Tuesday, January 31, 2006

RP economy in 2006: promises and pitfalls

The 6.1 percent GDP growth rate in the fourth quarter that lifted the Philippine economy to a 5.1 percent for entire 2005 seems to have given the idea that the Philippine economy is on the mend. I also hoped so. The best way to look at it, however, is by discerning the economy’s promises as well as its pitfalls.

Let’s figure out the promises for 2006. First—it seems that the farms’ recovery is really on the way given favorable weather. In the last several years, agriculture and fisheries—assuming good weather—has shown to be capable of growing within the 4-6 percent range despite problems related rural infrastructure. Over the years, agricultural and fisheries exports have diversified into new products like mango, tuna and other marine products, seaweeds, and asparagus besides the usual stuff like banana, pineapples, and coconut products. Lower industrial tariffs has enabled the agribusiness sector to have greater access to inputs, biomedics, seeds and planting materials, and packaging materials.

Second—Mining has rebounded and one could assume that this trend will continue given the rising prices of precious metals in the world market. Third—remittances from overseas Filipino workers may continue to fuel high domestic consumption and high and high growth in services particularly telecommunications, banking, and business services. Fourth—it seems that the global economy, according to experts from the World Economic Forum, will remain buoyant throughout 2006, a continuation of the “goldilocks economy” that prevailed in 2005. Because of this, exporters of electronics are already forecasting a 10 percent growth rate in 2006.

What are the pitfalls? First—it seems that personal consumption expenditure (PCE) is showing some danger signs. Remember that PCE accounts for more than 70 percent of the economy. The moment the people starts holding on tight to their wallets, the economy will choke. The signs of people scrimping on their basic necessities are unmistakable as shown by continuing decline in expenditures of beverages; tobacco; fuel, light, and water; household furnishings, and miscellaneous expenditures. It means people are now limiting their spending to the bare essentials like food, clothes, and transportation. Should inflation rates shoot up further owing to the continuing volatility of oil prices and the rise of valued tax rates from 10 to 12 percent, people will probably scrimp some more by cutting on purchases of food and clothes. That will depress personal consumption and slow down the economy.

Second—the expected rebound in construction activities is not a slam dunk case. Not yet anyway. The proliferation of call centers and other outsourcing companies has started to shake up the property markets. Nevertheless, that trend may not translate into more construction activities because of two factors. First, the difficulties in getting skilled workers may slow down the growth of outsourcing business. Second, real estate developers do not expect big-ticket projects in the next two years because of the footloose nature of the business process outsourcing industry. They are here today but could easily be gone tomorrow because of the ease of entry and exit in this business. The trend lately has been towards “build-to-suit” projects where real estate companies would only construct new buildings upon demand and according to the client’s specifications. Most new buildings for outsourcing companies these days are “demountable” types that could be easily constructed and dismantled once the occupants are gone. That trend doesn’t seem to indicate long-term commitments among investors. Also, there seems to be no clear trend towards substantial demand for residential condominiums yet as “experts” (e.g. Leechiu and Associates) continue to warn about a possible “condo glut.”

Third—the project higher public construction is premised on higher government revenue collection arising from the higher VAT rates. VAT, however, is a tax on consumption and coupled with high energy prices, people may yet scrimp (e.g. by buying less, eating out less) such that the government wouldn’t be able to collect substantial amounts.

Fourth—the flipside of the global goldilocks economy is the continuing tightness of the global oil supply. What did those economists from the World Economic Forum told us? That China, Japan, and Germany are going to have it so good economically. That would only means higher consumption of oil, thus making the global crude oil prices even more vulnerable to political shocks.

Which of these scenarios will prevail? My heart necessarily goes for the bright sky scenario. After all it will be ordinary mortals like us who will lose jobs when the economy turns bad. But what do government figures say? Let’s quote from the National Statistical Coordination Board initial report on the leading economic indicators: “After posting consecutive increases during the last two quarters [third and fourth quarters of 2005], the composite leading indicator [a sort of early warning device on the trajectory of the Philippine economy] decreased to 0.018 in the first quarter of 2006 from 0.115 in the fourth quarter of 2005.” That’s not a comforting thought. But you see, statistics and projections by economists are oftentimes wrong. (For a more personal, visceral take on the world, please visit Photographs and Memories).

Monday, January 30, 2006

The Philippines in 2005: A "Manny Pacquiao" economy?

Dennis Arroyo, head of National Economic and Development Authority (Neda) policy and planning division, calls it a “Manny Pacquiao economy.” The year 2005 was when the Philippine economy has to overcome all the hurdles imaginable—political uncertainty brought about by the continuing questions on the President Arroyo’s legitimacy, sluggish export, fiscal problems, deteriorating infrastructure, high energy prices, and threats of military coup. Yet the economy’s seems to have acquitted itself quietly well with a relatively decent 5.1 percent, courtesy of a 6.1 percent spurt in economic activity in the fourth quarter.

But we would rather call it the “people’s economy” essentially because the sources of growth largely came from sectors whose dynamics are largely independent of government’s actions.

As usual, personal consumption expenditure (PCE), accounting for 73 percent of the country’s gross domestic product, carried the day for the economy. It’s apparent that people are buying more food products, clothes, and cellular phones despite the high inflation rates. There are indications that people have actually started to scrimp on their purchases of certain items like beverages; tobacco; fuel, light and water; and household furnishings but the overall figure is still significant enough to lift the economy, particularly the manufacturing sector which grew by 5.8 percent in last quarter and 5.6 percent for the entire 2005.

Where did the people get the money?

As expected, overseas Filipinos sent in a lot of money as shown by the 20 percent fourth quarter rise in the “net factor income from abroad” (NFIA), comprising compensation and property incomes. For the whole year NFIA jumped 13.8 percent (amounting to $10.85 billion), owing to the double-digit growth in dollar remittances as more workers (i.e., about a million) sought foreign employment.

In the fourth quarter, the farms—specifically rice, banana, and fisheries—bounced back thus providing some incremental buying power in the countryside. Also the expansion of economic activities in mining sector (i.e., 9.3 percent growth rate in 2005) and manufacturing (5.6 percent growth rate) may also have led to rising payrolls. Of course, higher remittances coupled with a recovering farm and industry sectors has created a lot of economic activities and revenues for the services sector particularly in banking, telecommunications, wholesale and retail, real estate, business services and import-export trade.

In fact, the sources of growth were pretty broad-based with each major sector contributing their shares to the growth of the economy. The only sector that has failed to pitch is the government. Owing to the government’s continuing failure to collect more taxes, public expenditure has been curtailed, reason why government consumption has been in the negative in the last two quarters of the year. That means that for most of 2005, there have been no substantial investments in vital economic and social infrastructure. In effect, in 2005, the country’s entrepreneurs (e.g., farmers, manufacturers, exporters, traders) were practically on their own without any assistance from the state sector. For much of the year, the government was pretty much preoccupied with controlling spending in an effort to gain a better sovereign rating.

The question now is if the economy rallied in the last quarter of 2005, will that trend carry through the rest of 2006?

Dennis Arroyo says yes, stressing Neda’s earlier target of 5.7 percent to 6.3 percent growth rate. He said that the Philippine economy grew by 5.1 percent in 2005 despite hurdles like high energy prices, tumultuous politics, and the El Niño phenomenon that ravaged the farm sector. The economy, he said, should have grown by 5.7 percent if there was no El Niño. This year, he said, El Niño would no longer be an issue hence it would be possible to achieve the 5.7-6.3 GDP growth rate target.

He admits that high oil prices and the higher EVAT rate may dampen domestic demand but these negative factors maybe counteracted by the continuing rise in remittances, the recovery of electronic exports, a boom in mining activities, the rebound in the farm sector, and the expansion in as OFW families start spending their money for home renovation and acquisition of new houses and lots.

Certainly there are reasons to share Neda’s hope. However, there should be greater scope for caution. It seems to me that Neda has failed to consider the following local and international events in their forecasting exercise.

One—how the world oil prices will play up in the next few months is uncertain. It seems that Middle East politics has suddenly grown murkier with the landslide victory of Hamas in the recent Palestinian election, the continuing impasse over Iran’s nuclear program, and the continuing bloodletting in Iraq. Should these events send oil prices soaring again, local inflation rate could choke the economy.

Two—fixed capital formation, due largely to declining spending on durable equipment has been in the negative in the last four quarters. This trend signifies a wait-and-see attitude among the country’s factory managers, an indicator of lack of investor confidence. These figures simply validate the latest export figures showing that purchases of capital equipment are down. It seems like businesses are waiting for politics to settle down before they decide to expand operations.

Three—government’s expectations on the supposed rebound in construction maybe misplaced. Neda says a significant part of the money that will be used to prime the economy will come from the higher EVAT rate. What if government collections, owing to corruption at the BIR, would not rise? (For a personal take on the world, please visit Photographs and Memories).

Nicanor Faeldon: Rebellion in a woman's clothes

For all we know, Marine Captain Nicanor Faeldon’s escape was really just about a young man’s affair of the heart and not the business of the rebellion. It’s so stupid of him to dress like a woman and go around in the metropolis cavorting with a woman, a military one at that. He should have known better. From the very start, government intelligence knew everything about his relationship with that lawyer-military girl. He should have known that the first thing government troops would do is to tail her. They did and—voila!—Faeldon recaptured. I wonder how he looked in a woman’s clothes.

If he really valued his freedom, his “cause,” and his blog, he should just have maintained reasonable distance from her. You know what Mao Zedong said? Revolution is no picnic. Certainly it’s not romantic tryst. Faeldon did not heed that lesson. He wanted the best of both worlds so he paid dearly. What now, Captain? Now you are also going to ruin the career of your love. I’m sure it’s not your idea of collateral damage.

But then again, Faeldon’s misadventures may simply reflect the bigger truth about military coup plotters’ legendary capacity for bungling. Remember Gringo Honasan and his group in 1986? Had it not for people power, Gringo and his politician benefactor, Juan Ponce Enrile, may have been bombed to kingdom come by Marcos henchmen. When Cory Aquino assumed power, Gringo and his kind tried several times to seize power and they failed all the time. Save for the presidency of Fidel Ramos, every administration after Marcos had faced military coup attempts but all those efforts went bonkers. So it appears that Faeldon simply played his part in this continuing tragicomedy called Philippine politics.

It seems like guys like Gringo and Faeldon are not studying history. Is it because they were always on “maneuvers”? They should have known that coups d’etat and armed revolutions are no longer in fashion. Pervez Musharraf of course has succeeded to take power but he is gradually democratizing Pakistan, knowing that the era of the men on horseback, of colorful caudillos are now relics of a bygone era. (For a less political take on the world, please visit Photographs and Memories).

Sunday, January 29, 2006

Philippines ranks 55 in the Pilot 2006 Environmental Performance Index

Scoring low on air quality and environmental health protection, environmental experts from Yale and Columbia University recently ranked the Philippines number 55 out of 133 countries in its pilot Environmental Performance Index report released last Friday at the World Economic Forum in Davos, Switzerland.
The report ranked New Zealand first followed by Sweden, Finland, Czech Republic, and United Kingdom as the top performers in terms of six policy categories including environmental health, air quality, water resources, biodiversity and habitat, protective natural resources, and sustainable energy.

These top-ranked countries, the report said, “commit significant resources and effort to environmental protection, resulting in strong performance across most of the policy categories.”

Prepared by the Yale Center for Environmental Law and Policy and Columbia University’s Center for International Earth Science Information Network, the study aims to help countries worldwide to reduce environmental stresses on human health and protect the vitality of ecosystems.

“The Pilot 2006 EPI deploys a proximity-to-target methodology focused on a core set of environmental outcomes linked to policy goals for which government should be held accountable,” the Report said. “This approach provides a context for spotting trends and issues of concern, evaluating policy results, highlighting leaders and laggards, and identifying best practices.”

The study used 16 indicators to calculate each countries’ scores on each policy category, namely child mortality, indoor air pollution, drinking water, adequate sanitation, urban particulates, regional ozone, nitrogen loading, water consumption, wilderness protection, ecoregion protection, timber harvest rate, agricultural subsidies, overfishing, energy efficiency, renewable energy, and carbon dioxide per GDP.

The report showed the Philippines lagging seriously behind targets in areas of indoor air pollution, regional ozone, overfishing, renewable energy, wilderness protection, adequate sanitation, and drinking water. Nevertheless, based on the overall ranking, the Philippines ranked relatively well at number 55 following Malaysia (ranked number 9), Japan (number 14), and Taiwan (number 24).

Based on the Report’s peer group ranking, the Philippines ranked number seven (7) in the Asia-Pacific Region. The best performers are New Zealand (1), Malaysia (2), Japan (3), Australia (4), Taiwan (5), and South Korea (6). Trailing the Philippines are Thailand, Sri Lanka, and Indonesia.

At the bottom of the global ranking are countries including Ethiopia, Mali, Mauritania, Chad, and Niger. “These are underdeveloped countries with little capacity to invest in environmental infrastructure (such as drinking water and sanitation systems) and weak regulatory systems,” said the report.

The EPI concludes that a country’s wealth emerges as a significant determinant of environmental outcomes. Nevertheless, the EPI has noted that some countries achieve environmental results that far exceed their peers in their respective regions, an indication—the report said—that policy regimes determines environmental performance.

“Policy choices matter,” said Daniel C. Esty, director of the Yale Center for Environmental Law and Policy, in a press statement. “Good governance is a critical driver of environmental performance.”

The 2006 EPI ranked the United States at number 28, significantly below other highly developed countries like the United Kingdom (5) and Canada (8), owing to its supposed underperformance on “critical issues like renewable energy, greenhouse gas emissions, and water resources.”

“The lagging performance of the United States on environmental issues—particularly on energy and climate change—signals trouble not only for the American people, but for the whole world,” said Gus Speth, Dean of the Yale School of Forestry and Environmental Studies, in a press statement. “Perhaps, this ranking will serve as a wake up call to the American public and particularly to leaders in Washington.”

Saturday, January 28, 2006

Economic growth from where?

The government has been telling us that the economy is on the way to recovery. The National Economic and Development Authority said that the Philippines is likely to grow within the range of 4.5 percent to 5.4 percent in 2005. This year, Neda says that the Philippine economy is likely to grow within the range of 5.7 percent to 6.3 percent.

And it seems some numbers indeed are showing good signs. The budget deficit has gone down. The stock market seems to be doing fine. Remittances from overseas Filipino workers are rising. They are not spending their money yet but soon, probably starting this summer, they are going to renovate their houses or buy new units. And indeed, real estate business has started to perk up. On January 23, the National Statistics Office (NSO) said that production of factories rose 4 percent in November owing to improved sales. Their average capacity utilization has stayed at 80.3 percent indicating that factories are generally busier. Hey, things are looking up!

I say, easy on those numbers because the truth is that other economic indicators are telling us otherwise. Last week, the NSO released the latest available figures on imports and what see saw was not comforting. In a globalizing world, countries buy goods from abroad—specifically capital goods, raw materials, and intermediate inputs—so they can process them by applying labor, technology, local materials and expertise into products for exports back to world markets. NSO’s import data tells us that in January to November, capital imports were flat, our purchases of intermediate inputs even declined by more than 9 percent. These figures seem to tell us that many business people are not buying more machines or upgrading their plants and equipment. Many of them don’t need to because they are buying less raw and intermediate inputs.

If indeed the economy has started to rev up, business should be borrowing lots of money from banks by now so they could take advantage of the projected economic boom. The latest figures from the Bangko Sentral ng Pilipinas (BSP) seems to indicate that credit activity has been sluggish after peaking at an almost 7 percent growth rate in May last year. In October, the latest figure, the loans outstanding of commercial banks grew only by 1.3 percent. Loans outstanding of important sectors including mining and quarrying; manufacturing; electricity, gas, and water; construction; and wholesale and retail trade even declined in October.

OFW remittances, of course, will probably carry the economy through especially if the $12 billion sent in by workers are converted into purchases of construction materials besides other basic needs like food. Probably.

The official line is that OFW families saved their money in 2005 and are likely to spend them this year in purchases of houses and durable consumer items. Question: if they indeed saved in 2005, why should they start spending in 2006? Our own take is that the spending decisions of OFWs are dampened by declining purchasing power of the peso. Therefore they are probably not inclined to spend more in 2006 especially if political uncertainties continue and the oil prices remain volatile.

Call centers and outsourcing companies of course will continue to grow, albeit at a lower rate owing to difficulties in recruiting skilled labor. We are happy that these sectors have become real options for many of the jobless youth. Nevertheless, outsourcing alone will not spread the benefits of growth beyond the urban centers.

What we are stressing here is that government officials need not crow yet about the possible economic revival this year. The economic indicators are sending us mixed signals at best and there is a need for government to really do something drastic to boost the economy.

Investments are one possible source of growth, yet the policy environment is still hazy due to the continuing uncertainty over the country’s fiscal incentives system. The budget for 2006 has not been passed and we are still at limbo whether or not we could expect significant public investments in economic and social infrastructure that is necessary to catalyze entrepreneurship. The country’s tangle of bureaucratic regulations and conflicting rules, highlighted by the recent World Bank report on the “ease of doing business” worldwide, has been a major barrier to economic expansion. Yet the government has not responded at all to address the problem. A new year supposedly brings in fresh perspectives and new vitality; we are not yet seeing that from the government so far.

Thursday, January 26, 2006

Politics without borders: Hamas victory could be a positive sign

Hamas' landslide victory in the newly conducted Palestinian election has shocked the world, including the Hamas members themselves. Some are already saying the group's victory has darkened the prospects for Middle East peace. From that victory I see hope. Why? For two main reasons.

First--its a triumph of democracy, assuming that the election was indeed conducted fairly and without fear and intimidation. US President George Bush initiated a big bang to "democratize" the region. He got it. He is probably not comfortable with the result but the Palestinians have spoken and the world should respect that. Democracy means that you give equal chance to everybody to contest political power in a peaceful way, knowing that the winner might be the one you don't like.

Second--Hamas will now be doing the day-to-day boring and challenging job of governing the Palestinian nation. This tedious process will certainly transform them. They used to be known as a "terrorist" organization; now they are "legitimate." More than ever, the world now expect them to behave according to the prevailing "rule sets" among the family of nations. The organization is used to be known for its violent actions against the Israelis. Now the members have more responsibilities including the delivery of basic social services like health and education, providing economic and social infrastructure, generating investments and jobs, collecting taxes, among many others. To do that, they need to engage and be connected with the rest of the world.

Wednesday, January 25, 2006

NEDA's fearless forecast for 2006: 5.7-6.3 GDP growth rate

How will the Philippine economy perform in 2006? “For 2006, we made our run of our economic model and we came with a fearless forecast for 2006 is 5.7-6.3 GDP growth rate. That’s the official government target,” says Augusto B. Santos, director general of the National Economic and Development Authority, when I interviewed him a few weeks ago. The assumptions for this forecast, he said, include successful implementation of the EVAT law raising the value added tax from 10 to 12 percent, stabilization of the oil prices in the world market, and higher public spending for infrastructure. Neda also hopes to “translate the high GNP into GDP” by funneling the rising foreign exchange coming in towards productive economic activities. Santos admits, however, that politics will be the wild card that is not factored in the equation and he is crossing his fingers that the economy’s firewalls are stronger enough to withstand whatever political drama will unfold for the rest of the year. Excerpts:

Question: Could you please tell us some of the highlights of the Philippine economy in 2005?

Answer: There are still no actual figures yet for the entire year as to the actual economic performance in 2005. I will be announcing that on January 30. But we have made a forecast ranging from 4.8 to 5.1 percent GDP growth rate. We were really affected by the increases in oil prices and this had the effect of increasing inflation. Increasing inflation in turn had the effect of dampening consumer demand. That, in turn, slowed down the economy. Our earlier projection in 2005 of 5.3-6.3 percent growth rate; we have to downscale that to 4.8-5.1. And of course, 2005 saw the start of the implementation of EVAT last November 1. We forecasted the inflation rate for 2005 at 7.9 percent but in turned out, based on the last results, that the average inflation rate for the whole year is 7.6 percent. To a certain extent, particularly for the whole quarter of 2005, we feel that certain political developments affected the performance of the economy. The third quarter of 2005 was the height of the impeachment process. Somehow, based on our study, we could not help but say that these political developments affected the economy. As you know there is a correlation between political stability and investor confidence. National government fiscal [reforms] continue to perform very well. The target for 2005 was a deficit of 180 billion, but it looks like it’s only P145 billion. This is what the President is talking about: theoretically we have a saving of P35 billion pesos which the government wants to use to prime the economy for first quarter of 2006.

In 2006, how will the economy perform?

For 2006, we made our run of our economic model and we came with a fearless forecast for 2006 is 5.7-6.3 GDP growth rate. That’s the official government target.

What are the assumptions?

One of the major assumptions is increasing the EVAT from 10 to 12 percent this coming February 1. In the estimate of our department, we are going to generate additional P55-80 billion revenue and that’s a lot of money that we can use to construct roads, to pump prime the economy. Another major assumption is stabilizing oil prices. If you notice, the price of oil is still increasing but it’s gradual. It’s no longer volatile. Medro humuhupa na [It’s somewhat stabilizing].

What will be the leading sector in the 2006 growth forecast?

Services. For the past several years, it has been services. And even for 2006, we still look at services as the lynchpin of the Philippine economy. When I say services, maraming category yan but its mainly communications, trade, banking, transportation. Services will be the fastest, the biggest, followed by industry, particularly manufacturing, followed by agriculture, fishery, and forestry. In that order.

What are the prospects for construction?

In the third quarter 2005, there was little bit of economic slowdown because there was government underspending because of our austerity measures. Government or public construction was down, private construction was down. For 2006, in view of government decision to pump-prime the economy, we expect that government construction will go up. The economic theory is very simple. If the private sector sees that the government is spending, the private sector will follow through.

I suppose you also expect OFW money to prop up the construction sector.

Yes. Talking about real estate or property development—this is also included in the services sector. So it’s also a source of growth. For 2005, property development has contributed a lot to economic growth. In fact, anecdotally if you to go to the Ilocos provinces you will see a lot of new houses there. Those were built by OFW money. By the way, in terms of OFW deployment, we use to send drivers and mechanics, now we are sending doctors, nurses, teachers, caregivers. So there is higher skills, higher value. That’s why the remittances are higher while net deployment is down.

How do you see exports performing?

That’s a good question because there is a global slump in electronics. That’s little bit of bad news for us because it’s our number one exports, followed by garments. For 2006, we hope that the electronics sector will recover in terms of global demand so that our own electronics industry will recover but it is not clear that’s why I’ve been making pronouncements that we can’t just depend on electronics. We really have to diversify.

Tuesday, January 24, 2006

Output of Philippine factories rose 4 percent in November

We could probably expect a better figure from the manufacturing sector come January 30 when the National Statistical Coordination Board releases the 2005 Gross Domestic Product report. In November, industrial output rose 4 percent owing to rapid expansion in the output of at least eight manufacturing sub-sectors namely furniture and fixtures, petroleum, fabricated metals, chemicals, rubber, non-metallic minerals, textiles, and tobacco.

In its latest monthly integrated survey of selected industries (Missi), the National Statistics Office likewise reported a 12.9 percent rise in the value of production index indicating a generally favorable business environment for the manufacturing sector. Factories also have betters sales figures (i.e. 8.2 percent rise in value).

Despite gains in industrial output, however, the average capacity utilization remained practically the same—80.3 percent from 80.4 percent in October. To some extent, this is good news because it means there would be less inflationary pressures on the supply side as factories still have elbow room to raise production in response to a potential rise in demand without resorting to expansion in production capacity. On the other hand, it means factories are not likely to hire more workers soon.

(You may visit Photographs and Memories for pictures and some travel notes).

Monday, January 23, 2006

Manny Pacquiao’s victory—and his alone!

Now that Manny Pacquiao has won that fight of his life, let’s buckle down to work. Let’s not pretend that Manny’s victory is our victory as a country too, as some politicians would like us to believe. That victory is his alone. It was he alone who trained like crazy in the United States, skipped Christmas and New Year with his family just to get the fame and fortune that he deserved after demolishing the Mexican legend, Erik Morales. The truth is that had Manny lost, most Filipinos will probably dismiss him as just another boxing has-been who is soon forgotten.

Remember Luisito Espinosa? Espinosa was the toast of politicians and sports fanatics when he was the country’s boxing superstar. Today, he is totally forgotten. The politicians who basked in his glory in the halcyon days of his career would not even touch him now with a ten-foot pole. Not a single big-shot in this country has bothered helping him collect his fight money from that South Cotabato ex-governor who refused to honor the contract.

Yes, we are happy that Manny won that fight but he owes us nothing, except the taxes that he ought to pay for holding a Philippine passport. He did not win because of our “prayers.” The Mexicans prayed like hell too and the Lord Almighty probably stayed neutral. Manny won that fight because he did his homework and fought with intellect, great heart, and sheer will to win. These are traits that could never be said of our so-called political leaders.

For instance, we have yet to pass the country’s budget for 2006 and there seems to be no urgency at all among the administration legislators to do so. We might yet end up reenacting the 2005 budget that we know does not contain significant allocation for capital expenditures. That could mean that we are stuck with our rickety infrastructure, a major turn-off among investors. Too bad because next month, we are set to implement the expanded value added tax law raising corporate tax from 32 to 35 percent, extending the coverage to certain products including fuel, and raising that rate from 10 to 12 percent.

In view of the continuing failure of the government to provide good infrastructure, a higher corporate tax would simply make it more difficult for us to get more investments. Raising the VAT rate to 12 percent may yet push inflation rate soaring especially so that kidnapping incident in Nigeria and the deadlock over Iran’s nuclear program may yet add another layer of uncertainty to the already volatile world oil markets. Should crude prices soar again, we could expect a further slowdown in the economy as people are likely to reduce expenditures because of lower purchasing power. More so because the flow of dollars from overseas workers will probably slow down after remittances surged during the Christmas holidays. Is the government ready for these scenarios?

Yes, Manny won but let’s get back to work so we could get our own little victories. (Note: You may drop by Photographs and Memories for new pictures and some personal travel notes).

Sunday, January 22, 2006

Howard Belton—Filipinos are nice people to live with

It’s so easy to give up on the Philippines when you listen to how politicians and whiners describe the prospects of this country. However, if you talk to entrepreneurs—people who really put a stake in the system, people who do business—you could get a different perspective. I had the chance to interview Howard Belton, a British citizen and chair person of Unilever Philippines, a multinational, last week and came out of it a little bit more optimistic. I asked him asked why Unilever is still here in the Philippines when analysts often complain about everything including bad infrastructure and high power costs. “What do you see that other investors have failed to see?” I asked.

He answered: “We have a big export business [here]. There’s no question that infrastructure and power costs are a problem. But, what we found is that there are some positive factors—first of all, flexibility. I think that both the entrepreneurs in the Philippines and the individual employees are very flexible. They’re very willing to try new ways of doing things which is beneficial. Second is customer service. It seems to be easy here in the Philippines to build up customer centered approach which is very important when you’re in manufacturing."

I also asked him if he likes working in the Philippines.

He answered: "It’s been a pleasure living here. Normally Unilever’s term is 3 years. I’ve been here for 7 and a half years so I always say I can’t complain anymore about the Philippines because I’m here on voluntary basis (laughs). I like working in the Philippines because it is easy to do new things here. People are very easily motivated to change things so it’s very easy to get new things done. We pioneer in many things for Unilever here and for me that’s a great satisfaction as the leader. And from a personal point of view Filipinos are very nice people to live with."

(Please visit Photographs and Memories for some new pictures and personal travel notes.)

Boxing without borders: a compleat Manny Pacquiao

I admit I bet in favor of Erik Morales to win via unanimous decision. But I was happy that Manny Pacquiao won in such a very impressive passion. In their first fight, Manny could not figure out how to get past Morales' pesky jabs, the reason why he could not unload his much-vaunted killer lefts. This time, however, what I saw was a totally different Pacquiao--stronger, with more weapons (e.g. the right hooks to the rib cage did a lot of damage to Morales' stamina), with more lateral movements (to avoid the that jab-straight combination from Morales), and with more and relentless flurries (that made points and put a lot of pressures on Morales). Freddie Roach, his trainer, had really transformed Manny into a compleat fighter.

Saturday, January 21, 2006

Boxing without borders: Manny "Pacman" Pacquiao knocks out Mexico's Erik Morales

Please allow me to congratulate Manny Pacquiao on his ten-round demolition of Mexico's Erik Morales, thus avenging his loss in their first encounter in March 2005. Technique-wise Morales was the better fighter but Pacquiao's raw power and sheer will to win triumphed in the end. Morales difficulties in getting the right weight seemed to have taken its toll on his fight plan. In the first three rounds, one can see Morales loading big shots on Manny in the hope of finishing the gritty Filipino in the earlier rounds to avoid a war of attrition that will favor Manny. Pacquiao survived those trying moments and returned the favor starting round six. Since then there is no turning back. Morales was ripe for the taking since then and it amazed me how he survive three more rounds of continuous pounding from Manny. By the tenth round, Morales was counted out. Congratulations, Manny Pacquiao. Mabuhay!!!

Thursday, January 19, 2006

Of farms and bullshit

I could not understand how the Bureau of Agricultural Statistics (BAS) could say that in 2005 the farm sector has “surpassed” its 2004 performance. In 2005, the farm sector grew only by 2.24 percent in real terms (relative to 2004) as against 5.10 in 2004 (relative to 2003). Isn’t that clear enough?

Maybe they used the term “surpassed” to mean that the value of farm production in 2005 at current prices is almost 6 percent higher than the previous year’s figure. That’s true but “performance” is usually associated with growth in output in real terms and not in terms of increments in output. That’s a big difference. No sir! Philippine agriculture did not “surpass” its 2004 performance.

I’m not sure whether or not the BAS is deliberately lying or plain bullshitting. Lying is better because it means it is deliberately hiding the truth and, in effect, affirming it. But bullshitting is worse because it means BAS is telling us something with complete disregard for truth or facts. In his book “On Bullshit,” Princeton-based writer Harry Frankfurt said a bullshitter is he who "does not reject the authority of the truth, as the liar does, and oppose himself to it. He pays no attention to it at all. By virtue of this, bullshit is a greater enemy of the truth than lies are."

Nevertheless, a 2.24 percent is good enough considering El Niño that affected a lot of farms. It would surely boost growth of the overall economy. With this level of farm output, a GDP growth rate in the vicinity of 5 percent, given the continuing strength of the manufacturing and the services sectors, is possible.

Note:You may visit Photographs and Memories for my more personal reflections about the world. HAPPY WEEKEND TO ALL!!!

Wednesday, January 18, 2006

Photographs and memories: Introducing my new personal blog

Hello to the world! I would just like to let you know I've set up another blog entitled "Photographs and Memories." This one will contain my reflections about things trivial, non-cerebral, and down-to-earth matters about life as we know it. It will also contain some stills of life, nay memorable photographs reflecting the highs and lows of my existence (oh my, does it read like Sartreian angst?), including some pictures of my recent trip to the United States under the State Department's International Visitors Program. That visit was definitely a high point of my life. To visit my new blog, just click on the link. Thanks and have a nice day!

Cutting Red tape means hitting several birds with one stone

WE thought all along that the forces of globalization have slowly transformed the Philippines into a better place for business. Since 1995, policymakers have reduced tariff, removed most of the nontariff barriers and aligned many of our domestic economic policies with the World Trade Organization. We thought all along that we have started to allow the "invisible hand" of the market to guide economic decisions. The recent report of the International Finance Corporation (IFC), the investment arm of the World Bank, simply blew away those illusions. We are actually one of the most difficult places on earth to do business.

The IFC-World Bank Report says that in 2006, the Philippines ranked 113 out of 155 countries in the world in terms of "ease of doing business," just a notch higher than Iraq (ranked 114). This ranking means that in the Philippines it requires Herculean efforts just to do the basic thing like setting up a business, complying with licenses and permits, hiring and firing of employees, registering a property, getting credit, enforcing contracts, paying taxes or closing the business.

This status is not flattering at all. For ranking at 113, the Philippines shares the poor status with Mozambique (ranked 110), Bolivia (111), Honduras (112), Iraq (114), Indonesia (115), India (116), and Albania (117), Croatia (118), Brazil (119) and Venezuela (120).

Now we know the real reason why the country does not grow as fast as the roaring economies in the Asia-Pacific region. Many used to blame the "political noise" or the irrational exuberance of democracy for our failure to catch to progress. They have a point there. But that's really a peripheral issue; the real culprits are the dead and calloused hands of the State that are sapping the country's entrepreneurial energy.

How could we attract more investments when even in just opening a simple business store the government requires one to go through 11 steps within 48 days to complete the process costing 20 percent of one's gross per capita income? Consider this: when an entrepreneur wants to start a business he or she needs to obtain the following requirements: proof of funds or capital, registration with the Securities and Exchange Commission, barangay clearance, mayor's permit, purchase of books of account, registration for the value-added tax, a tax identification number, payment of documentary stamp taxes, authority to print invoices, printing of receipts and invoices, registration of those receipts and invoices, and filings for social security and medicare.

Why should foreign investors come when they would have an easier time setting up businesses in New Zealand , Singapore , United States , Canada , Norway , Australia , Hong Kong , Denmark , United Kingdom and Japan . Among Asian countries, Thailand , Malaysia and Korea ?

We want to solve the fiscal crisis? Then let's remove all these barriers to investments. One of the main reasons why the Philippines has a low tax base is because more than half of the country's economy is accounted for by the informal sector. This sector is largely composed of small unregistered family-operated businesses that do not pay taxes. Because of the high cost of registering business both in terms of money and time, they would rather stay underground thus depriving the government of much-needed revenue. But once the barriers to entry are brought down, the government would have a larger tax base as micro, small, and medium enterprises would find that the benefits of formalizing the business, such as greater access to credit and better utilities, far outweigh the amount that the entrepreneur pays the government in terms of taxes and fees.

We want to create more jobs and reduce poverty in this country? The shortest path is removing all these regulatory and bureaucratic tangles. With many entrepreneurs setting up businesses we create more jobs and more economic activities that even create more jobs. The bonus to this is that, as more firms go formal, there would be more quality jobs that are protected by social security, health insurance, work safety regulations, and nonmonetary benefits like vacation leaves.

We want to lick graft and corruption in the bureaucracy? Again, removing all these messy and unnecessary regulations is the key. The more complex the regulations, the more that bureaucrats would have opportunities to extort bribes from those trying to make an honest living through entrepreneurship. By reforming the country's business and economic regulatory system, the government therefore will hit several stones with just one shot. And the government should do it now with greater urgency and zeal because the future of the country's economy rests on this reform initiative.

In the recent IFC-WB report, countries like Serbia and Montenegro , Georgia , Vietnam , Slovakia , Egypt , Romania , Finland , Pakistan and Rwanda are reforming their regulatory systems hard and fast. These facts simply mean that the competition for foreign direct investments is getting keener by the day. If the government continues to procrastinate, the Philippines—like Rip Van Winkle—will wake up one day to a totally different world where most of those reformers are wining and dining in an exclusive rich man's club while Filipinos are wallowing in self-pity and misery.

Tuesday, January 17, 2006

Despite globalization, it's still difficult to do business in the Philippines

Last Monday I came across the latest “Doing Business Index” report preparred by the International Finance Corporation ranking countries worldwide on the ease of doing business. Sad to say, the Philippines did not do well in this report, ranking only 113 out of 155 countries. Now we know why the Philippine economy is not growing that fast. Below is my story that appeared as banner article of the BusinessMirror (18 January 2006).

THE Philippines remains to be among the world's most difficult countries to do business in, ranking a poor 113 out of 155 countries worldwide in the recent International Finance Corporation's 2006 global ranking on the "ease of doing business." With such rank, the Philippines is just a notch higher than Iraq.

The most business-friendly countries, the International Finance Corporation (IFC) said, is New Zealand—ranked number 1—followed by Singapore, United States, Canada, Norway, Australia, Hong Kong, Denmark, United Kingdom, and Japan. Among Asian countries, Thailand, Malaysia and Korea belong to the top 20.

The International Finance Corporation, the investment arm of the World Bank that celebrated its 50th anniversary Tuesday, provides loans, risk management services and structured finance products to developing countries worldwide.

In ranking countries, the IFC and the World Bank used 10 variables: the ease of starting a business, ease of dealing with licenses, ease of hiring and firing, ease of registering property, ease of getting credit, ease of protecting investors, ease of paying taxes, ease of trading, ease of enforcing contracts and ease of closing a business.

"[A] high ranking on the ease of doing business does mean that the government has created a regulatory environment conducive to the operation of business," said IFC and the World Bank in its report titled "Doing Business in 2006: Creating Jobs."

The report said: "Often, improvements on the Doing Business indicators proxy for broader reforms to laws and institutions which affect more than the administrative procedures and time and cost of complying with business regulations."

For ranking 113, the Philippines shares the poor status with Mozambique (ranked 110), Bolivia (111), Honduras (112), Iraq (114), Indonesia (115), India (116), and Albania (117), Croatia (118), Brazil (119) and Venezuela (120).
The WB-IFC report clarified that a high ranking in the Doing Business Index does not mean that countries like New Zealand, Singapore, United States, Canada and Norway have little or no regulation.

"All the top-ranking countries regulate businesses, but they do so in less costly and burdensome ways," said the WB-IFC report.

Nordic countries like Norway (ranked 5), Denmark (8), Iceland (12), Finland (13) and Sweden (14) do have regulations, but these regulations are simple, thus allowing businesses to be productive by focusing government intervention where it counts-protecting property rights and providing social services.
The IFC-WB report complains of the Philippines 's tangle of bureaucratic requirements as a major barrier to entrepreneurship.

"Entrepreneurs can expect to go through 11 steps to launch a business over 48 days on average, at a cost equal to 20.3 percent of gross national income (GNI) per capita," said the report. "They must deposit at least 2.0 percent of GNI per capita in a bank to obtain a business registration number."

The same report said that in Thailand (ranked 20) it just takes eight steps to launch a business over 33 days, at a much cheaper cost equal to 6 percent of the GNI per capita and without any required deposit.

Undoing these bureaucratic tangles and unreasonable regulations, the IFC-WB report said, is necessary for the economy to grow faster and create more jobs.

"An increasing number of those jobs will be in the formal economy because of the benefits of being formal (such as easier access to credit and better utility services) often outweigh the costs (such as taxes)," the report said. "And more formal jobs will mean that more workers are protected by pensions, safety regulations, and health benefits."

The report has noted that in complying with licensing and permit requirements alone would take 23 steps and 197 days to complete the process at a cost equivalent to 121 percent of income per capita. For the same activity in Thailand, an entrepreneur there would need nine steps and 147 days to complete the process at a cost of only 17 percent of income per capita.

"In Thailand, it takes two steps and two days to register a property. The cost to register property is 6.3 percent of overall property value," the WB-IFC report said. "In the Philippines, it takes eight steps and 33 days to register property, [at a cost of] 5.7 percent of overall property value."

Even the procedures involved in simply paying taxes—where people give money to the government—have been described as more difficult in the Philippines.

"The effective tax that a medium size company in the Philippines must pay or withhold within a year... Entrepreneurs there must make 62 payments, spend 94 hours, and pay 46.4 percent of gross profit in taxes," said the WB-IFC report. "Entrepreneurs there [Thailand] must make 44 payments, spend 52 hours and pay 29.2 percent of gross profit in taxes."

Monday, January 16, 2006

Dollar remittances and social paralysis (or the flipside of Philippine overseas employment)

LAST Friday, the Bangko Sentral ng Pilipinas (BSP) happily announced that remittances from overseas Filipino workers (OFW) coursed through commercial banks from January to November last year reached US$9.7 billion, a 26-percent rise from last year’s US$7.7 inflows. The BSP attributed this double-digit growth in dollar remittances to two factors: the rising demand for Filipino workers abroad, particularly of skilled ones including nurses, doctors, teachers, engineers; and the continuing efforts by banks to capture these remittances through the formal financial channels.

“Remittances… coursed through commercial banks remained robust,” the BSP said, stressing that the total amount of dollars sent home by Filipino workers abroad in 2005 would reach almost US$11 billion.

Nice news, except that the BSP does not necessarily tell us the entire picture, particularly the social cost that the Philippine society is paying for those dollars. Majority of those who left the country’s shores in search for a dollar pay are women, leaving in their wake families devoid of motherly care and guidance. In many cases, the husbands who are left to care for the entire family here in the Philippines proved to be lousy parents, giving rise to drug use, high dropout rates in school, and juvenile delinquency among the children.

The experience of Mabini, a small remittance-dependent town 92 kilometers south of Manila, as reported by Carlos Conde, the local correspondent of the International Herald Tribune, highlights this tragically high social cost. The report noted that once their wives started sending dollars from abroad, most of the husbands stopped working, thus creating a culture of dependency within their households. The town is awash with cash from abroad but the money often ends up wasted on lavish parties, Manila shopping malls, binge drinking, and conspicuous consumption (e.g., cars, expensive appliances, and donations for a church bell costing millions of pesos). Unemployment in the community is high since people would rather wait for their chance to work abroad than do something productive locally. Many children are not able to finish college since a diploma is not necessary to land a domestic helper’s job in Italy.

The danger is that Mabini could, from all indications, prove to be a microcosm of Philippine society. In the last five years, the country’s economy—propped up by the remittance dollar—has shown to be capable to growing within the 5-6 percent range. Malls are rising at every corner to siphon off those remittance dollars, yet the larger picture seems to reflect a continuously fragile economy incapable of soaking up joblessness. In fairness, dollar remittances have given a lot of purchasing power that is propping up a significant part of the country’s manufacturing sector. Do you ever wonder why the average capacity utilization is at a four-year high of 81.4 percent? That’s because people are buying a lot of goods and services, thus creating a lot of employment. Nevertheless, dollar remittances alone have proven to be inadequate to propel the economy beyond the low-level equilibrium that it is trapped in right now—while creating a lot of social problems.

The signs of low-level equilibrium, nay social paralysis, are clear. On one hand, survey after survey from both the Pulse Asia and the Social Weather Stations show the continuing poverty and hopelessness of many Filipinos, particularly in the lower social strata. On the other, we often hear some people in the middle and the richer classes saying that “the Philippine economy has been growing quite decently in the last few years despite the country’s political problems.” And true enough, the property markets have been sizzling lately, indication that the country’s richer classes whose wealth are largely based on ownership and control of real estate properties are starting to make a killing off those dollar remittances.

These contrasting perspectives appear to be producing some sort of social paralysis, a kind of social complacency that takes away the urgency of pursuing painful but crucial economic and political reforms. The remittance dollars seem to have become manna from heaven that has taken away our ambition and our will to rise from the heap and join the rest Asia-Pacific community in the journey to development and real progress.

The main point here is that overseas employment is not the real solution to this country’s failure to achieve development. We acknowledge the importance of this sector—once upon a time it was truly necessary—but it can never be a substitute for internally-generated growth. And this one could only be achieved if we have the courage to address corruption in government, remove all barriers to entrepreneurial activities, collect the taxes to finance infrastructure development, and ensure transparency and predictability in the country’s regulatory environment. And while doing this, we need to address with greater urgency the growing social problem engendered by the remittance mentality in our midst.

I had the chance to interview economist and former planning secretary Cielito Habito’s story a few years ago and his story should serve as warning to all us. Habito’s wife runs a school in Los Baños and noticed that the most problematic kids are those whose parents are working abroad. Many of these kids—he said—are underachievers, lack motivation for school work, lack focus, and can’t seem to get along well with other students. To put a face to this observation, one need only recall that a few months ago, the Laguna police arrested the three young sons of OFW icon Flor Contemplacion for drug dealing, right from their home.

Habito said these experiences are alarming, considering that about 10 percent of Filipinos (i.e., about 8 million) are currently working abroad. If the situation in Laguna reflects the national trend, we have a social time bomb waiting to explode.

Sunday, January 15, 2006

World Bank is “cautiously optimistic” about the Philippines’ prospects in 2006

“Cautious optimism.” That’s how Joachim von Amsberg—country director of the World Bank in the Philippines—describes the Philippines’ prospects in 2006 when I interviewed him last week. “Cautious” because of the ever raging political noise yet “optimistic” because of what he sees as significant strides that the country has made in improving the country’s public finances. A plus factor, he said, is the fact that the Philippines possesses “great natural resources, with wonderful entrepreneurial people, English-speaking and based in the most dynamic region” close to the booming economies of China and India. Excerpts from the interview:

Q: What’s the World Bank doing here in the Philippines?

A: We put our program under the theme “supporting islands of good governance in the Philippines.” What that means practically is we really try to help the Philippines live up to its incredible potentials for more rapid social and economic development. We have been grappling with the paradox that the Philippines is a country with obviously incredible potentials for social and economic development, with great natural resources, with wonderful entrepreneurial people, English speaking, and based in the most dynamic region with India and China booming in the neighborhood. The Philippines has so far not really lived up to its full potentials. And when we say we “support islands of good governance” we mean supporting leaders and institutions that has been successful, upscaling these successful experiences where Filipinos and their institutions have shown they can overcome the obstacles to development.

I understand you have this Country Assistance Strategy. What is this all about, what are its components, and how do you exactly operationalize it?

The CAS is a document that summarizes the agreement between the Philippine government and the World Bank (WB) on our contribution to the Philippines in the next three years. The recent version of the CAS lays out a program of support that focuses on helping build public institutions that work for the common good, public institutions that are free of corruption, free of capture by specific interests. One of the instruments by which the WB supports that objective is lending, which means loans of the WB to the government of the Philippines at cost that are substantially below the rates that the Philippine government pays when it borrows from the international market. The second instrument is non-lending, a program of technical assistance, analytical work or studies attempting to support the same objective: socio-economic development and supporting institutions, improving governance.

Some NGOs seem to think that WB influences local economic policy. How do you usually respond to this kind of criticism?

I’m not sure if that’s a criticism. What we are trying to do is to contribute to economic and social development of the Philippines and to make accessible to Philippine government and institutions and leaders low cost financing as well as experience and knowledge from international development. Now if that contribution needs improvements in policies and programs then I think that’s one of the benefits and I’m happy that we can make that contribution.

The World Bank seems to have adopted the language of NGOs. What prompted that kind of approach?

The government is essential but not the only important actor in development. Civil society organizations—from community organizations to lobby groups as well as other groups like media, the private sector—play equally critical part in development. And that means two things—one is more active dialogue on development issues and second is partnership in the implementation of programs.

Could you cite some examples of projects being implemented by the World Bank in the Philippines?

I can just cite a few. We are implementing loans, 23 loans right now, and I believe some 89 or 90 grants in the Philippines. I’ll just cite a few that might be of interest to you. Example: Kalahi-CIDSS [Kapitbisig Laban Sa Kahirapan-Comprehensive Integrated Delivery of Social Services] is a program that is being implemented by the DSWD and which is being financed by the WB. It channels government money coming from the World Bank, directly to local communities where their priority investments have shown to have very remarkable impacts in terms of (a) lower cost infrastructure and cost of services, and (b) strengthening community social capital or their ability to promote social change and improved better governance at the local level.

Second example is the series of programs to support investments at the local government level. These are programs, either with the national government or with the government financial institutions like the Land Bank and DBP to lend to local governments for their priority investments.

Third example is infrastructure investments, like water and sanitation in Manila. Here we are working with and providing a loan to Manila Water through Land Bank for expansion of the sewerage network and sewerage treatment in Metro Manila which is a huge problem because less than ten percent of the city is covered with sewerage which is extremely low in international comparison. It’s a serious problem both in terms of health and sanitary conditions as well as environmental conditions. This is a program that is supported by both WB itself, IBRD [International Bank for Reconstruction and Development], as well as the IFC [International Finance Corporation] which is the Bank’s private sector arm which invests directly in private companies.

Fourth example is a grant program, a series of grants to improve governance and fight corruption. This implies support to the Ombudsman’s office, presidential anti-graft commission, to the BIR. These are just a few examples.

In terms of figures, how much is the total loans that has been granted to the Philippines in terms of loans and grants?

We have right now outstanding loans to the Philippines of about 3.3 billion dollars. We are disbursing currently an amount of about 150 million dollars. This figure is relatively low in comparison to the overall lending that we could undertake in the next three years which is more than 2 billion dollars. This shows that there is a potential for the Philippines to use substantial amount of WB financing.

Does that reflect the Philippines lack of absorption capacity of the Philippine government?

It reflects a very challenging fiscal situation because we are lending to the government which means the government can take loans only to the extent that it makes investments. And since the fiscal situation has been so tight the government has not been able to invest that much and therefore it has been [using less] foreign financing.

Isn’t that these loans require counterpart financing?

That’s less of an issue today. It’s really an issue of what we call [the Philippines’] fiscal state. Because we are financing government expenditure so even if its 100 percent WB financing it would still need to be part of government budget. And we don’t want to contribute to a worsening debt situation. We don’t want to finance expenditures that are not in the context of an overall sustainable fiscal situation. We want to help solve the fiscal and economic problems [of the Philippines] rather than contribute to it.

There are impressions that a significant part of those programs are being implemented in Mindanao? Why the focus on Mindanao?

Mindanao is an important focus of our program and the reason is that Mindanao is among the poorest areas of the country. If you look at the social indicators you will see that some areas have the worst performance. There are economically dynamic areas like Davao City but there are many areas that require a lot of public investments. Secondly, the conflict situation in Mindanao is an important issue [because] it’s an obstacle to the development of the country overall. Ultimately, development, [higher] income, and less poverty are all ingredients toward the solution of the conflict.

Is it true that the World Bank is poised to provide more grants for Mindanao once the MILF-GRP peace pact is signed?

We have been working together with the government, with groups [linked] to the MILF and an international partner to prepare what is called the Mindanao Trust Fund. That program is financed by the contribution of several international agencies [involving] grants and programs. That is [on-going right now] and it will be upscaled significantly once there is a peace agreement between the MILF and the government that would allow a larger scale investment into development in conflict affected areas. Again, that’s because we want to help address the root causes which in many cases include very poor social conditions, very little public investments, and therefore very high poverty in conflict affected areas.

How about the private sector? Besides Manila Water, what other major projects are you doing with the private sector?

We see the private sector as the key driver for economic development and growth. We work for the government on what I will call investment planning [including efforts to improve] the condition that favor private investment—domestic or international—to come in and invest in the Philippines. And that is what mostly what the WB/IBRD is doing. IFC, our private sector arm invests directly in companies. The focus of IFC is on infrastructure, financial sector, SMEs, and we have a host of portfolio investments in the Philippines. We continue to invest in an on-going basis in private companies that are particularly likely to make important contribution to development.

What’s your prognosis on the prospects of the Philippine economy for 2006?

As to my expectations of 2006, I would put it under the heading of “cautious optimism—“cautious” because of all the political noise. We are not experts of political analysis, we are not political actors, but the key really there is that political noise could generate uncertainty. “Optimism” because in the last year at least has shown that despite all this political noise the country has been able to protect key policies from that political process. 2005 has actually seen a substantial turnaround in public finances and we said in the last few years that the large deficit in the public finances is the largest short and medium term obstacle to development. But the optimistic perspective will not be realized automatically, it will depend on the actions of the leaders of the institutions of this country as well as improvements in domestic policies and infrastructure development.

The Philippines doesn’t get much foreign direct investments these days. What does the international community wants to see in terms of reforms for them to be convinced to invest in the Philippines?

Last year, the ADB and WB conducted a survey of companies on what holds back their investments. The results: first is macroeconomic instability which is linked to the fiscal situation; second corruption in government; third is concern about infrastructure like power roads, ports; and fourth is uncertainty in the regulatory environment.

Saturday, January 14, 2006

Business process outsourcing and overseas Filipinos will drive property market growth in 2006

(Ortigas Park completed December 2005. As demand for Grade A Office space rise, Ortigas and Company, Inc. tries to refurbish the Ortigas Center to maintain its competitiveness.)

It appears that the “globalizing” components of the Philippine economy—i.e. companies engaged in business process outsourcing like call centers and overseas Filipino workers—have started to rock the property markets in 2005. It will continue to do so in 2006. But don’t expect an all out partying next year, the experts say, because the country is not yet poised to get back to the frenzy prior to the 1997-98 Asian financial crisis.

Certainly, owners and developers of the prime and grade A office spaces in both Ortigas and Makati will be smiling all their way to the banks. Claro Cordero, Jr., manager for consultancy services of the Makati-based LeeChiu and Associates (LNA) said these properties—large, efficient floor spaces with high-tech specifications and finish located in Ayala Avenue, Makati Avenue, Paseo de Roxas—will enjoy rising values and rents.

“Prices of prime and grade A properties have bottomed in 2003 but we have seen a recovery in the last two years,” said Cordero, stressing that vacancy rates in said property segments in Makati have gone down to about 5 percent. At this vacancy rate, one could say prime office spaces are practically filled up, except a few small non-contiguous office spaces. The reason for this high occupancy, about 95 percent on average, is the mushrooming of many business process outsourcing companies that gobbled up these prime office spaces.

Cathy Casares-Ko, real estate division head of the Ortigas & Company said that the Ortigas Center has attracted a lot of outsourcing companies because the area is close to bedroom communities of Quezon City, Antipolo, and Taguig. “Three years ago occupancy rates here in Ortigas was 60 percent. Now occupancy rate is about 80 percent due to all those call center facilities. We expect that trend to continue in 2006.”

Cordero noted that vacancy rates for Grade B and C office spaces in Ortigas and Makati, however, are still high at 25 percent. “These are mostly inefficient spaces, with limited power supply, and poor workmanship,” he explained. He said that there’s a recovery in B-C office market, most observers are still cautious as the prospect of this segment of the market.

“So overall, there’s going to be a continued recovery but it will not bring us to the level of prices and rental rates prior to the Asian crisis,” said Cordero. “Before the Asian crisis, you could find spaces and rent from P1000 to P1200 per square meter. Right now, the average is about P500-P600 per square meter, but we don’t see rents going up to P800-P900 per square meters.”

“Rental rates will not be able to support prime office developments similar to the Enterprise Center or the RCBC Plaza,” said Cordero. This is because, according to Cordero, outsourcing companies are likely to go to areas outside Makati and Ortigas or even to cities in the Visayas, where they are likely to get the labor pool that they need. The rapid growth of the outsourcing industry has led to the scarcity of skilled labor, particularly of good English-speaking workers, in Metro Manila.

Another factor, Cordero explained is the emergence of 14 new business districts all over Metro Manila that will pose competition to Ortigas and Makati. Mostly completed or initiated after 1995, these new business districts covering 1,300 hectares of developed land include the Eastwood City in Libis (Quezon City), Araneta Cyber Center (Quezon City), Greenhills Redevelopment, Edsa Central (Mandaluyong), Robinsons Gateway Center (Mandaluyong), Rockwell Center, For Bonifacio Global City, McKinley Hill, SM Central Business Park (Manila Bay), Metropolitan Business Park (Manila Bay), Newport City (Pasay City), Aseana IT Business Park (Parañaque), Asiaworld City (Pasay), Madrigal Business Park (Alabang), and the Filinvest Corporate City (Alabang).

“Competition among these business districts will deter rental escalations,” Cordero said, saying there might even be a “gradual decline in land values in Makati, Ortigas, and Binondo.

Because of these factors, developers—according to Cordero—will largely be conservative in developing additional buildings. Speculative buildings, he said, will be generally smaller, mid-rise facilities with 15,000 to 25,000 gross floor area (GFA).

Paulo Campos III, issues management associate of the Ayala Land, agrees to this analysis saying that new developments in 2006 will likely be towards “built-to-suit” types of projects where buildings are constructed based on the specific demand and specifications of would-be occupants. As an example, Campos said that Ayala Land is going to start a new nine-storey building designed specifically for the domestic back office operations of the Hongkong and Shanghai Bank (HSBC).

“The ground breaking ceremony will be December 23 to be completed sometime next year,” said Campos. “We are hoping that this project will be a catalyst for further developments in 2006.”

Jan Bengzon, assistant vice president for external affairs of the Ayala Land explained that the trend towards built-to-suit or customized projects is a new phenomenon in the property development industry. “There are no more one size-fits-all types of buildings.”

If there’s a consensus as to the prospects of the office markets, however, analysts and property developers can’t seem to agree on the direction of the residential property markets. Cordero expects two trends next year.

First, prime housing are bound to rise because, according to Cordero, supply of quality houses is limited, there are no prime villages coming up, and the pace of renovation of old houses does not keep pace with demand.

“The terms will continue to in landlords’ favor as the expatriate community grows,” he said. Demand for high quality houses, Cordero said, stems from the increasing number of top executives from business process outsourcing companies setting up shop in the country.

And second, Cordero expects prices of condominiums starting next year as the supply of condo units are expected to rise by 100 percent in the next four years. He said that prices may even plunge 30 percent especially if the economy slows down. This trend, however, will benefit the middle class as quality accommodations become more affordable.

“They always say that,” said Jaime Cura, president of the Chamber of the Real Estate and Builders Association and chief executive officer of the Creba-GSI, Inc., a company engaged in providing real estate and property development information, in reaction to Cordero’s projection. “Every research organization tends to say there’s going to be a glut. You go to Hongkong, property researchers there also say there’s going to be a glut [territory].”

But nothing is farther from the truth, says Cura, who thinks that developers always build with a little of bit of oversupply because nobody could predict the business cycle in the property market. Of course, many small players, he said, would lose their shirt when the bubble burst. In the Philippines, however, the residential sector, especially condominiums, does not seem to indicate a possible glut in the near term.

He attributes this trend to the rising inflow of money into the mid-range residential properties or properties ranging from P1.5 to P2.5 million, the payoff of their pioneering selling missions abroad particularly in the cities of Hongkong, Malaysia, Riyadh in Saudi Arabia, Singapore, Milan, Athens, London, and other cities where there are high numbers of OFWs. That is why, he said, sales of these condominium units have been growing at 30-40 percent in the last two years.

“When we started doing selling missions to reach the OFW market three years, many thought we were just having junkets,” said Cura, stressing that their efforts are now paying off for the entire real estate industry. It’s a strategy, he said, that is now being copied by most real estate companies including Ayala Land.

“Most of the developments were fully sold last year. I heard that in Manansala, a residential condominium developed by the Lopezes at Rockwell, 70-80 percent of the buyers are OFW. Due to the success of Manansala, the twin towers of Hoya, right beside Manansala is also doing very well among the OFW,” said Cordero. “Megaworld is doing the same for Forbestown Center as well as their developments in Cubao. They have setup offices in the United States, London, and Europe to reach the OFW markets.”

Even the hotels, residential resorts and leisure homes are getting a positive outlook from analysts. Cordero, for instance, said that values and prices for hotels may yet rise in the near future due to the continuing improvement in tourism arrivals. On the supply side there are few or limited developments in the pipeline. If there’s one niche that is slowly getting so much buzz, however, it’s in the residential resort and leisure homes.

“The major residential resort five years ago was just Punta Fuego in Batangas. The success of Punta Fuego has attracted other developers like Ayala Land,” said Cordero. SM is poised to do another Punta Fuego in Hacienda Looc, and other developers are looking into this market.”

Other major developments in 2006, Cordero said, would include Metro Pacific’s plans to reopen Cebu Plaza Hotel as a serviced apartment and medical facility for foreign retirees; the opening of an SM-owned hotel at SM Cebu City complex; a Shangrila Hotel and Resort to be situated in a 12-hectare Boracay prime land; a 580-room expansion by the Fairways and Bluewater Resort and Country Club; and another 80-room hotel by the Discovery Group.

Real estate developers like Creba tends to support the optimism for the residential resorts and leisure homes. Cura explained that China, with its rapidly expanding middle class, is looming as a huge market for these sea-side resorts in the Philippines. China doesn’t have good beaches, he said, and the Philippines could be the most likely destination of those Chinese tourists.

Analysts, however, do not seem to extend their favorable outlook on the retail property and industrial land markets. Cordero expects new completions in 2006 to further expand supply of retail space at a time when retail sales are flat. He said that narrowing margins among retailers are a major concern in the industry. The latest report by Collier International seems to indicate a continuing high vacancy rates, validating Cordero’s observations.

“As of end September 2005, the stock of retail space expanded by nearly 4 percent quarter on quarter to 3.87 million square meters with the completion of SM San Lazaro,” said the October Colliers Report ‘The Knowledge.’ “Manila-wide retain vacancy rate is estimated to have slightly increased to 13.1 percent from the previous quarter’s 13.0 percent.”

As to the industrial land market, Cordero said that continuing excess supply will continue to exert downward pressure on rents and prices. This is because, Cordero said, the proliferation of unplanned industrial estates all over the country.

“There are exceptions, of course, like the Laguna Technopark is looking to expand their industrial park, but basically locators are not new businesses,” he said. “These are present locators looking to expand their facilities within the park.

Thursday, January 12, 2006

Thank goodness its Friday!

(Picture downloaded from http://www.aeonflux.com/)

Thank goodness it’s Friday! And what am I going to do tomorrow? A movie is probably one good option. No, I’ll have nothing to do with that humongous monkey (Kingkong). Ill probably watch the chick instead, Aeon Flux. It’s not shown yet in the theaters because of that stupid film festival that prohibits the showing of foreign films for almost a month. But who cares? I can always settle for the pirated version (wink, wink).

I know, I know. It’s a lousy movie, story wise. But we are going to watch it, not for the story, but Charlize Theron. I don’t know but there’s something in this girl why I want to watch her films. I guess because, among the so-called "movie stars" or celebrities, she is one of the few blonds who doesn’t look dumb. Again, pardon the stereotyping.

But why complain about Aeon Flux’s terrible plot? I’ll watch it knowing it’s not Lord of the Rings or some high brow National Geographic documentary. I’ll be watching a cartoon. Yes, Aeon Flux was originally a cartoon with an offbeat and weird storyline. We are not supposed to complain about cartoons. Tom and Jerry is violent and senseless but I watched it a lot when I was younger. You don’t need a lot of neurons to appreciate Roadrunner. But hey, we just love that bird!

Happy weekend to all of you!

Wednesday, January 11, 2006

The church as bitchy free-rider!

It’s nice that the Catholic Church has started to meddle less in Philippine partisan politics now that the country’s “democratic exuberance” has started to brew so early in 2006. It’s possible that Joseph Ratzinger, the new pope, had told his troops here to focus their energies on evangelization instead. That’s a welcome change from the time of Jaime Cardinal Sin when the Church was practically kingmaker. Church people then were among the major political opinion makers of the day. Every priest and bishops had opinions on all earth-bound issues including human rights, feminism, gender, genetically-modified organism, environment, investments, population, international trade, Valentines Day despite the fact that most of them don’t have any expertise on these issues.

No problem there except the hypocrisy. While the bishops and priest are into campaigns against the State’s authoritarian impulses, the Church is by itself undemocratic. Bishops and priets speak about equality yet they don’t allow women to become priests. They speak about the “preferential option for the poor” knowing that they are making huge profits from their expensive, elitist schools. They fulminate about government’s failure to invest in necessary economic and social infrastructure, yet the Church does not pay taxes so vital in national development.

I believe in the separation of Church and State. But the Church can actually help solve the fiscal problem by voluntary paying taxes. They speak about honesty, about good governance, yet the Church does not provide the public duly-audited financial statements of her own collections from the people. Men of the cloth rant about gambling yet most of them receive contributions from PCSO and from gambling organizations.

I do rave and rant against the government oftentimes. I have the right to do so because I pay my taxes. I support the State with my money; the State has to pay me back with good governance. It’s that simple.

The party is one good metaphor. If you are an invited guest, you don’t rant and rave about the fly in the soup because it’s discourteous to do so. You just don’t eat the soup. In a restaurant, you have the right to complain because you paid for the meal with hard-earned money. The Church likes the excitement of bitching around every time while partaking of the political buffet with the full knowledge that someone else is paying for her meal.

More Filipinos are embracing globalization

The results of the recent Social Weather Stations (SWS) survey (released January 11, 2005) seem to confirm Filipinos changing view vis-à-vis foreign involvement in the Philippine economy. The survey says that 41 percent of Filipinos favors lessening restrictions on foreign participation in the economy, such as those on ownership of land and investment in mining and public utilities. Twenty two percent disapproves of said proposal.

“This is a significant change from the merely neutral 37% approval and 35% disapproval in the August 2004 Social Weather Survey on the general proposal to lessen restrictions on foreign investment in the Philippines,” says Mahar Mangahas, the president and founder of SWS.

About 15 years ago, according to Sergio Ortiz-Luiz, president of Philippine Exporters Confederation, the globalized” sector of the Philippine economy (e.g., merchandize trade, foreign direct investments, and overseas workers dollar remittances) was less than half of the country’s GDP. These days, remittances and merchandize exports alone constitute more than 60 percent of the country’s GDP. About 8 million Filipinos or ten percent of the country’s population are abroad working and sending home $12 billion dollars a year. Business process outsourcing (e.g. call centers, medical transcription) has been mushrooming in the last five years among the country's major cities. It's possible that the changing attitude of Filipinos regarding foreign involvement in economic sectors that are traditionally reserved for Filipinos (e.g. utilities, extractive industries, land) simply reflects this structural transformation.

Tuesday, January 10, 2006

Development means greater freedom

LET'S be clear about it: some of the data that the Heritage Foundation used to rank the Philippines in the 2006 "index of economic freedom" were erroneous and inaccurate.

The foundation castigated the Philippines for supposed 2004 "tsunami aid graft" when in fact the Philippines was not affected at all by the Indian Ocean tsunami that ravaged some near-shore communities in Indonesia, Thailand, Sri Lanka, India, Maldives, Myanmar, Malaysia and Seychelles. So there is nothing about "tsunami aid graft" to speak of. The last time the Philippines had tsunami was in 1976 and foreign aid then hardly came. It seems like this institution needs to brush up on its basic history and geography. Nevertheless, we agree with the argument that countries need to score high on "economic freedom" in order to attain long-term and sustainable economic growth.

It is clear that the Index of Economic Freedom is part of the foundation's advocacy toward "free enterprise, small government, individual freedom and traditional values." It is obvious that the institution subscribes to these principles for the outcome that they are supposed to catalyze—greater trade, higher economic growth and benefits that the bigger pie should generate.

Policy reforms, however, should go beyond that. We believe that—as put succinctly by Nobel Prize economist Amartya Sen from Harvard University—freedom should be the means and the end of development, and economic freedom should only be seen as one of the tools for achieving progress.

Definitely, there is a strong case for reforms in the country's trade and fiscal policy as pointed out in the report. Undue restrictions imposed on foreign investments are among the major reasons-besides the lousy infrastructure-why the Philippines has not been on the radar screen of foreign investors. And if there are two institutions that continuously give us black eyes in the international community, these are the Bureau of Customs and the Bureau of Internal Revenue.

Yes, we need to reform these institutions and policy regimes so we can remove constraints to entrepreneurship. To quote Amartya Sen, "We have good reasons to buy and sell, to exchange and to seek lives that can flourish on the basis of [market] transactions. To deny that freedom. . . would be in itself a major failing of society."

Nevertheless, we believe that economic freedom as defined by the report alone would not suffice to deal with the problems of developing countries like the Philippines. Contrary to arguments for "limited government," there is a stronger case for "bigger government" if only that should mean greater public expenditures for social services like better schools, infrastructure, adequate health facilities, social safety nets, and the continuing redistributive measures including agrarian reform.

In the United States , the conservative agenda has so far led to cutbacks in social services, the reason why tourists visiting American cities could see an ever increasing number of homeless wandering around aimlessly in parks and public spaces. It's a puzzling scene in a society that is known to be the most powerful country on earth, economically, politically, and militarily.

Following Sen's logic, there should be more government efforts at engagement to promote "transparency guarantees" that should ensure people's "freedom to deal with one another under guarantees of disclosure and lucidity." Without greater transparency both in the private and public sector, there would actually be less economic freedom. Yes, we want economic freedom but we also want a caring society.

Unleashing the Revolutions from Within and Beyond

We are happy that Cristina "Tinay" Bugayong (12 years old) got all those scholarship offers and washing machines after she found money (P300,000 worth of cash and checks) and returned it to its rightful owner. Her family is apparently hard-up. Yet she returned the money knowing that the same amount could have provided her family several days’ supply of basic needs like food. Definitely a good girl she is. She deserves all the media accolades and the spectacle that personalities and politicians created in order to ride on her new-found fame.

But wait a minute! Why should we go gaga over her when—poor or unpoor—she really has to return the money for the simple reason that it’s not hers?

Maybe it was a big deal because many of us have grown so cynical that we always assume that a person will always keep what he or she finds of value in some unlikely places all the time. So when the girl behaved otherwise, we were so surprised, even shocked. Some of us might have even derided her and her family for being “stupid” enough to return the money. Kuwarta na, naging bato pa! [It’s money turned to stone!] In a less insane society, the act of returning an item not one’s own would have been no big deal because people are naturally expected to behave honestly and in good faith without the expectations of receiving material rewards or extensive television coverage.

If there’s one thing that this Tinay episode has proven, it is that virtue—including honesty and good faith—seems to have become a rare commodity in this country. Yes, indeed, we should thank her for returning the money. But we should thank her more for exposing who we really are as a society and for telling us what changes we should take so we could catch up with the rest of the fast-growing world in the ever accelerating race to progress.

Don’t you ever wonder why we can’t seem to grow like our Tiger neighbors in the Asia-Pacific Region? It’s for this lack of honesty that we can’t seem to build good roads and bridges. Each one from top to bottom of the bureaucracy would always have his or her own cut in the infrastructure budget. It’s for this lack of honesty and good faith that investors are avoiding our shores. They know that they can’t trust our legal contracts as politicians and bureaucrats tend change their minds even before the ink used to sign the contract has dried.

Or maybe there are still a lot of honest people in our midst. Who knows? But if each day, one scam piles on top of the last one (e.g., Hello Garci, fertilizer scam, Piatco, overpriced highways, among many others) without some crooks going to jail for it, one could not simply help but be cynical. And this attitude easily rubs on to outsiders. These days, a lot of would-be investors perceive, rightly or wrongly, that many of our institutions, again for lack of honesty and good faith, are not doing their jobs. Many cops are not chasing the bad guys; they are with them. Soldiers are supposed to be chasing rebels and terrorists but some of the military officials are actually selling bullets to rebels and terrorists. Politicians are supposed to serve the public but are milking the bureaucracy for cash by favoring some vested interests. Many businesspersons are not creating wealth by entrepreneurial skills but by political deals. And priests and bishops are doing partisan politics when they are supposed to evangelize and refine our souls.

Of course, other factors that prevent investments from flowing abundantly in our direction are the limits and constraints we put on certain industries. We use all sorts of barriers: high tariff walls, negative list, nationality requirements, non-tariff barriers, customs regulations, phytosanitary regulations, among many others. And we use all sorts of excuses for these barriers—protecting “local” industry, infant industry protection, ensuring national security, environmental regulation, market failure, protecting local jobs, “nationalist industrialization,” among many others. We have been using all these barriers against entrepreneurship with the same excuses in more than half a century yet we have nothing to show for it. This is because those regulatory barriers are intended for nothing else but extorting bribes and facilitating smuggling.

Certainly the challenge is for us to make Tinay irrelevant. We shall have achieved this when corruption no longer pays and there are few opportunities for it. In the old days, people would storm the Bastille, send the bastards to the guillotine, or line them up against the walls and shot. This is no longer fashionable. But we can have the same “revolution from within” through gentler ways. We can start with schools by improving curricula, in churches by encouraging priests to preach conversion rather than hate and politics, in governance by ensuring transparency and by not allowing pretenders and usurpers to capture and hold political power, by strengthening the judiciary and other social institutions like media. Certainly, civic society could help through their old and tested “conscientization” or “arouse-organize-mobilize” techniques and alliances with reform-minded legislators and politicians (if ever there is such a creature!).

We should encourage progrowth policies, e.g., low and neutral tariff policy, replacement of fiscal incentives with low corporate tax, removing unnecessary barriers to foreign investments, introducing more competition in banks and services, and removing all barriers to entrepreneurship. We should also go for greater connectivity with the rest of the world through greater trade, engagements in multilateral institutions, and accelerated adoption of information and communications technologies. That way, we could also achieve what Thomas Friedman, author of the bestseller The Lexus and the Olive Tree, calls a “revolution from beyond” by imbibing the best practices, the international standards, and the rules-based systems that made rich countries practically graft-free and rich. How? Because foreign investors will always tend to demand transparency, internationally-accepted standard, and predictable rules before they would put their investments here. Even international institutions these days demand improved governance standards before granting loans for development projects.

When there is sustained growth generated by policy reforms and greater connectivity with the world, the ranks of the middle class expand and, according to political scientist Thomas Barnett, there would be more people to forcefully demand transparency and better governance. They have all the incentive to be vigilant for fear of losing their new-found affluence to corruption and rent-seeking. And isn’t it that in history, societies experiencing long-term growth—according to Benjamin Friedman’s recent bestseller The Moral Consequences of Economic Growth—tend to be virtuous?

Sunday, January 08, 2006

Lover with an Ax to Grind, Literally (Or the exciting lives of English Language Translators)

(Up: Lonnie Hilliard and Judith Kliks; down: David Pitts at the background)

Having lots of friends is certainly one of the great rewards of traveling beyond the borders. Until now, I’m constantly in touch with David Pitts (US), Lonnie Hilliard (US), Judith Kliks (US), Ramya Kannan (India), Aor Buaklee (Thailand), and Esther Lu Fang-liang (Taiwan). Ocassionally I also got emails from Segun Adio (Nigeria), Martin Rodriguez (Guatemala), Akilesh Roopun (Mauritius) and Marynna Rakhlei (Belarus). Recently, I got Christmas messages from Pamela (Kenya), Rolando Barbano (Argentina), Gloria Caleb (Pakistan), Suzanne Sheppard (Trinidad and Tobaggo).

Lonnie, David, and Judith were our “English Language Officers” (ELO) during our trip to the US under the 2005 International Visitors Program sponsored by the State Department. The title sounded like “interpreters” but they actually do more than that. Before my flight, Marilou from the US embassy in the Philippines said we can ask them all sorts of questions—like where’s the nearest coin laundry shop. They turned out to be our tour guides, sounding boards, friends, intellectual sparring partners, and nannies rolled into one. In New York, David played nurse to Salim Biryetega, editor of The Message (Uganda) who got seriously ill. David had to stay sleepless with him in the hospital overnight.

I remember Lonnie telling me how, in one of his previous assignments, he had to bail one participant out of jail after the cops arrested the guy for a “crime” related to the affairs of the heart. The guy fell in love with a female participant but she was not interested. Desperate, he tried to get the girl’s attention by tearing the door apart with the hotel’s emergency ax. With sirens blaring, the cops came and our lovesick international visitor had to enjoy jail hospitality for the night. Lonnie got him out a day after. But Lonnie said he has no regrets. He thinks he has the best job in the world. Being an ELO gives him a lot of opportunities to meet people from different cultures—“and from different love temperaments,” he said, grinning from ear to ear.

Who was that crazy lover? “No way, David. You can only get that information from me over cases of beer,” he said. Beers flowed abundantly like the surging waters off the Gulf of Mexico during those spontaneous beach parties in Tampa and Saint Petersburg (Florida) but I never had the chance to ask. Maybe, I was always too drunk to try.