Economy
THIEVES IN GOVERNMENT
By Ray L. Junia, Publisher
THIEVES continue to steal the future of this country.
Nothing can be more unreal than the government claim of economic gains trumpeted by Malacañang spin masters as the best in our part of the world.
The latest gesture of courtesy by an honored guest to his host, a World Bank top official saying the Philippines is on its way to become Asia’s economic tiger, made the headlines in our national media. This made us laugh. This WB seer is either the worst prophet or best in PR that envoys are trained to be.
Motoo Konishi, WB country director for the Philippines, cited macroeconomic strength of the economy for his trust in our future. He fails to see the sick trees inside what appears to be a beautiful forest. This is unfortunate as we expect bankers to be more forthright and honest and if they cannot be honest they better just shut up.
Tail ender
The Philippines is doomed to become tail ender in the race for economic gains in Asia if not the world. It is our destiny to be always poor. We have our reasons to believe so.
Corruption is the root cause of the country’s economic miseries. Cost of living, driven by high cost of basic necessities, is too high, seventy percent of the population has been declared poor.
Stealing from government coffers has not abated, even got worse with the President illegally spending Php177 Billion on DAP from the national budget. To think that other agencies are victims of the same thievery that ultimately ends up with the people suffering.
This thievery and corruption is the first reason responsible investors are not coming in and may even be packing up.
Latest report from the Philippine Statistics Authority on the foreign investments (FI) shows a sharp decline in the first quarter of 2014 compared to same period last year.
In the first quarter of 2014, FIs approved by seven investment promotion agencies amounted to Php37.4 Billion. This is 25.6 percent lower than the take in the same period last year. In 2013, FIs were Php50.3 Billion.
FDIs tell the story
On foreign direct investments (FDI), the Philippines is the tail ender, far way below the second lowest.
The average take by the country on FDIs between 2002 and 2012 was US$2.7Billion, the lowest while Singapore, a city state, got the highest at US$52.8Billion. Vietnam got second lowest with US$8.5B, better by over US$5B.
Even the numbers on FDIs in relation to the Gross Domestic Product (GDP) can cause investors to shy away from us. In the first two years of the Aquino administration, we registered again the lowest in ASEAN countries.
In 2010, net FDI was 0.7 percent of GDP and this declined to 0.6 percent in the following year, 2011. Compared with neighbor countries our net FDI was the worst and almost sick situation. Our neighbors did much better: Singapore 25.1%, Vietnam 6.2%, Malaysia 4.3%, Thailand 2.8% and Indonesia 2.2%.
In the measure of impact of the FDI to population or per capita shares, it will tell a clearer picture of the cause of our economic woes. On this measure, our FDI per capita is lowest at US$ 13.3 while Singapore registered the highest at US$ 12,347.00.
These figures covering the period ended 2011. Three years after, when poverty incidence has gone up and prices of basic goods and services have hit the ceiling, this situation could be lot worse.
The first look at our numbers will not encourage serious investors to come in. discouragement will set in when they find out why we are the cellar. The reason is massive corruption that has worsened during the Aquino administration.
It’s corruption, stupid!
Pulling down interest and trust by foreign investors in our country and national leadership are several reasons: high cost of electricity, lack of infrastructure and worsening peace and order and corruption.
While corruption is last in the list of reasons, it is the principal cause of reasons the country is losing the trust of investors.
The cost of electricity in the Philippines being highest in Asia and second highest in the world can be traced to massive corruption in the highest offices of the land, from Malacañang to Congress, down to the Energy Regulatory Commission (ERC).
On infrastructure, the national leadership has turned over this responsibility to the private sector. From supply of power, to supply of water, to use of roads, to building of transport, and airports, these are all now being given out to private investors.
It’s rape!
Our national leaders call this Public-Private Partnership or PPP. This is one marriage that was intended to legitimize rape.
How else would one describe a situation like what the Filipinos are going through now. Before privatization, cost of electricity was one of the lowest in Asia, roads were free to use, cost of water was affordable and cost of living allowed free money to spend outside of the essentials.
The national economy is now controlled by forty families. Eighty percent of national wealth is owned by 10 percent of the population. Ninety percent share the remaining 20 percent of national wealth. This situation has led to daily “rape” of every poor Filipino’s right to a decent living.
Now we have to pay for use of highways we call toll roads. The national leadership intentionally stopped building big roads to the big city to justify entry of toll roads.
Planned robbery
What happened to cost of electricity and cost in use of roads are examples of well planned grand robbery. Government neglected building new power stations while neglecting national roads, stirring consumers to demand for better services. Privatization became the only solution, offering lower cost that never happened and, worse, cost doubled if not tripled.
Government leaders said privatization saves the government of funding services that are obligations of government. These government duties are supposed to be supported by our taxes. This cost transfer led to savings that allowed Malacañang to “steal” Php177 Billion for DAP and tens of billions for PDAF.
Theft came from many points: at the privatization arrangement when investors would show interest and put his money where his mouth is. Second, at the national budget that would have been spent for these basic services given to the private group. This savings turns out be pork barrel of Malacañang, in the case of Aquino is Php177 Billion in two years, misappropriated and misspent.
Even when privatization became a solution to our infrastructure needs, still serious investors are saying the country is short of what are needed to gain their trust.
One leading complaint is our problem in communications. Even when Smart earns billions of pesos for Manny V. Pangilinan and Globe has multiplied several folds the billions of the Ayalas, the foreign groups are not still happy with our communications system.
Truth is not only the foreign investors are complaining but the locales are also complaining of being short changed by these telecom companies.
Privatization not free
Privatization is not free to the taxpayers. In 2012, President Aquino gave the DOTC Php8.6 Billion and the DPWH Php3 Billion for the preparation of business cases, pre-feasibility studies and feasibility studies for various PPP ventures.
In inviting private sector participation, the government waives many requirements that would have earned the national treasury billions of pesos. Of course these exemptions are always suspect to be products of under-the-table negotiations that line up the pockets of government executives and legislators.
The sum total of reasons this country will not move forward and bring economic relief to the poor is we have elected officials who serve the interests of their masters and not the interests of the people. We have national leaders who boldly steal, unmindful of constitution and laws, as if the public does not exist.
The “theft” of Php177 billion by Malacañang is just a symptom of a more serious malady. The effect of this disease is a society that will always be abused and used to enrich further enrich the billionaires and make new millionaires of those we trust to lead our government. This is because we have elected thieves to run our government.
MONEY WOES
By Al Labita
Monetary authorities may not admit it, but they appear edgy over how to tame a financial market which has gone awry.
Inflation, which measures the nation’s economic health, has surged to 4.5% in May, the fastest since November 2011.
Inflation, a key component in formulating monetary policy, was seen averaging 4.3 percent this year and by 3.4 percent for next year.
That, in turn, raised a red flag on whether it would trigger a rise in interest rates as they affect business transactions.
And as many expected, the Bangko Sentral Ng Pilipinas (BSP) turned to so-called special drawing rights (SDRs), jacking up the interest rates it pays to depositors from two to 2.25 percent per annum.
As everyone knows, SDRs are where the rich and the famous park their excess funds amounting to billions and get paid for it.
Risks to instability
This was meant to mop up excess liquidity in the system by making the SDRs attractive to depositors.
Usually, funds invested in SDAs are effectively taken out of the system and kept in the vaults of the central bank.
No matter the hefty costs SDAs carry, the BSP was willing to absorb rather than risk instability in an economy that has proven weaker than expected in the first three months.
BSP data showed that total deposits in the special facility, which at their peak were more than P2 trillion early last year, retreated to just P1.2 trillion as of mid-May this year.
At the current level of deposits, the BSP’s interest payables to depositors total around P27 billion, a big number seen to grow even bigger as the central bank endeavors to attract more funds to its vaults.
Interest-driven
The BSP has been unprofitable as a government corporation for four consecutive years already, owing to its huge SDA-driven interest expenses, based on records.
In 2012, for instance, the BSP incurred a net loss of P95.38 billion. This improved to a net loss of only P24.26 billion the following year, when it adopted measures that encouraged SDA depositors to make placements elsewhere, reducing the central bank’s interest expenses in the process.
Because the central bank’s mandate to keep prices stable costs a lot of money to pursue, the monetary authorities seek appropriate amendments to its charter that would allow the national government to raise its paid-up capital contribution to Php150 billion.
Analysts lauded the BSP for its decision raising SDA’s rates despite the heavy costs it entails on its finances.
They say the hike was a commendable move, as it sends a clear signal that BSP’s interest expenses, which naturally result from higher policy rates, take a low rank in the hierarchy of the BSP’s policy priorities.
The BSP’s decision to hike the SDA also demonstrated that the below-consensus GDP growth print for the first quarter of 2014 was not going to get in the way of carrying out their price-stability mandate, other pundits say.
While it was important to keep the BSP loss-free and operationally sound, the mandate to keep prices stable throughout the US$250-billion economy always comes out a priority.
While the BSP has raised the rates on SDRs, it has kept steady key policy rates at 3.5 percent for the overnight borrowing or reverse repurchase (RRP) facility and 5.5 percent for the overnight lending or repurchase (RP) facility, ostensibly taking into account the plight of ordinary borrowers.
DTI Welcomes Indian biz Mission to PH
The Department of Trade and Industry (DTI) recently received an Indian business mission to the Philippines that intends to explore potential business opportunities, and possibly locate and expand their operations in the country.
During the mission member’s courtesy call, Domingo noted the resurgence of the manufacturing sector in the Philippines, and the growth of capital formation in the gross domestic product (GDP) by 18 percent.
The mission was organized through the Philippine Trade and Investment Center (PTIC) in New Delhi and the Federation of Indian Chambers of Commerce and Industry (FICCI).
Domingo also noted that this mission is his second meeting with the FICCI. The first was during the First India-ASEAN Business Fair and Business Conclave in New Delhi, India in March 2011.
The FICCI is the oldest and largest top business organization in India. The history of FICCI is interwoven in India’s struggle for independence, industrialization, and emergence as one of the rapidly growing economies.
The FICCI has members from India’s corporate sector, including multi-national corporation (MNC), and enjoys an indirect membership of over 250,000 companies from various regional chambers of commerce.
“India is a huge market. The distribution is excellent and you just have to find the right partner,” said Kapil Rampal, deputy head of the delegation and director of the Ivory Education Pvt. Ltd., during the DTI business forum on doing business in the Philippines.
Rampal also mentioned investment interests in pharmaceuticals, bio and thermal energy (From Rampal’s presentation), motorcycles and auto parts, mining, infrastructure, and space and defense related industry.
Rampal added that the possibilities are more than enough, and suggested to look at possibilities of collaboration and be competitive at the global level.
During the business forum, Bureau of Export Trade Promotion (BETP) Director Senen M. Perlada said that both countries can do so much, and noted that Philippine exports to India only accounted for 0.54 percent of Philippine total exports in 2013.
Total trade between the two countries grew by 8.7 percent, export by 8.6 percent, and import by 4.8 percent from 2008 to 2012, according to BETP data.
Perlada also mentioned possible products for promotion in India such as motor vehicle parts, electronic components, sanitary articles of paper (i.e. diaper, toilet paper), personal care products, high-end furniture, and garments.
Likewise, Board of Investments’ (BOI) International Marketing Department Director Angie M. Cayas mentioned the following sectors for promotion to India: public–private partnership (PPP) projects, information technology and business process management (IT-BPM), tourism related investments, and other areas of investments such as the Special Investor’s Resident Visa (SIRV) and the Retail Trade Liberalization Act of 2000, particularly categories B and D.
In an interview, PTIC in New Delhi Commercial Attaché John Paul B. Iñigo said that the delegation is happy, and anticipates another group coming to the Philippines in the next six months.
The 14-member business delegation is composed of companies from sectors such as agriculture, hotel, hospitality, education, infrastructure, airport, food products and textile.
At present, the following Indian companies have presence in the Philippines: Aditya Birla Minacs Philippines Inc., Hinduja Global Solutions Limited, L&T Infotech, Biostadt India, Lupin Ltd., State Bank of India, The New india Assurance Co. Ltd., Wipro BPO Phils. Ltd., Infosys BPO Ltd., Zydus Cadila, Claris Lifesciences Ltd, Tata Consultancy Services, Infosys Technologies, Wipro, Cognizant, HCL Technologies, Genpact Intelenet Global Services, Tech Mahindra, Aegis Ltd. (People Support), WNS Global Services, Syntel Inc., Apatech Ltd., Headstrong, Interglobe Technologies, Virtusa, and Tata Motors.
Entrepreneurship in Relation to ASEAN 2015
ONE more year and the member countries of the Association of Southeast Asian Nations (ASEAN) are gearing towards freer and wider market in its Economic Integration pushing for the realization of the ASEAN Economic Community (AEC). Such countries are Indonesia, Malaysia, Philippines, Singapore, Thailand, Brunei, Vietnam, Lao PDR, Myanmar and Cambodia; with China, Japan, and South Korea in the ASEAN Plus.
To those who are not so familiar with the ASEAN Economic Integration, let me put it in simple terms – “free-flow”. With it, people would be allowed to purchase, sell products and services, work and invest in any of the member countries of the ASEAN with lesser restrictions unlike what we are used to – strict protectionism. Instead of having to spend so much in terms of tariffs and complying with bloody requirements, strict procedures and other trade burdens, trading would be a lot easier, because the aim of the ASEAN is to have zero or near zero trade barriers. This would be enjoyed by all ASEAN member countries. In addition, Southeast Asians wanting to work overseas (in ASEAN countries) would experience easier processes. Free-flow of work-force would happen. Investors could capitalize their resources freely as they expand from one nation to another nation in the ASEAN.
Entrepreneurs would directly benefit from the ASEAN Economic Integration. There is a lot to be excited about for them.
The Philippines would be able to compete in the global setting through the one market and production base of the ASEAN. In this sense, there would be unity and more productivity among the member countries. Ironically, as member countries compete in terms of the ability to offer lower prices to consumers brought by removing or lessening trade barriers, the whole of ASEAN could benefit as a group – bonded together in creating economic progress. The free-flow would give reason for entrepreneurs to be able to cut costs for their production materials, equipment and manpower, because they would be able to get it at significantly cheaper amounts. They could have the needed edge to compete with the other larger companies in the whole world.
At a regional scale, the lending and borrowing from banks would be easier as it would have to adjust with the changes and accompany the needs for capitalization of entrepreneurs. I believe that bank transactions between and among ASEAN countries would be a lot busier compared before and it would mean significant money coming in and out of the country.
The country’s local government units (LGUs) are being improved to become business-friendly and competitive. LGUs have programs that streamline Business Permits and Licensing System (BPLS) and develop the economy through the Local Economic Development (LED) programs. In this way, the country’s budding entrepreneurs who would like to take the opportunity to do business in the ASEAN would have better access to acquire the necessary documents they need to possess in order to establish legitimate enterprises.
Free-flow could not flourish if not for state-of-the-art infrastructure as well. Entrepreneurs know the hassle of transporting precious goods from one point to another. Even though we already have some notable infrastructure, there is still so much that need to be improved. With the ASEAN Economic Integration, lagging behind would not be an option. The budget and plans in developing infrastructure would have to be applied, so that the country would be able to connect with the member nations internally and externally – roads, bridges and ports would have to be made. Entrepreneurs would be able to transport their products in the country more safely and accessibly, in all of its provinces and cities and of course out of the country to all other ASEAN countries. Consequently, entrepreneurs that focus on the tourism sector would benefit from the ease of travel. Good news for all businesses in our tourist spots.
The ASEAN Economic Integration would also mean more opportunities for the country to develop its communications and information technology facilities. In this age of high technology, entrepreneurs could benefit even more from the World Wide Web when they try to compete with the tigers and reach their customers in the global setting. We know of it as entrepreneurs have established their on-line stores which are gaining more and more attention from customers who would rather remain in the comforts of their homes and order the latest products at best deals! Entrepreneurs who are home-based and who are mostly just starting up do business on-line. Why not? Communications brought by the internet has proven to be very effective and efficient.
With free-flow, the market is even wider and tougher and we could expect even greater – tons of exportation and importation dealings happening from one corner of the world to another with the use of the internet. Imagine how else entrepreneurs could speed up the increase of their sales, but with the use of the continually developing communications and information technology! Almost everything could be just one click away from happening. In order to “go with the flow”, the free-flow would have to be accompanied with improved communications and information technology.
Investors coming in the country for expansion would provide entrepreneurs that sub-contract for more opportunities to do business. Entrepreneurs who would like to invest in another ASEAN country would be encouraged and would enjoy none, if not fewer restrictions.
The Philippines would have to adjust and better its competitiveness as it would need to keep up with the requirements of the AEC and integrate with all member countries. There would be no other sensible way, but to improve. Sink or swim they say, but I am confident, our country’s entrepreneurs would have what it takes to take advantage of the free-flow and run with the tigers.
Reference:
“Rising as one: The Filipino Nation Towards The ASEAN Economic Integration” by Local Government Academy
OFW Remittances Boost Economy’s Outlook
Buoyed by surging remittances from Overseas Filipino Workers (OFWs), consumer sentiment improved moderately in this year’s first quarter, raising prospects of better times ahead.
Based on the Bangko Sentral ng Pilipinas (BSP survey, overall confidence index (CI) showed an upbeat trend because of some positive indicators spawned by a resilient economy.
These range from availability of more jobs to increase in the number of employed family members and the emergence of more investment prospects.
Consumer confidence is measured using three indicators–economic conditions of the country, family financial situation and family income.
By income group, consumer sentiment was mixed with respect to their views on family finances and income.
The low-income group showed a consistently more favorable outlook, but the middle-income group’s outlook weakened, but turned more bullish for the next quarter and the year ahead.
In the same BSP survey, the high-income group had a less upbeat outlook but anticipated financial conditions to improve in the next twelve months. Across income groups, confidence on the economic condition of the country improved.
The survey results also showed that the number of households with savings continued to pick up at 28.9 percent in Q1 2014 compared to 26.2 percent in the previous quarter.
Consistent with the higher spending outlook on basic goods and services in Q1 2014, consumers anticipated higher inflation in the year ahead. They expected the inflation rate to settle at 8.4 percent compared to 7 percent in Q4 2013. This indicates that inflationary expectations could be stronger in the next 12 months.
Respondents are also of the view that the peso would depreciate against the US dollar in the next 12 months. Their perception could have been influenced in part by the recent weakening of the peso against the dollar.
Of the 560 households included in the BSP survey that received OFW remittances in Q1 2014, 97 percent used the remittances that they received to purchase food.
More than two-thirds (68.9 percent) of the OFW households allocated part of their remittances for education, 62.9 percent for medical payments and 45.9 percent for debt payments.
Consumer Protection Group Hits Protector of Big Businesses
By William Dipasupil
THE economy will fall not because President Aquino is a poor manager but because of some politicians who are protecting the interests of big businesses, according to a consumer protection group. The Movement Against Business Abuses (MBA), an alliance of consumer protection advocates, was reacting to an earlier statement by Sen. Serge Osmeña blaming the President and Energy Secretary Jericho Petilla on the country’s power woes. “If there’s somebody that should be blamed for the country’s problem on electricity, it is Senator Serge Osmeña III, who obviously is protecting the rape of the economy by big businesses,” the group said. Osmeña, they said, has been remiss in his duty as a lawmaker in helping address the country’s problem on thinning power reserves, much more as chairman of the Senate energy committee. “He failed to recommend amendments to EPIRA which is the primary cause of our power problems,” MBA added. Republic Act No.9136 or the Electric Power Industry Reform Act of 2001squarely puts the burden of protecting the interest of consumers and ensuring competitiveness in a deregulated industry on the shoulders of the Energy Regulatory Commission (ERC). The ERC was created to promote and protect long-term consumer interest in terms of quality, reliability and reasonable pricing of a sustainable supply of electricity. The group pointed out that the recent order by the ERC to void spot market prices of electricity generated and sold to Meralco last December and January were clear indications that the government is aware of the real purpose of regulatory functions. The Movement said that it is about time that the real cost or electricity and how it is computed should be made public, which could be done by amending certain provisions of the EPIRA law. As chair of the Senate energy committee, they said, Osmeña may introduce the amendments so that the power generators and distributors would be compelled to make public how they arrived at on the cost of electricity being charged to the consumers. “Investors in the energy sector had for decades held hostage the government and consequently the users of electricity by threats of brownouts every time their greed driven profits are threatened,” the MBA spokesman, lawyer Rey Cardeno, said. Cardeno pointed out that the consumers had always been on the losing end and ended up paying more every time Meralco pushed for another round of power rate increase before the ERC. “We were convinced, then, that the ERC was in the pockets of Meralco,” he said, adding that “unless this is a trick, and ERC and Meralco has perfected several tricks against consumers, we are looking forward to a new directions at the ERC and the Department of Energy.” But now, he said, that the ERC is being true to its functions by ordering a review and recalculate the cost power that Meralco wants to pass on to consumers, the national leadership, including Osmeña, should support the peoples’ demand for transparency on the actual cost of electricity.
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