Showing posts with label economy. Show all posts
Showing posts with label economy. Show all posts

Monday, April 22, 2013

Discussion Topic: Authoritarianism and the Stateless Society

Your mission if you agree to accept it . . .
The real JoeAm?

JoeAm will be on family vacation for two weeks, returning in early May. He drops off this blog as a voluntary mission for readers, ala "Mission Impossible". 

Here's the framing:
  • The Philippines is an authoritarian society. Interpersonal rivalries are intense, a struggle to top or topple the opposition. The government is democratic but tends toward authoritarianism: laying down the law but enforcing it selectively, officious attitude in government offices, army and local government vigilante behavior, issuing dictates left and right with no open justice system for the people. Senators doling out millions in Christmas gifts as if it were THEIR money.
  • Richard Javad Heydarian in his recent article "Why the Philippines Failed" makes a very clear point that the Philippines does not keep pace with other developing nations because it does not have a strong concept of "State" governance. This article is the beginning point for the discussion and is required reading for volunteers.
Here's the issue: How can the Philippines be both authoritarian and weak of State? 

Here's the mission:
  1. Rationalize the apparent contradicition of authoritarianism and statelessness.
  2. Explain in clear terms what has to happen -- tangibly and practically achievable -- to move the Philippines forward to become of equal stature to Japan and South Korea as a core nation in Asia.
Whether and how you proceed is up to you.

This blog will self-destruct in two weeks . . .

Saturday, March 30, 2013

Parsing Fitch

The critics of the Philippines ate another bite of hat the other day when the Fitch Rating Agency upgraded Philippine debt to investment grade. Discussion threads on the upgrade were again the habitat of the 100 percenters, broken down about 80/20, with 80% offering commendations and full credit to President Aquino, and 20% claiming all credit should flow to Gloria Arroyo.

Largely missing were the voices of reason that say, sure, Ms. Arroyo can claim some credit for things like VAT, but the rating would not be raised if it weren't for Mr. Aquino's good governance agenda and fiscal management. Furthermore, some aspects, like steady OFW inflows, belong to no one but OFW's.

Like, where's the ANALYSIS instead of the need to win arguments?

Well, Joe's got it.

He took apart the Fitch statement announcing the rating upgrade piece by piece. The full statement is provided after this commentary. Here are Joe's findings:

  1. Fitch places the Philippines at the bottom of the investment-grade category of ratings. There is a long way to go to reach top. Key point: work is not done.
  2. Cash flows compare well with other countries thanks to strong OFW inflows. Imports are expected to increase with net flows remaining healthy through 2014. Key point:  The ratings look SIDEWAYS at other countries and AHEAD at what might happen; the Philippines compares favorably, in the main, with other peer nations, and the future looks stable.
  3. The economy is strongly driven by domestic demand. Key point: growth is not driven by manufacturing or exports or government infrastructure spending.
  4. Improvements in fiscal management have made debt resilient to shocks. This is a combination of good GDP growth with good debt management. Key point: Fitch explicitly attributes the START of this to President Arroyo.  Obviously, President Aquino has built on the foundation.
  5. The macro-economic condition is sound. Inflation is favorable to peer nations. Key point: BSP (the central bank) is doing good work.
  6. Governance is still weak compared to peers.  Key point: President Aquino is explicitly credited with improvements, but the Philippines is still seen as having governance problems.
  7. Family income and living conditions in the Philippines are below peers. Key point: Way below. Poverty is an economic risk.
  8. Philippine tax revenues are weak compared to peers. Key point: It is hard to extract blood from a turnip. Or taxes from a bazillion poor people.
  9. The Philippines can realize further ratings improvements by continuing to grow GDP while broadening the tax base. Ratings could go back down if governance deteriorates or financial integrity slips. Key point: Pause to appreciate the achievement. Then get back to work. Aquino's "collect more earned taxes" initiative is sound.
  10. The ratings assume: (a) good governance continues, (b) economic growth remains a little better than 5% per year, and (c ) there are no unexpected shocks. Key point: Pray.

The Philippines is looking good. The current administration should be rightfully proud of this achievement. So should OFW's and those of us supporting the economy by spending our income as soon as it comes in. Like, about EVERYONE I know.

Those who offer up sniping criticisms to take away pride in the occasion are small of mind and heart. This is a very notable and worthy achievement. By the Philippines. Period.

Now, y'all kindly get out there and keep earning and spending. Obey the laws, pay your taxes, be kind to your neighbor, support your nation.

Hi'yup!

Fitch Statement: March 27 (Organized in outline form by the editor for clarity)
  • Fitch Ratings upgraded the Philippines' Long-Term Foreign-Currency Issuer Default Rating (IDR) to 'BBB-' from 'BB+'. The Long-Term Local-Currency IDR has been upgraded to 'BBB' from 'BBB-'. The Outlooks on both ratings are Stable.
  • The agency has also upgraded the Country Ceiling to 'BBB' from 'BBB-' and the Short-Term Foreign-Currency IDR to 'F3' from 'B'.
  • Key Rating Drivers . The upgrade of Philippines' sovereign ratings reflects the following factors:
    • The Philippines' sovereign external balance sheet is considered strong relative to 'A' range peers, let alone 'BB' and 'BBB' category medians. A persistent current account surplus (CAS), underpinned by remittance inflows, has led to the emergence of a net external creditor position worth 12% of GDP by end-2012, up from 6% at end-2010. Remittance inflows were worth 8% of GDP in 2012 and proved resilient even through the shock of the global financial crisis. Fitch expects a rising import bill stemming from strong domestic demand to lead to a narrower CAS and to stabilise the net external creditor position at a strong level through to 2014.
    • The Philippine economy has been resilient, expanding 6.6% in 2012 amid a weak global economic backdrop. Strong domestic demand drove this outturn. Fitch expects GDP growth of 5.5% in 2013. The Philippines has experienced stronger and less volatile growth than its 'BBB' peers over the past five years.
    • Improvements in fiscal management begun under President Arroyo have made general government debt dynamics more resilient to shocks. Strong economic growth and moderate budget deficits have brought the general government (GG) debt/GDP ratio in line with the 'BBB' median. The sovereign has taken advantage of generally favourable funding conditions to lengthen the average maturity of GG debt to 10.7 years by end-2012 from 6.6 years at end-2008. The foreign currency share of GG debt has fallen to 47% from 53% over the same period.
    • Favourable macroeconomic outturns have been supported in Fitch's view by a strong policy-making framework. Bangko Sentral ng Pilipinas' (BSP) inflation management track record and proactive use of macro-prudential measures to limit the potential emergence of macroeconomic and financial imbalances is supportive of the credit profile. Inflation has been in line with 'BBB' peers on average over the past five years.
    • Governance standards, as measured in international indices such as the World Bank's framework, remain weaker than 'BBB' range norms but are not inconsistent with a 'BBB-' rating as a number of sovereigns in this rating category fare worse than the Philippines. Governance reform has been a centrepiece of the Aquino administration's policy efforts. Entrenching these reforms by 2016 is a policy priority of the government.
    • The Philippines' average income is low (USD2,600 versus 'BBB' range median of USD10,300 in 2012), although this measure does not account directly for the significant support to living standards from remittance inflows. The country's level of human development (as measured in the United Nations Development Programme's index) is less of an outlier against 'BBB' range peers.
    • The Philippines had a low fiscal revenue take of 18.3% of GDP in 2012, compared with a 'BBB' range median of 32.3%. This limits the fiscal scope to achieve the government's ambition of raising public investment. The recent introduction of a "sin tax", against stiff political opposition, will likely lead to some increment in revenues and underlines the administration's commitment to strengthening the revenue base.
  • Rating Sensitivities.
    • The main factors that could lead to a positive rating action, individually or collectively, are:
      • Sustained strong GDP growth that narrows income and development differentials with 'BBB' range peers. An uplift in the investment rate that enhances growth prospects without the emergence of macroeconomic imbalances.
      • Broadening of the fiscal revenue base, as well as further improvements in the structure of the Philippine sovereign debt stock.
    •  The main factors that could lead to a negative rating action, individually or collectively, are:
      • A reversal of reform measures and deterioration in governance standards.
      • Sustained fiscal slippage, leading to a higher fiscal debt burden.
      • Deterioration in monetary policy management that allows the economy to overheat.
      • Instability in the banking sector, leading to a crystallisation of contingent liabilities on the sovereign balance sheet.
  • Key Assumptions .The ratings and Outlooks are sensitive to a number of assumptions.
    • The agency assumes the Aquino administration will persist with its fiscal, governance and social reform agenda.
    • Fitch estimates trend GDP growth for the Philippines in a range of 5%-5.5%.
    • The ratings incorporate an assumption that the Philippines is not hit by a severe economic or financial shock sufficient to cause a significant contraction in GDP and trigger stress in the financial system.
    • Fitch assumes that there is no materialisation of severe risks to global financial stability that could impact emerging market economies, such as a breakup of the euro zone or a severe economic crisis in China.


Monday, February 4, 2013

The Speech President Aquino Cannot Give

Good evening my friends. It's good to be Filipino, eh?

I want to talk to you about our country. About our history and future. And about who we are as a nation.

Lets start with the basics. We are an Asian country. Let's make that clear. We are not European, although we are a playground for Europeans and we hosted Spanish marauders for several centuries. We are not Middle Eastern, although Filipinos work in homes and offices across the Middle East. We are not Canadian although we speak English better than those Quebec rebels do. We are not Mexican although Mexicans box pretty damn well, too.

We are not American, for sure. And we are not America's little orphan brother.

We are the Republic of the Philippines. 

And we are an Asian country.

So today I want to speak to three audiences. First, I want to speak to our Asian neighbors, our friends and our rivals in the peaceful competition for markets and goods and travel in this exciting part of the world. Second, I want to speak to Americans and their friends, the Europeans - those we term "Western Nations".  And, finally, I want to speak to you, my fellow Filipino citizens. 

Long live the Republic! 

Although we are an Asian nation, our racial heritage is mixed. It's about as mixed as it can get. Native  Filipinos have been here since before some of our volcanoes broke from the earth. They are older than a hundred Enriles stacked end to end. And being at the heart of trade and commerce in Asia, we have had many visitors. Some stayed longer than we wanted, but that happens with some guests, eh?

And the visitors mixed with the native Filipinos. Chinese, Malaysian, Indonesian, Moro, Spanish, American, African and who knows what else. People are surprised to look at us and see brown, eh? That is the bias, really, the discrimination of the Western world, is it not, to think that the mixing of all the races of the world should somehow turn up white?

Well, that is also the error of many cosmetics companies, too, but I don't begrudge them making a little money on colors they deem stylish.

But we are brown. If you blend all the nationalities of the world, as we have done in the Philippines, we get what we are. Brown. So those of you who are not brown, kindly set aside this notion that your color is the color of the world. It is not. We, the Filipino, are the natural color of this world.

Let me be very candid here. Our history is rich with conquest. Unfortunately, we were on the underside of that conquest much of the time. We of the hills and lands were no match for the military powers of Spain and the US and Japan. But we fought and bled with the best of them, with guns and knives and bare fists.  Our families have known of the tragedies of war.

And we don't like such tragedies.

We prefer peace. So let it be known, let all our neighbors and friends know, we are a peaceful land.

But we aspire to something we have never had as a nation.

We aspire to walk alone. To stand independent as a nation equal to all. Better than none, worse than none. Equal to all.

And we are passionate about doing that. We have been occupied by foreign lands and we want to be rid of foreign occupancy.

If our good friend China fails to understand why we are adamant about our territory, about our seas, we would encourage them to understand that we are angry about our past, about the abuses brought to our shores by militaristic conquerors of the past. We are determined to stand free, to claim what is ours, and to rule it our way.

If our good friend America fails to understand why we throw off the suffocating presence of foreign warships, or rise up in anger when one sails into a precious reef, we would encourage America to understand that we yearn to stand alone. To be masters of our own destiny. To be rid of foreign influence either real, or imagined.

To business people around the world. If our corporate ownership rules seem defensive to you, limiting foreign ownership to 40 percent, we would encourage you to understand that we are not for sale to anybody. That we are wary of those who would take control of our valued businesses and take the profits and run. We are through with being used for other people's well-being, and discarded. Perhaps there will be a day when our economy is strong enough to warrant a higher foreign ownership percentage. But this is not that day. We believe the determined among you will find a way to work with Filipinos and with Filipino corporations to make money. And in that way, you will participate in the blossoming of a vibrant economy in Asia.

When we are more secure, we can take more risks.

To my fellow citizens, my brown and beautiful and peaceful people, I say this. Corruption and ignorance are as powerful as any foreign occupancy at stopping our growth and our progress. If we look at the history of the Philippines, we can see that our wealth has been controlled by the landed few. The dynasties, the landowners, the big business owners. I am from such a dynastic family myself. We have captured the road leading to power and influence, and become occupiers of our own nation.

This must stop. It is as oppressive as foreign armies and navies. We must open up government and business opportunities to more Filipinos. Those Filipinos from any family, with or without land, with or without name, who aspire to work hard and work smart to get ahead. Ambition is not a bad word. It is a good word, and it ought not be reserved only for those of name and land.

To the churches of this land, you are a part of our heritage and the values we possess. We thank you for standing firm as the conscience of our nation. But, frankly, we hope you will minister to the whole of our peoples and not limit yourselves to one political spectrum or another. Politics is a divisive business, and those churches that engage directly in political battles subject our people to unnecessary choices, to vote for the good of the Philippines, or to vote for their faith. The churches must accept that we are a nation of many people, many ideas, many faiths. The job of the State is to work for all, no matter the faith. So we ask church leaders to respect our State obligation to serve those of every faith, and even non-faiths.

We are a conservative nation, yet we too often live secret lives that are not conservative. We slip under too many radars, abuse too many laws, carry too many guns, exert too much violence as a way to solve problems. Violence does not solve problems. And disobeying rules is a cancer that leads to more and more rule-breaking until soon we forget what it means to live for the good of the community.

That is what laws are for. The good of the community.

And we ignore them too often.

So we, as Filipinos, need both greater freedom and opportunity, to compete for better jobs and more prosperity. And we need greater discipline, to do this honestly. Because discipline is best for the community of Filipinos.

So to the leaders of foreign nations, I say, respect our sovereignty. We are passionate about defending it. We will defend it to the death.

To those who would use and abuse the Philippines, we say, no more. We will govern our own affairs. We will do this in partnership with others when we share the same goals. But we will not bow to the whims and wills of nations that do not respect our right to self-determination.

And to our people, I say, rise! Stand up and stand for certain principles.

Stand for the freedoms we cherish, to speak openly and compete fairly for opportunities and prosperity. And stand up for discipline, for the strength it takes to obey the laws and give a little of ourselves to the community of Filipinos.

It's a great day to be Filipino. It is indeed. Thank you, and may God bless the Republic of the Philippines!


Monday, December 10, 2012

"Well Done Mr. President"


By now I'm sure you've read about the Philippines rising in the corruption rankings provided by Transparency International. And perhaps you've read the anti-propaganda diminishing the importance of the ratings.

  • "They are just perceptions, and they are wrong!"

  • "105th is still corrupt!"

  • "President Aquino is a braggart, claiming this as his achievement."

You know, I disagree with the anti crowd once again. Indeed, I can't disagree more.

The Transparency International ranking is just one more check in a lengthening checklist that PROVES that President Aquino has recast the hopes and promise of the Philippines. Tangibly.

From a string of presidential disappointments to a huge stride forward. From the dark confusion and mistrust of Mrs. Arroyo into the light of good deeds and promise of Mr. Aquino.

If the anti crowd cannot grasp that perception is real, is tangible, is meaningful, then it is best to write them off as lost, adrift in self deceit. You see, hope is also intangible. But so very important. Promise. Courage. Dignity. Compassion. Loyalty. Trust.

Intangible, but oh so very real. Powerful in the right circumstances.

President Aquino brought that power to the Presidency.

I chalk this up as one more metric that the anti crowd must whine and rationalize away to hold onto their dwindling credibility, founded on some strange, enduring distaste for the Philippines and Filipinos and anything POSITIVE about the country they may once have called home. 

The "yellow glow" that the antis detest is real. It is the bed of promise, the motivation, the passion upon which real work has been done. One man provided that foundation, the platform needed to get the Philippines headed in a new direction, the man the antis can't bear to give credit to, even when credit is due: President Noynoy Aquino. The man who brought fundamental goodness and earnest work to the Presidency of the Philippines, for ALL that it is worth.

Would Estrada have done this? JoeAm figures the odds would be about 5%.

Villar? 20%

Gordon? 40%

Why? Because the nation rose as one and said "we demand good government!" Those guys had certain strengths, but they did not have the real-deal GOODS. The rock solid intangible of belief and trust.

Only one candidate in 2009 could bring the hope and the promise and, yes, authoritarian power that would clear the path for stern acts like the jailing of the predecessor President and the eviction of a Supreme Court Justice who did not pass muster. I'm imagining Estrada and Villar would have pardoned Arroyo and left Corona in office. Gordon, who knows . . . such an illusive butterfly, floating on emotion . . .

Do  you think that authoritarian power, granted by the will and demands of the people, is "intangible"? Do you think ANYONE else could have brought to the top desk what President Aquino brought? The good of his mother and the grit of his father?

Who?

You know I may climb on the President for his various acts from time to time. I even used the "I" word in a headline once. But that is akin to how one feels about a baseball infielder making an error during a game. We boo in frustration, but still cheer for him and his team when they do well.

I cheer for President Aquino, and the Philippines. Truly, I do.

 Here's the Philippines under President Aquino:

  • Economic  growth is strong. Everyone recognizes this from the international press to the debt rating agencies. 

  • Tourism, service-center, gaming and real estate industries are flourishing.

  • The stock market is roaring.

  • The peso is strong. Too strong for my dollar denominated wallet.

  • International standing is strong and respectably, and respectfully, firm. Ask China. They know what nation they can't roll.

  • Investors are investing, in call centers, in public/private partnerships, in casinos, in hotels and tourism ventures.

  • Infrastructure is being rebuilt after years of neglect and budget plunder. Roads and trains and schools and ports.

  • Primary schools are going to the international standard of K to 12, a hard transition, but essential for Filipino scholars to gain the recognition they deserve overseas.

  • Antiquated government paper processes are being automated and trimmed of red tape, the automation itself a form of check against corruption.

International standing is up markedly; not just on Transparency International's rankings, but S&P's and Moody's. ALL indicators are going in the same qualitative direction: UP. Only the antis and China and the Catholic Church and the incorrigibly corrupt are trying to drag the Philippines back into pits of darkness and dysfunction.

Strange partnership, eh? It warrants restatement for emphasis: Working against the moderization and betterment of the Philippines are:

  • The antis
  • China
  • The Catholic Church
  • The incorrigibly corrupt

Is President Aquino perfect?

Are you?

Is Philippine progress fragile?

Yes, yes it is. The manufacturing base is weak. The storms and disasters are real. Poverty is a huge burden. The pipelines for essentials - food and water and electricity and gasoline and health care - are barely able to keep up with demand. The nation seems always to be one step ahead of crushing need. Tuna are disappearing from the seas. Good farmland is being eroded. Congestion is bogging cities down in costly and dirty inefficiency. China is making threats daily, insulting and trying to intimidate the Philippines and Filipinos.

But here is what I hope will happen, with the idea that hope, combined with confidence and commitment, can become singularly important drivers of achievement:

  • HR will get passed and there will be a tempered but profound trend in the poorer areas to limit family size. Education will do that. Word of mouth endorsement of smaller families will do that. Availability of birth control methods will do that. In 50 years, poverty will have moderated. It's a slow freight, getting money to the millions of poor.

  • FOI will get passed, if not this year, then next. And with FOI will come additional incentives for government workers and agencies to focus forthrightly on the job to be done. On competency, not show. It will help seal good governance as a permanent quality. That's why the President will back it. His legacy is lost without it.

  • The economy will continue to rip, with a growing middle class spending and educating the nation to new wealth.  Also from the middle class will rise pragmatic managers focused on productivity and achievement, not the self-service of corrupt ways.

  • I'm inclined to wonder, what does China really provide that could not be built in the Philippines or bought elsewhere? Cheap plastic toys?  It is in China's interest not to stir up trouble with the Philippines. The Chinese have major investments here. Filipinos have little in China. Joint development of contested seas will be worked out. No guns will fire.

  • Peace in Mindanao will be troublesome, but successful. The government is making the kinds of investments there that can turn bitterness to opportunity. Something the Philippines has never delivered to poor Muslim communities. It's important to understand that the cause of unrest in Mindanao is not religion, it is poverty.

Two huge, critical milestones will need to be passed to assure that the rise of the Philippines is permanently sealed into the nation's social infrastructure. They are:

  • The FOI Bill, which opens government to inspection and puts the people in charge, a force for public good over private gain. 

  • The 2016 election, which will either advance the Aquino legacy or turn away from it. I personally believe Mr. Binay would be a bad choice and Mr. Roxas or Mr. Abaya would be a good choice.

Although it bugs me when President Aquino brags about every accomplishment as if it were his personal mark rather than the natural flow of things, I must admit, every achievement, every increase in ranking and rating, is indeed built on the bed of promise he brought to the Philippines, and the fundamentally good work that his agencies have done. So . . .

"Congratulations, Mr. President, on that improved Transparency International ranking."

You did that. You can claim it.

We would not have that improvement without your principled leadership.

But enough of that glow for now.

How about turning your attention to that FOI Bill, eh?

To allow you to exit stage 2016 with a profound and everlasting legacy that seals "good governance" into the way Philippine agencies, courts and legislators do the people's work. Work that is visible to the people and their agents, the press. And their advocates, the attorneys. Work that is forthright and open. You know . . . earnest . . . and good . . . like those intangible leadership qualities you brought to the Presidency that today enable Filipinos to convert another intangible, their good heart, to progress.


Friday, November 23, 2012

The Obey or Pay Industry

American Road Rules
This is a proposal that will most assuredly add jobs and increase the wealth of the Philippines. I'm proposing the establishment of a new industry. Well, it's an old industry, about as old as prostitution, but it is new in how we look at it in the matter.

I have often been struck by the chaos that exists on city streets hereabouts. Struck and sometimes stuck . . . like behind a line of trucks parked smack dab in the middle of the National Highway.

Probably half the drivers hereabouts are unlicensed. Maybe more, if the number who obey helmet laws is a reasonable guide. That's about 10% it seems.  People park on the sidewalks, in the middle of the road, in front of driveways. They go the wrong way on one-way streets and speed past schools as if kids were just dogs to run over.

Crosswalks? What a waste of good paint.

The idea came to me when I was researching Kim Henares. The Bureau of Internal Revenue has traditionally spent about 78 centavos for every 100 pesos of revenue generated.  This year, the expense rose appreciably and will probably come in at 1 peso for every 100 pesos of revenue generated. At first I was going to ding BIR and Henares for lousy cost control.

Then it struck me. Hey, if we can spend as much as 2 pesos for every 100 pesos of revenue generated, we are doing well. After all, 98 pesos are going into the government's kitty for roads and schools and agencies and pork.

So if we doubled the BIR budget, and put it all into tax collectors, we'd:

  • Provide whole bunch of jobs, thousands of them.

  • We'd increase revenue and be able to build more schools and better roads.

  • We'd improve obedience in the lawless Philippines, instill an upright culture rather than a cheating culture of impunity.

Philippine Road Rules
Where's the downside?

The downside is that revenue gets harder and harder to find. The addition of a peso of cost may not generate 100 pesos of revenue. It may at the outset generate 80. Then as people start to pay taxes like they are supposed to, it might drop to 60 or 40 or even 20. But it is highly measureable, eh?

  • Pay a tax collector P10,000 per month, plus incentive bonus based on collections. Say all-in cost of P150,000 per year. What should he or she be expected to generate over the course of that year out hunting? A million pesos?

He's paying for himself. So we're good to go.

Start hiring.

And in the municipality, that rat's nest of disobedience to order and safe driving, hire up. Get those traffic enforcers in uniform, ticket pad in hand, and start writing.

Pay a traffic enforcer P8,000 per month, plus incentive bonus based on collections. Say all-in cost of P120,000 per year. What should he or she be expected to generate over the course of that year out ticketing? P2,000 per day? Maybe P600,000 per year?

Good to go.

Start hiring.

Now about all those fishermen fishing in off-limits waters, or using small-mesh nets.

Good to go. Start hiring.

And the illegal logging.

And the under-the-table spiffs at LTO, or PNP.

Man, hunt 'em down.

Good to go. Good to go.

It's an industry, for sure . Enforcement of laws, "The Obey or Pay Industry". The advantage is threefold, and all three folds are huge.

  1. A LOT of good paying jobs.

  1. Filling of the civic treasury.

  1. Instilling more disciplined and safe behavior across the nation.

The marketplace, for sure, is huge. It consists of all the people who ignore the laws today.

I figure the market is about 40 million people including senators.

Easy pickings.

Good to go. Good to go.

Tuesday, November 20, 2012

Kim Henares, One Tough Chick

"One trillion smackeroos, Mr. President? Sure 'nuf!"
I find it amusing that in the manly Philippines, where men wear their macho stuff like fighting cocks doing the victory strut, women occupy three of the toughest jobs in the land:

  • Ombudsman:  Conchita Carpio-Morales
  • Secretary of Justice:  Leila de Lima
  • Head of the Bureau of Internal Revenue (BIR):  Kim Henares

Why women get the nasty job of hunting down killers and thieves warrants an investigative report, but that is a different blog. I will offer a simple guess that men don't like to investigate other men, or be investigated by them. It's too murderous.

Of these three powerful women, I'm guessing the toughest chick is Kim Henares. She's been tracking down scoundrels for years, and wants to keep doing it.

Incidentally, the Humpty Dumpty New World Dictionary has several definitions of "chick", and the one which is pertinent here is "chick: (3) noun, cool woman". The, we have to flip a few pages forward to find this definition: "(5) cool: adjective, admirable and hip". Flipping yet again: (3) "hip: adjective, stylish".

So thanks to the Big Egg Humpty, we discover that Commissioner Henares is one tough, admirable, stylish woman.

Why she is a cool woman

Well we can confirm this straightaway. For one thing, she does her job with no need to play games. She shoots straight, in more ways than one. Her job is to enforce tax collection in a nation where people take pride in cheating. But she goes after big fish, no matter who they may be, or to whom they are connected.

Try to find her biography on Wikipedia and you won't. She is not a political woman. She doesn't need fame and votes. She is a professional. She needs accomplishment.

Her available background information is sketchy. She graduated from Ateneo and got her law credentials. She has held private sector jobs as head of the ING Barings Bank’s compliance and legal department and senior private sector development specialist for the International Finance Corporation (IFC)/World Bank.

She joined BIR during the Arroyo Administration, serving as deputy commissioner for special concerns. She led the “Run After Tax Evaders” (RATE) operation, which led to cases being filed against celebrities Regine Velasquez and Richard Gomez among others. She was appointed to head the BIR in 2010 by incoming President Noynoy Aquino.

She was nominated as Chief Justice in 2012 but politely declined, arguing that she already had a big job, an important job, where she can make a difference.

The BIR

The goal of BIR is to reach 1.066 trillion pesos in collections this year. This is done through 19 regional offices responsible for  enforcing tax laws and collecting taxes. President Aquino has been applying some  heat to the tax offices, citing an expectation that they will reach the annual goal. Commissioner Henares acknowledges the challenge is tough, but is focused on making the goal.

"Yes, Comissioner, I'll pay, I'll pay!"
The BIR web site is an interesting place to visit. The home page is rather 50's in style, cluttered and hard to grasp. This is not an elegant site, by any standard. It is written for people who understand taxes, not those who don't, as there are links to resources a newbie would not understand, and can't understand because signing in requires a password.

The link to financial information in the right column leads to PDF scanned paper files that show expenditures for BIR as a whole. The revenue side - - how much each of the 19 regional agencies generates -- is not shown. So it is a secret, at least to JoeAm, as to how the 19 perform. Can you imagine the constructive heat that would be applied if the revenue generation accomplishments of each agency office were trended, say for five years, as a percentage of some indexing standard such as regional income or GDP?

That is what transparency is all about. That is what FOI is all about. That is what President Aquino is NOT advocating in a proactive way. Rather than complain about the level of taxes being generated, why not simply report results to the public and let the public's attention do the incenting for higher revenue? Publicly embarrass a couple of laggard regional offices, or, better yet, praise and reward the top achievers, and let me assure you, performance will improve.

But I digress.

The web site does reflect that automation is taking root, and that's good. It is possible to apply for a tax identification number on line, and, as a business, to report sales and taxes with payments made via participating banks. It is also possible to file a "whistle-blower" complaint about corrupt BIR employees on line.

The BIR value statement mentions that the BIR is "God fearing". That kind of thing is always a jolt to this westerner where laws requiring separation of church and state would make such a statement impossible. It is a clear indicator that the Philippines is motivated by values different than America.

Between totally modern and totally clunky, the BIR web site is half clunky. Or half modern, depending on how you need to use it.

RATE Progress

Commissioner Henares' priorities are to tighten up on collections and to automate processes to make the paper-intensive job of recording and reporting taxes easier, better and less susceptible to  manipulation. She grew up with the RATE operation, so she is riding it hard now.

According to a GMA news report, the BIR has filed 133 tax evasion cases representing P50 billion in unpaid taxes. One case case is P16 million from a contractor who has not filed tax returns for three years.  In another case, the BIR has filed criminal charges against the Registrar of Deeds in Manila who allowed a property transfer to take place without payment of the required P461,433 in taxes.

GMA also reported on a P63.9 million judgment successfully won in the Supreme Court against St. Luke's Medical Center in Manila. The precedent-setting ruling means that all hospitals that are non-profit but proprietary will have to pay income tax. The court ruled that the tax exclusion applies to charitable organizations, not organizations providing health care. The tax rate is a preferential 10%.

In August of this year, ABS-CBN reported on a BIR initiative to collect more taxes from sole proprietorships. The agency knows this area is grossly abused by tax evaders, and will deploy a larger field force through regional offices to identify evaders.

So the tax woman cometh in the Philippines.

Performance facts

Let's look at the BIR performance from the standpoint of a top-level observer, like, say, if we were President Aquino. Here's what we might look at:

Millions of Pesos
Measure
2009
2010
2011
2012
Notes
Philippine Tax Revenue
1,123,211
1,207,919
1,359,942
1,560,600
(a)
  1. BIR Revenue
750,287
822,623
924,146
1,036,587
(a)
  1. BIR % of Phil Rev
67%
68%
68%
66%

  1. BIR Rev Growth
-3.6%
7.9%
12.3%
13.7%

  1. BIR Rev % GDP
10.1%
9.1%
9.5%
10.0%

BIR Expenses (Actual)
5,737
6,508
7,178
10,114
(b),(c)
  1. BIR Exp to BIR Rev
0.76%
0.79%
0.78%
0.98%

(a) 2012 is annual projection by Department of Finance
(b) 2012 reconciliation is impossible to the layman as quarterly accounting forms are detailed and technical
(c ) The 2012 BIR expense budget is P11.114 billion. History shows that actual expenditures can be as much as P1,000,000 less than budget, and that adjustment has been made to reflect estimated "actual" 2012 expenses.

Here are some highlights we can pull from this table:

  • Overall Philippine revenues are up steadily and BIR revenue growth is a major contributor, steady at one-third of all Philippine revenue. Customs and other agencies make up the other third.

  • Growth at 13.7% this year is a huge step-up. The pace has accelerated three years running.

  • BIR expense to revenue is increasing. I liken this to oil fields that are maxed out. The hunting for the remaining sources is difficult and costly. The BIR's hunt for tax cheats is returning smaller denomination "finds". But they are still worthwhile, considering that it costs only 1% to acquire 99% usable revenue.

Proposed "sin taxes" of from P20 to P60 billion would be a nice kick to total revenue.

Some expansion of the tax base is natural as the Philippine economy grows. Add to that more disciplined collections and new taxes like sin taxes, and the Philippine revenue stream looks healthy.

Better automation is a priority for Commissioner Henares, and will be a good investment both for improved  BIR management "by objectives" and for ease of processing by tax payers.

Conclusions

The BIR is in good hands.

Web-available information on revenue generated by the 19 agency offices would help incent good performance by those offices. Similarly, web-based  financial reports of the agency would be more useful if recorded in spreadsheet format rather than as scanned paper documents.

Conclusion: sound agency, making progress, lots of work to do.