MANILA, February 11, 2005 (STAR) DEMAND AND SUPPLY By Boo Chanco  -  Some of you may say I am clutching at straws and may not even agree with me about this bit of good news as being that good. But we have to give her credit because credit is due her. The woman who appointed Ramon Revilla to the Public Estates Authority, appointed a dyed in the wool politician to the Supreme Court, insisted on two less than acceptable commissioners at Comelec, and made countless other dreadful political appointments, is capable of making good appointments too.

I am referring to the recent appointments she has made in her economic management team, which could be cautiously interpreted that she is finally taking our crisis situation seriously. If she allows her new Finance Secretary, the new Trade and Industry Secretary, the new Energy Secretary, the current BIR Chief and the new Customs Chief do their jobs as they see it, there may be reason to even be a little hopeful. Now, the only thing she has to do is choose a new NEDA chief, someone the local economists can respect, and she may regain the respect of the business sector as well.

But wait a minute.. I am hearing rumors that she is about to spring another very welcome surprise. I am keeping my fingers crossed but the story is she is ready to name an extremely competent Bangko Sentral professional, one who rose through the ranks, as the next Governor. Thatís good news!

This is one crucial appointment that would have a large impact on our international financial relations. Simply put, the appointment of Deputy Governor Say Tetangco to succeed Paeng Buenaventura would provide the continuity needed to follow through the reforms Tio Paeng has initiated. Thatís the one big concern the international financial sector has.

Not only is Say Tetangco young enough to have the physical stamina to endure the pressures that go with the job, he is also very professionally respected. Since he does not belong to the old boy fraternity of local bankers, he also has what it takes to be a Governor who is not beholden to the system.

Mr. Tetangcoís biggest disadvantage in getting that job is that apart from being a native of Pampanga, he does not have strong political connections. Since he is a career professional who belongs to the middle class, he couldnít have contributed millions to Ate Gloís re-election campaign. And, oh, I almost forgot, he also does not have a weekend house at Punta Fuego.

I realize it is not a done deal yet until the lady announces it. There are also some retired former bank presidents who look at the position of BSP Governor as some kind of a final career trophy. No wonder there is intense lobbying for the job. One of them must have been responsible for misleading one of our columnists into saying that to be BSP Governor, the charter of the BSP requires being a former commercial bank CEO who has represented his bank at the Bankers Association. Tio Paeng told me that is simply not so.

Tio Paeng said that while such senior bank management experience is helpful, a good economist with a good grasp of what it takes to make good monetary policy is just as good. Alan Greenspan is an economist and may have never worked in a bank. But then again, regulating our rambunctious local banking industry is no easy job. There are, however, enough career bureaucrats at the BSP who have done this all their lives and if given the right leadership and support, can be expected to deliver.

We all know that Ate Glo is full of surprises. Hopefully, she keeps on giving us these pleasant surprises that indicate she is finally really in business.

Capital market

One of the things that Tio Paeng worked so hard on during his watch that should be continued with all vigor by his successor is the effort to develop a domestic capital market. Its absence is one reason why our economic growth is not as robust as that of our neighbors. We are unable to finance basic infrastructure projects on our own, and long term ventures in the private sector must go abroad for financing.

Yet, if we think about it, why should a project like the modernization of the North Luzon Tollways be commercially financed by foreign funding agencies and banks? Why couldnít we finance it by borrowing locally, and in pesos rather than going abroad and in dollars, thereby exposing the project and its users to foreign exchange risk? And yes, financing in this country is short term and thatís also one more reason why we need to develop a good domestic capital market as a source of long term funds.

I also no longer buy the observation that because we have such a low savings rate, there is no such things as available domestic capital. The fact that a Russian cellphone company came here to make a presentation to Filipino investors means there must be available Filipino capital waiting to be tapped, if there is a good investment vehicle and opportunity.

And for the lower income classes, look at all those pyramid scams and even the close to a million subscribers of CAP as proof that it is possible to raise large amounts of money from Pinoys. Because there are no readily available investment outlets in the absence of a developed domestic capital market, a lot of money ends up lost with a lot of weeping, wailing and gnashing of teeth.

Tio Paeng told a group of journalists last weekend that a good domestic capital market is needed to give us the capacity to sustain our economic development. We need two strong pillars, Tio Paeng explained, to build a modern financial infrastructure that can mobilize our domestic savings to fund development. A country with a healthy banking system and a deep and efficient domestic capital market can be compared, he said, to a jet plane that flies better on two engines rather than on one. Right now, over 98 percent of the financing needs of the economy is dependent on the banking system.

Getting that done is not easy, the BSP Chief said. But they are slowly getting the job done and have in fact, managed to get critical legislation through Congress. Among these are the documentary stamp tax exemption, the SPV Law and asset securitization.

They still need an amendment to the BSP charter that would strengthen their hand in regulating banks to enable them to institute prompt and corrective action when banks get into trouble. They also want a law that would make it possible to have an industry wide credit bureau and a rationalization of taxes on financial transactions.

Another thing that would enhance the development of a domestic capital market that needs legislation is the institution of an individual retirement account similar to that in the United States. Middle income and mainly salary-based folks like me should be able to set aside a portion of our salary, shield it from income tax for the moment until such time as it is needed at retirement time. Meanwhile, it is invested in worthwhile projects that build the country and earns for the investor.

All in all, Tio Paeng and top officials of the BAP led by former Prime Minister Cesar Virata impressed upon us that there is so much to do to develop our domestic capital market. We will take up some of those things in future columns. What is important now is to have a new BSP Governor who is as passionate and determined to carry on the task.

Scared sh*tless

This ones from Dr. Ernie E.

A plane was taking off from Kennedy Airport. After it reached a comfortable cruising altitude, the captain made an announcement over the intercom, "Ladies and gentlemen, this is your captain speaking, Welcome to Flight Number 293, nonstop from New York to Los Angeles, the weather ahead is good and, therefore, we should have a smooth and uneventful flight. Now sit back and relax... "OH, MY GOD!"

Silence followed, and after a few minutes, the captain came back on the intercom and said, "Ladies and Gentlemen, I am so sorry if I scared you earlier. While I was talking to you, the flight attendant accidentally spilled a cup of hot coffee in my lap. You should see the front of my pants!"

A passenger in coach yelled, "Thatís nothing. You should see the back of mine!"

Boo Chancoís e-mail address is

Reported by: Sol Jose Vanzi

All rights reserved