Will DOTC’s new strict fines destabilize the banking sector?


On Wednesday June 25, our columnist Marlen Ronquillo’s piece titled “DOTC about to destabilize banking sector, spread misery all around” attacked “the DOTC’s new stiff penalties on colorum operators and other franchise violations” of “a P1 million fine on vehicles caught operating without a franchise.”

He admitted that at first sight, the new fines against “those spoiled public utility operators [who]have long gotten away with murder” look great because “ it is about time that they get their due.”

And all the media appear to have cheered the DOTC order.

“Yet a deeper look at the order would reveal its many flaws. It is a policy crafted in total idiocy, devoid of any consideration of what the Marxists fondly call the ‘objective conditions’ of the broader economy and society. It’s as if the order came from the alien gods, who have no clue on the savage impact of the order on the banking system, jobs and the lives of the Filipino Everyman.”

In his elaboration, Mr. Ronquillo, makes us realize that while “land transport has been a low profile sector of the national economy,” it is in fact “ one sector that has forged a close and productive relationship with the financing mainstream. The country’s major banks have a substantial exposure in the sector, from bus operators expanding or modernizing their fleets to the smallest UV operators. Taxi operators get loans, too. The same with truckers and freight haulers, which make up a vital backbone of the national economy. A medium-sized bus company, for one, has an average exposure of half a billion pesos from its creditor-bank.”

We have learned that in 2012, the Philippine banking system’s loan portfolio to the transport sector made up 5.9 percent of the total.

That’s a big percentage.

Mr. Ronquillo explains, “The banks lend to the transport sector either through the banks themselves or their adjuncts that precisely deal with the financing needs of the land transport operators—their leasing companies. Even the major state-owned banks have leasing companies with focus on transport and fleet loans. The mainstream banks so covet the transport lending business that the bank themselves and their leasing arms grant loans simultaneously to the same bus company at premium rates. Most bus companies, in turn, make it a rule not to delay or reschedule payments.

“Unleashing armies of traffic enforcers onto the major roads to implement the anti-colorum/anti-out-of-line order of the DOTC would lead to this inevitability: reckless imposition of fines, which would lead to huge financial losses, and which would ultimately lead to the collapse of the bus industry first, then the other operators—like truckers and taxi operators—later.”

Then he describes what happens next. “Banks reeling from the pile-up of unserviced transport loans. If the DOTC does not see this frightening scenario coming, just ask the banks and their leasing companies on the extent of their exposure to the transport sector. Or, in secret, the DOTC people can have a heart-to-heart talk with the BAP, the Bankers Association of the Philippines.”

He answers our question of why stiff penalties would cripple the transport sector and ruin most of the operators, are they violators of the franchise rules?

“The bus sector, the largest segment of the land transport sector, has been operating on the principle of route extension and flexibility. In some areas, they over-extend a bit to serve busy passenger routes. They adjust their franchises to meet public conveyance needs and that has been the practice for decades. Under the DOTC order, this constitutes illegal operations and should be fined big.”

Since the column came out, no one from the Banking sector or the LTFRB and its parent organization the DOTC has written us or Mr. Ronquillo contesting his assertions.

We talked to some bank executives. They told us Mr. Ronquillo is right.

This is one more instance of the incompetence of Aquino administration officials, their lack of knowledge about our society and its economic sectors and their tendency to be haphazard in their planning.

But perhaps, as Mr. Ronquillo suggested in his column, some of the officials are salivating over the prospect of making corrupt money from the implementation of these million-peso fines.


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