Out of the loop!

In a corporate setting, a senior executive who finds out that he is apparently out of the loop in major decision making on matters in his turf, has reason to worry… an omen of a career in twilight. That’s because the relationship of a senior executive to his boss, usually the CEO, is a matter of confidence. Finding oneself out of the loop is more than a subtle hint that there is some loss of confidence in an executive’s ability to carry out his mandate.

In government however, specially in Ate Glue’s cabinet, being out of the loop is par for the course. Ate Glue has this penchant for acting unilaterally, without consulting the cabinet member responsible for the issue. It is probably the cacique mentality in her… she thinks herself as superior to all the peons under her. A cabinet member is as good as her mayordoma, and is equally expected not to complain when treated like a doormat.

Running government is however, a complex undertaking. A president may have the IQ of an Einstein but it is impossible for one person to know all the complexities of issues that are presented in the course of a working day. That’s why Steady Eddie insisted on CSW… complete staff work. In Ate Glue’s case, some of her cabinet members may have been her students in college, but she must stop thinking of them as such and start thinking of them as experts in their respective fields.

In the past few weeks, there were glaring instances of senior cabinet members finding themselves out of the loop in major decisions within their turf. There was my poor Tito Bert, Foreign Secretary Bert Romulo who was not consulted in a major decision to abstain in a UN resolution we ironically, co-sponsored. What foreign government would now take my poor Tito Bert seriously when he negotiates on behalf of ours? He deserves better.

Then, there’s EO 556, the antedated executive order that pulled the rug from under the president of PNOC and the Secretary of Energy on the matter of selecting a partner for the development of the incidental oil production in the Camago-Malampaya gas field. It is simply unbelievable… antedated to June and it was almost end August when it became public knowledge.

How could the PNOC president be negotiating since May without knowing its existence? The Secretary of Energy also sounded clueless when asked by the press about it. Who now, in his right mind, would negotiate in earnest with anyone in government, even a cabinet member, when Malacañang can invalidate everything with an antedated EOs at the homestretch?

Now, there’s EO 558, which was apparently issued without the knowledge or full concurrence of the Finance Secretary. Poor Gary Teves! Ate Glue took him for granted again. Just because Gary’s humble and low key personality makes him look like a doormat, doesn’t mean he should be treated as such. He is a great guy and he knows his stuff. He deserves some respect from his boss.

This controversial EO would now allow government agencies other than the government financial institutions to go into micro credit lending at the grassroots. An area of concern is the change in credit policy, from one that is market-based to one dependent on state subsidies.

Gary called EO 558 too "all embracive" which might negatively impact on state finances. "There are several things we are concerned about," Gary told Business World. "Will the credit programs be sustainable? Will they generate revenues out of the amount lent to borrowers? What we don’t want is to give dole-outs."

The dole out angle and worse, the temptation for the administration to use this EO to buy votes in future elections (or plebiscites) are the top worries of policy makers in and out of government. The Foundation for Economic Freedom, a group of economists, expressed exactly those concerns in reaction to the new EO.

"Government’s long experience with implementing failed directed credit programs says it all. The Masagana-99 rice production program introduced in the 70s was undertaken at great cost to taxpayers (as a large portion of the subsidized loans were never paid back) and the financial system (as rural banks became dependent on cheap government funds which displaced deposit mobilization efforts). An ambitious livelihood program, the Kilusang Kabuhavan at Kaunlaran (KKK) launched in the 80s, similarly failed.

"These and other similar programs failed because borrowers see the funds as government dole-outs that need not be repaid; government non-financial agencies do not have the capability to administer loan programs resulting in poor screening, monitoring and program administration; the interest rate subsidies entail huge fiscal costs to government and the programs end up excluding private financial institutions, which cannot compete with the cheap funds, from the credit market."

Worse, the objective that Malacañang said the EO had of addressing the needs of critically-poor areas, cannot even be legally done. "No budget was allocated for them (government non-financial agencies and government owned or controlled corporations) for credit programs," Finance Undersecretary Gil Beltran said. "There is nothing in the (proposed 2007 budget) that will allow them to give away money." The Finance department, he also said, does not know what to make of the order.

Former Finance Secretary Romy Bernardo thinks there is no rationale for repealing EO 138. "EO 558 certainly does not provide one and the Palace’s defense – to enable government agencies to supply credit in poor areas not reached by financial institutions – has been shown time and again to be ineffective in combating poverty (better for government to focus on support and capability building services to help the poor become bankable). Thus, in one stroke of a pen, the President simply undid all the work that successive administrations since the time of President Aquino had put into the effort."

It will be recalled that the Aquino administration made it a policy to abolish direct lending by government non-financial agencies; the Ramos administration created the National Credit Council to rationalize all directed credit programs; the Estrada administration articulated in EO 138 government’s policy on directed credit programs.

And EO 138 was working too and shouldn’t have been repealed by EO 558. More and more, private financial institutions were extending credit to microentrepreneurs. In recent speeches, BSP Governor Say Tetangco noted that from about 55 banks claiming to do microfinance before 2000, there are 193 private financial institutions, with a portfolio of P3.3 billion and an outreach of over 600,000 beneficiaries, engaged in microfinance operations today.

The repeal of EO 138 will effectively signal private financial institutions to get out of the microfinance business, since they will not be able to compete with the subsidized interest rates that government charges. But the problem is, government does not have that much money to meet the huge demand for micro-credit. Moreover, with its limited funding and poor track record in microfinance, it will likely take only a few loan cycles for its funds to dry up.

In the end, small entrepreneurs’ lack of access to credit will come back to haunt the economy. That would put the poor once again in the tender mercies of the five to six operators.

I suppose this is the Palace’s idea of progress.

Alcogas

I got this e-mail from Francis Lorilla, the man who was on top of the Alcogas program when we did our test market in Bacolod in the 80s.

I fully agree with what you wrote in The Star’s Sept. 6th issue that we need the full cooperation of the car manufacturers to make the program succeed.

In fact, we need to urge the car companies to make all the cars they market ethanol-ready and to offer services to motorists to convert cars which are not to ethanol-gasoline service.

Unless we have come to a point when most if not all gasoline powered cars could run on ethanol-gasoline mixtures, gas stations should market both pure gasoline side by side with ethanol-gasoline fuels to give the motorist the freedom of choice.

Otherwise we will surely run into the same problems we had in Negros and Panay and history would have repeated itself.

Solar 1

A fellow journalist who may not want to be identified, related to me the "real story" why Solar 1 sunk.

Supposedly, the captain has this distinctive regional accent, something like what former Sen. Boy Herrera has, so that when zero hour came and he had to give the order, it came out like this…

"ALL HANDS ON DICK…"

So, all the crew members had their hands on well… you know… as that last big wave sunk the tanker.

Boo Chanco ‘s e-mail is [email protected]