FVR man tries to explain SSS ‘investments’

Former SSS Administrator Rene Valencia has written my editor complaining that I have "falsely accused former President Fidel V. Ramos of having ‘dipped into the SSS funds’ for ‘the Republic’s centennial’ through a ‘P400-million behest loan given under direct FVR instruction (and) guaranteed by National Development Co. (NDC).’

In his letter, Mr. Valencia tried to explain that SSS acts independently of Malacañang. He implied that in their infinite wisdom, the SSS Board and Management during FVR’s watch thought that the Clark Centennial carnival was judicious investment of a trust fund that belongs to private sector workers.

Mr. Valencia explained "the P350 million (not P400 million) SSS loan to NDC was part of a P1.05 billion-syndicated loan granted by the GFIs (government financial institutions) to NDC for the Philippine Expo Centennial Project in Clark. The SSS participation was recommended by the SSS Management and approved by the Social Security Commission on Dec. 11, 1997, after months of thorough study and negotiations by the GFIs and after securing the full and unconditional guarantee of the Republic of the Philippines."

I don’t know about you folks, but if that accommodation was the result of months of thorough study and negotiations by SSS management, we really have something to worry about the safety of our trust fund. The fact remains that the amount is still outstanding and, in fact, considered non performing. With unearned interest, it must be over P400 million by now.

Last I heard, the SSS couldn’t even get any IOUs from the National Treasury in the form of enough T-bills to cover the supposed unconditional government guarantee. Finance officials are reluctant to recognize the obligation, unconditional though it may be, because the amount will reflect in the government’s fiscal deficit numbers, something they are desperately trying to window dress.

Rene goes on to write: "This could not have been a ‘behest loan.’ For one, it was a loan from one government entity (GFI) to another (NDC). For another, there was no written or verbal instruction from President Ramos to grant the loan. Moreover, no one benefited from the loan except the project."

I cannot believe FVR did not put pressure on SSS to grant this accommodation. I doubt if Rene will want to execute a sworn affidavit to that effect. I remember seeing a document on the project with marginal notes from you-know-who detailing the contributions expected from the GFIs. I am sure, Rene who is normally a prudent banker, would not touch a deal like this on his own. The bottom line is, since 1998, the SSS pension fund is out P350 million and rising, in terms of accumulated interest.

It is also not entirely true that no one benefited from the proceeds of the loan. At the very least, it indulged the ego gratification needs of FVR. I am sure Rene didn’t benefit from it. But Ombudsman cases, including one that Doy Laurel brought all the way to the Supreme Court on question of immunity and lost, shows there are legitimate doubts that must be cleared. The worse part of that Expo project of FVR is that some people who actually rendered services for the project didn’t even get paid.

Aber Canlas, a highly competent former DPWH official who was called in to save the situation when things were falling apart, was not even paid his consultant’s fee and related expenses of a mere P3 million. Poor Aber was even out-of-pocket on the deal. But it is widely known that Expo officials managed to buy Mercedes Benzes.

Rene Valencia also tried to explain away the low-cost housing loan fiasco. According to him, "each loan is fully secured by the house and lot financed, 20 percent of the loan is additionally secured by RP guarantee, and each loan is a direct liability of NHMFC and Pag-IBIG to SSS." Again, the government guarantee is a laugh. The reality is, our pension fund is missing P30 to P40 billion that could be earning for us to ensure our retirement pensions.

This is the problem with trying to explain and trying to justify the unjustifiable. Mr. Valencia’s letter simply confirmed what I had written even as the use of legal and bureaucratic gobbledygook attempted to mask the reality that our pension fund was raided for political purposes. As I said, we have to insulate our SSS trust fund from the politicians.

Come on, Rene… don’t talk to me about government guarantees, no matter how unconditional they might be on paper. If you or FVR are really concerned, you should help Cora de la Paz get our money back from the government so that it could start to earn something at last for SSS members.

I tell you… these politicians and bureaucrats are something else. Huli na…humihirit pa.

India

I received this e-mail in response to my column last Wednesday on India from reader Arturo Reyes, a Pinoy investment banker based in California. Due to space limitations, I have to publish his very useful insights in two parts. Here is the first part.

I am writing in regard to your Dec. 3 commentary on India’s outsourcing business. I also read the Businessweek article last week and I have to agree with most of the points that you have raised. You are right about India’s government having a strong program to attract outsourcing business.

Four years ago, I read the Indian government’s master plan to transform the country into an IT superpower. I believe this master plan is very solid and is a major reason for the country’s success. However, I also think that some issues with regards to why India has become an outsourcing powerhouse have to be explained further.

There is only so much of India’s success that can be credited with their government as with the initiative of its own people. This initiative has given India two strong advantages: First, access to key decision makers and second, access to capital. During the course of my post-graduate career search, I was amazed to have come across a good number of Indian-owned and managed management consulting and private equity firms. While I assume that these private businesses deliver valuable services to their clients, they are also excellent platforms to divert outsourcing business to India.

Their professionals have earned MBAs in top international business schools and typically have some experience in big consulting firms and investment banks before setting up their own ventures. With their education, background and skills, these professionals have better access to Fortune 500 senior executives and the Wall Street investment community.

A typical engagement would be for consultants to conduct "cost efficiency studies" for clients, with part of the clients’ operations being subcontracted to India. They could even sweeten deals by offering to co-invest in the outsourcing venture through private equity investments. Consequently, American companies such as GE and Oracle will think of India for their outsourcing needs first before looking at other countries.

These advantages can be credited mainly to the Indian people’s initiative and entrepreneurial spirit. Indians scour the world for every opportunity to achieve a higher level of accomplishment. For example, while citizens of other countries are content with acquiring green cards and settling down as skilled workers in the US or Canada, Indians strive to earn graduate degrees and compete for every scholarship and assistantship in world-class universities.

As a result, Indians have a larger pool of talent from which they can tap to move on to higher-level business, academic and technical careers and more influential positions in society later on. Other countries will be hardpressed to compete with India at this level. While many can boast of advantages in skills, Indian nationals use superior strategy and execution to change the rules of the game.

On Monday, we will publish the portion of Mr. Reyes’s e-mail that suggests how we can catch up on another emerging opportunity.

Tee Off Time

Ray Dan gives fellow Prepian Dr. Ernie E a run for his joke book with this one.

An avid golfer once prayed, "Dear God, I love this game called golf, but I worry if there will be golf in heaven?"

Came a voice from above: "I have some good news and some bad news for you, would you like the good news first?"

The golfer answered, "surely, the good news first."

Answer from heaven, "There is golf up here"

The golfer replied, "God, with that great news, what can be bad news?"

Voice from heaven: "Your tee off time is tomorrow at 7:00 a.m."

Boo Chanco’s e-mail address is [email protected]