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Jul 09

The annual budget brouhaha

An interesting theme from commentaries overseas: a kind of all-pervasive mental and moral exhaustion afflicting national elites. Fin de siècle? The 1968 of our times (see contrasting views on that important year by Tom Stoppard and Tariq Ali; Filipinos had their 1968 in, well, 1970… it takes time for fashions to filter through…)? David Sirota thinks that in the United States, the possibility of a grassroots revolt ought to be considered:

America is in the throes of a powerful new uprising right now..

…this uprising is happening on both the Right and the Left. Like most revolts, it is rooted in a backlash to an Establishment widely seen as corrupt and morally decayed. This uprising has more picket signs and protests than pitchforks and pistols… It is a social phenomenon that is impacting all aspects of public life — our pop culture, our media, and most significantly, our upcoming national elections. It could take our country in a very different direction — perhaps positive (think universal health care, an end to the Iraq War, new trade policies), perhaps frighteningly negative (think immigrant bashing and a war with Iran).

Though today’s uprising has been going on since the two major explosions of the last decade — 9/11 and the Enron disaster — polls indicate that it is now intensifying in ways not seen before. Surveys reveal that the public despises its current president, and more importantly, that America is suffering a crisis of confidence in government as an institution. As Scripps Howard’s 2006 poll found, “anger against the federal government is at record levels” and “widespread resentment and alienation toward the national government appears to be fueling a growing acceptance of conspiracy theories” — most prominent being the one suggesting our leaders helped plot the 9/11 terrorist attacks.

The political topography resembles that of the last major uprising in our history — the one that took place in the 1970s. America then as today faced the same crises that have catalyzed uprisings since colonists tossed tea over the sides of boats in Boston harbor: among others, an energy emergency, a national security quagmire, a recession, a financial meltdown, and an attack on democracy.

As that uprising gained steam, Democrats nominated an outsider candidate for the presidency (sound familiar?). But when that outsider was elected he and the Democratic Party didn’t effectively represent that uprising – and that uprising did not go away. On the contrary, it became more intense. And by 1980, conservative organizers used the candidacy of Ronald Reagan to channel that revolt into the full-fledged conservative movement we’ve been living under for a generation. Over the next two decades, this conservative movement changed America domestically (tax cuts and social service cuts), internationally (massive increase in the military budget), and politically (wholly changed electoral map).

This same pace of change could be upon us again today — though one key indicator suggests the specific kind of change could be different. According to Gallup’s biannual survey of attitudes toward social institutions, Americans’ disgust with government resembles that of the late 1970s — but the variation between then and now is the antipathy toward Corporate America. Whereas in 1979 one in three Americans told Gallup’s pollsters they had confidence in big business, today a little less than one in five express the same confidence. In 1979, almost two out of three citizens said they had faith in banks. Today, only two out of five say the same thing.

The trend bodes well for progressives. Conservatives’ close affiliation with big business puts them at a disadvantage in the Left-versus-Right competition to harness the current uprising…

Of course, today’s uprising could be squelched completely, with neither the Right nor the Left capitalizing on it. Many institutions inside our government and our political parties exist specifically to crush populist, mass-based revolts.

Jared Bernstien responds by saying,

David is obviously writing about bottom-up uprisings, in many cases, movements that are a reaction to government failure. But in my experience, these groups eventually are demanding that the government alter its policies. So we’ve got to think on both bottom-up and top-down tracks.

And the problem for the top-down track is that government is in big trouble. I’m speaking at the federal level, but let’s not get too romantic about local cases. I haven’t seen much evidence that Albany works that much better than DC.

There are lots of reasons for this, but certainly one of the main ones is that if you elect people who explicitly prophesize that government is the problem, they will fulfill that prophecy with a vengeance. And yes, they’ll enrich their cronies along the way.

The problem cuts deep into the agencies… The depth of dysfunction is astounding, and it’s going to take years to repair.

David reminds us that our country was founded partly on “the right of the people to alter or abolish” destructive government. I’m in the “alter” camp, and I’d like to hear someone with David’s insights and movement experience hold forth on what it’s going to take to get there. What steps ought we be taking now that will ultimately give progressive uprisings a public conduit through which their goals can be achieved?

Are there echoes in how the police are despised, even attacked, in China? See Cracks in China’s Armor. Is this all in marked contrast, perhaps, to what’s going on in Thailand, where those formerly characterized as reformists are now advocating the dismantling of parliamentary democracy, according to The Asia Sentinel’s anonymous correspondent in Thailand’s “New Politics” Charade:

The New Politics turns out to be a startlingly reactionary proposal to move Thailand’s parliamentary system towards a form of appointed corporatism, or what might be called a selectoral democracy. Thirty percent of MPs would come from elections, perhaps one per province, and the rest of MPS would derive from various occupations and associations. Sondhi says the proportion is not fixed, it’s up for debate.

The rationale for wanting to dismantle Thailand’s electoral system is evident: pro-Thaksin forces keep winning elections. And as Thaksin is said to represent everything bad about Thai politics, he can not be allowed to wield power directly or indirectly. Thus, for Sondhi, and it would seem the PAD leadership as whole, there is now a need to bring about a revolution in political representation.

The idea of examining alternatives to electoral democracy is not without some merit, for it is common knowledge that massive amounts of money are required to win parliamentary seats, making parliament a millionaire’s playground and a source of further monopolization and corruption. It wasn’t always so, Sondhi told the rally. In the 1970s socialist politicians in Thailand could get elected on the basis of their ideology and popular support, but the emergence of dirty politics in the 1980s crushed any such possibility in the present.

The New Politics has interesting antecedents. The PAD leadership has clearly been speaking to military figures (this is now well documented in the Thai language press) who tried to stifle the emergence of parliament in the 1980s. Indeed, selectoral democracy nicely fits with corporatist visions of the old “Revolutionary Council”. The Council, to which General Chavalit Yongchaiyudh was said to have an association, held that elections merely led to parliamentary dictatorship and proposed a form of corporate representation to realize the “general will”.

A former communist, Prasert Sapsunthon, was the inspiration for this Thai appropriation of Rousseau, the French theorist of the social contract. Prasert became a leading intellectual among military circles calling for non-elective forms of democracy. When the Revolutionary Council effectively declared itself a provisional government during the political crisis of 1988 the elected Chatichai government took it to court for treason. It then faded into obscurity, but its ideas have never quite gone away, finding support among small rightist groups and even in some labor circles.

The New Politics is unashamedly pro-military and even codifies the conditions under which military intervention may occur. Sondhi has spoken of four conditions for military intervention: when charges of lese majeste are not acted on; when a government is incompetent; when corruption is rife; when a government betrays national sovereignty.

This has striking parallels to many discussions taking place here in the Philippines (e.g., “Should the military be kept out of politics or does military interventionism represent a deus ex machina moment to be ardently desired?” or “The problem with elections is that the electorate elects idiots”, see smoke and Verisimilitude), and reminds me of something I brought up when Adrian Cristobal died: the enduring triumph of Marcos’ concept of a New Society helps explain why Edsa contained the seeds of its own destruction.

The papers today report P1 hike for jeepneys, buses; P10 for taxis. The transport sector has to be placated. Senator Escudero lays down the basis for the next round of placating -of workers- as reported in Inflation cancels wage hike; hope pinned on new law. The Catholic bishops have to be placated, too: Gov’t open to lowering, not scrapping, EVAT on oil.

The problem of course is that soothing all these sectors requires money, and proof of the President putting the nation’s money where her mouth is, will be in the national budget.

Former national treasurer Leonor Briones in her column says something germane to yesterday’s entry (and the foreign commentary above), this time from point of view of economists:

Last week, I talked to two eminent economists. One drew a picture of the gathering of a perfect economic storm. To him, all the signals are already making themselves felt: increased unemployment, accelerating inflation, escalating prices, capital flight, and rise in poverty levels. The social consequences of the economic storm are also building up: increase in suicides, rise in criminality , social disintegration, and loss of hope.

So how come people are not rising in anger? The other economist said that all these negative developments did not occur in one fell swoop. They were building up, one after the other. By the time the perfect economic storm sweeps the country, people will be so weakened they will not have the strength to bestir themselves and take action.

She also happens to think Arroyo’s hold on funds, spending habits ‘dangerous’. One presidential habit I’ve heard about, is that the President travels with a stack of blank government checks when she drops in on local government officials; she then fills in these checks personally, a habit that apparently gives professional bureaucrats the Willies.

Anyway, in her column, Briones says the executive department has to redo the proposed national budget, because the macroeconomic assumptions that served as the budget’s parameters have become obsolete in the months since the Budget Call was made in May. Among the assumptions made were: singe-digit inflation, a balanced budget by this year, and a Peso-Dollar exchange rate of 40 to 43 to 1.

The Inquirer editorial for its part, says that real oversight over the national budget is a Mission impossible.

Anyway, the Palace propaganda machine has begun testing potential messages for the State of the Nation Address. If the Palace number-crunchers are, well, number-crunching furiously now, to come up with new economic assumptions for the national budget, Governor Joey Salceda is also batting for his economic plan by claiming it has presidential approval.

So we can expect the budgetary process to pop in and out of the news in the coming weeks and months. For a closer look at the entire process, visit The Philippine Center for National Budget Legislation. And here’s their book: CNBLbook.pdf which provides a crash course in understanding how the budget’s put together, and what it contains. (The Department of Budget and Management website also makes available the Budget Call for 2009 and last year’s national budget-related documents: the General Appropriations Act for 2008, which was based on the President’s Budget Message for 2008,with supplementary material: the National Expenditures Program FY 2008, Staffing Summary FY 2008 and Budget Expenditures and Sources of Financing 2008.)

I’ve reproduced some charts from the Philippine Center for National Budget Legislation’s book, and supplemented them with some charts I prepared for my show.

The first thing they point out, is that the Executive Department dominates the national budget, with the ratios more or less constant. The 2004 budget, for example, has 68% of the monies devoted to, and in the hands of, the Executive Department, with the next-biggest chunk devoted to debt payments, and a relatively slim percentage for the legislature, the judiciary, and constitutional commissions.

2004.jpg

The PCNBL helpfully presents past budgets in a color-coordinated manner:

oldgaa.jpg

And then explains what the color-coding means:

newgaa.jpg

Most members of Congress spend their time on the yellow portions, and sometimes run out of time to adequately look into the blue portions, which are meant to supplement the expenses of government offices (in yellow). The blue portions are called Special Purpose Funds, and as this chart shows, they total more than what’s spent for the established offices of the government:

spf2008.jpg

A page from the book explains why Alleba Politics, for example, can complain that the National Government is in arrears to the City of Davao, to the tune of 142 million pesos:

lgu.jpg

lgu2.jpg

Special Purpose Funds are entirely in the hands of the President, who decides when they’re released and to whom -and this includes the pork barrel funds of members of Congress (a surprisingly slender 3% of the whole) as well as the revenue allocations of Local Government Units. In a sense, then, aside from the fixed (because tied to government’s obligation to fund existing employees and offices) national budget, there is a parallel national budget, one bigger than the fixed budget and purely within the discretion of the chief executive.

This chart shows that of these funds, the biggest chunk is for “Unprogrammed” Funds.

spfbreakdown.jpg

These are, in a sense, promissory funds: if they come in, then they can be spent for certain purposes, still pretty much at the chief executive’s discretion. The book explains this in detail:

unprogrammed.jpg

These “wish ko lang” funds, in turn, have been growing, percentage-wise:

unprogrammed2.jpg

The book provides a glimpse of the budgets and expenses of the major agencies of the government. By way of illustration, here is a set of charts featuring expenditure programs for the different branches of government, and including samples of two constitutional bodies we all adore, the Comelec and the Ombudsman:

op.jpg

ovp.jpg

congress.jpg

judiciary.jpg

comelec.jpg

ombudsman.jpg

Then there’s a focus on some issues raised by the allocations for various departments and their flagship programs, for example:

deped.jpg

dnd.jpg

dnd2.jpg

dar.jpg

da2.jpg

As well as an introduction to lesser-known budgetary practices such as earmarking funds. One example the book focuses on is the Motor Vehicles’ User’s Charge, which the group says is the third-largest source of revenue for the government, with a tremendous amount collected in a few years:

mvuc1.jpg

The charge, levied on vehicle owners, is meant to be specifically used -or earmarked- for a specific fund, with four main programs funded by it:

mvuc2.jpg

Subject to two departments:

mvuc3.jpg

Here’s the introduction to the fund in the book:

dpwh.jpg

dpwh2.jpg

The organization hopes that their book will enable congressmen to deliberate on the budget more wisely and efficiently, and that it will inform the public so that it can keep tabs on budget preparation and execution.

250 comments

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  1. leytenian

    leasing continue,
    when clinton cut the budget for security during his term, it didn’t try to pursue and continue leasing in our country. the US somewhat just mutually agreed at that time due to its own policy to cut budgets. many agreed that US bases was just an expense.

    when clinton did that, it opened opportunities for terrorist to continue its plan. it weakens the US global security. 911 happened just as Bush came to office. Perfect timing for the blame. the expansion of US bases and cleaning up terrorist cell were Bush number one priority. ( airport security, ID, driver’s license, immigration policy, hired more CIA and FBI agent. ) He also destroy the number one supporter of terrorist, Saddam Hussein by freezing his bank account and many others. Clinton’s surplus became a deficit and the war continue..

    with the housing market crisis, the Office of thrift supervision has failed to regulate regularly .. countrywide’s expansion or branching into Indymac.. take note in 1983 and 1987.. the money making machine continue, verybody made money until clinton to bush term then the bubble burst finally. another perfect blame to the BUSH admin.
    http://www.suntimes.com/news/nation/1052704,CST-NWS-indymac12.article

  2. supremo

    Why didn’t the Japanese Army skip Singapore and Malaya?
    cvj said- the Brits were there

    Why was Indo China invaded by Japan?
    cvj said- It was a French colony

    cvj said – without the American military presence here (Philippines), the Japanese could have decided to sail on directly to the oil rich islands without first having to make a stopover here. In terms of timetable and resources, that would have made more sense as it would have allowed them to reach Australia faster.

    Just to complete the picture.

    Why did Japan invade Thailand? Who was there?
    Why did Japan invade China? Who was there? Brits? Americans? Bono?
    Why do they want Australia? Because the Brits were there too?

  3. UP n student

    cvj: You do know, right, that a dollar is not a dollar is not a dollar? OFW remittances (invaluable to Pinas economy) are NOT tax-collections. My understanding is the OFW remittances do not go into Pinas treasury so they can’t be used to fund programs for urban landless/rural poor.

    I’ve remained on message — the thread is about the budget — and have even tilted my comments towards your cause — land/seed/fertilizer for urban landless/rural poor.

    And do you really want want me (or Bencard, supremo, mlq3, Abe or Randy David) to make recommendations exclusively based on what Americans think?

  4. cvj

    Supremo, the Japanese were mainly interested in engaging its rival Colonial Powers i.e. the USA, Great Britain and France. Have you compared the casualties suffered by Thailand with that suffered by the Philippines? The US presence is what made the fighting over here fiercer than it was in Thailand, whose home-grown leadership dealt with Japan on the basis of its own national interests, i.e. the Thai people’s interest, and not that of the Americans, French or British.

    UPn, OFW remittances, export earnings and any US Bases rentals go to our Central Bank’s Dollar reserves where it is used to fund our imports and pay our dollar denominated debts. In that sense, dollars coming from US Bases rentals is similar to dollars coming from OFW remittances and/or Exports [aka a dollar is a dollar].

    As i said, don’t be blinded too much by money since the United States military is a magnet for its growing list of enemies. We’re better off sourcing funds from economic activities that do not open us up to national security risks.

  5. UP n student

    OFW’s are exempt from income taxes. OFW remittances are not tax payments. OFW remittances are not moneys owed by OFW’s to the Philippine treasury.

    As a Davao journalist just wrote recently:

    Over the past three years, overseas Filipino workers have saved the Philippine economy with over six billion dollars in annual remittances. Studies show that many Filipino migrants use their remittances to support their families’ basic economic needs such as home building, children’s education and the purchase of appliances.

    However, there are those who chose to flaunt their wealth in expensive non-productive pursuits such as the purchase or building of unusually large houses, holding frequent parties and mounting extravagant weddings.

    Imagine what migrants’ repatriated earnings could do to help the country overcome poverty if OFWs were given proper guidance on how to use their remittances constructively and productively?

    An OFW remittance dollar is not a dollar that GMA can spend to buy a router.

  6. leytenian

    Up N Student,
    An OFW remittance dollar is not a dollar that GMA can spend to buy a router.
    true, but the creation of employment due to spending is the benefits. again OFW contributes at 10% of GDP.

    that’s why my comment on
    http://www.quezon.ph/1903/the-annual-budget-brouhaha/#comment-865131
    a direct help… at least may makita ang mga OFW aside from lavish , negative investment of OFW money by their families.

    also dept of education must allow extra hours ( curriculum) to educate children in terms of basic finance and savings.

  7. UP n student

    leytenean: I hope you are not getting confused by cvj’s obfuscation or rhetoric. Someone better step in and give cvj an education on a chart of accounts and that even if the dollars are with PNB Ayala Avenue branch, a dollar (an OFW-remittance-dollar from Clara Guzman/Abu Dhabi for Procopio Guzman of Project 2) is not a dollar (a tax-payment from Procter/Gamble) is not a dollar (donation-dollar from Abe Margallo to UST scholarship fund).

    They really are all over the place, people very anxious to spend other people’s money. An OFW remittance dollar belongs to the OFW and/or the person he/she wants to get the money. Just as the remittance dollar does not belong to the government, the remittance dollar also does not belong to folks who want access to the OFW’s dollar to use it “..for the greater good“.

  8. Bencard

    leytenean, i see you are sailing on treacherous waters with no navigational gears. it’s true the post cold war defense spending cut-back happened under cllinton’s watch. but it’s a bipartisan, if not national, policy except for some far right extremists who would have no part of it. it would have been political suicide and disingenuous to have continued both the far-flung and the domestic military installations that were cold-war oriented and which were rendered unnecessary with the defeat of world communism. the clinton’s presidency may have reduced the military budget but never compromised national security and military preparedness in the process.

    nobody could have anticipated 9/11. while there may have been some intelligence about attack inside the u.s., the method employed was so unheard of that no power on earth could have prevented it, or act on it before the fact. when uss cole was attacked, clinton could not have deployed u.s. military might to go after bin laden and his al quaeda without strong opposition, if not political lynching, from the american people. the best that he could do was to fire off cruise missiles against known enemy lairs, thereby avoiding american lives being put in harm’s way.

    9/11 made the pendulum swing the other way. and that’s why bush was able to go after the taliban in afghanistan and sadam hussein in iraq. bush could not have done it if the u.s. military was not in good shape when he took over, as you seem to suggest. blaming clinton for the failures of bush is a clueless pretense and an ignorant misapprehension of contemporary events.

  9. KG

    Thailand, whose home-grown leadership dealt with Japan on the basis of its own national interests, i.e. the Thai people’s interest, and not that of the Americans, French or British.

    http://countrystudies.us/thailand/21.htm

    Thailand responded pragmatically to the military and political pressures of World War II. When sporadic fighting broke out between Thai and French forces along Thailand’s eastern frontier in late 1940 and early 1941, Japan used its influence with the Vichy regime in France to obtain concessions for Thailand. As a result, France agreed in March 1941 to cede 54,000 square kilometers of Laotian territory west of the Mekong and most of the Cambodian province of Battambang to Thailand. The recovery of this lost territory and the regime’s apparent victory over a European colonial power greatly enhanced Phibun’s reputation.

    Then, on December 8, 1941, after several hours of fighting between Thai and Japanese troops at Chumphon, Thailand had to accede to Japanese demands for access through the country for Japanese forces invading Burma and Malaya. Phibun assured the country that the Japanese action was prearranged with a sympathetic Thai government. Later in the month Phibun signed a mutual defense pact with Japan. Pridi resigned from the cabinet in protest but subsequently accepted the nonpolitical position of regent for the absent Ananda Mahidol.

    Under pressure from Japan, the Phibun regime declared war on Britain and the United States in January 1942, but the Thai ambassador in Washington, Seni Pramoj, refused to deliver the declaration to the United States government. Accordingly, the United States refrained from declaring war on Thailand. With American assistance Seni, a conservative aristocrat whose antiJapanese credentials were well established, organized the Free Thai Movement, recruiting Thai students in the United States to work with the United States Office of Strategic Services (OSS). The OSS trained Thai personnel for underground activities, and units were readied to infiltrate Thailand. From the office of the regent in Thailand, Pridi ran a clandestine movement that by the end of the war had with Allied aid armed more than 50,000 Thai to resist the Japanese.

    Thailand was rewarded for Phibun’s close cooperation with Japan during the early years of war with the return of further territory that had once been under Bangkok’s control, including portions of the Shan states in Burma and the four northernmost Malay states. Japan meanwhile had stationed 150,000 troops on Thai soil and built the infamous “death railway” through Thailand using Allied prisoners of war.

    As the war dragged on, however, the Japanese presence grew more irksome. Trade came to a halt, and Japanese military personnel requisitioning supplies increasingly dealt with Thailand as a conquered territory rather than as an ally. Allied bombing raids damaged Bangkok and other targets and caused several thousand casualties. Public opinion and, even more important, the sympathies of the civilian political elite, moved perceptibly against the Phibun regime and the military. In June 1944, Phibun was forced from office and replaced by the first predominantly civilian government since the 1932 coup.

  10. KG

    Guys,you can always correct me if I am wrong.

    external debt= 62 Billion
    gir= 36.7 billion
    remittances 14.1 billion

    ilan taon na above 60 billion ang utang natin????
    the bsp intervenes in our exchange rate in a daily basis either to keep it high or keep it low(the peso) and that affects the reserves too.
    the reserves are reserves should only be used for emergencies kaya di tayo kumuha dyan ng pambayad natin sa utang.(inuutang ulit,kung kulang revenue)
    kung walang blackmarket at courier services at ibang paraan ng padala mas mataas pa ang reserves natin.

    pero yung 14.1 billion ginagastos din in pesos,kaunti lang ang naiipon.
    pano yung mga 500 dollars or less ang kinikita buwanan makakaipon pa ba yan, buti nga ngayon madami nang managers,doctors,engineers,scientists.they would rather manage the money on their own and let the money they send be spent. Tama ba?

    some spending are investments to like buying condos,. some dependents are enterprising enough to be successful in their smes.

    will anyone fill in the blanks? CVJ,do the honors.or leytenian , give it a shot just don’t introduce words that I can not understand. keep it simple.

  11. leytenian

    bencard,
    thanks… the discussion is better as someone could be nicer to fill in the gap. did i blame clinton for bush failures? policies in the past can make a contributory factors. Bush failures will also contribute to the next…
    keeping the discussion open is better.

  12. leytenian

    Hi KG and Up N,

    here’s link to The Impact of International Labor Migration and OFW Remittances on Poverty in the Philippines: Focus on reading..Macro Level
    3.1 Impact of Migration and Remittances on Development Macro Level ( GDP)
    http://images.gmanews.tv/html/research/2007/12/impact_international_labor.pdf

    The Negative Effects of OFW :
    “These economists implied that higher remittances are in fact not that beneficial for a developing country as this could actually lead to corruption and poor domestic governance, which in turn hampers economic growth.”
    http://www.bworldonline.com/Research/populareconomics.php?id=0073

    this is the basis of why i am always supportive of direct donation. I am almost convince that this can at least minimize corruption.

    Manny Villar is smart enough to be in real estate business. he understands the demand but his strategy is not good for OFW because real estate ownership is not considered to be a positive investment. It may grow in value but slow.

    More to follow.

  13. cvj

    UPn (at 4:28 am), given annual OFW remittances of 14.1 billion (as per Karl’s comment at 6:51am), and assuming all of them are spent locally on consumer goods and services that are covered by E-VAT, then that means 12% or 1.7 Billion US Dollars of that 14.1 billion goes to E-VAT. That’s why we can say that OFW’s also contribute to the government’s budget.

  14. KG

    the americans got the japanese’s goat when their interests in china were hampered,they added more fuel to the fire by slapping an oil embargo to Japan. even before WW2 China at USSR ang kalaban ng Japan; sa tingin mo pag under pa tayo ng spain di tayo masasagasaan,dahil sa ties ng spain sa germany?

    ………………………………………………………………………

    Indonesia ,an oil rich country was not touched by Japan because germany did not allow it.oTher than that reason they could have went there after annihilating us.

    some supporting documents….that may prove me right, or even wrong..

    http://en.wikipedia.org/wiki/World_War_II

    In mid-1937, following the Marco Polo Bridge Incident, Japan began a full invasion of China. The Soviets quickly lent support to China, effectively ending China’s prior cooperation with Germany. Starting at Shanghai, the Japanese pushed Chinese forces back, capturing the capital Nanjing in December. In June of 1938 Chinese forces stalled the Japanese advance by flooding the Yellow River; though this bought time to prepare their defenses at Wuhan, the city was still taken by October.[26] During this time, Japanese and Soviet forces engaged in a minor skirmish at Lake Khasan; in May of 1939, they became involved in a more serious border war.[27]

    ………………………………………………………………………..

    Japan, hoping to utilize Germany’s control over the Netherlands, made several demands, including a steady supply of oil, from the Dutch East Indies; these talks, however, broke down in June.[74] In July, Japan seized military control of southern Indochina since it would not only put them in a better position to coerce the Dutch East Indies into yielding, but it would also be a blow against China; should war be necessary, it also improved their strategic position against the Americans and British.[75] The United States, United Kingdom and other western governments responded to Japan’s incursion by freezing all Japanese assets[76] and the United States, which supplied 80% of Japan’s oil, further placed an oil embargo against Japan.[77] With the unexpected embargo, Japan was essentially forced to choose between withdrawing from their aggression in Asia, or seizing the oil they needed directly; the Japanese military did not consider the former an option, and many of them considered the oil embargo as an unspoken declaration of war.

  15. KG

    bakit ba napunta sa gyera tong usapan

    see everything is interconnected,everything especially politics.

    on taxes

    why not the congressmen call the university of asia and pacific and dof
    to let them prove each other wrong sa mga tax collection.

    on erc control over napocor…..

    wala yatang control erc

    bumababa dollar kumita napocor,what can the erc do, beg napocor to reimburse us with its windfall?

    what can congress do?

  16. leytenian

    UP N..
    I may be wrong with increasing employment due to spending of OFW families. But employment should be the result with good governance and transparency. I was leaning towards the positive side on macro level but ignore the consequence of income inequality…
    The study show that a lot of our poor has no family or relative going overseas. This family are left to suffer and yet they are our majority.

    KG, CVJ and I were discussing small business opportunities… an active role by the government. I can’t find which blog..
    the small business education should help increase employment , at least employing the remaining poor that cannot find opportunities overseas..

  17. cvj

    Leytenian (at 8:39 am),

    I think you were referring to this:

    http://www.quezon.ph/1828/squeezing-the-turnip/

  18. leytenian

    oh wow cvj.. thank you very much.. grabeh ka… your memory is indeed elephantine… thanks again.

  19. UP n student

    cvj: YES…. it is the tax that the goverment collects [when the OFW remittances are spent] that Pinas gets to spend. [BSP estimates that for year 2008, the OFW remittances (via banks and other alternate channels) will be $16.45 billion, up 10 percent from 2007.]

    ——–
    KG: The Japanese also invaded and occupied Indonesia. With Tokyo was primarily interested in Indonesia’s oil, so Sukarno (who the dutch had exiled, first to island of Flores, then to Sumatra) returned to Jakarta. Sukarno and Hatta collaborated with the Japanese as well as continuing to work for Indonesia’s independence from the Dutch. On Aug. 17, 1945, two days after the surrender of Japan, Sukarno proclaimed Indonesian independence.

  20. UP n student

    Sukarno was not an “accidental collaborator”. The Japanese even before the war knew of Sukarno’s appeal among the Indonesians with his (Sukarno’s) efforts for Indonesia independence. After invading Indonesia, the Japanese brought Sukarno back to Jakarta for Sukarno to organize and pacify the Indonesians. Sukarno was such a great collaborator that on November 10, 1943 Sukarno was decorated by the Emperor of Japan in Tokyo. [The award was for Sukarno helping the Japanese in obtaining its aviation fuel (see KG’s post) and for romusha — labor conscripts, forced labor. in Java, between four and 10 million romusha were forced to work by the Japanese military. About 270,000 of these Javanese laborers were sent to other Japanese-held areas in South East Asia. Only 52,000 were repatriated to Java, meaning that there was a death rate of 80%.

    In 1945, Sukarno proclaimed Indonesian independence. Many years later, the Indonesian People’s Consultative Assembly proclaimed Sukarno President for Life. This “for-life” term ended when Sukarno was overthrown. On March 11, 1966, Suharto — himself also a Japanese collaborator –assumed power from Sukarno. [Suharto is “credited” with the purge that kills up to 1 million communists, trade unionists and other leftists 1966-to-1971.]

  21. KG

    UP n,
    Thanks!

  22. hvrds

    The BSP was only capitalized with Php 10B. Where did the BSP get the pesos to buy the $37B in forex reserves?????????

  23. hvrds

    “UPn, OFW remittances, export earnings and any US Bases rentals go to our Central Bank’s Dollar reserves where it is used to fund our imports and pay our dollar denominated debts. In that sense, dollars coming from US Bases rentals is similar to dollars coming from OFW remittances and/or Exports [aka a dollar is a dollar].” pundit blogger

    There are three levels of forex reserves in the Philippines.
    1. In private hands to include state owned banks 2. BSP 3. currency swap agreements of the BSP with counterparties.

    Forex ownership in the Philippines is almost compeltely liberalized.

    Today – the BSP does not have to supply dollars to fund imports. It also does not have to supply dollars to pay for loans or interest. Provided the private reserves are ample. Only in case of a forex crisis will the BSP intervene in any big way to support the markets.

    The Treasury and the BSP are separate. The Treasury is responsible for paying the loans. Not the BSP.

  24. cvj

    hvrds, thanks for the correction! In that case, just delete “Central Bank’s” from the quoted paragraph.

  25. Ruffy Biazon

    I have been trying to post replies to the comments for the past three days using my home internet account, but apparently, the system is identifying my posts as spam and therefore, is blocking my messages.

    I’m using my office internet connection now. I beg the indulgence of those who have been expecting a reply from me.

  26. Ruffy B

    I have been trying to post replies to the comments for the past three days using my home internet account, but the system is identifying my posts as spam and therefore, is blocking my messages.

    I’m using my office internet connection now, and I’m using a diffferent email address. I beg the indulgence of those who have been expecting a reply from me.

    Ruffy Biazon

  27. Ruffy Biazon

    Nash said:

    “Dear Congressman Biazon,

    Why do congressmen need drivers? The Mayor of London who presides over a budget of £Billions takes public transport, so do the generally cabinet of higher government. Former Cabinet Secretary Blunkett had a driver, but then again he is blind.

    In any case, P7000 a month seems very low for a driver.”

    Why do we need drivers? More productivity, of course. You may not agree, but let me give you the real score…

    A congressman’s job is not just limited to attending sessions which many people think so. There are committee hearings that are held outside Batasan (such as bicameral meetings with the Senate), meetings with different government agencies located in various locations around metro manila, speaking engagements, etc. All in one day.

    A congressman driving himself would have to deal with finding a parking space at his destination, which is difficult nowadays. The time consumed for such activities is time taken off from time that could be productive. While driving, the congressman has to concentrate on piloting his vehicle, but if he has a driver, he can use the time riding as a passenger to read materials pertaining to his meeting.

    I drove myself before, but I felt that the time wasted with me at the wheel and looking for a parking space was time that could be made productive if I had a driver. Anyway, I had a budget for that. Yes, 7,000 is a bit low for a driver. But that is what is prescribed in the salary grad scale. It is not my decision to give him that salary. It is prescribed.

    BUt even with a driver, when my schedule becomes so tight and is aggravated by the traffic, I get off my vehicle to ride public transport, particularly the MRT. There was one time that I was on the way from my district, Muntinlupa City, to a television interview in Quezon City and I got delayed by traffic on South Superhighway and Edsa. I got off in Makati and rode the MRT but was still late. So I did half of the interview via phone patch while I was on the MRT and did the other half in the studio when I got there.

    There are many members of congress who are not in the image that’s usually in the minds of people. Times have changed. There are congresspersons who are down to earth, drive themselves to work, don’t use SUVs, don’t have bodyguards, etc.

    All we need to do is take time to get to know them personally rather than confine ourselves to stereotypes.

  28. mab

    the blogthread is all about the annual budget and its impact to our poor and poorest countrymen. Well the discussions went to smc-kppi, then to WW II, and nowhere. I got lost too where the discussions are going.

    Its akin to GMAs use of her magic wand and empty rhetorics to mesmerize and deceive the intellectuals, middle class and even the business sectors for more than seven years so that they wont know where our country’s going.

    MLQ has showed to us the past year’s budget for the entire country’s bureaucracy for us to analyze it. The question now is with those annual budgets, did our countrymen (particularly the poor and poorest) benefited? My answer is negative. The source of our annual budget came from the taxes (direct and indirect) from our pockets and sweats. It all went to her households. Her seven years mis-rule and incompetence accomplished not a thing but uncontrolled inflation (stagflation), poverty never seen before in our country, rice shortage, disasters everywhere, anomalies, etc.

    Another SONA is forthcoming and she will again lay down her plans for our country on her remaining term which will be included in the annual budget. We should be vigilant of the 2009 and 2010 annual budget the appropriations for those budgets might be used unwisely to support her annointed one in the 2010 presidential elections. Just like the fertilizer scam, our ramblings in election rigging will be too late to alter the result and they can simply ignore and shut the mouth of others (like JDV) with trade-offs and money.

  29. Ruffy Biazon

    Bert said:

    “Congressman Biazon, my deep-throat source in the House of Representative whispered to me that there was an original agenda by the promoter of the junket trip to enjoy the Paquiao fight while there working in the USofA. Any idea about that, Congressman? Btw, I’m a fan of your father, the good and proper senator.”

    I’m not aware of such a plan. Neither was I part of any plan of watching the Pacquiao fight. I was part of the Committee on Veterans Affairs plan which rendezvoused with GMA in Washington DC specifically for the discussion on the veterans bill pending in the US COngress.

  30. PSI

    Representative Biazon,

    While I’m not a particular fan of the administration, I agree with its decision not to lift the EVAT on fuel and food. While indeed the high costs brought hard times, these too will pass.

    I believe that the more we need EVAT collections to provide opportunties to the poor and subsidize the poorest. RP severely needs the infrastructure projects, which in the medium term will generate employment (pro-poor), e.g. irrigation systems, post-harvest facilities, farm-to-market roads, port development, etc.

    I hope Congress will not succumb to the populist calls. Lifting EVAT will win elections but RP will lose direction and confidence.

    Go glocal: think global, but act local.

  31. hvrds

    Out of an almost Php 1.5 trillion budget (GAA & AAL) the projected allotments for capital outlay is Php 150 billion. Deduct the overpice for the vested few of 30%-40% The country will spend around Php 100 B out of Php 1.5 Trillion plus for capital outlay.

    We are not counting the inflationary efects on that nominal cost.

    To get out of the rut the country is in it will have to spend close to 30-40% of that for the foreseavble future to develop human capital (health and education) and physical infrastucture. Public capital stock

  32. KG

    thanks for the explanation on Forex reserves.

    about that 37 B, BSP has a table to show the breakdown.

    http://www.bsp.gov.ph/publications/tables/2008_07/news-07072008a1.htm

  33. rego

    Congressman Biazon,

    I really like what you are doing. Do you have a plan to run for senator in 20 10?. I will definitely vote for you.

    BTW can you give us some updates on whta you have been doing in the congress ? Any bill being work on> What are your advocacies? etc etc..

  34. UP n student

    to congressman biazon: it makes sense for …. All [the people] need to do is take time to get to know [the members of Congress] personally rather than [remain with] stereotype [thinking]. but it is quite inefficient. [ Just think of the number of visitors to your office. 😉 twenty-percent of them hoping for coffee or a cup of water. ]

    I believe the various stereotype caricatures that the public has against members of Congress is a penalty you’ll have to pay (just like stereotypes against bishops or movie stars) and “what-to-do?” may be answered by this (more efficient) periodically repeated advice from someone’s “my favorite grandmother”, periodically repeated —

    Kulang ang oras mo para labanan lahat ng mga kuwento-kutsero tungkol sa iyo; maraming chismoso, at mas marami silang oras mag-imbento ng kuwento tungkol sa iyo. Concentrate more on your work and let your accomplishments prove them wrong.

  35. mab

    Most likely a trillion pesos budget for 2009 and 2010 which will be coupled to the visions of GMA in her forthcoming SONA. I hope she will have new goals to announce rather than the last year’s super regions which didnt fly. Probably, floating again her dream for our country of becoming an NIC 20 years from now.

    Comparing our country’s accomplishment with Malaysia which has vision for NIC by 2020, it looks like we were left behind by decades. Malaysia has devoted its resources to NIC goal by 2020 as best exemplified by research-oriented type of their higher education with support from UK’s reknowned universities to pursue science and technology (nanotechnology). Their Ministry of Science, Technology and Innovation are miles ahead of our DOST. Time will come when Malaysians will think of us as good for lowly jobs incapable of technical work. In fact, they are now slowly repatriating our countrymen allegedly illegally staying in Sabah as they consider them not only as burden to their economy but also as no use to them. Even if you are an illegal alien if you have the necessary knowledge and skills which they need, they will certainly retain you.

    Thanks for HVRDS’s prescription-

    “To get out of the rut the country is in it will have to spend close to 30-40% of that for the foreseable future to develop human capital (health and education) and physical infrastucture.”

    Has GMA and our legislators wonder why the bulk of our OFWs are working as domestic helpers, caregivers, janitors and other lowly jobs even if they are graduate of 4 year course? Shall we allow these loss of dignity and respect of our countrymen in the coming years?

    I hope Congressman Biazon will help us rebuild our country from this rut.

  36. UP n student

    PSI: There is no EVAT on rice, meat, vegetables.

    From …Atty. Nenette G. Epon of the Bureau of Internal Revenue (BIR), Revenue Region 16’s Legal Division, to answer queries from a consumer who complained that a certain big store in Cagayan de Oro City had based the computation of the 12% EVAT on the gross of the groceries she bought.
    . . . .
    “Remember, the EVAT is only imposed on goods which had undergone some kind of processing but agricultural and marine products in their original state, such as vegetables, meat, fish, fruits, eggs and rice are not included,” Epon explained.

    http://www.pia.gov.ph/?m=12&r=R10&y=08&mo=07&fi=p060216.htm&no=12

  37. UP n student

    Other items not subject to the EVAT, as specified in Rep. Act. 9337, are the lease of residential houses not exceeding Php10,000 monthly, educational services rendered by both public and private educational institutions and books, newspapers and magazines.

    Also EVAT-exempt are sales of establishments and by persons earning not more than Php1.5 million annually, which could include sari-sari stores, carenderias and street vendors.

  38. UP n student

    … but leaving tips… that’s okay. 😛

  39. The Ca t

    Today – the BSP does not have to supply dollars to fund imports. It also does not have to supply dollars to pay for loans or interest. Provided the private reserves are ample. Only in case of a forex crisis will the BSP intervene in any big way to support the markets.

    Really?

    When a company imports, it uses the letter of credit which pays the foreign supplier with the curreny of exporting country or in dollar.

    Even before the goods arrived, the required marginal deposit in terms of foreign currecy is already earmarked from the dollar reserves of the country.

    The marginal deposit is set to control the outflow of dollars. There are goods which marginal deposit is only half of the total letter of credit; others are 100 per cent or 110 per cent of the total amount.

    When the goods arrived, the foreign supplier is paid thru the bank. It is a bank to bank transaction. Foreign suppliers present the invoice and bill of lading to the corresponding bank in their country; bank pays. The corresponding bank demands payment from the local bank where the LC is
    opened using its foreign currency reserves.

    During economic crisis, when dollars are not available and BSP controls outflow, it is difficult to import.

  40. The Ca t

    OFW remittances are not tax payments. OFW remittances are not moneys owed by OFW’s to the Philippine treasury.

    Right you are.

    The other items mentioned should have a caption , sources of dollars and other foreign currency which add to our reserves.

    Then we’ll talk about balance of payments which is the difference between the dollar receipts and the dollar payments involving importation, payment of loans and interests, repatriation of MNCs profits to their countries.

    Whatever is the difference goes to our dollar reserves.

    What is our dollar reserves? It is the amount of dollars that we have to maintain expressed in terms of percentage of our GDP.
    Average is 20 per cent of the GDP.

    Example: beginning dollar reserves 100
    Dollar receipts thru:
    OFW remittances
    Exports
    Rentals
    Etc. 1000

    Less: Balance of
    payments
    Imports
    loan payments
    etc. 900 100

    Total 200

    But if the payments exceed the receipts, there will be deficit which will reduce the dollar reserves. If the amount is less than the required 20 per cent, the government has to buy dollars.

    SO you can see how the OFW remittances helped the country? not because it can be spent like it would like earnings from taxes.

    Ow so how do the government get the dollars when they are owned by the
    OFWs.

    When the OFWS receive the remittances, either they are already converted to pesos or they exhange them for pesos.

    The banking system gets the dollar; the OFWs get the pesos to spend.
    Dollar accounts in the banks are accounted in the dollar receipts.

  41. The Ca t

    I may be wrong with increasing employment due to spending of OFW families. But employment should be the result with good governance and transparency. I was leaning towards the positive side on macro level but ignore the consequence of income inequality…

    Ano raw?

    The OFWs spending does not create employment directly. The spending may boost production of some goods because of the demand created and the need to supply.

    If the OFW decides to go into business and hire employees, then employment is generated. But the question, how big is the business that it would create employment. Usually the OFWs embarked on cottage industries which required families as employees which may only number around one or more but not significant to be called employment generation.

    They do not get even paid like regular employees. Thus their incomes are not coounted for in the GDP. GDP becomes understated.

  42. The Ca t

    A congressman driving himself would have to deal with finding a parking space at his destination, which is difficult nowadays. The time consumed for such activities is time taken off from time that could be productive. While driving, the congressman has to concentrate on piloting his vehicle, but if he has a driver, he can use the time riding as a passenger to read materials pertaining to his meeting.

    This is correct. When I was in the Philippines, when parking buildings are still few, I had also a driver to attend meetings in Makati and other Metromanila areas where parking was a nightmare. The driver lets me get off close to the building where I was going, he leaves me to park the car somewhere and waits for my beep or call.

    People do not realize that we are paying the solons or the managers in private firms not for their skills to type,(thus there is a need of staff, silly) to drive or to research. We are paying then to think and decide.

  43. hvrds

    When capital and current accounts are under a liberalized regime, private entities including banks are allowed to own their savings in dollars.

    Families of OFW’s and exporters do not have to exchange their dollars with the banks any more. They can maintain their own dollar accounts or if they wish they can exchange them for pesos and sell them to anyone they wish.

    That is what a liberalized current and capital account means. Private interests decide on what they want to do with their dollar or forex earnings.

    Banks are now allowed to keep dollars as part of their own stock. If they need dollars to make payments they buy dollars from the trading floor of the BAP… Banks with excess from their own reserves or their clients sell dollars on the floor of the BAP forex exchange.

    The BSP simply stands by and smoothens out the volatility in the markets to temper surges in the forex rates either way.

    It is amazing that at this day and age so many preconceptions about the forex markets still persist in the country.

  44. cvj

    hvrds, thanks for clearing up the preconceptions. my dad worked in the forex department of the Central Bank from the late 40’s up to the early 80’s so it didn’t register to me that today’s BSP is no longer my Dad’s CB.

  45. The Ca t

    Families of OFW’s and exporters do not have to exchange their dollars with the banks any more. They can maintain their own dollar accounts or if they wish they can exchange them for pesos and sell them to anyone they wish.

    True, that has been going on ever since. During the time of Marcos, if you withdraw fron your dollar accounts, you will be penalized.

    When I say the OFWs and their families exchange their dollars, they do, because they have to spend it pesos anyway.

    Whether the money is exchanged in the banks or in the other money exchangers, it is still accounted for in the banking system.

    Even the remittances of OFWs who send door to door are fully accounted for in the banking system thru the remittance companies which are often owned by banks.

  46. The Ca t

    Banks are now allowed to keep dollars as part of their own stock.

    But of course. There are so many transactions that they need to have their own stock of dollars. travellers checque, dollar withdrawals, bank to bank remittances in dollars.

    It is not like depositing their dollars with the BSP and withdrawing them when needed.

    Banks are only required to keep a minimum reserve requirement for the total
    transactions conducted everyday which they deposit with the BSP. The provincial banks which cannot do so are required to keep them in their vault or with other banks.

    When audited the banks are fined a certain percentage of the amount that they should have maintained as a way of protecting the bank clients that the banks are not overwithdrawn.

    The account in the BSP of marginal deposits are not BSP’s because you do not import thru BSP but with the commercial banks.

    This is some kind of monitoring of the dollar movements. Otherwise, those which are not reported and are remitted abroad are what you call cases of money laundering.

  47. The Ca t

    Banks are now allowed to keep dollars as part of their own stock.

    But of course. There are so many transactions that they need to have their own stock of dollars. travellers checque, dollar withdrawals, bank to bank remittances in dollars.

    It is not like depositing their dollars with the BSP and withdrawing them when needed.

    Banks are only required to keep a minimum reserve requirement for the total
    transactions conducted everyday which they deposit with the BSP. The provincial banks which cannot do so are required to keep them in their vault or with other banks.

    When audited the banks are fined a certain percentage of the amount that they should have maintained as a way of protecting the bank clients that the banks are not overwithdrawn.

    The account in the BSP of marginal deposits are not BSP’s because you do not import thru BSP but with the commercial banks.

    This is some kind of monitoring of the dollar movements. Otherwise, those which are not reported and are remitted abroad are what you call cases of money laundering.

  48. DevilsAdvc8

    We are closer to becoming a failed state than a successful one. Our neighbors including Vietnam are better placed to becoming successful states.

    don’t i know it.

    it’s there, staring us in the face!

    btw, me tumawag na ba ng exorcist?
    bad trip kasi ako sa mga multo.

  49. nash

    dati na pong successful and vietnam, naantala lang ng sandali ng mga french and americans.

  50. nash

    “All we need to do is take time to get to know them personally rather than confine ourselves to stereotypes.”

    I don’t know whether to laugh or to cry at this statement. The logic and relevance of this I cannot follow with respect to good governance.

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