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BusinessMirror vol. 5 no. 54 Sunday, January 10, 2010

Going into legacy mode »A2

President Arroyo is making sure she will be fondly remembered by the public that—independent pollsters say—has largely disapproved of her for most of her nine years as Chief Executive.

Beyond Manny Pacquiao »b8

Mixed bag of good, bad news in 2009—and 2010?

A broader look at today’s business

www.businessmirror.com.ph

A more digitized life »B5

An explosion of Internet applications and new gadgets makes 2009 memorable for business, fun, and the soul

A tale of two crises

out y toda

Bolivia’s hidden power source »C2

South America’s second-poorest country holds the world’s largest untapped reserves of the lithium needed for electric car batteries. Investors are lining up.

Natural disasters worsen conditions for people already braced for the full impact of a global economic crisis in the year just past. By Cai U. Ordinario

T  

Reporter

he year 2009 was challenging, to say the least—and from all indications, 2010 will be just as daunting, despite the mantra we keep hearing about being on the brink of

recovery. Filipinos got a taste of the worsening global economic environment when thousands were laid off and experienced shortened work hours at the beginning of the year. This led to shrinking incomes and was among the factors that significantly weakened the economy this year. With this, the government crafted the Economic Resiliency Plan (ERP) that prompted the government to spend 60 percent to 80 percent of the budget in the first half of the year. Despite the delay in the government’s budget and the recordhigh contractions in export growth, the country never posted a contraction in the first three quarters of the year.  However, nobody expected that September and October would bring two destructive typhoons, Ondoy and Pepeng, that tested not only the capability and disaster risk-management skills of the government, but also the spirit of the Filipino. Economists expect the effect of these typhoons to become more evident in the gross domestic product (GDP) numbers of the fourth quarter that will be released soon. The typhoons alone were enough for the World Bank to forecast a 1-percent growth in GDP this year. This was a downward revision of the 1.4-percent GDP growth expectation of the Washington-based lender in its Philippine Quarterly Update in mid-2009. Indeed, these two crises made 2009 not only a challenging year but a truly exceptional one. It may have brought the most destructive and never-before-seen challenges to the economy, but it also brought out the best in Filipinos. Many economists are hoping, however, that the government will extend more support to the ailing economy not only by prudent spending, but also by undertaking measures to solve structural problems in the economy, and conducting a clean and honest election in 2010.  

The global economic crisis

A man assists his wife and baby as mud and debris litter around their home in Marikina City, in this October 8, 2009, file photo. Based on the Post Disaster Needs Assessment report released by the World Bank, the typhoon damage and losses due to the two typhoons reached $4.38 billion. AP Photo/Aaron Favila

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The crisis that began in the West spilled over to the Philippines through the double-digit contractions posted by the growth of both export receipts and import bills this year. Exports and imports started contracting in October 2008, but peaked in the first half of 2009. Exports hit an all-time low in January when it posted a more than 40-percent contraction, while imports posted its worst contraction in April with a negative growth of more than 37 percent. University of the Philippines economist Dr. Benjamin Diokno said that certainly, external trade was among the biggest drags to the economy in 2009. He said export and import growth were significantly affected by the weak demand from the country’s usual trading partners, like the United States and Japan. “The weak demand for exports from our usual trading partners had caused Philippine exports to contract dangerously. As a result, manufacturing for the three quarters of 2009 fell 7.5 percent. Former export-oriented foreign firms have left Philippine shores, starting with Intel and

Sunday clothes

PROJECTED as a horrible year mainly because of the full impact of the global financial crisis that began in 2008—which by then had morphed into an economic slowdown and, at its peak, was a serious job crisis in many parts of the world—the year 2009 was truly a memorable one. As it began under a huge shadow cast by the spreading contagion from the global crisis, it ended beneath the pall of gloom cast by a string of disasters, topped by Ondoy in late September and Pepeng in early October. As many as 2 million people on Luzon island were left struggling to recover from the huge loss to homes, public infrastructure and farms. Not to mention the trauma etched in those who saw the real face of climate change at its worst, i.e., nonstop rain and then sudden floods that barely leave time for seeking safety. We thus inaugurate the BusinessMirror’s Sunday edition with a series of reflections on the year just past, and a glimpse of what many in the know expect in this new year. For resource persons, we didn’t tap the seers and feng shui experts for the latter—only the men and women who have helped our staff make sense of the news since the paper began publishing more than four years ago. Like our readers, we derive comfort in the thought that we are joined in this new phase of our adventure, in the brave, ever-changing and challenging world of journalism, by the people we have trusted—and we hope have trusted us back—all these years. This is our way of saying we enjoyed your company so much, we just couldn’t stay away on the best part of the week. Cheers to all. —The Editors

the most recent, the tire manufacturer Goodyear,” Diokno said. As a result, economists and even the National Economic and Development Authority (Neda) no longer see the government’s export and import targets being reached for 2009. The Development Budget Coordination Committee target for exports is a contraction of 13 percent to 15 percent, while import targets are pegged at a contraction of 12 percent to 8 percent. These targets may even be already be too optimistic considering that data from the National Statistics Office (NSO) show the country’s exports contracted by 27 percent to $31.311 billion in the January to October 2009 period; and imports contracted by 29 percent to $35.485 billion in 2009 from $49.960 billion in the same period last year.  

Typhoons Ondoy and Pepeng

Besides the global economic crisis, typhoons Ondoy and Pepeng severely affected the domestic economy. While the Neda and even the World Bank recognized that there are “perverse gains” that could result from the typhoons in terms of boosting GDP growth, it could not be denied that these were strong enough to bring the economy to its knees in the second half of the year. Based on the Post Disaster Needs Assessment (PDNA) report released by the World Bank, the typhoon damage and losses due to the two typhoons reached $4.38 billion. This means the country would need a total of $942.9 million for recovery needs, and $3.48 billion is required for reconstruction efforts until 2012. continued on a2


PresidencySunday

Going into legacy mode By Mia M. Gonzalez

P

Reporter

resident Arroyo is making sure she will be fondly remembered by the public that—independent pollsters say—has largely disapproved of her for most of her nine years as Chief

Executive. In a Cabinet meeting in Baguio City before the New Year, the President ordered concerned agency heads to complete their Sona (State-ofthe-Nation Address) projects before she relinquishes the presidency on June 30, 2010. To date, the government has completed 44 of the 149 Sona infrastructure projects, which the Presidential Management Staff (PMS) said would “further link up the country’s urban and rural economies, enhance access and spur growth through effective market linkages.” Alongside these key projects are five priority programs—the farm-to-market development program; communal and national irrigation systems; barangay electrification; upgrading of rural hospitals; and the resettlement of people displaced by the rail projects. Before the curtains are drawn on the Arroyo administration, it is expected to have completed another 23 projects involving the construction of roads and bridges, flood-control systems, power projects, airports, railways, irrigation and government hospital upgrading; and at least started others that would be completed under the new leadership. Projects that are scheduled for completion in the first half of 2010 include the Baler-Casiguran Road, Bontok-Tabuk-Tuguegarao Road, Cebu North Coastal Road, Dapitan-Dakak Road, Dinagat Island Road Network,  El Nido-Bataraza Rio Tuba Road, Halsema Highway, Iligan City Circumferential Road, Manila-Cavite Toll Expressway Project, Marikina-Infanta Road, SurigaoDavao Coastal Road and the Zamboanga West Coast Road. Also to be completed during the period are the Agno River Basin Flood Control Project Phase II; the Kamanava Flood Control Project; Cebu 200-megawatt coal-fired power plant; a new power plant in Masbate; closing the MRT-LRT Loop project; Banaoang Pump Irrigation Project; government hospital upgrading nationwide; and airports in Bagabag in Nueva Vizcaya, Bulan in Sorsogon, Dipolog in Zamboanga del Norte, and Zamboanga Airport in Zamboanga del Sur. Dr. Antonio Mendoza, head of the PMS Superregional Development Concerns Office; and Dominga Flores, acting head of the PMS Project Monitoring Office,  said projects started by the Arroyo administration would have to be continued by the incoming leadership regardless of their political affiliation, since these projects are already in progress, bound by contracts and have multiyear obligational authority.

“What is important is that the Arroyo administration has started the preconstruction phase of the projects,” Flores said, adding that this would ensure that they would proceed under a new administration. While Mrs. Arroyo’s pet projects are already assured of fruition sometime in the future, Palace officials said there are concerns about the continuity of some of the President’s programs, especially those that have been well-received by the public. “Every president, including this one, is concerned about the permanence of their legacy, and obviously a part of that depends on who succeeds them,” Deputy Presidential Spokesman Gary Olivar said in an interview with the BusinessMirror. Asked if the President is concerned about the continuity of the gains of her administration, Olivar replied: “Of course, every President is concerned that his or her legacy would be maintained by future administrations, and the President is not an exception.” If the President’s so-called legacy programs “are good programs, positive programs, helpful programs, popular programs, then it would be reasonable to expect and even require the new administration to continue and even build upon these programs,” he stressed. Even if the President were succeeded by an opposition candidate,  it would not make sense for the new leaders “to throw away the good achievements  from what they think are any bad parts of the presidential legacy.” Certainly,  he continued, “programs of the President that are good and helpful to the nation should be continued. The authorship of these programs, I think, is not as important as the positive effects they may have for our people and for our country.” Olivad said abandoning the key programs of the Arroyo administration “just because they happened to be authored by President GMA… would indicate a level of vindictiveness that is not appropriate for a new leadership.” He added that recognizing the President’s good programs by continuing them “would be the prudent and the civil and the right thing to do” on the part of the incoming leadership. Executive Secretary Eduardo Ermita said that in its last six months in power, the Arroyo administration will do its best to “place the house in order” to prepare it for the next administration. Ermita doubts if the President’s successor, especially if he is from the opposition, would be able to ignore Mrs. Arroyo’s accomplishments. “How can you disregard the infrastructure that are accomplished and constructed? You cannot disregard that. It’s there, staring you in the eye.... There is a need for continuity. That is essential. Every administration should continue the good things that its predecessor has done,” he said. n

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Scott Eells/Bloomberg News

A2 Sunday, January 10, 2010

The tale of two crises continued from a1

“Since the PDNA, the Post Disaster Needs Assessment, we’ve revised [our projection] slightly. For next year, we see a moderate recovery then after Pepeng and Ondoy, we adjusted it two ways. We adjusted downward this year’s growth and upward next year’s growth,” World Bank country director Bert Hofman earlier explained in a yearend briefing with reporters.  “What we expect is a negative impact of the typhoons this year because of lost production days and lost inventory and other things, [since] not all production could be sold in the end. But, because of our expectations of recovery and reconstruction spending next year, we actually expect some higher growth next year,” he added. In fact, National Statistical Coordination Board (NSCB) Secretary-General Dr. Romulo Virola said that without typhoons Ondoy and Pepeng, annual GDP growth could go as high as 2 percent this year. However, due to the typhoons, the country’s full-year GDP growth could settle at a maximum level of 1.3 percent. The NSCB said that based on data from the National Disaster Coordinating Council, Ondoy cost the country around P11.121 billion, while Pepeng cost P27.195 billion. By region, Central Luzon suffered the most with 32.2 percent of the total cost of damage; followed by the Ilocos region at 31.5 percent, Cagayan Valley at 12.2 percent, and the Cordillera Administrative Region at 10.3 percent.  

Perennial problems

The two crises only exacerbated the existing structural problems in the economy. University of the Philippines economist

Ernesto Pernia said that while the economy may have indeed been quite resilient in 2009, GDP growth per capita was still at negative 1.3 percent. Per-capita GDP estimates the value of goods produced per person in the country. The country’s GDP is divided by the total number of people in the country to indicate individual production. Pernia said the only factors that somehow saved the economy in 2009 are overseas Filipino worker (OFW) remittances and the stimulus spending of the government through the Economic Resiliency Plan, which required government agencies to spend 60 percent to 80 percent of their budget in the first half. According to the Bangko Sentral ng Pilipinas, OFW remittances posted a 4.5-percent growth in the January-to-October period. This means that cumulative OFW remittances have so far reached $14.3 billion in the first 10 months of 2009. “2009 [was] somewhat resilient only due to remittances. But GDP growth at mere 0.8 percent means negative 1.3-percent GDP growth per capita. Drivers were remittances and stimulus spending, [while the] drags [were] bad governance, worsening corruption, mistrust in leadership, poor revenue collection and unresolved population issue,” Pernia said. Diokno, meanwhile, refuses to believe that the Philippine economy was resilient in 2009. He said the economy slowed significantly in 2009, as characterized by rising unemployment and underemployment. In the October round of the Labor Force Survey released by the NSO, the number of unemployed and underemployed increased by 1.040 million to 9.594 million in October 2009, from 8.554 million in October 2008.

NSO data showed that in October, there were 6.875 million underemployed Filipinos, an increase of 846,000 from 6.029 million. In terms of unemployment, there were 2.719 million unemployed in October 2009, or an increase of 191,000 from 2.525 million in the same period last year. Neda figures even showed the country has not been able to meet its job-generation target since 2005. A year after the President included the target of providing 1 million jobs a year on her 10-point agenda, jobs generated only totaled 713,000. Succeeding years also showed below-target performance in creating jobs. The Neda said that in 2006, the government only generated some 675,000 jobs; 925,000 jobs in 2007; 529,000 jobs in 2008; and 972,000 jobs in 2009. Diokno added that data from the Social Weather Stations (SWS) quarterly survey results showed that poverty is deepening and hunger has increased. The SWS’ Third Quarter 2009 Social Weather Survey said that around 53 percent, or 9.7 million Filipino families, considered themselves poor, and another 41 percent, or 7.5 million families, believe they are food-poor. The SWS said the new self-rated poverty rate is three points up from 50 percent, or 9.3 million families, in June 2009. Around 28 percent of Filipino families put themselves at the borderline, and only 20 percent consider themselves as not poor. “Resilience is only in the minds of government propagandists. The economy has slowed sharply, and that is the opposite of resilience. Unemployment and underemployment have risen, poverty has deepened, and incidence of hunger has increased, according to the SWS’ quarterly survey results,” Diokno said.

Looking forward to 2010

There is no doubt that the global economy will continue to be weak in 2010. However, it will definitely be in better shape than in 2009. With a slow global recovery, economists believe the Philippine economy will also be slow in recovering from the ill-effects of the crisis and the typhoons. The government, along with some economists and multilateral institutions, expect export growth to get back on track and once again post positive numbers. OFW remittances are also seen to continue, despite the Dubai crisis, which is seen to affect OFWs working there. However, with a slow-growing economy, economists earlier said that job prospects in 2010 will continue to be weak. Economists expect the ill-effect of the crisis on the country’s labor force to continue until 2010, and possibly beyond. Dr. Rene Ofreneo, director of the UP School of Labor and Industrial Relations Center for Labor Justice, earlier said that due to the effect of the typhoons and the weak global trade, jobs in the country were threatened and lost in 2009. He said it would take some time before the real economy recovers, causing the increase in the number of people looking for permanent or part-time jobs. Ofreneo said another reason for the possibility that 2010 will continue to see more Filipinos underemployed and unemployed is the projection of the International Labor Organization (ILO) that a jobs recovery will happen sometime in 2011 and/or 2012. However, Diokno believes election activities will provide a boost for the services sector, especially in the first half of the year. There is a possibility that higher growth in transport, communications

and storage; wholesale and retail; private services and government services will be observed. Nonetheless, he cautioned that growth in these sectors is expected to slow in the second half of the year as the effect of the election-related spending fades. “[I expect] a slow-growing economy. I forecast a GDP growth of 3 percent, with the industrial sector leading the recovery. The manufacturing and construction sectors are expected to grow much faster in the first half compared with the second half,” Diokno said. “Agriculture activity is tricky to predict. It would depend on the severity and length of the anticipated El Niño phenomenon,” he added.

Forecast hinges on three things

Ultimately, Diokno said his forecast is hinged on three things: the severity of the El Niño phenomenon; how Malacañang will deal with changes made by Congress in the President’s 2010 budget; and ensuring an orderly, credible and peaceful 2010 polls. “It goes without saying that a chaotic and violent May 2010 elections could change drastically the projected outcomes. The worst possible outcome—failure of elections—could lead to circumstances that are truly mind-boggling,” Diokno said. Whether the elections will be peaceful or not, and whether the current problems of the country will continue to prevent it from achieving better growth that trickles down to the poor, has yet to be seen at this point. Still, one cannot discount that no matter what, Filipinos will continue doing what they do best—cope and hope that tomorrow will bring a brighter and better future for all. n


NeighborsSunday BusinessMirror

A4 Sunday, January 10, 2010

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Unprepared, unfunded, RP at the frontlines, facing free-trade fire from dragons

Leaders link arms during a photo session for the 4th East Asia Summit at the Association of Southeast Asian Nations Summit in Cha-am, Thailand, in this October 25, 2009, file photo. The Philippines has been at the forefront of the major negotiations for free-trade agreements Asean last year, but like its fellow developing countries, must brace for the rough winds of competition as these accords start to take effect this month. Yonhap News via Bloomberg

By Estrella Torres

T

Reporter

wo dragons are ready to breathe fire at the doorsteps of the Southeast Asian countries. But are these countries, mostly developing, ready for the tough trade competition posed by the region’s economic giants China and India? The Philippines has been at the forefront of the major negotiations for free-trade agreements (FTAs) concluded by the 10-member Association of Southeast Asian Nations (Asean) the past year, but like its fellow developing countries, must brace for the rough winds of competition as these accords start to take effect this month.

FTAs, Atiga

Asean countries signed and completed FTAs in 2009 with countries like China, South Korea, Japan, Australia and New Zealand, as well as India. The free-trade deals were implemented simultaneously on January 1, 2010. At the same time, while bracing for free-market competition with Asian neighbors, the 10-country bloc will also implement this January the Asean Trade in Goods Agreement (Atiga). The deal was signed in November 2007 replacing the 1993 Asean Free-Trade Area (Afta). It seeks to eliminate tariffs on almost 90 percent of products within the region and prepare the member-countries for an Asean Economic Community by 2015 for six countries—Malaysia, Indonesia, Thailand, Singapore, Brunei and the Philippines—and 2020 for Cambodia, Laos, Myanmar/Burma and Vietnam. Anna Robeniol, head of the External Economic Relations Division of the Asean Secretariat in Jakarta, said the region faces a lot of challenges in 2010 with the implementation of the free-trade deals. She said the free-trade deals were all anchored on agreements focused on investments and services to enable Asean economies to prepare for the economic integration by 2015.

It was China’s interest in Asean that moved many developed countries to enter into similar free-trade deals with the regional bloc, she added. It was soon followed by dialogue partners South Korea and Japan. The Asean economic integration by 2015 is envisioned to establish a single market and production base for the 10 members. It seeks to promote competitiveness in the region and bridge development gaps among members.

RP least prepared for Asean free trade

However, Robeniol admitted that the Philippines is one of the countries least prepared for Asean free trade and the tariff regime within the region under Atiga. She told a group of journalists from Asean countries, in a briefing in late 2009, that the level of maturity among the member-countries remains low, as there are “serious pressures” from the private sector, owing to tariffs being brought down to zero. “Many of the industries have been very complacent over the years, and relied too much on tariff protection,” said Robeniol, reacting to complaints of private companies on their lack of preparedness for the free-trade deals. She also argued that big industries have “relied too much on their lobby abilities, and there was no time to prepare for tariff elimination.” As the regional bloc braces for the two economic dragons, similar free-trade deals are in the pipeline, albeit the work is stalled by the linerging issues raised in connection with the human-rights violations in Burma/Myanmar. Robeniol said the European Union, along with the United States and Canada, is reluctant to push for free trade with Asean owing to serious concerns on the human-rights atrocities in Burma/ Myanmar.

Staunch political, security alliance with US

The Philippines has also led the regional bloc to push for a stronger political and security engage-

ment with the United States. Washington is apparently seeking to use Asean as a platform for regional engagement due to the looming threats of alliance between Burma and North Korea. In October, Manila hosted the preparatory meeting for the inaugural Asean-US Summit that was held in Singapore. Most of the issues discussed include regional security, climate change and counterterrorism. The hosting of the meeting was also an affirmation of Manila’s staunch political and security alliance with Washington. Senior officials from Asean and the US also set the platform for discussions for the visit to Manila of Secretary of State Hillary Clinton in November. In that visit, Clinton emphasized the importance of maintaining a security alliance with the Philippines under the Visiting Forces Agreement (VFA). Some senators aired concern over the treaty after the VFA, signed by the two countries in 1999 as part of the Mutual Defense Treaty, was tested with the alleged rape of a Filipina by US serviceman Daniel Smith in the former US military facilities in Subic, now a free port. Clinton also affirmed Washington’s commitment to help the Philippine government in counterterrorism efforts in Southern Mindanao through the continued presence of US troops in the Balikatan exercises. Western superpowers, led by the US, believe that engaging Asean is the best way to contain regional threats, such as the strong nuclear alliance involving North Korea, China and Burma. Robeniol believes that in its 42 years of existence, Asean has provided a platform for superpowers to converge and discuss security issues. She said the US is actively engaged in the Asean Regional Forum (ARF), where China and North Korea are also members. But economic engagement with Asean is limited to its dialogue partners— China, South Korea, Japan, India, New Zealand and Australia.

Slashed DFA budget

Despite having so much on its plate—both in

terms of economic diplomacy and regional security alliance issues—the Philippine Department of Foreign Affairs (DFA) saw its budget emasculated, yet again, in 2009. It had proposed to host the secretariat of the newly created Asean Intergovernmental Commission on Human Rights in Manila, as well as the regional headquarters of the United Nations Development Program (UNDP). However, its proposed 2010 budget has been slashed by more than P6 billion. The DFA asked for a 2010 budget of P19 billion, but the Department of Budget and Management approved only P12.394 billion, even lower than the current allocation of P12.543 billion. Foreign Affairs Secretary Alberto Romulo said the department needed a total of P424.480 million to establish the Asean human-rights headquarters in Manila—estimated to cost P350 million—while the UNDP office is expected to cost P15.4 million. The remaining P59 million will cover foreignexchange fluctuations.

Undocumented workers

As an agency tasked to protect the interests of some 8 million overseas Filipino workers (OFWs) abroad, the DFA finds it difficult to contend with its meager budget, particularly in dealing with the cost of repatriation of hundreds of undocumented workers. Just before the year ended, the department repatriated close to 200 undocumented Filipino workers from Beirut, Jeddah and Damascus. Most of these undocumented workers had already served detention for six months or more due to immigration-related offenses. However, even after their detention, they could not go home as the DFA had to raise funds for their repatriation. The repatriation of some 144 undocumented OFWs from Lebanon cost the DFA some $118,000 for airfare and immigration costs. The DFA has also been lobbying for a higher budget to attend to the welfare of Filipino workers in detention, like providing lawyers during trials. The Philippines is the world’s third-largest

source of migrant workers, next to India and China, and officials always make a big deal about how, with more than 8 million of them deployed abroad, remittances have shored up the economy for nearly four decades. In the first eight months of 2009, the Bangko Sentral ng Pilipinas said remittances from overseas Filipinos coursed through banks reached $11.3 billion; and the year-end total is expected to reach $19 billion. Yet the “goose that lays the golden egg,” it seems, has not deserved the proportional budget that would allow officials to tend to its needs. Foreign Affairs Undersecretary Esteban Conejos Jr. of the Migrant Workers Affairs Office disclosed that there are 800 to 1,000 OFWs currently detained. Most of them face immigration-related cases like traveling with no visa, fake visa or overstaying. The DFA is also closely monitoring 85 active death-penalty cases of Filipino workers abroad. At least 60 of these cases are drug-related offenses committed in China, where serious drug crimes often get the death penalty; the rest are murder charges, mostly in the Middle East.

Internal crisis

As the department continues to wage battle to improve the welfare of OFWs abroad, it suffers an internal crisis as career diplomats protest the increasing appointment of noncareer ambassadors. Close to year-end, diplomatic frontliners, led by the Union of Foreign Service Officers, protested the growing number of political appointees in the DFA. The crescendo rose after Secretary Romulo fired Victoria Bataclan as head of the DFA Office of the European Affairs—coincidentally, just after she led diplomats in protesting the growing number of noncareer ambassadors in key diplomatic posts. Bataclan has been on floating status since October. TheseniordiplomathadwrittenPresidentArroyo and complained about the appointment of Lakascontinued on a5

Swordplay with one hand tied

Local industries start the year with the burden of increasingly higher business costs, while competing with foreign counterparts favored by new trade deals. By Max V. de Leon Reporter LOCAL industries spent much time and effort in 2009 to persuade—in vain—the government to negotiate the deferment of the scheduled elimination of duties on over 90 percent of the country’s tariff lines for intraregional trade starting January 2010, pursuant to the Asean Trade in Goods Agreement (Atiga). Citing various reasons such as cost competitiveness, the financial crisis and even the twin typhoons that ravaged parts of the country in October, the different business groups closed ranks in saying that domestic industries should be given two to five years of reprieve from the tariff elimination, lest they be wiped out by their more competitive counterparts from other countries in Southeast Asia. But all the talk about suspending the Asean tariff-elimination scheme is now water under the bridge after Malacañang issued Executive Order 850 in the last week of December, effectively bringing down to zero the duties imposed on products included in the Philippines’ regular list of tariff lines under Atiga. Now, businesses in the country should look ahead and start doing some serious assessment on their chances of competing—assuming they can still compete under a fully liberalized Asean trade regime, experts said. “Businessmen should recognize what areas they could excel in, instead of pursuing a business

that cannot compete at the international level. If we cannot compete, we close shop. If we don’t want to close shop, then we look for other measures to survive, including the support mechanisms that we can get from the government,” Francis Chua, newly elected president of the Philippine Chamber of Commerce and Industry, told the BusinessMirror. It is inherent, he explained, for governments to find ways to protect their respective industries, in ways that would not go against the rules of the World Trade Organization. These, Chua said, include stricter product standards and requiring import-shipment surveys at the ports. “As long as we in business maintain good relationship with the government, it will be responsive to our issues,” Chua said. On the part of the businessmen, Chua said it is better to shift to sectors where the Philippines has the advantage in, particularly business-process outsourcing, electronics and semiconductors, and mining. Jose Sereno, chairman of the international trade committee of the Federation of Philippine Industries, said the general attitude now of domestic manufacturers is to brace for the onslaught of increased imported competition, whether they like or not. “We have no choice. We just have to compete or die.” Still, Sereno said domestic industries are disappointed with the government’s refusal to listen to their pleas to negotiate for the deferment of the

Atiga schedule. “Government officials are also saying that we just shut down our operations if we cannot compete. That is easy for them to say because they are not the owners. But they should keep in mind that the Constitution also pushes an industrialization program that the state has to protect, promote and develop. With our cost of doing business, the state of infrastructure and governance, we will not be competitive in any manufacturing activity for the domestic market,” Sereno said. Sereno said only those manufacturing activities located in the special economic and export-processing zones are likely to prosper in the country because of the numerous perks that locators are getting, topped by the option to pay the minimal 5-percent tax on gross revenues in lieu of all local and national taxes. High cost of doing business The uncompetitive cost of doing business in the country is also being blamed for the low investments the Philippines is registering compared with other Southeast Asian states. In 2009, for instance, the Board of Investments (BOI)—the top investment-promotion agency in the country—reported that it failed to reach its target to at least equal the P287 billion in fresh investments that it approved in 2008. The BOI failed to grow its new investment registrations despite coming out with a new-look Investment Priorities Plan (IPP) for 2009 that included a contingency list, which grants perks

to companies that will maintain investment and retain jobs; those that will retain investment and increase jobs; those that will increase investment and retain jobs; and those that will increase investment and increase jobs. As for the regular list, the new IPP will give incentives to new projects falling under infrastructure, agriculture/agribusiness/fisheries, engineered products, tourism and strategic investments, and research and development (R&D). Infrastructure includes, among others, logistics, power and mass housing. Engineered products cover basic iron and steel facilities, shipbuilding, machinery and transport equipment. Strategic investments cover those projects that have $300 million in minimum investments, or will hire at least 1,000 workers, or will employ new technology. R&D includes training facilities and centers of excellence. New projects of micro, small and medium enterprises will also qualify for incentives, provided they are not engaged in services, except those identified in the current listing, in smallscale mining, and are violative of public morals. Included in the mandatory listings are all export activities and those covered by other laws such as the Renewable Energy Act (pending the release of its implementing rules and regulations), Solid Waste Management Act, Clean Air Act and oil-deregulation law. Better figures for Peza In contrast, the Philippine Economic Zone Au-

thority (Peza) reported a 13-percent hike in approved new investments for 2009 to P175.36 billion. In Sereno’s view, the government should also do more to protect the investments of industries catering to the domestic market, and not just devote all its attention to the export-oriented locators in Peza-accredited zones. There are, he stressed, allowable nontariff barriers the government can employ to help domestic manufacturers from getting wiped out by imported competition. Also, he said the state should act promptly on the trade remedies that distressed industries are seeking, particularly the safeguard and antidumping measures. In August the local makers of steel angle bars managed to persuade the government to impose a safeguard duty on their imported competition because the surge in imports caused local production to shrink to 37,727 metric tons in 2008 from 106,699 metric tons in 2005. Malacañang issued an order slapping a P7.70-per-kilo safeguard duty on imported steel angle bars. More important, Sereno said the country badly needs the Philippine Trade Representative Office (PTRO) to serve as the main agency to oversee all trade negotiations and issues the Philippines is a party in. He said the industries would not have been put in a quandary by the series of far-reaching agreements the Philippines entered into had the bill creating the PTRO been enacted years back. continued on a5


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ReformsSunday BusinessMirror

Aviation: Flying high in rough winds Reporter

ince legal issues continued to hinder the full operation of the Ninoy Aquino International Airport Terminal 3 (Naia 3), the Manila International Airport Authority (Miaa) administrator devoted the better part of last year to making the two other passenger terminals as functional and user-friendly as possible. To make room for more passenger capacity at Naia 1, Miaa general manager Alfonso Cusi has spent more than a hundred million pesos to expand the arrival area up to the curb side. This enabled departing passengers to get down from their vehicle and immediately duck into the building, avoiding getting wet on rainy days, and also move closer to the entrance and the X-ray machines for their luggage examination.

Smooth operations at Naia 1

Cusi said that despite the increase in passenger capacity, the terminal was able to maintain smooth operations. Inside the terminal, Cusi had all the old, rusty-looking handrails replaced with shiny, stainless tubes, topped by clear flexiglass connected together in a long divider that separates passengers from well-wishers and visitors. This automatically prevents outsiders from getting in touch with checked-in passengers, thus avoiding the possibility of passing on unexamined, lastminute padala (gift) that could contain some illegal items. Once smelly and leaking, an almost decrepit remnant of the Marcos-era days, the decade-old terminal had suffered one major earthquake that loosened some joints and walls cracked by the temblor. In the course of a repair work, the rooftop’s waterproofing was mistakenly removed, causing water to cascade down into the building during a typhoon—flooding the lower floors, damaging precious electronic equipment of the airline companies and other concessionaires. The Miaa manager had the building renovated to make it leak-proof, with added coats of paint and more face-lifting in the interior. Free of the dripping water on rainy days, the entire floor was covered with new carpets and linoleum to replace the old jugged rubber mats. A new airconditioning system was also put in place. The clear delineation between passengers and nonpassengers, with clear, thick plastic wallscum-divider at the arrival and departure areas, now enables authorities to easily spot intruders, leaving passengers safe. Clear directional signs for the exit or entrance, and the location of toilets and other facilities, ease passengers’ movement in the terminal. Soon to be installed is a multimillion-peso closed-circuit television system—both for internal purposes, and to keep secure the perimeter of the 100-hectare compound.  

ISO 9000 rating

Such enhancements made it possible for the Naia 1 to attain ISO 9000 rating to indicate that the country’s premier gateway is now on a par with other international airports. It assures passengers of friendly and professional service; and of being able to fly safe, hassle-free and as comfortable as possible. In late December, Cusi and his trusted aides—senior assistant general manager Robert Uy and Miaa assistant general manager for airport development Tirso Serrano—brought the Terminals 1 and 2 closer to attaining ISO 9000 by gathering together some 15 airport stakeholders, mostly heads of agencies doing business with the Miaa, to sign a memorandum of agreement. The document binds all of them to fully cooperate in carrying the Miaa’s plans for total integration so that T1, T2 and T3 stakeholders

recto mercene

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By Recto Mercene

would all act in concert and harmony, giving passengers the best service they could expect. Cusi said T2 and T3 will be ISO-certified by January 2010.

CAAP regaining foothold

The Civil Aviation Authority of the Philippines (CAAP), hobbled by past blunders under the old Air Transportation Office, is slowly regaining its foothold to get back to Category 1 status. In November a team from the International Civil Aviation Organization (Icao) called the Universal Safety Oversight Audit Program (Usoap) spent 10 days at the CAAP, reviewing how the country’s aviation body fares vis-à-vis international requirements. Led by no-nonsense veteran CJ Collins, the team covered 987 predetermined questions, aimed mostly at critical areas: Primary Legislation and Civil Aviation Regulations; Civil Aviation Organization; Personnel Licensing and Training; Aircraft Operations Certification and Supervision; Airworthiness of Aircraft; Aircraft Accident and Incident Investigation; Air Navigation Service; and Aerodromes. The Icao-Usoap audit does not give “pass” or “fail” ratings, but computes the ratio between the affected protocol questionnaires. Out of 987 questions, the CAAP got 28.19 percent, a positive grade compared with the global average of 40.31 percent. CAAP director general Ruben Ciron said the lower the ratio, the less deficiencies there are for corrective actions. “CAAP is now on track for the next two audits—the European Union Safety Committee and the Federal Aviation Administration that will finally determine our eligibility for restoration to Category 1 status,” Ciron said “No less than CJ Collins remarked on the diligence of the officials concerned with their constant presence, the very transparent and prompt manner of providing documents and positive responsive answers,” Ciron said. He added that Collins referred to this CAAP audit as a “classic,” reflecting the state of preparedness of the agency.

Lack of qualified technical personnel

A highlight in the draft finding of Usoap is the lack of qualified technical personnel which handicapped the Caap. The reason: Training policies cannot be executed until new and qualified technical personnel are hired. “While we have developed a good number of manuals, the audit cited a lack of implementation of some procedures which is an outcome of personnel shortfall,” Ciron said. He noted that procedures have to be implemented for technical assessments of amendments to the annexes for review and adoption into the Civil Aviation Regulations. These are some of the key prerequisites of the CAAP. At the CAAP’s board meeting on October 29, 2009, the members approved a special plantilla of positions to address the lack of qualified technical

personnel. Hopefully, the new salary structure, approved by the board and by the Office of the President, will attract qualified applicants, even as the CAAP has to compete with higher salaries offered by the civil-aviation labor market. The Department of Foreign Affairs has also informed the CAAP that Ambassador Cristina Ortega met with James Moran, director for Asia of EC-Relex, to explore the availability of at least two European experts to help the CAAP address the technical issues raised by the Committee on Air Safety.

Modernizing Caticlan airport

Besides the technical demands, the CAAP also had to deal with local air carriers forced to abandon landing at Caticlan airport due to some limitations imposed by Icao. The Caticlan runway, the gateway to the world-famous Boracay resorts, registers the most numbers of landings and takeoffs compared with other airports, with the exception of the Naia and the Mactan-Cebu International Airport. Because of its short runway, a local air carrier suffered two air accidents within the year, forcing the CAAP to revise the computations of landing distance allowed due to the presence of a 45-meter hill near runway 24. After the figures were released by the Icao, only Category 3 aircraft, or those with sitting capacity of 30 passengers or less, could land at Caticlan. After five months of upgrading and spending P32 million, the CAAP provided 60 meters of extra length at both ends of Caticlan runways, 0624, eventually allowing affected carriers to land and take off at Caticlan airport. This conformed with the Icao’s standards of safety, increasing the usable length from 825 meters to 896 meters. A private firm has a contract to reduce the height of the hill obstruction near the runway, to be finished by mid-2010. It also includes the modernization of the passenger terminal and lengthening the runway to accommodate Airbus 320 or aircraft of similar performance. The airport modernization is under a buildoperate-transfer program.

Continuing challenges

FOR 2010 the Philippine aviation system is gearing up to meet all possible international standards to stay competitive, and as its contribution to the key economic strategy of boosting tourism and related industries, as well as fuel regional development. If 2009 were a yardstick for attaining set goals, officials can perhaps take comfort in the fact that a lot of crucial hurdles had been passed. Still, the first four days of the new year were bumpy at the premier airports, after the airline operators council and immigration authorities failed to agree on the adoption of new arrival cards, causing thousands of inbound passengers to cram the arrival terminal. But that’s another story. n

Unprepared, unfunded, RP at the frontlines, facing free-trade fire from dragons continued from a4

Promdi Rep. Antonio Cuenco of Cebu City as ambassador to Italy and Ambassador Francisco Benedicto as head of the Philippine post in Beijing. Their appointments have been turned down by the Commission on Appointments as a result. Diplomats argued that under the foreign-service law, diplomatic and permanent missions should be headed by a majority of career ambassadors. The current ratio between career and noncareer diplomats is closely breaching the limit of simple majority (50 percent plus one) because there are now 31 political appointees to the 34 career diplomats. The Arroyo administration, under Romulo as foreign-affairs chief, has the highest number of noncareer diplomats. Also, diplomats said career ambassadors who have reached the age of 65 should be retired from the service—and if they are retained, they should be considered political appointees. These include Ambassador to Beijing Sonia Brady, Ambassador to Berlin Delia Albert, Ambassador to Tokyo Domingo Siazon Jr., and Philippine

Permanent Representative to the United Nations in Geneva Erlinda Basilio. Career diplomats believe the increase in appointment of noncareer ambassadors can affect the Philippines’ political and trade negotiations at the bilateral, regional and multilateral levels. The issue continues to fuel the brewing row between Romulo, a noncareer diplomat himself, and the career ambassadors. Many diplomatic observers are wary that Romulo’s insistence in appointing noncareer diplomats could be his way to gather support, as he openly expressed his intention “to stay until and beyond” the term of President Arroyo. Romulo is also the only Cabinet secretary who expressed support for the presidential bid of Liberal Party standard-bearer Sen. Benigno “Noynoy” Aquino III.

Filipino seamen kidnapped

The year 2009 began and ended with the DFA still counting the number of Filipino seamen kidnapped—and some consequently released—by Somali pirates in the Gulf of Aden. According to Conejos, at least 439 Filipino

seamen have been kidnapped in the pirate-infested waters off Somalia since 2006. As of December 2009, there were 53 Filipino captives still onboard four pirate-held ships. The continuing acts of terror and piracy in the Gulf of Aden have prompted a high-level delegation from Somalia to visit the Philippines, led by Deputy Prime Minister Abdurahman Aden Ibrahim Ibbi, from December 21 to 23, upon the invitation of the Philippine government. While the United Nations and the international community have deployed warships to the Gulf of Aden, officials of the two countries emphasized the need to support poverty-alleviation programs in Somalia to address problems on piracy. The Philippines has been at the forefront of many trade, political and diplomatic engagements in 2009. Most of them concern the welfare of the 8 million Filipino migrant workers. But beyond the multibillion-dollar remittances these Filipino patriots send home, perhaps it’s only just that the government start looking at them as human beings first, with a crying need to prepare for a more sustainable way of life in their homeland. n

Sunday, January 10, 2010

A5

Bumper crop of laws, and a sordid legacy By Butch Fernandez & Fernan Marasigan

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Reporters

enate leaders are still looking to pass other vital reform bills to support growth, capital-markets expansion and other measures to improve fiscal health when Congress resumes sessions after the Christmas recess, bidding to top a “gainful” legislative output in last year’s plenary sessions. Senate President Juan Ponce Enrile reports that since the Senate began the third regular session of the 14th Congress in July, no less than 422 Senate and House bills were passed on third reading—of which 172 were enacted into law, including Republic Act (RA) 9576 increasing the maximum insurance on bank deposits from P250,000 to P500,000 to further protect savings of depositors, as well as the banking system.     Other Senate-initiated legislations enacted into law last year were RA 9501 embodying the Magna Carta for Small and Medium Enterprises; RA 9502 on Cheaper Medicines; RA 9505  creating the Personal Equity and Retirement Account (Pera); RA 9507 mandating Low-Cost Housing Loans;  RA 9510 establishing the Credit Information System; RA 9512  on  Environmental Awareness; RA 9513  on Renewable Energy; RA 9514 updating the Fire Code; RA 9515 on Ship Agents; RA 9516  on Acquisition of Firearms/Ammunition; RA 9521 on National Book Development; RA 9522  setting the Archipelagic Baselines; RA 9523 on Domestic Adoption; RA 9547 providing a Special Program for Employment of Students; RA 9576 amending the Philippine Deposit Insurance Corp. (PDIC) law; RA 9646 on the RealEstate Service Act; RA 9653 updating the  Rent Control Act; RA 9700 extending the Comprehensive Agrarian Reform Program by five years; RA 9829 establishing the Preneed Code; RA 9853 updating the Customs Brokers Act; RA 9729 on Climate Change; and RA 9856 on the Real-Estate Investment Company Act, among others. According to Enrile, a total of 3,561 bills and resolutions were filed in the Senate during the entire 14th Congress, of which 761 were acted upon and passed by the Senate, with at least 14 more measures awaiting consolidation by the bicameral conference committees before these could be submitted to Malacañang for signing into law.   Sen. Edgardo Angara, principal sponsor of the PDIC law (RA 9576), said the legislation institutes protective or remedial measures “to ensure that the Philippine financial market is resilient enough to weather the [global financial] crisis, and to enhance depositor protection, depositor confidence and a stronger banking system.” Yet another key legislation whose long-awaited passage was welcomed by the market is that institutionalizing the Real Estate Investment Trust (REIT). The Philippine Stock Exchange (PSE) said its passage will allow the local equity market to catch up with its “fast-growing” neighbors. The REIT Act provides the regulatory and tax framework for REITs, or companies that own and operate income-producing real-estate assets. Shares of these REITs will be listed on and traded at the PSE. PSE president Francis Lim said earlier REITs will democratize wealth by broadening ownership of real estate in the Philippines and provide incremental revenues to the national government through income taxes, value-added taxes and stock-transaction taxes.

Renewable energy, finally

Angara also authored the renewable-energy bill, which became RA 9513 that took nearly a decade to bring to life; it was intended to spur exploration and development of  renewableenergy sources like biomass, solar, wind, hydro, geothermal and ocean energy sources to reduce the country’s dependence on fossil fuels and minimize the country’s exposure to price fluctuations in the international markets. Another vital bill enacted last year was the Credit Information System Act or Cisa (RA 9510), designed to improve the overall availability of credit especially to micro, small and medium-

scale enterprises. It provides mechanisms to make credit more cost-effective; and reduces excessive dependence on collaterals to secure credit facilities. It provides credit information at the least cost to participants and ensures protection of consumer rights and the existence of fair competition in the industry. To promote capital-market development and savings mobilization, the Senate and the House also adopted Angara’s bill on the Pera, which became RA 9505. The new law would establish a legal and regulatory framework of retirement plans comprised of voluntary personal savings and investments. “This law recognizes the potential contribution of Pera to long-term fiscal sustainability through the provision of long-term financing and reduction of socialpension benefits,” the senator said.

A sordid ‘legacy’

IF there was one good thing the multibillion-peso Legacy Group fund mess brought to future preneed planholders, it is the passage of the Preneed Code of the Philippines, regulating the establishment and operations of preneed companies to derive the optimum advantages from them in the mobilization of savings, prevent and mitigate practices prejudicial to public interest, and protect planholders. Much of the preneed mess was linked, rightly or wrongly, with the Legacy Group mess, even though not all of the Celso de los Angeles companies that became the center of regulatory and congressional investigation were preneed firms per se. The mess, described by PDP-Laban Rep. Teodoro Locsin Jr. as the “Celso de los Angeles Legacy Scam,” served as a wake-up call to legislators to act on pending measures to address precisely such perils faced by ordinary savers who invest their hard-earned money only to be duped by some erring businessmen. As early as 2007 bills had been filed in the House of Representatives for a Preneed Code but, like other pending bills, were not immediately acted upon—until the news broke about the voluntary dissolution of the Legacy Group of Companies and the closure of 15 rural banks of businessman de los Angeles. Immediately, the House leadership called for an inquiry and made the measure a priority bill. In the middle of the investigation, the bill for a Preneed Code, authored by Laban ng Demokratikong Pilipino Rep. Juan Edgardo Angara of Aurora and Lakas-Kampi-CMD Rep. Jaime Lopez of Manila, was approved at the committee level. Later, after the House Committee on Banks and Financial Intermediaries, headed by Lopez, terminated the inquiry, the bill was approved by the House in plenary session on third and final reading. Preneed plans are contracts or agreements covering life, pension, education, interment and other future needs, the benefits of which shall be delivered at the time of actual need, with the planholders paying premiums in cash or installment. Besides the Preneed Code, the House also worked hard on the bill increasing the maximum deposit-insurance coverage from P250,000 to P500,000 per depositor under the PDIC. House leaders said the passage of these measures was a result of the Legacy mess investigation, which cast light on the work—and some gaps in regulation—of the Securities and Exchange Commission (SEC) and Bangko Sentral ng Pilipinas. The House Committee on Banks and Financial Intermediaries, at the end of the inquiry, also moved to transfer the supervisory mandate over such entities from the SEC to the Insurance Commission (IC) when several members pointed out that a preneed plan is a form of an insurance contract. Legislators also expressed dismay over the SEC’s failure to act accordingly when several pre­ need companies collapsed one after the other. According to Nacionalista Party Rep. Jesus Crispin Remulla of Cavite, the SEC “is not as capable or as equipped to be able to deal with the intricacies of preneed plans.” He said the business is “predictive, actuarial, mathematical and highly specialized,” for which the IC is deemed to be the better office handling it. n

Swordplay with one hand tied continued from a4 “All these things, including the timing, would have been managed better if the PTRO was there already. Now you have possible attacks from different sides because aside from Asean Free Trade Area, you also have the China-Asean FTA [freetrade agreement], Asean-Australia-New Zealand, and Japan-Philippines Economic Partnership Agreement,” he said. Sereno earlier used typhoons Ondoy and Pepeng in calling on the government to seek a deferment of the Philippines’ Atiga commitments, since Article 23 of this Asean agreement allows member-countries to suspend their tariff-elimination schedule on extraordinary circumstances, including natural calamities. The Department of Trade and Industry (DTI) did not heed the request to use the disasters as a reason for stalling the trade commitments. The DTI, however, made the twin typhoons as the bases for imposing a price freeze on basic commodities for two months. The agency also did extensive market monitoring and apprehended close to a hundred profiteers and violators of the price ceiling in the af-

fected areas. Businesses raised a howl over the price cap since it was a distortion of the supplyand-demand dictum, and the DTI promptly lifted it after the 60-day period. Thus, the start of the year has found several key sectors, notably the plastics industry that counts over 250 companies, loudly complaining about the adverse impact of Atiga on their bottom line. The plastics group is particularly hurting because of the double jeopardy it suffers: it continues to pay 10-percent tariff on its raw-material imports, even as its finished products must compete with the low prices of finished products imported from other Asean countries that now enjoy the zero-tariff regime under Atiga. From all indications, 2010 will see even more painful adjustments for several industries affected, not just by Atiga but also the other free-trade agreements. In Congress, meanwhile, a bill rationalizing fiscal incentives as a means for luring more investors is being fast-tracked. Local business rues that foreign entities are the ones targeted to be favored. And the locals?—most likely they will just keep hearing the mantra “compete, compete, compete.” n


Energy/TaxesSunday BusinessMirror

A6 Sunday, January 10, 2010

www.businessmirror.com.ph

Controlling oil prices in times of crisis

A City Oil employee pumps fuel into a vehicle at a gas station in Manila. The confluence of typhoons that hit the country in September and October and the volatility in world oil prices prompted the government to exert pressure on local oil companies to hold off weekly oil-price adjustments in the last quarter of 2009. Enrique Soriano/Bloomberg News

By Paul Anthony A. Isla

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Reporter

lthough local fuel prices were subject to the vagaries of world oil prices throughout the year, the confluence of typhoons that hit the country in September and October and the volatility in world oil prices prompted the government to exert pressure on local oil companies to hold off weekly oil-price adjustments in the last quarter of 2009. Since the start of that year, local oil companies have adjusted the pump prices of petroleum products on a weekly basis to immediately reflect increases or decreases in world oil benchmarks, such as Dubai Crude for oil refiners and the Mean of Platts Singapore for oil importers. In a deregulated oil-industry regime, local oil companies are allowed to adjust prices without government intervention. In October, however, after typhoons Ondoy and Pepeng hit the country and devastated areas in Northern and Central Luzon and Manila, the government had to resort to twisting the arm

of local oil firms to freeze prices in Luzon at the October 15 levels. This it did by issuing Executive Order 839, the first-ever such decree to control fuel prices since the industry was deregulated. President Arroyo’s move drew mixed reactions: praise from motorists and consumer groups, but criticism from oil-industry players and some economists. Many critics and industry players sought court clarification on whether the oil-price freeze was legal or constitutional. They noted that although the Oil Deregulation Act of 1998 provides that the government—in cases of state of emergency due to natural calamities or disasters—could control prices, the declaration of a state of emergency is not for the Palace alone to decide, but must entail congressional concurrence. Oil executives warned the government allowing EO 839 to be in effect much longer could result in supply disruptions, as no creditor would issue letters of credit to any oil company that is barred by the government from setting its prices, a key business decision to ensure survival. Industry players called the government’s

attention to supply disruptions in Luzon for almost two weeks even after the government came out with EO 845, which lifted the implementation of EO 839. In mid-November, even after the government had issued EO 845, local oil companies were not able to immediately replenish their supplies enough to restore them to normal levels, as some had to put on hold some shipments, or experienced long time lags between the ordering and delivery of fuel supply. Some oil executives had projected that normal fuel supply could come in December, or two weeks after the oil-price freeze mandate had been lifted. Most fuel service stations in Metro Manila had to either shorten operating hours or capped the volume of oil sold to motorists as some companies had to stretch their available supplies until the shipment of new fuel came. When EO 839 was still in force, the Department of Energy (DOE) warned that the supply of petroleum products would last only for eight to 13 days. And even as the DOE tried to secure commitments from local refiners Petron Corp. and Pilipinas Shell Petroleum Corp., both companies begged off from giving commitments.

“Petron would not be able to supplement the demand for petroleum products if the supply situation becomes critical as a result of the nonimportation of finished products for some of the importers,” Eric Recto, Petron president and chief executive, told Energy Secretary Angelo Reyes in a stakeholders’ meeting in November. Recto noted that they would be able to service the surge in demand by only a very marginal extent of 5 percent to 10 percent even as Petron continues to refine based on an earlier determined program. Ed Chua, country chairman of Shell Group of Companies in the Philippines, said his company could not cope with the sudden surge in demand if importers would not be able to import fuel products to curb their losses, and that they could not be expected to cover the shortfall if the others stop importing. Recto even painted a doomsday scenario, saying that Petron could incur losses of more than P1 billion in the fourth quarter of 2009 if the government insists on keeping EO 839 in effect. An industry source lamented that the reverse had, in fact, been the result of the government’s strategy to carry out its noble intention to help

the poor by cushioning the impact of expensive fuel products after being hit by two consecutive typhoons. EO 839, stressed the source, had made things worse for them. “Instead of helping them [the poor, with] some employed as attendants in fuel retail stations, the oil-price freeze mandate has caused some dealer and oil company-owned fuel-retail stations to cut their operating hours,” the source said. “Temporarily closed retail stations or those with shortened operating hours resulted in temporary unemployment and [loss of ] income for those who were working as attendants in fuel-retail stations,” the source said. With the oil-price freeze mandate lifted and the fuel supply getting back to normal levels and oil prices being reflective of the volatility in world oil prices, still many industry players and experts expressed fear that the government’s issuance of an oil-price freeze would set a bad precedent for the next administration. Some quarters are of the view that the issuance of an order similar to EO 839 would be a disincentive to any further investment in the sector that will affect future supply over the longer term. n

Plugging leaks, taxing business in a slowdown By VG Cabuag

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Reporter

sk any ranking official in the Bureau of Internal Revenue (BIR) about the attainment of the agency’s goals for this year, and he or she will just squirm. That general reaction of most revenue officers is expected, as the agency has been under pressure for almost the entire year. The widening shortfall has already cost the head of BIR Commissioner Sixto Esquivias IV, who resigned last November after barely a year as the country’s top taxman, accepting responsibility for—despite his indefatigable work ethic and integrity—the failure of the agency to attain its goal. It was a different situation, however, with the Bureau of Customs (BOC), the government’s second-largest revenue earner. BOC Commissioner Napoleon Morales, a career official, has been in a fighting stance since the start of the year, in an effort to convince the country’s economic managers that his agency’s failure to hit its targets was a result of several factors beyond BOC’s control, chiefly the weakening economy. “Our revenue collections were down because of the continued sluggish movement of international trade for the period which is beyond my control. What can you collect if there’s no cargo?” Morales said. So far, the collection deficit of both agencies continued to pile up just before the year ended, as their officials were just concerned on limiting the shortfall in their revenue collections. For the BIR, its shortfall was already P56.5 billion for the 11-month period ending November, while the BOC was not far off with a deficit

of P49.18 billion for the same period. Collections of the BIR and the BOC account for over 90 percent of the revenues of the national government. Their targets are set by the interagency Development Budget Coordination Committee (DBCC). It has been a tradition, at virtually the start of each year, for officials of both agencies to be haggling for the reduction of their targets, arguing that the assumptions were not entirely correct. “Our [BIR] target is very simple to compute. Just get 80 percent of the national government’s budget, and that’s our target,” BIR Manila regional director Arnel Guballa quipped.  “If we could not attain our target by the end of the year, we are branded as ‘corrupt’ and accused of so many things without [anyone bothering to] even look at the real reasons,” Guballa, who will be transferred to BIR Caloocan soon, said. The BIR is looking at a revenue goal of between P800 billion and P850 billion, after fiscal planners threw out the earlier figure of P875.1 billion. The BOC, on the other hand, has a lower collection goal of P255.9 billion from this year’s P273.3 billion. “We have already identified a lot of strategies and measures that will ensure that we will be in a good position to meet our tax-collection goal next year [2010]. It has not yet been finalized but…it’s an evolving target,” BIR Commissioner Joel Tan-Torres said in an interview just before the year ended.

Revenue-eroding measures

Much of the agency’s collection problems arise from the legislature’s enactment of revenue-eroding measures regardless of fiscal

consequences, according to Tan-Torres, who replaced Esquivias. For instance, the BIR is now treating the use of the Optional Standard Deduction (OSD) as a revenue leakage after the agency already incurred P3 billion in lost revenues. OSD, which gives a standard-deduction rate of 40 percent of gross income of companies, is just one of the provisions placed in Republic Act 9504, or the New Income Tax Exemption Act. Previously, companies computed their income-tax deduction on an itemized basis only. The law became the so-called tax-eroding measure after Congress failed to pass a law on Simplified Net Income Taxation Scheme (SNITS). According to an earlier plan, the government needs to pass a series of laws, in a move to have a more progressive tax system. On paper, one of the laws may erode revenue but the other measure should counter any tax leakage. “There will be changes in [OSD implementation] next year, and we will be stricter,” Tan-Torres said. Both agencies, on the other hand, are effecting change. For starters, they have begun reshuffling their people, with the BIR issuing a series of travel orders just this month that cover assistant commissioners down to revenue district officers (RDOs) in the key city centers. Tan-Torres said they would issue another order for RDOs and assistant RDOs in other parts of the country before the end of the year. The BOC has also made some changes, but its reshuffle of personnel was focused more on the bigger collection points in the country, such as Port of Manila (POM), the agency’s second-largest collection point, and also Cebu and Davao. In the middle of the year Arnel Alcaraz, POM collector, was replaced by Rogel Gatchalian

amid the protests of many BOC officials. Gatchalian, however, reportedly would be replaced by former Cebu collector Ricardo Belmonte, brother of Quezon City Mayor Feliciano Belmonte, in the next few months.

‘Electronic to manual’

But far deeper than change in posts, the BOC for years has been changing the way it operates with its billion-peso worth of electronic-tomobile project (E2M). The program is meant to rid the agency of corruption, by making it impossible for officials to be involved in graft and corruption. Unfortunately, E2M has been earning a new moniker as “electronic to manual” after some of the systems, such as the Imports Assessment System (IAS), have been reverted back to the older manual filing. In August the BOC was forced to shut down IAS in the two Manila ports after glitches in the software, and when port users did not comply with the requirements. IAS is a set of application components that handles the flow of import processing—including electronic manifest clearance, import declaration entry, risk assessment, regulatory clearances and release of cargo. Sources, however, said many of the stakeholders would not want the new system to be implemented because such would put an end to the nefarious practices of many parties. The latter, of course, involve lots of money that are just pocketed by individuals and not remitted to the government. IAS is proving to be a headache to BOC Deputy Commissioner Alexander Arevalo, as problems seem to arise on every front, from the submission of the manifest down to the reporting system. For instance, the BOC’s finance depart-

ment, which should track all the revenues directly from the port, was having a hard time making a report since it has insufficient or no data at all from the Manila International Container Port, the country’s largest terminal and the BOC’s biggest source of revenue.

Key challenge

That will be the main challenge for Arevalo for next year. And maybe a lot more headaches are in store, since Malacañang has instructed the BOC to implement the National Single Window system in major ports of collection in Manila starting this month in a move to improve the agency’s dismal revenue performance. It will also be a challenging year for the BIR as well. But Tan-Torres vowed to continue to instill fear among taxpayers and reward those who follow the law, a strategy started by his predecessor.   Oplan Kandado, a measure that closes down an erring establishment for at least five days, has been instrumental in the growth of value-added tax collections of the BIR, a feat that BIR Deputy Commissioner Nelson Aspe had already trumpeted before International Monetary Fund (IMF) officials. Tan-Torres wants the measure to continue, and to clog the courts with tax-evading cases, saying he would push all his men nationwide to jail tax evaders. The new BIR chief, however, is working on a tight schedule and may only hold on to his position until June, as a new administration will be in place after the May elections. Morales faces the same situation. But whoever step in as the new heads of these key agencies, they will surely have a tough job continuing the initiatives in place and plugging all the tax leakages in the country. n


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BankingSunday BusinessMirror

By Erik dela Cruz

TEVES: Asia’s 2009 Finance Minister of the Year

Balancing a ton of bricks Fiscal, monetary officials survive a hell of a year, but see challenges persisting in 2010

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complex issues arising from a US-led credit crisis already a year old by 2008 were dropped like so many bricks on the laps of Philippine monetary and fiscal officials in 2009. These were issues that even now continue to hound policy meetings and make it difficult for Bangko Sentral ng Pilipinas (BSP) Gov. Amando Tetangco Jr. and for Finance Secretary Margarito Teves to steer the economy past the year at a minimum clip of 0.8 percent in terms of the gross domestic product (GDP).  Tetangco would later be forced to acknowledge the high end of the target range of 1.8 percent as unreachable under the circumstances, the ravages of the credit crisis having gone truly global by then. Over at the Department of Finance, Teves helped craft a P330-billion fiscal-stimulus package to complement Tetangco’s multipronged monetary response to the growing economic malaise and ensure there will be growth. The intent, the Cabinet-level Development and Budget Coordination Committee (DBCC) would stress, was to release the bulk of that money in the first half for optimum impact. Various analysts at this time were already saying there will be “no meaningful recovery in 2009”, as even the National Economic and Development Authority said the global crisis was even then deepening and would likely last longer than anyone expected.

Recognition for RP, Teves

Regardless of the variations in the assessments of how deeply the crisis was eating into national life, the DBCC laid out a program that will pour 60 percent of the stimulus package within the first six months. Later, Teves would make it as Asia’s Finance Minister of the Year, declared by the London-based The Banker magazine, for helping steer the economy through a tumultuous period. The magazine said the Philippines remained afloat despite the ongoing economic turmoil, in contrast to its performance in the 1997 Asian financial crisis, when the country was one of the first to be affected. It said the Philippines was one of the first to fall in that crisis due to its very high public-sector debt and interest burden; but that it skirted this danger in the current crisis. Still, the year had its stormy periods. At the BSP, Tetangco and his deputies were summoned before Congress and made to explain how it was that a former senior government official with a mind for shady finance evaded detection for so long and made off with more than P12 billion in depositors’ money, paid for by the government through the Philippine Deposit Insurance Corp. (PDIC). This, as the Senate doubled the protection depositors get from the PDIC to P500,000 per account even as a number of banks, mostly rural lenders, began falling by the wayside as confidence on their integrity waned with the unraveling of the financial hocus pocus allegedly perpetrated by Celso de los Angeles and his cohorts. De los Angeles, et al., were accused of raiding the Legacy Group Banks’ vaults till there was only P835 million left. Tetangco would later stress that the number of failed banks was miniscule compared with the universe of lenders that continued to post positive performance after the Legacy Banks’ caper made the headlines.

Rate-easing strategy

He worked to ensure the global recession would spare the country by lowering the policy rates another half-percent in January 2009, or just six weeks from the first rate cut the previous December, even-

tually releasing some P600 billion into the system in a series of policy-rate cuts and regulatory relief measures just so credit would not stop flowing to where it was needed. In all, the BSP would cut its policy rates six times from December 2008 through July 2009 before taking a pause to let all that liquidity work throughout the system. Soon enough, the privately owned banks began forecasting double-digit lending growth no matter the economic downturn, and big names like the Bank of the Philippine Islands responded to the crisis by adopting back-to-basics banking. Banco de Oro Universal Bank would become the country’s largest by assets and the national government under Teves would set aside P698 billion for debt service, even as he prepared to borrow $2.5 billion overseas to plug a widening budget deficit.

The deficit albatross

Teves began the year with the deficit capped at only P199.2 billion, or 2.5 percent, of GDP.  He would grudgingly allow that number to hit P250 billion and, later, to P293 billion—as the revenue stream slowed in keeping with crisis, and just as spending must rev up in the wake of the destruction wrought on public infrastructure by typhoons Pepeng and Ondoy later in the year. While Teves is positive the 2009 deficit will be kept lower than P300 billion, the number of skeptics seeing a budget blowout already include former finance secretary Roberto de Ocampo. Teves insisted the markets could digest a deficit no wider than P300 billion, or 3.8 percent, of GDP. The government tempts punitive action from its creditors and investors should the deficit widen beyond this point, he argued. Around midyear, the Asian Development Bank (ADB) met in Indonesia and crafted a $120-billion liquidity fund that member-countries could dip into in the unlikely event of a foreign-exchange crisis. This facility drew lessons learned the hard way in 1997, when countries in the region had to borrow billions of dollars from a reluctant International Monetary Fund (IMF), at steep costs to Asian taxpayers, because foreign funds have fled the region. At around this time, the US Fed’s Ben Bernanke first spoke of the green shoots of recovery that many in the region were desperately on the lookout for. Tetangco would ask Teves for the balance of P40 billion the national government was supposed to give the BSP as subscription capital promised in 1993 yet. Tetangco hoped to leverage that amount into a stronger BSP better able to respond to the needs of the slowing economy, only to abandon it later as the global crisis deepened and widened at the same time. Teves himself was not spared the impact of the growing turmoil, having to persuade Congress to stop giving tax concessions to favored sectors and support the plan to adopt a single-rate excise system for alcohol and cigarettes to raise additional revenues of up to P60 billion or P70 billion a year. In all this time Tetangco helped soothe Teves’s frayed fiscal nerves, saying a deficit as large as P300 billion should still be manageable. Teves would tell reporters later the hell he went through as the deficit widened was just too much that he was prompted to give up the chance to seek an elective post at this year’s May elections in the process. (Note: He was a member of the House of Representatives for three terms before being tapped for Finance.)

Dubai debacle in December

AS the Christmas holiday mood set in the world was suddenly told that Dubai, one of seven making up the United Arab Emirates and host to millions of skilled overseas Filipino workers (OFWs), could not pay tens of billions of dollars in debt. Dubai’s woes magnified the importance of the stream of remittances sent home each year by millions of OFWs around the world—the same one that experts from the IMF/World Bank Group feared

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Reporter

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They’re certified healthy–and you can take that to the bank

TETANGCO: “The country’s external payments position continues to be a fundamental source of strength for the economy.”

By Jun Vallecera

Sunday, January 10, 2010

would contract and put at risk the country’s drastically reduced growth outlook for the year.

Timing is everything

The contrasting views, however, were distractions to the larger drama centering on the question of timing the withdrawal of fiscal and monetary stimuli—an exit that Australia started by hiking its policy rate early in October. Timing is important, as an early withdrawal would result in stunted growth, while a late exit heightens the risk of inflation and a price spiral. In Manila’s case, Tetangco said an exit plan was crafted even as the monetary adjustments were taking place.His deputy, Diwa Guinigundo, said they are looking at the demand indicators as electricity and vehicle sales, trade data and liquidity levels for signs of recovery and the buildup of prices for clues. “We started talking about this some months back, if only to assure that, at some point, we will have to unwind and the market is not caught by surprise,” Guinigundo said. Tetangco said liquidity growth, capacity utilization and the state of financial markets are special interest areas worth watching closely over the next six months. Analysts have said the BSP will likely begin its exit program in the second half this year when local output shall have firmed up. Growth has been very tentative in the first nine months of 2009, averaging only 0.7 percent during the period but proving more resilient than other countries which posted contractions rather than growth, Tetangco noted. He said bank lending never stopped although it slowed down noticeably: “The turn to cautiousness in lending is understandable as economic agents tend to assess the markets more carefully during a crisis.” He looked back and said the domestic financial markets have stabilized, as shown, for example, by the Philippine five-year credit-default swap rate and the emerging market bond index spread, where rates dipped significantly from their peaks in October 2008. Domestic interest rates have also trended down since then, Tetangco added. In addition, the banks’ asset base expanded steadily as deposits for the period grew. Soured loans averaging 4 percent in 2008 eased to only 3.4 percent at end-October last year, even as the industry’s capital-adequacy ratio remained high at 15.7 percent on aggregate basis and 14.8 percent on individual bank basis at end-June 2009.  This was higher than the BSP-mandated level of 10 percent and the 8 percent prescribed by the Bank for International Settlements, Tetangco said.  

External sector stays healthy

More important, the external sector proved robust during the year, with the gross international reserves at an all-time high of $45 billion and the balance of payment in a state of surplus likely as high as $5 billion. “The country’s external payments position continues to be a fundamental source of strength for the economy,” Tetangco said. The continued surplus state is significant in that there was a time in the recent past when the Philippines often had to obtain loans from the IMF on account of persistent deficits in the balance of payments. The imbalances were indicative of an economy that generated far less foreign-exchange earnings than it was spending at that time. That kind of imbalance seems behind the country for now, but the new year will still see it grappling with a fiscal overload. It’s a headache humongous enough to force the finance secretary to perish the thought of joining elections this summer. Speaking of which, the election fever is certain to dampen any last-minute congressional reform that entails new or higher taxes. After the elections? That’s a different story, obviously. n

Reporter

fter being shaken by a devastating global financial crisis that led to the collapse of several iconic Wall Street institutions, the Philippine banking industry was like a patient that had stabilized and was out of the intensive care unit by the end of 2009. Banks’ interest incomes and net interest margins had improved throughout the year that passed, and the country’s top bankers and even the regulators ended 2009 feeling better about the industry and the whole economy—buoyed by optimism that a global recovery was under way and would be sustained this year. What the Philippines has is “a relatively sound and liquid” banking system, said credit-rating agency Moody’s Investors Service in a statement issued ahead of Manila’s oversubscribed $1.5-billion global bond offering in the first week of this month. It was an industry assessment as upbeat as the previous ones by Moody’s and other foreign institutions, including the International Monetary Fund (IMF) and the World Bank (WB).  

Stress tests passed

Last month Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco Jr. said the Philippine banking system had passed the so-called stress tests conducted by the IMF and the WB. The industry’s nonperforming loans (NPLs) were found to be at manageable levels despite the economic downturn, while capital adequacy remained above the minimum regulatory requirement. Industry leaders said it was indeed another year of positive surprises for the banking sector and the economy that, in early 2009, were seen facing a lot of uncertainties. Local banks’ combined net profit in 2008 reached only P41.5 billion, falling sharply in a year that saw them incurring trading losses and hurting from margin squeeze. Their bottom lines in 2007 reached a total of P62.9 billion. “Everybody thought 2008 would be a good year, and then it turned out bad. And everyone thought 2009 would be bad but it turned out good,” said Aurelio Montinola III, president of the Bankers Association of the Philippines and chief executive of the country’s biggest bank by market capitalization, Bank of the Philippine Islands (BPI). The Philippine economy is widely expected to have expanded by around 1 percent in 2009, one of a few Asian economies that managed to avoid contraction, thanks to the still-growing remittances of Filipinos abroad that fuel consumer spending. Pascual Garcia III, president of the Chamber of Thrift Banks, said the pessimists at the start of the year had painted a grim scenario for the Philippine economy. He was referring to the analysts at some foreign financial institutions, who were all proven wrong in predicting a contraction in remittances and the weakening of the peso beyond 50 against the US dollar.

Beyond just surviving

“Our economy escaped recession and our banks stood strong and healthy and were able to withstand the global crisis,” said Pascual, chief executive of Philippine Savings Bank, the country’s largest-capitalized thrift bank. Latest BSP data showed the banks’ NPL ratio averaging 3.3 percent in October, the 13th month in a series when the incidence of bad loans averaged lower than 4 percent. The industry’s average capital-adequacy ratio, an indication of capacity to absorb risks associated with lending, stood at 14.81 percent as of end-June, well above the minimum requirement of 10 percent. In terms of profits, all major players expect their 2009 bottom lines to show significant im-

provement from the previous year’s figures. Tycoon Henry Sy’s Banco de Oro Unibank (BDO) expects to end 2009 with net income hitting its profit guidance of P5.5 billion, representing a 172-percent increase over the previous year’s bottom line of P2.2 billion. BDO—the country’s biggest bank in terms of assets, loans and deposits—posted a 31-percent increase in net interest income, to P22.3 billion, for the first nine months of 2009; it also booked higher fee-based income and bigger trading gains. Metropolitan Bank & Trust Co (Metrobank), the country’s second-largest bank in terms of assets, reported a 24-percent increase in nine-month net income to P4.6 billion, boosted by a 22-percent rise in net interest income. Ayala-led BPI posted a net income of P7.3 billion for the first nine months, up 11 percent over profit of P6.6 billion in the same period in 2008. Tycoon Lucio Tan’s Philippine National Bank (PNB), now the fifth biggest but may get much bigger this year, when it merges with Allied Banking Corp., expects its 2009 net income to be its highest in 12 years. PNB booked a nine-month net income of P2.1 billion, 134 percent higher compared with the previous year’s level, as net interest income rose 30 percent. The Yuchengco group’s Rizal Commercial Banking Corp. posted a nine-month profit of P2.8 billion, up 47 percent over the P1.9 billion it earned in the same period in 2008. Even midsized institutions performed better last year, led by Security Banking Corp., which posted the industry’s highest annualized return on average equity—a measure of profitability—of 21 percent as of end-September. Security Bank’s January-September net income jumped 27 percent to P2.2 billion. The listed bank was the best-performing banking issue in 2009, with its shares surging by triple-digit rates and further buoyed by a P2.5-billion stock rights offer in October that was priced at a discount of 50 percent.  

State lenders also robust

State lenders Development Bank of the Philippines (DBP) and Land Bank of the Philippines were also top performers in terms of making money. DBP’s net income in the first seven months of 2009 hit P2.47 billion, 60 percent higher than the P1.54-billion bottom line posted for the same period in the previous year, because of the significant increase in loan and deposit portfolios. LandBank reported a 41-percent increase in ninemonth net income to P5.4 billion, almost hitting its original full-year profit guidance of P5.5 billion. AnalystssayearningsprospectsarebrighterforPhilippine banks this year with the global economy, led by Asia, expected to sustain its recovery from the deepest downturn since the 1930s Great Depression.  

Outlook: buoyant, but...

“The financial sector should be buoyant [this] year, given the global revival in consumer demand,” said First Metro Investment Corp., an investment bank affiliated with Metrobank, in its 2009 year-end and 2010 outlook report. The major industry players, however, expect loan growth to be muted again this year if big corporate borrowers pursue their plans to issue more notes and bonds instead of negotiating with banks for direct loans. Loans to top-tier borrowers, or big-name companies, account for the largest portion of the big banks’ loan portfolios. To expand further their loan portfolios, the big banks are now focusing on microfinancing and lending to small and medium enterprises and the consumer segment. “Loan demand may drop if large corporations continue to tap the bond market for additional funds,” FMIC said. In 2009 around P300 billion—a record figure— were estimated to have been raised through corporate debt issuances, including corporate bonds and banks’ Tier 2 notes. n

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2 die in Nazarene feast

DEVOTEES swarm the carriage bearing the image of the Black Nazarene, as the procession leaves Quirino Grandstand for its 6.3-km route through 30 Manila streets to the Minor Basilica in Quiapo. One male devotee, Bernardino Basilio, 40, died in this crush of humanity as he fell from the carriage; a second devotee, Rodrigo Ocampo, 42, died of a heart attack. ROY DOMINGO

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inematic in its color and texture, biblical in its proportion, heartwarming in its stories of faith and hope, but also tragic in its occasional deaths and shallow affirmations by those who still need to deepen their devotion. Nearly 2 million people, roughly half a million more than last year, were estimated to have joined on Saturday the annual procession highlighting the Feast of the Black Nazarene, a ritual that is known worldwide for its Cecil B. de Mille-like proportions—more so on Saturday, when Church leaders said the bigger turnout may partly be traced to the people’s continuing sense of despair after a bout with killer storms in late 2009 that affected some 2 million people on Luzon island. The numbers associated with Saturday’s ritual, made interesting partly by the presence of famous devotees like Vice President Noli de Castro, are as mind-boggling as ever: Imagine 2 million people trying to follow the image of the Black Nazarene through 30 streets of Manila on a 6.3-kilometer route from Quirino Grandstand to the Minor Basilica in Quiapo.

Above all, the Nazarene’s lesson

But the messages should not be lost in the numbers. Manila Archbishop Gaudencio Cardinal Rosales called on the devotees of the Black Nazarene to learn from the lessons of Nazareth’s distinguished son, Jesus Christ. In his 11-minute homily at a concelebrated Mass at the Quirino Grandstand early Saturday morning, he said Jesus Christ “showed us how to live our lives,” punctuating such lesson with examples in simplicity, sacrifice, consistent selflessness and humility. “What good could come out of such a small town like that?” Rosales recalled biblical accounts of how the tiny town and its people were consistently put down by more progressive neighbors. And yet, because Jesus Christ, the Nazarene, shared important lessons and images of life,

He proved that “from the smallest place would spring the one who will teach and save all of mankind.” Rosales said Christ showed everyone how to live simple lives. “The image He left to us was when He carried the cross and fell, which reminds us who He really was,” he added in Filipino. “Live simply,” the prelate admonished the flock, repeating the Nazarene’s example. “The bounty of God is enough for all. But if some are greedy, it will never be enough. Not even 10 worlds will be enough for the greed of a few,” the cardinal said. Christ also taught the faithful to remain humble, he said. He cited Mary’s role in teaching her Son to live a simple family life with His foster father Joseph. No matter how a person succeeds in life, he has to remain humble. He said the third important lesson of Christ was charity, always. He added it was Mary who taught the young Nazarene to attend to people in need. In closing, the Manila prelate called on Black Nazarene devotees to live lives according to Christ’s teachings.

SAN Miguel Corp., the coumtry’s largest food-and-beverage maker, completed its investment in Top Frontier Holdings Inc., which plans to make an offer to buy out the company’s other shareholders. San Miguel earlier said it will buy 49 percent of Top Frontier, a company controlled by its directors Roberto Ongpin and Iñigo Zobel. The investment was made on Thursday, a filing released on Friday by the exchange showed. Top Frontier, which owns 26 percent of San Miguel, plans to offer P75 for each share in the foodmaker once it purchases stock held by Q-Tech Alliance Holdings Inc. Top Frontier’s stake in San Miguel is worth about P61.71 billion ($1.34 billion) based on Thursday’s price. “San Miguel is basically initiating an indirect buyback of its shares,” said Peter Lee, a senior investment officer at IGC Securities Inc. “The shares will have to move toward the price of the planned tender offer.” San Miguel said its board approved the investment based on Top Frontier agreeing to subsequently sell its San Miguel shares in an “orderly” manner to broaden the company’s shareholder base. San Miguel president Ramon Ang hasn’t responded to text messages asking about the amount paid for the Top Frontier investment. Bloomberg

Peso gains for week on reserves, global bond demand THE peso posted its biggest weekly gain in five weeks after the government’s sale of $1.5 billion of dollardenominated bonds and as an official forecast record foreign-exchange reserves in 2010.

The country’s reserve holdings will likely reach $48 billion, up from $45.03 billion at the end of last year, Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco said last week. The overseas debt sale was “heavily oversubscribed, highlighting the continued global investor support,” Treasurer Roberto Tan said. “With higher reserves, there is more stability in the peso,” said Roland Avante, treasurer at Sterling Bank of Asia. “Foreign investors are also looking at the Philippines, especially after the successful bond sale.” The local currency rose 0.9 percent in the week to 45.81 per dollar, the most since the period ended December 4, according to Tullett Prebon Plc. The peso touched 45.72 on January 5, the strongest level since August 2008. The Philippines sold $650 million of bonds due January 2020 at a yield of 5.67 percent and $850 million of notes due October 2034 at 6.66 percent. Local-currency bonds rose after the government got funding from the overseas offering. The yield on the 6.25-percent note due January 2014 fell six basis points to 6 percent from last week, according to Tradition Financial Services. The central bank may increase the rate it charges lenders for borrowing money, Tetangco said. Policymakers may raise the so-called rediscounting rates, which are used to control liquidity, as part of a stimulus exit, he said. On Friday, Deputy Governor Diwa Guinigundo told reporters that the central bank may withdraw “liquidity measures” before it cuts interest rates. Guinigundo also said the BSP will review banks’ reserve requirements as part of its “exit strategy” from steps taken amid the global economic recession. Bloomberg

Pacquiao may fight Clottey LOS ANGELES—Floyd Mayweather Jr. is still pushing for a megafight with Manny Pacquiao, but key people around Pacquiao said on Friday the Filipino star fighter’s focus has shifted to a replacement foe, Joshua Clottey. “If you concede to whatever Mayweather wants, that’s giving him an edge,” Pacquiao’s trainer Freddie Roach said on Friday. “We’re bigger than Mayweather. We don’t need him. We don’t work for him. “So, the way I feel now, we’ll go fight Clottey, then we’ll fight the winner of [Shane] Mosley and [Andre] Berto.” Welterweight Clottey (35-3) lost a close 2009 fight to Miguel Cotto, who was subsequently defeated by Pacquiao via a 12th-round technical knockout in November. “It’ll be a tough fight, not an easy fight, but better than some of the other names that were being thrown around,” Roach said. Pacquiao promoter Bob Arum went so far as saying he expects both fighters to verbally approve contracts sent to them in the Philippines and Africa, respectively. Arum will also tour Dallas Cowboys Stadium today, saying he expects to put Pacquiao-Clottey there on March 13. Behind the scenes, however, there is still movement in the Pacquiao and Mayweather camps to try to bridge the dividing line in their negotiations over when prefight random blood tests for performanceenhancing drugs should stop. Pacquiao agreed to a blood test 24 days before a Mayweather bout planned for March 13 in Las Vegas, and another sample immediately after the bout. Mayweather wants the final blood test to come 14 days before the fight. “Isn’t that reasonable?” asked

Clottey Mayweather promoter, Richard Schaefer. So there is a push to pitch Mayweather’s bloodtest plan to Pacquiao once more before he arrives back in the US to begin training on Monday at Roach’s Hollywood gym. Roach also said, “Mayweather can still say he’s OK with the 24 days, and the fight’s back on, right?” That’s not the case, according to Arum. “We have moved on,” he said. Schaefer is urging Mayweather-Pacquiao talks to continue, admitting a deal needs to be struck soon because of training schedules. Arum’s response: “He wants talks to continue. Who is he going to be talking to?” Los Angeles Times

Poll: Majority shun Lagman RH bill

2 deaths, dozens hurt

At press time, at least two persons were confirmed dead—one crushed by devotees jostling each other at the Luneta; and another, apparently exhausted after spending so many hours in devotion, of a heart attack. Seven devotees were treated for various injuries at the Jose Reyes Memorial Medical Center; including some who fell to the other side of MacArthur Bridge as the procession neared Quiapo.

Slow, long journey

The procession started at exactly 8:30 a.m. after Rosales celebrated Mass at Quirino Grandstand, but took a while to reach the Minor Basilica of the Black Nazarene in Quiapo Church. Last year Church officials changed the route of the procession, causing confusion among 1.5 million devotees. Because of the confusion, the Church restored this year the traditional route of the procession. In an early press conference, Quiapo Church rector Msgr. Clemente Ignacio said the number of devotees was expected to double this year. “We noticed that when our country experienced a crisis, the number of churchgoers also increased.” Senior Supt. Lito Mirasol, Manila Police deputy chief for operations, estimated that because of its crawling pace, the carriage of the Black Nazarene would be brought back to its resting place at the Minor Basilica at close to midnight. The Philippine National Red Cross mobilized 35 volunteers during the pre-event on Friday and deployed 227 staff and volunteers on Saturday, together with nine ambulances and three rubber boats. As of 9:30 a.m. on Saturday, the Red Cross had already assisted 119 people who were wounded and experienced dizziness. Sara Susanne D. Fabunan

as we go to press San Miguel completes investment in Top Frontier

www.businessmirror.com.ph

Volunteer diver’s heroism hailed MALACAÑANG expressed its sincere condolences on Saturday to the family of Petty Officer Armand Bonifacio, who died on Friday while retrieving bodies from a ship that sank in the waters off Libones Island near Cavite. “We share the grief of the family. We, of course, admire the heroism of the diver,” Deputy Presidential Spokesman Undersecretary Gary Olivar said. Bonifacio, one of the Navy’s Special Operation Group volunteer divers, lost consciousness while diving to the wreck of the Catalyn B, a small wooden ferry that sank on December 24 after hitting a steel-hulled fishing boat. It was reported that although he regained consciousness after being pulled from the water, he died later as he was being rushed to a hospital. PNA

‘Just do it,’ Smartmatic told THE consortium supplying vote-counting machines to the Commission on Elections is under pressure from Malacañang Palace, which admonished it on Saturday to “just do your best in ensuring the success of automated elections this May” and “not make an excuse of the [continued] state of emergency in Maguindanao.” Deputy Presidential Spokesman Gary Olivar reacted to the claim by Smartmatic/Total Information Management Corp. that the state of emergency is “delaying its preparation for the automated elections.” On the alleged looting and firefight between armed civilian volunteer organizations and the Moro Islamic Liberation Front in Maguindanao, and as to what message the administration is getting from this violence, Olivar said, “Clearly this would be an important factor for the National Security Council to maintain or not the state of emergency in Maguindanao.”

“It does not help the case for lifting the state of emergency if there are violent incidents like these,” Olivar said. PNA

Repatriation funding sought WHO will foot the bill for pardoned Filipino workers in Saudi Arabia? Nacionalista Party Senate candidate Susan Ople urged the Philippine government to make sure sufficient funds are available for the immediate repatriation and reintegration of overseas Filipino workers (OFWs) in various Saudi jails who will be included in the royal pardon for prisoners handed out by the King of Saudi Arabia. Ople, an OFW advocate and former labor undersecretary, said the Department of Foreign Affairs had recommended 700 Filipino detainees for inclusion in the King’s royal pardon. Several of those endorsed  by the Philippine Embassy for pardon were arrested due to immigration offenses and other petty crimes. “Foreign Affairs Undersecretary Esteban Conejos assured me yesterday that the names of all Filipinos under detention in Saudi Arabia were forwarded by the Philippine Embassy to a committee especially designated by King Abdullah to consider those eligible for pardon. My next question is, who would pay for the return tickets of those to be pardoned?” Ople said. Most of those charged in court and subsequently landed in Saudi jails left the country as Overseas Workers Welfare Adminsitration members, but were unable to renew their memberships since the date of their incarceration. The daughter of the late senator and foreignaffairs secretary Blas Ople said the final decision on who and how many to pardon would be rendered by the King of Saudi Arabia.

Pro-Life Philippines president Lito Atienza (right) points to the results of the survey commissioned by the Alliance of Family Life Organizations and conducted by HB&A International Research (affiliated with Louis Harris & Associates for technology transfer) and Asia Research Organization (affiliate of Gallup International), showing a 92-percent rejection of the reproductive-health bill by Filipinos. Also in photo are Alliance of Family Life Organizations chairman Lito Sandejas (center) and HB&A International Research managing director Tony Abaya.

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ore Filipinos reject the reproductive-health (RH) bill than its proponents would care to admit, Pro-Life Philippines reported at the weekend. A survey by HB&A International Research and Asia Research Organization, initiated by ProLife and commissioned by the Alliance of Family Life Organizations, showed that 92 percent of Filipinos reject the family-planning bill version that is now pending in Congress. In a press conference, Pro-Life president Lito Atienza said this clearly indicated Filipino families do not want the RH bill as proposed by lawmakers, led by Rep. Edcel Lagman. “That’s why the public needs to know this because our congressmen might be swayed [by] the blackmailing strategy of Congressman Lagman,” he said. Based on the survey, 90 percent of 500 respondents do not favor the contents of the RH bill, particularly the part teaching children aged 10 to 11 to learn sex education with pictures that would explain the dynamics or technical aspects of sex during biology class. Aside from the sex education among Grades 4 and 5 students, the proposed RH bill aims to make available all artificial birth-control methods like condoms, IUDs and pills to curb population growth in the country. According to Atienza, the survey showed nine out of 10 Filipinos want Congress to reject outright the RH bill, which is also being opposed by the Catholic Church and other religious and prolife groups. “It’s clear that Congressman Lagman’s claim about wide public support for their bill is

Gospel

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misleading. When Filipinos were asked about the true provisions of the proposed legislation, they overwhelmingly do not agree,” Atienza pointed out.   Alliance of Family Life Organizations chairman Lito Sandejas said 90 percent of those surveyed are also not in favor of the salient points of the RH bill on sex education; and 94 percent reject the idea, as well, of Congress passing a bill that will make available to young children and young teens artificial birth-control methods even without parental consent, giving them access to condoms, IUDs, birth-control pills and other abortifacients, and the worse part is, doctors and health workers could be jailed if they refuse them.   At the same time, 96 percent of those surveyed reject the passing of a legislation that would encourage a contraceptive mentality that will lead to an abortive mentality.   The respondents, too, are against the proposal that would allow one’s spouse to undergo vasectomy/tubal ligation without prior consent as required by law; and 91 percent believe the government should not allocate extra funds to buy birth-control pills and condoms, to the detriment of other essential medicines.   Atienza has been firmly pointing out that the RH bill is a mere “alibi for failure,” and what the country and Filipinos need to ensure economic progress is a good and effective government free from graft and corruption.   As former Department of Environment and Natural Resources secretary, Atienza stressed that “we are blessed as a country and as a people endowed with rich natural resources which could sustain a healthy growing population, if properly managed.” S. Fabunan

for Sunday, January 10, 2010

ESUS and his disciples went into the region of Judea,
where he spent some time with them baptizing.
John was also baptizing in Aenon near Salim,
because there was an abundance of water there,
and people came to be baptized,
for John had not yet been imprisoned.
Now a dispute arose between the disciples of John and a Jew
about ceremonial washings.
So they came to John and said to him,
“Rabbi, the one who was

with you across the Jordan,
to whom you testified,
here he is baptizing and everyone is coming to him.”
John answered and said,
“No one can receive anything except what has been given from heaven.
You yourselves can testify that I said that I am not the Christ,
but that I was sent before him.
The one who has the bride is the bridegroom;
the best man, who stands and listens for him,
rejoices greatly at the bridegroom’s voice.
So this joy of mine has been made complete.  He must increase; I must decrease.”

(From John 3:22-30)


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