Tony Lopez BizNewsAsia blog

Cha-cha's hidden agenda

2006-04-24T22:06:00.000+02:00

By Tony Lopez/BizNewsAsia.Com

I had a talk with industrialist Raul T. Concepcion last week. He is worried about the so-called charter change or cha cha initiative.

There are at least three reasons why RTC and concerned Filipinos like him should be worried.

One is that surveys indicate the Filipino people are against cha cha. Asked if they are in favor of shifting to the parliamentary system, 54 percent of respondents (or 26 million Filipinos) said No. This is according to the Social Weather Stations survey of February 18 to March 4. Only 33 percent are in favor with 13 percent undecided.

Even if you add the 13 percent undecided to those in favor, the total, 46 percent, would still be the minority. Add the three percent margin of error and you get only 49 percent – still a minority.

The other reason is that most Filipinos (64 percent to 76 percent, depending on the region) have little/almost no or completely no knowledge regarding the 1987 Constitution. They are not informed. Being uninformed or misinformed, it will be easy for Filipinos to be manipulated by cha cha advocates.

The third reason is the way cha cha proponents are ramming down charter change. It is thru the so-called popular initiative. Popular initiative was originally, and legally, designed only for piecemeal or provision-by-provision amendments to the Constitution. Not an overhaul or revision as the cha cha advocates want to happen.

Concepcion of the Consumer and Oil Price Watch says “charter change will dramatically, if not drastically, change our form of government.” “It won’t guarantee a better government,” he cautions. “It doesn’t guarantee national unity. Nor a better life for most Filipinos,” he adds.

Concepcion explains:

“Instead of a President as we have now, we will have a Prime Minister. Instead of the President, our leader, being elected directly by the people, the Prime Minister (PM) will be elected by our congressmen who will now be called Members of Parliament (MPs). The PM himself will be a congressman or MP first before being elected PM.”

“In other words, the people will lose their power to choose their leader directly, in a nationwide popular vote.”

“The present Senate will be abolished. With their consent, the senators are demoted to being congressmen.”

“The Executive and the Legislature will blend.” No one will check the PM.

In this what the people want? RTC wants to know.

Some 8.3 million signatures are being gathered by cha-cha proponents to push cha-cha. The so-called the popular initiative is being misused to amend the Constitution wholesale, instead of piece by piece as popular initiative is commonly and legally intended to be.

With cha cha, this is what will happen:

1. Shift from the presidential to parliamentary form of government. The present Congress, 234 congressmen and those senators who want to join, will be converted into an interim parliament until June 30, 2007. The interim parliament will set the date of the first parliamentary election to choose the regular members of the regular Parliament in 2010.

2. Gloria Macapagal Arroyo and Noli de Castro serve until June 30, 2010. GMA shall exercise the same powers as president, except those she delegates to the interim PM. Noli de Castro shall preside in the Parliament, but only for purposes of electing the interim PM. VP Noli will not even be member of the parliament.

3. After 2010, the President becomes a ceremonial figure. The most powerful person is the Prime Minister. The PM is the commander-in-chief and appoints more than 3,000 senior officials.

4. Within ten years from ratification, a federal system begins. The country shall be divided into 11 independent states, along tribal or ethnic lines.

25 April 2006

Email tonylopez@biznewsasia.com

JAZA's long reign at Ayala

2006-04-24T21:57:00.000+02:00

JAZA’s long reign

At Ayala Corp., the Rule of 80 is that an executive’s stay must not exceed the sum of his age and years of years of service. In general, retirement age is 60.

Jaime Augusto Zobel de Ayala is only 47. So he has 13 years more years at Ayala if he retires at 60. He was president from 1994 to 2005. He will be chairman and CEO from 2006 to 2019. JAZA will serve for a quarter of a century.

The idea behind the Rule of 80 is to ensure the flow of new blood, infusion of new ideas, the tapping of opportunities and prevent the kind of long reigns that could eventually hurt the company.
In Ayala, however, the CEO tends to have very long reigns.
The legendary late Col. Joseph McMicking, was CEO for 36 years, from 1931 to 1967. During that time, he designed and built what is now Makati. Alfonso Zobel de Ayala ruled for 36 years from 1929 to 1965, Enrique Zobel de Ayala from 42 years, from 1901 to 1943. Before him were two women, Trinidad de Ayala de Zobel, 27 years, from 1891 to 1918, and Carmen de Ayala de Rojas, 22 years, from 1891 to 1913.
It is the post-War CEOs who have made what Ayala is today.
McMicking was succeeded in 1967 by the irrepressible Enrique Zobel who served as CEO until 1983, a total of 16 years. EZ improved on Makati, brought Ayala into agriculture, and converted Bank of PI into a universal bank.
Don Jaime (JZA) replaced EZ. He was CEO for 10 years before turning over the presidency to JAZA in 1994. JZA remained chairman for 12 more years. JZA was kingpin for 22 years – ten as president-CEO, and 12 years as chairman.
JZA brought political activism to new heights, backing Corazon Aquino against his one-time boss, Ferdinand Marcos. Before the dictator’s 1986 ouster, Don Jaime nurtured Ayala during its most trying period -- the economic crisis that ensued from the 1983 killing of Ninoy Aquino. Only Don Jaime’s steadying hand kept Ayala on even keel during the country’s most debilitating political crisis ever.
Taking over from his father in 1994, Harvard-educated JAZA expanded the businesses enormously, pursuing an aggressiveness unusual for a staunchly conservative group. He bidded for 440 hectares of the former army reservation Fort Bonifacio. He lost despite an aggressive price, plus some visioning.
The winning bidder in 1996, First Pacific went into rough financial waters, losing $300 million in development cost, and was forced to give up Fort Bonifacio. JAZA finally got a piece of the the property, 54 hectares, at a huge discount and a paltry $90 million.
JAZA entered new areas-- wireless phone, thru Globe Telecom and Manila Water, and expanded Ayala’s electronics line. Ayala’s property business went mid to low end in response to the rising purchasing power of OFWs and the new middle class. Bank of PI also went mid-market.
In his zeal to expand, JAZA borrowed heavily, lining up as much as $2 billion in financing.
Then the Asian Crisis struck, doubling the peso equivalent of Ayala’s foreign debts. Some $318 million debts must be paid in 2008 and another $217 million in 2009.
Ayala must repay $849 million over the next six years. At the same time, it must spend an average $784 million for capital expenditure. Between 2004 and 2006, it would have spent $2.26 billion capex.
This explains the pressure on the Ayala companies to produce profits and to declare these earnings as dividends to keep stockholders happy and entice new partners as the conglomerate expands existing businesses or enter new ones.

Email tonylopez@biznewsasia.com

JAZA's long reign at Ayala

2006-04-24T15:20:00.000+02:00

At Ayala Corp., the Rule of 80 is that an executive’s stay must not exceed the sum of his age and years of years of service. In general, retirement age is 60.

Jaime Augusto Zobel de Ayala is only 47. So he has 13 years more years at Ayala if he retires at 60. He was president from 1994 to 2005. He will be chairman and CEO from 2006 to 2019. JAZA will serve for a quarter of a century.

The idea behind the Rule of 80 is to ensure the flow of new blood, infusion of new ideas, the tapping of opportunities and prevent the kind of long reigns that could eventually hurt the company.
In Ayala, however, the CEO tends to have very long reigns.
The legendary late Col. Joseph McMicking, was CEO for 36 years, from 1931 to 1967. During that time, he designed and built what is now Makati. Alfonso Zobel de Ayala ruled for 36 years from 1929 to 1965, Enrique Zobel de Ayala from 42 years, from 1901 to 1943. Before him were two women, Trinidad de Ayala de Zobel, 27 years, from 1891 to 1918, and Carmen de Ayala de Rojas, 22 years, from 1891 to 1913.
It is the post-War CEOs who have made what Ayala is today.
McMicking was succeeded in 1967 by the irrepressible Enrique Zobel who served as CEO until 1983, a total of 16 years. EZ improved on Makati, brought Ayala into agriculture, and converted Bank of PI into a universal bank.
Don Jaime (JZA) replaced EZ. He was CEO for 10 years before turning over the presidency to JAZA in 1994. JZA remained chairman for 12 more years. JZA was kingpin for 22 years – ten as president-CEO, and 12 years as chairman.
JZA brought political activism to new heights, backing Corazon Aquino against his one-time boss, Ferdinand Marcos. Before the dictator’s 1986 ouster, Don Jaime nurtured Ayala during its most trying period -- the economic crisis that ensued from the 1983 killing of Ninoy Aquino. Only Don Jaime’s steadying hand kept Ayala on even keel during the country’s most debilitating political crisis ever.
Taking over from his father in 1994, Harvard-educated JAZA expanded the businesses enormously, pursuing an aggressiveness unusual for a staunchly conservative group. He bidded for 440 hectares of the former army reservation Fort Bonifacio. He lost despite an aggressive price, plus some visioning.
The winning bidder in 1996, First Pacific went into rough financial waters, losing $300 million in development cost, and was forced to give up Fort Bonifacio. JAZA finally got a piece of the the property, 54 hectares, at a huge discount and a paltry $90 million.
JAZA entered new areas-- wireless phone, thru Globe Telecom and Manila Water, and expanded Ayala’s electronics line. Ayala’s property business went mid to low end in response to the rising purchasing power of OFWs and the new middle class. Bank of PI also went mid-market.
In his zeal to expand, JAZA borrowed heavily, lining up as much as $2 billion in financing.
Then the Asian Crisis struck, doubling the peso equivalent of Ayala’s foreign debts. Some $318 million debts must be paid in 2008 and another $217 million in 2009.
Ayala must repay $849 million over the next six years. At the same time, it must spend an average $784 million for capital expenditure. Between 2004 and 2006, it would have spent $2.26 billion capex.
This explains the pressure on the Ayala companies to produce profits and to declare these earnings as dividends to keep stockholders happy and entice new partners as the conglomerate expands existing businesses or enter new ones.

Email tonylopez@biznewsasia.com

JAZA's long reign at Ayala

2006-04-24T15:19:00.000+02:00

JAZA's long reign at Ayala

2006-04-24T14:54:00.000+02:00

Jaime Zobel de Ayala's long reign

2006-04-24T14:34:00.000+02:00

Jaime Zobel de Ayala's long reign

2006-04-24T14:33:00.000+02:00

The virtue of being honest

2006-03-13T02:15:00.000+01:00

By Tony Lopez

RECEIVING his Management Man of the Year award recently PLDT chair Manuel V. Pangilinan had one thesis based on his First Pacific experience.

“Those who choose to conduct business in an ethical way will, in the long run, perform better than those who don’t,” he declared.

“Success can only spring from old-fashioned values, values that are transcendent, and endure well beyond the context and circumstance of our time,” he declared, adding “those principles are as fundamental as being honest and truthful—especially with yourself. Being diligent, committed, and hard working will also serve you well in the long-term.”

Pangilinan says: “The challenge to management must be to create a corporate culture that encourages and rewards integrity as much as entrepreneurship.

Management—especially the CEO—must not only be exemplary stewards of corporate assets, they must also serve as the moral compass of the company. A CEO must actively encourage his team to be open and truthful in their decision-making processes and in their internal and public disclosures. We believe that the best insurance against the perils of crossing the ethical divide is transparency.”

Yet, the reason why the Philippines has become Asia’s economic laggard is mainly poor governance. The men and women in charge of Philippine government and Philippine business are corrupt.

Since corruption is excess, it results in inefficiency and waste. Why are streets in the Philippines always in a state of disrepair? Because it makes for good business. When you keep building the same road over and over again, you kept collecting your commission.

That is what is called repeat business. But it is at the expense of the taxpayer.

Pangilinan cites the case of PLDT. He relates:

“Only 7 years ago, PLDT had the habits of a monopolist. It was big, fat, and slow in an industry where changes were accelerating, with a bureaucracy and culture not different from government’s—for example, employees start to queue for lunch at 11:30am, and lights went out at lunch time. Our revenues were under pressure, costs bloated, debts too large, cash flows tight, and credit rating downgraded.

Doesn’t all this sound familiar—PLDT looking just like government?”

What did MVP do? He recalls:

First, we stabilized the company’s fiscal situation.

This meant getting hold immediately of the vital functional areas of finance—to ensure that we had access to all records and obtained a full and accurate view of the financial position; purchasing—we established transparent processes in our procurement; and most importantly, we acquired the position of Chief Executive.

Second, we defined a clear vision for PLDT. I thought that convergence—where telecoms, media, and information technology will merge onto a single platform provided a long-term conceptual beacon for the business, and a sturdy anchor for our future strategy.

Third, we proceeded to put flesh on this skeletal blueprint by identifying our most serious problems, and prioritizing them as to which should be tackled first. Cash flows were critical because debts were high—this meant revenues and collections had to grow, costs had to be reduced, and capex managed prudentially.

Fourth, it was essential to transform the organization’s mindset from being engineers to becoming marketing and customer-centric managers. For instance, when I first reviewed the PLDT budget in December 1998 for the incoming year 1999, I was surprised that the first item for discussion was not sales or revenues—but capital expenditures for equipment! You can probably infer the reason why.

On February 27 this year, PLDT will report a net profit of P32 billion, a record in corporate history. Good governance makes for good management. And good management makes for good profits.

E-mail tonylopez@biznewsasia.com

The age of the Filipino entrepreneur

2006-03-13T01:49:00.000+01:00

The age of the Filipino entrepreneur

By Tony Lopez

With its very high literacy rate, skilled workers, a large pool of managers, and a growing consumer market with western tastes, the Philippines should be a natural haven for entrepreneurs. It is not.
One reason is the lack of an entrepreneurial mindset. College graduates leave school thinking of a 9 to 5 job.
Another reason is lack of capital. There has not been much money to spare for small, struggling firms with little track record in the market and management with even smaller track records. And the scarce money that is available comes at a stiff price, higher than the 9 to 12% per year money that big companies are able to borrow.
What to do then?
Develop the entrepreneurial mindset, suggests Jose Concepcion III, CEO of the food company RFM Corp.
“We need to rally behind a national advocacy to push entrepreneurship,” he contends. Moreover, we want our countrymen to take their entrepreneurial drive to the next level. This means seeing that they grow from “survival” micro-entrepreneurs into “opportunity and innovation-driven” SME owners, the young Concepcion suggests.
A group of entrepreneurs have put up the non-profit Philippine Center for Entrepreneurship (PCE) together, Concepcion, with Tony Tan Caktiong (Jollibee Foods Corp.), Joselito Campos (Southeast Asia Foods/Heinz-UFC), Dr. Rolando Hortaleza (Splash Group of Companies), Atty. Felipe Gozon (GMA Network), Socorro Ramos (National Bookstore), Harley Sy (SM Investments), and Vivienne Tan (Entrepreneurs School of Asia, formerly Thames International Business School).
PCE’s concrete goal, says Concepcion, is to spawn the creation of so-called “Go Negosyo Communities” everywhere. These are communities where the academe, business and government sectors are drawn into a triangle of almost seamless collaboration.
“In such an ecosystem,” he explains, “there will be constant networking, mentoring and cooperation among professors, entrepreneurs, industry experts and venture capitalists, with the government providing support through a viable policy infrastructure. Every “Go Negosyo” community will be distinguished by its ability to produce a continuous stream of startup ventures.
PCE would also like to embed strong entrepreneurship lessons into the school curriculum. It is never too early, even for children in grade school, to be exposed to a real enterprise. If the goal is to develop a culture of enterprise and cultivate tomorrow’s competitive entrepreneurs, we must start them young, emphasizes Concepcion.
“Our primary and secondary schools can teach the values and develop the mindsets of an entrepreneur. At the college level, we are looking at how we can assist in the area of curriculum enhancement, providing manuals, training the teachers, and involving real entrepreneurs in the learning process.”
As for the lack of capital, Socorro Ramos, the founder and general manager of National Bookstore, has a very old-fashioned advice: be thrifty, save money, cut costs, buy less jewelry. Especially now, she frets, “when consumers seem to be holding back. They don’t want to spend because they seem worried about something. The trend became apparent second half of last year.”
So what does an entrepreneur do if he has little capital? “Start small,” Mrs. Ramos suggests.
“Most businesses start small,” adds Ben Chan, of the now legendary Bench garments chain. “And don’t be afraid to make mistakes. Just keep of trying new businesses until you succeed,” he advises. He recalls that before Bench, he tried Dimensione furniture and later rattan furniture, which at one point, was the craze in the United States.
Basic to entrepreneurship is taking risk. “You must be willing to take risks,” says banker, industrialist and philanthropist George S. K. Ty, chairman of Metrobank, the nation’s largest lender, and of Toyota Motor Philippines, the country’s biggest car manufacturer.
There is a secret to taking risk. “It must be disciplined,” points out Arthur Ty, 39, vice chairman of Metrobank. “You have to know when you are taking too much risk,” adds Alfred Ty, Arthur’s younger brother who heads the Metrobank group’s property and hotel operations as well as the Toyota franchise. In that sense, explains Arthur, “my dad is very good. He has a way of looking forward into the future which usually is right.” (See Buffett on taking risks, Page 39).
How do you train entrepreneurs? “Start them early,” says Arthur Ty. At ten, he was a messenger boy at Metrobank. This was the time when child labor laws were not yet in effect. Arthur rose through the ranks, becoming eventually, Metrobank’s vice chairman. When he takes over as president in April, he will be the country’s youngest bank CEO.
One way to minimize risk is to work hard. At Metrobank, says Arthur, 12 hours is a typical work day. He notes that current bank president, Antonio Abacan, reports for work at 7 in the morning and usually goes home at way past 7 p.m. Unlike many bankers, Abacan hardly plays golf because he has to spend time with clients.
That’s another secret of entrepreneurship. Service. Give what the customer wants.
Tony Tan Caktiong recalls that the ice cream house that preceded Jollibee in Cubao became successful “because customers were excited by the cleanliness made possible with white glove inspection on the underside of the table, super efficient service shown by serving a glass of cold water even before the customer sat down, and over-portioning of ice cream to the point were actually losing our profit in every scoop we served!”
Tony found out customers were craving for something hot. So he offered hamburgers which soon outsold ice cream. And even when McDonald’s entered the market, Tony was unfazed. “I knew our customers liked our hamburgers. They liked Jollibee’s taste and they kept coming back.” Today, Jollibee outsells McDo by two to one.
For their part, the Ayalas do not believe that just because you are members of the family you must be forced to join the business. “My father wanted to make sure that we were interested, qualified and would be passionate about the business,” says Fernando Zobel de Ayala, co-vice chairman of Ayala Corp., the banking, property and industrial conglomerate.
“When we came in, we were trained as managers and professionals, not as owners,” recalls Jaime Augusto Zobel de Ayala, the president and CEO of Ayala Corp. “We did summer jobs from an early age. I was with the Dept. of Trade and Industry when I was quite young, just before entering college, with a group put up to encourage and help small businesses.”
Fernando and Jaime both worked in a plantation in Davao.
Fernando worked outside Ayala, joining Shell in Brazil. At that time, Ayala owned part of Pilipinas Shell. For his part, Jaime did a summer job with Royal Orion, a London-based merchant bank, before entering college and also did some work at JP Morgan in Paris.
JAZA defines entrepreneurship as the capacity to see an idea, an opportunity, and bring the capital, knowledge, partners and the managerial skills needed to develop and then make it sustainable.”
He adds: “It is also about taking risks, and about failure. The stories of great entrepreneurs, people who have achieved great things show that failure is very much part of their lives.”
“I believe,” Jaime declares, “that an entrepreneurial culture, rather than a purely managerial one, is important particularly in this day and age when change is an important part of our lives.”
Entrepreneurship is often associated with starting small, and is very important at that level, Jaime observes. “But at the same time, you need entrepreneurial spirit at the level of medium-sized industries and on a larger scale, people who are willing to put capital to work and who use their balance sheets and reputation to help build the infrastructure needs of a country.”
To build infrastructure, such as rail, ports, and telecom, “you need not just the multinationals that come in and build,” Jaime Augusto points out, “but also large Filipino companies that have the capacities.”

Email tonylopez@biznewsasia.com

endit

President Arroyo vs. the army

2006-03-13T01:47:00.000+01:00

President Arroyo vs. the army

By Tony Lopez

Manila, March 13, 2006 – Having survived the biggest challenged posed by the military against her presidency of five years and one month, Gloria Macapagal Arroyo faces the daunting task of instilling discipline within the top brass and the ranks, consolidating her political forces, and focusing on the economy to bring about political and economic dividends to the people.

But first she needs to know who her enemies are – within the armed forces. It seems the commander-in-chief doesn’t have full command and control of the 127,000-strong Armed Forces of the Philippines and the 130,000-man Philippine National Police.

On the night of Feb. 23 and the early hours of Feb. 24, major elements in both the AFP and PNP were plotting to withdraw support from President Arroyo. They would do so by marching with protesters out to celebrate the 20th anniversary of People Power. The rebel soldiers and policemen were to march in Makati, scene of the protest rally, without their uniforms and possibly, without their guns. Their leader, Army Scout Ranger Chief Brig. Gen. Daniel Lim, was to have announced the mutineers’ withdrawal of support in the afternoon of Feb. 24, during the Friday march in Makati. He was to be joined by First Marine Battalion Commander, Col. Ariel Querubin and PNP Special Action Force head, Chief Superintendent Marcelino Franco Jr.

A military junta would have been in place by Feb. 25, 2006 and snap elections would have been called to choose Arroyo’s replacement. A group of influential businessmen were reported favoring a military action against the feisty president.

Arroyo had been wounded by allegations she cheated in the May 2004 polls. The controversial “Hello Garci” tapes would have been the smoking gun. As a result, 80% of Filipinos want Arroyo out; of that, 7% favored her removal by any means.

The Feb. 24 rally proceeded without much fuss but General Lim was nowhere to be found. AFP Chief Gen. Generoso Senga had placed him under house arrest, incommunicado for nearly a week, until Lim went to the National Bureau of Investigation (NBI) Thursday, March 9 to deny his involvement. “There was never a coup plot,” he declared.

In the meantime, Arroyo relieved early Sunday Feb. 26, the commandant of the Philippine Marines, Major Gen. Renato Miranda and replaced him with a loyalist general, Nelson Allaga, one supposedly involved in the Dagdag-Bawas scheme in the May 2004 presidential elections in Mindanao. Medina’s abrupt removal caused a six-hour stalemate between the group of Marine Colonel Querubin which was covered live by ABS-CBN News Channel.

It is a chilling thought to consider that three of the best-trained, best-armed, and most battle-tested units of the AFP and the PNP are against their commander-in-chief – the Philippine Marines, the Army Scout Rangers, and the PNP Special Action Force. In any of some ten coup attempts in the past 20 years, support of these units had been crucial to the success of any military uprising, whether backed by civilians and the Church, or not.

The Marines and the Scout Rangers were the frontline rebel soldiers in the 1987 and 1989 coup attempts against President Corazon Aquino. Both proved to be bloody and eventually brought the economy down, to zero growth by the time of Aquino’s farewell in June 1992.

Ostensibly, Mrs. Arroyo puts on a brave face. But she is probably doing by now, the ritual resorted to by Cory soon after the 1987 and 1989 coups – pray every night that nothing untoward would break out and that she would still be the president by the break of day.

“The chain of command has already shown itself to be unbreakable and the people can be assured that the great majority of our soldiers are on the side of the Constitution and the rule of law,” declared Press Secretary Ignacio Bunye on March 10. “The president and commander-in-chief leaves to the AFP command and the major services to deal with residual issues of military adventurism and destabilization,” Bunye said.

That’s exactly the problem. You can’t trust the military high command and the major service commanders. Arroyo has just to hang tough. And pray.

email tonylopez@biznewsasia.com

endit

Get rich, put up a business

2006-03-13T01:40:00.000+01:00

Get rich, put up a business

How does one parlay P10 million into a P300-million enterprise after five years?
Ask Bryan Tiu, founder of the Teriyaki Boy chain of ten restaurants in Metro Manila 70% of which was acquired for P230 million by the growing Pancake House conglomerate of the Lorenzo family. And to think that Bryan is only 30. He was barely 25 and fresh with a business management degree when he put up the first Teriyaki outlet in Greenhills in 2001, for just P10 million.
Bryan’s Teriyaki Boy was valued by Pancake House at P328 million of which a whopping P274.5 million was brand goodwill, meaning his brand value was growing by an average of P55 million per year.
How does one organize an airline and make it to the big league accumulate 14 million passengers and chalk up P8 billion in annual revenues in less than ten years?
Ask Lance Gokongwei, the genius (he has a double summa from UPenn) son of legendary entrepreneur John Gokongwei Jr.
His Cebu Pacific is today the second largest airline in the Philippines with a third of the market and with the best pricing structure and on-time reliability record among the half a dozen local airlines. This year, Cebu Pacific is expected to ring up profits of P300 million.
Lance offers three reasons for Cebu Pacific’s success story. “We were very focused on customers, we were able to deliver quality service to them. And I am surrounded by very talented managers, very passionate people who work with me.”
So there, the rules of business success: focus on the customer, render quality service, get the right people, and have passion.
And can a college dropout build a business worth P2 billion with just a single product?
Ask Alfredo Yao. He dropped out of Mapua because he needed to work right away and support his family. He first put up a printing press printing packaging materials. Then one day while visiting Europe in 1979, he chanced upon a packaging technology called “doy packs” -- a way to package ready to drink juices by keeping them fresh but easy to drink by the customer.
And to think nobody paid him attention when he was proferring doypacks to local food manufacturers. Undaunted, he decided to produce the juices himself. The rest as they say is history. Today, Yao’s Zest-O drinks generate P2 billion in annual sales.
Those are among the success stories celebrated in this year’s crop of Entrepreneur of the Year awardees handed out by SGV and Co. of the Ernst & Young accounting giant chain, on March 8.
The EOY awards is the most eagerly awaited business recognition program of its kind. It aims to identify, acknowledge, and encourage entrepreneurial people, who through their energy and passion, help bolster the economy, underpin the country’s future and create wealth and employment.
Says SGV Foundation Chairman and President of this year’s 20 finalists: “They play a significant role in their communities. they have helped produce new jobs, and new opportunities that have greatly influenced the way we live. They are the visionaries, leaders and winners in business.”
Capping the evening’s glittering awards rite, Senator Manuel Villar, the first Filipino brown billionaire, delivered an inspirational speech. Villar in the late 1990s had a housing construction business with a market value of $1 billion. Not bad for one who began as a fish vendor in Divisoria.
The senator wondered why the Philippines haven’t progressed all these years. And he has this theory:
“It is because there is bias against entrepreneurship in the Philippines, and that is why, to me, we have not moved forward.”
He elaborates:
“ We were told by our parents to study very hard so that one day we can get a job. And we tell our children to study very hard so that they can have a job, the children of our children.”
“We tell the children that they should study to have a job. And this is passed on from generation to generation to generation, and that is why we have become a nation of employees. We like to serve. We like to be employed.”
“If we cannot find employment in the Philippines, then we go out of the country. And there, in the other countries, we try to find employment.”
In Divisoria, he recalls, “I saw the difference between a Chinese and a Filipino vendor.”
“The Chinese -Filipino, and he would tell me, one day I want to become the biggest this, the biggest that. But when you talk to a Filipino vendor, he would tell you, as soon as my children graduate, I can retire, I will retire.”
“Among us Filipinos, at the age of 30, we are asked, why haven’t you got a job? But among the Chinese, they are asked, why haven’t you got a business, yet?”
“To me, unless you are able to change this, my dear friends, we cannot move this country forward.”
Finally, Villar suggested: “We entrepreneurs should share our thoughts. , it is nice to be on your own. You get the satisfaction of being the master of your fate, the captain of your destiny. Having no boss. That is the kind of feeling that you cannot have if you are employed.”

Get rich, put up a business

2006-03-13T01:39:00.000+01:00

On leadership

2006-01-01T23:21:00.000+01:00

The book, Lasting Leadership (by Wharton School Publishing) lists 25 great business leaders in America and narrates what you can learn from the “Top 25 Business People of Our Times.”

No. 1 on the list is Intel co-founder Andy Grove (Ph.D. University of California at Berkeley 1963).

Instead of a large company like Bell Labs, he joined Fairchild Semiconductor, a West Coast upstart where he worked under the legendary Gordon Moore who led the company’s research operations. Grove’s joining Fairchild was considered out-of-the box thinking. Five years later, Grove and Moore left to form Intel.

At Intel, Grove’s leadership was marked by unconventional thinking, imagination and integrity.

Grove said “my proudest accomplishment has been to contribute to the creation of a company that has helped put a billion PCs into people’s hands.”

Another legend is Warren Buffett of Berkshire Hathaway. In addition to his genius at spotting good investment opportunities, he is influential for one thing—his moral stature and integrity.

Equally remarkable was the late Sam Walton who built a single store into the greatest retailer in the world and Fortune 500’s largest company. His legacy, according to the book, is that “a single person can make a huge difference in an industry.”

Unconventional thinking, imagination, integrity, making a difference. These are qualities so valuable in the Philippines today, considering the state of its politics and the condition of its economy.

In the last 30 years, the Philippines chalked up the slowest growth per capita in the whole of Asia—a disheartening 0.75 percent per year. Today, the Philippines has one of the worst income inequality ratios in the world and one of the worst incidences of poverty in Asia.

The Philippines has a GDP per capita, in terms of purchasing power parity (what the national output person can buy in terms of domestic prices) of $4,321.

But Thailand has $7,595, Malaysia $9,512, and Singapore $24,481, and China $5,003. Twenty-five years ago, the Philippines was much richer than these countries.

In 1982, the Philippines already had a per capita income of $1,000 while China had about $350. Today, the Philippines still has a per capita income of $1,000—the same as China now. In other words, China caught up by tripling its growth rate while the Philippines stagnated.

One explanation for such dismal failure: Flawed leadership. China has good leaders. The Philippines has had bad leaders. China’s leaders, from Chairman Deng Xiao Ping to President Hu Jintao, have been bold, visionary and people of awesome integrity. The Chinese leaders delivered. The Filipino leaders failed. China restored Shanghai’s old glory as a modern metropolis in just the last ten years. That’s boldness and vision. Today, China is the second richest country on earth (after the United States) in terms of purchasing power parity.

What to do then?

Our leaders must reform, cope and deliver.

President Gloria Macapagal Arroyo has all the qualities of a bold and brilliant leader. An economist by training and by choice, she has a master’s in economics from Ateneo and a doctorate in economics from the University of the Philippines.

But there are questions about her integrity to a point that she may go down in history as a lying, cheating and stealing president with the worst popularity and trust ratings of any Philippine president. She will do anything to stay in power and survive as president.

Thankfully, during her watch, the economy has revived (tripling its growth rate from 2001 to early 2004) and as the year ended, the stock market was booming and the peso against the dollar hit a two-and-a-half-year high. So GMA can deliver.

For his part, Fidel V. Ramos is emerging as an elder statesman dishing out wisdom and advice from the standpoint of someone who has served his country well, so-called scams and scandals during his watch, notwithstanding. In recent months, he has become the moral force putting the country together especially during the crucial hours of the crisis of July 8, 2005.

On the other hand, ousted President Joseph Estrada, who has spent more time in isolation than the years he served as president, remains the symbol of a people’s yearning to be free from the bondage of poverty. His political capital is his immense popularity and the growing perception that he was a better president than GMA.

We got email from Jennifer Luy, the corporate development manager DPL Management Services of Del Monte Pacific. She said “MCI Inc [of the Lorenzos] bought Inc 28.73 percent stake from Del Monte Holdings and sold this together with its existing 21-percent stake for a total of 49.7 percent stake to NutriAsia for US$206.5 million. The total shares acquired by NutriAsia was 49.76 percent and not 78.49 percent as was reported in your article [of last Friday].”

E-mail tonylopez@biznews-asia.com

Arroyo will be both President and Prime Minister

2006-01-01T23:11:00.000+01:00

THE Consultative Commission’s Committee on Transitory Provisions is pushing through with the grand plan to cancel the elections of 2007 and to have all incumbent elected officials to continue in office beyond 2007 until 2010. President Gloria Macapagal Arroyo is also going to be the interim prime minister, from 2007 to 2010.

Section 7 of the proposed Transitory Provisions of the draft Constitution of 2006 provides:

“The elections scheduled in 2007 shall be cancelled and the terms of office of all elective officials shall be extended to June 30, 2010, coinciding with those of the incumbent President and Vice-President and the twelve Senators elected in 2004. The first election of Members of the Parliament and the first local elections under this Constitution shall be held on the second Monday of May 2010.”

Section 8 provides: “Upon ratification of this Constitution, the Senate and the House of Representatives are replaced by an interim Parliament that shall exist immediately and shall continue until Members of the regular Parliament shall have been elected and shall have assumed office following an election as provided in the preceding section. The interim Parliament shall have the same powers and its Members shall have the same functions, responsibilities, rights, privileges, and disqualifications as the regular Parliament and the Members thereof.”

Adds Section 9: “The Members of the interim Parliament shall be the incumbent Members of the Senate and the House of Representatives, one-third of the Cabinet, with portfolio, and thirty persons, experienced and experts in their respective fields, shall likewise become Members of the Parliament upon appointment by the President.”

Here are the rest of the Transitory Provisions:

“Section 10. The incumbent Vice President shall initially convene the interim Parliament and shall continue to exercise his powers and prerogatives under the Nineteen Eighty Seven Constitution.

“Section 11. The interim Parliament, by a majority vote of all its Members, shall elect on interim Prime Minister. He shall be a Member of the Cabinet.

“Section 12. Under the direction and supervision of the incumbent President, the interim Prime Minister and the Cabinet shall exercise all the powers and functions and discharge the responsibilities of the regular Prime Minister and Cabinet under this Constitution.

“Section 13. In the interim Parliament, the incumbent President shall exercise the powers vested in the head of state and the head of government under this Constitution, except the power to dissolve this Parliament, until the expiration of her term on June 30, 2010.

The incumbent President and Vice-President shall be subject to the same disqualification and manner of removal as provided in this Constitution. In case a vacancy arises by reason of removal, resignation, permanent incapacity or death of the incumbent President, the incumbent Vice-President shall become the President.

“Section 14. This Constitution shall take effect immediately upon its ratification by a majority of the votes cast in a plebiscite held for the purpose and shall supersede all previous Constitutions.”

Two things obvious from these provisions: one, there won’t be elections in 2007 and two, the president, Arroyo, will control the interim parliament whose members shall come from the present 236 congressmen and 23 senators. Since GMA’s party controls the House and the vote of the 23 senators, as MPs, shall be diluted, she becomes the frontrunner candidate for interim prime minister.

And to ensure that GMA gets elected as PM, the Con-Com allows her to appoint one third of her cabinet with portfolio (seven out of 22) plus 30 “experts” as MPs, for a total of 37 “insurance” votes. About 195 of the House members are allied with Speaker Jose de Venecia, a key supporter of President Arroyo.

At the same time, GMA remains the regular president until 2010. She becomes even more powerful being both president and prime minister.

Vice President Noli de Castro, meanwhile, becomes presiding officer. Finally, he gets a job.

***

Why did San Miguel Corp. agree to join venture with Joselito “Butch” Campos to buy control of Del Monte Pacific? SMC and Campos have put up NutriAsia Pacific Ltd. SMC owns 42 percent while Campos 58 percent but the latter must sell out to the beer and food giant in five years. NutriAsia has acquired for $206 million 49.76 percent of Del Monte Holdings from MCI (the former Macondray and Co.), the holding company of the Lorenzo family that used to own Del Monte Pacific.

Not many people know about it but Del Monte Pacific owns Great Lakes Fresh Foods and Juice Co., the premium fresh fruit juice company established in 1994 in Tianjin, China. In effect, San Miguel has entered the lucrative China juice market. Also, Del Monte operates in India. So now, San Miguel has a foothold in India.

Great Lakes has expanded from 12 people in 1994 to 190 today, “working together to make the best juice in the universe”. China is the world’s largest fruit producer, being No. 1 in apples, No. 3 in citrus and a leading producer of bananas, pineapples, pears, lychees, and kiwi.

E-mail tonylopez@biznewsasia.com

The new chief justice of the Supreme Court

2006-01-01T23:07:00.000+01:00

On December 21, 2005, the nation had a new chief justice, succeeding Hilario “Jun” Davide who retired December 20 after serving as the Chief for seven years.

Davide’s watch was remarkable for three things. The first is the unconstitutional removal of Joseph Estrada as president initially on the ground that there was a vacancy (there was none) in the presidency on the night of January 19, 2001 and later, on the ground that Erap had constructively resigned because he had discussed the matter of resignation with his then Executive Secretary Edgardo Angara who in turn wrote a diary which in turn was written about by Amando Doronilla whose article in turn was used as basis by the Supreme Court justices. Normally, a news item is considered hearsay.

This is not even considering the fact that it appeared in the Philippine Daily Inquirer. Now, I understand why the justices keep saying the Supreme Court is not a trier of facts.

The second is the intemperate interference by the high court into matters that are purely business or economic decisions. If you are a businessman, you cannot decide where to locate your petrochemical plant. You are not even sure that after winning a bidding for a hotel, it will be awarded to you. You are not sure that after winning a bidding to supply computers to the Comelec, you will not lose the contract. Or after finishing an airport without the government spending a single centavo, you are sure you will operate it.

This behavior of the Supreme Court, along with the penchant of lower court judges to issue TROs, is one of the biggest stumbling blocks to the entry of foreign investments in the Philippines. As a result, the Philippines missed two major waves of investment migration—first, before the 1997 Asian Crisis and second, after that Crisis.

Now, Vietnam and Myanmar get more investments than the Philippines does.

The third is the justices’ refusal to allow themselves to be impeached. Even a sitting president, now matter how depraved he or she may be, allows himself/herself to be impeached by the House. But not the justices, especially the chief justice on an issue as material as the whereabouts of the judiciary development fund which is taxpayers’ money. This is not to say Davide has no integrity. As his official biodata says “he is known to maintain his professional competence and integrity.”

I had predicted that Artemio Panganiban would be the chief justice after Davide. A man of probity and intellect (FEU Law, cum laude, 1959; No. 6 in the bar), he is a prolific writer—1,000 full-length decisions, ten books plus several thousand minute resolutions in the last ten years, with “no cases left undecided.” His fields of interests or expertise, if you may, outside of law, include mathematics, economics, business, accounting, canon law, and even biosciences. He is a devout Catholic.

The other serious contender was Reynato S. Puno (UP Law 1962, master of comparative law, Southern Methodist University; finished the academic requirements for a Ph. D. in judicial science, University of Illinois).

He is considered the intellectual of the Court and his writing prowess cannot be belittled. At 53, he joined the high court. He is a Protestant.

Both Justices Panganiban and Puno have served President Arroyo well.

Art was the one who cajoled Chief Justice Davide late afternoon of January 19, 2001, a Friday, into doing something about the People Power at EDSA. It seems that the justices were worried that there could be bloodshed and that a new government could conceivably abolish the Supreme Court. So fear of losing their jobs and losing the country was in the minds of the eminent jurists. By early morning of January 20, 1001, Panganiban and Davide had made up their minds: Erap had to go.

Communications were relayed to the camp of then Vice President Arroyo to prepare for her takeover “as acting president.” By 11 a.m. of Saturday, January 20, Mike Arroyo was heard over the radio claiming that he had “heard” President Estrada had resigned.

Davide and Panganiban herded the entire court to EDSA for Arroyo’s oath-taking.

In a subsequent decision, written by Justice Puno, the Supreme Court upheld the legitimacy of the Arroyo government.

Art was made chief justice because he would retire anyway in December next year. By then, he would be succeeded by Justice Puno who will retire in 2010. So everybody is happy.

What would be Chief Justice Panganiban’s first major decision? It is to rule on the constitutionality of the House of Representatives voting itself into a constituent assembly, with or without the Senate, to amend the Constitution to make PGMA both president and prime minister. Among other things, of course.

E-mail tonylopez@biz news asia.com

The evil that men (and women) will do

2006-01-01T23:00:00.000+01:00

A GROUP of seven commissioners has submitted a Minority Report objecting to the proposals advanced by the majority of the 55-person Consultative Commission to recommend constitutional amendments. They object to the parliamentary system and unitary legislature plus federal system. They favor the present presidential system.

The seven are: Anthony Acevedo, Rene Azurin, Donald Dee, Gerry Espina Sr., Jose Leviste, James Marty Lim, and Jose de Villanueva. They worry that fusion of executive and legislative powers will result in abuse.

They say there is no connection between a parliamentary system and economic growth. In other words, even a presidential system can produce economic growth. Thus, while Malaysia and Thailand, both parliamentary systems, are growing, so do South Korea and Taiwan, both presidential.

People should really be worried with what the Con-Com has recommended to Congress.

The majority adopted a parliamentary system with a single-chamber parliament that will come into being by middle of 2007 with its members coming from the 236 congressmen and 23 senators of the present 13th Congress. In addition, President Arroyo has the power to appoint an additional 30 members or “experts” plus one-third of her cabinet with portfolio. There are about 22 cabinet members with portfolio, those with line departments. One-third of that is seven. So seven plus 30, GMA has 37 MPs with her beck and call.

Not since the parliament of Indonesia under the dictator President Suharto had such a thing happened to any country in the ASEAN. Suharto was allowed to appoint 50 generals as members of his parliament. But at least in Indonesia at that time, they had no pretensions about being a democracy. In our case, we do pretend to be a democracy. And we are about to install a one-woman rule.

In the case of the strongman Ferdinand Marcos, at least he conducted elections to choose members of the Batasan Pambansa or Parliament. And to ensure there was an opposition party, in 1978, he funded an opposition party, like the Pusyon Bisaya of Cebu from where the then relatively unknown Hilario Davide came and was elected member of the parliament or Batasan.

To Marcos’s credit or dismay, Davide and Co. behaved like real oppositionists. That’s the risk you take when you conduct an election. You never know what kind of people get elected.

Perhaps, President Arroyo or her subalterns in the Con-Com are painfully aware of that fact. So their solution? No elections. Just convert the present Congress—all 236 congressmen and 23 senators—into an instant parliament. It will serve from 2007 to 2010.

To ensure nobody complains, all other elected officials—provincial governors and their vices and members of their Sanggunian, city and town mayors and their vices and members of their city and town councils will be automatically reelected, without benefit of an election, and serve until 2010. They get a bonus of three years. Some 17,000 such officials will benefit, thanks to GMA’s Con-Com none of whose members were elected by the people. This scheme will also ensure approval in a plebiscite of the proposed charter because the LGUs will work for its ratification.

What does GMA get in return? She gets a compliant parliament. More importantly, she legitimizes her rule—as president until 2010. And if that is not enough, the Con-Com allows her to seek election as Prime Minister. She is sure to become PM because the interim Parliament is loaded with her followers.

This is the evil that men (and women) do. We will have members of the Parliament not chosen by the people. And since that Parliament will consider tax proposals, we will have taxation without representation. In the history of decent countries, taxation without representation is a cause for a revolution.

The Supreme Court it seems will be involved in this charade. Lawyers tell me that under the present Constitution, a declaration of war by Congress requires the “vote of two-thirds of both Houses in joint session assembled voting separately.”

However, proposing amendments to or revising the Constitution does not have such a requirement. There is no mention of a vote of both Houses in joint session assembled and voting separately.

The Constitution merely says “an amendment to, or revision of, this Constitution may be proposed by (1) The Congress, upon a vote of three-fourths of all its members; or 2) a Constitutional convention.”

The legal team of Speaker Jose de Venecia interprets this to mean he can call a joint session. If the Senate refuses to join, the Congress, meaning the House of Representatives, shall constitute itself into a constituent assembly and consider amendments to the Constitution. The House needs only three-fourths of its 236 members to get approval of the Con-Con recommendations. That’s 177, a number quite easy to muster considering Speaker Joe’s legendary persuasive powers and President Arroyo’s political largesse.

E-mail tonylopez@biznews asia.com

Careful, there is a Bill of Duties

2006-01-01T22:58:00.000+01:00

Finally, somebody sends me by e-mail a copy of the missing draft of the proposed 2006 Constitution made by the 55-person Constitutional Commission.

In addition to the Bill of Rights, it has a new section, called Bill of Duties under Article V. It sounds to me like a lot of BS—You have to defend the State, contribute to its development and welfare, cooperate with the duly constituted authorities in the attainment and maintenance of the rule of law and of a peaceful, just, humane and orderly society.

I interpret such provisions to mean you have to fight the New People’s Army, the separatist Moro Islamic Liberation Front, and people designated as terrorists by the state. You have to be a partner of the police and the military in going after criminals and lawless elements. (What if the police and the military are the lawless elements themselves?) And if there is so much lawlessness all around (there is), country remains poor (it is), and the people are impoverished (majority of the people are), it will be your fault. You did not contribute to the country’s development and you did not cooperate with duly constituted authorities in the attainment and maintenance of the rule of law and of a peaceful, just, humane and orderly society.

So if you don’t like your President because he or she is nonperforming, incompetent or corrupt, you cannot complain because under the Bill of Duties, you are part of the problem. Besides, you are supposed to cooperate with the duly constituted authority, which the President is. And if your favorite bureaucrat is corrupt, it is your fault. You did not participate actively in public and civic affairs and contribute to good governance, honesty, and integrity in the public service, and the vitality and viability of
democracy.

Does that mean I have to join JoeCon’s Namfrel or Jaime Zobel de Ayala’s Makati Business Club or Donald Dee’s, Mike Varela’s, Jun Ortiz Ruiz’s (they take turns, if you didn’t know yet) goody-goody Philippine Chamber of Commerce and Industry? What about the famous Rotary Club of Makati? Or being a trustee of the First Gentleman Foundation?

And if citizens have so many duties pala, why do we have a government? Will it have anything to do outside of those not assigned—as duties—to citizens like us?

Remember what newly minted Chief Justice Artemio Panganiban said on television? Duty is something you cannot escape from. You can divorce your wife or husband. But duties? No way, Jose. Gosh, one day after Christmas, I feel like being pro-government and patriotic.

For your intellectual delectation or to humor yourself, here is the Bill of Duties:

ARTICLE V BILL OF DUTIES

SECTION 1. It shall be the duty of every citizen to be loyal to the Republic of the Philippines, honor the Philippine Flag, defend the State, contribute to its development and welfare, uphold the Constitution and obey the laws, pay taxes, and cooperate with the duly constituted authorities in the attainment and maintenance of the rule of law and of a peaceful, just, humane and orderly society.

SEC. 2. The rights of the individual impose upon him the correlative duty to exercise them responsibly and with due regard for the rights of others.
SEC. 3. Citizens and the State shall at all times respect the life and dignity of every human person and uphold human rights.

SEC. 4. Citizens shall participate actively in public and civic affairs, and contribute to good governance, honesty and integrity in the public service and the vitality and viability of democracy.

San Miguel Corp. has bought majority of Del Monte Pacific Holdings, owner of one of the oldest consumer brands in Asia (more than 100 years). SMC has acquired 42 percent of NutriAsia while Joselito “Butch” Campos of United Lab has 58 percent, but that’s just for appearances, it seems.

NutriAsia has acquired controlling interest of Del Monte Pacific but the stake could be increased to 100 percent because San Miguel has made a tender offer to buy all the remaining stockholders outside of the holdings of Macondray and Co. (or MCI) of the Lorenzo family. Del Monte is being relisted in Singapore giving rise to an SMC proxy IPO.

San Miguel has the right to increase its stake to 51 percent anytime it wants to. SMC was able to line up blue-chip financing—$85 million from HSBC, $80 million from the government Development Bank of the Philippines, and $50 million from Banco de Oro.

Why did DBP lend to SMC? It was afraid Del Monte, which has been based in the Philippines, would be moved to Indonesia, home base of the First Pacific, the failed bidder from Hong Kong.

Why did SMC buy Del Monte? SMC is the largest beverage company in the Philippines (it owns 65 percent of Coca-Cola Bottlers Philippines which in turn owns a number of beverage brands, aside from Coke). Del Monte, in addition to its pineapples, is a beverage company. Del Monte operates in China and India. So now, San Miguel is in China and India.

E-mail tonylopez@biznewsasia.com

Junk the Con-Com draft

2006-01-01T22:56:00.000+01:00

IT is now abundantly clear the draft Constitution made by the 55-person Consultative Commission appointed by President Arroyo is not going to be the panacea many people have expected it to be.

In fact, the revision of the Constitution will bring about more problems than it is trying to solve.

People are going to lose many of their freedoms or have them in a much diminished form.

They won’t have an election in May 2007 and not having elected them, they will have leaders who are illegitimate and without a mandate. People won’t be able to elect their president or prime minister directly—a contravention of the widespread clamor for voters to choose their leaders directly thru the ballot and not by proxy, through their parliament.

And if the draft Bill of Rights (Article IV) is adopted, long-cherished freedoms like free speech, free expression, free press and peaceful assembly will be diminished, if not curtailed, because their exercise must be “responsible”.

There are a number of reasons why the draft Constitution is bad.

For one, the Con-Com was given very little time to do its job. Its December 15 deadline was too tight for the panel to do a thorough job. And I like to think a few of the commissioners were, to use a cliché, pinabili lang ng suka, and ended up writing the basic law of the land.

For another, the Con-Com was headed by the wrong guy, former University of the Philippines president Jose Abueva.

Aside from the fact that the good dean is known to be pikon, he did not have the balance, objectivity and impartiality of a head of a collegial body. He pursued his own private agenda which is shift to the parliamentary system, abolish the Senate, and adopt a federal system of government. He won on the parliamentary system and abolition of the Senate, but lost on the federal system.

Abueva is anti-people and anti-democratic at heart.

He is also an elitist. He wants the prime minister, the president and the members of the parliament to be college graduates. But how many college graduates are there in this country of 85 million? Did you know, many of our well-known tycoons (and publishers) did not finish college. My parents, our parents, didn’t finish college. It was war time remember?

Abueva wants (as do majority of the Con-Com) the May 2007 elections cancelled and give some 17,000 incumbent elected officials a term extension of three years until 2010.

He thinks citizens are to blame for the poor state of the country and the poor quality of its governance.

So inserts a Bill of Duties in the draft Constitution.

He thinks governance is a matter of paying taxes.

So the Bill of Duties lists paying taxes is as the No. 1 duty of a citizen.

The Minority Report on the proposed 2006 Constitution of the Philippines

2006-01-01T22:50:00.000+01:00

13 December 2005

Her Excellency
Gloria Macapagal Arroyo
Malacañang Palace
Manila

Dear Madam President:

We, the undersigned members of the Consultative Commission, wish to express our serious reservations about the adoption by the Commission’s majority of the recommendation that the country should now shift from our present presidential form of government to a parliamentary form, and from the present unitary structure of our Republic to an eventual federal structure.

We are of the considered opinion that the positions taken by the Commission’s majority on these issues are based on deeply flawed and faulty arguments. We are also of the opinion that the system of ‘consultations’, as conducted, did not allow for an adequate airing of the relevant issues and that the results being reported by the Commission cannot therefore reflect the informed opinions of those ‘consulted’. Moreover, we feel that the Commission’s interpretation of the results of said ‘consultations’ is highly questionable.

Obviously, changing the nation’s Constitution is not a trivial matter. We believe that any proposed amendments to the nation’s Constitution should be logical and reasonable responses to specific concerns and/or systemic deficiencies. We believe that any proposed changes must be firmly anchored on a logical and reasonable belief that these will accelerate the pace of economic development, improve the standard of living of the Filipino people, and promote the general good.

Further, we believe that any attempt at constitutional reform must be based on a full understanding of the real problems that such reform should – and can – solve, and that such understanding requires a genuine consultation with as many sectors of Filipino society as possible. We believe that, in such an attempt, an honest and serious effort to solicit and hear the opinions and sentiments of all interested Filipinos should be made. We do not believe that such an effort was made.

For the record, we summarize below our major objections to the proposed shift to a parliamentary form of government. We bring these up here because these very serious objections were never fully dealt with – and were even cavalierly brushed aside – by the proponents of the parliamentary form.

1) The fusion of the executive and legislative branches of government in a single body – Parliament – concentrates too much power in the hands of politicos. The power of the Prime Minister and his ruling coalition in a parliamentary government to decide on projects, appropriate the funds needed for these projects, and then implement these projects effectively gives them discretion over the entire national budget (except of course for debt servicing and other fixed expenditures), and there are few checks to control possible abuse. The so-called ‘internal checks’ that might originate from the opposition parties in Parliament are believed inadequate and probably work only in theory, particularly in the Philippine situation where party affiliations are rarely based on hard principle and politicians often belong to the same social circle. Even in countries with mature parliamentary systems, abuse of the enormous power vested in parliamentary governments is actually fairly common. Cronyism tends to flower in a parliamentary environment.

2) The inherent instability in the tenure of the Prime Minister and his utter dependence on the votes of the other members of Parliament for his stay in office from one day to the next enshrines ‘horse trading’ and ‘transactional’ decision-making as the parliamentary way of governance. The ability to change leaders frequently and at any time is not a virtue (as proponents of the parliamentary form claim), but a very serious shortcoming. Because a parliamentary government can fall any time a sufficient number of members of Parliament withdraw their support from the ruling coalition, the Prime Minister and his ruling gang are forever hostage to the demands of every member of Parliament. Thus, the decisions that can be expected to be made by a parliamentary government will usually cater to special interests and will often be short-term in orientation and probably inconsistent with other decisions. And, because members of Parliament are elected by local constituencies, the special interests they will promote will rarely be expected to be congruent with the larger national interest.

3) It is not true that it is their form of government that makes other countries perform better economically than the Philippines. There is no established connection between form of government and economic performance, or between the parliamentary form and the rate of economic growth. In fact, for every country with a parliamentary government that is racing ahead of us economically, one can cite a country with a presidential system that is doing as well or better. Here in Asia, for example, Malaysia and Thailand, which have parliamentary governments, are growing faster than we are, but so are South Korea and Taiwan, and they have presidential governments. (China and Vietnam, both economic racehorses, are not even democracies.) The economic performance of a country is a function of its economic policies, resource endowments, and certain environmental conditions, not its form of government. In fact, in a parliamentary system, it is much more difficult for government to adhere to economic policies that are right for the country as a whole because such are often in conflict with the special interests typically represented by members of parliament. Of course, all politicians represent special interests. This problem, however, is compounded in a parliamentary system because the fusion of executive and legislative power in the parliamentary form simply puts too much power in the hands of politicos.

4) Given that even those who advocate the parliamentary form concede that political and economic power in this country is too concentrated (in less than 1% of the population), the obvious appropriate response should be to adopt ways that disperse power, not ways that concentrate it further. Thus, a shift to a parliamentary system is a totally inappropriate reaction to the country's present political and economic realities because it concentrates power even more, instead of spreading and diminishing it. Moreover, it allows such concentrated power to be wielded more easily and more effectively than is possible in a presidential system where the executive and legislative branches remain separate.

5) A statistic often cited by pro-parliamentary advocates is that there are more parliamentary governments than there are presidential ones. If that is intended to be an argument, it is an irrelevant one unless one first establishes the premises that, one, parliamentary governments are more successful than presidential ones, and, two, that such successes are the result of the parliamentary form. Neither of these statements can be supported. That there are more parliamentary governments than presidential ones is simply the result of Great Britain having had more colonies than anyone else.

6) The huge expenditure required of a presidential candidate in a national election is said to be a major reason why there is so much graft and corruption in government. It is then argued by proponents of the parliamentary form that, because elections in a parliamentary system are local ones and the expenditures required of candidates are much less, the subsequent need to ‘recover’ campaign expenditures through graft and corruption is also less. The whole argument is simplistic. Graft and corruption happens because of a mix of many factors including poverty, greed, a cultural predilection for ‘arreglo’, the availability of opportunity, and weak monitoring systems and law enforcement. The more important point, however, is that solutions to this problem do not require a change in the form of government. Electoral reform that includes campaign expense subsidies and judicial reform that makes catching grafters and administering justice more effective are means that are not dependent on the form of government. Besides, elections in a parliamentary system for someone who desires to be Prime Minister may not turn out to cost much less (and might even cost more) than running nationally in a presidential election. It should be borne in mind that candidates for Prime Minister may reasonably be expected to substantially finance the campaigns of the district candidates who he expects will vote for him and form part of his coalition in Parliament. In addition, the need for a Prime Minister to retain his support means continuing expenses in terms of projects and business favors.

7) It is not true – as proponents of the parliamentary form like to claim – that the ‘legislative gridlock’ built into the presidential system is the reason why this country has not been able to keep economic pace with its high-performing neighbors. This argument simply cannot be supported by historical fact. There was no legislative gridlock at all during the Marcos years and yet it was during this period that the Philippines fell behind its neighbors in economic performance. There was hardly any legislative gridlock during the Aquino years and the Philippines fell even farther behind. The Philippines’ failure to keep pace with its neighbors has been a consequence of protectionist economic policies, peace and order problems, and too much government regulation and bureaucracy. ‘Legislative gridlock’ is actually a special and recent problem.

8) Governance is an acquired skill and doing it well requires climbing up a learning curve. All nations making the transition from tribal or autocratic systems of government to representative democracy must navigate this learning curve, whether they are led by their respective histories down the presidential path or down the parliamentary path. Filipinos have been negotiating the learning curve of a presidential system for the past one hundred years or so and, as a result, have acquired considerable familiarity and experience with its nuances, its strengths, and its weaknesses. In fact, because of this experience, most Filipinos already have strong opinions on what features of this system of government need modification or correction. This will not be the case with a parliamentary system. In shifting to it, Filipinos must begin again at the bottom of the learning curve. That is, of course, justifiable if there are compelling reasons and clear benefits for making the shift. In this case, however, no clear benefits to the nation as a whole can be demonstrated by those who propose our adoption of a parliamentary government. And the reasons are apparently compelling only to a few.

With respect to changing from a unitary structure to an eventual federal structure, our main objections are also enumerated below. Likewise, the advocates of the federal structure have been unable to respond adequately to these objections.

1) The devolution of power to local governments can be accomplished without resorting to ‘federalization’. What local government officials repeatedly say they want are the power to deal with local issues and local projects at the local level (without having to get approval from ‘Imperial Manila’) and the automatic release to them of their shares of national tax revenue. But local autonomy is already provided within the framework of the existing Constitution and this includes the power to impose local taxes that accrue exclusively to the local government units, the entitlement to a fair share in the utilization of natural resources within their areas, and the automatic release to local units of a just share in national tax revenues. Any problems and shortcomings particularly with respect to the size of the share of local governments in national tax revenues or in the benefits derived from the exploitation of natural resources within their boundaries, or in the release of these shares to them by the national government can be addressed by simple legislation and administrative fiat. There is absolutely no need for the creation of another territorial and political subdivision – the independent federal State made up of a group of provinces – in order to address those issues.

2) The aforementioned creation of new territorial and political subdivisions in the country will be (in the words of one commissioner) an ‘administrative and fiscal nightmare’. The introduction of a whole new layer of government (the federal State’s) will increase complexity, bloat the bureaucracy, and increase spending on government. (Each federal state will have a separate state government, a separate state legislature, and a separate state judiciary.) This means more government rather than less, and we object to this on ideological grounds. The additional autonomy that federal states might gain over that which the existing provinces, cities, and municipalities could have under an enhanced local autonomy code is of dubious benefit. It is not worth the additional problems and expenditures that ‘federalizing’ will entail.

3) Most of the proposed new political instrumentalities will not be financially viable, at least for many many years. In a federal setup where each state is presumably on its own, conflicts may therefore arise because the few affluent states could balk at transferring significant amounts of their resources to the many marginal ones. If this is not managed properly, the country’s problem of uneven area development could very well intensify.

4) Another area of potential conflict is how the servicing of our large foreign debt will be allocated among the various individual states. Clearly, the few revenue-rich ones will be forced to bear a far larger burden than the many revenue-deficient ones and this could be a continuously contentious issue. Should these revenue-rich states start refusing what they may perceive as an unfair burden, it could very well jeopardize the country’s ability to meet its international debt obligations and this could have catastrophic consequences. This sharing of the foreign debt burden is actually a dangerous problem which might even trigger talk of secession.

5) The above issue will also arise with respect to the sharing of the expenses of the central government including the maintenance of the armed forces, the national police, Congress, etc. Invariably, revenue-rich states will be forced to bear a proportionately larger share of the burden and they may eventually feel that this is unfair and begin to insist on a more even distribution. Again, this can be a source of dangerous conflict.

6) Almost all existing federal republics in the world are made up of previously independent states that decided to band together in order to share the expenses of government and of national defense and security, to supplement each other’s resources, and to build larger, more viable markets. Even today, the move toward the consolidation of small units into larger groupings (e.g., the European Union) continues for the purpose of sharing resources, enlarging markets, and increasing global competitiveness. In contrast, the proposed ‘federalization’ of the Philippine Republic is aimed at artificially forcing the break-up of an already small unitary unit into even smaller units. This hardly makes economic sense.

7) The ‘federalization’ of the country could reverse any progress already made toward inculcating in every Filipino the idea of being part of one Filipino nation and one Filipino community. Instead of promoting the idea that we are one people, dividing up the country into groupings most likely based on common or similar dialects could very well return us to tribal modes of thinking. This could be fatal to any attempt to engage the whole nation in concerted efforts to achieve ‘national’ purposes. ‘Federalization’ could very easily lead to the eventual break-up of the Filipino nation.

For the reasons cited above, we wish to express our sincere conviction that the constitutional changes that will be presented to the Filipino people by the Commission – and perhaps subsequently by Congress – will not be beneficial to the nation as a whole and will only aggravate the problems the country now faces. We are concerned that the Filipino people are about to be stampeded into an action – ratification – that they will not have had time to contemplate and consider fully.

We would like to emphasize that we are not against constitutional change and we believe that several changes are necessary to address real problems. We believe however that such changes must be the right changes. The often-heard statement that ‘the presidential system has failed us, therefore we must change to a parliamentary system’ betrays a very superficial and shallow kind of thinking. Making the wrong analysis and settling on the wrong choice of changes will only make our situation worse than it already is. We believe that shifting to a parliamentary form of government and to a federal structure are precisely the wrong kind of changes.

In the light of the foregoing and in the light of our own individual objections to the conclusions and recommendations approved by the majority in the Commission, we regret that we are unable to sign and endorse the Commission’s Final Report.

In lieu of this, we are submitting to your office a working draft – with annotations – of an amended Constitution that we feel better represents the kind of change that we would like the Filipino people to consider. What we propose is to retain our existing presidential form of government with a unitary structure, but with some modifications. These modifications include limitations in the prerogatives of public officials, electoral reforms, additional modes of removing or recalling elected officials, reforms in the Judiciary to make the administration of justice more effective, a more powerful Ombudsman (reconstituted as an Anti-Corruption Commission), clearer definitions of peoples’ rights, enhanced local autonomy, and economic reforms.

On the matter of economic reforms, we strongly support the liberalization of the economy and the removal of citizenship restrictions on the exploitation of natural resources, the operation of public utilities, and the ownership of mass media, advertising companies, and educational institutions. We also support the lifting of the restrictions on foreigners owning land. In general, we support provisions that are consistent with an open economy, free competition, and minimum regulation.

The attached working draft provides, we believe, logical and appropriate responses to certain problems that have been identified as plaguing Filipino society (at least insofar as a Constitution is capable of addressing such problems). We would like to emphasize, however, that it is offered here not as a final product, but as a starting point for discussion by all interested Filipinos. For this purpose, we will make this working draft available to all interested entities, civic and professional groups, schools, and media outfits, so that anyone interested can review it and make comments and suggestions.

This submission is our collective contribution to the “great debate” on charter change. We hope that you will find it enlightening and useful.

In closing, please accept our sincere thanks for having given us all the opportunity to be part of this significant development in our nation’s history.

Very truly yours,

ANTHONY Y. ACEVEDO RENÉ B. AZURIN

DONALD G. DEE GERARDO S. ESPINA, SR.

JOSE P. LEVISTE, JR. JAMES MARTY L. LIM

JOSE D. VILLANUEVA

CC: Senate President Franklin M. Drilon
Speaker Jose C. de Venecia Jr.

RBA: 13dec2005

Minority Group Report – Working Draft of Revised Philippine Constitution

Proposed Revision of the 1987 PHILIPPINE CONSTITUTION

MAIN FEATURES OF WORKING DRAFT:

1) The presidential form is maintained, and the executive branch of government remains separate from the legislative branch (Congress).

2) As it is at present, the President and the Vice President will be elected nationally for a term of six years. The President cannot be reelected.

3) The qualifications required of a candidate for the position of President or Vice President shall now include a tertiary educational degree and public service experience of at least one full term as Governor of a province or as a member of Congress, or at least three years as a senior official (Bureau/Agency head or higher) in the executive branch of government.

4) The existing two chambers of Congress are fused into a single chamber. Congress will be made up of Regional Representatives elected by region and District Representatives elected by legislative district. There will be two Regional Representative per region and one District Representative per legislative district (set at a ratio of 1 for every 250,000 population, no limit on number).

5) The qualifications required of a candidate for the position of member of Congress shall now include a tertiary educational degree.

6) The Speaker and Deputy Speaker of Congress and the Chairmen of all standing Committees of Congress will be chosen only from the Regional Representatives.

7) The terms of the members of Congress shall be three years. There shall be no term limits for the members of Congress.

8) Elective office, except that of the President and Vice President, will be open to all citizens (not just natural-born ones).

9) The present Supreme Court will be broken up into two: a new Constitutional Court (7 members) and a Supreme Court (9 members). The Constitutional Court will have jurisdiction over constitutional issues, conflicts between government units, and impeachment cases against elected officials. The Supreme Court will remain the highest court for resolving private legal issues. Both Courts will sit only en banc.

10) The administrative supervision over the lower courts that is now being performed by the Supreme Court will be transferred to the Judicial and Bar Council which will be reconstituted as a new Judicial Commission. This is done to free the Supreme Court and allow it to concentrate on its adjudication functions.

11) The Commission on Human Rights is reconstituted with additional powers as a new Constitutional Commission called the Rights Enforcement Commission.

12) The Office of the Ombudsman is reconstituted with additional powers as a new Constitutional Commission called the Corruption Commission.

13) The power of the President to appoint officers in the Armed Forces is limited to the positions of Chief of Staff and the Major Service Commanders.

14) Additional restrictions are placed on appropriating and disbursing discretionary funds.

15) The fundamental rights of citizens are strengthened.

16) The old Regalian doctrine under which the State owns natural resources is replaced with a doctrine of State stewardship.

17) Free enterprise, open market competition, and private initiative are enshrined as principles of national economic policy.

18) All citizenship restrictions for the ownership of alienable land, the exploitation of natural resources, the operation of public utilities, the ownership of mass media, advertising companies, and educational institutions, and the practice of professions are removed.

19) The unitary (meaning, not federal) structure of the Republic is retained, but local autonomy is enhanced.

20) There will be additional modes of removing public officials: by judicial impeachment through a case filed in the Constitutional Court and through recall elections upon petition by 12% of voters who voted in the last general election in the subject area (the whole country in the case of the President).

ConCom will do more harm than good

2006-01-01T22:39:00.000+01:00

Con-Com abridges the freedoms of speech, expression, press and peaceful assembly

It seems the 55-person Constitutional Commission is going to do more harm than good to the people, to the country, and specifically, to us, journalists.

We already know that the body, composed of people who were not elected by the people but who are now trying to do social and economic engineering without the people’s mandate, is recommending the cancellation of the May 2007 senatorial, congressional and local elections.

Instead, incumbents get a free additional three years in office, until 2010, without the benefit of an election. This No-El (no election) is an outlandish, anti-people and anti-democratic idea and every democracy-loving Filipino must rise in arms (if need be) to defend the people’s right to choose their representatives and their leaders in a free, fair and honest election.

The No-El proposal is defended by the Con-Com commissioners notably by Dean Jose Abueva and a certain Atty. Romela M. Bengzon, on the ground that the country would save as much as P22 billion if no elections are held.

Since when did democracy have a peso price? Besides, the P22 billion will be spent by politicians, not by the people, and part, if not most of it, is stolen or jueteng money anyway. Democracy has a price, yes, and it is measured in terms of sweat, tears and blood of the people, not in pesos.

So election is one way of redistributing or returning wealth to the people, money that belongs to them in the first place.

Can you imagine the multiplier effect of P22 billion of consumption money? I estimate it to be about eight times or P176 billion (equivalent to how many times your favorite bank can lend your deposit earning a measly sum). For one thing, sales of beer, soft drinks, t-shirts, Jollibee and McDo, appliances and other consumer products go up every campaign time.

More importantly, we have already seen the destabilizing effect of having for leaders who are perceived as not having been elected by or without the mandate of the people.

An unstable political situation in turn results in an unstable economic situation. And an unstable economic situation turns off investors. Just how much investments, foreign and local, was held an abeyance at the height of the Garci tape and impeachment controversy? Incalculable. In fact, operators of restaurants and owners of malls tell me their sales went down during that time and it was only a few days before and after Christmas did consumer spending pick up.

I am disgressing from the main point – which is that the Con-Com has actually abridged press freedom,

Under the present 1987 (Section 4, Article III, Bill of Rights), “No law shall be passed abridging the freedom of speech, of expression, or of the press, or the right of the people peaceably to assemble and petition the government for redress of grievances.”

In the draft constitution by the Con-Com, Section 4, Article IV, Bill of Rights), “No law shall be passed abridging the responsible exercise of the freedom of speech, or of the press, or the right of the people peaceably to assemble and petition the government for redress of grievances.”

My God! The Con-Com has just abridged four of our most cherished and valuable freedoms --- speech, expression, free press and to assemble peacefully to seek redress for grievances.

This was done thru the simple expedient of adding the words “the responsible exercise of” before enumerating the four freedoms – of speech, of expression, press, and the right of the people peaceably to assemble and petition the government for redress of grievances.

What constitutes responsible exercise? Who determines responsible exercise? The President? Congress? The Judiciary?

In ordinary logic, once you define something, you limit it. Once you add an adjective (like responsible) to the exercise of freedom, you limit it. Therefore, the Con-Com has just abridged or curtailed our freedoms. This is outrageous and journalists, in fact, all freedom-loving Filipinos must hold the Con-Com, collectively and individually, responsible for a grave and unpardonable crime against the people.

How come suddenly we have tyrants in our midst? They are people who otherwise in ordinary circumstances (like elegant dinners and cocktail parties) seem sane, educated, and responsible. Why did we have to fight the Spaniards, the Americans, the Japanese and our own made-in-the-Philippines tyrants just so we will lose our freedoms to a bunch of people many of whom we do not know from Adam and who are now trying to rule our lives, restrict our freedoms, and dictate our destiny? Surely, there is a remedy for such tyranny and a process to defend what is our birthright. And the name is rebellion.

Email tonylopez@biznewsasia.com

Lucio Tan and UE

2005-10-03T21:48:00.000+02:00

Lucio Tan and UE

As a leading institution for the teaching of business management and accounting and finance, the University of the East could be expected to practice what it was preaching.

In 1990 that was not the case. At that time, “UE’s finances were in a mess. Fiscal controls were thrown out of the window,” recalls banker Panfilo O. Domingo, a 1950 business graduate. The school had reached its nadir, its reputation tarnished, its future bleak.

“The university’s lawn on Claro M. Recto was converted into a mini-Divisoria with some 100 stalls and even a moviehouse,” winces Domingo, who was by management for help, he being an alumnus. He was shocked that the Maharishi cult of India had acquired 60 percent of the university. The university had accumulated deficit of P58 million and debts of P110 million. In other words, the money of the major stockholders’ (like the Cancio and Bocaling families) had run out.

Bulletin publisher Emilio Yap extended a P27-million loan to shore up the uni-versity’s finances. The loan was backed by real properties of UE. He wanted the university. He should have asked for an assignment of its shares, not the properties.

That mistake enabled beer, tobacco and banking taipan Lucio Tan to enter the picture. Upon the advice of P.O. Domingo, he initially bought 22 percent of UE, plunking P20 million.

Tan later plowed an additional P45 million to buy the company’s unissued shares and increase his equity to 71 percent. The investment turned out to be one of the best he has made. The taipan put in another P65 million and paid UE’s debts of P110 million, for a total investment of P175 million. Today, UE, with its retained earnings and landholdings, is valued at P3 billion.

“The university is now sound financially,” Domingo gushes with pride. Retained earnings have amounted to P358 million as of end-March 2005, representing profits plowed back into university for expansion and modernization.

UE intends to become one of the leading universities in the country. It will be Tan’s legacy.

Aside from its traditional forte of business management and accounting, UE intends to excel in such fields as information technology, medicine and dentistry, nursing, and maritime technology. UE also wants to be a leading center of arts and culture “to complete the education of the management man,” says the UE CEO Domingo.

UE is credited for training among the country’s best professionals, managers and entrepreneurs. They are not as flashy and flamboyant as alumni from La Salle and Ateneo. But they are equally good, if not better.

Domingo, UE CEO for the last 15 years, himself epitomizes the best qualities of a UE alumnus. During his stint at the Philippine National Bank, it was the biggest in Southeast Asia and Domingo was named Asia’s top banker.

Between 1990 and 2000, UE’s gross revenues increased 415 percent from P115 million to P591.8 million, a frenetic average annual gain of 37.7 percent. The rise in profits was even more dramatic during the same 11-year period, by 1,559 percent, from P4.2 million to P69.7 million, for a spectacular average annual increase of 142 percent. UE chalked up cumulative profits of P321 million, doubling the money that Tan invested in the school.

Return on equity more than tripled, from 3.6 percent in 1990 to 12.3 percent in 1996, 13.5 percent in 1997, 10.5 percent in 1998, 12.6 percent in 1999, and 12.4percent in 2000. Assets also more than tripled, from P239 million in 1999 to P750 million in 2000, reflecting the owners’ sustained capital infusion and capital expenditures to improve facilities. In the past three years, however, revenues slowed down—P618.96 million in 2003, P613.55 million in 2004 and P628.14 million in 2005, increasing just 1.5 percent a year. Operating income was P7.4 million in 2003. That was reversed into a loss of P1.63 million in 2004 and an even bigger loss of P5.84 million in 2005.

Declining enrollment, rising costs and a difficult economic environment are taking their toll on the university. How did Domingo turn around UE? Three things—equity infusion, no debts and fiscal controls.

“We are now debt-free,” says the UE chair and president. As of March 31, 2005, UE had a net worth of P802.72, including retained earnings of P320 million. Domingo imparts three principles essential to running a viable university enterprise. One, “you must have a strong equity base,” he says. Two, “there should less reliance on loans. The expansion of the university must be through capital contribution.” And three, “you must enforce fiscal controls.” Tight budgeting and planning are also Domingo’s innovation. “I am planning and results-oriented,” he says.

With UE’s finances in good order, Domingo is now focusing on three things—how to arrest the drop in enrollment, improving faculty quality and planning for the 21st century.

E-mail tonylopez@biznewsasia.com

Is Gloria Arroyo a tyrant?

2005-10-03T21:43:00.000+02:00

I do not believe President Gloria Macapagal-Arroyo will declare martial law or impose emergency rule. She is not a tyrant. Having experienced how martial law drove her father, President Diosdado Macapagal, into ignominy if not penury, GMA should be the last to entertain thoughts of emergency rule.

“I’m tired of chasing the bully around the schoolyard,” she told an assembly of baranggay officials of Central Luzon Thursday last week. That’s psy-war, pure and simple.

Everybody is tired of bullies. In GMA’s case, she herself sounds the like the bully she is talking about in the school-yard. She was a professor of economics. So she uses the school metaphor. But it is the wrong metaphor and should not be used when you are the one accused of lying, cheating and stealing. In the school, these are prohibited acts and drilled into a student’s mind till boredom comes.

You are a bully if—despite Social Weather Station’s disturbing findings that 79 percent of the people want her impeached, 63 percent want her to resign and 51 percent want her ousted by People Power—you insist on ruling with an iron hand. Threats, intimidation and the use of force are standard weapons of tyrants and unwanted rulers.

When you are unpopular and use these weapons, you open yourself to threats, intimidation and the use of force. If protesters, rather than being heard, are gassed, truncheoned, arrested with the flimsiest of reasons or even murdered, you become not just a bully. You are a tyrant and a dictator. And people have no more patience with such rulers and their ilk.

First a restive people resort to prayers, then peaceful assemblies, then mass actions and eventually violence. The military reacts with its own violence. The result is civil war, then a revolution.

Soon, the tyrant is ousted. Lucky our own kind of tyrants, they are not killed by the mob nor their relatives shot by musketry. They are allowed to go on self-exile and a kind of house arrest, with most of their loot virtually intact.

E-mail tonylopez@biznewsasia.com

What Charter Change can do

2005-10-03T21:39:00.000+02:00

VIRTUAL BUSINESS
By Tony Lopez
What Charter change can do

The 37 or so members of the President Arroyo’s Consultative Commission have been given three months to finish their job, which is to amend the present Constitution drafted in 1986.

The commissioners have their work cut out for them, literally, by Speaker Jose de Venecia’s 236-member House of Representatives which two years ago drafted a constitution to replace the present one. That draft calls for a shift to the parliamentary system and a federal form of government, doing away with the presidential system which, probably by coincidence, has resulted in the slowest economic growth in the last 30 years in Asia, bar none—a per capita growth of less than 1 percent. Bangladesh and Myanmar did better, economically.

Whether the commission will shift the country to the parliamentary system or retain the rambunctious presidential system, I do not care. To me, it does not matter what kind of government we have as long as we have good men running it. Unfortunately for the Philippines, we have had a series of corrupt, or incompetent, or worse, both kinds of presidents in this country in the last 40 years ruining it to the point of irreversible perdition. Our presidents have damned us to extreme poverty never seen anywhere else in Asia.

Culturally in Southeast Asia, Filipinos are the most brilliant and most literate among the region’s diverse peoples. We are No. 2 in literacy, with 92.6 percent of the people able to read and write. Only the oil-rich sultanate of Brunei has a higher rate, but infinitesimally, at 92.7 percent. Yet per capita, we are the worst performing, economically. How do you explain that? It is a question of leadership.

We have had a series of bad presidents in the last 40 years. Half of our presidents should have been shot against the wall for corruption, incompetence, or both. Yet, the relatives of one want to give him a hero’s burial. Another masquerades as a Mother of Democracy. One goes around the world proselitizying about good governance. One remains hugely popular. And one refuses to quit.

They all have one thing in common—their administration was marked by corruption, most of it in unprecedented scale. Much of the Philippines’ money is in flight, and the factors of production are meeting abroad—not here. They are, in elementary economics—capital, labor, entrepreneurship.

The only factor of production inside the country is land, and that is because land is not portable. Otherwise, it would have been brought out too.

That is why we have about $80 billion of wealth stashed abroad. We have eight million workers abroad. And most of our taipans and tycoons have investments abroad. In this sense, the Filipino is the truly global citizen.

Why is this so? They are scared of our government, wary of our presidents.

It is in this light that we should view the work of Mrs. Arroyo’s constitutional consultants. Amending the charter should bring about two basic things—bring closure to our politics and open up the economy. All other amendments are just Christmas decors in relation to the impact of these two.

Closure means forgiving all our presidents who tortured or murdered their countrymen and who stole billions of pesos or dollars, not necessarily from the treasury (“Just how much can you steal from the Treasury?” President Marcos told me once), but through shady deals and countless acts of omission and commission. Let Marcos be buried at Libingan. Let Cory Aquino remain Mother of Democracy and keep her Hacienda Luisita. Let us forget about scams under Fidel V. Ramos. Let Joseph Estrada free. And let GMA rule until 2010. Let us recognize the legitimacy of their presidencies, whether they won big or won small or used Garci tapes, whether their votes were properly counted by a Comelec that couldn’t count.

But by God’s grace and forebearance, let us by 2010, start with a clean slate. And let capital come in by opening up the economy—property, utilities, mining, the media, to name some. Let us encourage the return of stolen capital by declaring amnesty with say, just ten percent tax. And let us give all Filipinos tax amnesty.

Then maybe, this nation can be great again, as Marcos once promised, or we will have a strong republic, as GMA once declared.

E-mail tonylopez@biznewsasia.com

The Truth Commission on President Arroyo

2005-07-13T01:59:00.000+02:00

Published in The Manila Times Business June 27, 2005

VIRTUAL BUSINESS
By Tony Lopez
A truth commission

AFTER the peaceful rally of the political opposition on June 24 and the canceled protest march of ex-generals on Saturday, the country enters a period of critical consolidation.

The political opposition is consolidating its forces.

What is remarkable about this consolidation is that the forces of the left, the right, the studentry, and the middle ground have united against what they perceive as their common enemy, Gloria Macapagal-Arroyo, and a common cause, her removal.

Sen. Panfilo Lacson has finally found common cause with the forces of Fernando Poe Jr. The former crime fighter and national police chief provides organization, platform, logic, rhetoric and not to be sneezed at, military intelligence, to the disparate pro-FPJ groups, led by Mayor Jojo Binay of Makati, Congressman Chiz Escudero and Rez Cortez. Ping took away anti-GMA votes from FPJ in the May 10, 2004 election. Had he run as the actor’s vice president, Ping would have been president by now.

For the first time since 1986, antiadministration forces have a common foe. Not since Ferdinand Marcos has this happened. It does not bode well for GMA who has triggered so much dislike and outrage to the point that everybody is now ganging up on her. The students’ Valentina placards portray her as “President Evil,” a takeoff from the computer game, “Resident Evil.”

The exceptional holdouts seem to be the Makati Business Club and the Catholic Church both of which are now divided between pro-GMA and anti-GMA forces.

This is because of two reasons: one, both the MBC and the Church are too proud to admit they made a mistake in backing GMA in January 2001 and May 2004 and two, they don’t know or rather, don’t like the president’s replacement under the constitutional succession order—the vice president, the Senate president and the House speaker. I cannot recall any vice president who has suddenly become so unpopular and suspect in so short a time as Noli de Castro.

For someone who started the 2004 vice-presidential campaign with a 30 percent vote advantage (this was at that time based on 30 million voters, equivalent to nine million votes) and winning by just 800,000 votes over Loren Legarda, VP Noli has indeed suffered a massive loss of popularity. GMA is the most unpopular President ever and Noli is the most unwanted vice president ever. Is there a connection? Does GMA’s unpopularity rub on Noli? Usually, when the president is unpopular, the vice president is not equally disliked.

Political parties that otherwise were sympathetic to if not allied with GMA are now distancing themselves from her. They include the Liberal Party and the Nacionalista Party and the group of former Defense Secretary Renato de Villa who used to be GMA’s executive secretary. The Ship of State is sinking and these groups have shown an artful way to jump.

Even Corazon Aquino was initially perceived to be against GMA by making a very neutral statement, calling for prayers, calling for finding the truth and by visiting FPJ widow Susan Roces at the height of Gloriagate.

The Great Tabako, Fidel V. Ramos is playing the usual enigmatic middle ground but two ranking men currently or formerly associated with him are active in the oust-GMA movement—retired Gen. Fortunato Abat and former finance secretary Jun Enriquez, both of whom have been accused of inciting to sedition.

To break the stalemate, the emerging consensus is for a “truth commission.” This is favored by Cory Aquino, by Fidel Ramos, by the MBC, by the Catholic Church, by the military, and by constitutional purists.

Patterned after the probe bodies that looked into the 1989 and Oakwood coups, the commission shall investigate allegations of jueteng payola to the President’s relatives and the Gloriagate tapes. Is she the voice in the tapes.

If so, was she really cheating. If she cheated, by how much. Would the cheating have changed the outcome of the May 2004 election?

In the 1986 election Marcos was accused of cheating but the electoral fraud was not enough to change the outcome. The strongman still won by a comfortable margin, by 300,000 votes instead of the official two million votes, over Cory Aquino. Just the same, Marcos was ousted by People Power. In late 2000 Joseph Estrada was accused of receiving illegal gambling payoffs, manipulating the stock market, and taking bribes that were deposited in a secret bank account. Nothing was ever proven outside of hearsay evidence. Just the same, Erap was ousted and has spent more time in isolation (4 years) than in the presidency (30 months). What undid Marcos and Estrada was popular perception and that was good enough to remove them.

E-mail tonylopez@biznewsasia.com.

The Legacy of Cardinal Sin

2005-07-13T01:56:00.000+02:00

Published in The Manila Times June 29, 2005

VIRTUAL BUSINESS
By Tony Lopez
The legacy of the house of Sin

The nation buried Cardinal Jaime Sin Tuesday (June 29, 2005), in a three-hour ceremony that was solemn, sonorous, timorous and humorless. The high and the mighty of the government, led by President Arroyo and Vice President Noli de Castro, and of the Catholic Church, led by Archbishop Cardinal Ricardo Vidal of Cebu and Archbishop Gaudencio Rosales of Manila, and leading prelates from Asia were in attendance.

Cardinal Sin leaves a legacy in three areas—in the finances of the Catholic Church, his political activism and his impact on the national economy.

Before Sin took over as prince of the Roman Catholic Church in 1976 and as president of the Catholic Bishops Conference of the Philippines in 1977, the local Catholic Church was one of the richest in the world. It had substantial investments in blue-chip companies like San Miguel, Bank of Philippine Islands, Ayala and the Cardinal Santos Medical Center. It owned Philippine Trust and Monte de Piedad, in the name of about 100 bishops. Those investments are gone. Philtrust was bought by publisher Emilio Yap. Monte de Piedad was bankrupted by graft and is now known as Keppel Bank.

The Medical Center was taken over by the Chinese and is now one of the best equipped, for the money, hospitals in Metro Manila, second perhaps in quality of equipment and medical personnel to St. Luke’s which is also Chinese-managed.

The norm now in churches in the national capital is two collections per Mass—one for the local church and another for the mother church. Sin was not as good a financial manager as the late Cardinal Rufino Santos. Santos rebuilt the Catholic Church from the ravages of war, renovated the Manila Catholic Cathedral and at the time of his death, the Church owned at least three major banks. Those banks are gone.

Cardinal Sin brought political activism to the extreme. He employed a press secretary and a full time close-in photographer and gave calibrated interviews, mostly to foreign correspondents like me.

He brought down two once hugely popular presidents, Ferdinand E. Marcos in February 1986, and Joseph “Erap” Ejercito Estrada in January 2001. Their successors are two of most controversial and unstable presidencies ever. The record of Corazon Cojuangco-Aquino and Gloria Macapagal-Arroyo as chief executives is mixed at best. In a sense, you can say Sin was the father of People Power.

However, People Power didn’t bring about good governance nor sustainable economic growth.

During 14 years of martial law, Sin was the beacon to whom Filipino Catholics looked up to for guidance and courage. He stood up to the dictatorship. With the media muzzled and the military pampered, having become Marcos’s private security agency, Sin was often the lone voice of dissent and righteousness. As early as 6 p.m. of February 22, 1986, he was on the radio summoning the throng to EDSA, lending credibility and mass power to the revolt of Defense Secretary Juan Ponce Enrile and Army Col. Gringo Honasan. The Armed Forces vice chief of staff, Fidel V. Ramos, gave support at 2 p.m. of the same day but it was very late in the day when he went to Camp Aguinaldo to join Enrile on national radio and television. As early as October 2000, Sin was asking for the resignation of Joseph Estrada following revelations by Northern Luzon warlord Chavit Singson that the president was the lord of all jueteng lords.

Despite People Power, the Philippines degenerated from being the second most robust economy in Asia into the region’s economic laggard. Per capita growth ground to 1.2 percent, from 1975 to 2002, the slowest in Asia, bar none, per statistics of the World Bank.

Poverty incidence doubled from 15 percent to more than 30 percent. The number of poor doubled to more than 30 million. This happened at a time when the Church policy was “a preferential option for the poor.” In the countryside, young priests became communist guerilla commanders and parishes their virtual headquarters. Today, the same 200 elite families that control the economy and the politics of the country remain ascendant.

During Sin’s cardinalship, population growth, at a frenetic 2.3 percent a year, or 1.9 million babies a year, became one of the fastest in the world.

Sin justified his political activism by claiming that all human activity has a moral dimension, a right and a wrong. I suspect that at one point, he entertained becoming president of the Philippines. In fact, many times, he acted like one.

Ultimately, however, the biggest immorality in this country is not jueteng, not the thieving people in the government, not the private affairs of many prominent people. It is the massive poverty of the people.

E-mail tonylopez@biznewsasia.com

President Ramos to the rescue

2005-07-13T01:54:00.000+02:00

Friday, July 08, 2005
VIRTUAL BUSINESS
By Tony Lopez
Ramos to the rescue

Former President Fidel V. Ramos gave yesterday an easy way out for embattled President Gloria Macapagal-Arroyo.

He doesn’t want Mrs. Arroyo to resign nor be toppled by People Power or a coup. He also wants Noli de Castro to stay put as Vice President. He wants her to remain in Malacañang but only for 10 more months as head of a caretaker government until a new parliamentary government headed by a Prime Minister takes over on June 1, 2006.

This is the gist of Ramos’s paper, “A Call to Duty: What the Nation Must Do” delivered before the Rotary Club of Manila yesterday and a copy of which was forwarded to President Arroyo in the morning.

Ramos said he would see President GMA either today (Friday) or Saturday about his proposal for a Constitutional Assembly and a High Commission of about seven eminent people who will examine the Philippine situation and recommend strategic solutions, what he calls policy reforms, executive actions and private endeavors.

Basically, the High Commission will recommend amendments to the Constitution for adoption by Congress, which shall constitute itself into a constituent assembly to adopt the amendments to the Charter within two months from September 1, 2005.

Among these changes are: a shift to a parliamentary form of government (Ramos says the US-style presidential system has not worked for us, looking at the past 100 years), electoral reform to prevent the kind of Comelec we have now, elimination of turncoatism and dynastism (which he defines as having a relative in government up to the fourth degree of consanguinity), judicial reforms to speed up the dispensation of justice and reinforce the sanctity of contracts (this is a dig at the Supreme Court which he says has become “intrusive” into matters purely economic or business), and socioeconomic reforms to promote human development.

Ramos recalled situation in France similar to what the Philippines is experiencing now. In 1958 the Fourth Republic, he said, reading a briefing paper, “was tainted by political instability, its failures in Indochina and its inability to resolve the Algerian question.” On May 13, 1958, French rebels had seized government buildings in Algiers. Their leader, General Raoul Salan, commander in chief of Algeria, declared “Vive de Gaulle!” De Gaulle responded he was “at the disposition of the country.”

I was in the eight-man panel assembled by the Rotary to ask questions of the former President. I asked Ramos if he was our de Gaulle. He called my question foolish. He said he was not interested to be prime minister, which he said, is a lower position than president of the Philippines (who is both the head of state and the head of government). But he added, President Arroyo could run as a member of the parliament (representing perhaps Pampanga, Pangasinan, Cebu, Iloilo or even Lanao del Sur) and get herself elected prime minister. Of course, she will have to contend with an Assemblyman Ramos from Pangasinan, Assemblyman Jose de Venecia from Pangasinan, Assemblyman Eduardo Cojuangco Jr. from Tarlac, Assemblyman Panfilo Lacson from Cavite, Assemblyman Manuel Villar from Las Piñas, Assemblyman Frank Drilon Drilon from Iloilo, Assemblyman Juan Ponce Enrile from Cagayan, Assemblyman Rodrigo Duterte from Davao, or even Assemblywoman Corazon Aquino of Tarlac or Assemblywoman Susan Roces of San Juan, to name a few.

Ramos’s proposal is interesting for two reasons. One, it goes beyond the current investigation into the jueteng payola and electoral fraud scandals, thus sparing Mrs. Arroyo the ignominy of being found guilty of the charges and being booted out of office forcibly for it. Second, it provides a strategic solution to festering problems of petty partisanship, bad governance, massive poverty and underdevelopment.

The betting in business circles, a fellow Rotarian confided to me yesterday, is that President Arroyo won’t last beyond the end of this month. Indeed, no president has ever defied the outrage of his/her own people. In 1986 Ferdinand Marcos was accused of electoral fraud. In just 18 days, he was gone. In 2000 Joseph Estrada was accused of taking jueteng bribes. In just four months, he was gone. In both instances, the guilt of Marcos and Estrada was never proven.

Now, Mrs. Arroyo has been accused of jueteng payola and electoral fraud. Surveys by SWS and Pulse Asia show she has become the most unpopular and most hated president in history. In the popular perception, she now appears to be worse than Marcos.

There is a problem though with Ramos’s proposal. To get it going, the scheme requires the cooperation of President Arroyo and of Congress. If Congress doesn’t cooperate, it could end up being abolished by a new revolutionary government that would forcibly take over the government. If Mrs. Arroyo ignores the proposal, Ramos says, “We will know what to do.”

E-mail tonylopez@biznewsasia.com

Good Manners and Right Conduct and why you should worry about the Philippines

2005-07-13T01:52:00.000+02:00

Wednesday, July 06, 2005

VIRTUAL BUSINESS
By Tony Lopez
GMRC and why worry?

La Salle and Ateneo came out with completely different stands on what to do with President Gloria Macapagal-Arroyo. La Salle is the current basketball and volleyball champion. The Christian Brothers otherwise produce very good wines when not praying, teaching and helping manage businesses. The Jesuits and La Sallians pray to the same God and as far as I could determine at press time, are both Catholic. So how could they come up with two divergent views as regards PGMA?

La Salle is asking President Arroyo “to voluntarily relinquish her post so that a constitutional process of succession may proceed.” La Salle has nine schools. The constitutional successor is Noli Boy de Castro, a banking graduate of UE. The UP Law School is also urging GMA to resign. By resigning, Mrs. Arroyo, La Salle said, will be making “a personal sacrifice for the nation’s interest.” The Ateneans, on the other hand, are telling GMA “it’s up to you Ma’am whether you want to resign or not.” Of course, she will not resign.

Do right and wrong have shades of grey? Wrong or evil by any other name or religion is wrong or evil. I remember a classmate of mine in senior high school. He was accused of cheating. He was not. Just the same, the teacher gave him a failing grade. As a result, he was disqualified for graduation honors.

There is a moral crisis sweeping the country. And I blame a major failure in the school. Schools no longer teach good manners and right conduct (GMRC).

When I was in elementary and high school, this was major subject. You couldn’t graduate with honors if you get low grades in this subject. GMRC was one-third of the weighted general average. The subject was supplanted by “Makabayan”—a hodgepodge of subjects covering social studies, community life and the study of Filipino.

The three major values taught under GMRC are honesty, cleanliness and diligence. Honesty means you don’t lie, you don’t cheat, you don’t rob and not tolerate those who do. A liar is a sibling of a thief. Cleanliness means personal hygiene and keeping your surroundings clean. You may be poor but still be neat. And cleanliness is next to godliness. Diligence means you study hard. PGMA has instructed schools to give emphasis to the teaching of English, science and math. If you are diligent, you don’t need to be told to study English, science and math. Diligence makes it a habit for one to study English, science and math.

Is it a coincidence that during the times when GMRC was being taught in public and private schools the Philippines had one of the most robust economies in Asia and we had a succession of decent presidents?

Similarly, Harvard and the other Ivy League business schools in America stopped the teaching of Ethics. Decades later, there was an epidemic of corporate abuse and accounting scandals on the scale of Enron and Worldcom.

Look at the record of presidents from Ferdinand Marcos to the present. Marcos, a brilliant lawyer, ended his 20 years as President with zero economic growth. Corazon Cojuangco Aquino, a plain housewife, ended her six years and four months with zero economic growth. Fidel V. Ramos, a bright West Pointer, ended his six years with zero economic growth. Joseph Estrada, an actor and third year engineering dropout, had declining economic growth by the time he was ousted in January 2001 after 30 months in office. Now, we have an economist, GMA. The economy posted its best economic growth in 15 years in 2004. But for the first quarter, the economy has started to slow down, at 4.6-percent GDP growth, compared with 6.4 percent in the first quarter last year. At the rate things are going, the economy will show a slower growth this year of five percent or less.

Our presidents start well and end up badly. We have tried nearly all kinds—a brilliant lawyer, a plain housewife who is a mathematician, a West Point soldier with engineering and MBA degrees, a college dropout with best acting awards, and now a PhD. economist.

During their presidencies, per capita income remained the same, at $1,000.

Actually, even if the president were a dog, the economy will keep moving forward and creating one million jobs a year. That’s how strong the economy is. Its output is worth $85 billion, making it as big if not bigger than the economies of Singapore, Pakistan, or Egypt. In purchasing power parity, the Philippine economy is worth $409 billion, the 25th largest in the world, bigger than 130 other countries.

So why worry if our president is an Arroyo, Estrada, Noli de Castro or—a dog?

E-mail tonylopez@biznewsasia.com

The coming deluge in the Philippines

2005-07-13T01:50:00.000+02:00

Published in The Manila Times Virtual Business July 4, 2005

By Tony Lopez
The coming deluge

THE Supreme Court giving due course to the petition of opposition legislators and NGOs to declare the expanded value-added tax law unconstitutional opens a Pandora’s Box of problems which could give rise to a number of things all of which bad for the people.

If the Supreme Court declares the law unconstitutional, it will force Congress to review the law, amend it, and cure its defects, or not enact a new tax law all, which means no higher VAT.

Without the new VAT law, government won’t be able to collect additionally, between P48 billion and P80 billion annually. That will alarm the international community that will then downgrade our credit rating, which in turn, will turn off investors and creditors.

The Arroyo administration won’t have the money to deliver basic services and the President has been under immense pressure to deliver if only to make good her promise to, well, be a good President if only to validate her claim she didn’t cheat.

The E-VAT law has two major defects.

It authorizes the President to increase the VAT from 10 percent to 12 percent. This is undue delegation of Congress’s exclusive power of taxation. The Senate originated the idea that corporations must pay higher corporate income tax of 35 percent instead of 32 percent. All tax laws must originate from the House, not from the Senate.

Considering the current political climate, the Supreme Court may not be inclined to declare constitutional what seems patently unconstitutional. Besides, the tribunal has had a huge credibility problem lately.

It is the one court that installed Gloria Arroyo as president and will now reap the consequences of her unpopularity.

So declaring the E-VAT law unconstitutional opens a way for the high court to gain pogi points with the public. Ours is a very political Supreme Court, and a very partisan one. When it comes to its own survival, it attends to its own interest. SWS acceptance ratings have not been very kind to the high court of late, and the justices are painfully aware of that fact. Besides, if there is a revolution, the justices will find themselves jobless.

Even the US Supreme Court, the grand daddy of all high courts, is not immune from political pressure. That is why there is so much tension and speculation with the retirement of Sandra Day O’Connor and the expected early retirement of the ailing 80-year-old Chief Justice William Rehnquist. Such vacancies are rare and President Bush sees an opportunist to tilt the Supreme Court’s ideological bent to his frame of mind.

Many of the Court’s decisions have been decided in close five votes to four, like on the separation of church and state, affirmative action and gay rights, and abortion (remember Roe vs. Wade?). I was surprised the US justices even debated on such minor things as to whether The Ten Commandments should be displayed on government property. Allowing so (it was allowed last week) implied endorsement of Christianity. If the US is not Christian, so be it. At least their presidents know when to resign (for a crime like attempting to bug an opponent’s convention center) and know when to pay atonement for their sins of the past (for a crime like misplacing one’s cigar in the wrong hole). So the addition of one or two conservative justices (meaning pro-Bush) will tilt the balance of power at the bench.

Chances are the E-VAT law will be sent back to Congress. That is when the problem begins. A new tax measure may not have the same sympathy as did the E-VAT Law because it becomes a new battlefront between the administration congressmen and the opposition, on top of the on-going jueteng and wiretapping investigations. My bet is that Congress will give priority to its wiretapping probe if only to calm the crescendo of protests in the streets, inside churches, and in increasing number of corporate board rooms.

The nation is afire with the issue.

Not surprisingly thus, industrialist Raul Concepcion urged Congress yesterday to immediately repeal the expanded value-added tax law when it convenes this July to eliminate its objectionable provisions which the Supreme Court may find unconstitutional.

At the same time, Concepcion is urging every taxpayer—businessmen, politicians or ordinary citizens—to immediately correct their 2004 income-tax return to avail themselves of a virtual tax amnesty whereby anyone who pays tax at least 20 percent higher than what he paid in 2003 as income tax is excused from tax investigation.

He appealed to Congress to exercise the highest degree of statesmanship, set aside partisanship and correct deficiencies in the E-VAT law.

Concepcion warns of dire consequences: a rapid peso deterioration, a credit downgrade and loss of investor confidence.

E-mail tonylopez@biznewsasia.com

President Arroyo's amazing cabinet members

2005-07-13T01:47:00.000+02:00

VIRTUAL BUSINESS Manila Times July 1, 2005
By Tony Lopez

President Arroyo's amazing cabinet members

One of the most remarkable things about this administration is the quality and dedication of President Arroyo’s economic team. I hope she keeps its members despite the impending Cabinet revamp or rigodon.

I am speaking in particular of Finance Secretary Cesar Purisima, Trade and Industry Secretary Juan Santos and the incoming Bangko Sentral Governor Amando Tetangco, who is scheduled to be sworn in, barring a last-minute revolution, this Monday.

Purisima is running after tax evaders, smugglers and people who refuse to pay the new expanded value-added tax. He has even included Mrs. Arroyo’s brother-in-law, Congressman Iggy Arroyo, as among the subject of his tax investigation though he has not included the President’s son, Mikey Arroyo, who has declared a P73-million networth despite being a neophyte congressman and not having completed schooling. Mikey perhaps can give his barkada tips on how to build a nest egg while you are young—and powerful.

Cesar thinks there could be a budget surplus as early as 2009 with the revenue from e-VAT, the campaign against tax evaders and smugglers, debt management, stricter discipline imposed on government-owned and -controlled corporations and privatization of government assets. Twenty-three cases have been filed against suspected tax evaders, which include a number of high-profile individuals like actresses and Agriculture Secretary Arthur Yap, a lawyer and an economist, who resigned yesterday effective upon the naming of his replacement. Art must have been very frustrated. He meant well but was unfairly targeted in the name of tokenism.

Once a case is filed in court, Purisima warns, “there is no more room for compromise.” The accused, of course, can win in the courts, as what taipan Lucio Tan has done. As for smuggling, well, the biggest suspect is about to leave the country for an extended vacation.

For his part, DTI Chief Johnny Santos projects a 10-percent growth in investments this year over 2004 during which investments increased 271.3 percent, and a 10-percent growth in exports to $43.6 billion. The Philippines, he says, is moving from being a hub for call centers to one more strategic—for software design and engineering for which the country has the people.

The economy is exceptionally resilient, assures Santos. Indeed, it is, considering our troubled past and our troubled politics. The reason for the resiliency is the $8 billion to $9 billion remitted annually by OCWs. My contention is that the economy is so big and so strong that even if the President were a dog—sometimes I think, considering the kind of presidents we have had in the past quarter century, it is better than this country had no president at all—the economy would continue generating one million jobs a year.

Economic growth has kept pace with most of our East Asian neighbors, says Johnny. Profits of publicly listed companies have increased 51 percent. Investment approvals (by Board of Investments and Philippine Economic Zone Authority) increased 153 percent in January to May, and by 115 percent in manufacturing.

The problem is addressing the main factors in the cost of doing business. One is fuel. Oil has reached more than $61 a barrel. Oil is a major cost component. George Drysdale of the agriculture group bearing their name says you use oil for fuel and for plastic packaging and their costs have gone up.

Another cost is energy. Power will go up this July because of VAT. Because of higher fuel cost and VAT, airlines are charging at least 10 percent more for domestic fares. Tollways too are raising rates.

Also a major cost factor is infrastructure, which is grossly inadequate.

Finally, the imponderable—corruption. An American Chamber survey says 88 percent of its respondents cited corruption as “a source of high dissatisfaction,” along with poor infrastructure.

This is why the current political turmoil is so unsettling for investors. They don’t know whether to deal with the present administration or wait-and-see until the next administration comes in. That way, they pay bribe only once.

Remember the Piatco? Its troubles began when a new administration came in. Now, Purisima says the government will expropriate Terminal 3. Cheng Yong of Piatco wants payment of at least $500 million, including “miscellaneous” expenses. Government wants to pay only $350 million, without the “miscellaneous” expenses. Guess where the difference went.

Item: Panfilo O. Domingo has taken over as president of the University of the East, in addition to his post as chair. With the takeover, the purge of ranking “gay” academic executives from UE is now completed.

Note: After the above column appeared in The Manila Times july 1, 2005, Cesar Purisima resigned as finance secretary and Juan Santos resigned as secretary of trade and industry (July 13, 2005)

For comments e-mail tonylopez@biznewsasia.com

Slow motion coup in the Philippines a gainst President Arroyo

2005-07-13T01:42:00.000+02:00

July 12, 2005

Slow motion coup

Something new has been added to the Philippine political lexicon – the slow motion removal of a sitting president. The coup is purely civilian – so far.

In just a week, from July 4 to July 8, President Gloria Macapagal Arroyo lost her major support groups. The academe. The civil society. The Protestant Church. Big Business. The bulk of the Catholic Church. Corazon Aquino. Fidel V. Ramos seems supportive but he wants Arroyo to be in office until June 2006 only. The unkindest cut came from the nine cabinet members who resigned last July 8, capping five days of hectic maneuverings designed to force a slow-mo ouster of Arroyo and the installation of Vice President Noli de Castro.

The coup de grace could be delivered with two developments – the further rise in crude price, possibly to $70 per barrel and Catholic bishops coming out in full force against Arroyo, with priests denouncing her every week in their homilies. In his time, not even the strongman Ferdinand Marcos could stand that kind of pummeling. Marcos had strong support bases, unlike Arroyo now.

Mrs. Arroyo has been dealt a serious if not mortal blow by the resignation of the Purisima Nine – Cesar of Finance, Juan Santos of Trade and Industry, Florencio Abad of Education, Corazon “Dinky” Soliman of Social Welfare, Emilia Boncodin of Budget and Management, Rene Villa of Agrarian Reform, Raphael Lotilla of Energy, Imelda Nicolas of the National Anti-Poverty Commission, Teresita Quintos-Deles, the presidential adviser on the peace process. They handled the anchor programs for the Arroyo administration to succeed – fiscal reform, investments, education for competitiveness, power reform, agrarian reform, poverty alleviation, and the peace process. You cannot have an effective government without these programs. The resignation of Guillermo Parayno of BIR and Alberto Lina of Customs derails Arroyo’s revenue enhancement program.

Taxpayers can now say they did not pay the right amount of taxes because of “lapse in judgement”. If Mrs. Arroyo can insist she should be forgiven for attempting to cheat in the elections, more so should taxpayers for attempting to cheat in their taxes. A vote has a higher premium than a tax payment.

The masses never liked nor accepted Mrs. Arroyo as president. More so now that she has been exposed by wiretaps recently made public to have called a senior official of the Commission on Elections urging him to ensure a one-million-vote margin over her opponent, the late actor Fernando Poe Jr.

In addition, witnesses before a Senate committee investigation claimed her husband, First Gentleman Jose Miguel Arroyo, their son, Congressman Juan Miguel “Mikey” Arroyo, and her brother-in-law, Congressman Ignacio “Iggy” Arroyo, received monthly bribes from jueteng gambling lords. This was on top of persistent rumors the father and son tandem, Mike and Mikey, were into all kinds of rackets and deals, a clear abuse of power and influence.

Even before the illegal numbers game jueteng bribery and electoral fraud wiretapping scandals broke out, 55 percent of the people, according to a Social Weather Stations poll last year believed she cheated to win the May 10, 2004 election. As separate survey by Pulse Asia said 59 percent didn’t believe she was their legitimate president. Survey after survey showed people don’t feel Mrs. Arroyo has done as much for them as did her predecessor, the ousted President Joseph Estrada.

So why has Arroyo not been booted out of Malacañang, the riverside presidential palace? Two reasons. One is that people have not turned out in massive numbers on the scale of People Power I and II that ousted two sitting and otherwise popular presidents, Marcos in February 1986 and Estrada in January 2001.

The other reason is that the military is playing it neutral this time, unlike in 1986 and 2001. Again, for two reasons: one, the military does not see the numbers in the protesters for it to take the side of the people, and two, it doesn’t have the credibility to mount a coup against what is perceived as a corrupt and hated administration. The military itself is tainted by massive corruption. It has neither bark nor bullet, literally.

People seem to have grown weary of People Power. People Power I and II did not bring about their much ballyhooed benefits which are good governance, alleviation from poverty, and sustainable prosperity.

Between 1986 and 2001, poverty incidence remained 34% and the number of poor people more than doubled, from 12 million to 28 million.

A Pulse Asia survey last June said 71 percent of the people consider themselves poor. SWS said 15 percent of the people (or at least 12 million) suffer from hunger – the first level of extreme poverty.

Email tonylopez@biznewsasia.com

endit

GMA fights on two fronts

2005-07-13T01:40:00.000+02:00

July 13, 2005

Fighting on two fronts

With the slow motion coup in full, well, motion, Gloria Macapagal Arroyo now has to fight on two fronts – political and economic. The economic crisis has exacerbated the political crisis, and the political crisis in turn has given rise to the economic crisis.

One solution to the political crisis is impeachment. This is very obvious from the statement of the 100-strong Catholic Bishops Conference of the Philippines (CBCP).

The bishops didn’t ask Arroyo to resign. Neither did they discourage those who want her to resign to stop, nor Arroyo herself from entertaining resignation thoughts.

The prelates of the Catholic Church are telling the congressmen to get on with the impeachment. Impeachment will be bad for the President. The trial will be like the Truth Commission itself. Charges against the President will be bribery (for jueteng) and betrayal for the public trust (for electoral fraud). Witnesses will claim relatives of the President, namely, First Gentleman Mike Arroyo, First son Mikey Arroyo and brother-in-law Ignacio “Iggy” Arroyo, received bribes from illegal gambling syndicates. Sandra Cam has already claimed it was retired police general Restituto Mosqueda who trained Iggy Arroyo to sign as Jose Pidal, the fictitious owner of a secret bank account where excess campaign contributions were parked. The resigned economic managers will probably be summoned to testify on corrupt deals and projects. Senate President Frank Drilon has already complained of what he calls “colossal corruption at customs” that has bothered him for months now and of the overpriced 32-km NorthRail project. It costs $503 million or $15.72 million (P880 million) per kilometer with the locomotives provided by a Chinese company with no experience in railways. Resigned DSWD Secretary Dinky Soliman has hinted of testifying on something fishy, under oath “when the proper time comes”. I am sure resigned Customs Commissioner Bert Lina and BIR Commissioner Guillermo Parayno know of other corrupt deals. The idea is to portray Arroyo and her relatives, in fact, the entire administration, as corrupt.

As for electoral fraud, there will be a parade of witnesses detailing how the military tapped calls to Comelec Commissioner Virgilio Garcillano, how payments were offered and received, and how the electoral returns were manipulated. The idea is to portray Arroyo as a cheater, a fraud, a bogus president. The hearings will be blockbuster daily events, beating the ratings of telenovelas “Kampanerang Kuba”, “Enkantadia” and “Darna”. They will be held while protests and outrage spill into the streets because of high prices of nearly everything – galunggong, pork, chicken, gasoline, LPG, electricity, EVAT or no EVAT.

The Purisima Nine – Cesar, Juan Santos formerly of Trade and Industry, Florencio Abad of Education, Corazon “Dinky” Soliman of Social Welfare, Emilia Boncodin of Budget and Management, Rene Villa of Agrarian Reform, Raphael Lotilla of Energy, Imelda Nicolas of the National Anti-Poverty Commission, and Teresita Quintos-Deles, of the presidential adviser on the peace process, can do a lot of damage to the President, if they opt to be naughty. Precisely because of the high credibility of these economic managers, the two major credit rating agencies, Fitch and S&P, have downgraded the Philippines’ credit outlook, from stable to negative. In effect, the country’s creditors – and investors-- are being told: “Watch out, run at the first sign of trouble.”

This week, two big rallies are scheduled on Ayala Avenue, in Makati, the business district. The images of angry protesters massing weekly in the heart of the country’s financial district will be carried around the world by cable television. The effect is to portray a country in turmoil because of a corrupt and an unpopular president.

In the meantime, President Arroyo herself won’t be able to undertake reform initiatives, for a number of reasons, making her a lame duck.

One, she doesn’t have the economic managers to implement them. Two, since the bishops have not asked her to resign, she will now feel obligated to enforce the Church’s economically crippling population policy. The Church is one reason why the Philippines’ per capita growth is the slowest in Asia in the last 28 years. There are just too many mouths sharing a rapidly shrinking economic pie and I am not referring to the grafters in government. Three, since the military played it neutral in Friday’s (July 8) coup, it will now have the power to ask for additional budget for pay increases, benefits, and purchases of military hardware, making them compete for scarce funds that otherwise should go to social services. Fourth, the congressmen will have to be pampered (with say prompt releases of their pork barrel money and “loyalty” bonuses) so they don’t sign the impeachment sheet. Finally, the poor have to be placated, with expensive subsidies on rice (state-owned NFA incurred a P27-billion deficit last year), electricity and fuel (our power and diesel pricing has shades of Robinhood).

Email tonylopez@biznewsasia.com

GMA's concrete legacy

2005-06-15T14:59:00.000+02:00

June 13, 2005

Overpasses

Allegations of illegal gambling payoffs to her relatives and cheating to win in the May presidential election have seriously damaged President Arroyo’s credibility, made her the most unpopular president ever, and triggered calls for her resignation or face ouster, by one of three means, a snap election, a military coup or a people’s revolt. The worst political crisis since January 2001 has battered the stock market, the peso and the people’s faith in their government.

What this means for business is that the President no longer has the political capital to push thru much needed fiscal and economic reforms.

It is doubtful whether GMA can jack up the value added tax to 12 percent by January next year to raise additional tax revenue to plug the budget deficit. A 12 percent VAT would hike the prices and rates of nearly everything – electricity, water, telecommunications, transportation, basic goods, raw materials, finished goods, and services. Don’t believe that BS that since unprocessed fruits, vegetables, seafood and other agricultural products are not subject to VAT, they won’t increase in prices. Price increases, in turn, will trigger an inflation spiral which will fuel more outrage from an already angry people.

Can President Arroyo afford such a scenario? She is a practical politician. And given the present situation, the name of the game is survival. Why use up the little political capital you have if by so doing, you undo your own presidency?

Thus, for the next two years at least, we will have a muddling through effect. The President will live day by day, hoping for the best and preparing for the worst.

This is the same situation that Corazon Aquino was into shortly after the bloody December 1989 coup. Every night, she prayed that there would not be a coup when she woke up the following morning. And every morning, she thanked God that nothing untoward took place the night before.

The result was paralysis, until the last six months of Cory’s term when she remembered she would leave nothing concrete as a legacy. So she summoned Ping de Jesus to build half a dozen overpasses in Metro Manila in record time. Ping delivered and for that, he was decorated with the highest award given a Filipino citizen.

So perhaps this early, GMA’s planners should prepare blueprints for overpasses. They are very good projects. They have short gestation, are easy to execute and create a lot of impact. In the case of the Ortigas-EDSA overpass, it is very useful giving photographers and rallysts a balcony view during People Power ceremonies. By the way, who is GMA’s Ping de Jesus?

We need overpasses in the South Expressway up to Alabang, from Balintawak going straight to San Jose del Monte Bulacan, another to Antipolo from Cubao or Ortigas, from C-5 to Fort Bonifacio, from Roxas Boulevard to Juan Luna, from Roxas Boulevard straight to the NAIA terminal, and in a few other places. These are just off-the-cuff-ideas. Maybe, GMA’s handlers can think of better places.

The Social Weather Stations survey from May 14 to 23 found that 59 percent of Filipinos were dissatisfied with Ms Arroyo's performance while only 26 percent were satisfied, for a negative 33 percent net satisfaction rating. In the SWS survey of Feb. 25 to March 10, this year, Mrs. Arroyo had a performance rating of -12, 48 percent dissatisfied and 36 percent satisfied.

In the May 10 presidential election, Gloria Macapagal Arroyo won by a margin of 1.12 million votes over Fernando Poe Jr. She got 12.9 million or 40 percent of the vote, while Poe 11.78 million votes or 36.5 percent. The 3.5 percent is the smallest margin ever scored by a presidential winner.

On the other hand, broadcaster Noli de Castro garnered 15.1 million votes while opposition vice presidential bet Loren Legarda received 14.2 million votes, a difference of just 882,000 votes. Legarda is contesting the results before the Presidential Electoral Tribunal (PET) which has given due course to her protest. Poe also filed a protest but the Supreme Court, acting as the PET, dismissed it soon after the actor’s death last December.

A post-election SWS survey showed 55 percent of the people believed Mrs. Arroyo cheated to win. A separate survey, by Pulse Asia, another respected pollster, said 59 percent of the people do not believe Mrs. Arroyo is a legitimate presidency.

According to retired army chief and Defense secretary Fortunato Abad, President Arroyo is not like Ferdinand Marcos or Joseph Estrada who peacefully relinquished power to avoid bloodshed. “GMA will not give up without putting up a fight,” predicts Abad.

A bloody revolution? We never had one before. We had picnics. But there is always a first time.

Email tonylopez@biznewsasia.com

endit

Visiting the United States

2005-06-15T14:58:00.000+02:00

June 8, 2005

Random travel notes

It is not difficult to visit the United States. Visitors do not undergo the kind of nightmare they
imagine beforehand when entering the most security paranoid nation on earth.

On the day we landed in Las Vegas, May 26, the immigration officer was polite. He asked my daughter
Ciara how long she was going to stay in the US. Two weeks, she replied. Then he noticed from her
passport that she gave up her green card and promptly gave her six-month stay. The only requirement was the fingerprinting of her two index fingers. If your finger is dry, the computer takes time to record your fingerprint and you have to apply a glue-like gel to wet your finger for the computer to work properly. I underwent the same procedure. It was no big deal.

The US Customs whisked us thru without any questions asked. There was no tedious unbundling of our
luggage, item by item.

Las Vegas doesn’t seem to have heard of terrorism. Visitors in hotels are not searched personally by
surly and burly security guards nor are they made to pass thru metal detectors. Las Vegas is America at
its liveliest and freest before Sept. 11. This city of chance and glance doesn’t seem to have changed at
all. There is after all, no business like show business and Las Vegas is one big show business.

On the flight to Tampa, Florida from Las Vegas, we had to remove our shoes, put them on plastic bins,
together with everything with metal on it, coins, keys, watches, cell phones, belts, and wallets, as
well as our coat or blazer. Removing your coat or blazer can be a problem for some women, especially if they are scantily dressed. In our case, there was no rigorous checking of our luggage to search for guns, drugs or any illegal material. Our pieces of luggage were simply x-rayed and that was it.

A US company has gotten the exclusive right to manufacture locks that can be decoded or opened by TSA airport security, no matter what kind of combination you apply to your locks. Without these locks, TSA simply destroys the locks on your luggage to inspect it. The monopoly locks sell for $8 apiece at Wilson’s Leather, $9 at Samsonite outlets, and $14 at airports. The numbers on the locks are not luminous nor large enough for anyone with an eye problem to see in the dim light. As far as I know, these locks are not yet available in Manila.
***
The chairman of the US Securities and Exchange Commission, William Donaldson, is stepping down this June, becoming in the past 28 years, the SEC chief with the second shortest stint. The one with the
briefest was his predecessor, the other George Bush appointee, Harvey Pitt, who served for 18 months, from Aug. 3, 2001 to Feb. 17, 2003 and who was generally acknowledged as one of the most ineffective (and I say one of the most useless) SEC chairmen.

Donaldson, (BA from Yale, MBA from Harvard) who became SEC chief on Feb. 18, 2003, leaves a good legacy. Though a Republican, he allied himself with the two Democratic SEC commissioners to push for reforms. According to USA Today, Donaldson required hedge funds to register with the SEC and allow SEC inspectors to audit books, stripped away some of CEOs’ power to control how board members are nominated, made mutual funds’ boards more independent and cracked down on
payments to brokers who promote funds, and required brokers to fill buy and sell orders at best possible
price available on all stock exchanges.

Under Donaldson, the SEC forced Richard Grasso, the imperial president of the New York Stock Exchange to disclose in 2004 his lump sum accrued payment of $187 million. The disclosure of the huge payment, which was tantamount to abuse, led to Grasso’s resignation.

I wish that kind of arms-length attitude could be said of our own SEC. Did you know that the disclosure web site of the SEC for public companies is run by the Philippine Stock Exchange? You inquire for materials disclosed by listed companies to the SEC and you are directed to the PSE web site. How can the PSE, which is regulated by the SEC, run the disclosure web site of the SEC, which is the regulator? Only in the Philippines.

You need a password to access what is disclosed by listed companies at the PSE web site? Unless PSE
gives you the password, you cannot save nor print the information. Why does one need a password to access what should be public information disclosed by listed companies? It defeats the whole idea of disclosure.

For comments or reaction, email tonylopez@biznewsasia.com

Things are looking up in the Philippines

2005-06-15T14:57:00.000+02:00

Things are looking up

By Tony Lopez
tonylopez@biznewsasia.com

Were it not for the clouded political climate, things are looking up, economically and demographically.

So say Albay Congressman Joey Salceda and Ayala Group CEO Jaime Augusto Zobel de Ayala. Salceda is one of the president’s economic advisers. JAZA heads the Philippines’ oldest conglomerate, Ayala Corp. which is 170 years old.

The government has money. Or expects a lot of money in the pipeline from four major sources: privatization, P300 billion, increase in the value added tax, P125 billion; savings in lower interest rates, P40 billion, and administrative reforms, P20 billion. That’s a total of P485 billion – “the biggest mobilization of resources for the government since Ferdinand Marcos tapped petrodollar loans in 1974-1979,” quips Salceda.

This is why in the remote possibility that Gloria Macapagal Arroyo is removed from power, her successor will be very lucky. He or she has P485 billion to look forward to. The amount is half the national government budget for 2005.

Among companies or businesses being privatized by the government are: the electricity transmission pipeline of the National Transmission Corp. which on a good day could be sold for P250 billion, reckons Salceda, double the $2 billion initial estimate of TransCo President Alan Ortiz; the 37 percent Coco Industry Investment Fund/SSS/GSIS ownership of San Miguel Corp. valued at P70 billion; and the 40 percent share of Masinloc valued at $562 million. From these three alone, Salceda says, P66 billion is doable. Indeed, the government’s equity in San Miguel can be sold to Kirin Brewery of Japan which has been aggressively buying shares in the past few months.

***

In a recent presentation before a select group of investors and executives in Singapore, JAZA explained why investors should pay attention to the Philippines.

Manila’s consumer market is vibrant, he asserts, because of OFW remittances. Filipinos are creative. “”Our innate creativity is unparalleled in Southeast Asia,” JAZA contends. But adds, “we haven’t done enough to build that up and turn it into a competitive advantage.” He relates: “In my conversations with people around the region, I always have very positive feedback about the quality of our fashion design, software, animation, music, many fronts. I don’t think it’s been developed enough.”

And there’s what JAZA calls the demographic dividend which is exemplified by the huge number of Filipinos being deployed for overseas jobs.

“We should not be embarrassed over the exodus of our workers. They have a great role to play in the demographic revolution that's happening right now,” says the headman of one of the Philippines’ oldest conglomerates. “You've got aging populations in the developed countries; world population growth is heading for an absolute decline. This will greatly affect the global distribution of labor, which will increasingly favor countries with younger populations like the Philippines…In 2005, the number of people of working age (in the Philippines) is projected to constitute 61.8 per cent of the population. This is projected to rise to close to 70 per cent by 2025. The implications of this very unique demographic structure have not been grasped by Filipino policymakers.”

Harvard-trained JAZA laments: “We have under-appreciated the strengths that we have as a people and as a country.” After China and India, the next boom, he predicts, will be in the Philippines – in the next ten to 15 years.

It is in the area of demographics that the Philippines can enjoy a competitive advantage. A young population means a high ratio of working population and reduced government social spending for those of poor health and the aged. It means the country can take care not only of its own aging population but the aging populations of many developed countries. Millions of Filipino caregivers can bring in billions of caring money into the Philippines. Combined with effective government policies, a young population can stimulate economic growth.

The government and indeed, the world, have not fully grasped the implications of the Philippines having a young, vibrant population.

Winces JAZA: “Our share and influence in global trade has become minuscule. And in the various world fora, we are, at best, just a part of the chorus,” In one recent World Economic Forum, there were only two Filipinos –JAZA and his younger brother, Fernando, the CEO of Ayala Land.

“The problem, really, is parochialism,' JAZA says. “One can point a finger at the way we conduct our politics in the Philippines, but basically, it is parochialism at all levels that is the problem. Bottom line is, in economic terms, we still have the tendency to wall ourselves off from the rest of the world and believe that we can survive.”

That in sum is our problem – politics and parochialiasm. And the best way to approach them is ignore them.

Email tonylopez@biznewsasia.com

endit

The beginning of the end

2005-06-15T14:54:00.000+02:00

June 15, 2005

Gloria-gate: When does the end begin?

By Tony Lopez
BizNewsAsia at biznewsasia.com
Allegations of illegal gambling payoffs to her relatives and tapes indicating she cheated to win in the May presidential election have seriously damaged President Arroyo’s credibility, made her the most unpopular president ever, and triggered calls for her resignation or face ouster, either by military coup or a people’s revolt. The worst political crisis since January 2001 has battered the stock market, the peso and the people’s faith in their government.

Miguel Arroyo, the husband, Pampanga Congressman Mikey Arroyo, their son, and Negros Congressman Ignacio “Iggy” Arroyo, the brother-in-law, of President Gloria Macapagal Arroyo receive monthly payoffs from jueteng or illegal lottery operators. She herself masterminded the massive cheating in the May 10, 2004 presidential elections to ensure that she gets at least a one-million-vote margin over her rival actor Fernando Poe Jr. This fraud was conducted mostly in Mindanao and done in connivance with ranking officials of the Commission on Elections. It makes Mrs. Arroyo a bogus president and being one, must resign.

This is the ineluctable conclusion one makes if one were to make sense out of recent revelations scandals involving the Macapagal Arroyo administration.

The scandals were triggered by disclosures of a jueteng bag woman from the Bicol region, Sandra Cam, by others involved in the illegal numbers game, and by Lingayen Archbishop Oscar Cruz. Cam said she delivered P500,000 to Mikey and P400,000 disguised in gift boxes to Iggy Arroyo last December at the Congress session hall. Explaining the discrepancy of P100,000 in the amount given to Iggy, Cam said there was a typhoon (“bagyo”) and jueteng had stopped in Camarines. To which the Negros retorted, “walang bagyo, bagyo. Ang pinagusapan ay pinagusapan. (“What storm? A deal is a deal!”).

Not surprisingly, the uncle-and-nephew Arroyo tandem denied ever receiving money from Cam. They threatened to file libel charges against Cam. But the witness declared, “ I’m ready to face them in court. Even if I am slapped 1,000 cases, I won’t recant.”

Even more damaging, Cam said it was former Bicol Philippine National Police regional police chief Restituto Mosqueda who trained Iggy Arroyo “for weeks” to sign as “Jose Pidal”. Iggy had owned up to the Jose Pidal account secret bank account to which about P270 million of excess campaign fund contributions were allegedly deposited. Sen. Panfilo Lacson had claimed the account belonged to First Gentleman Miguel Arroyo. He asked the Senate to revive the Jose Pidal investigation. Mosqueda was the chief of the PNB crime lab who certified that the Jose Pidal signature was indeed Iggy’s.

On the other hand, the allegations of electoral cheating were documented in a mysterious tape recording the bugged conversations of President Arroyo during a one week-period from late May 2004 to June 6, 2004, with Comelec Commissioner Virgilio Garcillano and her former presidential aide, Edgar Ruado, who is now chief of staff to Congressman Iggy Arroyo. The original of the tape was supposed to have run for three hours but excerpts from the incriminating conversations were put on another tape and circulated, amazingly by Presidential Spokesman and Press Secretary Ignacio Bunye who denounced the tapes as part of a destabilization plot to unseat President Arroyo. He bandied before the Malacañang Press Corps two tapes, one the original and the other, the edited, condensed version. He confirmed that it was indeed the president talking in the tapes.

Instead of discrediting the tapes, their release by Malacañang added a patina of virisimilitude. Having become a public record, the tapes were gingerly played and replayed over nationwide radio and television broadcast. A survey by the highly rated “Debate” show on Channel 7 Thursday, June 9, said 77% of listeners believed the tape and only 23% didn’t.

Belatedly, the palace disowned Bunye. The press secretary’s disclosure, said Executive Secretary Eduardo Ermita, was a knee-jerk reaction that was not cleared with either the President or the cabinet. Bunye disappeared for two days and surfaced Thursday afternoon. He said he was not now sure whether the female voice in the tapes were Mrs. Arroyo’s.

Amid what is now known as the Gloria-gate, the opposition launched a major political offensive. “She (Mrs. Arroyo) has lost the mandate of heaven,” sneered former President Joseph Estrada, “she should resign as she has clearly lost the trust and confidence of the Filipino people.” “It would be extremely difficult for her to govern,” he pointed out, noting that surveys have shown 59% of the people are dissatisfied with her and only 26% are satisfied.

That is the lowest ever satisfaction rating scored by a sitting president, making Arroyo the most unpopular president in history.

The private polling firm Social Weather Stations said its survey from May 14 to 23 found that 59% of Filipinos were dissatisfied with Ms Arroyo's performance while only 26% were satisfied.

In the SWS survey of Feb. 25 to March 10, this year, Mrs. Arroyo had a performance rating of -12, 48% dissatisfied and 36% satisfied.

Not even President Joseph Estrada, who was ousted amid charges of widespread corruption in his administration, experienced such a low performance rating during his three-year stay in office, said the Philippine Daily Inquirer.

Senate Minority Leader Aquilino Pimentel said it was time for Mrs. Arroyo to resign. He explained: “With a credibility rating several notches below zero, with corruption snapping at her heels, and with a clearly questionable electoral mandate, she no longer has the integrity or the moral ascendancy to continue sitting as president.”

Vice President Noli de Castro should also resign, Nene Pimentel said, “to clear the way for the holding of a new presidential election.”

Resigning, Pimentel pointed out, is better that a coup or impeaching the president. A coup could result in a military junta while impeachment is a tedious process where a technicality could let Mrs. Arroyo scot free.

“A new election for the presidency and vice presidency is the most feasible thing to do under the circumstances. The country cannot go leaderless for a week, much less for the next five years,” Senator Pimentel stressed.

In the May 10 presidential election, Mrs. Arroyo won by a margin of 1.12 million votes over FPJ. She got 12.9 million or 40% of the vote, while Poe 11.78 million votes or 36.5%. The 3.5% margin is the smallest ever scored by a presidential winner.

On the other hand, de Castro garnered 15.1 million votes while opposition vice presidential bet Loren Legarda received 14.2 million votes, a difference of just 882,000 votes. Legarda is contesting the results before the Presidential Electoral Tribunal (PET) which has given due course to her protest. Poe also filed a protest but the Supreme Court, acting as the PET, dismissed it soon after the actor’s death last December. His widow, Susan Roces, said she would bring the issue instead before the people.

A post-election SWS survey showed 55% of the people believed Mrs. Arroyo cheated to win. A separate survey, by Pulse Asia, another respected pollster, said 59% of the people do not believe Mrs. Arroyo is a legitimate presidency.

Amid the mounting calls for her to quit, Mrs. Arroyo stood her ground. Appearing at the popular DZRH radio station morning of June 9 she asserted: “I will not allow myself to be brought down by those people seeking my downfall. Nor will I allow myself to be weakened by those who seek to weaken my government.”

As to the allegations of graft involving her family, Mrs. Arroyo reiterated, “No member of my family is above the law.”

In the national capital, the Armed Forces of the Philippines and the PNP went on red alert, ostensibly to ensure order in connection with the 107th Republic Day anniversary celebrations. Militant groups involving leftists, Church activists and students, scheduled mass protests on June 11, the eve of the celebration.

Meanwhile, an army colonel, Ricardo Morales, commander of the 404th Brigade based in Mawab, Campostela Valley sent email to his fellow Philippine Military Academy alumni. “The time has come for all good men to come to the aid of their society. The time for talking is over; the time for action is now. The next ‘coup’ will be peaceful and open. Enough of leaders who talk about reforms but do not understand what they are saying. Enough of this organizational stupidity,” he blogged thru the Internet.

Morales, of PMA class 1977, was the officer who informed then AFP Chief of Staff Narciso Abaya, that a son of the then Major General Carlos Garcia was held by US Customs for bringing in $100,000 without declaring the money. Months later, the US government sent the documents to the Ombudsman triggering a full-blown investigation. General Garcia now faces plunder charges though he has not been put behind bars by the anti-graft court Sandiganbayan. Plunder is non-bailable.

On calls for her to resign to pave the way for snap elections. “I am saddened. I want to keep on working but there are people whjo are preventing me from doing so. They want to unseat me, or undermine my capability to run the affairs of this nation,” Mrs. Arroyo told a national broadcast over DZRH.

She also expressed confidence the military would resist any coup attempt.

While allegations of jueteng payoffs may have hurt the presidency, none is more damaging that Mrs. Arroyo’s alleged involving in electoral cheating.

In one part of the transcript, during a conversation on May 29, 2004 at 9:43 in the morning, the president is overheard asking an official, designated as “Gary”, “so I will lead by more than one million (votes)?” “We will try our best. As of the other day, we had 982,000.”

Mrs. Arroyo eventually won by a margin of more than one million votes.

With reports of jueteng payoffs and electoral fraud and her rising unpopularity, it is doubtful whether Arroyo can govern effectively. Congress has given her the mandate to raise the value added tax from 10% to 12% by January next year.

Given the bitter political atmosphere and questions about her legitimacy as president, Mrs. Arroyo will be playing with fire if she slaps additional taxes on the people, unless she wants to expedite her own political demise.

If not enough taxes are raised, however, basic services will continue to deteriorate, infrastructure will decay, and investors will shy away from a country unable to get its act together. Already, the Philippines is the slowest growing country in Asia.

In the last 27 years, the Philippines posted a per capita growth rate of 1.12% -- the poorest in Asia. The number of poor doubled during that time, to 34% -- the official figure as of 2000 until government statisticians “corrected” to just 24.7%.

Still, a survey by Pulse Asia says 74% of the people say they are poor, while another poll by SWS says 55% consider themselves poor. SWS also says 15% of Filipinos are hungry – that’s almost 13 million Filipinos.

No wonder, the people hate their president and want to change their government.

Why the Ayalas make money from water

2005-04-30T17:19:00.000+02:00

May 1, 2005 Tony Lopez

Liquidity from water

Very likely, Manila Water will get the West Zone water concession of the Lopezes’ Maynilad Water. The Ayalas, owners of Manila Water, seem to have the backing of the government. They have the track record. They have the organizational and financial wherewithal. A rehab plan has been submitted to a local court which will now decide on it. It gives the opening to Manila Water to make a bid.

The brothers Fernando Zobel de Ayala and Jaime Augusto turned around Manila Water from a money-losing company (losses of P38 million in 1997 and P67 million in 1998) into a hugely profitable operation. Cumulative profits from 1999 to 2004 amounted to a whopping P3.4 billion, 1.7 times what the Ayalas invested in Manila Water as equity. Of course, they put the right man in Manila Water, Antonino Aquino, 57, a 12-year IBM veteran before he moved to Ayala Corp. as computer systems manager rising to managing director of Ayala Corp. and CEO of Manila Water.

Also, the Ayalas have the blue chip name to line up partners who know the business and can help with the cash, as well as the reputation to borrow cheap money. East Zone was financed with six percent long-term money. You cannot find a better group to run Maynilad’s money-losing West Zone concession.

Why did the Ayalas make money on their East Zone concession and the Lopezes didn’t on their West Zone?

To start with, the Lopezes absorbed 90 percent of the debts of Metropolitan Waterworks and Sewerage System (MWSS). That’s equivalent to $800 million. The Ayalas took in only $80 million of MWSS’s debts in 1997. Naturally, when the peso devalued by more than 100 percent, the $800 million became a gargantuan P42 billion instead of just P20.8 billion (at P26 to $1) in 1997. The $80 million inherited Ayala debt ballooned only from P2.08 billion to a manageable P4.2 billion.

Manila Water also got 2,000 kms (since increased to 2,674 kms) of MWSS pipes which were newer than those of Maynilad’s 2,400 kms most of which were obsolete and useless. In terms of people being serviced, Manila Water got the households with better income – Makati, Pasig, Mandaluyong, Marikina, most parts of Quezon City, the business areas of Manila, and emerging bedroom and booming towns like San Juan, Taguig (the new Makati), and towns east of Manila in Rizal. All the major business centers went to Ayala – Makati, Ortigas Center, Araneta Center, Libis, and now bustling Fort Bonifacio in Taguig, bastions of new and traditional wealth where nearly every high-end home or building has a pool.

Maynilad Water, on the other hand, got most of the great unwashed of Metro Manila, the squatters in Pasay, Caloocan, Malabon, Navotas and Manila, citadels of filth and proverty where nearly every nook has cesspools of grimy sewage. In fairness though, the Lopezes got booming Alabang, Muntinglupa, Las Pinãs, and Parañaque and the Mall of Asia area on Roxas Boulevard.

In Alabang, you have the ironic situation where the Ayalas’ Alabang Village is within the water system of the Lopezes. The Lopezes are not providing water to Ayala Alabang. The Ayalas, thru Tony Aquino, built their own water system.

Manila Water services fewer people, 5.3 million, compared with Maynilad’s over seven million. Fewer people with more money vs. more people with less money. It is not difficult to see which concession makes more money and has a better future.

By the way, people keep complaining about rising petroleum prices and electricity rates. They should look at the water rates.

Since 1997 when the Ayalas took over the East Concession, water rates have risen by a stratospheric 348 percent in seven years, an average increase of 50 percent per year, from P4.02 per cubic meter to P18 by last January. Think of any business that can increase its price 50 percent each year. There is none.

Maynilad Water, meanwhile, got an increase of only 243 percent during the same period, from P8.78 per cubic meter to P30.15 by last January. The Lopezes got only 35 percent yearly increases. No wonder they returned their water concession.

Because of drought or by design, the Ayalas are actually delivering less water today (1,517 million liters a day) than they did in 2000 (1,6980 MLD). Yet they are making more money. The trick: They simply reduced the so-called non-revenue water (pilfered water and losses) from 26 percent to 43 percent.

For comments or reaction, email tonylopez@biznewsasia.com.

endit

Jestar Asia's tricky cheap fares

2005-04-28T17:00:00.000+02:00

April 28, 2005

JetStar Asia has launched what it calls value-for-money fares between Manila and Singapore. It has what it calls “everyday low fares” starting at $79. But finding the $79 one-way ticket is like looking for a needle in a haystack and you really have to be very, very desperate for cheapy, cheapy fares to have the patience to secure it. Previously, the company advertised the Manila-Singapore one-way fare of $59 but that too is not available. The price has been raised to $79 and even this ticket is not available.

For one, JetStar does not tell you how many seats are available for $79, when they will be available, and how you can secure them. Getting the tickets seems to be a matter of luck, chance or the whimsy of JetStar.

You call their number (810-4744) and nobody answers. You surf their website (jetstaraˇsia.com) and you get no information useful to your being able to buy the $79 ticket. The obvious conclusion is that the so-called value-for-money fare is nothing, but a trick to dragoon you into buying the more expensive $179 ticket, which is readily available.

JetStar, by the way, is owned 49 percent by Qantas, the Australian airline which is legendary for high ticket prices, 19 percent by Temasek Holdings, the company that owns Singapore Airlines which is legendary for its fine service and also high ticket prices, 22 percent by Singaporean businessman Tony Chew and 10 percent by another Singaporean businessman FF Wong.

The government should come in and set fairer rules on cheap tickets, which should not be an opportunity for certain people to vent their sadistic tendencies on hapless Filipinos.

Hu visit: A gathering of taipans at the Palace; tricky cheap fares; MMDA defanged

2005-04-28T16:58:00.000+02:00

April 28, 2005 10:53 p.m. Manila times

By Tony Lopez tonylopez@biznewsasia.com

The state dinner tendered by President Arroyo for visiting China President Hu Jintao Wednesday night (April 27) turned into a gathering of taipans many of whom do business in China. Among those seen by our spy were: Lucio Tan of Asia Brewery, Allied Bank and Fortune Tobacco, John Gokongwei Jr. of JG Summit, George Ty of Metrobank, Ramon Ang of San Miguel Corp., Tessie Sy of Shoemart and Hans Sy of SM Prime, Antonio Go of Equitable PCI Bank, Tony Tan Caktiong of Jollibee, Richard Lee of Universal Motors, Alfredo Yao of Zesto and RC Cola and Butch Campos of Unilab group. Kapitan Lucio, Big John and Dear George were accompanied by their genuinely beautiful wives. The Castilaloy tycoons were ably represented by Fernando Zobel de Ayala and by Castilaloy-looking Nick Alcantara of Petron. More than $20-billion worth of personal wealth was represented, probably more if you reckon the unreported China wealth of the Pinoy taipans.

Both GMA and Hu Jintao were effusive in their testimonial toasts.

Both talked about the “Golˇden Age” of Philippine-China relationship marked by a targeted (by Hu) two-way trade of $30 billion in five years from $13 billion last year and $500 million 10 years ago. GMA noted that Figaro Coffee, Bench, SM, Liwayway (Oishi noodles), Asia Brewery and SMC have made investments in China, that the Chinese have made a $500-million preferential loan for a railway to Clark, on top of a previous commitment of $400 million.

“This is an economic relationship that is bringing jobs and opportunities to thousands of our countrymen,” she enthused. “Their experience in developing oil and gas resources makes the Chinese ideal partners as we seek to exploit our own energy resources,” she said. And the joint seismic agreement has turned the South China Sea from an area of conflict into an area of cooperation.

For his part, Hu talked about the beauty of the Philippine archipelago.

The Chinese love islands. In fact, they claim all of the islands, islets and bodies of water in the South China Sea and they are willing to wait thousands of years to enforce their claim. He talked about China and the Philippines being near each other geographically “and related by blood.” He said China-Philippines relations have contributed to peace, stability and prosperity in the region. Hu was obviously on a charm offensive with a perpetual smile glued on his face. He looks warmer and younger in person.

The President sees “tremendous opportunities for Philippine companies and workers.”

Among agreements signed during Hu Jintao’s visit was the intention of a Chinese consortium to invest $1 billion in the nickel project of Philnico in Surigao City.
------------------------------------------------------------------------

Jestar's tricky cheap fares

JetStar has launched what it calls value-for-money fares between Manila and Singapore. It has what it calls “everyday low fares” starting at $79. But finding the $79 one-way ticket is like looking for a needle in a haystack and you really have to be very, very desperate for cheapy, cheapy fares to have the patience to secure it.

For one, JetStar does not tell you how many seats are available for $79, when they will be available, and how you can secure them. Getting the tickets seems to be a matter of luck, chance or the whimsy of JetStar.

You call their number (810-4744) and nobody answers. You surf their website (jetstarasia.com) and you get no information useful to your being able to buy the $79 ticket. The obvious conclusion is that the so-called value-for-money fare is nothing but a trick to dragoon you into buying the more expensive $179 ticket, which is readily available.

JetStar, by the way, is owned 49 percent by Qantas, the Australian airline which is legendary for high ticket prices, 19 percent by Temasek Holdings, the company that owns Singapore Airlines which is legendary for its fine service and also high ticket prices, 22 percent by Singaporean businessman Tony Chew and 10 percent by another Singaporean businessman FF Wong.

The government should come in and set fairer rules on cheap tickets, which should not be an opportunity for certain people to vent their sadistic tendencies on hapless Filipinos.
------------------------------------------------------------------------

MMDA defanged

Metro Manila Development Authority (MMDA) Chair Bayani Fernando has virtually been defanged. Ruling on a 10-year-old traffic case, the Supreme Court has in effect told the MMDA they can make traffic policies and rules but their people cannot confiscate drivers’ licenses, as this is a violation of due process. Even the matter of issuing traffic violation tickets is a violation of due process as you are not given the opportunity to explain yourself nor told just exactly what law or ordinance you violated as a motorist.

You should question the tickets issued to you and you have seven days to do that. You may not need to pay a fine because you are being ticketed for a violation that doesn’t exist in law or in an ordinance.

Truth to tell, MMDA cannot enact laws or ordinances.

It was not elected by the people to do so. It is at the mercy of local governments whose city or municipal councils must enact the ordinances that MMDA can implement. For this reason, without an enabling law or ordinance, the number-coding scheme banning vehicles from the streets on certain days is probably a violation of private property. Constitutionalists may argue that number coding is also a violation of the right to life since the right to life also includes the right to enjoy life (like driving your car).

A number of mayors have not been warm to BF because of its apparently antipoor policies—confiscating driver’s licenses of bus and jeepney drivers thus denying them a day’s work just so they could retrieve their licenses from the MMDA where the red tape can be terrific, I mean, full of traffic; destroying the makeshift tents and stalls of sidewalk vendors (this is actually also violation of due process and confiscation and destruction of private property), and removal of squatter houses (without benefit of court order).

In Marikina, BF could do these things when he was the mayor because what he said and did were the law. But not in Metro Manila. The metropolis has plenty of lords—like Jejomar Binay of Makati, where MMDA traffic enforcers are banned; Lito Atienza of Manila, where the MMDA people are banned from touching sidewalk vendors and squatters; and Sonny Belmonte of Quezon City, where BF has somehow managed to create havoc by creating chaotic U-Turns in intersections where traffic used to flow smoothly.

So with the Supreme Court ruling, the MMDA and its often abusive and corrupt traffic enforcers have been denied one of their biggest sources of revenue-fines from so-called violators.

For comments or reactions, email tonylopez@biznewsasia.com

Why the Senate needs to pass the VAT law

2005-04-26T17:16:00.000+02:00

Tony Lopez blog for Wednesday April 27, 2005 tonylopez@biznewsasia.com
11:15 p.m. manila

Time to separate the
men from the boys

It's time to separate the men from the boys in the value added tax (VAT) issue. I am referring to the nine-member Senate panel seeking to hammer out a compromise VAT bill. The House has passed a bill that increases the VAT to 12 percent, from 10 percent at present. It also retains many of the present exemptions.

The Senate contingent wants to retain the 10 percent but include those who are presently exempted like petroleum products (which are subject to excise tax), electricity generation (which is subject to a universal charge), lawyers and doctors (both of whom rake in oodles of money and do not issue receipts). It also wants to raise the corporate income tax rate from 32 percent to 35 percent (the old rate) which will be one of the highest tax rates in Asia on income of P1 million or more.

Petroleum prices in Manila are among the lowest in Asia while electricity rates are among the highest in the world. The obvious conclusion is that you should slap more taxes on petroleum products and not touch the already atrociously high electricity rates. But then when you tax petroleum products some more, you anger the bus and jeepney drivers who can paralyze our chaotic transport system and draw sympathy from the left looking for lost causes. As for high electricity rate, the one fault is actually the state-owned National Power Corp. whose debts are around P400 billion which must be paid back with taxpayers' money.

In the Senate bicam panel are five supposedly administration senators - Manny Villar, the chairman of the Senate Finance Committee, Ralph Recto of the Ways and Means Committee, Richard Gordon, Rodolfo Biazon and Joker Arroyo. From the opposition are Juan Ponce Enrile, Edgardo Angara, Jamby Madrigal and Serge Osmeña. Of the five administration solons, two, Ralph Recto and Gordon, seem to favor an increase in the VAT, one is staunchly against, Joker, and two are unclear about their stand, Villar and Biazon. Of the four opposition senators, two seem to favor a VAT increase, Enrile and Angara, while Jamby and Serge are for 10 percent. So one senator will decide whether it's 10 percent or 12 percent. Either way, says Senator Villar, the vote will be five-four.

One factor playing in the minds of the senators is the 2007 and 2010 elections. Villar, Recto and Serge are up for reelection. They need to be in the top three if they are to be seriously considered in the 2010 presidential race. Not only that, in the case of Recto and Villar, they need to be backed by Gloria Macapagal Arroyo.

President Arroyo is getting impatient. The Philippines has had four credit downgrades from different ratings agencies while waiting for a higher VAT (the downgrades, according to some estimates will cost borrowers additional P20 billion in interest for the same amount of debts). While seemingly bitter for all of us to swallow, she says in a statement, “this pill will save our economy from fiscal demise that could stem from having one of the narrowest revenue bases in the world.”

The whole idea of an expanded VAT is to collect P80 billion in additional revenues. But nobody knows for sure whether a higher VAT of 12 percent will bring that in, or including everyone in the coverage of VAT and still retain the 10 percent will do the trick. It's question of how efficient the collection machinery is. The Department of Finance assumes that with a higher VAT and a 70 percent collection efficiency from an expanded coverage, the additional tax take could be P77 billion. And if the excise tax on oil is retained plus a new VAT on it, DOF reckons it can generate an additional P16 billion. So P77 billion plus P16 billion is P93 billion.

The Senate should give President Arroyo what she wants. She is the CEO of the land and must be given the resources she needs to deliver basic services. If she is given the money and she still fails, then there is always 2010.
***

The Lopezes may not know it but there seem to be behind the scene negotiations for the transfer of their Maynilad Water West Zone Water concession which runs west of EDSA from Valenzuela to Cavite covering more than seven million. The Lopezes lost an estimated $80 million from the concession and have since returned it to the government. Now, the Ayalas are being asked to take over, following their huge success with the East Zone under their Manila Water which had an IPO that was 16 times oversubscribed.
The only problem being worked out is how not to present the takeover as a non-monopoly play, you know, one group operating the entire water system of Metro Manila and nearby provinces. In 1997, when the concessions were bidded out by government, the Ayalas won both but had to give up the East Zone to the Lopezes as required by the bidding rules.
I tried to call up Government Corporate Counsel Agnes Devanadera to get details of the legal aspects of the West Zone rehabilitation plan pending with a Makati court but she was too busy to return calls.
***
Who are the Filipino businessmen operating in China? Quite a number, and they include Henry Sy of SM which has two malls where Wal-mart is a tenant), Lucio Tan of Allied Bank and Asia Brewery, Danding Cojuangco of San Miguel (which has three breweries in China), Carlos Chan of Liwayway (Oishi noodles) which has 11 plants with annual sales of $250 million, his brother Ben Chan who is franchising the Bench brand and has eight stores, Alfredo Yao of RC Cola who has two bottling plants, Chit Juan of Figaro who has opened a coffee shop in Shanghai, Antonio Tan Caktiong whose Jollibee has bought an 80-store chain, and George Ty who has a bank in Shanghai and Beijing.

For comments or reactions, email tonylopez@biznewsasia.com

Endit.

San Miguel now a major regional player

2005-04-24T17:57:00.000+02:00

April 24, 2005 11:55 pm

tonylopez@biznewsasia.com

San Miguel now a major regional player

San Miguel Corp.'s acquisition of Australia's National Foods Ltd. for more than $1.4 billion validates its claim to being a regional player in the Asia Pacific beer, beverage and food market.

During 2004, San Miguel began to reap the benefits of its aggressive regional expansion. Its China beer operations became profitable, its Anker Bir became No. 2 in Indonesia, its Boag became No. 2 premium brand in Australia, and it showed strong growth and higher market share in Hong Kong.

SMC is the largest food and beverage company in the Philippines. SMC plans to expand its operations in the Asia-Pacific region, such as Thailand, Malaysia, Indonesia, Vietnam, Australia, and China.

SMC offered Australian $6.40 per share for all the shares of National Foods, effectively thwarting the rival bid of New Zealand's Fonterra Cooperative Group which originally offered $5.45 a share only to match SMC's original bid price of $6 a share. SMC made a counter offer of $6.40 share, forcing Fonterra out of the picture.

At the same time, San Miguel has offered to buy 100% of Del Monte Pacific based in Singapore for $400 million. Taipan Lucio Tan had also wanted to buy Del Monte but only to the extent of 40%. The Singapore government didn't allow him to do as it was against the rules on tender.

Del Monte owns the brand in the Philippines where it sells pineapple juice, juice drinks, pineapple solids, missed fruits, and tomato catsup.

In a related move, Kirin Brewery Company, Limited has acquired 117 million class B shares of San Miguel Corp. (SMC), representing 4.12% of the outstanding share capital of SMC, from the holdings of the SMC Retirement Plan. The shares were transacted at a price of 75 pesos per share, or a total value of about P8.8 billion,

Together with the previous investment in SMC in 2002, Kirin now holds a 19.67% stake in SMC. The Kirin presence consolidates Chairman Eduardo Cojuangco's management of SMC as the Japanese giant came in upon his invitation.

In the overseas alcohol beverages business, Kirin has set its targets for growth in Asia and Oceania, building strong operational basis for business expansion in the region.
Kirin believes SMC is and will be the best partner to exploit business opportunities and bring synergies among Kirin group companies in the region.

The National Foods board had unanimously recommended that shareholders accept San Miguel's offer in the absence of a superior proposal. Its management had valued in December the company at $6.11 and $6.65 per share, excluding then the value of interim dividends.

San Miguel Chairman andCEO Cojuangco had said "Being one of Australia's leading consumer product companies, National Foods is a highly attractive acquisition for San Miguel. This proposal reflects San Miguel's long term strategic ambition of leveraging its core competencies to expand its presence in non-alcoholic beverages and food in selected countries in the Asia Pacific region.”

“National Foods is a good strategic fit for San Miguel, and their management is strongly committed to growing the business. We recognize National Foods' strong growth prospects and believe closer links with our existing Australian and Asian operations will create opportunities for both companies,” Cojuangco pointed out at the time he made the bid in December.

SMC is also increasing its 51% stake in Berri Limited to 100% for $400 million. Berri is Australia's largest citrus fruit processor and plans to increase its Asian sales to 30% from 8% using San Miguel's foothold in the China beer and beverage market, the largest in the world.

“Berri provides a natural fit to San Miguel's existing beverage portfolio and complements the strategy to introduce recognized beverage brands in targeted markets around the region under the flagship Berri brand,” says Cojuangco.

San Miguel had previously acquired for A$96 million the small Australian brewer James Boag and Son which last year turned in good results. It became the second best selling premium beer in Australia. Operating income rose 19% while volume improved 12% from 2003.

In Thailand, since November, Red Horse Beer and Blue Ice Beer, just two of San Miguel's popular beer brands in a full-range portfolio, have been made available in Bangkok through selected hypermart, supermarket and convenience store chains and on-premise outlets.

Both products will be available in stores in key cities across the country by early 2005.
While new to Thailand, Blue Ice has been on shelves in the regional market since 1995. After its launch in the Philippines, it was successfully rolled out to Hong Kong and Taiwan where its ice smooth taste continues to win over discriminating younger beer drinkers.

San Miguel will finance the acquisition of National Foods from a combination of borrowings, equity and internally generated funds. It raised $300 million from a just concluded rights offer and has lined up a syndicated loan for the balance.

With $2 billion in equity and $2 billion in debt, the company's debt-equity ratio is now on one to one basis. The company has assets of P235 billion.

Offers to fund San Miguel's debt to pay for National Foods have been made by ABN AMRO Bank N.V., Barclays Capital (the investment banking division of Barclays Bank PLC), the Hong Kong and Shanghai Banking Corp. Limited, Standard Chartered Bank, and Sumitomo Mitsui Banking Corp..

During 2004, San Miguel made the following major acquisitions and initiatives abroad:

1. In March 2004, San Miguel through San Miguel Pure Foods Company, Inc. (SMPFC) acquired 75% of PTSMPFI (formerly P.T. Pure Foods Suba Indah) .

2. In April 2004, the company, through SMPFC formed RealSnacks Mfg. Corp. (RealSnacks), a snack company. As of December 31, 2004, RealSnacks has not yet started commercial operations.

3. In June 2004, the company, through San Miguel Beer (Thailand) Ltd., completed its acquisition of the brewery assets of Thai Amarit Brewery Company Ltd. in Thailand, with a payment of ThB3,999.7 million (US$97 million or P5,459 million).

4. In August 2004, the company, through San Miguel Australia Holdings Pty. Ltd, a wholly-owned subsidiary, acquired 50% stake in Berri for AU$134.5 million (US$95.8 million or P=5,394 million). In November 2004, an additional 1% stake was acquired for AU$2.7 million (US$2.1 million or P=119.7 million) giving SMC a total of 51% ownership. This entitled the Parent Company to fully consolidate Berri starting November 2004. Goodwill amounting to P3,469 million was recognized upon consolidation.

5. In October 2004, SMPFC entered into a joint venture agreement (JVA) with Singapore-based Super Coffeemix Manufacturing Ltd. for the establishment of joint venture company that will engage in the importation, packaging, manufacturing, marketing and distribution of coffee and coffee-related products in the Philippines and other countries in the Asian region. The joint venture company will be known as San Miguel Super Coffeemix Co., Inc. As of December 31, 2004, the joint venture company has not yet been incorporated.

6. In November 2004, the company through San Miguel Packaging International Limited (SMPIL) transferred to an escrow account RM26.6 million (US$7 million or P394 million), equivalent to 20% of the purchase price, for the acquisition of the packaging business of Malaysian firm Guolene Packaging Industries Berhad. In January 2005, SMPIL completed the acquisition with payment of RM106.4 million (US$28 million or P=1.6 billion). The escrow account as of December 31, 2004 is presented as part of “Noncurrent assets - Others” account.

7. In November 2004, the Company, through GSMI entered into Share Purchase Agreement (SPA) with the Thai Life Group of Companies (Seller) for the purchase of 4 million shares, representing 40% ownership of the outstanding shares of C.N.T. Wine and Liquor Company Limited (CNT), a limited company organized under the laws of Thailand. The consideration for total purchase price of ThB128.9 million (P=184.7 million) is based on the adjusted net asset value of CNT as of June 30, 2004. CNT possesses a license in Thailand to engage in the business of manufacturing alcohol and manufacturing, selling and distributing brandy, wine and distilled spirits products both for domestic and export markets. It is currently constructing a production facility which is expected to be completed in 2006.

Also, in November , GSMI and the seller entered into a joint venture agreement (JVA). The JVA established the terms and conditions regarding the ownership and operation of CNT and the mutual rights, obligations and responsibilities of GSMI and the Seller, as stockholders.

Subsequently, GSMI assigned its rights to purchase the 40% ownership of the outstanding shares of CNT to Ginebra San Miguel International, Ltd. On Dec. 15,2004, all the closing conditions for the execution of the SPA were satisfied and the purchase was effected.

The Philippine strategy on China

2005-04-24T17:49:00.000+02:00

April 24, 2005 11:45 p.m.

Email tonylopez@biznewsasia.com

Philippine tack on China - export, tourism and investments

You can penetrate the market,
but first, do your homework

China may be the largest market in the world but penetrating it requires a lot of due diligence, research and development, patience, perseverance, and good connections.”

In size, no country can beat the China market - 1.3 billion, 501 million in urban areas, 782 million in the rural areas. It is the world's fastest-growing market. It consumes 55% of world cement and 36% of world steel. It is the third largest exporting and third largest importing nation. Its imports grew by 35% a year. Every week, $1 billion in foreign direct investments come in (FDI). In 2004 alone, $60.6 billion FDI came. China has about $600 billion in reserves.

However, “the Chinese market is not that easy. It is unique, brutal and full of surprises,” winces Philippine special envoy to China Jose Antonio. His mandate from President Arroyo is to increase trade and investments between the Philippines and China. “Our game plan is to attract money from China rather than Philippine capital going to China,” he discloses.

Antonio cites the examples of several companies. Japan's Panasonic dominated the television market up to the early 1990s. By 1999, the top selling tv brands were all Chinese. LG, Samsung and Matsushita used to dominate microwave oven market. Today, China's Galanz brand has 60% of the market. Motorola had 20% of the mobile phone handsets. Now, it is facing competition from TCL and Ningbo Bird. Foreign brands, including Europeans, incur losses for the five five years before taking off.

Once you make it, however, the enterprise can be very, very profitable. Still, never lower your guard.

Ambassador Antonio sums up the effort in three words - dissect the dragon, segment, and strategize.

“You have to dissect the China market because it is so huge,” he advised participants at the Economic Network forum on China April 20. “You are like an ant probing a loaf of bread, you don't know where to start,” he says.

Also because the market is big, “anyone planning to sell in China must find ways to segment the market,” Antonio says.

As for strategy, this is relative. “You have to be innovative,” the presidential envoy points out.

One good strategy is to buy into state-owned firms. Another is look long term. Filipino entrepreneur Carlos Chan's Liwayway foods persevered for 12 years manufacturing and selling Oishi snack foods before he began making $250 million in annual sales. He began by buying a food plant and incurred losses for a number of years.

Chan now has 11 operating plants in China. His brother, Ben Chan of Bench sources his garments from China.

Jollibee is another company that has made good in China, by buying into an existing food chain that didn't have the Philippine company's logistics knowhow. The SM group of Henry Sy has put up two malls in partnership with locals and with giant Wal-Mart as a major tenant. It took years and an investment of P25 billion before San Miguel Corp. began making money from its breweries in China - last year. And even with the China market, SMC has had to invite Kirin Brewery of Japan to conquer the Asian beer market.

Another strategy is avoid areas that are overheated. These include autos, auto parts, steel, and mobile phones. In 2005, China had production capacity for 4.9 million cars. Yet, demand is for only 2.5 million cars.

Antonio suggests the E-T-I strategy for the Philippines - export, tourism and investments.

He lists 11 export products and services with export potential in China - coco products, abaca, minerals, holiday décor, furniture, food and beverage, fresh fruits, marine products, seaweeds and carrageenan, cosmetics and professional services (IT-enabled, education, nurses and doctors, and middle management).

Antonio sees big potential in the export of marine products and professional services. China needs English-speaking tutors. Taxi drivers in Beijing won't be given driver's licenses by 2008 unless they learn English. This is in preparation for the Olympics.

China is one of the biggest sources of outbound tourists. A third of Vietnam's visitors, 8% of Thailand's, and 5% of Malaysia's comes from China. In 2004, only 40,000 Chinese tourists came to the Philippines. “China's prosperity has resulted in a growing number of Chinese traveling abroad,” says Antonio. At 40% of household income, the Chinese have one of the highest savings rates in the world, he reckons.

As for investments, China has plenty of money. It is now one of the ten largest investors in Vietnam. Chinese enterprises are poised to invest in the Philippine mining, glass making, bio-tech and pharmaceuticals.

“China can use the Philippines as an assembly and distribution hub for the ASEAN market,” suggests Antonio.

However, the envoy advises businessmen: “Do your R and D. Have your proper connections. Get your guangxi. It's a lot of hard work.” And of course, “you should not fight the dragon, ride the back of the dragon.”

Adds Jorge M. Judan, Philippine commercial attaché in Beijing: “ Make a proper due diligence.”

The Philippines has been successful in increasing trade with China and registering a surplus in the process. How did the country did it?

It began in 2001. Department of Trade and Industry (DTI) Senior Undersecretary Thomas Aquino led a business delegation to Beijing as part of Manila's economic policy agenda. “We wanted to put the Philippines on China's radar screen,” relates Aquino, who has a doctorate in business administration from the University of Navarre, in Spain.

It wasn't easy to do, he says, despite the significant Chinese population in the Philippines, the fact that Filipino Chinese taipans dominate the economy, and nearly every Filipino has Chinese blood.

One approach Aquino took is having good rapport with the Chinese. “In China, when business moves, it moves because of certain directions from the government,” says the trade official. Rapport means not being perceived as an enemy. “The Chinese view of the Philippines is that it is a friendly country,” says Aquino.

Friendship sealed, Aquino mounted a trade show in Shanghai. In the group were companies engaged in what he calls lifestyle products-garments and apparel “where we are known as being very innovative.” The trade show was followed by sectoral visits so Filipino businessmen will give up their fear of the unknown or fear of the Chinese as a trader.

With its vastness, “there is always a market for anyone.” “China is very open. It is encouraging everyone to sell to China,” Aquino points out. “I cannot say that for many other markets around the world.” Finally, of course, DTI assigned a good man in Beijing, Jorge M. Judan. “He has a way with the Chinese although he doesn't speak Chinese,” says Pacita “Chit” Juan, who has just opened a coffee shop outlet in a strategic location in Shanghai. By the way, in 2004 alone, 5,000 new buildings of 30 stories high were built. So you can imagine the potential for her coffee shops if Chit Juan opens one in a every building.

Says Secretary Aquino: “China is a big country. When you enter it, you will be entering a country you will enjoy for a long, long time.”

Chit Juan of Figaro Coffee Co. went to China out of fun, joining the trade missions to Beijing and Shanghai among other places. “When I got home, I realized it was the biggest break of my life,” she gasped. She went back to Shanghai and found out that friends she has met in the previous visit were helping her, “like old friends.” “They really paved the way to know rules and regulations in China,” she relates, “really, for a small company like ours, this is a dream.”

In the Philippines, Figaro grew to 50 stores. Other multinationals have 9,000 stores, notes Chit Juan. Obviously, Figaro cannot grow big by concentrating in the Philippines. “If I could open five to ten outlets in China, that already would be an accomplishment,” she muses. She also was inspired by Carlos Chan of Oishi. He told her: “You are within the window of opportunity. Go for it.”

There is no reason why a Philippine coffee shop chain cannot make it abroad, particularly in China. “Coffee is now a global lifestyle product,” Chit Juan says.

Not being able to speak Chinese has been no barrier to Chit Juan. “Hire good interpreters, those you can trust,” she admonishes. “All our contracts are in Chinese,” she relates.

Figaro's first outlet in China cost $250,000 to open, more than what it takes to put up one in Manila, $120,000 to $150,000. So far, Chit is happy with the results, no matter how modest.

Filipino Chinese Federation wields considerable influence

2005-04-24T17:27:00.000+02:00

April 24, 2005 11:12 p.m. Manila time

Email tonylopez@biznewsasia.com

Filipino Chinese Federation wields
considerable influence and power

By Tony Lopez
BizNewsAsia

One of the highlights of President Hu Jintao's Manila visit is a luncheon meeting on April 28 with the officers and members of the Federation of the Filipino-Chinese Chambers of Commerce and Industry, Inc. (FFCCCII) with some 1,500 businessmen in attendance. FFCCCII Chairman Emeritus Lucio Tan, President Francis Chua, and honorary president Robin Sy will host the Chinese leader.

This is in addition to FFCCCII's presence when China President Hu Jintao addresses the joint session of Congress on April 27. Some 400 of its members will attend the session at the Batasan.

But it is the 90-minute luncheon co-hosted by the FFCCCII at Manila Hotel that promises to be the major highlight of Hu Jintao's three-day state visit, outside, of course, of the signing of six major agreements.

It is a recognition of the federation's role in the past 50 years to foster the growth of the trade industries and to unite under one roof the various trade, business, industrial and financial institutions in the Filipino-Chinese community.

President Gloria Macapagal Arroyo is fully aware of the FFCCCII influence. Immediately after attending the Rome funeral for John Paul II, she went to Manila Hotel for the biennial convention of the FFCCCII.

Also, the Philippines' leading taipans are making significant investments in China in such areas as banking, property, shopping malls, food retailing, and manufacturing.

And with China making huge investments in strategic areas like infrastructure and mining, its is members of the FFCCCII likely to pave the way for the realization of these projects.

Previously, China provided the miracle rice technology that enabled the Philippines to dramatically increase its palay production. This was made possible by the company of Henry Lim, Agritech. He befriended China's national treasure, Professor Yuan Long Ping, said to be the father of miracle rice and a 2001 Magsaysay Awardee in agriculture.

“The rice project has created the most impact in the lives of Filipinos,” says Lim. Some 180,000 hectares are now devoted to miracle rice. “We are now producing 300 cavans per hectare,” he enthuses.

Lim says China also provided the $100 million to build the fishing port at General Santos.

A new area of assistance is a $5 million grant for anti-terrorism. Over the long term, however, the National Economic and Development Authority (NEDA) is proposing a $5 billion five-year general infrastructure fund.

Ranking officers of the FFCCCII recently sat down with BizNewsAsia for a wide-ranging interview. They included Francis Chua, president; John Tan, executive vice president; Tan Tiang Siong, first vice president; Alfonso Siy, third vice president; Alfonso Uy, fourth vice president; Henry Lim, fifth vice president; Tan Ching, sixth vice president; Dr. Charles Chante, media committee chair, and Alfredo Yao, trade and industry committee chair.

They were unanimous in saying that Hu Jintao's visit is very significant. “China is our next door neighbor, they have progressed very fast, and they have developed closer relations with the Philippines,” says Francis Chua.
“The Philippines can be a major tourist destination for the Chinese,” says Alfonso Siy. “A lot of Chinese have plenty of money and they are going overseas to spend it.” The problem is, adds Tan Ching, “they go to Singapore and Malaysia rather than to the Philippines.” “Media has to be less negative about the Philippines,” he suggests.

“The competition for tourists is very keen and we have to be aggressive in attracting them,” Francis Chua insists. One positive factor is the vastly improved peace and order situation in Metro Manila. “Except for one or two, there has not been any major kidnapping,” he says.

Tan Tian Siong complains about the interference of the judiciary in economic issues. He cites the case of a decades-old restraining order that has prevented the widening of Circumferential Road north of Manila.

Alfonso Uy of Negros notes that the Chinese in the Philippines have fully assimilated themselves. “It is no longer an issue,” he says. John Tan says in big Chinese schools, Philippine Cultural High School and Chiang Kai-shek, Chinese is hardly spoken. “The kids cannot speak Chinese,” he laments.

And among businessmen, even if they negotiate in Chinese, they draft their agreement in English to make sure everything is clear.

To preserve the Chinese language, Lucio Tan makes it a point to send some 400 Filipino Chinese students to China to learn Chinese.

China, after all, is not only the mother country. It is the home of the mother tongue,Chinese, the language of business, especially if you do business in China.

endit

Why President Arroyo warms up to China, Sun Life vs Philamlife

2005-04-24T17:11:00.000+02:00

Virtual Business for Monday, April 25, 2005 Tony Lopez

A rich country pretending
to be poor; Philam's new rival

Chinese President Hu Jintao begins his two-and-a-half day state visit tomorrow, to mark the 30th anniversary of Philippine-China relations forged in June 1975 by then President Marcos. Hu is bringing an aid and business package estimated at $1.5 billion.

China is now Asia's largest economy and the second largest in the world, in terms of purchasing power parity (PPP) after the United States, $8 trillion GDP to America's $12 trillion. Japan is a poor third, $4 trillion, with India closely behind at 4th, $3.6 trillion, followed by Germany $2.5 trillion, 5th; UK $1.8 trillion, 6th; France $1.8 trillion, 7th; Italy $1.69 trillion, 8th; Russia $1.58 trillion, 9th; and Brazil, $1.55 trillion, 10th.

PPP is a global measure of the US dollar, the equivalent of what it can buy in your home country. The International Monetary Fund uses the PPP as the real measure of a country's wealth.

Surprisingly, the Philippines is the world's 25th richest country, with GDP (in PPP terms) of $499 billion. No wonder many of our government officials, including not a few generals and colonels, and our own elite spend so much money like there were no tomorrow. We are a rich country pretending to be poor.

This is the reason perhaps, why the Department of Labor beginning this April has changed the definition of unemployment. Those who say they have no jobs and not looking for a job and not willing to get a job will no longer be considered part of the labor force. The redefinition immediately brings the unemployment rate to single digit, from above 11 percent to just around seven percent, a reduction of four percentage points. There is so much money lying around anyway.

The government has also changed the definition of what is poor by removing from the ranks of the poor people who say they drink beer or say they smoke and people who say they buy the Milagrosa variety or special rice. If you can afford those mundane luxuries, you are not poor. Instantly, the poverty incidence drops to less than 25 percent, 24.7 percent, in fact, from 34 percent previously.

Also being redefined is inflation so that we will have a lower inflation rate. Soon, we will redefine the meaning of freebie, justice, and free elections. As the Batasan people would say, “noted”.

***

President Gloria Macapagal Arroyo has placed her bets with China, after pulling out the Philippines' non-combatant and puny force from US-occupied Iraq in the wake of the Angelo dela Cruz kidnapping last year. She lost pogi (look-good) points with George Bush. On the other hand, she is winning pogi (look-good) points with China President Hu Jintao.

She recently agreed to allow Chinese intruders, disguised as “fishermen” to go into the Philippine-claimed part of the disputed Spratlys archipelago. In effect, the Philippine military can no longer drive away the Chinese when they show up near the Kalayaan reef. The Chinese have built a garrison nearby.

China and the Philippines have a defense cooperation agreement. In November 2004, China donated RMB10 million to the government to buy firearms.

On March 14, this year, the Philippine National Oil Co., China National Oil Co. Ltd (CNOOC) and PetroVietnam signed a tripartite agreement on joint seismic survey in agreed areas in the South China Sea.

President Arroyo knows her economics and politics well.

China is the world's largest country in terms of population, 1.3 billion. It is the world's second largest economy, as we have said, and the world's fastest growing - 9.5 percent GDP growth in the first quarter, the same rate for the whole of 2004 which was the highest since 1997. Every week, $1 billion in foreign direct investments come in or $60 billion a year. Last year, in the Philippines, no FDI came in, because $1.37 billion in foreign capital went out.

China is the world's largest consumer market. It has 1,000 billionaires, more than what America has, and over three million millionaires. In 15 years, everybody in China will either be rich or middle class, no exceptions. At present, China has only 26 million poor, defined as people earning 22 cents a day. Last year, the rural poor numbered 29 million. So there was reduction of three million. China does not reduce its poor by redefining what is poor. The Chinese simply become rich. The disposable income in urban areas where 500 million live - is $930. The disposable income in the rural areas where 800 million people live is $300. The Chinese save 40 percent of their income - one of the highest savings rates in the world.

Since 2002, Philippine-China trade has increased by an average of 50 percent per year. It amounted to a record $13 billion, with a trade surplus in our favor. Part of the credit for this positive trade goes to Senior Trade Undersecretary Thomas Aquino. He led trade missions to China beginning 2001.

***

Resigned PNB president Lorenzo Tan has joined Sun Life Financial of Canada as its CEO in the Philippines and helping chart its strategic directions in Asia. He is responsible for insurance, pre-need and mutual fund business and is also member of the Asian management team. Sun Life, not Philam AIG, started the insurance business in the Philippines in 1895.

Lorenzo's objective is to recapture Sun Life's gold glory and make it the largest insurance company in the Philippines, get this, in three years, through organic growth, mergers with, and acquisition of other insurance companies. This means Philamlife is in danger of losing its leadership and stranglehold of the local insurance business.

Sun Life Financial Philippines had revenues of P15 billion and net income of P2.3 billion in 2004. It has the same revenue size as PNB which Lorenzo Tan helped turn around. Return on equity is very high, 25 percent. The mother company had 2004 net income of C$1.68 billion on revenues of C$21.7 billion and an asset base of C$10.7 billion. It has a Standard & Poor rating of AA plus. It is listed in New York, Toronto and Manila.

For comments or reactions, email tonylopez@biznewsasia.com

endit

Of Ford, IPOs, stabilization, JPEPA, Toyota and BMW

2005-04-14T17:56:00.000+02:00

Tony Lopez@BizNewsAsia.Com April 14, 2005

Of Ford, IPOs, stabilization,
JPEPA, Toyota and BMW

ON Monday, April 11, 2005, President Arroyo motored to the sprawling Ford Motor Co. manufacturing complex in Santa Rosa, Laguna. She was met by Ford officials, led by Henry Co, the Japanese-speaking Filipino president of Ford Group Philippines.

Her ostensible purpose was to witness the completion of the American auto giant’s 30,000th export vehicle from the Philippines. Ford is the only local exporter of completely built up vehicles. The other reason, and perhaps the main one, is that GMA wants to drum up foreign investments in the country.

There was a capital flight during the first quarter, which explains the slump in the stock market and the disappointing performance of two major IPOs this year—Manila Water of the Ayalas and SM Investments Corp. of the Sys.

The Manila Water IPO at P6.50 a share was oversubscribed 16 times while SM’s at P250 a share, was oversubscribed six times. Foreign funds are hungry for issues, especially those coming from reputable Philippine companies like the Ayalas and Henry Sy. Manila Water, operator of Metro Manila’s East Zone where there are 5.5 million people, is the Philippines’ only successful privatization. The operator of the West Zone, Maynilad, as you know by now, went bankrupt and has returned the concession to the government, to the chagrin of people like me who live in their territory. SM’s IPO, meanwhile, is Asia’s largest and the fifth largest in the world. It raised $500 million for Henry Sy so he can finance his malls, now being built at a frenetic pace of three to four malls per year, and his tourism-related projects in Tagaytay and Batangas.
Those who bought shares of Manila Water and SM will surely lose money if they sell at current depressed prices. GMA likes to point to the stock market as a barometer of investor confidence, noting that the Philippines in 2004 was the second best performing bourse in the region. The first is Indonesia, which like the Philippines, is often lumped with other emerging economies known as basket cases. Both countries, by the way, are in the top rungs of what investors make as the list of corrupt places for doing business.

But that is digressing from the story.

GMA’s Ford visit was planned as a surprise. Ford people were surprised that GMA wanted to visit their plant. The President had planned to visit an industrial project.

Ford happens to be conveniently nearby, is a major multinational with strong commitments to the Philippines, is doing great as an exporter of a new product, CBU vehicles, and of course, has a good economic story to tell.

Ever since her popularity and approval ratings nosedived to unheard of depths, the President has made it de rigueur to include in her daily schedule a “stabi?lization” gesture like inaugurating a major investment project like the Ford export or attending to the needs of the poor like visiting Mar Roxas’s Farmers Market in Cubao, for instance.

The idea is pump up her ratings or inspire investor confidence to generate jobs.

The inflation rate has almost tripled in barely a year. Pulse Asia says inflation and corruption are the two top national concerns, while health and jobs are top two personal concerns of Filipinos.

Exports have of late slowed down, by 1 percent this February, compared with 9.3-percent growth in 2004 and 20 percent as late as 1999.

Ford officials made a very visually creative presentation of their commitment to Philippine growth and how their project dovetails with GMA’s plan to make the Philippines the alternative (to Thailand) as the automotive manufacturing hub in the region. They paraded hundreds of young people in white shirts and khaki pants at their employ at the plant. They even painted their prototype Mazda SUV and Ford Focus export vehicles with the colors of the Philippine flag, which happily blended with the design of the units.

Conspicuously absent from Monday’s Ford event was the governor of Laguna, Lingning Lazaro, who was recently scolded by the President for imposing a—get this, a “road users” tax on every truck that comes out of major manufacturing facilities in the province.

Laguna probably has the highest concentration of multinational industrial plants in the country and a road users tax—which seemed to some as a toll or an unjust exaction or extortion—seemed a splendidly good idea to cover one’s financial deficit, until President Arroyo threatened to file charges against Governor Lazaro, a former staunch supporter of President Estrada.

Conversation at the Ford event became serious when someone mentioned JPEPA—the Japan-Philippine Economic Partnership Agreement. “It’s a done deal,” says Finance Secretary Cesar Purisima (he was not around, because of the short notice) and who negotiated or was told to negotiate the agreement when he was still the Department of Trade and Industry boss. “It is in the final finishing touches,” adds Trade Secretary Johnny Santos (he was also not around, also because of the short notice).

Basically, under JPEPA, almost anything that the Japanese produce enters the Philippines duty-free, by 2010. And some of what the Philippines makes will also enter Japan duty-free. Duties in Philippine bananas will be cut at the rate of 2 percent a year in 10 years, probably to avoid Japanese indigestion. The Japanese even have imposed a winter rate (20 percent to 18 percent) and a summer rate (10 percent to 8 percent) , probably because indigestion is seasonal in Japan.

JPEPA is not about bananas, however. Toyota’s upscale car, Camry will enter the Philippines tax-free or duty-free, if you may, because of JPEPA.

If JPEPA seems tailor-made for Toyota, don’t blame the most valuable car company in the world. Toyota has brought its now legendary Lexus brand from the US to Japan. Lexus will enter the Philippines duty-free, putting the likes of the German-made BMWs and Mercedes Benzes at a great disadvantage.

With the strong Euro, the German brands are already priced double their Japanese rivals. With duty-free cover, Lexus becomes cheaper by another 30 percent. Already, four of every five vehicles sold in the Philippines is Japanese-made.

If it is any consolation to the American and European carma?kers, GMA is doing something about smuggling.

In 2004, 80,000 units of locally assembled vehicles were sold. The smugglers, however, sold more, 120,000 units. The scuttlebutt in the auto community is that the top five vehicle smugglers have a big person for their patron.

But that again is disgressing from my story.

E-mail me at tonylopez@biznewsasia.com

After two papal visits, things worsened in the Philippines BizNewsAsia

2005-04-10T19:10:00.000+02:00

From BizNewsAsia newsmagazine

Tony Lopez for BizNewsAsia Newsmagazine

After two visits by Pope John Paul II
in 1981 and 1995 in the Philippines,
things didn't improve; they worsened

Now that the world has buried Pope John Paul II and awaits the election of the next pope, it is well to consider exactly what did Karol Josef Wojtyla, the 264th pope leave as a legacy.

His was the longest papacy of the 20th century (26 years; actually 25 years, 11 months and 24 days) and the third longest in the history of the Catholic Church, after St. Peter (34 or 37 years) and Pius IX who ruled for 31 years from 1846 to 1878.

John Paul II's was first digital papal reign and the first media-savvy pope. He gave press interviews (Time got interviews and the magazine happily obliged with 15 cover stories). He is the first pope to have a website. The Vatican website is one of the best in the world for a head state and is in several languages. It is complete in terms of statistics, number of speeches, all the trips and the major speeches, arranged by month and year. The only thing lacking are the pictures which is amazing considering that the pope had his own close-in photographer.

I suspect the Vatican sold the pictures to the Associated Press and other photo agencies. So if you want a good collection of the pope's pictures, contact AP, not the Vatican Press Office. The news of the pope's death was in the Vatican e-mail and texting.

He was the Pilgrim and the People's Pope. He made 104 visits to about 129 countries during more than a quarter century as leader of the 1.1 billion-strong Catholic Church, which unhappily remains a minority in the world ruled by non-Christians and where the globe's fastest-growing economies do not believe in Christianity. He saw more human beings than any other human being. Some 17.6 million saw him during more than 1,160 papal audiences, not to mention the millions more who saw him during his travels. He met with 38 heads of state and had 738 audiences and meetings with heads of state plus 246 with prime ministers.

He beautified and made saints more people than all those beatified and sainted by his predecessors combined. That can be disconcerting because of the so-called papal infallibility. As a result of this policy, Vietnam, a communist country, has more saints (117) than the Philippines (1), can you believe that! The closest to a Filipino saint, Lorenzo Ruiz, was probably not even a Filipino at the time of his martyrdom.

JPI II set a precedent. You can be a saint without need of dying defending the faith. So we infidels still have a chance. One attempted rape victim (Maria Goretti) was declared a saint. Another saint was a convert from Judaism, Edith Stein. Still another was a Franciscan friar, Maximilian Kolbe, who starved himself to death just so an Auschwitz prisoner could live. Does this mean that suicide bombers or Filipinos who starve to death because of poverty but still remaining Catholic could be saints later on? Then the number of saints will hit millions overnight.

The late John Paul II will perhaps become one of the best loved and one of the greatest of popes. He will surely be enshrined as a saint.

He championed freedom and human dignity, declared a preferential option for the poor, fought dictatorships and tyranny, including the Filipino version under Ferdinand Marcos, practiced ecumenism by reaching out to the billions who are non-Catholics or who espoused a different faith and a different ideology, and most important of all, advocated peace in the waning years of the Cold War, in the wake of the collapse of the Soviet Union and communism, and during this Digital Age.

John Paul II, however, couldn't prevent America's invasion of the Iraq which was based on a wrong premise and wrong intelligence, nor the removal of the life support system from Terri Schiavo. Osama bin Laden remains the icon of terrorism and the biggest source of fear of a peace-loving world. And there is North Korea and the enigma that is China, which he was not allowed to visit.

In the Philippines, John Paul II is credited for helping plant the seeds of People Power that eventually toppled the Marcos dictatorship in 1986. The Holy Father visited the Philippines in 1981 and 1995. On both occasions, he beatified a blessed Filipino martyr.

The pontiff's historic visit to the Philippines in February 1981 will be remembered for his subtle criticism of the Marcos regime and his rage against the lopsided distribution of wealth in the country. On Feb. 17, 1981, in Malacañang, the Pope reminded the Filipino strongman: “Even in exceptional situations, one can never justify any violation of the fundamental dignity of the human person or of the basic rights that safeguard this dignity.”

A few days after the Malacanang reception, he visited Bacolod City capital of sugarlandia where fiefdoms and serfdoms were then the norm.

He said: “Injustice reigns when within the same society, some groups hold most of the wealth and power while large strata of the population cannot decently provide for the livelihood of their families even thru long hours of backbraking labor. Injustice reigns when the laws of economic growth and every greater profit determine social relations leaving in poverty and destitution those who have only the work of their hands to offer. The Church will not hesitate to take up the cause of the poor and to become the voice of those who are not listened when they speak up not to demand charity but to ask for justice.”

In the Philippines, Pope John II announced the Church's policy of preferential option for the poor. Yet, the bitter irony is that in the two decades that followed Marcos's fall, the Philippines become poorer, Filipinos became even more impoverished, income maldistribution worsened, and bad governance became the rule of the day under presidents that succeeded the dictator.

In the last 27 years, the Philippines registered the slowest growth rate per capita in the entire Asia, bar none. In the last 25 years, the number of poor Filipinos doubled, from 15 million to more than 30 million today. If you believe surveys, 74% of Filipinos say they are poor. That's 63 million people.

Income maldistribution is the worst in Asia. The richest 10% makes 22 times more income than the poorest 10%. In other Asian countries, the richest 10% makes no more than ten times the poorest 10%. The Philippines has just been ranked second most corrupt country in Asia.

Does God listen to the Filipinos' prayers? Do Philippine leaders listen to God?

Perhaps, the next pope can tell us the answer.

endit

The economic mind of John Paul II from BizNewsAsia

2005-04-10T19:03:00.000+02:00

<

April 11, 2005

The economic mind of John Paul II
From BizNewsAsia newsmagazine

By Antonio S. Lopez Contact: tonylopez@biznewsasia.com

The late Pope John Paul II advocated a so-called “right of economic initiative”, apparently an answer to the debate between private property rights and society's right to regulate property and an individual's right for economic means without being totally dependent on or at the mercy of the government, especially one which has total control of the distribution and production of goods.

Christian tradition, the Pope reminded us, “has never upheld this right (to private property) as absolute and untouchable” but “has always understood it with the broader context of the right common to all to use the goods of the whole of creation.”

He warned of frustration of workers which could lead to emigration. So he was probably warning of the diaspora of overseas Filipino workers (OFWs) who could find jobs in their homeland because either the rich have overwhelming control of the economy or government is too incompetent or corrupt as to create jobs for the poor or empower them to create their own livelihood.

The “right of economic initiative” is one of his three major statements on economic justice. These are the three encyclicals on his social doctrine - the 22,000-word “On Human Work” (“Laborems Exercens”) of Sept. 14, 1981, the 22,780-word “On Social Concerns” (“Sollicitudo Rei Socialis”) of Dec. 30, 1987, and the On the Hundredth Anniversary of Rerun Novarum” (“Centesimus Annus”) of May 1, 1991.

The three are among the 14 encyclicals penned by John Paul II during his nearly 26 years of papacy. These papal teachings dealt on the splendor of truth, the mercy of God, the right to life, Mother Mary, faith and reason, morality, doctrinal questions, the development and underdevelopment of peoples, as well as other social and economic issues.

In “Laborems Exercens”, John Paul II saw human work as an extension of the Genesis. “Be fruitful and multiply, and fill the earth and subdue it.” “Subdue” implies sustained effort or work. Work, he said, is what distinguishes man from other creatures. Work is not a punishment of God. Man becomes a human being by working. Industriousness is a virtue.

Also, work is what makes nations rich. Man should not be treated as an instrument of production but as the effective subject of work and its true maker and creator.

At the same time, capital cannot be separated from or opposed to labor as it is itself the result of human labor. John Paul affirms the right to private property but says this right is subordinated to the right to common use, to the fact that “goods are meant for everyone.”

The principle of common use of goods should govern the proper remuneration of work through a just wage. A just wage is “remuneration which will suffice for establishing and properly maintaining a family and for providing security for its future.” Women can work but not at the expense of their family or when it contradicts or hinders the primary goals of the mission of a mother.

Capital should be at the service of labor and not labor at the service of capital. Unions are legit but not as part of the “class struggle” nor to play politics. Strikes are legitimate “in the proper conditions and with just limits” but “must not endanger essential community services”.

John Paul II condemned both the abolition of private property under Marxism and also “rigid capitalism”.

Meanwhile, “On Social Concerns” is a takeoff from Pope Paul VI's encyclical “Populorum Progressio” of March 26, 1967 which dealt with the “griefs and the anxieties of today”, “especially those who are poor”.

“Populorum Progressio” talked of the “universal purpose of goods”, the theme of development, the use of culture and technology for human liberation, and the insistence on the “most serious duty” incumbent on the more developed nations” to help the “developing countries”.

In his “On Social Concerns”, John Paul II lamented the reality of “an innumerable multitude of people” “who are suffering under the intolerable burden of poverty”. He cried that “the abundance of goods and services available in some parts of the world, particularly in the developed North, is matched in the South by an unacceptable delay, and it is precisely in this geopolitical area that the major part of the human race lives.”

Adding to the “social and economic indices” of underdevelopment are other “even more disturbing” indices.

These are, John Paul II said, “illiteracy, the difficulty or impossibility of obtaining higher education, the inability to share in the building of one's own nation, the various forms of exploitation and of economic, social, political and even religious oppression of the individual and his other rights, discrimination of every type, especially the exceptionally odious form based on difference of race.”

In today's world, the Pope said, “among other rights, the right of economic initiative is often suppressed.”

Yet, he stressed, “it is a right which is important not only for the individual but also for the common good.”

He explained: “…the denial of this right, or its limitation in the name of an alleged 'equality' of everyone in society, diminishes, or in practice absolutely destroys the spirit of initiative, that is to say the creative subjectivity of the citizen. As a consequence, there arises, not so much a true equality as a 'leveling down'. In the place of creative initiative there appears passivity, dependence and submission to the bureaucratic apparatus which, as the only 'ordering' and 'decision-making' body if not also the 'owner' of the entire totality of goods and the means of production, puts everyone in a position of almost absolute dependence, which is similar to the traditional dependence of the worker-proletarian in capitalism. This provokes a sense of frustration or desperation and predisposes people to opt out of national life, impelling many to emigrate and also favoring a form of 'psychological' emigration.”

Pope John Paul II elaborated:
“Such a situation has its consequences also from the point of view of the 'rights of individual nations'. In fact, it often happens that a nation is deprived of its subjectivity, that is to say the “sovereignty” which is its right, in its economic, since in a national community all these dimensions of life are bound together.”

No social group, he reiterated, “for example a political party, has the right to usurp the role of sole leader, since this brings about the destruction of the true subjectivity of society and of the individual citizens, as happens in every form of totalitarianism. In this situation the individual and the people become 'objects', in spite of all declarations to the contrary and verbal assurances.”

In today's world, John Paul said, “there are many other forms of poverty” such as “the denial or the limitation of human rights … the right to religious freedom, the right to share in the building of society, the freedom to organize and to form unions, or to take initiatives in economic matters-do these not impoverish the human person as much as, if not more than, the deprivation of material goods? And is development which does not take into account the full affirmation of these rights really development on the human level?”

endit

The legacy of Pope John Paul II

2005-04-10T18:57:00.000+02:00

To contact the writer, email: tonylopez@biznewsasia.com

The greatest Pope of our time

By Antonio S. Lopez April 11, 2005

One of the most remarkable things about John Paul II is that when he left this world, he had no relatives. Mankind was his family. Mankind mourned when he died on April 2, a Saturday, at the Vatican. Not only did mankind mourn. It wept. Mankind was present at his funeral on April 8. The rich and the powerful. The small and the poor. Young and old. Babies and the aged. They were there. Their tears mingled with cries of joy. Their prayers were made thunderous by their applause. John Paul II, after all, was no ordinary man.

Hundreds of millions saw his funeral on television. Probably a billion heard it on radio. About 300,000 jampacked St. Peter's Square for his last rites. In the days preceding the funeral up to the day itself, four million converged in Rome, lining up for as long as 15 hours just to see his remains for a few seconds. Rome stood still and was closed to vehicular traffic. The air space was closed too. It was the largest funeral in the history of mankind. And the biggest religious gathering of the modern times. The scene was repeated in many Catholic capitals.

Four kings, six queens, the United Nations secretary general, 70 heads of state, 15 religious leaders of various denominations from five continents attended the three-hour ceremony broadcast live on cable TV, an unprecedented assembly of political and religious power and royalty for a papal funeral or for any funeral for that matter. George Bush became the first American president to attend a pope's burial.

All the streets of Rome led to St. Peter's Square. Pilgrims waved flags of many nations. The Philippines, Poland, the United States, Croatia, Lebanon, everywhere. Only the officials of China and North Korea didn't seem to hear of Pope John Paul II's death and burial.

George W. Bush, sat with his wife, Laura. Prime Minister Tony Blair and Prince Charles of Britain, President Aleksander Kwasniewski of Poland, President Mohammad Khatami of Iran and President Moshe Katsav of Israel all attended, along with four kings and six queens and the United Nations secretary general, Kofi Annan. They were seated to the right of John Paul II's coffin.

Behind the coffin, sat more than 100 cardinals, resplendent in their bright, red robes. One of them becomes the pope in the coming weeks.

"None of us can ever forget how, in the last Easter Sunday of his life, the holy father, marked by suffering, came once more to the window of the apostolic palace and one last time gave his blessing," intoned Cardinal Joseph Ratzinger, the dean of the College of Cardinals, who gave the homily.

Pointing up from St. Peter's Square to the window of the papal apartment, he speculated, "We can be sure that our beloved pope is standing today at the window of the Father's house, that he sees and blesses us.". "Yes, bless us, holy father," he added.

The 300,000-strong crowd which filled St. Peter's Square and down to the Tiber River, erupted into an applause. Security was tight. Helicopters flew above the square, breaking the murmur of Latin hymns and prayers.

What is there in John Paul II that he has such a profound impact on humanity, while living and now that he is dead? He is a holy man. He is a saint. He is great.

How is greatness measured?

There are three ways - by looking at his innate qualities, by looking at what he has done for others, and by looking at his impact on mankind.

Karol K. Wojtyla had a lonely childhood. He sought refuge in religion, in Mary and Jesus Christ. Religion was his weapon and he sought to change the world with it, beginning with his country of birth, Poland.

He was born on May 18, 1920 in Wadowice, a tiny city 50 kms from Cracow. He was the second of two sons of Karol Wojtyla and Emilia Kaczorowska. His mother died when he was 9, in 1929. His only brother died when he was 12, in 1932. His father died, a non-commissioned army officer, died when he was 21, in 1941.

As a boy and as a young man, Karol was very athletic. He loved sports, canoeing, mountain climbing. He indulged in literature, poetry, philosophy. He performed in plays. He wrote books. He studied priesthood clandestinely. He saw the war. He saw terror. He saw tyranny in his native Poland. He coped with the twin evils of communism and fascism. These experiences would shape his papacy.

He had his First Holy Communion at 9 and was confirmed at 18. Upon graduation from Marcin Wadowita high school in Wadowice, he enrolled in Cracow's Jagiellonian University in 1938 and in a school for drama.

The Nazi occupation forces closed the university in 1939 and young Karol had to work in a quarry (1940-1944) and then in the Solvay chemical factory to earn his living and to avoid being deported to Germany.

In 1942, he began courses in the clandestine seminary of Cracow, run by Cardinal Adam Stefan Sapieha, archbishop of Cracow. He was one of the pioneers of the "Rhapsodic Theatre," also clandestine.

After the War, he continued his studies in the major seminary of Cracow, and in the faculty of theology of the Jagiellonian University, until his priestly ordination in Cracow on Nov. 1, 1946.

After that, Cardinal Sapieha sent him to Rome where he worked under the guidance of the French Dominican, Garrigou-Lagrange. He finished his doctorate in theology in 1948 with a thesis on the topic of faith in the works of St. John of the Cross. During his vacations, he conducted his pastoral ministry among the Polish immigrants of France, Belgium and Holland.

In 1948, he returned to Poland and was vicar of various parishes in Cracow as well as chaplain for the university students until 1951, when he took up again his studies on philosophy and theology. In 1953 he defended a thesis on "evaluation of the possibility of founding a Catholic ethic on the ethical system of Max Scheler" at Lublin Catholic University. Later he became professor of moral theology and social ethics in the major seminary of Cracow and in the Faculty of Theology of Lublin.

On July 4, 1958, he was appointed auxiliary bishop of Cracow by Pope Pius XII, and was consecrated Sept. 28, 1958, in Wawel Cathedral, Cracow, by Archbishop Baziak.
As the Cardinal Wojtyla, he took part in Vatican Council II with an important contribution to the elaboration of the Constitution Gaudium et spes, Cardinal Wojtyla participated in all the assemblies of the Synod of Bishops.

On Jan. 13, 1964, he was nominated Archbishop of Cracow by Pope Paul VI, who made him a cardinal June 26, 1967.

He became Pope after the eighth balloting on Oct. 16, 1978, a compromise candidate because the two Italian frontrunners wouldn't give way to the other. He was the first Islavic Pope and the first non-Italian in 455 years, from 1523.

When he was introduced at the balcony of his villa to the cheering crowd at St. Peter's Square, Cardinal Karol Wojtyla was an unknown. "I have come," he intoned in Italian, "from a faraway country - far away, but always so close in the communion of faith." "I do not know whether I can express myself in your - in our - Italian language," he paused. "If I make mistakes," he added, beaming suddenly, "you will correct me." The crowd was ecstatic and wild.
"Viva il Papa! Viva il Papa! Viva il Papa!"

Thus began the longest papal reign of the 20th century. It is the third longest in Catholic history, after St. Peter who served for 37 years, and Pius IX who was pope 31 years from 1846 to 1878.

John Paul II went on to become quite possibly the greatest Pope of the modern times. He mesmerized the world by the sheer magic of his personality, the force of his intellect, the logic of philosophy, the integrity of his beliefs, and by his vision of an assertive and combative Catholicism.

He conducted the most massive evangelization program ever undertaken by a pope, using the sheer power of his persona, the awesome influence of the Pope, the universal reach of cable television, and backbraking travel inside Italy and around the globe.

During his 26-year reign, the Berlin Wall would fall, the Soviet Union would disintegrate, 12 Soviet republics would hold an election, Communism would wither, dictatorship would die in his native Poland, and the Cold War would end. Democracy would prosper or at least elections would be held in many countries, from Albania to Bolivia, Bulgaria to Croatia, Lituania to Mauritania, and from the Philippines to Poland.

Many Pope John Paul II for those developments, especially the fall of communism in Poland, the Soviet Union and the rest of Eastern Europe. His June 1979 visit to Poland is widely considered as the detonator that overthrew the military regime installed by the Soviets and the sweeping changes that swept Eastern Europe from 1980 onwards.

In Poland, he repeated his exhortation, “Be not afraid!”. That gave courage to the Poles to organize Solidarity and challenge the sitting government.

“Be not afraid!” became his battlecry. He said it for the first time three times when he became Pope on Oct. 16, 1978. “Follow me” became his summons.

The number of Catholics would increase by a quarter of a million to 1.1 billion by the beginning of Christianity's Third Millennium.

John Paul II was a man of contradictions. He loved to promote democracy yet he himself was a dictator when it came to dogma and in dealing with those whose beliefs were less than Catholic or strayed from his ideas on sin, love and life. He loved media and technology and yet was ever wary of their power.

He raged against poverty yet the number of poor (at least 2.7 billion) remained huge, half of the world' population. In so-called middle-income countries live at least 870 million poor. In Asia, especially in the Philippines, the number of poor people doubled during his reign. The world's rich countries devoted more money for arms and war than the amounts doled out to the poor countries.

John Paul II loved to reach out to those who are non-Catholics yet he was theologically intransigent and confrontational. He talked of good governance yet critics say his many travels made him neglect his housekeeping duties at the Vatican.

He had wit, he had humor, he had energy, he had daring. Yet, at the waning years of his papacy, his voice seemed a feeble cry in the wilderness in a world tormented by globalization, massive poverty, and terrorism.

China was remained a closed society to religion, North Korea harbored nuclear annihilation ambitions, Osama bin Laden shattered the Twin Towers to smithereens, George Bush was able to invade Iraq, and he couldn't stop the removal of the life support system from Terri Schiavo. On the day before he died, he was too weak the papal blessing.

He was so dogmatic he was considered more conservative than his two equally able predecessors, John XXIII and Paul VI.

He was a disciplinarian yet he failed to sanction early on the erring pedophile priests of Boston who sexually abused hundreds of children.

But he was a humble man. He offered unprecedented apology for the errors of the Church and individuals it has wronged, including Galileo. He tried to make amends for sins of omission and commission against Jews, women, indigenous peoples, immigrants and the poor.

John Paul II acknowledged in 1998 the failure of many Catholics to help Jews in the Holocaust, and in 2002 the abuse by priests in sexual scandals that tormented the Catholic Church in America with cases of pedophilia and the ensuing cover-ups by the bishops and Church hierarchy.

This cleansing of conscience is only one part of his extraordinary papacy.

John Paul II was the People's Pope, the Pilgrim Pope. He was known for his travels. He was the first Pope to have a website, the first to utilize the power of media and television for his evangelization.

He saw more human beings than any other human being, with the possible exception of Jesus, the man.

More than 16.7 million participated in the more than 1,600 general audiences held on Wednesdays during his papacy. The number does include all other special audiences and religious ceremonies held. There were more than 8 million pilgrims during the Great Jubilee of the Year 2000 alone. He saw millions more during pastoral visits inside Italy and throughout the world. He also met with heads of state during 38 official visits and in 690 audiences and meetings and prime ministers during 226 audiences.

He made 104 visits to 129 countries, 146 visits in Italy outside Rome. He delivered 3,288 speeches. He issued 14 encyclicals, the most by a pope, 14 apostolic exhortations, 11 apostolic constitutions, 45 apostolic letters, and 30 motu propio letters.

John Paul was critical of totaliarianism, capitalism, human rights violations, the disparity between the rich and the poor, and the North-South divide. He was steadfast to the end against birth control, abortion, marriage for priests, and ordination of women.

He stressed the dignity of man and his right for freedom. He was the spokesman of human rights and asserted the Church's preferential option for the poor.

In his first papal visit to Poland, in 1979, John Paul II chastised the officially atheistic Communist government for treating people "merely as a means of production." In Brazil, he scolded the ruling military junta. "Violence," he preached , "kills what it intends to create."

In the Philippines, in February 1981, the Pope rerminded Ferdinand Marcos: “Even in exceptional situations, one can never justify any violation of the fundamental dignity of the human person or of the basic rights that safeguard this dignity.” In Bacolod, a few days later, he said: “The Church will not hesitate to take up the cause of the poor and to become the voice of those who are not listened when they speak up not to demand charity but to ask for justice.”

In Ireland, he confronted zealots of the Irish Republican Army and their Protestant enemies. "On my knees I beg you to turn away from the path of violence and to return to the ways of peace," he pleaded.

In Japan, he intoned: "To remember Hiroshima is to abhor nuclear war. To remember Hiroshima is to commit oneself to peace."

In Auschwitz, he wondered, "How far can cruelty go?"

At the United Nations in New York and he pleaded peace for "all the men and women living on this planet."

Pope John Paul II's thoughts and beliefs are contained in his 14 encyclicals. They bear his philosophy and background, having grown up and served as a prelate in a communist country. This may explain his combativeness when it comes to dogma and his intransigence in the light of rapid and sweeping changes in values of a modernizing world such as the sexual revolution, the appeal of Marxism to the young, and confusion over sex that has given rise to homosexuality and same-sex marriages.

Three full encyclicals are devoted to each Person of the Blessed Trinity.

In the first encyclical, the 24,000-word “Redemptor Hominis” (1979), Jesus Christ, is the centerpiece and center Person of all his subsequent teaching. Even the terms, redemptor and hominis pervaded all of Pope John Paul II's teachings and writings. He is convinced it is only in Christ that man can learn the truth about man and only by following Christ's example that one can live the truth about the human person. The caring of human life springs from the love of Christ. In this encyclical, John Paul II warned of an era of growing fear and weapons of war that raised the specter of “unimaginable self-destruction”.

“Dives in Misericordia” (1980) teaches about God the Father and the nature of our Father's love and life; “Dominum et Vivificantem” (1986) teaches about the central and active agency of the Holy Spirit.

Another full encyclical on the Blessed Virgin Mary, “Redemptoris Mater” (1987), is a profound and rich exposition of Lumen Gentium, chapter 8, nos. 58-69. This was followed by an apostolic exhortation on St. Joseph, “Redemptoris Custos” (1989.

Four other major encyclicals are on topics of supreme importance: the missionary nature of the Church, “Redemptoris Missio” (1990) which, in John Paul II's own words, sets forth the main problems facing evangelization, identifies by name the obstacles of evangelization and clarifies certain concepts often misused in journalistic language

“Veritais Splendor” (1993) is considered the moral masterpiece on fundamental moral theology. "The specific purpose of the present encyclical is this: to set forth, with regard to the problem being discussed, the principles of a moral teaching based on Sacred Scripture and the living Apostolic Tradition, and at the same time to shed light on the presuppositions and consequences of the dissent which that teaching has met" . This is a statement of moral theory for reflection and discussion on issues like conscience, reason, freedom and morality.

“Evanvelicum Vitae” (1995) is the formal teaching on life and the life issues, especially abortion and euthanasia which he says are “crimes which no human law can legitimize”. He condemns contraception, any intervention with the human embryo, and the death penalty.

“The mere probability that a human person is involved would suffice to justify an absolutely clear prohibition of any intervention aimed at killing a human embryo,” he explained. “Abortion willed as an end or as a means always constitutes a grave moral disorder,” he declares.

He makes exception to euthanasia “in such situations when death is clearly imminent and inevitable” and thus, “one can in conscience refuse forms of treatment that would only secure a precarious and burdensome prolongation of life, so long as the normal care due to the sick person in similar cases is not interrupted.”

The Pope denounces the “culture of death” and promotes the culture of life.

Also in 1995, the same Pope issued a major and extensive encyclical on ecumenism, “Ut Unum Sint”.

John Paul II argues magnificently in three full encyclicalson social justice: “Laborem Exercens” (1981), “Sollicitudo Rei Socialis” (1987), and the magisterial summary of 100 years of Catholic social teaching, together with present analysis and future indications, in “Centesimus Annus” (1991). (See separate story, “The Economic Mind of Pope John Paul II”.

John Paul II's 13th encyclical, “Fides et Ratio” (“Faith and Reason”, 1998) marked his 20th year as Pope. He argues that both faith and reason are needed in the search for truth.

There are three Apostolic Letters are said to be of profound importance, dealing as they do on moral confusion and social chaos. “Salvifici Doloris” (1984) is about the Christian understanding of suffering, which if understood could arrest the advance of assisted suicide. “Mulieris Dignitatem” (1988) details the dignity and vocation of women, along with the Pope's personal Letter to Families (1994) which summarizes central themes of his whole priestly and papal apostolate.

The Apostolic Exhortation, “Ex Corde Ecclesiae” (1990), not only recapitulates the relevant universal law of the Church but offers as well ways and means to provide a juridic link with Catholic higher education.

Of particular doctrinal importance is the Apostolic Letter On Reserving Priestly Ordination to Men Alone (“Ordinatio Sacerdotalis” of May 1994.

During Pope John Paul's pontificate, the 16-year recodification of the universal law of the Western Church was promulgated in the “Codex Iuris Canonici” (1983). For the first time too, a complete codification of the canon laws of the Eastern Church was promulgated, “Codex Canonum Ecclesiarum Orientalium” (1990). These two codes fulfilled a request and requirement of the Fathers of Vatican Council II, say experts.

John Paul II gives generous credit to Cardinal Joseph Ratzinger for the publication of the “Catechism of the Catholic Church” (1992). The Holy Father views the Catechism as indispensable "in order that all the richness of the teaching of the Church following the Second Vatican Council could be preserved in a new synthesis and be given a new direction."

The Pope also tackled the Declaration on Euthanasia (May 1980), the Instruction on Infant Baptism (October 1980) and the letter on The Minister of the Eucharist (August 1983), as well the Theology of Liberation and On Christian Freedom and Liberation.

The Church's Letter to the Bishops of the Catholic Church on the Pastoral Care of Homosexual Persons (October 1986) is said to be the most complete and concise treatment of that question and its implications in Catholic history.

The Church instruction, Donum Vitae (February 1987), on bioethics and bioethical issues, presents clearly the moral status of the human embryo and all the needed distinctions and moral guidance necessary for resolving pressing and future questions.

endit

BiznewsAsia email: tonylopez@biznewsasia.com

2005-04-10T18:55:00.000+02:00

To contact Tony Lopez and to contact BizNewsAsia weekly newsmagazine from the Philippines, pls use the following email address:

tonylopez@biznewsasia.com

John Paul II: The greatest Pope of our time

2005-04-10T18:53:00.000+02:00

The greatest Pope of our time

By Antonio S. Lopez April 11, 2005

One of the most remarkable things about John Paul II is that when he left this world, he had no relatives. Mankind was his family. Mankind mourned when he died on April 2, a Saturday, at the Vatican. Not only did mankind mourn. It wept. Mankind was present at his funeral on April 8. The rich and the powerful. The small and the poor. Young and old. Babies and the aged. They were there. Their tears mingled with cries of joy. Their prayers were made thunderous by their applause. John Paul II, after all, was no ordinary man.

Hundreds of millions saw his funeral on television. Probably a billion heard it on radio. About 300,000 jampacked St. Peter's Square for his last rites. In the days preceding the funeral up to the day itself, four million converged in Rome, lining up for as long as 15 hours just to see his remains for a few seconds. Rome stood still and was closed to vehicular traffic. The air space was closed too. It was the largest funeral in the history of mankind. And the biggest religious gathering of the modern times. The scene was repeated in many Catholic capitals.

Four kings, six queens, the United Nations secretary general, 70 heads of state, 15 religious leaders of various denominations from five continents attended the three-hour ceremony broadcast live on cable TV, an unprecedented assembly of political and religious power and royalty for a papal funeral or for any funeral for that matter. George Bush became the first American president to attend a pope's burial.

All the streets of Rome led to St. Peter's Square. Pilgrims waved flags of many nations. The Philippines, Poland, the United States, Croatia, Lebanon, everywhere. Only the officials of China and North Korea didn't seem to hear of Pope John Paul II's death and burial.

George W. Bush, sat with his wife, Laura. Prime Minister Tony Blair and Prince Charles of Britain, President Aleksander Kwasniewski of Poland, President Mohammad Khatami of Iran and President Moshe Katsav of Israel all attended, along with four kings and six queens and the United Nations secretary general, Kofi Annan. They were seated to the right of John Paul II's coffin.

Behind the coffin, sat more than 100 cardinals, resplendent in their bright, red robes. One of them becomes the pope in the coming weeks.

"None of us can ever forget how, in the last Easter Sunday of his life, the holy father, marked by suffering, came once more to the window of the apostolic palace and one last time gave his blessing," intoned Cardinal Joseph Ratzinger, the dean of the College of Cardinals, who gave the homily.

Pointing up from St. Peter's Square to the window of the papal apartment, he speculated, "We can be sure that our beloved pope is standing today at the window of the Father's house, that he sees and blesses us.". "Yes, bless us, holy father," he added.

The 300,000-strong crowd which filled St. Peter's Square and down to the Tiber River, erupted into an applause. Security was tight. Helicopters flew above the square, breaking the murmur of Latin hymns and prayers.

What is there in John Paul II that he has such a profound impact on humanity, while living and now that he is dead? He is a holy man. He is a saint. He is great.

How is greatness measured?

There are three ways - by looking at his innate qualities, by looking at what he has done for others, and by looking at his impact on mankind.

Karol K. Wojtyla had a lonely childhood. He sought refuge in religion, in Mary and Jesus Christ. Religion was his weapon and he sought to change the world with it, beginning with his country of birth, Poland.

He was born on May 18, 1920 in Wadowice, a tiny city 50 kms from Cracow. He was the second of two sons of Karol Wojtyla and Emilia Kaczorowska. His mother died when he was 9, in 1929. His only brother died when he was 12, in 1932. His father died, a non-commissioned army officer, died when he was 21, in 1941.

As a boy and as a young man, Karol was very athletic. He loved sports, canoeing, mountain climbing. He indulged in literature, poetry, philosophy. He performed in plays. He wrote books. He studied priesthood clandestinely. He saw the war. He saw terror. He saw tyranny in his native Poland. He coped with the twin evils of communism and fascism. These experiences would shape his papacy.

He had his First Holy Communion at 9 and was confirmed at 18. Upon graduation from Marcin Wadowita high school in Wadowice, he enrolled in Cracow's Jagiellonian University in 1938 and in a school for drama.

The Nazi occupation forces closed the university in 1939 and young Karol had to work in a quarry (1940-1944) and then in the Solvay chemical factory to earn his living and to avoid being deported to Germany.

In 1942, he began courses in the clandestine seminary of Cracow, run by Cardinal Adam Stefan Sapieha, archbishop of Cracow. He was one of the pioneers of the "Rhapsodic Theatre," also clandestine.

After the War, he continued his studies in the major seminary of Cracow, and in the faculty of theology of the Jagiellonian University, until his priestly ordination in Cracow on Nov. 1, 1946.

After that, Cardinal Sapieha sent him to Rome where he worked under the guidance of the French Dominican, Garrigou-Lagrange. He finished his doctorate in theology in 1948 with a thesis on the topic of faith in the works of St. John of the Cross. During his vacations, he conducted his pastoral ministry among the Polish immigrants of France, Belgium and Holland.

In 1948, he returned to Poland and was vicar of various parishes in Cracow as well as chaplain for the university students until 1951, when he took up again his studies on philosophy and theology. In 1953 he defended a thesis on "evaluation of the possibility of founding a Catholic ethic on the ethical system of Max Scheler" at Lublin Catholic University. Later he became professor of moral theology and social ethics in the major seminary of Cracow and in the Faculty of Theology of Lublin.

On July 4, 1958, he was appointed auxiliary bishop of Cracow by Pope Pius XII, and was consecrated Sept. 28, 1958, in Wawel Cathedral, Cracow, by Archbishop Baziak.
As the Cardinal Wojtyla, he took part in Vatican Council II with an important contribution to the elaboration of the Constitution Gaudium et spes, Cardinal Wojtyla participated in all the assemblies of the Synod of Bishops.

On Jan. 13, 1964, he was nominated Archbishop of Cracow by Pope Paul VI, who made him a cardinal June 26, 1967.

He became Pope after the eighth balloting on Oct. 16, 1978, a compromise candidate because the two Italian frontrunners wouldn't give way to the other. He was the first Islavic Pope and the first non-Italian in 455 years, from 1523.

When he was introduced at the balcony of his villa to the cheering crowd at St. Peter's Square, Cardinal Karol Wojtyla was an unknown. "I have come," he intoned in Italian, "from a faraway country - far away, but always so close in the communion of faith." "I do not know whether I can express myself in your - in our - Italian language," he paused. "If I make mistakes," he added, beaming suddenly, "you will correct me." The crowd was ecstatic and wild.
"Viva il Papa! Viva il Papa! Viva il Papa!"

Thus began the longest papal reign of the 20th century. It is the third longest in Catholic history, after St. Peter who served for 37 years, and Pius IX who was pope 31 years from 1846 to 1878.

John Paul II went on to become quite possibly the greatest Pope of the modern times. He mesmerized the world by the sheer magic of his personality, the force of his intellect, the logic of philosophy, the integrity of his beliefs, and by his vision of an assertive and combative Catholicism.

He conducted the most massive evangelization program ever undertaken by a pope, using the sheer power of his persona, the awesome influence of the Pope, the universal reach of cable television, and backbraking travel inside Italy and around the globe.

During his 26-year reign, the Berlin Wall would fall, the Soviet Union would disintegrate, 12 Soviet republics would hold an election, Communism would wither, dictatorship would die in his native Poland, and the Cold War would end. Democracy would prosper or at least elections would be held in many countries, from Albania to Bolivia, Bulgaria to Croatia, Lituania to Mauritania, and from the Philippines to Poland.

Many Pope John Paul II for those developments, especially the fall of communism in Poland, the Soviet Union and the rest of Eastern Europe. His June 1979 visit to Poland is widely considered as the detonator that overthrew the military regime installed by the Soviets and the sweeping changes that swept Eastern Europe from 1980 onwards.

In Poland, he repeated his exhortation, “Be not afraid!”. That gave courage to the Poles to organize Solidarity and challenge the sitting government.

“Be not afraid!” became his battlecry. He said it for the first time three times when he became Pope on Oct. 16, 1978. “Follow me” became his summons.

The number of Catholics would increase by a quarter of a million to 1.1 billion by the beginning of Christianity's Third Millennium.

John Paul II was a man of contradictions. He loved to promote democracy yet he himself was a dictator when it came to dogma and in dealing with those whose beliefs were less than Catholic or strayed from his ideas on sin, love and life. He loved media and technology and yet was ever wary of their power.

He raged against poverty yet the number of poor (at least 2.7 billion) remained huge, half of the world' population. In so-called middle-income countries live at least 870 million poor. In Asia, especially in the Philippines, the number of poor people doubled during his reign. The world's rich countries devoted more money for arms and war than the amounts doled out to the poor countries.

John Paul II loved to reach out to those who are non-Catholics yet he was theologically intransigent and confrontational. He talked of good governance yet critics say his many travels made him neglect his housekeeping duties at the Vatican.

He had wit, he had humor, he had energy, he had daring. Yet, at the waning years of his papacy, his voice seemed a feeble cry in the wilderness in a world tormented by globalization, massive poverty, and terrorism.

China was remained a closed society to religion, North Korea harbored nuclear annihilation ambitions, Osama bin Laden shattered the Twin Towers to smithereens, George Bush was able to invade Iraq, and he couldn't stop the removal of the life support system from Terri Schiavo. On the day before he died, he was too weak the papal blessing.

He was so dogmatic he was considered more conservative than his two equally able predecessors, John XXIII and Paul VI.

He was a disciplinarian yet he failed to sanction early on the erring pedophile priests of Boston who sexually abused hundreds of children.

But he was a humble man. He offered unprecedented apology for the errors of the Church and individuals it has wronged, including Galileo. He tried to make amends for sins of omission and commission against Jews, women, indigenous peoples, immigrants and the poor.

John Paul II acknowledged in 1998 the failure of many Catholics to help Jews in the Holocaust, and in 2002 the abuse by priests in sexual scandals that tormented the Catholic Church in America with cases of pedophilia and the ensuing cover-ups by the bishops and Church hierarchy.

This cleansing of conscience is only one part of his extraordinary papacy.

John Paul II was the People's Pope, the Pilgrim Pope. He was known for his travels. He was the first Pope to have a website, the first to utilize the power of media and television for his evangelization.

He saw more human beings than any other human being, with the possible exception of Jesus, the man.

More than 16.7 million participated in the more than 1,600 general audiences held on Wednesdays during his papacy. The number does include all other special audiences and religious ceremonies held. There were more than 8 million pilgrims during the Great Jubilee of the Year 2000 alone. He saw millions more during pastoral visits inside Italy and throughout the world. He also met with heads of state during 38 official visits and in 690 audiences and meetings and prime ministers during 226 audiences.

He made 104 visits to 129 countries, 146 visits in Italy outside Rome. He delivered 3,288 speeches. He issued 14 encyclicals, the most by a pope, 14 apostolic exhortations, 11 apostolic constitutions, 45 apostolic letters, and 30 motu propio letters.

John Paul was critical of totaliarianism, capitalism, human rights violations, the disparity between the rich and the poor, and the North-South divide. He was steadfast to the end against birth control, abortion, experimenting with the human embryo, euthansia, marriage for priests, and ordination of women.

He stressed the dignity of man and his right for freedom. He was the spokesman of human rights and asserted the Church's preferential option for the poor.

In his first papal visit to Poland, in 1979, John Paul II chastised the officially atheistic Communist government for treating people "merely as a means of production." In Brazil, he scolded the ruling military junta. "Violence," he preached , "kills what it intends to create."

In the Philippines, in February 1981, the Pope rerminded Ferdinand Marcos: “Even in exceptional situations, one can never justify any violation of the fundamental dignity of the human person or of the basic rights that safeguard this dignity.” In Bacolod, a few days later, he said: “The Church will not hesitate to take up the cause of the poor and to become the voice of those who are not listened when they speak up not to demand charity but to ask for justice.”

In Ireland, he confronted zealots of the Irish Republican Army and their Protestant enemies. "On my knees I beg you to turn away from the path of violence and to return to the ways of peace," he pleaded.

In Japan, he intoned: "To remember Hiroshima is to abhor nuclear war. To remember Hiroshima is to commit oneself to peace."

In Auschwitz, he wondered, "How far can cruelty go?"

At the United Nations in New York and he pleaded peace for "all the men and women living on this planet."

Pope John Paul II's thoughts and beliefs are contained in his 14 encyclicals. They bear his philosophy and background, having grown up and served as a prelate in a communist country. This may explain his combativeness when it comes to dogma and his intransigence in the light of rapid and sweeping changes in values of a modernizing world such as the sexual revolution, the appeal of Marxism to the young, and confusion over sex that has given rise to homosexuality and same-sex marriages.

Three full encyclicals are devoted to each Person of the Blessed Trinity.

In the first encyclical, the 24,000-word “Redemptor Hominis” (1979), Jesus Christ, is the centerpiece and center Person of all his subsequent teaching. Even the terms, redemptor and hominis pervaded all of Pope John Paul II's teachings and writings. He is convinced it is only in Christ that man can learn the truth about man and only by following Christ's example that one can live the truth about the human person. The caring of human life springs from the love of Christ. In this encyclical, John Paul II warned of an era of growing fear and weapons of war that raised the specter of “unimaginable self-destruction”.

“Dives in Misericordia” (1980) teaches about God the Father and the nature of our Father's love and life; “Dominum et Vivificantem” (1986) teaches about the central and active agency of the Holy Spirit.

Another full encyclical on the Blessed Virgin Mary, “Redemptoris Mater” (1987), is a profound and rich exposition of Lumen Gentium, chapter 8, nos. 58-69. This was followed by an apostolic exhortation on St. Joseph, “Redemptoris Custos” (1989.

Four other major encyclicals are on topics of supreme importance: the missionary nature of the Church, “Redemptoris Missio” (1990) which, in John Paul II's own words, sets forth the main problems facing evangelization, identifies by name the obstacles of evangelization and clarifies certain concepts often misused in journalistic language

“Veritais Splendor” (1993) is considered the moral masterpiece on fundamental moral theology. "The specific purpose of the present encyclical is this: to set forth, with regard to the problem being discussed, the principles of a moral teaching based on Sacred Scripture and the living Apostolic Tradition, and at the same time to shed light on the presuppositions and consequences of the dissent which that teaching has met" . This is a statement of moral theory for reflection and discussion on issues like conscience, reason, freedom and morality.

“Evanvelicum Vitae” (1995) is the formal teaching on life and the life issues, especially abortion and euthanasia which he says are “crimes which no human law can legitimize”. He condemns contraception, any intervention with the human embryo, and the death penalty.

“The mere probability that a human person is involved would suffice to justify an absolutely clear prohibition of any intervention aimed at killing a human embryo,” he explained. “Abortion willed as an end or as a means always constitutes a grave moral disorder,” he declares.

He makes exception to euthanasia “in such situations when death is clearly imminent and inevitable” and thus, “one can in conscience refuse forms of treatment that would only secure a precarious and burdensome prolongation of life, so long as the normal care due to the sick person in similar cases is not interrupted.”

The Pope denounces the “culture of death” and promotes the culture of life.

Also in 1995, the same Pope issued a major and extensive encyclical on ecumenism, “Ut Unum Sint”.

John Paul II argues magnificently in three full encyclicalson social justice: “Laborem Exercens” (1981), “Sollicitudo Rei Socialis” (1987), and the magisterial summary of 100 years of Catholic social teaching, together with present analysis and future indications, in “Centesimus Annus” (1991). (See separate story, “The Economic Mind of Pope John Paul II”.

John Paul II's 13th encyclical, “Fides et Ratio” (“Faith and Reason”, 1998) marked his 20th year as Pope. He argues that both faith and reason are needed in the search for truth.

There are three Apostolic Letters are said to be of profound importance, dealing as they do on moral confusion and social chaos. “Salvifici Doloris” (1984) is about the Christian understanding of suffering, which if understood could arrest the advance of assisted suicide. “Mulieris Dignitatem” (1988) details the dignity and vocation of women, along with the Pope's personal Letter to Families (1994) which summarizes central themes of his whole priestly and papal apostolate.

The Apostolic Exhortation, “Ex Corde Ecclesiae” (1990), not only recapitulates the relevant universal law of the Church but offers as well ways and means to provide a juridic link with Catholic higher education.

Of particular doctrinal importance is the Apostolic Letter On Reserving Priestly Ordination to Men Alone (“Ordinatio Sacerdotalis” of May 1994.

During Pope John Paul's pontificate, the 16-year recodification of the universal law of the Western Church was promulgated in the “Codex Iuris Canonici” (1983). For the first time too, a complete codification of the canon laws of the Eastern Church was promulgated, “Codex Canonum Ecclesiarum Orientalium” (1990). These two codes fulfilled a request and requirement of the Fathers of Vatican Council II, say experts.

John Paul II gives generous credit to Cardinal Joseph Ratzinger for the publication of the “Catechism of the Catholic Church” (1992). The Holy Father views the Catechism as indispensable "in order that all the richness of the teaching of the Church following the Second Vatican Council could be preserved in a new synthesis and be given a new direction."

The Pope also tackled the Declaration on Euthanasia (May 1980), the Instruction on Infant Baptism (October 1980) and the letter on The Minister of the Eucharist (August 1983), as well the Theology of Liberation and On Christian Freedom and Liberation.

The Church's Letter to the Bishops of the Catholic Church on the Pastoral Care of Homosexual Persons (October 1986) is said to be the most complete and concise treatment of that question and its implications in Catholic history.

The Church instruction, Donum Vitae (February 1987), on bioethics and bioethical issues, presents clearly the moral status of the human embryo and all the needed distinctions and moral guidance necessary for resolving pressing and future questions.

endit

When Philippine statistics lie

2005-03-18T10:37:00.000+01:00

From BiznewsAsia Newsmagazine
Contact Tony Lopez at tonylopez@biznewsasia.com

March 18, 2005

When statistics lie
By Tony Lopez

The economy is growing ro bustly, unemployment is going down and poverty has declined. Right?

Not exactly.

A number of prominent economists have questioned the way the government measures economic growth, unemployment and poverty incidence using data that are inaccurate and methods that are inconsistent, if not flawed.

The debates on questionable government statistics erupted at the annual meeting on Friday of the Philippine Economic Society. The conclusion from these debates is you don’t know for sure whether the economy is strong or weak, how many are unemployed, and whether people’s income is rising or not.

Former economic planning minister Gerardo Sicat says the data being used to measure the production of agriculture, services and industry as components of the gross domestic product are either old or weak.

And yet, agriculture and services have been portrayed as among the strongest sectors of the economy in the past two years while industry has been recovering.

Agriculture grew by 4.9 percent in 2004, powered by first-quarter growth of 8.1 percent and third-quarter growth of 7.3 percent during the year. Services grew by 7.3 percent in 2004 on top of the 5.8-percent growth in 2003. Industry grew by 5.3 percent last year and by 3.8 percent in 2003.

Could it be possible that these agriculture and services are not doing as well as government statisticians claim? And since these two sectors have powered the economy in 2004 to a growth rate of 6.1 percent, the highest in 15 years, could it be that the economy didn’t grow that fast?

“Agricultural data have been the weakest,” asserts Sicat, because the function of agriculture data gathering was devolved to the local government units, whose competence to handle the task is questionable. Industrial data, he adds, “are suspect.”

What makes agricultural data suspect is that it is the local governments like the provinces and cities and towns that are now gathering the data. The job used to be handled by the Department of Agriculture and its field workers.

How can you explain that although the GDP has been growing, people’s real income has been declining and the ranks of the unemployed keep swelling?

If the economy is indeed growing that fast, then jobs must be created and incomes must rise. When you produce (that is, growth), you must be able to sell what you are producing. But you cannot sell unless people have income. And you cannot claim you are exporting what you are producing, since in recent years exports have been slowing down.

Unemployment figures are also suspect. Unemployment has declined, thanks to a definition by the Arroyo administration of who is unemployed and who is unemployable. As a result, the National Statistics Office on its website uses two sets of labor-force data—one using the old definition of unemployment and the other using the new definition, which of course lowers unemployment by about four percentage points.

Under the new system, jobless people are asked: “Were you available for work the past week?” You answer either yes or no. If you answer no, then you are not counted as part of the labor force, since one requirement for being included in the labor force statistics is that you must be “available” for work.

But former Economic Planning Secretary Dante Canlas says this is not the way to do it. He cites recommendations of the International Labor Organization. In applying the criteria of availability, additional questions must be asked, he suggests, depending on the local circumstances. Such questions may be based on notions like the present desire for work and previous work experience, willingness to take up work for wage or salary at locally prevailing terms, or readiness to undertake self-employment activity given the necessary resources and facilities.

Meanwhile, by government's new definition, poverty incidence is falling and therefore, fewer Filipinos are poor. And this, the Asian Development Bank has been questioning.

The government has been using two methods—one for 1992 and another for 2003—in measuring poverty. In the 1992 revision poverty line was based on or limited to “total basic expenditure.” Only food was included and presumably, the poor do not bother themselves buying or paying for other essentials like cellular cards or cell phones, for instance. This 1992 revision was applied to 1991 and retroactively to results of the 1985 and 1988 Family Income and Expenditure Survey (FIES).

In 2003 the government again revised the method. It began using provincial prices rather than regional prices in costing regional food baskets. And it changed what was in the food basket. For instance, it uses “ordinary” rice instead of special rice, since presumably the poor do not have the taste for, say, Wagwag or Sinandomeng.

The government applied the 2003 method retroactively to the 1997 and 2000 data. Under the old method, the poverty incidence of families in 2000 was 33.7 percent. In the 2003 method this declined to 28.4 percent and even this was even revised to 24.7 percent for 2003 poverty incidence.

If you are poor, according to the government, you are not supposed to drink beer or Ginebra nor smoke nor buy furniture. The poor do, but if the government finds you out, you are removed from the ranks of the poor.

ADB says official poverty lines are inconsistent across time and among regions. In 1988 the official poverty line was P4,777. If the effect of prices were inputted to compute the equivalent of P4,777 in the year 2000, the amount would be P14,136. But the government uses a figure lower by P2,500, which is P11,605.

The ADB says the FIES also excludes squatters in its surveys. There are no squatters in Metro Manila (there are at least half a million families who are squatters in the national capital). Yet, they don’t exist, according to the FIES. Since they don’t exist, less than 6 percent of families in Metro Manila are poor. This results in understatement of poverty.

Bangko Sentral Governor "Say" Tetangco

2005-03-18T10:23:00.000+01:00

From BizNewsAsia Newsmagazine, Manila, Philippines
Contact Tony Lopez at tonylopez@biznewsasia.com

n February 14 Amando M. Tetangco Jr. was nominated the next governor of the Bangko Sentral ng Pilipinas. It was a gift of love from President Gloria Macapagal Arroyo who made the announcement before a group of visiting Japanese businessmen in Malacañang. He takes over from Governor Rafael Buenaventura whose six-year term ends on July 3.

At 52, Tetangco is the third youngest governor of the central bank, after Jaime Laya who was 42 when he took the post and Jose Cuisia, who was 46.

Though named after his father, Amando Sr., his parents called him “Say,” after the hugely popular populist President Ramon Magsaysay. Just like the well-loved Magsaysay, the hope of many is that Governor Say Tetangco will make a difference.

He has hobnobbed with the world’s top commercial and central bankers and knows intimately the imperial gods of the World Bank, the International Monetary Fund and the Manila-based Asian Development Bank.

Tetangco, an economist by training and a monetarist by practice, will dish out his own set of policies appropriate for the country’s level of dollar income, foreign debt, the widening disparity between the rich and the poor and the country’s state of development.

He went to Ateneo de Manila for his economics degree, cum laude and to the University of Wisconsin, on a central bank scholarship, for his master’s degree in public policy and administration. He is a veteran central banker, having spent 31 years at the central bank. Outside of a short stint of one year at SGV and Co. as an economist and researcher, he has known no other job except central banking.

“Say is better known abroad,” says outgoing Governor Rafael Buenaventura. “He represents continuity of reforms” and “has been involved in helping steer the economy during various crisis periods.”

Buenaventura says Tetangco “is one of the principal architects of the reforms the BSP is spearheading in the development of the domestic capital market, strengthening the banking sector and amending the BSP charter to make it more responsive to the demands of a changing environment.”

“I am very pleased with his nomination,” chimes in Finance Secretary Cesar Purisima. “I was impressed with his maturity, keen knowledge of global monetary issues, and his calm demeanor… Tetangco is a testament to the stewardship of Governor Buenaˇventura and his success in building a strong management team at the BSP… I look forward to working closely with him.”

“Tetangco meets the criteria of integrity, independence and credibility,” adds industrialist Raul T. Concepcion.

His job, Tetangco says, is price stability. But price stability has not resulted in higher real income for Filipinos. While economic growth has risen in the past three years, unemployment is climbing and poverty is worsening, rather than improving.

In 1995, the Bangko Sentral was made to focus on price stability. It was prohibited from financing the national government’s budget deficit.

Since 1995, in the last 10 years, Philippine economic growth has been slowest in Asia, bar none. At a little over 1 percent a year, per capita economic growth is not enough to overcome massive poverty, the worst in the region. Growth has also not propelled job creation. And income distribution is so lopsided no other country in Asia is in a worst situation.

Real growth in the value of domestic goods and services or GDP averaged 3.7 percent during 1998 to 2004. Minus the effect of 2.3 percent annual population growth rate, average GDP growth during the seven-year period was only 1.4 percent. This is the slowest per capita growth in Asia.

Yet during the same seven years, inflation was contained, slowing down from a hefty 9.7 percent in 1998 to 6.7 percent in 1999, 4.4 percent in 2000, back to 6.15 in 2001, then slumping to a historic low 3 percent in 2002 and 2003, before preparing to roar at 5.5 percent in 2004. The average during those seven years: 5.49 percent. In the previous seven years, from 1991 to 1997, inflation averaged 9.34 percent. In the eighties inflation was averaging 14 percent.

In absolute numbers, however, the number of poor keeps swelling. It was 30.85 million in the 2000, according to ADB’s estimates, about 33.7 percent of the population. But surveys last year indicated a self-rated poverty of 74 percent. Nearly two-thirds of the population says they are poor. That’s three times the official poverty incidence.

In 2004 one million Filipinos lost their jobs or joined the jobless, one of the greatest job losses in recent memory. Unemployment rose to 11.3 percent, with the number of people without jobs increasing to 4.03 million in January 2005 from only 3.09 million in the same month last year. This was in 2004, when GDP growth was 6.1 percent—the highest in 15 years. In October 2004 unemployment was only 10.9 percent.

Item: Is it true Philippine National Bank President Loˇrenzo Tan is leaving the bank? The Northwestern University-educated Tan has been offered a position in the senior Asian team and as CEO of a foreign firm. The job is less political and presents a new challenge to him. It seems Yayie has had a difference of opinion with PNB’s largest private stockholder, Kapitan Lucio Tan who has his own unique style of banking.

Bangko Sentral Governor Say Tetangco

2005-03-18T10:19:00.000+01:00

n February 14 Amando M. Tetangco Jr. was nominated the next governor of the Bangko Sentral ng Pilipinas. It was a gift of love from President Gloria Macapagal Arroyo who made the announcement before a group of visiting Japanese businessmen in Malacañang. He takes over from Governor Rafael Buenaventura whose six-year term ends on July 3.

At 52, Tetangco is the third youngest governor of the central bank, after Jaime Laya who was 42 when he took the post and Jose Cuisia, who was 46.

Though named after his father, Amando Sr., his parents called him “Say,” after the hugely popular populist President Ramon Magsaysay. Just like the well-loved Magsaysay, the hope of many is that Governor Say Tetangco will make a difference.

He has hobnobbed with the world’s top commercial and central bankers and knows intimately the imperial gods of the World Bank, the International Monetary Fund and the Manila-based Asian Development Bank.

Tetangco, an economist by training and a monetarist by practice, will dish out his own set of policies appropriate for the country’s level of dollar income, foreign debt, the widening disparity between the rich and the poor and the country’s state of development.

He went to Ateneo de Manila for his economics degree, cum laude and to the University of Wisconsin, on a central bank scholarship, for his master’s degree in public policy and administration. He is a veteran central banker, having spent 31 years at the central bank. Outside of a short stint of one year at SGV and Co. as an economist and researcher, he has known no other job except central banking.

“Say is better known abroad,” says outgoing Governor Rafael Buenaventura. “He represents continuity of reforms” and “has been involved in helping steer the economy during various crisis periods.”

Buenaventura says Tetangco “is one of the principal architects of the reforms the BSP is spearheading in the development of the domestic capital market, strengthening the banking sector and amending the BSP charter to make it more responsive to the demands of a changing environment.”

“I am very pleased with his nomination,” chimes in Finance Secretary Cesar Purisima. “I was impressed with his maturity, keen knowledge of global monetary issues, and his calm demeanor… Tetangco is a testament to the stewardship of Governor Buenaˇventura and his success in building a strong management team at the BSP… I look forward to working closely with him.”

“Tetangco meets the criteria of integrity, independence and credibility,” adds industrialist Raul T. Concepcion.

His job, Tetangco says, is price stability. But price stability has not resulted in higher real income for Filipinos. While economic growth has risen in the past three years, unemployment is climbing and poverty is worsening, rather than improving.

The 1995 law that created the Bangko Sentral required it to focus on price stability. It was prohibited from financing the national government’s budget deficit.

Since 1995, in the last 10 years, Philippine economic growth has been slowest in Asia, bar none. At a little over 1 percent a year, per capita economic growth is not enough to overcome massive poverty, the worst in the region. Growth has also not propelled job creation. And income distribution is so lopsided no other country in Asia is in a worst situation.

Real growth in the value of domestic goods and services or GDP averaged 3.7 percent during 1998 to 2004. Minus the effect of 2.3 percent annual population growth rate, average GDP growth during the seven-year period was only 1.4 percent. This is the slowest per capita growth in Asia.

Yet during the same seven years, inflation was contained, slowing down from a hefty 9.7 percent in 1998 to 6.7 percent in 1999, 4.4 percent in 2000, back to 6.15 in 2001, then slumping to a historic low 3 percent in 2002 and 2003, before preparing to roar at 5.5 percent in 2004. The average during those seven years: 5.49 percent. In the previous seven years, from 1991 to 1997, inflation averaged 9.34 percent. In the eighties inflation was averaging 14 percent.

In absolute numbers, however, the number of poor keeps swelling. It was 30.85 million in the 2000, according to ADB’s estimates, about 33.7 percent of the population. But surveys last year indicated a self-rated poverty of 74 percent. Nearly two-thirds of the population says they are poor. That’s three times the official poverty incidence.

In 2004 one million Filipinos lost their jobs or joined the jobless, one of the greatest job losses in recent memory. Unemployment rose to 11.3 percent, with the number of people without jobs increasing to 4.03 million in January 2005 from only 3.09 million in the same month last year. This was in 2004, when GDP growth was 6.1 percent—the highest in 15 years. In October 2004 unemployment was only 10.9 percent.

Item: Is it true Philippine National Bank President Loˇrenzo Tan is leaving the bank? The Northwestern University-educated Tan has been offered a position in the senior Asian team and as CEO of a foreign firm. The job is less political and presents a new challenge to him. It seems Yayie has had a difference of opinion with PNB’s largest private stockholder, Kapitan Lucio Tan who has his own unique style of banking.

BIZNEWSASIA email tonylopez@biznewsasia.com

2005-03-08T13:51:00.000+01:00

Mar 8, 2005

BizNewsAsia Newsmagazine email is tonylopez@biznewsasia.com

Tony Lopez email is tonylopez@biznewsasia.com

2005-03-08T13:49:00.000+01:00

Mar 8, 2005

My dear readers,

Pls use my email address tonylopez@biznewsasia.com instead of biznewsasia.net which has been sabotaged by tridel communications in the Philippines out of greed and incompetence and bad service.

Thanks
Tony

What next for PLDT

2005-03-03T16:54:00.000+01:00

What next for PLDT?

After posting whopping P28 billion profits, can the
phone giant surpass last year's record performance?
PLDT plans to go down market too, after Globe Telcom
followed in the footsteps of aggressive Sun Cellular

By Antonio S. Lopez (BizNewsAsia Newsmagazine Philippines)

After posting record profits of P28 billion on revenues of P115 billion in 2004, the Philippine Long Distance Telephone Co. is faced with one big challenge - how to surpass this year last year's unprecedented performance.

PLDT Chairman Manuel V. Pangilinan offers three strategies - innovation, keeping cellular subscriber loyalty, and making the most of its landline business thru data services like broadband and narrowband.

There is no doubt PLDT's hugely profitable cellular subsidiary, Smart Telecommunications, has been the most innovative Philippine telco - bar none. For that, Smart has won many awards, including the CEO of the Year for President Napoleon Nazareno. The hope is that Smart has not run out of the bag of tricks to overwhelm the competition.

Now, keeping customer loyalty is a matter of competitive pricing and better service. Smart and PLDT's low-end wireless subsidiary, Piltel, have been market leaders primarily because they have been the first to offer the best value for the money - like a P2 e-load for which subscribers are charged P1 for the service. And better service? Well, the PLDT Group has 4,300 cellular sites - enough to cover 97% of the country, nationwide.

The combination of innovation and service has attracted droves of cellular subscribers to PLDT - a record 6.2 million during 2004 alone, including a record 1.7 million in just one quarter, during the fourth quarter. That means PLDT was enrolling into its system an average of 1.5 million subscribers every three months - a phenomenal feat. By end-2004, PLDT had 19.2 million cellular subscribers - unrivalled. The second best is the 12 million of Globe Telecom.

Now, can PLDT keep that frenetic pace? Even Wharton-educated Pangilinan concedes “there will be a slowdown this year.” For instance, mobile subscriber additions in the first quarter this year, he says, will be less than that in the first quarter of 2003.

Economic conditions remain difficult, he says, especially for consumers. “everything is going up,” he notes, “prices, toll rates, taxes.” Also, the cellular players will moderate their SIM swap programs which means subscribers cannot just move from one brand to another without any penalty.

The challenge thus is increase revenues without relying on new subscribers. This could mean increasing prices or rates so revenues can grow and keeping costs down to increase profit. Can that be done given Sun Cellular's aggressive stance?

To make up for that, PLDT has to think of new businesses. "The strong performance of the wireless business continues to drive our profits, but we have begun to look beyond mobile growth and are now focusing on developing new products and services," says Pangilinan.

Consolidated cellular revenues expanded 27% to P67 billion from 2003, helped by net subscriber additions of more than 1.6 million in the fourth quarter alone. In contrast, rival Globe Telecom had 800,000 net subscriber additions in the fourth quarter. The 1.6 million additions came, Pangilinan notes, at a time when Sun Cellular had launched its aggressive 24/7 pricing. Globe has matched Sun Cellular's offering with P300 a month for unlimited calls and texting. That should scare the daylights out of Sun since Globe has three times more cellular sites to the John Gokongwei company's 1,200.

As for the landline business, well, PLDT has stopped losing money on it. Pangilinan sees the key is in offering data services. Voice is passé. People will rather go wireless, and not bother themselves with a wired device which can be inconvenient and self-limiting.

The PLDT chairman notes, of course, that this year (2005) is laden with challenges. Prices are going up, of nearly everything and that could dampen consumer consumption. The cellular SIM card, along with with the e-loading, has been the third most popular consumption item of the Filipino - after milk and coffee. It's not patis nor vinegar, nor Coke (which may explain why this summer, Coca-Cola dropped its price).

Pangilinan says it would have to spend considerable amounts on the new services whilst earnings could be flat this year. He concedes that mobile subscriber growth would considerably slow down with 39% of the population already owning cell phones.

With voice services on fixed line networks worldwide "increasingly becoming a commodity business," says Pangilinan PLDT clearly "has got to move on a big time basis toward the data business," including possibly video services delivered over land lines.

"PLDT is not about to settle into a middle-age status. We have to change the paradigm because the paradigms are changing," he adds.

The delivery system would be reconfigured so it could service both fixed lines, wireless, "and other gateways that could develop over time," he relates.

PLDT is spending P18 billion to P20 billion annually over the next three years, with half of that be devoted to the fixed line business, Pangilinan discloses.

For the wireless operations, the way forward is to offer more innovative products and services as well as to get subscribers to "increase their usage" of the existing services, he suggests.

Pangilinan says "The cellular network of Smart is almost fully beefed up. It's the fixed line that needs more gas to accelerate network build up."

He concedes that Gokongwei-led Sun Cellular created a new niche in the market when it started offering unlimited call and text services in October 2004.

"They developed a new business behavior. It did affect us a little bit, but not to the point where it affected our net additions and revenue growth, because we did not post negative figures," says the PLDT chairman. "Sooner in 2005, Smart will tap into this unlimited market. It's a new market segment and we will participate in it," Pangilinan says.

As of latest count, Sun Cellular has more than 1.5 million subscribers, more than double its base when it started its unlimited service offering. While apparently big, the 1.5 million is less than what Gokongwei had projected to chalk up when he launched the 24/7 campaign.

Pangilinan says consumers should recognize that good service quality comes at a price. He says PLDT was not overcharging its subscribers.

"Players invested tons of money to offer this kinds of products. Consumers just have to be educated to pay for the kind of service that they deserve," he says.

Also, he says PLDT would start offering this year its voice over internet protocol (VoIP)-based network, enabling corporate and residential users to make long distance phone calls using the internet at lower costs.

He says that the using IP-based networks rather than copper wires would boost its internet business.

"PLDT is not about to settle in the middle-age status. We have to change paradigms," he stresses.

"If we would look at the drivers of growth for fixed-line in the last five years in the US [United States], voice, data and video are at the top of the list. Video is at the bottom, but it is the fastest growing. If that were any indication, then we think a voice-only service cannot stand the test of time," he says.

PLDT has also started priming up aggressive pricing schemes for narrowband, broadband, wireless fidelity, and WiMAX -- connections that are all ready for VoIP.

The company reported about 360,000 narrowband subscribers as of end 2004, twice as many as it counted in 2003. For broadband subscribers, PLDT has acquired over 50,000 users before last year drew to a close.

To be sure, PLDT has plenty of money to smother the competition. Its cash - as measured by EBITDA - earnings before interest, taxes, and depreciation - amounted to P70.4 billion, including free cash flow of P37.3 billion. No other Philippine company has that much cash hoard.

What to do then with the money?

Well, pay PLDT's debts, for one. PLDT's fixed line business paid $500 million in debts last year, more than the $300 million it initially planned to pay and the higher target of $350 million.

There is merit in paying one's debts. You diminish your interest burden and thus add to your profits. And you course, creditors let you off the hook - so to speak - by allowing you to pay dividends so stockholders walk or drive to the bank happy.

PLDT has declared P14 per common share dividend. Pangilinan says the company will declare 15% of profits as dividends this year.

A deal for Henry Sy's two million mall goers

2005-03-03T16:42:00.000+01:00

A deal for Henry Sy's
2M daily mall goers

By Antonio S. Lopez

Two million visit Henry Sy's 19 malls daily. They will have a chance to share in his success and portfolio of businesses when the retailing king's holding company, SM Investments Corp., goes public this March. The 75-million share offering is valued at P17.25 billion, the largest IPO in a decade.

With SMIC, says former analyst Joey Salceda, “you are buying Henry Sy.” Sy is one of the most liquid, if not the most liquid, of the taipans, and probably the richest. The businesses are veritable moneymakers.

Henry's four major businesses generate P3.8 billion in sales monthly or P127 million daily. Of that, P94 million comes daily from retailing, 74% of the total. In the nine months to Dec. 31, 2004, SMIC revenues reached P34.32 billion of which P25.38 billion came from retailing. Another P6.82 billion or 20% came from commercial center operation, P470.6 million or 1.3% from tourism and real estate development, while others (dividends from investments like Banco de Oro, China Bank, Ayala Corp. and San Miguel Corp. and management fees from the SM group) provided P1.644 billion or 4.8%.

In terms of net income, commercial centers are the biggest money-makers, P1.82 billion or 46.7% of the P3.9 billion net profits during the nine months of April to December 2004. Retail is next with P1.7 billion or 43.7%, followed by tourism and real estate development, P323.8 million or 8.3%. Others contributed P52.6 million or 1.3%.

In terms of assets, investments in other companies have the biggest share, P49.10 billion or 43.9% of the total SMIC assets of P111.74 billion as of the nine months ended Dec. 31, 2004. Commercial centers came next with P42.4 billion or 37.9%, retail P13.9 billion or 12.5%, and tourism and real estate P6.32 billion or 5.7%.

The IPO shares are equivalent to a 15% of SMIC equity.

The IPO proceeds will be used for property development, tourism and leisure projects as well as to pay some P3.82 billion in loans.

SMIC is owned 25% by taipan Henry Sr., 15% by Felicidad Sy, 11.9% by Teresita Sr., their eldest; 12% each by sons Henry Sy Jr., Hans, Herbert, Harley, and 2,411 shares by Elizabeth T. Sy..

Incorporated in 1960, SM Investments Corp. (SMIC) has four principal businesses: commercial centers where SM is the leading shopping mall operator in the country; retail, wholesale and merchandising thru its department store, Shoemart, Inc.; financial services through Banco de Oro universal bank and China Bank; and real estate development and tourism.

SM Investments Corp. (SMIC) has three major subsidiaries which are publicly listed - SM Prime Holdings, owned 52.6%; SM Development Corp., owned 58%; and Banco de Oro (BDO) owned 41.2%. SM Investments has 600 million shares of stock, each with P10 par value (reduced from P100 last January), and of which 425 million shares have been subscribed.

BDO assets grew 23.1% from P121 billion as of end-December 2002 to P148.9 billion in December 2003, and by 6.2% to P158.2 billion as of Sept. 30, 2004. Loan portfolio grew 36% in 2002, 8.5% in 2003, and 2.7% for the nine months ended Sept. 30, 2004. In December 2003, BDO bought 25.8% of Equitable PCI Bank, making it the latter's largest shareholder, slightly above the 25% equity of the ruling Go family.

SM Investments sees booming business ahead in its four sectors, exploring opportunities in Metro Manila and the provinces.

SM is the country's largest retailer with at least 19 malls with combined area of 2.5 million square meters. They are owned by SM Prime which is publicly listed. SM Prime has budgeted P5 billion this year to build four more malls, including San Lazaro in Manila, SM Molino in Cavite, and the biggest of them all, the Mall Asia on reclaimed land in Roxas Boulevard.

The Mall of Asia will be the biggest in the region and is designed to become the premier shopping and tourist attraction in the Philippines. SM Prime has a 179-hectare land bank.

SM Prime plans to develop three to four malls a year and the group plans to develop two to four SM Department stores each year.
endit

Things are looking up in the Philippines

2005-03-03T16:39:00.000+01:00

March 3, 2005

Things are looking up in the Philippines

By Antonio S. Lopez (BizNewsAsia Newsmagazine Philippines)

Things are looking up and looking right in the Philippines.

So says Albay Congressman Jose “Joey” Salceda.

Among the right things that happened in 2004 are: the Supreme Court's reversal of its decision disallowing foreign participation in mining under Financial and Technical Assistance Agreements; the government takeover of the NAIA Terminal 3, the anti-graft court Sandigan's ruling that the Coco Industry Investment Fund's 25.5% equity in San Miguel belong to the state, the approval of a higher tax on sin products liquor and cigarettes, Congress' P10-billion reduction of its pork barrel, the sale of the Masinloc power plant for $562 million, the national government's absorption of P200 billion of Napocor debts, and austerity measures imposed upon government-owned and controlled corporations.

For 2005, there has been a good start. President Arroyo named a new economic team. Trade Secretary Cesar Purisima is now finance secretary. Nestle veteran Juan Santos becomes trade secretary. Popo Lotilla replaced Vince Perez at the Department of Energy. Fedex Philippines CEO Bert Lina has become customs commissioner. They are supposed to infuse new vigor and dynamism in the cabinet.

Also, the peso against the dollar has strengthened. “The peso is fundamentally undervalued,” estimates Salceda. “P54 for every dollar is easy and P50 is possible,” he reckons. Indeed, even Bangko Sentral Governor Rafael Buenaventura says if the local currency were to be where it was with the Thai bath before 1997, the peso should be doing at around P50 to the dollar. In 1999, when the peso was P39 to the dollar, the baht had a 3% advantage over the peso in relation to the dollar, at about 40 baht to the dollar. Today, that advantage is up to 43%. The Thai currency hovers at 40 while the peso went down to P56.

So have stocks. Manila (up 40% over end-2003) is the best performing stock exchange in Asia after Indonesia (up 49.8%). Despite that, Philippine stocks are what Salceda calls “underperforming” from their pre-1997 levels. The Phisix is still 26% down from pre-1997 and down 56% in dollar terms from pre-1997.

Salceda cites two fundamental forces that will drive stocks up to near 3000 Phisix level: 1) an upswing in cyclical profits and new investment cycles from cash-rich corporations.

Stronger demand for credit will benefit banks and a dynamic market provides an increase for fee-based financial services. And there is a seven-year property upcycle unfolding (see separate story, “Property market strong”).

Meanwhile, profit forecasts for corporations, Salceda notes, do not reflect: 1) a reversal in the soft demand for bank loans (loan growth assumption remains timid, he says); 2) substantial resolution of historically persistent fiscal issues (like the the shift in the interest curve downward and the lower risk premium for Philippine financial assets), and 3) structural reforms which if added up contribute to a critical mass.

Manila has been delisted by the Financial Action Task Force from the list of places for money laundering. That meant the world can business with the Philippines without fear of their money being laundered. And President Arroyo said she will sell government holdings in San Miguel - 37.39% or P70 billion.

Of course, there has been bad news. Both Standard and Poor's and Moody's downgraded Philippine sovereign bonds. Moody's classifies RP IOUs as B1 (from Ba2) or four notches below investment grade, the lowest ever. They are junk, speculative and risky. Malacañang, the presidential palace, and Finance Secretary Purisima consider the downgrade “harsh”. “Moody's is six months behind,” sneered Congressman Salceda.

Salceda urges investors now is the time to come to the Philippines. Invest in mining. Invest in factories. Invest in the stock market.

And why aren't investors coming and ratings agencies downgrading the country? Salceda says it's because of cognitive dissonance. The Philippines suffers from a perception problem and ignorance of people who should know better. “Dramatic improvements and structural changes are not being appreciated until they show up in the bottomline of companies,” he explains.

For instance, not many people believe the government can solve its fiscal crisis - this year, at the earliest. “We are one year ahead of the fiscal reform program,” says Salceda. “The fiscal crisis will be substantially resolved in 2005,” he predicts.

In 2004, the actual deficit was P182 billion, lower than the target of P197.5 billion due to restraints on expenditures. These restraints included AO 83 which requires a 10% savings on non-wage expenditures of government agencies (that saves about P5 billion per year); AO 103 which prohibits non-essential activities and caps pay in GOCCs (for P5 billion a year savings), and EO 366 for early retirement of redundant state workers (that should bring in P7 billion in recurring savings a year).

This year's deficit target is P160 billion. Total deficit - that of the national government plus those of GOCCs, what is called the Consolidated Public Sector Deficit (CPSD) will only be P210 billion, down 32% from the P310 billion CPSD in 2004 (the original projection was P317 billion).

The P317 billion CPSD deficit in 2004 was due mainly to three sources: P199 billion deficit of the national government, P118 billion losses of GOCCs, and P108 billion losses of state-owned Napocor.

Salceda predicts that the budget will be balanced by 2008, two years ahead of the original 2010 target.

The Albay solon believes Napocor has much better finances now. Its 2004 operating losses were cut to P48 billion because of the P1 per kilowatt hour tariff hike which boosted its revenues by P11 billion. Its financial losses have been reduced to P39 billion largely because the government absorbed or assumed P19 billion of its liabilities. And because of the new ruling that devaluation losses be reflected immediately, in a single year rather than amortized over a period of years, NPC readily booked P21 billion in forex losses. As a result, total reported loss for 2004 was P108 billion.

Aggressive deficit reduction will reduce CPSD to P210 billion this year, from P310 billion in 2004, as the NG (national government) deficit reduced to P177 billion from P185 billion and NPC losses cut to P30 billion instead of P116 billion.

NPC will generate P37 billion in additional revenues for 2005 because of the P1 rate increase, reduce its interest payments (and losses) with the absorption by NG of its P200-billion debt, absence of forex losses (as these have been imputed for 2004). The debt absorption means NPC pays only P3 billion in interest charges out of the usual P20 billion. The remaining P17 billion is paid by the NG.

And because the peso has appreciated by 2.9% from a single-month closing high of P56.357 in March 2004 to P54.695 at this writing, NPC may yet reflect a currency revaluation gain of P10 billion for 2005, instead of a loss of P30 billion.

Salceda concedes that economic growth will slow down to 5% this year from a 15-year high of 6.1% in 2004. “It's a tactical slowdown,” he explains. With fiscal adjustments and reforms taking place over the next 18 months, however, “you build a stronger foundation for rapid investment-led growth starting in the second half of 2006,” he predicts.

This year, the chairman of the House Economic Affairs Committee, sees resurgent investment inflows - into information technology-related businesses like call centers and business process outsourcing (the call center business has been doubling every year in the last three years), mining, infrastructure, and energy (Mirant is building a commercial power plant, for instance, without the stigma of PPA terms).

Free trade agreements with China and Japan (thru the Japan Philippine Economic Partnership Agreement or JPEPA) can bring in what Salceda calls an “early harvest” to boost Philippine trade.

As for the stock market, Salceda asserts that a number of listed Philippine companies are awash with cash (as measured by their EBITDA - earnings before interest, tax and depreciation). “This will lead to new investment cycles,” he concludes.

Telecom giant Philippine Long Distance Telephone Co., which owns 100% the hugely profitable No. 1 cellular provider Smart,l has P70 billion in EBITDA. Globe Telecom has P30 billion, and San Miguel Corp. P16 billion. Mirant, the biggest and most profitable independent power producer, has P20 billion cash hoard.

endit

Management lessons from Henry Sy Sr of SM

2005-03-03T16:35:00.000+01:00

March 3, 2005

Management lessons
from Henry Sy Sr.

By Antonio S. Lopez (BizNewsAsia Newsmagazine, Philippines)

This March 2005, Henry Sy Sr. opens to public ownership his holding company, SM Investments Corp. (SMIC) whichs the shopping malls, the land on which they are built, two well-managed banks, Banco de Oro and China Bank, the hotel and resort properties in Tagaytay. These businesses generate about P127 million in revenues daily. Of that P94 million comes from retailing. Some two million people visit his 19 malls everyday. On a good day, they spend P100 million inside the malls.

Why is Henry Sy so successful and why does he seem to have a midas touch? Simple answer: hard work, integrity, passion for the things he does, and unbridled optimism about the future of this country. When blood is in the streets, he plans his next mall, and the mall after that, and the mall after that.

So for those who have given up on this country, these are the lessons to learn from taipan Sy as retold by his eldest, Teresita Sy, chairman of Banco de Oro and president of Shoemart, Inc., the department store.

I got these lessons from an email Tessie sent me recently, upon my request. It is basically the speech she delivered as recent forum on Taipan Entrepreneurship in Binondo. Here is Tessie on her father:

1. Strive to be a leader in your chosen field.
My Dad has big and bold visions and dreams. Being a leader means being different, taking bold steps, and going to unexplored places. Leadership is a skill and process, which like other skills can be learned through practice. Leadership is being simple and driven.
Being a leader means being a self-starter, not waiting for motivation from others. It also means knowing and focusing on one's target, and pushing oneself beyond one's comfort zone.

2. Be a person of integrity.
We have to be trustworthy in our undertakings, be fair and credible. And put a lot of weight in our commitments and responsibilities. Moreover, it is best to do things for the good of our company, the good of our employees,our suppliers, and most of all, our customers.

3. Have a long term vision and strategy.
Our vision has to be wide-angled, making us able to see the big picture as well as the small things. My Dad thinks long term, investing for the future and seeking long term relationships in business.

4..Focus.
It would mean concentrating and prioritizing. In business, we have to prioritize our goals and be selective. Once we have identified our goals, we can concentrate on our areas of strength - developing them with our time, energy, and resources.
My father concentrated on four main categories in business - retail, shopping centers, banking, and leisure property development. He focused on integrating them to add value to each other, create multiplier effects, and provide synergy to the group.
He taught us that as our business grows, we also have to go back to basics and concentrate our resources in areas wherein we have a competitive advantage.
Being in business also means focusing on growth and seeking new ideas. Growth means change, and if you want to be better, you have to keep changing and improving. Otherwise, your customer or your organization will outgrow you.

5. My Dad has always liked to explore new ideas.
He traveled a lot when he was younger, always looking for new ideas and new ways of doing things. He made his first million after a trip abroad wherein he was able to observe new trends in merchandising and new concepts in stores.

6. Have a great passion to achieve.
Your desires determine your destiny.
The stronger you will power to achieve, the greater your potential. If you follow your passion, you become a more dedicated and productive person.
Apart from intelligence and education, it is passion that makes a difference. It increases one's will power... It is in fact, the fuel for the will... passion makes the impossible possible.

7. Work hard.
My Dad used to tell us that there is no substitute for hard work. Long before people thought 24/7, he used to work 14 hours a day, 7 days a week.

Success will not last if you do not continue to work hard. My Dad would always tell us. If you are lacking in some aspects, work harder and longer, and you may be able to catch up. If you have caught up, work longer so you can surpass your competitors.

8. Be patient and persevere.
My Dad has always reminded us that there is no such thing as an overnight success, or is there easy money. If it does happen, then it could be luck.
Even if one gets lucky, he has to work hard to sustain it. If you fail, do not be discouraged - try again as they always say. Success is not just good luck. It is a combination of hard work, opportunity, readiness and timing.
My father took a lot of risks, and made mistakes too. He experienced failures, but these did not deter him. He did not let them bother him too long. Success, they say, is connected with action and motion. He kept on moving and did not quit.

9. Recognize opportunity.
It is one thing to see opportunity, it is another to do something about it. When opportunity comes, you should be ready to react. Otherwise, it goes to someone else.
Opportunity does not always come knocking. You've got to go out and look for it. Pick the best opportunity you see and take it as far as you can.
Don't stop until you have done everything you can do to make it happen.
What others would consider as luck, is actually a combination of opportunity knocking and our being ready for it.
10. Try to be optimistic.
Optimism is difficult in the Philippines. Looking back at my Dad's business career, however, there were major crisis in the country during SM's key periods of growth.

11. Be confident.
A positive attitude comes with confidence. It is more than inspiration. If you believe you can, you can. Life is not easy for any one of us. We must have the perseverance and above all the confidence in ourselves. You've got to go out and look for it. Take stock of your assets, talents, and resources. Doing it will give you an idea of your potentials.We must believe we are gifted for something, recognize that gift, and use it to attain our goals.

12. Be disciplined.
My father is disciplined both in his personal and business life. When he undertakes something, he gives it his all. Second best does not exist.
In work, he instilled in us the importance of excellence - in products, service, and operations.
My Dad advocates a culture that abhors waste. He put a big premium on saving, because of the need to be prepared for all contingencies in business, politics, and one's personal life.
He also encouraged us to maintain a disciplined and simple life. In order to ensure long term growth and success, he has made for himself a disciplined lifestyle. Despite his success in business, my father places great value on his family. Over the value of money for him is the value of family.
13. Build your organization.
Having a sound and dynamic organization is the ultimate competitive advantage.

14. Make it your mission to provide employment.

15. Social responsibility is important.
My father has made it a point to show appreciation for good things that have come his way by giving back to the community through SM Foundation.

16. Henry Sy wants his family to remain an important part of his business.

endit

The new Philippine central bank governor

2005-03-03T16:32:00.000+01:00

March 4, 2005

Challenges to the new Philippine Central Bank governor

By Antonio S. Lopez (BizNewsAsia Philippines)

One of the best received appointments made by President Arroyo is that Amando Tetangco, 52, as governor the Bangko Sentral ng Pilipinas (BSP).

He succeeds Rafael Buenaventura when the latter retires on July 3, 2005, capping a sterling record marked primarily by historic-low inflation and low interest rates.

When ex-Citibanker Buenaventura came to BSP in mid-1998, the economy was in negative growth and inflation was raging at nearly 10%. Inflation came down to 3% in 2002 and 2003, matching the historic low set in 1987. In 1998, the 91-day Treasury bill rate was sky-high at 15.3%. By May 2002, it came down to a historic low of 4.4% though it rose to a 35-month high of 7.9% by November 2004. In 2004, Paeng's last full year as governor, the economy grew by 6.1%, the highest in 15 years.

Moreover, between 2000 and 2003, according to the National Statistical Coordination Board, poverty declined from 27.5% to 24% -- a rather outlandish claim considering that during the same period, real income went down 2.9%.

President Arroyo is justifiably proud of her appointee. Tetangco, like her, is a cabalen and nothing is more reassuring than appointing a member of your own tribe to head the central monetary authority, especially given the expected economic slowdown this year and the still uneasy situation with non-performing assets and non-performing loans of banks. And inflation has begun to rear its ugly head on the economic front.

Governor Tetangco thus has his work cut out for him. His big challenges over the next six years include:

n Controlling inflation. Consumer prices rose 7.9% in December 2004, more than double the December 2003 average of 3.1% and more than triple the December 2002 level of 2.5%. The 7.9% is the highest since the 1998 peak of 9.7%. High prices are the main worry of Filipinos, according to surveys.
n Controlling interest rates. They are under pressure to rise. Interest rates are the highest in Asia outside Indonesia.
n Accelerating disposal of banks' bad assets. The property market is tightening due to demand by call centers for offices and medium housing by OFWs. That should give momentum to banks to sell unwanted assets (worth about $8 billion) which have brought down their profitability and return on assets. Standard and Poor's says “the profitability of banks is likely to come under pressure, given the slow pace of asset disposal and the expected stepped-up provisioning required under current regulations for foreclosed assets held in the banks' books for more than five years.”
n Finding the right mix between a strong peso against the dollar (to make debt servicing cheaper and bring in cheaper capital goods) and a weak peso (to encourage OFW remittances and curb non-essential imports). At $8.5 billion, remittances clearly outdistance foreign direct investments (a paltry $161 million in 2003) so government must pay more attention to remittances.
n Stimulating economic growth to accelerate poverty reduction. Income distribution in the Philippines is the most lopsided in Asia. The share of the richest 10% is 36.7% of the national income. The poorest 10% share is only 1.8%. That has been the ratio since 1960.

But is Tetangco capable of out of the box thinking? “He is apparatchik,” says businessman Jose Puyat. It is a Soviet term for a subordinate who is extremely loyal to the boss or the organization. Tetangco has spent a third of a century at BSP. But then Gabriel Singson was also a BSP bureaucrat and his term as governor was marked by rapid economic growth until the 1997 Asian Crisis blindsided him.

Tetangco is not lacking in backers and admirers. “I worked closely with Governor Tetangco and I was impressed with his maturity, keen knowledge of global monetary iossues and his calm demeanor,” volunteers Finance Secretary Cesar Purisima. “He is a known figure in the international banking community. He is a testament to the stewardship of Governor Buenaventura and his success in building a strong management team,” he adds.

Adds Buenaventura: “Deputy Governor Tetangco is one of the principal architects of the far-reaching reforms BSP is spearheading to foster the development of the domestic capital market, strengthen the banking sector, and amend the BSP charter to make it more responsive to the demands of a changing environment.”

Equally important, the outgoing governor points out, “DG Tetangco is a professional central banker with extensive exposure here and abroad. An accomplished economist, he has served as my alternate at the Development Budget Coordinating Council which counts the country's economic managers as members. He is also well-known in the international financial community having ably represented the BSP in several fora. Clearly, his three decades of experience at the BSP gives him unmatched advantage as he can hit the ground running, so to speak.”

For his part, Gvoernor Tetangco thanks the President “for her trust and confidence in my ability to head the BSP.”

He says: “There are others qualified to head the BSP. That the President chose a career officer of the BSP signals a strong vote of confidence on the ability of BSP in particular and the bureaucracy in general to nurture leaders who serve the country. In a larger sense, my designation also represents a validation that BSP is on the right track insofar as implementing responsive monetary policy to achieve price stability and appropriate banking regulation to attain financial stability. I therefore commit to continue the reforms we have started at the BSP in accordance with our mandate to ensure stable prices and a strong banking sector.”

A regulator not a commercial banker

Amando M. Tetangco, Jr.,52, is a regulator, not a commercial banker. Thus, he is not likely to coddle erring banks and very likely, push for reforms towards a stronger banking system. The Philippine banking system is so far unique in Asia in not having regained its pre-1997 Crisis strength. Loan demand has remained sluggish and disposal of bank assets has been in slow motion mode over the past three years.

One likely downside to him is that he may not have the brave heart to stand up to the demands of the likes of the IMF, World Bank and the ADB and the often capricious ratings of western credit rating agencies. And he may take a global outlook when what is needed is a local pulse to feel the pains of the people 74% of whom say they are poor (that ratio is three times official poverty incidence).

Tetangco is currently deputy governor of the Bangko Sentral ng Pilipinas in-charge of the Banking Services Sector, Economic Research and Treasury. In this capacity, he is directly involved in the formulation and implementation of monetary and foreign exchange policy of the BSP, including the conduct of open market operations and the management of BSP's international reserves.

The monitoring and management of the country's external obligations, and the administration of existing policies on foreign loans and investments also fall under his area of responsibility.

He looks after BSP's domestic credit operations particularly rediscounting and the other financing facilities available to banks and other financial institutions, and the management and disposition of acquired assets. He also oversees the BSP's cash operations that include the issuance, distribution, and retirement of currency notes and coins in the Philippines.

Tetangco sits in various boards, including the National Economic and Development Authority (NEDA) Board (chaired by the President of the Philippines), National Food Authority (NFA) Council, and Industrial Guarantee and Loan Fund (IGLF) Review Committee, as the representative of BSP.

Before joining the Central Bank of the Philippines in 1974, Tetangco was with the Management Services Division of SGV & Co. for about one year. He served as alternate executive director of the International Monetary Fund in Washington, D.C. in 1992 - 1994. There he participated in policy making in the IMF Executive Board and was involved in providing economic policy advice to various governments in the context of IMF board meetings, and during visits to member countries.

He has been closely involved in the activities of various international and regional organizations including the Executive Meeting of East Asia and Pacific (EMEAP) Central Banks, ASEAN and ASEAN+3, South East Asia Central Banks (SEACEN) and APEC, in the promotion of regional cooperation like the Asian Bond Fund and the ASEAN Swap Arrangement, and economic and financial surveillance of member countries.

Tetangco finished his AB Economics at the Ateneo de Manila University (cum laude) where he also took graduate courses in business administration. He obtained his MA in Public Policy and Administration (concentration in Development Economics) at the University of Wisconsin - Madison, Wisconsin, USA as a Central Bank scholar. He has attended various training programs and seminars in macroeconomics, banking and finance, portfolio management, central bank independence, leadership and governance.

Tetangco is married to Elvira Ma. Plana. They have three children: a boy and two girls.

My Creba speech

2005-03-03T16:26:00.000+01:00

Lasst Feb. 24, I spoke before the Chamber of Real Estate and Builders Association, the influential business association involved in real estate and construction. Here is what I said:

Today, I am going to discuss what is good and what is bad about our economy and our country.

First, what is good about our country.

With 85 million people, the Philippines is the 12th largest country in the world. It is the third largest English-speaking country in the world - after the United States and India. The population growth rate is one of the highest in the world - 2.23 percent per year. That means we are producing babies at the rate of 1.95 million a year. At that rate in 10 years or by the year 2015, we would be more than 106 million people - the eighth largest in the world. In twenty years, by the year 2025, we would have 150 million people.

Still, with more babies being born every year, Filipinos are getting younger. Abroad, in many western countries, the death rate is now exceeding their birth rate. The people who are dying are not being replaced. Here in the Philippines even the dead do not die, especially if they are government retirees. So families do not report if their aging retiree has died, because the retirement benefit dies or ends with him. That is why in the retiree rolls of the GSIS and SSS, you have thousands of people above 90 and are even above 100, which is statistically improbable.

The Philippines is a relatively young country. Our average age is close to 20. Literacy is very high - more than 93 percent. We are strategically located. The major cities of Asia are less than four hours away.

In 2004, the economy posted 6.1 percent growth in terms of gross domestic production or the value of goods and services produced in the country. That is the highest in 15 years.

There are now to me, four bright spots in the economy:

One, the call center and the business process (BPO) outsourcing business.

Two, the OFW remittances. They amounted to $8.5 billion last year. It amounted to $8 billion in 2003. In 2003, foreign investments in the Philippines was a negative $545 million - meaning foreign investors not only brought out of the country their profits and dividends; they also brought out their original capital. Outflow exceeded inflow - in terms of foreign investments, resulting in a drain on the country's international reserves.

Three, the surge in foreign investments due to the recent Supreme Court ruling on foreign participation in technical and financial agreements on mining.

Four, the stock market and IPO boom.

Now on the call center and business process outsourcing business. It is the fastest growing business in the Philippines today. The number of call centers doubles every year - a growth rate of 100 percent. Even kidnappings do not have that kind of frenetic growth. In 2004, at least $850 million was generated as call center revenues. It was $400 million in 2003 and less than $200 million in 2002.

There are 45,000 call center seats in the Philippines now, manned by 67,000 people. One thousand people are hired every week. About 80 percent of the call centers are in Metro Manila. About 87 percent of clients are from the US.

BPO, of course, means business process outsourcing and that includes accounting, auditing, accounts receivable management, customer management, animation, medical transcription, and other back office processes. These can be done in Manila at a fourth of the cost in the US.

Call centers are now the biggest producers of white collar jobs in Metro Manila. The only limiting factor is the supply of English-speaking people to man the call centers. Out of every 100 applicants, only four or five are hired. So your workers who are in construction and whom you are planning to fire - maybe, you can tell them to attend a crash course in English and become a call center employee. Pay is good - 18,000 to 22,000 pesos a month. Outside Metro Manila, big cities in the provinces are now vying to become centers of call centers - Cebu, Davao, Iloilo, even Naga and Butuan. Any place where there is fiber optic telephony and a large pool of English-speaking people qualifies.

The Philippines has 50,000 top caliber programmers, systems analysts and project managers. Plus up to 50,000 graduates of science and computer programming every year. There are some 50 animation houses.

In America, there are six million people employed in call centers, according to the estimate of Senator Mar Roxas. Most of those people will have to be relocated abroad. And the most desirable places right now are India and the Philippines. The bulk of the business goes to India.

The Philippines should overtake India. We speak better English. We have western values and orientation. We are the gateway to the Pacific for many Americans. We love democracy, we love McDonalds, we love Starbucks. And the cost of doing business here, even after imputing the cost of corruption, is low. Among 133 countries surveyed by the Economist Intelligence Unit in the Spring of 2004 in cost of doing business, the Philippines was ranked 131st. Only Caracas and Tehran were cheaper.

Now, what is the relationship of call centers and your business, real estate?

According to Alan Dagleish, managing director of Colliers International, demand for office space in Makati is up because of the booming call center business. People Support, one of the biggest call center operators here, is leaving three floors of the Export Industry Bank building so they can move to their new five-story building at the corner of Ayala and Buenda. An Indian company is interested in those three floors.

Vacancies were down to 9.5 percent last year in the Makati Central Business District from 12.2 percent in 2003, according to Mr. Dagleish. As a result office rents are going up. Premium space went up by 11 percent last year. Mr Dagleish expects rent to go up by 15 percent this year.

Sale of commercial lots is also increasing, according to Mr. Dagleish. With increasing rent and more sales of commercial lots, Mr. Dagleish expects a new wave of office developments. Until these new buildings are up, rents will continue rising, he says.

Now, for OFW remittances. Filipinos abroad are now the biggest investors in the Philippines, not the so-called foreign investors or portfolio investors. Since 1998, OFWs have been remitting at least $6 billion a year. Between 1998 and 2004, total remittance was $35 billion. During the same six-year period, total net foreign investment was only $17 billion. In other words, for every dollar of foreign investment that comes in, the Filipino abroad sends two dollars.

There are eight million Filipinos abroad, making the Philippines the second biggest source of immigrant labor. The biggest source is Mexico but we will soon overtake the Mexicans.

So we the Philippine middle class lives abroad - eight million of them. Assuming each of them has a family in the Philippines, that's 8 million families. Since there are 16 million families in the Philippines, that means every other household in the country has an OFW abroad. This also implies that the Filipino income is understated by one half - because the money or income remitted from abroad is usually not reported to the government and is not taxed at all.

For builders like you, what this means is that the biggest demand for housing, especially middle class housing, comes from OFWs. Because they are the people with money, money looking for investment outlets like house and lot, piggery, jeepney, tricycle, and cellular phones.

This year, the number of cellular phone users will hit 38 million - 45 percent of the population. And that is partly because of money coming from Filipino workers abroad. They send money to the Philippines so the wife, brother, sister, son, daughter, pamangkin, apo can buy a cellular phone.

The biggest consumer items now in the country are milk, coffee and cellular cards. It used to buy milk, sardines and Coke. Students are no longer buying Big Mac and Big Champ nor are they drinking Coke, just so they can save money to reload their cell phones. That is why Coke sales are down. That is why Coke reduced its price this summer.

Now, for the boom in mining. Mining will be the biggest industrial activity in the next three years and it will attract the most investments. Twenty mining projects identified by the government are expected to generate $6 billion in investments and 200,000 in employment.

The boom in mining has also sparked a nascent stock market boom.

But the other reason for the stock market boom is the recent entry of portfolio investments - an initial foray of $300 million, according to the bangko sentral. But that is peanuts. In 1999, before the stock market collapsed, some $6.68 billion in portfolio investments came in - an average of $573 million a month.

If course, investors, who were not able to get out, lost two-thirds of the value of their investments in the stock market. That money is now itching to get out as soon the stock market reaches a certain peak where they can recover the dollar equivalent of what they invested.

As regards your business, construction has been the fastest growing segment of the economy. It grew by 8.9 percent in 2004 and will grow by another 8.0 percent this year (2005). Construction even beat services (telecommunications) in growth rate last year. Services grew by only 7.3 percent.

So things are looking up and you should be sporting happy faces these days.

Of course, inflation is surging. It was 7.9 percent in December and 7.6 in November - the highest in more than five years. Interest rates are going up because of the series of credit downgrades.

And there remains the problem of corruption. The Philippines is ranked No. 2 most corruption nation by Transparency International.

And GMA? Well, you have your conclusions.

endit

The good things about the Philippines

2005-03-03T16:24:00.000+01:00

Last Feb. 24, I spoke during the general meeting of the Chamber of Real Estate and Builders Association which has about 4,000 members. About 250 people showed up for the event.

Here is what I said:

Today, I am going to discuss what is good and what is bad about our economy and our country.

First, what is good about our country.

With 85 million people, the Philippines is the 12th largest country in the world. It is the third largest English-speaking country in the world - after the United States and India. The population growth rate is one of the highest in the world - 2.23 percent per year. That means we are producing babies at the rate of 1.95 million a year. At that rate in 10 years or by the year 2015, we would be more than 106 million people - the eighth largest in the world. In twenty years, by the year 2025, we would have 150 million people.

Still, with more babies being born every year, Filipinos are getting younger. Abroad, in many western countries, the death rate is now exceeding their birth rate. The people who are dying are not being replaced. Here in the Philippines even the dead do not die, especially if they are government retirees. So families do not report if their aging retiree has died, because the retirement benefit dies or ends with him. That is why in the retiree rolls of the GSIS and SSS, you have thousands of people above 90 and are even above 100, which is statistically improbable.

The Philippines is a relatively young country. Our average age is close to 20. Literacy is very high - more than 93 percent. We are strategically located. The major cities of Asia are less than four hours away.

In 2004, the economy posted 6.1 percent growth in terms of gross domestic production or the value of goods and services produced in the country. That is the highest in 15 years.

There are now to me, four bright spots in the economy:

One, the call center and the business process (BPO) outsourcing business.

Two, the OFW remittances. They amounted to $8.5 billion last year. It amounted to $8 billion in 2003. In 2003, foreign investments in the Philippines was a negative $545 million - meaning foreign investors not only brought out of the country their profits and dividends; they also brought out their original capital. Outflow exceeded inflow - in terms of foreign investments, resulting in a drain on the country's international reserves.

Three, the surge in foreign investments due to the recent Supreme Court ruling on foreign participation in technical and financial agreements on mining.

Four, the stock market and IPO boom.

Now on the call center and business process outsourcing business. It is the fastest growing business in the Philippines today. The number of call centers doubles every year - a growth rate of 100 percent. Even kidnappings do not have that kind of frenetic growth. In 2004, at least $850 million was generated as call center revenues. It was $400 million in 2003 and less than $200 million in 2002.

There are 45,000 call center seats in the Philippines now, manned by 67,000 people. One thousand people are hired every week. About 80 percent of the call centers are in Metro Manila. About 87 percent of clients are from the US.

BPO, of course, means business process outsourcing and that includes accounting, auditing, accounts receivable management, customer management, animation, medical transcription, and other back office processes. These can be done in Manila at a fourth of the cost in the US.

Call centers are now the biggest producers of white collar jobs in Metro Manila. The only limiting factor is the supply of English-speaking people to man the call centers. Out of every 100 applicants, only four or five are hired. So your workers who are in construction and whom you are planning to fire - maybe, you can tell them to attend a crash course in English and become a call center employee. Pay is good - 18,000 to 22,000 pesos a month. Outside Metro Manila, big cities in the provinces are now vying to become centers of call centers - Cebu, Davao, Iloilo, even Naga and Butuan. Any place where there is fiber optic telephony and a large pool of English-speaking people qualifies.

The Philippines has 50,000 top caliber programmers, systems analysts and project managers. Plus up to 50,000 graduates of science and computer programming every year. There are some 50 animation houses.

In America, there are six million people employed in call centers, according to the estimate of Senator Mar Roxas. Most of those people will have to be relocated abroad. And the most desirable places right now are India and the Philippines. The bulk of the business goes to India.

The Philippines should overtake India. We speak better English. We have western values and orientation. We are the gateway to the Pacific for many Americans. We love democracy, we love McDonalds, we love Starbucks. And the cost of doing business here, even after imputing the cost of corruption, is low. Among 133 countries surveyed by the Economist Intelligence Unit in the Spring of 2004 in cost of doing business, the Philippines was ranked 131st. Only Caracas and Tehran were cheaper.

Now, what is the relationship of call centers and your business, real estate?

According to Alan Dagleish, managing director of Colliers International, demand for office space in Makati is up because of the booming call center business. People Support, one of the biggest call center operators here, is leaving three floors of the Export Industry Bank building so they can move to their new five-story building at the corner of Ayala and Buenda. An Indian company is interested in those three floors.

Vacancies were down to 9.5 percent last year in the Makati Central Business District from 12.2 percent in 2003, according to Mr. Dagleish. As a result office rents are going up. Premium space went up by 11 percent last year. Mr Dagleish expects rent to go up by 15 percent this year.

Sale of commercial lots is also increasing, according to Mr. Dagleish. With increasing rent and more sales of commercial lots, Mr. Dagleish expects a new wave of office developments. Until these new buildings are up, rents will continue rising, he says.

Now, for OFW remittances. Filipinos abroad are now the biggest investors in the Philippines, not the so-called foreign investors or portfolio investors. Since 1998, OFWs have been remitting at least $6 billion a year. Between 1998 and 2004, total remittance was $35 billion. During the same six-year period, total net foreign investment was only $17 billion. In other words, for every dollar of foreign investment that comes in, the Filipino abroad sends two dollars.

There are eight million Filipinos abroad, making the Philippines the second biggest source of immigrant labor. The biggest source is Mexico but we will soon overtake the Mexicans.

So we the Philippine middle class lives abroad - eight million of them. Assuming each of them has a family in the Philippines, that's 8 million families. Since there are 16 million families in the Philippines, that means every other household in the country has an OFW abroad. This also implies that the Filipino income is understated by one half - because the money or income remitted from abroad is usually not reported to the government and is not taxed at all.

For builders like you, what this means is that the biggest demand for housing, especially middle class housing, comes from OFWs. Because they are the people with money, money looking for investment outlets like house and lot, piggery, jeepney, tricycle, and cellular phones.

This year, the number of cellular phone users will hit 38 million - 45 percent of the population. And that is partly because of money coming from Filipino workers abroad. They send money to the Philippines so the wife, brother, sister, son, daughter, pamangkin, apo can buy a cellular phone.

The biggest consumer items now in the country are milk, coffee and cellular cards. It used to buy milk, sardines and Coke. Students are no longer buying Big Mac and Big Champ nor are they drinking Coke, just so they can save money to reload their cell phones. That is why Coke sales are down. That is why Coke reduced its price this summer.

Now, for the boom in mining. Mining will be the biggest industrial activity in the next three years and it will attract the most investments. Twenty mining projects identified by the government are expected to generate $6 billion in investments and 200,000 in employment.

The boom in mining has also sparked a nascent stock market boom.

But the other reason for the stock market boom is the recent entry of portfolio investments - an initial foray of $300 million, according to the bangko sentral. But that is peanuts. In 1999, before the stock market collapsed, some $6.68 billion in portfolio investments came in - an average of $573 million a month.

If course, investors, who were not able to get out, lost two-thirds of the value of their investments in the stock market. That money is now itching to get out as soon the stock market reaches a certain peak where they can recover the dollar equivalent of what they invested.

As regards your business, construction has been the fastest growing segment of the economy. It grew by 8.9 percent in 2004 and will grow by another 8.0 percent this year (2005). Construction even beat services (telecommunications) in growth rate last year. Services grew by only 7.3 percent.

So things are looking up and you should be sporting happy faces these days.

Of course, inflation is surging. It was 7.9 percent in December and 7.6 in November - the highest in more than five years. Interest rates are going up because of the series of credit downgrades.

And there remains the problem of corruption. The Philippines is ranked No. 2 most corruption nation by Transparency International.

And GMA? Well, you have your conclusions.

endit

The good things about the Philippines

2005-03-03T16:22:00.000+01:00

Tony Lopez BizNewsAsia blog

Tax targets

2005-03-03T16:11:00.000+01:00

March 3, 2005 Cesar Purisima's targets

Finance Secretary Cesar Purisima identifies people who should be paying taxes but are not

At his Jan. 28 speech before the Makati Business Club,
incoming Finance Secretary Cesar Purisima identified
where he will get the money for the cash-strapped
Arroyo government. They are those who have not been
paying taxes and if they do, pay only a minuscule
portion of their huge income.

To start with, there are these professionals like
doctors and lawyers. These people are exempt from
paying the value added tax.

The BIR recently did a survey of 600+ doctors. Cesar
Purisima was baffled by the results. About 60% of
these 600 doctors had gross income of less than P1
million. In fact, only two - repeat two-- had an
income of more than P5 million. In addition, BIR
looked at how much of that income was taxed. The
percentage was quite low, Purisima winces.

The rich and famous and the propertied class also
don't pay taxes.

In 2003, the total estate tax in 2003 was P518
million. At 20% estate tax, that's about P2.5 billion
in wealth only. Asks Purisima: Does that make sense?
Only P2.5 billion of wealth is transferred as a result
of the death of our fellow Filipinos! Cesar doesn't
think so.

And yet, how much is the value of wealth in this
country? The total gross domestic production per
year is about P4.67 trillion ($1,000 per capita times
85 million times P55). According to the World Bank,
56 percent of that is earned by 20 percent of the
population. So that's P2.6 trillion earned by just 17
million Filipinos. Divide P2.6 trillion by 17 million
and you get P152,941 a year. There are 17 million
Filipinos each earning P152,941 a year in this
country. Since income distribution has not changed in
the last year 20 years - the same 20 percent keeps
earning 56 percent of the national income, you
multiply the P152,941 by 20 years and you get P3
million. There are 17 million Filipinos with wealth
of at least P3 million. And yet, how many paid their
taxes last year? Only two million Filipinos. Truly,
there is something wrong with our taxation.

The rich Filipinos whenever they turnover their
property to their children or to their heirs also do
not pay taxes whenever they do so.

Purisima says total collection from property transfers
last year was P740 million. At a simple rate of 10%,
Cesar wonders does that mean that total properties
transferred is only P7 billion? It doesn't make sense,
he says. Indeed, it doesn't. The total income of
the richest 20% of the population is P2.6 trillion
(that's 2,600 billions).

The rich also don't pay taxes whenever they buy or
import cars.
There were 200,000 cars registered last year as new in
LTO, according to Purisima. The production in the
Philippines is about 80,000 units. So about 120,000
were imported used cars. Cesar vows that BIR will
work closely with the LTO to make sure that the
importers pay the right amount of duties.

Here is Cesar's arithmetic. Again, P500,000 minimum
would probably be a good starting point for cars.
P500,000 times 120,000 units is P60 billion. Did
anyone pay taxes on those P60 billion worth of
vehicles? Few, if any.

Cesar says you have to have P3 million in assets to b
e able to buy a P2 million or P3 million car like a
Benz or a BMW. The individual tax rate is 32 percent
for income of over P1 million. So to have an extra
P2 million or P3 million, you must be earning P6
million to P9 million.

Cesar has it figured out: “To own a P3 million car,
you need to pay at least P1 million as taxes (on your
income), whether this year or over a period of time.
Because P3 million is an asset and it comes from
taxable income at 32%, that's P1 million. “

Importers too don't pay taxes.

Explains Cesar: “How much do you pay for a container
to transport it? Probably from the US to the
Philippines, you pay $2,000 - 3,000 as shipment
charge. Obviously, what's inside the container
probably should be worth more than $3,000 or else it
doesn't make sense paying $3,000. In fact, it should
not just be worth as much as three percent, we should
look at the ratio of transportation cost to the cost
of materials. In some cases, it's only five percent.”

Cesar assumes five percent. then the contents must at
least be worth $40,000 or P2 million. He asks:
“Shouldn't it be alright to make a minimum charge or
duty per container using that analysis. P2 million,
assuming an average tariff of five percent, plus VAT
of 10 percent, that's 15 percent times P2 million,
that's P300,000. “

So, each container must pay at least P300,000. Cesar
says this is the kind of approach that Commissioner
Parayno and Customs Commissioner Lina will be using
to make sure that they improve the efficiency of our
tax collection He says there are over a million
containers that go through the Port of Manila alone.
Assuming half of those are duty-free going to the PEZA
zones, 500,000 times P300,000 is P150 billion.

To capture the income of the rich and tax them, Cesar
intends to resort to:
What Cesar intends to do

--Predictive auditing

BIR would like to predict what you will pay. It will
use statistics, we will use information because
that's the only tool that we have to try to improve
collection.

--Benchmarking

You pay 20% in taxes this year than the previous
year's and you don't get a BIR audit. So you don't
have sleepless nights. However, you must keep paying
20% more per year year for five years to escape a BIR
audit, for five years. You pay less than 20% in one
year, then you get a BIR audit.

--Appeal to patriotism

If you have a house that's worth P20 million, then
you must ask yourself “how much tax I should pay?”
Plus, your taxable income, then you can compute how
much the tax should be. If you're paying less than
10% of the P20 million, then maybe you should ask
yourself am I being a Filipino, am I acting as a
Filipino who cares?

--Remind you, you get what you pay for

Explains Cesar: We need to improve our tax collection.
We need to grow our economy. It's not really about
just fixing our fiscal situation or increasing taxes.
It's really about creating a better Philippines,
creating opportunities for our fellow Filipinos who
are unemployed, who are underemployed, who are earning
less than $2 a day. It's creating a Philippines that
we can be proud of. There's no reason why we cannot do
it. We were once there. In 1965, the total exports of
the Philippines was $650 million, It was more than the
combined total of Taiwan and Korea. So, we can be
there again. It's really up to us. We're a blessed
country. There are a lot of opportunities. We just
need to work.

endit

Tax targets

2005-03-03T16:10:00.000+01:00

Tony Lopez BizNewsAsia blog

Tony Lopez BizNewsAsia blog

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