POSTSCRIPT / August 5, 2001 / Sunday

By FEDERICO D. PASCUAL JR.

Philippine STAR Columnist

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Pocket People Power a restraint to reforms?

FIRST Gentleman Mike Arroyo better heed his wife’s advice for him to shun interviews about the rumor that he had accepted a bribe to work out the recall of the veto of a telecommunications franchise.

Whatever he says on the subject, talo siya (he’s a sure loser). To those who believe in his innocence, no explanation is necessary. And to those who have convicted him in their minds, no explanation is enough.

Like a nuclear submarine embarking on a mission deep in the Atlantic, Mike should maintain radio silence while submerged. No talk, no mistake.

* * *

THAT radio program of Mike should be scrapped, too. What is it for in the first place, unless he’s trying hard to be another Inday Badiday?

With due respect to President Gloria Macapagal Arroyo who suggested Mike’s getting himself a spokesman, that step is also unnecessary. It could even be disastrous. If there’s anything important to announce about the President’s husband, which is not everyday, the presidential Press Office can handle it.

Mike should do a fadeout. Right away.

* * *

NOW many of us are asking if Malacañang did the right thing delivering the head of the Social Security System president to the personnel threatening to paralyze services unless SSS president Vitaliano Nañagas is fired.

Where do we draw the line for pocket People Power deciding the fate of executives of government agencies who want to clean house?

What will happen if the chiefs of notorious agencies such as the internal revenue and customs bureaus, the education and the public works departments as much as give a hint of initiating some housecleaning and kicking out entrenched grafters?

To what extent would the Nañagas experience discourage would-be reformers in government?

* * *

IT’S good that, before leaving, Nañagas submitted an audit report on hot deals involving billions in trust funds of SSS members who cannot even get petty cash for emergency loans. That could be a good starting point for unmasking the rascals milking the SSS.

Another angle that merits investigation is the possible abuse of insider information by some SSS officials who may have plotted to make millions while presidential cronies made theirs.

For instance, when then President Estrada secretly ordered SSS to invest P8 billion in a wobbly crony corporation, how did SSS officials who knew of the impending massive infusion position themselves in the stock market?

* * *

THE Philippine Cement Manufacturing Corp. (Philcemcor) wrote to dispute what we said about the cement cartel manipulating supply and prices to the detriment of the government’s public works program as well as the construction and related industries.

The cement cartel is asking the government to impose higher tariff (50 percent) on imported cement. We object on the ground that this would make imported cement more expensive, kill the competition and enable the cartel to continue overpricing its products.

In average dwellings, especially in mass housing, cement and cement products account for some 70 percent of the total cost of materials, according to engineers, architects and builders that we have consulted.

Expensive cement (now selling at P144 per bag) naturally results in expensive houses. Expensive houses in turn dampen housing and real estate development and allied industries.

* * *

THE cartel disagreed, saying that cement and cement products account only for 9 percent of a house. Who is the homeowner who would believe this? Maybe if we were talking of nipa houses…

Now if we talk of roads and bridges… Most highways will be all reinforced concrete, not 9 percent unless it is a macadam or an asphalt road. Most bridges are still made of reinforced concrete, except the few that are the rickety British bailey bridges or the superior Austrian steel bridges.

* * *

IN short, cement is of such strategic importance to many government programs and to myriad private construction ventures to entrust to a cartel whose only motivation is megaprofits.

If the cartel refuses to sell at more reasonable prices, importation must not be restricted by slapping it with prohibitive tariff. After all, we’re supposed to have committed the country to globalization, open trade and import liberalization.

If the cement cartel wants to stay in business, it should compete in a free market like other industries.

* * *

IN a letter to us, the cartel claimed that:

  1. Cheap imports do not benefit consumers. On the contrary, traders and importers are the only parties benefiting from it in the form of exorbitant and immoral margins from imported cement.
  2. The imposition of a 50-percent tariff will not result in the ban on imported cement.
  3. There is no cement cartel in the local cement industry.
  4. Cement is not a significant cost in the construction of houses. Cement costs for horizontal structures which include low and middle class housing is only 9 percent of total costs.
  5. Local ex-plant prices (or the price at which the cement leaves the plant) have not increased significantly despite the depreciation of the peso as compared to imported cement that has increased 24 percent despite decrease in landed cost.
  6. Only three out of 17 local cement producers export cement, but their exports do not redound to profits.
  7. Economic upheaval, political unrest and serious injury are more likely to result if safeguard measures are not imposed.

* * *

WE advise the cement cartel to keep their copy of the letter and submit it to the Senate inquiry that Sen. Manuel Villar is pressing in the face of complaints that the cement cartel has been manipulating supply and prices.

There they can explain all they want. Of course they should know that Villar is a successful businessman (until he ran for the Senate) who knows the construction business, especially mass housing, inside out.

The cartel members better review their financial statements before submitting them to the Senate as Villar is a topnotch accountant.

* * *

AT this stage, Villar does not seem impressed with warnings of the cartel that with cheaper imports coming in, local cement factories would close and thousands of their workers left jobless.

The senator explained that the correct response of the cement manufacturers is to lower their prices so they could compete with the imports. He said they could lower prices if they wanted. In fact, while they retail cement at P144 per bag, they export it at only P35!

He said the cement manufacturers should not complain about their paying interest to the banks. If they brought in their own money in the first place when they bought up local factories, Villar said, they would not have to pay now for the cost of money.

This is one financing detail that the Senate should also investigate. Too many so-called foreign investors do not bring in their own money. They just borrow from local banks the funds that they need, then pass on the cost of money to consumers.

* * *

VILLAR allayed fears being fanned by the cartel that thousands of workers would be laid off if cheaper imports were allowed. He explained that if any manufacturer gives up, somebody else would buy his plant at a lower price, continue the business and be able to sell at lower prices.

Somebody is bound to take over the plants that may close. If a bank takes over from a defaulting manufacturer, he said, the bank would look for a buyer and is likely to sell at a lower price to get rid of the non-performing asset.

He said there would only be a changing of ownership, not the permanent padlocking, of the factories. With the abundance of raw materials in this country and the continuing big demand for cement, the mass and permanent closure of cement plants is unlikely, he said.

* * *

WE see the need for making importers sell at prices significantly lower than the P144 being charged by local manufacturers. As importers land their cement at an average cost of P86 per bag, they have a relatively higher spread and can therefore charge lower and still make a killing.

Importers now charge just slightly lower than the locally made cement even if they could price their cement much lower and still make money. That’s exploiting the situation.

This is similar to the case of new players in the deregulated oil-fuel business who are supposed to provide real pricing competition to the oil cartel but who sell only at a few negligible centavos lower (sometimes even at the same prices as the cartel’s retail price).

* * *

(First published in the Philippine STAR of August 5, 2001)

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