07/11/2011
The Bangko Sentral ng
Pilipinas (BSP), through one of its officers, issued a
letter-to-the-editor last July 6 in response to my “RP wasting
$30-billion fund” column of July 1. That article triggered one of the
highest positive feedbacks ever to my e-mail inbox. Indeed, the response
was unanimous: Readers agreed with our position that at least half (or
$30 billion) of our international reserves should be freed up and put to
good use since not only I but several others, like former National
Economic Development Authority (Neda) chief Romulo Neri, believe it to
be not just necessary but even legal under IMF rules. In fact, another
supporter of this position with whom we had lengthy consultations on
this some years ago is former National Treasurer Norma Lasala.
Last
Saturday, I went to a Tomas Morato restaurant to attend a briefing with
Butch Junia, former Mayor Jun Simon, and law professor Alan Paguia on
the latest Energy Regulatory Commission (ERC) dismissal of Commission on
Audit (CoA) findings pointing to Meralco (Manila Electric Co.)
overcharging in 2004 and 2007 that amount to some P7 billion. It was
there that a Kapihan was also being held, diverting my colleagues into
becoming its panelists as well.
Among the featured guests was the
same BSP official who responded to our column. He was the first to
speak. After heaping effusive praise for ratings agencies, such as Fitch
and Moody’s, in upgrading the Philippines to just below investment
grade, which he said is something to crow about, he ended his statements
with a very aggressive pitch for more taxes, insisting that the
Philippines is being left behind by Singapore, Thailand, and Malaysia
because of our low taxes.
Let’s put these ratings agencies in the
proper perspective. Consider this RJR online business report: “…a US
Senate committee examining the reasons behind the crisis… concluded that
Moody’s and Standard and Poor’s, the world’s two most prominent ratings
agencies… (triggered) the global financial crisis in 2008… (by
continuing) to give top ratings to mortgage-backed securities months
after the housing market started to collapse…” It added, “neither
company had a financial incentive to assign tougher credit ratings to
the very securities that for a short while increased their revenues,
boosted their stock prices, and expanded their executive compensation.”
From
The Huffington Post’s “SEC Threatens Credit Rating Agencies with Fraud
Charges” story, we have another confirmation that official moves have
begun “against Moody’s Investors Services over its ratings of risky
investments that led to the financial crisis.”
More recently from
Peninsula News, we learn of “European politicians (accusing) credit
rating agencies… of anti-European bias after Moody’s downgrade of
Portugal ’s debt… (with EU Commission President José Manuel Barroso
saying) ‘It seems strange that there is not a single rating agency
coming from Europe. It shows there may be some bias in the markets…’
(joined by) German Finance Minister Wolfgang Schäuble (calling) for
limits to be placed on the rating agencies’ ‘oligopoly.’”
China
also views these western ratings firms with deep trepidation, which is
why it set up its own ratings agency, Dagong. From China.org.cn (July 9,
2011): “China ’s own sovereign credit rating report… (comes) at a time
when many complain (that) Moody’s, Standard and Poor’s and Fitch were
partly to blame for the recent global financial crisis.” It further
quoted Dagong chairman Guan Jianzhong as saying “that the current
Western-led rating system ‘provides incorrect credit-rating
information.’”
Back here, the problem with these so-called
“upgrades” which the BSP official attending the Kapihan so enthused over
is that the sources — the ratings agencies themselves — formulate their
assertions on the basis of their own agenda which often is, as in the
case of the Philippines, one that is contrary to the interest of the
people. This is a fundamental point.
The BSP, in following these
ratings agencies’ agenda by trumpeting their claims, is merely taking
Filipinos for a ride. The real agenda of the ratings agencies and the
financial mafia they serve is to make the Philippines take on more debt,
which is being made much easier by the ratings upgrade. This is despite
the fact that the Philippines actually now has the internal resources
(and lots of it) to pay off such debt and/or fund its own development —
something that BSP officials such as Diwa Guinigundo are not saying.
Coming
from Guinigundo himself, our 2011 international reserves of $69 billion
already cover 12 months of imports even while the IMF requires only
three months, and as Philippine foreign debt stands at P60 billion.
Guinigundo justifies the costly (interest, opportunity costs, dollar
depreciation) idling of 75 percent, or $45 billion, of RP’ reserves as a
safety measure against finicky financial markets. Is this sane while
the country continues to take on new debt? Philippine debt rose by $788
million in 2010 and debt stock grew by more than 9.2 percent, or $5
billion, by end of 2010.
Meanwhile, despite Guinigundo’s claim in
his letter that “…the BSP does not own (the Special Deposit Account or
SDA) and therefore, it is hardly a ‘disposable’ fund kept idle,” others,
such as Marvin Fausto, president of the Trust Officers Association of
the Philippines contend otherwise. Fausto, in fact, said on Nov. 3,
2010, “(the money parked in SDA facilities) should instead be channeled
to funding needs, like in infrastructure projects. We need investments.
(The money in SDAs) is enough to spur (further) growth.”
Victor
Abola, senior economist at the University of Asia and the Pacific, whom I
seldom agree with but do in this case, has also said that SDAs are a
“waste of resources” and the “BSP should lower interest rates for SDAs
to free up more funds, from the present 4 percent to 3 percent.” I was
prevented from cross-examining Guinigundo at that Kapihan only because
the host probably feared that I would put his guest on the spot. Well,
now he is.
(Tune in to Radyo OpinYon, Monday to Friday, 5 to 6
p.m., and Sulo ng Pilipino, Monday, Wednesday, and Friday, 6 to 7 p.m.
on 1098AM; Talk News TV with HTL, Tuesday, 8 to 9 p.m., with replay at
11 p.m., on GNN, Destiny Cable Channel 8, on “Head-to-Head vs Coconut
Oligarchs”; visit http://newkatipunero.blogspot.com and
http://hermantiulaurel.blogspot.com for our articles plus TV and radio
archives)
(Reprinted with permission from Mr. Herman Tiu-Laurel)
Source: The Daily Tribune
URL: http://www.tribuneonline.org/commentary/20110711com5.html
