Approved building permits rise in first quarter but may not spur construction activity

APPROVED BUILDING permits climbed by 21% in the first quarter but may not boost slackening construction activity as central bank oversight on real estate credit remains tight.

Preliminary data released by the Philippine Statistics Authority (PSA) on May 30 showed approved building permits rising to 29,468 in the first three months of the year from 24,400 in the same period in 2013.

The projects summed up to a total floor area of 6.25 million square meters and were valued at P61.15 million. Around 70% were for residential use.

Region 4A or the Calabarzon (Cavite, Laguna, Batangas, Rizal and Quezon) was site of 21% of projects. Following it were Region 3 or Central Luzon with 13%; Region 7 or Central Visayas with 12.7%; the National Capital Region with 10.3%; and Region 11 or Davao Region with 7.8%.

PSA statistics were based on building permits approved by local government units’ building officials. The permits were for construction work that ought to have been completed within the reference period -- the first quarter, in this case -- and not construction work that was completed during the reference period.

Noting the slowdown in the construction sector in the first quarter, Nicholas Antonio T. Mapa, associate economist at the Bank of the Philippine Islands, said construction activity may stay sluggish in the second quarter with the Bangko Sentral ng Pilipinas (BSP) closely watching bank lending to the real estate sector.

“Private construction makes up bulk of the construction sector and the slowdown in the private sector, in response to BSP’s measures, was enough to slow down the overall industry... Banks are [constrained] by the rule of 20% real estate lending to total loan portfolio, which ensures that only the best borrowers are granted credit...,” he said in an email.

“Construction will undoubtedly slow down possibly in the [second quarter] but rebound in the [second half] of the year due to base effects.”

Gross domestic product growth slowed to 5.7% in the first quarter from 7.7% in the same period in 2013. Growth in the industry sector fell to 5.5% from 11.3%, with growth in construction substantially decelerating to 0.9% from 31%.

To better monitor banks’ exposure to the real estate sector, the BSP has required them to report not only loans, including loans for socialized and low-cost housing, but also investments in debt and equity securities that were used to raise money for real estate activities. Real estate exposure is capped at 20% of total loans.

The definition of “real estate activities” was expanded to include buying and selling, rental and management of real estate properties on top of development and construction of real estate properties.

The BSP wanted to check price bubbles, noting how banking crises often stemmed from crises in the property markets.

Early this month, it said stress tests would be conducted to see if banks’ capital adequacy ratio remained compliant with the 10% regulatory minimum even after absorbing losses from their real estate exposure.

“The slowdown in construction [in the first quarter] was a welcome one as it was on the back of BSP’s prudent stewardship... to ensure that a real estate bubble was avoided,” Mr. Mapa said. - See more at: http://research.bworldonline.com/print_preview.php?article_id=416#sthash.5kDx8pZF.dpuf

Angara urges gov't to hire more cops

Senator Juan Edgardo “Sonny” Angara on Friday urged President Benigno Aquino III to announce in his State of the Nation Address (SONA) a massive police recruitment program to beef up the country’s national police force.

Angara said that in order to fight the increasing crime incidents in the country, the government should “put more boots on the ground” by hiring at least 50,000 policemen to augment the Philippine National Police (PNP) force by at least 200,000 cops and improve the cop-to-population ratio to one per 500 people which is the ideal.

In fact, Angara said, the ideal police-population ratio “is not an option but a mandate of law, Republic Act 6975, the 1989 law creating the Department of Interior and Local Government (DILG).”

But a quarter of a century since it was passed, the policeman-to-population ratio, which on paper currently stands at one per 675, has never been achieved, the senator pointed out.

“If I may give an unsolicited advice, I think the President should announce a massive policemen recruitment program in his second-to-the-last SONA,” Angara said.

With a current population of 100 million, the senator said the country needs about 200,000 policemen, but the authorized “uniformed personnel ceiling” of the PNP is only around 151,410.

“Filling all of these, plus adding more should be part of the last two years agenda of the Aquino administration,” he said.

“It will send a comforting message to the nation that more men are being suited up to roll back crime,” the neophyte senator said.

He said Aquino’s SONA announcement could be followed through with a request for Congress to approve funds that can be used for the hiring of rookies in the 2015 national budget.

Angara suggested that 25,000 policemen be hired in 2015 and the same number in 2016.

"The initial cost of hiring 25,000 new cops, assuming they will join the service in the second half of the year, is about P5 billion," Angara said.

While there is inevitably going to be a question of funding, the senator said the government can make use of the pork barrel funds of the senators that was scrapped in the 2014 national budget which is at P3.2-billion.

Citing police data, Angara said there were only 1,033,833 reported to the police last year which he said, could just be a fraction of the total as more victims prefer not to report crime matters to police.

The senator lamented that this may be due to persistent doubts on the ability of law enforcement personnel to catch the culprits.

“Understated the data may be, it still paints a scary picture: One is murdered every hour, a robbery is committed every 10 minutes, someone is raped every 72 minutes, a theft is happening every three and half minutes,” he said.

Other countries, particularly ASEAN neighbors, in contrast “are fielding more policemen.”

“Thailand has one for every 304 persons; Indonesia, one per 428; Malaysia, one per 267," he said.

Angara said the current Philippine ratio of one policeman to 675 population does not translate to the actual number of cops on duty at any given time.

Angara also said that aside from hiring more policemen, the PNP can maximize its force by removing police officers from their desks, and handing over administrative duties to non-uniformed personnel (NUP).

source:  Yahoo!

K + 12 = P10 billion out of government coffers

K + 12 = P10 billion out of government coffers

THERE is much reason to trumpet the success of the administration’s effort to increase starting last year the excise taxes on tobacco and alcohol. With the initiative, the government managed to collect an additional P51.2 billion in so-called sin taxes. This year, the additional collection is estimated at P44 billion.

But while this seems to total to a substantial amount -- over P95 billion in two years -- it remains minuscule relative to the government’s total budgetary needs. In 2015, the proposed national budget is about P2.6 trillion. The P44 billion to be collected this year is just 1.6% of the proposed budget.

The concern, of course, is that these are all estimates. And as experience shows us, not all estimates can be successfully and consistently achieved. If memory serves me well, revenue collection (taxes plus customs duties) has actually been below target for some time now. In short, below estimates with respect to meeting the government’s financing needs for this year.

There are outliers as well -- unexpected expenses that were not budgeted for the year but would have to be paid nonetheless. Some such expenses result from force majeure. Yolanda late last year is the perfect example. Rescue, relief, recovery and rehabilitation expenses were all unplanned but necessary.

In some cases, outliers result from poor planning. And sadly, while government planners and managers are to blame for such situations, the burden still falls on the people they are sworn to serve -- even if these people, who pay the government salaries, had absolutely nothing to do with the poor planning or formulating and implementing policies.

Take the case of the K+12 initiative, with the Commission on Higher Education (CHEd) now asking Congress for at least P10 billion in subsidies to cover what was reported as projected “losses” arising from “transition pains” of the K+12 program. Kinder plus 12 years of basic education (Grades 1-12) is now the requirement for entry to higher education institutions.

By its own admission, CHEd was reported to have told Congress that it had not anticipated all forms of transition pains, which include lack of college enrollments when Grades 11 and 12 or senior high school takes effect in 2016. Also an impending issue is the displacement of college teachers with the transfer of several basic courses to senior high school.

CHEd should have fully anticipated all transition concerns. The K+12 program was not something that was imposed suddenly. In fact, the transition to K+12 took several years. But now we learn the initiative seems to suffer from insufficient planning. It thus puzzles me why the government insisted on it in 2012 even while the government was still to exhaustively study all transition issues.

As CHEd boss Patricia Licuanan herself admitted on the displacement of college teachers, “This is not something that is easy and we do not have easy answers. We are studying this very carefully. We have a technical working group and the ideas coming out are radical but doable.”

She added that recommendations have been made, but their feasibility was under review.

But why review only now? Any feasibility study should have been done a couple of years back. Recommendations should have been made and tested even before the K+12 initiative was approved and implemented, and not after. These recommendations should have formed part of the overall plan prior to implementing it.

As for the P10 billion, a CHEd official said this would be used to assist colleges as the government “subsidizes” the tuition differential to cover for the lack of college enrollment in 2016 once Grades 11 and 12 are implemented. Budget is also sought to assist displaced teachers after remedial courses such as English, Filipino and Math are removed from the college general education curriculum and transferred to senior high school. Other courses such as General Psychology and Basic Economics are also to be removed.

The K+12 program could have benefitted a lot from further study and simulation prior to implementation. But it seems the options for teachers to be displaced are being considered only now.

Moreover, why should the government -- that means taxpayers -- foot the subsidies for tuition differentials? Will these subsidies go to state colleges or privately owned schools as well? Private schools are for-profit businesses. Why should the national budget be used to “sustain” them when they temporarily suffer from lack of enrollment as a result of government policy? The policy shift is a regulatory risk, is it not?

In 2012, as he pushed for K+12, Education Secretary Armin Luistro also expressed support for the idea of “outsourcing” senior high school classes to colleges and universities. This is reportedly to bridge the expected gap in college freshmen enrollment in 2016 and 2017.

Secretary Luistro, a La Salle brother from Lipa, Batangas, who used to be president and chief executive officer of De La Salle Philippines (covering eight De La Salle institutions), even told a House budget hearing at the time that higher educational institutions (HEIs) had sought DepEd permission to temporarily offer Grades 11 and 12 in 2016 and 2017.

Back then, two years ago, I already said that Secretary Luistro was offering solutions for a problem that he himself had created by adamantly pushing for K+12 and thus temporarily creating a gap in freshmen enrollment in 2016 and 2017, with colleges and universities also seeing temporary overcapacity with respect to facilities and faculty. Retrenchment was not mentioned then.

What confused me then, as it still does now, is that this gap was created by DepEd itself as it pushed K+12 without first building up towards it. The initiative could have been better planned prior to implementation.

Implement now + plan later = bad governance.

(Send comments to matort@yahoo.com.)

source:  Businessworld

UN body tags Asia as biggest FDI recipient

ASIA remained the recipient of the most foreign direct investments (FDI) for the second time in a row last year, a United Nations agency said in a new report.

The World Investment Report 2014 -- released yesterday by the United Nations Conference on Trade and Development -- showed global FDI inflows hitting $1.452 trillion last year, up 9% from $1.330 trillion in 2012, which in turn was 21% less than 2011’s $1.700 trillion. Asia attracted the most money at 29.4% or $426 billion, followed by Latin America and the Caribbean at 20.1% ($292 billion), North America at 17.2% ($250 billion), and the European Union at 17% ($246 billion). Transition economies, Africa, and Oceania attracted the least FDI at 7.4%, 3.9%, and 0.2%, respectively.

Central bank data show the Philippines ended last year with $3.86-billion FDI net inflows, 20% more than 2012’s $3.215 billion and topping an official $2.1-billion forecast.

source:  Businessworld

Google takes down guide on how to harass Filipinos in Singapore

The Filipino community in Singapore is estimated at more than 170,000, many of them professionals seen by some Singaporeans as rivals for jobs—a sharp change from a decade ago, when most Filipinos in the city-state worked as domestic helpers.

Singaporeans make up just over 60 percent of the 5.4 million population, with a low fertility rate forcing the government to rely heavily on guest workers.

This is despite a per capita income of $55,183, one of the highest in the world, and an unemployment rate of just over two percent.

source:   Inquirer

Corruption’s staggering cost to national well-being

HOW much has been lost to malfeasance and misfeasance through the years that could have secured our national well-being instead? An accurate figure is impossible to gauge for sure, but various studies give us a fairly good idea. Let’s revisit some of them because the mission to improve our gross national well-being remains far from being accomplished.

In 2012, a Washington DC-based research organization, Global Financial Integrity (GFI), released a study that said the Philippine economy was cheated of $132.9 billion (more than P6 trillion) through illicit money outflows in the past five decades (1960-2011), including proceeds from crime, corruption and tax evasion. The losses amounted to more than P357 billion annually on average. Researchers (Kar and LeBlanc) found that 72% of the outflows were from misinvoicing.

The illicit inflow of capital and merchandise was even more insidious -- fueling crime, growing the underground economy, and costing the government billions of dollars annually. Around $277.6 billion (or P12.6 trillion!) were lost mainly from underinvoicing, which accounted for around 96% of the transactions. Additionally, one in four transactions went unreported. Between 1990 and 2011 alone, the government lost $23 billion or P1 trillion in revenues.

Illicit money that flowed in and out of the country during this period was approximately $410.5 billion or P18 trillion! Yet, the numbers are still below actual amounts because other kinds of fraudulent invoicing, hawalatransactions (informal funds transfers), and illegal dealings conducted in bulk cash were supposedly not covered by the study.

Another GFI report from another researcher (Freitas) estimated that the Philippines lost around $142 billion between 2000 and 2009. It also cited that income inequality in the Philippines, as measured by a Gini index of 45.8, ranks among the worst in the region. It pointed to the wealthy elite likely using misinvoicing to move money out of the country. It explains why, despite the country’s economic growth, tax revenue as a percentage of GDP has been declining since 1990.

In 2012, Commission on Audit Chair Grace Pulido-Tan reported that the government lost over P100 billion to graft and corruption in 2011 alone. To put things in perspective, the report listed 19 schemes by which various government agencies siphoned taxpayers’ money big-time.

Topping the list was “under-assessment or under-collection,” where government lost P20.8 billion from 157 recorded cases.

Next was profligacy or reckless spending, accounting for P18.6 billion from 1,642 cases.

Third were questionable supply contracts -- signed without public bidding or without complying with Republic Act 9184 (Government Procurement Reform Act) -- in which 692 defective contracts cost the public P15.163 billion.

Fourth were 104 “unutilized and/or ineffective projects” worth P13.584 billion.

Fifth were 1,003 cases of unliquidated cash advances amounting to P7.534 billion.

Rounding off the top 10 were:

Unliquidated cash transfers: P6.8 billion

Fictitious claims/expenses: P5.199 billion

Unremitted/uncollected incomes: P3.512 billion

Unimplemented projects/unutilized funds: P3.276 billion

Delayed implementation or suspended projects: P2.554 billion

A third source of information is the EC-funded GAN (Global Advice Network) Integrity Solutions, the Business Anti-Corruption Portal, based in Copenhagen. Its April report noted that corruption at all government levels was more rampant among top officials; complex, sometimes contradictory, regulatory regimes open doors for extortion; and there is a serious lack of confidence in the judicial system owing to incompetent court personnel, corruption and long delays.

The Survey of Enterprises on Corruption 2014 pointed to persistent opaqueness in public procurement and bribery from companies wishing to win government contracts or obtain licenses and permits. The survey showed that the latter was the most common type of private sector corruption -- bribing local officials in return for licenses and permits -- in 2012 and 2013.

Although gifts and favors are forbidden in the Code of Conduct for Public Officials, and defined as bribes by the Revised Penal Code and the Anti-Graft and Corrupt Practices Act, these are poorly enforced. Facilitation fees are another risk area where companies “grease” officials to violate regulations, favorably settle disputes, and reduce or ignore legitimate fines for infractions.

The GAN report covers various forms of corruption in various sectors; and the levels of corruption are defined as follows:

• Individual corruption: primarily between individual citizens and public officials and authorities.

• Business corruption: primarily between enterprises or companies and public officials and authorities.

• Political corruption: takes place in the higher echelons of public administration and at the political level.

The sectors covered by the report include the judicial system; police; licenses; infrastructure and public utilities; land administration; tax administration; customs administration; public procurement and contracting; and the environment, natural resources and extractive industry. I’m not certain if it had data on the corrupt practices and income diversions of local government units and of government-owned and -controlled corporations.

The estimated P18 trillion lost to corrupt practices over the past 50 years is simply staggering; and that is still on the low side! It constitutes gross national sabotage. Today, Filipinos are enraged by the PDAF (Priority Development Assistance Fund) and DAP (Disbursement Acceleration Program) scandals, in reality serial malfeasance and misfeasance. Why then, taxpayers ask, should they dutifully continue paying taxes?

The P18 trillion could have been used to wipe out our socio-economic deficits such as those in housing, health, education, water and electricity; professionalize the bureaucracy; modernize public service delivery; build a potent military force; improve our civil defense and internal security networks; protect the environment; upgrade vital infrastructure; and reduce poverty.

Institutional reforms are essential. The criminal justice system must be given more muscle to detect, deter and defeat corruption in government and the business sector. Other key strategies include upgrading administrative and operations systems and processes; capability building; public information; and additional legislation to criminalize methods indispensable to money laundering.

The government and business must step up to restore integrity in the way they serve and transact. The will to do the right things and do things right must be consistently demonstrated. We must have the right people to serve and transform the nation. It begins with good governance in public offices and in the boardroom.

Only then can we begin to seriously build a nation for all our children.

(The author served on the cabinets of President Fidel Ramos and President Corazon Aquino as Secretary of the Interior and Local Government and Secretary of Tourism, respectively.)

source:  Businessworld Column of

To Take A Stand 
Rafael M. Alunan III

Philippines aims high on FDI

THOUGH early performance has been sluggish, officials in the Philippines are confident the strong foreign direct investment (FDI) showing from last year will be maintained in 2014, with an improved business climate along with political and economic stability as the Philippines’ main selling points. Even so, competition for investments is likely to remain keen.

On May 13, Trade Secretary Gregory L Domingo said the government expected FDI growth to match the 20% increase posted in 2013, even though investment inflows were down in the opening two months of the year.

“We expect at least a 20% growth in FDI this year to be driven by the increasing competitiveness of the Philippines, in particular the increasing capability of our workforce,” Mr. Domingo said during an address to a business forum in Manila.

If the government’s target is met, it will mean the Philippines will attract around $4.7 billion this year, after almost $3.9 billion flowed into the economy in 2013, the highest figure in more than a decade.

The secretary’s forecast came a day after the Bangko Sentral ng Pilipinas (BSP) issued a report on FDI inflows for February, showing net inflows of $350 million, 59% down on the same month in 2013. The sharp decline took FDI for the first two months of 2014 to $1.3 billion, 24.7% less than the same period last year. One of the reasons given by the BSP in its report issued on May 12 was a higher than usual outflow of funds.

“This resulted from sustained lending by parent companies abroad to their local subsidiaries/affiliates to support existing operations and to fund the expansion of their businesses in the country,” the BSP said.

Should the BSP be correct in its assessment of outflows, the weaker-than-expected February result could be a one-off, with a stronger movement of inbound capital to be expected in subsequent months.

MANUFACTURING FDI DESTINATION
If, as the government and other agencies have forecast, FDI does continue its strong inward flow, the manufacturing sector could be one of the leading beneficiaries. Indeed, overseas high-tech firms are being tapped as one segment that could make the move to establish a base in the Philippines over the longer term, according to the Philippine Chamber of Commerce and Industry (PCCI). In part, this would be a result of improved investment opportunities but also from the Philippines recently being removed from the US Trade Representative Office’s Special 301 Watch List, meaning Washington has reduced the level of violations, the PCCI said.

Last year, the Philippines’ manufacturing component expanded by 10%, with some of this growth driven by higher levels of FDI. This performance is likely to be built on this year, with GDP predicted to expand by 7% or more, in line with the 2013 result. Alongside manufacturing, the chamber said other sectors that could attract greater FDI this year were software and information technology, chemicals and food processing.

In March, the BSP forecast that FDI inflows would remain strong for 2014, with a number of factors contributing to expected high investment levels being maintained. Among these, the bank cited continued growth, stable inflation and the country’s solid external payments position as domestic factors that could attract FDI, while an external push could come from the ongoing recovery of the global economy.

BEST PLACED TO POST FDI GROWTH
Another to talk up the Philippines’ FDI prospects for this year was HSBC. In a report issued at the end of April, the bank said the country was best placed of the ASEAN-5 economies to attract higher levels of FDI, while both Malaysia and Thailand could fall back. Compared with Singapore, Malaysia, Indonesia and Thailand, the Philippines was in a relatively favorable situation, given the lower degree of leverage and its current account surplus, the report said. These factors made its less vulnerable to a tightening in global financial conditions and more appealing to overseas investors.

While HSBC may be upbeat about the Philippines’ appeal as an FDI destination, that appeal is relative. All the other members of the ASEAN-5 have outperformed the Philippines in recent years, with Singapore posting a net FDI inflow of $56.17 billion in 2012, with Indonesia attracting $19.85 billion; Thailand, $10.67 billion; and Malaysia, $9.4 billion for that year, compared with Manila’s $3.2 billion.

source:  Businessworld

Debt payments down in April

THE GOVERNMENT’S debt payments declined by nearly 50% in April as it settled less in interest and principal for its liabilities, data from the Bureau of the Treasury showed.

The state spent P16.083 billion to service its interest and principal payments to its creditors in April, 46.81% less than the P30.238 billion disbursed in the same month last year.

Interest payments accounted for the bulk of the month’s total at P13.398 billion. This amount was 43.42% less than the P23.681 billion in interest settled in April 2013.

Of this total, the government made P10.655 billion in interest payments to its domestic creditors, down by 37.02% from the P16.919 billion paid a year ago.

Broken down further, of the interest payments made to domestic creditors in April, P5.841 billon went to holders of fixed-rate Treasury bonds. Holders of retail Treasury bonds were paid P4.596 billion while Treasury bills holders accounted for P196 million.

The remaining P2.743 billion in interest paid in April, meanwhile, went to foreign lenders. This was also down from the P6.762 billion spent in the same month in 2013.

On the other hand, principal payments in the month dropped to P2.685 billion from last year’s P6.557 billion.

Majority of this went to the state’s external creditors at P2.413 billion, less than the P2.875 billion paid in April 2013. Some P272 million, meanwhile, went to local lenders, down sharply from the P3.682 billion recorded a year ago.

For the first four months of the year, debt payments totaled P174.194 billion, 31.83% less than the P255.56 billion spent in January to April 2013.

Interest payments during the period amounted to P116.527 billion, less than the P122.017 billion recorded the year previous. Of this, P75.082 billion was paid to local lenders and the remaining P41.445 billion, to external lenders.

Meanwhile, principal payments made from January to April totaled P57.667 billion, also less than the P133.543 billion recorded a year ago. Payments to foreign lenders made up bulk of this total at P56.683 billion, and the remaining P984 million went to local creditors.

A significant portion of the national budget goes to interest payments on debt, while principal payments are off-budget items covered by debt refinancing.

The government is programmed to spend P793.583 billion to service its debts this year, with P440.931 billion of this total going to principal payments and P352.652 billion to interest payments, according to the national budget.

In 2013, debt payments dropped by over a fifth to P559.017 billion from P729.774 billion the previous year, staying well below the P767.394 billion programmed for debt service last year.

The national government’s outstanding debt grew by 6.2% year-on-year to P5.64 trillion at end-April from the P5.308 trillion recorded as of the same month in 2013. -- Bettina Faye V. Roc

source:  Businessworld

Revisiting the Sin Tax Law

AFTER YEARS of debate, Congress finally ended the deal with “sin taxes” by enacting the Sin Tax Law on December 2012. The law imposes additional ad valorem taxes, among other specific taxes, on top of existing excise and value-added taxes on different kinds of tobacco products and alcoholic beverages. Naturally, the legislation drew staunch opposition from sellers and buyers of the said products.

The objectives of the Sin Tax Law are three-fold: promoting better health outcomes by discouraging consumption of alcohol and tobacco, raising much-needed revenues to fund the government’s health programs, and simplifying the tax structure for alcoholic and tobacco products.

Smoking-related diseases such as lung cancer are a burden not only on the health system, but also on overall public welfare. Heavy consumption of tobacco products is inextricably linked with the growing number of people who suffer from lung cancer, among other forms of cancer for which smoking is a risk factor. According to the Department of Health (DOH), the Philippines has an estimated 17.3 million tobacco consumers, the largest number of smokers in Southeast Asia. It comes as no surprise, therefore, that lung cancer is the leading form of cancer in the country. Furthermore, DOH data reveal that ten Filipinos die from smoking-related causes every hour. Alcoholic beverages, meanwhile, are relatively milder, health-wise, than smoking. But alcohol consumption does pose a number of social costs including vehicular accidents, violence, and crimes.

Given the above, the Sin Tax Law aims to promote a healthy lifestyle by discouraging the consumption of tobacco and alcohol. These products are known to have adverse effects on the health and welfare of its primary users and even more so for secondary users. Sin taxes, therefore, will help induce consumers of these products to reduce their consumption, if not quit altogether. More importantly, higher prices through taxation will help prevent others, especially the youth, from starting on these vices.

This leads to another objective of the Sin Tax Law, which is to increase government revenues that could then be used to augment funding for the country’s struggling universal healthcare program. The said program includes medical assistance for those in need and the enhancement of poorly-equipped government health facilities. The last objective of the law is to simplify the tax structure of the above-mentioned products and remove the price- or brand-classification freeze. This involves a shift from a multi-tiered tax structure to a single tax structure, an automatic annual adjustment of tax rates using relevant tobacco and alcohol indices established by statistical authorities, and finally, a proper tax classification of alcohol and tobacco products that will be determined every two years. The said shift, however, is to be implemented gradually and is set to be completed by 2017.

So, has the Sin Tax Law achieved its desired objectives? Bureau of Internal Revenue (BIR) Commissioner Kim Henares reported that for the first 11 months of implementation of the law, a total of PhP91.6 billion has been generated from taxes imposed on alcohol and tobacco, exceeding the full-year collection target of PhP85.86 billion. The amount is also 81.5 percent higher than the collection of PhP50.4 billion during the same period in 2012.

The bulk of total sin tax collections or 80 percent would be allocated for the universal healthcare program, specifically under the National Health Insurance Program that targets the attainment of health-related Millennium Development Goals, as well as health awareness programs. The remaining 20 percent will be used to enhance health care facilities. DOH Undersecretary Ted Herbosa noted that the government allocated PhP84 billion for the DOH in 2014, an increase of 58 percent from the 2013 budget and the highest so far in the history of the department. Of the incremental revenue collections from tobacco products, 15 percent would be used to fund programs to promote economically viable alternatives for tobacco farmers and workers.

As to whether the law has been effective in curbing smoking and alcohol usage, a consumer study conducted by AC Nielsen shows that smoking prevalence dropped from 52 percent to 46 percent for smokers aged 20 to 44 years old for the first half of 2013. BIR data also showed a reduction in the volumes withdrawn from plants for tobacco and fermented alcohol products from January to November 2013 by 16.97 percent and 12.18 percent, respectively. Withdrawn volume for distilled drinks, however, increased by 26.04 percent. Civil society groups agree that it is still too early to gauge the effectiveness of the law, but with continued annual increase in the tax rates, many are expecting that the evidence will show in the future.

In sum, the Sin Tax Law shows great promise as an effective mechanism for reducing tobacco and alcohol consumption as well as being a successful policy for generating revenues. The World Bank hailed the reform measure as a “win-win” piece of legislation for the Philippines. That being said, the government and the public should keep an eye out for developments that can affect the progression of this law. Foremost would be the issue of smuggling or the availability of illicit products in the domestic market, as well as making sure that the revenues collected would be properly spent and used towards the avowed objectives.

The Institute for Development and Econometric Analysis (IDEA), Inc. is a non-stock, non-partisan institution dedicated to high-quality economic research, instruction, and communication. The views and opinions expressed herein are those of the author and do not necessarily reflect those of the organization. For questions and inquiries, please contact Remrick Patagan via ideainc.mail[@]gmail.com or telefax no. 920-6872.

source:  Businessworld

No savings left for most OFWs–PSA

Despite sending billions of remittances to their families in the country, only two in every five overseas Filipino workers (OFWs) are able to save from their cash remittances, according to the Philippine Statistics Authority (PSA).

Data showed that around 1.9 million OFWs sent remittances in 2013 and only 40.7 percent of them were able to set aside savings from their cash remittances.

This was lower than the 42.2 percent of OFWs who had remitted cash to their families had savings from cash remittances sent in 2012.

“Regardless of the amount of the cash remittances sent, for every 10 OFWs, six [61.7 percent] were able to save less than 25 percent of the total amount received, two [21.6 percent] were able to save from 25 percent to 49 percent of it, and about two [16.7 percent] saved 50 percent or more,” PSA added.

In 2013 the PSA said the total remittance sent by OFWs during the period April to September 2013 was estimated at P163.2 billion.

These remittances included cash sent home reached P118.7 billion; cash brought home reach P35.3 billion; and remittances in kind worth P9.1 billion.

The PSA said the majority of OFWs, or 67.4 percent, sent their remittance through banks while the rest, or 3.1 percent, were sent through agencies or local offices; door-to-door delivery, 2.3 percent; friends or co-workers, 0.5 percent; or through other means, 26.8 percent.  

                                                               

“OFWs from Asia had remitted the largest amount at P87.6 billion, or an average of P56,000 per OFW. OFWs from North and South America remitted an average of P86,000 per OFW and OFWs from Europe remitted an average of P78,000 per OFW,” the PSA said.

Data also showed that remittances of OFWs working as laborers and unskilled workers had the biggest share at 19.2 percent, or P22.9 billion. This means Filipino laborers and unskilled workers sent an average remittance of P38,000 each.

The PSA also said total remittance of OFWs working in Asia, comprising 81.2 percent of all OFWs, accounted for 73.8 percent of the total cash remittances. Remittance sent by OFWs in North and South America, and Europe accounted for 9.9 percent; Australia, 3.9 percent; and Africa, 2.5 percent.

“The remittances sent by OFWs to their respective families may just be a part of the total salary received by the OFWs. Data on remittances in this report are based on the answers given by the survey respondents to the questions on how much cash remittance was received by the family during the period April to September 2013 from its member who is an OFW, how much cash did this member bring home during the reference period, if any,” the PSA explained.

“Further, if the family received during the reference period goods and products sent by this OFW, the imputed value of such goods was included in his/her total remittance,” it added.

Based on PSA data, the number of OFWs who worked abroad at anytime during the period April to September 2013 was estimated at 2.3 million.  

The overseas contract workers or those with existing work contract abroad comprised 96.2 percent, or 2.2 million, of the total OFWs during the period April to September 2013.

source:  Business Mirror