NOW that the Board of Investments (BOI) and the Bureau of Internal Revenue (BIR) have admitted that they were giving tax holidays to every Tom, Dick and Harry without asking why, it’s high time for Congress to take over and launch a thorough investigation on the matter.
Right now, Congress is trying to reform the country’s fiscal incentive system through the “fiscal rationalization” bill and it would help if they first get to the bottom of this issue. Congress should do it not just “in aid of legislation” but in pursuit of economic equity and social justice!
The other day, Trade Undersecretary Elmer Hernandez told our reporter Max de Leon that some companies are enjoying income tax holiday despite the fact that they are not eligible to get these perks. Each year, the country loses about P300 billion in forgone revenues—and part of this forgone amount goes to those who don’t deserve them because, as Hernandez admitted, many of those who availed themselves of the fiscal perks were not entitled to them.
Hernandez said the government lost billions because the BIR just allowed income tax holiday claims in their income tax returns even without proof from the BOI that the claimants were really eligible for the perks. He seems to be telling us that it’s just a simple, honest mistake, or one caused by sheer inability of state agencies to get their act together or streamline their systems owing to the great burden of their work.
We don’t think so. We believe a large part of such neglect grows out of corruption that has been plaguing the country’s fiscal-incentive system since the last several decades.
We don’t think bureaucrats from the BOI and the BIR are people who are naïve enough to allow these shenanigans to get through under their noses unless some people deep within these bureaucracies are benefiting financially from it.
The questions right now are the following: What are those companies that stole from the country’s coffers? Who in the BIR approved their ITH claims? How much money did the country lose to what companies since the President Aquino Executive Order 226? And why is it that BOI doesn’t seem to have any idea about how the country’s incentives system is being implemented? How about the Peza’s incentive system? These are questions that boggle our mind.
This blatant abuse of the fiscal incentives system is almost criminal. For years, the country, nay the Filipino people, have been suffering from poverty and lack of economic opportunities for the simple reason that the State could not provide good economic and social infrastructure. Bureaucrats have been telling us ordinary mortals that the government needs to collect more taxes “to finance development” and we were foolish enough to agree to a higher VAT rate on all the things we buy with our slave wages. Little did we know that while these bureaucrats were taking away food from the mouths of our children, they gave away hundreds of billions of pesos worth of income tax holidays to favored friends and clients, including to ones not entitled to the fiscal perks in the first place.
God knows how much money bureaucrats from the BIR and the BOI and other “investments promotions agencies” are really giving away to favored companies. For all we know, they have been giving away the Filipino nation’s birthright, probably the main reason why we can’t seem to achieve economic takeoff despite a favorable external economic environment.
In the last 20 years, BOI, the Philippine Economic Zone Authority and several other “investments promotion agencies” have been giving away all sorts of perks—income tax holiday; duty-free importation of machines and equipment; exemption on duties and taxes on imported spare parts; exemption from wharfage dues and export tax, duty, imposts and fees; tax exemption on breeding stocks and genetic materials; tax credits; and additional deductions from taxable income—and we can’t seem to account for their impact on the Philippine economy and our future as a nation.
Agencies like the National Economic and Development Authority, the Department of Finance, and the Department of Trade and Industry cannot account for the real contribution of these perks to economic development because they may have been designed as a vehicle for rent-seeking behavior in the bureaucracy. Amid this flurry of perks are a tangle of almost 200 other laws and executive orders giving privileges to companies to claim more fiscal perks from the country’s coffers for several other economic activities ranging from the production of steels and ships and jewelries. This confusing snarls of laws and regulations and the apparent lack of transparency with which these agencies implement them suggest that abuses like double-dipping (claiming perks for the same projects from several laws and agencies) and the brazen act of collecting perks for investment projects that were not even registered with the BOI are prevalent.
Right now, the DTI does not want to release detailed information about the issue because “they are still completing their findings.” Congress should not wait for that report before acting on behalf of the Filipino people.
Monday, October 30, 2006
Imports figures say economy is on track
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Imports rose more than ten percent in January-August this year, allaying fears of a possible slowdown late this year. It’s encouraging to note that purchases of capital equipment also rose significantly at more than 8 percent. It means our business people are buying machines and equipment for their factories and offices, an indicator of business confidence. But is it enough to reverse the decline in capital formation? That's the big question that could only be answered with the release of national income accounts in the third quarter.Notable increases in capital imports could be noticed particularly in telecommunications equipment and electrical machines, as well as aircraft, ships and boats. This means the telecom boom in this country is continuing. The drive towards the 3G is one possible factor for this trend.
Friday, October 27, 2006
It's time to move on
Now that the Supreme Court has rejected Sigaw ng Bayan’s petition for Charter change through the “people’s initiative,” let’s bury that effort deep into Hades and move on with our lives.
If there’s one major political issue that’s dividing the country and has prevented the government from focusing its energies on the Philippine economy, that’s the Cha-cha. Let’s now consign it to the dustbin of history. Let’s work together as a nation to focus on the economy where we could really make a difference in the lives of ordinary people.
Actually, the Filipino people have moved on a long time ago and focused on what really matters most—their means of living. In the 10 quarters the Philippine economy has been growing within the 5-percent to 6-percent growth rate band despite all the handicaps of having to put up with corrupt leaders and perpetually squabbling politicians. And it’s quite a broad-based effort as the farms, factories and services all contributed significantly.
Our entrepreneurs, despite all the odds, moved heaven and earth to set up as well as attract investors in call centers, shared services, software developers and electronics if only to provide job opportunities and hopes to young college graduates.
Sick and tired of negativism and continuing tales of corruption in high places, many of our countrymen, many of them women, have left the country to slave it out as domestic helpers, nurses, engineers and service workers so they could send back dollars to their families and save the country from tearing apart. The government, the State and its leaders, have failed them but those OFWs can’t afford to fail their families so they just closed their eyes and out they went to endure loneliness and hard work in foreign shores.
Now, the entrepreneurs’, the farmers’ and OFWs’ money are lifting the economy out of its boom-bust cycles, creating demand for goods and services, giving life and more profits to factories, banks, hotels and restaurants, and shopping malls. Certainly, these gains are not enough to create a million jobs and soak up joblessness, but the people have done a lot of their own to kick-start an economic revolution that may yet lift the economy into a higher growth path if only the country’s political leaders would cooperate.
Yes, in the last 10 quarters, the economy—and we call it a people’s economy because it has been moving steadfastly on autopilot —grew amid declining capital expenditures from the government. Yes, the people—the entrepreneurs, including foreign investors; the working people in offices, farms and factories; and OFWs have moved on and tried hard to do business and create jobs while bureaucrats and politicians holding the levers of power are preoccupied with nothing but their day-to-day political survival.
And yes, the people sacrificed a lot by agreeing to a higher value-added tax if only the country’s finances could rise up beyond the shortsightedness of their political “leaders.”
Now, it’s high time that our political leaders, especially those in the ruling party, perform their own “sacrifice” by reining in their irrational political exuberance and focus their energies on the economy. Right now, the Philippine economy has reached a stage where shifting to a higher growth path requires a constructive role for the State, something that it has failed to do in the last three years.
In 2001, the country’s national government deficit was equivalent to 4.1 percent of the country’s gross domestic product (GDP). By this time of the year, the government’s national deficit is down to about 2 percent of the GDP, an indication that the people have done their share of moving this country forward.
We are not saying here that we should forget all about the sins of the malefactors in this government. Certainly we still want to have real closure to the Bolante fertilizer and other scams. We are saying that the rule of law should proceed to its due course while doing away with the unnecessary political distractions that could derail the country from its path to development. Surely, the political questions will linger. But we should let the May election next year and other legal procedures available to the opposition settle those political questions.
We are not blind to the arguments for economic reforms advocated by the proponents of Cha-cha. Indeed there is a need to remove the remaining obstacles to entrepreneurship and investments in this country. The main problem that stops us from supporting this effort is its political complications. When “economic reforms” are clouded by political opportunism, such a process of change loses credibility and therefore creates uncertainty that hampers economic expansion.
Some Cha-cha proponents say we need to dance the Cha-cha now or we lose the chance forever. We share their concern for stasis, but we believe that if the economic reforms being pushed through Cha-cha are really such good ideas, they are going to have a momentum of their own. No one could stop the flow of good ideas; they are going to gain flesh, blood and passion at the right time sans the baggage of partisan political considerations.
Stability, continuity and order. That’s what the country needs now.
If there’s one major political issue that’s dividing the country and has prevented the government from focusing its energies on the Philippine economy, that’s the Cha-cha. Let’s now consign it to the dustbin of history. Let’s work together as a nation to focus on the economy where we could really make a difference in the lives of ordinary people.
Actually, the Filipino people have moved on a long time ago and focused on what really matters most—their means of living. In the 10 quarters the Philippine economy has been growing within the 5-percent to 6-percent growth rate band despite all the handicaps of having to put up with corrupt leaders and perpetually squabbling politicians. And it’s quite a broad-based effort as the farms, factories and services all contributed significantly.
Our entrepreneurs, despite all the odds, moved heaven and earth to set up as well as attract investors in call centers, shared services, software developers and electronics if only to provide job opportunities and hopes to young college graduates.
Sick and tired of negativism and continuing tales of corruption in high places, many of our countrymen, many of them women, have left the country to slave it out as domestic helpers, nurses, engineers and service workers so they could send back dollars to their families and save the country from tearing apart. The government, the State and its leaders, have failed them but those OFWs can’t afford to fail their families so they just closed their eyes and out they went to endure loneliness and hard work in foreign shores.
Now, the entrepreneurs’, the farmers’ and OFWs’ money are lifting the economy out of its boom-bust cycles, creating demand for goods and services, giving life and more profits to factories, banks, hotels and restaurants, and shopping malls. Certainly, these gains are not enough to create a million jobs and soak up joblessness, but the people have done a lot of their own to kick-start an economic revolution that may yet lift the economy into a higher growth path if only the country’s political leaders would cooperate.
Yes, in the last 10 quarters, the economy—and we call it a people’s economy because it has been moving steadfastly on autopilot —grew amid declining capital expenditures from the government. Yes, the people—the entrepreneurs, including foreign investors; the working people in offices, farms and factories; and OFWs have moved on and tried hard to do business and create jobs while bureaucrats and politicians holding the levers of power are preoccupied with nothing but their day-to-day political survival.
And yes, the people sacrificed a lot by agreeing to a higher value-added tax if only the country’s finances could rise up beyond the shortsightedness of their political “leaders.”
Now, it’s high time that our political leaders, especially those in the ruling party, perform their own “sacrifice” by reining in their irrational political exuberance and focus their energies on the economy. Right now, the Philippine economy has reached a stage where shifting to a higher growth path requires a constructive role for the State, something that it has failed to do in the last three years.
In 2001, the country’s national government deficit was equivalent to 4.1 percent of the country’s gross domestic product (GDP). By this time of the year, the government’s national deficit is down to about 2 percent of the GDP, an indication that the people have done their share of moving this country forward.
We are not saying here that we should forget all about the sins of the malefactors in this government. Certainly we still want to have real closure to the Bolante fertilizer and other scams. We are saying that the rule of law should proceed to its due course while doing away with the unnecessary political distractions that could derail the country from its path to development. Surely, the political questions will linger. But we should let the May election next year and other legal procedures available to the opposition settle those political questions.
We are not blind to the arguments for economic reforms advocated by the proponents of Cha-cha. Indeed there is a need to remove the remaining obstacles to entrepreneurship and investments in this country. The main problem that stops us from supporting this effort is its political complications. When “economic reforms” are clouded by political opportunism, such a process of change loses credibility and therefore creates uncertainty that hampers economic expansion.
Some Cha-cha proponents say we need to dance the Cha-cha now or we lose the chance forever. We share their concern for stasis, but we believe that if the economic reforms being pushed through Cha-cha are really such good ideas, they are going to have a momentum of their own. No one could stop the flow of good ideas; they are going to gain flesh, blood and passion at the right time sans the baggage of partisan political considerations.
Stability, continuity and order. That’s what the country needs now.
Tuesday, October 24, 2006
That messy MISSI!
Four months into Christmas, the average capacity utilization of selected manufacturing enterprises remained high at 80.3 percent. That's good news, an indicator that the manufacturing sector has been pretty stable. But wait a minute! Why is it stable when it's supposed to move upwards? In the last ten quarters, the manufacturing sector has been growing at 4-5 percent. That means factories should be busier. But why is not reflected in the Monthly Survey of Selected Industries (Missi)? Something must be wrong somewhere.
Another question: why is it that for the last eight months, the volume of output has been declining? Of course, the computation of the national accounts is probably based on value, and the value of output has been growing quite well. But that's not an adequate explanation. Merchandize exports have been growing briskly in the last eight months. That means there's a real expansion in factory activities! But why is it not reflected in the Missi?
It's possible that the Missi is based on an old sampling structure that no longer reflect the new dynamics of the Philippine. Or its possible that private business organizations dont just tell the truth when the NSO people came.
Another question: why is it that for the last eight months, the volume of output has been declining? Of course, the computation of the national accounts is probably based on value, and the value of output has been growing quite well. But that's not an adequate explanation. Merchandize exports have been growing briskly in the last eight months. That means there's a real expansion in factory activities! But why is it not reflected in the Missi?
It's possible that the Missi is based on an old sampling structure that no longer reflect the new dynamics of the Philippine. Or its possible that private business organizations dont just tell the truth when the NSO people came.
Monday, October 23, 2006
Third World telecom, first world charges!
WE support the efforts of the Philippine government, specifically the National Telecommunication Commission (NTC), to make the country’s telecommunications industry competitive and efficient.That policy environment is long overdue. Had we established an open and competitive policy environment for the telecommunications sector—nay, for the entire services sector— a decade or two ago, this country could have been growing as fast as India and China by now. We have missed a beat in the ongoing Information Revolution but it’s not yet too late to catch up. The government may not have the money to “upgrade” this country into the 21st century, but it could certainly do so by ensuring a competitive environment through several measures including disincentives to predatory practices and abuses. And why not go all the way by opening everything 100 percent to foreign direct investments?
The Philippine economy, and the entire Filipino nation for that matter, is better off in a more competitive policy environment for all economic sectors, not just telecommunications. Such a policy environment assures easy entry and exit, and therefore would allow more innovative players to emerge, thus offering better and cheaper value-added services that will benefit the entire economy. Open competition ensures the economic diversity that this country needs to grow and mature as well as withstand potential shocks from an increasingly globalizing world. Besides, open competition and greater economic diversity benefits all Filipinos in terms of choices. Right now, many Filipinos go abroad the moment they have the opportunity to do so because they feel powerless vis-à-vis factors like lack of career choices, lack of clear direction for the economy, and the utter inefficiencies of structures and institutions affecting their lives that could be linked to the country’s economically restrictive policies.
Right now, the Philippines is considered the “texting capital of the world.” But that’s an ironic reputation since the Philippines right now has among the highest or the most expensive telecommunications charges in the Asia-Pacific Region. According to the latest study by the Asian Institute of Management (AIM), overseas calls to the United States now cost US$0.90 for every three minutes—yes, that’s P45 pesos per three minutes—against $0.48 in India and $0.71 in Malaysia, our closest competitors in the outsourcing business. To call the US, the Canadians ($0.48 per 3 minutes), the Irish ($.59 per three minutes), and the British ($.65 per three minutes) are charged even lower rates than us Filipinos who are dirt poor! It’s these skyrocketing telecommunications charges that are forcing us to do the finger-breaking task of encoding letters into those tiny keypads one by one so we could send important messages to our loved ones.
In this country, however, companies are making money from the sale of cellular-phone units alone, the cheapest of which could cost nearly $200. In India, the typical cellular phone handset would cost as much as US$60. In other countries like the United States, telecom companies would even give away cellular phones for free if only to get subscription. Telecommunications companies would move heaven and earth just to please their clients.
This is now the 21st century, where wealth is created through innovation as well as the creation of knowledge. Access to information, specifically the Internet, is vital to progress and development. But what we have in this country right now is the deepening of the digital divide, where the rich who are few are getting the best of the digital world while the poor could not even think beyond three square meals a day. Again, that’s because of the uncompetitive situation in this industry. Right now, according to the AIM, Filipinos also bear the highest Internet charges in the region. On a monthly basis, Filipinos pay about US$17.05 for Internet services as against $8.74 a month for Indians, $8.42 a month for the Malaysians, $10 for the Chinese, $12.71 for Canadians, and $14.95 for Americans.
For a very poor country with just over a thousand dollars of per capita income, Filipinos are paying telecom and Internet charges way above what is being paid by citizens in the First World countries, who enjoy per capita incomes ranging from 10 thousand to 30 thousand dollars! And most of us don’t even enjoy the benefits of real broadband that most of these neighboring countries have. Why should Filipinos continue to put up with these, when they certainly deserve better?
Many of us still wonder why we can’t seem to catch up with our neighbors in the Asia-Pacific Region. The major reasons for this continuing underdevelopment lie with these realities. Not only do we have the most expensive electricity, we also have the most expensive telecommunications and Internet services, thus ranking us among the most expensive places to do business.
Right now, we still attract lots of investments in cyberservices. But that’s because skilled labor here is dirt cheap. So are the prices of real- estate. But once the supply of skilled professionals and technical people tightens, wages will rise. So will real-estate prices, especially now that occupancy rates in major urban centers are approaching 100 percent. That will push up business cost in the Philippines higher than places like India, Malaysia and Vietnam. That in turn will turn away cyberindustries from the Philippines. Our skilled professionals and technical people will probably follow them through global migration should that happen. That will be the tragedy of us all.
The choices therefore are clear: reform and be competitive—or perish.
Thursday, October 19, 2006
Philippine export numbers are looking good!
The Philippine merchandize exports rose 17 percent year-on-year in January to August this year. Now, that's real good news for the Philippine economy. The reasons? Electronics exports are doing well. So are other sectors including minerals, liquified petroleum gas, transmission applications, electrical machinery, bananas, basketwares, wiring sets, copper bars and rods, and crude coconut oil. That means the growth in exports are pretty broad-based.It appears that the main sources of growth in the Philippines have been diversifying quite fast lately. Besides merchandize exports, services exports (outsourcing) and remittances from overseas workers are contributing significantly. Nice to know things are improving this side of the Pacific.
American national security experts don't know the difference between Sunni and Shiite!
"Know thy enemy, know thyself. A hundred battles fought a hundred battles won. That’s classic Sun Tzu. Everybody who is into the war business or intelligence knows that, right? American “national security experts” who are prosecuting the war on terror therefore should know the difference between Sunni and Shiite, right? Wrong. In fact, most of them don’t know a damn thing. In his article in Washington Post, Jeff Stein lamented:
And as I quickly explain to my subjects, I’m not looking for theological explanations, just the basics: Who’s on what side today, and what does each want?
But so far, most American officials I’ve interviewed don’t have a clue. That includes not just intelligence and law enforcement officials, but also members of Congress who have important roles overseeing our spy agencies. How can they do their jobs without knowing the basics?
That answers our questions why George Bush’s “democratization” project in the
“Truly, we are governed by idiots!,” cries Americablog.com.
The new refurbished Blogger is cool!
Seems like I'm back actively blogging with blogger now that it has new cool features. I've started with Blogger November 29 last year. But as I got deeply into blogging, I realized its features are inferior compared to other platforms like Wordpress. So I strayed into Wordpress and Multiply from which I developed a new online social networks. With these new features, however, I guess I'll be back. Multiply of course is a totally different experience and I'll continue posting personal stuff there. Here in Blogger, I'll continue tackling the usual "serious" stuff I've been doing since last year.
For you guys in Blogger.com, thanks a lot!
For you guys in Blogger.com, thanks a lot!
Wednesday, October 18, 2006
Christmas is in the air!
Siberian winds are blowing; Christmas is in the air.
RP's fundamentals are improving but fundamental problems linger
Thursday, October 12, 2006
Mixed signals on fiscal incentives
We hope that President Gloria Macapagal Arroyo (GMA) was just talking in general terms to soothe the nerves of business people who attended workshop on foreign direct investment in the Philippines organized by the American Chamber of Commerce.
The president said that “our policy is to keep and improve the incentives the Philippines offers strategic foreign and domestic investors, especially exporters. The incentives need not be fiscal. The incentives you want are the competitiveness element: the workers being paid well enough in terms of affordable food; the technology, in other words, our continuing knowledge worker richness in our economy; the infrastructure; the power; and the reduction in the red tape. “
And on fiscal incentives she said: “let us assure you too that the Philippines will not become less competitive in the fiscal incentives we offer our foreign and domestic investors. I know some of your worries that's why I want to assure you that we will not support proposals that have that effect of reducing competitiveness.”
Anybody who follows the debate on the fiscal rationalization bill now being discussed in the Senate would find those statements confusing. On one hand, she was saying that competitiveness ultimately depends on a much broader range of factors like the state of infrastructure, overall policy environment, among others. This has been the argument by the economists who think it’s high time we junk the current fiscal incentives system that has been causing a lot of hemorrhage in the country’s revenue collection system. Each year, based on data from the Department of Finance, the country has been foregoing collection of at least P300 billion a significant part of which are probably redundant and unnecessary. Had the country been able to collect at least half of that, so the argument goes, we could have accumulated a significant amount of money to fund the building of more roads, bridges, and other important infrastructure. Doing this would mean that we achieve “fiscal consolidation,” obtain better sovereign ratings that would guarantee easier and cheaper access to global capital for both the public and private business organizations.
But on the other hand, she seems to be saying she is going to junk the bill being discussed at the Senate ways and means committee, one major proposal of which, is the removal of income tax holidays granted to firms registered with the Board of Investments, to be replaced with a uniform 15 tax percent rate. Some companies and business organizations have been worried that the removal of their income tax holidays would undermine their competitiveness. If President Arroyo was actually to talking to this crowd, then certainly she is telling Senate that their deliberations are going nowhere as she is bent on maintaining the status despite here earlier commitment to reform the country’s fiscal incentive system.
But then again, we don’t really know. She may have been saying that broader economy-wide incentives are in the offing. For instance, what prevents the country from simplifying the incentives regime by wholesale reduction of corporate income tax from the current 36 percent to say 15 percent a la Hongkong and Ireland? Certainly, that will be more attractive to investors as they no longer have to see the face of bureaucrats when setting up their operations here. That policy option shoots several birds in one stone: you address red tape (you could even abolish many of these agencies including the BOI), ensure transparency, and speeds up the process of setting up business.
But who knows? So until this time, the uncertainty continues. And it’s sending a mixed signal to the Senate ways and means committee that is currently crafting the fiscal rationalizations bill. When legislators started discussing the fiscal incentives rationalizations bill, the mood from Malacañang has been towards improving the country’s finances. Now, Malacañang is singing a confusing tune, something that will confuse the investor community even more. It’s this uncertainty that actually drives away foreign investors.
Is there a way out? Joachim von Amsberg, country director of the World Bank in the Philippines, has a concrete set of solutions during that worshop. Allow us to site a few:
First, ensure macroeconomic stability and fiscal sustainability (efficient collection of taxes). Second, continue deregulation in the economy (which could mean no more oligopoly in shipping and port operations). Third, move away from sector or firm specific to economy wide deregulation and incentives (read: why not provide incentives for everybody through a lower corporate income tax across the board?). Fourth, uphold the sanctity of contracts (a contract is a contract is a contract!). Fifth, reduce cost of doing business (no red tape, speed up court processes, no graft). Sixth, ensure open and competitive bidding (no under the table deals). And seventh, further liberalize foreign entry into the financial services sector (read an end to the banking oligopoly).
If we could achieve most of these recommendations, we may realize we may not even need “fiscal incentives.”
The president said that “our policy is to keep and improve the incentives the Philippines offers strategic foreign and domestic investors, especially exporters. The incentives need not be fiscal. The incentives you want are the competitiveness element: the workers being paid well enough in terms of affordable food; the technology, in other words, our continuing knowledge worker richness in our economy; the infrastructure; the power; and the reduction in the red tape. “
And on fiscal incentives she said: “let us assure you too that the Philippines will not become less competitive in the fiscal incentives we offer our foreign and domestic investors. I know some of your worries that's why I want to assure you that we will not support proposals that have that effect of reducing competitiveness.”
Anybody who follows the debate on the fiscal rationalization bill now being discussed in the Senate would find those statements confusing. On one hand, she was saying that competitiveness ultimately depends on a much broader range of factors like the state of infrastructure, overall policy environment, among others. This has been the argument by the economists who think it’s high time we junk the current fiscal incentives system that has been causing a lot of hemorrhage in the country’s revenue collection system. Each year, based on data from the Department of Finance, the country has been foregoing collection of at least P300 billion a significant part of which are probably redundant and unnecessary. Had the country been able to collect at least half of that, so the argument goes, we could have accumulated a significant amount of money to fund the building of more roads, bridges, and other important infrastructure. Doing this would mean that we achieve “fiscal consolidation,” obtain better sovereign ratings that would guarantee easier and cheaper access to global capital for both the public and private business organizations.
But on the other hand, she seems to be saying she is going to junk the bill being discussed at the Senate ways and means committee, one major proposal of which, is the removal of income tax holidays granted to firms registered with the Board of Investments, to be replaced with a uniform 15 tax percent rate. Some companies and business organizations have been worried that the removal of their income tax holidays would undermine their competitiveness. If President Arroyo was actually to talking to this crowd, then certainly she is telling Senate that their deliberations are going nowhere as she is bent on maintaining the status despite here earlier commitment to reform the country’s fiscal incentive system.
But then again, we don’t really know. She may have been saying that broader economy-wide incentives are in the offing. For instance, what prevents the country from simplifying the incentives regime by wholesale reduction of corporate income tax from the current 36 percent to say 15 percent a la Hongkong and Ireland? Certainly, that will be more attractive to investors as they no longer have to see the face of bureaucrats when setting up their operations here. That policy option shoots several birds in one stone: you address red tape (you could even abolish many of these agencies including the BOI), ensure transparency, and speeds up the process of setting up business.
But who knows? So until this time, the uncertainty continues. And it’s sending a mixed signal to the Senate ways and means committee that is currently crafting the fiscal rationalizations bill. When legislators started discussing the fiscal incentives rationalizations bill, the mood from Malacañang has been towards improving the country’s finances. Now, Malacañang is singing a confusing tune, something that will confuse the investor community even more. It’s this uncertainty that actually drives away foreign investors.
Is there a way out? Joachim von Amsberg, country director of the World Bank in the Philippines, has a concrete set of solutions during that worshop. Allow us to site a few:
First, ensure macroeconomic stability and fiscal sustainability (efficient collection of taxes). Second, continue deregulation in the economy (which could mean no more oligopoly in shipping and port operations). Third, move away from sector or firm specific to economy wide deregulation and incentives (read: why not provide incentives for everybody through a lower corporate income tax across the board?). Fourth, uphold the sanctity of contracts (a contract is a contract is a contract!). Fifth, reduce cost of doing business (no red tape, speed up court processes, no graft). Sixth, ensure open and competitive bidding (no under the table deals). And seventh, further liberalize foreign entry into the financial services sector (read an end to the banking oligopoly).
If we could achieve most of these recommendations, we may realize we may not even need “fiscal incentives.”
Monday, October 09, 2006
City in a cage
WHAT is Bayani Fernando trying to prove? That Filipinos are animals that need to be controlled, manipulated through cages, bullying cops and physical barriers?
At the rate he is erecting visually intrusive iron cages in every corner of the metropolis, we will wake up one day to find our cities destroyed and freedom of movement curbed liked chicken trapped in a wire.
When President Arroyo appointed Fernando chairman of the Metropolitan Manila Development Authority (MMDA) in 2001, many residents hoped he could replicate, albeit on limited basis, what he has achieved in Marikina. Until now, Marikina is tidy, orderly and well-managed, proving to the world that Filipinos could actually clean up their surroundings, provided they elect leaders with common sense and with the will to implement zoning ordinances, rules and regulations. It ranks among those well-governed places like Puerto Princesa and Naga, cities smart enough to elect innovative and effective leaders.
When Fernando started cleaning up sidewalks by removing physical barriers to human traffic we applauded him. Here was a guy who means business, who doesn’t care about being unpopular if only to bring comfort to pedestrians.
We supported him when he started going against those grimy, topless drunks drifting around, vexing passersby. And, even if it looked so much like a publicity stunt, companies supported him by donating deodorants in his efforts to rid the streets of sweaty, stinking sando-wearing jeepney drivers. Surely, we need cleanliness in the streets and the drivers’ armpits are the most strategic places to start if we have to bring Metro Manila into the 21st century.
In an urban setting people should respect their fellowmen by behaving accordingly. That’s the essence of urbanidad (urbanism), the catchphrase with which Fernando justifies his actions. In simpler terms, urbanism means people should be taught the sophistication needed to live in crowded urban areas. It means people should not litter, not urinate against the wall, use the traffic lights; pedestrians should cross only on pedestrian lanes, should not engage in long, loud karaoke sessions in the neighborhood, or let their dogs relieve themselves on sidewalks. Most important, drivers should follow traffic laws. In all this, public education would play a big role.
Under Fernando, we had higher expectations that—together with Manila’s mayors and barangay chairmen—he would embark on a serious campaign to promote this behavior among Metro Manilans. He had the support of well- meaning citizens and the corporate world to catalyze an Urban Revolution.
We knew he did not have the charm of a Juan Flavier when he was at the Department of Health, but at least we expected even a fraction of Flavier’s ability to get things done without bullying people. Who can argue that Filipinos are among the most hard-headed people, and our drivers are always held up as models of road barbarism? But Flavier proved that even a hard-headed populace, if educated and motivated enough, could be prodded to act for its own sake. Defying skepticism, he organized the world’s first multivaccine national immunization campaign, and achieved universal coverage for it, drawing praise from the UN no less. Flavier succeeded even with modest resources because he multiplied his charm—he got private firms and other state agencies to help; got the military and communist rebels to honor a nationwide cease-fire just to let health workers reach remote villages; and got mass media to give free services and air time.
Since Fernando was an organization man and seemed to have the right vision, people reposed hope in him as they did with Flavier. Instead, he embarked on inane projects that distracted people from their noble purpose: pink urinals, the wet blankets to force people into using the sidewalks, U-turn slots, and lately, the pink cages to herd weary commuters into buses. The pink urinals are ugly and stink, the wet blankets downright fascistic, and the cages visually intrusive and mean—all of them don’t achieve the desired results.
Citizens thought Fernando’s pink urinals were just temporary, to be replaced later by better comfort rooms, and complimented by a massive awareness program. It turned out later the pink urinals are the end-all and the be-all—institutionalizing an inappropriate behavior that should have no place in an urban context. If he wanted to eliminate pissing against the wall, all he had to do was look at Manila Mayor Lito Atienza who eliminated the pink urinals and installed clean comfort rooms in the right places in Manila.
Metro Manila is going against the trend of modern urban traffic management. Instead of computerizing the traffic system, and educating traffic enforcers and pedestrians, Fernando had a simple solution: the U-turn slot. Without consulting traffic planners, he erected them all over the metropolis, causing traffic chokepoints at strategic areas. Traffic engineers say that installing a U-turn slot creates more traffic-flow conflict and therefore prone to traffic accidents.
But the nastiest of them all are really the pink cages. You could see them quickly expanding all around Metro Manila now, especially in central places like Quezon Avenue and Edsa and Baclaran. Garish and ugly, these cages restrict a pedestrian’s movements, causing inconvenience among people at peak hours. A commuter who disembarks on Quezon Avenue—especially the MRT station—during rains will have to suffer long walks through the cages if only to get a ride. The junction at the corner of Edsa-Quezon Avenue itself, a public space, is now an ugly parking garage for taxis and jeepneys peddling their services to passengers who walk along the narrow, caged and crowded pathways.
Why do they need the cage? Because the U-turn slot at the intersection of Quezon Avenue and Edsa has become a chokepoint, so they’d rather control people if they can’t control the vehicles. So here is a case of one silly measure, a U-turn slot, being compounded by another silly one like the cage. We are not even talking here of aesthetics, which those pink cages have totally destroyed. Come to think of it, Binay’s Makati also has fences for traffic control, but they are nowhere near as repulsive as the pink chicken cages at Edsa. Beyond aesthetics and inconvenience, there’s also safety: not a few people complain that the “cages” make them easy prey for robbers, who can easily stick a knife into them in certain dark, narrow parts of the cages.
These cages signal a certain mean-spiritedness, or a complete insensitivity to those who can’t afford cars. Chairman Fernando seems to have a dim view of humanity; he looks at ordinary people as creatures who need to be controlled through physical barriers and violence at all times, when in truth there are ways by which he could get them to stop jaywalking, if that’s his purpose.
At the rate he is erecting visually intrusive iron cages in every corner of the metropolis, we will wake up one day to find our cities destroyed and freedom of movement curbed liked chicken trapped in a wire.
When President Arroyo appointed Fernando chairman of the Metropolitan Manila Development Authority (MMDA) in 2001, many residents hoped he could replicate, albeit on limited basis, what he has achieved in Marikina. Until now, Marikina is tidy, orderly and well-managed, proving to the world that Filipinos could actually clean up their surroundings, provided they elect leaders with common sense and with the will to implement zoning ordinances, rules and regulations. It ranks among those well-governed places like Puerto Princesa and Naga, cities smart enough to elect innovative and effective leaders.
When Fernando started cleaning up sidewalks by removing physical barriers to human traffic we applauded him. Here was a guy who means business, who doesn’t care about being unpopular if only to bring comfort to pedestrians.
We supported him when he started going against those grimy, topless drunks drifting around, vexing passersby. And, even if it looked so much like a publicity stunt, companies supported him by donating deodorants in his efforts to rid the streets of sweaty, stinking sando-wearing jeepney drivers. Surely, we need cleanliness in the streets and the drivers’ armpits are the most strategic places to start if we have to bring Metro Manila into the 21st century.
In an urban setting people should respect their fellowmen by behaving accordingly. That’s the essence of urbanidad (urbanism), the catchphrase with which Fernando justifies his actions. In simpler terms, urbanism means people should be taught the sophistication needed to live in crowded urban areas. It means people should not litter, not urinate against the wall, use the traffic lights; pedestrians should cross only on pedestrian lanes, should not engage in long, loud karaoke sessions in the neighborhood, or let their dogs relieve themselves on sidewalks. Most important, drivers should follow traffic laws. In all this, public education would play a big role.
Under Fernando, we had higher expectations that—together with Manila’s mayors and barangay chairmen—he would embark on a serious campaign to promote this behavior among Metro Manilans. He had the support of well- meaning citizens and the corporate world to catalyze an Urban Revolution.
We knew he did not have the charm of a Juan Flavier when he was at the Department of Health, but at least we expected even a fraction of Flavier’s ability to get things done without bullying people. Who can argue that Filipinos are among the most hard-headed people, and our drivers are always held up as models of road barbarism? But Flavier proved that even a hard-headed populace, if educated and motivated enough, could be prodded to act for its own sake. Defying skepticism, he organized the world’s first multivaccine national immunization campaign, and achieved universal coverage for it, drawing praise from the UN no less. Flavier succeeded even with modest resources because he multiplied his charm—he got private firms and other state agencies to help; got the military and communist rebels to honor a nationwide cease-fire just to let health workers reach remote villages; and got mass media to give free services and air time.
Since Fernando was an organization man and seemed to have the right vision, people reposed hope in him as they did with Flavier. Instead, he embarked on inane projects that distracted people from their noble purpose: pink urinals, the wet blankets to force people into using the sidewalks, U-turn slots, and lately, the pink cages to herd weary commuters into buses. The pink urinals are ugly and stink, the wet blankets downright fascistic, and the cages visually intrusive and mean—all of them don’t achieve the desired results.
Citizens thought Fernando’s pink urinals were just temporary, to be replaced later by better comfort rooms, and complimented by a massive awareness program. It turned out later the pink urinals are the end-all and the be-all—institutionalizing an inappropriate behavior that should have no place in an urban context. If he wanted to eliminate pissing against the wall, all he had to do was look at Manila Mayor Lito Atienza who eliminated the pink urinals and installed clean comfort rooms in the right places in Manila.
Metro Manila is going against the trend of modern urban traffic management. Instead of computerizing the traffic system, and educating traffic enforcers and pedestrians, Fernando had a simple solution: the U-turn slot. Without consulting traffic planners, he erected them all over the metropolis, causing traffic chokepoints at strategic areas. Traffic engineers say that installing a U-turn slot creates more traffic-flow conflict and therefore prone to traffic accidents.
But the nastiest of them all are really the pink cages. You could see them quickly expanding all around Metro Manila now, especially in central places like Quezon Avenue and Edsa and Baclaran. Garish and ugly, these cages restrict a pedestrian’s movements, causing inconvenience among people at peak hours. A commuter who disembarks on Quezon Avenue—especially the MRT station—during rains will have to suffer long walks through the cages if only to get a ride. The junction at the corner of Edsa-Quezon Avenue itself, a public space, is now an ugly parking garage for taxis and jeepneys peddling their services to passengers who walk along the narrow, caged and crowded pathways.
Why do they need the cage? Because the U-turn slot at the intersection of Quezon Avenue and Edsa has become a chokepoint, so they’d rather control people if they can’t control the vehicles. So here is a case of one silly measure, a U-turn slot, being compounded by another silly one like the cage. We are not even talking here of aesthetics, which those pink cages have totally destroyed. Come to think of it, Binay’s Makati also has fences for traffic control, but they are nowhere near as repulsive as the pink chicken cages at Edsa. Beyond aesthetics and inconvenience, there’s also safety: not a few people complain that the “cages” make them easy prey for robbers, who can easily stick a knife into them in certain dark, narrow parts of the cages.
These cages signal a certain mean-spiritedness, or a complete insensitivity to those who can’t afford cars. Chairman Fernando seems to have a dim view of humanity; he looks at ordinary people as creatures who need to be controlled through physical barriers and violence at all times, when in truth there are ways by which he could get them to stop jaywalking, if that’s his purpose.
Monday, October 02, 2006
To the future through the cities from the farms
WE totally agree with the National Economic and Development Authority (Neda) that the country’s future depends on its urban areas. But we would like to add a little phrase to that line—only if the cities articulate well with the countryside.
Only if the farms are thoughtfully integrated into a well-defined hierarchy of urban systems that nurtures, instead of suppresses, the hinterlands’ development potentials. And only if the policy environment supports that kind of a growth strategy through infrastructure development and a competitive, if not totally deregulated, transport systems. Sad to say, we don’t have such right now.
Definitely, if we look at history, the way to the future is the journey to the cities. There is no escaping that fact. As the economy transforms from agriculture to industry and ultimately services, there’s no denying that truism that people will have to move from the countryside to the cities to take advantage of economic opportunities there as well as become catalysts of that transformation. A lot of activities that unleash economic development and progress will never be viable without the economies of scale that urbanization provides.
That’s the theory, of course, and it’s quite simple and neat as any practitioners of the dismal science would tell us. It’s as simple and neat as any country in the West has experienced. In the context of the developing world, however, the story is full of twists and turns and its details don’t normally fit in the econometric models of economists nurtured from the books of Adam Smith and Milton Friedman. Colonialism came and urbanization transmogrified as a structure to squeeze off surplus from the plantations, forests, and mines in the wilderness and bowels of the “third world,” and we never seemed to have totally got over it despite efforts to reverse the trend.
Wonder why cities like Davao and Cagayan de Oro do not seem to interact well with the interiors of Mindanao? It’s because Davao and the like were designed primarily as port cities to facilitate the flow of timber, gold, silver, pineapples, bananas and fishes from the inner core of Mindanao straight to Manila then Japan, US, and Europe. In Negros, the infrastructure system seems to reflect the same need to speed up sugar exports at the expense of the island’s need for diversification. The same trend could be observed elsewhere, a phenomenon called rural-urban dualism that explains much about the underdevelopment of rest of the country.
We are not against trade of these resource-based products per se. They are very important components of the Philippine economy. But it must be stressed that a well-integrated network of settlements and production areas connected by an efficient network of infrastructure would go a long way in diversifying the economy and spreading the benefits of trade and globalization to broader segments of society.
Slowly, government planners have come to realize this and are trying to undo the bad legacies of the past, but these efforts have always been a little too late.
Much of the solution is related to infrastructure development. None has been done on this aspect so far. In an archipelagic country such as ours, experts have been stressing the need for comprehensive multimodal transport network that would economically link production areas with the country’s urban systems. Yet the government’s record on this has been spotty, nothwithstanding its claim about the “nautical highway.” The government has been so lousy at collecting taxes that it has been convenient for economic planners to skip on economic infrastructure spending, if only to achieve fiscal consolidation.
The other task is simply rewriting the rules of the game to attract more players and put more competitive pressure on the country’s producers and service providers. You don’t expect banks, shipping companies, telecommunications providers to provide top-of-the-line services and technologies if they are complacent in their oligopolistic perches. The best thing the government could do is remove the remaining restrictions on full foreign participation. Again, the government has been reluctant to do this for fear of alienating the vested interests in these sectors. The Philippines has actually pioneered the policy of attracting private sector money to fund infrastructure development but corruption and scandals, the prototypical example of which is Piatco/Naia Terminal III, have practically killed that option.
This continuing failure to undertake these twin measures accounts for the messy rural-urban transition in the Philippines. In the Dismal Science’s neat theory on structural change, the transfer of people from the farms to the cities is always smooth and seamless. People from the farms, made redundant by technological innovation (e.g. farm mechanization, use of better crop science) got jobs in the ever-growing factories and service offices. In the Philipines, low farm productivity—again because of factors like lack of infrastructure and inadequate market information—are driving farm people to the cities, only for them to end up in the slums and the informal sector, thus stretching the cities’ economic and social services.
Economic opportunities in the factories and offices have been growing quite well—thanks to the boom in electronics, call centers, and other service-oriented activities— but they are not growing fast enough to absorb those who come from rural areas in droves for the same reason that we didn’t set the policy environment right. That explains the pervasive joblessness despite decent economic growth.
Yes, the way to the future is through the cities. Yet we will never get there for as long as we continue to ignore those who live in the farms.
Only if the farms are thoughtfully integrated into a well-defined hierarchy of urban systems that nurtures, instead of suppresses, the hinterlands’ development potentials. And only if the policy environment supports that kind of a growth strategy through infrastructure development and a competitive, if not totally deregulated, transport systems. Sad to say, we don’t have such right now.
Definitely, if we look at history, the way to the future is the journey to the cities. There is no escaping that fact. As the economy transforms from agriculture to industry and ultimately services, there’s no denying that truism that people will have to move from the countryside to the cities to take advantage of economic opportunities there as well as become catalysts of that transformation. A lot of activities that unleash economic development and progress will never be viable without the economies of scale that urbanization provides.
That’s the theory, of course, and it’s quite simple and neat as any practitioners of the dismal science would tell us. It’s as simple and neat as any country in the West has experienced. In the context of the developing world, however, the story is full of twists and turns and its details don’t normally fit in the econometric models of economists nurtured from the books of Adam Smith and Milton Friedman. Colonialism came and urbanization transmogrified as a structure to squeeze off surplus from the plantations, forests, and mines in the wilderness and bowels of the “third world,” and we never seemed to have totally got over it despite efforts to reverse the trend.
Wonder why cities like Davao and Cagayan de Oro do not seem to interact well with the interiors of Mindanao? It’s because Davao and the like were designed primarily as port cities to facilitate the flow of timber, gold, silver, pineapples, bananas and fishes from the inner core of Mindanao straight to Manila then Japan, US, and Europe. In Negros, the infrastructure system seems to reflect the same need to speed up sugar exports at the expense of the island’s need for diversification. The same trend could be observed elsewhere, a phenomenon called rural-urban dualism that explains much about the underdevelopment of rest of the country.
We are not against trade of these resource-based products per se. They are very important components of the Philippine economy. But it must be stressed that a well-integrated network of settlements and production areas connected by an efficient network of infrastructure would go a long way in diversifying the economy and spreading the benefits of trade and globalization to broader segments of society.
Slowly, government planners have come to realize this and are trying to undo the bad legacies of the past, but these efforts have always been a little too late.
Much of the solution is related to infrastructure development. None has been done on this aspect so far. In an archipelagic country such as ours, experts have been stressing the need for comprehensive multimodal transport network that would economically link production areas with the country’s urban systems. Yet the government’s record on this has been spotty, nothwithstanding its claim about the “nautical highway.” The government has been so lousy at collecting taxes that it has been convenient for economic planners to skip on economic infrastructure spending, if only to achieve fiscal consolidation.
The other task is simply rewriting the rules of the game to attract more players and put more competitive pressure on the country’s producers and service providers. You don’t expect banks, shipping companies, telecommunications providers to provide top-of-the-line services and technologies if they are complacent in their oligopolistic perches. The best thing the government could do is remove the remaining restrictions on full foreign participation. Again, the government has been reluctant to do this for fear of alienating the vested interests in these sectors. The Philippines has actually pioneered the policy of attracting private sector money to fund infrastructure development but corruption and scandals, the prototypical example of which is Piatco/Naia Terminal III, have practically killed that option.
This continuing failure to undertake these twin measures accounts for the messy rural-urban transition in the Philippines. In the Dismal Science’s neat theory on structural change, the transfer of people from the farms to the cities is always smooth and seamless. People from the farms, made redundant by technological innovation (e.g. farm mechanization, use of better crop science) got jobs in the ever-growing factories and service offices. In the Philipines, low farm productivity—again because of factors like lack of infrastructure and inadequate market information—are driving farm people to the cities, only for them to end up in the slums and the informal sector, thus stretching the cities’ economic and social services.
Economic opportunities in the factories and offices have been growing quite well—thanks to the boom in electronics, call centers, and other service-oriented activities— but they are not growing fast enough to absorb those who come from rural areas in droves for the same reason that we didn’t set the policy environment right. That explains the pervasive joblessness despite decent economic growth.
Yes, the way to the future is through the cities. Yet we will never get there for as long as we continue to ignore those who live in the farms.
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