A Bad Investment

I am sure that most people in the Philippines know of Manila Electric company or better know as MERALCO. During the past few weeks, The Philippine Government Service Insurance System (GSIS) which owns a substantial share of MERALCO have decided to try to take over the company through a proxy fight. The GSIS President, the ever honorable bag of gas that is Winston Garcia, has decided that MERALCO overcharges its consumers and have mismanaged the company. GSIS invests money into MERALCO in order to turn a profit which is then used to pay for the pensions of thousands of civil servants.

The management of a company's number one priority should be to increase shareholder wealth. They are in fact owners of the company. To this effect, I believe that MERALCO's current management has held its end of the bargain. Only when the government has started to talk about a takeover is when the stock price began to plummet.

Hence, I am still VERY hesitant about investing in the Philippines.

Whenever government dabbles too much into the affairs of business, it ends into a tangled mess with politicians pocketing profits more than the shareholders. When a friend or a business associate asks me if I hold investments in the Philippines, I reply with a consistent "No."

I am sorry to say that the stock market has not fully matured. There are too many backroom deals with companies exchanging hands through a drunken night of mahjong. The corruption of government regulators is rampant and my confidence has continually eroded. Winston Garcia's current theatrics has added to the reputation of Philippine capital markets as being volatile and corrupt.

It doesn't end there. Several politicians have proposed that all text messages be free so as to alleviate the situation of the poor. The government should think long and hard before mandating this preposterous proposal. It would be another blow against private enterprise at the guise of helping the poor.

Then again, can anyone be really surprised?

Elections are coming soon and the dogs must be given their bone. Harsh reality. But sometimes we all need a reality check.

A Deep Divide

In reading Jessica Zafra’s blog entry “A Condensed History of the Rich”, Zafra contends that the oligarchic tendency of the Philippine social structure as well as its penchant for bossism and nepotism ultimately contribute to the cycle of poverty. The end result is a wide and deep income inequality. That is to say, that those at the top earn disproportionately more compared to those at the bottom of the economic barrel. This inequality cycles itself therefore not allowing the country to prosper as a whole.

Got that?

This can certainly be seen in the case of many industrialized nations. For instance, look at the United States. A strong middle class brought about by the industrial revolution allowed the country to prosper. But this was not always the case. So-called robber barons of the late 1800’s dominated America’s industries. Then the income tax came about. The progressive income tax is seen as a leveler of inequality. Tax the rich more than the poor. After all, they can afford. Furthermore taxes such as the Inheritance or Estate Tax ensured that family wealth would not stay “in the family” for generations to come. In this way oligarchies were broken. New entrepreneurs were encouraged and the country benefited as a whole.

If income inequality is the root of the problem, then government has the power to fix it through a progressive income tax rather than the regressive consumption tax known as the VAT. It is unconscionable that the Philippine government tax the poor at the same rate as the rich.

How is this possible you ask?

Let’s say there is 1 peso a tax on sardines. Since the poor would essentially consume the same number of cans of sardines as the rich (theoretically), then the same tax rate of 1 peso per can of sardines would apply to both of them. Proportionately, the 1 peso tax would hurt the poor man more since…well…he’s poor.

Then why oh why is GMA proclaiming that the RP will be a first world nation within a generation? It’s an estimate that is premature and certainly unrealistic given the current situation. The GDP did grow 7 percent, yet most of the gains were garnered by the rich and the poor felt little. Trickle down economics has not worked. A lot of work needs to be done before anyone can proclaim the Philippines as first world. Open your eyes and see the poor in Baseco, Tondo, Payatas, and a myriad of other “informal settlements”. Look at those living beside the antiquated railway.

It’s time for a revolution. The patchwork solutions of former administrations have not worked. Wake up and smell the stench from the Pasig River running right through your backyard.

How to Plan a Coup.

"Do you know of any other countries where coup attempts are staged from luxury hotels?"
-Jessica Zaffra

I first heard of the attempted coup/mutiny/incident while reading Reyna Elena's blog.
My first thought was "why do something that FAILED the first time again?" I was there in 2003 when the same Trillanes took Oakwood while I was staying at the Intercon. I thought I would have to evacuate and run screaming to the Embassy. Anyway here are some tips for future coup plotters...

1. Make sure you have more than 30 men. In fact, make sure you have over half of the military on your side.

2. Ousting the President would actually mean physically extracting her from the Palace. This means that you and your men have to leave the luxury five-star hotel and march across Mendiola into Malacanang Palace.

3. Be articulate. Not like this:

Trillanes: “Like soldiers, we’re going to face this.”
Reporter: “Sir, how are you going to face this?”
Trillanes: (after a beat) “Whatever.”
From the McVie Show

4. Make sure you have the successor, ie. the Vice-President on board, make sure you have Cabinet Members, Congressmen, and the Middle Class on your side.

5.Have an actual plan.

6.Be prepared to die if necessary

7. Did I mention leave the luxury hotel?

Well, following these simple rules should allow for a successful coup. Remember it's easier to have a coup than to actually govern. If you should fail to meet any of these criteria, I suggest not starting a rebellion.

It's just my opinion.

Julia Campbell

She was a 40-year- old Peace Corps volunteer. Walking along the irrigation mounds amidst the massive Banaue Rice Terraces, Julia could not believe the beauty that surrounded her. All of a sudden she was attacked and as her eyes dimmed the Ancient Beauty swallowed her soul and being. She became ONE with the Earth and became a part of the History of an ancient land.

Julia's story gave me an idea--to talk openly and candidly about the Philippines, a land which I left when I was a child due to circumstances. She was so brave helping others and leaving her comfortable life here in the US. I wish I was as brave as her. At times I feel that I should be over there helping to build the country, but it is an insurmountable task. Julia was a great woman who loved the Philippines and saw through the dirt and grime to behold the Pearl of the Orient. If only more Filipinos would be like her.