A stunning reversal of fortune is one way of describing the predicament Finance Minister Rod Gantefoer finds himself in halfway through the fiscal year that began with so much promise.
Even Gantefoer admitted that the elephant in the room -- the finance ministry's projected potash revenue of $1.9 billion -- was something that he worried about from Day One.
"I said when I tabled the budget that the one thing that was going to keep me awake was potash," Gantefoer told reporters. "I didn't think it would end up turning into a bit of a nightmare."
A nightmare is another way of describing the sickening feeling of seeing $1.9 billion in projected revenues plummet by two-thirds to $638 million in the first quarter, then plunge another 83 per cent to $109 million by mid-term.
A sickening slide also describes what happened to the finance ministry's projected potash production, which fell 62 per cent to 4.4 million tonnes, the lowest level in 37 years.
The ministry's miscalculation on potash shaved two percentage points off the province's projected economic growth of 2.1 per cent in the 2009-10 budget. Economic growth is now expected to come in at negative 2.9 per cent -- a full five-percentage-point drop from the budget projection.
For its part, the NDP Opposition called Gantefoer's gaffe "the biggest example of fiscal incompetence in the history of Saskatchewan.'' In absolute dollar terms, it may be.
From a projected deficit of $25 million (on a summary basis, which includes Crown corporations), the ministry is now forecasting a deficit of $1.05 billion in 2009-10 -- an unbudgeted $1-billlion shortfall.
NDP finance critic Trent Wotherspoon lays the blame for the province's current fiscal and economic problems clearly at the feet of Gantefoer and the Saskatchewan Party government. "This is a problem of the Wall government's own making,'' Wotherspoon said, citing "irresponsible revenue projections,'' equity stripping in the Crowns and "out of-control'' government spending.
So are Gantefoer and the Sask. Party government entirely to blame for the mess they find themselves in? With the benefit of hindsight, it goes without saying that the budget's economic and fiscal projections were far too rosy.
The more important question is: Were there signs that those projections were too optimistic even before the budget went to the printers?
Certainly, private economic forecasters were already signalling that the budget's economic projections were unrealistic.
According to the budget, the average of eight private sector forecasts was one-per-cent economic growth in 2009. And two of those forecasts had since been lowered (RBC from 2.8 per cent in January to 0.9 per cent and Scotiabank 0.6 per cent zero per cent, which would have lowered the average to 0.66 per cent).
Yet, contrary to previous practice, the finance ministry projected economic growth of 2.1 per cent -- more than twice the average of the private sector forecasts.
That's largely because they believed that potash prices and production would remain on par or higher than 2008 levels.
For example, the budget projected potash prices to average $550 US per tonne in 2009, $100 US higher than 2008, while potash production was projected to remain unchanged at 10 million tonnes. Instead, potash prices came in about $100 US per tonne lower than last year and production about 60-per-cent lower.
At the time, then-NDP finance critic Harry Van Mulligen warned production cuts announced by potash companies could easily derail the budget's revenue and economic projections.
"Bottom line,'' Van Mulligen said, "shaky economic and revenue assumptions, plus runaway spending, equals a potential fiscal trainwreck.''
As it turns out, Van Mulligen was remarkably prescient, unlike his counterpart in the government benches.
While Gantefoer can be excused for not forecasting the unprecedented cutbacks in potash production, he stands guilty as charged for failing to moderate his overly optimistic budget projections, despite the mounting evidence to the contrary.
Source: leaderpost.com
Saturday, November 21, 2009
7 finance meeting will be hosted at Iqaluit
The capital of Nunavut will host a major meeting of G7 finance ministers and central bank governors in February, federal officials announced Wednesday.
The Iqaluit meeting, slated for Feb. 5-6, will be the first of a series of important finance meetings to be held in Canada in 2010, Finance Minister Jim Flaherty told reporters in Ottawa.
It will be followed by the G8 and G20 leaders' summits to be held in June.
Flaherty said the G7 colleagues he spoke to in Italy last summer all expressed interest in travelling to Canada's Far North for the February meeting.
"We have to limit the size of the delegations so that we can use Iqaluit, but I'm really looking forward to showing my colleagues from around the world the beauty of the Canadian Arctic in February," he said.
"It's spectacularly pristine and gorgeous. And yes, it's very cold."
Flaherty was joined by Health Minister Leona Aglukkaq, the Conservative MP for Nunavut, at Wednesday's announcement.
The meeting will include discussion on actions to strengthen the global economy, ways of following through on financial sector reforms, and ways to strengthen international financial institutions.
G7 members include Canada, the United States, Britain, France and Germany, Italy and Japan.
Flaherty, who last visited Iqaluit with Prime Minister Stephen Harper in August, acknowledged that his counterparts from countries such as France, Japan and Italy may be shocked by Canada's cold winter conditions, especially in the Far North.
"I promised I would get them big coats and dress them properly," he said.
Flaherty said he is also not fazed by the possibility that a February blizzard could affect travel to and from the Nunavut captial.
"I've been stuck in a blizzard in Toronto in February," he remarked. "I mean, this is Canada, after all."
Source: cbc.ca
The Iqaluit meeting, slated for Feb. 5-6, will be the first of a series of important finance meetings to be held in Canada in 2010, Finance Minister Jim Flaherty told reporters in Ottawa.
It will be followed by the G8 and G20 leaders' summits to be held in June.
Flaherty said the G7 colleagues he spoke to in Italy last summer all expressed interest in travelling to Canada's Far North for the February meeting.
"We have to limit the size of the delegations so that we can use Iqaluit, but I'm really looking forward to showing my colleagues from around the world the beauty of the Canadian Arctic in February," he said.
"It's spectacularly pristine and gorgeous. And yes, it's very cold."
Flaherty was joined by Health Minister Leona Aglukkaq, the Conservative MP for Nunavut, at Wednesday's announcement.
The meeting will include discussion on actions to strengthen the global economy, ways of following through on financial sector reforms, and ways to strengthen international financial institutions.
G7 members include Canada, the United States, Britain, France and Germany, Italy and Japan.
Flaherty, who last visited Iqaluit with Prime Minister Stephen Harper in August, acknowledged that his counterparts from countries such as France, Japan and Italy may be shocked by Canada's cold winter conditions, especially in the Far North.
"I promised I would get them big coats and dress them properly," he said.
Flaherty said he is also not fazed by the possibility that a February blizzard could affect travel to and from the Nunavut captial.
"I've been stuck in a blizzard in Toronto in February," he remarked. "I mean, this is Canada, after all."
Source: cbc.ca
Thursday, August 6, 2009
Tenn. finance head says state faces more cuts
NASHVILLE, Tenn. -- Tennessee Finance Commissioner Dave Goetz said Wednesday that continued poor sales tax revenue means state departments will likely have to make more cuts.
Goetz told the state legislative Fiscal Review Committee that the state is experiencing the "fourth month in a row of double-digit sales tax losses." Sales taxes are about 60 percent of the state's money.
As a result, the commissioner said state departments won't be receiving $56.1 million that had been appropriated in the governor's budget. Reception of the money was contingent on whether the state met certain budget expectations for this year, but Goetz said projections have been complicated by the sales tax losses.
However, if the economy should take a turn for the better and revenue improves, Goetz said state departments could receive the money.
"If the economy comes back ... these funds don't have to be withheld," he said. "But we won't know that for a long time."
State Sen. Bill Ketron, a Murfreesboro Republican and chairman of the Fiscal Review Committee, said he agrees with releasing the funds if the economic climate improves, but warns state departments should be careful in their spending because cuts are still expected next year.
"When it comes back to them, I think they need to be very conservative ... in knowing that there are going to be possibly more cuts," Ketron said.
Goetz said state officials are currently reviewing departments' plans on how they intend to operate on the budgets they've been allotted. He said much of the savings are through not filling vacancies, and that Tennesseans will likely be affected by "responsiveness in agencies because of the vacancies."
"It's the nature of where we are," he said. "Our employees are stepping up and doing the best they can, but it may take a little longer to get some things done."
The agency hit hardest by withholding funding is TennCare, the state's expanded Medicaid program. It was to receive $20 million, but Goetz said services provided by the program shouldn't be affected because it still has millions of dollars in "reserves to fall back on."
Last month, Goetz sent out a memo to all state agency heads urging them to manage responsibly.
For instance, they were asked to limit in-state travel, and out-of-travel was to be for "emergency or mandatory situations only."
Source: forbes.com
Goetz told the state legislative Fiscal Review Committee that the state is experiencing the "fourth month in a row of double-digit sales tax losses." Sales taxes are about 60 percent of the state's money.
As a result, the commissioner said state departments won't be receiving $56.1 million that had been appropriated in the governor's budget. Reception of the money was contingent on whether the state met certain budget expectations for this year, but Goetz said projections have been complicated by the sales tax losses.
However, if the economy should take a turn for the better and revenue improves, Goetz said state departments could receive the money.
"If the economy comes back ... these funds don't have to be withheld," he said. "But we won't know that for a long time."
State Sen. Bill Ketron, a Murfreesboro Republican and chairman of the Fiscal Review Committee, said he agrees with releasing the funds if the economic climate improves, but warns state departments should be careful in their spending because cuts are still expected next year.
"When it comes back to them, I think they need to be very conservative ... in knowing that there are going to be possibly more cuts," Ketron said.
Goetz said state officials are currently reviewing departments' plans on how they intend to operate on the budgets they've been allotted. He said much of the savings are through not filling vacancies, and that Tennesseans will likely be affected by "responsiveness in agencies because of the vacancies."
"It's the nature of where we are," he said. "Our employees are stepping up and doing the best they can, but it may take a little longer to get some things done."
The agency hit hardest by withholding funding is TennCare, the state's expanded Medicaid program. It was to receive $20 million, but Goetz said services provided by the program shouldn't be affected because it still has millions of dollars in "reserves to fall back on."
Last month, Goetz sent out a memo to all state agency heads urging them to manage responsibly.
For instance, they were asked to limit in-state travel, and out-of-travel was to be for "emergency or mandatory situations only."
Source: forbes.com
Shriram Finance joins hands with small players, beats slowdown
Three years ago, Deepak Dugar of Mahaveer Finance India, a Chennai-based private financier of light commercial vehicles (LCVs), had about 1,000 customers but not enough funds to service them. Today, his customer count has more than doubled to about 2,500, and funding problems are more or less a thing of the past.
Dugar gives credit to their franchise tie-up with Shriram Transport Finance for the buoyancy in business. “Earlier, funds were a major problem since banks were the only avenue and we had strict limits. So, then we couldn’t service more than 800-1,000 customers. The partnership with Shriram has helped double our business and improve profitability,” he says.
Shriram Transport Finance is one of the few organised financiers of used commercial vehicles in the country. According to its Managing Director R Sridhar, tie-ups with small private financiers are beneficial to both sides as cash-strapped small players get access to funds, while Shriram Transport gets the opportunity to tap local customer networks.
Besides Dugar, Shriram Finance has tied up with about 500 other private financiers across the country. Now, almost 10 per cent of Shriram Transport Finance’s loans flow through this channel and the firm is keen on growing its network. As part of the arrangement, the smaller partner is responsible for acquiring customers, collecting payments and pitching in with about 10-20 per cent of the loan amount. The remaining part of the loan is extended by Shriram Transport Finance. Profits or loss above the minimum internal rate of return (IRR) is shared 50:50.
Sridhar claims that innovative business models and the firm’s niche focus have helped Shriram Finance tide over the downturn that pulled down annual sales of new commercial vehicles by 29 per cent in 2008-09. Bankers corroborate Sridhar’s claim by saying that the new commercial vehicle financing industry has seen a drop of 30-35 per cent since the beginning of the year. Players such as IndusInd Bank say the year-on-year growth in their portfolios has been only 10-15 per cent. The country’s largest private lender, ICICI Bank, has shrunk its commercial vehicle loanbook by about 10 per cent in the June quarter on a sequential basis.
The country’s largest lender, State Bank of India, says unlike heavy commercial vehicles, demand for finance of LCVs has improved, driven by rural areas.
Since Shriram Finance has a strong network in rural India, the company stands to gain. It’s so because financing of pre-owned commercial vehicles rests mostly in the hands of private financiers. Banks consider this category of loans high-risk, because the owners are mini-truck operators who drive their own vehicles. Such vehicles usually ply short distances of less than 200 km and are used to transfer essential commodities.
However, 90 per cent of loans disbursed by Shriram Finance, which has assets worth Rs 24,274.87 crore as of June 30, 2009, are to this segment, which has proved relatively resilient to the slowdown.
For Shriram Finance, although the pace of growth in operating income has slowed to 23 per cent in the June 2009 quarter from 74 per cent a year ago, it is still a respectable percentage given the present economic environment. It has also managed to maintain a net interest margin, or the percentage difference between interest earned on loans and that paid on funds, of 6.5 per cent in the June quarter and restricted non-performing assets (NPAs) to 2.2 per cent of total advances. This is despite having an incremental cost of funds of 10.5 per cent—significantly higher than that for banks, which have access to low-cost retail deposits.
Shriram Transport Finance is able to maintain such strong margins because loans in the used commercial vehicles segment are issued at interest rates in the range of 18-24 per cent, while the coupon for new commercial vehicles is lower at 15-16 per cent. Pricing pressure from competition is not an issue because the only other players in this segment are private financiers, who lend at rates as high as 30 per cent.
However, Sridhar says the firm’s objective is not necessarily to increase margins, but to bring down the cost of financing for his customers.
“We lend to a segment which has no banking habits and no one else in the organised sector is willing to lend to them because they are considered extremely risky. We encourage our customers to become bankable and upgrade to new vehicles so that they can access cheaper financing from banks,” he says.
Source: business-standard.com
Dugar gives credit to their franchise tie-up with Shriram Transport Finance for the buoyancy in business. “Earlier, funds were a major problem since banks were the only avenue and we had strict limits. So, then we couldn’t service more than 800-1,000 customers. The partnership with Shriram has helped double our business and improve profitability,” he says.
Shriram Transport Finance is one of the few organised financiers of used commercial vehicles in the country. According to its Managing Director R Sridhar, tie-ups with small private financiers are beneficial to both sides as cash-strapped small players get access to funds, while Shriram Transport gets the opportunity to tap local customer networks.
Besides Dugar, Shriram Finance has tied up with about 500 other private financiers across the country. Now, almost 10 per cent of Shriram Transport Finance’s loans flow through this channel and the firm is keen on growing its network. As part of the arrangement, the smaller partner is responsible for acquiring customers, collecting payments and pitching in with about 10-20 per cent of the loan amount. The remaining part of the loan is extended by Shriram Transport Finance. Profits or loss above the minimum internal rate of return (IRR) is shared 50:50.
Sridhar claims that innovative business models and the firm’s niche focus have helped Shriram Finance tide over the downturn that pulled down annual sales of new commercial vehicles by 29 per cent in 2008-09. Bankers corroborate Sridhar’s claim by saying that the new commercial vehicle financing industry has seen a drop of 30-35 per cent since the beginning of the year. Players such as IndusInd Bank say the year-on-year growth in their portfolios has been only 10-15 per cent. The country’s largest private lender, ICICI Bank, has shrunk its commercial vehicle loanbook by about 10 per cent in the June quarter on a sequential basis.
The country’s largest lender, State Bank of India, says unlike heavy commercial vehicles, demand for finance of LCVs has improved, driven by rural areas.
Since Shriram Finance has a strong network in rural India, the company stands to gain. It’s so because financing of pre-owned commercial vehicles rests mostly in the hands of private financiers. Banks consider this category of loans high-risk, because the owners are mini-truck operators who drive their own vehicles. Such vehicles usually ply short distances of less than 200 km and are used to transfer essential commodities.
However, 90 per cent of loans disbursed by Shriram Finance, which has assets worth Rs 24,274.87 crore as of June 30, 2009, are to this segment, which has proved relatively resilient to the slowdown.
For Shriram Finance, although the pace of growth in operating income has slowed to 23 per cent in the June 2009 quarter from 74 per cent a year ago, it is still a respectable percentage given the present economic environment. It has also managed to maintain a net interest margin, or the percentage difference between interest earned on loans and that paid on funds, of 6.5 per cent in the June quarter and restricted non-performing assets (NPAs) to 2.2 per cent of total advances. This is despite having an incremental cost of funds of 10.5 per cent—significantly higher than that for banks, which have access to low-cost retail deposits.
Shriram Transport Finance is able to maintain such strong margins because loans in the used commercial vehicles segment are issued at interest rates in the range of 18-24 per cent, while the coupon for new commercial vehicles is lower at 15-16 per cent. Pricing pressure from competition is not an issue because the only other players in this segment are private financiers, who lend at rates as high as 30 per cent.
However, Sridhar says the firm’s objective is not necessarily to increase margins, but to bring down the cost of financing for his customers.
“We lend to a segment which has no banking habits and no one else in the organised sector is willing to lend to them because they are considered extremely risky. We encourage our customers to become bankable and upgrade to new vehicles so that they can access cheaper financing from banks,” he says.
Source: business-standard.com
UPDATE 1-Romanian finance min sure IMF will OK deficit hike
BUCHAREST, Aug 5 (Reuters) - Romania's Finance Minister said on Wednesday he was 'convinced' the International Monetary Fund will allow the country to run a bigger budget deficit this year, as the economy could contract by up to 8.5 percent.
'In 2009, the deficit could reach 7 percent of GDP,' Gheorghe Pogea was quoted as saying by state news agency Agerpres, referring to the country's gross domestic product.
An IMF mission is in Bucharest until Aug. 10, reviewing the European Union member's progress in meeting conditions attached to a 20 billion euro aid deal secured in March.
The deal set a 2009 budget shortfall of 4.6 percent of GDP based on a forecast for the economy to shrink 4.1 percent.
Conditions have deteriorated sharply since the deal was agreed, however, as the global financial crisis slashed both demand and lending, and the contraction is now seen more than doubling.
'The global recession ... will lead to an economic contraction that may reach 8 to 8.5 percent, and the first impact will be a drop in public revenues,' Pogea told reporters after a meeting of the center-left government.
'As a result, we will discuss with the IMF about raising the deficit, and I am firmly convinced that they will accept, but at the same time, we must certainly enforce structural reforms that will ensure budget balance.'
This week, the IMF's mission chief said the Fund will be flexible with Bucharest. However, the government must enforce deep reforms of its public administration, which employs about a third of Romania's total workforce of around 5 million people and is seen as bloated and largely inefficient.
On Wednesday, Prime Minister Emil Boc said the cabinet will thin out the state sector by cutting or merging state agencies, which will lead to a little more than 9,000 job losses.
He also said Romania will stick to its calendar for IMF-prescribed public sector reforms. A single wage bill should be approved in October, while pension reform should occur by December at the latest.
'These are laws that will shake the Romanian public system to its core,' Boc said.
Source: forbes.com
'In 2009, the deficit could reach 7 percent of GDP,' Gheorghe Pogea was quoted as saying by state news agency Agerpres, referring to the country's gross domestic product.
An IMF mission is in Bucharest until Aug. 10, reviewing the European Union member's progress in meeting conditions attached to a 20 billion euro aid deal secured in March.
The deal set a 2009 budget shortfall of 4.6 percent of GDP based on a forecast for the economy to shrink 4.1 percent.
Conditions have deteriorated sharply since the deal was agreed, however, as the global financial crisis slashed both demand and lending, and the contraction is now seen more than doubling.
'The global recession ... will lead to an economic contraction that may reach 8 to 8.5 percent, and the first impact will be a drop in public revenues,' Pogea told reporters after a meeting of the center-left government.
'As a result, we will discuss with the IMF about raising the deficit, and I am firmly convinced that they will accept, but at the same time, we must certainly enforce structural reforms that will ensure budget balance.'
This week, the IMF's mission chief said the Fund will be flexible with Bucharest. However, the government must enforce deep reforms of its public administration, which employs about a third of Romania's total workforce of around 5 million people and is seen as bloated and largely inefficient.
On Wednesday, Prime Minister Emil Boc said the cabinet will thin out the state sector by cutting or merging state agencies, which will lead to a little more than 9,000 job losses.
He also said Romania will stick to its calendar for IMF-prescribed public sector reforms. A single wage bill should be approved in October, while pension reform should occur by December at the latest.
'These are laws that will shake the Romanian public system to its core,' Boc said.
Source: forbes.com
How suite it is to be Council Finance chief
When times are tough, most people forget about remodeling. If the carpeting has holes and the paint is peeling, they live with it.
Not Chicago's most powerful alderman. Finance Committee Chairman Edward M. Burke (14th) is freshening up his third-floor suite at City Hall.
New carpeting is being installed to eliminate the need to cover holes with duct tape. Walls are being re-painted. A "small number" of chairs and cubicles are being replaced.
Acting General Services Commissioner Mark Maloney offered no cost estimate on the Finance Committee project.
"I was not aware that we were doing any work down there," he said.
Finance Committee spokesman Donal Quinlan also provided no budget. But he insisted that the touch-up was justified -- even after an early '90s remodeling that created a giant conference room in the suite.
"The Finance Committee was last re-carpeted in 1993-94. We have at least seven areas of carpeting that are torn. Many of them are patched over with wide, unsightly silver duct tape so people don't trip," Quinlan said, after taking a reporter on a tour of the office suite.
"See all these spots -- these taped wide areas. . . . And as you can see, some stains just won't come out."
No matter what the cost, the touch-up comes at the worst possible time from a public relations standpoint. Most of Chicago's unionized employees have been forced to take unpaid days off and make other cost-cutting concessions.
Source: suntimes.com
Not Chicago's most powerful alderman. Finance Committee Chairman Edward M. Burke (14th) is freshening up his third-floor suite at City Hall.
New carpeting is being installed to eliminate the need to cover holes with duct tape. Walls are being re-painted. A "small number" of chairs and cubicles are being replaced.
Acting General Services Commissioner Mark Maloney offered no cost estimate on the Finance Committee project.
"I was not aware that we were doing any work down there," he said.
Finance Committee spokesman Donal Quinlan also provided no budget. But he insisted that the touch-up was justified -- even after an early '90s remodeling that created a giant conference room in the suite.
"The Finance Committee was last re-carpeted in 1993-94. We have at least seven areas of carpeting that are torn. Many of them are patched over with wide, unsightly silver duct tape so people don't trip," Quinlan said, after taking a reporter on a tour of the office suite.
"See all these spots -- these taped wide areas. . . . And as you can see, some stains just won't come out."
No matter what the cost, the touch-up comes at the worst possible time from a public relations standpoint. Most of Chicago's unionized employees have been forced to take unpaid days off and make other cost-cutting concessions.
Source: suntimes.com
Move on nonperforming state firms put on hold amid economic crisis
THE GOVERNMENT is not inclined to abolish any state-run firm while the country is reeling from an economic slowdown, since this would lead to job losses, the Finance department said.
"None. None for now. Because of the crisis, we cannot close any corporation," Finance Undersecretary Jeremias N. Paul said in a chance interview last Tuesday.
Mr. Paul, who heads the department’s corporate affairs group, claimed that they are already undertaking reforms to improve the management of government-owned companies.
Separately, Finance Secretary Margarito B. Teves said timing should be considered in deciding whether a state entity should be shuttered, given that the government is trying to preserve jobs to mitigate the impact of the global downturn.
Least cost
The Finance chief, however, maintained that in the long-run, the operation of state-owned firms should not be burdensome to taxpayers.
"In terms of what needs to be done over the long-term, we still go by the principle that we have to maintain GOCCs (government owned and controlled corporations) at the least cost possible to taxpayers," Mr. Teves said.
He added that the abolition of GOCCs may take time as this would have to undergo the usual process of legislating new measures.
"Abolition would require congressional approval since these GOCCs were created by Congress," Mr. Teves said.
The government aim is to make GOCCs financially independent.
For now, however, it is continuously providing them funding support to enable them to invest in areas that are not usually attractive to the private sector like rural electrification and socialized housing.
Earlier, Manila-based multilateral lender Asian Development Bank (ADB) scored the government for its supposed failure to reduce bleeding state firms, noting that some of these are suffering from weak institutional and regulatory frameworks.
ADB also urged the government to dissolve nonperforming corporations or to privatize them to ensure that these are not eating much funds from the government coffers.
Mr. Teves had previously said that his department will assess the performance of state-owned firms to see if they should be retained or deactivated.
He said he will not hesitate to recommend to Congress the closure of firms that pose burden to the public, whose taxes are being used to support their operations.
Subsidies double
Last month, the Finance Department reported that subsidies disbursed to state-run firms in the first half almost doubled from last year.
This, as the government also spent on infrastructure and social services to help prod private consumption and other economic activity amid the global slump that is not expected to ease until later next year.
Funds released to GOCCs and government financial institutions (GFIs) totaled P6.98 billion in the first six months, up by 90% from P3.67 billion last year.
On a month-on-month basis, subsidies extended to GOCCs and GFIs reached P1.95 billion in June, more than double the P942 million disbursed in May.
The top recipients of national government funds as of June were the National Housing Authority (P2.37 billion), National Home Mortgage Finance Corp. (P900 million), National Irrigation Administration (P892 million), National Electrification Administration (P509 million) and Philippine National Railways (P349 million). Other top recipients were the Philippine Coconut Authority (P322 million), Philippine Rice Research Institute (P210 million), National Livelihood Development Corp. (P200 million), the National Kidney Transplant Institute (P143 million), the Cultural Center of the Philippines (P128 million), the Philippine Children’s Medical Center (P126 million) and the Philippine Heart Center (P120 million). — Alexis Douglas B. Romero
Source: bworldonline.com
"None. None for now. Because of the crisis, we cannot close any corporation," Finance Undersecretary Jeremias N. Paul said in a chance interview last Tuesday.
Mr. Paul, who heads the department’s corporate affairs group, claimed that they are already undertaking reforms to improve the management of government-owned companies.
Separately, Finance Secretary Margarito B. Teves said timing should be considered in deciding whether a state entity should be shuttered, given that the government is trying to preserve jobs to mitigate the impact of the global downturn.
Least cost
The Finance chief, however, maintained that in the long-run, the operation of state-owned firms should not be burdensome to taxpayers.
"In terms of what needs to be done over the long-term, we still go by the principle that we have to maintain GOCCs (government owned and controlled corporations) at the least cost possible to taxpayers," Mr. Teves said.
He added that the abolition of GOCCs may take time as this would have to undergo the usual process of legislating new measures.
"Abolition would require congressional approval since these GOCCs were created by Congress," Mr. Teves said.
The government aim is to make GOCCs financially independent.
For now, however, it is continuously providing them funding support to enable them to invest in areas that are not usually attractive to the private sector like rural electrification and socialized housing.
Earlier, Manila-based multilateral lender Asian Development Bank (ADB) scored the government for its supposed failure to reduce bleeding state firms, noting that some of these are suffering from weak institutional and regulatory frameworks.
ADB also urged the government to dissolve nonperforming corporations or to privatize them to ensure that these are not eating much funds from the government coffers.
Mr. Teves had previously said that his department will assess the performance of state-owned firms to see if they should be retained or deactivated.
He said he will not hesitate to recommend to Congress the closure of firms that pose burden to the public, whose taxes are being used to support their operations.
Subsidies double
Last month, the Finance Department reported that subsidies disbursed to state-run firms in the first half almost doubled from last year.
This, as the government also spent on infrastructure and social services to help prod private consumption and other economic activity amid the global slump that is not expected to ease until later next year.
Funds released to GOCCs and government financial institutions (GFIs) totaled P6.98 billion in the first six months, up by 90% from P3.67 billion last year.
On a month-on-month basis, subsidies extended to GOCCs and GFIs reached P1.95 billion in June, more than double the P942 million disbursed in May.
The top recipients of national government funds as of June were the National Housing Authority (P2.37 billion), National Home Mortgage Finance Corp. (P900 million), National Irrigation Administration (P892 million), National Electrification Administration (P509 million) and Philippine National Railways (P349 million). Other top recipients were the Philippine Coconut Authority (P322 million), Philippine Rice Research Institute (P210 million), National Livelihood Development Corp. (P200 million), the National Kidney Transplant Institute (P143 million), the Cultural Center of the Philippines (P128 million), the Philippine Children’s Medical Center (P126 million) and the Philippine Heart Center (P120 million). — Alexis Douglas B. Romero
Source: bworldonline.com
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