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WHEN times are tough....people buy lottery tickets! Even with the most recent huge jackpot of about P347 Million (a little over $7 million), long lines can still be seen in lottery outlets as the public hopes to be the next lucky person to win a big prize in the other games still playing with relatively large jackpots. Many times, people ask me if I have ever won in either the Lotto (pari-mutuel game) or the Numbers (fixed odds games) games, and I have had to answer in the negative. I am not, after all, a gambler at heart, but do wander off to a nearby lottery outlet to take my chance once in a while. Those who ask the question are the ones who somehow know of my involvement in the conceptualization of the online lottery game in the country. It began with an invitation by my uncle Norberto Quisumbing, Jr. to help him when he had just taken over PAGCOR upon the assumption of power by the Cory government. He had in mind the transformation of PAGCOR into an authority able to operate like the Nevada state gaming authority. On the other hand, he wanted to try to introduce the concept of the online lottery here, having seen how successful lottery operations were in various jurisdictions around the world. So, armed only with this informal mandate, I gathered together a small team composed of my classmate Mon Abad, Atty. Gerry Geronimo--a former colleague of mine in a bank--and one other person whose name escapes me. We drafted a revised charter for PAGCOR that somehow got lost in the Palace, and we lost the initiative of getting a law in place before the deadline for issuing Presidential Decrees. Studying the operations of different lottery organizations around the world was a more pleasant task. Suffice it to say that I visited many countries, and, in the case of the US, some half-dozen of the larger lottery operations of different states. Sadly, the climate was not suitable yet for the implementation of the online lottery and so we shelved the study. Many years later, a friend contacted me and asked if I still remembered anything about the study I had made some five to six years earlier. When I inquired, this friend mentioned that Mamita Pardo de Tavera had just taken over the PCSO and wanted to try implanting the game. Knowing her to be an honest and wonderful person, I readily agreed to dust off the study and begin the process all over again. Turns out that PCSO did not yet have the firm mandate, but that we had to go through some sort of bureaucratic shootout wherein the President would select one appropriate government corporation or agency to start the process....but not after proving that the agency could do it. Well, to make a long story short, PCSO won the shootout because we already had the core study in place. Then began the long process of drawing up bidding requirements through an appropriate RFP, designing the parameters for the game in terms of hardware, software, and other considerations that would help make the game successful. We also had to struggle through various sessions with Congress and the Senate, a process that was not easy but which we managed to survive. Unfortunately, many people mistook the online lottery as a replacement for the jueteng and masiao informal games, and we had powerful people calling up to see if they could get franchises for entire provinces. It was not easy convincing them that the typical lottery outlet was either a Mom and Pop store, or an existing business that would have a terminal as a sideline. And when I told them of the (measly, it seems) 5% commission that each outlet would get for every ticket sold, they all realized that the game was not for them. Some of the changes we effected then were to keep the entire draw process televised, requiring winners of the grand prize(s) to be brought straight to the Chairman’s office for documentation and awarding, dispensing with the previous practice of issuing winning checks made out to “Bearer,” and so forth. But few are aware of the effort backstage during the draw to ensure that it is fair and beyond reproach. A committee of scrutineers selects a suitcase from a universe of many suitcases containing the balls used in the draw. The (pingpong) balls are taken (not by hand, to minimize human contact) from the suitcase and weighed carefully. Balls outside of a given tolerance level are discarded. Practice draws are made using the balls, and if any given ball comes out too often, it is examined again to see if it is too light, for example, since this would allow it to rise higher and more easily through the hole. After each draw, the balls are again scrutinized and examined to see if they really allowed for a random draw. This process is done every draw, and the idea is to make sure that the public gets a fair game. Yes, we did encounter some opposition from Church quarters at first, but we managed to convince them that the online lottery was just another form of entertainment and did not constitute hardcore gambling. Thus, by the time we held the bidding and the award was made by the President, most opposition to the game had quietly gone away. Did we get to savor the actual setting up of the game? No, this honor went to Mamita’s successor, Manoling Morato, who ran a pretty tight ship and managed to get the game going despite the usual carping from the sidelines. For personal reasons, Mamita quit soon after the selection was made, and since I came in during her watch, decided it would be best if the torch was passed on too. There is one thing that I would have wanted very much to do, based on the experience of lottery winners both here and abroad. Some studies have shown that winners, especially in the US, do not end up happier after spending or using their windfall earnings. This is why I thought it would be wise to have a professional (person or institution) give general advice to lottery winners to protect them from themselves and from the many investment and financial traps that they could be prey to. Not to mention a horde or old and newly minted relatives queuing up for a share of the now hapless winner’s earnings.

One of the unintended casualties of the free fall being suffered by banks and the finance sector in general is the increasing lack of good places one can expect to park cash and hard-earned funds. Many banks, especially in the US and Europe, remain in business only because of extreme measures taken by their host governments by way of direct cash infusions (in tens of billions of dollars and euros) and guarantees. As a result, many people are probably contemplating putting extra cash under the proverbial mattress in anticipation of worse days to come. The folding up of the Legacy group of banks locally calls to mind a similar spate of bank closures that arose from essentially bad management practices and the tendency of many bankers to treat deposits as a private piggy bank into which they can dip their grubby hands. Banking is a business built on trust, faith that the money deposited there will be used wisely by way of loans to productive enterprises or investments in high-grade bonds or other financial instruments. Now, depositors have to think twice before committing funds that may never get back to them. That is why it pains one when failed banks--that were closed for obvious mismanagement or the use of bank deposits to fund owners’ and management’s personal ventures, adventures, or peccadillios--are allowed by government or the legal system to get away with their crime and even file cases against regulators. In a legal system that is fraught with illicit transactions that favor those who are willing to pay the price, it is highly possible for a failed bank to reopen for business, to the future distress of new and unsuspecting depositors. I sincerely hope that our local banking system remains fairly solid, and able to withstand the buffeting that they will get because of the malaise that is affecting their counterparts abroad. On the other hand, depositors should be prepared to ask tough questions of their bankers: Their policies on investments and lending, their exposure to bad debts, whether any garbage is hidden away in the contingent accounts, actual exposure in potential land mines like (the bad kind of) derivatives, and so forth. This should set bank managements to thinking too, and keep them on their toes, as both the depositing public and the regulators act to keep the banks and bankers honest.

By Digoy Fernandez If only the process of sweeping out the baggage and detritus of the old year could be so simple. Just get a broom and sweep away! Unfortunately, life in real time suggests that the only way to get rid of old baggage is to sweep clean one’s own psyche, more like an emotional cleansing. At the very least, even if the problems of the old year manage to carry on into the New Year, one would be better conditioned, mentally that is, to tilt with the windmills that 2009 promises to bring to bear on one’s already tired shoulders. A comment was made to the blog on global warming, insinuating that it is a problem of the elite or those who would raise the specter of rising ocean levels just to obtain paltry grants. Well, speaking for myself, I don’t get paid a single cent to blog, nor do I rely on anyone’s largesse to support this private initiative in favor of the environment (among other concerns, of course!). It is true that the planet has had to deal with catastrophic events in millennia past. But if we just think of the rough time span that homo sapiens has been on this earth, this would be the equivalent of a hiccup in the face of millions – perhaps billions – of evolutionary years. The great difference is that the recent crisis has been largely man-made, mainly through the rapid use of non-renewable resources, the constant emission of effluents into the air and the world’s water systems, and the creation of incredibly large carbon footprints per capita that the world’s dwindling forests can barely cope up with. (FYI, trees generally are able to process carbon dioxide from the air and convert them into oxygen, etc.) Who will be affected by rising ocean levels? Will this be merely a subtraction in the number of islands in a given archipelago? Well, try filling up a pan with water – with simulated island masses on it – and find out the harsh truth: rising seas will not discriminate on who or what they drown. Rich or poor, same same! Even if only 1,000 islands will be left of the supposedly 7,000+ islands we have in our archipelago, this will not mean that the islands left behind will be intact as before. They will also suffer severe diminution in size, leaving only areas maybe more than a couple of meters above water able to survive. Almost all existing shorelines of the big islands will be obliterated and will see a literal “sea change”, i.e., the encroaching seas will take over much of existing dry land. In which case, man had better learn to live in the hills and high mountain areas of of the world. Unfortunately, many of the world’s poorer people live along the periphery of the normal habitats available to man, such is their inability to obtain more advantageous locations for their makeshift housing. Therefore, the poor would be most affected by rising ocean levels, whereas the rich will be able to secure better upland-inland areas for themselves. So, except for those coveted beachfront properties that the rich seem to gravitate to, the great masses huddle tightly in areas vulnerable to inundation, close to rivers and seas. Because this problem is one that affects everyone regardless of social or economic status, it is important to find out how one contributes to or helps minimize global warming. Again, this is not a problem generated by the elite for its benefit, because all mankind will have equal opportunity to drown in the encroaching waters as the Greenland ice, glaciers, and polar caps melt. There are already evident signs of this as we witness the sad plight of mighty polar bears drowning or starving as their normal hunting grounds melt into the oceans. I have a tongue in cheek name for the so-called Environmental Concerns committee of my village: The Tree-Cutting and Environmental Destruction Committee. This is a well-deserved sobriquet given their total lack of consideration for true environmental preservation and appreciation of the impact of their actions. If the strict implementation of PD 953 were to be observed, I figure they owe millions of pesos in fines and penalties for their wanton destruction of the existing tree cover and even half of the mini-forest we planted two decades ago. How can we talk about the economy and keeping afloat when we can’t even take the first step towards keeping the country afloat, period! And just in case anyone out there is interested, look up the many opportunities that now exist in the areas where environmental concerns are pre-eminent. Biofuels, hybrid motors, hydroponic and organic farming, tree farms with selective cutting, safe waste disposal methods, etc. These are areas that will not go down with the sinking economy, simply because more and more people know that these are vital to the planet’s survival. We must, therefore, consider what baggage to leave behind in this year, and begin to think about new and better initiatives that would help both the earth and the people who live in it. Initiatives need not be big: A tree planting every month for each individual, stopping the use of non-biodegradable products, renewing & recycling, helping poor families get ahead with proper tutoring and assistance with microfinance and other such successful models, and so forth. We just have to take that first all important step!

By Digoy Fernandez WITHOUT doubt, we now live in interesting times. In fact, the venerable Chinese -- who have seen many civilizations come and go over their long and storied history -- sometimes use the term in a euphemistic manner, akin to wishing that someone, perhaps an adversary, live in interesting times. A relative tells of her own well-to-do siblings taking off for a vacation in the US and then Europe. It seems that, in the case of the former, most stores still open are on Sale Mode, offering up to a solid 70 percent off on all goods. Problem is, there are no takers, leading one to realize that genuine belt-tightening is going on. This is not surprising given the problem of lay-offs and company closures that have been taking place in an accelerated fashion. To make things worse, even companies able to weather the economic storm find themselves with dwindling sales as less and less people commit to purchasing anything unless absolutely necessary. The consumer-led US economy is fast sputtering to a halt, and the new president will have his hands full trying to jumpstart the engine by building up buyer confidence by creating new jobs and opportunities for others who have already been laid off. Despite naysayers who claim that the US is no longer the world’s economic locomotive, it is pretty clear that this malaise has began to seep into the other main economies of the world, from Europe, to the Middle East and its oil riches, to the East with “ChIndia” (China and India) and Japan slowly sliding into the morass. An interesting footnote to that trip taken by our intrepid band is that they found themselves buying a lot of the bargains being offered, proving once again that Cash is King these days. It is a well known fact to many local country and corporate planners that the saving grace of the Philippine economy has always been the Value Added Tax and the foreign exchange inflows generated by our army of overseas workers. Unfortunately, the spread of economic gloom and a general decrease in economic activity worldwide will probably result in some diminution of the foreign exchange remittances currently propping up the economy. The government, probably prompted by the need to show some backbone in the current crisis, has mapped out a program for public sector spending meant to inject funds into the economy before it throttles downward. Unfortunately, there is little or no surplus to spend, and any program aimed at propping up the economy may be just a short-lived and expensive exercise as we poach into the largesse generated by VAT. I know of families that have recently gone through a series of sales of family properties, some through the Voluntary Offer to Sell (VOS) program under land reform (deformed?). Many of these people believe in paying the right taxes and fees. It is interesting to note that they have always had to pay much more just to get proceeds into their hands. What galls one is that the VOS is supposed to generate tax-free revenues for the selling party, and yet, functionaries find ways and means to make the transactions interesting. It is precisely this type of practice so prevalent today that screams for structural reform. A philosophical observer of the scene once said that, to get rid of corruption in this country, one would have to eliminate almost everyone above the age of 30 and start all over again -- hopefully in the right direction. The coming year promises even more of what will really be interesting times. The country will have to come up with creative ways to beat back the economic malaise that threatens to seep into our own fabric. It does not help that the political process is being thwarted yet again by people who hold on to their public offices like leeches. Like the true parasites that they are, they only know how to suck blood and do the country a disservice by coming up with new-fangled ways to cling to power beyond the mandated election year 2010. During these interesting times, we are tempted to take a page from our Chinese friends and wish the very best of these interesting times on those who seek to thwart the will of the people and the constitution. Perhaps, in the next process of reviewing the constitution -- for it does need some tweaking -- it may be wise to put in a provision that NO ONE who has ever held the highest position of the land can ever take on a similar top position, e.g., prime minister or chief janitor, even if the constitution were to be changed a thousand times.

By Digoy Fernandez THE news that a leading international bank -- OK, its Citi -- will knock off more than 50,000 jobs did not excite the markets, but it raises the specter of diminishing service in a service-oriented industry. I remember all too vividly arguing with a very rude Citi rep a few years ago -- probably one from their call center -- and recounting this to one of my classmates who was a former high ranking executive of the bank. He agreed that the service of the bank had gone down tremendously. The net effect of all this is that, after I mentioned the incident to my family and friends, they all resolved to bring their banking business elsewhere. We talk about outsourcing here in the country as if it will be a panacea for all our economic woes. True, employment in this sector is expected to be more stable than most as international companies shed staff and outsource certain functions to firms like those found in this country. But outsourcing can only go so far. The news today about additional woes in Quantas -- an airline that had once been proud of its service history -- as yet another plane suffered from a failure in one of its systems. The sudden increase in incidents in this airline are said to be traceable to its having outsourced the maintenance function. This is not a wrong move, per se, but an airline certainly cannot take chances that something will go terribly wrong with one of its airplanes as it coasts at 30,000 feet above sea level. The TV program Air Crash Investigation has highlighted the danger to a plane if one little part gives way, or if a plane passes cursory inspection only to fall from the sky because of something the mechanic forgot to do. One airline that they featured had taken shortcuts in their maintenance schedule by maximizing the length of time between mandatory service schedules, and an air crash was the result. That is why I look apprehensively at any airline that publishes many flights on any given day, and, after considering the number of aircraft that they have available for flight, come to the conclusion that someone is short-circuiting maintenance schedules. Last week, a funny thing happened to me when I sat down to eat in one restaurant (initials GG) in an upscale mall in Alabang. I sat for fully 10 to 15 minutes and saw many waiters pass by and practically ignored me. And this was at 2 PM after the usual noon rush hour! I stood up and crossed over to another restaurant that had long been a favorite of my son (initials NP). The service staff in NP also studiously ignored me as I sat there waiting for anyone to acknowledge my presence. After another 15 minutes of waiting, I decided to test restaurant GG to see if the first incident was a fluke. I waited at the entrance to be shown in, and even sat down on one of the chairs provided there for that purpose. Alas, the staff had mastered the art of avoiding eye contact as they kept on bantering and moving around and ignoring me. Again??? I stood up once again and decided to also give NP another try. To make a long story short, one of the staff promptly noticed me, showed me to a seat, put one of their paper table runners that also serves as a menu, and then left me to my devices for the next quarter hour. Hay Naku!! Convinced that the food gods were conspiring against me, I went to another section of the mall and decided that I wanted some food with couscous, and settled on the Café Mediterranean (I mention their name because their service was excellent, as usual). Not only were the staff hovering over me, they practically were anticipating my every need. That is why it remains a favorite of mine and my son to this day. What could be the main cause behind the lack of attention by service staff? Well, maybe they were dog tired after the noon rush hour. Or, possibly, relying on a depleted number of staff -- compared to full strength -- as some may have been taking their break. But I believe that, in the case of GG at least, the restaurant really sucks when it comes to service. They really take long to serve and have no sense of professionalism or pride in their work, which means that it will be a cold day in hell before I dare eat there again, even if my family begs me to bring them there!

By Digoy Fernandez IN the typical Western corporate setting, the initial reflex action in severe downturns like what we are beginning to go through is to lay off staff, close down plants, and cut both expenses and benefits in an effort to pare down costs. Of course, if one multiplies this action thousands of times over as companies across the international spectrum tighten their collective belts, the more pernicious effects of a severe recession become like a self-fulfilling prophecy. The more people lain off and plants closed result in lower spending power all over the world’s markets, making the downward spiral not only inevitable but also longer lasting. There was a trigger, to be sure, and this was the debacle in the sub-prime housing loans and the discovery of crappy credit swap default loans in the portfolio of many an otherwise respectable financial institution. But the period of fault finding is over. Now is the time to think positive to get ourselves going, even if the economy is headed the opposite direction. With the loss of jobs coming along like a tidal wave, it boggles one to attempt to visualize the effect this will have on consumer spending, the subsequent decline in production, the ejection of families from their homes, and a general sense of malaise. What is one to do then, when faced with an unpalatable situation such as this one? In our country where the family system remains alive, it is easy to think of a dispossessed family moving back into the parents’ household, or being given the use of an underutilized asset. Not so in many Western countries where homeless or church shelters often provide the only possible fallback for a family that hits bottom. At the very least, in the more socialized economies, there will always be welfare to lean on…but even this is not a bottomless fund and many governments may prove reluctant to support an army of dispossessed people who will not be able to find work. At the risk of going against the grain -- something I have always had the habit of doing all my life -- I would suggest that companies try to hold on to their people for as long as possible. In this case, I am sure -- or at least, hope -- that the shareholders will understand that the people who make up the organization are important stakeholders, people who spill blood and guts each day for the companies they work for. Will it hurt for companies to go into emergency mode and try to figure out a course of action for survival of the company and its most important assets, its people? Maybe, as another form of corporate CSR, companies can extend some form of microfinance assistance to help fund projects that their employees could undertake in order to maintain some semblance of self-respect as they earn a bit more in the process. Why not do CSR right in one’s own backyard, and, in the process, help put the brakes on the worst effects of the downward economy on the corporation’s employees? A corporate pipe dream? So were many other wild schemes proposed by many people in the past, now hailed as visionaries. It just needs a bit of guts and some determination on the part of corporate leaders, instead of their acting like ostriches and hiding their heads in holes on the ground.

By Digoy Fernandez THIS particular blog will not bore you with statistics nor will we provide a chronology or a timeline for the present economic crisis. I have received enough forwards, looked into a myriad number of web-pages and articles about how the crisis began and how it is playing out. Instead, I would like to dwell a bit on the motivation that drove otherwise sensible bankers and finance whizzes into making catastrophic (in retrospect) decisions on a truly grand scale. In a word, we find that, in almost all cases, the common denominator was GREED! Someone commented that bankers and finance men (and women) who are currently in their 50s or 60s and above, would be boggled at the type of financial products developed and marketed during the past two decades. These so-called financial products tend to confuse the traditional finance people, schooled as we were in the basics of borrowing and lending. But the new mavens have gotten to the point of fashioning intricate debt or credit instruments that have become less based on fundamentals and more on an ability to flip the products through the mill, earning one a hefty commission in the process. In the good old days, our bosses told us to know our clients very well, and to know their companies and products to the point of being well-versed in the nuances of these businesses. We did cash flows of the firms’ products and their cycles, and we knew when and how much to lend to these corporations. Lending and investment were based on good old fundamentals. Unfortunately, the traditional way of doing business was deemed too arcane and too sluggish for the financial wizards of today. Born and schooled in an age of instant gratification, they tended to live in a world divorced from the Main Streets of the world. In another publication where I write with a group of the country’s top finance people, I have long tended to look askance at financial derivatives and financial analysts who track a company based on quarterly results. Because of this tendency to focus on quarters, top executives have also been inclined to take short cuts or measures that would ensure good quarterly results, often sacrificing a firm’s long term prospects in the process. I am not sure if there is a direct correlation, but the pressure to produce regular rosy reports has probably tempted not a few CEOs to sweep problems under the rug…like hiding them in innocuous sections of the contingency accounts of the balance sheet. Naturally, to participate in such a shameful process, a CEO must probably be motivated by his or her own personal bottom line by way of high salaries and benefits, significant profit sharing schemes, and the ultimate in bailout plans – the golden parachute. This last item, the golden parachute, was originally designed as a “poison pill” that would discourage predatory funds or investors from gobbling up a particular fund, because they would have to pay a very large up-front fee just to get rid of a sitting CEO, for example. Over time, the golden parachute evolved into a necessary part of a CEO’s remuneration, allowing him or her to avail of very large payouts whether or not the company under his or her care made money or was leaking red ink during the period of stewardship. A classmate forwarded a thread that showed how many of the CEOs involved in the institutions being bailed out by various governments were eased out of their respective positions, but not before availing of generous separation benefits. Even the US Congress was incensed enough to point out this fact in their deliberations regarding the $700 billion bailout fund. The CEOs of today will have to remember that, at the very least, they are stewards of their companies, whether they have a significant financial stake in these institutions or not. They are, after all, responsible to a number of employees and their families who depend on the firm for their daily and long term sustenance. Furthermore, the good health of a company, and of all companies for that matter, help ensure the health of the economy in the long term. It will take quite a while, if at all, for the world economy to get back on its feet. This was a Mortal Wound. And it was powered by insensitive Greed, because, to this day, what they did still doesn’t make sense to the man on the street.

By Digoy Fernandez ONE of the unintended casualties of the current global financial meltdown may be corporate social responsibility programs. CSR projects are not exactly favorites of the sharp scissors of most budget cutters, who also cast an evil eye on what they consider as expensive programs like Training and Manpower Development, the upgrade of Information Systems, and the like. In fact, for CSR and the others mentioned to survive the budget cutters’ wide strokes, these would need strong sponsors from the upper reaches of top management or the ownership. Otherwise, kaput! When CSR programs get short shrift, it also sends a signal to various publics of the corporation that the company has ceased to care about some of these sectors and is buckling down into self-defense (or self-preservation) mode. There are many ways of cutting down on expenses without sending the wrong signals to the public. In fact, I am particularly enamored of a continuously running short feature on CNN and Discovery Channel showing a denuded piece of land in Malaysia that was replanted in 2004, and that has began to show signs of becoming a true wildlife habitat just 4 short years later. This is the kind of project that can be replicated by companies, groups, and individuals: regenerating parcels of land -- small to large -- and reclaiming them in the interest of the environment. In fact, the project that finally won the Grand Anvil for the bank I worked with was conceived by this author way back in the early 80s when the country was reeling from the economic and financial crisis that accompanied the assassination of Ninoy. In short, I suggested that companies or groups each adopt a depressed community, and work with them in developing skills that could eventually be made use of by the trainor / adopting units. Our own parish council has some programs aimed at helping the depressed sectors assigned to us, under the concept of Stewardship. For example, used paper could be given to these people to be recycled into stationery or other paraphernalia that both the company and the public could make use of. It is unfortunate that the rapacious greed of a few high flying financial mavens finally caused them to crash, bringing along with them practically the whole world economy. It will be a long time before companies begin to think of CSR again…which would be very very bad indeed. Let us hope that enlightened individuals and companies manage to rise above the projected morass and think of how they can help those who may be in worse shape then even they are.