Sunday, December 11, 2011
Finance Dept. on airlines tax: Equal gain must offset revenue loss
The Department of Finance has no objections to repealing the common carrier’s tax (CCT) as long as Congress can come up with a counter measure to compensate for the revenue loss.
Government stands to lose P1.6 billion a year once the tax on airlines operating in the Philippines has been scrapped, according to Finance Department estimates.
The Aquino administration’s position on the CCT issue was relayed to House committee on ways and means chair Hermilando Mandanas and Senate committee on ways and means chair Ralph Recto.
“We subscribe to the position that any revenue loss measure enacted in Congress should at least be compensated by a corresponding revenue gain,” said Finance Secretary Cesar Purisima.
Legislators want to remove the 5.5 percent CCT and the 2.5 percent gross Philippine billings tax (GPBT) on international airlines.
Section 118 of the National Internal Revenue Code of 1997 allows government to impose the CCT — equivalent to 3 percent of airlines and shippers quarterly gross receipts — and the GPBT on their airlines flying to the Philippines.
A World Bank report in June called for the CCT’s repeal, in line with international practice that encourages growth in tourism.
Government’s position is consistent with the World Bank stand on the matter, Purisima noted.
“We acknowledge the role of tourism in generating investments, employment and reducing poverty in the country,” he said.
But when it comes to the GPBT, the Aquino administration maintains that it should not be dropped. There is no compelling reason to drop the GPBT, which is also implemented in other countries, said Purisima.
“We do not support its elimination…Freeing international airlines from income taxes is not in accordance with the basic principle of reciprocity which governs international taxation,” the Finance secretary noted.
Air France-KLM earlier said it plans to cancel its Amsterdam-Manila- Amsterdam route early next year because of the CCT.
The route is the only remaining direct flight serving Manila and Europe. — VS, GMA News
http://bit.ly/sBwjsv
Friday, December 09, 2011
Financial services for the poor
By: Gemma Rita R. Marin
Philippine Daily Inquirer
10:42 pm | Wednesday, December 7th, 2011
Philippine Daily Inquirer
10:42 pm | Wednesday, December 7th, 2011
It is interesting to be studying microfinance
in a classroom setting after 20 years of being involved in the business.
I was accepted to a three-week certificate program on Community-Based
Microfinance at the Coady International Institute in Antigonish, Nova
Scotia, which began last Sept. 26, 2011. We were 12 in the class coming
from nine countries. I introduced myself as working in a research and
advocacy organization, which has microfinance for one of the focus
themes of its rural development program. Others in the class included
the director of an NGO in West Nile, Uganda, a Nepalese working for a
refugee camp in Thailand, a Jesuit priest assisting a savings and credit
cooperative in Jharkhand, India, another Indian working for a
consulting company which provides organizational development and
technical services to institutions in Bihar, two development workers
from CARE-Bangladesh, another Bangladeshi working for the Bangladesh
Rural Advancement Committee (BRAC) but based in Afghanistan, an
Australian working for low-income groups in Tasmania, a senior manager
in a Canadian organization providing financial services to young
entrepreneurs, a volunteer program coordinator worker for a women’s
organization in Zimbabwe, and a regulator from the Department of
Cooperatives in St. Vincent and the Grenadines. Despite our experiences
in microfinance work, we all felt overwhelmed and enriched by the amount
of information and the deluge of experiences shared during the first
days of class.
The program at the Coady Institute promotes community-based microfinance approaches typified by member-owned institutions (MOIs). We learned about the village savings and loan associations (VSLA) approach promoted by CARE across the continent under its Access Africa Program. Twenty to thirty members, mostly women, come together to save weekly, and are allowed to borrow from the fund after three months of saving. At the end of the year, the savings and income accumulated by the group are distributed among its members in proportion to the number of shares each has contributed. Three factors account for the success of the VSLA: flexibility where different savings schemes are adopted by different members depending on their agreements; informality which makes it easy for anyone to join the group; and transparency where loans are taken in front of the whole group.
Another MOI we studied was the self-help groups (SHG), similar to VSLAs but operating in perpetuity. SHGs are “small groups with 10 to 20 members who have voluntarily organized themselves and are related by affinity for a specific purpose and whose members engage in savings, credit and social involvement as instruments of empowerment.” As saving continues, and financing and other requirements expand, the group finds the need to access additional capital and often acquires a legal status through the formation of a federation to be able to link up with formal financial institutions. This model has flourished especially in India where seven million SHGs composed of over 70 million women have been formed, and many of them have opened bank accounts. A total of $2 billion in savings is estimated to be rotating as loan capital and the groups have accessed a total of $6 billion in loans from mainstream formal banks to date.
Interestingly in the late 1990s, the government of India began to promote SHGs on a large scale and began offering revolving loan funds through state-owned banks. The self-help character of SHGs thus took a back seat, as groups started to organize themselves to access the loan funds from banks, with lower incentive and motivation for saving. (This resonates with the unsuccessful Samahang Nayon program of the Marcos government in the 1970s and the recurrent failures of the cooperative movement in the Philippines during earlier years due to government intervention.) But the SHG federations have managed to sustain the movement by providing value-adding services to member groups, with the encouragement of the non-government sector.
In one of our sessions, the class took a field trip to downtown Antigonish to visit the Bergengren Credit Union and learn about its operations. It was amazing to see how this credit union has grown in more than 70 years so that now it is run like a bank. While it cannot always compete with the more sophisticated products of a bank, it manages to stay in competition with the other savings and loan products by providing better customer relations and offering innovative products to the youth and students. As a member-owned institution, it continues to attract members by providing additional income in the form of patronage reward. It also shares its surplus with the community through contributions to hospitals, youth sports events, and partnerships with St. Francis Xavier University and the Coady International Institute.
Time and again in class, Anuj Jain and C.S. Reddy, our facilitators reminded us that there is no one ideal model for providing financial services to the poor. The key to the design and meaningful implementation of a microfinance program is to look at the people and situation of an area or country, to be mindful of the institution’s goals, and to ask the essential question, which is, “Whom are you serving? And why?” In the end, selecting the features that are appropriate for the target groups being served or one intends to serve is more important than the model itself. The partiality towards community-based or member-owned approaches is premised on the belief that the members find savings to be useful when they need small loans and know their situation well enough to make their own decisions and chart the directions of their institution as well as their own lives.
http://bit.ly/tACbPP
The program at the Coady Institute promotes community-based microfinance approaches typified by member-owned institutions (MOIs). We learned about the village savings and loan associations (VSLA) approach promoted by CARE across the continent under its Access Africa Program. Twenty to thirty members, mostly women, come together to save weekly, and are allowed to borrow from the fund after three months of saving. At the end of the year, the savings and income accumulated by the group are distributed among its members in proportion to the number of shares each has contributed. Three factors account for the success of the VSLA: flexibility where different savings schemes are adopted by different members depending on their agreements; informality which makes it easy for anyone to join the group; and transparency where loans are taken in front of the whole group.
Another MOI we studied was the self-help groups (SHG), similar to VSLAs but operating in perpetuity. SHGs are “small groups with 10 to 20 members who have voluntarily organized themselves and are related by affinity for a specific purpose and whose members engage in savings, credit and social involvement as instruments of empowerment.” As saving continues, and financing and other requirements expand, the group finds the need to access additional capital and often acquires a legal status through the formation of a federation to be able to link up with formal financial institutions. This model has flourished especially in India where seven million SHGs composed of over 70 million women have been formed, and many of them have opened bank accounts. A total of $2 billion in savings is estimated to be rotating as loan capital and the groups have accessed a total of $6 billion in loans from mainstream formal banks to date.
Interestingly in the late 1990s, the government of India began to promote SHGs on a large scale and began offering revolving loan funds through state-owned banks. The self-help character of SHGs thus took a back seat, as groups started to organize themselves to access the loan funds from banks, with lower incentive and motivation for saving. (This resonates with the unsuccessful Samahang Nayon program of the Marcos government in the 1970s and the recurrent failures of the cooperative movement in the Philippines during earlier years due to government intervention.) But the SHG federations have managed to sustain the movement by providing value-adding services to member groups, with the encouragement of the non-government sector.
In one of our sessions, the class took a field trip to downtown Antigonish to visit the Bergengren Credit Union and learn about its operations. It was amazing to see how this credit union has grown in more than 70 years so that now it is run like a bank. While it cannot always compete with the more sophisticated products of a bank, it manages to stay in competition with the other savings and loan products by providing better customer relations and offering innovative products to the youth and students. As a member-owned institution, it continues to attract members by providing additional income in the form of patronage reward. It also shares its surplus with the community through contributions to hospitals, youth sports events, and partnerships with St. Francis Xavier University and the Coady International Institute.
Time and again in class, Anuj Jain and C.S. Reddy, our facilitators reminded us that there is no one ideal model for providing financial services to the poor. The key to the design and meaningful implementation of a microfinance program is to look at the people and situation of an area or country, to be mindful of the institution’s goals, and to ask the essential question, which is, “Whom are you serving? And why?” In the end, selecting the features that are appropriate for the target groups being served or one intends to serve is more important than the model itself. The partiality towards community-based or member-owned approaches is premised on the belief that the members find savings to be useful when they need small loans and know their situation well enough to make their own decisions and chart the directions of their institution as well as their own lives.
http://bit.ly/tACbPP
Friday, December 02, 2011
Time to deliver
Editorial
Philippine Daily Inquirer
9:10 pm | Thursday, December 1st, 2011
Are Filipinos dreaming, or are they experiencing something that economic
statistics cannot capture? The latest survey conducted by the Social
Weather Stations found a growing number of Filipinos saying their lives
had improved during the previous 12 months. While still more people—32
percent of respondents—said their quality of life had worsened, 26
percent said it had improved, up from 22 percent three months earlier in
June. Looking ahead to the next 12 months, 39 percent expected a better
quality of life, higher by 3 percentage points from the 36 percent in
June, while the percentage of those who expected it to worsen remained
at 9. This made for a “very high” net optimism level of +30 percent,
higher than the +27 percent level in June and 24 percent in March,
according to SWS.
Businessmen apparently share this optimistic outlook. The Business Expectation Survey of the Bangko Sentral ng Pilipinas for the fourth quarter showed the business confidence index rising to 38.7 percent from 34.1 percent in the third quarter. A BSP official said the rise in the business confidence index could be traced to anticipation of higher consumer demand during the harvest and Christmas seasons, higher remittances from overseas Filipino workers and sound economic fundamentals.
Economic statistics, however, indicate that both the average Filipino and the businessman may have little reason to feel better about their lives, much less to expect an even better year ahead. The year has been marked by a progressive deceleration in the rate of growth, with growth in gross domestic product slowing down to 4.9 percent in the first quarter, 3.4 percent in the second quarter and 3.2 percent in the third quarter, way lower than the 3.8 to 4.8 percent GDP growth forecast for the quarter of the National Economic and Development Authority. Year on year, the GDP growth for the first nine months was recorded at a very disappointing 3.6 percent, less than half the 8 percent growth that the government was aiming for at the start of the year. To achieve the government’s much-reduced target of 4.5 percent GDP growth for the whole year, the economy would have to grow by 6.9 percent in the last quarter of the year, according to the National Statistical Coordination Board. Estimates by private economists and financial institutions, however, place the full-year GDP growth at between 3.5 percent and 4 percent.
Socioeconomic Planning Secretary Cayetano Paderanga said the “modest performance” of the economy was caused by typhoons which damaged crops, the global economic slowdown caused by worries over the huge debts of several European countries and the weakness of the US economy and the “contraction of the construction sector amid stricter project reviews for public construction projects.”
These are the same excuses heard from government officials, and true enough there is nothing government can do to change some of them. For instance, nobody expects the Philippines to do anything that would improve the financial condition of Greece or push the US economy to higher levels of growth. Neither is there an instant solution to the heavy dependence on electronics of our export sector, although diversification should be started soon. But certainly there is much government can do to speed up the implementation of its centerpiece public-private partnership program as well as its own infrastructure projects. Where once the government had to scale down its construction program for lack of funds, now that it has the money it is too slow in spending it. Of course, the government can never be too careful in safeguarding the people’s money and ensuring it is spent wisely, but fiscal prudence should not lead to economic paralysis. Now that the government has put its financial house in order, it should devote its full attention to fixing the economy.
Optimism such as the one being expressed by businessmen and ordinary people alike is good for the the country’s economic health. But it could burst easily. The slowdown in GDP growth has gone on for far too long and should be cause for alarm. It is time for the country’s economic managers to deliver on their promise to provide the stimulus that would push the economy to faster rates of growth.
http://bit.ly/ub9l5l
Businessmen apparently share this optimistic outlook. The Business Expectation Survey of the Bangko Sentral ng Pilipinas for the fourth quarter showed the business confidence index rising to 38.7 percent from 34.1 percent in the third quarter. A BSP official said the rise in the business confidence index could be traced to anticipation of higher consumer demand during the harvest and Christmas seasons, higher remittances from overseas Filipino workers and sound economic fundamentals.
Economic statistics, however, indicate that both the average Filipino and the businessman may have little reason to feel better about their lives, much less to expect an even better year ahead. The year has been marked by a progressive deceleration in the rate of growth, with growth in gross domestic product slowing down to 4.9 percent in the first quarter, 3.4 percent in the second quarter and 3.2 percent in the third quarter, way lower than the 3.8 to 4.8 percent GDP growth forecast for the quarter of the National Economic and Development Authority. Year on year, the GDP growth for the first nine months was recorded at a very disappointing 3.6 percent, less than half the 8 percent growth that the government was aiming for at the start of the year. To achieve the government’s much-reduced target of 4.5 percent GDP growth for the whole year, the economy would have to grow by 6.9 percent in the last quarter of the year, according to the National Statistical Coordination Board. Estimates by private economists and financial institutions, however, place the full-year GDP growth at between 3.5 percent and 4 percent.
Socioeconomic Planning Secretary Cayetano Paderanga said the “modest performance” of the economy was caused by typhoons which damaged crops, the global economic slowdown caused by worries over the huge debts of several European countries and the weakness of the US economy and the “contraction of the construction sector amid stricter project reviews for public construction projects.”
These are the same excuses heard from government officials, and true enough there is nothing government can do to change some of them. For instance, nobody expects the Philippines to do anything that would improve the financial condition of Greece or push the US economy to higher levels of growth. Neither is there an instant solution to the heavy dependence on electronics of our export sector, although diversification should be started soon. But certainly there is much government can do to speed up the implementation of its centerpiece public-private partnership program as well as its own infrastructure projects. Where once the government had to scale down its construction program for lack of funds, now that it has the money it is too slow in spending it. Of course, the government can never be too careful in safeguarding the people’s money and ensuring it is spent wisely, but fiscal prudence should not lead to economic paralysis. Now that the government has put its financial house in order, it should devote its full attention to fixing the economy.
Optimism such as the one being expressed by businessmen and ordinary people alike is good for the the country’s economic health. But it could burst easily. The slowdown in GDP growth has gone on for far too long and should be cause for alarm. It is time for the country’s economic managers to deliver on their promise to provide the stimulus that would push the economy to faster rates of growth.
http://bit.ly/ub9l5l
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