Hard times could begin next month

Hard times could begin next month

Everyone should pay attention to the warnings made by UP Economics Professor Ernesto Pernia, the former chief economist of the Asian Development Bank and its expert in human-development economics, that the looming US recession, which has begun to cause a slowdown throughout the world, will hit the Philippines hard. Harder than the 1997 Asian crisis did.

Some economists, however, still believe the situation is not as bad as Pernia paints it.

The most complete presentation of his forebodings came out in Newsbreak last Monday with Lala Rimando’s byline.

Hard times will begin to be felt next month, Pernia forecasts, up to the third quarter of the year—if the stimulus packages recently launched in the United States work to arrest the slowdown or recession there. If not, Filipinos will feel the pains throughout 2008 and maybe beyond.

“It’s going to be a hard year for us. Everyone will be affected. And the hurt will be deepest among the low-income families,” Prof. Pernia was quoted as saying.

Economic domino effect

Although the Philippines is no longer as dependent on the USA as our largest export market (we now sell only 17 percent of our exports to Americans, it was twice that volume just a decade ago), the looming recession there also impacts on the economies of our other major buyers.

We sell 27 percent of our exports to China (including Hong Kong) and 20 percent to Japan. US purchases from China will be as badly hit as ours. This means China/Hong Kong will have its own slowdown, so they will not be buying from us as much as they used to. The same goes for Japan—which, despite its hobbled economy for many years now, buys 20 percent of our exports—and these are not just our bananas and mangoes but the automotive parts and harnesses we make for that country’s carmakers.

Europe buys less than 10 percent of our exports. It will also experience a slowdown as a result of the US recession. So even our sales to Europe—and everywhere in the world that has to do some belt-tightening in response to economic doldrums in America—will decline.

Cebu’s world-class furniture industry is now already suffering from the strength of the peso. If customers in Singapore and other countries need to economize, they will hold off buying from their Cebu suppliers.

Less labor exports

It won’t just be the hits on our product exports that will make us suffer.

Let’s not forget that hardworking Filipinos are in fact our country’s biggest exports. Less money for service companies in the United States and for companies and families in the Arab world, Hong Kong, Macau, Singapore, Taiwan, Malaysia, Japan and Europe will mean POEA will be deploying less OFWs to those places. We pray all the Filipinos already holding jobs abroad are retained by their employers. Prof. Pernia, however, worries that some may have to be let go by the hardest-hit countries and business sectors.

This means there will be less US dollars in remittances from our OFWs to their families. These remittances have been a major driving force in our consumption-led economy. This decline will hurt our malls, restaurants, supermarkets, department stores and even the wet markets.

Bad news for OFWs

OFWs’ investments in family-owned small and medium family enterprises will also decline. Less OFWs will buy the condominiums now being built for them by property companies. We hope and pray not too many OFWs who signed their installment-plan contracts these past few years get pink slips—and end up being in default. Less OFW funds could abort the revival of the property market. And this will in turn mean less employment in construction and private-sector infrastructure building.

A poorer USA, Europe, Japan and China will mean less foreign direct investment here. And less foreign firms coming to the Philippines to open call-centers and other business process outsourcing offices (BPOs).

These forthcoming days of hardship for us Filipinos will be worse than the 1997 Asian crisis. That one was not so bad because at that time we were less pronouncedly involved in the global economy. APEC was just starting and the vision of Asean economic solidarity was only being fleshed out.

As usual the poorest segments of our society will be hardest hit. With such problems as a possible rice shortage and steep increases in the prices of food and fuel, the threat of inflation becomes real.

Beware of kleptocrats

The administration has announced various economic stimulus plans. Scores of billions will be spent for infrastructure. This will create jobs and inject money in the lower segments of society. Wonderful.

But massive government spending has a downside—success in meeting the goal of maintaining a budget surplus and liberation from the pressures of a deficit will have to be forgone. This means S&P’s, Moody’s and Fitch cannot soon raise our risk rating to investment grade.

The administration will also have to make doubly sure that all the billions allocated and released to pump prime the economy do not go to the pockets of the kleptocrats in the Palace and the Cabinet. Bureaucratic theft, in the perception of most of our fellow citizens as well as of the international country-assessment institutions, usually gobbles up at least 40 percent of government budgets.

Ping’s sting

Ping’s sting

HOW could that have happened to Sen. Panfilo “Ping” Lacson?

That was the question on everybody’s mind following the dud of a testimony given by Leo San Miguel before the Senate probe of the national broadband deal. For publicity’s sake, Lacson had built up San Miguel’s scheduled appearance before the blue-ribbon inquiry. Filipinos were made to expect that the new resource person would offer the same level of entertainment, which the now-famous Jun Lozada has provided the public.

As it turned out, however, San Miguel’s testimony became a source of major embarrassment to Lacson—for several reasons.

First, palpable is the public’s frustration over Lacson’s failure to satisfy their expectation that the new witness would be as exciting, if not as entertaining, as Lozada.

Second, San Miguel’s testimony tends to show that not everybody is afraid of the top cop-turned-lawmaker. For 12 hours Lacson tried to badger San Miguel into saying in the Senate hearing what the two of them allegedly discussed in private. But San Miguel dug in and stuck to his line—forcing Lacson to utter the scary words, “My patience has its limits.”

San Miguel did not flinch, however—apparently unintimidated by Lacson’s fearsome reputation.

Third, the San Miguel dud tends to show that Lacson is highly vulnerable to unreliable or deliberately misleading information. The senator’s press statements always carry the standard qualifier, “I have information that . . . ” It gave the impression that the former chief of the Philippine National Police has maintained an intelligence network, which possesses dossiers on just about anybody who matters in this country.

The San Miguel debacle loudly hinted that some of the senator’s intelligence sources might actually be peddling reports designed to mislead and embarrass him. Not a few observers now think that his much-vaunted machinery of spooks and stoolies has become what makes the senator vulnerable.

Given the embarrassment that San Miguel has caused him, Lacson should now take a second look at Dante Madriaga, author of the “Greedy Four Plus Plus” tale. It was Madriaga who created in Lacson’s mind the impression that San Miguel was a major player in the NBN-ZTE deal.

Madriaga’s “revelations” may have given the notion that San Miguel was in possession of a potential bombshell. Lacson may have unwittingly bought Mad­riaga’s pitch about the value of a San Miguel appearance at the blue-hearing inquiry.

As the saying goes, once burned twice shy. Lacson should now take a second look at everything that Madriaga has said at the inquiry—and elsewhere. The senator should now determine whether or not Madriaga’s so-called bombshells were merely meant to sell San Miguel to Lacson.

Observers suspect that Lacson has been had and that San Miguel was not alone in a conspiracy to embarrass him, deliberately or otherwise.

Evidently, it was Madriaga who inflated the value of San Miguel whom the former insisted was part of the Greedy Four. That description generated excitement for San Miguel, which was magnified through a second label, “surprise witness.”

Clearly, the biggest surprise was on Lacson. And the public is startled that despite his much-vaunted intelligence apparatus, Lacson could still be flabbergasted.

As far as many observers are concerned, the San Miguel dud further eroded what credibility Madriaga still has. It has now become harder and harder to accept what he has said—and what he would say in the future.

Was Lacson set up with a scheme that exposed his vulnerability to bum steers, which sounds even more humiliating in its Tagalog translation—kuryente.

Too bad, the confirmation that Madriaga has no credibility virtually dismisses his own allegation that former presidential chief of staff Mike Defensor was somehow involved in the NBN-ZTE scandal. Did Madriaga drag Defensor’s name into the controversy merely to spice up his tall tale?

Madriaga may be aware of it or not, but there is an ongoing smear campaign against Defensor, which knowledgeable sources say is being carried out by the “Thunderbird Gang.”

The clique’s moniker has nothing to do with the classic coupe that giant automaker Ford first rolled out in the 1950s. The gang takes its name from its members’ “I love my own” syndrome. The hatchet job on Defensor is, according to knowledgeable sources, all about local politics.

Lacson should not allow characters like Madriaga and San Miguel to highlight the chinks in the senator’s armor. He obviously has been had—and it will take some time for people to forget that he was publicly shamed by a nationally televised dud.

Lacson should also take a second look at his intelligence apparatus and clean it up before it is manipulated again by a San Miguel-type caper. The ex-PNP chief’s edge over his political rivals is his uncanny ability to get the “goods” on anyone he targets.

Another Leo San Miguel-type flop, and people might start to think that Ping has lost his sting.

So Insensitive

So Insensitive

THEY come in the wee hours of the morning, without ample warning, as we’re in our homes fast asleep after a long week at work. We’re not talking about thieves in the night, but they might as well be, considering how much they take away from our hard-earned incomes.

Since the Downstream Oil Industry Deregulation Act took effect more than a decade ago—and especially lately with the record crude prices worldwide—retailers have been raising prices at the pump when we are at our most vulnerable.

Their announcements—if we could call them that—hardly reach the public to be of any practical use. If at all, they would be aired during the late night TV news or barely 30 minutes before midnight, by which time most of us are already in bed and too beat up from a week’s work and the Friday traffic to have the energy to get up and drive to the nearest station to gas up.

For all the discomfort they’re causing commuters during transport strikes, we must hand it to public utility vehicle operators and drivers because they have the decency to announce their plans way ahead of time. At least people could plan their lives accordingly.

We can say the same about labor unions, which are required by law to file the necessary papers with the government before they embark on work stoppages. Not that we’re great fans of these two groups, but the antiquated restraints imposed on these factor markets betray the free-market ideologists’ bias for the powerful when it comes to sectors such as the downstream oil industry.

The underhandedness exhibited by oil companies is so insensitive coming at this time when very expensive oil products are causing inflation to shoot up again, raising fears that incomes may be slow in catching up to the erosion in people’s purchasing power.

What difference would it make for companies if they announce their price increases early in the evening, giving motorists enough time to pass by a station along the way home to gas up? Apparently it means a whole lot for their margins, as they would rather surprise most of us the following morning.

What we find so intriguing is that whereas multinational oil refiners had reported record profits last year, their local units and affiliates said their earnings barely rose from the previous year. And we hear this at a time when oil products are at their most expensive in history—and still rising, judging from the unabated increases in the futures markets.

The sad part is that the downstream deregulation law took away whatever legal remedies past edicts provided consumers. The 1998 law even emasculated the government, which has been reduced to a bean counter, tallying price changes after the fact. The operative word, according to the law, is “price monitoring.”

True, the law banned a handful of anti-competitive offenses to prevent price collusion, but oil companies have found a way around these practices. The law also gave the Department of Energy certain powers it could exercise in such circumstances, but left it to the local courts to deliberate on the matter. As it is, the courts are already clogged up with other pressing cases, so ordinary consumers are left to their own devices. Once again, the free-market ideologists have betrayed the lot of their unsuspecting middle-class supporters.

Despite the limitations set by law, we’re still waiting for the incumbent energy secretary to make good on his bluster when he took office. Last year, he had warned oil companies to comply with a directive to inform the department of price adjustments. Moreover, he announced a government plan to audit oil companies, tapping the services of a third-party service provider.

We’re well into a new year, and we’ve yet to hear anything come out of those initiatives. So, Mr. Secretary, we’re still waiting.

Mayor Lim: Consistent crimefighter

Mayor Lim: Consistent crimefighter

The City of Manila’s Mayor Alfredo Lim made our day again. He has once more shown how consistent and admirable an enemy of crime he is.

The Filipino “Dirty Harry” vowed last Monday not to lift a finger to help his son, Manuel, who was arrested in a drug bust.

He said “Manuel should be man enough to face the music. I will not protect him. I will not lift a finger to help him. Whatever trouble he has got himself into he must bear by himself.”

Manuel is a 44-year-old man. He had been arrested with two other suspects for allegedly trying to sell methamphetamine—also known as shabu, which is the most popular illegal drug in the country. They did not know that their sale was a sting. Their buyer was an undercover agent of the Philippine Drug Enforcement Agency.

Police have filed charges against the young Lim and his companions. If convicted, Manuel could face a long prison term for selling shabu.

A model LGU official

We have always admired Mayor Lim for being a staunch anti-crime crusader. He cleaned Manila’s red-light districts of prostitutes and drug dealers in his previous (pre-Lito Atienza) terms as mayor of the Philippine capital. He is a model for other local government officials.

Not too many Filipinos liked his use of the spray-paint in one of his anti-drug campaigns. What he did was spray-paint warnings on the the houses of suspected drug pushers. This was criticized by activists as a violation of the house-owners human rights. Besides, they reasoned, some of the residents in the spray-painted houses—the wives and children and parents of the actual drug pusher—were most likely innocent. What if some crazed anti-drug crusader threw a grenade at the house?

Mayor Lim relented and stopped his unusual campaign. But it was effective. Many of Manila’s drug pushers moved to other places—especially Pasay and the Baclaran area.

We need more public officials with Mayor Lim’s honesty and consistency as a crime-fighter.

It must have been painful for him to make the decision to let the law take its course in the case of his flesh-and-blood Manuel.

Mayor Lim’s posture runs counter to the feudalistic and overly-personalistic mentality of the Filipinos. That mentality is often the source of corruption in this country.

A less strong-willed and honest powerholder than Mayor Lim would have surely sprung Manuel out. The mayor could have easily managed such an operation. He is after all a former chief of the national police and a former senator. But it would have sullied his integrity.

If President Arroyo had been as firm a crime and corruption fighter as Mayor Lim, she would not have to suffer for the alleged corruption of her underlings—and perhaps some close friends and political creditors—whose wrongdoings are being exposed in Senate investigations.

Many people of good will are not joining the anti-Arroyo forces holding rallies and trying to organize the public into forming a massive movement that will force her out of office.

Among these are the Catholic bishops and the impressive body of former senior government officials (FSGO). These two groups have made sharp assessments of government corruption. They see the President as—at least—negligent in curbing corruption that has cost this country scores of billions. The FSGO says she must be central in these alleged corrupt deals.

Yet they do not want to add their voices to the call for her resignation or ouster by people power.

They want her to continue being president until her term ends in 2010. But they do insist that she must zealously go after her administration’s monsters of corruption.

We hope the President heeds the CBCP and the FSGO. Doing so can’t possibly be as painful as Mayor Lim’s resolve not to lift a finger to help his son out of the mess he has put himself in.

Lim as Malacañang anti-corruption czar

Here’s our inspired thought: Mayor Alfredo Lim—despite being an opposition party member and a close friend of former President Estrada who has of late been actively speaking against President Arroyo and asking her to resign—is one of those men of goodwill who want President Gloria Macapagal Arroyo to finish her term.

He has vowed to keep her safe from any force that will unconstitutionally push her out of the Palace.

Why not make Mayor Lim the Palace’s anti-corruption czar? He can be that while keeping his job as Manila mayor.

But, of course, if she takes our unsolicited suggestion, she has to give Mayor Lim the proper equipment and resources to collar the thieves and scoundrels in the corridors of power.

The fastest and biggest deal

The fastest and biggest deal

ON Dec. 13, 2006, the state-owned PNOC Energy Development Corp. (PNOC EDC) sold its shares for the public for the first time. EDC is the world’s largest geothermal company. It generated P19.2 billion from the initial public offering (IPO) at P3.20 per share for 20 percent of the world’s leading geothermal producer.

The P3.20 share price was grossly underpriced. On the first trading day, investors easily earned 42 percent as the shares closed at P4.60 per share, thanks to CLSA Exchange Capital, the financial advisor and global coordinator hired by PNOC EDC President Paul Aquino.

In July 2007, PNOC EDC made a follow-on offering, for 20 percent of the company. It raised P17 billion and PNOC EDC was no longer a government firm. The IPO price was higher this time, P5.70 per share.

In November 2007, the remaining 60 percent was auctioned—40 percent in common shares and 20 percent in preferred shares.

EDC was acquired by the Lopez family’s Red Vulcan Holdings Corp. for a whopping P58.5 billion. EDC had become 100 percent private from 100 percent government three years ago.

Why would the Lopezes, the family that invented large-scale power ownership and management in the Philippines, value a company three times it was worth after 11 months and eight days?

The first answer is that the P3.20 per share IPO price was, it now turns out, really an anomaly. PNOC EDC was wrongly priced in December 2006.

The second answer is that PNOC EDC is a good company. It is literally steaming with potential. The largest geothermal energy producer in the world, it supplies steam to 12 operating power plants with total generating capacity of 1,199 megawatts (MW). Future projects will add 300 MW more in capacity.

EDC has hot geothermal properties. It has good management, especially the engineering team (including 750 geothermalists with combined 11,000 man years of experience). An archipelago of volcanoes, the Philippines is the world’s second largest geothermal producer, with 1,978 MW of installed capacity. The US is first, with 2,544 MW.

The company’s worth has been highlighted with oil soaring past $111 per barrel and by the global focus on green fuel like geothermal.

Finally, the team that auctioned the controlling 60 percent of PNOC EDC last November did a really good job, packaging the equity, drawing up the ground rules, adopting complete transparency, and thus triggering unprecedented investor interest.

That team was composed of PNOC President Antonio Cailao, president and CEO of PNOC, PNOC EDC’s mother company; veteran treasury expert Reynaldo G. David, president and CEO of the state-owned Development Bank of the Philippines; Manuel Salak III, managing director of ING, and topnotch lawyer Perry Pe, a partner in the Romulo Law Offices.

David’s DBP committed to provide what he calls “staple financing” or half of the financing needed by the winning bidder. “Where can you find a bidding where the bidders are given the financial wherewithal, the financial lubrication, the ammo for their bids,” gushed PNOC CEO Cailao.

The staple financing, David explained, “is that it would come in just in case the foreign partners of the winning bidder opted out.”

Rey also secured, quickly, the required approvals from government to sweeten the offer. This included continuance of government guarantees on PNOC EDC’s sovereign loans, the Monetary Board exemption from the single borrower’s limit on loans extended by the financiers, and the Department of Justice and the Securities and Exchange Commission opinions that a 60 percent Filipino consortium could be considered 100 percent Filipino as far as the bidding was concerned.

At the time of the bidding, Pe noted, EDC was already about 30 percent foreign, leaving just 10 percent remaining to be owned by foreigners since utilities like energy must be at least 60 percent Filipino.

Salak packaged the deal to interested bidders. His ING has an enviable track record, having handled or played the leading role in the $98 million IPO of Meralco in 1992, the $400 million IPO of Petron in 1994, the sale of government’s 32.5 percent equity in PNB for $145 million in 2005, and the $336 million EDC IPO in 2006. It counts Aboitiz,Marubenim,Banpu of China, Siemens, and Mirant among its energy clients.

Lawyer Pe made sure that “the rules crafted were all transparent and of international standard.”

With the terms made appealing, the bidding naturally attracted what Cailao calls “the crème de la crème” of the energy business, 15 groups, later reduced to five, then four final bidders. The interested parties were amazed at the groundwork done by the privatization team. Two of them, Reykjavik Energy and Geysir, told the group: “You think like Bobby Fisher, 30 steps ahead.” Which means the team was a genius in their work.

Rey David’s heart sank when the first bid was opened, P33.2 billion by AP Renewables of the Aboitiz Group. PANASIA Energy of San Miguel quoted P39 billion. Then Andrew Gotianun submitted P48.5 billion. The privatization team’s hopes were buoyed. Then Red Vulcan’s bid was opened—P8.5 billion!

More than common economic indicators

More than common economic indicators

THE economy is performing better according to the standard measurements and the administration never fails to say so in every forum available.

The Philippine peso continues to strengthen after having the second highest appreciation among the currencies in Southeast Asia. Macroeconomic performance is strong and the 7.3% GDP output last year was the highest in three decades. Inflation is under control, the government is making headway in reducing the budget deficit, and unemployment is well below double digits.

The administration must be wondering why there’s hardly any kudos from its citizens. The economy is doing so well and yet there’s no applause and a great many Filipinos are not “feeling” GMA and her administration. Are they simply suffering from adjustment anxieties, from an economy that’s just picking up? Perhaps the so-called trickle-down effect has not trickled down yet? Or perhaps the economic indicators are painting a picture that is markedly different from what most Filipinos are actually experiencing?

The Philippines continues to have a high poverty incidence according to the Asian Development Bank report titled, “Philippines: Critical Development Constraints,” and this is because of poor revenue collections and rampant corruption. These are the “critical constraints” to sustainable growth, the ADB said. The pace of poverty reduction has been slow and income inequality remains stubbornly high because of corruption.

Even government statistics show that there are more Filipinos living below the poverty line today. The National Statistical Coordination Board said two weeks ago that 33 out of 100 Filipinos were considered poor in 2006 compared to only 30 out of 100 in 2000. Not a few, of course, suspect that poverty among the populace is higher than the 30% plus stats thus provided.

How “rampant” is this corruption that leads to poverty? The independent think tank Ibon Foundation Inc. said that in the past seven years, the figure could easily reach P7.3 billion, noting the allegedly highly anomalous projects and otherwise unresolved scandals like the P720-million fertilizer fund scam, the Northrail project, P400 million plus Jose Pidal bank accounts, the Impsa power-plant project, the Macapagal Boulevard project and the ZTE-NBN broadband project.

Yes, corruption is an economic problem too—perhaps the economic problem which the political arena seeks to address. So this administration cannot just resort to the usual “let’s-move-on-and-focus-on-the-economy” argument. Neither a strong peso nor a rising GDP will lead to sustainable growth and poverty reduction if the money circulating in the economy flows only among the political and economic elite, or if it just lines the pocket of corrupt officials in government

Economic growth has many dimensions. Ultimately, a country should gauge its economy on its ability to provide its citizens with what they need to live a decent life: enough food, adequate shelter and health services, a well-paying job, leisure and family time and a good education.

The United Nations Development Programme (UNDP) came up with a way to measure or calculate more real indicators to measure growth and progress, which it called the Human Development Index, which measures things like GDP per capita, the literacy rate, life expectancy rate, school enrollment, the purchasing power of the currency, and others.

In the 2007/2008 UNDP Human Development Report, the Philippines’ Human Development Index ranking dropped to 90th place, lower than a lot of our neighbors in East Asia and the Pacific region.

Obviously the mere quantity of economic activity, as measured by a common indicator like the GDP, taken alone, says virtually nothing about whether life for the common Filipino is getting better or worse. It ignores the distribution of income and makes no distinction between workers with top-paying jobs and those workers who can barely eke out a living. It ignores the fact, for instance, that the record remittances which makes economic figures so rosy have a heavy social toll in terms of broken families. The booming mining industry which the government touts? That has environmental costs too which should count for something when you’re calculating economic balance.

Economics must be a means to an end. It is not an end in itself. Real economic growth must benefit the people. And when the economic figures are out of sync with the everyday experience of most Filipinos, the government cannot simply shrug its shoulders and say the figures are right, their (Filipinos) experience is wrong.

Chinese objection means RP is right

Chinese objection means RP is right

That China is objecting to the baselines bill in Congress is a helpful sign for RP. It means the House of Reps is on the right track in defining once and for all RP’s western archipelagic boundary facing the South China Sea. Rep. Antonio Cuenco has all the reasons to bellow, “Full steam ahead and damn the torpedoes,” in pushing for his bill’s passage. Weak-kneed foreign affairs officials, shaking in their booties from China’s protests, must stand aside.

The bill would set 135 base points to draw RP’s outermost limits. The primary data are the same base points in the Treaty of Paris by which Spain ceded the archipelago in 1898 to the rising US naval power. It dumps the old RP claim to Sabah, now Malaysia’s state of North Borneo. But added are Scarborough Shoal off Zambales, and the Kalayaan Isles at the edge of the Spratlys west of Palawan.

Long occupation of Scarborough and the seven islets of Kalayaan, now a municipality of Palawan, is RP’s basis for territorial claim. Since the American Regime, Luzon fishermen have been using Scarborough, 135 miles west, for rest and repairs. As for Kalayaan, Filipino mariner Tomas Cloma discovered and laid claim to the isles in the early ’50s. RP in the ’70s dispatched soldiers to inhabit the islets. Civilians from Palawan and Luzon soon populated the biggest one, Pag-asa.

More than that, RP’s claim is geological. Earth science is the requisite, under the United Nations Convention on the Law of the Sea, for a coastal or archipelagic state to declare its borders. Specifically, UNCLOS entitles such a state to a continental shelf that geologically exists as an extension, albeit submerged, of its land territory. A shelf is officially defined as “the seabed and subsoil of the submarine areas that extend beyond its territorial sea throughout the natural prolongation of its land territory to the outer edge of the continental margin, or to a distance of 200 nautical miles from the baselines from which the breadth of the territorial sea is measured where the outer edge of the continental margin does not extend up to that distance.” The area 200 miles from its baselines is that state’s exclusive economic zone (EEZ).

Dr. Jose Antonio Socrates, Palawan’s provincial health officer, has been explaining for two decades the geological basis to claim Kalayaan. Also a geologist, Socrates cites studies by the University of London on how Earth’s land formations evolved. Based on limestone and other evidence, it appears that Palawan once was a part of mainland Asia. Just that, a mighty earthquake, millions of years ago before man, flung the elongated island onto the Pacific Ocean. The split created between Palawan and Asia a water channel now called the South China Sea. And with Palawan pushing the ocean floor eastward along with volcanic eruptions, islands of the RP and Indonesian archipelagoes later sprouted.

The cited study goes on: as it drifted farther from Asia, Palawan grew its own continental shelf, stretching all the way to Kalayaan Isles near what is now the Spratlys. That shelf ends where it begins to slope steeply into the sea bottom, 50 miles west of Pag-asa.

From the evidence, Cuenco’s baselines bill draws RP’s 200-mile EEZ to commence westward from Scarborough and Kalayaan. Once enacted, RP must submit the baselines for UNCLOS verification. Thence, only RP may fish or mine its EEZ, and can enjoy UN shield against poaching or illegal passage of, say, vessels laden with nuke waste.

China protests because RP’s baselines bill goes against its own claims. Invoking false “historic rights”, China in 1992 arbitrarily drew baselines to cover not just Kalayaan and Scarborough but more. Roped in were Mischief Reef, Commodore Reef and Sabina Shoal, all closer to Palawan, in defiance of scientific evidence required by UNCLOS. On this basis, China built in 1995 “fishermen’s shelters” on Mischief that actually are naval and air force facilities. During monsoons when RP’s puny naval craft can hardly patrol the coast, China attempts to plant buoys on Commodore and Sabina. If China’s baselines were to be accepted, its 200-mile EEZ would encompass Palawan and RP’s internal Sulu Sea. China routinely barges into territories it dreams to own. Breaching international treaties in the ’90s, Chinese navy ships docked on Antarctica and machine-gunned penguins.

Victory for Pacquiao

Victory for Pacquiao

For several hours yesterday, lawless elements took a break, the military unilaterally observed an informal truce and politicians paused from their endless brawls as Filipinos, in a rare show of unity, rooted for one of the nation’s own. It seemed for some moments that the nation was in for a big disappointment, as the prospect of a draw loomed in the match between boxing superstar Manny Pacquiao and Mexico’s Juan Manuel Marquez. But in the end the judges, by a split decision, gave the World Boxing Council superfeatherweight crown to Pacquiao.

Several police commands happily reported zero crime rates throughout the match, broadcast live from Las Vegas. For the Filipino, Pacquiao has come to symbolize rare achievement in sports, a field where the nation is sorely lacking in international recognition.

Later this year the Olympic Games will be held in Beijing. The Games are a reminder of what the Philippines has not yet achieved: the highest honor in the world of sports, an Olympic gold medal. Pacquiao’s many feats show what is needed to excel in sports: disciplined development of natural talent, adequate facilities for rigorous training, and sufficient support from both the government and interested parties in the private sector.

Proper training in athletics, which ideally should start at a young age, does not come cheap. Many promising athletes are from poor families, and development of their athletic skills is often set aside because of the demands of day-to-day survival. Often, Filipino athletes who excel in regional games are members of the Armed Forces of the Philippines, which has a special program for personnel with sports potential. Military discipline no doubt helps in turning these athletes into winners. But budding athletes who are too young for the AFP must look elsewhere for support in developing their skills. The nation’s jubilation over Pacquiao’s latest victory should encourage concerned sectors to provide that kind of support.

Making good use of BSP’s cooperation

Making good use of BSP’s cooperation

AFTER about a year of prodding by financial market players, the Bangko Sentral ng Pilipinas (BSP) finally succumbed to calls to limit access to a facility meant to temper inflation.

Its policy-making Monetary Board decided last Thursday to close some of the windows of its special deposit account (SDA), which has been competing for funds with the national government, preventing it from securing short-term borrowings during its fortnightly auctions of Treasury bills.

What appeared to have been the straw that broke the camel’s back was the Bureau of Treasury’s recourse to negotiated sales of T-bills after it had failed to sell these in the open market due to the attempts of banks to bid up their rates.

Conceding to the high bids would have led T-bill rates, the benchmark for banks’ lending rates, to shoot up, removing a key pillar of the country’s recent economic success. The low interest-rate regime has allowed businesses to expand and households to leverage their incomes and spend more, boosting investment and consumer spending, respectively.

Low rates also enabled the government to trim its debt servicing costs, helping it reduce its budget deficit to a record low and way below the ceiling ahead of this year’s objective of bridging the fiscal gap.

The government move to do away with auctions and negotiate T-bill rates however would have short-circuited the debt market, which is premised on transparent price discovery. The BSP no less warned that negotiated rates would throw off course capital market reform. Its decision to refine the SDA therefore is a case of walking the talk.

This move also reverts to its regular policy tools the burden of taming inflation. Alongside refining its SDA, the BSP also parted ways with its US counterpart, the Federal Reserve (Fed), suspending further monetary easing by keeping its overnight rates steady. Had it cut anew in lock-step with the Fed, the BSP would have encouraged an uptake in inflation.

The consequence of this action however is a wider differential between Philippine and US rates, especially if the Fed eases its funds rate later this month as is widely expected. From then onwards, we should expect a further strengthening of the peso vis-à-vis the dollar, which would also temper inflation in light of record prices of imported oil and other commodities.

The downside of course would be felt by, among others, the export sector, where jobs may be at risk due to slipping sales abroad. Data for January already showed this, as electronics shipments, the bulk of the Philippines’ sales abroad, decelerated. That data also lent credence to our susceptibility to a US slowdown as shipments to our largest market abroad likewise fell. State-run Philippine Institute of Development Studies (PIDS) just last week warned the country may have already contracted the Dutch disease, which infected the Netherlands in the 1960s when the discovery of huge gas reserves attracted big foreign investments, sending the kroner to record highs. This eroded the share of Dutch manufactured exports abroad, causing job losses.

PIDS said this might be happening in the Philippines, citing the weak manufacturing amid a strengthening peso. If we’ve been smitten, then expect unemployment to rise. This puts policy markers in a bind.

With monetary authorities preoccupied with reining in inflationary pressures, the task of ensuring the Philippine economy survives a US recession lay squarely on the fiscal side of policy. The question is whether the government has the wherewithal to rise up to this challenge.

Pump priming requires ample resources, which may not be forthcoming, as the government’s two main revenue agencies have insisted they are unlikely to meet higher collection targets this year. Last year’s record-low deficit was largely due to huge proceeds from government’s privatization, which is also unlikely to be replicated this year.

That leaves borrowing to plug the gap, which brings us back to where we started. Incurring more debt to accommodate the planned spending hike implies that the government would have to forego its balanced budget goal this year.

It’s a tough call given that this government has worked hard for the much-coveted upgrade in its credit rating hopefully by yearend. This Holy Grail would further improve the government’s chances of securing much cheaper borrowings from abroad.

But after the BSP’s recent policy move, the government should push this effort to its logical conclusion: jack up state spending to support economic growth. Otherwise, the central bank’s cooperation would all be for naught.

How do you solve a problem like Jamby?

How do you solve a problem like Jamby?

That is the question confronting the senators and congressmen who are members of the powerful Commission on Appointments (CA).

Last week Sen. Ana Consuelo Madrigal invoked wholesale Article 20 of the bicameral body’s rules, thus preventing the promotion of 24 ranking officers of the Armed Forces of the Philippines. She raised her objection in plenary session although other CA members do not recall her doing so when the appointment of the same officers were being tackled at the committee level.

Agusan del Sur Rep. Rodolfo Plaza told the Kapihan sa Sulo media forum Saturday that while Madrigal may have attended the pre-plenary deliberations on the officers’ promotion, he does not recall her coming on time.

Madrigal, according to CA and Senate sources, is notorious for her tardiness. Even columnist Angelito Banayo, in his testimony before the Senate blue-ribbon inquiry into the NBB-ZTE deal, revealed that Madrigal came late to the “secret meeting” former economic planning secretary Romulo Neri had with Sen. Panfilo Lacson, star witness Jun Lozada and others in Makati last December.

According to CA rules, any member can invoke Section 20 to suspend consideration of any nomination or appointment—including those favorably recommended by a standing committee and the chairman—without question from the rest of the bicameral body.

So why did Madrigal invoke Section 20 last Wednesday?

Other CA members said they believe it was her way of getting back at her colleagues who did not go along with her two weeks ago when she tried to block the promotion of a general who had a run-in with jailed Sen. Antonio Trillanes 4th, another Jamby favorite.

“She was awake but sleeping,” was how a published report quoted Plaza as saying about the incident when Madrigal failed to hear the name of the officer when it was read during plenary session for confirmation.

The only other CA member who agreed with Madrigal when she wielded her one-woman veto last Wednesday was Lacson—to the surprise of no one.

The Ping and Jamby tandem has been the motive force behind the NBN-ZTE probe, seemingly superseding the blue-ribbon committee chairman Sen. Alan Peter Cayetano.

A number of Senate reporters noted that Lacson and Madrigal—putative partners in the 2010 presidential election—now seem to be “running the chamber, setting the agenda, overstepping even some of their more senior colleagues, including those who also belong to the opposition.”

A veteran newspaperman who has covered the chamber since the 1990s noted how the Ping and Jamby team seems to be exercising greater influence over their fellow senators than Senate President Manuel Villar.

The tandem’s newfound sense of power has evidently extended even to the CA. However, most of the 22 other members of the bicameral body now feel that Madrigal, as abetted by Lacson, has gone too far.

Sen. Rodolfo Biazon, a former AFP chief of staff, fumed after Madrigal invoked Section 20. The former Marine general, who took up the cudgels for the officers affected by Jamby’s stunt, moved to amend the CA rules if only to prevent her from repeating it in the future.

Madrigal responded that she blocked the AFP officers’ confirmation because she wants to “reform” the CA.

“As minority floor leader of the commission, I invoke this powerful provision of our rules to send a strong message: Reform the commission now!” Madrigal said. “Tapusin na natin ang bata-bata at padrino system sa Commission on Appointments.”

Madrigal’s reformist posturing, however, failed to impress most of her CA colleagues—and the public.

Sen. Richard Gordon summed up the annoyance with Madrigal when he said: “She must explain to everyone and to every individual here that has earned star rank through blood and guts that she is using it fairly—without whim, caprice or arbitrariness.”

So, how do you solve a problem like Madrigal who evidently will not hesitate to brandish Section 20 just to make a point, no matter how bizarre?

Former Sen. Francisco Tatad said, also at the Kapihan sa Sulo, that any CA member “who does not actively participate in the pre-plenary deliberations should not be allowed to invoke Section 20.”

The leading opposition figure added that objections to any appointment should be voiced at the committee level, which Madrigal apparently failed to do in the case of the 24 AFP officers whose careers she has put on hold and whose individual reputations she has besmirched—with Lacson’s collaboration.

Tatad, however, did concede that the CA could stand some reforming. He said that the bicameral body needs to be “more proactive,” as he recalled the case of former Chief Justice Hilario Davide Jr. who was named the country’s permanent representative to the United Nations—even without CA confirmation and despite the fact that he is past the mandatory retirement age of 70 for public officials.

But that’s another matter—or is it?