Online corruption in the Philippines by pro-Aquino lobbyists

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In recent times, the new President of the Philippines has come under attack for his poor handling of the hostage crisis. There is also suggestions of corruption, like the setting up of very generous discretionary funds. The Filipino people are among the most prolific social networkers, so it is understandable that these issues would raise some controversy online. It is also little wonder that such opposition would not go unchallenged by Aquino, or his supporters.

Consider one Facebook group 'Step Down Aquino'. The developers of this website tell me that Aquino and/or his supporters have been able to infiltrate their Facebook account and engage in all manner of identity fraud, including:

1. Posting of pornography

2. Deleting 50% of the content

3. Thinly veiled threats to delete by showing their ability to corrupt

4. Setting up similar Facebook accounts under the identity of the person, but placing 'jibbish' content to discredit any opposition to their cause.

Andrew SheldonNZ Property Guide Philippine Real Estate GuideForeclosed Japan GuideApplied Critical Thinking, Strategy, Integrity Investments SheldonThinks

The Philippines under seige

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The last two weeks has been a very interesting period in Philippine politics.

Noy Aquino is of course a so-called 'liberal progressive', who was elected to power on the basis of sentimentalism relating to his mother's recent death. His mother - Cory Aquino - was of course a lame-duck president who presided over a spate of failed military coups. She was supposed by the poor. She was eventually replaced by a former military leader Fidel Ramos, who orchestrated the BOT Law, and thus restored power to the Philippines. He was effective in timely implementation, though there is little wonder given the unfavourable terms he negotiated with foreign power companies. National Power Corp was left with onerous debts and electricity consumers were left paying expensive power...the most expensive in the world.

So there you have it, Philippine politics is divided between:

1. Liberal politicians supported by the media and the poor.

2. Conservatives, whether supported by landowners, military, who dominate power among corrupt officials.

The problem for both camps is that both sides are unthinking collectivists who are going to have little support for their policy initiatives. Noy Aquino is already off to a bad start. He is being condemned already for the following:

1. He was a lame duck senator - in 12 years he initiated 12 failed bills. He came to power on the basis that he would turn back corruption, and that he would free the poor from poverty.

2. He has struggled to establish his leadership credentials, as he has been dealing poorly with a series of 'brush fires' like the killing of 8 Chinese nationals in Manila. It was not the incident which resulted in his criticism, but the succession of follies after the incident.

The reality is that Noy Noy Aquino is not going to finish his 6-year presidential term. There are several reasons for believing this:

1. Who would want a lame duck president for 6 years - having just been elected

2. He is not popular among the military

3. He is not popular among the Conservatives, who will support the military because too many of them are corrupt to want Aquino investigating their misdeeds

4. The Thai military takeover highlights the 'practicality' of military takeovers. There was no foreign intervention. i.e. No sanctions, etc.

5. The top generals in the military are corrupt, and the same goes for the police. Expect them to be under scrutiny for the way they are appointed, i.e. Kickbacks for promotions, which was highlighted by the incompetency which resulted in this failed stand-off with the police in Manila recently.

The other alternative is of course an assasination of Noy Noy Aquino, but I think that is less likely. I would expect a takeover within a year. The implication is that we are going to see a collapse in the Philippines currency. For this reason I have some property advice - don't buy property there until the currency collapses. More details on our Property blog.

What will be the implication of a military takeover? Well the economy has been performing rather well of late for structural reasons, and increased tax receipts. I think poor 'military' administration will result in another Conservative Party supported leader, and I am guessing it will be Manny Villar. He is a very wealthy Filipino, with at least some 'roots' in poverty. I believe a good marketing campaign will see him depicted as the pin-up boy for the poor. A bit of promotion of his Eton City development might help as people drive along the Southern Tollway.

For those who want to support the resignation of Noy Noy Aquino - you will have to wish for a military takeover, his good judgement, or his assasination. Personally I prefer the military takeover because the country needs a shake-up, and as an investor, I appreciate the volatility. One day people will come to realise that democracy is nothing more than a system for legitimatising fascism. i.e. Tyranny of the minority or majority, its still tyranny. So good luck with that! Be sure to make lots of money, accumulate lots of guilt, then spend it on the poor to recoup your 'good grace'. :)

Andrew SheldonNZ Property Guide Philippine Real Estate GuideForeclosed Japan GuideApplied Critical Thinking, Strategy, Integrity Investments SheldonThinks

Taxation in the Philippines

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Have you thought about residence in the Philippines. Consider the tax benefits.

CHAPTER II - GENERAL PRINCIPLES

Section 23. General Principles of Income Taxation in the Philippines. - Except when otherwise provided in this Code:

(A) A citizen of the Philippines residing therein is taxable on all income derived from sources within and without the Philippines;

(B) A nonresident citizen is taxable only on income derived from sources within the Philippines;

(C) An individual citizen of the Philippines who is working and deriving income from abroad as an overseas contract worker is taxable only on income derived from sources within the Philippines: Provided, That a seaman who is a citizen of the Philippines and who receives compensation for services rendered abroad as a member of the complement of a vessel engaged exclusively in international trade shall be treated as an overseas contract worker;

(D) An alien individual, whether a resident or not of the Philippines, is taxable only on income derived from sources within the Philippines;

(E) A domestic corporation is taxable on all income derived from sources within and without the Philippines; and

(F) A foreign corporation, whether engaged or not in trade or business in the Philippines, is taxable only on income derived from sources within the Philippines.

Source.

Andrew SheldonNZ Property Guide Philippine Real Estate GuideForeclosed Japan GuideApplied Critical Thinking, Strategy, Integrity Investments SheldonThinks

Education - a barrier to Philippines development

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Education is a big problem and opportunity in the Philippines. The standards of education are really quite poor. There are numerous facets to this problem, and the biggest perhaps does not start with teachers but with parents. The problem for many parents is creating an environment for learning in the home. The Filipino family is so indulgent and unstructured from my experience. Parents really take no steps to extend the knowledge of their children beyond their own shortcomings. Kids simply run around the yard chaotically. There is no sense of purpose, no plan and no structure. There is also no peace in which to engage in study for those who are able to establish a sense of purpose.
The social context in which kids participate is no better. If kids talk about serious conceptual issues with their children, then they will carry these ideas into the playground. If that education is lacking from amongst the majority of kids, then they will either be alienated for such talk, or they will drift into groups whom they can more comfortably relate. If there is no such group, they are unlikely to develop those skills, unless they are lucky enough to find the company of adults who support them.
From the perspective of formal education, the big problem is the nation's teachers are not particularly well-trained, and the students lack structure and general knowledge. This is going to slow the pace of learning. More particularly it is going to kinder more conceptual development. Abstract and critical thinking skills which play a big part in developing Western education are largely absence. They are not too prevalent in Western cultures either, but in Asia, they are essentially absent.
This is precisely the reason why Asia needs to introduce Western educational standards, and yet in the Philippines the constitution prevents Western interests from participating in education; at least from an equity standpoint. This fact poses a great opportunity cost to Filipinos in several respects:
1. The best and brightest in the Philippines are being denied the opportunity to fully develop their minds. In addition they are made to feel inadequate when they achieve degrees in engineering in the Philippines, then realise their general knowledge is below some technician from a Western nation. They suffer the indignity of having to ask the technician how to do their job, even though they might be getting paid more. They get these jobs in the West only because they are very cheap labour, because there is a skills shortage, or no one will live in the conditions they are willing to tolerate.
2. There are a great many students in Asia (i.e. Not just the Philippines) who go to Western countries looking for a better quality of education. If they take these opportunities, they are less likely to go back to the Philippines.

The implication is that the Philippines is denied better educational standards which would otherwise give their people a better opportunity to earn more money and achieve higher levels of productivity. They are also being negatively impacted in terms of personal or cognitive development, such that when they step out of their 'deprived nation' they are made to feel inadequate or unprepared for their shame of not being given the best chance for success. This is an unnecessary state of affairs, and it is just one of the reasons why the Philippines Constitution needs to be repealed, and a more appropriate framework for personal development established.

Another silly provision in the constitution prevents foreigners from investing in land in the Philippines. As a result, Filipino pastures go under-utilised, development opportunities are overlooked and Filipinos who remain under-employed or unemployed grow impatient waiting for their opportunity. The Philippines as a result has high levels of alcoholism and simply low productivity since many are not raised in a culture where they have had to work.

Andrew Sheldon
NZ Property Guide
Philippine Real Estate Guide
Foreclosed Japan Guide
Applied Critical Thinking, Strategy, Integrity Investments SheldonThinks

The job opportunities in the Philippines

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The appeal of the Philippines is that it is like no other country. Consider its unique features:
1. The people is English speaking - only the poorest cannot understand much. They have good fluency and they even have the American accent. There is of course a learning curve for Filipinos to take on more value-added roles, but expect in a number of years for Filipinos to be performing a number of your business outsourcing roles, e.g. accounting, sales, telephone technical support, etc.
2. The people are amicable - they have a positive and friendly personality; and more generally they have values not too far removed from the Western world; at least compared to the rest of Asia. This makes them particularly well suited to sales tele support roles. I recall a Telstra call promoting their telco services in Australia. My father answered the call, and was having a pushy Indian trying to cajole him to buy some service.
3. They are lifestyle orientated - which means you can expect good staff retention because they want to retain relationships more than climb the corporate ladder. India, the Philippines main competitor in this area suffers from poor retention rates. Indians are far more likely to aspire for more, so for business service providers its difficult to perform it.

There are obstacles as well. The Philippine work ethic more closely resembles the Spanish culture from which is drew its greatest influence. That said, the university population is more aspirational than the general perception one might draw driving around a slump or some provincial images which might permeate our minds walking the streets.

The outlook for the Philippines is rather good. The country is starting to develop some of its mineral resources, and remittances remain a strong & important contributor to the economy.
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Andrew Sheldon
Investment eBooks
NZ Property Guide
Philippine Real Estate Guide
Foreclosed Japan Guide
Mining Stocks Guide
Applied Critical Thinking, Strategy, Integrity Investments SheldonThinks

Yields on Philippine rental apartments

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The Philippine property market is looking very strong. According to Global Property Guide the yield on an aprtment in Manila is around 9% per annum, making it the 6th best yields in the world. The best yields are on property in Jakarta (Indonesia) and Lima (Peru), which are offering 12% yields. I would suggest however that some regional cities in the Philippines offer far better investment returns. Lipa City near the commercial port of Batangas and the Subic Economic Zone are areas which will benefit from satellite developments to the Metro Manila area. Further afield, you can expect places like Lucena City (Quezon), Naga City (Bohol) and Lauag City (Ilocos Norte), Davao City among others to perform very well as well. Improving infrastructure in the Philippines will see call centres placed in these areas in future, and expect these developments to result in a rapid rise in relatively high paid jobs, as well as new entertainment precincts. The most attractive areas are those with recognised universities like La Salle Lipa City. Foreigners will appreciate the improved facilities in these places as well. Lipa City already has 3 shopping malls, new tollway connections to Batangas and Manila. It also has the advantage of higher elevation, so its an attractive place to live. Part of its appeal is that its not as high as Tagaytay, so its not covered in rain clouds, making it an attractive place to live. Its perched on the edge of the Taal Volcano, though not so close that you have to worry, and being to the south, the city is likely avoid any unlikely prospect of a volcaniclastic eruption. Lipa is close to Batangas, Manila, as well as those tourist areas like Nusugbu, Tagatyay and Puerto Gallera. The improvement to the tollway to Manila means it can take just 1 hour and 15mins to get to Manila. Ten years ago the same trip would have taken you 4 hours; 2 years ago it would haven taken 2 hours. This should be important information to prospective investors looking for places to invest. Lucena City is currently isolated from Manila. In another 10 years the freeway might well stretch to Lucena City, which will also place that city in far closer proximity to Manila, but also Lipa, which is also likely to benefit from any development by Manny Villar in the Eton City - Calamba City area.
You can learn more about buying in the Philippines from our Philippines Property report 2008. Buyers of this report will receive the 2010 (2nd edition) free when it is complete. The Philippines is confronting a presidential election in May 2010, so that will be something to watch. There should be no big surprises on the downside, though I suspect better leadership could see the Philippines attract a RE-RATING in future years.

Buying property in the Philippines

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According to a survey by Global Property Guide the Philippines ranks in 3rd place with the best yields on property - with Jakarta and Lima (Peru) in 1st and 2nd places. The average yield for a property in Manila is 10.99%. I much prefer the Philippines for lifestyle reasons and because of a number of other reasons:
1. Greater regulation means restrictions on where you build - so prospect of restricted property development looking forward
2. Strong population growth - this country is growing at 2% per annum, that's almost 2mil people a year
3. Job creation - The Philippines is the preferred business outsourcing base because Filipinos are the best diplomats. Laxed work ethic aside, they have potential for more of this 'structural' shifting of jobs from the west.
4. Remittance - A great deal of money is flowing from expats abroad to the home country, as well as BFs sending GFs money.
5. Reform - The Philippines government on balance is getting its act together. Infrastructure is being built. The country could do with some ports reform, but is otherwise on a positive path. I note that they are increasingly building infrastructure for tourism around the country.
6. China proximity - The Philippines is close to some of the biggest and fastest growing countries in the world, so some of the benefits can be expected to rub off in terms of trade and tourism. There is a new airport flight from Lauag (Ilocos Norte) to China, and expect more of these links to draw tourists. Not just China, but Korea and Japan.
7. Tourist friendly - The Philippines is without a doubt the most tourist friendly country in the world. They are very diplomatic and engaging. Great sense of life, very personable. Gradually you can expect them to get their service culture in place, and a worth ethic. Better still - you can stay in the country on a tourist visa for 18 months without even leaving. Try doing that in Indonesia.

My advice is to check out some of the rural cities - as opposed to focusing on the Manila. My picks are Naga City, Vigan City, Lucena City and Davao City. If you need more info on buying property in the Philippines, I have written a 2 volume eBook "Buying Phililppines Property" on the topic. See my bookstore for more information. Currently updating the late 2008 edition - so I'm forwarding the 2010 edition to those who purchase the 2008 edition.