Uncle Sam to check out Binay?

DEMAND AND SUPPLY
By Boo Chanco
The Philippine Star

Vice President Jejomar "Jojo" Binay

Could it be that Uncle Sam is getting worried and is checking out the alternative? Then again, it is probably just a normal invitation. But the timing of Vice President Jojo Binay’s visit to Washington is rather auspicious… not necessarily suspicious.

Binay left for the US capital yesterday to attend meetings with the World Bank on human trafficking, urban development and disaster risk management. It is the dead of winter and the East coast is being hit by one snowstorm after another. It is not the best time for someone from the tropics to be visiting, so there must be a more urgent reason.

The World Bank provides a good cover excuse but I am told the real invitation was from Foggy Bottom. It seems Uncle Sam is in a hurry to know what his options are in the Philippines. I am almost sure the local US Embassy’s political officers, as Wikileaks will likely tell us some time in the future, have been sending worrisome assessments of our Great Leader lately.

Based on what Wikileaks have revealed of such assessments of Third World leaders in the past, one can only imagine what is now being said of our Porsche-loving President today. I am sure the early cables are as hopeful as our early columns. But most likely, more recent cables can’t be too different from what we have been writing lately too.

I am also somewhat sure that reports of P-Noy’s late night driving of his Porsche and the potential dangers of an accident must have made some folks in Foggy Bottom more than a little concerned. Unlike our government, Uncle Sam’s boys take their contingency planning seriously. If something happens to the Porsche while P-Noy is in it, they will want to know who they will have to deal with. And the name is Jejomar… Jejomar Binay.

It helps Jojo that last Thursday, SWS released its trust ratings and Jojo is up there with a plus rating of 57 percent (69 percent satisfied and 13 percent dissatisfied). That’s not too far from P-Noy’s at plus 64 (74 percent satisfied and 10 percent dissatisfied). Other top officials are pretty much distant: five percent satisfied and 21 percent dissatisfied with Senate President Juan Ponce Enrile for a plus 34, 33 percent satisfied and 26 percent dissatisfied with Speaker Sonny Belmonte for a plus seven, and 26 percent satisfied and 33 percent dissatisfied with Chief Justice Renato Corona for a minus seven.

It could be just protocol but I was told Vice President Biden will spend a bit of time with our VP Jojo. Whatever it is Uncle Sam is looking for, I am confident our VP Jojo would more than impress. After sizing him up, I am sure Uncle Sam will be able to sleep knowing that whatever happens to that Porsche, the Philippines will be in very capable hands… in fact, in more capable hands.

I wonder if VP Jojo will meet up with DILG Usec Rico Puno while in DC. Mr Puno is on a three month crash course in law enforcement at the FBI training facilities in Quantico, Virginia about 36 miles outside Washington, D.C.

Puno needs to burnish his credentials for the job he is holding. It was clear from the Luneta hostage debacle and the current sad state of the PNP that being a shooting buddy of P-Noy is not enough qualification to be the civilian officer in charge of the police.

Then again, Puno is also probably being interrogated on what he knows about P-Noy’s moods and way of thinking. He would probably be asked to expand on his claim that he is the only one who can control P-Noy. It also wouldn’t hurt if Puno keeps an eye on Jojo just to see what he may be up to.

Public float

I totally support the position taken by BIR Commissioner Kim Henares that listed companies should comply with the minimum public requirement to continue enjoying preferential tax rates. The problem with our business elite is that they want to get all the benefits but forget why the benefits are being given in the first place.

Commissioner Henares is correct to point out that the preferential tax rates enjoyed by listed companies were instituted to help develop the country’s capital markets. It is her job to make sure that this objective is met.

“The reason why this sector enjoys lower tax rates as against the others is that the government wants to fully develop and promote the capital markets. But up until now it has not yet developed and the preferential tax rate and fiscal incentives given to them at the expense of the government continue,” the BIR Chief said.

Henares also pointed out that it is the Philippine Stock Exchange’s mandate to make sure that the companies under its supervisory and regulatory powers are compliant on the minimum public float requirement set by law. A number of large supposedly public companies like San Miguel and Petron are no longer in compliance with the minimum float rule. In fairness to both, their managements have expressed their plans to do something about it.

The BIR said it will collect the capital gains tax beginning Jan. 1, on some PSE-listed firms that could no longer be considered publicly listed, and therefore no longer entitled to tax perks. The PSE required listed firms to maintain their public float, or the level of public ownership, at 10 percent, late last year, and gave those that did not meet the threshold a grace period of one year.

“In order to qualify as a publicly listed company, initial public offering (IPO) requirement is set between the range of 10 percent to 33 percent depending on the market capitalization, as such all listed companies should maintain nothing less than their initial public offering as continuing listing requirement,” the BIR said in its letter to the SEC.

Actually, even a 10 percent float is too little. The PSE actually requires firms seeking to go public to have a 33 percent float or P50 million worth of shares, whichever is higher, for companies with a market capitalization not exceeding P400 million.

“Listed companies should continually maintain, if not surpass their IPO requirement to continually enjoy the preferential tax rate of 1/2 of one percent of gross selling price of gross value on money on disposals by stockholders of publicly-listed shares through the exchange,” the BIR said. Erring companies will be subject to the five to 10 percent capital gains tax, the BIR said.

There are very good reasons why listed companies should maintain the required public float. A high level of public float would encourage wider market participation. It will provide liquidity to investors, ensure fair prices, guard against manipulation of prices, and serve as a tool for redistribution of wealth. It will also make it more difficult for any price manipulations on the stock market.

I googled the issue and found out that all global stock exchanges have implemented rules to enhance public float. On London Stock Exchange, the public float is fixed at 25 percent for IPOs and continuous listing. In Singapore, the rule stipulates 25 percent of public shareholding at the time of IPO if market cap is less than S$300million, and 20 percent if the market cap is in excess of $300million but less than S$400 million. On New York Stock Exchange (NYSE) and Nasdaq, the public float is not based on the market cap, but the number of shares.

Government should be tough on this requirement. This should be non-negotiable. Hopefully top government officials will give Commissioner Henares full support on this issue. The old boys club at the PSE has played around with the rules for too long, which explains why our stock market cannot win a more widespread local investing public.

Ms. Henares is right: government gives something in terms of incentives but expects something good in return.

Terror warning

Here’s something hilarious from the Professional Heckler.

“Dear Terrorists: Next time, kung aatake kayo, umatake kayo sa pinagbantaan n’yong lugar, okay? Kung mall, mall! Huwag n’yong lituhin ang aming pangulo.”

“Dear Foreign Governments: Next time, kung maglalabas kayo ng travel advisory, puwede ba isama n’yo na pati bus, train, at iba pang PUVs dito sa Pilipinas? Ayan tuloy, nasisi pa kayo.”

Boo Chanco’s e-mail address is bchanco@gmail.com.


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