Press Release
April 28, 2011

Transcript of Kapihan sa Senado with Sen. Osmena

On mitigating the soaring oil prices

We are not the only nation in this world that should undergo this hardship. This is not also the first time we experienced this. We've always been able to bounce back. All nations of the world were able to bounce back. Because I was an exile in America during the second oil crisis, I was able to observe what the government took to bring down the demand for gas and oil. This step, which was called the man-side management, should have been long ago undertaken by our government. Perhaps now we can sit down with the Department of Energy people and help bring about these measures that will bring down the demand for oil. The price of oil is dictated by the suppliers, by the owners of oil. There's nothing anybody can do about it. We all suffer when somebody wakes up and say I want to charge ten percent more for my oil'. However, we can prepare for such eventualities by bringing down the demand for oil in our country, which will ease the pain. It will not remove the pain but it will certainly ease the pain. We have to take sacrifices by reducing our office and household oil and energy consumptions, just like what they did in America. At that time, people in the US were conscious of buying appliances that consume less energy. These are little steps that help people reduce the demand for oil in their country. At that time, America was producing 50% of its domestic needs. Now it's down to 25%. They also diversified their sources of oil. They were no longer almost solely dependent on Saudi Arabian oil or Venezuelan oil. They started to pick and choose and balance- out their sources of oil so that no one can have an overpowering effect on the US economy if it so decided to raise its oil prices. These are some of the steps that our government should be taking. There are many things that we could do. Only we need the cooperation of the Department of Energy to implement these measures.

On the outcry against charging vat on oil

The value-added tax is a buoyant tax. It's settled at 12%. The value- added tax cannot work properly if there are exemptions. Unless you are the direct consumer of oil, there's no actual savings on the value- added tax. For example, nagko- consume tayo ng electricity ngayon, so we're using up some amount of oil. Ngayon pumunta tayo sa Mall of Asia, they're using electricity, and 50% of that is dependent on thermal fuel, such as coal and oil. Pag bumibili kayo ng sigarilyo dun, magbabayad kayo ng 12% vat. It's included in the price of one pack cigarette that you buy. The 12% vat for power that the owner of Mall of Asia is charging the retailer who is selling you the pack of cigarette. It is already captured. If you set exemptions for value- added tax, any type of exemption, there's going to be a cascading effect. When you buy a pack of cigarette, naka input na d'yan 'yung 12% vat on power. There's an indirect collection. Here's another example. Pag nagpapadal;a kayo ng produkto n'yo sa Bicol, sasabihin ng may- ari ng sasakyan na vat- free 'yung fuel. But he will still charge you vat on his cost for transportation. So, it's like he's also charging you 12% vat for fuel. That's why exemption at any point for value- added tax doesn't make sense or just makes life harder for the Bureau of Internal Revenue.

On what to do with the windfall

We are getting a windfall of about five to seven billion pesos savings on vat collection, depending on the price of fuel. 'Yan ang gamitin ng gobiyerno, I- earmark ng administration ni Pres. Noynoy 'yung five to seven billion for anti- poverty programs. Ginamit nga nila 'yung about five hundred million pesos to give out vouchers sa public transportation.

On reducing tariff on oil importation

Well, ibaba natin 'yung excise taxes or tariffs or duties. Hindi naman ang pinapasa ng mga producers sa tao' yan. That's going to be very hard to implement. As of now, we have no penalty for overpricing. There's no such thing as overpricing. There's no law telling them na hanggang dito lang ang profits n'yo, hindi gaya ng mga monopolies dito gaya ng MERALCO, they are limited on a certain return on equity. When we passed the Oil De-regulation Act in 1998, we totally deregulated pricing for oil products. We left it up to the market competition to determine what the price will be. There's no penalty you can impose on somebody who wants to charge 100% profit margin. We are barking on the wrong tree when we complain about high oil prices.

On impeachment votes, whether it's easier to get 16 votes for conviction or eight votes for acquittal

It's the same. Let's say it's down to one deciding vote. The vote will be 16-7 or 15- 8 because there are only 23 senators currently, it's just hard to get that one vote by either side.

On the perception of abusive practice by oil companies in price increase

They are not abusing because there's no law that says if you make a margin of ten percent or fifteen percent you are abusing. Anti- Trust will not cover the oil industry because there are so many players. Petron is the biggest player, about 40% of the domestic market. Anti- Trust will not be an issue against them. Perhaps you're talking about the telecom industry where there is an outcry now with the purchase now by PLDT Smart of Digitel telephone company wherein both perhaps enjoy about 70% of the market. Unfortunately, even in that instance, our Anti- Trust laws are so antiquated and not gonna stand up in court. We have to formulate new Anti- Trust legislation to be able to deal with that. What we are going to watch- out in the oil companies is collusion in the oil pricing. Nag- uusap ba sila? Bakit pare- pareho ang pagtaas ng produkto nila. It's going to be very difficult to prove. But there should be no price collusion.

On checking the books of oil companies

That's for collusion of and not for overpricing. There's no overpricing of oil. The big oil producing companies actually sell to traders. They don't even sell directly to oil companies. The traders are what keep the balance between the supply and demand and try to keep the price stable. So you can buy oil spot. You can buy oil 90 days forward or 180 days forward. It's the traders, more or less, that can determine what the price will be. The traders then sell to oil companies in various countries around the world. 'Yung presyo na binibili ng gasoline stations galling sa mga traders ay hindi under regulation. There's no law in our country that limit the margin of profits on oil companies. So, what will the government check on the books of oil companies? You are trying to make the people believe that you can find some proof that they are overpricing, but there is no such crime called overpricing in this country as far as oil products are concern. You don't arrest them. We adjust. We must learn to adjust. The consumers must adjust. You try to consume less electricity, less gas, etc. You take public transport instead of bringing your cars to the office.

On the Middle East turmoil resulting to oil price hike

In this particular instance, yes. Remember, there is no actual shortage. However, when people perceive that there might be a shortage three months from now, then the price of oil, say for the June 30 delivery, will go up. So, there may be no actual shortage but there's just a perception that there may be a shortage and people start to hedging their bets.

Libya was supplying about 1.8 million barrels a day. So, Saudi Arabia came forward and said we will increase our production by 2 million barrels a day. Di covered na 'yung Libya. So, there's no actual shortage. It's a perception problem.

Matagal na tayong hostage ng oil-producing countries. Maski ang America hostage rin. The best thing we can do is learn to adjust. Use less oil by using more energy efficient appliances, cars. That's the way to resolve this problem.

On oil price deregulation

Well, if you look at it from an economic point of view, the moment that you say we will limit your profits, you're courting shortages. Sapagkat if you're going to be overly strict on the oil companies, they may divert the oil elsewhere. Remember, we are a very small economy. Kung ako ang Shell sasabihin ko sa inyo, o sige diyan na muna kayo, I will only import how many barrels a month then I'll give the rest to China. Anyway China is paying my price. That's not what we want. We want to pay the same price that other countries our paying. Otherwise, we are going to run short. And believe me, the most expensive oil is no oil at all.

There's nothing to revisit there simply because it is a law that adheres to the market principles that the whole world follows. We can't be different. We have to adjust and we will adjust but we have to focus our efforts now on demand management.

On the consumer not being able to buy oil because of its high price

Remember, oil is a commodity that's in great demand around the world. You have a daily export capacity of about 82 million barrels a day. The oil countries are exporting 82 million barrels a day. So, sagad na sagad 'yan. Essentially, they're in control.

On the government controlling the oil price

Petron cannot control the price of oil. And Petron, believe me, will not lose money just to make sure that we enjoy our oil prices because we will not be able to sustain it.

If we can prove that there is collusion in pricing, that's going to be a different matter. But for people to think, you know we had the misfortune of having had, in the past, the Oil Price Stabilization Fund (OPSF) where the government absorbs the increase. I remember by the time we are debating the Oil Deregulation Law, the OPSF was at the level of Php 5 billion. Hindi natin binabayaran. We just had to move from that business model because hindi sustainable. Maraming humihingi na ibalik ang OPSF model, hindi pwede 'yan kasi hindi natin kayang bayaran 'yan.

My advice to people is that they're barking up the wrong tree. If you're going to put pressure on government, put pressure on the government to teach us all to bring down the demand for oil.

On if there is possible collusion of oil companies

That will be very difficult for me to answer unless I look at the books of the oil companies and we don't have the time to do that. That is the job of the department of energy.

If it's in the law that the government has a right to check your books, then COA can check your books.

There are several types of penalties for collusion. There are fines...closure, if you want to close them. But that's going a bit too far. Just make them pay.

It's not easy to prove collusion. You need pretty sophisticated people to check into that.

On overpricing of commodities

The DTI is adhering to the Price Law. We have a law, forgive me if my memory is not going to be as accurate as I want it to be, which says that you cannot raise prices within 24 hours or 48 hours by more than 10%. So, this essentially, serves problems encountered during emergency like a flood. But this is a short term type of remedy.

On the VAT windfall

The government is making an extra Php 5 to 7 billion because of a windfall in VAT collection owing to the increase in oil prices. It should dedicate that entire amount to poverty alleviation measures.

Transportation rates are controlled so ang sinsabi ng mga jeepney operators and owners, kapag binigyan mo kami ng ganito, we will not press for an increase in jeepney fairs. Pwede 'yon pero that has to be properly administered by the department of energy.

It can help mitigate in fares in those transportation utilities that are subject to price control.

In a market-driven economy, you cannot measure every cost component that goes into the price of goods that reaches your house. Hindi pwede 'yan. If we try to do that, you'll go crazy because there is no economy that goes that way. We will usually allow market competitive forces to determine the right level of pricing. We cannot dictate the level of price. We have to learn that lesson. Maski sa America, hindi ho nila kaya to subsidize prices.

You never have enough money for the various sectors that need the money. That's why we're running a Php 325 billion deficit. We are spending more than we earn. Having said that, if we give everybody a tax break, then collection of the government will be less. There will be less money for schools, hospitals, infrastructure development, for a lot of things. When you're looking at an economy and you're programmed to spend Php 71 million and we need that Php 71 million to pump into the economy, nobody is going to give you a trophy for underspending. This should have gone back into the people's pocket. We should have had roads done, more bridges constructed. This is what we have to understand. If you are looking at the National Budget, we're not going to collect as much as we want to collect from various sectors then we're going to have a bigger problem.

The BIR is having a difficult time already collecting what they have to collect. You know, the problems we perennially have with the BIR and the Bureau of Customs. Secretary Purisima pointed out to the smuggling of oil which he called the low-lying fruit. Low-lying fruit is an idiom which means na medaling damputin, andoon na, hindi na kailangang umakyat ng ladder or puno but they have not collected the low-lying fruit. Masyadong wais ang mga smuggler na ito. There is where we have to push the department of finance and the bureau of customs to do their jobs.

On the new taxes eyed by Malacañang

I'm in favor if we are going to be selective and intelligent about it. For example, taxes of sin products. As long as it's properly spent because we cannot sustain this Php 325 billion deficit. Definitely, we need more funds to achieve our Millennium Development Goals and the deadline for the MDG is 2015.

On new taxes

There are others we can rationalize. For example, we have a bill which has long been pending in legislature called the rationalization of income taxes. 'Yung ibang malalaki dito, nakakakuha ng 15-17 years tax holiday kasi marami po tayong batas na pinasa. We passed quite a few laws to give tax holidays to different types of industries and to different types of economic zones. Itong isang company, will get a 7-year tax holiday with the BOI, pagkatapos niyan, mag-claim siya na nasa loob siya ng economic zone, another 7 years na naman siya. E hindi naman yan ang intention ng gobyerno, so we want to stop that practice because it is causing a lot of leakage in our revenues.

Q How much is it na nawawalang tax?

We estimate. Again, our numbers are never accurate because they themselves don't know. Between P10 million-P20 million, just on oil products. I want to bring to mind that the world now has a way of checking whether their imports are equivalent to other country's exports. So, through the UN, through various multi-lateral agencies, we are able to collect information and data that will show the volume of exports from one country, to the Philippines. I remember that year after year, there will be a gap of about $5-billion to $7-billion dollars. Ang nirereport po dito, nag-import po tayo ng 35 billion, pero pag inipon ninyo lahat ng exports na galing sa Japan, India, Hong Kong, China, galing sa Europe, umaabot ng 42-billion. Teka muna. Ano ang nangyari sa 7-billion? In other words, 'yun po 'yung smuggled. They will say well, I saved you 100 tons of oil last month, we say no, we only received 80 tons. Bakit ganoon? Nakarating naman dito. Hindi lang nagbayad, hindi lang nagdeclare. Hindi lang nahuli ng Customs, hindi lang nagbayad ng buwis. 'Yan nag problema.

On the election ban and major revamp in the Cabinet

No. As a matter of fact, there are only two minds that come to mind as candidates for the Cabinet and that would be former senator Mar Roxas and former congressman Neric Acosta. I think Neric already has a lock on the Department of Energy and Natural Resources. As a matter of fact, Sec. Paje's nomination has never been submitted to the Commission on Appointments for confirmation, which was a signal that he is temporary.

Q How about Robredo?

Robredo also was not, but I do not know who is in line to take his place. I think he is in a period of probation and he has been doing a very good job, so I am fairly certain that President PNoy will retain him and probably submit his name already.

Q How about Mar Roxas?

Mar will be the trouble shooter of the President. He did a good job in the Taiwan snafu, and I think that essentially Mar will be assigned to do a lot of things because he is a man of many parts and he can cover almost any problem that the government can come up or will be faced with. He can cover any problems, financial problems, etc., so he will be good.

Q Will he replace Sec. Ochoa?

No, those are pure speculations. I do not think that's going to happen. First, it's very difficult. There's a lot of administrative chores if you are Executive Secretary. I don't think Mar would enjoy that.

On the RH Bill

I think the RH Bill will pass the Senate, that is just my educated guess.

On the postponement of the ARMM elections

That is going to be difficult. I am not saying it's dead, I myself have doubts of voting for it, but it could go either way. If the full force of Malacañang is brought to bear on some Senators they may give in. However, I think it is not a good idea to postpone the ARMM elections. We will see. Debates will probably hit the floor in one or two weeks so we will be able to educate ourselves better as we hear or listen to both sides.

On whether the Ombudsman will get 8 votes

I honestly have not made any survey of the individual senators. I do not know which way they will go. I think essentially in a situation like this, it will be premature to ask them which way they will vote because we're supposed to be jurors and judges. We are supposed to listen to the evidence for and against. We are not supposed to make up our minds before the trial begins. Maybe you can ask us that question two months from now, or two months after the trial begins. But then, I would decline to comment because I would already be at that time be in the middle of listening to the arguments for and against. There are people who are astute enough to hazard an intelligent guess in one or two months' time.

On the priority bills opening sea lanes in the country

I think that's in consonance with our commitments to international trade organizations. I do not see any harm in that, I do not think it will create any controversy.

Q But the Constitution prohibits foreign powers to enter the country...

I do not think we are talking about military ships, I think we are talking about commercial. Remember, we also have technical control of our air lanes. You know how many planes overfly the Philippines, from one country to the other. I do not think it is a violation of our sovereign rights. As a matter of fact, they do pay us fees for overflying our territories. It is no big deal.

On the plunder case against GMA

I have not read it. I am not surprised, she certainly deserves having a hundred more plunder cases filed against her and I think the Filipino people realized what a corrupt person she was. How corrupt her administration was, so I am not surprised that it happened, I am not surprised that there is more that is going to be filed.

On Globe Asiatique

We are having a slowdown there because I was preoccupied with certain energy problems like what you were talking to me about. That is not going to be a stumbling block. Vice President Binay is pursuing the investigation, the NBI is pursuing the investigation, the Department of Justice is pursuing the investigation and I am working with the players in the industry to plug the loopholes in the existing Pag-Ibig charter so that we can prevent scams like this from happening again. Having said that, unfortunately, the impeachment trial is going to take up so much of our legislative time and I am hoping that we will be able to come up with the final version of amendments in about one to two months time but I think it is not possible now because we will be occupied five hours a day, Monday, Tuesday and Thursdays and we will only be able to hold committee hearings on Fridays. We certainly need more than one day for the committee hearings. Another problem is, if you only have one day for committee hearings, everybody's committee hearings will happen all at the same time.

Q Kasama po ba sa report yung recommendation to file charges against the former vice president?

No. We don't have to do that because the investigation is going on already. Unless we find something new, then I will send it to the DOJ. The DOJ and VP Binay as chairman of the HLURB stepped in right away so I had an easy time.

On Lapid being involved in the fertilizer fund scam

I do not know how it will impact on the investigation on Lapid, on the Merci trial, or on Lapid's decision how to vote. Let's wait and see.

On the RH Bill

We have been talking about it every once in a while with the senators and I think there is a consensus that it is needed at this time. While I do not like to speak out at the elders of my Church, ang sabi nila, criminal daw 'yung gumamit ng condom. Kung talagang masama, why have they not asked any of us to declare the usage of condom a crime? Today only those who can afford to buy condoms use condoms. Kung talagang masamang gumamit ng condom, bakit wala pong lumalapit sa amin at noon pa sinabing can you please introduce a bill outlawing condoms because it's a crime? All of these years, only those who could afford to buy condoms bought condoms. What we are saying is that we should allow the poor to have access to condoms. That's a difference. This is a rich-poor situation now. Before, the UN Population Commission used to distribute it but there is a lot of flak from the Catholic Church. Now we want to make it official because after a while even the USAID cancelled their funding for population mitigation issues because the program was not effective because of the intervention of the Church officials.

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