The “F” word is “flawed”.
Whether you watched the economic “therapy sessions” in “Davos”, Switzerland or the Senate investigation on the state of the pre need industry in the Philippines, you will certainly conclude that the economic crisis in the world or in the Philippines has come about because of greed and the failure of government regulators worldwide.
In Switzerland, the participants have acknowledged that globalization as a system to insure fair and free trade has failed, because the human factor of resisting control, rules and regulation led to “Globalization without global governance”.
We all plugged into one economic or financial system based on presumed trust and compliance. All the participating world leaders and representatives may have meant well, but being elected or appointed officials, they themselves presumed that their respective citizens would comply and be controlled by existing laws and procedures. But as the book says “some people are smarter than others”, or some people are morally blind and have no problems with having criminal behavior.
So in the absence of global regulation our economies are now similar to computer terminals that have been fried by hackers and viruses. In a micro level, the same has happened in the Philippines.
The fundamental myth
Contrary to the rumor being spread by Malacanang, our economy and financial system are not fundamentally sound. If we had the correct fundamental policies and guidelines, why did thousands of families lose millions upon millions of savings and capital to unscrupulous “financial experts” in the last three years?
If we have the correct fundamentals, how come legitimate business people and investors risk their money on non-traditional options instead of government offerings or traditional institutions? If we have a fundamentally sound system, how come the NBI and the PNP have never caught the fugitives who masterminded many of the scams?
If our system actually works, how come most of the cases filed against big pre-need corporations handled by big law firms often get dismissed by regional trial courts, even if everybody else with an understanding of the law, such as members of Congress believe crimes have been committed? Why do contracts even stipulate a preferred jurisdiction in the case of a legal case being filed? Are courts in Makati fairer than in Baguio or Pampanga?
If the system were fundamentally sound we would not be having problems in the rural bank sector simply because of one group. The pre-need industry would not be in pre-terminal state, our labor sector would not be in a state of “casual employment”. Small and medium businesses would have flourished instead of being massacred by big businesses that have lobbied to annihilate competition by imposing what government regulations will be put in place.
If we have correct fundamentals, why are lawmakers pushing to double the insurance coverage on bank deposits? If our fundamentals are sound why has there been no revamp in the Bureau of Customs?
To insist on the Malacanang line is un-sound because they are fundamentally and morally F_ _ _ED.
No to self-regulation and market determination
We cannot continue using western formulas and concepts such as “self-regulation” or “market determination” because what they really mean is “I decide” or “They decide”.
As illustrated by the “resource person” from the Legacy group, they did not commit anything illegal. They simply “stayed under the radar”. One company sold pre-need plans, one company operated a couple of banks that also made money on credit cards based on an industry rate of 43% interest per annum, and also gave out loans for purchase of motorcycle units, which were sold by another company.
Analyzing the many industry trends and practices, they all seem to follow a system: Set up a corporation with rich and powerful friends with name recall and political value like a President, a Vice-President or a Congressman. Put up a bank and get even more investors, get them to be depositors to strengthen the profile so you can get other depositors which brings in more capital, give out credit cards and earn millions in interests.
Bundle the investments and buy/set-up a pre-need company to create even more capital with a four- to five-year maturity. Use the money, make more money then collapse the company but be kind and compassionate by returning their original investment which has lost its value at least twice.
Buy or build a new business such as an automotive or motorcycle distributorship. Make five to 15 percent profit on product sales depending on the extent of smuggling or tax evasion, pass on business opportunity through in-house financing to your own bank, rack up another five to 15 percent profit through hidden costs, repossession and resale to secondary customers.
Put up a real estate company, use depositors and “former” plan holders’ money, buy cheap land through build and sell or unit share scheme, design a “mix-use” complex, purchase materials and services on extended payment term or unit share, pre-sell units to create even more capital before you even pour your first pillar!
The BCC or Business Crime Channel is the wonderful contribution of the Philippine Senate. They may not pass enough laws to cover all our needs, but from time to time we get to see and hear “LIVE” how many so-called legitimate families and companies are actually gathering capital by using other peoples’ money to enrich themselves because no one has declared it illegal. They do it because they can!
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The officers of the Securities and Exchange Commission have never been so humiliating and humiliated in the entire history of the SEC. But it was a necessary for the officers of the SEC to undergo such an experience to realize that thousands of Filipino families have suffered because the commission failed in its legal and moral obligation to monitor and regulate bad business.
Under a very different leadership, under a different President, they would have ALL been asked to submit their letters of resignation. In effect, that was what Senator Rodolfo Biazon did on behalf of the Filipino people.