Govt. & Taxes, Philippines

Thursday, July 26, 2007

UPSE's new Dean

The University of the Philippines School of Economics (UPSE) will have a new Dean by August 1, next week. Outgoing is Dr. Raul Fabella, my former Professor in Econ. 141 (International Trade) in the mid-80s. He's a true-blue academic, with most of his papers incomprehensible for ordinary mortals even with undergrad Economics training because they are very mathematical and theoretical. So most of his papers land in international academic journals, which give UP additional pride because one of its faculties get published in prestigious academic journals which are read by many academics, even some government policy makers, around the world. He has written some less technical economic and political papers though, but you need an above-average level of IQ to dig fully his thoughts.

Sir Raul served as Dean of the School for 9 years. Among the recent important role of the School under his leadership, was its provision of intellectual ammunition for the approval of tuition fee hike in UP starting this school year for the incoming freshmen. The sophomores and older batches would pay the old rates. This tuition hike meant lesser dependence of UP from Malacanang, DBM, the Senate and the House of Representatives, for its annual financial needs. Which means lesser mendicancy on the part of UP administrators from the top politicians of the country with some of their top idiosyncracies. And more importantly, this means less drain on the pockets of taxpayers to support UP students!

Incoming Dean will be Dr. Emmanuel "Noel" de Dios. He was my professor in Econ. 106 (Math Econ.) in my undergrad years in the early 80s. Like Sir Raul, Sir Noel also got published in a number of international economic journals. But Sir Noel also writes economic papers which can be comprehensible to ordinary mortals who can read good English. For some reason of plain charm or intellectual superiority, some leftist people think the man is sympathetic with them while some rightist guys (like me) think this academic can be a good ally in advancing the philosophy of "less government, more individual responsibility".

My dream for UP, which shocks many of my fellow UP alumni and makes some of them disdain me, is for UP to be a full private university someday. Just like Ateneo and UE, La Salle and UST, FEU and UV, Adamson and WNC, and hundreds of many other private colleges and universities. These universities and their students somehow manage without receiving a single centavo of subsidy from taxpayers' money for their tuition and other school fees. The poor students? Private UP can give scholarships, can offer study now pay later, can provide opportunities for working students, and so on. But not an across-the-board scholarship for each and every student, including rich students.

About 3 years ago, I had a short and informal chat with Sir Noel about privatizing UP. He replied, "Yes, possible, why not?"

UPSE still stands on rock-solid intellectual foundation with guys like Dr. Fabella and Dr. de Dios at the helm.

Thursday, July 19, 2007

Privatizing shares in SMC, PNOC, PAL

The first "wave" of privatization in the Philippines was in 1987, during the time of Pres. Cory Aquino and after the downfall of the Marcos' 20 years government in 1986. A number of government enterprises; private enterprises transferred to the Development Bank of the Philippines (DBP), Phil. National Bank (PNB) and National Development Co. (NDC); as well as enterprises owned by Marcos cronies and sequestered by the PCGG under Pres. Cory, were sold.

Exactly 2 decades after, a number of sequestered assets, like government shares in San Miguel Corp. (SMC), Phil. National Oil Co.-Energy Development Corp. (PNOC-EDC), Manila Electric Co. (MERALCO), were never privatized at all. Usually, friends and cronies of the country's Presidents sat in the board of these big corporations as "government representatives".

Now the Department of Finance (DOF) is pressed to find more money to fill the budget deficit this year. Government shares of the above-mentioned big private corporations, as well as other private enterprises, have been planned for privatization over the past few years. Seems that government is becoming more desperate and will really be compelled to let go of its interests in these big companies.

Projected revenues or proceeds from privatizating government shares in the following are:
1. SMC, P50 billion
2. PNOC-EDC, P36 B (P17 B sold last week)
3. Meralco, P6-10 B
4. PNB, P1 B
5. Iloilo City airport, P1 B
6. land property in Tokyo (Fujimi Kudan), P3 B.

If not for cronyism, these and several dozen other assets should have been privatized many years ago, the proceeds used to pay and retire many domestic and foreign debts. Once these public debts are significatly reduced, then government payment in both principal amortization (not included in total budget appropriation) and interest payment (included in budget appropriation) would have gone down since many years ago.

A big portion of the annual deficit is caused by fiscal bleeding to pay high interest payment, taking up to nearly 1/3 of the total annual budget.

Privatizing government shares in those and other assets is a policy move that should have been done yesterday. The bleeding in the pockets of Filipino taxpayers to pay those big public debts, a big bureaucracy and big pork barrels, is a serious crime that only callous politicians and bureaucrats cannot afford to feel.

Tuesday, July 17, 2007

Tourism, investments and migration policies

As of end-2006, the number of foreign tourists who visited the Philippines, per Dept. of Tourism (DOT) data, are the following:

1. S. Koreans, 572,133 (20.1 % of total)
2. Americans, 567.355 (20.0 %)
3. Japanese, 421,808 (14.8 %)
4. Chinese, 133,585 (4.7 %)
5. Taiwanese, 114,955 (4.0 %)

It was the first time that Americans, including Filipino-Americans, were dislodged from the #1 spot of visitors to the country. This year, no doubt the Koreans will retain the #1 spot, and the coming years.

Aside from proximity (Seoul-Manila for instance is less than 4 hours only by plane, vs. 12-16 hours from the US, depending on the city or state one is coming from), Koreans find it cheaper to learn English here than hire language tutors in Korea, or go to Australia or UK or US/Canada. Of course the tropical climate of the country is another attraction to the Koreans, Japanese, other people from the temperate countries.

On learning and practicing English speaking, the law of free trade is at work here. The Korean government makes it difficult for thousands of foreign English tutors to go to Korea and work there, making the supply of English tutors and speakers very small, that makes their price high. So thousands of Koreans opted to leave their country, at least temporarily, and move to the Philippines to learn English, among others. For many young Koreans, the Philippines is only a "stepping stone" since their ultimate target is to study or work or migrate to the US, UK, Canada, other English-speaking industrialized countries.

If the Korean government finds it rather discomforting that many of its citizens are leaving their country even temporarily, go to the Philippines, spend their savings there, then it only has itself to blame.

Conversely, if the Philippine government finds it discomforting (although I doubt the country's top political leaders and bureaucrats would feel this way) that many Filipinos are leaving the country to seek high-paying work abroad, it only has itself to blame. Entrepreneurs here, both Filipinos and foreigners, are penalized with so many business regulations, taxes and fees, that many of them abdicated the plan. They opted to remain employees, instead of becoming employers and job-creators, thereby helping squeeze the employment environment.

Wednesday, July 04, 2007

Government owns all land in the country

The Philippines has a total land area of 30 million hectares. Of this, 53 percent is public forest land (PFL) and 47 percent is alienable and disposable (A&D) land. The PFL, under the Constitution, cannot be alienated by the state or sold to the private sector, so it’s all government-owned. Now, of the A&D land, a big portion of this is owned by the government, perhaps a million hectares or more – military camps, police camps, special economic zones (SEZs), campuses of state universities and colleges (SUCs), various land properties by by government corporations (GOCCs & GFIs), national government agencies, and local government units (LGUs). Overall, I think the government, both national and local, own at least 60-65 percent of the country’s total land area.

So government is the largest land-owner in the country, right?
Wrong! Government owns ALL lands in the country!
I think it's in the constitution too, the "Regalian doctrine" that "all lands belong to the state".

Consider this: All owners of private lands, whether they own only a 50 sq.meter lot in the barrio, or a 2,000 sq.m lot in Forbes Park, or a 20,000 hectares of pineapple or sugar plantation, all of them must pay "rent" to the government, the LGUs in particular, in the form of real property tax (RPT) and other estates taxes. You don't pay your RPT on time, especially in big cities like Metro Manila cities and municipalities, the penalties are high. You forget to pay for several years, you will be surprised that the accumulated RPT + penalties are almost equivalent to the market value of your land! If you cannot "arrange" this and you don't have enough money, government will confiscate the land. And one can forget private property. At the end of the day, it’s all government property.