BusinessMirror October 29, 2015

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three-time rotary club of manila journalism awardee 2006, 2010, 2012

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Royals in game 1 Sports BusinessMirror

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| Thursday, OCTOber 29, 2015 mirror_sports@yahoo.com.ph sports@businessmirror.com.ph Editor: Jun Lomibao

IN GAME 1

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By David Lennon Newsday

ANSAS CITY—Game One of the World Series began with Matt Harvey throwing a typical, 95-mph, getme-over fastball. Not much different than any other start in April or August. But what happened after that was hardly ordinary, and for Harvey, probably twice as frustrating than if Alcides Esobar had just deposited the pitch into one of Kauffman Stadium’s scenic waterfalls.

Instead, Harvey spun around to see Escobar’s deep fly dive between a braking Michael Conforto and the sprinting Yoenis Cespedes, who took his eye off the ball long enough for it to nail him on the right knee. So Harvey watched his first out skip along the warning track and allow the speedy Escobar to race around the bases for the leadoff, inside-the-park home run in what eventually became a 5-4 New York Mets loss in 14 innings on Tuesday night.

It didn’t seem fair. The crowning moment of Harvey’s career, one derailed by Tommy John surgery, was smeared through no fault of his own. The Mets never trailed in their four-game National League Championship Series sweep of the Cubs, and Harvey wound up saddled with the task of halting the momentum of a Royals

team that is nearly impossible to slow down once they get rolling.

But that’s exactly what Harvey did, stopping the free-swinging, high-contact Royals into the sixth inning, giving the Mets a chance to get to Edinson Volquez. Harvey shook off that Cespedes blunder with four scoreless innings.

Once the Royals got to Harvey in the sixth, tying the score on Eric Hosmer’s sacrifice fly and Mike Moustakas’s run batted in single, Terry Collins began warming up Bartolo Colon—and Harvey didn’t come back out for the seventh. That was a somewhat perplexing move by the manager, considering Harvey had thrown just 80 pitches, but Addison Reed still replaced him.

Heading into Game One, Collins said he was looking forward to having Harvey hand the ball off to Jeurys Familia, but the Mets fell far short of that.

“Kansas City will decide how long Matt is going to pitch,” Collins said. “I have all the confidence in the world that he’s going to get deep.”

Harvey had been overpowering in these playoffs, and his swingand-miss rate of 37.2 percent was the best this postseason. Not surprisingly, that didn’t happen as much with the Royals, who failed to make contact only twice in their first 14 swings.

While that kept Harvey’s pitch count low, he also wasn’t getting

strikeouts. Harvey had only two Ks through five innings, and the Royals burned him by putting the ball in play during every at-bat in the sixth, when they tied the score at 3.

It started with Ben Zobrist’s leadoff double down the right-field line, and Lorenzo Cain’s single put Royals at first and third. Hosmer followed with the sacrifice fly and, after a tapper back to the mound, Moustakas slapped a 2-and-0 changeup into center field for the tying single.

With Colon up, the end was drawing near for Harvey. Collins didn’t hesitate to give him the ball in Game One, partly because the manager felt the extra rest was necessary for Jacob deGrom, but Harvey couldn’t hold the lead on this night.

The Royals’ lineup, with the benefit of a DH, is longer and more dangerous than the Dodgers’ and Cubs’ before them.

Harvey seemed to go to his off-speed pitches more, especially the changeup, in trying to keep the Royals off-balance. A day earlier, Harvey suggested that he’s had to be more strategic lately with a fastball that occasionally is a few ticks slower.

“I think maybe between the long year and having surgery I think I might have lost a little bit of—I don’t know how they said it—the effective velocity,” he said. “I think I kind of went down a little bit. So I really had to learn how to pitch a little bit more and kind of go out there and be a little more crafty than normal.”

STEPHEN CURRY explodes for 40 points, seven assists and six rebounds in the Warriors’ 111-95 win against the Pelicans. AP

CROWD-PLEASING SHOW

By Diamond Leung

The Oakland Tribune

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AKLAND, California—Stephen Curry served as the master of ceremonies as the Golden State Warriors unfurled a championship banner and accepted gaudy rings in front of the team’s roaring fans.

Then in his first act of the regular season, Curry put on another crowd-pleasing show and exploded for 40 points, seven assists and six rebounds in the Warriors’ 111-95 win against the New Orleans Pelicans on Tuesday.

Downplaying the notion that the Warriors might be distracted by the celebratory pregame festivities, Curry poured in 24 points in the first quarter as he hit nine of his first 12 shots from the field, including four three-pointers.

The reigning Most Valuable Player had declared in the preseason he was an improved player and didn’t need long to prove his point. By halftime of the opener, he had scored 29 points and was far from finished.

The Pelicans were plagued by injuries and missing starting point guard Jrue Holiday, who was resting his

surgically repaired right leg. That left New Orleans starting Nate Robinson and having newly signed Ish Smith come off the bench.

Curry took full advantage and dazzled. He had Smith going one way on defense when he went the other. On another play, Curry wove around 7-foot-2 Pelicans center Alexis Ajinca for a lay-up as part of his fantastic first quarter.

He hit the 40-point mark in the third quarter when he drained his fifth three-pointer of the game. He finished 14for-26 from the field after playing 35 minutes.

The Warriors won the game easily on a night when Luke Walton remained the interim head coach. Steve Kerr was at Oracle Arena to receive his championship ring, but said before the ceremony that he could not yet return to the bench as he continued to recover from off-season back surgeries.

Pelicans Coach Alvin Gentry, who last season helped turn the Warriors’ offense into a juggernaut, participated in the ring ceremony but then couldn’t find answers for Curry.

Meanwhile, the Warriors contained Pelicans star Anthony Davis, who started the game one-for-15 from the field and still finished with a team-high 18 points. Davis found it difficult to

get on track as the Warriors threw multiple defenders at him and was four-for-20 from the field by the end of the game.

New Orleans did manage to keep the game close in the first half despite Curry’s early outburst. After trailing by 12 points in the first quarter, the Pelicans rallied to take a 44-43 lead in the second quarter as the Warriors’ bench struggled.

The Warriors weren’t able to pull away from the Pelicans until after halftime, when Curry’s lay-up capped off an 8-0 run to start the third and gave his team a 67-49 lead.

The Warriors didn’t finish the game entirely unscathed as center Andrew Bogut, already wearing a mask over his broken nose, suffered a laceration above the right eye in the third quarter and left to get stitches.

Bogut finished with 12 points as he made each of his six shot attempts. Festus Ezeli also came off the bench to score 13 points.

Draymond Green scored 10 points, and Harrison Barnes added eight points and nine rebounds despite missing his first seven shots. Barnes’s struggles early on came hours after he and General Manager Bob Myers announced the two sides had decided to table contract-extension negotiations

until next summer when he becomes a restricted free agent.

The Pelicans got unlikely contributions early from starting center Kendrick Perkins, who was replacing the injured Omer Asik in the lineup and scored eight points in the first. Smith, who was signed after recently being waived by the Washington Wizards, ended up scoring 17 points.

Eric Gordon added 14 points for New Orleans, and Dante Cunningham had 13.

The Warriors committed 20 turnovers, but also saw the Pelicans have 19 of them.

In Chicago Nikola Mirotic scored 19 points and Derrick Rose added 18 to lead Chicago to a season-opening 97-95 victory over LeBron James and Cleveland with President Barack Obama watching.

Pau Gasol blocked a potential tying lay-up by James in the closing seconds. Jimmy Butler then broke up an inbounds pass intended for James as time expired.

The president sat courtside for most of the game as his beloved Bulls knocked off the defending Eastern Conference champions and gave Coach Fred Hoiberg a narrow win in his first game.

James scored 25 points and grabbed 10 rebounds for Cleveland, but the Cavaliers came up short against the team they knocked out in the conference semifinals last season.

In Atlanta Kentavious Caldwell-Pope scored 21 points to lead all five Detroit starters in double figures, carrying the Pistons to a 106-94 triumph over Atlanta and ruining the opener of the team with the best record in the Eastern Conference last season.

The Pistons, who haven’t had a winning season since 2008 and finished 28 games behind the Hawks a year ago, began to pull away just before halftime. They led by double figures through most of the final two quarters and held on despite missing 20 of their last 22 shots from the field.

Andre Drummond had 19 rebounds and 18 points for the Pistons. Marcus Morris also had a double-double with 18 points and 10 rebounds. Ersan Ilyasova chipped in with 16 points and Reggie Jackson added 15.

Dennis Schroder led the Hawks with 20 points. Paul Millsap had 19 and Jeff Teague 18, but new starter Kent Bazemore—who stepped in at small forward after DeMarre Carroll left in free agency—was held scoreless. With AP

Sports

By David Cagahastian & Cai U. Ordinario

he Philippines didn’t like the fact that it slipped six notches in the World Bank’s Doing Business report for 2016; so, immediately, it aired the “strongest and loudest critique” of this year’s edition of the report.

KANSAS City’s Eric Hosmer hits a sacrifice fly in the 14th inning to drive in Alcides Escobar for the Royals’ winning run. AP

Thursday 2014 Vol. No. 40 Thursday,18,October 29,102015 Vol. 11 No. 21

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Finance Secretary Cesar V. Purisima questioned the methodology of arriving at the scores on the different categories that make up a country’s grade in the area of ease of doing business, blaming it for the drop in the rankings of the Philippines to 103rd place out of the 189

economies surveyed.

Purisima said that, instead of using as basis one or two cities in determining the rankings, the World Bank should collect data from other parts of the country, such as the economic zones administered by the Philippine Economic Zone

Authority (Peza). In the case of the Philippines, the ranking was based on government regulations and business experiences in Quezon City.

Ironically, Purisima himself has been pushing to “rationalize” the incentives given to locators in special economic zones, suspecting that many of these locators are no longer deserving of these incentives.

“Countries, especially developing ones like the Philippines, will have bright spots of promise in some areas and not in others. For example, we have our economic zones managed by Peza, which will give investors a drastically different landscape than other areas.

With this methodology, the Doing Business survey should be more

media partner

message

By Bianca Cuaresma

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he economic gains of the Philippines should not slip back quickly after President Aquino steps down next year when his term ends.

Economists at Australia and New Zealand (ANZ) Bank Research said the wheels that have kept the economy

growing at a fast pace relative to peers have been in place even before Mr. Aquino stepped in office in 2010.

“As the end of President Benigno Aquino’s administration draws near, many are concerned whether the outperformance of the Philippine economy will come to an end, as well,” ANZ economists and author of the latest review on the Philip-

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y heartfelt greetings to the BusinessMirror on its 10th anniversary!

In just a decade, the BusinessMirror has become one of the top business daily broadsheets in the Philippines for its unyielding commitment to serving not only the business community but the entire nation, as well, with its balanced reporting and responsible journalism.

Indeed, the newspaper has established itself as a veritable source of news and information on a wide range of issues, at the same time providing a forum for healthy dialogues vital to nation-building and regional cooperation.

A fine publication such as the BusinessMirror deserves the support and patronage of the reading public, for their own advantage.

Best wishes to the publisher and to the entire staff.

The Iglesia Ni Cristo is one with you in praying to God for the continued success and growth of the BusinessMirror.

Congratulations!

Eduardo V. Manalo Executive Minister Iglesia Ni Cristo

DANGAL AWARDEES The Dakilang Adhikain ng Ating Lahi (Dangal) awardees, together with Jun Vallecera (second row, left), editor in chief of the BusinessMirror; Claire Papa (second row, second from left), Unilab director for external affairs; and T. Anthony C. Cabangon (third row, right), publisher of the BusinessMirror, at the Third Dangal Awards for Elderly Care held at the Bayanihan Center of Unilab in Pasig City. Stephanie Tumampos

PESO exchange rates n US 46.6550

U.S. Rivalry With China Heats Up Over key Asia Shipping Lane China’s defense budget Comparison of China’s 2014 official defense budget with those of other regional powers China Russia Japan

Continued on A2

Change in administration will not drag down economic growth–ANZ BusinessMirror

P25.00 nationwide | 9 sections 50 pages | 7 days a week

nn

PHL gripes after drop in World Bank ranking

INSIDE

ROYALS

A broader look at today’s business

pines Eugenia Victorino and Glenn Maguire said.

“We believe that most of the structural changes in the Philippines needed for economic advancement were already in place before President Aquino assumed power in 2010.

While an improvement in local sentiment had also supported growth See “Economic growth,” A2

India Republic of Korea Taiwan

$136.3 $76.3 $47.6 $38.2 $33.4 $10.3

Billion (USD) Adjusted for inflation

$581

United States Source: U.S. Department of Defense Graphic: Staff, Tribune News Service

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he moment the US Navy sailed a warship into waters claimed

by China in the South China Sea, it gave President Xi Jinping a pretext to accelerate his country’s military presence in the disputed waterway, further placing the vital shipping lane at the heart of USChina rivalry in the Pacific.

The patrol by the USS Lassen prompted an angry response by Beijing and came just weeks after Xi met with President Barack Obama in Washington, where he said China “does not intend to pursue militarization”of the area. The decision to send in the warship—the most direct challenge to China over its island building in the waters—may change that.

Tuesday’s action brought the US more formally into the territorial spats between China and some Southeast Asian nations, and cemented the expectation it would act as a policeman and protector in the area. While the patrols are probably being welcomed by smaller countries who feel China is encroaching on their own claims, they also set the stage for similar assertions of authority by Beijing.

“It is certainly a signal of a downturn in the US belief that China is going to sign on to the prevailing view of international law without this type of navigational assertion,” said Mira Rapp-Hooper, a senior fellow on Asia-Pacific security at the

Center for a New American Security in Washington. “China has been very much aware of the fact that the US was considering these operations for the last several months.”

Potential dangers

The risk is that a greater presence of military planes and ships sparks a clash, however unintended, analysts said. They warned the tensions could further erode broader USChina ties and efforts to manage disputes over cybersecurity and human rights. Xi and Obama are due to cross paths at several international meetings next month, including an Asia-Pacific leaders summit in the Philippines.

The tensions in the South China Sea reflect broader strains, as China becomes a more expansive military power in a region that the US has dominated in security terms since World War II. The US says it is not seeking to contain China, while China says the US policy, known as the “pivot” to Asia, is precisely about that.

“This deepens the trust deficit between the two countries and reinforces the drift toward strategic rivalry,” said Ian Storey, a senior fellow at the Institute of Southeast Asian Studies in Singapore.“US credibility is on the line here. Countries have been watching very closely. It can’t be a one-off, symbolic sail past Continued on A2

n japan 0.3873 n UK 71.3868 n HK 6.0202 n CHINA 7.3435 n singapore 33.4085 n australia 33.7030 n EU 51.5025 n SAUDI arabia 12.4403

Source: BSP (28 October 2015)

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News

BusinessMirror

Thursday, October 29, 2015

PHL gripes after drop in World Bank ranking Continued from A1

aptly titled as ‘Doing Business Across Cities’ to provide a better representation of the results of the report,” Purisima said in a statement. The National Competitiveness Council (NCC) also openly criticized the methodology used in the World Bank 2016 Doing Business Report in a teleconference on Wednesday.

T he NCC Pr ivate Sector Coc h a i r m a n Guillermo M. Luz said the changes made by the World Bank on the Doing Business methodology have made it difficult for the NCC to monitor the country’s progress.

Luz said in the past five years, the World Bank changed its methodology four times. These changes, he said, also prevented the government to determine which of its interventions worked to improve its rankings and which did not.

“It’s the fourth time in the last five years that the methodology and the calculations and the scales have been changing so that its become very difficult for us to make heads or tails out of this particular diagnostic tool,” Luz told World Bank Doing Business 2016 coauthors Jean Nicolas Arlet and Laura Diniz in a teleconference.

Luz added that some of the reforms in the country, particularly in the paying-taxes indicator, was not included in the 2016 Doing Business Report. Paying taxes in the country to date already includes e-government initiatives that offer convenient payroll-related payments for Philippine Health Insurance Corp. and Home Development Mutual Funds.

Purisima cited the Doing Business report for 2011 to 2015, which saw the Philippines improving a total of 53 notches due to its reforms mainly in cutting red tape.

The World Bank, however, defended the rankings, saying that the Doing Business report is not only about helping potential investors start a business, but also about helping investors with other activities required in their business, such as paying taxes, enforcing contracts, getting credits and availing of services such as electricity and transportation.

Under the new Doing Business report for 2016, the World Bank pointed out that the scope and relevance of indicator sets are continually being adjusted to reflect the actual needs of investors in not only starting up a business but actually doing business in a particular economy.

“In this year’s report, four indicator sets are being expanded to also measure regulatory quality: registering property; dealing with construction permits; getting electricity, and; enforcing contracts. A similar expansion for the paying

taxes indicator set is being considered for next year. The new indicators being introduced emphasize the importance of having the right type of regulation.

In general, economies with less regulation or none at all will have a lower score on the new indicators,” the World Bank said in the report.

In the indicators of “Starting a Business” and “Getting Electricity,” the Philippines’s ranking for Doing Business report for 2016 increased from its previous position last year. But the country slid down in rank in all the rest of the indicators, namely, Dealing with Construction Permits; Registering Property; Getting Credit; Protecting Minority Investors; Paying Taxes; Trading Across Borders; Enforcing Contracts, and; Resolving Insolvency.

Based on the distance to frontier score from 0 to 100, the country’s score improved to 60.07 in 2016 from 59.94 in 2015. The “I want to emphasize that the Philippines has risen and you are now in a much tougher, much competitive environment. Even Hong Kong which is third ranked had four reforms last year. The top is moving all the time, therefore, we have to move faster for the Philippines to gain ground,” World Bank Philippines Country Director Motoo Konishi said in a briefing on Wednesday.

“There are questions on methodology, etc., but one thing to emphasize though is the Philippines has been doing reforms, it simply needs to accelerate to compete with others in the neighborhood,” he added. Among its Asean neighbors, the Philippines was the only country that registered the largest fall in the rankings.

Singapore retained its No. 1 ranking for the 10th consecutive year, while Hong Kong maintained is fifth ranking overall.

Vietnam was considered among this year’s best performers after saw its ranking improve to 90th in the 2016 report from 93rd in the previous year.

“Vietnam implemented the most reforms in the region, with five, followed by Hong Kong SAR, China [four]; and Indonesia [three],” the World Bank said. For the 2016 report, the country introduced only one improvement in its business processes which is to make it easier to start a business by expediting the process of issuing an employer registration number.

The government was able to do this by streamlining communications between the Securities and Exchange Commission and the Social Security System.

For their part, Arlet said these changes were only a response to the recommendations in a panel review of the Doing Business report made three years ago. He said many of these changes focused

on issues on quality of supply or construction, which were addressed in the 2016 methodology.

He added that apart from taking up this recommendation, the World Bank also embarked on expanding and improving the range of what the Doing Business report measures in the past two years. Arlet said moving forward, the World Bank is not expected to make any major changes following the recent changes in its methodology. The only change that countries like the Philippines should watch out for is the indicator on paying taxes, which may be revised in the succeeding report.

“Although we did expand, we haven’t really changed most of the indicators so more than two-thirds of our data is still comparable over time. Additionally, we did expand these into the areas where we found that we needed to capture more of the best practices that were being implemented on the ground,” Diniz said.

Doing business indicators

Despite the innovation introduced by the government to speed up the issuance of an employer registration number, the Philippines still ranked the lowest in the Starting a Business indicator.

The country ranked 165th out of 189 economies.

This is because it still takes 29 days to complete 16 procedures in putting up a business in the Philippines. New businesses also need to spend 16.1 percent of income per capita to register and a minimum capital of 3.3 percent of income per capita.

The World Bank pegged the per-capita income of the Philippines at $3,440. The estimated population of the country is 100.1 million.

Apart from starting a business, the country also did not do well in the indicator on protecting minority investors, where it ranked 155th overall.

Out of a perfect score of 10, the country scored four in terms of extent of the conflict of interest regulation index; 3.7 in the extent of shareholder governance index; and 3.8 in the strength of minority investor protection index.

Meanwhile, of all the indicators, the Philippines was found to be doing well in terms of getting electricity, where the country ranked 19th out of 189 economies.

In the Philippines, it takes an average of 42 days to complete four procedures in getting electricity.

It also takes 28.7 percent of income per capita and scored six out of eight in reliability of supply and transparency of tariffs index.

The country also did relatively well in resolving insolvency, where it ranked 53rd out of 189 economies. Based on the World Bank’s data, it takes 2.7 years to resolve insolvency and costs 32 percent of the estate of businesses.

news@businessmirror.com.ph

US rivalry with China heats up over key Asia shipping lane. . .

Continued from A1

these features. It has to be conducted on a regular basis.”

Subi Reef

The USS Lassen came within 12 nautical miles of Subi Reef in the Spratly Island chain in order to show the US doesn’t believe the feature qualifies for such a territorial zone under international law.

The roughly hour-long patrol, which did not go deeply into the 12-mile zone, was the first of what the Pentagon envisions will be repeated transits of the waters, according to two US defense officials who spoke on condition of anonymity. The aim is to conduct such patrols about twice every four months, one of the officials said.

Shadowed, warned

China said it “shadowed and warned” the USS Lassen off—it sent the missile destroyer Lanzhou and patrol vessel Taizhou to the area—and its foreign minister called the US action illegal. Vice Foreign Minister Zhang Yesui summoned US Ambassador Max Baucus, China Central Television reported, and said the US should “cherish the hard-won momentum of development” in ties.

Until now, China has mostly relied on the coast guard to assert its claims to the waters, rather than its navy, though it has sailed destroyers through the area.

“If the US warships come back more frequently and stick around longer, the Chinese side would likely strengthen military facilities on the artificial islands and take necessary action,”said Zhu Feng, director of the China Center for Collaborative Studies of the South China Sea at Nanjing University. “The escalation of the maritime situation now is the big irony of the Xi-Obama summit and shows how challenging the South China Sea issue can be to the Sino-US bilateral relationship.”

1940s map

China bases its claims to more than 80 percent of the sea, a conduit for trade and energy supplies between Europe and Asia, on a so-called nine-dash line drawn

on a 1947 map. Its reclamation program had created 2,900 acres in the Spratlys as of June, according to the Pentagon.

China contends its building of airstrips and other facilities is primarily for civilian purposes, though it has installed artillery on some reefs.

Protecting freedom of navigation resonates in the region because the South China Sea hosts more than $5 trillion of shipping each year and is home to about a 10th of the world’s annual fishing catch. Some of the sea is also claimed by the Philippines, Vietnam, Brunei Darussalam, Malaysia and Taiwan.

“The region is basically happy the US is doing this but they obviously don’t want the US to get too provocative,” said Richard Bitzinger, a senior fellow at the S. Rajaratnam School of International Studies in Singapore. “They will be silently glad the US is doing this.”

Air zone

China may respond to the patrol by declaring an air defense identification zone over the waters, said Malcolm Davis, an assistant professor in China-Western relations at Bond University on Australia’s Gold Coast.

China’s foreign ministry said in May it reserves the right to establish such an air zone. In November 2013 it set up a zone covering islands in the East China Sea also claimed by Japan, prompting the US to fly B-52 bombers into the area to challenge its enforcement.

“A Chinese attempt to enforce an ADIZ over the South China Sea would increase tensions with its neighbors, most notably Vietnam, the Philippines and Malaysia, and they would place increasing pressure on Washington not to back down,” he said.

The plan to continue the patrol suggests that tensions in the contested waters are likely to be the new normal.

Still, “I don’t think many of us believe Xi is looking for an armed clash between Chinese armed forces and those of the US,”Rapp-Hooper of the Center for a New American Security said. Bloomberg News

Economic growth. . .

Continued from A1

NORTHEAST MONSOON AFFECTING NORTHERN AND CENTRAL LUZON (OCTOBER. 28, 5:00 PM)

during the Aquino administration, we see little risk of a reversal in the country’s growth momentum even after President Aquino steps down in June 2016,” they added.

ANZ particularly noted local output expansion trend, measured as the GDP, has steadily risen for a decade and that government debt steadily fell since 2004 even as the business-process outsourcing (BPO) sector, which has proven a rich source of foreign exchange, similarly rose in copious increments due to incentives introduced in the early 2000s.

“The rise in trend growth likely started a decade ago. Although growth has historically been volatile for various reasons, the average growth rates under various presidents since 1986 hovered around 3 percent to 4 percent until around 2005,” the ANZ economists said.

“Except for President Joseph Estrada who was ousted after less than three years in office, each president had served long enough to witness a full economic cycle with periods of expansion and contraction. As such, we note that the increase of average growth rate to 5 percent year-on-year occurred during the second term of President Gloria Macapagal-Arroyo in 2004 to 2010. In fact, if the global financial crisis had not occurred, we estimate that the average GDP growth would have been 5.7 percent,” the economists added.

They remained optimistic the economy will continue to expand even without President Aquino in 2016 and despite the lower growth trajectory seen due to lower global output growth this year. ANZ cut its forecast on Philippine growth this year to 5.7 percent due to the low turnout in the first half of the year.

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The Nation BusinessMirror

Mass production of vote-counting machines starts Nov. 7–Comelec

By Jovee Marie N. dela Cruz

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HE Commission on Elections (Comelec) on Wednesday announced that the mass production of 93,977 vote-counting machines will begin on November 7 in Taiwan.

Comelec Executive Director Jose Tolentino, in a hearing of the House Committee on Suffrage and Electoral Reforms, said the 93,977 counting machines will be manufactured by Smartmatic-Total Information Management (TIM) in seven batches and will be completed on January 25, 2016.

“What’s important is that according to our agreement, all voting-counting machines should be on Philippine shores by January 30,” Tolentino said.

He added that the poll body’s officials are set to inspet the Taiwan plant where the machines will be manufactured.

Earlier, after receiving an intelligence report that there might be an attempt by China to sabotage the country’s 2016 elections, the Comelec has decided to transfer the manufacturing of the vote-counting machines in Taiwan from Suzhou, China.

Elections Commissioner Christian Robert Lim has said that an intelligence report showed that China may sabotage the next year 2016 national and local elections.

Lim added that an elections commis-

sioner with military contacts relayed this information to the Comelec en banc.

Online registration for overseas Pinoys

PARTY-LIST Rep. Jesulito A. Manalo of Angkla and Liberal Party Rep. Ronald M. Cosalan of Benguet have filed a bill amending the Overseas Voting Act of 2013 to authorize the Comelec to resort to online registration and voting for Filipino seamen and other migrant workers.

The House Bill 4991 entitled “An Act Amending Republic Act 10590, entitled ‘The Overseas Voting Act of 2013,’” is pending with the Committee on Suffrage and Electoral Reforms.

“The proposed amendatory law is designed to guarantee equal opportunity to all qualified citizens of the Philippines here and abroad in the exercise of the fundamental right of suffrage,” the authors said.

Manalo and Cosalan said the use of recent and most accessible technology, like the Internet, had always largely assisted in facilitating and promoting progress, adding that latest technologies may yield positive results for the nation’s voting processes.

Under the current law, the Comelec is authorized to explore other modes or systems using the automated election system, but initial findings by the commission reveal that the present modes of overseas voting do not address the factors afflicting voter turnout.

Editor: Dionisio L. Pelayo • Thursday, October 29, 2015 A3

No letup in operations vs Abu Sayyaf–military

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By Rene Acosta

HE military said on Wednesday that it will not stop the ongoing operations against the Abu Sayyaf Group (ASG) bandits, who are holding kidnap victims in the provinces of Sulu and Basilan.

Lt. Col. Noel Detoyato, Armed Forces Public Affairs Office chief, said there will be no Halloween break for soldiers who are pursuing the bandits in the two provinces.

“Our law-enforcement operations against the bandits will continue. There will be no letup in our campaign against these lawless elements,” he said.

Detoyato said the deliberate operations being conducted by members of the Joint Task Group Sulu and even forces in Basilan will continue even during the observance of All Saints’ and All Souls’ days.

Detoyato said the relentless opera-

tions against the ASG is also in compliance with the directive of the Armed Forces Chief of Staff Gen. Hernando Iriberri to make life difficult for all enemies of the state.

“This is in line with the guidance of General Iriberri to all military commanders to make their respective areas of responsibility inhospitable to all threat groups,” he said.

ASG bandits have been monitored crisscrossing Basilan and Sulu provinces to evade military operations.

Currently, the ASG is still holding several hostages, including Dutch Elwold Horn, one of the two bird-

watchers snatched by the bandits in February 2012 in Tawi-Tawi province.

His companion, Swiss Lorenzo Vinciguerra, escaped from the bandits in December 2014.

There are also reports saying that Norwegian Kjartan Sekkingstad, Canadians John Ridsdel and Robert Hall, and Filipina Maritess Flor are being held by the ASG in Sulu.

The four were seized by the bandits from the Ocean View Resort on Samal Island in Davao del Norte last month.

Aside from the foreigners, the ASG is also holding at least 10 other kidnap victims, most of them Filipinos.

“Our troops are on the ground, we don’t want to jeopardize the operations,” Detoyato said.

Earlier, Defense Secretary Voltaire T. Gazmin ordered the military in Sulu and Basilan to finish off the ASG problem in Sulu and Basilan by conducting continuing operations.

Even the local officials of the two provinces have already called on the government to end the reign of terror and criminal activities by the group.

Economy

A4 Thursday, October 29, 2015 • Editors: Vittorio V. Vitug and Max V. de Leon

BusinessMirror

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Palace noncommital on income-tax reform compromise

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By Butch Fernandez

alacañang on Wednesday declined to commit support for a compromise to adjust the 19-year-old incometax brackets to inflation in lieu of outright reduction of tax rates.

This, despite threat of massive “Black Payday Friday” protest planned by the Tax Management Association of the Philippines (TMAP), which noted that existing tax rates are among the highest in the region.

The brackets were set two decades ago and the value of workers’ salary have been eroded since by inflation.

Asked on Wednesday if the Executive will reconsider and endorse the latest compromise being pushed by Sen. Juan Edgardo M. Angara, chairman of the Senate Ways and Means Committee and his House counterpart, for Congress to instead update the two-decade-old tax brackets to

provide relief to overtaxed workers, Palace Spokesmen indicated no change in President Aquino’s position on the issue.

Secretary Herminio B. Coloma Jr. recalled Mr. Aquino’s statement at the Foreign Correspondents forum on Tuesday during which the President pointed out that no upward adjustments in taxes have been imposed under his administration, other than the so-called sin taxes on cigarettes and alcohol products.

But Coloma assured the Aquino administration “is willing to enact wholistic tax reforms that will enhance the growth and competitiveness of the national economy.”

For his part, President Aquino’s Chief Spokesman Secretary Edwin Lacierda, sidestepped a query on whether the Palace would be open to

a dialogue with protesting tax managers who are set to lead a “Black Payday Friday” mass action denouncing the Aquino administration’s refusal to enact income-tax reforms Lacierda said the position of the government is that “there is no debate in the need to reform the tax laws.” “As the President has said [on Tuesday], with the exception of the sin tax rationalization, we have not raised taxes for the last five years. What we are in favor is a comprehensive review of the tax laws,” Lacierda added.

In a news statement, the TMAP encouraged overburdenend taxpayers to wear black on Friday, and also urged workers to join an online protest against high taxes that the Aquino administration refuses to rectify.

PPA tightens port security as Manila hosts Apec meeting next month

By Lorenz S. Marasigan

T

he Philippine Ports Authority (PPA) has started to implement stricter security checks to complement the initiatives being imposed by the Philippine Coast Guard and the Maritime Industry Authority in line with the forthcoming holidays.

Tighter security measures were also placed in preparation for the upcoming Asia-Pacific Economic Cooperation (Apec) meeting, which will be held in Manila on November 18 and 19.

Despite being a regular weekend, the port movement—particularly passenger travel—is still expected to “surge” during the All Saints’

Day and All Souls’ Day, PPA General Manager Juan C. Sta. Ana said.

“We can’t take for granted the security of our ports. We should always be cautious and alert,” he said. “I have already ordered our port managers to take all the necessary measures to reduce the inconvenience and to make sure that our ports are safe at all times.”

The long queuing of passenger and cargo movements would continue in preparation for the long weekend brought about by the Apec meeting, which was declared by Malacañang as nonworking holidays.

“The Manila ports are, likewise, advised to take additional security measures due to its proximity to the venue of the Apec meeting and

I urge cargo owners to withdraw cargoes as early as possible to avoid possible delays brought about by the event,” Sta. Ana said.

The action plans, on the other hand, include enhanced security procedures through maximum utilization of walk-through and baggage x-ray machines, walk through metal detectors, utilization of K9 units, as well as continuing visibility of PPA Police and security guards within the port area and passenger terminal buildings.

A well-ventilated passenger terminal building with clean comfort rooms, nursing stations and other travel amenities, roundthe-clock medical and passenger assistance counters and passen-

ger help desks ready to assist will also be provided.

To further enhance the procedures, the port chief is asking the passengers to “segregate and declare metallic objects and bladed tools for industry use so that such items can be tagged, then turned over for safekeeping and to be retrieved at the port of destination by the owner.”

Vessel operators, on the other hand, are also advised to “actively assist in the information dissemination in the event that vessels have to stop issuance of tickets for whatever reason and to provide information as to when the affected passengers can be accommodated in the succeeding trips.”

PSF Board of directors opens applications for climate-change project proposals

T

he board of directors of the People’s Survival Fund (PSF) formally invited on Wednesday local purisima government units to submit their project proposals on how to adapt their communities to the risks brought about by climate change.

Finance Secretary Cesar V. Purisima, ex-officio chairman of the board of the PSF Board, said the project proposals should aim at enabling communities under threat of the effects of climate change to adapt to such threats and live sustainably.

Purisima said there is dire need for funding, not only by the Philippine government but also by the international community, in mitigating the effects of climate change.

Data from the Global Commission on the Economy and Climate and the World Economic Forum indicate that about $90 trillion in infrastructure investments are needed worldwide to make sure that the increase in temperature in the world will be limited to below 2 degrees Celsius by 2030.

This is on top of the

$4 trillion in the needed incremental investments for low-carbon technologies, and the $5 trillion in required infrastructure funding yearly up to 2020 and the additional $700 billion in incremental resources to make such investments sustainable.

The PSF was created by Republic Act 10174, which intended to make the government more able in addressing the problem of climate change and its effects on the environment and livelihood of Filipinos. The law mandates the creation of a Board, headed by the secretary of the Department of Finance, which will administer the PSF. The other members of the Board are the vice chairman of the Climate Change Commission; secretary of the Department of Budget and Management; director-general of the National Economic and Development Authority; secretary of the Department of the Interior and Local Government; chairman of the Philippine Commission on Women; and representatives from academe and scientific community, the business sector and non-governmental organizations.

Requests for application forms for the project proposals may be sent to the secretariat of the PSF Board at psf@climate. gov.ph. David Cagahastian

Halloween scare A lady shopper browses through a pile of spooky costumes a day before the traditional commemoration of Halloween on Saturday. Halloween is widely celebrated, especially in the US, with Americans expected to spend $6.9 billion for the pre-Christmas and Thanksgiving occasion. Nonoy Lacza

Peso revision paves way for grassroots labor market infrastructure–lawmaker

T

By Jovee Marie N. dela Cruz

he signing of the measure amending Public Employment Service Office (Peso) Act into law will effectively establish grassroots labor market infrastructure nationwide that makes it easier for the people in the far-flung rural areas to have access to employment information and assistance, a lawmaker said on Wednesday.

Party-list Rep. Emmeline Aglipay-Villar of Democratic Independent Workers’ Association, principal author of the law, said that the amendments made to the Peso law provide a clearer mandate to the local government units (LGUs) which will operate the Peso offices and the Department of Labor and Employment (DOLE) that will provide technical supervision.

“This improved and more efficient system of linking businesses with job openings to Filipinos seeking work helps reduce the unemployment rate and, consequently, combats poverty,” Aglipay-Villar said.

During the recent 15th National Peso Congress, President Aquino signed into law Republic Act (RA) 10691, or an “Act Strengthening the Public Employment Service Law.” RA 10691 is an amendment to the existing RA 8759, or the Public Employment Service Office Act of 1991.

RA 10691 strengthens the functionality of the previous law by providing definite roles and functions among the DOLE, LGUs, and other non-governmental organizations and job-placement offices in the country.

According to Aglipay-Villar, the law also makes the Peso more accessible to job seekers by mandating the establishment of a Peso in every province, city and municipality whereas in the previous Peso law, Peso offices were only found in key cities and capital towns.

“RA 10691 sets up a grassroots labor market infrastructure that makes it easier for the people in the farflung rural areas to have access to employment information and assistance, thereby targeting unemployment

in areas which are often neglected,” she added.

Under the act, “persons who are seeking employment, particularly the unemployed, shall register at the Peso for unemployment facilitation assistance. The establishment, on the other hand, shall submit their job vacancies as, well as applicants hired to the Peso to ensure the availability of accurate information on supply and demand for skills in the labor market.”

It added that the Peso offices will be operated, maintained and funded by the LGUs, and will be coordinated by the DOLE Central and Regional Offices.

The DOLE will also provide technical supervision and capacity-building to the Peso offices.

The law also said that LGUs should develop job registries where all businesses operating within the province, city or municipality will report the present and projected number and nature of jobs that will be offered within the next five years. Persons seeking employment should also register at the Peso for employment facilitation.

news@businessmirror.com.ph

Economy BusinessMirror

DA starts review of 5-year plan to improve PHL fisheries sector

By Mary Grace Padin

T

he Department of Agriculture (DA) on Wednesday said it has started the review of a five-year plan to improve the country’s fisheries sector.

Agriculture Secretary Proceso J. Alcala said during the National Summit on Participatory Governance Towards Sustainable Fisheries that the DA and the Bureau of Fisheries and Aquatic Resources (BFAR), together with other stakeholders in the fisheries industry, has started last week the review process for the Comprehensive National Fisheries Industry Development Plan (CNFIDP).

“Nakita namin kung gaano kasidhi ang kagustuhan ng sektor na maging bahagi sa pagbuo ng five-year plan para sa pangisdaan. Hinihikayat namin [sila] na patuloy na maging bahagi ng prosesong ito,” Alcala said in his speech.

According to the BFAR report, the CNFIDP was developed to provide the comprehensive framework for promoting the optimal development and long-term sustainability of benefits derived by the country from fisheries.

The CNFIDP provides strategic directions for the Philippine fisheries over the next 20 years, from 2006 to 2025. The priority projects under the CNFIDP have already been implemented during its first five-year medium-term period from 2006 to 2010. The BFAR said the agency and other industry players will review its targets for the next five years. The review of the CNFIDP will end by December this year.

One of the components of the CNFIDP that the BFAR is pushing is the development of aquaculture in the country.

According to the BFAR, the production budget for aquaculture in 2016 has reached about P700 million as compared to the P300 million allocated for marine and inland capture fisheries. The BFAR said this is a manifestation that the government is now trying to focus more on aquaculture production.

The agency said there is a need to improve aqua-

culture production to give leeway to the protection of the marine resources in the country. The BFAR said it will protect the country’s fisheries resources and, at the same time, ensure there is enough fisheries supply through aquaculture.

Data from the Philippine Statistics Authority (PSA) showed that the value of the country’s aquaculture production in the second quarter of 2015 increased by 1.25 percent to P15.52 billion from P15.33 billion in the same period last year. The PSA said aquaculture accounted to 40.54 percent of the total fisheries output in the period of April to June 2015.

Aside from aquaculture development, the BFAR said the CNFIDP will also aim to improve the livelihood of the fishermen through access to better market.

For one, there is a surplus in the fisheries production in the Philippines. The BFAR said the total domestic requirement for fisheries in the country is 2.8 million metric tons (MMT). This is lower in comparison to the country’s total fisheries production, which is about 5 MMT, the agency said.

The BFAR said the improvement of the country’s fisheries resources and production should also entail market access for the farmers where they can sell their produce.

The Philippines is a net exporter of fish and fish products to other countries. PSA data showed that exports of fresh and processed fish reached $994.61 million last year.

The BFAR also earlier said it is pushing for the export of fish products to new markets, such as Russia and Shanghai.

The agency said other countries now view the Philippines as a sustainable source of fish and processed fish products due to the reforms rolled out by the government to prevent illegal, unreported and unregulated fishing.

The Philippine government amended Republic Act (RA) 8550, or the Philippine Fisheries Code, into RA 10654. Among its provisions is the implementation of closed seasons in Philippine waters to protect fishes during their spawning season.

Thursday, October 29, 2015 A5

PPP head says $70B more needed for infra investment

T

By David Cagahastian

he next administration should still have to invest at least $70 billion in infrastructure despite the huge increase in infrastructure spending since 2010 during the Aquino administration.

According to Public-Private Partnership (PPP) Center Executive Director Cossette Canilao, the government would have already spent a total of $57.1 billion, or P2.57 trillion, in PPP projects by the end of 2016.

At the Jaime V. Ongpin Annual Memorial Lecture on Public Service in Business and Government, Canilao said that for 2015 and 2016 alone, the government would have spent P1.4 trillion in infrastructure, or more than half of the total expenditures in infrastructure that the Aquino administration would have spent for infrastructure from 2010 to 2016.

Of this amount, a bulk of P2.38 trillion is funded locally either by the government alone or with the help of the private sector through the PPP Program; while the rest of the P187 billion in infrastructure spending are foreign-assisted projects.

But Canilao said this projected amount of total infrastructure spending is still short of the $127.1 billion that the Asian Development Bank (ADB), in its study entitled “Estimating Demand for Infrastructure in Energy, Transport, Telecommunications, Water and Sanitation in Asia and the Pacific: 2010-2020,”

had recommended as being needed for the Philippines to meet its growing population and rising incomes.

Thus, Canilao pointed out that although the Philippine government’s infrastructure spending had been at record highs during the Aquino administration, the infrastructure spending required of the government for 2010 to 2020 is still short by some 55 percent, with only five more years to go until the end of 2020.

According to the Department of Budget and Management (DBM), infrastructure spending for 2015 should be around 4 percent of the GDP, and the allocated infrastructure spending for 2016 should be at 5 percent of GDP. Canilao said that out of the $70 billion in infrastructure spending that the next administration would have to spend to reach the optimal level as prescribed by ADB, around 36.2 percent, or $25.33 billion, will come from PPP projects, should the next administration decide to push through with some 40 PPP projects already started during this administration but the implementation of which are expected to carry over into the next administration.

Sandiganbayan orders turnover of UCPB shares to government

T

he Sandiganbayan has recently ordered the turnover of 72.2 percent of United Coconut Planters Bank (UCPB) shares to the government.

In a resolution dated October 23, the antigraft Court granted the motion for execution filed by the Presidential Commission on Good Government (PCGG) and the Office of the Solicitor General (OSG).

“The PCA [Philippine Coconut Authority] and defendant [Eduardo “Danding”] Cojuangco Jr. are hereby ordered to surrender to the Court the necessary documents to effect the transfer of the subject shares of stocks in favor of plaintiff Republic of the Philippines,” the resolution said.

“The UCPB is directed to cancel the subject shares of stock and to issue the equivalent number of shares in the name of the Republic of the Philippines,” the resolution added.

In June, the PCGG and the OSG asked the antigraft Court to issue a writ of execution transferring Cojuangco’s major shares in UCPB to the government, following the ruling of the Supreme Court in July 2013.

The High Court has ruled with finality in July 2013 that the shares of Cojuangco in the UCPB belong to the government since the money used to accumulate the equity stake came from cocolevy funds, which sourced from taxes imposed on coconut farmers during the martial law years by alleged cronies of late President Ferdinand Marcos, including Cojuangco. Jovee Marie N. dela Cruz

A8

Banking&Finance

Thursday, October 29, 2015 • Editor: Jun B. Vallecera

BusinessMirror

Shopping centers will thrive despite the evolving consumption landscape

M

alls, which belong to the so-called brick-and-mortar businesses, will continue to “click” despite the evolving retail landscape, which is enabled by the explosion of digital formats.

Speakers attested to this during the recently held SM Partners Summit, in line with SM Supermalls’ 30th Anniversary, with the theme “Bricks Click,” at the SMX Convention Center in Pasay City.

Addressing retail partners at the summit, SM Prime Holdings President Hans T. Sy said that brick-and-mortar businesses, like shopping centers, are continuously challenged by “clicks” or online formats and social media.

“As you all know, much has happened since we opened our first mall 30 years ago—the retail landscape has become more global and competitive, technology has forever changed the way we live and do things, and customer tastes have changed along with the times,” Sy said.

According to Sy, brick-and-mortar businesses, like shopping malls, have evolved with the times, surviving major and economic political shifts and changing the Filipino lifestyle.

In 1985 SM Founder Henry Sy Sr. opened

his first shopping mall, SM City North Edsa after seeing that suburbs in the United States were being built in the outskirts of big cities, with a shopping mall as the center. Sy believed that this would also happen in the Philippines.

“When we started building SM City North Edsa in 1983, people thought my father was crazy. There was a political crisis; interest rates were as high as 45 percent, and the location of the mall was in the middle of nowhere. They said that SM City would not succeed, but the mall was an instant success. And the rest, as they say, is history. And that is why we are all here today after 30 years,” the younger Sy said.

Malling became more of a phenomenon when SM Megamall in Mandaluyong City was built in 1991, amid an energy crisis. Once again, the mall’s success affirmed the competitive business model that Sy developed.

SM soon opened SM City Cebu in November 1993, its first provincial mall, which was

followed by an aggressive expansion program in key cities around the country.

In 2006 SM Mall of Asia in Pasay City was opened, SM’s premiere mall destination in the region. It soon introduced more upscale projects like SM Aura Premier in Taguig and expanded Megamall in 2014 with the Mega Fashion Hall.

“We have seen changing lifestyles in a world that is more global in perspective, and more technologically advanced and environmentally concerned. But together, we have changed the Filipino lifestyle forever,” Sy said.

Steven Tan, senior vice president of SM Supermalls said that today’s breed of shoppers are not the “shop and go” types. “Right now they’re very experimental. They really want the experience,” he said.

In order to cater to this new breed and to enhance the shopping experience, SM has introduced more international retail brands, more interesting food concepts, as well as services geared toward enhancing wellness and providing greater convenience. These include spas, dental clinics and waxing salons, to name a few. “You have to make sure that your brands are competitive. There are still people who want to see and feel what they’re buying. You have to make sure that your malls are lifestyle centers. You have to be ready. Change is going to come. You just have to be fast and quick in evolving,” Tan said.

PBOC done cutting benchmark rates, according to economist survey

C

hina’s central bank will refrain from further benchmark interest-rate cuts and economic growth will hold steady in the fourth quarter, according to economists surveyed by Bloomberg News.

Growth in the final three months will be 6.9 percent from a year earlier, according to the median of analysts estimates in an October 19 to 27 survey. That’s more optimistic than the 6.8-percent projected for the quarter in an earlier poll.

The People’s Bank of China (PBOC) will make one more cut to banks’ required reserve ratio (RRR) this year but leave both the lending and deposit interest rates at current levels through to 2017, according to the survey. Policy-makers lowered the benchmark rate last week for a sixth time in a year after third-quarter growth came in at the weakest rate since 2009.

“The PBOC may cut the RRR one more time this year and increase central bank lending to make monetary policy transmission more efficient and reduce effective financing costs,” Bian Quanshui, a China economy analyst at China International Capital Corp. in Beijing, wrote in a note. “Lower real-interest rates will help stabilize economic growth and prices.”

The central bank said late Friday it would

news@businessmirror.com.ph

Climate-change fund seeking LGU projects it may underwrite

T

he board of directors of the People’s Survival Fund (PSF) formally invited on Wednesday the local government units (LGUs) to submit project proposals on how to adapt and insulate their communities against risks brought about by climate change.

Finance Secretary Cesar V. Purisima, ex-officio chairman of the board of the PSF, said the project proposals should aim at enabling communities under threat of the effects of climate change to adapt to such threats and live sustainably.

Purisima said there is a dire need for funding, not only by the Philippine government, but also by the international community in mitigating the effects of climate change.

Data from the Global Commission on the Economy and Climate and the World Economic Forum indicate that some $90 trillion in infrastructure investments are needed worldwide to make sure the anticipated increase in temperature will be limited to below 2 degrees Celsius by 2030.

The amount is on top of the $4-trillion required incremental investments for low carbon technologies and the $5

trillion in infrastructure funding yearly up to 2020 and the additional $700 billion in incremental resources to make such investments sustainable.

The PSF was created by Republic Act 10174 intended to make the government more able in addressing the problem of climate change and its effects on the environment and livelihood of Filipinos. The law mandates the creation of a board headed by the secretary of the Department of Finance, which will administer the PSF. The other members of the board are: the vice chairman of the Climate Change Commission; secretary of the Department of Budget and Management; director general of the National Economic and Development Authority; secretary of the Department of the Interior and Local Government; chairman of the Philippine Commission on Women; and representatives from academe and scientific community, the business sector and non-governmental organizations Requests for application forms for the project proposals may be sent to the secretariat of the PSF board at psf@ climate.gov.ph. David Cagahastian

Case clippings

By Justice S J Ranada Jr.

CHARGING LIEN–manner of enforcement As security for his fees, a lawyer is allowed a charging lien over money judgments he has secured for his clients. To enforce the lien, he must 1) enter a statement of his claim in the record of the case while the court has jurisdiction over the case and before full satisfaction of the judgment, and 2) deliver a written notice of his claim to his client and the adverse party.

Navarez v Abrogar 02 Sep 2015 cut benchmark interest rates, stepping up the battle against deflationary pressures.

Policy-makers also reduced the amount of deposits banks must hold as reserves, adding liquidity that’s been drained by increasing capital outflows since August’s yuan devaluation. A gauge of capital outflows compiled by Bloomberg surged to a record $194.3 billion in September.

The rate cut came just before this week’s gathering of China’s top leaders, who are gathering in Beijing to formulate the 13th five-year plan while confronting an era of sub-7-percent growth for the first time since Deng Xiaoping opened the nation to the outside world in the late 1970s. The world’s secondlargest economy grew 7 percent in both of the first two quarters of this year, in line with Premier Li Keqiang’s goal, before the expansion slipped to 6.9 percent in the third quarter.

Some alternative readings suggest the growth pace is even slower. Bloomberg Intelligence economists Tom Orlik and

G R No 191641 Brion, J Fielding Chen say “official numbers may be upward biased during downturns.”

UBS Group AG chief China economist Wang Tao expects the PBOC will cut rates one more time this year, probably in December, and again in early 2016 to bring the lending rate to 3.85 percent and the one-year deposit rate to 1 percent.

“This would push real deposit rate into negative territory,” as has often happened in the past, Tao wrote in a report. That could “encourage consumption, support asset prices and anchor inflation expectations.”

Forecasters expect growth to decelerate to 6.5 percent in 2016 and to 6.3 percent the following year, the survey showed, down from an anticipated 6.9 percent for 2015.

“Policy-makers are serious about defending the 7-percent growth target this year,” Larry Hu, head of China economics at Macquarie Securities Ltd. in Hong Kong, said in a recent note. He expects the central bank to make one more RRR cut this year while leaving the main rate unchanged.

Kuroda’s stimulus toolkit: Here are options for Bank of Japan

W

ith expectations building that the Bank of Japan (BOJ) may further boost stimulus to keep its reflation program on track, here are some of the obvious—and not so obvious —choices available to Governor Haruhiko Kuroda.

While a third of economists surveyed by Bloomberg expect no further increase in asset purchases from Kuroda’s BOJ, 44 percent forecast a change in policy at the central bank’s meeting on October 30. The remainder thinks the BOJ will make a move sometime between December and April.

Kuroda, who launched his record asset-purchase program in April 2013 and then bolstered it in October 2014, picks his shots carefully to make the most of his monetary firepower.

The governor said earlier this year there were “many options” available for more stimulus and that the central bank may need to get creative in the case of any further expansion.

The easy road would be more government bond purchases, though more radical ideas such as buying stocks or debt from local governments have been suggested by economists.

Japanese government bonds

Purchases of Japanese government bonds (JGBs) are already the mainstay of Kuroda’sstimulus program. The BOJ is snapping them up so that its holdings increase at an annual pace of ¥80 trillion($664 billion) to expand the size of the monetary base and encourage a decline in real-interest rates. Boosting JGBs is something it turned to in October 2014. Eleven economists in the latest Bloomberg survey point to another increase in JGB purchases.

While Kuroda has indicated there’s still plenty of room to buy more JGBs, traders in the bond market complain that liquidity is drying up. BNP Paribas SA has estimated the central bank will hold 43 percent of outstanding government bonds at the end of 2016, up from 28.5 percent through the end of June. Another possibility is changing the average maturity of bonds bought from the

current seven to 10 years to options including nine to 12 years.

Commercial paper and corporate bonds

Kuroda’s Target is to hold CP and corporate bond purchases at ¥2.2 trillion and ¥3.2 trillion a year, respectively. Unlike other parts of the current stimulus program, this was left unchanged during the surprise boost in October last year. The BOJ moved into this market after the financial crisis that followed the collapse of Lehman Brothers Holdings Inc. in 2008. Stepping up purchases again could raise the question of fairness in choosing which companies’ bonds and CP to buy.

Exchange-traded funds and J-REITs

The BOJ is purchasing ETFs at an annual rate of ¥3 trillion, and Japanese real-estate investment trusts at a pace of ¥90 billion a year.

Economists at Nomura Securities have suggested the BOJ could load up on ETFs—boosting purchases to ¥6 trillion a year—and then pare its bond-buying. This could propel the Japanese stock market from a slump in August and extend a recent rally to set new highs.

Purchases of J-REITs have buoyed this key market, helping breathe life back into the property industry. But the BOJ’s strict investment criteria could see it run out of securities to buy over the next year as it tripled the pace of purchases in October 2014.

A boost here may require the central bank to dive into securities rated lower than AA.

Local government debt

This would be one of the more creative solutions to boosting stimulus. Several economists have suggested this idea as a fresh way to help adjust the composition of asset purchases. DBS Research said the BOJ could consider increasing the amount of “risky assets” to be purchased, including ETFs and J-REITs and incorporating new choices like local government bonds. This option has

the advantage of helping revitalize regional economies but risks debates over favoritism if some areas benefit more than others.

Buying shares

While this unconventional idea also would raise issues of fairness, Credit Agricole has floated it as a possibility. Purchasing a composite of stocks based on a gauge like the JPX Nikkei Index 400 amounting to as much as ¥10 trillion a year could be used to raise the annual pace of monetary base expansion to ¥90 trillion, according to Credit Agricole’s Kazuhiko Ogata.

Cutting interest rates

Economists at Mizuho Research and Mitsubishi UFJ Securities predict the BOJ will cut the interest rate it pays private banks on excess reserves that they hold at the central bank when it next boosts stimulus.

The BOJ wasn’t considering lowering the rate from the current 0.1 percent, though the option hadn’t been taken permanently off the table either, people familiar with discussions at the bank said in May. Kuroda said more recently that the BOJ wasn’t considering a reserve rate cut for the time being. Some economists say the BOJ could even implement a negative-interest rate policy, as has been seen in Europe.

Raising the inflation target

Consumer prices as measured by the BOJ’s main gauge stood at -0.1 percent in August, and no economists in the Bloomberg survey expect it to reach its 2-percent goal in the six months through September 2016, Kuroda’s latest time frame. To reignite inflation expectations, the governor and his colleagues could aim to overshoot the target and establish a longer time frame. One option, says JPMorgan Chase & Co. economist Masaaki Kanno, is to target 3-percent inflation and push out the horizon to 2018.

A10 Thursday, October 29, 2015 • Editor: Angel R. Calso

Opinion BusinessMirror

editorial BusinessMirror’s

journey from premium to prestige

T

hat newspapers are being forced by circumstances to think beyond just flogging advertising to survive is an accepted fact.

All over the world, newspapers of all sizes have to confront declining revenues that threaten their viability. To continue serving their stakeholders, publishers have to take significant steps to align their costs with current economic realities.

For us at the BusinessMirror, our publisher, T. Anthony C. Cabangon, has been burning the midnight oil finding ways to keep our operations at maximum speed. Not wont to allow cost-cutting measures to trump quality, he challenged himself to come up with innovative ways to bring more readers into the fold.

Thad, as friends call him, announced at the paper’s 10th anniversary party his intention to make the BusinessMirror not just a premium publication but a newspaper of prestige. Part of the strategy is to publish content that readers can’t find anywhere else. The BusinessMirror wants to lead the industry in offering informed perspectives, a broader look at issues and compelling stories.

To do this well, the BusinessMirror is retooling its team of journalists and editors to get them ready for the forthcoming heavyweight bouts. They are required to produce stories that are on a par with the content that The New York Times, our latest partner, will bring to the fold. To join forces with The New York Times is a no-brainer: For more than a century, it has stood for quality, integrity and distinguished journalism.

The first recipe to be served in December by the BusinessMirror-The New York Times tandem is called Turning Points, a year-ahead global magazine with a local twist, featuring exclusive content from recognized voices who will share their perspectives on how our world and our lives may change in the coming year and beyond. Turning Points will feature opinion pieces by political, cultural and economic thinkers who look at trends and new ideas from around the world to identify key turning points, and explain how they may influence the year ahead. Previous contributors to this review and pre-view year-end magazine have included Nobel laureates, among others.

On our 10th anniversary issue, our innovative offering “When I was 25” got good reviews. This series of articles featuring personalities who were recounting their respective life choices when they were 25 years old could help inspire our millennials, a generation with new motivations that the paper hopes to serve.

The BusinessMirror, however, will continue serving the same quality offering with the paper’s more than 30 sections: Top News (the biggest and hottest news); Nation; Regions (news that impact regional businesses and local government units); Economy; World News; Corporate News; Banking & Finance; Agriculture & Commodities; Entrepreneur; Sports; Opinion; Life; Tourism; Digital Life; Art; Show; Perspective (featuring the views of analysts and industry leaders); Our Times; Education; Biodiversity; Marketing; Green; Science; Faith; Motoring; Property; and Special Reports.

The other sections that complete our offering: Asean Economic Community (to guide and help Philippine businesses to prepare for the regional economic integration); Envoys & Expats; and The Millennials (to cater to the digital natives, the future leaders of the Philippines).

We know it’s far from easy to embrace the challenge to make the BusinessMirror not just a premium publication but a newspaper of prestige. But as long as we are guided by the vision of its founder, Ambassador Antonio L. Cabangon Chua, the rewards of success will be worth the rigorous journey.

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Love and the stock market John Mangun

OUTSIDE THE BOX

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ife is complicated. There are so many situations that will occur that it is difficult to know what action to take or not to take some of the time. But the biblical Ten Commandments laid down basic ideas that tend to make things better, even if they are simple. Don’t kill other people. Don’t lie or steal. Don’t hunger for what other people have.

Investing in the stock market can also be complicated, and there are thousands of “commandments” to follow. I suppose that is why there is only one basic Christian Bible and probably a million stockmarket books.

Granted, the brevity of the “Ten” has caused confusion through the centuries, especially with the “Do not kill” and “Do not steal” ideas.

It would have been nice if there had been more practical tips to explain those two as there is with all the stock-market advice. But do not think that stock-market wisdom is any less confusing than the Ten Commandments wisdom.

“Do not steal—except maybe to feed your starving children” may be just as reasonable or unreasonable as “Cut your loss—unless you are investing for the long term.”

Perhaps, there is a need to put

both the life commandments and the stock-investing advice in context. Maybe the first readers of the “Ten” clearly understood that “Do not kill” automatically did not apply to the daily situation back then of having roving bands of barbarians constantly ready to burn your city down and carry off the women and children as slaves.

Everyone likes to quote Warren Buffett’s wisdom of “I buy on the assumption that they could close the market the next day and not reopen it for five years.” But in context, the average holding period of US stocks when he said that was seven years.

That’s like me saying, “I buy on the assumption that they could close the Philippine Stock Exchange the next day and not reopen it for one week—like during the upcoming Apec holiday.”

However, if you notice, the

biblical commandments and many of those for the stock market have to do with keeping your emotions in control to avoid suffering. Perhaps more accurately, it should read, “No matter how mad you are, don’t kill the other person.” Or “No matter how beautiful the other guy’s wife is, don’t even think about it.”

Given the chance, emotions will rule everything that we do. Maybe the simplest piece of stock-market advice is “Don’t marry your stocks.”

The idea here is that marriage is for “better or worse, in sickness and in health,” which can be costly in the stock market.

But the real question is, why would we even need to talk about not marrying our stock portfolio? Why would we want a long-term relationship with an investment that is not making money for us? It seems incomprehensible why we would need to have a “rule” or even a discussion about what to do if a stock position sets a trend against us.

Here are some examples of extended negative trends regardless of any short-term upswings: Union Bank of the Philippines—29 months; Philippine Long Distance Telephone —14 months; and the winner, San Miguel Corp.—55 months.

Although it might be true that investors are prudent enough not to be holding these issues all the way down for months as they continued to fall, International Container Terminal Services fell 30 percent in

three months. Vista Land and LT Group both dropped 20 percent in three weeks.

It is not the fact that some of these stocks have recovered some or even all of the losses. It is why do we stay in bad relationships, bad jobs and bad stocks?

We have been told that people are afraid of changing their comfort zone of the status quo, like little children not wanting to leave their beds on a rainy day. As I have quoted before, economist John Kenneth Galbraith said, “In the choice between changing one’s mind and proving there’s no need to do so, most people get busy on the proof.” The problem is always the fact of having to admit your original decision was wrong.

Leaving a bad relationship or job is more difficult than leaving a bad stock. You can easily get back into the stock. This is the rule that might be helpful about whether you should sell either for profit or to cut a loss when the “relationship” with your stock is going down.

If you ask yourself the question “Should I sell?”, the right answer is almost always “Yes”. That way, you can avoid a bad stock-market love affair.

E-mail me at mangun@gmail.com.

Visit my web site at www.mangunonmarkets.com. Follow me on Twitter @mangunonmarkets. PSE stock-market information and technical analysis tools provided by the COL Financial Group Inc.

Clinton’s endorsements carry her through

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By Jonathan Bernstein | Bloomberg View

illary Clinton picked up another high-profile endorsement today, this time from liberal Ohio Sen. Sherrod Brown. She can add him to the October list, which includes Sens. Thomas Carper of Delaware and Ed Markey of Massachusetts; and Governors John Hickenlooper of Colorado and Jack Markell of Delaware.

Clinton has proved to be strong with liberals, as Vox’s Dylan Matthews explains, yet has also pulled in backers across ideological, geographical and ethnic lines.

Endorsements might affect voters in a direct and an indirect way, as Seth Masket of the Washington Post’s Wonkblog explained on Tuesday. First, voters can consciously seek the views of opinion leaders.

Second, the visible endorsements (such as from governors and senators) indicate broader party support, and that, in turn, provides important resources to favored candidates. As

Masket notes, there’s evidence that both of these theories are correct, depending on circumstances.

Sometimes the effects may be relatively easy to measure. Which candidates attract the most volunteers and become the biggest fundraisers, for example? We can also ask voters if they are aware of endorsements and if they are affected by them.

Sometimes, however, it’s all about the process.

Think, for example, about how Clinton survived her months-long slump. Relatively few big-name Democrats turned on her over the

e-mail story. Bernie Sanders surged, but few Democrats said he was likely to win. When Joe Biden encouraged speculation in August and September about a possible announcement, hardly any Democrats outside of Biden’s circle encouraged him. Clinton’s repositioning on the Keystone pipeline and US trade policy was mostly accepted.

It isn’t just about high-profile Democrats coming to her support on TV (or at least not piling on). Reporters talking formally and informally to others in the Democratic party network were presumably hearing similarly positive things more often than not.

And Democrats were eager to tout Clinton’s performances in the first Democratic debate and before the House Select Committee on Benghazi. Perhaps in the case of the debate the backers of Sanders didn’t think she scored a triumph, but Democrats who were already committed to Clin-

ton saw what they wanted to see.

Compare her continued strength with the demise of Scott Walker’s candidacy or Jeb Bush’s current slump. Without supporters of independent standing to vouch for a candidate, it’s easier for the press to pile on when he or she stumbles —and all of them trip up at some point or another. Because of her solid party support, Clinton was able to continue generating resources even when she received bad press. Walker wasn’t able to do this, and now Bush may be having the same problems.

Endorsements can’t prevent a polling surge by another candidate—as Sanders has proved this year. Nor do they prevent slumps, which involve bad press and worried supporters. But having a large section of a party on a candidate’s side makes things a lot easier— even if this support can’t always be quantified.

Opinion BusinessMirror

opinion@businessmirror.com.ph

Proper timing for withholding of tax on wages and bonuses Atty. Roselle U. Casiguran

Tax law for business

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mong the income payments where the payor is required to withhold the applicable tax in full is on the payment of compensation by an employer to its officers and employees. This obligation is not difficult to comply since the withholding is done for every payroll period and remittance is made on a monthly basis. And an annualization is made at the end of the year, such that any excess withholding tax made for the previous months has to be returned to the employees and any deficiency in the taxes already withheld has to be deducted on the last payment to the employee for the year.

A related issue, however, in relation to the withholding of taxes on wages is the timing. Is the withholding and remittance of the tax required to be made upon the accrual in the books of the employer?

Or is the responsibility of the employer as withholding agent timely met when the withholding tax is remitted only upon payment of the compensation to the employee?

This question was somehow settled by the Supreme Court (SC) in G.R. 167679, July 22, 2015. In said case, the taxpayer was assessed by the Bureau of Internal Revenue (BIR) for, among others, withholding tax on bonuses accruing to its officers and employees. The assessment pertains to accrued bonuses for said years where the taxpayer maintained that the liability of the employer to withhold tax does not arise until such bonus is actually distributed. As the bonuses were not paid in the year they were accrued but only in the following year when such amounts were finally determined, the employer asserted that its obligation to withhold did not arise upon accrual. The BIR, on the other hand, contended that the employer’s act of claiming the bonuses as deductible expenses although it has not yet remitted the withholding taxes contravenes Section 29(j) [now Section 349k)] of the Tax Code.

In its decision, the SC cited various provisions of the Tax Code (such as Section 79 of the Tax Code) and the implementing rules and regulation which seem to imply that withholding of tax on compensation shall be made on compensations paid to employees, either actually or constructively.

However, the SC made reference also to Section 45 of the Tax Code, which provides that the deductions from gross income are taken for the taxable year in which “paid or accrued” or “paid or incurred,” dependent upon the method of accounting income and expenses adopted by the taxpayer.

Under the said rule, an expense is considered as accrued and can be deducted for tax purposes when (1) the obligation to pay is already fixed; (2) the amount can be determined with reasonable accuracy; and (3) it is already knowable or the taxpayer can reasonably be expected to have known at the closing of its books for the taxable year.

Therefore, if the taxpayer is on cash basis, the expense is deductible in the year it was paid, regardless of the year it was incurred. If the employer is on accrual method, he can deduct the expense upon accrual thereof.

In this regard, the SC also made reference to Section 34(k) of the 1997 Tax Code, which expressly requires as a condition for the deductibility of an expense, that the tax required to be withheld on the amount paid or payable is shown to have been made to the BIR by the taxpayer constituted as withholding agent of the government.

According to the Court, both the provisions of Section 79 regarding the withholding on wages must be read and construed in harmo-

When the employer had deducted the expense from its gross income, it already recognized the definite liability on its part to withhold since, in effect, there was already a constructive payment for income tax purposes considering that the bonuses were already allotted and made available to the officers and employees. ny with Section 34(k), or the Tax Code, on deductions from gross income. And reading these provisions together, the Court declared that the obligation of the payor/ employer to deduct and withhold the related withholding tax arises at the time the income was paid or accrued or recorded as expense in the payor’s/employer’s books, whichever comes first.

In conclusion, the Court held that since the employer applied the accrual method of accounting, by accruing and recording the bonuses in its books and claimed them as a deductible expense in the year of accrual, it should have withheld the compensation tax at the time of accrual and not at the time of actual payment. Further, when the employer had deducted the expense from its gross income, it already recognized the definite liability on its part to withhold since, in effect, there was already a constructive payment for income tax purposes considering that the bonuses were already allotted and made available to the officers and employees.

On final note, in this particular case, the employer was held liable for the withholding of tax on the bonuses at the time of the accrual since the accrued expenses were claimed as deductions when the accrual was made. Is the rule different if the accrued bonus was not claimed as deduction upon accrual but only in the following year when the withholding of tax was actually made. The case did not specially deal on such issue. The opening statement in the decision, however, stated that the duty to withhold tax on compensation arises upon accrual. This seems to emphasize that the withholding of tax on compensation should be made once an accrual of the expense is recorded in the books.

The author is a junior associate of Du-Baladad and Associates Law Offices, a member-firm of World Tax Services Alliance.

The article is for general information only and is not intended, nor should be construed as a substitute for tax, legal or financial advice on any specific matter. Applicability of this article to any actual or particular tax or legal issue should be supported therefore by a professional study or advice. If you have any comments or questions concerning the article, you may e-mail the author at roselle. casiguran@bdblaw.com.ph or call 403-2001 local 370.

All Saints of God Msgr. Sabino A. Vengco Jr.

Alálaong Bagá

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he countless multitude of the righteous gathered before the throne of God are those marked on earth with the seal of God and whose robes have been washed in the blood of the Lamb (Revelation 7:2-4, 7-14). They see God’s face (Psalm 24:1-2, 3-4, 5-6) as the children of God (1 John 3:1-3). They have inherited the Kingdom of heaven because they have lived lives of holiness (Matthew 5:1-12).

The universality of righteousness The seer’s two apocalyptic visions, one on earth and the other in heaven, supplement each other and illustrate the vast assemblies of the righteous. Coming from the east whence salvation is expected, the angel in charge of the divine seal marks on the forehead all the servants of God, to save them from the impending destruction (cf. Ezekiel 9:4-6). The symbolic number 144,000 (twelve squared then multiplied by a thousand) represents the complete and uncountable multitude of believers making up the People of God. Transposed before the throne of God in heaven, this vast assembly coming from every nation, race, people and tongue proclaims that their unmerited victory and salvation comes from God on the throne and from the Lamb. In the heavenly worship and doxology the white robes of the righteous and the palm branches in their hands underline the truth that they are

the survivors of the great distress who have washed their robes white in the blood of the Lamb.

God’s children seeking to see His face

The psalm sings a hymn of praise of God the Creator to whom belongs the earth and all those who live on it. He exercises dominion over the cosmic powers of chaos, establishing order and putting all under His protection. And so who can go up to God and stand before Him, if not one whose hands are sinless and whose heart is pure and whose desires are not vain? God blesses and rewards such a person just as He has been the savior of the chosen people, His covenant partner who seeks God’s face, to be united to Him through fidelity and devotion. God the Creator is the God who wants intimate covenant with His people.

God’s transforming love (agape) for those who believe in Him makes them His children. John emphasizes

Thursday, October 29, 2015 A11

that being recreated as God ’s children makes them a new reality that the world cannot comprehend and accept, just as the only begotten Son of God was not recognized by the world subject to sin and recognizing only its own.

A life that flows from intimacy with God contradicts the lifestyle according to the sinful world, bringing about rejection and even persecution. But though already now God’s children, we are not yet completely transformed, nor is the ultimate manifestation of God and of Christ already accomplished. But surely we shall see God as God is, for we shall be like Him. Meantime we must pattern our lives here and now after the holiness and goodness of God.

Concrete lives of holiness

The Beatitudes are wisdom teaching of Christ; rather than Christian law, they are for purposes of teaching simple descriptions of specific manners of behavior and their consequent encouraging results. Christians are happy and blessed because they live and act in a particular way. Explicitly directed toward the establishment of the reign of God, the behavior and values Jesus is advocating are clearly at odds with what the world espouses.

The “poor in spirit” and the “meek” are pretty similar: just as in the world they rule who have power and the means, the reign of God on the contrary is in the hands of the poor who have no means to exert power and of those who are meek and powerless. Those who “mourn” and they who “hunger and thirst for

righteousness” are not suffering due to retribution for some inappropriate behavior, in fact, in their innocence they are promised alleviation and satisfaction. The “merciful,” the “clean of heart” and the “peacemakers” are characteristics of true religious piety. Those who seek God’s mercy for sinners should extend it to others. What opens to the presence of God is not mere ritual conformity but a simple, open heart. And God’s own desire for us from the beginning is peace and tranquility, but sin disrupts this order and destroys this peace; to work for peace, overcoming evil with good, is to do God’s work and to be known as God’s children.

The last beatitude, those “persecuted and insulted” for the sake of righteousness and because of Christ, clearly shows that Christians are not of this world. Fidelity to God and to the cause of Jesus are bound to bring ridicule and persecution to believers, but the reversal of the situation will be full when they receive the great reward in heaven.

Alalaong bagá, there is definite celebration both in heaven and among us now of all those faithful ones who have lived lives of holiness.

Whether known or unknown to us personally, all these are children and saints of God, the truly blessed ones who have been marked forever with the seal of God’s creative and redeeming love.

Join me in meditating on the Word of God every Sunday, 5 to 6 a.m. on DWIZ 882, or by audio-streaming on www.dwiz882.com.

Battle over China’s artificial islands has just begun

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By Josh Rogin | Bloomberg View

fter months of internal debate, the White House permitted the Defense Department to sail one ship near a reef in the South China Sea that China claims. The Chinese reaction shows Beijing has no intention of backing down. Now the Obama administration is debating what to do next.

Defense Secretary Ashton Carter confirmed on Tuesday that the Lassen, a US Navy-guided missile destroyer, traveled on Monday within 12 miles of the Subi Reef, which was underwater until the Chinese government built it into an artificial island. Under questioning from the Senate Armed Services Committee, Carter said the US has the right to operate near the Chinese structures. He expressed support for doing such a “freedom of navigation operation” again.

“What you read in the newspaper is accurate, but I don’t want to say when, whether or how we operate anywhere in the world,” he said. “These are operations that we should be conducting normally.”

Carter has publicly asserted US access to these waters since his speech in May at the ShangriLa Dialogue in Singapore. Adm. Harry Harris, the head of Pacific Command, has advocated that right as well, within the administration. But other senior officials pushed to delay the sail-by, fearing it would provoke Beijing and hurt other areas of cooperation, US officials told me.

The White House decision to move forward came after several meetings at the National Security Council Principal Committee level, where the timing was a sticking point. White House officials wanted to wait until after President Obama’s summit last month with Chinese President Xi Jinping, during which Xi said publicly that China did not intend to militarize the artificial islands. Secretary of State John Kerry argued for delaying the operation until after the Paris Climate Change conference, US officials said. It ends in December.

The Chinese Foreign Ministry reacted swiftly on Tuesday, calling the US move a “deliberate provocation” and summoning the US ambassador to China, Max Baucus, to protest the action. The foreign ministry spokesman said

China might conclude it had to “increase and strengthen the building up of our relevant abilities.” The Chinese Defense Ministry said the ship’s activity was a “coercive action that seeks to militarize the South China Sea region.”

US officials told me on Tuesday that the Chinese reaction was as expected and that the Obama administration had publicly signaled for months that the freedom of navigation operation would take place. There is no expectation that one ship’s action will deter the Chinese expansion in the South China Sea. Instead there is a new internal debate over what the US should do next and when.

Officials said Carter had told Pacific Command to come up with a detailed plan for conducting freedom of navigation operations in the South China Sea that could include deploying more naval forces to the western Pacific to routinely conduct these exercises out of Clark Air Base in the Philippines with support from P8 surveillance aircraft. The official in charge of developing the plan is Rear Adm. Mark Montgomery, the head of Pacific Command operations.

Carter and the top brass support that strategy, US officials briefed

by Carter’s staff said, but others in the Pentagon—including Adm. John Richardson, the new chief of Naval Operations—favor less confrontation and more engagement with the Chinese People’s Liberation Army Navy. Pacific Command will submit its proposal to an interagency process. It could be debated for months before the president makes another decision.

Some Republican lawmakers expressed support for the freedom of navigation patrol—and said the Obama administration must do more to stand up to Chinese aggression.

“This cannot be a one-off occurrence,” said Sen. Cory Gardner, the chairman of the Senate Foreign

US officials and outside experts agree that China’s militarization of artificial islands in the South China Sea is a problem that is not going away and will require a robust US strategy for the foreseeable future. There is also a consensus that although changing China’s behavior is difficult, the US and its allies still need to impede the Chinese as they try to consolidate control of disputed territory.

Relations East Asia Subcommittee. “This must continue. It must be regular.”

Rep. Randy Forbes of Virginia, who has urged the administration to travel within 12 miles of China’s artificial islands, told me that the White House is still coming up short in its promise to shift US focus to East Asia. He said China’s claims in the South China Sea show that need.

“Instead of a strategy to prevent these actions, they are in a position where they react,” Forbes said of the Obama administration. “Now we have to just wait and see what the next steps are.”

Asia experts who are sympathetic to this view point out that the administration has responded to provocations from China with finite reactions, lacking follow-up.

For example, when China declared an Air Defense Identification Zone last year in the East China Sea, the US made a show of flying B52 bombers through it one time. The US has not pushed back since then, and America’s regional partners have largely acquiesced to Chinese claims to the zone.

“If the US just sends in one destroyer, it’s flamboyant and it doesn’t do anything to say the nature of the balance is shifting back in our direction,” said Michael Auslin, an Asia scholar at the American Enterprise Institute.

“The Americans have been forced into a reactive stance. And it took them a year to figure out what to do in the first place.”

If the buildup in the South China Sea continues, in a few years China

will have cemented its control over the territory, he said. In addition to regular freedom of navigation operations, Auslin thinks the US should encourage other regional allies to join the US in physically challenging Chinese maritime claims.

Patrick Cronin, director of the Asia Pacific Security Program and the Center for a New American Security, said the administration does have a multipronged approach to dealing with China’s assertiveness in the South China Sea. Part of it is to build partnerships with Southeast Asian allies and push for a code of conduct that China will sign to govern all nations’ actions there.

But the Obama administration needs to do more to prevent China from changing the power dynamics in the South China Sea, he said.

“Over all, the White House wants to secure its legacy of managing a stable US-China relationship despite differences. But even within that approach, we’re going to have to flex some muscle,” Cronin said. “These operations are not fixing the problem. These operations are to demonstrate our interests that we are working toward.”

Sen. Ben Cardin, the ranking Democrat on the Asia subcommittee, told me that the administration is right to weigh the risks of escalation with China while reinforcing American commitments and policies. “What the US is doing is calculated,” he said. “We don’t want to cause unintended consequences.”

US officials and outside experts agree that China’s militarization of artificial islands in the South China Sea is a problem that is not going away and will require a robust US strategy for the foreseeable future.

There is also a consensus that although changing China’s behavior is difficult, the US and its allies still need to impede the Chinese as they try to consolidate control of disputed territory.

However, there is no consensus in Washington about how to do that. The US government has a range of tools—diplomatic, economic and military—to push back against the Chinese strategy. The question is whether the US will use those tools effectively before China’s control of the South China Sea becomes a fait accompli.