Saturday, 23 June 2007

On the ZTE deal

Saturday, June 23, 2007

The effort to build a national broadband network, and the deal concluded to execute that project, has become the subject of controversy. By the time the new Congress opens next month, the matter could quickly degenerate into a political circus, with one theatrical inquiry called after the other.

As it stands, the issue is murky rather than clear. The more propaganda is generated around the issue — by losing bidders and by those seeking to exploit the controversy for political ends —— the murkier this issue will become.

And in the confusion, larger national interests could be foregone. This seems to be the pattern in all major national undertakings — including the task of building a database to allow us to comply with the global deadline for using electronic passports — condemning us to lag behind everybody else due to procedural paralysis.

It does not help the matter that the Philippine copy of the signed contract with China’s ZTE Corp. was lost to thieves abroad. That is an embarrassing and sensational event that can only needlessly feed the cloud of malice that is now growing around the deal.

The country’s commercial attaché to China, charged with bringing the document home, has now been charged with “infidelity in the custody of a public document.” The attaché, Emmanuel Ang, is an officer of the Department of Trade and Industry although the lead agency in the deal is the Department of Transport and Communications.

The loss of the original copy of the contract is indeed infinitely embarrassing. But it is not fatal. We can simply photocopy the Chinese copy of the same document, have it notarized and validated by the counterparty and that’s that.

But the event of loss of our copy of the contract allows propagandists to unjustly liken the event to the electoral returns from Maguindanao in order to taint the integrity of the deal. That will, to be sure, not help build a sympathetic constituency for the deal. Nor will it help serve the ends of public clarity about the matter.

This is all very unfortunate, for national interest more than anything else.

For the sake of our own understanding, it is necessary to untangle the issue and look separately at its two component parts. First, there is the validity of the existing national policy to build a broadband network for the exclusive use of government. Second, there is the deal concluded with ZTE Corp.

The national policy is central to the Medium-Term Development Plan and the digital infrastructure component of the President’s 10-point agenda. Constructing a national broadband network (NBN) will enable digital governance to advance, raising the efficiency of the public sector in delivering services to the people and bringing down the government’s communications costs by using the most advanced internet protocol technologies.

The NBN will allow for seamless voice, data and video connectivity within and among the agencies of national and local governments. It will also be immensely useful in upgrading the quality of our educational system. It will avoid duplication of technology systems and adopt cost-saving VoIP.

To reassure the telecoms giants, the NBN will not have a mobile phone component — although the public sector will eventually purchase services wholesale rather than retail from the phone companies. It will enable government to salvage the old, technologically inferior public phone link by resurrecting it within the new IP-based network. By the provisions of RA 7925, the envisioned NBN will not compete with private telecoms carriers.

Most governments, including those of economies vastly less developed than ours, are presently embarking on building their own broadband networks. The program will keep us abreast with the state of the art in governance.

And the deal itself?

ZTE Corp. submitted their proposal to the Philippine government July 2006. After intensive review of the proposal and the other options, the Commission on Information and Communications Technologies endorsed the proposal to the NEDA Investment Coordination Committee. The DOTC did its own review and endorsed the same to NEDA. The Investment Coordination Committee, after its own evaluation, endorsed the project to the NEDA Board. The project was approved March 2007.

The project cost of $329 million will be financed by the Export-Import Bank of China under preferential terms of 3% annual interest and a 5-year grace period. Such preferential rates qualify the loan as a form of official development assistance from China. As a tied loan, China is entitled to nominate the project contractor, which is ZTE in this case.

Two other bidders did submit lower offers, which is the probably source of the controversy surrounding the ZTE deal. But the other offers are not comparable in terms of technology to be used and the communications system to be built.

The technology offered by ZTE are state-of-the-art, mature but in the early stages of product life, ensuring that the NBN will not lapse into obsolescence too soon. Comparatively, Amsterdam Holdings is offering a mobile network with limited coverage. The other bidder, Arescom is proposing technology that is already obsolete.

Neither of the two other bidders include a financing scheme the will allow government to undertake the project without diverting money from our scarce budgetary resources. The China Eximbank-ZTE deal allows the project to be built and then pay for itself by way of immense savings in government operating costs as well as enhanced governance values over the next two decades.

If the national policy underpinning this deal is arguable, then it should be debated as policy. If the ZTE deal wants in either its technological aspects or, as its critics argue, for lack of transparency, then let that be publicly debated in terms of other effective options within the framework of existing policy.

This is a technology and financing issue and we will all lose if we debate this on the basis of insinuation and intrigue.

Friday, 22 June 2007

Government financial system needs an overhaul, says Buñag

By Dennis Estopace
Full report at the Business Mirror

ALL ODDS are stacked against the revenue commissioner, former bureau head Jose Mario Buñag told Business Mirror the evening after Malaca๑ang unceremoniously sacked him on Wednesday.

Hours after the sacking that apparently surprised him—coming days after the Palace had said he will stay on pending a review of the revenue agencies’ performance—Buñag attended the 85th anniversary celebration of accounting and tax consultancy firm Isla Lipana & Co. Here, he was approached left and right by well-wishers and reporters at the Rizal Ballroom of the Makati Shangri-La Hotel in Makati City.

“The whole government financial system should be reorganized,” Buñag replied when asked for his reaction on his dismissal as head of the Bureau of Internal Revenue.

Buñag gave a copy of the comparative BIR collection and goal from calendar years 1975 to 2006, which showed that despite a 20.28-collection growth rate last year, there was still a deficiency of P22.6 billion, short of the P652.75-billion target.

“Hence, anybody who’s appointed there would really have a difficult time meeting the targets,” he added.

Buñag pointed out that it was only in 1975 that the country posted a two-digit excess in the collection against the goal of P4.7 billion.

Would you believe, ZTE contract was ‘stolen’?

By Jarius Bondoc
Friday, June 22, 2007
Original article at the Philippine Star

Stolen, missing, vanished. That’s what DOTC Asec Lorenzo Formoso said of the contract signed by government with ZTE Corp. of China in April. Sorry, he said, they couldn’t make the document public all this time that six business groups were demanding abrogation, the US envoy urging review, competitors crying fraud, and even President Arroyo praising it as a major landmark in diplomacy. The $330-million contract allegedly just wasn’t in the hands of signatories Sec. Leandro Mendoza and ZTE’s Yu Yong. Kasi, the only two “sovereign copies” disappeared from a hotel room in Boao, Hainan, soon after the signing. So give them the benefit of the daw [sic].

Jaws dropped at Wednesday’s forum on the ZTE deal at Ateneo-Makati. The 50 telecom experts, lawyers, economists and journalists had gone there to ask many questions about the national broadband network: Why the rush? Is government competing with private telcos that offer broadband services? Can 3-percent interest on a Chinese loan for the NBN truly be called a concession rate? Why ease out two superior bidders? Why deal at all with ZTE, which is being sued in many countries for scams? But no one could fire off the questions they had prepared. The casual claim of alleged theft got them wondering if they were not at the Ateneo but at Comelec, faced not by DOTC’s Formoso but by Maguindanao election chief Lintang Bedol. A month after Election Day, when the Comelec summoned him to Manila to back up his report on election results, Bedol said sorry he couldn’t because the certificates of canvass from 22 towns were stolen. Just like that, he shrugged that the papers disappeared from his office one night. And here now was Formoso, the DOTC officer for the NBN, saying two controversial months after the signing that the ZTE papers were gone too.

Formoso wanted to move on to the supposed benefits of an exclusive government broadband. But the audience wouldn’t let him, so he had to reveal more.

Why were they disclosing the “theft” only now? Because, he said, it had to be kept under wraps to avoid national shame. But isn’t the delayed newsbreak more a national shame when sectors already were decrying the contract? The NBI took this long to investigate, Formoso stammered, please ask them for details. All he knows is that the Philippine commercial attaché in Guangzhou was responsible, by protocol, to keep the signed documents for official transmittal to Manila and ZTE’s head office.

News Editor Marichu Villanueva checked with Mendoza who was at Malacañang then. The latter said Emmanuel Ang has been charged with infidelity in the custody of public documents. I checked with the head of an NBI division, who in turn asked six other units including Interpol, and all said they never handled the case.

The “theft” raised more questions than answers. Ms Arroyo had left her husband’s bedside, from heart surgery, just to witness the signing in Boao on Apr. 21 of five different contracts, including ZTE’s. Were the four other contracts also stolen? Nobody’s complaining about loss.

Why were there only two signed copies? Contract signings between two countries usual have an even number of copies for both sides, so that even if one party loses its set, the other would gladly provide one of its own. No answer.

How come we at DTI-BOI never heard of the theft, a government manager asked, when one of our attachés is involved? You’re out of the loop, Formoso said.

With the contract lost, is the deal dead? No, Formoso said, because they’ve “reconstituted” it. Don’t such supply deals usually consist of 50-100 pages, detailing the duties of buyer and seller, product specs, and prices? Was anything changed during the reconstituting? No, he said, everything remained as is. How did they do that? They traced back the documents in computers. Did they use the versions submitted to NEDA and finance department, who must review such contracts prior to signing? No answer. How can the public ensure that the reconstituted version is the same as the original, since DOTC never showed anything before or after? No answer.

Did they change any date? No, Formoso said. Does that mean the contract is still dated Apr. 21, 2007, within the election period when the government is prohibited from awarding any infrastructure or supply deal? Has Comelec chief Benjamin Abalos issued a waiver of the ban? No answer.

When will the DOTC finally release the reconstituted contract? By today (Thursday), Formoso promised. None came as of this writing.

Thursday, 21 June 2007

More on Buñag

By Lito U Gagni
Original article at the Business Mirror

(Editor’s note: This column piece was submitted before Malacañang announced Mr. Buñag’s replacement.)
After giving it his all, resulting in a 20-percent uptick in the collections of the Bureau of Internal Revenue (BIR), achieved through a no-nonsense embrace of new technology and old-school pat on the shoulders of the BIR staff, and still getting a “collection-shortfall” notice from his boss (not by a face-to-face meeting as is usual in management conglomerates, mind you, but through a press conference), BIR chief Jose Mario Buñag is probably now wrestling with the ultimate question: To quit or not to quit.

Indeed, how do you solve a problem like Mr. Buñag’s? Having made an unprecedented surge in revenue collections of over P100 billion last year (up P20 for every P100 of collections the previous year), due to high morale from the BIR personnel, plus the benchmarking and profiling of companies that he initiated, and then being stunned by a press notice from his boss himself, Finance Secretary Gary Teves, that there was a collection shortfall based on targets that were found way off the mark, what do you do?

Go figure. Mr. Teves announced that there was a collection shortfall based on the Department of Finance (DOF) projections that were simply not achieved. The DOF sets targets based on the following variables: gross domestic product (GDP) growth, inflation rate and interest rates. All these DOF targets were way off the mark, and yet here comes Mr. Teves announcing that there was a collection shortfall, the bases of which were on targets that did not come about.

Instead of boosting the morale of the BIR rank-and-file by going gaga over the big increase in revenue collections, Mr. Teves comes marching in, parading the shortfalls to one and all. And to think that the supposed shortfalls came about due to what turned out later on as unrealistic targets.

A sensible way of analyzing statistical data is through comparisons of current data versus year-ago figures. The 2007 first-quarter tax-collection figure of P143.11 billion is 6.04 percent higher compared with its year-ago level of P134.96 billion, a much more realistic growth when compared with the targeted GDP growth of 10.2 percent for the same period.

Tax administration is no easy task and the Herculean task of bettering the collections year-on-year falls on the shoulders of Mr. Bunag. On this score, he has succeeded. And yet in the eyes of his boss, he has failed because of underlying assumptions that did not happen. Why so?

In a bestselling book published early this year that has taken the financial world by a storm, The Black Swan, by derivatives trader Nassim Nicholas Taleb, a case was made on the “scandal of prediction.”

In the book, Mr. Taleb demolished the myth of forecasts, even of those based on elegant math. For him, there are random events that should be considered. Period. This is what Mr. Teves should have equally considered when he made projections on revenue targets based on forecasts of GDP growth, inflation rate and interest rate.

The targets that the DOF set and what really happened are interesting cases that make relevant the randomness of events and their impact that is the book’s thesis.

The DOF saw the interest rate at 5.1 percent as against the 3.64 percent that came about. To see through this variance, one only has to look at the BusinessMirror’s research on time deposits, savings deposits and foreign- currency deposits.

Out of 24,948,362 accounts, there were a total of P1.35 trillion in savings deposits and out of 988,282 accounts, there were a total of P560.7 billion in time deposits.

In the case of foreign-currency deposit units, there were a total of 1,432,548 accounts with combined deposits of P916.86 billion. Not included in the computation for the tax take on the withholding taxes on the interest earnings of the deposits are the demand/NOW deposits which had total accounts of 2,270,659, with a deposit base of P427.22 billion.

Based on this, the BIR’s collections should conform with the actual interest rates, not on the forecast rates. But not for Mr. Teves. That, in essence, is the problem that is Mr. Buñag’s.

Buñag: revamp DOF, starting with Teves

By Paolo Romero
Thursday, June 21, 2007
Full article at the Philippine Star

Bureau of Internal Revenue (BIR) Commissioner Jose Mario Buñag received his walking papers yesterday and said he was being used as a “sacrificial lamb” for his agency’s dismal collection performance.

Buñag met with President Arroyo in Malacañang and aired his side on the issue of falling collection performance of his agency as the rift between him and Finance Secretary Margarito Teves deepened.

BIR deputy commissioner Lilian Hefti takes over as officer-in-charge until the President finds a permanent replacement for Buñag. Hefti is a career BIR official who headed the bureau’s operations department.

Buñag declined Mrs. Arroyo’s offer of an ambassadorial post as he strongly urged her to revamp the Department of Finance (DOF) starting with his former boss, Teves.

He said he was being used as a scapegoat by Teves for the poor revenue performance of the government.

“I thanked the President for giving me the opportunity to serve in government, particularly as BIR chief,” Buñag said in a telephone interview. “But I also informed her that I was declining the ambassadorial post being offered to me.”

“However, there are higher authorities in the government’s financial institutions who would like to wash their hands of the responsibility for the dire consequences of their unrealistic, failed and bungled policies and who look for a sacrificial lamb and a scapegoat to whom they can assign blame. So be it. Their time to answer for their failure and incompetence will also eventually come,” he said in a statement.

He described the task of tax collection as “very difficult and intricate, dependent upon variables in economic development and growth as well as the accuracy of the estimated collection goal.”

He said the agency, under his watch, did its best as he pointed out that in 2006, the BIR exceeded collections from the previous year by 22 percent, a feat not achieved since 1997.

Buñag said Mrs. Arroyo wished him luck during their meeting. He said he preferred to “take a long-deserved rest from the duties of a government official and to be able to explore other options.”

He said he also told the President that if the government really wants to sustain its revenue gains, she should undertake a revamp of revenue agencies and the DOF “starting with Teves.”

Teves has been blaming Buñag for the poor revenue collections of the BIR that could threaten his objective of wiping out the deficit this year and achieving a balanced budget next year.

“He (Teves) knew from the start the revenue picture, the trends,” Buñag said. “He was there from the start, and his agency is part of that (revenue) effort. He was supposed to be on top of the situation.”

“A revamp would send a very strong signal that we can sustain our programs, and obtain for us a better rating from rating agencies,” he said.

He pointed out that raising revenues was a collective effort and not the sole responsibility of the BIR.

Recto, Buñag, and the economy

Dean O. de la Paz
Original article at the BusinessWorld Print Edition

There are two upright men aligned with Gloria Arroyo who have been victimized by a faceless entity hidden in her shadows. In the case of Sen. Ralph Recto, black propaganda on E-Vat measures denied him a seat in the forthcoming Senate. For BIR Commissioner Jose Mario Buñag, the smear campaign has sunk to lower depths. The campaign on Recto worked. Against Buñag, the lying just got more vicious.

We decry the political machinations applied on these men as founded merely on disinformation and misconceptions that deliberately mislead the public on their contributions to the economy. Behind her throne there seems to be a shadow government with an agenda deviant of democracy, sinister and secretive.

Perhaps Recto was not an intended victim. We would like to think that he was never in the cross hairs of Arroyo’s shadow government. We realize of course that, of those on Arroyo’s senatorial wish list, there are sycophants more rabidly loyal, and we surmise she wishes for yes-men with shorter leashes.

Perhaps it is the influence of his seatmate, Joker Arroyo, reputed to be a maverick and straight as an arrow. Perhaps, it is Recto’s studied stances on economic issues. We recall that in the summer of Gloria Arroyo’s ascendance, Recto took her revenue
agencies to task, criticizing unfair pressure on wage earners compared to ussyfooting with political benefactors.

According to Dr. Prospero de Vera, professor of political science at the University of the Philippines, Recto lost because he did not use his celebrity arsenal as others did. Moreover, the smear campaign that attached to him the E-Vat was not only potent, Recto chose to confront it head on. On the matter of using celebrities, we admire his propriety. On the matter of defending the E-Vat, we salute both intelligence and principle in amounts unheard of in a politician.

After all, Recto is a consummate student of government. He did his research. He studied and analyzed. He was one of the best administration senators — a fact unappreciated by many too mad at Gloria Arroyo to see Recto’s worth. Never mind
that on the E-Vat, he is correct. In the end, Recto was collateral damage, wounded by the toxic discharge trailing where Arroyo treads.

Like bulbous snails that leave sinewy slime in their wake, hers comprised the broken careers of those who served her well. To the most competent in her cabinet, the sputum that trailed her poisoned. Many of the most capable in the Hyatt 10 will perhaps never speak to her again. The others she persecutes despise her as do the public cheated and lied to.

While uncertain on the origins of the propaganda engineered against Recto, we are certain those against Buñag stir in Malacañang’s nooks and crannies. The assault on Buñag is constant and periodic, quoting myopic statistics while disregarding the
larger picture. The masterminds are intimately knowledgeable about the grease and cogs of the Bureau of Internal Revenue. They know which buttons to push and which levers to pull.

Look at the attempt to revamp the BIR. Look also at recent promotions by executive order and reshuffling by whim that violate organizational logic and delicadeza.

Already this government is tainted by inordinate influence in the matter of customs collections and the large taxpayers unit. Yet it brazenly usurps from independent agencies and transfers critical functions to an office suspect and tainted with illegitimacy.

Save for specific political benefactors, large taxpayers and multinationals actually pay taxes correctly, some even in advance. Had those who engineered the revamp wanted to pursue tax evaders and not simply harass and extort, they would have gone after undocumented mid-sized enterprises where the largest leakages occur.

Moreover, the pretext for the attacks on Buñag’s competence, as in Recto’s tragic senatorial bid, is based on economics.

But look at the economic data. Recto was proven correct on E-Vat and Buñag’s competence is unparalleled. E-Vat improved credit ratings, opened up borrowing avenues, and eased debt burdens.

Buñag’s collection record achieved the same. His 2006 collections surpassed 2005 by 20%, the highest increase since 1997. His agency surpassed targets by P30 billion even as P27 billion was misallocated to the BIR targets when these should have been
assigned to the Bureau of Customs.

The economic upsides cannot be denied. In the retail sector where E-Vat readily impacts, trade rose 12.1% compared with 5.6% last year. Transport sector growth likewise grew 8.8% from a dismal 0.3% last year. Food manufacturing grew 7.7% from 5.2% and agriculture grew to 4.2% from 4.1%. These indicate economic development along a broader spectrum of classes, debunking criticism only the affluent benefit from consumer taxation.

More importantly, there was a doubling of productive government spending for infrastructure from 3.7% to 7.1% as E-Vat and aggressive collections provided the financial wherewithal. As a GDP driver, this is better than a reliance on the
illusory growth of the services sector.

For those who undermined Recto and those gunpowder-brained morons hidden behind Arroyo’s shadows who continue to bear down on Buñag, by their conspiracies they destroy what economic gains the public pays for via taxation.

Wednesday, 20 June 2007

Buñag's replacement refutes DOF report on BIR underperformance

Full updated report at ABS-CBN News

President Arroyo may have been convinced to sack Bureau of Internal Revenue Commissioner Jose Mario Buñag after seeing a report on the performance review of the tax collection agency conducted by the Department of Finance (DOF), ABS-CBN News reported.

The DOF's Tax Audit Group, headed by Undersecretary Gil Beltran, showed that P9.7 billion of BIR's P12.1 billion low tax collection for the first quarter of 2007 was due to weakness in tax administration.

The quarterly tax audit is based on data from various industry groups and government agencies such as the National Statistics Office and National Statistical Coordination Board.

Beltran said if only the BIR leadership had an effective tax administration, the bureau could have exceeded its target. "In fact [BIR] should have been able to meet the target or even exceeded by about P200 million."

He said the audit computed revenue loss against the target from assumptions imposed by the Development Budget Coordination Committee that did not materialize, which included lower inflation and lower interest rates.

Beltran also said BIR's collection for the first three months of the year should have been boosted by higher gross domestic product growth, increased bank deposits, higher bank loans and more trades in the equities market.

Beltran said improved economic fundamentals should have allowed BIR to collect higher capital gains tax, corporate income tax, excise tax on petroleum products and tobacco products as well as insurance premium tax.

However, he said the BIR performed well in collecting value-added tax and taxes on bank deposits and other percentage taxes.

Meanwhile, the report said BIR Deputy Commissioner Lilian Hefti, who was appointed Wednesday by Mrs. Arroyo as officer-in-charge of the bureau, had disputed Beltran's report.

Hefti said the report was overstated. Beltran, however, said his report will stand even if it's scrutinized.

Buñag's replacement came after DOF Secretary Margarito Teves announced that Mrs. Arroyo was alarmed after receiving reports that BIR missed its tax collection target for the first quarter of 2007.

Buñag: I'm a sacrificial lamb and scapegoat

06/20/2007 | 05:29 PM
Original article at GMANews.TV

Outgoing Bureau of Internal Revenue commissioner Jose Mario Buñag, who was sacked on Wednesday by Malacanang due to his agency's failure to meet collection goals, said he was made a 'sacrificial lamb and scapegoat' by higher finance officials in the government.

President Gloria Macapagal-Arroyo has appointed deputy commissioner Lilian Hefti as officer-in-charge of the collection agency. The Palace expects Hefti, a lawyer and certified public accountant with 30 years of experience in public service, to turn around BIR's performance.

"There are higher authorities in the government's financial institutions who would like to wash their hands of responsibility for the dire consequences of their unrealistic, failed and bungled policies and who look for a sacrificial lamb and a scapegoat to which they can assign the blame," Buñag said in the statement.

"So be it. Their time to answer for their failure and incompetence will also eventually come," he added.


Buñag has been offered an ambassadorial position to either Norway or the Netherlands as he leaves the BIR. He declined the offer saying he wanted to take a "long-deserved" rest from government service.

Instead, he thanked the President for the opportunity of having been part of her administration.

"I am grateful to the President for having given me the opportunity to have served the government under her administration as commissioner of the Bureau of Internal Revenue. Although the task of tax collection is very difficult and intricate... we have tried our best to meet the administration's expectations," Buñag said.

"I pray for the success of those who follow me in this difficult post of BIR commissioner and for the continued well-being and success of the entire personnel of the bureau," he added.

Buñag-Teves saga: how to turn competent people away from public service

By Alvin Capino
Original article at the Manila Standard Today

The latest news from highly reliable sources within the Ateneo alumni community is that Bureau of Internal Revenue chief Jose Mario Buñag is not inclined to accept the offer of Finance Secretary Gary Teves for the former to take on a diplomatic post in exchange for vacating the plum BIR seat.

Teves has reportedly told Buñag that he has convinced the President to give the latter the ambassadorship to Jordan or The Hague. Buñag is reportedly cold to the Teves offer and is heard to have said that he will simply wait till Teves announces his replacement, then quietly pack up and go back to the private sector.

The view of some members of the Ateneo HS class of 1960, to which Teves and Buñag belong to, who have followed this very disappointing ending to the Buñag-Teves saga, is that the BIR chief “has too much delicadeza to accept a diplomatic post after what is perceived as an unfair ouster scenario.”

It is obvious that the hype about a first quarter shortfall was simply meant to condition the public that there was a reason for Teves to axe Buñag. Such an exit plan has left the public wondering whether the demolition and the smear campaigns were necessary just to get Buñag out.

Buñag reportedly told his former classmates at the Ateneo that he “does not want to give the President additional problems such as looking for a diplomatic post” and that “the President does not have to appease me since I serve at her pleasure.”

The BIR chief is not affected by the impending exit but is merely smarting from the manner in which Teves has apparently arranged the exit, our contacts in that Blue Eagle circle say.

Recent developments seem to aggravate the adverse perception that there has been an unfair ouster plot against the BIR chief. After weeks of hyping up an imagined BIR collection shortfall for the first quarter, the finance department suddenly floated the idea that it was now “warming up” to the possibility of lowering the BIR collection targets for the year. Ostensibly after its officials have succeeded in ousting the BIR chief?

Recently, Budget Secretary Rolando Andaya said the government had more than enough money to fund its programs and that it no longer intended to borrow money next year. The question is where did the government get that much cash? Didn’t the cash come from the internal revenue bureau and Customs collections?

It will also be recalled that former National Treasurer Omar Cruz had a similar sunshine stance on the revenue collection period. Cruz lauded the bureau performance last year and said that collection levels had helped the government pre-pay a significant portion of its foreign debts resulting in savings.

Cruz was lauding the bureau while the agency was being heckled by doomsayers who predicted that it will not meet its 2006 goal. Buñag’s P30-billion overshoot of the 2006 target proved Cruz correct. Cruz, of course, mysteriously resigned in a huff soon after.

The other question being asked about the sad ending to the Buñag-Teves saga is this: What programs or initiatives did the finance department put in place to help BIR improve its collection efficiency? As far as we know, the agency had to make do with the same manpower, same technology and same systems despite the astronomical rise in collection targets.

In other words, the radically improving collection performance under Buñag was the result of sheer human will to succeed. The perception was that Teves had merely watched on the sidelines while targets were set and the BIR proceeded to do the near-impossible.

This view has led to another question: If Buñag is being axed for the supposed “shortfall” and the finance department has not really done much to help its bureau meet its goal, shouldn’t Teves himself resign on the principle of command responsibility? If not, wouldn’t Teves look like a commander who has reduced himself to the task of lead heckler against his own team?

Two names are now being floated to replace Commissioner Buñag. One is Deputy Commissioner Lillian Hefti who is part of the Buñag team. The other one is former BIR Deputy Commissioner Kim Henares, protégé of Hyatt 10 stalwart Guillermo Parayno, reputedly an influential Teves adviser.

Hefti’s probable assumption has also raised questions. If Teves is replacing Buñag with someone from the bureau chief’s own team, why doesn’t he just keep Buñag? Hefti’s performance has always depended on Buñag. Is there a presumption that Hefti, without Buñag, can meet the collection goal? Or will they simply lower the goal as soon as Hefti assumes the post so they can say later on that Hefti without Buñag was able to do the job? Whose legs are we trying to pull?

Henares’ reentry to the bureau was reportedly consistently nixed by Buñag for the simple reason that he cannot work with one identified with the group that sought the ouster of the President. What Buñag apparently did not know is the extent of the influence of Henares’ backer in the Office of the Finance Secretary.

Assuming Henares can make a BIR comeback as soon as Teves completes the axe job, would Henares be able to meet the BIR goals? Observers say any speculation can only be based on past experience. Henares served under Hyatt 10’s Parayno. And during that term, the bureau never met its goal.

Buñag will soon return to the private sector, sans fanfare and sans a consuelo de bobo diplomatic post. But people will continue to ask whether or not the exit scenario given Buñag is deserving of a person who made a mark in the private sector and then left the lucrative career to help government.

A lot of people are watching Commissioner Buñag’s final days at the BIR. How the ending will be will have a lot of say on whether or not the government can attract competent and honest people in the future.

What's wrong with Teves' math?

Buñag hits back at Teves on BIR shortfall in target collection
Original article at ABS-CBN News

The Bureau of Internal Revenue on Wednesday said taxes paid in advance, mostly due to the request of Finance Secretary Margarito Teves, affected BIR's target collection for the first quarter of 2007.

BIR said one of the major factors for the low tax collection was taxes paid in advance by large taxpayers last year, which, it said, Teves was fully aware of.

"Such advance payments were made by various taxpayers upon the personal calls and requests made, as is well-known in the BIR, by no less than Finance Secretary Margarito B. Teves himself to the President/CEOs of taxpayers," a statement released by the office of BIR Commissioner Jose Mario Buñag said.

It said the requests made by Teves were strongly criticized by Buñag and Assistant Commissioner Nestor Valeroso of BIR's Large Taxpayers Service.

"The impact of the advance tax payments made in 2006 has affected the 2007 performance of the BIR's Large Taxpayers Service in particular, which would have seen a more remarkable increase," it added.

The statement said the practice of advance tax payments was prohibited when Buñag was appointed as BIR commissioner.

"While it should be noted that there is nothing illegal in making the advance payments because the Tax Code allows taxpayers to pay their liabilities on or before fixed dates, huge advance payments distort the collection performance, the goals for which are set on a year on year basis."

Advance payments made for a particular year are automatically integrated as part of the goal of the ensuing year plus the corresponding growth rate, the statement said.

The statement also questioned Teves's early "pushing of the panic button." It said targets should be discussed at the end of the year and not at the end of the early quarters of the year.

6.55% increase in actual tax collections

In the statement, BIR belied Teves's claim that tax collections in the first quarter is disappointing and boasted a 6.55 percent increase in collected tax.

The statement said that for the period of January to May of 2007, BIR has already collected P285.586 billion in taxes.

BIR said the amount is 6.55 percent higher than the P17.566 billion collected for the same period in 2006.

BIR admitted that if failed to achieve the target collection for this year imposed by the Development Budget Coordination Committee and the Department of Finance.

However, BIR defended that the imposed targets "is humanly impossible" to be achieved because of the economy's performance this year.

He said the government assumed the gross domestic product for 2007 to improve 10.20 percent but it fell short of 0.34 percent as it improved by 9.86 percent only.

The statement also cited the government's failed assumptions on T-bill interest rates and on deposit interest rates.

"Historically, since 2002, realized indicators have generally been lower than the assumptions. In short, if the assumptions do not pan out, as in fact, they did not, it is unreasonable to expect that the BIR would still meet its target. It is humanly impossible for the BIR to be outperforming the economy, to say the least," the statement said.

There were reports that Mrs. Arroyo has sent an emissary to Buñag to offer him a job as ambassador.

The offer was allegedly made after Teves's statement: "Tax collections continue to disappoint."

Teves said that Mrs. Arroyo became concerned after being told that the country had incurred a P1.7-billion deficit in May as against the P5.8-billion surplus in the same period last year.

He said Mrs. Arroyo wanted to see the figures on revenue collections first before deciding on Buñag's fate.

"The President has talked to Commissioner Buñag and has expressed her concern about the slippages in BIR collection, but she would like to wait for more recent information for her to make the final decision on the matter as soon as possible," Teves said.

In the statement, BIR said "the foregone revenues" and weak collection on excise taxes because of decreased consumption of cigarettes and alcohol amount to P11.45 billion. The shortfall for the first quarter as against the target is only P10.03 billion, the statement added.

"This means the BIR has succeeded to some extent in overcoming the non-realization of the assumptions," the tax bureau said.

BIR also said the slower growth rate of agricultural and manufacturing sector, which are consumers of "VAT (Value added Tax)-able and excisable products contributed to the low tax collections. With a report from The Philippine Star


Arroyo appoints BIR officer-in-charge

Malacañang on Wednesday announced that President Arroyo has replaced Bureau of Internal Revenue (BIR) Commissioner Jose Mario Buñag, ABS-CBN News reported.

At a briefing in Malacañang, Executive Secretary Eduardo Ermita said Deputy Commissioner Lilian Hefti will replace Buñag as BIR officer-in-charge.

May deficit widens shortfall to P41.8 billion in 5 months

Full report at Manila Bulletin

The National Government had a budget deficit of P41.8 billion in the first five months of the year and P1.7 billion for the month of May, Finance Secretary Margarito B. Teves announced yesterday.

The five-month budget shortfall was P2.4 billion lower compared to 2006’s P44.2 billion while the May deficit figure was better than the DoF’s monthly internal target of P6.5 billion for the period, mainly because of lower spending.

Total revenues collected in January to May increased by 11 percent or P42.8 billion to P432.6 billion while the government spent P474.4 billion. The Bureau of Internal Revenue (BIR) reported taxes of P285.6 billion during the period, up 6.6 percent or by P17.6 billion while the Bureau of Customs (BoC) contributed P75 billion, which was 1.7 percent or P1.2 billion lower compared to the same period last year.


To better monitor BIR and BoC performance, Teves said the DoF is trying to make a "fair" assessment of their collections. "Here’s how we will do it: we have our targets for the first semester and we will compare it with the actual (and the) actual will be analyzed and we’ll try to remove factors beyond the control of the BIR like inflation, interest rates (but) also adding factors that could have contributed to the increase in collection," he explained to reporters.

By Josefa Labay Cagoco and Maria Eloisa I. Calderon with Reuters
Full report at BusinessWorld Online


Victor A. Abola, senior economist at the University of Asia and the Pacific, said the fall in tax collections was likely to persist until the third quarter, when the effects of value-added tax (VAT) credits will have subsided.

He noted that revenue collections were posting double-digit growth since the implementation of the amended VAT law in 2005. In November last year, however, Congress removed the ceiling on input VAT credits, formerly capped at 70%, triggering a spate of claims from companies, mostly trading firms.

Mr. Abola said he doubts the government could meet its budget surplus target of P14.6 billion for the second quarter.

"Collections are going to underperform until the third quarter. Industries’ claim of input VAT credits has in effect lowered their tax liabilities. That has to be exhausted. Until then, the collections will normalize," Mr. Abola told BusinessWorld.

The UA&P professor said the government must beef up tax administration amid the uncertainties of new tax measures being passed by the new Congress this year. Privatization of assets could also help, Mr. Abola said.


Mr. Abola said the government should keep its current pace of spending "until the tax collection situation has normalized because the conclusion we can get is we’re getting back again to bigger deficit."

The better-than-expected 6.9% economic growth in the first quarter bodes well for the government’s yearend target, so that "they don’t have to worry about growth. It has its own inertia," he added.

MIAA seeks new contractor for airport repairs

By Michael Punongbayan
Wednesday, June 20, 2007
Original article at the Philippine Star

The Manila International Airport Authority (MIAA) has started the search for a new contractor that would repair the structural defects at the still to be opened Ninoy Aquino International Airport Terminal 3 (NAIA-3).

MIAA General Manager Alfonso Cusi said they had invited local and foreign construction companies to join the bidding process.

“We are already looking for a new contractor to repair NAIA-3. We will choose the one with the best price and quality for the job,” he told The Star.

Cusi said the selection process will be in accordance with procurement rules under Republic Act 9184 which means that there will be submission of proposals, biddings, and other procedural concerns.

The MIAA said it is not closing the doors to Takenaka Corp. the Japanese firm that constructed the airport but refused to take responsibility for the structural defects.

The Office of the Solicitor General (OSG) is still studying the possibility of filing a case against the Japanese contractor for refusing to repair the defects of the NAIA-3.

Cusi stressed that the important thing now is to find a company who can do the repairs at the soonest possible time with the best job quality.

Cusi postponed last March the scheduled opening of NAIA-3 after its consultants TCGI Engineers Inc. and the Ove Arup & Partners HK Ltd. found structural defects in the facility that would endanger public safety.

ZTE's modus operandi

Why are they dealing with a firm like ZTE?
GOTCHA By Jarius Bondoc
Wednesday, June 20, 2007

Thrilled by its P16-billion telecom deal with the government, ZTE Corp. of China said it is bullish on RP. And so it is “investing in other” local industries: mining, rubber, agri-business.

The implication is that the P16 billion ZTE will supply in the form of broadband gear is its initial investment. It is far from true. Government will borrow from a Chinese bank the P16 billion to be paid to ZTE. Thus, it isn’t new money coming in; it is unnecessary money for a superfluous project. Existing telecom firms in Manila can provide the broadband service to the government. Yet with the ZTE deal, generations of Filipinos will have to repay a loan for a likely white elephant. And the loan amount has a built-in kickback of P10 billion for the Philippine approvers.

That is the same modus operandi ZTE employs in other countries. It comes in doling big cash to public officials in exchange for juicy contracts. Fortunately for people in other lands, ZTE has been exposed and driven out. Only in the Philippines is it being welcomed with open arms by a government that doesn’t know any better. Or does it?

I had written in a previous column that ZTE messed things up in Mexico, Ecuador, Ethiopia and Indonesia (Gotcha, 25 April 2007). Since then, more news items from around the world have detailed ZTE’s scams.

ZTE’s country manager in Liberia and his co-conspirators have been indicted for bribery. The ZTE man reportedly bribed regulators to ease out the real winner of a telecom project bidding. He also falsified bid papers to make it appear that ZTE was China’s largest telecom supplier, when it is only third. A report on the case says that ZTE violated corporate laws not only of Liberia but also of China against unfair competition.

A similar probe broke out in Libya. ZTE submitted false claims of track record and technical skill. Two of the fake papers reportedly contain the forged signatures of a private telecom executive in Manila and a junta leader in Burma.

The use of a false Burmese connection was cheeky. ZTE presently is being investigated also in Burma for corrupting a general who doubles as minister of post and communication. The officer had contracted ZTE to supply a $150-million system for 300,000 phone lines. The amount, to be borrowed from a Chinese bank, was ten times the real cost of the project, according to industry experts. Another ZTE contract for a million phone lines in another Southeast Asian country cost $30 million, a report from Bangkok stated.

Earlier ZTE indictments in Ecuador and Ethiopia also were for graft and bribery. In Indonesia the company is charged with price dumping.

The most celebrated ZTE case is in Mexico City, where residents have accused the mayor of addled priorities. The official had commissioned ZTE for high-speed Internet to 8.7 million citizens, plus broadband “hotspots” linking government offices and thousands of street surveillance cameras. Mexicans groan that what they need instead is water and electricity.

In Manila six business groups have urged President Arroyo to cancel the P16-billion deal signed by DOTC Sec. Leandro Mendoza with ZTE on Apr. 21. Executives and economists said the money could be better used building 36,000 classrooms, or 6,000 rural health clinics, or 120,000 artesian wells. Mendoza has yet to make the contract public, though.

Graft investigator of ZTE deal axed

GOTCHA By Jarius Bondoc
Wednesday, June 20, 2007
Original article at the Philippine Star

The Presidential Anti-Graft Commission fired its officer who started a probe of mighty Cabinet men. Vida Zora Bocar was axed last Monday. It was the same day I published her request for documents on the ZTE deal to beef up an investigation of DOTC Sec. Leandro Mendoza and Asec. Elmer Soneja. Superiors claimed Ms Bocar had violated the confidential nature of PAGC proceedings. She reasoned out — to no avail — that she had no control over what I wrote.

Ms Bocar did nothing wrong. In asking me for papers on my exposé, she was only doing her job as a thorough graft investigator. We had yet to meet.

But other forces were at play. Ms Bocar had begun looking into a potential P10-billion kickback from an unnecessary P16-billion project. That ruffled powerful feathers and endangered PAGC posts. One of those to be questioned is murmured to soon become executive secretary, to which the PAGC submits its reports and budget needs. Looking for an excuse to back out of the inquiry, PAGC higher-ups conveniently accused Ms Bocar of indiscretion. Will anyone now dare to submit evidence on the scam?

Pray that Ms Bocar’s bosses restrain themselves. May the words of Luke (3:14) touch them: “And the soldiers likewise demanded of him, saying, ‘and what shall we do?’ And he said unto them, ‘Do violence to no man, neither accuse any falsely, and be content with your wages.’”

RP trading costs too high–WB

By Jun Vallecera
Original article at the Business Mirror

THE World Bank has adjudged the Philippines the most expensive place there is in Asia from which to trade with the rest of the world.

In a report, the World Bank found that Manila charges the most per container van of export or import materials, higher than Singapore, China or Thailand.

According to the World Bank, port and terminal handling costs in the Philippines total $1,336 per 20-foot container versus only $335 in China, $382 in Singapore and $848 in Thailand.

It concluded Manila has the highest cost among the countries it surveyed, adding this was a “cause of concern for the Filipino exporters/importers.”

The study found the cost for shipping anything out of Manila in a 20-footer already totals $994, which includes $500 for domestic transshipment from Cebu to Manila, for example; cargo handling or arrastre of another $175; $45 for the terminal handling charge and $274 as port charges.

The World Bank said the $994 per 20-footer figure accounts for the bulk of the total cost to export from the Philippines.

This was on top of another schedule of fees that total $721.21 per container van.

The fee charged the exporter or importer by a foreign shipping company for transporting vans from Cebu to Manila already costs $500.

This was on top of a $30 fee for the bill of lading, the terminal handling charge of $30, chassis rental of $9, a fuel adjustment factor of $70, even a telex release fee of $35, a loading fee of $11, cargo handling/arrastre fee of $46.02 and export wharfage of $5.19.

Except for the export wharfage, arrastre and loading fees, the World Bank said all these fees went to the foreign shipping liners.

The charges had been such that Socioeconomic Planning Secretary and Neda chief Romulo Neri was scandalized to learn that even the Bureau of Customs seems to have taken advantage of the situation by charging exporters fees for the use of its x-ray scanning machines.

Industry sources said Neri reminded BOC chief Napoleon Morales it was never the intention of the National Economic Development Authority for the bureau to impose a scanning fee.

Neri said the fee was needless, as Manila can recover the cost of purchasing the equipment out of the increase in customs duties and taxes.

Reports claimed Morales charges $50 as security fee per 40-foot container, and $25 per 20-footer containers.

The Philippines obtained a loan from the Chinese government to make the purchase of the x-ray scanning machines possible.

Sources also said Finance Secretary Margarito Teves was similarly scandalized and has promised to “look into the matter” quickly.

Tuesday, 19 June 2007

Macapagal airport to install new baggage-handling system

By Reynaldo G. Navales
Original article at Sun.Star Pampanga

CLARK FREEPORT -- The Clark International Airport Corporation (Ciac) signed a contract for the installation of a new baggage handling system at the sprawling Diosdado Macapagal International Airport (DMIA).

Ciac president Victor Jose Luciano inked the contract with Raymond Dan, president of the R. Dan and Company, Inc., at Club Filipino in Manila in the presence of Ciac executives led by executive vice president Alexander Cauguiran and chief executive officer Cynthia Dungca.

The contract amounting to over P22.6 million will provide for the supply and installation of a new baggage handling system, including rehabilitation and reconditioning of the existing baggage conveyor at the check-in and arrival area of DMIA.

The installation of a new baggage handling system at DMIA coincides with the expansion of the existing terminal in anticipation of the growing passenger volume.

Last year, DMIA posted over 480,000 international and domestic passengers and for this year the number is expected to grow. The airport was already averaging 49,000 passengers per month for this year.

Luciano said services at DMIA will be more improved with the installation of the new baggage handling system.

Among the development[s] at DMIA include the establishment of an in-flight catering facility by Miascor-Gate Gourmet. At least 4,000 hot meals per day will be prepared by the world-class in-flight catering firm to service long-haul airliners such as Tair Airlines of Saudi Arabia.

Tair Airways is expected to service the route Clark-Riyadh-Jeddah-Clark this year pending the delivery of one Boeing 747-400.

DMIA general manager Bienvenido Manga said Tair Airways will fly three times a week and is expected to tap the hundreds of Overseas Filipino Workers based in the Middle East.

CebuPac to fly to regional destinations from Clark

06/19/2007 | 03:01 PM
Original article at GMANews.TV

Budget airline Cebu Pacific said Tuesday that it plans to use Clark International Airport in Pampanga to for flights to its regional destinations.

Cebu Pacific is a unit of Gokongwei-owned JG Summit Holdings Inc.

In a statement sent to the media, Cebu Pacific said it wants to fly daily to Hong Kong, four-times a week to Singapore and Macau, three times a week to Bangkok and Taipei from the Clark airport.

“If we get the necessary approvals from all the governments concerned, we will make Clark our third base and hub after Manila and Cebu," Cebu Pacific president and CEO Lance Y. Gokongwei said.

“We hope to get a favorable response from all other governments considering that our own government has given their carriers similar rights to Clark," he added.

Victor Jose I. Luciano, president and chief executive officer of the Clark International Airport Corp., welcomed the CEB plan.

“Clark addresses a much-needed demand and this is shown in the exponential growth of passenger traffic and cargo volume in the relatively short time that it has been in operation as an international airport. With CEB there, we expect to grow faster," Luciano said.

Cebu Pacific's plan, Gokongwei said, is also strategically important to the JG Summit unit since making Clark a base of aircraft and a hub for flights to and from various regional destinations gives the budget airline a major presence in Central Luzon, one of the country’s fastest growing regions, and in the whole of Northern Luzon.

Gokongwei said he expects to carry about 300,000 passengers in and out of Clark per year initially but is confident of increasing this volume as Clark continues to spark growth in the region, being the gateway to the northern corridor.

“We want to help accelerate the growth of the region as well as the commercial aviation market. We have done this in other parts of the country by offering our permanently low ‘GO’ fares and serving more destinations using our new Airbus fleet," Gokongwei said. -

January-May BOP surplus at $2.365B

The surplus in the balance of payments (BoP) reached $2.365 billion in the January-May period. The figure is 31 percent from $1.81 billion in the period last year.

The Central Bank had earlier forecast a surplus of $1.6 billion for the whole year.

Jan $731M
Jan-Feb $1.285
Jan-Mar $1.411
Jan-Apr $1.891
Jan-May $2.365

PGMA takes action on media killings

By Tony Lopez
Original article at The Manila Times

Expect fewer cases of journalists being killed, whether the killing is done while in the course of the mediaman doing his job or simply personal vendetta.

President Arroyo on Thursday, June 14, last week vowed to put an end to the unexplained killings of journalists (and activists) that began when she assumed office in January 2001. The number of killed journalists had risen steadily, from two per year in 2001 to six per year, until a lull last year (when killings went down to two).

The President invited the leaders of the various press organizations for lunch at the Agui­naldo State Dining Hall. The meeting was upon her initiative.

I represented the Manila Overseas Press Club as its chairman. With me was Emil Jurado, the MOPC vice-president and a columnist of The Manila Standard Today.

Upon my suggestion, the President designated a special team of prosecutors to exclusively handle cases of violence against media practitioners. At the dialogue, I had requested Justice Secretary Raul M. Gonzalez to assign his crack prosecutors to the cases but he instead began enumerating who his top prosecutors are, in order of their rank, from the chief state prosecutor down.

The President butted in and got what I wanted to say, that we needed a special team of prosecutors to handle the cases of media killings. Someone suggested the name of newly promoted Cavite provincial prosecutor, Emmanuel Velasco, a former newsman.

Right there, the President asked that Velasco be brought back to Manila, given a promotion, and tasked to handle the cases of media murders. Now, that’s aksyon agad [immediate action].

I also suggested that a meeting with top security officials and the media leaders be held once every quarter. The idea is to keep the AFP, PNP and DOJ on their toes since during such meetings, they would naturally be asked to report on the status of the killings. The President adopted the suggestion and will probably attend, if not host, the meetings.

In her statement read at the start of the special lunch meeting, the President vowed to punish rogue members of the military and police who are reportedly involved in the killings.

“As we have made tough choices to turn around our economy, we will also get a handle on these killings to end them once and for all,” Mrs. Arroyo said. “Let me once again deplore the killings of journalists.”

“We have a sorry history in our nation for political violence. We aim to break this cycle of violence once and for all,” she said.

The President told Armed Forces of the Philippines chief of staff General Hermogenes Esperon, Philippine National Police Director General Oscar Calderon, Department of Justice Secretary Raul M. Gonzalez and other law-enforcement agencies to speed up the investigation and resolution of cases of media killings.

Also at the two-hour meeting were Executive Secretary Eduardo Ermita, Press Secretary Ignacio Bunye, Defense Undersecretary Melchor Rosales, Press Undersecretaries Jose Capadocia and Isabel de Leon, Philippine Information Agency (PIA) chief Dodie Limcaoco, PNP Task Force Usig chief Director Gerry Barias and Deputy Presidential Security Group chief Col. Emmanuel Cacdac.

Representing the news organizations were myself of the MOPC, National Press Club president Roy Mabasa, NPC director Samuel Julian, NPC legal counsel Toto Causing, Malacañang Press Corps president Paolo Romero, MPC vice-president Mia Gonzalez, De­fense Press Corps president Verlin Ruiz, PNP Press Corps president Nilo Marasigan and PNPPC chairman Alvin Bal­tazar, Kapisanan ng mga Brodkaster ng Pilipinas chairman Ruperto Nicdao Jr. and KBP member Butch Canoy.

The Philippine Star on June 15 reported that “Lopez also urged Mrs. Arroyo to take stronger steps and send a signal to all government officials and law-enforcement agencies that she will not tolerate such killings.”

Star’s Paolo Romero reported, quoting me, “Of the 34 suspects in the killings of journalists, half are either members of the AFP or the PNP or government officials—including mayors. Of the 111 cases of killings acknowledged by the government, 27 of the fatalities were journalists.”

“That means one out of four cases [is] media killings,” I concluded.

Analyzing the killings, I told the President the incidents were organized, with more than one person involved in the assassinations.

I also stressed journalism is the only profession guaranteed protection under the 1987 Constitution.

Chinese shipping company to invest $3 billion in RP

By Mia Gonzalez
Original report at the Business Mirror

CHINA Ocean Shipping (Group) Company, or Cosco, one of the world’s shipping giants, will invest $3 billion on a shipping complex development project in Sangley Point, Cavite, company officials informed President Arroyo on Monday.

Wei Jia Fu, Cosco president and chief executive officer, informed the President about the company’s new investment in the country during a courtesy call in Malacañang.

Ambassador Francis Chua, special Philippine envoy on China trade and investments who was at the courtesy call, said that the President may witness a contract signing for the project when she returns to China for a working visit in August.

“Now, they are starting to do a feasibility study. That’s Phase 1 and that will continue. And they hope to sign a significant contract with the concerned party upon the visit of the President to China sometime in August,” Chua said.

He said that the project will “initially involve” an investment for the development of 250 hectares of land in Sangley Point, specifically for the expansion of existing facilities and the construction of new structures.

He said the new structures include a maritime training school, and ship repair and shipbuilding facilities.

Chua added: “Cosco will use the Philippines as a hub for shipment to Europe and America. So all cargo from Asia will come to the Philippines, using the Philippines as a staging point to go to the US, North America, Europe, and vice versa.”

He said the Cosco development project is expected to generate “a minimum” of 100,000 jobs.

With Wei were Cosco general managers Shi Zemin and Yuan Xiayu, Cosco container lines managing director Sun Jia Kang, and Ji Hai Sheng, president of Cosco Corp. Singapore Ltd.

Other officials who were with the President were Trade Secretary Peter Favila, Transportation Secretary Leandro Mendoza and Socioeconomic Planning Secretary Romulo Neri.

Sangley Point, which Cosco is reportedly eyeing as its main hub in Southeast Asia, is being developed as an international transshipment point through the creation of a special economic zone.

Cosco will be the second foreign company to set up a shipping complex in the Philippines, after Hanjin Corp. of Korea infused $1 billion into a shipyard project at the Subic Bay Free Port in Zambales.

Cosco is a $17-billion global company that owns and operates 600 ships calling on 1,300 ports in more than 160 countries worldwide.

Better jobs for those with jobs

Business Mirror

ON May 31, the National Statistical Coordination Board announced that the Philippine economy grew by 6.9 percent in the first quarter. Then on June 15, the National Statistics Office (NSO) announced that based on the April labor force survey, unemployment went down significantly.

Those two statistical releases seem to indicate that, finally, the Philippine economy is strengthening and has started to produce more jobs. Maybe—but let’s not celebrate yet.

A keener look at the numbers seems to indicate that our recovery remains fragile and skewed. Those gains in jobs could evaporate unless the government can attract substantial investments in the next three years.

According to the April labor force survey, the country’s unemployment rate, using the International Labor Organization definition, went down from 8.2 percent to 7.4 percent.

That’s not really miraculous because it simply means seven out of a hundred are jobless, compared to eight out of a hundred a year ago. In absolute terms, there are 33.7 million employed people in April this year, compared to 32.7 million in the same month last year—translating to about a million extra jobs.

But given our chronic high jobless rate, that’s an encouraging sign—more so because underemployment has gone down by almost 7 percentage points from 25.4 percent to 18.9 percent.

Lower underemployment could be interpreted to mean there are fewer workers who feel dissatisfied with their jobs during the survey. The underemployed are the ones who think they need more sidelines, more overtime, more working hours, or new high-paying or more satisfying jobs. Their percentage share is down.

Are wages rising? We can only speculate to that effect. That is quite observable in the case of the fast-growing industries like the call centers, other cyber services and electronics.

It’s also possible that the continued flow of skilled workers abroad has started to tighten labor supply, especially among skilled workers. Or it’s also possible that the 6.9-percent growth rate may have really created more job opportunities. It’s quite obvious, given the fact that there are more than a million employed people in April this year than in April last year.

The decrease in underemployment may suggest that those who are already working simply took advantage of the opportunity by moving into those relatively better-paying jobs—maybe. We say “maybe” because, this time, the labor force survey doesn’t provide much detail the way it used to, and we can’t help but wonder what the NSO is trying to hide.

Anyway, if seen by industry or sector, it’s obvious that the share of agriculture in employment has increased. So the farms are contributing significantly despite the fact that agricultural growth has been stable at 4.2 percent.

The share of construction is also rising. This is quite consistent with the supposed recovery in the real-estate sector. And then it’s obvious that private households are hiring more. We are not disparaging the farms, but we know that farm work, as well as construction, tends to be seasonal. It was summer and that’s when people usually start repairing their houses and building up buildings.

By occupation or skills, it’s clear that the percentage share of machine operators and assemblers rose. It seems to suggest the factories are a little busier. Laborers and unskilled labor also have the same trend. This is quite obvious because the farms employ lots of seasonal workers and the construction sector usually hire unskilled labor in summer to do manual and menial jobs.

By class of workers, there is clearly an improvement in the share of wage and salary earners, while that of own- account workers declined.

Is the availability of quality jobs improving? One could be tempted to think that way. Private establishments are definitely hiring; so are private households. The only problem is that those employed in private households are mostly unpaid family members. There’s the rub. So it seems the small guys here are not yet the real beneficiaries of the higher growth rate.

Underemployment has gone down but the gains are largely confined in the industry and services. That seems to validate our earlier observations that so far the major beneficiaries of the recent surge in the economy are urban dwellers. And they are concentrated in the 35-years-and-over category, indicating that those who benefited most were probably supervisory or managerial level workers. Underemployment in the farm sector has actually worsened.

In summary, the major beneficiaries of the 6.9-percent growth are primarily those who are urban dwellers working in the industry and services sectors, mostly in the supervisory and managerial levels. The secondary beneficiaries are those engaged in the farm, construction and real estate sectors whose jobs are probably seasonal or cyclical. More so because those construction jobs were probably triggered by electoral considerations and may therefore vanish once the government feels they are not collecting enough revenues.

How about the other sectors of the economy? The share of manufacturing, mining and quarrying, and electricity, gas and water either went down or stayed the same. The same trend could be observed in wholesale and retail; hotels and restaurants; transport, storage and communications; and finance.

This should be a surprise given the generally higher growth in the economy. Well, if one looks at capital formation in the country’s national-income accounts, which is still in the negative, the trend seems to indicate that we don’t have the critical mass of investments yet to propel the economy forward.

That means that if the government really wants to spread the benefits of growth, it has to attract more investments, especially foreign direct investments, on a scale that our Asian neighbors do. That would, in turn, require really serious investments promotion and significant reforms to improve the investment climate.

Is the government up to the challenge? That’s the question.

RP in ‘unprecedented’ industrial peace with zero labor strikes in 4 months

By Mayen Jaymalin
Tuesday, June 19, 2007
Full report at the Philippine Star

The country is in the midst of an “unprecedented” industrial peace, with no report of strikes or lockout in the past four months, Labor Undersecretary Danilo Cruz said yesterday.
“This is an unprecedented record of four straight months without an incidence of strike or lockout, thus pulling down the number of strikes by 88 percent compared to last year,” Cruz noted.

He said that based on data from the Labor department’s National Conciliation and Mediation Board, the only strike recorded this year was in January, involving Radphil Corp. The labor row in the company has since been settled. NCMB recorded eight strikes in the first five months of 2006. This year’s strike affected 54 workers as against last year’s 919.

Cruz added that despite the near-zero strike record, the number of strike and lockout notices filed with the NCMB this year was almost the same as last year’s.

“A total of 150 notices of strike and lockout were filed this year from 149 a year ago although the number of workers involved in these notices were remarkably lower,” Cruz said.
Preventive mediation cases filed in the first five months of the year went down by 18 percent to 210 cases. Such mediation efforts unlocked monetary benefits of P12 million for 300 workers.
DOLE earlier projected an increase in the number of labor disputes for the year due to collective bargaining disagreements.

“Since year 2007 is a collective bargaining year, we expect an increase in the number of notices of strikes and lockouts to be filed in the coming months,” Labor Secretary Arturo Brion said.
He said NCMB data indicated that CBAs in more than 400 companies nationwide are expiring in the next months.

Monday, 18 June 2007

All together now: "Open skies! Open skies!"

CAB: Open skies or open their hearts and minds?
By Bobit S. Avila
Full article at the Philippine Star

As usual no tourism forum would be complete without a presentation of the so-called open skies policy. Narzalina Lim ably presented the issue, knowing too well that we in Cebu have always wanted to open our skies and bring in more tourists not just to Cebu but to the whole Visayas as well. But then as you know, the Philippine government is so blind to see a golden opportunity banging on our door. The open skies policy has done great things for the tourism industry of Vietnam and Laos and I’m sure it can help boost our tourism here in Cebu. But then, we’re Filipinos… we love to talk about open skies, but that’s all we do… just talk, talk and talk about it!

It is for that reason why I didn’t care to listen to the other speakers, like my friend, former PAL boss Avelino Zapanta who is now the big boss of SEAIR. But during our international media forum, where I was invited by Mila Espina to be one of the panelists, we got to hear Atty. Carmelo L. Arcilla, executive director of the Civil Aeronautics Board (CAB), who explained that there really is no true “open skies.” I don’t know about that, but I believe Singapore or Hong Kong has such an open skies policy.

But no matter how the CAB defends its position, the whole truth is that the CAB continues to live within its narrow-minded, archaic regulatory functions at a time when unheard-of low-cost carriers (LCCs) have spurred the tourism growth of so many new destinations not part of the usual traditional air routes. I would like to believe that our problem is not about opening up our skies, rather it should start from opening the hearts and minds of our protectionist policies brought forth by the CAB.

CAB officials should look at what happened to the country when the Arroyo administration threw away the unlamented anti-carnapping permit (ANCAR) where you needed to prove that your car wasn’t stolen before you could board a ferry to the next island. Today, this allowed the President to come up with her backbone program dubbed the Strong Republic Nautical Highway. If we didn’t fight the self-interest groups which extorted money from our commuters in almost every port, domestic tourism would not be what it is today, where commuters bring their cars from island to island!

So, there is a suggestion from Rep. Raul del Mar to come up with a “pocket skies” policy. I can only say, what’s in a name? Call it pocket or open skies, it doesn’t matter. What we need to do is stop talking about it (God knows I was still a young fellow when I started writing about this) and follow the examples of other countries and start adopting it this year!

Graft commission investigates ZTE

Letter from graft prober
By Jarius Bondoc

Letter from the Presidential Anti-Graft Commission:

Greetings, Mr. Bondoc: The Commission is investigating the involvement of DOTC Sec. Leandro Mendoza and Assistant Sec. Elmer Soneja in a Chinese telecom deal with ZTE Corp, upon receipt of an article authored by you in the Philippine STAR dated April 20, 2007.

May we ask for your cooperation and assistance by providing us any and all documents relating to the telecom deal, if there is any in your possession.

We would highly appreciate any information you could provide to aid in the speedy investigation. We look forward to an effective partnership with you towards a graft-free Philippines.

Vida Zora G. Bocar
Graft Investigation Officer

Sure thing. But shouldn’t the Commission also compel Mendoza to submit the $330-million (P16-billion) contract he signed with ZTE on Apr 21? He keeps on hiding it, despite complaints from two competitors, one diplomat, and seven business groups. It breaks the Constitutional rule on full disclosure.

Market players score BSP policy moves

SDA competing with other investment vehicles
By Likha Cuevas-Miel, Reporter
Original report at The Manila Times

THERE is a clamor among capital market players for the reversal of recent Bangko Sentral ng Pilipinas (BSP) moves aimed separately at stemming the expansion of the country’s money supply and redirecting liquidity toward banks’ traditional lending business.

Market players are up in arms over the BSP’s policy of allowing state-run financial institutions and banks’ trust departments to tap its special deposit account (SDA). Also a source of frustration is the central bank’s tiering scheme, which effectively caps the gains lenders can make on overnight deposits with the BSP.

On the sidelines of a conference on the corporate market for bonds or IOUs, Victor A. Abola, University of Asia and the Pacific senior economist, said the BSP’s two policies are “hurting” the domestic capital market, adding these schemes have effectively reduced the attraction of local securities or investment vehicles.

“A tiering system is not good for signaling purposes because it confuses the market and a central bank is supposed to signal its intention to the market whether it’s tightening, loosening or maintaining a neutral stand. But that is achievable if you only have one rate. All other central banks have only one rate,” Abola said.

Since October 2005, the BSP has kept its overnight borrowing rate at 7.5 percent, while adopting a tiering scheme on banks’ aggregate placements in the facility. Under the said window, the rate for banks’ first P5-billion placement would be the applicable BSP published rate. For the next P5 billion, the rate would be the applicable published rate less 200 basis points and for any placements excess of P10 billion, the rate would be the applicable BSP published rate less 400 basis points.

Abola said the country’s money supply growth is at par with those of its Asian neighbors. He cited last year’s month-on-month money supply growth of less than 4 percent and the annual 15-percent expansion, which is the average in the region based on data from the International Monetary Fund.

In other words, the economy can still absorb the growing domestic liquidity, he said.

“You cannot micro-manage if there are no clear signs that inflation is rising, which is three consecutive months of accelerating inflation, not year on year. It’s not that high. On the average it’s only 0.2 month on month,” the economist said.

A market insider said what the central bank is doing is “remedial” to what was perceived to be a growing domestic liquidity that may push inflation upwards.

“They cannot issue any instruments unless there is already a price spiral but it seems they could not figure out what to do, what preventive measure to apply,” the source said. “Now what the treasury does is to reject auctions to keep interest rates low,” the source added.

Another market insider said rejecting auctions also distorts the “real market price” since the auction is a price mechanism, which is the most efficient method of allocating risk and resources.

If the government rejects the auction, in effect the price mechanism, then it becomes distorted, the source added.

“[Former National Treasurer] Omar [Cruz] tended to respect the secondary market. Let the market dictate. [T]he government can, too, under a certain condition. [But] it should be clear, the parameters should be displayed by the government [and] not like a guessing game,” the source said.

These parameters can be similar to the stop-loss condition at the local bourse, wherein if the loss is too high, then there is a trading halt. Abola said this mechanism contributes to an orderly market.

Foreign investment in stock market up 86%

By Honey Madrilejos-Reyes
Full report at the Business Mirror

NET foreign investment in the stock market rose 86.2 percent to P46.56 billion during the first five months of the year, from 25.01 billion a year earlier, the Philippine Stock Exchange (PSE) said over the weekend.

Known as net foreign buying, the measure shows the difference between how much foreign investors bought and how much they sold in a given period.

“The build-up of foreign investments is fuelling the market’s record-breaking run, said PSE president Francis Lim. “I am optimistic we can sustain the interest of foreign investors, as long as the country’s economic foundations remain solid and our political leaders will maintain their sense of maturity and sobriety.”

According to numbers released by the exchange, foreign buying almost doubled to P280.31 billion from P141.2 billion in the same comparable [period]. Foreign selling expanded 101.3 percent and reached P233.75 billion from P116.14 billion.

So, who’s afraid of Yap, Buñag?

J.A. de la Cruz
Original article at the Business Mirror

This question is being asked in the wake of the unrelenting (until some days back anyway) barrage of negative reports on two of the most-driven, results-oriented and, yes, misunderstood officials of the Arroyo administration for weeks on end now—Agriculture Secretary Art Yap and BIR Commissioner Jojo Buñag.

The youthful agriculture chief who just returned from a successful trip to the People’s Republic of China (PROC) with President Arroyo has been put to task by the group Kilusang Makabansang Ekonomiya (KME) for allegedly playing “land broker” to Chinese corporations bent on venturing into the undeveloped and, might I add, investment-challenged agricultural sector.

Taking off from similar criticisms from unknown sectors earlier, KME insists that Yap and, by implication, this administration is: a) violating the constitutional provision on foreign ownership of land by letting the Chinese companies enter into partnerships to develop these farming areas and b) threatening the country’s food security by such an unwarranted act.

Of course, the KME concerns, if we may call them such, are completely baseless and unavailing. But they make good copy for those who have an ax or, should we say, axes to grind against Yap and this administration.

If only KME’s manifesto writers bothered to scrutinize the agreements which the Chinese corporations entered into, thus far, there is nothing in these documents which cedes landownership to the latter. They are merely leasing these lands on a long-term, I believe 25 years renewable, some even less at 10-years basis, from legitimate private owners and government.

Most if not all of these lands are undercultivated, or if they are being farmed right now, have not been used to the fullest. What Secretary Yap and his colleagues have done, or are poised to do, is putting these lands up for full and responsible cultivation as a means not only to put these to good use, but as a bait, if we may call it such, to get the Chinese groups to put in more money into food and agricultural processing.

It is the latter effort, aside from the promised monies, which has been wanting in most contracts. Even the so-called most enlightened US, EU or Australian investors in agriculture have never ceded.

Besides the respectable land lease, other features of these contracts are a definite timetable for investing the promised monies, transfer of technology and retention of at least 30 percent of the production for sale locally.

Unless one is from another planet or simply a native naysayer, by any kind of reckoning, this effort will not only enhance our food security but generate more jobs, enhance rural development and, of course, generate much-needed foreign exchange as a good part of the production is exported to China.

If the critics are not yet aware, China has become and continues to become a glutton for agricultural products, mopping up all kinds of items from all sources worldwide, including our neighbors in Asean.

In the process, the Chinese have also entered into similar contracts and have been lavished with praises and incentives in return. As a senior Thai minister noted upon learning of the attacks on Yap: the Chinese investors can always divert their investments to their country if they are unwelcome in these parts

Ooops. . . We are talking of an estimated P240 billion in investments indicated in the 19 agreements which have been signed through Yap’s initiative ever since he and his boss, President Arroyo, decided to look East at China rather than be bamboozled by the extravagant but unavailing claims and promises of the country’s traditional sources of foreign agricultural investments who have so monopolized and depressed the market to suit their own ends.

If the critics are being honest with themselves, and with the country, they will have to acknowledge the fact that investments in the higher stages of agriculture have stagnated and that, instead of food security, we have been importing more and more of our basic needs rather than producing them.

So, is it any wonder Yap is getting this kind of vitriol from, of all sectors, KME, which is supposed to be one of the more enlightened advocates of the “Filipino First” policy?

It should go back to the contracts and assist in ensuring that the same stay as close to the avowed goals of enlightened investments, creative partnering and food sufficiency, among others, which are the objects of these arrangements anyway.

The case of Commissioner Buñag is eerily similar to that of Yap—an out-and-out ouster initiative by powerful forces disguised as a so-called performance check.

The story begins with an unrealistic revenue collection target imposed by the DBCC and relayed to Buñag by Finance Secretary Gary Teves, who is his classmate at the Ateneo.

Of course, Teves and Buñag were both aware that the target was issued to justify the trillion-plus peso 2008 budget and that, in time, the same will probably be adjusted depending on the country’s economic situation and other factors.

The trouble began when some sectors started badgering Buñag after the first quarter to abide by his commitment using the shortfall within the three months period as the battering rod.

Whether Teves was aware of the sly tactics of these critics or not has yet to be determined. Suffice it to say that the good secretary was suddenly tongue-tied about the whole issue.

Rather than assisting Buñag explain the whole situation as he did last year when the same issue of revenue shortfall was brought up, Teves was nowhere to be found. Which was, of course, strange.

Being Buñag’s immediate boss he could have come in and showed the critics the correct picture. He could have, at the very least, told them to take pause explaining in the process that the goal was just that, a goal, and something which can be or ought to be reviewed as the year gets going.

He could have also noted that a similar attack was launched against Buñag last year to no avail since the BIR managed to overshoot the target by P30 billion, more or less.

Teves’s silence was palpable, especially when Malacañang came out with that highly irregular, if not illegal, Executive Order 625 reorganizing certain sectors of the BIR without as much as advising him and Buñag about it.

But that is all under the bridge now as Buñag has been given a reprieve by no less than President Arroyo after she recalled the order and asked Buñag to step up his revenue drive.

But the question remains: who is afraid of Secretary Yap and Commissioner Buñag? Or, should it be, whose toes have they stepped on? Abangan.