Loopholes

The irony of it all is that we are now commemorating the 13th Annual Global Warming and Climate Change Consciousness Week. The irresistible forces of nature have again wreaked havoc on our lives.

We have not only allowed our environment to degrade. We have also been importing “garbage technology” banned elsewhere to pollute our air and abet global warming.

Before the Duterte administration took office, for instance, five induction furnace (IF) steel plants were in operation here. Today, there are 13 such plants.

The loophole that allowed importation of obsolete steelmaking technology that produces inferior products for domestic consumption is so large a train could go through it. Yet these loopholes have been allowed to remain wide open.

IF steel plants caught the attention of China’s leaders when they had to shut them down to clear the air ahead of the Beijing Olympics. Finally, by 2017, these dirty and inefficient plants were banned in China. A total of 140 million metric tons of annual production capacity was mothballed because of this ban.

The dirty technology did not remain idle for too long. The banned steel plants were scuttled and transferred to Southeast Asia, in countries where lax regulations and weak enforcement allowed them to be used. 13 of them are now here and more will be imported if the loophole is not closed. They are a threat to our steel industry and a hazard for Filipino consumers.

A few months ago, news broke of the mistreatment of workers in a San Simon, Pampanga steel plant. That involved an IF plant run by engineers from China who treated their workers like slaves. Philippine authorities raided the plant but only to rescue the workers, not to inquire about the plant’s conformity with environmental regulations.

The Philippine Iron and Steel Institute (PISI) wrote the DENR to ask for the amendment of a provision in the 2014 Environmental Management Bureau circular that created a loophole for these banned plants to operate here. The circular ceded to local governments the power to grant permits to steel plants with an annual capacity of 30,000 metric tons or less.

By ceding that power to local governments, the DENR basically exempted these plants from strict environmental compliance verification. The local governments for their part had no technical capacity to examine these plants – or were vulnerable to the temptations unscrupulous businessmen offered.

To begin with, there are no 30,000-metric ton plants produced in the last century. They are simply uneconomical to operate and can only produce substandard products. The importers of these plants had obviously understated their actual capacity to exploit the loophole mentioned above.

Residents in the vicinity of these plants have complained of the acid rain produced by their dirty technology. PISI has conducted tests and found the output from these plants to be inferior, putting the lives and limbs of Filipino consumers in peril.

The DENR-EMB must act urgently to save Filipinos from garbage technology.

Secure

Expectedly, the severe recession we now endure puts great strain on our banking system. The peril of rising non-performing loan ratios forced banks to do more provisioning and thus operate with less capital to lend.

Unexpectedly, however, our banking system demonstrated impressive resiliency. Most of our banks continued to operate profitably under the severe conditions that pertained since lockdowns were enforced last month.

This is crucial to our recovery. The financial system is to the economy what the circulatory system is to the human body. The banks are the vessels that enhance circulation or block it. So far, the system is healthy despite the number businesses in distress.

For instance, Security Bank just reported a net income of P6.7 billion for the first nine months of 2020. This is on the back of increases in net interest income and trading gains. The bank’s total revenues increased 66 percent to P40.2 billion. Excluding trading gains, total revenues grew by 22 percent to P27.9 billion over the same period last year.

The bank’s non-performing loan ratio did rise to 4.03 percent in the third quarter from just 1.58 percent in the second quarter. This remains well within prudential levels and it is due in large part to the extended loan moratorium mandated by the Bayanihan II law. The emergency legislation, intended to cushion the impact of the pandemic on our businesses, commanded the banks to offer borrowers a two-month grace period on their repayments.

Bayanihan II, with its grace period for loan repayments, was expected to sharply reduce the profitability of banks. In the case of Security Bank, profitability was maintained through proactive measures including increased lending to momentarily distressed enterprises. When the economy begins growing again, this will reflect in stronger business for banks that carefully select the risks they assume.

The latest numbers show that it is unlikely that our economy could bounce back quickly in what is called a V-shaped recovery. Most economists expect that while a growth rate of 7 percent might be achieved in 2021, it might take us until 2023 to get back to the size of our economy pre-pandemic.

Considering the difficult path ahead, it should be reassuring that our banking system remains strong. Our banks have been among the most conservatively managed for many years. That has proven to be a strong point when the pandemic and its terrible economic fallout put our entire banking system through a severe stress test.

As we claw our way back to the path of rapid growth, the strength of our banks provides our economy a sturdy platform to rebuild from.