Perhaps de Venecia’s foresight can kickstart an economy that, dozy from slow business, can wake up only with government spending. He has heard of what Thailand and South Korea had done in recent months to rise from the 1997 Asian financial crisis. In Congress and in business circles Yoda is rousing the few remaining optimists to surmount the bleak future.
Others see only dark days ahead. Exports had dropped 25 percent in August, the worst in 20 years. And that’s before the Sept. 11 terrorist hits in New York set Europe and America tightening belts and cutting purchases from Asia. Stock trading dropped to even lower prices and volumes than what many thought was already rock bottom. The Bangko Sentral is wary if its $14-billion foreign reserve – the lowest in Southeast Asia – will last till yearend.
With business barely keeping its head above water, government is starved of revenues. If doomsayers prove right, it won’t meet its budget deficit ceiling of P145 billion for 2001. Yet the only way to keep business going is through more government spending. So for next year, Malacañang is proposing a P780-billion spending plan. On top of that is an automatic appropriation of P155 billion for maturing debts. All told, the budget of P935 billion – almost a trillion – would be the biggest in history.
Malacañang promises to keep next year’s spending deficit at a lower P130 billion, but the Opposition isn’t biting. House Minority Leader Carlos Padilla is wondering how Malacañang can do so, when its own budget bill calls for new borrowings of P270 billion. Other minority congressmen say the deficit could be worse. There’s that P155 billion in maturing debt that has to be paid, plus another P368 billion in interests of many other loans, for a total of P523 billion - 56 percent of the P935-billion budget for 2002. A big debt trap lies ahead, with government borrowing new money just to pay old loans, yet hardly any money left from revenues to pay for salaries and routine operations.
But de Venecia is undaunted. He not only is pushing for the trillion-peso budget, he even says the government can balance it. No gaping P523-billion borrowings, much less a P130-billion deficit.
As far back as Feb., when he was raring to regain his congressional seat, de Venecia already saw a potential source of money. Shell was about to draw natural gas from Malampaya well, in the reefs off Palawan where de Venecia’s Basic Petroleum Co. once struck black gold. Government was already computing its potential royalty earnings of $10 billion for 20 years. Back then de Venecia uttered a strange word: securitization. He said that government must not sit on a rocking chair and wait for a $500-million "rent" from Shell. As soon as the well starts operating, he said, government should "sell" its "rights" to the 20-year royalties for cash up front – money that it can use to fund antipoverty projects here and now.
Malampaya did start operating last Oct. 16. And Finance Sec. Jose Isidro Camacho and Energy Sec. Vincent Perez have refined de Venecia’s germ idea. They’re now talking to competing groups of international financiers to securitize the $10-billion potential earnings by the first quarter of 2002 at the latest.
The Speaker and the two secretaries would rather not state at what discount to offer the royalties for investors to bite. But private bankers note from experience that it could be anywhere from 30-40 percent. Even if, at worst, government is left with 60 percent, it would still fetch $6 billion, or P312 billion at the present P52:$1 exchange rate.
Let’s see now, de Venecia computes, if Malacañang says it must borrow P270 billion next year, but securitization can raise P312 billion, then government will have surplus left. Meaning, it does not have to borrow at all.
Oh, but the Opposition still says the deficit will be at P523 billion, not just P270 billion. P523 billion in deficit minus P312 billion in new money equals P211 billion that government still has to fill up.
De Venecia has a second idea to raise money. He says government should strike a settlement with San Miguel Corp. CEO Danding Cojuangco on the contentious coconut levy fund. After all, the Supreme Court already ruled and Cojuangco concedes that 29 percent of it, or P70 billion, is public money. The fund is tied up in escrow. Releasing it would bring down the remaining P211-billion budget shortfall to only P141 billion.
De Venecia has still a third proposal to cover that. It goes by another strange term: special purpose asset vehicles, or SPAVs. This means freeing up banks from their P267 billion in non-performing loans and P140 billion in foreclaosed collateral, mostly real estate. Such unproductive financial holdings drive up the cost of banking to artificially high levels. Taking the cue from Thailand and South Korea, de Venecia says the SPAVs – in the form of five-year tax breaks – will allow banks to dispose of the holdings to foreign financiers. It’s somewhat akin to securitizing; only, the discounts are bigger, at 50 percent left with the mismanaged or hard-pressed banks. But de Venecia notes that Thailand and Korea not only raised $6 billion and $18 billion, respectively, in new investments from their own SPAVs. More importantly, they restarted their economies from the Crash of ’97.
A fourth parallel idea from de Venecia is to revise old securities laws that turn off investors because of overlapping taxes. By slashing and combining the final securities tax from the present 10-percent VAT, four-percent documentary stamps and sliding gross receipts tax, investors will be encouraged to trade assets in the stock market.
Coupled with the SPAVs for banks, de Venecia says a new securities law can entice $30 billion in fresh investments, the same amount that his Build-Operate-Transfer Law brought in. If government nets 10-percent tax from new investments, it would have $3 billion or P156 billion in hand – more than enough to cover that remaining pesky deficit of P141 billion.
Malacanang didn’t list the P2-billion expense in the 2002 budget bill. Comelec itself was surprised to find out that it will not have to conduct the elections. But minority congressmen are wary of the bad precendent it sets.
Only Comelec may say if it can’t hold an election. Only Congress, with its constitutional power of the purse, can allot a budget for it. The only job of Malacanang is to list the budget item, then release it in time.
Besides, voters need a chance to effirm or change their barangay officials, many of whom have grown complacent in their work that they don’t even bother to lead in garbage collection.