Kapihan Sa Makati Chapter
by Pogs Gaspay, Ph.D.

We have some news to share with you about the Makati Chapter's activities. We launched a featured speaker series with Brod Vic Valdepenas (President of Union Bank) giving his assessment of the state of the Philippine economy from the viewpoint of the banking sector.

We had more than the usual number of Brods attending, who listened intently at Vic's frank and very informative assessment. Some of the newer faces besides our usual Cafe Rizal crowd were Brods Raul Victorino, Vic Ulanday (Vice-mayor of Muntinlupa), Henry Chua (alias Robert Uy, he-he!), realtor Nick Zaratan, and Jerry Bongco (IT sales manager). The usual merry band of "Chairman" Engie de Gracia, Nonoy Bautista (Makati GP), Enching Rodriguez, attorney cum sex-slave Boyet Fernandez, and yours truly provided happy noises, to complement the more task-oriented and low-key participation of reliables such as Ross Fernando, Gene Puente, Carlo Gervasio, Yay Topacio, Boy Jaurigue, Jigs Reyes, Nilo Punzalan, and many others (my apologies for those brods whom my memory now fails).

Some of the major points made by Vic were that the prospects of recovery is still far ahead as banking and finance remain mired in a high NPL ratio. Almost a third of current bank loans (30%) are estimated by Vic to be unable to service their scheduled payments. Hence, the government has difficulty stimulating the economy as any injections of new liquidity gets gobbled up by repayments. Thus, new expenditures cannot be induced. Lenders are very wary of new lendings as they see no new investments worthwhile making. So business and investor confidence remain low despite government rhetoric.

The other piece of worrying info is Vic's estimate that the majority of foreign-exchanged dominated loans made by the banking sector will mature almost at the same time two years from now. What that implies is that the brunt of the forex pressure still has to be felt and continue being discounted in financial market pricing over the next two years. Some brods were very impatient to get Vic's advice on what the government should be doing, to which Vic demurred by pointing out that the government has very little leeway in this situation.

The most he could advise is to stay away from "big get-rich-quick scheme" and be content with "sari-sari store" type of activities (small but fast cash-flow). That of course did not please the crowd who vented their complaints either on the government or on the mukhang-pera banking sector to which Vic gamely bantered that banks are not only mukhang-pera but talagang perang-pera. Vic, of course, pointed out that not all business will be down as there continues to be opportunities such as for bankuptcy specialists (to which brods pointed to Boyet Fernandez, as fast becoming the attorney of choice for brods nearing the brink) who stand ready to gain from both sides of the bankruptcy transaction.

What Vic did not declare in such a semi-official talk was how forward financial planning of any kind becomes impossible not only due to the liquidity problem but also to the business regulatory and governance style of the Erap administration. With influence-peddling gone irrational and rules played footloose, daily attempts at intervening in business decisions are not helping business confidence any. It is also very dispiriting when corruption and scandals lace your daily affairs. As Vic pointed out to me earlier, most of the daily news are dominated not by business news but by political shenanigans and scandalous news. As to how long this state of affairs can survive nobody knows.

But as Engie who just returned from Taiwan can attest, travel for businessmen like him has already become a pain as they have to be re-routed and pay a higher fare with Lucio Tan's government-sanctioned war with Taiwanese airlines. It is a mark of this government that it is willing to sacrifice national interest for the sake of a crony's interest. Even its Tourism Department is crying foul over the sacrifice of tourism interest (Taiwanese visitors are second only in numbers to Japanese) to PAL's interest.

For November and December, we had Brod Rupert Somera of BIR discuss with us issues on inheritance taxation and problems of passing on property (legal and taxation complications). He is Asst. Director here at Makati (where about half of corporate taxes in the Philippines is collected.) He is a recognized expert on inheritance taxation, holding a CPA, MBA and a Ph.D. degree.

Ed’s Note: Dr. Gaspay is a faculty member and a Director of the Asian Institute of Management.