Saturday, 18 February 2012

Education Budget

Manila Standard

If education is to play a key role in national development, the United Nations recommends an allotment of 6 percent of the country’s gross domestic product to basic education. The Philippines’ 2012 budget earmarks less than half that at 2.7 percent or P238 billion.

For the second straight year since his ascent into power, President Benigno Aquino III’s administration has consistently cut its investment in state universities and colleges. This year, 50 schools had their budget slashed by more than P500 million; 45 had a P250 million cut from their miscellaneous and other operating expenses budget; and 58 had their allotment for personnel services reduced by P400 million.

In the third quarter of 2011, all of the country’s premiere universities—private or public—slid several notches down the London-based Quacquarelli Symonds University World Rankings. Experts from the survey firm pointed to the cuts in government spending on education for the proportionate decline in the quality of education.

Thursday, 16 February 2012

National government or practical government?

Business Mirror

FOR some 20 years, there have been intense and sometimes heated discussions about changing the government in the Philippines from a three-branch system to a two-branch parliamentary form.
There are valid arguments on both sides of the issue. However, I think the pro-parliament idea that a change would be the economic magic bullet is a logical extension that goes too far.

To argue that under a parliament, legislative gridlock is diminished may not be totally accurate, either. Under the current presidential system, gridlocks either work themselves out or do not. Presidential-system proponents would say that if the legislature cannot get a consensus, perhaps that law should not be implemented. And if Thailand is any example with its governments lasting an average of 18 months, new parliamentary elections are a formidable gridlock breaker.

Can you imagine a Philippine election every other year?

If history is any example, the Philippines operates under a quasi-parliamentary system as the sitting president usually has very strong control of the House of Representatives. The Philippine Senate acts as a check and balance to the House of Representatives.

In most parliaments, one party usually does not get enough votes to have a majority government and, therefore, must form a coalition government with other parties. These coalition partners act as the “check.”

It would be interesting to see if the Philippines under a parliament could form strong party loyalties that would support particular agendas rather than merely moving in the direction the financial winds from the prime minister’s funding blows.

There are two major responsibilities of the government. The first is to create policy and the second is to implement that policy. The proper and effective management of these two duties create the net outcome.

However, the Philippine government has been criticized on both accounts for decades and perhaps the results prove the allegations. The thrust then has been to think of ways to change the structure of the government in hopes it will lead to a better system for policy creation and implementation. So, some have looked to other nations that have a different form of government and concluded that a parliamentary system must be the positive variable that the Philippines lacks.

But is a parliament the correct variable to look at? Both Germany and Bangladesh are parliamentary. Both Indonesia and Rwanda are presidential.

Here is a list of what most would consider successful economies: Brazil, Germany, Switzerland, Australia, Malaysia, Russia, the US, Canada and India.

They are part of a minority of 24 nations that have a common trait that is neither the presidential or parliamentary system. However, they represent 40 percent of the global population. The one common characteristic of their governmental system is that they are all federal republics.

Federalism is a system based upon democratic rules and institutions in which the power to govern is shared between national and provincial/state governments.

When the national government creates and implements specific and detailed policies and rules, it assumes a one size fits all approach.

The Philippines “Local Government Code of 1991” (LGC) was passed to give “political subdivisions of the State…genuine and meaningful local autonomy to enable them to attain their fullest development…as…more effective partners in the attainment of national goals.”

Notice the language of “partners in the attainment of national goals.” The proper implication would be the national government sets the goals, the local government figures out how to do it and the national government monitors the local performance. The national government should also act as final arbitrator and check for disputes and abuses by the locals.

But the national government has violated the spirit if not the letter of the LGC.

It has issued specific and detailed policy and rules and then forced the locals to conform by using monetary incentives/disincentives.

Illegal logging may be rampant in one or more areas but a nationwide moratorium is imposed. One size fits all.

The core argument of the anti-federalists is that locals are not capable of implementing sound policies for financial and expertise reasons. There are great inequalities between provinces in terms of economic base and conditions. They say that what is necessary is to strengthen and improve the national government.

The pro-federalism group counters that people are more responsive to the local government and that federalism promotes innovation. Muntinlupa City banned plastic bags. The ban is annoying and burdensome, but it is giving positive results. The national government could have never done this efficiently or effectively.

“Imperial Manila” has been always been problematic and efforts to improve its performance are meager. There was a good rational for the Local Government Code. It’s reasonable to wonder what might have happened if it had been fully embraced.

E-mail to and Twitter @mangunonmarkets. PSE stock-market information and technical-analysis tools provided by, Inc.

2011 Remittances break $20B mark

2011 OF Remittances Exceed 7% Growth Projection; Full-Year Level Reaches US$20.1 Billion

Bangko Sentral

Media Releases
To view the table, click here:

Remittances from overseas Filipinos (OF) coursed through banks for 2011 expanded by 7.2 percent to US$20.1 billion relative to the year-ago level.  The growth in cumulative remittances through December slightly surpassed the BSP projection of a 7 percent expansion in 2011, Bangko Sentral ng Pilipinas (BSP) Officer-in-Charge Juan D. De Zuniga, Jr. announced today. The substantial expansion of fund transfers from Filipinos abroad was due to higher remittances from both sea-based and land-based workers, which rose by 14.0 percent and 5.5 percent, respectively.  The remittances of land-based workers accounted for about three-fourths or 78.4 percent of total remittances.  For the month of December 2011, remittances grew by 6.2 percent, registering the highest monthly level at  US$1.8 billion.

Cash transfers from overseas Filipinos which were estimated to be around     9 percent of GDP continued to be a major contributor in stimulating domestic demand. Remittances remained resilient throughout the year amid the political turmoil in some parts of the Middle East and North Africa, the slowdown in global economic growth and intensified financial strains brought about by the Euro Area sovereign debt crisis. This developed owing to the diversified destinations and skills of overseas Filipinos, the strategic network of bank and non-bank service providers across the globe as well as the new financial products and money transfer services offered in the remittance market which helped better capture global remittances. As of end-December 2011, commercial banks’ established tie-ups, remittance centers, correspondent banks and branches/representative offices abroad increased to 4,723 (or by 3.1 percent) from 4,581 at end-December 2010.

Meanwhile, latest reports from the Philippine Overseas Employment Administration (POEA) showed that for January 2012, 12.3 percent (or 7,160) of the total approved job orders of 58,123 were processed. The processed job orders were mainly in the service, production, and professional, technical and related job categories, particularly in Saudi Arabia, United Arab Emirates, Qatar, Taiwan, Singapore and Kuwait.

For the period January-December 2011, the major sources of remittances were the U.S., Canada, Saudi Arabia, U.K., Japan, United Arab Emirates, Singapore, Italy, Germany and Norway.

Globe launches $700-M program

Business Mirror
Read more:
GLOBE Telecom on Wednesday launched a $700-million mobile-network modernization program at Malacañang which President Aquino promptly described as a rightful bet on a country like the Philippines that has become a “virtual gold mine for the telecommunications sector.”

AFP takes delivery of 4 helicopters

Business Mirror

FOUR of the eight utility helicopters that were bought by the previous administration under the Armed Forces Modernization Program are already in the country, military officials said on Wednesday.

Maj. Gen. Roy Deveraturda, Armed Forces deputy chief of staff for plans and programs (J-5), said four of the eight Sokol (Falcon) helicopters from Polish-Italian defense supplier Augusta PZL Swidnik have arrived at Clark Field in Pampanga.

“The four utility helicopters are being assembled and will soon be inspected by the Air Force. These are a great addition to our capability, and we hope to use them soon,” Deveraturda said.

He said the remaining four are being expected to be delivered at the third quarter of this year.

Since they are multipurpose, Deveraturda said the delivered helicopters can be used to transport troops and for air evacuation, disaster response and even relief missions.

The procurement of the eight helicopters was done through a negotiated bidding during the term of then-Defense Secretary Norberto Gonzales. The P2.8-billion contract was sealed in August 2009.

The Air Force said in a statement that the Sokols can be fitted with equipment that make them ideal as utility helicopters. They are night-vision capable and are equipped with the SN-350 autopilot system.

It said that while a Huey helicopter can only carry seven passengers, a Sokol can accommodate 10 passengers.

The Polish-made helicopter also has a maximum takeoff weight of 14,110 pounds and a maximum range of 402 nautical miles in a single flight with airspeed of 140.5 knots.

“A Sokol is fitted with gun mounts for the M-60D MG [7.62mm machinegun] on both sides and when utilized during search and rescue or over water operations, it can be equipped with pilot-controlled Emergency Floatation Gear attached to the lowest portion of the aircraft,” the Air Force said.

Read more:

Wednesday, 15 February 2012

Pinoy swordsmith has Hollywood touch

by Cecil Morella, Agence France-Presse

POZORRUBIO, Philippines -- Filomeno de Guzman does not know Sparta from medieval Scotland, but the Philippine swordsmith is an expert at replicating ancient warriors' tools for killing each other.

A stubby ex-military sergeant who has never set foot abroad, de Guzman and 15 rice farmer-neighbors who moonlight as blacksmiths craft old truck leaf springs into things of terrible beauty.

The business feeds an overseas market for replica swords of Roman gladiators, Greek infantry and Japanese samurais, as well as movie-inspired weapons from "Braveheart", "Conan the Barbarian", and "Rambo".

"Swords are enjoying a renaissance in Hollywood. That means the storied weapon remains popular, and that works in our favor," de Guzman, 63, told AFP during a visit to his workshop in a farming area of Pangasian, in northern Philippines.

De Guzman never went to university and confesses he does not know much about ancient history, although he does enjoy learning from movies.

"Hollywood, yes, I love Hollywood movies. I watched 'Braveheart', 'Gladiator', 'Lord of the Rings', 'Conan the Barbarian', 'Rambo', and 'Samurai', all on DVD," he said.

De Guzman's unlikely export business had its origins in him deciding to quit the Philippine security forces in 1980 and taking free government lessons in metalworks.

He began producing kitchen knives using a wood-fired forge in his backyard, set amid vast rice fields in the farming town of Pozorrubio, 180 kilometers north of Manila.

"It's a good, non-perishable product. All households need blacksmiths and their knives," de Guzman explained of his career choice.

However US soldiers deployed at two nearby US military bases soon noticed his craftsmanship and they also began commissioning him to make knives.

Later on the soldiers started ordering swords and, as the demand for more elaborate designs grew, he started delving into books on ancient weaponry.

When a friend took some of his swords to an exhibition in the United States in the 1990s, de Guzman was connected with an American distributor and his international business was cemented.

A few other Philippine smithies also craft swords for export, though de Guzman believes he is the biggest exporter.

The majority of his work now caters for the overseas market, although he still makes some knives and machetes for local housewives and farmers.

De Guzman describes his overseas clientele as medieval warfare and history buffs with a lot of disposable income.

"I was told these are people who dress up with Renaissance costumes and bring swords to annual festivals," he said.

More than 100 models hang on pegs on his office wall, including copies of short Roman empire infantry swords and a massive broadsword like those used by Spartans against Persians in the Battle of Thermopylae in 480 B.C.

De Guzman said he had sold more than 1,000 Excalibur swords from the Arthurian legend.

He has also exported a similar number of the Sir William Wallace sword, popularized by the 1995 Mel Gibson "Braveheart" film of the 13th-century Scot who fought English rule.

The two-handed sword, with a 28-inch long blade, weighs 11 pounds and sells for $600 abroad, according to de Guzman.

While declining to talk in detail about how much money he had made exporting the weapons, de Guzman said his profession had allowed him to send his four children to university.

His home is also clearly middle class, no small achievement in the Philippines where roughly one quarter of the country's 100 million people live on a dollar a day or less.

De Guzman has also provided extra employment for his rice farming neighbors, who gather in his backyard in their basketball shorts and sandals to work the forge and mould metal when orders come in.

"Like me, they are also unschooled. If there are orders we all work together, but since they are farmers, the crops get first priority and the shop orders just have to wait. My distributor understands," he said.

However lawyers in Hollywood have occasionally been less understanding of his profession.

"I named one of my knives 'Rambo III'," de Guzman said of a 46-centimeter Bowie blade. "I got a letter from the Rambo producers, telling me, 'Don't use our name Rambo or we will sue you.'"

Nevertheless, after renaming it 'The Stallone', after the movie's star, there had been no more threatening letters.

De Guzman also insists his popular "Braveheart" Wallace sword was not a movie rip-off, but made from specifications his distributor gave him of the original, which is stored at a museum in Scotland.

After his distributor recently broke into Germany's sword market, de Guzman is looking to explore more deeply the blood-soaked history of medieval Europe.

"I am already developing a prototype Teutonic great sword," he said, referring to two-handed blades used by Germanic knights in the 11th-13th Century Crusades in Muslim lands.

The new world order

Business Mirror

AS the world plunges headlong into one economic and political crisis after another, there is constant talk about the realigning of the concentration of global power.
Fifty years ago, it was simple. The US and the Soviet Union were the global powers. Each gained power through the old combination of guns and gold. The rest of the world marched into one of the camps, either by force or self-interest. Those so-called non-aligned nations merely used that designation to extract what they could from each side by diplomatically playing one against the other.

The 19th century political economist Frederic Bastiat is reported to have said that, “If goods don’t cross borders, armies will.” However, the truth is that the armies crossed first in the conquest of other nations primarily for the purpose of trade. Spain took the Philippines to establish a trading facility in Asia and in part as a way to counter the other European nations’ trade expansion in the region.

However, history shows two things. Economic power based on military force never lasts. Also, global, and to a lesser extent regional power, depends on the “power” nation being relatively self-sufficient in order to first establish that power and then to keep it.

The USSR was able to be relatively self-sufficient by keeping a low standard of living for its citizens. The US was and is a net exporter of food and has nearly a boundless supply of raw materials.

Over the last decades, the US gave up its self-sufficiency first to Japan and now to China and lost much of its power. A map of “power” countries would now include the US, the European Union, China, Brazil, India and Russia.

But none of those nations are economically independent as they all desperately need each other and the rest of the world for both raw materials and as an export market.

American ingenuity depends on China to manufacture the products it develops. Russia depends on the European Union to buy its oil and natural gas. China cannot survive without both the global consumer market and oil. Brazil must have foreign investment to fuel its economy. India imports nearly all it energy requirements.

You cannot be a super power if you are seriously dependent on other countries. We have a new world order.

The above list of power nations is certainly not complete. However, the key component of this new order is countries like the Philippines, if their leaders have learned from history.

While no nation that is growing economically can be completely self-sufficient, it appears that small countries like the Philippines can increase power by having other nations economically dependent on them while not being as dependant on others. Further if you are small, it helps to be specialized.

Any country can replace PHL as an assembler, with low value-added, of electronic products. China already did that with Christmas ornaments, clothes and athletic shoes.

However, PHL owns the global call-center business. We are exporting customer service, which is high value-added. You cannot easily replace competent, English-speaking, and Western-familiarized Filipinos by simply moving a call center to another country.

Outsourcing employs more people than the electronic-export sector and brings in more net revenue to the country.

Do we need them, the foreign clients, more than they need us? No. For example, US telecoms companies cannot afford to pay Americans $15 to $18 per hour when they can pay more highly educated Filipinos the same amount for a day’s work.

We have witnessed a massive diffusion of economic power in the last 10 years and it has only accelerated since 2008. The new global powers are scrambling to preserve and consolidate their gains. But that is difficult when they actually are feeding off each other and the net economic pie in those countries is not growing very much.

Enter the dragons and I do not mean China. Remember dragons are specialized creatures, associated with breathing fire or poison and guarding or taking the treasure.

Thailand is in the top 10 of car exporters. Who expected that a decade ago? Malaysia exports a wide variety of tropical agricultural products. Vietnam is the largest exporter of pepper.

Power will be more decentralized and diffused in the years to come. However, that does not mean that nations like the Philippines cannot be powerful.

On a personal note, I invite you to visit the new web site. The old one was so terrible in so many ways that I have “impeached” my former web developer. If you would like a complimentary copy of my “PSE Strategy Guide,” please e-mail me at And don’t forget my upcoming seminar in Cebu on March 3rd.

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

Monday, 13 February 2012

PH: Top Investment Site in Southeast Asia

JETRO Competitiveness Survey In Asia
Bernie Cahiles-Magkilat
Manila Bulletin

MANILA, Philippines — The Philippines has emerged as the most competitive country among seven Asian economies as an investment destination and doing business whether in manufacturing or services sectors, the latest survey conducted by the Japan External Trade Organization (JETRO) revealed.

Trade and Industry Undersecretary Cristino L. Panlilio said that JETRO came out with this Philippine Competitiveness survey by comparing the Philippines with six other Asian countries wherein the Philippines bested China, Malaysia, Thailand, India, Vietnam, Indonesia and Myanmar in most categories. Competitiveness indicators included in the survey are financial costs, sufficient labor supply and reasonable salary (for manufacturing and non-manufacturing personnel).

The survey was conducted by JETRO on Japanese-affiliated Firms in Asia and Oceania for the period August-September 2011.

“We are the cheapest in almost all categories of doing business,” Panlilio said.

The Philippines garnered favorable ratings in terms of competitiveness advantage on business environment in comparison to other Asian countries, the report said.

Based on the survey results, the Philippines has the cheapest rates when it comes to labor, rentals and land prices. The Philippines also has the least problem on the competency of its labor pool.

In terms of sufficiency of labor supply, the Philippines emerged to have the most plentiful number of workers and second to Malaysia when it comes to the availability of executives.

“In terms of employment retention, we have the best loyalty record. In terms of problems of workers competency, we have the least problem,” Panlilio said. .

“The implication of this project is that even in Asia, we are now very competitive. In fact, we are the most competitive when it comes to those factors of business or investment decision making,” Panlilio said.

Specifically, the JETRO survey showed that when it comes to problems on increasing financial costs in the Philippines, the country had the lowest percentage rating of 4.6 percent while China had 64.1 percent. Comparatively, ratings of Indonesia, Vietnam, India, Thailand and Malaysia ranged from 51.9 to 61.5 percent.

In terms of problems in shortage of land/offices, rising land prices/rental, the survey results showed this is not a major problem in the Philippines considering that the 5.8 percent rating is way far lower than the 32 percent rating of India, which is the highest. Ratings of Malaysia, Thailand, Indonesia and Vietnam ranged from 9.8 percent-18 percent for this particular indicator.

On problems in skyrockettng payroll costs, again the Philippines had the lowest rating of 18.2 percent with Vietnam having the highest 61.3 percent. Malaysia was second lowest with 27.5 percent while ratings of Indonesia, India and Thailand ranged from 40.8 to 48.1 percent.

On sufficiency of labor supply, the survey showed the Philippines had the lowest rating of 3.2 percent followed by India, 4.2 percent and Indonesia, 4.4 percent respectively, in terms of difficulty in recruiting general staff.

This particular rating means there is a large pool of general staff which MNCs can recruit or hire. Ratings of China, Thailand, Malaysia and Vietnam ranged from 28.6 percent to 36.7 percent with Vietnam having the highest rating when it comes to difficulty in recruiting general staff.

On the difficulty in recruiting executives, Malaysia had the lowest rating of 37.9 percent followed by the Philippines 39 percent. Myanmar had the highest rating of 64.3 percent while the ratings of Thailand, China, Indonesia, India and Vietnam ranged from 40 to 52.8 percent.

Another indicator is low rate of worker’s employment retention where the Philippines had a rating of 30.6 percent, the lowest among ratings of other Asian countries. Vietnam had 48.7 percent rating so far the highest, while ratings of Thailand, China, India and Malaysia ranged from 33.6 percent to 42.5 percent.

The Philippines boasts of highly competent and English-proficient labor force. Thus the rating of 37.9 percent the lowest which means our country does not have a major problem when it comes to worker’s competency compared to Thailand, Indonesia, Malaysia, India, China, Vietnam and Myanmar, with ratings from 40.9 percent to 56.3 percent with Myanmar having their highest percentage when it comes to problems on worker’s competency.

For the manufacturing sector only, when it comes to difficulty in quality control Philippine ratings of 26.7 percent, the lowest so far among other Asian countries in the report, proved that manufacturing firms had minimal problems on quality control compared to India with the highest rating of 45.5 percent. Indonesia, Vietnam, Thailand, Malaysia and China with rating of 28.7 to 43.4 percent.

Reasonable salary, another competitiveness indicator, showed that the Philippines had 5.3 percent rating salary base-up rate for 2011-2012. Malaysia followed with 4.5 percent. Vietnam had the highest rating of 17.1 percent for said indicator while Thailand’s rating was third from the lowest at 6 percent, followed by Indonesia, 9 percent; China, 11.4 percent and India,, 12.8 percent

For the annual salary (including bonuses, allowances, benefits like SSS, Pag-Ibig etc) of the manufacturing staff, the Philippines ranked third from the lowest giving an annual salary of $4,048.

The lowest was Vietnam with annual salary of $2,196 followed by Indonesia, $3,980. Annual salary ranges of India, Thailand, China and Malaysia were from $4,495 to $6,340 with Malaysia giving the highest annual salary for its manufacturing staff.

0n annual salary (including bonuses, allowances, SSS, etc) for manufacturing engineers, again, Vietnam’s annual salary of $4,793 was the lowest, followed by the Philippines, $6,494.

Malaysia had the highest annual salary for manufacturing engineers at $16,092 while annual salaries of Indonesia, China, India, and Thailand ranged from $9,937 to $11,464.

On annual salary (including onuses, allowances, SSS, Etc) for mfg managers, still Vietnam’s annual salary of $11,526 was the lowest annual salary of $5,199 again followed by Indonesia and the Philippines at $6,852 and $7,324, respectively. Malaysia had the highest annual salary for non-mfg staff at $14,554 while annual salaries of India, Thailand and China ranged from 10,088 to $12,334.

On annual salary (including bonuses, allowances, SSS, etc) for non-manufacturing manages, again Vietnam continued to be giving the lowest annual salary of $14,977 for non-mfg managers, followed by the Philippines and Indonesia at $19,187 and $23,068, respectively.

Consistent for annual salaries, all categories, Malaysia had the highest annual salary at $35,117 while annual salaries of India, Thailand and China ranged from $25,179 to $27,610.