Asking for more

The passage of the Special Purpose Vehicle Act back in 2002 was a crucial move towards supporting the government’s efforts to spur growth in the beleaguered banking industry. The objective was very clear: reduce the P500 billion worth of bad loans, and revitalize the banking sector as a major engine of economic growth.

Despite some misgivings, we had to accept the privilege extended to misbehaving banks, knowing only too well that it is part of the solution to help ease their burden of huge bad asset portfolios, which had eaten away their reserves that otherwise could have been used for lending.

When the SPV Law expired last April, the results were not even half of expectations. So far, only P96 billion of the non-performing loans have been removed. Pricing was considered a major problem as SPV investors insisted on buying the assets at less than half of their book value. This would have forced banks to take a haircut and use up their provisions for probable losses; worst, it could have been their capital at stake.

Sweeter perks

Pressure to have the SPV Law extended is now underway. This brings back again the perennial issue of having to grant favors to an industry that has by its own folly and poor judgment committed a lot of excesses.

Will our lawmakers give in again this time? My concern is they just might, and without having to debate at all. Already, the Bangko Sentral ng Pilipinas is strongly urging lawmakers to consider extending – and even sweeten – the existing SPV Law.

Just recently, there was a report that the Senate ways and means committee was proposing to extend not just the fiscal incentives that banks and SPV investors are entitled to, but to widen the law’s coverage to include non-performing loans and foreclosed assets that had been booked as of end-2004.

The original law explicitly stated that only idle assets as of June 30, 2002 would be entitled to tax incentives. Months before the SPV law’s effectivity was breached, banks had been talking already about extending the coverage. Had most banks really dragged their feet, confident that the law will be extended with more liberal terms?

Both reports at the Senate and the Lower House are seeking to lengthen the fiscal perks for the sale of idle assets by two more years from the passage of the new measure, and for an extension of the deadline to establish and register SPVs by 18 more months.

Extending deadlines merely encourages complacency but worst is the proposed expanding of the asset coverage. It gives the perception that banks are encouraged to lend injudiciously on the premise that there will always be the SPV Law to rescue whatever their folly. This sweetener will only strengthen this sentiment.

Asking for the whole arm

There is a saying about offering someone in distress your hand, and ending up with having to give up a whole arm. Is this not the case with our erring banks? Now an expanded SPV Law will even reward them with more privileges?

If ever the SPV law should be amended, it should entail clearer provisions that would prompt banks to immediately act on their soured assets, and for SPV investors to immediately start the process of cleaning up the banking sector’s NPL portfolios as soon as their registrations are approved.

It’s time for our more enlightened legislators to consider the SPV Law as a time-bound cure and not a boundless privilege given to a banking industry that has been given much and from whom much is expected.

Unhappiness over telecom deregulation

Philippine Long Distance Telephone Co. is the biggest earner in the telecoms industry. So for many, the statement of chairman Manny Pangilinan sounded suspect when he called for a review of the telecommunication industry’s deregulation policy. PLDT, after all, had just declared consolidated earnings of P25 billion (up 13 percent) as of the third quarter of the year.

The astute Pangilinan spoke of an enlightened competition policy purportedly to encourage the growth of its current and future competitors. By insinuating the telecom industry’s deregulation policy as a flop, citing the failure to install more fixed lines in rural areas as an example, Pangilinan may actually be setting up the stage for a review of the open market policy currently being adopted in the telecom industry.

Maybe he sees the need to put in place some measures to protect PLDT’s future profits, in particular, from new telecommunication platforms like the use of Voice over Internet Protocol (VoIP).

For example, PLDT is arguing that VoIP is a value-added network service instead of a value-added service, and that any new VoIP service providers must by regulation go through any of the (few) network service providers, like PLDT. The use of VoIP technology represents substantial savings for Filipinos who choose to use broadband lines to communicate with their relatives abroad. By opening the market to new VoIP service providers, consumers will benefit from wider choice of competitively priced packages.The case is pending before the National Telecommunications Commission. Will the NTC rule in favor of consumers, or give way to the mounting pressure from the giant PLDT? Another case of asking for more.

Poker enlivens casino Tagaytay

Alex Betita Jr., Casino Filipino Tagaytay branch manager, was all smiles last weekend as he showed PAGCOR President Rafael "Butch" Francisco around the crowded gaming hall. There were new faces in the crowd and most of them out-of-towners. The reason for the sudden surge in the number of visitors was the highly successful non-wager tournament that was the main activity of the day.

After the recent staging the 5th Leg of the Poker King Challenge with the Poker Club of the Philippines, Betita and his team decided to follow up the event with the 1st Casino Filipino Texas Hold’em Poker Tournament. Despite initial doubts, Betita pursued the project to its successful conclusion.

He is now thankful to the Poker Club of the Philipines for helping pave the way for a new attraction that casino patrons would appreciate. He is seriously considering having poker as a regular feature of Casino Filipino Tagaytay.

Congratulations to all the members of the Poker Club of the Philippines and the Cebu Series of Poker, Inc. who were brave and confident enough to participate and pit their skills against the tough field of old-timers and new poker converts. Special mention go to prize winners, namely, Poker Club of the Philippines members Ronald Javier (2nd place), Barb Galan (4th), Benny Gonzalez (7th), Jun Gacho (8th) and Cebu Champion Alfonzo "Ponsoy" Canizares (5th place).

Reminders to Poker Club of the Philippines members: Valle Verde Special Event on Saturday, 3rd December (10 a.m. registration); and the Business & Leisure Poker Mall Tour at Eastwood City mall, 6 p.m. on same day. Those interested to know the goings-on in the poker gaming circle and details about non-wager poker tournaments may visit www.PokerClubofthePhilippines.com or call the Secretariat (c/o Cindy) at 817-9092 for details.

Should you wish to share any insights, write me at Link Edge, 4th Floor, 156 Valero Street, Salcedo Village, 1227 Makati City. Or e-mail me at [email protected] or at [email protected]. If you wish to view the previous columns, you may visit my website at http://bizlinks.linkedge.biz. Send instant messages to your online friends http://uk.messenger.yahoo.com