Monthly Archives: April 2013

Make poverty reduction the most important PH economic measure

After all that is said and done about the huge accomplishments made by the current Philippine government, the bottomline is poverty remains unchanged for the past 6 years at 27%. I think even that measure may be an understatement. Let us all hope P-Noy will make poverty reduction the most important economic for the remaining years of his administration. Not another credit upgrade, or a higher stock exchange index closing or even a higher level of direct foreign investment. These are good economic measures but they mean little if the many continue to live in poverty particularly when a select few grow richer.

DESPITE ECONOMIC GROWTHS

PH poverty incidence unchanged in past 6 yrs

10% of Filipino families rated ‘extremely poor’

12:02 am | Wednesday, April 24th, 2013

WHERE’S TRICKLE DOWN EFFECT? Despite the expansion of the economy, the benefits of growth are not trickling down to the poor, including these children living in shanties in Pasay City. INQUIRER PHOTO

 

Economic growth over the past six years hardly made a dent in poverty incidence in the Philippines, as the percentage of Filipinos living below the poverty line remained practically the same between 2006 and 2012, official statistics showed.

The poverty incidence stood at 27.9 percent in the first semester of 2012—“practically unchanged” from the same period in 2009 (28.6 percent) and in 2006 (28.8 percent), the National Statistical Coordination Board (NSCB) reported Tuesday.

Unlike in previous poverty reports, the NSCB did not indicate the number of families and people who fell below the poverty line.

Although the poverty incidence was practically unchanged in the past six years, the number of poor people was expected to be higher in 2012 because of the country’s growing population.

Norio Usui, senior country economist for the Asian Development Bank, said the government must solve the problem of jobless growth if it hoped to reduce poverty.

“I am not surprised at all. The benefits of strong economic growth have not spilled over to the people because they still cannot find a job,” he told Agence France-Presse in a telephone interview.

He said the Philippines’ economic model depended on consumption, strong remittances from its large overseas workforce and the business process outsourcing industry, which employs college graduates.

However, the country, with its weak industrial base, has stood out in the region, he  added.

“Why do you need a strong industrial base? To give jobs not only to the highly educated college graduates, but also to high school graduates,” Usui said.

The National Economic and Development Authority (Neda) said it hoped to see improved results given new investments in infrastructure, agriculture and manufacturing.

“Although this first-semester result on poverty incidence is not the dramatic result we wanted, we remain hopeful that, with the timely measures we are now implementing, the next rounds of poverty statistics will give much better results,” Socioeconomic Planning Secretary Arsenio M. Balisacan said at a briefing.

Create quality jobs

Balisacan said increased infrastructure and business investments since the latter part of 2012 should help create quality jobs that would enable the poor to improve their lives.

The country, which has a population of about 97 million, posted 6.6 percent economic growth last year, and this year obtained its first-ever investment-grade rating from Fitch Ratings.

However, the January 2013 jobless rate stood at 7.1 percent, with a further 20.9 percent underemployed, or working fewer than 40 hours a week.

About 41.8 percent of the underemployed are in the farming sector.

Joel Rocamora, head of the National Anti-Poverty Commission, said about three out of every five Filipinos were highly dependent on agriculture. “As such, increasing incomes in agriculture will make a big dent in addressing the poverty problem,” he said.

Falling commodity prices

Balisacan said underemployment in rural areas, security problems in provinces facing insurgencies and warlords, and the falling price of a number of commodities such as sugar were mainly to blame.

“If the problem of visible underemployment in agriculture is addressed, then incomes of farmers would increase, poverty incidence would decrease, and we would not be compromising food security,” Balisacan said in a statement.

He expressed hopes that the next round of data would reflect the government’s massive investment in human development and poverty reduction.

‘Extreme poverty’

NSCB Secretary General Jose Ramon Albert said at the briefing that during the first semester of 2012, a Filipino family of five needed P5,458 to meet basic food needs every month. Families earning that amount were considered to be living in “extreme poverty.”

The proportion of extreme poverty among families was largely unchanged from 10.8 percent in 2006, 10.0 percent in 2009 and 10.0 percent in 2012.

A family of five family would need P7,821 to meet both food and non-food needs (such as clothing, housing, transportation, health, education) every month. Family earning that much is considered to be living in “poverty.”

The NSCB said P79.7 billion was needed to eradicate poverty for the first semester of last year. By contrast, the government 2012 budget for its conditional cash transfer program was P39.4 billion.

Poorest provinces

Neda said that while there was a slight difference in poverty incidence between the first semester of 2009 and 2012, the results were not uniform across regions and provinces.

The NSCB identified the five poorest provinces as Lanao del Sur (68.9 percent poverty incidence), Apayao (59.8 percent), Eastern Samar (59.4 percent), Maguindanao (57.8 percent) and Zamboanga del Norte (50.3 percent).

By region, the Autonomous Region in Muslim Mindanao (46.9 percent), Region 12 (37.5 percent), Region 8 (37.2), Region 9 (36.9 percent), and Region 10 (35.6 percent) had the highest family poverty incidence.

“This suggests that the strong economic growth in 2010 and 2012 were not enough to extricate a lot of people from the poverty trap,” Dr. Benjamin Diokno of the University of the Philippines School of Economics said via e-mail.—With a report from AFP

Read more: http://newsinfo.inquirer.net/396237/ph-poverty-unchanged#ixzz2RTxNLngl
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Letting Domain be its master

I am a great fan of Domain.com.au and the value of its business to home buyers. Its owners newspaper publisher Fairfax Media recognising the value of the business to its bottom line is making changes to make it shine better outside its main bread and butter of selling newspapers. Let’s hope that if it doesn’t give it the needed support that it will sell it to someone who will make it realise its maximum value.

Fairfax restructure gives a new home for Domain that will make its value more explicit

April 4, 2013

Read more: http://www.smh.com.au/business/fairfax-restructure-gives-a-new-home-for-domain-that-will-make-its-value-more-explicit-20130404-2h8ov.html#ixzz2RTl7CaN4

Domain ... in a new division.Domain … in a new division.

Fairfax Media’s organisational restructure is primarily about eliminating duplication of management functions that sit behind and support the group’s stable of media brands, but one fascinating by-product is that the group’s Domain online and print real estate listings and search business will be visible as a separate profit centre for the first time.

In the new structure there are five divisions. Australian publishing media, which contains all of the group’s print and online news-oriented assets including The Sydney Morning Herald, The Age, the Financial Review and regional media; digital ventures, which will house Fairfax’s transaction-oriented online businesses, including Stayz and RSVP;  Fairfax Radio; Fairfax New Zealand; and finally Domain, which will will house the Domain business and the group’s Metro Media Publishing real estate and specialist publishing joint venture.

It’s the movement of Domain into the spotlight that might interest Fairfax followers

The big Australian publishing media division will in turn have four units – news media, business media, life (or lifestyle) media and community media – but the key support functions for them including sales, marketing, business planning and information technology management will be rationalised to create a unified support platform.

That will deliver additional cost savings as Fairfax deals with the structural shift from print media to online media, pressure on revenue that accompanies the change, and a cyclical downturn in activity and advertising demand that began during the 2008-09 global financial crisis.

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Chief executive Greg Hywood said in February that the group was on track to deliver annual cost savings of $251 million a year by June 2015, but that more savings were being sought: this restructure delivers some of them.

It’s the movement of Domain into the spotlight that might interest Fairfax followers most however.

Morgan Stanley estimated in August last year that Fairfax’s digital metropolitan media business was worth $704 million, and that within that the successful Domain business was worth $474 million. That was based on a multiple of 12 times estimated earnings. Estimates of Domain’s profitably will be replaced by harder numbers now.

Morgan Stanley attributed no value to the group’s less successful Drive and myCareer online brands, which are under review by Hywood, and have not been broken out like Domain in the restructure.

Morgan Stanley’s argument last year was that the value of Fairfax’s digital business was not being reflected in the group’s share price, which hit a low of 36 cents in mid-October. The shares have recovered and were trading at 60.5 cents early Thursday afternoon, but that still only values Fairfax at $1.4 billion, making Domain a key and potentially not fully recognised asset.

Domain would have dedicated management, Hywood said on Thursday, adding that its elevation as a “stand-alone division” recognised the significance of the real estate sector for the group. It should also make the value of Domain more explicit, inside Fairfax, but also to potential acquirers: in a tough media market that can’t hurt.

Read more: http://www.smh.com.au/business/fairfax-restructure-gives-a-new-home-for-domain-that-will-make-its-value-more-explicit-20130404-2h8ov.html#ixzz2RTk32Wx6

Philippine enterprise incubation with support of MVP

I had always had a strong personal in venture capital and enterprise incubation and reading this article inspires me with the confidence there is that possibility talented Filipinos will now get the needed financial and business coaching support to translate their bright ideas into the next big enterprise. Its been a long way from the Venture Capital Corporations the government started with local banks in the 1980s. We have to credit Manny Pangilinan for making this possible.

 

Top 10 startup businesses eyed by MVP

By 

Sunday, April 21st, 2013

CLARK FREEPORT—Can IdeaSpace jumpstart a Silicon Valley in the Philippines?

Business tycoon Manuel V. Pangilinan once posed this question to promote the idea of creating a center for high technology-based enterprises, which would be “incubated” through IdeaSpace, a nonprofit foundation that is supported by industry leaders.

“The aim was to create jobs so that few people leave the country,” says Diane Eustaquio, executive director of IdeaSpace, who narrated that encounter with Pangilinan in early 2012.

Technology entrepreneurship or technopreneurship is what IdeaSpace intends to develop for the next five years, Eustaquio said.

“We will help technopreneurs every step of the way,” she says in a briefing here on Thursday.

With P500 million extended by First Pacific Company Ltd., Metro Pacific Investments, PLDT Group and affiliate groups, the joint effort became what was dubbed the “largest private sector commitment for technology entrepreneurship in the Philippines.”

IdeaSpace selected 10 startup businesses it would sponsor from 700 entries in a search competition that opened in August 2012 and closed on April 5.

One of the winners is Armtech, the group composed of Alvin Layda, Reinell Cunanan and Moses Guevarra, who are from Angeles and Mabalacat cities in Pampanga.

The winning business ideas are practical commodities: a low-cost water purifier for homes, beverages made from dates, joint implants designed to fit the Asian-build, a system that generates electricity each time vehicles drive through rumble strips laid out along high-traffic roads, and a seat-reservation system for buses plying the provinces.

Also catching the interest of IdeaSpace are an online marketplace for creative professionals, a softwaresolution for highly-targeted promotions for merchants using big data analytics, a software solution for monitoring chronic health conditions like diabetes, an automated queuing system transmitted through text messages, and a new design for a wind turbine.

Within a six-month incubation period that starts on May 7, each team gets a funding of P500,000 as well as mentoring services, support services, and grants worth P2 million from IdeaSpace partners Amazon, Asian Institute of Management, Freelancher.com, Ionics, IPO Philippines, Microsoft Philippines, Adamson University and the University of the Philippines’ Open University, Eustaquio says.

The teams, she says, can get additional investments of up to P5 million during the incubation period. The teams will also be linked to potential investors in and out of the country.

“Our job is to make them investable businesses at par with global standards,” IdeaSpace president Earl Martin Valencia says.

“What is common is that they all pose innovative and disruptive solutions to market needs,” he says.

For example, Armtech’s compact water purifier for households could  give water bottling companies a run for their money.

“It can kill 99.9 percent of harmful organisms,” Cunanan adds. His group intends to produce 50 prototypes until November.

Eustaquio says: “We are proud of these groups. Their products will affect the lives of many people in a good way.”

The 10 teams are setting up offices initially at the 10th Floor of the PLDT MGO building in Makati City.

What it means when there rich people in the Philippines

After this current news about one billionaire having paid more taxes than the younger sister of the President, I would like to share a previous article on what it means when there are rich people in the Philippines. I hope this message gets some reading not only from the President but also to every one working in his administration.

No Free Lunch

Inequity, initiative and inclusive growth

By Cielito F. Habito
Philippine Daily Inquirer

It is not correct to say that the 40 richest Filipino families own 76 percent of our nation’s gross domestic product (GDP). I have recently been widely misquoted as having said so. What I did say, and had first explained in this space nine months ago (“Economic growth for all,” 6/26/12), was that the growth in the aggregate wealth of our 40 richest families in 2011—which Forbes Asia reported to have risen by $13 billion in 2010-2011—was equivalent (in value) to 76.5 percent of the growth in our total GDP at the time, which official data show to have risen nominally then by P732 billion, or around $17 billion. I found that this ratio was only 33.7 percent in Thailand, 5.6 percent in Malaysia, and 2.8 percent in Japan—suggesting that our income inequality is much worse than in our neighbors.
My observation, misquoted as it was, evoked two kinds of reactions. One audience, mostly fellow economists and business people, balked at my supposed assertion that the bulk of our national income was in the hands of only 40 families (the reporters’ mistaken inference from the misquote). They took me to task for the improper comparison between the billionaires’ wealth, mostly held in the form of stocks in various companies, and GDP, which measures total incomes earned for productive activities in the economy. The former went up because the stock market saw record highs, inflating the value of stock holdings. The latter went up because of greater economic activity; “valuation income” resulting from rising stock market values is not counted here. The former is certainly not part of the latter, and I never said that it was. My point was this: Relative to rise in total incomes, the wealth gain of our billionaires that year dwarfed those in our neighbors (who had seen similar stock market surges), suggesting much more skewed distribution in our country.
The other group was the general audience, for whom the technical clarification above is of little interest. Their reactions were borne out of unhappiness over the way our economic growth has been too “exclusive,” benefiting only a few while bypassing the wide majority of Filipinos. For them, whatever indicator of inequality we use doesn’t change the fact that our country stands out with an income gap wider than seen in most of the region. The clear imperative is to pursue more inclusive growth. This is in fact the theme and mantra of President Aquino’s Philippine Development Plan.
I’ve said it before, and I’ll say it again: I do not fault our billionaires for being rich, particularly those who gained their riches through hard work and superior initiative. (But I can’t say the same for those who have employed less than fair or ethical means—and not a few believe that some in the Forbes list did.) Neither do I favor a socialist approach that would take from the rich to give to the poor.
An anecdote making the rounds of the Internet aptly illustrates why this cannot be the way to go. As the story goes, a professor known to have never failed any student in the past suddenly found himself failing an entire class. The class had proposed a grading system based on the socialist ideal where no one would be poor and no one would be rich. The professor thus adopted a system where all grades will be averaged, with everyone receiving the same grade. This way, everyone thought, no one would fail and no one would stand out and get an A. After the first test, the grades were averaged and everyone got a B. The students who studied hard were upset, while those who studied little were happy. For the second test, the lazy students studied even less, and the better students decided it wasn’t worth studying as hard as before. The average grade for the second test was D, and no one was happy. By the time of the final test, the average grade had dropped to F, and everyone flunked the course. As the tests proceeded, it became clear that students were unwilling to put in effort that would only benefit someone else. In like manner, an economic system that takes from the rich to give to the poor for the sake of equality is likely headed for overall decline.
A thriving economy rests on initiative. Initiative, in turn, rests on proper incentive. Take away the incentive of commensurate rewards for one’s efforts, and the initiative to achieve more disappears. (Without “carrots,” the alternative is for the state to wield a “stick” and force production quotas on its citizens—at the cost of freedom and happiness.) In a democratic society, then, pursuing inclusive growth is not about redistributing wealth and income to equalize it; rather, it’s about providing genuinely equal opportunities for all.
As I have argued before, inclusive growth is about ensuring that all are equipped with or can readily access needed human, natural, physical, social and financial capital to be able to pursue opportunities to uplift their lives. This entails ensuring quality education and health services for all; correcting historically lopsided access to land and natural assets; equitable access to credit by small and large borrowers alike; a justice system that is blind to people’s social and economic status; and a competition policy that levels the playing field for big and small enterprises so that the latter can thrive along with the former. In other words, it calls for correcting our social, political and institutional flaws, in all their obvious and subtle forms, that perpetuate unequal access to economic and political power.
What worries me is that there is so much yet to be done, and the job would take much more time than remains for this particular President to do it.
* * *
E-mail: cielito.habito@gmail.com

How to avoid taxes in the Philippines

Wonder how to pay minimal tax in the Philippines? Don’t get paid a salary. Just become a shareholder and get paid from cash dividends declared by your company. You pay only 10% tax.

Andrew Tan raises tax equity issue

DEMAND AND SUPPLY By Boo Chanco (The Philippine Star) | Updated April 22, 2013

Megaworld founder Andrew Tan has complained he paid more taxes than the President’s sister but was ignored in the top taxpayers list released by the BIR. Tan, the chairman of Alliance Global (AGI) and Megaworld, claims to have paid P60.1 million in taxes for 2011. It’s unfair.

Tan’s business empire in AGI alone includes Emperador Distillers Inc., Travellers International Hotel Group Inc. (which partnered with Genting to operate Resorts World Manila), Golden Arches Development (Philippine franchise holder for McDonald’s) and Global Estate Resorts Inc.

I can understand Tan’s hurt feelings. How can an actress, no matter that she is the President’s youngest sister, be paying more taxes than him? It’s embarrassing.

But wait a minute… Tan seems to be protesting before he understood the basis of the BIR list. The list covers only those who actually filed income tax returns like me and others who are not awesomely successful entrepreneurs like he is. Maybe the BIR should have released a consolidated list covering all sources of income and all manners of tax payments. But that’s not the case.

Tan’s P60-million tax payment and Kris Aquino’s P49.87 million are apples and oranges as far as the BIR is concerned. Let us see why.

The bulk of Mr. Tan’s income is his very impressive dividend earnings of P518 million for which he paid a 10-percent final tax. He need not report this kind of income the way salaries and other income must be reported in an income tax return filed every April 15.

Nevertheless, I am glad Mr. Tan made a fuss because he raised a good tax policy issue. Why should the hoi polloi like you and me who sweat it out daily to earn a salary being made to pay as much as 30 to 32 percent in income tax? That’s like working for government for close to four months every year compared to a little over a month for Mr. Tan.

Rich folks can do nothing more than play golf the whole year but only have to pay a 10-percent tax on the dividends they earn. Even the minimal interest earnings on our puny savings accounts are charged a 20-percent tax.

Of course I know that Tan is no idle rich. He works hard and earned his riches the hard way. But still, the dividend income he earned should be taxed the same rate our salaries are taxed. The tax laws should be framed so that income is income and every one must pay at the same tax rate.

It is bad enough that the working class is already paying its unfair share of value added and other consumption based taxes on basic necessities including food, energy, water and yes, cell phone bills. Alan Peter Cayetano told PhilStar editors last week that 70 percent of what we earn end up as taxes if you add up direct and indirect taxes.

Indeed, everyone knows the rich employ the best tax lawyers and accountants and are using so called tax avoidance practices. Commissioner Kim Henares mentioned in an interview that she is aware of their ploy of creating a personal holding company where the salaries and bonuses of high earning executives are paid.

Henares warned the wealthy not to “incorporate” even their personal expenses under separate companies just to minimize their tax liabilities. “You cannot book groceries for your household under a separate corporation, or the salaries of your helpers, or your mobile phone bills,”

I understand that “tax planning” is also why the Zobel de Ayala brothers are not on the big tax payers list. Fernando Zobel told my colleague Ichu Villanueva they are covered by “substituted filing” for the salaries they earn in much the same way as their clerks and janitors are.

That means their companies, Ayala and Ayala Land, withhold taxes on their salaries each payday. At the end of the year, their tax liabilities on their salaries are fully paid and they don’t have to file a return on April 15.

But I wonder if “substituted filing” applies to the Zobel brothers. I am sure that at least in the case of JAZA, he gets compensation from Ayala, Ayala Land, BPI, Globe, among many others. “Substituted filing” is only allowed if there is a single source of income. How are all the other compensation income accounted for?

Maybe that’s where the personal holding company mentioned by Commissioner Henares comes into the picture. But on top of that, I am told the Ayalas also have a holding company called Sonoma where the nine cousins hold equal shares.

I am told the way it works, all the profits declared by the Ayala companies for the family’s shares go to this company which has a policy to declare 80 percent dividend each year. Like Andrew Tan, the Zobel cousins only get taxed 10 percent on their dividend earnings.

This tax disclosure problem for the captains of business and industry is not going to go away. And particularly for the Zobels who are active in the Makati Business Club, the MAP and other self righteous business organizations that constantly demand transparency from government, the same level of transparency is expected from them too. How do they pay their taxes and how much?

It is a pity not too many people, not even Mr. Tan himself, realized that he opened a can of worms. Until Mr. Tan protested, few were aware how atrociously our tax law discriminates against the poor wage earners.

An inequitable tax system is bad for the economy, Warren Buffet, America’s best and wealthiest investor had been saying for years. Buffett said that he was taxed at 17.7 percent on the $46 million he made in one taxable year, while his secretary, who earned $60,000, was taxed at 30 percent.

Mr. Buffett believes a tax policy that favors the rich over everyone else accentuates a disparity of wealth that hurts the economy by stifling opportunity and motivation. See… we can’t even blame this tax policy on the workings of capitalism because a big practicing capitalist is saying this works against the economic system.

As one blog puts it (The Unofficial Stanford Blog) America has a huge disparity in income between its richest and its poorest citizens. If America has a big wealth disparity problem, I don’t know what we can call ours. Studies show that income disparity makes a huge difference in a person’s health and happiness… An unfair tax policy is apparently a violation of human rights.

Buffett has been advocating a minimum tax on top earners – like himself. His proposal is popularly known as the Buffett rule, something we need here too.

Here, we can also make the tax rule more equitable by bringing the top income tax rate down and bringing the tax on dividend incomes up. That should also be good for the economy. Ordinary folks will spend the extra cash and boost the economy while rich folks only tend to hoard it as the trillion pesos in SDA accounts prove.

Now that the government is embarking on an all out drive to get people to pay the proper taxes, our legislators must also review the tax code and make sure it is fair specially to the ordinary wage earners.

Alas, Mr. Andrew Tan… you complained too much. Confucius might have said there is wisdom in keeping one’s mouth shut when one is already so much ahead. But thank you anyway. By opening our eyes to tax inequity, you inadvertently did something good.

Tax time

Mel Amado sent this one.

A woman walks into an accountant’s office and tells him that she needs to file her taxes.

The accountant says, “Before we begin, I’ll need to ask you a few questions. He gets her name, address, social security number, etc. and then asks, “What’s your occupation?”

“I’m a Lady of the night,” she says.

The accountant is somewhat taken aback and says, “Let’s try to rephrase that.”

The woman says, “OK, I’m a high-end call girl”.

“No, that still won’t work. Try again.”

They both think for a minute; then the woman says, “I’m an elite chicken farmer.”

The accountant asks, “What does chicken farming have to do with being a prostitute?”

“Well, I raised a thousand little peckers last year.”

“Chicken farmer it is.” replied the accountant

Boo Chanco’s e-mail address is bchanco@gmail.com. Follow him on Twitter @boochanco

Wasted Opportunity

With the national elections scheduled in the Philippines, one would hope a chance for better governance is possible. Reading this articles the hope for change is somehow lost when you realise the process is largely determined by amount of money given to win votes.

 

Election opportunities

SKETCHES By Ana Marie Pamintuan (The Philippine Star) 5 April 2013

A person who handles logistics for a local candidate told me that a reasonable campaign budget per district in Metro Manila during the official campaign period is P6 million.

This is for a candidate running unopposed, or with an opponent so weak the challenge can be considered token. Naturally, the budget goes up if there’s a serious opponent.

The amount does not cover posters and similar campaign materials. I asked what the money was for. The logistics guy would only say that the money is given to the candidate’s district political leader, who in turn is expected to distribute the money down to the grassroots.

In another city, a woman says the local leader gives her son and several others who make up the core group of supporters of an incumbent official P500 a week to ensure voter loyalty. Rice is also distributed regularly to selected households.

Told that a person can take the money and still vote for someone else – or according to his conscience, as famously advised during the Marcos regime by then Manila Archbishop Jaime Cardinal Sin – the woman said she would give the source of the dole-outs value for his money. Even if there may be a more qualified opponent, the woman explained, all candidates behave the same anyway once in office – always looking out first for personal interest. So she might as well go for someone from whom she is already receiving benefits.

The logistics guy told me a similar story about voter loyalty. It’s how political dynasties are built and reinforced, he said. Once a person benefits directly from an incumbent official, the tendency is to want the benefits to continue. Rival candidates are seen as unknown factors who may stop those benefits.

Occasionally, a rival candidate who has cultivated, usually through show business (or sports), a generous and pro-poor image can overcome this edge of the incumbent and put an end to a dynasty.

But the recipient of the P500 a week is right: the show biz character, if he wins, will likely want to perpetuate himself in power and build his own dynasty.

As for competence, we can’t attribute the success in politics of entertainment and sports has-beens to voters who are uninformed. The average Pinoy voter in fact can be an astute observer of politics and governance. The recipient of the P500 a week, for example, expresses what I often hear in the wet markets and depressed communities: we’ve had presidents of exceptional intelligence, and how did they govern? They turned out to be exceptionally intelligent crooks. The rich keep getting richer, and too many Pinoys remain poor.

*      *      *

The political realities are such that in many areas, people find it more practical to support a dynasty – and benefit personally from the support – rather than waste time, resources and the goodwill of the incumbent by opposing him or his clan.

In several areas, different clans hold friendly discussions on division of turf and positions, to save on campaign costs.

Even when voters would rather pick a candidate outside the dynasty, they may be left with no choice. Many candidates belonging to political dynasties are running unopposed, or only with token opponents. This is the situation in my neck of the woods in Metro Manila.

Or else the principal opponents all belong to dynasties. An example is Parañaque, where second-generation politicians are running: Edwin Olivarez and Benjo Bernabe are slugging it out for mayor; Rico Golez, son of Congressman Roilo, is running for vice mayor; and Wahoo Sotto, nephew of the senator in the plagiarism scandals, wants to take his father Val’s seat as councilor.

Although I’m no Parañaque voter, motorists driving through one of the major thoroughfares in the city, President’s Avenue, cannot miss the campaign posters of the local candidates. In addition to the children of politicians, posters of Gus Tambunting and former mayor Joey Marquez (party uncertain) running for congressman are also pasted on lampposts and walls.

The Commission on Elections’ much-touted drive against the illegal display of campaign posters is non-existent along this avenue. If the Comelec can’t enforce its poster rules in Parañaque, it can’t possibly do better in areas outside Metro Manila.

And if the Comelec can’t enforce its rules against the display of campaign posters, it’s doubtful that it can regulate campaign expenditures.

There are voters who don’ t care. They consider elections as occasions for politicians to share some of their wealth. Election spending stimulates the economy and paves the way for a bit of wealth redistribution.

The voters are aware that the wealth redistribution is short-term. The income gap remains wide in this country despite free elections every three years. Elections merely validate the hold on power of political clans.

In almost every election, we even add more politicians feeding from the public trough, through gerrymandering and poor implementation of the party-list system. Consider some of the characters wanting to enter Congress through the party-list backdoor.

Elections are supposed to herald change, but this is rarely the case in many parts of the country. Too often, candidates who promise reforms end up doing the same things as their predecessors. For disillusioned voters, it’s better to see elections merely as opportunities for making a quick buck.

For the new generation, you have to invent your job

 

Here’s one way for creating your job particularly for the new generation. Learn innovation early.

 

March 30, 2013
From the NY Times

Need a Job? Invent It

By Thomas L Friedman

WHEN Tony Wagner, the Harvard education specialist, describes his job today, he says he’s “a translator between two hostile tribes” — the education world and the business world, the people who teach our kids and the people who give them jobs. Wagner’s argument in his book “Creating Innovators: The Making of Young People Who Will Change the World” is that our K-12 and college tracks are not consistently “adding the value and teaching the skills that matter most in the marketplace.”

This is dangerous at a time when there is increasingly no such thing as a high-wage, middle-skilled job — the thing that sustained the middle class in the last generation. Now there is only a high-wage, high-skilled job. Every middle-class job today is being pulled up, out or down faster than ever. That is, it either requires more skill or can be done by more people around the world or is being buried — made obsolete — faster than ever. Which is why the goal of education today, argues Wagner, should not be to make every child “college ready” but “innovation ready” — ready to add value to whatever they do.

That is a tall task. I tracked Wagner down and asked him to elaborate. “Today,” he said via e-mail, “because knowledge is available on every Internet-connected device, what you know matters far less than what you can do with what you know. The capacity to innovate — the ability to solve problems creatively or bring new possibilities to life — and skills like critical thinking, communication and collaboration are far more important than academic knowledge. As one executive told me, ‘We can teach new hires the content, and we will have to because it continues to change, but we can’t teach them how to think — to ask the right questions — and to take initiative.’ ”

 My generation had it easy. We got to “find” a job. But, more than ever, our kids will have to “invent” a job. (Fortunately, in today’s world, that’s easier and cheaper than ever before.) Sure, the lucky ones will find their first job, but, given the pace of change today, even they will have to reinvent, re-engineer and reimagine that job much more often than their parents if they want to advance in it. If that’s true, I asked Wagner, what do young people need to know today?

“Every young person will continue to need basic knowledge, of course,” he said. “But they will need skills and motivation even more. Of these three education goals, motivation is the most critical. Young people who are intrinsically motivated — curious, persistent, and willing to take risks — will learn new knowledge and skills continuously. They will be able to find new opportunities or create their own — a disposition that will be increasingly important as many traditional careers disappear.”

So what should be the focus of education reform today?

“We teach and test things most students have no interest in and will never need, and facts that they can Google and will forget as soon as the test is over,” said Wagner. “Because of this, the longer kids are in school, the less motivated they become. Gallup’s recent survey showed student engagement going from 80 percent in fifth grade to 40 percent in high school. More than a century ago, we ‘reinvented’ the one-room schoolhouse and created factory schools for the industrial economy. Reimagining schools for the 21st-century must be our highest priority. We need to focus more on teaching the skill and will to learn and to make a difference and bring the three most powerful ingredients of intrinsic motivation into the classroom: play, passion and purpose.”

What does that mean for teachers and principals?

Teachers,” he said, “need to coach students to performance excellence, and principals must be instructional leaders who create the culture of collaboration required to innovate. But what gets tested is what gets taught, and so we need ‘Accountability 2.0.’ All students should have digital portfolios to show evidence of mastery of skills like critical thinking and communication, which they build up right through K-12 and postsecondary. Selective use of high-quality tests, like the College and Work Readiness Assessment, is important. Finally, teachers should be judged on evidence of improvement in students’ work through the year — instead of a score on a bubble test in May. We need lab schools where students earn a high school diploma by completing a series of skill-based ‘merit badges’ in things like entrepreneurship. And schools of education where all new teachers have ‘residencies’ with master teachers and performance standards — not content standards — must become the new normal throughout the system.”

Who is doing it right?

“Finland is one of the most innovative economies in the world,” he said, “and it is the only country where students leave high school ‘innovation-ready.’  They learn concepts and creativity more than facts, and have a choice of many electives — all with a shorter school day, little homework, and almost no testing. In the U.S., 500 K-12 schools affiliated with Hewlett Foundation’s Deeper Learning Initiative and a consortium of 100 school districts called EdLeader21 are developing new approaches to teaching 21st-century skills. There are also a growing number of ‘reinvented’ colleges like the Olin College of Engineering, the M.I.T. Media Lab and the ‘D-school’ at Stanford where students learn to innovate.”

 

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Credit Upgrade: What happens next

The recent credit rating upgrade given to the Philippines has been a landmark achievement by the current administration. Let us hope the upgrade is followed by a host of other government action needed to attract the huge investments for the ultimate benefit of creating more jobs needed in the country.

From BusinessWorld Philippines

By Raul V Fabella

April 03, 2013

Investment grade: boon or bane?

THE ANNALS of underdevelopment are filled with chapters on failures due to wasted opportunities, with hardly any account of failure due to scarcity of resources.

The stellar performers in development were indeed countries most initially challenged by dearth of resources, but whose people bore down to transform native adversities into opportunities. Such for example were Japan and South Korea bereft of fertile arable land and the Netherlands struggling mightily to wrest some land from the raging North Sea.

In stark contrast, counter-Reformation Spain wallowing in New World gold left its mercantile and industrial innards to rot while soaking up on wool imported from England, thereby sinking into 200 years of decay.

I hasten to point these historical episodes out because the Philippines is notable for wasting opportunities. Gunnar Myrdal of the then celebrated Asian Drama fame and an early Nobel Laureate, boldly predicted in the 1960s that the two countries in the region that will forge ahead of the rest were Burma and the Philippines, while South Korea will eat their dust.

The advantages of land resources and colonial pedigree were such that the call should be then obvious. It was not yet clear in the 1960s that Quezon’s rhetorical flourish would be fulfilled (“I prefer a Philippines run like hell by Filipinos to one run like heaven by Americans.”) Nor was it apparent that post-independence Burma will be hijacked by a military junta gripped by a poisonous brew of socialism and jingoism. Myrdal simply failed to account for the unlimited capacity of even well-meant politicians and juntas to fritter away initial advantages.

In the late 1970s, the Philippines faced the opportunity of almost unlimited foreign borrowing at negative real interest rate. The authorities borrowed to the hilt among others to finance the ill-fated 11 industrial projects,mostly tradable import substitutes (cement, petrochemicals, steel, copper, etc). These didn’t stand a chance between two grindstones: the anti-Filipino strong peso policy and the additional cost of up-front payolas.

Taiwan had at the same time a program of 10 major industrial projects, most of which were public infrastructure (highways, airports, etc) that paid for themselves and then some.

Paul Volcker’s war on inflation sent global interest rate soaring and doomed the Philippine’ major projects to sudden demise. The resulting debt overhang was the millstone that mocked the Cory Aquino economic recovery. Unable to show convincing economic dividends from restored democracy, it became hostage to the misguided ambitions of the Enrile-Honasan clique.

In the 1990s, at the height of excitement over the Ramos capital account liberalization and deregulation, foreign resources were once more knocking at the door.

But the tsunami was dominated by portfolio investment which cared little for good roads, the price ofpowerand stable regulatory environment. They instead cared for and helped along price bubbles in the stock and real estate markets.

The Philippines was then forex-indigent and any forex inflow, however laced with deadly mercury, was welcome. Exuberant but unthinking monetary authorities, obliged by maintaining a high interest rate and letting the peso appreciate — heart-warmers all for portfolio investors.

Foreign direct investment (FDI), by contrast, kept well clear, frightened by the strength of the peso, the grossly inferior regulatory and physical infrastructure.

To confound matters,the 1990 Supreme Court decision on the “Garcia versus DTI” case cynically wrested the location decision of a petrochemical project from investors who promptly packed their bags.

When business complained of high interest rate, the Bangko Sentral ng Pilipinas (BSP) advised them to borrow cheap dollars abroad which they did with vengeance. This poisoned borrowing eventually aborted the promising Ramos recovery.

More resources without firm safeguards against misuse are Trojan horses for disaster.

On March 27, 2013, Fitch Ratings elevated the Philippines to investment grade, a first in its history.

“A landmark,” crowed BSP. “A reclamation of our national pride,” chimed the President Aquino, adding: “The perennial laggard of Asia is taking off.” The chorus of paeans is deafening.

More dollar loans at cheaper price! But wait a second: Are we not now just coming to a consensus to borrow less from abroad?

A conspiracy theorist would saythat this is to dissuade us from that right path, borrowing more in-shore.

Some thoughtful commentators (see, among others, Habito, Philippine Daily Inquirer, 4/2/13, “An early Easter gift”; BusinessWorld, 4/1/13, “Peso, assets get mild tonic”) have defied the tide to say that the benefits of the Fitch move should not be exaggerated since (i) a second credit rating agency has to confer the same status for institutional investors to move our way, (ii) investors have anticipated and thus priced in the effect of the announcement, (iii) the Fitch announcement itself contained a caution: the Philippines’per capita income is $2,600 versus an average of $10,300 for countries in same investment grade, and (iv) the more beneficial FDI flow may not spike.

Put simply, it is not a bouquet of roses at the finish line; it is an encouraging “vamos” after the first of many laps.

This commentary is not about the boon that may not materialize; it is about the bane that can be visited on the economy by the investment grade.

While the investment grade status is a first and has strictly no formal parallel in Philippine history, at its barest it is no more than a signal for increased resource flow.

As such, its core dynamic has many parallels. The stories recounted above — the capital account liberalization in the ’90s and the petro-dollar borrowings in the ’70s — were all resource flow episodes. These first warmed the heart before clogging the arteries and causing cardiac arrest. To render the resource flow beneficial requires understanding of the its dynamic and taking hard resolute action.

The signs are not comforting.

That Malacañang counts the record levels reached by the Philippine Stock Exchange (PSE) as a vote of confidence betrays a want of understanding. Stock market bubbles in history have been mostly portents of doom. Wealth generated from asset price and financial bubbles is hogged by the rich. Job creation and inclusiveness are not among the fruits of bubbles. And their association with portfolio investments is well known.

It is no surprise that the PSE climb to peaks coincided with a portfolio investment spike to $3.8 billion in 2012 from $0.4 billion in 2011. Even more will now trek our way.

The resulting peso appreciation has hit the most buoyant job-creators, dollar earners all, and job creation is anemic.

How about FDI which creates jobs?

On March 22, 2013, the Supreme Court released an advisory regarding its decision to review again the constitutionality of the 1995 Philippine Mining Act. This involves the contract on the Tampakan gold and copper mine project in Mindanao, a $6-billion foreign investment which has passed all the national requirements but whose construction has been halted by a provincial ordinance proscribing open-pit mining.

Now, the contract itself is going to be reviewed after the project has spent hundreds of millions of dollars on set up facilities. This is plain vanilla regulatory hold-up. Forgotten is the lesson of the infamous 1990 “Garcia versus DTI” decision by the Supreme Court which effectively killed the petrochemical project and any hope for a FDI revival for that decade.

On top of the festering NAIA Terminal 3 compensation issue, the message to the world is clear: regulatory fragility and hold-up is still rife the Philippines! Which explains why FDI flow was a puny $1.5 billion in 2012.

Investment grade or not, FDIs would rather be elsewhere.

How about resolute action? The Department of Finance has, after much foot-dragging, announced the intent to increase further the proportion of its borrowing from the domestic market. The BSP leadership is aware of the dangers of Dutch Disease and instability from short-term flows but has deployed primarily macro-prudential measures to protect the banking sector.

Vitamins and health foods are good but if you face the Russian winter, you will need industrial-grade overcoats. The BSP may now need to transcend its traditional toolbox to effectively engage the oncoming new turbulence. It may need to drop the special deposit account-open market nexus and do what has always been obvious to Hong Kong monetary authorities: print money to buy up increased forex inflow. Hong Kong’s average inflation rate in the past three years has been 3.9% — about the same as the Philippines’ — while its exchange rate has remained between HK$7.76 and HK$7.78 to US$1.

If additional intake is mostly fat and bad cholesterol, the investment grade will bring the economy closer to economic thrombosis rather than catharsis.

So will investment grade be a bane?

Yes, unless we learn and act decisively on lessons of the capital account liberalization in the ’90s and the petrodollar borrowing in the ’70s.

The author, a National Scientist and a professor at the University of the Philippines School of Economics, is a member of BusinessWorld’s editorial and corporate boards.

Article location : http://www.bworldonline.com/content.php?section=TopStory&title=Investment grade: boon or bane?&id=68138

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