Be Careful What You Wish For

The President finally brought his Vice-President in from the cold. Duterte appointed Robredo Secretary of the Housing and Urban Development Coordinating Council (HUDCC). VPs Noli de Castro and Jojo Binay previously held this position. Leni is super pumped.

The HUDCC co-ordinates the various agencies involved with the National Shelter Program namely the National Housing Authority (NHA), the Home and Land Use Regulatory Board (HLURB), the Home Development Mutual Fund (Pag-Ibig), the Home Guarantee Corp. (HGC), the National Home Mortgage Finance Corp. (NHFMC), and the Social Housing Finance Corp. (SHFC).

Leni is now unique among her Cabinet peers in that she is both an elected and an appointed official. She is the only one with political as well as executive responsibilities. As VP she is accountable to 100 million Filipinos. She cannot be fired by the President. As a Cabinet Secretary she serves at the President’s discretion. This is where things can become complicated.

The President initially hesitated to appoint Leni to his team because this would have offended his friend Bongbong. He also was unsure whether he could trust her, whether she would not be a mole in his midst reporting back to the Liberal Party.

The move is a win-win for him. One, he adds an honest if relatively inexperienced person to his Cabinet (more on this later). Two, he mollifies her 14.4 million supporters most of whom also voted for him. Politics is addition.

Three, he brings into the fold someone who could otherwise be a rallying point for his detractors. As a Cabinet Secretary, Leni now has to follow the house rules, no speaking out of turn, no solo flights. She has, correctly, not accepted to officially head the Liberal Party to avoid any conflicts with her boss. She will not wear yellow to Cabinet meetings. She is now part of the failures as well as the successes of the Duterte Government.

Four, he holds her political future in his hands. If Leni succeeds in her task, Duterte will get the credit. If she fails, he can permanently banish her from his kingdom and lay a political curse on her and the Liberal Party she represents: She asked for a job, the President will say, he gave her a critical one and look what happened. Any other Cabinet Secretary who messes up can retire in obscurity to the private sector. This is not an option for Leni. As an elected official she will have to publicly carry the scar of failure until the end of her term. Her political enemies will make sure of that.

In short Leni has no alternative but to succeed.

Leni has some management experience but the scale is now different. Together with a job, kids’ education and healthcare, it is the dream of every Filipino family to own a home. Leni has said there is a housing backlog of 1.4 million. Defending on how one defines the term, the real backlog is actually several times that. There are 100 million Filipinos. At an average family of 5, that is 20 million families. Some already have dwellings but most don’t. Assuming 70% do not, that means there are 14 million families without homes. That theoretically is the backlog but never mind.

National housing is technically complicated, it is politically sensitive, it is big money and it is ripe for corruption. It is a combination of real estate development and banking.There are many moving parts any number of which could spell disaster. A housing project could collapse from faulty construction. More seriously, the system could financially blowout due to mismanagement.

Almost all affordable housing must be financed. The Government does this in two ways, first by extending loans to the home buyer through Pag-Ibig and SHFC: and, second, by guaranteeing mortgages originated by the private sector through HGC. These agencies have cumulatively financed and guaranteed over P500 billion in housing mortgages. At an average of P350,000 per home the money required to fund Leni’s backlog of 1.4 million dwellings is another P500 billion. This would bring the Government’s total mortgage exposure to over P1 trillion. This is where things become scary.

In the U.S lending for affordable housing is called sub-prime lending. Private banks will rarely go into it without a government guarantee. Most of the buyers are economically challenged, the houses have poor resale value and there is massive corruption. In the Philippines Global Asiatique, a developer owned by one Delfin Lee, allegedly defrauded Pag-Ibig and HGC of P7 billion in bogus mortgages.

In 2008 defaults in U.S. sub-prime lending almost brought down the banking system and the Government housing agencies, Freddie Mae and Freddie Mac. This is what faces Leni if she gets over eager. Building the homes and financing them is easy, it is collecting the money that is hard. In her rush to fill a 1.4 million home backlog, she may end up with a massive mortgage meltdown. In this sense, Leni’s problem may not be that she fails to deliver these dwellings in record time but that she succeeds. She should be careful what she wishes for.


What A Steal!

Indonesia is set to auction telecom frequencies to private parties for an estimated $80 billion- News item.

Subramanian Swamy, one of India’s most notable anti-corruption figures, petitioned the country’s Supreme Court in 2010 to prosecute the telecommunications minister for awarding cellphone spectrum to companies below market rates. “That helped fuel the perception of widespread corruption and led to the defeat of India’s longtime governing Congress Party.”- International New York Times, July 4 2016.

These two pieces of news highlight the tragedy that has befallen our country over the recent “sale” for P70 billion of largely unused telecom frequencies by San Miguel Corp. to PLDT and Globe.These frequencies are owned by the nation but the parties and their expensive lawyers found a way to deprive our country of the money. Shares of SMC, Globe and PLDT rose after the announcement to the tune of about P100 billion.

The transaction was reportedly approved by the National Telecommunications Commission (NTC), the Dept. of Transport and Communication and possibly Malacanang shortly before the Duterte Administration was to take office. The sale has still to be approved by the newly formed independent, quasi-judicial Philippine Competition Commission for possible anti-trust violations. The international chambers of commerce have supported the review. The telecom companies oppose it based on a technicality. They threaten to go to court if the PCC nixes the deal. The PCC is headed by ex-NEDA Secretary Arsi Barasican who is undeterred.

Even if the PCC  approves the deal, there remains the issue of who should pocket the P70 billion, is it SMC or the State, and who is accountable for the snafu? SMC, Globe and PLDT claim it is all kosher. Theirs is not to referee the game, only to play it. The ultimate responsibility for the fiasco is the PNoy Government which approved it at midnight. Is the Duterte Administration prepared to overturn the transaction if not on legal grounds, then on moral ones?  The owners of SMC, Globe and PLDT are involved in many other regulated industries including banking, energy, toll roads, mining and ports. Would they fight the new Government in court to save the deal at the expense of these other investments?

Manny Pangilinan has said the Government should not interfere. Manny is the CEO of PLDT which was awarded its franchise by the Republic essentially for free. PLDT is a public utility which is defined as an industry imbued with national interest and public welfare. The Philippine telecom industry has globally  among the highest costs for internet and mobile phones and the slowest speed, just ahead of last place Afghanistan. The latter has been at war for over 30 years so maybe it has an excuse. Philippine telcos make a gross profit margin on mobile and broadband of around 40% and a return on owners’ equity of over 25% p.a. By comparison the interest rate on your bank deposit is 0.50% p.a. The industry is a duopoly. Manny says the Government should not interfere. I now understand why he says that.

In an unrelated matter the Commission on Audit and the Philippine Supreme Court declared the Government owes contractors P24 billion over the Terminal 3 Airport. Nurses’ salaries and SSS pensions cannot be raised due to budget constraints. New classrooms, teachers and infrastructure are needed. P70 billion would have paid for all these. They will now have to be funded by taxpayers. In addition, consumers will presumably be asked to  underwrite the P70 billion the telcos paid SMC so it’s a double whammy. The nation just got presented a bill for P140 billion.

May God have mercy on us.

Please Kiss And Make Up

It’s like when Dad and Mom are not talking to each other. That is how Filipinos feel about the love spat between Rody and Leni.

Actually there is no love lost between the two since there was never any love gained. It was a shotgun marriage forced on the couple by the Filipino people. We thought what a lovely pair, her grace and caring will complement his strength and passion, it is a match made in heaven. She is duskily attractive (did she not look lovely in her inaugural with her windswept hair?) and he, puede pa, in that debonair, roguish, bad boy albeit ageing kind of way. Ok there is a 19 year gap, it is one of those Winter/Spring relationships, but who is counting?

The truth is Leni wants to come together but Rody does not. He did not invite her to his prom nor to his Cabinet. Various theories abound. One, Rody believes Leni is still betrothed to Mar & Co. and what happens in the Palace, the pillow talk, will not stay in the Palace. It is the Trojan Horse syndrome. He does not want a partner who still pines for the yellow ribbon around the old oak tree.

Rody senses Leni & Associates are out to unseat him. Leni has said she will sign a pre-nup but that, apparently, is not good enough.

Two, Rody did not care much for how Leni’s friends sicked Trillanes on him with all that business about the BPI bank accounts. And then there were those awful things XPNoy said about him in the heat of the elections like beware of dictators and such. Rody is feeling sensitive. This is his revenge on the Liberal Party.

Three, Rody is still very much enamored with Bongbong and would have so wanted to spend possibly the last years of his life together in Malacanang. He believes his paramour was cheated at the polls. He will not take Alan Cayetano’s word that that is not so, that Rody is really much better off without the young Marcos. Rody is unconvinced and has asked Alan to stop it, just stop it. He will not countenance any bad talk about those he loves.

Bongbong has filed a protest questioning the union of Rody and Leni. Perhaps the President wants to keep the nuptial bed empty pending that outcome. To give Leni a post now would recognize her as his official partner making it a “fait accompli”.

Four, and this is a wild pitch, Rody wants to break Leni before he takes her in. She is the nation’s new sweetheart. He wants to bring her down a notch, take away any pretensions she may have to power.

Rody has called for unity in the nation. The elections are over, he is now the President of all Filipinos regardless of race, religion, creed, political or gender inclination, it is time to heal and move on. He said he is a man with a lantern looking unsuccessfully for honest men and women to serve the country. What part of Leni is not in that equation?

Leni is not diminished. She knows she has a constitutional place under the sun. She was chosen by 14.4 million Filipinos, not far from his own 16 million. She has vowed to fulfill her mandate to help the poor. She will build a parallel movement outside of Government with NGOs and like-minded citizens. She will be starved for a budget but hopes to replace that with international funding from nations and private donors.

Rody is doing himself a disservice by isolating Leni. Keep your friends close, but your real or perceived enemies even closer. Leni is not the President’s enemy, but as an outsider she will unwittingly become the rallying point for any public disenchantment – and there is bound to eventually be some- with the Rody Administration. Already, as an outcast from the official family, Leni is getting more press than if she were inside. Mr. President, make Leni a part of the problem just as she could be a part of the solution.

What are Filipinos to make of all this? Rody and Leni share many of the same supporters who are disheartened at what is happening. We face so many challenges as a nation and have so few good men and women to take them on. We cannot understand how something that might arguably be described as petty is splitting the country. Like all children of dysfunctional parents, we want our President and Vice-President if not to sleep in the same bed, at least to sleep in the same house, to talk civilly, to present a united front to the world. I am confident that will happen in due course, he just needs to know her and to trust her. The country just wishes it would be sooner rather than later.

Yesterday the President finally agreed to a date. That’s it, a little beso-beso, maybe some hand holding and who knows? It could be the start of something beautiful.