This premartial law editorial cartoon suggests the theme for today's entry, which is: as a possible constitutional plebiscite or national election looms, the government, at a time of economic recesson, is going to be hard-put to find the cash it needs to put out to curry favor with the electorate and its allies.
I. The Economy and Jobs
New stories today range from 11-mo trade gap widens to $6.9B to Manufacturing output down 6.6% (for November, 2008, where Imports were down 31.5%). The Department of Labor calculates 23,485 job losses traced to crisis since October last year. Overseas, Bloody Monday: Over 71,400 jobs lost (200,000 lost since 2009 began; 2.5 million lost in 2008).
A few days ago, Jon Limjap wrote in Filipino Voices on IT and electronics industries in a binary of fuzzy fate:
The silver lining in this landscape of layoff despair is that the local IT (the internet and software part of it, not the hardware part) as well as the BPO industries are faring well, with some experts believing that the jobless can be absorbed by these industries altogether...
Not all is bright and dandy in those industries either, however...
And if you think the call center industry is safe, think again: late last year, Dell has started moving call centers back to the United States after constant customer complaints of having difficulty talking with Filipino and Indian call center agents. While the service has a higher price than Dell’s regular customer support services, it underscores the not-so-obvious fragility of the call center industry...
Meawhile, the government's various activities (see the interesting discussion, in the comments section, in Marking out, on the NTC's proposed order concerning telecoms content providers) is leading to a lot of hand-wringing concerning blogger ethics (see an excellent piece in It's True! It's True!), but also, apprehensions about whether e-commerce is going to start being intensively taxed.
The other day a colleague told me of a briefing Citibank held for some prominent businessmen, in which they were told "this year can be one of two things for you: bad, or disastrous." If the bankers say that, and the businessmen say that, you know both will be telling the politicians, "so sorry, no money" going into 2010. And so, the need to find alternative sources of political funding. All the scandals being touted by the government can therefore be seen, from the perspective of needing to shake down enemies, identify vulnerable patsies, and rake in the money.
II. World Bank Report
Even as Ebdane: 700 firms on DPWH 2007 blacklist: 300 more to be added, Senate told, the Senate's also been told, by Ebdane, 3 banned firms still have gov’t projects. Senator Miriam Defensor Santiago elicited chuckles from the public over her hare-brained tantrums in the Senate, but it might be interesting to see if all the entertaining heat is producing very little light.
Of course the President's husband has been dragged into the fray, with a to-be-expected pooh-pooing of his critics courtesy of the Palace.
What I find even more remarkable, though, is that no one outside the Executive Department seems to have gotten hold of the World Bank report; nor has the WB been forthcoming in releasing the report either to the public or to the legislature.
III. Rural Banks
The Monetary Board, according to the Central Bank, has to decide whether to approve a loan to the Philippine Deposit Insurance Corporation, to cover payments to depositors in failed rural banks. See PDIC seeks P14-B loan from BSP:
According to PDIC president Jose Nograles, the insurer has started negotiations with BSP Governor Amando Tetangco Jr. for another loan worth P14 billion to boost its deposit-insurance fund.
The fund would cover claims of depositors of failed banks. By law, up to P250,000 worth of deposit per account is insured with the PDIC. Pending before Congress are bills that would double the deposit insurance to P500,000, a development Nograles and Tetangco support.
Nograles said the PDIC is now deep in debt, having incurred up to P72.5 billion in loans by the end of 2008.
The state-owned deposit insurer, however, has a deposit-insurance fund of only P60.5 billion. Thus the need to borrow from the BSP, Nograles said.
“We are borrowing P14 billion from the BSP to fund our deposit-insurance claims this year,” he said. The loan will be structured as a 10-year obligation of the PDIC.
As Manuel Buencamino pointed out in a column on September 3, 2008, the rural banking sector's been shaky for some time now. Back in September, the House of Representatives wanted to relax rules covering rural banks' capital requirements; the Rural Bankers Association objected to the measure; so did the Central Bank. As Buencamino pointed out, the House was trying to bail out the rural banks:
It seems undercapitalized rural banks lending money taken from depositors and creditors lured by outrageous interest rates are the intended beneficiaries of House Bill 3827. The bill will legalize “behaviors posing moral hazard.”
The BSP tried to place a number of undercapitalized but munificent rural banks under receivership, but the rural banks, acting in concert, were able to stymie the BSP with a temporary restraining order (TRO) from a Manila Regional Trial Court and a Court of Appeals division taking its sweet time on the BSP’s urgent appeal for a reversal of the TRO.
“Those rural banks, already enjoying the protection of the courts, might also get their meal ticket from the Batasan,” observed an apprehensive depositor.
An article in today's Inquirer (the first of a four-part series) reports on Legacy banks’ double-money scheme: Former PDIC chief was alerted 3 yrs ago.
Ricardo Tan recalled that he was alerted by former Prime Minister Cesar Virata—who was then president of the Bankers Association of the Philippines—to the growing proliferation of “double-your-money” schemes that were being used to attract investors into putting their money in little-known financial institutions and rural banks.
“[Virata] called me up and told me that there were people soliciting deposits all over the country, offering double-your-money [schemes] and cars as incentives,” said Tan, who was at that time the president and CEO of PDIC, the government agency tasked mainly with insuring the people’s deposits in failed banks.
A probe of the banks that offered these schemes led to one name: Celso de los Angeles Jr., an Ateneo de Manila University and Asian Institute of Management graduate who already had previous entanglements with regulators in the 1980s...
“We invited him (De los Angeles) to our office to learn more about his business, and to my surprise, he showed up with a battery of lawyers,” Tan said.
The Philippine Daily Inquirer tried repeatedly to contact De los Angeles—who is now mayor of Santo Domingo, Albay—through his legal counsel, publicists, political allies, and at his offices to get his side, to no avail.
What followed and preceded this meeting was a chain of events that was directly linked to the BSP decision to close 13 small rural banks across the country just a few days before the long holiday break of December 2008, according to the former PDIC chief...
“What we found were fictitious deposits, [rotating] collateral from one bank to the other, unsafe and unsound [banking practices] and improper documentation.”
However, a weak regulatory and legal system—and the alleged involvement of high-profile politicians—also meant that PDIC would shell out 250 percent more to cover the banks’ insured deposits three years later.
“When I left PDIC [in April 2006], our exposure to [De los Angeles’] 12 banks [in terms of insured deposits] was P4 billion,” Tan said in an interview with the Inquirer. “Since then, PDIC’s exposure has risen to P14 billion.”...
..These banks linked to the Legacy Group are Rural Bank of Parañaque, Rural Bank of San Jose (Batangas), Rural Bank of Carmen (Cebu), Pilipino Rural Bank, Philippine Countryside Rural Bank, Rural Bank of Calatagan (Batangas) [now Dynamic Rural Bank], Rural Bank of DARBCI, Rural Bank of Kananga (Leyte) [now First Interstate Rural Bank], Rural Bank of Bisayas Minglanilla [now Bank of East Asia], San Pablo City Development Bank, Bicol Development Bank, Nation Bank and Rural Bank of Bais.
These banks closed voluntarily in late 2008 and were taken over by PDIC early this month.
Well, the slow burn finally led to a full-blown capitalization conflagration.
Meanwhile, House to start probe on Legacy fiasco:
Representative Teodoro Locsin of Makati City has described the failed banks saga as the "Celso de los Angeles Legacy scam.''
"He milked it, thinking it was a cow,” Locsin said of De los Angeles and the Legacy Group.
He added that “the mafia” in Philippine Deposit Insurance Corp. “took a dive for Celso de los Angeles.''
House Speaker Prospero Nograles is also calling for an investigation of the Legacy Group’s shuttered pre-need firms.
But what does the House intend to accomplish? Considering it had lobbied to keep the banks afloat and seems inclined to keep other troubled rural banks afloat, it therefore has to investigate itself -which is doubtful- even as it tries to apply pressure on the PDIC and the Banko Sentral.
As indicated by the Speaker's interest in the pre-need activities of failed Legacy Bank, other regulatory problems are slowly simmering, too. See Gov't mulls bailout for preneed sector even as 35 insurers warned on capital deficiency. You can expect insurance claims to increase as times get tougher and some businessmen turn to filing false claims (on the basis of arson, etc.) or when the coffers of insurance companies hard-hit by no new policies being sold, have to face unexpected big claims.
IV. Drug Menace
Related to the above, today's Business Mirror editorial points to a statement by "four former presidents of the Philippine Deposit Insurance Corp. (PDIC), three of the most recent finance secretaries and two of the most senior former central-bank officials, among others", warning of “the increased boldness and arrogance by rogue bankers and their political padrino.”
According to the editorial, the Central Bank governor is, at least, getting moral support. But what about whistleblowers? The editorial then goes on to say -and this is what makes it relevant to this sub-section of today's entry- that other whistleblowers don't have it so good:
But for many other bureaucrats, especially in regulatory bodies, who are waging lonely battles against wrongdoers in and out of government, the story is quite different. In fact, some of the names in the FSGO roster have themselves once suffered the kind of shabby treatment that this administration has come to be known for, when it comes to dealing with its executives. We all remember stories of Cabinet and sub-Cabinet officers, directors or heads of regulatory agencies—many of whom got on the wrong side of the administration by stepping on the toes of cronies—who were rudely told to quit, or learned about their “resignation” in the most embarrassing situations, often through the media. One ambassador learned he had been replaced just before undergoing surgery; another learned it from reporters while they were airborne. Perhaps the latest casualty is the chief of the National Printing Office (NPO), Enrique Agana, who was abruptly replaced last week, after a most curious string of events: Right after he firmly blocked a cabal of contractors linked to alleged anomalies in the past, he suddenly found himself facing the most unpalatable of charges—child molestation—and Mr. Agana is crying frame-up. This is not to conclude that Mr. Agana is innocent; it is simply a plea for the due process that was denied him. Child molestation is a serious charge; but equally deserving of attention, nay, a thorough investigation, is the man’s claim that the usual “syndicates” that had the run of the place for years are aggressively lobbying for more share of the pie. That Mr. Agana—a man with a clean work record as far as we can ascertain—is to be replaced by a controversial general embroiled in the “Hello, Garci” case only makes this latest Executive firing uglier. The Palace cannot accuse the opposition this time of beating a dead horse; the decision to name former Admiral Tirso Danga is an invitation to dredge up anew this issue against the President, considering the NPO prints sensitive election forms. Meanwhile, the people are losing another good public servant; and getting the signal that working in the bureaucracy here is much too hazardous for reformers.
The willingness of the current gangsters in government to go after its enemies by any means (and to keep probing the defenses of the public by trying to put in all sorts of characters into politically-useful positions -in place of Agana, the President tried to appointretired Admiral Tirso Danga, is something we ought to consider as the same government revs up its "War on Drugs." The Palace hastily backtracked on Danga's appointment when NAMFREL raised a hue and cry because of Danga's having been implicated in the Hello Garci scandal.
Which is why the point raised by John Nery in his column Drugged (or, PDA for PDEA) , yesterday, needs to be more widely discussed:
Lost in all the noise is the enormous power of the beast that is coiled inside the law creating the PDEA.
Tito Sotto, chairman of the Dangerous Drugs Board (DDB) as reconstituted by Republic Act 9165, hinted at the stirrings of the beast, with his appeal for a return of the death penalty. PDEA Director-General Dionisio Santiago, once one of President Gloria Macapagal-Arroyo’s favorite generals and for five months Armed Forces chief of staff, let the ghostly cat out of the bag when he admitted that PDEA agents sometimes planted evidence. “We sometimes do this although this is against the rule of law. Definitely we only apply this matter to some cases, like a subject who is publicly known to be peddling drugs but always escapes arrest. This is when we enter the picture.”
Now, the President’s impending appointment of Palparan, the so-called “Butcher” at whose whetting stone the Melo Commission laid the blame for some extrajudicial killings, to the DDB is the virtual pronouncement of the Arroyo administration’s new strategy, its own version of “narcopolitics.”
Call it paranoia, but perhaps we should brace for a future where critics, whistleblowers, just plain annoying people can be removed from (political or media) circulation with a timely dose of planted evidence.
Note that Section 11 of RA 9165 provides that mere possession of “any dangerous drug” (the provision specifies the quantities) can result in “life imprisonment to death and a fine ranging from five hundred thousand pesos (P500,000.00) to ten million pesos (P10,000,000.00).”
...We should hold the PDEA’s feet to the same fire we have started for the DoJ. Far from a simple black-and-white fable, we are dealing with the human narrative in all its messy glory: flawed human beings, doing sometimes contradictory things, for not necessarily simple reasons.
For instance, my instinctive reaction to the House hearings (a different matter from the newspaper reports) was formed largely by an aversion to the PDEA chief legal counsel, Alvaro Bernabe Lazaro. I did not know him from Adam (or Adan), but the way he comported himself during the first televised hearing triggered internal alarm bells. In particular, his attempt to raise the stakes by bringing in something Resado said about Chief State Prosecutor Jovencito Zuño in a phone conversation was shameless.
After much hyping of the phone call, Lazaro then recalled Resado saying, “Pare, delikado, ‘wag tayo sa telepono mag-usap. Eh kasi si Chief Zuño pumirma, eh.” [Buddy, this is risky. Let’s not talk on the phone. It was Chief Zuño who signed it.] After insinuating proof of wrongdoing, he then said (I am recalling from memory): But I am not insinuating anything.
Santiago is another flawed character. In 2005, he was charged before the Ombudsman with a graft case, based on a military probe alleging that after he had retired as AFP chief of staff he “defrauded the government” by depositing an P8-million check in his personal account. I do not know what happened to the case, which his successor Gen. Efren Abu had announced. I can find no further reference to it.
What about Marcelino? He remains unsullied by all the back and forth, a good man trying to do his best in a sordid though necessary job. But he strikes me as Ruben Guinolbay redux: The Scout Ranger captain emerged a hero from the Lamitan siege, but his personal bravery could not mask the reality that, in Lamitan, the Armed Forces suffered one of the worst debacles in its history.
I'd pointed out the disquieting statements of Santiago in my June 15, 2008 column, The Rule of Glo .
I'd like to raise some additional points, here, that I originally raised in the discussion going on Smoke's blog entry, Militarization is it?.
If you've noticed, reports on the illegal drugs trade, specifically on the manufacture and sale of Shabu (a danger posing a real National Emergency, in my opinion), always point out there are several factors at play.
The first is that foreign drug syndicates won't engage in "technology transfer," so chemists come and go, to cook up batches of the stuff.
Have we heard of a concerted plan to increase the scrutiny of foreign arrivals, in cooperation with the drug agencies of foreign countries?
The second, is that ephedrine is a necessary raw material. Tons of the stuff is imported under false pretexts.
Have we heard from officialdom, first of all, how much ephedrine is required for legitimate purposes? Next, have we heard of any sort of scheme to beef up customs inspections, and fortify the system of permits and documentation?Have we heard of a doable plan to secure our coastlines, scrutinize private ports and docks, keep tabs on interisland shipping? Keep track of cargo manifests outside Metro Manila, in a country where Marina officials keep track of these things by scribbling data on yellow legal pad, which indicates the absence of a timely and reliable national database on interisland and international commerce?
The third is, if you recall the saturation drives conducted by the armed forces in Luzon during the time of Palparan, and similar efforts undertaken in urban poor areas last year, one benefit people did point out, was that public disorder and things like the drug trade were dramatically affected by the saturation drives. And yet, we have not heard of any plan to integrate the police and armed forces in simply maintaining the high visibility of law enforcement agents, in a manner that inspires confidence and not unease, in the public. This is particularly true in far-flung provincial areas where the drug trade seems to be taking root as things get hot for the syndicates in the metropolis.
The absence of a holistic picture, informed by facts which could be gleaned from a government that is looking at the big picture -interdiction, patrols, scrutiny, as wel as the more dramatic rounding up of petty pushers- is why we ought to consider whether this is really a serious effort to fight the Drug Menace or a great to-do in aid of extortion and growing the administration's campaign kitty. As the economy takes a downturn, the government will be hard-pressed to raise taxes, to pay for patronage, and to build up a war chest for whatever comes next -and so, needs to farm out favors, in the tradition of tax farming.
Cocoy, in his Filipino Voices entry All Your Drugs Belong to Me , had also pointed out that oodles of money's to be made from drug testing, when a drug testing policy requires safeguards being put in place. Yesterday's Cebu Daily News editorial, Drug tests can be abused, lays out the dangers of a blanket policy of drug testing for kids:
Still there are fears that, like in the Alabang Boys case, the police and the PDEA may manipulate drug test results, a convenient way to extort money from students.
There are grave concerns about how the drug tests will be conducted and its potential for abuse.
Urine samples can be switched. Test results can be manipulated.
Just observe the hole-in-the-wall health centers that abound near the Land Transportation Office where adult drivers have to pay for a certification that they were tested for drug use.
Users anticipating a test can also abstain from their vice or flush it out of their system in time for the exercise.
Then again, random drug testing is also known to produce false-positive results. A person can show misleading positive results after having taken over the counter medicine like Ibuprofen, a common pain reliever.
The whole system of managing the information that comes out of a surprise drug test is supposed to be conducted in strict confidence and under controlled terms for results to be reliable.
Imagine the damage to a youngster's self confidence or reputation, when rumor spreads in school that he tested positive in the screening test? (A confirmation test would have to be made before one concludes that illegal drugs were found in one's system.)
Another cause for concern is when school officials conduct drug tests with specific targets in mind, namely students they consider troublemakers. The test would be a convenient means to bar enrollment or defer graduation of an undesirable.
A lot of assurances will be have to be given that the right of students to privacy, to refuse the test and not to incriminate oneself without due process are guarded.
Again, this is a question of government going for the spectacular, and expensive, shotgun approach to the headline-hogging crisis of the day. Schools, for example, could have been encouraged, as a matter of policy, to undertake drug tests, but leaving the details to the schools themselves. Greater education and a kind of neighborhood watch could be encouraged, too; at the same time training in detection and the counseling of kids, has to take place among educators and school staff, the kids themselves, and parents.
V. LPG and Gasoline
In my on LPG entry the other day, I quoted industrialist Raul Concepcion as saying he expected oil prices to go down. But instead, Oil firms hike gasoline prices (including, interestingly, ethanol blend gasoline). The third time prices have gone up for gasoline this month (while the price of Diesel continues to fall):
According to data from the Department of Energy, the regional benchmark Dubai crude climbed to an average $46 a barrel as of January 26, from an average $41 a barrel last month.
The price of unleaded gasoline based on the Mean of Platts Singapore (MOPS) benchmark for refined petroleum products likewise increased to a $51-a-barrel average as of January 26, from its December average of $41 a barrel.
The reason for this is put forward by the International Energy Agency in its Oil Market Report:
Crude oil prices rose to nearly $50/bbl in early January, supported by cold weather, the Russian/Ukrainian gas crisis and fighting in Gaza. Subsequently, weak global refinery demand and an increasing crude overhang have pressured Brent futures to currently around $45/bbl, while WTI was at $35/bbl, distorted by record-high Cushing stocks.
Other news has OPEC and other producers slashing output to keep crude at the $50 a barrel range for this year. Maybe Concepcion didn't take this into account in his ad.
A caption to a front page photo in the Inquirer says LPG prices are expected to go up 5 Pesos per kilo next month (with no answers, up to now, about the ongoing shortage in supply).