Monthly Archives: August 2014

8 basic points for growth according to the ADB

Let’s hope the current administration will focus on these 8 points in not only maintaining the growth achieved but getting inclusion to more members of the community on the benefits gained.


ADB: Inclusive growth, better infra needed

MANILA, Philippines – Better infrastructure, open trade and investment regimes, sound governance and inclusive growth are among eight basic points that countries in the Asia-Pacific can pursue for robust and sustained economic growth, according to the head of the Asian Development Bank (ADB).

By pursuing the eight-point development agenda, the Philippines can regain its status as one of Asia’s most prosperous economies, ADB president Takehiko Nakao told The Philippine STAR in an interview yesterday at the bank’s headquarters in Mandaluyong.

The other points in what Nakao described as “Going Back to Basics” are macroeconomic stability, investment in human capital, security and political stability and a “well-articulated” development strategy.

Nakao,  who was Japan’s vice minister of finance for international affairs before assuming the top ADB post in April last year, said he drew up the eight-point agenda after visiting the 17 developing countries that are members of the Manila-based bank.

He observed that in the 1960s, the Philippines was second only to Japan in economic development in the Asia-Pacific, a pioneer on many fronts, and “rich compared to neighboring countries.”

“I believe that the country – building on its recent progress – can go back to that top place again,” Nakao said.

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Today the Philippines is one of the region’s best economic performers, but many challenges remain and the country can do more, he said.

“I see the progress made in the last several years as leading to a ‘glass half full’ rather than ‘glass half empty’ situation,” Nakao declared.

In recent weeks, Nakao has met with Philippine officials, among them Bangko Sentral Governor Amando Tetangco, Finance Secretary Cesar Purisima, Socio-Economic Planning Secretary Arsenio Balisacan and Social Welfare Secretary Corazon Soliman to discuss how the ADB can support the country’s development.

“The Philippines is a nice country, we’re happy to be here and I’d like to see it develop,” Nakao told The STAR. “Although it is growing very fast, you still have a lot of poor people.”

In his meeting with Tetangco, Nakao lauded the policies that have led to fiscal stability and tempered inflation.

But Philippine investments in infrastructure constitute only two percent of GDP compared to about five percent in neighboring countries, Nakao observed. While the government has lined up 56 public-private partnership (PPP) projects in infrastructure, Nakao said the government can increase its own spending in this sector.

In education, the quality “can be enhanced,” he said, although the country has a 98 percent literacy rate. More investments are also needed in public health.

Nakao noted that the government is making an effort to improve the investment climate and promote exports, but there are areas that call for reforms, including the regulatory environment.

He said having 10 percent of the population working overseas, even if they are remitting billions in earnings annually, “is not an ideal situation.”

Nakao lauded the anti-corruption effort of the Aquino administration as he stressed the importance of sound governance in development. The peace initiative in Mindanao can also promote security, political stability and inclusive growth, he said.

In terms of development strategy, countries need a “vision of growth,” Nakao said – one that is shared by the people and would go beyond the term of any president.

“This is really the time to look at the potential for the Philippines,” he said.

Wanted Mini Hydro power developers

This was an article I saw a month ago about one of the poorest provinces in the Philippines seeking help to develop its hydro power resources. If there is anything I can do to help them in their needs it is to help spread the word. But if there are any foreign parties interested let me help one step more in assisting them to make this happen.

From the Philippine Star

Samar town seeks investors to develop hydropower potential

SAN JUAN DE BUAN, Samar, Philippines – The mayor of this far-flung, fourth-class municipality wants a number of the fast-flowing rivers in his territory inspected for their potential to generate clean and renewable energy.

Mayor Ananias Rebato said they want the Department of Energy or the Department of Science and Technology (DOST) to survey the municipality’s five major rivers to determine if these can be harnessed to generate hydropower.

Rebato said they are open to any hydropower exploration activities to be conducted by interested private power companies, local or foreign.

“We have five major rivers here, and several falls, which we believe could be harnessed to produce hydropower. We’re hoping that either the DOE or the DOST can help us explore this potential,” Rebato told The STAR.

Rebato identified the major rivers in the municipality as the Blanca, the Dolores, the Oras, the Olot and the Las Navas rivers.

Rebato said they are somewhat cut off from the trade and commerce lanes in Samar, especially Catbalogan and Calbayog cities due to rough roads going into their municipality which lies in the heart of Samar province. He pointed out, however, that exploration activities, and hopefully the resulting hydropower production can generate revenues to allow them to build roads.

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“Hopefully, we can attract investments into San Jose de Buan. We want to generate revenues so we can build roads and make it easy for our farmers to bring their produce to the markets of Catbalogan and Tacloban and even Cebu,” Rebato said.

San Jose de Buan is one of the fourth to sixth class municipalities in the country’s 10 poorest provinces covered by the Department of Social Welfare and Development’s extended Kapitbisig Laban sa Kahirapan-Comprehensive and Integrated Delivery of Social Services (Kalahi-CIDSS) program where communities are trained and then made to supervise various infrastructure projects funded by grants from foreign donor agencies like the World Bank, the Asian Development Bank, and others.

The municipality was able to undertake infrastructure projects worth P6.855 million in the first cycle of funds given under Kalahi-CIDSS that started in 2011. There was a second cycle of funds that enabled the municipality to undertake eight projects worth P3.208 million.

For the first cycle, there were six projects namely, two one-classroom elementary school building construction projects in two barangays, the construction of individual sanitary toilet facilities in two barangays, the construction of two gravity-fed water supply system in two barangays, and the construction of another one-classroom school building.


More job opportunities needed in the Philippines

With less than 2 years left in the current administration of President Aquino, many will try to identify what legacies it will leave behind that will capture the essence of its contribution to the country’s development. While many would think strong governance would be foremost in my mind as the one legacy it can be proud of, its long-term value will greatly diminish if the  next administration will not continue the Daang Matuwid motto. This is something beyond their control and only the voters can decide. The other legacy they could claim is the high economic growth achieved yet in the history of the country’s economic development. However, the benefits of this growth has hardly reached the common man particularly the many still in poverty. Even its claim it has achieved a demographic sweet spot in reference to the availability many young workers with no dependents sound hollow if there is little or no jobs available locally for this demographic. However, it still has the power to put in place an attractive economic environment that will create the needed jobs through the right kind of policies and programs to promote this. Hopefully, as the next administration comes around the fruits of creating more jobs and income generating opportunities will continue and encourage them not to make any changes in the policies and programs that created them.


From BusinessWorld Philippines


MANILA, Philippines – The government should work on increasing job opportunities in the country to take advantage of the growing labor force and pull down poverty incidence, the International Monetary Fund said.

“Favorable demographics are a missed opportunity if the economy cannot effectively absorb the growing working-age population,” the IMF said in a statement.

“Better domestic job opportunities would reduce poverty, thereby curtailing outward migration and the accompanying social hardships and sustained remittance inflows that can complicate macroeconomic management in the absence of compensating productivity gains,” the Fund said.

Government officials have been trumpeting the country’s entry into a “demographic sweet spot” by 2015, which is seen driving economic growth to new highs as domestic consumption further climbs and more investments flow in.

Latest data showed that the unemployment rate improved to seven percent in April this year, from 7.6 percent in the same period last year. This reflects 1.7 million additional employed persons in April.

Latest available data also showed the poverty incidence in the country fell to 24.9 percent in the first half of 2013 from 27.9 percent in the same period in 2012.

The economy grew by 7.2 percent last year, sustaining the 6.8-percent growth posted in 2012. The IMF said that the domestic economy remains strong and even equipped with financial sector and external buffers to shield it from shocks.

“The challenge is to deliver high-quality growth. Better realizing the Philippines’ potential for rapid, sustained and more inclusive growth calls for further reducing bottlenecks to investment and formal sector employment that may be discouraging broad-based business activities,” the IMF said.

“A more diversified production structure would strengthen resilience to economic shocks, which unduly impact the poor,” it added.

The economy grew by a lower-than-expected 5.7 percent in the first quarter but the government kept its 6.5-to 7.5-percent growth target for the full year.

But risks to the rosy prospects of the Philippine economy remain, the IMF cautioned.

“Abrupt exit from exceptionally loose monetary policies abroad, a sharp slowdown in China or other emerging markets, or a major geopolitical incident could impact global or regional trade and capital flows and adversely affect the Philippine economy,” the IMF said.

“On the domestic front, rapid credit growth or a disproportionate flow of resources to the property sector could boost short-term growth but heighten volatility thereafter, impacting over leveraged households and corporates,” it added.

Help needed for SMEs to survive ASEAN integration

The ASEAN economic integration is happening in 6 months time. Already aside from the Agricultural sector, one other sector identified to be vulnerable are the many SMEs operating in the country. And with a broad base covering a cross section of various economic sectors from retail to agriculture, service establishments to even manufacturing entities, the danger of their inability to survive may result in serious capital and job losses as well as serious business disruption for the economy. Let’s hope government act now to address what is needed. More importantly, the various SME groups and associations should start planning a roadmap to help address the various areas for support and assistance.


From BusinessWorld Philippines

August 06, 2014

Are our SMEs ready for ASEAN 2015?

MANY LOCAL CONSUMERS, investors, businesspeople, students and even academe remain unaware of the full impact of the Association of Southeast Asian Nations (ASEAN) full integration, which takes effect six months from now. The most vulnerable sector that is almost unaware of the impact of economic integration is the sector of the small and medium enterprises (SMEs).

Under the ASEAN economic integration, which has the tagline “One Vision, One Identity, One Community,” member nations will enjoy free movement of goods, services, investment, and skilled labor. This means that all trade, non-trade, technical, governmental barriers will be removed. Rules and regulations will be rationalized for good governance and transparency. The goal is for different industries in the region to gain from the enlarged market, greater market access, and growth in trade, investment, private sector, consumer welfare, human resources, and financial resources.

How can the government help SMEs become ready for this challenge? Can the government prevent anti-competitive practices by foreign businesses that have strong trans-border capabilities? Can it ensure a level playing field for local businesses? Does the government have trade restrictions to encourage the observance of ethical business practices to protect Filipino consumers and SMEs, at the same time sustaining the economic performance of the ASEAN region?

In the declaration on the ASEAN Economic Blueprint (AEC Blueprint), each member nation should abide by and implement the AEC by 2015. A nationwide competition policy and law must be developed and observed by 2015 to create a fair competition environment and to enhance regional economic performance.

Tasked with crafting and implementing the competition policy and law is the Office of Competition, which falls under the Department of Justice (DOJ). As early as June 2011, under Executive Order No. 45, the DOJ was designated the Competition Authority of the Philippines, which will formulate national competition frameworks and policies to ensure a level playing field for businesses, especially the micro, small and medium enterprises.

SMEs comprise 99.6% of all registered business in the Philippines and employ 70% of the workforce. They are suppliers, distributors and business partners of world-class corporations. SMEs are engaged in wholesale and retail trading, agriculture, construction, education, real estate, the operation of hotels and restaurants, and the manufacture of food, electronics, textiles, garments, and more.

Now is the time for SMEs to reassert their market position in preparation for ASEAN integration, which takes effect in six months. SMEs need to strengthen their resources and capabilities if they want to survive. Renewal of their sources of competitive advantages is not enough for them to face the region’s business giants. Newly empowered enterprises will enter the Philippine market, which may force smaller SMEs to shut down. Market domination will be the name of the game. New dominant groups that have never been seen in the country will emerge and may distort the business mapping dimensions. Mergers, acquisitions and joint ventures will be their primary agenda to sustain their economic performance.

However, SMEs will be powerless without government protection. It is imperative that SMEs remain the catalyst of economic growth. They are relevant and will continue to be relevant in creating growth as well as maintaining social stability for our developing country. Thus, they must be able to compete directly against the better-funded and highly capitalized foreign companies, whose liberalized capital inflow can threaten the capital structure of the SMEs. The government needs to seriously lay down workable plans and initiatives to provide the much-needed fiscal policy and resources for SMEs. Finally, there is a need for capacity-building, training, information dissemination, and easy access to capital that will enable SMEs to prepare themselves for a more competitive environment next year.

Without sound, efficient and sufficient government support when ASEAN economic integration takes effect, can SMEs survive? I doubt it.

Fred S. Cabuang teaches Strategic Management and Strategic Marketing at the Ramon V. Del Rosario College of Business of De La Salle University.

Article location : our SMEs ready for ASEAN 2015?&id=92256

ASEAN: Going strong at 47

A group being together for close to 50 years can only grow stronger over time. We look forward to strong ASEAN cooperation and economic integration based on shared values and mutual beneficial interest among the member nations. And hopefully develop a distinct Asian approach to doing things the ASEAN way.


From BusinessWorld Philippines

August 07, 2014

Happy birthday, ASEAN!

PEOPLE CELEBRATE birthdays by reminding themselves of the good things that have happened in their lives. So should institutions.

The Association of Southeast Asian Nations (ASEAN) is indeed fortunate that since Aug. 8, 1967, it has outgrown the birth pains of political uncertainties, survived the economic difficulties of a restructuring world, and is heading towards a more conscious social order for the peace, prosperity and welfare of its diverse peoples.

It is in the economic realm that ASEAN has much to celebrate about. The big-picture story is that after the 2008 global financial crisis, Southeast Asia remains very dynamic compared to the developed countries. As the seventh largest in the global economy today, it is projected to be the fourth by mid-21st century.

In the knowledge era, as the second largest Facebook-using region in the world today, it has much potential in transforming social media into productive forces even among the poorer communities.

Of course, it is far from being a single market and production base where all goods and services can move freely within the 10 member states — after all, it took longer for other groups to achieve the same outside political unions. But some skilled workers can now move more easily and ASEAN-qualified banks are being discussed in capitals today.

The member states can increase trade more effectively with each other as tariff rates have been reduced to zero; their openness to former colonial export-import partners is a reason why ASEAN’s intra-regional trade is around half of USA-Canada-Mexico trading within NAFTA, and European Union’s own. As a major contributor to the world’s supply chain in many industries, however, it has room for more indigenous globally branded products and companies.

The region is still a major agricultural powerhouse, serving markets far and near (especially the Dialogue Partners Australia, Canada, China, EU, India, Japan, Korea, New Zealand, Pakistan, Russia, USA). While touted as the Detroit of the region with its automotive industry prowess, Thailand is keeping to its promise of being the world’s kitchen: it is the number one world producer of pineapple, rubber, shrimp, processed chicken and canned tuna. Myanmar is the largest global producer of sesame seeds and sugar crops, while Vietnam is the world leader in production of cashew nuts and pepper commodities, the Philippines in abaca, and Indonesia in coconuts.

Even small countries like Lao PDR rank eighth largest in ramie production, and Cambodia 21st in fiber crops and 25th in cassava. Malaysia is the sixth largest producer of palm kernels and seventh in natural rubber. Thailand, Vietnam and Myanmar remain as major rice exporters in a region that houses the International Rice Research Institute (IRRI) which helped both India and China with their famine situations as local scientists developed their local varieties from the science and technology of IRRI.

Blessed with natural resources, ASEAN is also home to vast fields that make it a major liquefied natural gas producer and exporter — Malaysia is the world’s No. 2, while Brunei, rated as fifth richest economy in the world by Forbes magazine, is ninth in LNG. Indonesia has the world’s largest geothermal reserves, and the Philippines is among the key players in this energy area. The Coral Triangle, an area embracing the Philippines, Malaysia, Indonesia and other neighboring countries, is a vast fisheries and marine resource base for the world; the Verde Island Passage between Batangas and Mindoro provinces in the Philippines has been discovered to be the center of global marine biodiversity, a boon to the pharmaceutical industry.

Even more blessed with resilient people that survive challenges of their own kind and mother nature, ASEAN member states look at market forces to nurture sunrise industries.

The Philippines is among the top outsourcing destination of the world, thanks to its much touted English versatility and less noticed trainability that give it number one exporter status in seafaring and nursing. Singapore, the second most competitive nation in the planet, is focusing on biotechnology, among others to support its 21st century vision; Malaysia and Thailand are also quite engaged in research and development networks in the health field, as the Philippines attempts to advance those in neglected tropical diseases through ASEAN, and fears that the next pandemic will originate from this part of the mobile world.

Tourism professionals are being trained around the region to keep up with a key driver in many local economies, e.g., eco-tourism in Lao PDR. Cross-border education is growing although not to the extent that ERASMUS impacts in Europe.

ASEAN has no peacekeeping force and no concrete mechanism for enforcing human rights, but it has kept the peace in the region. Global attention on regional conflicts is more directed at other places today. The ASEAN Secretariat is thankfully around a 10th of that of the European Commission; it is being reinvented to give more attention to the private sector whose partnerships with governments is making possible new sources of dynamism.

A post-2015 scenario is being discussed in many countries in ASEAN today as crafted by the Economic Research Institute for ASEAN and Northeast Asia (ERIA). As the Philippines anticipates the 50th celebration of ASEAN when it hosts the Summit in 2017, we should raise our glasses to wish it well and the region an even better future.

Prof. Federico M. Macaranas is ASEAN 2015 Project Leader, Asian Institute of Management

Article location : birthday, ASEAN!&id=92361

Power or the lack of it continues in the Philippines

After the much success of answering the power crisis in the 1990s under the  previous Ramos Administration, we again are facing a similar situation once again.  What to do now? Even with the proposed solutions identified, the needed action of government appears to take forever to happen. I guess we just have to be like the British during the period of constant bombing by the Germans in World War II, to have the attitude to BE CALM AND CARRY ON.


From BusinessWorld Philippines

August 07, 2014

Power woes to plague next administration

THE PHILIPPINE Chamber of Commerce and Industry (PCCI) expects the currently worsening power shortage to persist beyond 2016 to become a key challenge for the next administration, the country’s biggest business organization said in a statement yesterday.

“The serious concern about power supply shortfall in Luzon in 2015-2016, a similar potential shortfall in the Visayas and the ongoing shortage in Mindanao is definitely a deafening call for action — a deliberate one that does not need to raise the panic button [sic] among the public,” PCCI said in its statement.
A check with the National Grid Corporation of the Philippines Web site yesterday showed generally thin reserves nationwide: 12 megawatts (MW) in Mindanao as system capacity of 1,337 MW barely covered estimated system peak of 1,325 MW; 89 MW in the Visayas with 1,626 MW in capacity against 1,537 MW in peak demand; as well as 1,682 MW in Luzon which had an estimated 9,113-MW capacity against a 7,431-MW system peak.

PCCI said that there are two critical periods the country faces in this issue, namely: 2015-2016 and the post-2016 period.

PCCI said the situation in the next two years can be managed without the need to declare a state of national emergency.

“The first (period) has to be confronted with basic stop-gap or band-aid measures,” the statement read, adding that “[t]here is no need to declare a national emergency” and “any steps taken to cure, to bridge or aid the gap would be acceptable to all.”

“The second (period) is different because it must be addressed by way of a well laid-out plan that is shared with all stakeholders and which government could smoothly and competently implement through the grant of emergency powers to the President, if the plan would warrant the declaration of a state of emergency,” the business group said.

“Without such a well-laid plan behind it, declaring a state of emergency would be dangerous and could eventually be counter-productive as we have experienced before.”

PCCI said no one should be surprised with the current situation since “over the last four to five years, the power supply-and-demand situation has been extensively presented and discussed in several consumer, business and government fora…”

The group noted that the private sector has proposed various ways to lure investments to boost generation capacity, including pooling demand of distribution utilities, opening the generation market to competitive bidding as well as streamlining the process of securing permits.

“The National Government should begin to earnestly consider these proposals and develop them into a road map consistent with the goals of adequate, reliable power supply and competitive power rates,” the statement read, ending with a call for “the exercise of strong and reasonable political leadership and will.”

PCCI also reiterated that there is no need to amend Republic Act No. 9136 — or the Electric Power Industry Reform Act of 2001 (EPIRA) — arguing that doing so would only “create unnecessary restlessness and uncertainties and slow down the present market and investment momentum.”

“If EPIRA is sent back to Congress for review, the uncertainty it will introduce into the regulatory regime of the power industry will lead to a potentially chaotic system, and worryingly put our future needs at risk at a time when our supply of power is marginal,” several business groups had said in a joint statement last May, as they reiterated the need to maintain “known” and “stable” investment rules. — Claire-Ann Marie C. Feliciano

Article location : woes to plague next administration&id=92373



One of the few good men

I had the honour of meeting Mr Endriga two years ago when working for a client, an Australian credit bureau seeking to expand in the Philippines. At that time, he was the President and CEO of the Credit Information Corporation (CIC), the credit bureau created by the CISA of 2008. During that period I found a man with a sense of mission in laying the ground work for the huge task of setting up a national credit bureau. Despite all the challenges faced, he took all things in stride. Above all, he did his job with a strong sense of governance without any signs of favour or compromise. I recently approached him to help me in a new business venture by being one of my business advisers for which I am grateful he has accepted. I am confident there is much we can still learn from the wealth of his business experience, skills and knowledge as well as his strong values for good governance and service to the community.


From BusinessWorld Philippines

August 05, 2014

Bal Endriga, hometown hero

LIKE HIS REVERED boss Washington Sycip, Baltazar Endriga firmly believes that human development is the most important thing in countryside development. Largely self-made, Bal has built upon the work begun by his father who founded the Libagon Academy, their hometown’s first school to offer high school education. Upon his retirement as managing director of Andersen Consulting, formerly the computer consulting arm of the SGV Group, Bal Endriga devoted much of his energy and personal funds to enhance human capital in his hometown of Libagon, Southern Leyte. His siblings and cousins have contributed to the family commitment to improve life for the 15,000 people in this 5th-class town.

His father Felix Baltazar Endriga had left Libagon as a teenager after having spent four years in Grade 4, since that was the highest level in the local school system. He stowed away on a boat to become a street sweeper in Cebu City. From there he managed to go to Manila where he got himself an education doing odd jobs, including working as a houseboy for a former Thomasite educator who agreed to let him go to night school. When he had completed his college education, the elder Endriga returned home and established, with the help of the Bishop of Southern Leyte, the Libagon Academy, a private Catholic school which offered a complete high school. Felix Baltazar Endriga served as principal of Libagon Academy for the rest of his active life.

Bal and his family have taken over the school. His cousin Victor donated two new school buildings. Bal and his siblings provide 80 scholarships in the school, of which he is now the president and principal. Because his energy level seems boundless despite two heart valve replacements in the 1990s, he attends to this hometown work while running an accounting firm with his partners in Manila. Simultaneously, he serves as the president of Meridian College of Business & the Arts in McKinley Hill, Taguig. He makes it a point to travel to Libagon once or twice a month to attend to his commitment to Libagon Academy.

In addition, to generate employment, Bal Endriga has also established a resort hotel in his hometown. The construction of the resort hotel employed up to 150 persons, by making much of it manual work, including the transport of sand and gravel. To this day, 30 employees tend to the cultivation and maintenance of the gardens, the swimming pool, the Jacuzzi, the restaurant café, and the air-conditioned hotel guest rooms complete with television and wifi. Visiting overseas workers and their friends now have a comfortable place to stay. Dorm-style facilities offer lower-cost options for seminars. Bal thinks that the exposure to urban amenities and modern facilities is good for the people of Libagon. He also makes sure they are environmentally responsible for the facilities and surroundings of the resort. He has brought in trainers in hotel and restaurant management to upgrade the skills and service orientations of their hotel employees. Most of the workers are graduates of the Libagon Academy.

The Endrigas seem to excel in their chosen professions. His brother Jose became vice-president of the University of the Philippines. His cousin Victor is treasurer of Quezon City, which is now the richest local government unit in the country. Now his niece Tita Endriga Caluya is the national president of the Philippine Institute of Certified Public Accountants (PICPA).

After working his way through college and landing among the top ten in the CPA exams, Bal applied for a scholarship from the SC Johnson and Co., and went for an MBA from no less than the Harvard Business School. Since his SC Johnson grant was for one year, he got a student loan for the second year and worked in New York as a systems analyst for 2 years to pay for his student loan.

In the 1970s, information technology had entered the mainstream. Then SGV Chairman Roberto V. Ongpin offered him a job at SGV where he was put in charge of bringing computer systems into their accounting and auditing services. He is also responsible for the establishment of IACT, the information technology training arm of the SGV Group.

When he retired from the SGV Group, and later from spun-off Andersen Consulting, Bal became president of the Cultural Center of the Philippines. During this time, he arranged for a performance of the musical Kabayao couple in Libagon, which for the first time enabled the Libagon folk to enjoy classical music right there in their hometown, in their own hotel pavilion. He also asked Andrea Veneracion of the Madrigal Singers to train a local choral group and Ramon Obusan to train the local folk dance troupe. These led to many special events which were held in the Libagon resort-hotel. Bal Endriga later set up the computerization of the central depository for stock market transactions which has become the Philippine Dealing System. He also served as president of the University of the East. Like his father before him, Bal Endriga is a committed educator.

Valedictorians and salutatorians of Libagon Academy can go on to college in Manila with tuition and living scholarships provided by Bal Endriga until their college graduation. They are offered housing in the old Endriga home in Sampaloc and provided with tuition and transportation money. Some of these college graduates have done quite well. Two have become CPAs, one is treasurer of Cagayan de Oro City, another is chief accountant of a government-owned or -controlled corporation, and still another is a computer professional at Hewlett Packard.

Why does he do these things? Bal says he considers it a moral obligation. Inclusive growth, he says is not just the job of the government. Given the huge gap between the rich and the poor in our country, those who have been blessed with good fortune, because of a good education, must do their share. Bal Endriga says people who have made good in the big city should invest in sustainable development in their hometowns. Human capital, he says, is the best investment they can make. God bless Bal Endriga and his family. May their tribe increase!

Teresa S. Abesamis is a former professor at the Asian Institute of Management and an independent development management consultant.

Article location : Endriga, hometown hero&id=92187

Opportunities and Challenges for a future Philippines

Here is a reality check assessment from the Asian Development Bank on the country at the time when the current administration has two years left to make the best of what the country could be.


From BusinessWorld Philippines

August 04, 2014

ADB tags long-term development challenges for the Philippines

CONTINUING POVERTY, a small manufacturing sector, and low investments are problems the Philippines must solve in order to achieve sustained growth, the Asian Development Bank (ADB) said.

In its new publication ASEAN 2030: Towards a Borderless Economic Community, the bank looked at long-term development issues for members of the Association of Southeast Asian Nations (ASEAN). The region is expected to merge into one economic community in 2015.

“The Philippine economy is characterized by a relatively small, manufacturing sector, low investment, and the presence of several imbalances,” the ADB said.

“Uneven productivity across sectors, huge output gaps between large corporations and SMEs (small and medium enterprises) and unbalanced geographical distribution of income all need to be corrected to achieve sustained growth in the long run.”

The lender noted that the country’s high poverty incidence and the concentration of wealth in the hands of a select few pose challenges to the effective implementation of inclusive growth strategies.

“Prospects for environmental sustainability have worsened in recent years due to progressive deforestation and increasing urban pollution,” it said.

The ADB added, however, that the country can count on its wealth of natural resources and labor force to spur its growth. “On the other hand, the country can not only count on the large availability of natural resources, but also on a well-educated labor force, English language proficiency, and a vibrant service sector.”

The country can also count on its “encouraging” macroeconomic stability record in the recent years, it said.

In order to improve the country’s investment climate, the ADB recommends that the country streamline regulations and reduce the time needed for opening and closing businesses.

Strengthening the rule of law and police force modernization would also would also help, it added.

Local firms must also be encouraged to shift to higher value-added products in order to strengthen the industrial base. To strengthen the economic structure, the ADB recommends that a comprehensive and integrated infrastructure program that emphasizes cooperation between national and local governments be introduced. — BCPB

Article location : tags long term development challenges for the Philippines&id=92118

Now is the time we need a national credit bureau

Amen. 2008 is 6 years ago when the law was first created to establish a national credit bureau for Philippine residents. It may take another year at least before it becomes operational. Hopefully, having one in operation will level the playing field in allowing people with good credit records the opportunity to access credit particularly small business owners who do not have the kind of collateral most local lenders ask before being given any credit for their business needs. Long-term, the presence of a credit bureau will open opportunities for new ways for lending that will change the pawnshop mentality to one of (credit) character and capacity to pay of a borrower.


From Businessworld Philippines

August 03, 2014

Why we need a credit information system, and why we need it now

A 2007 STUDY by the Asian Development Bank (ADB) on binding constraints in the Philippines identified the lack of financing as a key stumbling block to growth and development. This was at a time when local banks were holding a lot of excess cash, and chasing after a few large corporates which were thus in a position to demand lower-than-treasury-yield interest rates.

The constraint clearly applied to micro-enterprises and small and medium enterprises (SMEs). Micro-enterprises refer to those with assets under P3 million, small enterprises those with P3 million to P15 million, and medium enterprises up to P100 million. SMEs alone make up 98% of firms in the country. It is often harder to lend to such enterprises than big corporations — they do not have audited financial statements, and owners do not put a bar between their business and their household wallets.

SMEs’ lack of access to financing is of course not new. Together with the agricultural sector, they have been the target of failed government-directed programs since the 1970s.

In fact, even as the Bangko Sentral has been barred from these developmental activities, laws mandating private banks to lend to agri-agra and SMEs continue to be in effect. In many cases, banks had found themselves better off accepting the penalties of non-compliance than to risk capital loss by lending to these sectors. Why?

At the core of the problem is a well-known market failure in economies, information asymmetry: banks and other financiers do not know as well as the borrower the latter’s track record in loan repayment, and would thus have a hard time telling apart good borrowers from bad ones.

In the absence of reliable information to help banks make the right credit decision, SMEs and most especially micro enterprises applying for loans would face a higher probability of getting denied. This is true as well for individuals.

The flip side is that the pool of borrowers is smaller, resulting in high opportunity costs not just for the banks and other credit providers, but most crucially for the nation and public at large.

Although the problem is a well-known one, it was only in 2008 that a law was passed creating the Credit Information Corporation (CIC). The CIC is supposed to aggregate individuals’ and firms’ credit information in a database to help would-be borrowers prove good credit record (thus improving their chances of getting a loan) and financiers make good credit judgements (thus reducing default risk).

Work on this has been gaining traction in the past year with the appointment of a dynamic and charismatic IT entrepreneur, Jaime Garchitorena, as President. He has the solid support of his entire board, led by its ex-officio chairman, Securities and Exchange Commission Chair Teresa Herbosa.

Under Garchitorena’s leadership, key milestones were achieved: First, a meeting of the minds between the CIC and the first batch of data providers, primarily the banks. In addition to the banks, the CIC is also aiming to fill its database with payment records of utility companies such as Meralco, the water concessionaires and the telecoms, as well as those of pension agencies, cooperatives and micro-finance institutions.

Second, the signing of contract between the CIC and the CRIF, a leading international credit bureau services technology provider, after a thorough and transparent competitive procurement process supported by the International Finance Corporation. The target is to be able to offer CIC’s services to the public toward the end of next year even as it continually expands data sources to enrich its database.

A necessary activity to ensure public acceptance and wide usage of the credit information system (CIS), which the CIC law also mandates, is a continuing awareness campaign that educates the public about the benefits of the CIS, the do’s and dont’s of keeping one’s credit history clean, conditions for accessing credit records, and increasing financial literacy in general.

The activities of the CIC are fully supported by the government in light of the benefits generated by a functional CIC to the economy and financial system. In addition to the Bangko Sentral and the SEC, Finance Secretary Cesar Purisima and Trade and Industry Secretary Gregory Domingo have been keen for the Philippines to join soonest the rest of the original ASEAN countries with a functioning credit information system. This is one of the factors in international competitive surveys — including the IFC’s Ease of Doing Business.

My own small involvement is as a member of the USAID-funded COMPETE project that is assisting the CIC in bringing global best practice knowledge in the design and marketing of the CIS as well as garnering broad-based support from local financial institutions, industry organizations, and the other government and non-government organizations.

International experience with credit information systems (most recently in Japan, Malaysia, Taiwan) shows that the availability of reliable information helps reduce firms’ and individuals’ financial constraints, increases their access to credit, lowers banks’ loan default rates and fosters long-term responsible borrower behavior. The CIS is clearly a win-win solution to a critical binding constraint to our country’s inclusive growth aspirations. Simply put, the CIC will help improve our people’s lives.

Romeo Bernardo was finance undersecretary during the Cory Aquino and Ramos administrations, and board director of Institute of Development and Econometric Analysis Inc.

Article location : we need a credit information system, and why we need it now&id=92018

A good law with a less than good rules

Even before becoming into law, the opportunity of having a retirement savings account which you can directly manage gives them the same benefit of a super account which most Australians enjoy. Still, despite this good law being available for the benefit of Filipinos to use, the implementing rules and regulations has created certain issues that need to be address to make it really beneficial for people to prepare for their retirement needs.

Hopefully, if the issues raised have been addressed, there would be a groundswell of demand for it particularly for the boomer generation (and maybe even the X generation) coming into retirement now and in the immediate future.


From BusinessWorld Philippines

July 30, 2014

Addressing small investors’ tax concerns under PERA law

SAVING for retirement takes a lot of discipline.
It entails regularly setting aside a portion of your income, and having enough self-control not to touch your savings or investment until you reach the age of retirement.
This is not easy to do as retirement planning often takes a backseat to immediate needs and wants, especially for young people still building careers.

Retirement, however, is something one must plan for if one does not enjoy the prospect of having to work later in life just to survive.

On 1 January 2009, Republic Act No. 9505, otherwise known as the Personal Equity and Retirement Account (PERA) Act of 2008 became effective, giving Filipinos a helpful and accessible tool for retirement planning.

Under the law, any person with the capacity to contract and who possesses a tax identification number (TIN) may open a PERA and become a contributor.

Unlike retirement benefits under the Social Security System, the opening of a PERA is voluntary, with the contributor given the opportunity to make a decision as to where his money will be invested.

A contributor may open a PERA through banks, insurance companies and other similar financial institutions which have been duly qualified and accredited to act as administrators.

As an incentive, the law gives contributors a tax credit equivalent to 5% of their total PERA contribution.

Income earned on investments and reinvestments and distributions of the PERA upon the retirement or death of the contributor are likewise exempt from tax.

The law likewise provides for a non-assignability provision in that PERA assets cannot be transferred, pledged, attached, garnished, seized nor levied, and are not considered assets of the contributor for purposes of insolvency.

Since PERAs are meant for retirement, generally, a PERA can be withdrawn only when the contributor reaches the age of 55 and only after he has made contributions to his account for at least five years.

Early withdrawals are subject to a penalty which shall not be less than the tax incentives enjoyed by the contributor.

On 27 October 2011, the Bureau of Internal Revenue (BIR) issued Revenue Regulations (RR) No. 17-2011 providing for rules on the administration of the tax aspects of the PERA law.

Certain provisions of the RR, however, appear to need further clarification and even appear to be inconsistent with the law and its Implementing Rules and Regulations (IRR).

One such provision is on the maximum annual contribution. The law provides that a contributor may make an annual aggregate maximum contribution of P100,000 to his PERA (P200,000 in the case of an overseas Filipino).

A contributor may contribute more than the maximum amount; however, the excess shall not be entitled to the 5% tax credit and tax exemption on the investment income.

RR 17-2011, however, does not give the contributor the option to make additional contributions beyond the prescribed maximum annual contribution.

The regulations specifically prohibit an administrator from accepting PERA contributions in excess of the maximum amount; but such excess amounts may be accepted as other savings or investment income.

The regulations further provide that such additional contributions shall not be entitled to any benefit under the PERA law.

As discussed above, aside from the tax incentives, the law also provides protection by way of the non-assignability of PERA assets, which thus preserves them for the contributor’s retirement.

While contributions in excess of the maximum annual amount no longer enjoy tax benefits, a contributor would have been able to claim the benefits of non-assignability with respect to such excess under the law and its IRR.

The foregoing provision thus effectively reduced the benefits provided under the PERA law and its IRR.

Further clarification is likewise needed with respect to the 5% tax credit.

Under the PERA law and RR 17-2011, no refund can be claimed with respect to this tax credit.

However, no clarification has been made as to whether or not the unused PERA tax credit can be forwarded to succeeding years.

In relation to the tax exemption provided with respect to income earned from investments and reinvestments of the maximum allowable contribution, RR 17-2011 exempted PERA income from regular income tax; final withholding tax on interest income from bank deposits and deposit substitutes, etc.; capital gains tax on the sale, exchange, retirement or maturity of bonds or certificates of indebtedness; 10% tax on cash and/or property dividends and capital gains tax on the sale or disposition of shares of stock in a domestic corporation.

However, non-income taxes on the investment income will continue to be imposed.

One such tax is the stock transaction tax (STT) imposed on the sale or other disposition of listed shares equivalent to one-half of 1% of the gross selling price of the shares.

While the STT is classified as a percentage tax and not an income tax under the Tax Code, its exclusion from the PERA tax exemption provision results to a PERA contributor suffering tax on (presumed) income that may be earned by him from his investment in listed equities.

The early withdrawal penalties are also worth noting in relation to the STT. As earlier mentioned, a contributor who makes an early withdrawal of PERA is required to pay a penalty amounting to not less than the tax incentives he enjoyed.

Under RR 17-2011, among the penalties a contributor is required to pay is the STT, even though no exemption from said tax is granted to a PERA contributor.

Given the foregoing, a PERA that includes listed shares of stock as part of its assets may thus be subject to the payment of the STT twice — first, when such listed equities are disposed and second, as a penalty in the event of early withdrawal.

Hence, it would appear that RR 17-2011 puts investments in listed stocks at a disadvantage over other financial instruments as investment products for PERA.

In fact, investment in the shares of stock of an unlisted corporation — a highly unusual investment option for individuals — appears to be given preference over listed equities, since income derived from the disposition of such shares would be exempt from capital gains tax.

This would appear to be contrary to the intention of the law which provides that a PERA investment product must be, among others, readily marketable.

In this regard, it is also worth noting that shares of stock or other securities listed and traded in the stock exchange are among those specifically provided in the law and its IRR as qualified or eligible PERA investment products.

The provisions of RR 17-2011 on the treatment of the STT thus place at a disadvantage those contributors who wish to invest in more potentially more lucrative instruments.

The BIR still needs to issue further guidelines to address some of the administrative aspects of the PERA tax provisions. Hopefully, these guidelines will address the issues discussed above.

Despite these issues, however, opening a PERA should still be worth pursuing as it provides both the incentive as well as the discipline needed to save up for retirement.

Maria Celsa Corina Kilayko is an assistant manager at the Tax Services Department of Isla Lipana & Co., the Philippine member firm of the PwC network.

Article location : small investors’ tax concerns under PERA law&id=91838


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