Monthly Archives: December 2012

The need for PPPs for the SMEs too

Why should all the PPPs be for large scale companies? Here’s an interesting idea to have also PPPs for SME particularly if we want to increase job creation in the countryside.


Let small firms get a piece of PPP action, gov’t urged

Setup will generate more jobs, expert says


Friday, December 21st, 2012

Setting up public-private partnership (PPP) agreements on a local level will enable small and medium-scale contractors to acquire a piece of the government action and ease the worsening employment situation in the country, a labor expert said Thursday.

By doing so, the government will also reawaken entrepreneurship in the grassroots, said Rene Ofreneo, a professor at the UP School of Labor and Industrial Relations (Solair).

According to government data released this week, the jobless rate in the Philippines rose in October to 6.8 percent, or about 2.8 million unemployed people, from the 6.4 percent recorded in the same month last year.

“The PPP should be repackaged, in which there is more localization,” Ofreneo said.

By localization, he meant dividing the major projects into small community ventures.

Ofreneo noted that most of the contractors that bagged the PPP projects were huge Manila-based firms.

He cited the Department of Education’s project to build a close to 10,000 classrooms across the country.

Ofreneo said it awarded the contract to design, build and maintain 2,157 new classrooms in Region 1 for P3.45 billion to BF Corporation and Riverbanks Development, a group led by former Metropolitan Manila Development Authority Bayani Fernando.

For P12.83 billion, the contract for the 7,144 classrooms in Regions III and IV was given to the consortium of Citicore Investment Holdings and Megawide Construction Corp.

“How can small firms compete against these big corporations? The PPP should not just be for the rich and huge companies, but also for the people,” Ofreneo said.

He explained that localized PPP projects would have a “multiplier effect” in the grassroots level, increasing the income or the purchasing power of the people.

He said that with this kind of setup, the benefits to the common folk would outweigh the issues on economic efficiency.

The government would encourage dynamism. By transforming the PPP, small and medium enterprises, cooperatives, and even OFWS who have pooled their savings, may come in,” Ofreneo said.

He said some of the PPP infrastructure projects, like classrooms, farm-to-market roads and community centers, do not necessarily have to be carried out by giant corporations.

The professor said it would be even better if the government would couple this with a cash transfer for work—a type of conditional cash transfer program similar to what the government has been doing to boost education and nutrition in poor communities.

“Cash for work should be done mainstream as a strategy to address unemployment,” he said.

Ofreneo suggested that the program be done in areas hard hit by recent tropical storms.

While the recent NSO data do not show reasons why employment rises or declines, climate change is one of the factors often observed and cited by economists, Ofreneo said.

The professor also proposed a revival of the country’s industrialization in labor-intensive manufacturing and agriculture sectors.

Adopt a kid from the Philippines

In this period of Christmas when we celebrate the birth of Jesus, let us consider helping other children find their own family too. If you can, please consider adopting a child from the Philippines.

Few takers for ‘adoptable’ kids


Saturday, December 15th, 2012

Social Welfare Secretary Dinky Soliman Santos

MANILA, Philippines—Most orphaned or abandoned Filipino children who are put up for adoption remain in social welfare institutions. The Department of Social Welfare and Development (DSWD) said the stigma associated with adopted children was apparently holding back interested families from adopting. “There are so many children in orphanages and other child-caring agencies waiting to be adopted. But families hold back on adoption because of its stigma,” Social Welfare Secretary Dinky Soliman said at the launch of a campaign dubbed, “Love Sees Beyond Differences.” This year alone, nearly 500 children were declared legally available for adoption. But only 62 were adopted by Filipino families, according to the DSWD. The DSWD and the Inter-Country Adoption Board (Icab) have recently partnered with PR giant McCann Philippines for an advocacy campaign to try to erase the stigma on adoption and inspire families to open their homes to orphaned or abandoned children. She said the campaign hopes to change the mind-set of Filipinos about adoption and encourage families to open their homes to adoptive children. “We have long sought to undertake a communications campaign to give a new, more relevant perspective to legal adoption. Now the Department together with Icab and McCann Erickson has finally made this possible,” she added. From January to Nov. 15 this year, the DSWD issued certificates for 457 children declaring them legally available for adoption. Twenty-four children were matched to local families. The DSWD said 38 other children who were legally declared up for adoption in past years were also matched this year to local families. Central to the advocacy campaign is the song “I love you Anak” sang by Ogie Alcasid, an adoption advocate whose US-based sister and American brother-in-law are currently going through the process of adopting a Filipino child. Raul Castro, chief executive officer of McCann Worldgroup, said their latest advocacy campaign shows their commitment to promote positive values that will help transform lives. John Boren, president of Adoptive Families Foundation Inc., said keeping adoption secret from the adopted child as well as family and friends lead adoptive families to live a lie. Their group helps adoptive families during and after the process of adoption deal with issues while encouraging them to share their stories and inspire other families to adopt.

Australia’s economic success secret

When you look at it, Australia‘s success story goes beyond just exporting minerals and agricultural products. Part of that success also is due to the proper management of the economy. A lesson the Philippines may like to learn.

From the Sydney Morning Herald

Lucky country also blessed with skilful management

Ross Gittins
Published: November 28, 2012 –

It drew little comment, but the centrepiece of Julia Gillard‘s white paper on the Asian century was her target of raising Australia’s standard of living – income per person – from the 13th highest in the world into the top 10 by 2025. Considering the three richest economies on the list are the tiddlers of Qatar, Luxembourg and Singapore, it’s clear we’re already very rich.

Perhaps the reason this grand objective excited so little interest is that, for us Australians, there’s nothing new about being in the materialist winners’ circle. As Ian McLean, an economic historian at the University of Adelaide, reminds us in a new book, Why Australia Prospered, we joined that company from about 1820, and between 1860 and 1890 we were the richest country of all.

Few countries have been so successful for so long, he says. Some have achieved comparable levels of income only since World War II (think Japan or Italy). Many Asian countries are making good progress in catching up to these levels, though they still have some distance to travel (even South Korea).

McLean reminds us one country has experienced long-term relative decline after having achieved membership of the rich nations’ club in the early 20th century: Argentina. And even New Zealand, which tagged along near us for most of the journey, has been falling further behind since the 1970s.

So, in the first major economic history of Australia for 40 years, McLean sets out to explain why we became rich so soon and how we’ve managed to stay that way for the most part of 200 years.

The story we have in the back of our minds explains it in a phrase: we’re the Lucky Country. The Europeans who settled in this vast land had the good fortune to arrive at a place well suited to farming and teaming with valuable minerals. For more than 200 years we’ve been living off that great luck.

There’s no doubt Australia’s longstanding prosperity owes a lot to the exploitation of its bountiful ”natural endowment”. We became a major world producer and exporter of wool as early as the 1820s, and it stayed our principal export earner until the 1950s, save for the 1850s and 1860s when it was supplanted by gold.

McLean says the gold rush was ”no flash in the pan”. Gold continued to be important to our prosperity for several decades. And we remain a significant world producer to this day.

At the start of the wool boom in 1820, Australia’s European population was just 30,000. By the time gold was discovered in 1851, it was up to 430,000. Thanks to the gold rush, in just 10 years it had reached 1.2 million. Most of those people stayed, and by the start of the serious depression of the 1890s it was 3.2 million.

The story of our lucky natural endowment continued with the discovery of many mineral deposits in the 1960s, right up to the Asia-driven resources boom of the past decade. Still today, primary products account for two-thirds of our export income.

But McLean disputes the notion our unending prosperity can be explained simply in terms of our lucky strikes. For one thing, their study of many countries has led modern economists to the conclusion that possession of some valuable resource deposit is almost always a curse rather than a blessing.

It tends to lead to squabbling over who gets the proceeds, corruption, complacency, underdevelopment and stagnation. By contrast, resource-bereft countries such as Singapore or Taiwan seem to have succeeded precisely because they knew they had nothing going for them beside their own efforts.

Clearly, Australia is an exception to the ”resource curse” rule. But then we have our erstwhile southern hemisphere twin, Argentina, as a reminder you do have to play your cards right.

Our long prosperity defies another conventional wisdom: colonies get exploited by their colonising power. McLean finds no evidence of significant exploitation by the British. On the contrary.

Unlike some Asian colonies, our economy had to be built from scratch. Who built the foundations and paid for them? The British taxpayer. We benefited from our convict origins. The Brits were expecting it to cost them, and the 160,000 convicts they sent us were selected for their suitability for hard work.

A big part of the reason we got rich so quickly was that such a high proportion of the population was in the workforce. Then there was the advantage of being part of the British Empire trading bloc and the privileged access it gave us to Britain’s market.

Self-government came early and bloodlessly in the 1850s.

But McLean gives much of the credit to the quality of our economic and political ”institutions” – legal system, property rights, control of corruption, political arrangements and social norms – most of them inherited from the Brits.

The test of our institutions is their flexibility, their ability to adapt in response to changing circumstances and needs. As evidence of flexibility McLean cites the ending of transportation of convicts, a solution to the monopolisation of grazing land by squatters and the pull-back from using indentured islander labour on sugar plantations.

Much more recently you can point to all the economic reforms we undertook in the 1980s and ’90s to open our economy to a globalising world. And to our skilful response to the global financial crisis – just the latest of many economic shocks the world has thrown at us.

Australians don’t have tickets on themselves as great managers of our economic fortunes, but a look at the record – and at the performance of comparable countries – says we’ve had a lot more going for us than just luck.

Ross Gittins is the economics editor.

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Making doing business in Manila at par with Sydney

Here’s one approach the current Philippine administration can do which while may not necessarily benefit the poor man in the street can help the multitude of small business owners grow and sustain their business. If we can only make doing business in Manila as easy as doing it in Sydney we already achieved a lot.

From BusinessWorld Philippines

December 10, 2012

NCC targets improvement in competitiveness

THE NATIONAL Competitiveness Council (NCC) targets a big improvement in the country’s competitiveness after slipping in the International Finance Corp. (IFC) and the World Bank’s “Doing Business” rankings.

“We are hopeful we can achieve an increase in our ranking,” said Guillermo M. Luz, private sector co-chairman of the NCC during a dialogue with stakeholders yesterday.

“There is no reason for us not meet our goal.”

The NCC is targeting a leap to 109th place in the “Doing Business” for 2014 after the country slid to 138th (out of 185 economies) from 136th in the “Doing Business” for 2013.

Its plan of action involves principally reducing the time needed to get permits and streamlining procedures.

Other initiatives require legislative action. These include the removal of the minimum paid-in capital for corporations, a review of the laws on the protection of creditors’ legal rights and a review of the Corporation Code.

“There is a timing issue for legislative matters because of the elections and we are unsure of the calendar of the lawmakers but we don’t expect this to hamper us. We will start contacting people to help reduce the steps needed to get permits as well as other needed reforms after Christmas,” Mr. Luz said.

The NCC will also prepare a list of needed measures that it will present to lawmakers.

Among 10 variables reviewed by the IFC and the World Bank, the Philippines scored poorly in seven in the “Doing Business” for 2013.

In “starting a business,” the country fell to 161st from 158th, with the number of procedures required to start a business increasing to 16 from 15 and the time needed to complete them rising to 36 days from 35 days.

In “getting electricity” the Philippines fell to 57 from 53; “registering property,” to 122 from 120; “getting credit,” to 129 from 127, “protecting investors” to 128 from 124; and “paying taxes” to 143 from 136.

In “enforcing contracts,” the Philippines slid to 111 from 109, given no improvement in the number of procedures and time to enforce contracts.

The Philippines, however, climbed in “trading across borders” (53 from 56), “resolving insolvency” (165 from 166) and “dealing with construction permits” (100 from 101). —ENJD

Article location : targets improvement in competitiveness&id=62756

A brighter future is happening now

Contrary to all the bad news we get of most things (including the Philippines), a brighter future is happening now. Its true good news does not drive newspaper sales but bad news.  So for today only,  have a break from the bad news and ignore reading the newspaper.


From the Sydney Morning Herald

Things aren’t as bad as they might seem

Peter Hartcher
Published: December 11, 2012

With most rich countries in economic difficulty and cutting their aid spending, with civil wars breaking out in Syria and Sudan, with crises building in Iran and North Korea, human misery is surely on the rise.

A scan of the news of 2012 suggests there is so much going wrong with the world that Thomas Hobbes‘s 1651 summary of the human condition must be vindicated: “Solitary, poor, nasty, brutish and short.”

But much also is going right in the world. We hear less about it because news, overwhelmingly, is something going wrong. It’s a natural phenomenon.

If a thousand cars drive safely and uneventfully down your street, do you remark on it? No. But if one car suffers a spectacular smash-up, you’re sure to talk about it. That’s just how news works.

So you might be surprised to hear that there is progress, very real progress, on some of the worst of the scourges that have always afflicted the world.

Remember the hopelessly idealistic Millennium Development Goals set in 2000? Among the key goals were the halving of deep global poverty, cutting infant mortality by two-thirds, and cutting mortality for mothers by three-quarters of their 1990 levels by 2015.

Researchers at the World Bank counted up the total aid from the rich countries to the poor and found it totalled $US54 billion in 2002. To help the poor countries reach the goals, they reckoned they’d need another $US40 billion to $US60 billion, assuming their aid programs were intelligent and the money spent well.

A decade later, how much aid is being provided? A total of $US156 billion ($149 billion) went to 155 poor and middle-income countries in 2011, including Australia’s $US5 billion, according to the Organisation for Economic Co-operation and Development, considerably more than the World Bank thought necessary.

And here’s another surprise. Poor countries have found another offshore source of assistance, and it has turned out to be far bigger and more generous than the governments of the rich world.

It is overseas remittances from their own citizens who go overseas to get work, then send money home. While aid from foreign governments amounted to $US156 billion, these remittances supplied more than twice as much – $US372 billion last year and an estimated $US406 billion this year, according to the World Bank.

“Some humble people – Haitian dishwashers and Salvadoran day-labourers in Florida and California, Samoan and Tongan rugby players on weekend Pacific TV, Indonesian and Filipino maids in Hong Kong and Japan, Turkish gastarbeiter in German auto plants – find it possible to do quite a bit more,” than all the governments of all the rich countries put together, says Ed Gresser of Progressive Economy, a US advisory panel.

And although the global financial crisis that had its epicentre in the wealthy West did take its toll on the poor countries, their economies have been recovering faster.

And the dead zone of the world economy for most of the past century, Africa, is now growing more strongly than most people ever dared hope.

The continent’s economy expanded by 5 per cent in 2010, slowed to 3.4 per cent last year because of the disturbances of the Arab Spring uprisings, and is rebounding to 4.5 per cent this year and expecting 4.8 per cent next, according to the African Development Bank.

“People are still thinking with the mindset of the 1990s and haven’t caught up with the fact that, notwithstanding the global recession, developing countries are coming out much better,” says Andrew Mack, director of the Human Security Report produced by Canada’s Simon Fraser University. “They’re making extraordinary strides.”

The combined effect on the poor countries? The official aid, plus the remittances from their own citizens working abroad, plus the development under way in their own economies, has gone a long way towards meeting the Millennium Development Goals. Ed Gresser sums up progress on the three goals that were set to be achieved by 2015:

“Between 1990 and 2010, world infant mortality rates dropped by about 33 per cent, a bit below the pace necessary to meet the goals. Maternal mortality fell from 400 to 210 deaths per 100,000 births, just about on track. And the deep poverty rate – that is, the share of people living on $1.25 a day or less, in constant dollars – fell by half, from 43 per cent of developing world people to 22.5 per cent in 2008, the most recent year for which there is an estimate. Or in total from 1.91 billion people to 1.29 billion people, meaning the goal is achieved.”

And this progress out of poverty and suffering is important not only in its own right but also because it leads to improved prospects for reducing that other scourge of human existence, war.

“As incomes rise, states become more capable and have more resources, so are better able to crush rebels, who only win in about one in six conflicts anyway, and buy off the popular grievances that tend to fuel insurgencies,” Mack observes.

And while some new conflicts have erupted amid much publicity, some old ones have wound down quietly.

In the Philippines, the Moro Islamic Liberation Front brought to an end its 30-year-old armed insurgency on the island of Mindanao when it signed a peace deal with government in October. In Colombia, the FARC guerillas halted their five-decade-long armed rebellion by signing a ceasefire with the government last month. We’ll find out whether the ceasefire becomes a more durable peace when it expires next November.

If Northern Ireland’s civil strife can be brought to a peaceful close, even the bitterest, longest-running and apparently most intractable conflicts can, eventually, end.

Remember that, despite popular impressions, worldwide deaths by armed conflict have been declining steeply for 20 years. Since the end of the Cold War, the number of armed conflicts in the world is down by 40 per cent, and the number of high-intensity conflicts that kill more than 1000 people is down by 60 per cent, Mack reports.

Poverty, war and human misery will never be banished entirely from the face of the Earth but progress is possible, progress is happening and progress is real.

Of course, there are always new threats. Climate change is the great, new, unmet challenge facing humanity. As it sets up contests for water and other resources, experts predict that it will generate new conflicts and new misery. Progress can always be set back.

Peter Hartcher is the international editor.



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The need of using a better economic measure

Using GDP to measure the economic development of the country may be more appropriate for a developed country than one like the Philippines where a lot of poverty and lack of jobs still exist. Maybe the government should consider using a more appropriate measures like those that more jobs, wages and prices as suggested by this article.

From BusinessWorld Philippines

December 05, 2012

Growth without change

GROSS DOMESTIC product (GDP) grew 7.1% in the third quarter of 2012. And with a GDP growth of 6.5% in the first nine months of the year, an annual growth of 6.0% is easily within reach. But the next question is whether this year’s expansion would be the beginning of a sustained, inclusive, growth or would it fit right into the pattern of stop-and-go expansion that we’ve experienced in recent years.

The immediate risk of these seemingly good numbers is complacency. Our nation’s leaders might think that these kind of growth can be sustained without further fundamental reforms. That kind of thinking would be a tragedy.

They ought to be reminded that the economy grew much faster than 7.1%, as recent as two years ago. In the first three quarters of 2010, the economy grew 8.4%, 8.9% and 7.3%, respectively. But, as in the past, such spectacular expansion was not sustained. In 2011, GDP slowed to 3.9%.

Let’s face reality. Growth without major reforms is not sustainable. The present administration has done nothing yet that would ensure strong, sustained, and inclusive growth in the future. For example, the government has to invest more heavily in public infrastructure. To date, its record has been dismal.

Government leaders have to do much more to establish credibility, policy consistency, and public accountability. Foreign investors, based on poor foreign direct investment inflows, remain unimpressed with what the Aquino government has done after two and a half years in office.

The government has to reform the tax system — by broadening the base and simplifying the tax system. The grant of fiscal incentives have to be rationalized. Right now, the favored few get away with murder, while the rest of private enterprises suffer in silence.

Monetary and fiscal authorities have to do something with the rapid appreciation of the peso, which I believe is the most serious policy issue that needs to be addressed now.

Monetary authorities are fighting a different war: our country’s major problem is the avalanche of hot money, not the scarcity of foreign exchange. Fiscal authorities should be a bit more aggressive in spending in public infrastructure, rather than overly obsessed with investment grade rating.

The growth of population has to be managed consistent with the preferences of individual families. The poor should be given access to modern methods of family planning. The short-term impact of an aggressive population policy may be limited, but it promises to be a game-changer in the long-term.

The three recent economic peaks — 2004, 2007, and 2010, were preceded by weak or modest economic performance, followed by a significant slowdown. The economic growth of 6.7% in 2004 was preceded by a modest growth of 3.6% in 2002 and 5.0% growth in 2003. It was followed by a slow growth of 4.8% in 2005.

The economic expansion of 6.6% in 2007 was preceded by a modest growth of 5.2% in 2006. It was followed by an economic slowdown of 4.2% in 2007.

The strong GDP growth of 7.2% in 2010 was preceded by a sharp downturn of 1.1% growth in 2009 largely because of the Great Recession. The 7.2% growth in 2010 was followed by a modest GDP growth of 3.9% in 2011.

The Philippine economy may grow by 6% this year. This year’s seemingly impressive growth is, to a great extent, because of the mild economic expansion in 2011. Public construction was a big winner during the first three quarters of 2012 with growth of 62.2% in the first quarter, 45.7% in the second quarter and 23.7% in the third quarter.

But these outstanding expansion rates appear impressive only because of the sharp contraction in public construction during the same period last year — negative 37.3% in the first quarter, negative 51.2% in the second quarter, and negative 21.3% in the third quarter.

The outlook for a similar expansion in public infrastructure next year — in the vicinity of 43.9% — is dim. One can’t spend what has not been authorized by Congress. The proposed budget for public infrastructure in 2013 is ₱237 billion, only 24.1 % higher than the ₱191 billion authorized in 2012. And this assumes that the infrastructure departments would be able to implement projects authorized by Congress.

In order to catch up with our ASEAN-5 neighbors, the Philippine government has to invest more for public infrastructure — in the neighborhood of 5% of GDP or around P500 billion annually — for the next seven to 10 years.

The sad reality is that the Philippine government failed to do so in the past. As percent of GDP, public infrastructure was 1.49 in 2006, 1.92 in 2007, 1.90 in 2008, and 2.24 in 2009. In 2010, it went down further to its lowest level of 1.83%.

In order to make economic growth sustainable, we need to invest more heavily. Yet, public capital formation was not only low, it continues to deteriorate.

In the last seven quarters, public capital formation as percent of gross national income (GNI) was a poor 15.6%. Ideally it should be around 25% to 30%. It averaged 17% in 2011 and then edged down further to 13.9% in the first three quarters of 2012. How can an economy sustain growth of 6% to 7% in the next 7 years with a such a low level of public capital formation?

The most pressing question that I have to answer in public conversation, is this: if the economy is doing so well as the numbers suggest, why is unemployment still high and poverty still widespread? My reply: the GDP number as a measure of economic health is of limited value. And because of the enormous complexity in its calculation, as a statistic it is not perfect. How can one statistic represent all the activities that took place in an economy.

A 7.1% GDP growth for the whole economy, does not mean 7.1% growth for all Filipinos — young or old, men or women, educated or uneducated. It may mean more than 100% growth for owners of big firms or for stock brokers, zero growth for many who were able to keep up with inflation, and negative growth of those who lost their jobs or can’t find gainful employment.

The GDP growth rate is a good guide for policy makers, but it shouldn’t be the only guide. For a labor surplus economy like the Philippines, unemployment and underemployment numbers are perhaps more important.

Inflation numbers are important, and so are measures of poverty. The Millennium Development Goals indicators are important, especially the health and education indicators.

Government spokesmen will choose to exaggerate statistics that may put the current government in a good light and downplay those they feel are politically unpopular. But, the ordinary man on the street will only recognize factual evidence that directly affect his stomach — jobs, wages, and prices.

Benjamin Diokno is former secretary of budget and management and is Professor of Economics at the UP School of Economics.

Article location : without change&id=62499

Social Enterprise: a force for good

I previously mentioned in another post about the concept of social enterprises and value of leveraging a for profit operation for the benefit of a social cause. And in the case of the Philippines, poverty alleviation is a major social cause. Let’s hope as the attraction of entrepreneurship is being promoted as a career option, social enterprises be a business model to be encouraged as the best way to go to help the country too.

From BusinessWorld Philippines

November 26, 2012

Social enterprise: A force of social change

RECENT SURVEYS show worsening figures regarding poverty in the Philippines. The latest family income and expenditure survey done by the National Statistics Office in 2009 revealed that 26.5% of the Philippine population suffers from poverty. This is slightly higher than that of the 2006 survey which is 26.4%. Furthermore, Social Weather Station’s (SWS) self-rated poverty survey in the third quarter of this year showed that 47% of the Filipinos consider themselves poor (the report showed a drop of 8%age points from 51% the previous quarter).

While poverty is a problem in itself, more problems are offshoots of poverty. Crime rates continue to increase. Filipinos who want to work overseas continue to increase. Human trafficking is ballooning. While everyone thinks that overseas Filipino workers (OFWs) shielded the country from the effects of the global recession, the bigger picture would paint the problems associated with it. For instance, more and more Filipinos have become victims of illegal recruiters and at some point drug syndicates. Then there are the social costs of families being separated by the OFW phenomenon. These are problems that could have been prevented if the economic conditions within the country were conducive for decent living.

Poverty in the country is not really a result of Filipinos indolence. It has been argued that if one person is not doing well economically, then there must be something wrong with that person. But if more and more Filipinos are suffering from poverty, then there must be something wrong within the system itself. While there is no contention that the government should be at the forefront of such matters, initiatives among the private sector are also important. Moreover, economists would agree that in a lot of cases private sector initiatives are more efficient than the government’s. An offshoot of this line of thinking is the concept of social entrepreneurship.

The proliferation of social enterprises that encompass both social objectives and profit goals is a new means of utilizing the efficiency of the private sector for the purpose of improving economic and social circumstances. The idea has been around for so long although the term was coined just recently, which is defined as the use of entrepreneurial skills to solve social problems. Technically, the idea is still profit-oriented, but the purpose leans more towards being socially relevant.

Inequality has been a problem in the country for so long. While the economy has been growing, the disparity between income groups continues to widen as well. Economic growth is essential to achieve development. In fact, everything starts with economic growth as it is a prerequisite to development. But the problem of the distribution of economic wealth in the country is very serious.

The area of income disparity is where the idea of social entrepreneurship will be most relevant. The goal of social entrepreneurs to put forward the welfare of marginalized Filipino groups over profit orientation will certainly aid the redistribution of economic output while simultaneously supporting the growth of the economy. As a result, income disparities will narrow. Because of a social enterprise’s profit-orientation, however, one can expect a certain degree of efficiency to minimize costs and maximize profits in its operation.

The bullish outlook for the Philippine economy is a perfect time to exploit the possibility of social entrepreneurship as a means to alleviate poverty. The key factor will be whether the current positive economic perception can be translated into increased investments into the country, not only into traditional but also social enterprises.

Moreover, the 2006-2007 Philippine Report of the Global Entrepreneurship Monitor contains findings of a survey of 2,000 Filipinos nationwide, which indicated that 57% perceived business opportunities in their locality while 83% of those surveyed wanted to start their own businesses. Meanwhile, 46% are expecting to establish their own ventures.

Tommy Hutchinson, a social entrepreneur and founder and chief executive officer of i-genius, a network of social entrepreneurs around the world, said that people recognize that we need to do business and run society in a different way.

Hence, the government should initiate programs that will encourage entrepreneurs to tackle social problems while at the same time making money out of it. One way of fostering a conducive environment for social entrepreneurs is to put up funding and subsidy programs to support existing social entrepreneurs and to encourage aspiring ones to take action as well.

As a Chinese proverb says, “Give a man a fish and you feed him for a day. Teach a man to fish and you feed him for a lifetime.” Social entrepreneurs will work in the same manner. More than profit-seeking, they can be mentors who will teach men how to fish.

The success of social entrepreneurial ventures like Hapinoy and Human Nature in changing lives is an indication that everyone should believe or perhaps consider the idea of social entrepreneurship as an innovation and a social change-maker.

The Institute for Development and Econometric Analysis (IDEA), Inc. is a non-stock, non-partisan institution dedicated to high-quality economic research, instruction, and communication. The views and opinions expressed herein are those of the author and do not necessarily reflect those of the organization. For questions and inquiries, please contact Remrick Patagan via or telefax no. 920-6872.

Article location : enterprise: A force of social change&id=61999

The issue of VAT on a building management owners

A recent BIR memo subjecting to VAT transactions made by a condominium corporation will significantly increase the cost of owning a unit. Here is one article gives some reasons why the memo should be changed.

From BusinessWorld Philippines

December 03, 2012

Condo living is not a business

THE BASIC aspiration of a common Filipino is to own a piece of land, with a humble house he can call his own. Nowadays, even the lack of direct soil ownership has become acceptable. For some, even preferred.

Owning a condominium unit and living in the city do have their advantages. Proximity to the workplace means more quality time with family, instead of wasting precious time in traffic. And better security translates to peace of mind and more productivity while at work.

One may say, not so peaceful of late though, as ownership of a condominium unit appears to be indirectly attacked through the imposition of value-added tax, and income/withholding tax on condominium dues.

In Revenue Memorandum Circular 65-2012, the Bureau of Internal Revenue (BIR) rationalizes that condominium corporations are subject to income tax as the association dues and other assessment/charges are not merely held in trust but are compensation for “beneficial services it provides to its members and tenants.” The BIR also said they are subject to VAT on their gross receipts because all persons in the course of trade or business is subject to VAT, even if they are non-stock or non-profit entities.

Truth be told, you will not find condominium corporations in the enumeration of tax-exempt corporations in Section 30 of the Tax Code. And VAT being imposed on gross revenue or receipts does not care whether an entity earns income or not.

The other truth of the matter is condominium corporations organized under the Condominium Act do not need the tax exemption under Section 30 of the Tax Code to be not subject to tax.

A condominium is an interest in property consisting of a separate interest in a unit and an undivided interest in the common areas, including land. Such common areas are held by the unit owners through the condominium corporation. The Condominium Act also sanctioned the assessment of dues for the upkeep of the common areas.

In Civil Code language, a condominium is both an ownership and a co-ownership. Merely owning or co-owning is not a business per se. The incidental efforts to preserve what one owns is therefore also not a business activity. This is the reason why assessments/dues paid to condominium corporations organized under the Condominium Act are not income payments.

VAT should also not apply on these payments by owners because while VAT is indeed based on gross receipts, it is imposed on those who receive such payments in the ordinary course of business. The term ordinary course of business has been consistently defined in jurisprudence as a regular commercial activity with profit as motive. Co-owning, and spending for the maintenance of the co-owned property in an efficient manner, is not a business or commercial activity.

Fortunately, this school of thought that owning and maintaining a condo unit is not a business is not without legal backing.

In the case of Makati City vs. BA Lepanto Condominium Corp. (GR 154993, Oct. 25, 2005), the city tried to impose local business tax on the condominium corporation. When the city treasurer was pressed for the legal basis of the assessment, she insisted that the collection of dues from the unit owners was for the expenses to maintain the common areas to get “full appreciative living values” for the individual occupants. If you struggle with what that means, the treasurer was actually referring to being able to command better prices if the condominium unit is sold in the future. And because a condo unit owner may make money when the unit is eventually sold (if ever), then the condominium corporation should be considered engaged in business.

The Supreme Court (SC), ruling in favor of the condominium corporation, elucidated that in order for corporations to be subjected to business taxes, their activities must constitute business. In this case, the SC stated that the activities of the condominium corporation are limited by law. In this case, the Charter and by-laws of the corporation hew to this limitation, and none of its stated purposes are geared towards maintaining a livelihood or the obtention of profit.

The SC went on to state that condominium corporations are empowered to “acquire, own, hold, enjoy, lease, operate and maintain, and convey sell, sell, transfer or otherwise dispose of real or personal properties” as all corporations. Without this power, they will be “deprived of the capacity to engage in most meaningful legal relations.”

As to the reason given by the City treasurer (i.e., “full appreciative living values”), the SC found such “baffling.” Following this rationale, the SC said that every Makati City car owner may be considered engaged in business since the repairs and improvements on the car can appreciate the value of the car upon resale.

The SC in the same case cautioned that it is not unthinkable for unit owners to band together and engage in activities for profit under the shelter of the condominium corporation. But this fact must be established to make the condominium corporation subject to tax.

In the same vein, it can be echoed that no condominium corporation can be used as an invalid cover to hide taxable activities. And the BIR can certainly go after them in these cases with all their might.

But in the meantime, it is earnestly hoped that RMC 65-2012 will be reconsidered. After all, condominium unit owners should be allowed to peaceably dwell in their residences and not be subjected to costs of living higher than necessary, or to taxes when not necessary.

(The article is the personal opinion of the author and does not reflect the official stand of the Management Association of the Philippines. The author is vice-chair of the Tax Committee of the Management Association of the Philippines. He is the vice-chair and tax managing partner of Isla Lipana & Co., the Philippine member firm of the PricewaterhouseCoopers global network. Feedback at For previous articles, please visit

Article location : living is not a business&id=62359

Renewable Energy needs to be used more

I assuming there is a way to use more renewable energy in the country where power cost is very high. The current targets and rates do not encourage this. And when you consider the positive impact it makes to the environment we should do more to promote it. Let’s hope during the month where we celebrate National Energy Consciousness (and a  new DOE secretary too) a change can be made.

From BusinessWorld Philippines

December 03, 2012

Energy dep’t to strike balance in RE review

THE DEPARTMENT of Energy (DoE) yesterday vowed to take into account the “welfare of consumers and the future of the renewable energy (RE) industry” in a review of installation targets.

“Take note that when we increase, the subsidy of consumers will be bigger,” Energy Secretary Carlos Jericho L. Petilla said at the sidelines of the opening the National Energy Consciousness Month. “If we add a few more hundred megawatts, it can be done but the more pressing concern will be the impact of the overall pricing to the customers,” he told reporters.

The department wants to keep installation targets as they are, Mr. Petilla said. Currently, run-of-river hydropower and biomass projects are allocated 250 megawatts (MW) each; wind power, 200 MW; solar power, 50 MW; and ocean power, 10 MW.

The installation targets — which limit the number and capacity of projects for each renewable technology — are used as a basis for feed-in tariff (FIT) rates.

The Energy Regulatory Commission has approved FIT rates for RE projects as follows: for run-of-river hydropower, P5.90/kWh; biomass, P6.63/kWh; wind, P8.53/kWh; and solar, P9.68/kWh.

The FIT rate, which will be divided by the number of actual consumers as “FIT allowance,” will be paid to RE developers over a period of 20 years. — Claire-Ann Marie C. Feliciano

Article location : dep’t to strike balance in RE review&id=62368

Another PPP bidder selected

Here is another PPP tender finished with a winning bidder selected. Let’s hope it will do a better job than the last IT provider to enable the LTO do its job.


DOTC picks winner of LTO IT project

By Rainier Allan Ronda (The Philippine Star) | Updated November 28, 2012

MANILA, Philippines – The Department of Transportation and Communications (DOTC) announced yesterday that it has selected a winning bidder for the P8.2-billion Land Transportation Office (LTO) road transportation information technology infrastructure project.

With an Approved Budget for the Contract (ABC) of P8.2 billion, the bidding was won by Digitext Asia Corp., which put up a bid of P3.8 billion, the lowest bid among five companies.

Digitext is a three-firm consortium with New Tech Media Solutions and Trima Infrastructure and Services Limited.

Five groups submitted bids with the DOTC bids and awards committee last Monday by the 2 p.m. deadline for the submission of bids for the project, from nine companies that purchased bid documents sold by the DOTC BAC last April.

Besides Digitext, the other bidders were Fritz and Macziol Asia, Eurolink Network, International Corp., Kaisa Consulting and Ceragon Network.

Fritz and Macziol Asia submitted the second lowest bid at P5.3 billion, while Eurolink was third lowest with at P5.8 billion. The financial bids of Kaisa and Ceragon were not opened because they lacked technical requirements.

Kaisa was considered as non-complying because it did not have a schedule of requirements, while Ceragon lacked a schedule of requirements and a certificate of reciprocity for a foreign consortium to qualify for the bid.

The four other companies that purchased bidding documents but did not participate in the bidding were Stradcom Corp., which is the current system provider of the LTO IT system; Smartmatic; Oberthur Technologies and Indra Sistemas S.A. The contract with Stradcom will expire in February next year.

The DOTC will go through the bid evaluation and post qualification process, including resolving the remaining issues with the non-complying bidders and other technical and administrative matters.

DOTC Secretary Joseph Abaya, in a statement, said the new IT system will provide a viable and long-term solution to address the current system’s issues.

“The previous LTO IT system, which has been running for 13 years, is no longer responsive to current land transportation regulation requirements. Once the new LTO IT system is in place, it will make it easier for authorities to recover stolen vehicles, trace smuggled vehicles, prevent double registration and monitor unregistered vehicles,” the DOTC said.

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