is no better example of this than the recent “Sin Tax” reform, which put in a sensible excise regime and created a level playing field for alcohol and tobacco.

From an objective vantage point, looking at the governmental, societal, economic and benchmark data, there was nothing more obvious to do than to revise excise as was done. Yes, it may indeed hurt some quarters in some small way, but for the overall health of the economy, it was irrefutably the right thing to do. But of course, as is par for these things, those who may be hurt raise the proverbial Armageddon arguments. “This is the end of the local tobacco industry.” “This is the end of the tobacco farmers.” “This is the start of massive smuggling.” And on and on.

We are now entering month four of the new excise law. It is still, of course, far too early to be conclusive. But the data is clear, and we can say so far none of the fears are coming true.

What are the facts?

Anecdotal evidence from the farmer advocates indicates that all is “business as usual,” and there is plenty of business. To quote, “Local tobacco is doing well. And nobody is buying any less.” This is, of course, not surprising since well over half of the local crop is exported, meaning is has nothing to do with local excise rates! This is why the statement, “This is the end to all the farmers” never had any credence to any knowledgeable individual. There has been no discernible impact on the farmers.

The Nielsen data is in now for January and February, the first two months of the start of the new excise law. After a very strong December that was +15 percent (due to massive industry loading before excise reform and, of course, that would impact January and February!), January and February did decline by averagely -9 percent. Now at this point it is hard to discern how much of this is due to December loading, and how much is real market decline due to higher excise rates. My estimate? We probably won’t see much more than a -5-7 percent decline in the market sizes. A far cry from the “death” and “-40 percent market decline” estimates that were randomly tossed around.

So far, there has been no discernible uptick in the amount of smuggled cigarettes being sold. Again, not entirely surprising. Filipino prices for cigarettes are among the lowest globally even after excise reform! Smuggling directly correlates to local pricing levels: the higher they go, the more smuggling becomes attractive. It’s difficult to show a massive increase in smuggling when local prices still remain at benchmark low levels.

Finally, one of the big “fears” of excise reform was the “death of the local Filipino companies” and a victory for multinationals and imported brands. So what is the result so far? Well, first of all, if we take the latest February share, compared to December (the last month before reform started), the three multinationals in the market have lost 10 share points combined! And guess who gained +10 share points? You got it! The local Filipino companies! And, the one “imported brand” that some have obsessively raved about “flooding the market”? It has hit a share level in February of 0.3 percent! Talk about overreaction!

My dear friend Erik Weihenmayer is the only blind man to successfully climb Mt. Everest. A few years ago he and I climbed Mt. Kilimanjaro, the tallest peak in Africa, and I was one of his guides. One night at 4,000 meters we were chatting and he said something I will never forget: “Jim, sometimes the things we most dread end up being the best things that ever happened to us. When I was going blind, all I ever worried about was ending up completely sightless. And then the day came when I saw nothing. And that changed my life. I became better. Stronger. I made a better career than I could have ever imagined. I visited the world. Met amazing people. I have to say Jim, that going blind was the best thing that ever happened to me.”

Imagine that. Joy over being blind!

Many foresaw doom and gloom with excise reform. The jury is still out as we are early in the game. But into month four, it is looking brilliant and the administration has hit the proverbial “home run” and kudos to the DOF and BIR. And, like Erik, perhaps even the unthinkable is true the best thing that ever happened to the local tobacco industry was the recent excise reform.

Sam Miguel
04-04-2013, 08:21 AM
‘Rising tiger’ begins to growl

1:25 am | Sunday, March 31st, 2013

MANILA, Philippines—Interior Secretary Mar Roxas and Sen. Loren Legarda on Saturday attributed the decision of Fitch Ratings to award the country with its first-ever investment grade rating of BBB- from BB+ on the reform-oriented and transparent governance of President Benigno Aquino III.

“It reflects the Philippines’ good fundamentals arising from President Benigno Aquino III’s leadership, enabling takeoff. Our challenge now is to ramp up to cruising altitude, so that we could soar higher,” Roxas said in a phone interview.

Legarda credited her colleagues in Congress for providing the Aquino presidency with the crucial political backing to ensure the success of his legislative agenda.

“We are the great survivor of the financial crisis which hit Europe and other Asian countries. This impetus will lead to sustainable and inclusive growth, thanks to the cooperation of both houses of Congress with the good governance policies of President Aquino,” Legarda told the INQUIRER.

Legarda said she sees global funders and multinational corporations funneling massive investments into the country in the short term.

But “being complimented as a ‘rising tiger’ is not an excuse for complacency,” said Presidential Communications Operations Office Secretary Herminio Coloma.

Coloma said the global excitement on the surging economy of the country is an “inspiration to carry on continuing long-term reforms that will bring about a change in mind set and empower our people to participate in community-building and establish enduring democratic institutions.”

Stable outlook

Fitch Ratings, the first of the three major international debt watchers to upgrade the Philippines, also assigned a stable outlook for the country’s credit rating.

It cited the country’s sovereign balance sheet as being comparable to those of “A”-rated nations, while a “persistent current account surplus, underpinned by remittance inflows” has made the country a “net creditor” from its previous deficit position.

Fitch also noted the economy’s 6.6-percent economic growth for 2012 and the expected 5.5-percent growth for this year, both of which are “stronger and less volatile” than those of BBB-rated peers over the last five years.

Parañaque Rep. Roilo Golez preferred to describe the economy as a “tiger cub” that was “starting to growl.”

He said the Fitch upgrade was “good timing because the US and Japan are starting to reconsider China as investment haven,” explaining that Japanese companies were “under assault there and Apple, an American icon, is being bashed by Chinese state media.”

Another administration ally, Sen. Francis Pangilinan, welcomed the upgrade, but said a lot of work needs to be done “to reach levels of economic growth that will be inclusive and sustainable.”

He pushed for the creation of employment here at home instead of relying on remittances from overseas workers.

Key sectors

“Infrastructure, tourism and agriculture are key sectors we need to focus on if we are to reach developed-nation status in 15 to 20 years’ time,” he said.

On Wednesday, President Aquino credited the trust of the global economy on the Philippines on the accelerated pace of reforms over the last three years.

“This means much more than lower interest rates on our debt and more investors buying our securities. Greater access to low-cost funds gives us more fiscal space to sustain and further improve on social protection, defense, and economic stimulus, among others,” Mr. Aquino said.

For her part, administration senatorial candidate Risa Hontiveros said the investment grade status should result in intensified antipoverty programs and services.

Sam Miguel
04-04-2013, 08:25 AM
S&P seen to follow investment upgrade

BSP scrambles to contain expected surge in liquidity

By Doris C. Dumlao, Michelle V. Remo

10:23 pm | Monday, April 1st, 2013

American banking giant Citigroup expects Standard & Poor’s to affirm Fitch’s recent Philippine sovereign investment upgrade by likewise raising the country’s credit bar.

“We believe S&P may also upgrade soon. We believe two out of three ratings upgrade will represent a strong argument to investors that the country deserves an IG (investment grade) rating,” Jun Trinidad, an economist for Citi Group said.

S&P currently rates the Philippine government at a notch below investment grade, but it was the first to hint of an upgrade when it issued a “positive” outlook on its rating.

But the flipside to the rating upgrade is the strong likelihood of a surge in portfolio inflows that may aggravate the risks the country now faces by having too much liquidity, Trinidad said in a recent research note.

“This may be the reason why the BSP has been moving urgently to put in place a monetary policy framework and correct existing policy settings that hopefully can address … [the] excess liquidity risk that may come with the upgrade,” Trinidad said.

Apart from the liquidity risks, the BSP will need to do something about the pressures on its balance sheet brought on by the pileup in its special deposit accounts, which now amounts to nearly P2 trillion, the economist said.

The special deposit account is a facility where banks can park their excess funds with the central bank.

As such, Trinidad said, the sovereign upgrade may compel the BSP to ease the SDA rate to 1 or 2 percent. The SDA rate has already been slashed by a total of 100 basis points this year, and now stands at 2.5 percent.

Future BSP actions on the SDA may “bode well for the local bond market, although admittedly, the long end has rallied furiously in recent sessions due to previous SDA cuts, strong liquidity and the fiscal story,” Trinidad said.

Fitch’s surprise move to raise the country’s credit to investment grade supports the strong rallies of local financial markets since late last year, when the anticipation of a rating upgrade in 2013 ran high, Trinidad said.

The rating upgrade also removes a key investment obstacle for some offshore funds that may be mandated to invest only in investment grade paper, he added.

[B]“On the real economy side, an investment grade should make it easier to ‘market’ the economy to real investors. Attracting private proponents, including private funding to PPP [public-private partnership] and other infrastructure projects would not constitute a major obstacle with the investment grade,” Trinidad said.

The cost of investing in the country, including investment insurance coverage, may ease with the higher ratings. The investment grade rating can thus provide “additional spark” to investment-driven growth other than fast-tracking the government’s PPP, he explained.

On Monday, Fitch Ratings also upgraded the credit standing of the country’s biggest banks.

In a statement, Fitch said it raised by a notch the Long-Term Foreign-Currency Issuer Default Rating (LTFC IDR) of Bank of the Philippine Island and Banco de Oro.

The two banks now boast of a minimum investment grade of BBB-.

Fitch also raised by a notch the Long-term Local-Currency IDR (LTLC IDR) and Viability Rating (VR) of Banco de Oro to BB+, or a notch below investment grade.

The ratings agency said it raised the support rating (SR) of the following banks following the improved credit standing of the government: China Banking Corp., Rizal Commercial Banking Corp., Security Bank Corp., and Union Bank of the Philippines.

SR dictates the amount of support a bank may get from the government in the event of liquidity crunch.

Meanwhile, long-term local and foreign currency ratings indicate the ability of a bank to meet its obligations to local and foreign investors, respectively. Viability rating indicates an entity’s overall capability to withstand financial stress.

Sam Miguel
04-04-2013, 08:29 AM
The Philippines’ BRICS future

By Dan Steinbock

Philippine Daily Inquirer

2:58 am | Monday, April 1st, 2013

Last week, Brazil, Russia, India, China and South Africa, or the BRICS nations, met for their fifth summit in South Africa. The growth prospects in these economies are no longer immune to the severe debt crises in the West. In the short term, India and South Africa may be at the biggest risk of sovereign-rating downgrade.

Among the emerging economies, the Philippines is best placed for an upgrade. It is favorably positioned to sustain growth in an exceptionally grim international landscape.

During the past decade, I have used much time to analyze and to consult on the transformation of the major advanced and large emerging economies worldwide. After the global crisis of 2008-09, this transformation has only accelerated.

When Goldman Sachs identified the emerging group of potential successors to BRICS a few years ago, the Philippines also made it into the list, in the footprints of two other major Southeast Asian nations—Indonesia and Vietnam—that have attracted much more foreign direct investments so far.

In the aftermath of the Ramos era, the inclusion was based mainly on the economic potential rather than a sustained growth record. In 2002, the Philippines gross domestic product (GDP) still amounted to $81 billion, in current prices. Today, it has tripled to $241 billion.

In the aftermath of the global crisis, the Philippines is one of the few nations in which forecasts are revised up by financial analysts. In January, it reported a 6.8-percent year-to-year growth, which made it the growth leader in Southeast Asia. Almost half of the recent growth can be attributed to private consumption, which has been coupled by investment, especially in construction. Due to the impending mid-term elections in May, government spending will accelerate through the spring.

Business process outsourcing now exceeds the value of the remittances flows. Diversification is accelerating into non-electronic exports. Meanwhile, the Philippine peso has been appreciating significantly, along with resurging capital inflows. The acceleration of domestic demand since the first quarter of 2012 reflects the country’s solid macroeconomic fundamentals, stronger government finances, and high confidence in the Aquino government’s commitment to reform.

Along with current account surpluses and foreign exchange reserves, the growth record has given rise to a more diversified export basket, while shielding the economy from very challenging international headwinds.

Complacency not an option

In the past few months, one investment bank after another has argued that the Philippines is on its path for a bright BRIC future.

The beauty of the BRICS projections is that they allow policy architects to reflect on (very) long time perspectives. The trap of the same projections is that, when they create a sense of inevitability, they can lull even the most promising growth stories into complacency.

In the Philippines, delivering the growth promise is predicated on accelerated structural progress. According to various competitiveness indicators, the country has made dramatic strides in improving competitiveness, often from a very low base. The perception is that corruption and red tape are finally addressed decisively. In addition to the strong macroeconomic performance, the financial sector has become supportive of business activity.

Despite these positive trends, weaknesses remain to be addressed, including the poor infrastructure, various market inefficiencies and labor market rigidities. As the Aquino administration knows only too well, the economy needs to shift from consumption toward investment, both public and private. Sectorally, this requires rising productivity in agriculture, while requiring less dependence on low-wage and low-skill services and more on labor-intensive manufacturing and high value services.

In BRICS economies, such changes have typically preceded periods of sustained growth. However, they have required difficult policy reforms in agriculture, manufacturing, business and labor regulations, and social protection, in order to raise the incentives for entrepreneurship and job creation. In turn, these reforms make possible greater public investment in health, education, and infrastructure.

Inclusive growth

Today, the Philippines is at the verge of receiving an investment-grade rating by the major rating agencies. In the absence of adverse surprises, most agencies are likely to upgrade the Philippines economy within a year and a half, if not sooner. Nonetheless, significant challenges of poverty remain. Growth is not yet inclusive.

Except for Brazil, inequities have typically increased in all emerging economies during their high-growth phases, while job-creation has been strong and unemployment low. In the Philippines, the story is different because labor outcomes have been less responsive to growth. Even in 2011-2012, unemployment rate stayed at 7 percent, while underemployment rate rose to 22.7 percent since the number of full-time jobs declined by half a million in the same period.

In the next half a decade, GDP growth rate in the Philippines could climb close to that of China. In order to be sustained, this growth must become more inclusive, however.

In the Philippines, the BRICS future has potential for a large consumer economy, with some 150-170 million people by 2050. That objective is predicated on huge expansion of consumption, which is only viable through more inclusive growth.

Due to the historical legacies of the Philippine political and economic institutions, there remain strong vested interests in the current status quo. That, in turn, makes vital reforms challenging to implement, as the IMF and the World Bank have argued. However, the Aquino administration has proven able and willing to make difficult decisions.

In all BRICS nations, sustained growth has been neither inevitable nor automatic. It must be made to happen. It must be realized.

In addition to his consulting/advisory activities, Dr. Dan Steinbock is the research director of international business at the India, China and America Institute (USA) and a visiting fellow at the Shanghai Institutes for International Studies (China).

Sam Miguel
04-05-2013, 08:29 AM
Senate may override Aquino veto of Magna Carta of Poor

By Vincent Cabreza

Inquirer Northern Luzon 3:43 am | Friday, April 5th, 2013

BAGUIO CITY—Reelectionist Sen. Francis Escudero on said senators are discussing a possible “Senate override” to overturn President Benigno Aquino III’s recent vetoes of certain bills, including the proposed “Magna Carta of the Poor,” that the senators apparently consider important.

Escudero said the proposed Senate override could also benefit other local measures, such as the Baguio City charter amendment bill.

The senator was reacting to complaints that the President had snubbed vital measures affecting the indigenous peoples of the Cordillera, such as the magna carta and the Baguio charter amendment bill, and his purportedly lukewarm response to a third attempt to create a Cordillera Autonomous Region.

“We have been discussing a Senate override of the President’s veto when Congress resumes in June. When we convene, we can test our convictions regarding those bills,” Escudero said.

Straight talker

But he cautioned against misinterpreting the President. “He is just too honest and is a straight talker,” Escudero said, to explain why Mr. Aquino cited insufficient funds as the reason for vetoing the magna carta.

“Even if the truth is harsh, he will state it because he is honest and trustworthy. The President knew he couldn’t enforce it and his enemies may try to use the law against him. He probably did not want to give the poor false hopes, at least according to his perspective,” he said.

Mr. Aquino announced the veto on March 25, saying House Bill No. 4484 and its counterpart, Senate Bill No. 3309, were phrased in such a way as to require the government to quickly finance new poverty alleviation projects at a cost of P3 trillion, money which the government did not have.

The proposed Magna Carta for the Poor obliges the government to undertake programs that improve the living standards of the poor, who are guaranteed the rights to food, employment and livelihood, quality education, shelter and basic health services.

The President said he would have preferred that the magna carta pursue these programs gradually. He said he had directed Palace officials to develop a financially sound version of the magna carta.

Gradual funding

But Escudero said what the President wanted was a “chicken and egg proposition”.

“What will they do if there’s no money to finance the bill? And yet, what will they do when money is finally available but there’s no law?” he asked.

“That’s why I voted for the magna carta now despite the fund limitations. Can we fund it with 20 percent this year, add more money next year, just so we can improve our services to the poor today?” he said.

Mr. Aquino vetoed the Baguio charter bill (House Bill No. 121 that was renamed HB 3759 in the bicameral conference committee last year) last January. The bill proposes to update Baguio’s 1909 American-designed charter but the President said the bill carried provisions that would impact on national land use policies.

04-17-2013, 10:01 AM
Kinks in the economy

Philippine Daily Inquirer 9:35 pm | Monday, April 15th, 2013 15 84 35

After the euphoria-inducing investment-grade rating given to the Philippines during the Lenten break, a string of not-so-good news has hit the economic front. Foreign direct investments—or money that goes into productive undertakings like tourism, agriculture, or industrial projects—registered a net inflow of $576 million in January, down by nearly half from $1.05 billion posted in January last year. Merchandise exports fell 15.6 percent in February, the steepest decline in more than a year, according to the National Statistics Office (NSO). Growth in manufacturing output likewise eased to 8.7 percent in February, after posting double-digit growth in the previous month, as domestic and global demand for local goods declined.

Revenues from exports declined to $3.74 billion in February from $4.43 billion a year ago. The drop was reported to be the biggest since December 2011, when exports contracted by 18.9 percent. The latest data brought total exports in the first two months of 2013 to $7.75 billion, down 9.4 percent from $8.55 billion in 2012. Global bank HSBC has expressed concern that the decline in electronic exports could indicate that the Philippines is losing its competitiveness in semiconductors, and noted that the first two months of the year showed electronics falling by more than 30 percent. Electronics shipments—which accounted for 39.7 percent of total export earnings—shrank by 36 percent to $1.48 billion in February from $2.33 billion a year ago. The NSO observed that the double-digit decline in electronics exports was also the steepest since the 36.6-percent drop in October 2011.

Businessmen were quick to blame the peso’s strong performance for the decline in exports and local manufacturing output. Donald Dee, vice chair of the Philippine Chamber of Commerce and Industry, was quoted as saying that the peso’s appreciation weighed on local production even as consumption was driving demand; he pointed out that prices of imported goods had become more competitive than those of locally made products. The peso averaged 40.67 to a dollar in February, as against 42.66 in the same month last year.

The peso’s strength is due to the continued remittances from overseas Filipinos and investments in the BPO (business process outsourcing) sector. Add to that the fact that the Philippines is attracting the “wrong” or “unproductive” kind of money. The net inflow of foreign portfolio investments to the Philippines reached $1.09 billion in the first quarter, more than double the $464.45 million registered in the same period last year, according to the Bangko Sentral ng Pilipinas. This is money put mainly in local stocks, which have been experiencing a bull run. It is called “hot money” because of its fickle nature: It can leave as easily as it came in.

And these are not the only kinks in the economy. There are the delays in big infrastructure projects under the Aquino administration’s flagship Public-Private Partnership (PPP) program, including the expansion of the Mactan airport and other regional air terminals, and the connector road for the north and south Luzon expressways. Even the acquisition of additional coaches for the MRT 3 on Edsa is just taking too long. Also, investments in the mining sector are on hold due to the absence of new guidelines to govern the industry.

Governance-wise, the Aquino administration has accomplished a lot in just three years in office. But on the economic front, it has much to do to draw in real foreign investments, boost exports, enhance the agriculture and tourism sectors, and truly strengthen and maintain a resilient domestic economy. Perhaps it can start by listing the structural reforms that it intends to initiate for its remaining three years.

In the past decades, neighbors like Thailand and Malaysia have overtaken the Philippines economically. Bloomberg reported last week that Vietnam’s stock market—a barometer of business expectations for the next year or so—is now being favored by many investors after its communist government promised to open up the economy. Vietnam is preparing to remove bad debts from the banking sector, ease restrictions on foreign ownership of listed businesses, and change its constitution to limit the “leading role” of state companies that comprise about a third of the gross domestic product (GDP), Bloomberg said.

We should not wait for Vietnam to overtake us this time.

04-17-2013, 10:03 AM
Falling exports: Why I worry

By Cielito F. Habito

Philippine Daily Inquirer 9:33 pm | Monday, April 15th, 2013 30 154 103

Philippine export earnings in February fell by a hefty 15.6 percent from last year, the National Statistics Office reported last week. The fall largely traces to an even heftier drop during the same period (-36.5 percent) in our electronics exports, which still comprise our single largest export product category. Global demand for personal computers has slumped in recent months, spurring a deep decline in electronics exports worldwide.

There are upsides and downsides to our recent export trends, but I’m a bit concerned about the situation, for a number of reasons. First, the drop in our exports was deeper than in most of our closest neighbors, except Singapore. Second, we have lagged far behind our Asean neighbors in export performance all these years, so we ought to be catching up rather than falling even farther behind. Third, we are still too heavily dependent on exports of electronics, making us more vulnerable to volatility in just one product.

Against our 15.6-percent drop in February, Indonesia’s exports fell by only 4.5 percent, Malaysia’s by 7.8 percent, Thailand’s by 5.8 percent, and Vietnam’s by 13.6 percent. If it’s any consolation, Singapore’s corresponding 30.6-percent drop was nearly double ours, as it was also hard hit by steeply falling electronics and computer exports. For the first two months of the year, our exports fell by 9.4 percent, against a drop of only 2.9 percent in Indonesia and 2.3 percent in Malaysia. Singapore’s fell by 16.4 percent. But for Thailand and Vietnam, exports actually still grew 4.1 and 22.1 percent respectively in the two months combined. Even as the slowdown in export markets in Europe and North America has affected us all, these comparisons suggest that certain factors peculiar to the Philippines led us to take a bigger hit.

It’s particularly disturbing to see our export growth do much worse than most of our neighbors’, given that we have already been trailing them badly all these years. I recently cited that in 2004-2011, average annual export earnings in our closest Asean neighbors ranged from Vietnam’s $55 billion to Singapore’s $333 billion—yet we only managed $44 billion (“An early Easter gift,” Inquirer, 4/2/13). Indonesia averaged $125 billion, Thailand $154 billion, and Malaysia $174 billion in the same 8-year period. We like to console ourselves that we have the unique element of overseas remittances to compensate for our export shortfall relative to our neighbors’ export earnings. But that’s far from enough; even if we add the $21 billion we got from remittances last year, we are still nowhere close to the kind of foreign exchange earnings that our four original Asean cofounders reap every year. We are too far behind their export performance—even that of relative Asean newcomer Vietnam—that one would have to suspect that there is something structurally wrong with our economy that has led us to this.

Our vulnerability to wider swings comes from our inordinately high dependence on electronics exports, which still accounted for nearly 40 percent of our export earnings in February. But there is good news. Our dependence on these export products had actually already declined significantly in recent years. Up until a few years ago, these products—mostly semi-conductors and circuit boards—accounted for two-thirds (66 percent) of our export earnings. Their export share has eased not so much because electronics exports declined, but more because nonelectronics exports have grown by so much more. This is a positive indication that we are beginning to attain greater export diversification, something we have long needed and must pursue with even more vigor.

Still, our neighbors’ exports are even more diversified, hence less vulnerable to downswings in just one particular product. Looking at our neighbors’ trade data, the highest shares I saw for any particular product category were 31 percent and 22 percent (also for electronics) in Malaysia and Singapore respectively. But agricultural and nonelectronic manufactured exports figure more prominently in our neighbors’ export portfolios, such as fishery products, palm oil, processed fruit, rubber and rubber products, chemical products, pharmaceuticals, and precious gems/stones, among many others.

What are our neighbors doing right that we are not doing? The composition of their exports provides some clues. For one thing, we have long been allocating the lion’s share (an estimated 70 percent) of our agriculture commodity budget to rice—which contributes only 16 percent to the value of total farm output—to the relative neglect of exportable crops such as coconut, sugar, fruits, coffee, cacao and many more. Our agricultural exports are thus uncompetitive, and have in fact declined through the years while those of our neighbors grew briskly. Another difference with our neighbors is our failure to industrialize the way they did. Here’s a stark contrast: In 1990, industrial production made up 39 percent of Indonesia’s GDP, and 34.5 percent of ours. By 2009, industry’s share in Indonesia rose to 48 percent; it went down to 30 percent in our case. A host of reasons are behind that divergent performance, ranging from policy, governance and institutional weaknesses (including smuggling), to “cultural” impediments such as individualistic (“kanya-kanya”) attitudes of many small- and medium-scale Filipino entrepreneurs.

One thing is clear: Fixing our foreign trade is a matter of critical importance in our national economic agenda. And it’s time that we take a long hard look at the problem and come up with a deliberate, strategic and concerted approach to address it.

04-20-2013, 03:52 AM
Hohum. Nothing changed. This is again an example of Cielito Habito's textbook approach to everything. How was your NEDA stint., Mr Habito? NADA.

Parepareho lang sinasabi niyo.

Sam Miguel
04-25-2013, 08:52 AM
Moody’s: PH a rising star

Set to be ‘one of world’s fastest growth rates’

By Michelle V. Remo

Philippine Daily Inquirer

12:02 am | Thursday, April 25th, 2013

The Philippines has grabbed the spotlight amid a lackluster global economy, with a think tank describing it as a “rising star” poised to record one of the fastest growth rates in the world and a credit-rating firm raising its growth forecast for the country.

Moody’s Analytics said in a report released Wednesday that the Philippines is likely to grow between 6.5 and 7 percent this year and within the same range next year, outperforming not only the anemic advanced economies but also many robustly growing emerging markets.

It also said that if favorable economic trends continue, the growth rate for the Philippines could be close to 8 percent by 2016.

“The Philippines has been among the brightest parts of a generally gloomy global picture,” Moody’s Analytics said in the report, titled “Philippines Outlook: Asia’s Rising Star” and authored by its senior economist Glenn Levine.

It said the story of the Philippines was noteworthy, noting that the country swung from being a “perennial underachiever” in Asia until the last few years.

Moody’s Analytics, a sister company of credit rating watchdog Moody’s Investor Service, said the country’s 6.6-percent growth in 2012 was achieved despite weak growth in the United States, a crisis in the eurozone and a slowdown in China.

It said the problems of the United States, the eurozone and China—

key export markets—significantly dampened the performance of other economies last year.

Sustainable growth

The Philippines, however, managed to temper the drag of a weak external environment because of a strong household consumption, a nascent rise in private investments and a spike in government spending.

S&P’s rosy forecast

“This impressive rate of GDP [gross domestic product] growth [last year] looks sustainable, as risks are low and most sectors of the economy are growing solidly. We expect GDP growth to remain in the 6.5 to 7-percent range in 2013 and 2014, making the Philippines one of the world’s fastest-growing economies,” Moody’s Analytics said.

Echoing a similar tune, international credit-rating firm Standard & Poor’s has raised its growth forecast for the Philippines for this year from 5.9 to 6.5 percent. At the same time, it said the economy was expected to post another robust growth of 6.3 percent in 2014.

S&P’s updated growth projections for the Philippines were cited in its latest report on Asia, which it said would grow by a decent pace this year and next year as a region. But, it said, the impact of external factors on individual countries would vary.

Domestic demand strong

The credit rating agency said the advantage of the Philippines—together with a few neighbors namely China, Indonesia, Malaysia, Thailand and Vietnam—was that domestic demand was strong and so any adverse impact of weak global demand on the country’s exports would not significantly harm its overall growth.

“China and the Asean 5—Indonesia, Malaysia, Philippines, Thailand and Vietnam—are more domestically driven and, therefore, continue to enjoy relatively high and stable growth rates. This is not the case elsewhere,” S&P said in the report, titled “Emerging Asia Will Grow but Won’t Be Firing on All Cylinders.”

S&P also said that unlike other countries, the Philippines and the rest of the Asean 5 were not expected to suffer from the weakening yen, a trend that has alarmed advanced economies and some Asian economies.

Weakening yen

This was because the Philippines and the four other Southeast Asian economies were net importers of goods from Japan. A weakening yen, therefore, would actually be beneficial as this would make Japanese imports cheaper.

Anticorruption agenda

Moody’s Analytics, meanwhile, highlighted the benefits of the anticorruption agenda of the Aquino administration.

It said the reform programs of the current administration had significantly improved business sentiment in the Philippines.

“The government’s 2011-2016 development plan provides a five-year blueprint for growth and development, providing transparency, predictability and accountability. The crackdown on corruption and encouragement of local and foreign investments, in particular, have worked well,” it said.

Sam Miguel
04-25-2013, 08:53 AM
MV Pangilinan: Allow private sector to actively help end poverty

By Gil C. Cabacungan, Michael Lim Ubac

Philippine Daily Inquirer 2:26 am | Thursday, April 25th, 2013

A top businessman on Wednesday called on Malacañang to include the private sector in mapping out fresh antipoverty programs as lawmakers blamed income inequality for chronic poverty amid robust economic growth.

Manuel V. Pangilinan, chairman of the Philippine Long Distance Telephone Co., said the government should allow the private sector to take an active role in ensuring that economic growth was shared and enjoyed by all classes.

“The imperative is inclusive, not exclusionary, growth. Business and government need to work together to identify areas that offer the higher levels of employment and income to our people—agriculture and tourism, for instance,” Pangilinan said.

Work in progress

Malacañang said eradicating poverty in the country was “not an overnight thing.”

President Aquino’s spokesman, Edwin Lacierda, largely blamed the high level of poverty incidence on the lackluster performance of the agricultural-fishery sector.

“But again, this (defeating poverty) is not overnight. This is a work in progress and hence, for that reason, we also need support from both houses of Congress,” Lacierda said.

He also said the NCSB report was already dated. “These are all historical data. So the survey … the press conference on the poverty incidence was (based) on the first semester of 2012,” he said, but added:

“We have already identified the areas where we need to improve on: in the agricultural sector.”

Pangilinan added that government should provide the guidance, encouragement and rewards. “Business should mobilize the resources for development. The franchise to inclusive growth is not the exclusive province of either business or government—neither can accomplish it alone,” he said in a text message.

Pangilinan was reacting to the report of the National Statistical Coordination Board (NSCB) on Tuesday that poverty incidence had remained unchanged since 2006 amid high economic growth. The NSCB said poverty incidence in the first semester of 2012 was 27.9 percent, “practically unchanged” from the same period in 2009 (28.6 percent) and in 2006 (28.8 percent).

Trickle down doesn’t work

“Even if we build all the infrastructure that we need, only the rich and educated will benefit the most because they will know how to use them properly and productively, unlike the poor and uneducated,” said Sen. Ralph Recto in a text message.

He said only the educated class or the entrepreneurs and professionals would benefit from economic growth, leading to income inequality and the rich getting richer and the poor poorer.

“Trickle down really does not work. High growth even leads to greater inequality even when it brings significant numbers out of poverty,” said Akbayan Rep. Walden Bello.

Recto said the government had the tools to break the paradox: Higher spending (specifically in education) and taxation.

Recto pointed out that expanding the middle class would also help in spreading the wealth across all classes. “We must allow for more private sector investments in infrastructure, factories and food production to create more jobs and build the middle class. Government does not create jobs. It is the private sector,” he said.

He said the country needed to grow at a faster rate of at least 10 percent for a long period of time to reduce poverty to less than 10 percent by 2020.

To spur agri growth

Both Bello and Recto said that the centerpiece antipoverty tool of the government, the conditional cash transfer program, had been helpful. Bello said the results would be felt in the medium to long term.

Lacierda said the challenge was to spur growth in agriculture to create more jobs, increase production and ensure that the production translates to a greater income for farmers since the bulk of the population was still in the agricultural sector.

Looking at the bright side, Lacierda noted that private investments had increased, and that public infrastructure spending in 2012 was around P250 billion.

Reacting to the NSCB data, Norio Usui, senior country economist for the Asian Development Bank, said on Wednesday that the government must solve the problem of jobless growth if it hoped to reduce poverty.

Sam Miguel
05-03-2013, 09:01 AM
Phl gets second investment grade

By Prinz Magtulis

(The Philippine Star) | Updated May 3, 2013 - 12:00am

MANILA, Philippines - The Philippines has received its second credit rating upgrade in just over a month – this time from Standard & Poor’s Ratings Services (S&P).

In a statement, S&P said yesterday its credit rating for the country went up a notch to BBB- with a stable outlook.

Fitch Ratings raised its rating for the Philippines to the same level last March 27.

“This investment grade rating is another resounding vote of confidence on the Philippines and an affirmation of what the markets already recognize – that our economy’s underlying soundness is on par with countries rated investment grade or higher,” Finance Secretary Cesar Purisima said. “For now, we must redouble our efforts to remove the remaining constraints to our growth if we are to reach even greater heights.”

For Bangko Sentral ng Pilipinas Governor Amando Tetangco Jr., the S&P upgrade “undoubtedly cements the Philippines’ status as an economy with one of the brightest prospects globally.”

Of the three major credit raters, only Moody’s Investors Service placed the country one notch below investment grade, at Ba1. But it stressed its “positive” outlook, and hinted at upward revision soon.

“We are very pleased that S&P, along with Fitch, has also now affirmed the Philippines’ strong economic and fiscal gains, progress that has been made thanks to the discipline and prudence in financial management instilled by President Aquino in his administration,” Purisima said.

“Truly, good governance – tuwid na daan (straight path) – is bringing structurally sustainable growth for the Philippines,” he added.

“This momentous achievement is cause for celebration, but be assured that no one in public service rests on this laurel. Rather, we are spurred on ever harder to build a better Philippines, for today and tomorrow,” the Finance chief said.

“Once again, I salute S&P for recognizing the strength and possibility of our country and our economy. Their seal of approval is symbolic of the new standard that Filipinos can come to expect from their government,” he added.

The latest upgrade has put the Aquino administration on track in its goal of bringing the country to investment grade territory this year. With the development, more foreign investments are expected to come in and more credit avenues are expected to open up.

“The upgrade on the Philippines reflects a strengthening external profile, moderating inflation, and the government’s declining reliance on foreign currency debt,” S&P credit analyst Agost Benard said in a statement.

The New York-based agency also raised its ratings for the BSP, the National Power Corp. and the Private Sector Assets and Liabilities Management.

The peso strengthened to a near three-week high after the S&P announcement at 3:44 p.m. and closed at P41.05 to a dollar yesterday.

In raising the country’s creditworthiness, S&P noted the Philippines’ “substantial” foreign reserves, comprising mostly dollar investments and remittances. Reserves stood at $84.1 billion as of the first quarter, data showed.

The government’s balance sheet has also remained in check, S&P said, helping reduce the need to borrow – consequently lowering debt levels. As of March, the budget deficit stood at P66.478 billion, or below forecast.

“The Philippines’ improved inflation environment is also a rating support. Despite some shortcomings in monetary policy transmission, inflation is low and fairly stable, helped partly by currency appreciation,” Benard said.

Consumer prices were at 3.2 percent as of March, or still within the central bank’s three- to five-percent target for the year.

A low per capita income – a measure of how much growth has been distributed to the population – remains a key rating constraint, S&P said.

Based on its estimates, the country’s per capita income can rise to $2,850 by year-end.

S&P also said its rating for the country is likely to further improve if proposed measures designed to generate more revenues and allow more foreign investments are enacted into law.

“We may also lower our ratings if problems at one of the large conglomerates impair investor confidence, or if political developments cause the government to veer from its commitment to improving governance,” it added, without elaborating. With Zinnia dela Peña

05-04-2013, 10:08 AM
Neda recommendation a huge mistake

By Solita Collas-Monsod

Philippine Daily Inquirer

11:06 pm | Friday, May 3rd, 2013

After more than four months of review, the National Economic and Development Authority has recommended that the national government continue its support of Apeco (Aurora Pacific Economic Zone and Freeport Authority) in managing and operating the expanded special economic zone (12,900 hectares) now called the Aurora Pacific Economic and Freeport Zone (APEFZ).

A huge mistake. One that is comparable, sadly, to its NBN-ZTE fiasco during the Arroyo regime. While the Neda staff has tried to protect itself by putting in a number of caveats on Apeco’s future operations, the caveats and their justification only serve to induce the Reader to ask the question: Why the go-ahead signal, in the first place?

The huge mistake has at least three aspects, the last two of which have to be fatal to the conclusions that are made (i.e., game-changing/deal-breaking).

The first aspect is that while the executive summary of the Neda study was submitted to the Office of the President last April 18, the whole study will be available only after “a few weeks” (from April 30).

Now this wide gap between the submission of an executive summary and the entire report is not “normal.” The executive summary, after all, is exactly what it sounds like—it summarizes what is in the main body of the report. So there should not be any gap whatsoever. The gap—and a wide one at that—can mean either one or even a combination of two things: One is that this is a situation where a conclusion comes first, with the findings supporting that conclusion having to be tailored during the interim. Another implication is that this is an attempt to postpone facing the political fallout until such time that the damage would be minimized.

Neither implication would be flattering to the Neda or to the Aquino administration. In fairness to the Neda, though, if it was indeed a here’s-the-conclusion-come-up-with-the-study situation, the executive summary shows that the staff wasn’t going to follow meekly. The number of caveats and the final statement of the summary attest to that. But that is really cold comfort.

The second aspect of the huge mistake is that reading just from the executive summary, it is clear that the Neda was jumping through hoops in order to get the project to achieve an Economic Internal Rate of Return (EIRR) of almost 20 percent (15 percent is the minimum acceptable).

Everything else remaining the same, the smaller the costs of a project, and the greater the benefits, the higher the EIRR. So what were done to get the costs of Apeco/APEFZ as low as possible? For starters, all the previous expenditures undertaken by the economic zone—from 2008 to 2012, or the first five years of its existence—were disregarded. The justification here was that they were “sunk costs”—water under the bridge. Marginal analysis, after all, means comparing extra costs and benefits. Which is correct, but it should be applied to the entire project, rather than that part that still has to be done.

That a feasibility study estimating, among other things, the EIRR wasn’t done before the laws creating the economic zone and the free port were passed is already an egregious error. Treating all previous expenditures (lowest estimate P800 million, highest estimate P10.7 billion) as “sunk costs” and therefore ignoring them does not penalize, but rather rewards, that error. The message to politicians would be: Undertake a project even without the necessary feasibility study, because when the Neda comes in to review, all your previous expenditures will be disregarded (no matter how wasteful or corrupt).

But wait. That’s not the only thing that was done to lower the costs. The cost of the 121-kilometer Baler-Casiguran road (Casiguran is where the Apeco corporate campus is)—estimates ranging from P2.3 billion to P5.1 billion—undertaken after the law was passed, was also not included, because “it would have been built anyway,” even without Apeco. The cost of rehabilitating the existing Casiguran airport wasn’t included, because it was funded by the Civil Aeronautics Authority (what, aren’t these government funds?).

Worse, it looks like the cost of building an international seaport wasn’t included either, because, as I understand it, the project did not pass muster with the Neda (the only one so far that I know to have been submitted to it). Of course, the question is: If there is no seaport, and the airport (which has never, in the five years of the ecozone’s existence, seen a commercial flight) is for small planes, then the freeport/ecozone concept is useless.

Nor were enormous costs to the economy of smuggling that seems to be standard practice in all freeports (e.g., Subic, Cagayan, Poro Point) taken into account.

Now how were the benefits enlarged? How about assuming, contrary to the experience of other Philippine freeports and ecozones, that the targeted locators would be in place by 2017 (for the so-called agri-aqua ventures) and by 2024 (for “light industries”)? Or assuming that all the outputs would be absorbed by Aurora and its neighboring provinces (not taking into account other ecozones in the area)?

The third aspect of the huge mistake is the implicit assumption that all the caveats listed that still need to be fulfilled in order for the benefits to take place, and for the costs not to balloon, would indeed be fulfilled: a master plan, a land-use plan, feasibility studies for various projects, other operational plans, coordination between stakeholders, government and civil society, environmental safety measures. That is a heroic assumption.

Sam Miguel
05-07-2013, 08:37 AM
Investments and ratings

Philippine Daily Inquirer

9:43 pm | Monday, May 6th, 2013

International credit watchdog Standard & Poor’s Ratings Services affirmed last week the Philippines’ investment-grade status, a month after Fitch Ratings gave it its first investment-grade credit rating. Malacañang spokesperson Edwin Lacierda, Finance Secretary Cesar Purisima and Bangko Sentral ng Pilipinas Governor Amando Tetangco all credited the good governance platform of President Aquino for the upgrade. They said the S&P action would trigger an influx of investments that, in turn, would fuel and sustain the economy’s stellar growth. Will it, really?

The term “investment grade” historically referred to bonds and other debt securities that bank regulators and investors viewed as suitable investment outlets. Now, the term is broadly used to describe issuers like governments or corporations with relatively high levels of credit-worthiness and credit quality.

In its latest ratings action, S&P cited the Philippines’ increased ability to pay its foreign debts, as evidenced by its dollar reserves that currently stand at about $84 billion and are driven largely by remittances from Filipinos overseas, foreign investments in the business process outsourcing sector, and “hot money” (foreign investments mainly in the local stock market). S&P also noted the Philippine government’s declining debt burden, which it attributed to a nearly decade-long effort to improve tax collection. After peaking at 74 percent in 2004, the ratio of the government’s outstanding debt to the country’s gross domestic product declined to about 50 percent by the end of 2012 and is projected to fall further to 47 percent by yearend. “The current and previous administrations improved fiscal flexibility through restraining expenditures, reducing the share of foreign currency debt, deepening domestic capital markets and more recently through modest revenue gains,” S&P said.

But S&P did not say that foreign direct investments would start flowing to the Philippines. What exactly do credit ratings mean? Here is what S&P has to say: Credit ratings are opinions about credit risk. S&P ratings express the agency’s opinion about the ability and willingness of an issuer, in this case the Philippine government, to meet its financial obligations in full and on time. They are just one factor investors may consider in making investment decisions. Credit ratings are not guarantees of credit quality or of future credit risk.

While the forward-looking opinions of rating agencies can be of use to investors and market participants who are making long- or short-term investment and business decisions, S&P pointed out that credit ratings are not a guarantee that an investment will pay out or that it will not default. While investors may use credit ratings in making investment decisions, S&P said, its ratings are not indications of investment merit. In other words, the ratings are not buy, sell, or hold recommendations, or a measure of asset value. They speak to one aspect of an investment decision—credit quality—and, in some cases, may also address what investors can expect to recover in the event of default, it added.

“In evaluating an investment, investors should consider, in addition to credit quality, the current makeup of their portfolios, their investment strategy and time horizon, their tolerance for risk, and an estimation of the security’s relative value in comparison to other securities they might choose. By way of analogy, while reputation for dependability may be an important consideration in buying a car, it is not the sole criterion on which drivers normally base their purchase decisions,” S&P said.

Foreign investors entered the banking sector in the 1990s and the retail sector starting in 2000 when the Philippines was not investment-grade. They also recently entered the mining industry when the Philippines was not investment-grade. They did so because the government allowed them to—by removing restrictions and other barriers that were provided in the Constitution and in laws and regulations.

Purisima said something very significant when he was asked to comment on the S&P upgrade last week. In a TV interview, he said the Aquino administration was preparing measures that would open up certain sectors of the economy to foreign investors, economic activities that would not need time-consuming congressional action to amend the Constitution.

Now that—and not a ratings upgrade—will really excite investors.

Sam Miguel
05-07-2013, 08:48 AM
Policy-based evidence making?

By Cielito F. Habito

Philippine Daily Inquirer

9:40 pm | Monday, May 6th, 2013

Fellow Inquirer columnist Winnie Monsod was quite disturbed—nay, agitated—as we discussed the advance executive summary recently submitted by the National Economic and Development Authority (Neda) to the President, of its assessment on the controversial Aurora Pacific Economic Zone and Freeport Authority (Apeco). As former heads of Neda, we were pained by the prospect that our beloved institution may have been pushed into what she termed in her Saturday column a “here’s-the-conclusion-come-up-with-the-study” situation. Others call it “policy-based evidence making,” a tongue-in-cheek play on the widely held ideal of “evidence-based policy making.” On reading the paper, I could sense the agony that must have gone into its preparation, based on the equivocation that marks the document, and on its heavily nuanced recommendations.

Such ambivalence goes farther back. Last December, when 120 Casiguran residents trekked to Manila to protest the project, I wrote of the seemingly reluctant reference to Apeco in the Regional Development Plan (RDP) for Central Luzon, the formulation of which was spearheaded by Neda’s Region 3 office. “Years have passed since the establishment of most of these economic zones,” the RDP notes, “and … there remain large tracts of lands within the proclaimed areas that remain unoccupied and undeveloped.” Truth to tell, the Regional Development Council and Neda Region 3 played no prominent role, as they normally should have had, in the conceptualization and planning of Apeco; they had to take it as a given.

This was because the special economic zone (SEZ) managed by Apeco came about via Republic Act 9490 enacted in 2007, covering 496 hectares of land in Casiguran. RA 10083, which President Aquino did not sign but lapsed into law in 2010, later expanded it more than 25-fold to 12,923 hectares by including the entire San Ildefonso Peninsula. Aimed to bring development into this erstwhile depressed area of Luzon, Apeco has had difficulty attracting major investors. Meanwhile, the latest poverty statistics released recently by the government show poverty in the province worsening by over 10 percentage points, from 20.4 percent of families in 2009 to 30.7 percent in early 2012.

There is little to be surprised about in this turn of events. From an objective business standpoint, Apeco would be far less attractive than several SEZs and freeports previously existing and still highly wanting of locators in Central and Northeastern Luzon (including Clark, Subic and Cagayan). The area it lies in is not even connected to the Luzon power grid. The province’s official website states that a “power generating plant in Casiguran provides a maximum of 20 hours of power supply for the northern municipalities of Dinalungan, Casiguran, and Dilasag.” The Neda paper cites studies “showing that the ecozone could benefit from tapping renewable energy (RE) sources. Apeco’s plan to install its own 1-megawatt solar power plant … needs revalidation. Solar energy is not necessarily the cheapest RE source of electricity. Considering investment costs, options for power such as procurement of diesel generator sets, hydropower, biomass-based power production, including connection to the grid, in the long term, may be studied further.” Neda agonizingly beats around the bush (one of several instances in the document), when the simple message is that lack of ample reliable power is a formidable constraint to the zone’s viability, thereby needing more careful study.

It’s a puzzle how Neda managed to calculate economic rates of return—to the precision of two decimal places—for the continued development of Apeco, even as it laments the absence of a master plan, normally a fundamental basis for such appraisal. The original master planner hired in 2008, Palafox Associates, is mentioned to be currently in a legal case with Apeco. But it apparently failed to consider that Felino Palafox Jr. had testified in a Senate inquiry that the Apeco site is “subject to flooding, liquefaction and storm surge,” posing severe questions on the environmental integrity of the area development, and dramatically raising required engineering costs. A second firm subsequently prepared a master plan, which Neda deems no longer applicable after Apeco shifted direction toward an agri-aqua-tourism-light-industries hub. Under such circumstances, and given uncharacteristically optimistic (“heroic,” in Winnie’s estimation) assumptions that went into the economic appraisal (for example, achievement of 100-percent investor targets within a few years, and others she raised), I’d say the advisability of pursuing Apeco remains wide open to question.

What’s clear to me is that basic road, energy, water and communication infrastructure long lacking in Aurora province must be provided without delay, if its residents’ lives are to be uplifted through expanded economic activities and better linkage to markets. Apeco’s proponents may have hoped to force the national government’s hand on these basics by “putting the cart before the horse.” What remains far from clear is whether it’s in everyone’s best interest to sink even more substantial resources into that “cart,” whose economic, social and environmental viability relative to many other similar SEZs already in place invites so much debate.

Meanwhile, the Casiguran marchers are again in town, having walked hundreds of kilometers anew to draw public attention to the continuing uncertain plight of the thousands of families they claim to represent. They had hoped Neda to be their hero. Winnie and I fear that it is reluctantly allowing itself to become their villain instead.

Sam Miguel
05-08-2013, 10:03 AM
Do we have an economic game plan?


By Boo Chanco

(The Philippine Star) | Updated May 8, 2013 - 12:00am

Beyond the press releases and statements of intentions, do we honestly have an economic game plan? If you ask the folks who continue to put their money on SDA accounts, I guess their answer is no. They would rather let the BSP have their money for safekeeping at an interest rate lower than inflation because something is still not right with the investment climate.

Maybe, somewhere in the mess that passes for government thinking on economic policies, there is a game plan or an idea of it. But I wouldn’t bet on it. Government agencies are acting at cross purposes and P-Noy has failed to take on the role of an orchestra conductor so what we hear will finally be music to our ears. Now it is all noise… nothing but noise.

It is amazing really. The BSP cuts the rate it pays for SDA accounts and the deposits grew from P2 trillion to almost P3 trillion now. I guess it shows folks with cash still don’t trust the economy or the government enough to invest in the equity bull market or in some venture in the real economy. They would rather let BSP keep their money and earn next to nothing while they wait for better signals to invest.

Those two investment grade ratings are like diplomas on the wall. Proud as P-Noy and his Cabinet economic cluster may be about these diplomas, real people have yet to feel the good times press releases say the upgrades herald.

Perhaps, the real test is not in convincing the credit rating agencies to give us the upgrades. It is FDI P-Noy should focus on because that’s what creates jobs and is a better measure of what a healthy economy is about. Investors, local and foreign, are looking for just about the same things.

Let me guess. They will be really impressed if P-Noy can improve coordination in policy implementation. They will also be impressed if he could get the infra agencies like DOTC working on projects on the ground and not just on their desktops.

It is nearly half time and if the bureaucrats can dribble the ball of progress for three years, what’s three more years? Before we realize it, P-Noy is preparing to evacuate Malacañang for his usual digs at Times Street.

The week I wrote a series of columns on the delayed schedule of DOTC projects, I was told the Cabinet Economic Cluster met to precisely speed up the projects. I understand the President is not happy with the prospect no major projects will be completed before his term ends.

What happened afterwards is vintage DOTC. Sec. Jun Abaya told reporters that they will meet their deadlines and P-Noy will inaugurate those projects. Words, unfortunately, are cheap.

Then there is Tourism Sec. Mon Jimenez and his target of 10 million tourists. I don’t think there is a cabinet member more fired up and more frustrated than Sec. Mon. His tourism campaign abroad is gaining traction but infra bottlenecks at home mean he can’t bring those prospective tourists here.

Sec. Mon did a great job convincing DOF Sec. Cesar Purisima and Congress to let go of a much complained about tax on foreign carriers. But guess what? The foreign carriers can’t come back anyway because flights to NAIA are curtailed… congested already. The other regional airports including the key airport in Kalibo for the premier tourist destination of Boracay are ill-equipped to handle even current flights.

Hotels aren’t just going to materialize too. The private sector must invest in building those hotels. We have promised those investors some fiscal perks under the groundbreaking Tourism Law. But implementation has gone awry.

The incentives need implementing revenue regulations, and the DOF and the BIR have not issued those regulations to this day. Investors took our government’s word for it, but now don’t know the status of our promise. Over P100 million have already been invested in the three designated Tourism Economic Zones (TEZs).

Worse, the Board of Investments issued a rule that limits the perks for investors in Manila, Cebu and Boracay. PEZA also limited the creation of new TEZs in these same key tourism markets. This must make Sec MonJ feel like a fool representing a government that is not coordinated… says one thing and does another…

P-Noy has been getting raves for his Daang Matuwid. But like the poverty statistics that disappointed an incredulous P-Noy, the latest annual review of corruption in Asia by Political & Economic Risk Consultancy (PERC) indicates the corruption needle hardly moved.

In a report released March 20, 2013, PERC still rates us at 8.28 or the third highest after India and Indonesia. The closer the rating to 10, the more corrupt the country. We rated 8.25 in 2010; 8.90 in 2011 and 9.35 in 2012. PERC obtained the scores for this latest survey by averaging responses from at least 100 expatriate executives working in each of the countries surveyed.

“The respondents (there were 2,057 in total) were directly assessing political leaders, civil servants and key national institutions for their propensity for participating in corrupt activities. They also gave their opinions on the degree of success that different countries are having in fighting corruption, the extent that corruption hurts the overall business environment…”

P-Noy should worry that his flagship program, Daang Matuwid is in trouble. That’s probably why even if foreign analysts praise him for it, FDI is not coming in. Only short term “hot money” is cashing in on our good reviews.

Unless we do something drastic, that second upgrade from S&P is probably not going to make a difference in a way that would matter to us… While that upgrade means investors like San Miguel and Metro Pacific can borrow cheaper abroad for infra projects, government approval of their projects is taking too much time. We will likely miss a good opportunity the upgrade is giving us.

Economist and National Scientist Raul Fabella wrote about a month ago about his fear we face another episode of wasted opportunity. The Philippines, he said, is notable for wasting opportunities.

Here is how Dr Fabella puts it:

“The annals of underdevelopment are filled with chapters on failures due to wasted opportunities… in the late 1970s, the Philippines faced the opportunity of almost unlimited foreign borrowing at negative real interest rate. The authorities borrowed to the hilt among others to finance the ill-fated 11 industrial projects, mostly tradable import substitutes (cement, petrochemicals, steel, copper, etc). These didn’t stand a chance between two grindstones: the anti-Filipino strong peso policy and the additional cost of up-front payolas.

“Taiwan had at the same time a program of 10 major industrial projects, most of which were public infrastructure (highways, airports, etc) that paid for themselves and then some.

“Paul Volcker’s war on inflation sent global interest rate soaring and doomed the Philippines’ major projects to sudden demise. The resulting debt overhang was the millstone that mocked the Cory Aquino economic recovery. Unable to show convincing economic dividends from restored democracy, it became hostage to the misguided ambitions of the Enrile-Honasan clique.

“In the 1990s, at the height of excitement over the Ramos capital account liberalization and deregulation, foreign resources were once more knocking at the door.

“But the tsunami was dominated by portfolio investment which cared little for good roads, the price of power and stable regulatory environment. They instead cared for and helped along price bubbles in the stock and real estate markets…

“Foreign direct investment (FDI), by contrast, kept well clear, frightened by the strength of the peso, the grossly inferior regulatory and physical infrastructure.

“To confound matters, the 1990 Supreme Court decision on the ‘Garcia versus DTI’ case cynically wrested the location decision of a petrochemical project from investors who promptly packed their bags.”

Honestly, nothing much has really changed. Even the Supreme Court and the court system in general are driving investors away, e.g. the PLDT ruling. The foreign chambers of commerce tried to help by working on a detailed Arangkada plan but the progress had been slow and painful.

The National Competitiveness Council, where private and public sectors work, have been trying to make our country attractive to investors. But the NCC isn’t getting much support from the country’s leadership. One initiative to make NAIA 1 better was quickly rejected.

The challenge for P-Noy after the election is to show potential investors he has an economic game plan. He got them all excited with the PPP during the first months after his election only for the program to fizzle out. It will take more to excite investors this time around. Let us not miss this opportunity again.

Hospital sign

Robin Tong sent this.

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Donate your eyes to the eye bank!

Sam Miguel
05-09-2013, 08:23 AM
PH warned against risks of ‘overheating’

S&P says key is proper management of foreign inflows

By Michelle V. Remo

Philippine Daily Inquirer

2:57 am | Thursday, May 9th, 2013

Standard & Poor’s has warned that the Philippines faced risks of overheating that could materialize unless surging foreign capital inflows were properly managed.

The warning came after the country recently attained investment-grade credit ratings from S&P and Fitch and in light of concerns that the favorable ratings, although a very welcome development, could result in the excessive inflow of foreign portfolio investments.

Agost Bernard, associate director for sovereigns rating at S&P, said there should be strict policies on managing growing liquidity in the economy to ensure this would not result in financial-sector instability and an overheating economy.

“The immediate risk [for the Philippines] is the increasing capital inflows. These flows are going to accelerate only if these are not managed properly. These can lead to an overheating economy and put pressure on the banking sector,” Bernard said in a video commentary posted by S&P on its website.

Following the ratings upgrade from Fitch and S&P, the Philippine Stock Exchange index (PSEi) has risen to new highs. Interest rates on government securities also eased on the back of heightened demand.

Economists have warned that the Philippines was vulnerable to rising foreign investments in real estate since real-estate regulations in the country were more relaxed compared with those in China, Hong Kong and Singapore.

Although foreign portfolio and real-estate investments were welcome, economists said excessive amounts have a tendency to accelerate asset price inflation and cause bubbles.

The Philippines last year grew by 6.6 percent, beating most projections and registering one of the fastest growth rates in Asia.

Sam Miguel
05-09-2013, 08:34 AM
Some new laws to chew on


By Rey Gamboa

(The Philippine Star) | Updated May 9, 2013 - 12:00am

My tokayo, Rey Dyquiangco, a retiree and former director of the defunct camp John Hay Dev. Corp., sent a wishlist of laws that he believes needs to be urgently enacted by the incoming Congress to sustain the country’s economic growth.

While this is intended as a guide for voters when choosing their candidates in the forthcoming elections, it could also form part of a longer list that our newly elected officials may wish to look at in the coming months ahead. There are three items that I have singled out for now.

We can continue expanding this list in forthcoming columns. Meantime, here are the items I chose from Dyquiangco’s enumeration:

Economic labor zones

“I completely agree with the observation of former NEDA Secretary Gerardo Sicat that the passage of an enabling law that will create “economic labor zones” in depressed towns and provinces will create employment opportunities.

“Right now, we are losing a lot of foreign investments to the competition of low wages offered by Indonesia, Vietnam and soon Myanmar or Laos. The issue here is simple: to have employment or no employment at all. This will not be exploitation of labor but rather an opportunity for employment.

“As part of the role of the National Wages and Tripartite Board, zones should be identified every three years through a “list of inclusions” that will allow an outright reduction of prescribed wages of not less than 75 percent or even 70 percent.

“However, the compulsory minimum coverage of SSS/ECC, PhilHealth and Pag-ibig is required to allow such members to benefit in these programs. This will definitely encourage businesses to locate at depressed regions in the Philippines.

“However, the business entities that operate in these areas will be required to undertake a prescribed gain-sharing arrangement equivalent to 10 percent of their audited net profits after taxes as declared in the filed income tax return.

“In short, business is given the opportunity to pay lower salaries rates but is required to share the business profits to their employees. This is a realistic compromise to lower wages.

Split the DOTC

“Our present situation of letting DOTC handle the transport and communications program under one government agency is unrealistic.

“Transportation covers land, air and water transport licensing and franchising, integrated fast rail systems, airports, seaports (PPA). This alone is a heavy responsibility.

“There is a need to give priority development for fast train systems nationwide that would carry both passengers and cargo to their destinations at a cheaper and faster rate.

“As an archipelagic country, we need to improve our maritime capacities like large scale catamarans and ship building capacities with emphasis on roll on-roll off capacities.

“Communications and information technology should be a separate department that will handle communications, bandwidth allocation, radio TV licensing, railroad and utility post/tower, right of ways among others.

“We have to recognize that the next stage of business revolution will be in information and communications technology, which are being fused into an integrated technology and we must be prepared for it.

Clustering agencies

“The present practice of regional or government centers, spread out in different rented building, is not taxpayer friendly, and incurs a lot of rental expense that is another source of corruption. The cost of rental when summarized will be a shock to DBM.

“To address this, government should undertake a BOT/ PPP program for the building of these regional/ government centers on a lease-purchase basis under the PPP program.

“The idea is to allow the private sector to build each cluster or a whole set of clusters … and place it on a lease-purchase arrangement over a period of 25-30 years. After that, government will own the land and buildings.

“Government agencies belonging to the same cluster must be located adjoining each other in a regional or government center allocated from public lands (if available).

“To maximize the effect of savings, at the center of each cluster will be a common service center that will have a shared secretariat, seminar/ conference, events place, and hostel to save on manpower, tech support, secretarial staff and computer equipment needs.

“All vehicles will be transferred (except that of the regional director) to a common motor and drivers’ pool for joint use by all the agencies concerned upon scheduled request. This will avoid unnecessary use of government cars as they are all parked in the motorpool. To pinpoint vehicle use and responsibility, each unit is assigned to only one driver.

“In the common service area, the private sector can provide the facilities on a BOT basis and operate these for a fee. This could include a food court, hostel and conference center. This common area, after the PPP period, will be transfered to government, with the maintenance and operations processes once again bid out.

“To strengthen this program, there may still be a need to pass an enabling law in order to force subsequent presidential administration to comply with this operational process.”

Freedom of informed choice

As an ender, let me share the letter sent by Jerry Quibilan, who calls himself a crusader for peace, prosperity, unity and love.

“Your article is very apt and informative. ‘Making an informed choice’ reminds me an event during the third quarter of 2010.

“Shortly after the opening of the 15th Congress, Representatives Edsel Lagman and Rufus Rodriguez were guests at the then Kapihan sa Sulo, now Saturday Forum @Annabel’s hosted by former Rep. Jonathan dela Cruz.

“The topic discussed was the RH bill. During the presentation of Lagman, he frequently mentioned “freedom of choice.” When I was given the opportunity to raise a question, I commented first by saying: “Cong Edsel, while freedom of choice is everybody’s right, its result may not be positive or effective due to the lack of correct information or education. I suggest that we insert ‘informed’ and make it ‘freedom of informed choice’.

“Since then Cong Edsel always used ‘freedom of informed choice’.”

Let’s all go out and vote and exercise our freedom of informed choice on Monday, May 13.

Sam Miguel
05-10-2013, 09:44 AM
Complying with US Foreign Account Tax Compliance Act: Is it worth the pain?

By Francis Lim

Philippine Daily Inquirer

11:12 pm | Thursday, May 9th, 2013

On March 18, 2010, President Barack Obama signed into law the Foreign Account Tax Compliance Act (Fatca).

The Fatca was envisioned primarily to combat offshore tax evasion and recoup federal tax revenues. It enhances the ability of the US Internal Revenue Service (IRS) to detect tax evaders in the United States who hide their wealth in foreign accounts and investments.

Based on estimates, the US Treasury loses as much as $100 billion annually to offshore tax non-compliance.

The Fatca requires US persons to report their foreign accounts and other specified financial assets on a new form (Form 8938 ), which is filed with their tax returns if they are generally worth more than $50,000; a higher reporting threshold applies to overseas residents and others.

US persons include those with US passports, US addresses, US telephone numbers, US bank accounts, holders of US identifications cards, and those born in the US. Included in the definition are our overseas Filipino workers, American expats working in the Philippines, and Filipinos who are permanent US residents.

Fatca affects not only US taxpayers. It applies to foreign financial institutions (FFIs) which have, as clients or customers, US persons covered by the new law.

Examples of these FFIs are our banks, mutual funds, stockbrokers and trust companies.

The Fatca requires FFIs to report to the IRS about their clients considered as US persons.

FFIs that do not comply with Fatca will suffer a 30 percent US withholding tax on: (i) US sourced interest and dividend income (e.g., income from US stocks and bonds); (ii) gross proceeds on the sale of US stocks or bonds; and, (iii) up to 30 percent tax on foreign pass through payments.

Thus far, the US has been successful in getting the cooperation of several countries to help implement the law. France, Germany, Italy, Spain and the United Kingdom have consented to cooperate with the US on Fatca implementation, as have Switzerland, Japan and South Africa.

On the other hand, a top official of the People’s Bank of China, the central bank of the People’s Republic of China, has stated that “China’s banking and tax laws and regulations do not allow Chinese financial institutions to comply with Fatca directly.”

Locally, we have laws such as the Bank Deposits Secrecy Act, Foreign Currency Deposit Act and the Data Privacy Act that have to be considered by our government before agreeing to cooperate with the US.

Our affected financial institutions must consider the cost and burden that are attendant to complying with the Fatca.

Whatever their business decision will be, they have to start addressing it now to avoid the penalties arising from failure to comply with the Fatca.

Sam Miguel
05-10-2013, 09:52 AM
The invasion of Casiguran

By Bernie V. Lopez

Philippine Daily Inquirer

10:53 pm | Thursday, May 9th, 2013

The Aurora-Pacific Economic and Freeport Zone (Apeco), a P3-billion 12,900-hectare economic zone in Casiguran, Quezon, was branded by the Guidon, the official newspaper of Ateneo de Manila University, as “revealing an attitude that is insidiously totalitarian and marginalizing.” Apeco was coauthored by Aurora Rep. Sonny Angara, who is running for senator, and his father, Sen. Edgardo Angara.

Apeco promises to displace the local agriculture and fishery sectors that have been nurturing both the Agta Dumagat and Christian communities since time immemorial. Apeco is a misplaced development project that gives to the rich and denies to the poor. It will dislocate about 300 hectares of farm lands, affecting about 3,000 families or 15,000 individuals—but this is only the tip of the iceberg. In the long term, more of the 12,900 hectares and hundreds of thousands of people will be affected.

The Guidon reported that Sonny Angara admitted during a dialogue “inadequate consultation with the people of Casiguran” and “a need for a thorough review.” This is tantamount to admitting that the project is illegal, violating the Indigenous People’s Rights Act (Ipra), which requires proper public consultation and free prior and informed consent (FPIC).

At a dialogue with the protesters at the Ateneo campus in December 2012, President Aquino said he was ordering the National Economic and Development Authority to submit an evaluation report on Apeco. The report was submitted last April 18. But why was P2 billion in funds released even before then? Why was the cart put in front of the horse?

Dumagat and Christian farmers and fishermen conducted one of the longest protest marches in history, walking their slippers to a pulp for 18 days from Casiguran to the Ateneo grounds, for the dialogue. Luis Antonio Cardinal Tagle was present to provide support to them. Late last month, they conducted an even longer march to the Supreme Court grounds in Baguio, then to the Department of Agrarian Reform compound in Manila, in the hope that someone would listen. People who ruin a lot of slippers during what seems like a heat wave must have something very important to say.

At the Ateneo dialogue, the President told the protesters to open their minds and listen, but it seemed it was he who needed to open his mind and listen to their desperate pleas. When the protesters asked him to freeze the P1-billion funds not yet released, he replied: “Hindi ako diktador. Bilang pangulo, executive director, ano ba ang i-e-execute ko? Kailangan kong ipatupad yung batas. Kung mali yung batas, papalitan natin. Pero habang batas yan, obligado po akong ipatupad.” (I’m not a dictator. Being the President, the executive director, what will I execute? I have to enforce the law. If the law is wrong, we will change it. But while it is a law, I am required to enforce it.)

In defending the Angara dynasty (Aurora Gov. Bellaflor Angara-Castillo included), the President seemed to be saying he would defend a “development” project for the vested interests of his powerful friends, no matter if the locals would be impoverished.

Talking of “kung mali yung batas,” there is an eerie abnormality in our jurisprudence which created Apeco in 2010 into Republic Act 10083, when it simply “lapsed into law.” The weird logic is, if no one objects, it becomes a law even if Congress does not pass it explicitly. It is a legal maneuver of shrewd lawmakers. Apeco was promulgated with a whimper, not a bang, by a “time lapse,” not by lawmakers.

Apeco actually violates a trilogy of laws, not to mention the Constitution itself (the Comprehensive Agrarian Reform Program): the Extension and Reform Law (RA 9700), by converting CARP lands into industrial zones; the Fisheries Code (RA 8550), by not having a planned relocation of affected fisherfolk; and the Ipra (RA 8371), by not having the required public consultations and the FPIC.

It is not a matter of amending the law if it is wrong, as the President said, but a matter of following the law. Apeco is a “behest law,” mimicking Marcos’ behest loans. There is a trend today of executive orders and laws supported by the President contradicting other laws, such as Executive Order 79, which contradicts the Mining Act.

The Apeco group was quick to call the protesters “communists.” I suppose it was the red habit of Cardinal Tagle that turned them off. Many other members of the Church are anti-Apeco, including Fr. Joefran Talaba, parish priest of Nuestra Señora de Salvacion in Baler, and Fr. Victor Gascon, SJ, of the Center for Family Ministries.

Agta spokesperson Armand dela Cruz spoke of the contentment, fulfillment, and happiness of his people: “Nabubuhay kami nang malaya (We live free). In the face of such deep happiness, who is the government—or Aquino, or the Angaras—to tell these people they are not truly happy, and their happiness can in fact only be secured through the imposition of this aggressive development project on their lives?”

The invasion of Casiguran by a powerful political dynasty close to the President will go down in history as his legacy. It is an example of vibrant feudalism within our weak democracy.

Bernie V. Lopez has been writing commentaries for the last 20 years, and is a radio-TV broadcaster. E-mail: eastwindreplyctr@gmail.com

Sam Miguel
05-10-2013, 10:24 AM
Poverty amidst signs of plenty


By Roberto R. Romulo

(The Philippine Star) | Updated May 10, 2013 - 12:00am

The reaction among politicians to the phenomenal economic growth being experienced by the Philippines appears to be divided between those who see it as a half-filled glass and those who see it as half-empty. One side of the political spectrum claim credit for this achievement and brook no criticism despite certainly valid points being raised on poverty and job creation. The other side includes those, who are in Henry David Thoreau words, “fault-finders who will find faults even in paradise”. But even discounting the fact that this is also the “silly season” – meaning the election campaign period — where politicians are given to hyperboles and impractical solutions, both sides make a valid point. It cannot be denied that this is indeed a remarkable achievement and a validation of President Aquino’s program, in which “Daang Matuwid” is the underpinning. Equally, to deny that poverty incidence remains high and that joblessness continues to be a major challenge would be doing a great disservice to the efforts to make this economic growth sustainable and inclusive.

NEDA’s Balisacan

This is why I think NEDA director-general Arsenio Balisacan, a well-known expert on poverty, should be commended for not couching his report in the language tailored for this “silly season” of political spin. Some say this might not have been a good time to release the report so kudos too for the administration’s countenance of this report. But numbers do not lie though their interpretation can perpetuate a lie. The 2012 poverty report says that the poverty incidence since 2008 is unchanged and as a matter of fact not much changed from the 31-percent poverty incidence during the time of President Ramos. An important point to be made however is that during the same period our population base grew by more than 30 percent. This would have required our GDP to grow at a rate of around seven percent minimum for it to make any significant dent on poverty. This rate is the commonly accepted yardstick based on modeling and on the actual experience of countries like China and Indonesia. In our case, we averaged around four percent during this period. In fact our real GDP per capital rate in 2010 based on purchasing power is lower than the per capita rate in 2000!

Focus on education

Fortunately there are people who have not lost sight of the fact that “every system is perfectly designed to produce the results it gets.” Since our poverty incidence has remained intractable for the past few decades, it must mean that our present system is “perfectly designed” to keep a third of Filipinos in poverty and must therefore be overhauled if we are to solve this problem once and for all. For this issue, I would like to focus on one component of this system - education as it relates to job creation.

Obviously poverty reduction is complex, with multi-stakeholders. Even with the right policies in place, it will take some years before a sharp reduction is experienced. It will take a combination of low population growth and sustained economic growth to achieve this. Even then not everyone will necessarily share the fruits of economic growth - there will always be pockets of poverty geographically and demographically even in the highest growing economies. They include children, single-parent households, indigenous and tribal peoples and those who cannot take advantage of the opportunities offered by economic growth by virtue of their skills and location relative to the employment. Then there are those living in areas that are poorly endowed, far from the sources of growth or are racked by instability and failed governance – the combination of which have made the ARMM as the poorest region in the country. It is therefore important to look at the sources of this high economic growth and its distribution, in particular, its implications for job creation. To take this to the extreme by example, many of the unemployed and underemployed are in the rural areas and not everyone can be a call center agent or a BPO provider – there are not enough openings anyway to accommodate them all. There must be other sources of employment – in agribusiness, manufacturing and services – where the vast majority of our unemployed can qualify – must be created. Job creation and poverty rates are inextricably linked. The challenge is formidable. World Bank country director for the Philippines Motoo Konishi estimates that the Philippines must create 14.6 million jobs between now and 2016 if the political aspirations of inclusive growth are to be fulfilled.

‘Demographic dividend’

Much has been made of the so-called “demographic dividend” which they say the Philippines is poised to enjoy as countries in the region face an aging population. Indeed it is the consumption of this large, relatively young population that is propelling the country’s economic growth. In a paper presented to the 35th Pacific Trade and Development Conference in Vancouver in June 2012 by Emmanuel Jimenez and Elizabeth M. King, the World Bank pointed out the benefits from the “demographic dividend” is not automatic and requires a massive effort to obtain, and even more difficult to sustain.

The authors, Jimenez and King, say that almost a half century ago, the famed Swedish economist Gunnar Myrdal predicted that Burma (Myanmar) and the Philippines were the two Asian countries most likely to achieve rapid growth in the Asian region. This prediction, since proven to be inaccurate, was based partly on the fact that the Philippines and Burma accumulated more human capital than other countries in the region – based on the literacy and educational levels of its population. “In 1960, the secondary school enrolment rate in the Philippines was 26 percent — higher than that of Malaysia and Hong Kong and, in fact, higher than that of Portugal and Spain. At 10 percent, secondary school enrolment rate in the poorer parts of Burma was much lower, but still exceeded the rates of countries that are now significantly richer, such as Indonesia and Thailand.” We know that what happened to Myanmar was largely self-inflicted. The case of the Philippines was a little more complicated – population pressure not matched by income growth – overburdened the school system, lowering its quality and depriving others of educational opportunity. While our participation rate at the secondary level has risen steadily, it has since been exceeded by Indonesia and Thailand.

East asian tigers

In contrast, they point out that the growth of the so-called East Asian Tigers — Hong Kong SAR (China), Singapore, South Korea and Taiwan (China) — was built on “astute investments in schooling and training and enhanced by a demographic dividend made possible through falling fertility rates. The demographic dividend meant that when young people became workers they not only had more schooling but they also had fewer dependents to support.”

‘Tiger cubs’

The authors say that the “tiger cubs” — Indonesia, Malaysia, the Philippines and Thailand — are well placed to emulate the Asian tigers. But they would need “to adjust to dramatic demographic shifts” and ensure that education systems deliver the skills needed to boost productivity and meet the needs of a changing global economy. This will require a “vigorous response” from the education systems. Yet the track record of these systems is mixed – that is to say the quality of education and training in some cases – is not up to par with global standards or are not relevant to current and future demands. Recent surveys have in fact shown that despite the increasing number of educated youth, firms in the region say that finding the right people remains a significant obstacle to their growth.

Our education system must be improved to achieve the objective which the authors outlined and which they themselves say are quite known and accepted, but poses significant challenge in implementing: “matching the skills being acquired today with those that will be needed in tomorrow’s global markets; stimulating demand for human capital formation among excluded groups; providing second-chance learning opportunities; reforming higher education; and facilitating the movement of educated labor to where it can be used most productively.” In other words, quality is just as important as expanding quantity for education opportunities.

The fact that writing about one component of the social and economic system – education – has taken up all the space I have for this column and with more that still need to be said about this alone confirms that poverty reduction is a complex task encompassing a broad array of factors - health, population, capital investment, infrastructure, rural development and many others. What is clear is that the system as it currently stands is inadequate to meet the challenge. It has to be overhauled if it is to produce new results. The simple message is creating jobs is the most effective way of addressing poverty. Obviously this needs the convergence of different stakeholders towards a shared understanding of the intractable issue as well as a coordinated response and collective action. In other countries, they do a national summit and a national compact. I am sure there are people in the Cabinet who can put this together.

Sam Miguel
05-10-2013, 10:26 AM
BSP says no bubble as property exposure limit is breached

By Prinz Magtulis

(philstar.com) | Updated May 10, 2013 - 10:15am

MANILA, Philippines - Property exposure of banks has exceeded regulatory limits, but the Bangko Sentral ng Pilipinas (BSP) was quick to dispel fears of asset bubble forming.

Real estate exposure— the proportion of property loans against total loan portfolio— hit 20.86 percent last year using an expanded computation that dropped all exemptions and included securities issued to property firms.

The tally fell slightly above the 20-percent cap set by the central bank beginning in 1997 when a property bubble in Asia escalated into a full-blown economic crisis. BSP Governor Amando Tetangco Jr. said there is no cause to worry.

“We have to keep in mind that this is now based on the more comprehensive computation. This is now based on a more expanded definition,” Tetangco told reporters late Thursday.

“It is not a cause of concern…There is no evidence of a bubble,” he added.