Much has been said about the ability of Cebu-based shipyards to construct ships. It was therefore inevitable that defense enthusiasts ask: "Why doesn't the Philippine Navy have its ships built by these companies (e.g., FBMA Babcock, Tsuneishi Heavy Industries - Balamban)?

Sultan Lapu-lapu has already offered a financing scheme that involves the Development Bank of the Philippines. So one could say that the funding issue has been taken care of.

I submit, however, that we should also ask: Are THI and FBM Babcock willing to build ships for the Philippine Navy?

Quite simply, the government has a record of not paying its debts. Ever heard of government offices, that had their public utilities shut off because they didn't pay their bills? I've seen construction businesses go belly-up because the government took so long to pay for services already rendered.

With a project as lucrative as a ship construction deal, I would not be surprised if some senator or congressman to came up with an "expose" a few weeks before the ship was commissioned, calling attention to alleged irregularities in the construction contract (translation = he didn't get his cut).

As a result, the Department of Finance would then freeze payments for the ship pending an investigation. The PN would also be constrained from accepting the ship. End result: the shipbuilder gets screwed because they had already spent resources building the ship.

Past examples of this kind of behavior include (these involve construction projects, but that simply because these are the most common big budget government projects around):

- NAIA 3
- Davao International Airport
- Davao legislative building

(Most of my examples are Davao-based simply because I'm from Davao)

A decision-maker in either THI or Babcock, would treat a request for bid from the PN very very carefully. These companies would, arguably, take the unreliability of the government into consideration when deciding upon how much to charge for the ships. End result: it will be cheaper to buy second hand from abroad.

Your thoughts gentlemen?

Simple lang naman ang sagot dyan.

Eh di walang manghihingi ng kickback para walang magrereklamo na di kasi sya nakakuha ng parte nya.

:exactly:

Nonetheless, "past is past"... and we must move on.

With this government, i mean this new opportunity that we have to make things right, if something goes wrong with any deal we make with the defense contractors, ....

... WE SHOULD BLAME THE PRESIDENT, THE DND SEC AND THE AFP CHIEF.

Nothing like this "kickback" issue should hamper any deal "if noone from among these 3 will initiate to try to get their own share of that dirty money."

If anyone from Congress or the Senate, the Defense Committees that is, will try to shake the deal JUST TO GET HIS SHARE OR FORCE THE 3 TO GET A PIECE OF THE FUND, ...

... then it is best for all to bring their identity and their ploy into public's attention so that we may know what to do next.

Dapat ang mga ito ang tinatarget ng vigilante eh. :armyroleyes:

Nang mabawasan ang mga makakapal ang mukha at masisiba sa gobyerno.

They could start building transport ships for the Navy. Transport ships are easier to build than full-blown combat vessels and could generate more funding support from banks because of its "softer" image, plus the added utility during calamities and SAR operations.

Ay sows...
Hindi nga puede ang DBP diyan, dahil PN ang pinag-uusapan.
The DBP, particularly because of the fisheries angle, could be inclined to help arrange financing for new civilian PCG vessels. As with the "Aussie financing" of the San Juan class boats, it's a loan, but the actual funds really come from elsewhere, through a long chain of other guarantors/banks. There are even grants and soft loans to draw on at the end of that chain, because that long chain reassures the grant-providers/aid agencies.

Warship-building contractors don't become successful because they have shipyards.
They are successful because they can win and manage contracts.
They are successful because they can arrange financing and insurance.
The shipyard where the boats are actually built is a lesser concern
--something tossed to subcontractors --wherever it is cheaper.

The recently-noted shipyards in Cebu were really just subcontractors in a long chain of assembly and management across the globe. BTW, ano nga ba uli yung mga "Filipino" pangalan ng mga 'Filipino' shipyards na mga yan?

The prime impediment to PN shipbuilding here or ANYWHERE is the lack of money. Period.
There is no existing credit facility to draw on, if you don't even have a PN budget to show to the banks you are talking to. Banks only lend to those who already have money, or at least have real money on the way.

But if there was real PN money, budgeted or even in some form of escrow,
a winning contractor could obtain financing to begin building.
Performance-based ang gradual release ng contract amount (ang bayad sa contractor), so the contractor HAS to have capital for construction.

Heck, that's just financing. The provision and installation of restricted warship components is a whole other kettle of fish to think about. You can't just order a hull from (say) Tsuneishi and THEN buy and slap suites yourself onto it. Design phase pa lang, alam na dapat roughly ang kakargahin, at alam na rin na aprubado ang pagbili ng mga iyon. If a 'local' shipbuilder can't swing foreign approvals on restricted items... ah well...

Foreign project management, local-shipyard, ...aba sure.
Parang yung Jacinto-class overhaul... basta there is a budget.


Iron Dragon's suggestion of transport ships is fine, not because of any publicly-acceptable 'profile': if its PN, its PN --even if it's just a friggin' tugboat-- and that disqualifies it from a lot of foreign soft loans and grants.

No, transports are good because they're needed, and because the design and construction does not depart much fom what local subcontractors are already building. Same for an OPV --try looking into the lessons learned by the UK. Their OPV hulls incorporate design features of commercial fishing vessels --the latter are the result of centuries of refinement towards endurance and cargo efficiency, and so long as you design good hardpoints and maybe unmanned-helo capability for sensory range (not for helo patrol, just for raising the radar mast, so to speak), what's left is securing armaments, defenses and sensory capability befitting a warship. If an OPV design is more like a commercial vessel, then it is going to be more comfortably familiar to "local" subcontractor-shipyards. Iyan lang Meko 200 --what does it look like at first glance?


Of course, we always come back to the money, no?
It doesn't matter how long a chain of bank-guarantors you try to set up --there is no grant money for defense spending, nor soft loans for the same, out there at the end of the chain. No such animal. There is only the defense budget approved (or not) by Congress for PN...

Banks will only lend if there is money forthcoming or already there.




+

:exactly:

Read and learn boys. Read and learn.

jorge

1) the DBP is owned by the philippine govt so there is no stopping the philippine govt instructing the DBP to lend money to the AFP or PN if it wants to
2) DND projects are part of economic security. in fact, DND projects have to be approved by NEDA. for example, the jacinto upgrade went thru NEDA. thus, for all we know, based on this, the DBP can lend to the AFP. i mean, has the AFP even tried or explored this approach at all?

Let us assume for the sake of argument that the armed forces is allowed to borrow money which it is not. The AFP, through the Department of Defense, would still need congressional approval for that borrowing. Congress would still have to pass a budget appropriation for any expenditure, in this case, debt repayments.

Given that, you now have a left pocket to right pocket situation. The government lending to itself. Why the need for a loan when an outright appropriation can be made?

Borrowings, for and on behalf, of the government, except those agencies allowed by charter is a function of the Department of Finance.

Pardon my ignorance about government-related financial matters, but how does the government go about borrowing domestically?

As of December last year, the national government had 1.96B pesos in domestic debt. Are these actually loans from local banks? Do these include bonds?

Does the government borrow money based on the size of the budget defecit, or are these loans incurred in connection with specific projects (e.g., modernization efforts, etc.)

. . . or do these figures still reflect Marcos-era behest loans?

i completely agree that the bottomline to the AFP's modernization problem is funding or money.

There is a practical solution to the hard-headedness of the congress and senate in allocating money to the AFP. its like this:

Put yourself in the shoes of a congressman or senator, and imagine what goes thru his mind everyday. he needs to make this or that guy happy, this or that mayor happy, this or that barangay captain happy, this or that housewife happy, this or that voters happy because being the politicians that they are, they want to make sure they are re-elected in the next elections.

so the solution??

call a grand meeting of leaders or representatives of AFP enlisted mens association, non-com officers association, AGFO, RAM, YOU, retired officers associations, policemen associations, AFP wives associations, Police officers and policemen association, and all groups that are connected with the AFP and police and agree on one thing, that is, if a congressman or senator is not known to vote for a bigger DND budget then instruct all AFP and police members, their families ,relatives and friends not to vote for that congressman or senator.

when congressmen and senators realize what a big voting bloc the AFP , police, their relatives and friends are, then they will surely approve increased defense budget.

basically, gayahin ng AFP ang voting bloc power ng iglesia ni cristo .

This should be a separate thread.

Everytime a note (paper, IOU, bond, etc) is issued, a borrowing is made.

Domestic borrowings include government securities (T-Bills, Bonds), medium to long term debt instruments issued to fund domestic projects (e.g. LRTA Bonds, NIA Bonds, etc). Paper issued by government financial institutions (LBP, DBP, Guarantee Funds, etc). GOCC (e.g. NAPOCOR, NHMFC) issued notes. Local government bonds. Private issued paper with government guarantees. Reserve requirements, overnight deposits, other deposits of local banks with the BSP.

The government borrows as a monetary measure or as a fiscal measure. Monetary, to mop up excess liquidity or to infuence the interest and exchange rate regime. Fiscal, to generate funding for government infrastructure, capital budget and governmental spending.

Ultimately, currency in circulation. The government can always print money which is in effect a borrowing.

No offense, but there's so much dangerously wrong with your statement,
I don't quite know where to begin, so let me meander:

The DBP is owned by the Philippine Government, did you say?
It is 'owned' by the Filipino people, especially after it unloaded its debt and NPA's to form part of the National Debt. Do you know how much national debt was generated from the DBP alone, when it was ORDERED by President Marcos to guarantee/extend bad loans to this or that favorite crony?
USD 2.54 Billion. That loss cannot ever be allowed again, and so today, 'government' cannot just 'order' the DBP to finance this or that project.

The DBP has little real money, even though it finally started operating as a unibank in the mid-90's. Go look up the assets of DBP, compare it to commercial banks. What DBP usually does is GUARANTEE loans. Japanese creditors feel easier when the DBP is on board, and when NEDA has signed off on the borrower's worthiness. In essence, DBP offers its principal as reassuring collateral to help a project get loans. DBP dips into principal too, but for loans to COMMERCIAL ventures.... the sort that involve a return on investment. Tell me --what is the return on investment sa warship?

There are no external grants or soft loans for warships.
A loan, last time I checked, implies repayment, with interest if you please.
Now, follow me, car loans and housing loans don't directly apply to commercial ventures..
so, the lender checks the income generation of the borrower --his/her ability to repay the loan.

Who is the borrower with regard to warships?
PN? DND? Nuh-uh ---they can't borrow.
As you move higher and higher up searching for the actual borrower, you come closer and closer to looking right at the National Budget. That's right, the thing has to be budgeted for, and then what is pertinent to us is that the CONTRACTOR borrows against said budget.

The DBP is probably the best-performing bank in the country, peso for peso, and it got there through sound fiscal management and discipline, not by being ordered around. It makes sure it stays away from bad loans, and makes sure it collects on the loans it's given out.

You want someone to lend money towards warship-building?
Then show the lender that there's money to pay him back!
Line item the project into the national budget.

NEDA? NEDA is, for our purposes, an assessing agency, and its stamp of approval on local borrowers/projects is one of the first things creditors look for prior to considering the extension of a loan or grant towards a national project.

Let's say NEDA clears a proposed shipbuilding project, and refers it to DBP.
Who is DBP lending money to? Who is repaying DBP its loan?
Government? Circuitious, when the government can simply budget it.
The loan advanced would really be going towards project implementation, and therefore, towards the project implementaTOR: the contractor. Thus, it is often the contractor who formally arranges the loan. Tenix, anyone?

If you want the government to someday budget for say, 3-4 NEW Super-Jacinto OPV's
and, I dunno ---the fuel and spare parts to keep them running, then

1. Pay your goddamn taxes
2. Vote better candidates into office --lower primates man lang, please
3. Get everyone around you to do the same

Wow, ha...
That's even more dangerous than your previous call for Marcos-era dictation of the DBP.
:nono:

Simple math muna... what is the total troop strength of the AFP? Dependents included?
Even if you could get them to stand behind a single set of candidates --which they won't, because most of the unfit with stars on their shoulder boards are ALREADY beholden to competing political interests-- there is the simple issue of voting bloc SIZE. The INC has the numbers, AFP doesn't.

Worse, while the AFP has a tight obedience hierarchy like the INC, the AFP is avowedly APOLITICAL as an organization. You're asking for AFP politicization at a time when the AFP needs to return fully to its professional, duty-focused origins.

Soldiers will individually vote their conscience, and if their thinking aligns towards similar candidates, that is not unexpected. The AFP is politicized already, to the detriment of their duties and the promotion of violent adventurism. Political allegiance is why the unfit are given command, whence they skim off AFP budgets --and they would pocket any budget increase arising from your fantasy scenario-- while brave young soldiers are sent to their deaths underequipped.


No teynks.

jorge,
1) the govt finances their projects or programs with either taxes or loans. kung kulang ang taxes then the govt borrows. if the civilian departments can borrow, then a way can be found for the military to borrow too. why not give it a try? if they dont try, they wont find out.
2) the DBP offers loans to for the purchase of civilian ro-ro ships so since the DBP is owned by the philippine govt or like you said by the filipino people, then there is no harm in trying to finance warships thru DBP loans. i mean, why shoot down the idea of borrowing from DBP when we they in the govt have not even explored this idea. you and me can debate this to death, but the bottomline is that borrowing from DBP has not yet been explored. why dont we give it a try before we shoot it down?like they say, you wont find out till you try

3) regarding the voting power of AFP, i would think it is much larger. here is the math:
lets say 140,000 men including CAFGU(there are about 35,000 cafgu). lets say half are married so thats 70,000 wives for a total of 140,000 +70,000 wives = 210,000 voters. lets say this 200,000 voters have 8 adult relatives each(including their parents) and 2 friends each so thats a total of 2,000,000 voters so far.
we have not counted yet the retired AFP personnel that is much bigger than the active personnel. in fact RAM supposedly has a membership of 500,000 kung totoo. theres the AGFO, YOU, etc...
then theres the reserves of the AFP. well, its just an idea. that i think is worth the try. if we already shoot down the idea without trying then we will never find out.
like they say, you wont find out till you try.

Sultan LapuLapu,

Before anything else, I do not know why you keep addressing me as "jorge".

As for your points:

1. The gov't borrows all the time, sure. But I wager your all-too-casual generalization isn't based on MILITARY project financing. It's too easy for you to say that 'a way can be found' for AFP or PN to borrow on their own. Spell it out then, in specifics to show that the law of the land is not violated.

2. You're too-casually assuming that the AFP hasn't explored other possible financing angles before. The PCG's Tenix, Rodman Poyships and Norad deals --stymied by certain senators or not-- are instructive examples of how easily boats can be ordered, with generous grants and loans thrown in from without, when a non-military agency is the recipient. Why was the PCG moved to the DOTC's civvy control?

3. Your careless math as to AFP voting power is, to put it charitably, optimistic. It assumes utopian homogeneity within the sample considered. That is however not the worst part of your electoral musings. That you trot out RAM suggests you see no problem with the maximized politicization of our AFP, as well as the adventurist mutinies that it breeds. What again is the official policy of the AFP / PNP regarding RAM, Guardians, etc? I (and the law) prefer a more professional, duty-oriented AFP.

All your idle, wide-eyed 'why don't we try' could use grounding in some (easily-obtained) knowledge of the law, as well as of past attempts by the services to procure brand-new materiel.

Left pocket to right pocket indeed... most concisely served, Pendejo.
Read and learn, boys. Read and learn


----------------------

As I said much earlier, financing is merely the first hurdle --obtaining sovereign releases on restricted warship components is the second. I haven't even got to the third, let alone the others up to the eighth and ninth major "impediments" to a local "Filipino" (sh'yeah, right) shipyard on its own, bidding-winning-delivering on a PN warship contract. Boats can be built locally for sure, if local shipyards partner up with defense heavyweights who can handle the impediments. Why do you think BAe, Vosper Thornycroft, etc. are watching the Qinetiq-Keppel relationship carefully? Even Bazan hinted at a limited local-build feature in their PCG bid, but their financing proposal stank, and so the contract went to Rodman Poyships.

There is one existing avenue remaining in order to dodge steep commercial interest rates, and that is via a specifically-military credit/grant facility extended from the US. Such a one seems to have already hit snags in both our Congress and Senate. There was a P200 Million new LST construction project noted in Jane's Defense Weekly (Dec 15, 2004), slated for completion in 2006. This was apparently a matching-funds proposal from the US government ---but this required the local counterpart's inclusion in the budget. If this LST project successfully bears fruit, then additional vesels (4 or more) are being suggested under the same scheme, and a separate fixed-wing MPA project is also being sounded out.

But hey, none of that seems to matter since the DBP isn't a part of it, so carry on!



H

Hahaha. Let me try again. Financing is always premised on capacity to pay. In short and simple, "where will the money to pay the loan come from?"

Developmental financing for let's say a fast ferry boat terminal in Samar is possible because of the revenues generated in terminal fees, real property rentals and concessionaire business over a period of time.

Let us assume again that financing a warship falls under the category of developmental financing. Financing a warship? Where will the revenue stream come from to pay back the loan? Who pays for the warship loan, and with what money?

If you cannot answer the question you have no financing in sight. Not in your wildest dreams, my boy.

I don't think there is such a thing as military bloc vote. Maybe you have military communities in Villamor Air Base barrio voting for Lorna Verano Yap. The same military communities at East Rembo, Fort Bonifacio that voted for Joker Arroyo, Butz Aquino, and Jojo Binay. The military class is but a mirror of society. They vote the way their communities vote, not the other way around.

Give a little credit to the military mind. They don't vote like cattle. I certainly won't and nothing I can do will influence my independent minded wife and children. About giving it a try, hey, thats what the Veterans Party List was all about. My priority for the budget would still be education, not defense.

RAM and it's 500,000 members. Duh, uh. They couldn't even put Honasan on the party list.

There is another way to raise funds for the AFP. The gov't advances X amount of money for their let say 10 yr appropriation (they may raise these money through borrowings domestically or internationally). Put this money on a trust fund, let professional money managers run the fund to make money where the sole beneficiary of the trust fund is the AFP. The trust fund can also be used a security collateral for debt based purchase or lease with option to own arms deals.

The original proponents of the RSBS have this in mind. Using the retirees' savings and some AFP seed money and occasional participation of AFP funds will be controlled through a trust fund and the AFP gets the proceeds. The plan is more than great as a matter of fact it is brilliant. One problem is the execution. They let retired generals run the show. If they only let big fund managers run the show it could have been really profitable now just like CALPERS in california (the same scheme with california state employee retirees).

A bold president would have done so, do not let govt manage development fund so that the real beneficiary will receive its due.

Oh by the way, Singapore Armed Forces started this way, so as PRC's western technology purchases, Some regiments in the British army (ever wonder why they are called the Queen's Royal Scottish Regiment?) are funded by bankrolled trust funds.

Point here is this, and armed forces can only borrow money if it has revenues of its own, we are patterned after the americans, the gov't borrows in the AFP's behalf but the AFP have no control if they get a fair share of the borrowed money. In Indonesia and PRC, their armed forces have commercial interests not run by the military but the military is the recipient of proceeds.

One point in time 80% of telecom operators (including mobile service) in China is owned in part by the PLA. When China's telecom industry was liberalized the PLA sold its holdings and re invested them into US T Bills and other instruments. Thus the PLA is one of the US goverment's biggest lenders outside from central banks around the world.

Further, in Suharto's time, they have engineering brigades bidding for goverment infrastructure contracts with engineering services provided by foreign engineering companies. They even had mining interests.

When these funds are at work, these countries were able to embark on huge capital equipment buildup program.

For the AFP to buy modern weapons, it should either have its own revenue and purchase capital equipment comensurate to its earnings oor the RP govt is making huge surpluses to fund advanced systems for use of the AFP.

Lastly, the most succesful fund management operation for an armed forces is China in the 30's. Chiang Kai Shek begged for money all over the world on behalf of China's cause. When Japan invaded Manchuria, CKS move all its financial assets to Switzerland and London to be managed by pro fund managers participating on bond issues, trading and commodities.

When CKS was driven south to Chongquing, ever wondered how he made bureaucracy work on a retreating gov't? One point in time, his fund managers started an air charter and air maintenance service. It bought all sorts of planes including P-40 fighters. With verbal US state department blessing, they recruited pilots all over the US and gave them airline pilots salaries + hazard and enemy bounty bonuses. Led by Claire Chennault, the success of the American Volunteer Group (a.k.a. The Flying Tigers) was partly on witty tactics agains zeros, daredevil flying, effective monitoring network all funded and took cared for by commercial fund managers in London. The avaitors of the Flying Tigers even have insurance policies underwritten by the Lloyds of London.

All of this can be done, the will to do it is another story.

Well okay...
What's the difference between government depositories and a fund-manager-ed trust? The vastly larger principal in the former probably makes for more interest overall, without the attendant, greater risk of playing the markets with a smaller, separated amount.

There's no advantage in immunity from corruption, if the money is given over to AFP control-- (AFPSLAI, anyone?), but then you acknowledge that in your post.

Even if the money is left in the government's mothership kitty, as long as a line item for PN contract shipbuilding is in the national budget, that's good enough ---the contractor can then arrange financing to deliver the boat(s).

However, the problem remains: THERE IS NO MONEY to budget.
Almost everything normally usable is tied up in debt servicing, CDF's (no, not you of course, I mean pork barrel allocations), or in duty as guarantee-collateral. Until national fiscal health is restored, the money will have to come from outside. Heck, if fiscal health is not restored, we could default on loan repayments for the PCG boats already delivered, losing the boats (and more). That would be a disaster ----so how can you expect government to be eager to set up additional boat-loan exposure?

The US is trying to help us out with a matching-funds proposal --it at least halves the amount we need to raise, and could have us laying keel on an LST this year, launching it in 2006, with two more such craft every year into 2008, that is if Osmena, Biazon & Co. would stop trying to block it.

We ain't the KMT, nor the HRH's, nor the United States of America.
We have to play the impoverished hand we've been dealt, and that means getting the financial house in order very quickly, so we can continue the gradual, careful capability-building of the AFP.

JMO, YMMV, TANSTAAFL, etc...


+

how is the PN going to pay for the loan? one way is thru annual appropriations from the AFP budget. for example, if a ship was 1 billion pesos, but the PN does not have 1 billion pesos, then the PN can pay for the 1 billion pesos in installments.
lets say, the PN can only set aside 50 million pesos a year so, if the loan has no interest( for simplistic reasoing), the 1 billion loan will take 20 years to pay.
my question now to you is how does the PCG pay for the loans on the ships it bought from Tenix? the answer is what i mentioned above. if you look at the DBM website for previous years till the present, the DOTC allocates a portion of its budget yearly to pay for the loan on the ships.
lets just take out DBP out of this ,since no one wants to explore or try the DBP route. the bottom line is that the PN can borrow money thru various other means to buy ships. the question is whether an amount can be found to pay the yearly installments.

concerning the voting power of the AFP, who know, maybe on such a super important issue as money for their salaries, money for their equipment, etc, it might galvanize all AFP retired and active to vote as one. we are not asking AFP men to vote for some shallow reason . we are asking them to vote for candidates that will put money into their organization, that will make their organization stronger. surely, this a simple yet powerful appeal to AFP men

the only way to find out is to try.

More precisely, the Philippine Coast Guard generates revenues from fees, licenses, penalties, and other charges. Some revenues are shared with other government agencies. Therefore there is a means to pay over a period of time.

How about the Navy?

the fees and taxes collected by the PCG , DOTC, BIR, BID, Customs ,etc is allocated by the dept of budget after approval by the legislature to all the govt agencies whether they earn revenue or not. all govt agencies share in the small pie.
the BIR or DOTC , etc..does not keep for itself the taxes and fees it collects, it is allocated among all the govt agencies.

the DOTC still has to get approval from congress as to its budget allocation, e.g. allocation for yearly payments of the tenix ships.

in other words, all govt agencies whether revenue generating or not get to share in the taxes and fees collectted by the revenue generators.
by the way, the PN indirectly earns revenue from the smuggled items it seizes. however, it turns them over to the concerned govt agency, e.g. customs who supposedly then disposes of them 'properly'

I had typed a really detailed explication, but realized that almost everything needed to dispel the repetitious, misinformed and misleading notions I would have contested, had already been laid out earlier. Several times.


+

The Tenix deal is a sweet one, if I am not msitaken, the australian gov't paid for the cost of the ships to a trust as aid. The trust pays Tenix in installments, while the trust makes money on the funds where the interest income pays for part of the tenix installments, the DOTC pays for the short fall. The budget allocation of DOTC is not by no means the full amount that has to be paid, it is just the difference between the interest income of the trust and the payments to TENIX.

The only condition by trust so that the collateral in question does not carry any risk that can not be insured is a guarantee by the RP that the ships will not be used for military purposes. That is the reason no weapons are mounted to the Tenix ships.

Once the ships are paid for, the trust returns the money to Australia, RP can do whatever to the ships, Australian manufacturer received goverment support through sovereign importation contracts. This the reason why most US, Australian and European nations have big companies in other countries bec they receive contracts based on this type of deals. This is the same method how the Japanese manages their foreign aid. The Fil-Japan freindship highway or the PAG-ASA flood forecasting system never cost the japanese taxpayer a cent as in the long run the money went back to gov't coffers, the interest paid for the war reparations/ aid projects and they helped support local industries.

But that's the whole point, no president ever went to the US senate and ask for conversion of US aid to real financial aid.

They will give us 200MUSD but with 400T peso PRC-77 radios that is 70's technology. It is overpriced so as the real cost is not that huge, it is all funny money that is given in aid, I reckon we only receive 1/3 present values of what was appropriated.

If the US puts their aid into a trust fund, we buy the equipment as we see fit ( no JUSMAG bs), the interest will be paid to the purchase, the gov't borrows money to pay for the difference, do some math and 2 squadrons of F16s is not that impossible. It will be within our budgetary means.

The US taxpayer will get their money back, after the trust fund paid for itself, US defense contractors made decent deals with the RP and we did not spend a lot for hardware.

That is the reason I am hopeful on Japanese change of heart on regional defense. Down the line, we are more likely to get deals like this than get it from the US.

I don't really think this can be considered "revenue", in the same way that the DOTC's fees are revenues for the PCG.

The AFP is a cost center; it was never intended to be a revenue generator, nor should it be allowed to become one. That way it remains institutionally beholden to the civilian government, and by extension, the people of the republic.

We're starting to go into all sorts of directions here, so I think sort through the babble and get at the key questions that have not been answered. As far as I can tell, the following questions have been raised:

- Are Philippine shipbuilders actually capable of managing (from financing to construction) a large shipbuilding project? (Horge)

- How can a non-revenue generating entity (e.g., the AFP) be qualified to obtain a loan? (Pendejo)

I believe the following question is at the heart of Sultan's posts; one that I share as well:

- What funding options are open to the AFP, both domestic and foreign?

Did I miss anything?

CDF, where can one get the specifics of the Tenix deal?

Hi adroth,

IMO, No.
They will have to partner up with a foreign manager that the low-interest, hevyweight creditor banks are comfortable with; foreign managers who can swing the easy clearances on restricted materiel, so that hull and superstructure construction proceeds swiftly. In a sense, local shipbuilders are already halfway there, as these 'Philippine' shipbuilders are partly or almost-wholly controlled by foreign interests. Over the medium-long term I'd say Tsuneishi/Aboitiz is probably top dog of the pack, with Keppel second... unless the Brits go to phase two.

Once the third-party, proprietary-component merchants are comfortable selling to our foreign-partnered local contractors, the odds are good that in a few years they will consider selling to our local contractors flying solo.

Got nothing to do with whether PN is income generating or not.
But, hey... your ball, flyboy.
:drunk:

1. Annual Budget courtesy of the government.

2. Indirectly, military-specific external grants/credit, such as US FMA and similr facilities presently on hold from UK, and potential (if unlikely) such facilities from Japan--which all go FIRST to the central government --in legal fiction-- before rolling down to the PN. The recipient project has to be line-itemed into the annual budget kasi.

3. Sale of PN EDA and underutilized real estate, which I dislike for many, many reasons

4. ColdDF's speculation-fund option, which I really dislike because it :
(a) is wide open to abuse such as the AFP have exhibited, time and again;
(b) interferes with the traditional dependency and already-suspect allegiance of parts of the AFP to the Filipino people.

Of course this is about money on the client side of the project, which is withheld from the project contractor until requisite delivery terms (graduated or not) have been met. The accessibility of necessary borrowable capital and insurance to the contractor is a separate matter --this is where we begin to separate local and foreign heavyweight shipbuilders.



.

adroth,
I've found that the full money trail involved in financing the Tenix deal is a little difficult to obtain. If CDF or anyone can get it, it would be very instructive, but I doubt all of the creditors involved will ever be generally known. Maybe CDF can add to or refute what I perceive:

ANZ Investment was the lead financier for the PCG boats,
BNP Paribas and Societe' Generale (!!!!) were involved as co-financiers.
AUSAid extended both soft credit and outright grant to the project cost.
It is assumed that other grant facilities contibuted, but I have failed to identify them.
It is assumed that other upstream and downstream creditors were involved,
but I have thus far failed to identify them.

The Australian state export credit facility (EFIC)
eased the risk to the creditors, insuring 80% of the contract value.
Here is a link on the usefulness of such export finance guarantees, from EFIC itself:
http://www.efic.gov.au/static/efi/exportfi...e/guarantee.htm

I am unclear on how much of the oustanding credit has been repaid,
the principal and mounting interest, nor on whether payment has fallen behind or not.

Tenix is formally in bed with the creditors:
BNP Paribas
Westpac Banking Corp. Ltd
Citibank N.A.
ANZ Banking Corp. Ltd.
Commonwealth Bank of Australia

:)
hth

Horge,

That is almost as close as I can get. AusAid provided the principal capital, EFIC underwritten the export guarantee to TENIX, protecting this export sale. ANZ is consolidator and trustee do not know if BNP and SG are just participating on the trust or they co manage the trust as downstream revenue sources or just a conduit to the security instrument used to make the trust funds move and earn money.

Or AusAid is the manager, ANZ is a trust bank provider and the others are just there to spread the risk.

Let me try to put these in layman's terms, just to see if I got it:

- Tenix built the ships, which were guaranteed by the Australian gov't c/o AusAid

- AusAid put up the cash, but instead of handing it over to Tenix, they gave it a consortium of banks

- The banks figure out how to make the money earn interest, then pay the interest to Tenix as compensation for building the ships

- In essence, the Aussie government didn't really part with any cash

AFAIK, adroth...

-PCG want boat
-RP DoF talk Tenix, plenty love but no money, ay!
-Tenix talk friends get money for DoF
-AUSAid donate money (from principal, from profit off investment, who care?)
-AUSAid also lend money, very low interest.
-Tenix ask best friend ANZ, BNP Paribas to loan money to RP DoF
-BNP Paribas ask best friend Socgen to loan money to RP DoF
-EFIC reassure French banks with loan guarantee, 80%,
-The banks (BNP Paribas, SocGen and Aussies' ANZ) lend money to RP DoF, but...
-Most money actually stay with banks (earning interest for RP-DoF and banks)
-Tenix build boat, toot! toot!
-Banks pay Tenix on time from RP DoF loan. Ubos loan, on schedule.
-RP DoF now try repay loan.
-RP DoF default loan repayment. Bad.
-Banks take possession of boat
-Banks lease boat to other country
-Other country boat sink many bulok PN boat, bang bang. J/K.


Seriously, the Aussie & French banks would never have loaned RP DoF that kind of money
without EFIC assurance, and EFIC would never have extended assurance to
two French banks, if it hadn't been an important Aussie exporter (Tenix) involved.
AUSAid even donated money just to see the Tenix contract through.
It takes a lot of influence to obtain that kind of support, and Tenix has it.

Now, if Tenix were to build for say, Australia's coast guard, it'd no longer be
an Aussie company bringing in export dollars. Canberra is going to want assurances
vs. Tenix performance. Tenix can't count on EFIC coverage (no export involved kasi),
nor call in AUSAid to lower the pricetag on each boat (domestic project kasi).
Tenix would have to secure loans on its own ---and that's why it's in bed with
BNP Paribas and ANZ, among other banks. Kaya pa rin. That's strength.


h

PS: On this forum, discussing boats as if toys...
it's easy to forget that there's very serious money involved. Deadly serious.
Check the Tenix MOA dates and the number of vessels that were originally
supposed to be contracted out to Tenix. Now, check also when DoF/DOTC started
seriously flirting with European contractors (Bazan, Rodman, the Norwegians, etc.)
to build PCG boats ---and correlate all that to when the Australian PM started
slamming us over our Iraqi pullout. Tralalalala.

PPS: And that's enough verbal diarrhea out of me. Promise :)

singapore started first building commercial ships then branched out to military ships after gained experience and success in commercial vessel production...my suggestion is philippines has first to own government own shipyard to make commercial vessels like singapore did first then expand to naval warships later only practical way for you to establish indigenous shipbuilding industry and not-relying on local shipyards owned by foreign countries..is this not so?

:armygrin:

Thanks Horge. :thumb:

Sounds like the Aussies really bent over backwards to get that deal through.

Makes sense. Shipbuilding for commercial purposes is the only way to make the industry sustainable.

True if it was as simple as a direct and unconditional obligation of the Republic of the Philippines. From a financial standpoint it depends on how the funding was raised. For example, LRTA Bonds or NAIA Bonds. These are direct borrowings of the Light Rail Transit Authority or the Airport Authority in the form of a bond issue. Repayment of the bonds would come from revenues generated from LRTA or NAIA operations unless there is a Philippine Government guarantee (that's Congress) which is rare.

Just because you issued a bond doesn't mean it will be bought. If the PN was to issue 25 Year BRP Bonds. Who would buy it unless there was a sovereign guarantee?

Borrowings have always three factors Capacity to Pay, Liquidity and Security (Collateral).

Let's not split hairs. If a government agency can do a direct borrowing it would have been done a long time ago. It just does not happen that way.

Hi Singa,
As I noted in another thread elsewhere on this board...

Singapore's situation is/was almost unique:
-coming into being in modern times, when colonial subjugation was frowned upon;
-having a lot of failed/successful regional models to study;
-having small, contiguous land area

The last one is important.
It means tht the dominant power base can exercise solid control (tax-collection, law enforcement, etc.) of the area, which means a monopoly of sorts. Since numero uno power is supposed to be the government, it can dictate how industry develops ---the various component-entities under the aegis of 'Chartered Industries' avoided many of the competitive growing pains that plague truly-private enterprise.

As for the Philippines...there already is some nice commercial shipbuilding going on, and there has been for a few decades. I believe its existence (belatedly recognized) was one of the bases for this thread.



h

I believe the reason why we can't create our own naval vessels is our lack of initiative in this. Nobody is volunteering anyway to build our ships, and nobody in the country has the technology to do it. We need to look abroad, like Japan or Korea.

Japan is 1 of our closest friends next to Uncle Sam, and the Filipino peso is twice the value of the Japanese yen. This is to our advantage, and we can even negitiate a discount.

:snipemo: :snipemo: :snipemo: :snipemo:

Semper Fidelis et Paratus

The technology and know-how are there.

Have you gone over the preceding discussion?

what is apparent is the ...

... LACK OF INITIATIVE FROM THE GOVT, PARTICULARLY THE AFP, TO ORDER SHIPS FROM THESE LOCAL SHIPBUILDERS.

Some pointed out in the earlier postings that ... they picked foreign builders because these are where the biggest kickbacks can be obtained.

I hope Gen. Abu will prove us wrong.

You know what? PGMA can help our local shipbuilders benefit much from our modernization program.

Let's hope she finally realizes soon enough the need for her to get her hands on this and help the local shipbuilders start building ships for the AFP.

Imagine? Dollar deposits will be saved and this will definitely boost local employment.

how can this be to our advantage? if you mean like peso cost more than yen...then there seems to be problem. just because peso is twice the value of yen doesnt mean we can cheaply buy japanese products. take this as an example...one can of bear in japan is 150 yen.

It was before mentioned in one of the daily papers that how come the goverment has not used this opportunity.
But sadly it is true that foreign firms has a way of persuading goverment officials.Check out the latest scandal in Thailand involving Gen Electric.
Since PGMA has the habit of going to Cebu someone might point this out to her.