Saturday, 12 November 2011

Now is our chance


Peter Wallace
LIKE IT IS
Manila Standard
http://www.manilastandardtoday.com/insideOpinion.htm?f=2011/november/11/peterwallace.isx&d=2011/november/11

The world is in turmoil. There is the Arab Spring where three governments have fallen, sadly in far too bloody ways. Europe is in crisis, one that may bring the world down. Due to debts that can’t be paid. The Greek prime minister has gone, Italian prime minister Silvio Berlusconi is following. Ireland had to be rescued, Portugal, too. Disgust with the world’s financiers and their excessive greed has led to an “Occupy Wall Street” revolution that is sweeping the world, and may lead to sweeping change in how that financial world is managed.
Then there’s nature doing its bit with a tsunami that took nearly 16,000 lives and cost some $300 billion in Japan. And now flooding in Thailand so severe that 10,000 factories have closed and millions of lives have been disrupted. These are the worst such disasters in over 50 years. Earthquakes have rocked Turkey, Alaska and New Zealand.

Amidst all this turmoil, there’s a haven of calm: The Philippines. Where we are arguing over whether Gloria should be allowed to travel or not. And how did one woman get away. The pettiness of Philippine politics suddenly doesn’t seem so bad.

It seems heartless to take advantage of another’s misfortune, but there’s an opportunity here the Philippines can grab. The first is that companies need to diversify their operations to have factories in several locations. The Honda plant in Thailand, for example, is underwater and it will be weeks, if not months, before it’s back in operation. If there were a plant here, cars could still come off the line. There will be many other industries where diversification makes sense.

Then there’s tourism. Tourists will be looking for alternative sites. We just need a polite way of saying “Make it here!”

On finance, this now looks like a much safer bet. A country with banks in sound shape, no debts of any significance to write off, a financial system that is stable and strongly backed by gross international reserves worth $75 billion that could cover 11 months worth of imports, and rating agencies that are upgrading the country, not downgrading like elsewhere, is not to be sniffed at. The world’s rich are still rich (a sad irony in this debacle) and will be looking for safer havens.

It wouldn’t hurt the Philippines at all if it doubled its bond offerings and then spent it on infrastructure. At 2.4 percent of GDP being budgeted for 2012 it is the lowest among the major Asean countries. It needs to, at a minimum, match the Asean average of 6 percent. More for a couple of years would be better. Private funds into public-private partnerships and official development assistance, for other projects won’t reach this level. We have more than 30 years of underspending to catch up. In 1971 when Thailand and the Philippines were about equal, a GDP of $7.38 billion and $7.41 billion, respectively, their lack of infrastructure was about the same. For more than three decades Thailand spent a total of $130 billion on infrastructure, the Philippines only half that—$60 billion. And the Philippines had a more difficult (islands not a contiguous land mass) area to cover. By our estimate we have lost over 2 percentage points (6.3 percent vs 4 percent) of GDP in the first half because government didn’t spend. Spending creates jobs, so there must be much more urgency to finalizing projects and getting them going.

The President wants to make a dramatic positive impact on the people, this will do it. The direct employment and leverage into jobs for every other sector is enormous. Eliminating corruption would be a wonderful step forward, but it won’t eliminate poverty by and of itself. Infrastructure and an efficient bureaucracy are needed too. An executive order ordering EVERY government process to be reduced by at least half by December 2012 or the department head loses his/her job would be good first step in the bureaucracy. The President has to be tough and demanding and radical. The Philippines won’t turn around by a cautious approach to the problems.

***

We were having some doors installed in our rest house and I was watching one of the tradesmen and his careful approach to the job. At 5 o’clock work stopped and the others left, but he didn’t. He kept going till the job was done at about 7.

So I talked to him. He wasn’t a carpenter, a job he’d been doing proficiently all day, but an electrical engineer who’d spent six years in Saudi but wanted to return to his family and be part of his kids’ lives.

This was a part-time job, contractual just for this project. So I hired him as we have more than enough work to be done and, as he told me, he could weld, do plumbing and masonry. A Man Friday if ever there was one.

After a couple of weeks he asked if he could borrow for his daughter’s entry into college. I thought “Oh no, here we go.” But I lent. I was going to give him a couple of weeks of steady income before deducting, but next pay day he reminded me I hadn’t deducted. Did you get that? He reminded me. A few weeks later my wife and I decided he deserved a salary increase, so next pay I gave more. He counted it and said “Sir, you’ve given me too much” Did you get that? He told me I’d overpaid. There’s more, his workmanship is meticulous, careful and tidy. And he puts tools back (other engineers will know how rare and important this is!)

You can’t have him.

There’s more, like him but not enough. The thing is there could be if the training was there. You shouldn’t have to go to Saudi to learn all this, our local colleges should be more than capable of doing it. But they’re not, oh they are quite good, but that insistence on excellence, on perfection just isn’t there.

I kill (figuratively of course before someone rushes me into court) electricians who twist wires together. It’s an ideal way to burn a house down when, after a few years, corrosion builds up, resistance develops, heat is created and the fluff inevitable in any household catches fire. The house, soon follows. But twisting saves P5 on a terminal block. P5, or a house worth millions, which would you prefer?

My point though is that Filipinos can match the renowned Germanic precision and attention to detail, all it needs is training. “Bahala na” is not genetically implanted it’s learned from poor teaching, and a society that doesn’t insist on more. It should start at school, but with the president too. If there’s demand for excellence, for attention to detail, to doing it right it filters down to all levels.

There is only one way to do a job: Properly.

Thursday, 10 November 2011

What exactly are the charges against her?


Rigoberto Tiglao
Philippine Daily Inquirer
http://opinion.inquirer.net/16945/what-exactly-are-the-charges-against-her

Ferdinand Marcos in 1980 allowed his archenemy Ninoy Aquino to go to Boston for a heart bypass surgery, even as the procedure had become routine since 1975 at the Philippine Heart Center. Aquino had been sentenced to death for murder and subversion after five years of trial by Military Commission No. 2, whose legality was affirmed by the Supreme Court.

The Sandiganbayan in 2004 allowed Joseph Estrada to travel to Hong Kong so that the doctor he chose could undertake a very routine procedure to correct his knee ailment.  Estrada’s plunder trial was then underway for nearly four years, with credible eye-witnesses against him such as Ilocos Gov. Chavit Singson and Clarissa Ocampo and roomfuls of documents, especially bank accounts supporting the allegations that he enriched himself in office.

In sharp contrast to these past situations, the cases against former President Gloria Macapagal-Arroyo haven’t even reached the very first stage of trial. Yet she is barred from seeking medical attention abroad for a rare disease that couldn’t be cured after three operations.

What exactly are the charges against Arroyo, which Justice Secretary Leila de Lima claims bar her from traveling abroad?  The complainants should already raise very red warning signals as to the charges’ authenticity.  Two were filed by the party-list Bayan Muna, which is allied with the Communist Party of the Philippines whose New People’s Army suffered serious setbacks under Arroyo’s watch.  The other leftist party Akbayan calculates that the publicity in filing its own charges against Arroyo would boost the senatorial ambitions of its leaders. And there is Frank Chavez, who perhaps not so coincidentally filed his attention-getting charges when President Aquino was still looking around for a new ombudsman.

While the term “plunder,” which conjures up images of pillage, in the charges was effectively designed for media impact, it creates a fatal legal flaw.  These charges will be thrown out simply because the crime of plunder that she is accused of doesn’t have anything to do with the things she is alleged to have done.  The requirement for conviction under the Anti-Plunder Law of 1991 is that there is proof of personal material gain of over P50 million—“an asset, property, and business enterprise or material possession” amassed by the accused government official through graft.  Estrada was convicted of plunder because prosecutors uncovered his bank accounts where he kept over P500 million acquired through graft.

All the charges against Arroyo, except one that doesn’t have an iota of credibility, do not even claim that she made money out of graft.

First, the most ridiculous, filed by Chavez:  that Arroyo (together with other officials such as the unassailable Foreign Secretary Alberto Romulo) transferred overseas workers’ fund to the Philippine Health Insurance System.  This “plunder” put millions of overseas Filipino workers under the umbrella of the state’s medical care system.

Second, the most futile: that government funds for fertilizers were allocated to over 500 congressmen, mayors and governors who supported Arroyo’s election bid in 2004.  But Arroyo is not charged here for amassing money from the funds.  Would any congressmen or local politician testify that he or she received illegal funds?

Third, the most unintelligent: the alleged misuse of the Philippine Charity Sweepstakes Office’s intelligence funds. It turns out that these were allocated for such purposes as emergency operations that saved overseas Filipino workers’ lives.  Even Sen. Francis Escudero pointed out that this charge is nonsense, as there is not even an accusation of personal gain on the part of Arroyo.

Fourth, the weirdest: that P72 million in capital gains tax was not collected from the sale of the old Iloilo City airport to Megaworld.   Even Revenue Commissioner Kim Henares says that there was no capital gains tax to be collected in the first place, as it is government selling the property.

Fifth, the most media-driven: that ZTE Corp., China’s largest listed telecoms company which this year overtook Apple as the fourth biggest cell phone vendor in the world, gave Arroyo a bribe to bag a government contract.  This allegation of a bribe to Arroyo was solely made by one Dante Madriaga, who claimed he overheard it from his employer.  He however refused to sign his affidavit, which he had distributed all over cyberspace. The Senate suspected he was fabricating lies and withdrew the security it initially provided him.  Sen. Panfilo Lacson disclosed that Madriaga initially asked him P10 million for his false testimony.

And sixth, the most sycophantic charge:  De Lima’s own 2007 poll fraud allegation, her “compliance” move to Mr. Aquino’s announcement that his administration would file charges against Arroyo by this month. But her main witnesses are the likes of Zaldy Ampatuan and the clan’s underboss Norie Unas, who are facing or will face charges for the Maguindanao massacre.  Their motives—obviously to save their own skins—are so suspect that any principled judge would strike out their testimonies.

It is because of these ridiculous, futile, unintelligent, weird, media-driven and sycophantic charges that a former president is being barred from seeking medical aid abroad that could save her life.
And we haven’t even discussed the unconstitutionality of barring a citizen from traveling abroad without a court order, as constitutional expert Fr. Joaquin Bernas, S.J., explained in a column in this paper.  We are seeing the eclipse of reason and justice under this administration.

If De Lima’s order is intended for her senatorial ambitions, she has made a big blunder.  Filipinos will not take kindly her callousness over the suffering of a former president, just because of her unprincipled servility to an equally hard-hearted boss.

E-mail for comments: tiglao.inquirer@gmail.com

Mining group cites industry gains: jobs, $1b investments

Manila Standard
http://www.manilastandardtoday.com/insideNation.htm?f=2011/november/10/nation4.isx&d=2011/november/10

Baguio City—With their combined investments exceeding $1 billion,mining companies have generated more than 120,000 direct and indirect jobs, according to a top official of the Philippine Mine Safety and Environment Association.

“The prevailing high metal prices coupled with the huge demand and abundant mineral production is keeping the country’s mining industry alive which is also boosting economic growth. We want to take advantage of the situation so that we will be able to achieve our desired growth,” Louie Sarmiento, PMSEA president, said on Tuesday during ceremonies to mark the Mining Safety Week celebrations in Baguio City.

The full operation of Masbate Gold in Bicol, Carmen Copper in Cebu, the Silangan project of Philex Mining Corporation in Mindanao and the dozens of exploration activities, the country will see a robust growth of the mining industry.

Despite the advancement in technology, Sarmiento pointed out that investors in the country’s mining industry continue to create jobs in host communities.

“Because of the huge demand for copper and gold in the world market, large-scale mining companies have doubled their production this year,” he said. “That also translated to higher income and more money circulated in our economy,” he stressed. Over 1,000 mining industry stakeholders gather in the mountain resort city to attend the 58th staging of the Mine Safety and Environment Week led by the 200-member PMSEA that kicked off Tuesday with a tree planting activity.

“ The tree-planting activity is unique and special because we planted endemic species and will help provide a lush greenery for the city’s Botannical Grdens,” he said.

Among the endemic tree species are alstonia scholaris, known as Dita flowering tree, and the Benguet pine which thrives in the Cordilleras.

Sarmiento said that more investments in the mineral industry are expected to be available next year once other large-scale mines operate in full blast. Dexter See

Globe investing $790m


Jeremiah F. de Guzman
Bloomberg
http://www.manilastandardtoday.com/insideBusiness.htm?f=2011/november/10/business1.isx&d=2011/november/10
 
Globe Telecom Inc. will invest $790 million to upgrade its network and technology systems to expand coverage and cut costs as market leader Philippine Long Distance Telephone Co. turns to acquisitions for growth.

“We want to be an even stronger challenger to a larger competitor,” Globe president and chief executive Ernest Cu said in a press briefing Wednesday. “We will be second for a while but we will be a strong second worthy of competition.”

The venture of Singapore Telecommunications Ltd. and Ayala Corp. will spend $700 million in the next five years on its network and $90 million on information technology systems over a two-year period, Globe said. The investment will generate savings of about $390 million in operating expenses and capital spending in the next five years, it said.

“After the program, there will be minimal dropped calls, delayed SMS and overall, a more pervasive 3G coverage,” Cu said.

The company is making its “biggest and most significant investment” in two decades to meet an expected increase in voice and data demand and to counter competition from PLDT, which bought Digital Telecommunications Philippines Inc. last month. Globe will also increase capital spending by about 60 percent to almost $800 million in 2012, chief financial officer Alberto de Larrazabal said.

“Globe will have to expand aggressively given increased competition from PLDT, which is substantially adding subscribers after the Digital purchase,” First Grade Holdings Inc. managing director Astro del Castillo said in a phone interview. Phone companies are expanding their data networks as Filipinos increasingly use social-networking Web sites, he said.

Globe rose 0.85 percent to P950 at the close of trading, its highest level since Aug. 5. PLDT fell 0.3 percent to P2,380 and the benchmark Philippine Stock Exchange Index gained 0.7 percent.

Globe will sell $550 million to $600 million of bonds in the next six to eight months to fund the network upgrade, De Larrazabal said in an interview.

“We are already soliciting offers from domestic and international financial institutions,” he said.

The company said its dividend payout starting 2012 will be 75 percent to 90 percent of the prior year’s core net income instead of reported net income, to exclude non-recurring charges related to the upgrade.

Globe will retire assets with a net book value of $388 million as a result of the upgrade, with almost half the amount to be written off next year, De Larrazabal said. While the move will affect net income in the next two to three years, it won’t result in a loss, he said.

Joe’s Bar brings global financial ruin


JOHN MANGUN
OUTSIDE THE BOX  
Business Mirror
http://www.businessmirror.com.ph/home/opinion/19108-joes-bar-brings-global-financial-ruin

THE world banking system is in chaos and headed for more catastrophes. The following story is taken from the web site of gold guru Jim Sinclair. It’s long but at the end you will better understand why the US housing market and banking system collapsed. You will understand how big countries like Italy (a G-8 member) and little countries like Greece are coming apart.

The story reads:

Joe is the proprietor of a bar. He realizes that virtually all of his customers are unemployed alcoholics and, as such, can no longer afford to patronize his bar. To solve this problem, he comes up with a new marketing plan that allows his customers to drink now, but pay later. Joe keeps track of the drinks consumed on a ledger thereby granting loans to his customers.

Word gets around about Joe’s “drink now, pay later” marketing strategy and, as a result, more and more customers flood into the bar. Soon he has the largest sales volume for any bar in town.

By providing his customers freedom from immediate payment, Joe gets no resistance when, at regular intervals, he substantially increases his prices for wine and beer.

Consequently, Joe’s gross sales volume goes up and up.

A vice president at the local bank recognizes that these customer debts constitute valuable future assets and increases Joe’s borrowing limit.

The banker does not see any reason for concern, since he has the debts of the unemployed alcoholics as collateral.

At the bank’s corporate headquarters, expert traders figure a way to make huge commissions, and transform Joe’s customer loans into DRINKBONDS.

These “securities” then are bundled and traded on international securities markets.

Naive investors do not really understand that the securities being sold to them as “AA Secured Bonds” are really debts of unemployed alcoholics. Nevertheless, the bond prices climb continuously and these securities soon become the hottest-selling items for some of the nation’s leading brokerage houses.

One day a risk manager at the original local bank decides that the time has come to demand payment on the debts incurred by the drinkers at Joe’s bar. He tells Joe to pay up. Joe then demands payment from his alcoholic patrons, but being unemployed alcoholics they cannot pay back their drinking debts.

Since Joe cannot fulfill his loan obligations, he is forced into bankruptcy. The bar closes and Joe’s 11 employees lose their jobs.

Overnight, DRINKBOND prices drop by 90 percent. The collapsed bond asset value destroys the bank’s liquidity and prevents it from issuing new loans, thus freezing credit and economic activity in Joe’s town.

The suppliers of Joe’s bar had granted generous payment extensions and had invested their firms’ pension funds in the DRINKBOND securities. They find they are now faced with having to write off Joe’s bad debt and losing over 90 percent of the value of the bonds.

His wine supplier also goes broke. His beer supplier is forced to sell out.

Fortunately though, the bank, the brokerage houses, and their executives are saved and bailed out by a multibillion-dollar no-strings attached cash infusion from the government.

The funds required for this bailout are obtained by new taxes levied on employed, middle-class, non-drinkers who have never been in Joe’s bar.

****

Housing loans in the US and some in Europe were given to people who could not afford the loans. The scheme was based on the belief that housing prices would always continue to rise as an unending flow of new buyers entered the market. The US ran out of “unemployed alcoholics.” That is what eventually happens to all pyramid schemes.

However, the “Joe’s Bar” scenario was also being executed on a national level. “Joe’s Bar” were the international banks and the unemployed alcoholics were Greece and Italy, among others.

Both Italy and Greece did not qualify for the loans that they were granted by the banks during the last decade. But the banking “Joe’s Bar” could not just let that kind of revenue from lending the money just disappear. So the banks gave these countries a version of “drink now; pay later.” We are seeing the results today.

The government talks about the Philippines being “shielded” from the effects of global uncertainty. Actually we should welcome the uncertainty and do everything to take advantage of it.

With billions of dollars flowing out of the West into Asia, the Philippines is still acting like it is afraid to take the money. Shifting rules, more regulations and red tape, endless political posturing. What a waste.



****

E-mail to mangun@gmail.com and Twitter @mangunonmarkets. PSE stock-market information and technical analysis tools provided by CitisecOnline.com Inc.

Boxer, Godfather, Politician. Can Manny Pacquiao Do Everything?


NEWSWEEK
Full article: http://www.thedailybeast.com/newsweek/2011/10/30/boxer-godfather-politician-can-manny-pacquiao-do-everything.html

Boxer, Godfather, saint, politician ... Is there anything in the world that Manny can’t do?

To call Manny Pacquiao a “boxer” is one of those descriptions that don’t quite fly, like calling Mahatma Gandhi a “Hindu lawyer.” The pound-for-pound greatest fighter on earth has begun to move beyond his bloody sport in increasingly unpredictable ways. In the Philippines, where he was born into abject poverty, the WBO welterweight champion is an almost religious figure, whose following is ecstatically cult-like. In America, he is “Pacman”—the idol of Las Vegas mega-fights, the Bruce Lee of Marquess of Queensberry boxing: tiny, furious, and lethal. “Manny Pacquiao,” Mike Tyson has said, “is a phenomenon.” No argument there: ESPN ranked him tied for first among the world’s highest-salaried athletes this year.

Tuesday, 8 November 2011

A great November


JOHN MANGUN
OUTSIDE THE BOX  
Business Mirror
http://www.businessmirror.com.ph/home/opinion/18987-a-great-november

WHICH country has the most holidays? No, it’s not the Philippines but it sure seems like it this month of November.

So many tumultuous events flood the news every day and yet we can work a few days, take some time off, and then come back to take more time away from the job.

But you can’t isolate yourself from the world because you never know what’s going to happen or where the excitement is going to come from.

The protests around the world seem not to be losing any momentum. These “Occupiers” are apparently there for the long term, whatever that means. While the stated focus appears to be the greedy bankers, each of the protests seems to have a lot of messages to bring to world, all different.

While one interviewee talks about making the government pay for everything, another is calling for anarchism and no governments. I wonder how their conversations are trying to figure out why they are at the same “occupy” site.

The one thing that could be guaranteed if there were large protests in the Philippines would be lots and lots of vendors. Even if there were a large group of “anti-capitalists” protesting in the Makati financial district, there would be very many “true capitalists” selling fish balls and bottled water. And the anti-capitalists would be buying from them.

Most of the protest camps in Europe and the US seem to have a problem with capitalism also, with lots and lots of drug use and I suppose, drug-selling going on. I guess that is “grassroots” capitalism. These occupiers are also getting free food. That might be a problem in the Philippines because then, the street vendors would be put out of business.

The Greek protests are particularly interesting. You see, Greek citizens are much like Filipinos in that the participation rate in paying income tax or any tax is very low. The Greek government puts a yearly tax on swimming pools. Naturally very few houses in Athens have a swimming pool, at least, according to the tax payments. But one enterprising Greek tax official got on the Internet and decided to look at the Google maps. What he found was that there were hundreds and hundreds of swimming pools in Athens.

Here in the Philippines, the same thing happens. Here again according to the tax payments, the Philippines has very few doctors and dentists.

So the Aquino administration decided to go after erring doctors who may be a little short in what they report as their taxable income.

The doctors are claiming that Bureau of Internal Revenue (BIR) agents are using “Gestapo tactics,” whatever that means. Of course, tax officials must be courteous and obey the law. But it seems that the problem with the licensed professionals in the Philippines is that they do not understand how the tax laws work and they do not understand how to pay the correct taxes.

The Philippine Medical Association has tied up with the BIR for the creation of a joint task force to “educate and assist medical doctors on the payment of the right taxes and related matters.” Maybe tax laws and taxpaying should be a required course in medical school since the doctors seem to know so little about the subject. These non-tax paying doctors might also ask their attorney about paying taxes but probably the attorney would not know much about the subject, either.

One doctor said that he needed help. “All of us doctors are willing to do so. However, we need to be educated and properly guided as to the right ways and means to do this [paying taxes].” Obviously this medical professional has never heard of the accounting profession.

The obvious solution is to require all doctors, dentists and attorneys to have a BIR certified cash register and the BIR can have a monthly raffle for the official receipts from these professionals.

The All Saints’ Day holiday this year seemed to be sort of quiet. There did not appear to be the mad rush for the cemeteries as in the past. It seemed as if people visited their dearly beloved relatives and then rushed off on vacation someplace. That is probably what you get from All Saints’ Day creating a long weekend. Not a bad thing.

People were complaining about the high cost of flowers and the government is going to do something about it. Or not. It is remarkable how all governments immediately have a solution to a problem, which the day before the government did not even know existed.

It’s officially back-to-work day today. But it is not until next week for a complete week of stock-market trading. And then only one more full week until we have another dayoff. Thank goodness.




E-mail to mangun@gmail.com and Twitter @mangunonmarkets. PSE stock-market information and technical analysis tools provided by CitisecOnline.com Inc.