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Approved telco permits at nearly 10,000 since July — ARTA

NEARLY 10,000 permits were issued to telecommunication companies within the past five months, the Anti-Red Tape Authority (ARTA) reported Thursday.

In a briefing, ARTA Director-General Jeremiah B. Belgica said 9,737 permits for wired and wireless projects were issued to the three major telecommunication companies to date, starting from July.

“Sa pakikipagtulungan ng mga (Through the collaboration of) LGUs and National Government agencies, there are almost 10,000 total na lumabas (that were released). Itong mga permits na ito ay combination ng mga (These permits are a combination of) applications for cell towers and for fiber optics,” he said.

Mr. Belgica said transactions speeded up after the release of Joint Memorandum Order No. 1 series of 2020, which streamlined the application process.

In July, President Rodrigo R. Duterte imposed a December deadline for telcos to improve their services, threatening them with closure. The need for improved service was heightened by the quarantine which forced millions to work from home.

In August, Mr. Duterte ordered all government agencies to improve the transaction time for cell tower applications after telecommunication companies identified red tape in the tower-building process as a key obstacle to improving coverage. — Gillian M. Cortez

BFAR confident P500-M stimulus package will help aquaculture raise production

THE Bureau of Fisheries and Aquatic Resources (BFAR) said the P500 million worth of stimulus funds allocated to the fishing industry will support mainly aquaculture and will help the entire sector raise output levels.

The support package was authorized by Republic Act No. 11494 or the Bayanihan to Recover as One Act (Bayanihan II).

In a statement Thursday, BFAR said the P500-million stimulus package is expected to help the aquaculture industry produce an additional 9.6 thousand metric tons (MT).

The focus of the aid will go to growers of glass eels, sea urchins and seaweed, while also helping establish hatcheries.

“The stimulus package aims to help the fisheries sector, especially aquaculture, to recover and improve amid various challenges such as natural calamities and the coronavirus disease 2019 (COVID-19) pandemic,” the BFAR said.

BFAR National Director Eduardo B. Gongona said: “Glass eels, sea urchins and more species of seaweed are only some of our many abundant fisheries commodities with culture technologies that we have yet to sustainably develop,” Mr. Gongona said.

According to the bureau, the culture technology for glass eel will be presented via demonstration projects, while fingerlings will be given to selected growers in the Cagayan Valley and North Cotabato.

Sea urchin production will be promoted in the Ilocos Region, the Cagayan Valley, Caraga, Bicol, and Zamboanga, with fisherfolk undergoing training on grow-out and cage culture technology, while equipment and infrastructure such as sea urchin hatcheries, nursery tanks, and processing areas will also be established.

The BFAR also plans to set up hatcheries, nurseries, solar dryers, and farmhouses for seaweed growers.

“The establishment, rehabilitation, and repair of multi-species hatcheries and broodstock facilities, including of high-value species like sea bass, siganids, and blue swimming crabs, among others, will also continue in order to ensure production of good-quality fingerlings and broodstock,” the BFAR said.

In the third quarter, aquaculture production fell 2.7% year on year to 480,671 MT and accounted for 47.3% of overall fisheries output, according to the Philippine Statistics Authority (PSA).

The PSA added that the value of production of the fisheries sector in the three months to September rose 1.9% year on year and accounted for 15.8% of total agricultural output. — Revin Mikhael D. Ochave

Agricultural workforce average age of 57 seen as threat to food security

AGRARIAN REFORM Secretary John R. Castriciones said farmers need to encourage their children to take up agricultural courses to lower the average age of the farming workforce.

Appearing on the Department of Agrarian Reform’s “Radyo Agraryo” program, Mr. Castriciones said the average age of farmers is 57, raising questions about the sustainability of the food supply.

“In a decade, this farmer can no longer be as strong and as efficient on the field as he or she was in the earlier days. The prospects for retirement are dim for this farmer unless the younger set take over the farmer’s tasks,” Mr. Castriciones said.

As a result, Mr. Castriciones called on parents to encourage their children to take up agriculture studies in order to assist aging farmers.

However, Mr. Castriciones said young people are staying away from farming, which they associate with hard work and poverty. He added that parents also aspire for their children to work in cities or overseas.

Mr. Castriciones said the best hope is for more young people to take an interest in farming, ideally through formal study to improve food production.

“The government must be on their side to intervene and nurture them through credit facilities, technical assistance, and support services,” Mr. Castriciones said.

According to the Philippine Statistics Authority (PSA), the agriculture sector employed 9.70 million people and accounted for 22.9% of the workforce in 2019.

Of those employed in the sector, some 7.46 million were male while 2.24 million were female.

The PSA said children working in the agriculture sector numbered around 560,000 in 2019.

“A child is considered working or economically active if at any time during the reference period he or she is engaged in any economic activity for at least one hour. He may be studying, looking for work and/or housekeeping at the same time,” the PSA said. — Revin Mikhael D. Ochave

Another policy rate cut expected next year — Sun Life Asset Management

THE Bangko Sentral ng Pilipinas (BSP) could still resort to another policy rate cut early next year to further support the recovery, with the stock market seen benefiting the most from the low interest rate environment, according to Sun Life Asset Management Co., Inc.

In a briefing Thursday, Sun Life Asset Management Chief Investment Officer Michael Gerard D. Enriquez said the Monetary Board could decide to ease by another 25 basis points (bps) in the first quarter of 2021.

The BSP has reduced rates by 200 bps so far this year, bringing policy rates to record lows.

The projected cut will help the economy sustain its rebound to growth of 6-7% by 2022 following a prolonged effort to contain the coronavirus, it said.

Sun Life Asset Management forecasts a 7.2% contraction in gross domestic product this year, followed by a 4-5% rise in 2021 and 6-7% in 2022.

Mr. Enriquez said the recovery will likely be slow with quarantine restrictions still in place.

“We don’t think 2021 has potential to be a strong recovery year unless a fiscal stimulus is passed early and impacts households. Hence, we expect an extended U-shaped type of recovery,” he said.

In a low-interest rate environment, he said the stock market is likely to benefit, with investors not getting their desired yields from bonds.

“For those looking for yield, the PSEi (Philippine Stock Exchange index) has been a go-to for those who would want to have a longer-term view of how they would want to manage their portfolio,” he said. — Beatrice M. Laforga

Central bank, JICA unveil database to help evaluate SME credit risk

THE Bangko Sentral ng Pilipinas (BSP) and the Japan International Cooperation Agency (JICA) announced the list of banking participants for a credit risk database project intended to facilitate lending decisions for small businesses.

“The project aims to improve access to finance among SMEs (small and medium enterprises) by promoting risk-based lending which uses credit scoring models to assess the capacity of SMEs to repay their loans,” BSP Governor Benjamin E. Diokno said at the virtual launch of the project.

The BSP said 17 banks participated in the project — Land Bank of the Philippines, Development Bank of the Philippines, Security Bank Corp., Rizal Commercial Banking Corp., Philippine Business Bank, Sterling Bank of Asia, China Bank Savings, Malayan Bank, Philippine Savings Bank, UCPB Savings Bank, Producers Savings Bank, Queen City Development Bank, Wealth Development Bank Corp., Sun Savings Bank, AllBank, Inc., CARD SME Bank, Inc. and First Consolidated Bank.

Chamber of Thrift Banks President Cecilio D. San Pedro said the data collection for the project has started. Meanwhile, the scoring model and the service will launch by July 2021, he added.

“We all know that one of the main issues for MSMEs (micro-, small-, and medium-sized enterprises) is funding, which is primarily because of the difficulty faced by MSMEs to prepare sufficient information for loan appraisals, making it tough for financial institutions to evaluate credit,” Mr. San Pedro said.

In the first quarter, banks lent P208.201 billion to the MSME sector, about 2.47% of their total loan portfolio. This is below the 10% share required by Republic Act No. 6977 or the Magna Carta for MSMEs.

BSP Center for Learning and Inclusion Advocacy Ellen Joyce L. Suficiencia said the database will be a three-year project ending in 2022 that will be turned over to a permanent body — an industry association, a government agency or the BSP.

MSMEs made up about 99% of registered businesses in the Philippines as of 2018, according to the Department of Trade and Industry.

“Clearly, both the government and private sector should support MSMEs to help them withstand this crisis and eventually recover and thrive beyond this pandemic,” Mr. Diokno said. — Luz Wendy T. Noble

COVID scare on cruise shows perils of resuming tourism

THE OPTIMISM on display just two months ago when Singapore Transport Minister Ong Ye Kung pledged to reopen the city-state and its tourism-reliant economy has taken a beating after a possible local coronavirus case was found aboard one of Royal Caribbean Cruise Ltd.’s ships.

In the early hours of Wednesday morning, the 1,680 passengers on Quantum of the Seas — enjoying day three of a four-day cruise to nowhere — and 1,148 crew were alerted to an announcement that a suspected case of coronavirus disease 2019 (COVID-19) had been discovered, the voyage was being cut short and everyone should remain in their staterooms.

“At 2:30am, the captain made an announcement saying that the vessel was officially going into quarantine.”

It was the second blow in as many months after a highly anticipated air travel bubble with Hong Kong was axed before it even started, leaving would-be travelers on both sides of South China Sea stranded, their hopes of quarantine-free reunions with family and friends dashed.

As Wednesday dragged on, some people on the ship, now back at the Marina Bay Cruise Centre, took to their balconies for fresh air in an all-too familiar 2020 sight — another floating palace, docked but isolated as the arduous process of contact tracing and testing gets underway.

The 83-year-old male who tested positive was found to be negative in a subsequent test, though health officials plan to conduct an additional test, Singapore Ministry of Health said. By late Wednesday, all passengers had disembarked. They were tested before being allowed to leave the terminal.

“Even in the early days of the pandemic, cruise ships posed a high risk of outbreaks, and these in turn can spill over into communities,” said Raina MacIntyre, a professor of global biosecurity at the University of New South Wales in Australia. “The pandemic today is far, far worse than it was in May, when cruising stopped. This means the risk of an infected passenger boarding or an infected staff member being on board is higher now.”

Singapore’s ill-fated attempts to enliven tourism underscore the difficulties of getting any sort of travel up and running even in a nation where community cases have been close to zero for several weeks. Stringent protocols to permit the pilot sea voyages had been established, including extensive testing of crew and passengers. The cruises, including another that’s being run by Genting’s World Dream, were also required to sail at a reduced passenger capacity of 50%.

All 2,828 people on Quantum of the Seas had tested negative when the ship departed Dec. 7, according to a statement from the Singapore Tourism Board. There was also increased sanitization and improved fresh air circulation.

Ultimately, those measures plus others that included mask-wearing at all times, social distancing and buffets staffed by servers in protective gear may have proven insufficient to combat a virus that’s still raging in Europe and the US Globally, more than 68 million people have been infected and some 1.6 million are dead.

Trade and Industry Minister Chan Chun Sing said the case onboard was “not unexpected,” according to a ChannelNewsAsia report, and that the government was prepared for such a situation. The public can be assured that such incidents can be managed properly with the protocols that have been put in place, he said.

Singapore isn’t alone in stumbling. As the coronavirus resurges in Japan, politicians and experts are growing more divided on the impact that a subsidy program encouraging people to travel is having on the spread of infections. A popular “Go To Travel” campaign, which discounts trips to boost regions hit hardest by a lack of tourists, is one of the government’s most prized projects for spurring the economy, and has been heavily backed by Prime Minister Yoshihide Suga.

In Bali, a plan to reopen to foreign visitors in September was scrapped due to a resurgence in cases while Thailand, another popular tourist destination in Southeast Asia, is taking baby steps, allowing just 1,000 international tourists in October versus the some 3.1 million it hosted the same period last year.

Escalating virus numbers in Hong Kong have meant the air travel bubble with Singapore won’t start until 2021. The arrangement, initially set for Nov. 22, will be reviewed between Christmas and New Year.

In a sign of how desperate residents of Singapore are to go somewhere beyond the island’s tiny confines, escapes including luxury overnight camping at Changi Airport and daycations at beach hotels at Sentosa, an enclave off the south coast, are booked solid.

Seats on Singapore Airlines Ltd.’s superjumbo-turned-pop-up restaurant in October sold out in 30 minutes, with some paying upwards of S$600 ($450) for a meal in a suite on the stationary Airbus SE A380. And the government has launched its own domestic tourism campaign, with S$320 million in credits set aside to encourage residents to support local businesses.

“It’s obviously disappointing, disappointing for those that had travel to Hong Kong planned, and disappointing for those on the cruise,” said Dale Fisher, an infectious diseases physician at Singapore’s National University Hospital who also chairs the Global Outbreak Alert and Response Network. “But there needs to be an expectation that things can change because we’re trying to do it safely. This isn’t going to have a fairytale ending and we wake up one day and it’s all over.” — Bloomberg

Japan to buy 10,500 freezers for coronavirus vaccines

A STAFF member of All Nippon Airways is seen in front of a plane at a boarding gate amid the coronavirus disease outbreak at Haneda airport in Tokyo, Japan, June 4. — REUTERS

TOKYO  — Japan will buy 10,500 deep freezers to store novel coronavirus vaccines and is considering purchasing dry ice in bulk as it prepares to protect its population from the virus, the Ministry of Health said on Thursday.

Japan has agreements to buy a total of 290 million doses of the vaccines from Pfizer, Inc, AstraZeneca Plc and Moderna, Inc, or enough for 145 million people if everyone gets two shots as required.

Pfizer’s vaccines need to be kept at around minus 75 Celsius (minus 103 Fahrenheit, and Moderna’s at about minus 20C, posing logistics problems.

Pfizer, as well as Moderna and its domestic partner Takeda Pharmaceutical, plan to build networks to keep vaccines at the appropriate temperature as they are distributed to where they will be deployed, the ministry said in a statement.

Japan has had more than 165,000 cases of novel coronavirus infection and 2,417 fatalities, with the capital, Tokyo, particularly hard hit. Tokyo reported 352 new cases on Tuesday. — Reuters

Scientists develop genome sequencing to trace virus cases

SYDNEY — Australian scientists said on Thursday they had developed a rapid genome sequencing method that would cut to within four hours the time taken to trace the source of coronavirus cases, helping to quickly contain any future outbreaks.

Genome sequencing can help scientists monitor small changes in the virus at a national or international scale to understand how it is spreading and provide insight into how different cases are linked.

“When a new ‘mystery’ coronavirus case is identified, every minute counts,” Ira Deveson, scientist at the Garvan Institute of Medical Research, said in a report, prepared in collaboration with the University of New South Wales (UNSW).

Genomic testing helps track the source of mystery cases, the ones whose source of infection remains unknown. But results often take more than 24 hours now.

The novel coronavirus genome is about 30,000 letters long, but tiny compared with the 3 billion letters that make up the DNA, or deoxyribonucleic acid, of the human genome.

The virus can alter the genetic signature of the hosts as it replicates itself inside them.

“By identifying this genetic variation, we can establish how different cases of coronavirus are linked,” UNSW scientist Rowena Bull said.

Australia has largely avoided the high number of cases and deaths from the virus compared with other developed countries, cautiously easing restrictions after reporting zero local coronavirus disease 2019 (COVID-19) cases for the past several days.

It has reported just under 28,000 cases of COVID-19 and 908 deaths since the pandemic began but estimates there are fewer than 50 active cases remaining, mostly returned travelers from overseas in hotel quarantine. — Reuters

Back to the Fifties

Whenever President Rodrigo Duterte’s military and police minions or he himself “red-tags” — or, as it was known in the 1950s, red-baits — a women’s organization, a journalists’ union, or any other group that dares criticize the regime, they inevitably label it a “legal front” of the Communist Party of the Philippines (CPP) and/or the New People’s Army (NPA).

But by describing the supposed “fronts” as legal, they unwittingly admit that these groups have met the requirements of Philippine law in terms of registration and other conditions. What is even more crucial is that their status as legitimate organizations is protected by such provisions of the Constitution as those on the right to free expression, freedom of association and press freedom.

Equally problematic is the concept of their being “fronts.” Does that mean that they are under the command of the CPP, and that, like the NPA, they foment rebellion, or are actually in rebellion themselves?

The regime has not outrightly accused these and the other groups it has labeled “red” of rebellion and of urging others to join the NPA so they too can take up the gun. But it is nevertheless still accusing them of conspiring with it. If what the government is saying is that these groups are “red” because their programs are the same, or nearly the same as those of the CPP and NPA, it does not prove, even if true, that they are under their command.

Any group can have the same advocacy as others without being part of any terrorist cabal or conspiracy. Gender equality, for instance, is not uniquely the advocacy of the women’s groups in this country, and is shared by countless organizations worldwide. As any scan of the codes of ethics of the press of many countries will reveal, the principle of truth-telling to which the biggest journalists’ organization in the Philippines subscribes is shared by hundreds of media communities and thousands of media practitioners across the planet.

If the basis of the claim that what makes these and other legal groups “fronts” is their being critical of the government and their focus on getting at and reporting the truth, that is hardly a tenable argument. It instead raises the question of whether, in the first place, the Duterte regime can present evidence rather than hearsay or the say-so of its paid informers to prove its contention. Although they have failed to do so, the police and military nevertheless still persist in red-baiting them, implying thereby that it is their programs’ similarity to those of the CPP and its allied organizations that make them “enemies of the State.”

But the legal groups they’re demonizing are perfectly within their rights to propagate their advocacies. No law bars any one or any organization from doing so. By protecting their right to present and speak for what they believe in, and to convince others to share those beliefs, the Constitution is, on the contrary, encouraging them to exercise those rights.

Regime antipathy to those rights drives its use of the 1950s practice of red-baiting. It is to intimidate critics into silence. But some of its adherents would go even farther by reviving the Anti-Subversion Law (RA 1700), which, when in force, made not only membership in the Communist Party but also holding views and proposing reform programs similar to its own illegal.

Former President and Duterte ally Gloria Macapagal-Arroyo’s favorite general’s proposal to revive it was echoed in 2019 by Department of the Interior and Local Government (DILG) Secretary Eduardo Año. But he included in his justification for its reenactment the claim that not only the CPP and the NPA but also their “front organizations” have been using force and violence as well as “deceit, propaganda and other illegal means” to overthrow the government.

One can only conclude from his statements that if reenacted, a 21st century version of the Anti-Subversion Act would criminalize “deceit, propaganda and other illegal means,” which Ferdinand Marcos included among his amendments to the original RA 1700 when he endowed himself with legislative powers during the martial law years.

Such a reprise of an even more oppressive law than the 1957 original, as in the time of the Marcos dictatorship, would define “deceit and propaganda” as anything contrary to what the government says. It would be in contravention of the Constitutional provision protecting free expression and press freedom, the exercise of either right being quite easily defined by those in power as deceit and propaganda, neither of which is currently illegal.

(One can argue that it is the government that is most involved in both, as its own media system’s masters of disinformation have been amply demonstrating. But no one in his right mind would argue for the prosecution of those overpaid bureaucrats. The Constitution after all recognizes everyone’s right to free expression, including that of government functionaries.)

Justice Secretary Menardo Guevarra and Senator Franklin Drilon opposed the proposal, with Guevarra pointing out that membership in the CPP is not illegal so long as it is limited to the espousal of its programs. Drilon for his part noted the legal infirmities of RA 1700, which, he said, included its abridging the freedoms of assembly and association and the equal protection clause of the Constitution.

RA 1700 was in fact described by its critics as a bill of attainder because it punished without trial, and as an ex-post facto law that made acts that were not contrary to law before it was passed illegal. Congress repealed it at the urging of then President Fidel Ramos in 1992 for an even more compelling reason: the imperative of broadening participation in government so as to minimize if not totally put an end to the rebellions that have characterized much of Philippine history.

A former Deputy Chief of Staff of the Armed Forces of the Philippines (AFP) and Secretary of National Defense during the Corazon Aquino presidency, Mr. Ramos described the repeal as a means of convincing reformers and revolutionaries to participate in government rather than to take up arms. He correctly assumed that one of the causes of rebellions is the refusal of government to allow such groups the opportunity to make their programs heard, and if plausible, to have them adopted through parliamentary means. He was in that regard far more astute than his fellow generals, who today make it appear that people take up arms simply out of malice. Mr. Ramos also implicitly recognized that underdevelopment, poverty, injustice, and the many other ills Filipino flesh is heir to are the causes of rebellion rather than rebellion’s being their cause. That indisputable fact helps explain why, during the 35 years that it was in force, RA 1700 failed to prevent the armed conflicts that have persisted in this country for decades.

Only the severely intellectually challenged would fail to conclude from the evidence available that penalizing people for their political beliefs and red-baiting, harassing and threatening government critics will not end rebellions. What will is democratizing governance so that the economic and social inequities that condemn millions to the horrors of poverty and injustice and to short brutish lives can be effectively addressed.

Unfortunately, the last time an administration actually believed that was 28 years ago. What is instead happening today is a replication of the bad old days of the 1950s, in another demonstration of the gross incapacity of this country’s power elite to learn from the past.

 

Luis V. Teodoro is on Facebook and Twitter (@luisteodoro).

www.luisteodoro.com

Monetary ‘drag’: Why the BSP should conserve firepower

If there is a “fiscal drag,” we also have a “monetary drag.”

There is fiscal drag when the tax system becomes so progressive that extra earnings are penalized. Another example is when someone gets promoted but ends up taking home less income on account of being in a higher tax bracket.

In such a case, a rational individual will be forced to reduce his consumption expenditures. On a magnified scale, this impacts aggregate demand. In the same way, lower corporate income after a tax restructuring could also lower investment spending. In such a case, the increase in public revenues will be insufficient to compensate for the decline in aggregate demand.

A fiscal drag could cushion the economy from demand-pull inflation, but the more serious impact is on economic growth and employment.

In another column, we wrote that banks choose to be pro-cyclical. This is why we suggested that by continuously lowering policy rates, the central bank is pushing on a string. Instead of expanding loan portfolios in response to monetary easing, banks are instead tightening lending standards and are placing the public’s deposits and their own freed reserves in government securities. The Bangko Sentral ng Pilipinas (BSP) is also a risk-free investment choice. Thus, by cutting policy rates in this climate, the BSP ultimately absorbs and compensates for the liquidity it released into the system to lower the cost of money and increase the volume of credit.

The goal to inspire more business activities is impeded in the credit channel of monetary policy.

More rigor on this issue was recently provided by the BSP through its Working Paper Series. Two very competent bank officers at the Department of Economic Research, Carolina P. Austria and Bernadette Marie N. Bondoc, wrote about this in their article, “The Impact of Monetary Policy on Bank Lending Activity in the Philippines.”

Austria and Bondoc premised their research on the various channels of monetary policy. These are the interest rate, exchange rate, asset price, and bank lending channels. In recent years, the expectations channel has also gathered potency. The research’s goal was to check how these channels transmit monetary policy to the real sector and affect domestic demand.

Focusing on the bank lending channel, the BSP senior economists stressed that monetary policy impact on bank lending depends greatly on the substitutability of the sources of credit. If bank loans are the dominant source of credit, the effect of monetary policy is more potent on bank lending.

The economists admitted that undoubtedly, “measuring the sensitivity of bank lending behavior to monetary policy changes is… fraught with challenges.”

One challenge is simultaneity. This means it is difficult to establish the effects of policy when an economic shock is addressed by a monetary action. High economic growth is often accompanied by tight monetary policy because down the road, with a lag in monetary impact, central bankers should anticipate a potential run-up in consumer prices. It is the role of central banks to worry and watch out for risks.

In a downturn, like what we are experiencing today following the COVID-19 pandemic, excessive monetary easing could trigger future high inflation and financial instability due to mispricing of risks.

Because the channels work together, another challenge is the difficulty of isolating the impact of bank lending from other channels. For instance, while tightening monetary policy could result in lower bank lending, ascertaining how much is due to a decline in demand following an interest rate increase or to a decline in loan supply will be a tall order.

Austria and Bondoc were correct in adopting the methodology used by Kashyap and Stein (2000)* who squarely addressed these empirical issues. In their paper, Kashyap and Stein argued that the lending channel assumed that banks cannot leverage on uninsured sources of funds to make up for a central bank-induced shortfall in insured deposits without cost. This implies that monetary policy affects bank lending differently depending on the liquidity position of each bank. This will determine how they will react to monetary policy.

The BSP paper builds on the Kashyap and Stein model to determine the existence and strength of the bank lending channel in the Philippines. They tested two hypotheses. First, bank lending in the Philippines increases (decreases) as the monetary policy of the BSP eases (tightens). The effect is magnified when banks have weaker balance sheets. Second, the effect is strongest for smaller banks.

The BSP senior economists found very little evidence of monetary policy transmission through the bank lending channel in the Philippines.

Despite trying different ways of generating other possible results by increasing the sample size, using various proxies to the BSP’s policy rate and changing the banks’ composition and groupings, their conclusion held through these different configurations.

One possible explanation for this is loan portfolio rebalancing. Tighter monetary policy could motivate a shift of portfolio from say, real estate and consumer loans to commercial and industrial loans.

Another explanation is some banks’ superior balance sheets and liquidity which allow them to sustain their loan programs despite BSP monetary initiatives. These banks could choose not to increase their lending operations during a downturn by selective lending. According to the BSP quarterly survey of senior loan officers, instead of easing their loan standards, some banks even tightened them. Thus, the BSP’s goal of inspiring more lending operations is frustrated.

Beyond the tendency to be pro-cyclical, banks have behaved differently: bank lending turned out to be a weak monetary policy channel.

They quoted our own 2008 paper where we found that the weak bank lending channel may be attributed to financial market liberalization in the Philippines. This began in the early 1990s and weakened the impact of monetary policy on bank lending. The surge of alternatives to bank loans; the opening up of financial markets; and increase in securities trading have weakened the link between the real economy and the bank lending channel. Moreover, the rise of conglomerates involving cross ownership of banks and real estate development, has allowed the banks to override monetary policy intent because banks have alternative fund outlets.

It is precisely because of this weak bank lending channel that the BSP decided in 2016 to establish the interest rate corridor system to influence short-term market interest rates to move closely with the BSP’s policy rate. This would hopefully strengthen this channel of monetary policy.

Their findings could also be explained in terms of the banking regulatory framework. The BSP imposes a penalty on banks co-mingling regular peso and foreign currency deposits (FCDs). Liquidity coming from the external sector, whether from foreign investments or current account surplus, is kept with the banks’ FCD units and is invested abroad or lent to exporters or non-residents. External flows are immaterial to local lending by banks unless the BSP buys those dollars for pesos.

The other explanation is the abnormal period of 2008-2015. With very high credit growth at the time, the BSP increased its policy rate twice in 2014 alone. But these increases were not enough. Higher rate adjustments were required to even temper credit growth. This irregular period was due to one, the global financial cycle which led to more dollar inflows to emerging markets with higher interest rates; and two, higher dollar inflows that constrained monetary policy regardless of the exchange rate regime.

Concluding that the bank lending channel is a weak channel of monetary policy, Austria and Bondoc proposed two policy implications. The monetary authority should consider using a combination of its policy rate, required reserve ratio (RRR), auction volumes for deposit facilities and macro-prudential measures. Good coordination of policy and operation is important.

We observe that precisely, the BSP has been doing just that. Given the deep recession for the last three quarters of 2020, the BSP has brought down the policy rate to negative in real terms. RRR was brought down by 200 basis points. Auction volume has been adjusted periodically but given the enormous injection of liquidity in the system, the BSP has been constrained to also mop up almost the same volume of liquidity amounting to around P1.9 trillion. The banks’ modest lending leaves them with so much liquidity which they park with the BSP itself. Macro-prudential measures have been resorted to including the incentive for banks to support small business.

Yet, the latest monetary condition continues to support the argument that bank lending remains a weak channel of monetary policy. In October, while money supply expanded by 11.8%, bank lending net of placement with BSP, barely rose by only 1.9%.

Are we seeing instead stronger evidence of monetary drag?

It’s about time the BSP considered conserving its firepower for when it is really necessary.

* Kashyap, Anil K., and Jeremy C. Stein (2000). “What Do a Million Observations on Banks Say about the Transmission of Monetary Policy?” American Economic Review, 90(3): 407-428.

 

Diwa C. Guinigundo is the former Deputy Governor for the Monetary and Economics Sector, the Bangko Sentral ng Pilipinas (BSP). He served the BSP for 41 years. In 2001-2003, he was Alternate Executive Director at the International Monetary Fund in Washington, DC. He is the senior pastor of the Fullness of Christ International Ministries in Mandaluyong.

Putting ‘parens patriae’ in the dustbin

The problem is the thinking that the government is there to take care of people. But this fundamentally goes against the philosophy and structure that our society, as embodied in the Constitution, is built upon.

Law schools and the legal profession contributed to this canard. Setting aside misguided thoughts regarding “social justice,” blame can be laid at the continued invocation of the “parens patriae” doctrine. As enunciated by the Supreme Court in Monte de Piedad: it is supposedly “inherent in the supreme power of every State.” As presently and popularly understood, parens patriae is a legal concept whereby the government acts as defender of the rights of the people.

Literally, it means the government is acting as the “father of nation,” which makes sense indeed if you are talking of helpless children or invalids. Because the doctrine was indeed originally conceived for the protection of such individuals, not adults capable of caring for themselves: “The parens patriae doctrine has its roots in English common law. In feudal times various obligations and powers, collectively referred to as the ‘royal prerogative,’ were reserved to the king. The king exercised these functions in his role of father of the country.

“In the United States, the parens patriae doctrine has had its greatest application in the treatment of children, mentally ill persons, and other individuals who are legally incompetent to manage their affairs.” (American Law and Legal Information).

Unfortunately, US jurisprudence (particularly Hawaii v. Standard Oil Co., 1972), whose lead we oft follow, evolved the doctrine to justify government case standing for a variety of matters, most notably antitrust cases.

But why the government should act as “father” over independent adults, particularly when those adults are the ones paying for the former’ subsistence from taxes collected, is an inconsistency never fully reasoned out.

Contrary to how many people today feel entitled to be taken care of by the government, particularly by the president, they forget that the point of our tripartite constitutional system is precisely to limit government’s powers.

Under our Constitution, it’s the citizens that run the country. Not government bureaucrats. Civil servants, from the president down are all exactly that: the people’s servants.

Our governmental structure is designed to allow our people to act with self-responsibility, government being merely there to assist. In other words, the government was not designed under our Constitution to be the be-all and do all for the people. The actual running and welfare of the State is the responsibility of the people themselves.

The primary job of government is to serve and protect the people, which includes maintaining peace and order, and securing life, liberty, and property. All others are secondary, for which the government acts subordinate to the people.

The rationale behind limiting government’s power is that if the people abdicate their responsibilities and prefer the government stepping in, the latter’s tendency is to want more power. Soon, it will be telling people what to eat, work, buy, believe, travel, who to be with. Which requires more government personnel/resources, which demands a bigger budget, hence more taxes. Hence, less autonomy for the people: less money in the wallet, less choices, less exercise of free will. Thus, more dependency. And on and on.

This COVID-19 pandemic (or whatever it is) has been exploited by the government to run amuck and enlarge itself. It is a Hobbesian nightmare on steroids (or rushed vaccine).

In truth, the proper thing to do should have been to cut the bureaucracy, thus allowing our citizens the freedom to take care of themselves as they best see fit; churches to engage in their religious, charity, and counseling activities; businesses to generate income; schools to educate our youths; and — most importantly — families to take primary care of our citizenry.

Instead, the government — with the people’s submission — has grown gigantically, such that it now pervades every decision point in every person’s life: when to leave the house, what to wear, how to eat, which people to meet, how to travel, how to set up a business. And on and on.

The ironic thing is that this submission, enslavement rather, as it includes the wholesale derogation of our civil liberties, is subsidized by the people themselves: a government budget of P4.1 trillion, representing a 167% increase from 2010’s Php1.541 trillion.

This expansion is not driven by economics or population, considering the 3% average inflation from 2010 to pre-COVID-19 2019 and 17% population growth from 2010 to present. Rather, it’s an expansion driven by the need to control and intrude into every aspect of Filipino’s lives.

Filipinos should stop treating government as the “father of the nation.” We already have our own fathers and many of us are fathers as well. Ours is a country of self rule and we should act like it.

Besides, considering how extravagantly and wastefully it spends the people’s tax money, the government is really just the most deadbeat father around if there ever was one.

 

Jemy Gatdula is a Senior Fellow of the Philippine Council for Foreign Relations and a Philippine Judicial Academy law lecturer for constitutional philosophy and jurisprudence.

jemygatdula@yahoo.com

www.jemygatdula. blogspot.com

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Twitter @jemygatdula

Facebook has only itself to blame for drastic remedy

MARK ZUCKERBERG always knew.

In 2012, when Instagram was two years old, with 13 employees and no obvious path to profitability, Zuckerberg knew that the fast-growing photo app was a potential threat to Facebook, Inc.’s social media dominance. “Instagram can hurt us,” he wrote in an e-mail. In an internal discussion about whether to buy Instagram — and other startups that might one day pose a threat to Facebook’s social media monopoly — he added, “The basic plan would be to buy these companies and leave their products running while over time incorporating the social dynamics they’ve invented into our core products.”

Kevin Systrom, Instagram’s co-founder, knew something, too. He knew that angering Zuckerberg might cause the “wrath of Mark” to come down on his still-fragile company and cause Facebook’s founder to go into “destroy mode,” as he put it in a text message to one of Instagram’s early investors. Yes, Instagram might one day become a significant competitor to Facebook — but it was also possible that Facebook would clone Instagram’s technology and put the startup out of business. So in April 2012, when Zuckerberg offered to pay $1 billion for the company, Systrom and the Instagram board said “yes.”

But when it sought to get the deal approved by the Federal Trade Commission (FTC)  in the US and the Office of Fair Trading in the UK, Facebook argued with a straight face that there was plenty of competition from other photo apps like Camera Awesome. And the two government agencies were also convinced that because Instagram had no revenue, a merger with Facebook wouldn’t meaningfully add to its market share. The two regulators took only four months to approve the deal. But of course they didn’t know what Zuckerberg and Systrom knew.

On Wednesday afternoon, the FTC and 48 attorneys general filed dual antitrust suits designed to undo the merger of Facebook and Instagram — as well as Facebook’s takeover of WhatsApp, another potential rival that it bought in 2014 for a staggering $19 billion. (WhatsApp also had no revenue and 55 employees at the time Facebook bought it.)

This is a radical proposition — the US government hasn’t contemplated breaking up a company since the Justice Department sued Microsoft in 1998. But I’ve long believed that there is simply no other way to curb Facebook’s immense monopoly power.

In the attorneys general complaint, the plaintiffs contend that Facebook employs a “buy-or-bury strategy that thwarts competition and harms both users and advertisers.” One would be hard pressed to disagree. Venture capitalists are so fearful of Facebook’s ruthless tactics they simply won’t fund startups that Zuckerberg might view as competition, no matter how insignificant. Thus is innovation stifled, as is competition itself.

As a result, the plaintiffs contend, social media consumers don’t have legitimate choices. If they don’t like Facebook’s privacy policies, or if they want fewer ads, or are offended by Facebook’s unwillingness to face squarely the amount of disinformation on its platform, what are their options? Move to Instagram? Or WhatsApp? They are still in Facebook’s universe, which can still use their data to make oodles of money.

Zuckerberg has apologized a dozen times or more for some Facebook missteps and promised to do better. Nothing much changes. Facebook agreed to a settlement with the FTC in 2012 over what the agency called “privacy-related violations” — and then had to pay a $5-billion fine seven years later for violating the terms of that settlement. One reason to break up Facebook is that less onerous remedies have simply failed to make a difference. Facebook has proved again and again that it doesn’t take government mandates seriously.

As the economist Hal Singer put it in a tweet soon after the complaint was filed, “There is no injunctive or behavioral cure that can remedy this mess. Facebook’s anticompetitive conduct defies traditional (regulatory) approaches.”

The second reason to break up Facebook is that it is the only way to create competition in the social media business — and to create it instantly. Instagram now has more than 1 billion monthly active users. WhatsApp has more than 1.6 billion. What’s more, before Facebook bought them, the two companies had much different approaches to matters such as privacy and even profitability.

For instance, WhatsApp’s Chief Executive Officer Jan Koum, left Facebook in 2018 after a “clash over data,” as the Washington Post put it at the time. Koum had long kept the data of WhatsApp users private, but Zuckerberg had decided the time had come for Facebook to start monetizing it. A WhatsApp that was divorced from Facebook might well establish itself as an alternative to Facebook’s data practices. Indeed, that’s what it was before it was acquired in 2014. The same could be true of Instagram. They wouldn’t compete with Facebook on price, obviously, but on all the other things social media users care about.

It’s no secret that government antitrust cases are difficult to win in court, where judges have heavily favored consolidation in recent decades. Facebook will argue — as it already has — that it won government approval of the deals fair and square. “Years after the FTC cleared our acquisitions, the government now wants a do-over,” the company said in a tweet.

But reducing Facebook’s power is one of the few issues that Republicans and Democrats agree on, and as my colleague Tae Kim notes, David Cicilline, the chair of the House antitrust subcommittee, would be well served to craft a bill that would make it easier to curb the power of the big technology companies, starting with Facebook.

As for the antitrust suits, breaking up Facebook isn’t just the right solution, it’s the only solution.

BLOOMBERG OPINION

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