A zarzuela of past errors

DIE HARD III
Herman Tiu Laurel
8/5/2011



Finger-pointing is again the order of the day. Not long after Sen. Tito Sotto challenged his colleagues, Kiko Pangilinan and Franklin Drilon, believed to be two of the original collaborators of Gloria Arroyo in the cheating of 2004, to finally come clean by dropping their pretensions, was his subsequent collaboration with the alleged cheating mastermind to partake of the corrupt system also laid bare. Similarly acting blameless while lambasting the cheats today, many of those in media were themselves part of the propaganda blitz that sustained the series of cheating and cover-ups well into 2007 and 2010.

This pattern of holding elections suffused with cheating, then eventually making an exposé out of them, has become a deftly-staged zarzuela of focusing only on the subsidiary corruption in politics to distract the people from a totally debased political-economic order. As a result, the economic and financial corruption, particularly of the parasitic elite, is missed by many.

The past months, we built up a case against the Bangko Sentral ng Pilipinas (BSP) and the Department of Finance (DoF) for their seriously corrupt financial policy of keeping the country in debt despite the financial surplus afforded by our decades-long OFW remittances. Such an anomaly was gleaned from the Special Deposit Account (SDA) amounting to P1.5 to 1.7 trillion and the Gross International Reserves (GIR) which total $70 billion today.

After some controversy with BSP Deputy Gov. Diwa Guinigundo over the issue, an unexpected affirmation of our position came from none other than Finance Secretary Cesar Purisima who publicly favored “the unwinding of the SDA,” which entails the reduction of interest rates to facilitate the fund’s release for domestic investments.

In fact, an Aug. 3, 2011 Manila Bulletin news story by Chino S. Leyco reported that “Purisima, who is also a member of the central bank’s Monetary Board, said… the Aquino government would be happy to accommodate (any unwinding of the SDA). He explained that by unwinding the P1.44-trillion deposits at the BSP’s special deposit accounts, it may cut the borrowing costs of the government.” Furthermore, the report noted, “Deposits by banks to the special deposit account facility of the BSP continued to increase in the past few years, a scenario which critics said… could have been more useful for the economy if it were invested in lending.”

Actually, when we were having consultations with former National Treasurer Norma Lasala way back in 2004-2005, she already insisted that the management of our national reserves had gone awry and, thus, wasted billions. At that time, Purisima was already Finance secretary and Amando Tetangco, the BSP chief. Despite this, the continuity in the financial mafia remains unbroken. Tetangco has gotten his second term for the same post while Purisima got back the Finance portfolio after a hiatus courtesy of “Hyatt 10.”

So the question is, why is Purisima only now beginning to admit the wisdom of “unwinding” the gargantuan SDA (and, in all probability, later proclaim that we can indeed mobilize a greater part of our GIR)?

For sure, achieving this would be a first step toward liberating ourselves from the chains that have shackled us for the past five decades. But that’s just the beginning. The next stage is to free ourselves from ALL debt and all private bankers’ traps.

Since all credit and money is guaranteed by the taxpayer, there is absolutely no reason the people, through the State, should borrow from any private party. The nation should instead set up a “Peoples’ Bank” where creation of credit and money will be subject to referendum.

Now, we ask: Why was there no fanfare when Aquino III reappointed Tetangco to his BSP post when this is one of the most important jobs in the whole government?

Undoubtedly, the answer lies in the fact that the BSP, as it is set up today, is actually “independent,” with the presidential appointment merely ceremonial. And with a Board dominated by private bankers, the bank decides on monetary policy, possessed of an “independent” character institutionalized by Cory Aquino’s handpicked Constitutional Commission — whose members claim is a relic of the 1973 Constitution even without basis.

Being a private bank, the BSP actually follows the workings of the US Federal Reserve and the Bank of International Settlements (BIS) where both have a public façade but with private bankers at the core (see “The Tower of Basel: The World’s Biggest Central Bank Has Private shareholders,” GlobalResearch, July 29, 2011).

Is there any wonder then why the People’s Republic of China is today the leading nation and economy in the world in terms of growth and stability? Its banking system is based on the concept of the “People’s Bank,” with its credit policies designed for national development and public welfare. Of course, this is not the case for the US and its satellites — such as Europe’s PIGS (Portugal, Italy/Ireland, Greece, Spain) — now reeling from the greed and machinations of so-called “banksters.”

But sadly, our Senate, House, and financial bureaucracy — from the Bureau of Internal Revenue to the Bureau of Customs et al. — all follow the diktats of Wall Street, IMF-WB, ADB, and Basel in keeping the Philippines perpetually in debt; in taxing us more to pay it off; and in privatizing public services to create more debt (like the call for P110 billion more borrowings after 10 years of privatizing the state’s power assets).

Our past national errors, such as the 10 years of fraud under Gloria Arroyo, should offer us concrete lessons in our nation’s political-economic history; our decision now should be to turn a completely new leaf — starting with a deeper understanding of our financial system.

(Tune in to Radyo OpinYon, Monday to Friday, 5 to 6 p.m., and Sulo ng Pilipino, Monday, Wednesday, and Friday, 6 to 7 p.m. on 1098AM; Talk News TV with HTL, on “Hello Garci: A Complete History,” with Atty. Alan Paguia, Saturday, 8 to 9 p.m., with replay at 11 p.m., on GNN, Destiny Cable Channel 8; visit http://newkatipunero.blogspot.com and http://hermantiulaurel.blogspot.com for our articles plus TV and radio archives)

Condo buyers beware

CONSUMERS DEMAND!
Herman Tiu Laurel
8/1-7/2011



Several months ago I had received a number of texts from Wilson Lee Flores, Philippine Star columnist and real estate entrepreneur, warning of a condominium bubble building up.

The past few years, Metro Manila has been seeing its skyline changing like a major tectonic realignment pushing up steep cliffs and mountains astride major avenues and boulevards.

At the same time the boom in sub-urban residential subdivision spread like uncontrolled mushroom growth just south of Makati where new names of towns have been springing up, from that strange sounding Nuvali subdivision and Eton City, etc.

SMDC, the condominium development conglomerate of the SM group, has its billboards rising all over town, especially on EDSA where they have this billboard in front of their giant development near Boni Ave. while ubiquitous in-the-face giant bus ads pounce on commuters as their tambuchos puff out black smoke.

The boom seems to be going on forever.

A Buyers’ Market
Last week Wilson texted me again, pointing out a recent column by Amado Macasaet of Malaya reporting an apparent shifting of the rising expectation in the real estate and property market.

The title said it all, “Property now a buyer’s market”.

Here are some telling information from Macasaet’s article: “The Philippine National Bank is cutting down its equity requirement for housing borrowers by 50 percent, from 20 percent to 10 percent. Before the Aquino administration took over the reins of government, equity requirement, not only for housing but for nearly all types of borrowers, averaged 40 percent….

“Three other banks surveyed by Malaya Business Insight require equity of between 20 percent and 10 percent….

“Metrobank has the longest repayment period of up to 25 years. The average among the rest of the banks is 20 years.”

While Macasaet is seeing the glut one giant realty group executive he interviewed opined differently.

Collapse in Imminent
The executive says that property development “will never be overbuilt for as long as the players are building homes and apartments for the low and low middle market….

“The A-1 market which is small in number but has all the money to buy expensive apartments…. The demand for homes … will continue to expand.”

But then, the US housing mortgaged collapse was also built on direct home buyers and users. It wasn’t the lack of a market but instead the collapsing real economy in the US as jobs dwindled and real incomes shrank while the credit bubble exploded on securitization and financial pyramiding of the banks and investment packagers and speculators.

Every human being needs housing, but if they have lost the incomes needed to keep amortization going a collapse is imminent.

Do economic conditions in the Philippines, as it is also impacted by World economic conditions, augur well for a continued real estate boom in the country or is Macasaet and Wilson Flores’ fears more real.

Less means More
The real estate developers in the Philippines has been cashing in on loopholes in the tax system giving discounts to those categories that fall under social housing, including the design features of the condo units.

Many of these loopholes simply mean less amenities in condo living for those now buying into or renting in condos.

In one of our regular discussion in our Wednesday edition of Radyo OpinYon with Liza Gaspar, our OpinYon Economics Perspective editor and “Moneyed View” columnist, we were told of the discomforts of living in these new condo units with their very limited head room and ventilation where air-conditioning become a costly necessity, and high cost of common charges offset what benefits may accrue from savings on transportation fare and time.

Liza was comparing her present condo life to the previous years when she shared facilities in those old apartment units where there were at least more windows and elbow room and no condominium fees to pay.

Suburban Life
Those new subdivisions south of Makati may take off only after the problem of high cost of the South expressway and skyway fares are resolved in favor of commuters.

Especially after the Supreme Court’s recent decision making the EVAT of 12% on toll fees legal, suburban living in these new towns 20 – 50 kms away from work or school becomes more difficult.

A friend, Joe Escartin, sold his house in the South to live in a condo at Katipunan to his only child the daily travel to UP Diliman.

The move supports the condo market in Quezon City but would weaken the real estate prices in the South.

The real big middle class condo market is the dollar earning OFWs, albeit many markets are like the troubled Middle East/North Africa and Fukushima hit Japan are shrinking.

Government is underplaying the impact of these but manpower export companies see serious impairment.

Then there’s the US debt crisis that will inevitably further erode the US Dollar.

Do these factors augur well for the Philippine real estate sector?

Bubble nearly Bursting
Wilson Flores texted some more: “Philippine government has no social conscience to discourage over investment in condos and should boost agriculture and factories for more jobs …

“Philippine realty glut of condos maybe because electricity too high and other problem, so no factories or agricultural ventures...”

In telegraph fashion, Flores has put my own thoughts on this issue in a very short gist.

We are seeing a real estate balloon building up but because the real economy does not support the jobs and income generation for the people on a long term basis to support the multiplying condo and subdivision units running into tens of thousands every year, the market will dry out.

Much of the consumers’ incomes already go to basic public utilities like electricity, water, telecoms and toll fees which are all priced with predatory greed and allowed by an oligarch-captured Congress and regulatory agencies.

The indicators of this bubble nearing bursting are the premium payments and interest rates on them precipitously declining.

No to Future Deliveries
Consumers, commuters and home seekers should demand that government stop turning a blind eye and take action on these issues, save the real estate sector, rationalize the condominium market and protect buyers.

Buyers, on the hand, should be more coy now in jumping on to the real estate buying bandwagon the realty developers massive ad campaigns are trying to fuel, we should take our cue from concerned observers and journalists like Wilson Flores and Amado Macasaet – Buyers Beware.

This is the time for condo and home buyers to press for more concessions from developers, wait for actual finished units and not future deliveries, in this way prices can be forced even lower to the benefit of new home buyers and users.

(Tune in to Radyo OpinYon, Monday to Friday, 5 to 6 p.m., and Sulo ng Pilipino, Monday, Wednesday, and Friday, 6 to 7 p.m. on 1098AM; Talk News TV with HTL, Tuesday, 8 to 9 p.m., with replay at 11 p.m., on GNN, Destiny Cable Channel 8; visit http://newkatipunero.blogspot.com and http://hermantiulaurel.blogspot.com for our articles plus TV and radio archives)

Salamat po

CROSSINGS
Butch Junia
8/1-7/2011



The President must have been misinformed when he unconditionally commended Congress for extending the lifeline rate in electricity and extending the Joint Congressional Power Commission. In his second SONA delivered exactly a week ago, President Aquino said: “I thank Congress for passing laws regarding… Lifeline Electricity Rate Extension, Joint Congressional Power Commission Extension...”

Socialized Pricing
The two are sound concepts, the first being a safety net for those in real need and the latter being the oversight of a reform law in obvious need of oversight, as current experience has abundantly shown.

Via the Lifeline Rate Discount, households whose monthly consumption is 100 kwh or less get the discount, from 30% for those in the range of 70 to 100 kwh, to 100% for those 50 kwh and below.

Sec. 72 of the Electric Power Industry Reform Act provides: “A socialized pricing mechanism called a lifeline rate for the marginalized end-users shall be set by the ERC… for a period of ten years, unless extended by law...”

While the law did not clearly say how Government will implement that pricing mechanism, the ERC proceeded to charge the cost of that subsidy to households using 101 kwh and more per month, creating a cross-subsidy. In effect, you and I and your Uncle pay for that subsidy for which the President commended Congress.

Pagtutuwid
It can be validly argued that the President merely extended an ongoing program, one that has, in fact, ran the full course of 10 years. But since we are in the pagtutuwid mode, why could he not straighten this out for the Subsidizing Consumers by shifting the subsidy burden to Government, which should have been the case, in the first place.

The Government, too, should be forthright and forthcoming in informing consumers using more than 100kwh a month that they are paying for this subsidy.

Neither Congress nor the Palace was clear about who was footing the bill on this lifeline.

Only very few, those with gold in their deep pockets and in their hearts, endorsed the idea of consumers subsidizing the Government’s safety net even after being told that they were paying for it.

It can be just a few centavos or a handful of pesos, but when you take it with the rest of the other distortions in the power rates, you realize that this where you must draw the line.

It Does Count
I compared Meralco billings of a 156 kwh and a 829 kwh household for the period 25 June to 25 July, each paying P1,607.50 and P9,800.75, respectively. For convenience, let us designate them Household or HH A and HH B.

For that billing period, the Lifeline Rate was P0.1173 pkwh, presumably based on the subsidies paid for qualified beneficiaries, which cost was divided or shared among the so-called Subsidizing Consumers, meaning you and I and your Uncle.

Bear in mind that if Meralco’s monthly sales is 2.4 billion kwh, one centavo per kilowatt hour is P24 million thus the total subsidy we paid for that month was P281.52 million.

In the bills that I have, HH A paid a Lifeline Subsidy of P18.30 for the month, half the price of a kilo of rice under this Administration.

HH B paid P97.24, which would have bought a goto special with egg, okoy and soda, and some change, at the Goto King in the Landmark Food Court at Trinoma.

It does count for something, even with inflation.

COA Must Step In
Meralco has 4.4 million customers. If 400,000 HHs qualify for the subsidy, then the rest of them, the 4 million customers, pay subsidy anywhere between P18.00 to P97.00 or more, per month. Meralco pays itself the cost of electricity it supplies to Lifeline households from the Lifeline subsidy it charges us, at the behest of the Energy Regulatory Commission (ERC).

By the way, in the interest of transparency, ERC should post at its website and publish in a newspaper of general circulation Meralco’s periodic (monthly) liquidation of the subsidy – HHs served, meter read of those HHs, kwh paid, subsidy charged, total amount collected, etc.

ERC should give a full accounting of the subsidy they have authorized Meralco to collect and administer.

As public funds, the Commission on Audit should be asked to step in and check this account, though I doubt this, ERC having excluded COA from the rate-setting process, preferring instead their highly-paid foreign consultants.

But I digress, and will save that for another Crossing.

Stark Injustice
It is high time you look closely at your monthly bill. Check the reverse side.

Under Government taxes, our sample HH A paid P156.70 while HH B paid P989.80.

Government could very well have paid the subsidy from these taxes. But Government would rather keep its cake, eat it, and have your neighbor eat your cake, too.

Worst, the subsidy we paid was taxed 12% VAT as part of “Distribution Rev & Subs” listed under Government Taxes - an unjust tax on an involuntary subsidy.

If the President was fully apprised of this injustice, I have no doubt he would have rectified it, for the millions of Subsidizing Consumers who also are his Bosses.

Salamat po.