Demolition Man

I can still remember the 1993 American film Demolition Man where Sylvester Stallone faced off Wesley Snipes in a science-fiction-war-thriller movie set in 2032. The forces between good and evil, between light and darkness, is captured vividly in the film while it puts forward the idea that one can coexist with the other even in the mind of a single person. In movies of this plot, the protagonist is always the one at the fold of the law, the one that is just, the one who asserts its rightful power against the other.

But as I write this piece, I no longer refer to that police officer played by Stallone in the movie. I refer to one person who has, after all these years, shown what political will is all about. I must admit I am never a fan of this man. I was very critical of his administration when he ‘ruled’ the island of Panglao when I was still studying university. But he is the modern-day Demolition Man.

His name is Benedicto ‘Dodong’ Alcala, three-term mayor in the municipality of Panglao in the 1990’s, slid back to head the local Sanggunian when he was no longer legally qualified to run, and now currently the mayor of the town. To an extent he is responsible for the how local politics in Panglao has been tremendously changed, not for the better though, in recent years, but now seemed to redeem his place as a worthy and respected individual in politics.

I should stay I have become a great fan of him with his recent move to actually lead the demolition team in Panglao’s famous beach named after movie star Alona Alegre – Alona Beach. The demolition, rightly done as the owners of structures are violators of the 20 meter salvage zone, was conducted in the second week of June this year, amidst protests from affected resort owners as well as a collective legal action to suspend the implementation of the law. (Article 51 of the Water Code of the Philippines requires the removal of structures within the 20 meter salvage zone area).

The move was long overdue, and the Environment rightfully deserved it. Panglao can’t allow itself to be another Boracay. Besides the problem of waste disposal, more particularly the cleaning of septic tanks, as well as the lack of road access during fire and other emergency hazards, Alona Beach is losing its sand, like an old man confronted with the problem of a receding hairline.

A study conducted by Dr. Winfried Wiedemeyer, who used to work with the Tropical Marine Ecology, Fishery Biology, Aquaculture and Physical Oceanography of the Environment and Natural Resources Management Divison of the province of Negros Oriental in the late 1990s concluded that the main asset of Alona Beach, its white beach is “vanishing at a horrifying speed”. One of the human causes of this is massive extraction of sand at the beach and the putting up of concrete walls and other structures in the area that increased the vulnerability of the beach to sand erosion.

What prompted Mayor Alcala to take the axe and go ahead with implementing the full force of the law?
His opponents in local politics (who surprisingly were his allies before) said it was all politicking. They could very well say this, especially because they were one of those who also violated the legal requirement on easement. Other observers noted that he must have felt the pressure from the provincial government, more particularly from Governor Aumentado who promised to implement the law in the interest of the environment and with sufficient pressure from lobby groups. A businessman said it’s all about business. Mayor Alcala is reportedly supported by hotelier Anos Fonacier, owner of the long-standing Bohol Beach Club, a dominant player in Panglao’s tourism landscape. A close ally to the mayor said that Mayor Alcala was able to do this now because he did not have any interest anymore in running for an elected post in the upcoming elections in 2010.

But for whatever reason, I should credit the man for bravery and courage. It takes a stubborn determination to undertake what he did. If one visits the beach area these days, the remnants of the demolition operations are still evident while a few structures were still spared. To continue what has been started is still a major challenge. Paz Trotin of Bohol Diver’s Resort was reported to have gained a Temporary Restraining Order (TRO) to suspend the demolition at her property. Soon, Mayor Alcala should go on and finish the job when the TRO expires, to make the statement that no one is above the law, rich or poor, big or small.

When all these are over, and the beach area of Panglao is clean and clear of unwanted and illegal structures, we should declare a holiday to honour the man, and the countless and nameless individuals who made this critical event happen.

The Lords of the Ring

(as you read this piece, bear in mind how the arguments can be located in the political landscape of Bohol)

Introduction





Manny Pacquiao’s victory over Hatton in their recent fight gained several descriptions attached to our political development as a nation. National dailies said that his victory once again “unified the nation” or that it showed that “the Philippines still has hope”. Even the Bohol Chronicle said that “we have not had this high feeling since EDSA 1986”, and that “Boholanos back pacman’s politics”.

The Philippine fanaticism in boxing as a sport dates even beyond the time that Gabriel “Flash” Ilorde was proclaimed by the WBC as the “greatest world junior lightweight champion in WBC history” in 1972. Records show that the Philippines had its first international champion in 1925, at a time at which the country was experiencing its painful journey towards autonomy from the United States regime. Coincidentally, it was also the time when local politicians seemed like boxing champions, trying to defend their titles in the political arena from somebody else’s grab, to ensure their place in the government in transition.

Thus, boxing is all too familiar to the Filipino’s political psyche. In Philippine local politics, politicians were likened to boxers by voters who also seemed like spectators of a highly exclusive political fight. Like the lords of the ring, they prepare themselves extensively before a fight, publicize well their match, hire coaches and water bearers as well as cheerers in the crowd, and do all means to secure and keep the belt in however way they can. While analysis of politicians vis-à-vis boxers is not new, it is worthwhile to look into how local bosses in the Philippines act like boxers, by looking into the way they prepare for and keep for themselves a much-coveted prize in local politics.

This paper will compare and contrast three famous and notorious local bosses in Philippine politics, in three different local landscapes and across different time zones – Jejomar Binay of the prime business district of Makati in Luzon, Democrito Plaza of the once logging empire of Agusan in Mindanao, and Ramon Durano of the gun manufacturing city of the province of Cebu in the Visayas. To allow analysis in parsimonious fashion, only two frames of comparison will be used – the manner by which these bosses rise to power and the way by which they ensured to stay there. The intention of the paper is for the reader to find similar patterns here in the beloved province of Bohol, whether our politicians are just lousy copycats of these premier boxers or were able to develop a style distinctively their own.

Similar Beginnings

It is striking to note that Binay, Plaza and Durano do not come from rich, political and influential families. Binay was orphaned at an early age and worked his way through college. Plaza, on the other hand, managed to pass sixth grade and started to farm land for subsistence when he was 19. While Durano seemed to be the best-off among the three, he still was not considered wealthy based on the standards of his time. The three had big dreams in their own fields, Binay wanted to be make a difference in the country, Plaza to be rich, and Durano to become powerful. Each of them, in the pursuit of their desires, went through life in different ways but landed on the same dangerous ground – politics.

Jejomar Binay while finishing law at the University of the Philippines was lured to activism and even continued as a leftist activist during the martial law years. He was reported to have joined a liberation movement, the PLM, and was one of the strongest supporters of Corazon Aquino in her bid for presidency in 1986. After the EDSA revolution that ousted Ferdinand Marcos out of power, Binay, then 44 years old, was blessed to head the country’s rich financial district – the City of Makati. He became its first mayor ( and still is).

Democrito “DO” Plaza, on the other hand entered politics at the prodding of his uncle, once a mayor of a town in Agusan, much to protect the budding logging business rather than serve the people. In 1950, at the age of 35, he became the province’s congressman but later on opted out in the next election to concentrate on the building of his logging empire. However, sensing how other loggers not into politics were left wanting on logging concessions, he made a political comeback in 1967, in Agusan’s bloodiest elections, in alliance with other major loggers known as the Seventh Fleet, and won as governor, a post he occupied until Marcos’ downfall in 1986. Plaza ran again for congress in 1988, won and retained his post until nine years later.

Ramon Durano, the most senior among the three, started out as a high school classroom teacher in Cebu, ran for municipal councillor and won, and later on pursued a degree in law and became a member of the Philippine bar in 1936. After conducting law practice for a while and running a cement company, he tried his first luck in provincial politics and lost. The Japanese occupation of the country halted his political career, but he found a strong comeback in 1949 as Cebu’s first district congressman with the support of Mariano Cuenco. Ramon Durano remained one of Cebu’s influential local politicians despite the number of times he lost, until his death in 1988.

Securing the Prize

It is interesting to look into the political strategies employed by Binay, Plaza, and Durano in making sure that they secure the power that they hold most dearly. For this purpose, I looked into three points of analysis of their political machines – violence, money, and campaign organization.

While Binay was not seen to be a local warlord in the country’s prime business district, he was rumoured to be responsible for the deaths of several local leaders who ran opposed to him not only in elections but on several policy concerns. At least three barangay captains, staunch oppositions to Binay’s rule died since 1986, 32 killings were seen as politically-motivated and a failed ambush on Binay’s opponent in the 1989 elections occurred. These, however, can not be directly linked to the mayor – the opposition can only speculate based on the presence of a security group that Binay keeps for years now, members of which comes from Remulla’s Cavite.

Danao, on the other hand, never ran out of guns when Durano was in power. It was both a source of business income, reaching as far as Taiwan and Japan and as a threat to local politicians who will oppose his or his family’s rule. Durano was also rumoured as responsible of the deaths of his political opponents during the Japanese occupation and several others during his rule. Among the three, only Plaza was not notorious in using violence to win an elected post. It was only in 1995, when he was opposed by a military man, Coronel Noble, that Plaza hired for the first time, a personal security group to defend him against the threat of Noble’s military power and the latter’s threat of a coup if he will not make it in the elections.

While Binay and Durano were dependent on national patrons in waging victory in their areas, Plaza was also different. He ran and won and never lost elections on his own, even without political support from the national party. In the elections in 1995 for example, he openly told presidential candidate Edgardo Angara that he would not ask for any support from the national party and that he would take care of Agusan province on his own. Binay, on the other hand, retained his post by his close affinity with the people in Malacanang, even evading graft and corruption charges when Corazon Aquino was still president. After his last term in 1997, Binay was appointed MMDA Chair by Joseph Estrada and lost the position when the latter was ousted in the EDSA II Revolution in 2001. Similarly, Durano’s rise and fall in his political career, especially in the provincial level, coincided with the rise and fall of the national patron to whom he subscribed – the reason why he was very keen on delivering the votes for the patron during election day.

Binay’s charm in Makati’s elections does not rely on the business conglomerates that control the city’s financial success. He hated them, and even openly criticized them, especially when Bea Zobel de Ayala supported his opponent in 1992 and also because the Makati Business Club has never honoured him with an invitation in one of their business functions. He portrays himself as one with the people, jogging with them, talking to them, personally visiting them during times of sickness and mourning. He always corners the votes of the poor in Makati, to whom he promised protection against demolition. Plaza situated himself in Agusan in the same way. He was the poor people’s patron, a stark reminder that the poor can go a long way. He even identified himself as a native Manobo, an ethnic group that is about one fifth of Agusan’s population. He likewise portrayed the role of a provider, during and even after elections, the fact that his poor constituents displayed his picture and burnt candles for him when he died. In contrast, Durano was never seen as somebody close to the people, but rather somebody feared and revered. He sought compliance by fear through hiring goons before election day, kidnapping political opponents, and even shooting them. However, he compensates for this notoriety his large donations to the Catholic Church and his occasional display of faith.

In effect, Durano did not actually need money to buy voters on election day (though he did distribute but not in material sums). The “gold” that he accumulated from his different businesses he used not to buy votes but to pay his personal army, composed of casuals and regulars from the slums of Cebu, and the notorious criminals of Tondo and Cavite. Plaza, in contrast, has one political strategy that was proven effective all throughout his political career, and that was to outspend his opponents. The nagging poverty in the area provided a fertile landscape to this strategy. As a matter of fact, Plaza was reported to have spent nine million pesos in 1995, though others think this is grossly underestimated. While Durano and Plaza acted only months or days before elections, the former in sowing fear and the latter in buying votes, Binay took another route. Political analysts contend that Binay treats every move he makes at the start of his term a chance for campaigning, for establishing ties and patronage. He personally delivered goods to his constituents, he ran his own foundation, he controlled employment in the city hall and made sure he has their loyalty. On top of that, Binay, like Plaza, flooded the streets with money days before election day. In 1988, he was estimated to have spent 20 million pesos in buying votes alone.

It is interesting to know where these politicians got their money, aside from the usual national party support. Plaza, undoubtedly, has his logging empire as his resource base, which later on expanded to real estate, cement, rubber, shipping, and transport. Plaza was already relatively rich even before he hit congress for the first time. Durano on the other hand has a string of companies that started off from coal mining to cement, to guns and to many more, all products of favours and grants of concessions from the national government to which he was then allied and with which he was able to extract sums to expand his asset base, later becoming one of Cebu’s landed elites. But Binay?

The Transparent and Accountable Governance project in a special report revealed that Binay, after only a decade of public office, was able to accumulate 92 million worth of real estate properties in Manila and Batangas, 90 percent of which was undeclared. The same report questions how Binay was able to accumulate such wealth given the fact that the monthly salary was only thirty two thousand pesos (P32,000) and with only a base figure of only 3 million pesos in 1992. During his tenure, Binay was not a businessman, unlike Plaza and Durano, in his own backyard. Makati’s opposition politicians only have one thing to offer as an explanation for this incomprehensible increase in wealth – the granting of business and construction permits that ran very costly in terms of “under the table” deals. However, Binay was also charged by the Commission on Audit in 1988 to have misallocated close to 1.2 million pesos to “ghost employees”, illegal acts and purchases under “unusual circumstances”. In another audit in 1999, COA found a 58 million peso discrepancy in Makati’s cash in bank and 10.5 billion peso unverifiable fixed assets. Despite this, Binay won 4th runner up in World City Mayor Search in 2006.


Keeping the Belt

Binay’s, Plaza’s and Durano’s political machineries converge in two distinct terms – the use of networks and their families. Binay, for example, considers the bureaucracy as his biggest asset. He boasts of an employee base of 9,000 people and their families, loose and informal organizations of vendors, barangay tanods, slum dwellers, barangay captains, police forces who have representatives with whom he consult and hear information from. He also has a foundation for and of mothers whose main job is to turn in support for Binay in several functions and in elections as well as a network of political ward leaders actively functioning all year. Most important of all, he relied on public school teachers to rake in the votes on election day.

Durano worked the same way. The uncontested supremacy of the Duranos in Danao, apart from the customary violence showcased during election day was the use of the political exercise itself and its supposed administrators, the public school teachers, to falsify registrations, switch ballot boxes and fabricate election results. He also had a large employee base due to his many companies based in Danao, but that did not matter. Under Durano’s reign in Danao and the First District, violence and election fraud was more than enough. Plaza, on the other hand, relied on his political allies to support his gubernatorial bid all throughout. His only strategy was to bankroll their campaign and for them to deliver the votes on election time. It was not clear from literature though (there is a drought of sources on Democrito Plaza) if his supporters resorted to the same dirty ways that Binay and Durano did, or if he rigged election results at the provincial level.

All three maximized the opportunity to wrench control over their bailiwicks by perpetuating their political base through their family members. Binay’s wife ran for city mayor and won when he was no longer eligible to run because of term limits, and one thing he will do again when he ends his third term in 2010. Durano’s wife, sons, grandsons, and relatives controlled the municipal government of Danao and the adjoining municipalities and districts even until now. Ramonito Durano III, Ramon Durano’s son, is Danao City’s mayor at present. Plaza’s wife, brother, sister in law (with whom he had a feud but reconciled later), son, alternately hold different offices in the province of Agusan del Norte. Democrito Plaza II, DO’s son, is currently the mayor of Butuan City, the provincial capital.


Conclusion

Based on the discussions above, we note of particular similarities in the manner by which the three featured local bosses secure and maintain their power. While used at varying degrees and with different intensities, the political machinery of the three were tainted by the use of money, violence and intimidation, as well as a strong network of relationships and a line of patrons that make successful a bid for candidacy. Across time, and across different contexts, the rules of the game seem not to change – the one who knows how to whip an appropriate mix of these factors, with due consideration of the changing politics of the area, would surely win. Like boxers, they did have certain skills, more importantly in using the hand that delivers the best punch and by compensating deficiencies with other means.

But one common feature that made all these things possible is the landscape outside the boxing ring, a grim picture of poverty and destitution all present in the three areas, even in the premier business district of Makati. Binay’s “jog with them, eat with them” appeal did not work with the rich people at Bel-Air’s plush villages who do not think he is important anyway, but raked in the votes in the poor areas of the city. Plaza’s “outspend them all” strategy was very effective in the dirty poor Agusan, and Durano’s “intimidate them, feed them” stance was very effective with people with the least economic and political power.

This weaves a picture of “instrumental friendship” between two unequal parties (Scott and Keklviet 1977) where the patron, does not only take advantage of his position by buying out the client, but also makes sure that the latter’s dependency, insecurity and poverty is sustained for his benefit (Sidel 1995). The poverty in Agusan was denied by Plaza, even when it would have meant social reform project funds to flow in the area during Ramos’ time. Like him, Binay’s interest was not to empower his poor constituents, not matter how much he gave them, but to make them remain poor and dependent on him (Rocamora 2000). Durano, on the other hand, was not only interested on maintaining the poverty of the people, but to make sure that they were in fear as well.

The lords of the ring did not only fight against their opponents, but also made sure that the crowd were kept to their side. In the Phillipines, the spectators at the bench are poor, unable to place bets, but claps the hardest.

Space

There is one big reason why I cannot stand living in Singapore – space. Limited, constricted, and limiting space, that is.

I realized this when I stayed at a condotel in Makati where all the features of a house are squeezed to fit a 36 square meter floor area. I cannot imagine raising my son in this very limited space – no trees to climb, no grasses to keep his feet moist and dirty. I cannot probably sleep for the fear that my son might accidentally fall from the 21st floor where I live.

Sometimes we fail to acknowledge the fact that in Bohol, we have so much space still (though Tagbilaran may have become crowded in recent past). A physical space to move around is important to one’s psycho, social, emotional and spiritual health.

Physical space gives you a certain degree of freedom – to walk around, to run around, shout and give vent to all sorts of emotions. The movie Revolutionary Road showed Kate Winslet running to the forest to vent her anger and frustration. In the same movie, Leonardo de Caprio, after Winslet’s death, run the whole stretch of Revolutionary Road.

I find it interesting that suicide rates in countries in Southeast Asia are coincidentally (or accidentally) positively correlated with population density. Population density, computed as a proportion of persons per land area, can be a proxy indicator for the amount of space a person has to be able to move around. Hongkong and Singapore, for example, have national suicide rates which are higher than the region’s average. (Though admittedly, there are other conditions contributing to high suicide rates such as cost of living, upward mobility mechanisms and general freedom, among others).

A friend I met in Cairo comes from Kenya where atrocities occurred in the recent national elections. He told me that violence is not in itself election-related, but it is an expression of anger because apart from the fact that economic poverty persists in several regions, people do not have a voice on how their lives have been wasted. Elections, as sites of political participation, “their space” to manoeuvre politically, is undermined by corruption and vote rigging.

Fortunately, in Bohol, while oppressive structures exist, there is an amount of space where the local constituency has the sufficient capacity to move around. While this varies from one place to another, there are concrete efforts of a few local government units to give their constituencies a “voice”, a “political space”.

Jagna, for example, portrays an example where the space where people can participate in governance has been widely increased. I was involved in one capability building session of its new community radio, the first ever in Bohol. The session with the radio team was heart-warming. The participants–from the far-flung barangays of the town, from the women sector, from the porters’ association–all felt delighted and inspired for their chance of getting involved in Jagna’s monumental move towards responsible community information dissemination. As a development worker, it was such an emotional moment to see how the grant of “space” by the powerful can make a tremendous difference in people’s lives.

In a rigidly structured society as Bohol, where economic, political, and religious powers often intersect and influence each other, opening up a space for participation is a hard task from below. For someone to do it from above takes a lot of courage. To open up one’s space is to delimit one’s own. This is the reason why some mayoralty posts in certain towns in the province were, and still are, held by the same families for the last 20 years.

Participatory approaches and legally-mandated avenues for participation needs a brand of leadership that allows space for people to be heard and tolerates criticisms and objections. I wonder how many leaders in the province can do this, and genuinely do so. It is saddening to know that sometimes, while leaders profess that their intent is to listen to people’s voices, they attend to their interest more especially when the situation calls for critical decision and action.

A Search for Entrepreneurship that Creates the Needed Change

I have the good fortune of attending again another United Nations conference; this time around in the historic city of Londonderry in Northern Ireland, where one of the most recent ‘successful’ peace-making processes in the modern day world is reported to occur. The conference is sponsored by the United Nations University World Institute for Development Economics Research and focused on two distinct themes invariably linked into a progression – conflict and entrepreneurship.

Around 25 individuals were invited for the conference. The batch was composed of economists, psychologists, political scientists, anthropologists, sociologists, among others. Statistically speaking, roughly 40% are young professionals like me while the rest are experts in their different fields. Interestingly, I am one of the 3 people who has not finished or started his Phd yet.

Yesterday’s (20 March 2009) keynote speech was delivered by Professor Zoltan Acs of George Mason University. Zoltan Acs was one of the pioneer thinkers in entrepreneurship and was the most reluctant in the group to think that there is ever a plausible relationship between entrepreneurship and conflict. It is very easy to know why he would say so.

Acs is very certain of his definition of entrepreneurship. Entrepreneurship, for him, is a process where a society allows the best and the brightest to change society through an innovation. He alluded to the Bill Gates type of entrepreneur who has the capacity to transform society in a tremendous way and argued that such a person would not probably exist in a conflict society where the incentive structure and the institutions are not fertile enough to allow these types of creation and innovation to sprout.

I contextualize Acs’ definition in Bohol and ask myself, if there is ever any entrepreneur that would qualify to Acs’ definition? There are several people whom the local papers (the Bohol Chronicle, Sunday Post, etc) describe as entrepreneurs, most of them of Chinese descent, while others are non-locals (e.g. coming from somewhere else and doing business in Bohol). It is not that I have something against the Chinese or the domestic (or foreign) migrants that come to the island, but my question is, do they have the incentive to change the way we live?

At least 40% of the people in Bohol are below the poverty line, if you compute it using the dollar a day criteria or when you use a multiple cluster indicator to measure levels of deprivation. You have a primarily agricultural economy that relied on domestic consumption for growth. You have a thriving tourism industry that provides the needed cash for both local businessmen and the employed. But do entrepreneurs exist here?

Subscribing strictly to Acs definition, it seems that we do not have entrepreneurs in Bohol. First, we have businessmen but they do not engage in tradeable goods. Acs argued that services (hotels, etc) and trading businesses (your supermarkets) do not create tradeable goods that are necessary to have a pervasive multiplier effect on your economy. Trading and service establishments do not create the needed backward and forward linkages (e.g. demand and supply chains) that would make an economy vibrant and hardly maximise the use of factor endowments and factor inputs for greater efficiency gains. Simply put, the businesses we have in Bohol do not create jobs beyond the numbers that it directly employed. They do not create the demand for raw materials, nor do they use our excess educated labour force. They make use of products produced elsewhere and do not stir local production. A cellphone retail chain, for example, like Save and Earn does employ people but it does not in any way create any demand for raw materials, nor do they create alternative distribution channels where others can participate.

Second, businessmen in Bohol do not innovate, in the classic sense of the word. To innovate is to create something out of nothing, by making use of available raw materials and knowledge in the process of creation. They innovate on the ways they sell their merchandise and services, but they do not actually create anything. By “thing” here, we again mean the tradeable goods, one that can be passed on from a production chain participant or a consumer to another.

Third, businessmen in the province do not revolutionize the way the majority of the people live. Yes, we have businessmen getting their merchandise from local farmers, but the farmers are experiencing depressed prices. Yes, we have businesses employing people, but do they pay them well? I happen to talk to several supermarket employees and they receive only half of the legally-mandated daily minimum pay. It is sad to note that most, if not majority of the businessmen we have around are only concerned about their own net benefit, and not everybody else’s. Even our politicians are such, even though they are not businessmen.

Today is a historic day for me, as I sound of this call from Londonderry, to search for at least one entrepreneur in Bohol, one that would qualify strictly to Acs’ definition. This would seem like a desperate call. If you happen to know one, please tell me. Your news will be a great light for me because today, the weather forecast says we will not get to have some sun in Derry.

What is the Church's Business in the Dauis Renaissance Program?

Introduction

This paper presents an analysis, in financial perspective, of the details of the agreement entered into by parties 1) The Bishop of Tagbilaran, 2) Beatriz Susanna Zobel de Ayala, 3) Dauis Renaissance Company, Inc. and signed on June 24, 2008 in Dauis, Bohol, Philippines. As the agreement is vague in some respects, figure computations were interpreted on the basis of its implications to financial statements of the “Dauis Renaissance Company”, both currently and prospectively.

The paper is structured in three parts. The first section analyses the facts of the agreement and its implication on assets, equities, and net income projections. The relevant provisions of the agreement are cited side by side with the analysis. The second section represents the general independent appraisal of the author on the “Dauis Renaissance Company”, taking collectively all the facts mentioned in the first section. The annex section presents a list of important financial terms which are defined within the context of how these terms are used in the analysis.


Section 1. Who Stands to Benefit in the Dauis Renaissance Program?

AGREEMENT on ASSETS:

(Sec. 2.2) The redevelopment of the Dauis rectory is a major component of the Program. The first phase was completed with the construction of the Decks, the Museum (partial) and the Souvenir and Coffee Shop and installation of lighting fixtures for the Dauis Rectory Courtyard (the “First Redevelopment Phase”).These developments helped the Parish to host St. Therese of the Child Jesus….

(Sec.2.3) Bea paid the expenses for the First Redevelopment Phase amounting to P8,104,631. Of this amount, she donated to the parish P2,129,966……. She hereby assigns to the Organization the balance of P5,974,665 (the “Pre-incorporation Expenses”…

(Sec. 5.1)… Bea shall subscribe to P3,750,00 of redeemable shares at an issue price of P1.00per share and pay P1,250,000

ANALYSIS:

Pre-incorporation expenses are "assetized", as the agreement provides the application of the P2,500,000 for the full payment of the balance of her subscription and the P3,474,665 as redeemable preferred shares. The accounting entry for this is as follows:

Pre-incorporation Expenses (Assets) 5,974,665
Redeemable Preferred Shares (by application to subscription) 2,500,000
Redeemable Preferred Shares (by direct issuance) 3,474,565

Pre-incorporation expenses are costs necessary in forming a corporation and should be recognized as expense. The amount stated, however, are costs borne and paid by Bea at the time when there has been no indication of an intention to organize a corporation. The costs were incurred and paid in February 2008, without the necessary agreement to incorporate, and thus can be construed as a personal gesture of Bea, absent a written formal agreement between her and the bishop or the parish. The agreement was signed in June 24, 2008, without reference to previous agreements on the intention to incorporate, or a written contract to the effect that costs prior to incorporation are to be considered as initial capital for a corporation to be created. Without this priori agreement, the provision on application seems to be misplaced.

Pre-incorporation expenses, if indeed this was the intention (contrary to what has been commented in the preceding point) needs substantiation. If these were necessary expenses to "incorporate", the accounting standards require that these needs to be expensed as incurred. But the nature of the expenses incurred (as this was development of fixed assets) prevents this classification. However, if indeed these are to be taken as is, these assets, acquired before incorporation, need to be valued at fair value of assets received than book values of assets transferred. Undoubtedly, as the costs were incurred in February 2008, these are book values, and not fair values.

The new corporation to be created will start off its operations with non-cash assets. To date and based on the values contained on the agreements, the following are the assets of the corporation:
Pre-incorporation Expense (assumed as fixed assets) 5,974,665
Receivable from Bishop as subscribed capital contribution 1,250,000
Receivable from Bishop as subscribed capital contribution 1,250,000
TOTAL ASSETS 8,474,665

As such, it is important to ascertain if both Bishop and Bea have already paid cash their subscriptions, and documents substantiating this need to be examined. We assume here that this is already paid as the project is currently up and running. (Recent evidence, however shows, that the Bishop only has P1 subscription in the organized corporation, the "Dauis Renaissance Company". Also, Bea only has P1 subscription in the authorized capital stock. It is Reinosa Holdings, a company said to be owned by Bea who acquires majority shares).

What is disturbing however, is the fact that the pre-incorporation expenses are “capitalized” even when these are fully expensed or depreciated. It is important to determine what part of the pre-incorporation expenses are productive assets and those which no longer provide future benefits to the corporation.

AGREEMENT ON EQUITIES

(Sec 5.1) The organization shall have an authorized capital stock of P15 million divided into ten million Redeemable Shares, with par value of P1.00 per share, and five million Common Shares with par value of P1.00 per share.

(Sec 5.2) The Redeemable Shares shall have the following features: full voting rights, preferred cumulative dividend of 6% per annum, non-participating, redeemable…….in the case of liquidation to the extent of issue price plus accrued dividends.

(Sec 5.6) Bea deploys her capital contribution……..with the objective of effecting the redemption of all Redeemable Shares within five years from the incorporation of the organization.

(Sec 5.2) The Redeemable Shares shall have the following features………preferred right to assets of the organization in case of liquidation to the extent of the issue price plus accrued dividends.

(Sec.5.1) The Organization shall have an authorized capital stock of P15 million………
(Sec. 5.3) Bea shall subscribe to 3,750,000 of Redeemable Shares….the Bishop shall subscribe to 1,250,000 of the common shares .(Sec 5.4) ….the Organization shall apply P2,500,000 of Pre-incorporation expenses…….shall also issue Bea 3,474,665 of Redeemable Preferred Shares.

ANALYSIS:

The agreement seems not to indicate the existence of creditor's equity, and made mention only of residual equity (capital stock). However, a closer scrutiny of the stockholder's equity of the corporation would indicate that the new corporation has a total liability of P7.2 million, indicated to be paid with a 6% interest per annum (as this is the rate of preferred dividend), and payable over a five-year period (as this is the stated period of redemption). Consequently, this will result to a total cash outflow of:

Total Liability at redemption
For principal 7,224,665
For Interest ( at 6% for 5 years) 2,167,400

Total 9,392,065
Assumed Liability per year (to be recovered from income) 1,878,413
Total monthly net income (net of all charges) requirement to pay-off liability 156,534

This is highly contentious and reflects the poor business planning skills of parties. At the current state of things, it is impossible to generate a net-of-all income of P1.8 million per year.

The contract does not indicate the obligation of the corporation when the corporation will not be able to redeem the shares in 5 years, whether or not the corporation is liable to pay interests. However, the agreement provides for the payment of the investors in case of liquidation of the corporation. As the board membership is 3 is to 2, in favor of Bea, the corporation can be easily declared by the board as insolvent when unable to settle its liabilities. In the case of dissolution, the Corporation Code provides that payment of redeemable preferred shares is superior to common shares. Thus, Bea benefits from liquidation procedures.

In view of the last item mentioned above, what is critical here is to designate what are the assets of the corporation. If the improvements of land and building are the investments of Bea and the primary assets of the corporation, then these are correspondingly subject to distribution.

What is troubling here, however, is the fact that while Bea's improvements on building and land are factored as investments of the new corporation, the land and building (convent) themselves, are not. Had they been considered part of the investment in the corporation, then the capital of the Bishop, and thus, the preference, especially when these investments are treated as redeemable preferred shares, and not as common shares, are protected. Consequently, the assets of the Parish are protected in case of dissolution procedures. (Though at present, what Bea can only acquire is the building improvements and consequently the building when costs are factored). A greater amount of redeemable preferred shares would have accorded the Bishop greater voting rights, and thus, greater control.

Thus, the case of non-payment of the redeemable shares at the end of five years will give Bea the full right over the parish convent, as this will be the payment for the unpaid redeemable equity. The Bishop will lose its control of the asset, though he retains ownership of the land.

The equity structure is highly favorable to Bea in the current set-up. Bea already owns 72% of the preferred shares. Because preferred shares are voting shares, she already controls the total corporation given the current number of issued and outstanding shares. Also, because Bea also has a committed capital of P6.1M, she basically is saying she will purchase both unissued and unsubscribed preferred shares. Thus Bea is in control of this corporation.

The other equity-related obligations of the corporation are as follows:

Monthly payment to the Bishop 15,000
Annual payment to the Bishop 180,000
Share of the bishop 90,000
Share of the Dauis Heritage Program 90,000

The share of the people of Dauis, assuming the heritage program is intended for the people of Dauis, is miniscule as compared to the share of Bea which is P433,479.90 and even to the share of the Bishop. More than 5,000 parishioners share 90,000 while the single person, the Bishop also has P90,000.

The phrase which says "she desires to improve the lives of Dauis people" is contentious, given the way the earnings of the corporation is distributed. Also, the manner by which the share of the Bishop is to be used is not covered by the agreement, and thus, are within the rules of the Church. The challenge of the clergy of the Diocese of Tagbilaran is to ensure that this is accounted properly.

AGREEMENT ON INCOME PROJECTIONS

(Sec 2.2) ….the construction of …..the souvenir and coffee shop..
(Sec 2.3) The final phase……the construction of a function room, the and fit out of Kitchen and Bakery, completion of the Museum,…..the acquisition of implements for dining and banquet services
(Sec 3.2.b) …..the private rooms in the second floor…...

ANALYSIS:

The following are considered income-earning assets of the corporation, as indicated in the agreement:

Revenue Centers
Museum - entrance fees, donations
Souvenir - Shop sales
Coffee - Shop sales
Function Room - rent / service income
Bakery - sales
Dining and Banquet - Sales / service income

The aggregated total net income requirement out of these revenue centers are as follows (without considering the recovery of liability at the end of 5 years):

Interest Expense to Bea 433,480
Love Offering to Bishop 180,000
Total Annual Net Income Requirement 613,480
Total Monthly Net Income Requirement 51,123

It is to be noted here that there is no feasibility study conducted to ascertain feasibility of the projections. But if there are documents to prove feasibility of the different businesses identified above, these should be subjected to further scrutiny in order to determine validity of financial projections.

The author learned of a fine-dining restaurant feasibility study done by Holy Name University Research Center and commissioned by Fr. Valentino Pinlac but this only included one aspect of the “Dauis Renaissance Company” business. A scrutiny of this research output needs to be done as well.

The foregoing discussion has indicated that to a large extent, Bea, and not the Bishop, nor the people of Dauis will largely benefit from the Dauis Renaissance Program. The structure of assets, equity, and net income distribution is highly favourable to her and her company, at formation, operation, and even corporate liquidation. This is however expected, as she is the corporation’s largest investor, and thus, has the preferred right over the corporation’s earnings and assets.

The implication however of this is the fact that the Bishop and the people of Dauis loses control over its own heritage assets. The convent itself, will no longer be theirs, if the Dauis Renaissance Company will not be able to pay Bea’s redeemable preferred shares plus accrued interest in five years.


Section 2. The Dauis Renaissance Program: Whose Interest?

Given the facts mentioned above, the following can be deduced:

a. The Bishop has an immaterial financial control in the Dauis Renaissance Company. He currently holds 8% of the total company capitalization, and 14% of the total subscribed capital. As his investment is on common shares, he receives only the residual assets after payment to Bea upon liquidation.

b. The Faithful, the Laity of Dauis do not have a financial control over the Dauis Renaissance Company. They do not have an investment in the enterprise. They do not have a voting right. Only 60% of the 1,250,000 shares accrue to them, but still through a cooperative to be organized. Converted to percentage, their ownership is only 5% of the total company.

c. Bea is not an investor, but is “constructively” a creditor to the company, with a loan term of 5 years at 6% interest per annum. The “substance” of her investment is that of a loan, though the “form” is equity shares. She is assured of 6% interest per annum, cumulative, over five years. Her investment is also to be redeemed by the company after five years.

d. The Dauis Renaissance Company has high income projections without sufficient basis. To be able to pay Bea (both principal and interest) the company needs to earn 1.8 million pesos of net income per year. Net income means that all expenses for the operation of the business including salaries, light and water, among others are already deducted from sales or revenues. Furthermore, considering the fact that the company still needs to pay the Bishop P180,000 per year, the company needs to earn P2 million in net income per year to be able to pay all its committed obligations. There is no feasibility study available regarding how these projections are to be achieved.

e. To say that the Dauis Renaissance Company is created to “contribute to the betterment of the lives and people of Dauis” and to “strengthen the spiritual, moral, and religious foundation, cultural identity, and pride and community solidarity of the Dauis people” (Sec1.b and Sec 1.c) is objectionable. The income of the corporation in the next five years will all go to debt servicing (at P433,480 per year) and payment to the Bishop (at P180,000 per year). There is no clear provision of the agreement that says how the betterment of the lives of the people of Dauis will be achieved through the renaissance program. Also, there is not an indication that the income of the company will be used for spiritual, moral, and cultural purposes.

f. If the Dauis Renaissance Company can not achieve the income projections stated in item d above, it can not pay its obligations. If the corporation desires to liquidate, the Bishop and the Laity of Dauis will lose control of its heritage assets. Bea can decide on a corporate liquidation as she has the controlling power over the corporation. The consequent effect on this is the distribution of assets of the corporation. Because Bea owns majority interest, and preferred shares as well, she receives most of the assets of the corporation, including the building and land improvements on the Dauis convent and its environment. Unless, the Bishop has the sufficient money to pay Bea her investment plus accrued interest.

Thus, the answer to the question posed in the title of this section seems obvious. It is not of the interest to the Bishop, nor the Laity of Dauis to enter into a cooperation agreement for the Dauis Renaissance Program, unless there is evidence to suggest that the Dauis Renaissance Program is the collective will of the Faithful of Dauis, or the personal desire of the Bishop. But if the Bishop and the Faithful of Dauis desired for this program or company, then they entered into an agreement where they are most disadvantaged.

Where Will Tagbilaran's Waste Go?

(This is an excerpt of the paper to be presented by MCanares in the upcoming United Nations University Conference in Kolkata India, 15-17 December 2008. The conference topic is "Beyond the Tipping Point: Asian Development in an Urban World. Mr. Canares' paper is titled "The Excluded Poor: How Targeting Has Left out the Poor in Peripheral Cities in the Philippines.)

In 2004, the Provincial Planning and Development Office conducted a poverty monitoring exercise to determine the levels of deprivation of every local government unit in Bohol. Tagbilaran City was part of this exercise which sought to determine the poverty condition of the barangays using a set of indicators including malnutrition, mortality, crime, disability, access to water and electricity, food shortage, health insurance, income, housing, literacy, sanitary toilet, house and lot ownership, and garbage disposal systems.

Interestingly, in the survey, all of the houses in the city were found to have environmentally-unfriendly garbage disposal systems. In Tagbilaran, until now, waste segregation is not practiced though garbage is regularly collected by government-commissioned garbage collection system. Burning of trash is still practiced in some areas, especially those not proximate to the city and household and commercial waste are dealt as one.

Tagbilaran city has an open dumping site, where the garbage, after collection, are accumulated regardless of nature. Before the passage of Republic Act (RA) 9003 (Ecological Solid Waste Management Act) by the Philippine legislature in 2000 that prohibits open dumping systems in the country, garbage collected in Tagbilaran City was burnt in open air. Now, the garbage is just openly stored in an area 3 kilometers away from the city centre, either left to rot while recyclables are collected by scavengers.

Liquid waste also is a problem to the city. The construction company hired to rehabilitate the road and drainage system discovered that there were various illegal tapping of the drainage system; illegal, because untreated water coming from the septic tanks of several establishments were channelled to the public drainage system which should have been used only for grey water.

The bulk of waste as well as grey water is enormous that it caused flooding in some parts of the city during heavy rain. The water can not just be disposed to the sea as these were not yet treated. A water treatment facility is not available and thus the big problem. The city has not yet penalized those with illegal connections and the flooding continued for a while until the city government, without the necessary clearance from the Department of Environment and Natural Resources (DENR), authorized the opening of the drainage water outfall in 9 November 2008, solving the flooding problem but jeopardizing the marine resources and the livelihood of several people.

The government of Tagbilaran has done little to respond to the alarming problem on waste management. An inter-local government unit sanitary landfill was conceptualized and currently undergoing construction. It should have served Tagbilaran and its eleven adjacent municipalities but the city government opted out to construct its own sanitary landfill facility. It has been a year and a half now since that pronouncement was made, but nothing material has turned out and Tagbilaran’s solid waste still goes to the open dumpsite.

The barangay captain of Dampas, the barangay where the dumpsite is located, expressed concern that his barangay constituents were greatly affected by the open dumpsite and requested for the dumpsite’s closure, citing RA 9003 as basis. The leading causes of morbidity of the city, and more particularly barangay Dampas are respiratory-related diseases as acute respiratory infection, bronchitis, pneumonia, and TB. Also, among the leading causes of death in the last eight years is pneumonia. This does not imply causation though but the issue deserves further interrogation, especially in a city where hospitalization costs are high and a significant number of poor people do not have health insurance.

The city government also acted late on the concern for waste water. An order for disconnecting the illegal tapping to the city’s drainage system was agreed to but not implemented. The negotiations for a wastewater treatment stalled, until such time that people clamoured for immediate action. The national government, through DENR Secretary Lito Atienza, agreed to flush the water to the sea, given the appropriate clearance from the agency. Rich people in the flooded areas acted on their own to protect their houses by piling sandbags, accentuating the flooding. Those who were not able to afford this control measure were largely affected.

It should be noted that Tagbilaran City’s main business establishments are tourism and tourism-support service providers. Unmanaged solid waste and wastewater will risk tourism-related activities, especially so that one of Bohol’s competitive advantages is its white beaches. Several hotels and restaurants are located along the coastline of Tagbilaran. Also, 4% of the population rely on fishing for livelihood. Polluting the seas will have adverse effects on marine resources, and consequently on people’s livelihoods.

It is admitted though that quantifying the risks that unmanaged waste disposal systems pose to poor city residents is a very difficult task. What this paper would like to highlight, however, is the possible repercussions of improper waste management on city residents. Eventually, those with meagre resources will be hit the hardest as their capability to respond to these vulnerabilities will be stifled by their poverty.

Missing Tagbilaran

It’s but normal that when you are somewhere else, you miss nothing but home.

I (together with 3 others) was facilitating a workshop for DISOP Philippines yesterday in Tacloban City and I was appalled by the striking contrast between private service providers (e.g. hotels, transport companies, etc.) in Tacloban and Tagbilaran. We arrived in Tacloban via Ormoc on a cloudy Wednesday afternoon. We were billeted at the conference resort, VicMar Beach Resort at Baybay, San Jose, Tacloban City and the moment we arrived at the venue, we went to the restaurant right away to order food as we were hungry.

The alfresco restaurant was located facing the beach, a stone throw across the reception desk. Three service ladies were watching TV when we got in. We sat down and they never minded us as if not a single soul arrived, though how noisy we were. It was only when I called them to ask if we could order food that they stopped their recreation time. (tsk, tsk, tsk).

While waiting for the food, I went to reception desk to ask for transport arrangements. I told them we need to be picked up by the van-for-hire at 530 pm the following day as I wanted to make sure we will be in Ormoc a night before our trip back to Cebu. They said it was already arranged, and we will pay P2000 directly to the driver. I also asked how much we will pay for our stay, and they said its P1000 per room per night, excluding food. It rained hard outside so I asked for an umbrella to go back to the restaurant, they said, they did not have one. (Tsk, tsk, tsk).

I was soaked in rain while eating pancit bihon and bread. I must be very hungry because I did not mind and the pancit tasted very good. After eating, I went again to the reception to ask when was buffet dinner scheduled for the night. They said at 9 pm, as the participants were still on field.

We worked from 5 to 9. At 9, I called the organizer if they have already eaten and he told me that all of them had, and that the service crew was already cleaning the tables. (Tsk, tsk, tsk). We were left with no choice but to brave the rain and go to nearest restaurant (around 12 minute-ride from the resort).

Tacloban City Convention Center, the one where we went was a gymnasium of some sort with resto bars in the ground floor area. When we arrived there, we surveyed the place and looked for a resto where we could possibly be served fast and found one with only a single table occupied. The place was nice and cozy so we liked it right away. We ordered for food but almost all that we liked in the menu were out of stock that we ended up eating what the service crew suggested (Tsk, tsk, tsk).

The training went well. The sessions were well appreciated. After saying a few goodbyes, we hurried to our rooms to pack. An associate settled our bills and we were told we had to pay P5200, because the rate was P1300 per person per night and that what the front desk told us was not right. Though the price was unbelievable, we paid. The manager told us that the cost of the room per night is P1000, and that the package rate of P1300 included P600 for the room and P700 for the 3 meals and 2 snacks. I objected, asking why we had to pay for the room at P1200 (as two of us were sharing a room) when its rate was only P1000. My associate was also objecting because what we ate did not deserve the P700. The manager only told us that the rate was 5 years old and nobody complained except us. Lousy excuse. (Tsk, tsk, tsk).

I passed by the front desk to ask for the phone number of Vanvans so that we can be picked up earlier. They said they do not have the number as the one arranging the transport was already off duty. I ended up looking for the number myself. (Tsk, tsk, tsk.). I called up Vanvans, they said they could not pick us up earlier but at 530. We were at the lobby at 5. The van did not arrive at 530. I called up Vanvans again. They said it will be around at 6. At 6, the van did not arrive. And they said it will arrive at 630. It was already too much. We cancelled the reservation. The organizer drove us to the bus terminal where we were able to get a van. We arrived in Ormoc safe and sound, but I was so disappointed.

At least in Tagbilaran, service restaurants charge you a good rate for your money’s value. At least in Bohol Tropics, there are available umbrellas when the rain is tough. At least Lugod Rent a Car, Varescon Taxi, or NF, honour your travel arrangements even when made through phone. At least conference package rates are reasonable when compared to the kind of service you get. At least hotel staff are helpful to get you the phone numbers that you need. At least waiters greet you with a smile when you enter a restaurant and not glue their eyes on the screen. At least most, if not all of the menu items are available for ordering. At least you get good and not misleading information when you ask people. Though the service may not be perfect, but at least, it came to a point that professionalism is part of the game.

Over the years, Tagbilaran service establishments have improved greatly. It should, if it wants to be a competitive tourism destination. I just hope that with development, some essential values remain the same – the willingness to help, the service with a smile, the walking the extra mile.

It’s the people that make a place, and not the other way around.