NOY ORDERED TEAM SEEK WAYS EASE RISING OIL PRICES / DEFENDS BF CLOSURE
[PHOTO - Students are pushed back by private guards of the oil giant Shell Friday March 18, 2011 at suburban Makati city east of Manila, Philippines in protest against another round of oil price increase, the 9th such increase since the Middle East crisis. The three major oil companies raised the pump prices anew following increase of oil prices in the world market allegedly due to concerns in the Middle East and the high demand in the quake and tsunami-ravaged northeastern Japan. (AP Photo/Bullit Marque]
MANILA, APRIL 7, 2011 (STAR) By Aurea Calica - President Aquino has ordered his economic team to find ways to immediately help the public cope with increasing oil prices, including possibly raising wages, imposing price controls or reducing the value added tax (VAT) even if these had already been thumbed down by his finance officials.
“I did instruct them to study all and every means of how to mitigate the spiraling oil prices, especially given the fact that we don’t see a quick solution to this,” Aquino said in an ambush interview yesterday.
“So everything is being studied – wage increase, if price controls are feasible, and if we can reduce the VAT. It’s like any and all avenues,” he said.
“And true solutions and not just to earn brownie points are being explored. So I have tasked them to give me the outcome as soon as possible and I guess by next week there will be some progress,” he said.
Aquino told reporters about his instructions to his economic team shortly after the signing of a memorandum of agreement between the Department of Budget and Management and judges’ associations on the increase in salaries of justices, judges and judiciary officials of the same rank.
Malacañang also disclosed that trade officials are carefully monitoring the prices of basic commodities as power and fuel rates are increasing.
Deputy presidential spokesperson Abigail Valte said in a press briefing at Malacañang that power subsidy was not being discussed at present but that the President would want his economic managers to help the vulnerable sectors cope with the increase in prices.
The President said the first step was the P450-million fuel subsidy for tricycle and jeepney drivers.
Asked if he was open to reducing VAT, Aquino said “in general, it seems that it’s not the right solution.”
“If we make the prices artificially low, would this encourage people to conserve and save on consumption or would we just increase it? If (consumption) is increased, will this have an effect on our dollar reserves that will lower the value of the peso and push all prices up? There are a lot of related consequences once we touch the VAT itself. So what we are running after, more than anything, there should be focus and concentrate on sectors that are really in need,” Aquino said.
“Of course, those who are more well off can be helped a bit later but those most vulnerable must be identified and we can only do this if we are focused on our programs,” the President said.
“The criteria is focus and we lose the focus (if VAT is reduced). The brunt is on the whole society and those who were supposed to be assisted were not clearly assisted,” Aquino said.
“So if there is contravening data, then we will look at it,” Aquino said.
The President said that in the next few days, the people would be hearing more good news on the economic front.
“What I only want to point out, even at this stage, the government has the capability to get into this, provide even just temporary relief to a problem that nobody foresaw nor could predict when it would end,” he said.
The President also expressed hope that the crisis in the Middle East and North Africa would end soon.
“But as of now, we have the ability to ease the burden on our fellowmen,” Aquino said.
Budget Secretary Florencio Abad said the President told his economic managers that the “situation continues to be uncertain and he doesn’t want the people to continue to face uncertainty and additional burden.”
“So in case the situation continues on, if it gets even worse, we ought to be ready with some measures so that we can alleviate whatever additional burdens the situation may bring to our people, but that is a general directive,” Abad said.
Abad stressed the economic managers were not in favor of reducing the VAT.
“The economic advisers advised him that reducing the VAT may not be the most direct and effective way of helping our people. It might even have some adverse consequences on our fiscal position,” Abad told reporters.
“We have to go back and study the matter and recommend measures to him soon,” Abad said.
The budget secretary said there might be bigger VAT collections from fuel due to higher prices but “we are facing a deficit.”
“Whatever revenue we generate we would like to be able to close the deficit gap because the lower deficit that we face the more flexibility we will have in addressing future contingencies,” Abad said.
“As much as possible, (measures) should not have an adverse impact on the fiscal position as well as on the deficit,” he said.
Abad said they should work fast because “when he (Aquino) said ‘soon,’ he said it with great sense of urgency.”
He stressed that the President did not call for specific measures and that his economic managers shot down the proposal to reduce VAT.
“He said, you take a look at it (VAT cut) and come back to me with your recommendations. He still said take a second look and come back to me but as far as some of us are concerned, that’s how we feel about the particular proposal,” Abad said.
The budget secretary said that with a budget deficit of P300 billion, “obviously the answer is we need to raise more revenues.”
As regards wage increase, Abad said the President asked them to also look into it.
“As a matter of principle, he understands that insofar as private sector employees are concerned, they’re carrying a burden. As far as the public sector is concerned, we are currently implementing the third phase of the SSL 3 (salary standardization law) so they’re enjoying adjustments in their wages, but it’s the private sector that he’s asking us to study,” Abad said.
No power subsidy
Valte, in a press briefing at Malacañang, said the Department of Trade and Industry (DTI) was using standard computations of the impact of fuel price increases on basic commodities.
She also said the Department of Energy (DOE) was computing the prices of fuel on a regular basis vis-à-vis the prices of crude in the world market.
Aquino defends BSP on closure of Banco Filipino By Delon Porcalla (The Philippine Star) Updated April 07, 2011 12:00 AM
MANILA, Philippines - President Aquino yesterday defended the Bangko Sentral ng Pilipinas (BSP) for closing the insolvent Banco Filipino (BF) for unsound banking practices.
Banco Filipino has filed a petition before the Court of Appeals seeking a temporary restraining order or an injunction to stop the BSP and the Philippine Deposit Insurance Corp. (PDIC) from placing the bank under receivership.
“They (BF) pay out double digit interest rates while other members of the industry pay out single digit interest rates. They accumulate funds faster but how will they be able to pay the interest?” Aquino said.
Banco Filipino, owned by the Aguirre family, was run by polo player Albert Aguirre, whose brother Adolfo is the father of Aquino’s former girlfriend Shalani Soledad. In a 170-page comment, the BSP told the appellate court that it ordered the bank placed under PDIC receivership last March 17 because it operated under a Ponzi scheme, a fraudulent investment scheme in which withdrawals were funded by later deposits.
“In view of all these undisputed facts, BSP’s action in recommending and thereafter placing under the receivership of PDIC was the only course left in order to protect Banco Filipino’s depositors, creditors, and the public in general,” BSP said.
The central bank said the bank lured depositors by offering interest rates within the range of 6.0 percent to 14 percent for special savings accounts when most banks were paying only 1.8 percent to 3.3 percent.
Instead of investing the deposits, the BSP said Banco Filipino used the funds to pay the interest of old deposits and for day-to-day operations.
A Ponzi scheme is an investment operation that pays returns to investors not from actual profit earned but from money paid by subsequent investors. It was named after Charles Ponzi who became notorious for using the technique in the1920s.
The BSP said Banco Filipino borrowed P2.2 billion of the depositors’ money and never paid them back. The bank also paid P250 million to officers and consultants as well as P245 million in legal fees to former Securities and Exchange Commission (SEC) chairman and bank vice chairman Perfecto Yasay Jr. and lawyer Harry Roque last year.
“Banks are not created for the benefit of its directors or officers. Instead Banco Filipino was being run to the extreme prejudice of its depositors since it was violating various laws and BSP regulations, including its refusal to submit periodic financial statements for the few years to hide its true financial weakness,” the BSP said in a statement.
Based on a memorandum submitted by the Integrated Supervision Department II of the BSP and the report of examination cited in the comment, Banco Filipino incurred average losses of P2.8 billion from 2007 to 2009. During the period, the bank posted an average gross income of around P242.5 million that was insufficient to pay the average interest expense of P1.1 billion.
The BSP pointed out that Banco Filipino was insolvent because its liabilities overtook its asset base by P8.4 billion.
The central bank noted that Banco Filipino had a capital deficiency of P1 billion, preventing it from covering deposit liabilities. The bank also failed to hold any meeting of its board of directors and its executive committee to review the financial situation of the bank.
Banco Filipino managed to lure 177,652 depositors, mostly small depositors with accounts having deposits below P5,000. Its whole deposit base, however, swelled to P15 billion.
Now that the bank has been placed under receivership, deposits as high as P500,000 would be paid by PDIC.
Banco Filipino also owes the BSP about P4.4 billion in loans as of September last year.
As of March 15, the Philippine Clearing House Corp. returned P798 million worth of checks to Banco Filipino because it had insufficient balance in its demand deposit account with the central bank.
Valte said stakeholders are apprised of developments every week to make them aware of the factors surrounding the price increases.
She said the DOE would also check on the power rate increase being readied by the Manila Electric Co.
But Valte said she had not heard of any discussions on fuel subsidy by concerned authorities.
“We know the basic problem, when you subsidize something, that means money would be funneled into something that may not necessarily be sustainable when, in fact, you can put it into some other project that will have long-term benefits. So as far as I’m aware, there are no discussions on any proposal for a power subsidy,” Valte said.
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