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
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.
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.
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 [is], 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.
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.
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.
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.
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.
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.
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.
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.
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
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.
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.
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.
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.
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.
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
PH stocks rally sharply on reports of good corporate earnings, upbeat markets
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.