A CONVENIENT TRUTH

The Philippine Star
11/30/07

Surprisingly, the Philippines is faring relatively better than some of its economically challenged neighbors. Even a few other countries outside the regional orbit but which have similar struggling concerns as the Philippines are surprised at how upbeat our state of affairs has become.

Occasions such as this are few and far between in Philippine history, so much so that when it actually happens, very few Filipinos want to believe it is really happening.

You can blame it on us being more pessimists: seeing the glass half empty rather than half full. Even in the face of good fortune, we would rather choose to look at the golden gift with askance, searching instead for a booby trap or hidden costs.

And who can blame us.

Reasons to celebrate

Under “normal” circumstances, our fragile economy would have floundered and drowned in the sea of financial mishaps that is shaking the biggest economies and financial giants in the world.

We are seeing some of the major banks in the U.S. announcing their intention to write off billions of dollars to the subprime crisis, an admission that they had been less circumspect in lending too much money to a high-risk secondary American home mortgage market.

This unease over the extent of the crisis has caused the dollar to weaken substantially, paving the way for the European currency to reach historical exchange highs. Understandably, the world is seeing record gold and metal prices, and even crude oil levels are threatening to breach the formerly unreachable $100 per barrel frontier.

On the other hand, we are seeing a substantial flow of hot money into our stock markets, thanks to the “sharpees” of the investment world who have accessed loans at ultra-low interest rates, and have turned around to invest these in higher-yielding assets.

Lastly, and without doubt an important ingredient in our new stature, is the salving effect of those remittances from our reliable working countrymen abroad. All this cash is fueling a burst of hot spending on real properties, electronic gadgets, cars, stocks, metals, appliances, even jewelry.

This in turn is boosting profits of Philippine companies. Coupled with improving economic fundamentals like low interest rates, the strong peso and a relatively modest inflation, all have combined to create a potent brew that is now souping up the economy.

Indeed, our country is experiencing its fastest economic expansion in two decades.

Reason to be cynical

Yet there seems to be something fundamentally wrong, a faint warning that needs to be heeded lest this delirious bubble of optimism bursts, leaving us all soaking wet and most likely in tears.

The economy is precariously perched on a mountain of debt that is not at all helped by an oversized and costly bureaucracy and political system – overpriced and unnecessary projects, graft and corruption, expensive elections, political dynasties, and so on and so forth.

It is not clear how we are going to pay off all this debt.

Despite the seemingly dogged work attitude of the country's economic managers, including those in the finance department, our tax efficiency remains one of the weakest of the 100 countries being monitored by Fitch Ratings.

Collections of the BIR and Customs, which missed first half revenue goals, have faltered again in October after meeting their monthly targets in the third-quarter.

In October, BIR collection was just 2.8 percent higher from a year ago while Customs was even lower by 0.7 percent. So where did the GDP growth of 7.3 percent in the first half go? Such robust economic activity should have translated to higher collections by the tax agencies.

Obviously, it hasn't.

Filling the revenue gap

So, what happens if a family is in deficit, meaning income is not enough to meet expenditures? You start selling off possessions, especially those that have increased in value over the years.

And this is what is happening now. In the midst of falling revenue collections, the government is selling assets that have increased in value, no doubt a pleasant offshoot of the global liquidity situation.

Such assets that a couple of years ago would have attracted only flies are now selling like the latest Hollywood blockbuster pirated DVDs. Everything from steam-producing companies to tracts of ex-penitentiary real estate are keenly being eyed.

In the last couple of auctions, the government had managed – or at least it claims – to sell these properties at prices higher than the reserve cost. In the case of PNOC Energy Development Corp. for instance, the winning bid of P58.5 billion was almost 50 percent more than the floor price of P40 billion.

The last two coal-plant biddings conducted by the Power Sector Assets and Liability Management boasted similar fates. And all these brought total revenue from privatization this year to about P90 billion, offsetting the P50-billion shortfall of the tax agencies.

Next year, the government still has P80 billion worth of assets it can sell to meet its goal of a balanced budget. That list includes P50-billion worth of San Miguel Corp. shares, the P30-billion worth of Manila Electric Co. shares, the Food Terminal property and a stake in PNOC Exploration Co.

When all are gone

What happens then to the years starting 2009 when the current administration had sold all its prized jewels and its tax collecting bureaus continue to mire in corruption and inefficiency?

That is obviously the problem for the next president of this country, the next finance secretary, the next BIR and Customs commissioners.

Well isn't that truly convenient.

Congratulations to Filoil Flying V Collegiate National Championship winners

Congratulations to the following winners of the recently concluded Filoil Flying V Collegiate National Championship:

National Collegiate Champion – Ateneo de Manila University Blue Eagles (recipient of P500,000 scholarship/athletic grant); 2^nd place – University of Visayas Green Lancers (awarded P200,000 scholarship/athletic grant); 3^rd place – STI Colleges Olympians (P100,000 grant); 4^th place – UST Growling Tigers (P50,000 grant).

Most Valuable Player – Nonoy Baclao of the Ateneo Blue Eagles; Best Coach – Norman Black; and Best Referee – Ermin Mallorca.

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