Catch by supplies
Barely a month old, the Duterte administration already announced a plan to spend a hefty P7 trillion on public construction in the next six years.
This would be equal to the entire budget of the national government for two years at the very least.
The plan provoked serious reaction, particularly from the business sector: It would strain government finances, leading to huge indebtedness.
History taught us that grand plans to modernize public works in this country, which technocrats in the past 60 years lumped together simply as “infrastructure,” always entailed heavy borrowing by the government.
Still, the infrastructure “golden age,” as envisioned by the Duterte administration for the next six years, with respect to government debt, could just be a middle-of-the-road stance.
That was the conclusion of financial institutions in their studies: the “golden age” would be what finance guys called “neutral” in the computation of the debt-to-GDP ratio.
Used by the financial world as an indication of the ability of the government to pay back its debts, the ratio became a fixation of the Aquino (Part II) administration.
According to analysis, the P7-billion target in the infrastructure “golden age” would mean the debt-to-GDP ratio in the next six years could just stay as it was today. It would not improve and it would not worsen, either.
It would be what the technocrats in this administration called “manageable,” justifying the policy to update the country’s infrastructure, instead of prioritizing lifeless figures called ratios.
In the Philippines, the debt-to-GDP ratio was over 20 percent in recent years, in comparison, the ratio in the United States was about 100 percent, and in Japan, over 240 percent.
Really, boss, what more improvement in the ratio would we want!
If the administration would want to bring this economy to the modern age, it must pour every peso it could afford into infrastructure.
According to the latest world competitiveness report of the 35-year-old Switzerland-based World Economic Forum, or WEF, out of some 140 countries in the annual study, the Philippines ranked No. 90 in terms of infrastructure.
Five countries in the Asean, deemed as our toughest “competitors” for trade and investments in the region beat us—Singapore at No. 2, Malaysia at No. 24, Thailand at No. 44, Indonesia at No. 62, and Vietnam at No. 76.
The country under Duterte would have a big catching-up to do in public hardware supplies.
The good news is that, in the WEF global competitiveness index, the Philippines stood at No. 47 in the category of “soundness of banks,” which was one of the main pillars of the survey.
By the way, Security Bank, which started as mid-size commercial bank in 1951, announced it had won the coveted Bank of the Year Award in the Philippines for 2016, a recognition given by Euromoney annually in the past 25 years.
SBC beat bigger banks in the Philippines in the metrics on return on equity, return on assets, cost-income ratio, non-performing loan, and non-performing loans coverage.
SBC was also chosen Bank of the Year in the Philippines by The Banker, the magazine of the Financial Times of London.
Another pillar in the WEF global competitiveness index was the “technological readiness” of the countries—the Internet service.
In this category, the Philippines placed a poor 68th, beaten by most of our neighbors.
Speaking of which, the newly formed Philippine Competitiveness Council threw a tantrum over the acquisition of the telecom venture of the San Miguel group by PLDT and Globe.
The three companies announced last May that the deal would help speed up the upgrading of the Internet services in the country, adjudged as the second slowest in Asia and one of the most expensive in the world.
Enter the PCC—it claimed that, contrary to its own series of memorandum issued earlier, the transaction was “not” deemed as approved.
The reason given by the PCC, when it informed PLDT and Globe of its decision in a letter, was that their documents were “deficient in form and substance.”
Globe in particular has been saying it already provided the PCC with additional information and documents, although they were for PCC reference and information only, i.e. confidential.
Subsequently, the company submitted more documents, but the PCC would still require it to submit even more documents, and Globe said that it always complied.
Besides, PLDT and Globe have been arguing that the NTC, the , , had already approved the transaction, and the NTC supposedly was the government agency that oversaw the telecom sector.
It followed that the PCC could no longer challenge the deal.
Only last week, Globe and PLDT made the ultimate move: It sued the PCC in court, asking for a TRO against the order to block the transaction.
The two companies maintained that the PCC could not obstruct a deal in the private sector with reasons that were not found in its own rules and that were not even known to the public.
Now, for the sake of some misplaced economic advisers in the government, the term “deemed as approved” simply gave outright approval by the PCC to all mergers and acquisitions in the past several months.
It was the equivalent to the general absolution given by Catholic priests.
It came about because the PCC had yet to write down the IRR, or the implementing rules and regulations, to apply the Philippine Competitiveness Act of 2016, or RA 10667, which was the equivalent of the anti-trust law in other countries, which in turn watched out for the creation of monopolies through mergers and acquisitions.
Without the IRR, and even with the law already in effect, the PCC would still need to approve all the transactions somehow—thus the automatic “deemed as approved.”
It so happened that all other transactions all this time received the general absolution from PCC, except of course the acquisition of the San Miguel telcos by PLDT and Globe.
In a way the PCC just singled out the telecom industry. Why? It turned out the PCC apparently sought public opinion in the transaction to help it in its review of the deal.
In short, it was mob rule—the first ever in the history of anti-trust measures in the whole wide world!
Subscribe to INQUIRER PLUS to get access to The Philippine Daily Inquirer & other 70+ titles, share up to 5 gadgets, listen to the news, download as early as 4am & share articles on social media. Call 896 6000.