September 29, 2015

DTI DEMANDS VW’S REPORT ON AFFECTED MARKETS

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he Department of Trade and IndustryConsumer Protection Group (DTI-CPG) has directed Volkswagen (VW) Philippines to immediately furnish the agency of the report on the investigation being conducted by its mother unit on the markets affected by the global recall, especially if the country is on the list.

“On the side of the DTI, what we want is for Volkswagen to send us the official notice of the vehicles and the diesel-engine models that are affected after they undergo the official investigation being carried out by the principal. These are if there are any that are affected,” Trade Undersecretary for the CPG lawyer Victorio Mario A. Dimagiba told the BusinessMirror.

Company logos of the German car manufacturer Volkswagen sit in a box at a scrap yard in Berlin, Germany. AP

Less than a thousand units have been sold by the German car brand since its reentry into the Philippine market in 2013. VW started using the engine equipped with the “defeat device” in 2009.

VW Philippines officials are keeping mum on the issue, while its principal determines how many units shipped to the Philippines have the engine with the defeat device software, if there are any.

The local unit of the German auto brand said it is also waiting for the results, but have not yet been given a timeline as to when the coverage report will be transmitted to them.

“We want the number of affected units, the year model and possibly the owners,” Dimagiba said.

A VW Philippines official assured that the company will comply with the DTI-CPG order.

The official said VW Philippines has a complete database of all its car owners and will notify their if they units are indeed affected. A recall process may be initiated to remove the software.

According to international reports, 11 million vehicles worldwide carry the Type EA189 common rail diesel engine equipped with the “rigged” software.

The Volkswagen Group installed the engines in various motor brands under its management, most of them distributed in the US and Europe.

VW Philippines officials stressed that the software does not, in any way, affect the roadworthiness of the vehicles. Catherine N. Pillas

BusinessMirror

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A broader look at today’s business

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ThursdaySeptember 18, 2014 Vol.29, 10 No. 40 Tuesday, 2015 Vol. 10 No. 355

P25.00 nationwide | 6 sections 32 pages | 7 days a week

‘No need to probe shipping lines on additional charges’

By Catherine N. Pillas

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he government has virtually cleared the shipping lines from the allegation of the Federation of Philippine Industries (FPI) that they continue to impose hefty fees, to the detriment of local manufacturers and traders.

INSIDE

GILAS SHOCKS IRAN

By Lenie Lectura

Art

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The Filipino identity is complicated, and so is art

By Samito Jalbuena

W

HAT exactly is a Filipino? The question or, rather, its answers are complicated. From various people, let’s say a million, we can gather at least also a million different descriptions, not all of them positive and some won’t even be worthy of emulation, much more allowed on printed media. Do we as a race deserve praise?

For others, questions arise: Why are Filipinos anti-intellectual? Why are Filipinos so proud? Why are Filipinos racist? There appears at first a slight incredulity when confronted with such assumptions, whether true or not. Are Filipinos really antiintellectual? Are Filipinos proud? Are they racist? Who says so?

While delving into such matters can trigger more complex issues than it can solve them—like tending a beautiful garden with problematic undergrowth choking good plants and burrowing into myriad innumerable roots—peering into a recently opened group exhibit at an art space off the beaten road may be construed as a curious self-invitation to take apart some of these aforementioned assumptions and break them into their unconstitutional parts. Ergo, by looking at some facets of the problem—or, rather, by looking at the artworks of the young—perhaps we can attempt to situate identity politics on more stable ground.

For our purposes, we have to first dismiss the first questions (What exactly is a Filipino? Why are Filipinos anti-intellectual? Why are Filipinos so proud? Why are Filipinos racist?) and ask these instead: If art is the aesthetization and celebration of the works of man, is man truly mirrored in his art? And if Philippine art is the question, can we see the real Filipino emerge atop this sort of eclectic madness? Or is Philippine art garbage in the first place?

Take a look. For an example, Artery Art Space (102 P. Tuazon Boulevard, Cubao, Quezon City) presents Razzle Dazzle, ongoing October 31—a presentation of creative studies, often of anti-art art catalyzed by experimentation and intuitive research alongside attempts at artistic pattern and design, fantastic narratives and figuration, and pop content with a surreal sense of wit. Razzle Dazzle features the works of Kris Abrigo, Dean Africa, Zeus Bascon, Gene Paul Martin, Carlo Ricafort and Tanya Villanueva.

While the morning news of rising gas prices, horrendous traffic and incoming typhoons have often made one want to jump ship and change passports, these young artists have decided to stay put and create some art. Hence, Razzle Dazzle takes its inspiration from the now and the apparent spectacle of its artists’ presumed creativity, according to the show literature.

Creativity is “the dazzling move of artistic production and the illuminating genius that is found within the finished masterpiece, the completed labor of love,

One nation Under Flood by Kris Abrigo

the proverbial alchemical gold wrung from mundane material.” Art serves as the process of transformation, like the ways man himself has transformed.

The paths to this are eclectic and often go beyond the rational. Kris Abrigo breaks time and space into fragments of gestural stroke and patterned ornament.

His paintings—imbued with modernism’s spirit—are chromatic fugues with angular faÇades that remind one that reason may yet lie behind the pattern. It’s up to the seer to give thought.

Dean Africa destroys fantasy to give more illusion. His paintings plumb the consciousness of a multicentered hegemonic cultural milieu, the zeitgeist of commodity culture as global, and the society of the spectacle as the most important.

In his processes, he creates labyrinthine mirror narratives of a world filled with artificial experiences and signification, itself the stuff of identification in a world gone mad with despair. Masks and alternate identities become the focal point of Zeus Bascon’s artistic exploration on the world of subjectivity and identity, spirituality and the unseen. Art is a cosmetic costume that spreads into the periphery of ritual, selfinvention and myth-making, fabulation and creative

Untitled (detail) by Dean Africa

interpretation. Meanwhile, the more the thing is strange, the more it becomes the constant in Gene Paul Martin’s world of mutants and the postapocalypse.

He seems to warn us that we will all become monsters unless we renew our relationship with art or with ourselves. Carlo Ricafort’s caricatures of expressionism and primitivism border on ironic critique over pure states of being in this age of late capitalist reproduction, while Tanya Villanueva’s work reckons that feminisn doesn’t have to be totemic and visceral. She uses domestic scenes and arts and crafts as subversive tactic in proclaiming liberation from patriarchy.

Such an exhibit reveals the processes from humble idea and non-idea to perhaps their grand flourish.

Some works have this and some do not. What’s more, we are told the composition of the exhibit will change in its duration, with an independent solo feature of each artist’s artistic statement, like the fugue states of different personas that come and go, leave and reside in each person. Like this art show, we too are in constant state of flux. Is this, too, the state of the Filipino?

Sometimes, it isn’t really a matter of description but of process, and looking at the work of these young upstarts, we are curious as to where they will bring us. n

ouse Committee on Energy Chairman and Liberal Party Rep. Reynaldo Umali of Oriental Mindoro had tried to amend the 14-year-old Electric Power Industry Reform Act (Epira). Umali, however, said it proved to be an uphill battle as too many were against it.

Epira’s thrust was questioned when power distributor Manila Electric Co. (Meralco) announced that the generation charge, which accounts for more than half of the Meralco bill, went up by P9.10 per kilowatt-hour (kWh) in December 2013 and P10.23 per kWh in January 2014.

Consumers were furious at the Meralco rate increase, which was approved for implementation on a staggered basis by the Energy Regulatory Commission (ERC).

Shortly after it was implemented, the Supreme Court (SC) issued a temporary restraining order (TRO) to stop the power-rate increase. Until now the TRO has not been lifted.

High power rates

The power of Three in ‘ArTis3’

The exhibit Artis3 features the amazing talents of three women, each with their own brand of artistry, from October 1 to 30, at The Globe Art Gallery, The Globe Tower, 32nd Street corner 7th Avenue, in Bonifacio Global City, Taguig.

After a successful artistic confluence last year, Artis3 again brings together three artists—master potter Lanelle Abueva-Fernando, mosaic artist Lisa de Leon-Zayco and fine-art photographer Suzette Bernardo-Montelibano—for another collaboration, taking their individual artistry to a whole new level.

Boldness is perhaps what comes to mind as they bolt out of their comfort zones, taking on an approach that’s not usually expected of them. This time, they sought to view nature with an eye for the abstract.

Abueva-Fernando, de Leon-Zayco and BernardoMontelibano share their passions to create pieces of mix media never done before. At first glance, you cannot help but be awed by the beautiful, cohesive whole. however, you will find that it draws you in, pulls you in realizing that the minute details hold the uniqueness of each art genre, thereby telling more stories than meets the eye. You can almost feel the hand print in the pottery, the nips and cracks of each tesserae, and the blend of light and color of the photograph that holds it together.

It is unsettling yet calming. Bold yet graceful. Powerful yet refined.

Abueva-Fernando is no stranger to the art world, owning her own brand of pottery. The discipline she has earned after years of apprenticeship in Japan yields free-form shapes and swathes of uncommon glazes.

De Leon-Zayco was recently commissioned to create a mosaic version of one of Juvenal Sansó’s famed artworks. each piece painstakingly put together now graces the entrance of the newly opened Sanso Museum.

Bernardo-Montelibano is a rare gem among a sea of photographers who continues to elevate and differentiate fine-art photography with her insightful eye for architectural lines even in the most ordinary of things, bringing to light what one is unable to see before.

They also bring to this exciting, multisensory exhibit a taste of their individual works showcasing how they continue to evolve as artists and what makes them forces to contend with.

ART

Second of three parts

COLLABOrATIve artwork by master potter Lanelle Abueva-Fernando, mosaic artist Lisa de Leon-Zayco and fine-art photographer Suzette BernardoMontelibano.

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The National Association of Electricity Consumers for Reform Inc., which filed a separate petition before the High Court seeking to stop the Meralco rate hike, said Epira has pushed the power rate up.

“It didn’t help. Something should be done.

For Meralco, it should have cut the cost of electricity,” said the consumer group’s leader, Pete

nonie reyes

C2

THE FILIPINO IDENTITY IS COMPLICATED, AND SO IS ART BusinessMirror

Continued on A2

Epira amendment no panacea for power crisis, rate increases

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D4 Tuesday, September 29, 2015

Instead of seeking a probe into the prohibitive charges, Dimagiba advised the FPI to have a better dialogue with the Association of International Shipping Lines (AISL) to bring down shipping costs in the country.

The FPI recently sought the Senate’s help in investigating foreign shipping lines that, according to the group, continue to burden traders with various random charges, such as

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Trade Undersecretary Victorio Mar io A . Dimag iba said the FPI’s complaint and request for investigationappeartobeunfounded, as almost all the shipping lines have stopped imposing the fees that the business group mentioned in its letter to the Senate.

“Halos wala nang nagcha-charge nung fees na sinasabi nila; I don’t know where they got their data,” Dimagiba told the BusinessMirror.

Ilagan, in a recent forum.

The Philippines’s electricity rates are still the second highest in the Southeast Asian region and seventh in the world. “Sadly, this is still the case,” Umali said.

The Philippine Statistics Authority (PSA) said in a report that Filipinos pay one of the highest rates in the region. It cited data from the Asean Center for Energy showing that among the 10 countries in Southeast Asia, the Philippines has the third highest residential

electricity tariffs, fifth highest for commercial and fourth highest in terms of industrial electricity tariffs.

A study conducted by the Perth-based consultancy firm International Energy Consultants (IEC) placed the rates in Luzon as having the ninth highest electricity tariffs of the 44 countries surveyed. Meralco commissioned the IEC to conduct the study. Citing the IEC study, the PSA said one of the main reasons the Continued on A2

WORD OF MOUTH, TRADITIONAL ADS MOST TRUSTED BY FILIPINO BUYERS

By Cai U. Ordinario

A

lthough advertising in the digital sphere has become increasingly popular, Filipino consumers still trust the word of mouth and the more traditional forms of advertising.

Based on the results of Nielsen Global’s Trust in Advertising Survey, some 91 percent of Filipinos trust the recommendation of people they know when it comes to products and when seeking information.

The survey results also show that 80 percent of Filipino consumers trust editorial contents, such as newspaper articles, than those found in so-called online formats.

“Despite continued media fragmentation, the proliferation of online formats has not eroded trust in traditional offline-paid channels. Ads on television, newspapers and magazines continue to be among the most trusted forms of paid advertising in the Philippines, surpassing global trustlevel averages,” Nielsen said.

Data also show that 75 percent of consumers in the Philippines trust ads on television, which is higher than the global average of 63 percent.

This is closely followed by ads in newspapers, which some 74 percent of Filipinos surveyed said they trusted. This is also higher than the 60 percent global average.

Nielsen also said some 70 percent of Filipinos trust ads contained in magazines, which is significantly higher than the global average of 58 percent.

“While digital ads offer considerable advantages—such as precision-focused campaigns, in-flight adjustments and more creative options—TV still delivers unequalled ability to reach the masses,” said Stuart Jamieson, managing director of Nielsen Philippines.

“Cross-platform ad exposure drives greater memorability and brand lift than single platform exposure, even when adjusted for frequency,” he added. In terms of advertising topics, a majority, or 65 percent, of Filipinos believe in contents that carry family-oriented Continued on A2

Apec moves to cut losses in food-supply chain

By Mary Grace Padin

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embers of the Asia-Pacific Economic Cooperation (Apec) have agreed to strengthen public-private partnerships to reduce food losses in the supply chain of the fishery and livestock industry, the Philippine Center for Postharvest Development and Mechanization (PhilMech) said on Monday.

The PhilMech said stakeholders from

PESO exchange rates n US 46.9020

both the public and private sectors shared their ideas and experiences in developing policy recommendations, action plans and methodologies that can provide solutions to the global problem on food losses during one of the seminars organized as part of the ongoing Apec Food Security Week in Iloilo City.

The seminar was organized by the Ministry of Agriculture of Chinese Taipei, the Ministry for Primary Industries of New

Zealand and PhilMech.

According to PhilMech, the Philippines, along with other economies, deemed it necessary to come up with policies and measures that will address wastage in the agriculture sector, specifically within the livestock and fishery industries.

PhilMech Director Rex L. Bingabing said there is a need to ensure the supply of affordable, safe and good-quality food.

Continued on A2

n japan 0.3894 n UK 71.3145 n HK 6.0517 n CHINA 7.3579 n singapore 32.9044 n australia 32.9253 n EU 52.5818 n SAUDI arabia 12.5072 Source: BSP (28 September 2015)

BMReports BusinessMirror

A2 Tuesday, September 29, 2015

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Epira amendment no panacea for power crisis, rate increases Continued from A1

country’s power rates are higher compared to other countries is the absence of government subsidies for electricity, unlike countries like Indonesia, Thailand and Malaysia, where electricity rates are subsidized by the government.

“These subsidies eat up a large chunk of public budget. In Indonesia, for example, energy subsidies account for 24 percent of the 2013 public expenditure plan,” the PSA paper read.

It also said the generation charge is the biggest component of the electricity cost, accounting for 65 percent of what customers pay for.

But Department of Energy (DOE) Officer in Charge Zenaida Monsada said, without Epira, power costs could have been higher and that the government’s role would have

been limited to being the “facilitator” and “catalyst” of the energy sector.

“To some, it may seem that the government was placed in the losing side, however, the reality is that we need to capitalize on the dynamism of the economy as well as the influx of foreign and local investors,” Monsada said.

Proper implementation

Meralco, which serves over 5 million customers in Metro Manila, Batangas, Bulacan, Cavite, Rizal, Laguna and Quezon, said that while it respects the view of various groups that are calling for amendments to the landmark law that promised reforms in the power sector, the move is “premature.”

“First of all, I think a lot of thought and time were spent by industry experts to write up the Epira. Having said that, I think any

Apec moves to cut losses in food-supply chain Continued from A1

“With the additional new challenges in food production such as climate change, decreasing production area and depletion of natural resources, food loss and food waste must be given serious attention,” Bingabing said in a statement.

Bingabing said the Apec members have a big role in addressing this challenge, since the majority of the total food production comes from the Apec region.

He said concerned institutions recognize that the problem on food wastage is not the sole problem of the government, so the private sector was called upon to contribute to the issue’s long-term solution.

Deputy Director General of the Department of International Affairs, Council of Agriculture of Chinese Taipei Dong-Chong Hsiou said the private sector plays a critical role in reducing losses along the supply chain.

“We are positive that this seminar will give value to the inputs and participation of the private sector, and so we encourage you to provide us with more creative and innovative ideas and solutions,” she said.

About 80 delegates from both public and private sectors exchanged information on research, trends, business models and postharvest technologies in the fishery and livestock industry during the seminar, according to PhilMech.

Foreign delegates from Chile, China, Japan, New Zealand, Papua New Guinea, Peru, the Philippines, Singapore, Chinese Taipei, Thailand, the US and Vietnam attended the seminar.

amendments is premature. What should be done is to properly implement the Epira,” Meralco Senior Vice President Alfredo Panlilio said in an interview.

The law is the law, stressed the Meralco official. The problem, he said, is implementation. “I think the problem is more of its execution. Of course, we should be cognizant of present market conditions and align [the law] with that.”

Meanwhile, former Energy Secretary Rafael Perpetuo Lotilla said implementation plays an important factor to determine its success or failure.

“Epira is broad enough to cover smarter regulation. Also, aspects of the reform, including deepening retail competition, open access and allowing aggregators still have to be implemented,” Lotilla said in a text message.

“Electric cooperatives reform would require

separate legislation while competition issues are already covered by new law,” he added.

No to Epira

Research group IBON disagrees. It believes that the problem is not the proper implementation but the law itself.

It said that Epira, by design, actually allows the companies engaged in the power sector to impose the most profitable rates on electricity consumers.

According to IBON, with Epira facilitating the complete takeover of a handful of local and foreign businesses in the power sector, the deregulation of generation rates makes it easy for firms to abuse power consumers with exorbitant rates.

“The recent Wholesale Electricity Spot Market [WESM] controversy wherein Meralco sought what could have been an all-time-

high increase in power rates has clearly shown how privatization and deregulation under Epira created a conducive environment to profit from high power rates,” it said, adding that the law creates favorable conditions for collusion and manipulation of supply and fixing prices.

There is currently an investigation against WESM players who allegedly withheld their full capacity in the spot market.

“The latest controversy facing the power industry, plus the impact of Epira on power consumers and on national development, are enough reasons to stop and reverse the privatization and deregulation of the electricity industry,” the group said.

IBON calls on lawmakers to repeal the Epira and work toward building a more rational power sector using the country’s resources,” it said.

‘No need to probe shipping lines on additional charges’. . .

the emergency cost recovery surcharge (ECRS), container imbalance charge, equipment positioning services, container cleaning fee, documentation fee at destination and terminal handling charge.

The DTI official said many of the fees mentioned by the FPI have already been removed. Only added were the Port Congestion Surcharge (PCS) and the ECRS. Dimagiba has extensive data on shipping costs, as he oversees the public-private dialogues involving concerned government agencies, foreign chambers, local business groups and the AISL. The meetings are meant to identify ways of cutting shipping costs in the country, reputed as among the highest in the world.

According to data provided by the DTI-Consumer Protection Group (CPG) headed by Dimagiba, the following lines have removed the PCS and ECRS since July 16: APL, “K” Line, Hapag Lloyd, MCC Transport, Maersk, MOL, NYK, Hanjin, Advance Container Lines and Pacific International Lines.

But the CPG data also showed that

TYPHOON “JENNY” (DUJUAN) 395 KM NORTH OF ITBAYAT, BATANES SOUTHWEST MONSOON AFFECTING CENTRAL AND SOUTHERN LUZON AND VISAYAS (SEPTEMBER 28, 5:00 PM)

a number of shipping firms are still imposing the “ECRS or its equivalent.”

These are the Wan Hai, Heung-A, OCL, CMA-CGM, China Shipping, Cosco (for China imports only), Gold Star Shipping, Evergreen, RCL, Sinotrans and SITC. Dimagiba said the FPI should consult first with the AISL and seek further dialogue, instead of immediately asking the Senate for an investigation into the matter.

The CPG opened the dialogue between affected business chambers and the shipping lines in April to look into the continued imposition of additional shipping charges. In that meeting, AISL General Manager Maximino T. Cruz said while many foreign lines are removing the PCS and the ECRS, they are not in the position to dictate on the decisions of individual shippers.

Unlikely to be regulated

by Marina

Dimagiba also dismissed the proposal to have the foreign shipping lines’ administration of charges regulated

by the Maritime Industry Authority (Marina).

“They only accredit local ship agents. It seems unlikely that they will make the move to regulate foreign ships, especially now that the cabotage law has been passed,” he added.

Dimagiba earlier cited the laws by which Marina can exercise the power to regulate shipping lines, in an effort to appease business groups that were clamoring for the streamlining of shipping charges.

FPI seeks Senate probe

The FPI, the countr y’s largest organization of manufacturers, has sent a letter to Senate Trade, Commerce and Entrepreneurship Committee Chairman Paolo Benigno “Bam” Aquino IV to air its concern on the rising shipping fees.

“While some shipping lines have discontinued the collection of PCS, there are other types of charges that have been imposed by various shipping lines,” FPI Chairman Jesus L. Arranza said in his letter to the senator.

“In view of its sheer gravity, which is

Continued from A1

seriouslyaffectingthenationaleconomy, as well as the competitiveness of local manufacturers and directly impacting consumers, the federation wishes to seek your intervention in finally investigating this matter,” he added.

The other charges reportedly being imposed by the shipping lines are the ECRS, container imbalance charge, equipment positioning services, container cleaning fee, documentation fee at destination and terminal handling charge.

Based on FPI’s computation, with these six additional fees, the average shipping cost per 20-foot container van now amounts to P 27,159.

This makes the Philippines’s shipping charges the highest among five economies compared by the FPI. Other countries’ shipping charges are Indonesia, P465 to P4,737.89; Malaysia (Kuantan Port), P5,360.6 to P5,634.10; Malaysia (other ports), P5,743.5 to P5,907.60; Singapore, P11,118.65 to P10,952.70; Thailand, P7,804.50 to P9,288; Bangladesh, P3,952.50; and Japan, P12,692 to P12,540.

WORD OF MOUTH, TRADITIONAL ADS MOST TRUSTED BY FILIPINO BUYERS Continued from A1

themes. This is significantly higher than the Southeast Asian average of only 51 percent.

This is also the highest relative to other countries in Southeast Asia.

Data show that 59 percent of Vietnamese consumers are partial to family-themed ads followed by 47 percent of Malaysians; 43 percent of Indonesians and Singaporeans; and 36 percent of Thais.

Survey results also show that other ads that resonate well with Filipinos are either health-themed (57 percent), value-oriented (50 percent) and humorous (42 percent).

“The advertising medium is only part of the formula for reaching consumers. It’s important for consumers to identify and connect with both the brandandmessage,”Jamiesonadvised.

“Advertisements that feature relatable situations and comedic relief, and which focus on family, values and health greatly appeal to consumers and elicit the most positive response.”

Nielsen’s Global Trust in Advertising Survey polled 30,000 online respondents in 60 countries to gauge consumer sentiment in 19 forms of paid, earned and owned advertising mediums. The results identify the ad formats resonating most strongly with consumers and those that have room to grow.

The Nielsen Global Survey of Trust in Advertising was conducted between February 23 and March 13. Nielsen uses a minimum reporting standard of 60-percent Internet penetration or an online population of 10 million for survey inclusion.

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BusinessMirror Special Feature

Wednesday, September 29, 2015 A3

Economy

A4 Tuesday, September 29, 2015 • Editors: Vittorio V. Vitug and Max V. de Leon

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Lawmakers reassure ‘pork-less’ 2016 national budget

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By Jovee Marie N. dela Cruz

he chairman of the House Committee on Appropriations on Monday assured the public that the proposed 2016 P3.002-trillion national budget will be spent for the country’s development.

House Committee on Appropriations Chairman and Liberal Party Rep. Isidro Ungab of Davao, at the start of the budget deliberations in the plenary, said the leadership of the 16th Congress is ensuring that every public peso under the P3.002trillion national budget is spent within means, with the right priorities, and with measurable results, particularly in fostering inclusive development.

Ungab also expressed confidence that with the collective wisdom of lawmakers, they will pass House Bill 6132, or the General Appropriations bill (GAB) for 2016 on time, as they did in the past five years.

“We will pass the budget bill on time—delaying the passage of the budget bill will mean delaying our country’s forward move toward the achievement of our national development goals,” Ungab said.

Ungab said the proposed 2016 budget is 15.2 percent, or P396 billion, more than the 2015 expenditure program. It corresponds to 19.5 percent of the gross domestic product (GDP), increasing from 18.7

percent of GDP in 2015.

Of the P3.002-trillion obligation budget, Ungab said the new general appropriations, which they proposed to Congress to authorize, amounts to P2.139 trillion, consisting of P2.071 trillion in programmed new appropriations, and P67.5 billion in unprogrammed appropriations which may only be utilized if revenues exceed targets or new loans be secured.

The programmed new appropriations of P2.071 trillion, together with the P930.7 billion in automatic appropriations, which is outside the purview of this General Appropriations Act (GAA) will provide for the appropriation cover for the P3.002trillion budget, he said.

Ungab said the proposed budget has been shaped by financial management reforms that include the two-tier budgeting approach, the GAA-as release document policy, the performance informed budgeting, the unified accounts code structure, and the bottom-up budgeting process.

“As the proposed budget has

been shaped by these reforms, we become more confident that it is not just a budget where we spell out the sources of funds and the plan for the disbursement of funds, but an investment plan for a better Philippines.

We agree with the appreciation of President Aquino that the national budget is the government’s most potent instrument in achieving the country’s development goals. And from the point of view of a representative of the people, I say with conviction that the national budget should be the clearest, the loudest and the best expression of our people’s desire for development,” Ungab said.

The lawmaker added that the budget measure is anchored on the assumptions that economic growth will be 7 percent to 8 percent this year, in 2016 and over the medium term, inflation will be within 2 percent to 4 percent, and an exchange rate of 43 to 46 per dollar. It is also consistent with other macroeconomic assumptions, such as a 364day T-bill rate of 2 percent to 4 percent, exports growth at 6 percent, and imports growth at 12 percent.

Also, Ungab said the budget proposal has been formulated based on fiscal program with total revenues of P2.697 trillion in 2016, which translate to 17.5 percent of GDP and is higher by 18.5 percent from the 2015 revenue program of P2.275 trillion; consolidated public-sector deficit of P128.8 billion or 0.8 percent of GDP; national government budget deficit of P308.7 billion or 2 percent of GDP, consistent with the medium-term fiscal program; and outstanding

national government debt of P6.423 trillion or a debt-to-GDP ratio of 41.8 percent by the end of 2016.

According to Ungab, the GAB also effectively reduces the number of special purpose funds (SPFs), from 10 in the 2015 GAA to seven in the 2016 GAB, as the E-Government Fund and the International Commitments Fund were incorporated back to the budgets of the relevant departments, while the Rehabilitation and Reconstruction Program was integrated into the National Disaster Risk Reduction and Management Fund.

Ungab also noted the amounts allocated for the Miscellaneous Personnel Benefits Fund and the Pension and Gratuity Fund were notably decreased, as funds for the creation of new or filling up of unfilled positions, as well as compulsory retirement, were integrated back into the respective departments’ budgets.

“The distribution of the 2016 Budget by sector reflects the government’s commitment to inclusive growth as more than P64 in every P100 will be spent on social and economic services in 2016—this shows a dramatic improvement from P45 in every P100 in 2015,” Ungab said.

He added that the social services sector continues to get the largest share of the budget at 36.8 percent of the national budget, or P1.106 trillion.

Economic services, the lawmaker said, will get the second-largest share of the budget with 27.6 percent or P829.6 billion, while General Public Services will receive 17.3

percent or P517.9 billion.

“The debt burden, which is composed of interest payments to service outstanding debts, as well as net lending to government corporations, will reach an all-time low of 14 percent of the total budget or P419.3 billion. To boost the government’s capacity to defend national sovereignty, the Defense sector will get a share of 4.3 percent or P129.1 billion,” he said.

Ungab also cited that starting in the 2016 proposed national budget, the government adopted a new framework in classifying the budget called the Classification of Functions of Government, which categorizes programs and projects of government agencies according to function to accurately reflect an agency’s contribution to the social and economic goals of the government.

As to the funding source for government operations and programs, Ungab said these include government revenues in the amount of P2.697 trillion to be collected in 2016. Of this, P2.543 trillion, or 94.3 percent, will be sourced from tax revenues. The remainder will come from nontax revenues at P151.4 billion and privatization proceeds at P2 billion; collections of the Bureau of the Treasury (BTr) at P58.3 billion, fees and charges at P40 billion, the sale of government assets at P2 billion, and other nontax revenues at P53.2 billion; borrowings of P674.8 billion in 2016, of which P308.7 billion will be used to finance the projected fiscal deficit, P347.7 billion to amortize maturing obligations and P18.4 bil-

lion for the national government’s cash buffer account.

By department allocation, the Top 10 departments are Department of Education, P435.9 billion; Department of Public Works and Highways, P394.5 billion; Department of National Defense, P172.7 billion; Department of the Interior and Local Government, P154.5 billion; Department of Health, P128.4 billion; Department of Social Welfare and Development, P104.2 billion; Department of Agriculture, P93.4 billion; Department of Finance, P55.3 billion; Department of Transportation and Communications, P49.3 billion; Department of Environment and Natural Resources, P25.8 billion; and Department of Science and Technology, P18.6 billion.

The marathon budget deliberations will be held in the next two weeks from Monday to Friday before Congress goes on a break on October 10 to prepare for the filing of certificate of candidacy.

Lawmakers will return to work on November 2. Session will again adjourn on December 19 and resume on January 18, 2016.

Meanwhile, as the lower chamber began tackling the proposed 2016 budget, the chances of the proposed Basic Law on Bangsamoro Autonomous Region (BLBar) are becoming slim.

At least 13 members of the lower house are still set to interpellate the BLBar. The BLBar aims to create the new Bangsamoro juridical entity replacing the Autonomous Region in Muslim Mindanao.

I.N.C. leader thanks guests from all over the world who attended Church’s first simultaneous worldwide mission I

glesia Ni Cristo Executive Minister Bro. Eduardo V. Manalo thanked all the guests of different nationalities who were invited to the Church’s first-ever simultaneous worldwide mission on Saturday, September 26, as he stressed the importance of having an open and curious mind to find out the truth written in the Bible.

“Maraming salamat sa pagbibigay ng ganitong pagkakataon sa amin na kami ay makapaglingkod sa inyo [Thank you very much for giving us the opportunity to serve you],” said Bro. Eduardo at the start of his preaching as he addressed a worldwide audience of guests—not just in the Philippines, but from other countries, as well—who had been reached through more than 2,000 remote sites set up across the globe.

“Salamat din sa mga kapatid na tumutugon sa ganitong gawain upang tayong lahat ay makatulong sa pagpapalaganap ng mga salita ng Diyos. Sumasampalataya kami na ito’y hindi mawawalan ng kabuluhan [Thank you, too, to our brethren who responded to this activity so all of us could help in the propagation of God’s Words.

We faithfully believe that this will not be in vain],” he said.

The INC leader used the Philippine national language in his officiation of the largest and most extensive evangelical mission in the INC’s history. This was simultaneously translated into the various different languages in the 2,125 sites around the world, as the INC embarked on an even more intensive campaign to offer God’s message of salvation as written in the Bible to as many people as possible on its 101st year.

At the center was Ciudad de Victoria’s Philippine Arena, where Bro. Eduardo officiated the activity dubbed as “Dakilang Pamamahayag ng mga Salita ng Diyos [Most Extensive Proclamation of God’s words],” which was basically a Bible exposition that centered on the message of

A view from inside the packed 55,000-seater Philippine Arena during the September 26 worldwide evangelical mission of the Iglesia Ni Cristo officiated by INC Executive Minister Bro. Eduardo V. Manalo. The event was beamed live via online video feed to more than 2,000 sites across the globe. Photo courtesy INC Executive News

salvation as written in the Bible.

Through video web link, Bro. Eduardo’s preaching was heard and seen all around the world. The 2,125 sites of the video conferencing reported how hundreds of thousands of guests from the Philippines, to the countries in Europe, North America, the Middle East, Southeast Asia, East Asia, Africa, Australia and the Pacific Islands had been reached.

At the Philippine Arena alone in Bocaue, Bulacan, about a hundred thousand attended the event. In the Philippines, the remote sites where the live video feed from the 55,000-seater Philippine Arena was shown were in the various INC buildings of worship in Metro Manila, and in other large venues from Luzon to Mindanao.

“Sa pagsusuri sa kalooban ng ating Panginoong Diyos, hindi kami magbibigay ng opinyon.

Kundi babasahin lang namin kung ano ang katotohanan na

nakasulat sa Biblia [In studying God’s will, we will not give any opinion. We would merely read what is written in the Bible],” Bro. Eduardo said at the start of the evangelical mission that started earlier than 7 p.m., at the Philippine Arena.

“Kapag ang pag-uusapan ay paglilingkod sa Diyos, hindi ba tama lamang na kung ano ang gusto ng Diyos ang dapat sundin?

[If we talk about serving God, isn’t it right that we follow what God wants]?” the INC leader asked.

The activity started a few minutes earlier as the Philippine Arena, the Philippine Sports Stadium, and the rest of the Ciudad de Victoria was filled with people.

Giant screens were also placed inside and outside the Arena.

Before the actual preaching, people inside the Arena, and in all the other remote sites, prayed to God for the success of the event.

It was then followed by choir singing by some 1,600 choir members

who wore white robes inside the Philippine Arena.

Bro. Eduardo explained that it was important to know what God Himself wanted people to follow for them to attain salvation. He then read various verses in the Bible that pointed out that not all who are professing to know Christ, or those who profess to be Christians, will be saved (Matthew 7:21-23). He also read verses that showed the Lord Jesus’ instruction for man to be saved, which is by entering the Church of Christ (John 10:7 and 9 REB).

Bro. Eduardo repeatedly stressed that he is just reading the verses in the Bible pertaining to salvation.

He said it was important for everybody to have an open mind, and to study the truth as written in the Bible, because only those who follow God’s will, will be saved.

He encouraged all the guests who attended the Bible

exposition to continue searching for the truth, and to study God’s words by attending the INC ’s worship ser vices and doctrinal lessons.

At one point during his preaching, Bro. Eduardo said he would want to take opportunity of the event to address those making false accusations against the INC that were being circulated in media and in the social media, as well.

“Kung totoo ang sinasabi nila, hindi sana nangyayari ngayon ang kasalukuyang aktibidad na ito. Ito’y katunayan na kasama natin ang Diyos [If what they are saying is true, then this event would not be happening today. This is proof that we have God on our side],” the INC Executive Minister said.

He then explained that it is the words of God as written in the Bible which every man should believe in, and that what the Bible says is that members of the Church of Christ or Iglesia Ni Cristo are those who will be saved.

“Hindi ako ang nagsasabi nito.

Binasa ko lang ito sa Biblia [It is not I who says this, but I just read this from the Bible],” Bro. Eduardo said after reading a series of biblical verses.

The Iglesia Ni Cristo declared the event a success as all the 2,000 remote sites around the world reported the attendance of thousands of guests; everything also went smoothly as there were no technical difficulty that happened. In worship services the following day, Sunday, September 27, the INC brethren thanked God for the successful holding of the firstever worldwide evangelical mission of such magnitude.

“It was successful because we were able to reach the sites that we had planned to reach via the technology we have chosen for this. We have heard from many guests that they would like to know more about the Iglesia Ni Cristo and its biblical doctrines,” explained INC spokesman Minis-

ter Edwil Zabala.

“This is just the fulfillment of God’s promise to His Church,” he said.

Zabala added that the participation of the INC brethren in the Philippines and in other countries, in the worldwide evangelical mission, served as “proof of the commitment and solidarity to uphold the biblical doctrines that have been the core of the faith of the members of the Church.”

INC General Auditor Minister Glicerio Santos Jr. said that this is just the start of even more intensive and extensive worldwide evangelical missions.

The INC, since it was registered in the Philippines in 1914, had held large gatherings for Bible expositions in the Philippines, and later in the other countries as well. From the Bible expositions during the time of the first Executive Minister, Bro. Felix Y. Manalo, the grand evangelical missions during the time of the second Executive Minister, Bro. Eraño G. Manalo, to the large victorious evangelical missions during the time of the present Executive Minister Eduardo Manalo, the INC has held bible expositions in large gatherings, citing as basis the biblical verses in Psalms 40:9-10.

More recently, such evangelical missions under the project “Kabayan Ko, Kapatid Ko” or “My Countrymen, My Brethren” —which was launched in April 2013—have reached millions in the Philippines, and around the world.

More recently, the INC had also embarked on online evangelical missions that reached more people around the world through live streaming, the Internet, and the various media platforms of the INC. The“Dakilang Pamamahayag,” however, is the first time that a worldwide simultaneous live feed of Bro. Eduardo’s officiation of an evangelical mission happened. Eagle News

Economy BusinessMirror

news@businessmirror.com.ph

Office take-up remained strong in Q3, study shows

By Roderick L. Abad

D

ESPITE the surge in workspace inventory due to completion of new buildings, Pinnacle Real Estate Consulting Services Inc. reported that the local office market has remained healthy in the third quarter of this year on the back of robust demand, low vacancy and increasing rents.

Based on the company’s Market Insight Report for September 2015, office space take-up in Metro Manila has continued its growth trajectory, with a total of around 40,000 square meters (sq m) already filled up by business-process outsourcing (BPO) companies in the past three months.

More than 1,000 firms are now comprising the country’s BPO industry, employing over 1 million people as of end of last year.

Given their massive absorption of office space, the overall vacancy rate of central business districts (CBDs) in the metropolis is below 3 percent even with the faster pace of new supply.

T he P i n n ac le R esea rc h , likewise, revealed that rental rates in Makati City grew at approximately 1 percent quarter-on-quarter.

Monthly lease charges of Premium Grade A buildings have a weighted average of P1,280 per sq m, while P675 per sq m for Grade B and C buildings.

Grade A buildings, on the other hand, is at the mid-range of P865 per sq m a month.

This is comparable to lease charges in other CBDs, for instance, in Ortigas and Alabang— both with estimated weighted average rent for the same office category at P650.

For P870 per sq m per month, on the other hand, Grade A buildings are a bit expensive in Bonifacio Global City.

But it’s cheaper moving to such kind of an office in Quezon City at P625 per sq m on a monthly basis.

That is why office buildings in this area are “practically fully leased out” because the average rent “remains unchanged,” Pinnacle said.

It expects leasing activities to continue in the coming years even though most industry players are projecting that the BPO sector will slow down by 2020, with an estimated total revenue of $50 billion.

With the industry’s phenomenal growth in just over a decade, Pinnacle said that major players are already talking about moving up in the value chain.

Tuesday, September 29, 2015 A5

House panel approves bill exempting system loss in power bills from VAT

T

By Jovee Marie N. dela Cruz

he House Committee on Ways and Means on Monday approved a measure exempting the systemloss charge component in the sale of electricity by distribution companies and electric cooperatives from the coverage of the value-added tax (VAT).

House Bill 5543, authored by Party-list Rep. Neri Colmenares and Rep. Carlos Isagani Zarate of Bayan Muna, seeks to amend for the purpose of Section 109 of the National Internal Revenue Code.

Under the bill, the system-loss component in the sale of electricity by distribution companies and electric cooperatives shall be exempt from the VAT. “Sale or lease of goods or properties or the performance of services other than the transactions mentioned in the preceding paragraphs, the gross annual sales and/or receipts do not exceed the amount of P1.5 million. Provided, That not later than January 31, 2009, and every three years thereafter, the amount herein stated shall be adjusted to its present value using the Consumer Price Index

as published by the National Statistics Office,” the bill said.

Meanwhile, Colmenares and Zarate, citing independent think tank Ibon Foundation, said that the system-loss charge comprises about 8 percent of the total electricity bill.

“Worse, this system-loss charge is subjected to the coverage of VAT which further drives electricity bills up,” the lawmakers said. System-loss charge, Colmenares and Zarate said that part of one’s electric bill, representing the cost of electricity lost during transmission, pilferage, and due to technical and administrative inefficiency.

“Even pilfered power and the electricity used by the distribution companies [like Manila Electric Co.] and electric cooperatives are passed on to consumers. Thus, the people are made

to pay more than the cost of electricity they have actually consumed,” they said.

Zarate and Colmenares, meanwhile, said the VAT is a form of sales tax.

“It is a tax on consumption levied on the sale, barter, exchange or lease of goods or properties and services in the Philippines and on importation of goods into the Philippines,” they said, adding, “VAT is an indirect tax. It is shifted or passed on to the buyer, transferee or lessee of goods, properties or services.

Being a pass-on tax, the burden of paying the VAT is, therefore, ultimately left upon the shoulder of the final consumers—the consuming public.”

“As a tax on consumption, VAT ought to be imposed upon the goods and services people actually buy and consume. By its very definition, therefore, the imposition of VAT upon this system-loss charge is unfounded and illegal as the people are taxed for goods/services they have not actually consumed,” the solons said.

They added that following the rising prices of consumer goods and commodities, fuel, education and medical costs, worsening inflation, and unabated sinking of the purchasing power of peso, “it is high time that Congress devise means which could readily help in keeping the pockets of Filipinos, especially those coming from the lower income class, from completely running dry.”

PETROLEUM FIRMS HIKE FUEL PRICES AT THE PUMP

O

IL firms are raising the prices of petroleum products effective on Tuesday following a spike in the international oil market.

In separate advisories to the Department of Energy (DOE), local pump prices will go up by P0.50 per liter for gasoline and P0.10 per liter for kerosene and diesel, respectively.

Pilipinas Shell and Caltex Philippines informed the agency about the latest oil price movement that they will implement at past midnight.

Meanwhile, Seaoil Philippines said separately that it will implement the same price adjustment.

Eastern Petroleum also announced a similar adjustment in diesel and gasoline prices effective 6a.m. of Tuesday.

Other oil firms are expected to follow suit. Lenie Lectura

A6 Tuesday, September 29, 2015

Opinion BusinessMirror

editorial

Lower the income tax rate now

T

wo thousand five hundred years ago, legendary Chinese philosopher and all-around smart guy Lao Tzu wrote, “The people are hungry: It is because those in authority eat up too much in taxes.”

In 2015 the Philippine government says that reducing income taxes would lead to less money for the government with which to invest in the people and in infrastructure.

Not much has changed in the last 25 centuries, as the emperors and warlords of ancient China probably used the same arguments against Lao Tzu as the government is currently using against reforming the tax code. The emperor’s “finance minster” may have also said that the real problem is “to ensure improved tax collection.”

We will assume that the leaders of ancient times were no more malevolent than today’s leaders, actually wanting for the lives of the people to improve through whatever means that the government could manage. But back then as now, it all comes down to people in the government believing that they have the wisdom and the right to spend the people’s money the way they want to.

Total government tax revenues as a percentage of the Philippine gross domestic product is about 14 percent. That is actually about the same as most of our regional neighbors and many nations, other than those like Sweden and France which are socialist in nature. So what is the problem?

The problem in the Philippines is that the people do not think that they are getting their money’s worth from the taxes that they do pay. Granted that is probably true in most countries, the belief that we the people are getting cheated in terms of not getting what we pay for maybe higher here than in Singapore or Thailand, for example.

Further, the idea that normal salaried employees that do pay 100 percent of their tax obligation cannot get a lower tax rate because some doctor or lawyer is cheating on their tax payments is baseless. That argument needs to be filed under “It’s not my problem.”

The government is saying that law-abiding citizens must be penalized because the crooked people are not being caught.

The government is ineffective in stopping smuggling, which is also a source of government revenue. The government cannot stop tax evasion, which limits government revenue. The government cannot keep its infrastructure projects free of wasteful expenses.

But this same government needs all the money you can possibly afford to give it because it knows how to spend it better than you do.

The income-tax code must be reformed now. There is absolutely no excuse for delaying this process. The need for a reduction in the overall income-tax rates and a large decrease for the lowest wage earners should not be subject to debate.

It is time the government stops simply paying lip service to the idea of who the real Bosses are in a representative democracy.

Second-quarter disappointment Manny B. Villar

THE Entrepreneur

Part three of a series

A

S I mentioned at the beginning of this series, the second development that could trigger a wave of pessimism in the economy is the country’s performance in the second quarter.

In reaction to the disappointing results, credit-rating agencies and analysts have revised downward their Philippine gross domestic product (GDP) growth forecasts for 2015. Following the release of the government’s report on the economy for the second quarter, Moody’s Investors Service lowered its GDP growth forecast to 5.7 percent from an earlier forecast of 6.7 percent.

Standard & Poor’s also scaled down its 2015 forecast for the Philippines, from 6 percent to 5.6 percent. For 2016, the rating agency also expects the country’s GDP to grow by 5.6 percent, down from 6 percent. The World Bank and the International Monetary Fund (IMF) both lowered their growth forecasts even before the release of the second-quarter results.

In its latest East Asia Pacific Economic Update report released in April, the World Bank said the Philippines’s GDP would grow by 6.5 percent in 2015,

down from its earlier forecast of 6.7 percent. In July the IMF said it expected the country’s GDP to grow by 6.2 percent this year before accelerating to 6.5 percent in 2016. The new forecasts were lower than the IMF’s projections in April: 6.7 percent for 2015 and 6.3 percent in 2016.

The two institutions may reduce further their forecasts for 2015 as a result of the unexpectedly low numbers for the second quarter. The GDP, according to the National Statistical Coordination Board (NSCB), grew by 5.6 percent in the second quarter, an improvement from 5.0 percent in the first quarter, but a sharp decline from 6.7 percent in the second quarter of 2014. With an average GDP growth of 5.3 percent for the first half of 2015 (down from 6.2 percent year-on-year), it will be very difficult for the economy to reach the government’s target of 7-percent to to 8-percent growth target for this year.

What makes the low growth more

disappointing is that it was caused by something within our control, namely, underspending. Moody’s noted that fiscal underspending continued to be an issue as the government repeatedly failed to achieve its targets with respect to spending for “growth-enhancing” infrastructure projects. The lower growth posted by other countries were brought about by factors beyond their control, such as the slowdown in foreign markets, particularly for commodities exporters.

In fairness, Economic Planning Secretary Arsenio M. Balisacan said that government spending in the second quarter showed “noteworthy recovery.”

He cited the increase in the government’s final consumption expenditure by 3.9 percent in the second quarter compared with 1.7 percent in the first quarter. He also said public construction rebounded to a 20-percent growth in the second quarter from a 24-percent contraction in the first quarter.

Still, NSCB data show that government consumption contributed a meager 0.5 percent to GDP growth in the second quarter, compared to the 4.1 percent contributed by household or privatesector consumption. Government consumption in the second quarter was also much lower than the 6.2-percent growth posted by household consumption.

The impact of the underspending was aggravated by the 3.0-percent contraction in merchandise exports. The 3.7-percent growth in total exports during the second quarter, which was about half of the 7.9-percent increase in the same period last year, was due mainly

Get ready for more quantitative easing John Mangun

OUTSIDE THE BOX

T

here is a big difference between a country, company, or individual having a “cash flow problem” (liquidity) and being broke (insolvent).

One friend comes to you asking for a loan to pay his children’s school tuition until one of his clients pay an invoice.

Another friend comes to you for a loan to pay his credit-card bill. Which one would you give the money to?

The current global financial crisis began as financial services firm Lehman Brothers went out of business. Lehman has borrowed billions of dollars to fund its subsidiary company, BNC Mortgage, which invested in subprime-home mortgages. Lehman was not being paid on those mortgages, creating a liquidity problem as they could not even sell the mortgages at a discount for cash. No other financial institution wanted to buy that debt.

We are talking big money here, as Lehman Brothers was still holding $6 billion in hard assets and had been extended a $138-billion cash advance by the US Federal Reserve (the Fed) to keep the company going.

The ripple effects through the

industry were profound and the US government responded with its Troubled Asset Relief Program (TARP) to buy $700 billion in bad debt to keep other institutions alive.

Bailing out these financial institutions probably made sense at the time.

However, subsequent measures to help the financial sector and the US economy did not make sense. Because of the poor financial condition of both US and global banks, lending to ordinary borrowers virtually stopped, which is catastrophic as the world depends on both short- and long-term borrowing to keep businesses running.

The problem of some major financial institutions being “broke” or insolvent was treated simply as a liquidity problem requiring short-term cash infusions. In late November 2008, the Fed started buying $600 billion in mortgage-backed securities and by March 2009, it held $1.75 trillion of bank debt, mortgage-backed securities and Treasury notes. That was

Quantitative Easing (QE) 1.

But it was not a liquidity problem; it was a solvency crisis for the banks and they knew that. Instead of using the money that they received in bailouts to lend, they used those funds to make their financial condition more viable.

Continuing to address the “liquidity” problem and thereby stimulate the economy, the Fed continued with QE 2 and 3. And here we are now even years later with little, if any at all, improvement in the global economy. The reason is because a solvency problem was addressed with a remedy for a liquidity problem.

A more reasonable solution would have been to either let the banks close down and take over their deposits or nationalize the banks directly and let taxpayers both in the US and Europe to absorb the financial losses. But that would have caused thousands of bankers to lose their jobs and their multimilliondollar annual bonuses.

The Fed did not raise interest rates recently because to do so would have created a huge insolvency problem with both countries and banks. But now we do have a genuine and serious liquidity problem.

We think of goods and services moving around the world. But what really moves is money to pay for that trade. Remember that anything can be sold at anytime for the right—meaning low enough—price. But no one is buying much of anything that is tradable: commodities, raw materials, or finished goods.

to exports of services, particularly the business-process outsourcing (BPO) industry. With a large and strong domestic market and a vibrant private sector, I believe we could have grown higher than 5.6 percent. As it turned out, we missed an opportunity to show the world what we are capable of, economically.

If we had grown by even a percent higher, we would have gotten the respect of a lot of investors. This is the time when we need investor confidence to be able to attract more investments to develop industries and sustain long-term growth.

Instead, as I mentioned in last week’s column, net foreign direct investments plunged 40.1 percent to $2 billion for the first half of 2015 compared to $3.4 billion for the same period last year. The mining industry, according to the Chamber of Mines of the Philippines, received $693 million worth of investments in 2014, about 76 percent short of the industry’s target of $3 billion.

The drop in expectations will contribute to the pessimism that is likely to prevail as a result of the changes around us. Whereas before, everything was booming; now some industries will be left behind, like mining.

Hopefully, the wave of pessimism will not spread. The nice thing about us is that our industries are led by companies that are strong, so they can survive.

(To be continued)

For comments, e-mail mbv.secretariat@gmail.com or visit www.mannyvillar.com.ph.

There are only two choices; hold cash or hold assets. When people are scared or lose economic confidence, they hold cash and that is what is happening now. The world is facing a massive lack of liquidity.

Major stock markets are falling not because of selling but because of a lack of buyers. The same is true with copper and Chinese-made sport shoes. Money is just not moving primarily because of cash hoarding by the very many countries, companies and people that have wealth, and a lack of money by other people, companies and countries that are broke.

Trillions in global QE combined with zero interest rates were supposed to bring global demand back to life and eventually the central banks could raise rates. QE 1, 2 and 3 failed because it was the wrong solution to the problem of insolvency from 2009 to 2013. Now there is a genuine liquidity problem and an interest-rate increase will only make it worse.

The only solution to a liquidity problem is to inject hard cash into the system.

There will be QE 4. That is why stock markets will become stronger and probably commodity prices will increase also.

As for global economic growth, we will have to worry about that down the road.

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.

Opinion BusinessMirror

opinion@businessmirror.com.ph

Platforms are what’s important Ernesto M. Hilario

ABOUT TOWN

W

ith two weeks to go before the official filing of certificates of candidacy in mid-October and seven months before the May 2016 general elections, the latest survey by the Social Weather Stations shows the three declared presidential candidates, namely Sen. Grace Poe, Vice President Jejomar C. Binay and former Interior Secretary Manuel A. Roxas II, in a statistical tie. Poe enjoys only a few percentage points of voter preference over Binay, with Roxas, the official candidate of the ruling Liberal Party coalition, gaining precious points after his endorsement by President Aquino.

With the three presidential candidates having an equal chance at this point to swing the votes in their favor if elections were held today, their choice of vice-presidential bet would no doubt affect their chances in May. So far, only Poe has a vice-presidential candidate, Sen. Francis G. Escudero.

Binay had announced his plan for the presidency as early as 2010. But it appears he has had difficulty in getting a teammate, especially after his survey ratings took a plunge with allegations of corruption against him in the Senate. As of today he has yet to announce who has agreed to run as his vice-presidential candidate.

Roxas is reported to be holding talks with Rep. Leni G. Robredo of the Third District of Camarines Sur to get her as his running mate. If this is a done deal as reported in media last week, then we should be getting an announcement, perhaps, within this week or the next.

The senatorial slates of the three presidential bets are eagerly anticipated as this would also impact on the standard-bearer’s chances in next year’s polls. A strong senatorial slate would definitely be an asset to the party’s presidential bet during the campaign.

The latest surveys on possible senatorial bets show that reelectionist and former senators are likely to be in the winning column, with only a few newcomers likely to get elected. In other words, those with name recall need not spend as much as those about to introduce themselves to the electorate as worthy of a seat in the Senate.

Popularity and name recall, however, should not be the main determinants of capability to lead this nation. I, therefore, support the move of the Commission on Elections to hold a series of debates among the presidential candidates as this would allow voters to evaluate their respective stand on important issues confronting the nation.

These debates, which should also include face-offs among the vicepresidential and senatorial bets, would give us an idea of those who are really qualified and deserved to be elected, and those who should be roundly repudiated in May 2016.

It’s time to give the Filipino voters the chance to hear what candidates have to say on political, economic and social issues so we can make an informed choice next year.

ROW

Just how bad the traffic congestion in Metro Manila has gotten is underscored by what has been described as “Carmageddon” when two weeks ago, a late-night thunderstorm unleashed torrential rain that flooded low-lying areas, including parts of Edsa, transforming the main artery into a huge parking lot for hours. Since then, many suggestions have been offered to alleviate the situation, such as improving and modernizing our road infrastructure.

Many planned or ongoing road projects, however, are being delayed by right-of-way (ROW) problems that lend credence to the dire prediction that traffic will certainly get worse before it gets any better.

ROW is the legal right, established by usage or grant, to pass along a specific route through grounds or property belonging to another.

Several big-ticket road projects actually suffer from ROW hitches.

One of these is the P35.42-billion Cavite-Laguna Expressway (Calax), a public-private partnership (PPP) venture awarded to Metro Pacific Investments Corp.’s MPCALA Holdings Inc. This is a four-lane, 44.6-kilometer project connecting the Cavite Expressway (Cavitex) in Kawit, Cavite, to the South Luzon Expressway (Slex)-Malampasan Interchange in Biñan, Laguna.

The concession deal was signed in July, with MPCALA making a down payment of P5.4 billion, or 20 percent of the P27.3-billion premium that it had offered to win the second public tender. But the scheduled groundbreaking rites in March 2016 is not likely to take place because of the government’s continuing failure to deliver the ROW. Another road project unduly delayed by ROW issues is the P2.01billion Muntinlupa-Cavite Expressway (MCX), which had its ceremonial opening on July 24. Otherwise known as the Daang Hari-Slex Link Road, MCX is a 4-kilometer toll road built by the Ayala Corp.’s AC Infrastructure. Its completion was delayed for a year because of delays caused by ROW problems and unexpected changes in project design.

ROW snags also hound Manila North Tollways Corp. (MNTC) North Luzon Expressway (Nlex) Harbor Link project and another one extending Nlex from Mindanao Avenue to Commonwealth Avenue in Quezon City.

The government has yet to deliver full ROW acquisition for the construction of Segments 9 and 10 of the Nlex Harbor Link scheduled for completion

by December 2016. Segment 9 connects Mindanao Avenue to MacArthur Highway in Valenzuela City, while Segment 10 connects MacArthur Highway to Circumferential Road 3 (C-3) or 5th Avenue in Caloocan City.

MNTC is ready to spend P10.5 billion on a 7.85-km road extension from Mindanao Avenue to Commonwealth Avenue, but this project is similarly being delayed by ROW problems. The Nlex C-5 Link Project, or Segment 8.2 Road, is part of the 1998 Supplemental Toll Operating Agreement (STOA) for Nlex, and the major bottleneck is the ROW problem in an area now occupied by informal settlers.

MNTC originally expected to start the construction of the project in the second half of 2015 and to complete it in 2019. But that’s no longer feasible.

Finally, there’s the Nlex-Slex Connector Road that’s supposed to cut travel time between the two expressways to only 15 to 20 minutes.

Originally priced at P18 billion, this project is a four-lane, 8-km elevated expressway that will be built over the Philippine National Railways ROW, starting from C-3 in Caloocan City to the Polytechnic University of the Philippines in Manila’s Santa Mesa district. It was originally designed as a 13.4-km expressway connecting Nlex from its Balintawak, Quezon City, entrance to Skyway 3’s Buendia entry in Makati City. But it was reduced to 8 km because a 5-km common alignment with SMC-Citra’s Skyway 3 was later on assigned to the SMC-Citra consortium. While the project price has been trimmed to P11 billion, ROW issues, apart from regulatory delays and project redesign, would bring the project cost to P16 million to P17 billion.

So when will our traffic woes end?

Your guess is as good as ours.

E-mail: ernhil@yahoo.com.

Tuesday, September 29, 2015

The world’s new rallying point Edgardo J. Angara

S

ome describe the Millennium Development Goals (MDGs) as the United Nations’s (UN) most successful antipoverty initiative in its 70-year history, setting a common development agenda for the world.

Between 2000 and 2015, a number of the MDG targets were achieved. For instance the share of people living in extreme poverty was halved from 36 percent in 1990 to 12 percent in 2015. During the same period some 2.6 billion people gained access to improved drinking water sources, halving the share of the global population without a steady supply of clean water.

These gains are remarkable. But many remain disempowered and marginalized as a disproportionate few benefit from the current global economic system. And the

world continues to face several challenges, including the worst refugee crisis since World War II; global economic slowdown; widespread unemployment, especially among the youth; and a more erratic and destructive climate.

The world cannot continue on its current path. Pope Francis wrote in Laudato Si’, his encyclical on the environment: “The present world system is certainly unsustainable from a number of points of view, for we have stopped thinking about the goals of human activity.”

Over the weekend, leaders

from 193 countries, including the Philippines, convened at the UN Headquarters in Manhattan.

They met to ratify the new set of Sustainable Development Goals (SDGs) that will replace the MDGs expiring this year and hopefully rally global action for the next decade and a half.

The SDGs are more ambitious than their predecessors. Where there were eight MDGs covering 18 targets, there are 17 SDGs coinciding with 169 targets. They cover old grounds like health, education and gender equality, but include new areas like climate change, inequality, energy access, urbanization, infrastructure and even peace.

Their wide sweep remains a sticking issue. Critics say the SDGs lack focus and are hard to communicate, while supporters defend their breadth as necessary given the interrelated nature of the world’s problems.

Either way, leaders will still play a key role in strategizing and prioritizing how the SDGs will be pursued and implemented in the Philippines.

Meeting the urbanization challenge Jaime Augusto Zobel de Ayala

Urbanization an irreversible trend Over the last half century, the world has become increasingly urbanized. In East Asia over 50 percent of the people live in cities and Asia is now home to more than half of the world’s megacities. In the next 35 years, up to 75 percent of the world’s population (almost 7 billion, today’s population) will live in urban areas versus only one-third in the 1950s when the total population was only 2.5 billion.

The Philippine experience sees nearly half of population residing in urban centers, with almost 25 percent in the capital alone. Massive urban sprawl has expanded the metropolis into a Greater Manila Area, which includes the south and east ends of Metro Manila. This expanded metropolitan area has a population of about 25 million, or a quarter of the country’s total population.

Over the past two decades, regions within and adjacent to Metro Manila have sporadically grown without proper planning, with their capacities unable to keep up with a growing urban population. This has led to a host of infrastructure, health, environmental and social problems, including traffic congestion, burgeoning informal settlements, disaster vulnerability, and threats to water and food security.

A Japan International Cooperation Agency study cited how traffic congestion currently robs us of

up to $55 million a day. The study furthered that if no intervention will be done, this amount is projected to increase to over $130 million a day.

Clearly, much needs to be done in infrastructure development. The World Bank cited that the Philippines would need to hit spending levels of at least 5 percent of gross domestic product (GDP) in infrastructure projects to catch up with Asean neighbors. Our average infrastructure expenditure since 2009 has only been 2.2 percent of GDP.

Risks and opportunities

Cities are main centers of consumption, resource use, congestion and waste. Eleven of the 20 most polluted cities and 15 of the 20 most vulnerable to rising sea levels are in Asia.

For all these problems, cities are the growth drivers of most economies, particularly when one looks at clusters of cities. Urban density is actually a positive feature. It is usually accompanied by lower poverty incidence, increased productivity, and steeper economic growth. This is true across-the-board, and even more so as the city size grows.

The high concentration of industries and services in highly urbanized cities has attracted job-seekers to relocate in droves to seek employment and gain better access to education, health care and overall quality of life.

Urban density creates the critical mass, attracts the diversity, and

makes possible the “creative combustion” that brings life, new ideas, entrepreneurial vigor and an innovative verve to urban communities.

Today, when people think of places to live, work, invest, or visit, they think not so much of countries; they think of cities.

Decisive interventions are needed at the city-level

However, it is important to manage the “quality of that density.” Cities in Metro Manila need to ensure that urban growth is supported by adequate infrastructure, such as power, water, roads, transport systems, flood control and waste management, to name a few.

Aside from hard infrastructure, we need to ensure that the right level of governance, urban management and planning is in place to support Metro Manila. I believe there is a need for the creation of a central institution that would spearhead a cohesive and strategic planning and execution of a national urban agenda—from the land use and urban planning to infrastructure development, while ensuring the sustainability and resilience of cities. While local government units continue to do their part in addressing challenges, the lack of an integrated urban management framework and execution fall short in enabling seamless connectivity across the whole spectrum.

Mayors have control over all the key elements that will make urbanization and density work as opportunities. Leadership at the local government level is critical. I believe that role is often underappreciated.

The happiest man in Washington

H

ow happy was John Boehner to be quitting his job? So happy that he couldn’t resist singing a few bars of “Zip-a-Dee-Doo-Dah” on his way out. His relief, however, is proportional to the difficulty that will face his successor as speaker of the House.

The next speaker is unlikely to be any more sympathetic to the faction of antigovernment Republicans that hastened Boehner’s demise by angling to overthrow him. Whoever Boehner’s replacement is, he has an unenviable task.

There is no indication that Boehner’s

sacrifice will purge the poisons. In all likelihood, the next speaker—whether it is Boehner deputy Kevin McCarthy of California or another victim—will face the same Hobson’s choice Boehner did: appease the faction in his own party with no interest in compromise or governing, inviting brinkmanship and shutdown; or collaborate with the opposing party, inviting a coup.

Boehner did the best he could, even demonstrating that the party was capable of governing when it had to. “When you are the speaker of the House, your No. 1 responsibility is to the institution,”

And to do this, they will need proper feedback and information.

Noted economist Jeffrey Sachs recently that for the SDGs to succeed, more efficient data-collection systems should be put in place so that policy and project decisions can be made more scientifically.

Financing will be an even more challenging hurdle. Some estimate that reaching the goals will cost between $3.5 trillion and $5 trillion a year between 2016 and 2030.

Richer countries were expected to help developing countries achieve the MDGs through foreign aid.

But with the West’s current obsession on austerity, private finance will have to play a bigger role with the SDGs while the developing world struggle with their rickety tax systems.

In a briefing document for the SDGs, the UN wrote: “We can be the first generation to succeed in ending poverty; just as we may be the last to have a chance of saving the planet.”

E-mail: angara.ed@gmail.com.

Without the leadership provided by mayors, it will be extremely difficult for us to turn urbanization and density into beneficial opportunities and maintain progress for our cities.

A need for a cities initiative within Apec

U

rbanization has been a significant phenomenon globally and has been a key factor to development. As an Asia-Pacific Economic Cooperation (Apec) discussion theme, it was formally recognized in the Bali Declaration two years ago. Last year the Apec Joint Cooperation Initiative for Establishing an Asia-Pacific Urbanization was endorsed to set up a Senior Officials’ Meeting (SOM) “Friends of the Chair on Urbanization.” This group guides and promotes collective efforts toward robust, inclusive and sustainable growth in cities.

A7

he said. To spare the institution, Boehner is sparing the House a contentious vote to remove him.

It’s a noble thought, but it won’t be much help to Boehner’s successor.

The turmoil in the House is the result of discord in the Republican party.

Boehner was unable to defeat the radicals who made his tenure so draining, and the radicals have proved unwilling to accept that a minority of one party does not dictate the agenda in a divided capital.

Meanwhile, mainstream conservatives in the House who had hoped to

Our Apec Business Advisory Council work program in the Sustainable Cities Working Group is premised on urbanization as a key trend.

Studies such as PricewaterhouseCoopers’s (PwC) “Cities of Opportunity” and other independent reports like the “Global Livable Cities Index” have taken measure of what makes cities work. Based on these previous studies, we commissioned a cities report customized to the development needs Apec cities and to answer the question: “What makes a city livable, sustainable and competitive?”

Today, our partners from PwC are working on the “Apec Building Better Cities” report. The study will surface the strengths and weaknesses of our 21 Apec economies, relating to urban success. It will serve as a guiding framework, as well as provide current information to feed our discussions today and tomorrow.

Aside from this customized research, we’ve also proposed setting up interactive learning sessions and an online training and exchange of information among city mayors, planners, and developers, and stakeholders—a virtual and physical Sustainable Cities Academy, if you will. The program sounds simple, yet is actually quite ambitious. By combining metrics with action, I am confident we will make a solid contribution to the cities and economies of Apec. We are happy to work with Apec’s Friends of the Chair on Urbanization to help create better cities in the future.

The author is chairman and CEO of Ayala Corp. and a member of the Apec Business Advisory Council (Abac) and the Apec National Organizing Council.

Adapted from remarks delivered at the Apec City Mayors’ Forum organized

by Abac and the Apec 2015 CEO Summit on September 3 and 4 in Cebu.

use their majority to put their stamp on viable legislation will continue to be frustrated. Even bipartisan initiatives, such as a highway bill, will be stuck.

This is the unhappy state of politics in Congress today, and there is no reason to expect a new world after Boehner.

But, perhaps, a brief honeymoon will be allowed the next speaker, during which highway funding and other priorities can be fast-tracked before the Capitol is overrun with familiar demands to defund this or that. The hardest job in Washington is unlikely to get easier.

Bloomberg View

국제선 여객운송약관 GENERAL CONDITIONS OF CARRIAGE FOR INTERNATIONAL PASSENGER AND BAGGAGE

GENERAL CONDITIONS OF CARRIAGE FOR INTERNATIONAL PASSENGER AND BAGGAGE ARTICLE 1 DEFINITIONS As used in these conditions of carriage, terms shall be defined as follows; 1. “BAGGAGE”, which is equivalent to luggage, means such articles, effects and other personal property of a passenger as are necessary or appropriate for wear, use, comfort of convenience in connection with his trip. Unless otherwise specified, it includes both checked and unchecked baggage of the passenger. However, in the case of a more than reasonable quantity of the same article, it will be regarded that the articles are for commercial purpose and will not be considered baggage if there is no valid reason in the opinion of JJA 2. “BAGGAGE CHECK” means those portions of the ticket which provide for the carriage of passenger’s checked baggage and which are issued by carrier as a receipt for the passenger’s checked baggage.

3. “BAGGAGE TAG” means a document issued by carrier solely for identification of the checked baggage, the baggage (strap) tag portion of which is attached by carrier to a particular article of checked baggage and baggage (claim) tag portion of which is given to passenger.

4. “CARRIAGE” which is equivalent to transportation, means carriage of passenger and/or baggage by air, gratuitously or for reward.

5. “CARRIER” means air carrier and includes the air carrier issuing the ticket and all air carriers that carry the passenger and/or his baggage thereunder, or perform or undertake to perform and other services related to such air carriage.

6. “CHECKED BAGGAGE”, which is equivalent to “registered luggage”, means baggage of which carrier takes sole custody and for which carrier has issued a baggage check and baggage (claim) tag(s).

7. “CHILD” means for the purpose of discounts for children, a person of 2 years of age or over but under 12 years of age.

8. “CIRCLE TRIP” means travel from a point and return there to by a continuous, circuitous air route; provided that where no reasonable direct scheduled air route is available between two points, a break in the circle may be traveled by any other means of transportation without prejudice to the circle trip.

9. “CONJUNCTION TICKET” means two or more tickets concurrently issued to a passenger and which constitute a single contract of carriage.

10. “CONSEQUENTIAL DAMAGES” means damages which are reasonable out-of-pocket expenses and other provable damage incurred by passenger as the consequence of the loss, damage, or delay in the delivery of such personal property.

11. “CONVENTION” means the Convention for the Unification of Certain Rules Relating to International Carriage by Air, signed at Warsaw, October 12, 1929, (hereinafter called “the Warsaw Convention”) or that Convention as amended at the Hague, September 28, 1955 (hereinafter called “the Warsaw Convention as amended at the Hague, 1955”), whichever may be applicable.

12. “DAYS” means calendar days, including Sundays and legal holidays; provided that for the purpose of notification, the day upon which the notice is dispatched shall not be counted; and that for purpose of determining duration of validity, the balance the day upon which the ticket is issued, or flight commenced shall not be counted.

13. “DAMAGE” includes death, injury, delay, loss or other damage of whatsoever nature arising out of or in connection with carriage or other services performed by carrier incidental thereto.

14. “DESTINATION” means the ultimate stopping place according to the contract of carriage. In the case of round trip or circle trip, the destination is the same place as the point of origin.

15. “FLIGHT COUPON” means the portion of the Passenger Ticket that indicates particular places between which the coupon is good for carriage.

16. “INFANT” means, for the purpose of discounts for infants, a person under 2 years of age.

17. “INTERNATIONAL CARRIAGE OTHER THAN THAT DEFINED

BY THE CONVENTION” means any carriage which is not international carriage as defined by the Warsaw Convention or the Warsaw Convention as amended at The Hague, 1955, but in which, according to the agreement made by the parties, the place of departure and the place of landing are situated in more than one country. As used therein, the term “country” which is equivalent to “state” includes all territory subject to its sovereignty, suzerainty, mandate, trusteeship or authority.

18. “JJA” means JEJU AIR Incorporated.

19. “MISCELLANEOUS CHARGES ORDER” means a document issued by a carrier or its agent, requesting issue of an appropriate Passenger Ticket and Baggage Check or provision of services to the person named in such document.

20. “NORMAL FARE” means the full fare established for a normal, regular or usual service, the application of which is not dependent upon any specially limited period or ticket validity or other special circumstances.

21. “OPEN-JAW TRIP” means travel which is essentially of a round trip nature but the outward point of departure and inward point or arrival and/or outward point of arrival and inward point of departure of which are not the same.

22. “PASSENGER” means any person, except members of the crew, carried or to be carried in an aircraft with the consent of Carrier.

23. “PASSENGER COUPON” means that portion of the Passenger Ticket constituting the passenger’s written evidence of the contract of carriage.

24. “PASSENGER TICKET” means those portions of the ticket issued by carrier which provide for the carriage of the passenger.

25. “ROUND TRIP”, which is equivalent to a return journey, means travel from one point to another and return by the same air route used outbound whether or not the fares outbound and inbound be the same, or travel from one point to another and return by an air route different from that used outbound, for which the same normal through, one-way fare is established.

26. “SPECIAL FARE” means a fare other than a normal fare.

27. “TARIFFS” means JJA’s fares, rates and charges for international carriage of passengers and baggage and related rules and regulations, which are made part of these Conditions of Carriage.

28. “TICKET” means the “Passenger Ticket and Baggage Check” or Electronic Ticket including all flight, passenger and other coupons therein, issued by carrier or on our behalf, which provides for the carriage of the passenger and his baggage.

29. “ELECTRONIC TICKET” means the Itinerary/Receipt issued by JJA or on our behalf, the Electronic Coupons.

30. “ELECTRONIC COUPON” means an electronic flight coupon or other value document held in JJA’s data base.

31. “ITINERARY/RECEIPT” means a document or documents JJA issue to Passengers traveling on Electronic Tickets that contains the Passenger’s name, flight information and notices.

32. “TO VALIDATION” means to stamp or write on the passenger ticket an indication that the passenger ticket has been officially issued by carrier.

33. “UNCHECKED BAGGAGE”, which is equivalent to hand luggage, is baggage other than checked baggage.

34. “FRENCH GOLD FRANCS” means French francs consisting of 65 1/2 milligrams of gold at the standard of fineness of nine hundred thousandths.

35. UNITED STATES OF AMERICA or THE UNITED STATES or THE USA means, unless otherwise specified, the area comprising the 48 contiguous federated states, the Federal District of Columbia, Alaska, Hawaii, Guam, Puerto Rico, St. Croix and St. Thomas of the Virgin Islands, American Samoa, The Canal Zone, Canton, Midway and Wake islands.

ARTICLE 2 APPLICATION OF CONDITIONS 1 General Nothing in these Conditions of Carriage and other applicable tariffs modifies or waives any provision of the Warsaw Convention and Warsaw Convention as amended at The Hague, 1955.

2 Applicability To the extent not in conflict with the Convention and except as excluded by JJA’s conditions in relation to carriage wholly on its own domestic services, these Conditions of Carriage shall apply to all carriage of passenger and baggage including all services incidental thereto, performed by JJA at fares, rates and charges published in connection with these Conditions of Carriage.

3 Gratuitous Carriage With respect to gratuitous carriage, JJA reserves the right to exclude the application of all or any part of these Conditions of Carriage.

4 Charter Agreement Carriage of passengers and baggage performed pursuant to a charter agreement with JJA shall be preferably subject to such charter agreement, and any others not specifically provided in the charter agreement shall be subject to these Conditions of Carriage. The passenger, by accepting carriage pursuant to a charter agreement and a carriage is performed thereunder, shall be regarded as having agreed to said agreement and these Conditions of Carriage, whether or not he has concluded the charter agreement with JJA. 5 Effectiveness All carriage of passengers and/or baggage shall be subject to these Conditions of Carriage and other applicable tariffs in effect on the date of commencement of carriage covered by the first flight coupon of the ticket.

6 Change Without Notice Except as may be required by applicable laws, government regulations, orders and requirements, these Conditions of Carriage and other applicable tariffs are subject to change without notice; provided that no such change shall apply to a contract of carriage after the carriage has been commenced.

ARTICLE 3 TICKET 1 General A ticket will not be issued and in any case JJA will not transport the passenger until the passenger has paid the applicable fare or has complied with credit arrangement established by JJA. 2 Validity for Carriage 1. When validated, the ticket is good for carriage from the airport at the place of departure to the airport at the place of destination via the route shown therein and for the applicable class of service and is valid for the period of time specified or referred to in Subparagraph 2. Below Each flight coupon will be accepted for carriage on the date and flight for which accommodation has been reserved. When flight coupons are issued on “open-date” basis, accommodations will be reserved upon application, subject to the availability of space. The place and date of issue are set forth on the flight coupons.

2. A ticket issued at normal fare is valid for carriage for one year from the date of commencement of carriage, or if no portion of the ticket is used, from the date of issuance of the ticket. If the ticket is for or includes fare having a shorter period of validity than indicated above, such shorter validity shall apply only in respect to transportation to which such fare applies.

3. Tickets expire at midnight on the date of expiration of ticket validity.

Travel on the last continuous portion by the last flight coupon of the ticket must be commenced prior to midnight of the date of expiration but may continue beyond, unless otherwise provided in applicable tariffs.

4. An expired ticket or Miscellaneous Charges Order will be accepted for refund in accordance with Article 11.

5. The booking class printed on the ticket must be identical with the class indicated by the respective PNR. Passenger holding ticket which fails to meet the above condition may be denied from boarding or, may board only after paying a predetermined surcharge.

3 Extension of Ticket Validity 1. Notwithstanding Paragraph 2.3 above, the validity of a ticket will be extended by JJA without additional collection of fare as follows; 1) For no longer than 30 days beyond the original limit when JJA: a. cancels or postpones the flight during the period of validity; b. omits a scheduled stop which is the passenger’s place of departure, place of destination or place of stopover; c. fails to operate a flight reasonably according to schedule; d. cause the passenger to miss a connection; e. is unable to provide previously confirmed spaces.

2) For no longer than 7 days beyond the original limit, when a passenger who holds a ticket valid for one year is unable to obtain space at time of application to JJA. 2. When a passenger is prevented from travelling by reason of illness.

Unless otherwise provided in applicable tariffs, when a passenger is prevented from travelling within the period of validity of his or ticket by reason of illness (but not pregnancy), JJA will extend the period of validity of such passenger’s ticket until the date when he/she become fit to travel according to a medical certificate, or until the first service of the class of JJA, for which the fare has been paid, on which space is available after such date from the point where the journey is resumed or from the last connecting point.

Provided that, when the flight coupons remaining in the ticket having one year validity involve one or more stopovers, the validity of such ticket will be extended for not more than 3 months from the date shown on the certificate.

In such circumstances, JJA will extend similarly the period of validity of ticket of persons travelling with the incapacitated passenger.

3. When a passenger dies enroute, the validity of the tickets of the accompanying immediate family or other persons accompanying the passenger maybe extended by not more than 45 days after the date of death.

4. When a ticket is sold at a special fare containing minimum-stay requirements, the minimum-stay requirement will be waived on presentation of a death certificate or a copy thereof for passengers who are; a. members of the immediate family of a passenger who dies enroute, or b. other persons actually accompanying a passenger who dies enroute.

5. If a passenger holding a special fare ticket with a minimum-stay requirement desires to commence the return travel before the expiry of the minimum-stay period owing to the death of an immediate family member not accompanying the passenger, and a death certificate or a copy thereof is not immediately available, the passenger will be entitled to a refund of the additional amounts paid to permit earlier return, on presentation of a death certificate attesting to the death of such family member after the passenger’s commencement of travel.

6. When a ticket is sold at a special fare containing a minimum-stay requirement, the minimum-stay requirement will be waived when the passenger by reason of illness, substantiated by a medical certificate attesting to the illness of such passenger after passenger’s commencement of travel, desires to commence return travel prior to the minimum-stay period. The passenger will be permitted to return at the special fare paid.

The ticket must be endorsed “Early Return Account Illness of (name of passenger)”. A copy of the medical certificate must be retained in the files for a minimum period of 2 years.

Note: The same provisions will apply to immediate family member(s) accompanying the passenger.

4 Coupon Sequence and Production of Ticket Flight coupons must be used in sequence from the place of departure as shown on the passenger coupon. Flight coupons must be presented with the passenger coupon. The passenger throughout his journey must retain the passenger coupon and all flight coupons not previously surrendered to carrier. He/she must, when required, produce the ticket and surrendered any applicable portion to carrier.

5 Absence, Loss or Irregularities of Ticket JJA will refuse carriage to any person not in possession of a valid ticket. In case of loss or non-presentation of the ticket or the applicable portion thereof, carriage will not be furnished for that part of the trip covered by such ticket or portion thereof until the passenger purchases another ticket at the current applicable fare for the carriage to be performed. JJA will not accept a ticket if any part of it is mutilated or if it has been altered or erased by other than carrier or if it is presented without the passenger coupon and all unused flight coupon.

Notwithstanding the foregoing, JJA will issue at the passenger’s request a new ticket to replace the lost one upon receipt of proof of loss satisfactory of JJA and may collect a service charge or handling fee, and if the circumstances of the case in JJA’s opinion warrant such action; provided that the passenger agrees, in such form as may be prescribed by JJA, to indemnify for any loss or damage which JJA may sustain by reason thereof.

6 Non-Transferability A ticket is not transferable, but JJA shall not be liable to the person entitled to receive such refund for honoring or refunding such ticket when presented by someone other than the person entitled to be transported thereunder or to a refund in connection therewith. If a ticket is in fact used by any person other than the person to whom it was issued, with or without the knowledge and consent of the person to whom it was issued, JJA will not be liable for death or injury of such unauthorized person or for the loss, destruction, damage, or delay of such unauthorized person’s baggage or other personal property arising from or in connection with such unauthorized use.

ARTICLE 4 STOPOVER 1. Permission of Stopover 1) In case of a passenger holding a ticket issued at the normal fare, stopovers within the period of ticket validity will be permitted at any scheduled stop unless government requirements or applicable tariffs don’t permit such stopover.

2) In case of passengers holding tickets issued at special fare, stopovers will be subject to the limitations, prohibitions or additional stopover charges as provided in the applicable tariffs of JJA. 2. Prior Arrangement Stopovers shall be arranged with KAL in advance and specified in the passenger ticket.

ARTICLE 5 FARES, CHARGES AND ROUTINGS 1 Applicable Fares and Charges 1. Except as otherwise provided in applicable tariffs, applicable fares and charges for carriage governed by these Conditions of Carriage and other applicable tariffs are those duly published by JJA, and shall be those in effect on the date on which full payment is made, for travel on the specific dates and journey shown on the ticket. When the fares or charges collected are not the applicable fares or charges, the difference will be refunded to or collected from the passenger, as may be appropriate. In the event of a voluntary change to the originating flight, the fares and charges for the passenger’s journey shall be recalculated in accordance with the fares and charges in effect on the date on which the change is made and is reflected on the ticket.

2. Published fares apply only for carriage from the airport at the point or origin to the airport at the point of destination and do not include ground transfer service within airport areas or between airports or between airport and downtown except where applicable tariffs specifically provide that such ground transfer service will be furnished without additional charge.

3. Except as otherwise provided in applicable tariffs, direct fares published in tariffs take precedence over any combination of intermediate fares applicable to the same class of service between the same points.

4. Except as otherwise provided in applicable tariffs, fares published in tariffs entitle the passenger to occupy one seat of the applicable class provided that, when a passenger cannot be accommodated in one seat because of his size, no charge will be made for providing an additional seat subject to the availability of space. If the passenger reserves two seats in advance, twice the applicable fare must be charged.

2 Construction of Unpublished Fares When the fare between any two points is not specifically published, such fare will be constructed as provided in applicable tariffs.

3 Routings Except as otherwise provided in applicable tariffs, fares apply in either direction and only to routings published in connection therewith. If there is more than one routing at the same fare, the passenger, prior to issuance of the ticket, may specify the routing, and in respect to any open-date portion of such ticket, may specify an optional routing; if no routing is specified, JJA may determine the routing.

4 Payment of Fares and Charges Subject to currency exchange laws, government regulations and acceptability to JJA, payment of fares and charges may be made in a currency other than the currency in which the fare or charges is published.

1. Applicable exchange rate The rate of exchange established by JJA will be used to convert the published fare or charge into the selling currency unless otherwise provided in applicable tariffs.

2. When Payment is made in other currency than KRW Except otherwise provided by laws, orders, requirements and/or regulations of government, the exchange rate for conversion of published fare and/or charges into foreign currency amount shall be the bankers’ buying rate of Monday which shall be used from Tuesday of the week to Monday of the following week; provided that, a. The rate of Friday of the previous week shall be used from Tuesday of the week to Monday of the following week in case Monday is bank holiday; b. Applicable bankers’ buying rate of the day on which refund application is accepted by JJA shall be used when the ticket or charge paid for in foreign currency is refunded in KRW. c. Applicable bankers’ buying rate of issuing day shall be applied only to KRW amount to be collected additionally when ticket reissuance results in collection of additional charge: 3. Applicable bankers’ selling rate or buying rate mentioned above means bankers’ selling or buying rate of Monday of the week which shall be used

by JJA from Tuesday of the week to Monday of the following week.

5 TAXES Any tax or other charge imposed by government authority and collected from a passenger will be in addition to the published fares and charges.

ARTICLE 6 REVISED ROUTINGS, FAILURE TO CARRY AND MISSED CONNECTIONS 1 Changes Requested by passenger 1. At a passenger’s request, JJA will effect a change in the routing (other than point of origin), carrier(s), class(es) of service, destination, fare or validity specified in an unused ticket, flight coupon(s) or Miscellaneous Charges Order by issuing a new ticket or by endorsing such unused ticket, flight coupon(s) or Miscellaneous Charges Order, provided that; (1) JJA issued the original ticket or Miscellaneous Charges Order or, (2) JJA is the carrier designated in the “ via carrier ” box, or no carrier is designated in the “ via carrier ” box, of the unused flight coupon or Miscellaneous Charges Order for the first onward carriage from the point on the route the change is to commence; however, where the carrier who issued the ticket is designated as carrier for any subsequent section(s) and has an office or general agent who is authorized to make endorsement, at the point on the route where the change is to commence where the passenger makes his request for such change, JJA shall obtain such issuing carrier’s endorsement; or (3) JJA has received written or telegraphic authority to do so from the carrier entitled to effect the change.

2. When the rerouting results in a change of fare, the new fare and charges shall be calculated as provided in the applicable tariffs.

3. In the case of a ticket or Miscellaneous Charges Order issued pursuant to a Prepaid Ticket Advice, the authorization to make endorsement shall not apply to the carrier issuing such document but shall remain with the carrier issuing the Prepaid Ticket Advice.

2 Involuntarily Revised Routings 1. In the event JJA cancels a flight, fails to operate a flight reasonably according to schedule, fails to stop at a point to which the passenger is destined or is ticketed to stopover, is unable to provide previously confirmed space, or the passenger is refused carriage or removed in accordance with Article 8, JJA shall either; (1) Carry the passenger on another flight of JJA, on which space is available, (2) Make involuntary refund in accordance with Article 11. 4 2. In the event a passenger misses an onward connecting flight of JJA on which space has been reserved for him because the delivering carrier did not operate its flight according to schedule, or changed the schedule of such flight, the delivering carrier will arrange for the carriage of the passenger or make other arrangements and JJA shall not be liable for such missed connection.

3. An involuntarily rerouted passenger shall be entitled to retain the free baggage allowance applicable to the fare originally paid. This provision shall apply even though the passenger may be transferred from an mono class service and is entitled to a fare refund.

ARTICLE 7 RESERVATIONS 1 General A ticket will be valid for the flight(s) for which reservation(s) shall have been made, and only between the points named on the ticket or applicable flight coupons. A passenger holding an unused open-date ticket or portion thereof or Miscellaneous Charges Order, or who wishes to change his ticketed reservation to another date shall not be entitled to any preferential right with respect to the obtaining of reservations.

2 Conditions of Reservations 1. A reservation for space on a given flight is valid when the availability and allocation of such space is confirmed by reservations agent of JJA and a record of the confirmed space is reflected in JJA’s reservation system.

Whenever a passenger fails to purchase a ticket for the reserved space by the time fixed by JJA, JJA will cancel the reservations at any time without notice.

2. JJA does not guarantee allocation of any particular space in the aircraft.

3 Arrival of Passengers at Airports The passenger must arrive at the airport or other point of departure by the time fixed by JJA, or if no time is fixed, sufficiently in advance of flight departure time to permit completion of government formalities and departure procedures. If the passenger fails to arrive at such airport or other point of departure by the established time limits or appears improperly documented and is not ready to travel, JJA will cancel the space reserved for him. Departure will not be delayed for passenger who arrives at airport or other point of departure too late for such formalities to be completed before scheduled departure time. JJA is not liable to the passenger for loss or expense due to passenger’s failure to comply with this provision.

4 Cancellation of Reservations If a passenger fails to occupy space which has been reserved for him, JJA will cancel all other reservations held by such passenger for continuing or return space.

5 Change of Reservations Charges The passenger will be charged for any change of reservations, cancel or refund after purchased ticket by JJA regulation.

6 Personal Information A passenger or its agent should furnish JJA with the required passenger’s personal information (name, telephone number, address, credit card number, etc.) for requesting flight reservation or any other services that may or may not be provided through JJA. In order to provide the requested services or products, JJA may share the passenger’s personal information with any of its own offices, its agents, other carriers, other affiliated companies, and the providers of services, and that may provide the passenger’s personal information with the government authorities or other agencies concerned to comply with all laws, regulations, orders, demands of countries to be flown from, to or over.

ARTICLE 8 LIMITATIONS OF CARRIAGE 1 Refusal, Cancellations or Removal 1. JJA may refuse to carry, cancel the reserved space of, or remove enroute any passenger when, in the exercise of its reasonable discretion, (1) Such action is necessary for reason of safety;

(2) Such action is necessary to prevent violation of any applicable laws, regulations or orders of any state or country to be flown from, into or over; (3) The conduct, age or mental or physical condition of the passenger is such as to; a. require special assistance of JJA or b. cause discomfort or make himself objectionable to other passenger, or c. involve any hazard or risk to himself or to other persons or to property, or (4) The passenger refuses on request to produce positive identification or (5) The passenger refuses to permit search of his person or property for explosives or a concealed, deadly or dangerous weapon or articles.

(6) The passenger has been notified in writing that he/she will be refused carriage for inflicting damage on or disrupting other passengers’ comfort and safety or, displaying any act of violence to any JJA employee or making repeated improper claims during business transactions resulting JJA’s inability to provide a public service 2. If question arises of any aircraft being overloaded, JJA shall decide which passengers or articles will be carried.

3. JJA will make refund as provided in Article 11. ④ for the unused portion of the ticket of a passenger so refused carriage or removed enroute for any reason specified in the foregoing Paragraphs.

2 Conditional Acceptance for Carriage If a passenger whose status, age, or mental or physical condition is such as to involve any hazard or risk to himself is carried, it is on the expressive condition that JJA shall not be liable for any injury, illness or disability or any aggravation or consequences thereof, including death, caused by such status, age, or mental or physical condition and that the conditions for his/ her carriage shall be subject to the applicable tariffs and the requirements of JJA’s regulations.

3 Carriage or Unaccompanied Children and Infants 1. Children not accompanied in the same compartment by a passenger of 12 years of age or over, will be accepted for carriage subject to advance arrangements with JJA, and only under the following conditions; (1) They are accompanied to the airport of departure by a parent, guardian or responsible adult who shall remain with the child until enplaned and satisfactory evidence is presented by such parent, guardian or responsible adult that the child will be met at the airport of stopover or destination by another parent, guardian or responsible adult upon deplaning; (2) The flight on which space is held is not expected to terminate short of or by-pass destination due to weather conditons or others; (3) A letter of indemnity in such form as may be prescribed by JJA and signed by a parent; guardian or responsible adult is presented to JJA at the time of reservations; 2. Children under 5 years of age and Infants will not be accepted for travel unaccompanied.

ARTICLE 9 BAGGAGE 1 General 1. Carriage of baggage shall be subject to these Conditions of Carriage and other applicable tariffs in effect on the date of commencement of carriage covered by the first flight coupon of the ticket. In the event that any country has its own laws, regulations or orders, those laws shall take precedence.

2. JJA will not carry baggage until the passenger has paid all applicable charges or has complied with credit arrangements established by JJA. 2 Free Baggage Allowance for Passenger 1. Children for whom the fare is 75 percent or more of the applicable adult fare shall be granted the checked baggage allowance (15kilograms; 33pounds) on the same basis as a passenger paying the adult fare.

2. Free Checked Baggage Allowance for Passenger (1) When travel is not to/from points in USA, US territories a. Passengers paying the adult fare shall be permitted the checked baggage allowance of 15kilograms. b. Children paying at least 75 percent of the adult fare are entitled to the same allowance as adults. c. Infants not entitled to a seat shall be allowed 10 kilograms and in addition one checked or carry-on fully collapsible stroller/ push-chair or infants carrying basket or infants car seat, which may be carried in the passenger cabin subject to the availability of space. d. In addition to the checked baggage allowance provided for in above Paragraphs, incapacitated passengers may carry free of charge one wheelchair and/or other assistive devices they are dependent upon. e. limitations on size and weight may be enforced due to security and safety regulations.

(2) When travel is to/from points in USA, US territories a. Passengers paying the adult Economy class fare shall be granted as free baggage allowance two pieces of baggage provided that the weight of each bag does not exceed 23 kilograms. b. Children paying at least 75 percent of the adult fare are entitled to the same allowance as adults. c. Infants not entitled to a seat shall be allowed 10 kilograms and in addition one checked or carry-on fully collapsible stroller/ push-chair or infants carrying basket or infants car seat, which may be carried in the passenger cabin subject to the availability of space. d. In addition to the checked baggage allowance provided for in above Paragraphs, incapacitated passengers may carry free of charge one wheelchair and/or other assistive devices they are dependent upon. e. limitations on size and weight may be enforced due to security and safety regulations.

3. Pooling of free baggage allowance When two or more passengers, travelling as one group to a common destination or point of stopover by the same flight, present themselves and deliver their baggage to JJA at the same time and p lace, the passengers shall be permitted, upon request, a total free baggage allowance equal to the combination of their individual free baggage allowance. Baggage weight in excess of the combined free baggage allowance shall be subject to excess baggage charges.

3 Excess Baggage 1. Baggage exceeding the checked baggage allowance set forth in Paragraph 2 above shall be charged excess baggage charges prescribed in the applicable tariffs in effect on the date of issuance of excess baggage ticket.

2. If the total dimensions and/or weight of a piece of luggage exceed JJA’s free baggage allowance, then an excess baggage charge may be assessed by JJA. 3. At the passenger’s option, excess baggage charges will be payable either at the point of origin for t he entire journey via stopover points to final destination (even though baggage may not in some cases be checked through to final destination), or at the point of origin to the point of stopover, in which case, when trip resumed, the charges will be payable from the point of stopover to the next point of stopover or destination. If a passenger has paid all excess baggage charges and then attempts to check additional baggage mid-journey, JJA will only accept said baggage under the condition that an additional excess baggage charge for the entire journey or next stopover point has been paid as well.

4. JJA will not carry baggage until the passenger has paid all applicable charges or has complied with credit arrangements established by JJA. 5. In case a passenger is rerouted or his carriage cancelled, the provisions which govern with respect to the payment of additional fares or the refunding of fares shall likewise govern the payment or the refunding of excess baggage charges.

4 Items unacceptable as Baggage In the opinion of JJA, the weight, shape, size or character of baggage renders it unsuitable for carriage on the aircraft, JJA, prior to or at any stage of the journey, will refus e to carry the baggage or any portion thereof.

1. Items specified in the International Civil Aviation Organization (ICAO) Technical Instructions for the Safe Transport of Dangerous Goods by Air and the International Air Transport Association (IATA) Dangerous Goods Regulations 2. Items which are likely to endanger the aircraft or persons or property on board the aircraft; 3. Items the carriage of which is prohibited by the applicable laws, regulations or orders of any state to be flown from, to or over; 4. Items which are likely to be damaged by air carriage; 5. Items which are unsuitably packed; 5 Right of Search For reasons of safety and security, JJA has the right, but not the obligation, to verify in the presence of passenger the contents of his baggage, and in the case of unaccompanied baggage, to open and examine such baggage whether or not the passenger is present. The existence or exercise of such right shall not be construed as an agreement, expressed or implied, by JJA to carry such contents as would otherwise by precluded from carriage.

6 Checked Baggage 1. Nothing contained in these Conditions of Carriage shall entitle a passenger to have his baggage checked on a journey for which JJA does not offer facilities for checking of baggage.

2. Upon delivery to JJA of baggage to be checked, JJA will insert in the ticket or system the number of pieces and weight of the checked baggage.

In addition, JJA will issue, for identification purpose only, a baggage tag for each piece of baggage so delivered and covered by the baggage check./li> 3. All checked baggage must be properly packed in suitcases or similar containers in order to ensure safe carriage with ordinary care in handling.

Electronic devices such as laptop computers, cellular phones, cameras, camcorders, MP3 players, fragile or perishable articles, unsuitably packed items, money, jewelry, negotiable papers, securities or other valuables, samples or business documents will not be accepted as checked baggage 4. In the event that an individual attempts to check baggage after the allotted check-in time has passed ABL reserves the right to refuse acceptance of said baggage.

5. Checked baggage will be carried on the same aircraft as the passenger unless such carriage is impracticable due to safety, security or other reasons, in which event JJA will carry the checked baggage on the next flight on which space is available.

6. JJA reserves the right to refuse the loading or transport of any baggage in which its owner is not the name listed on the ticket or boarding pass, and furthermore JJA reserves the right to claim all losses and expenses resulting from said baggage against its owner and the passenger who presented the baggage to JJA to be checked (1) Nothing contained in these Conditions of Carriage shall entitle a passenger to have his baggage checked on a journey for which JJA does not offer facilities for checking of baggage.

(2) Upon delivery to JJA of baggage to be checked, JJA will insert in the ticket the number of pieces and weight of the checked baggage (which act shall constitute the issuance of the baggage check); in addition, JJA will issue, for identification purpose only, a baggage (claim) tag for each piece of baggage so delivered and covered by the baggage check. All checked baggage must be properly packed in suitcases or similar containers in order to ensure safe carriage with ordinary care in handling. Fragile or perishable articles, money, jewelry, silverware, negotiable papers, securities or other valuables, samples or business documents will not be accepted as checked baggage.

7 Carry-on Items Free of Charge 1. Baggage allowance for carry on items for the services of mono class is subject to JJA ‘s conditions of limitations. In addition to the checked baggage allowance, each passenger may carry, without additional charges, hand baggage suitable for placing in closed overhead rack or under the passenger’s seat with maximum dimensions (the sum of the three dimensions of all such carry on items) not more than 115cms(45inches), only when they are placed in the passenger’s sole custody.

2. JJA will accept one (1) more carry-on item below lists; a. A handbag; b. A few of Books; c. An overcoat or blanket or wrap; d. Infant’s food for consumption in flight; e. A pair of crutches, braces and the prosthetic devices for the physically handicapped passenger’s use; provided that the passenger is fully dependent upon them.

3. Carry-on luggage may be limited according to airport conditions, security regulations, or insufficient space.

4. Objects not suitable for transport in the cargo compartment (such as delicate musical instruments and the like) will only be accepted for transportation in the cabin compartment if due notice has been given in advance and permission granted by JJA. The transport of such objects may be charged for separately.

5. JJA will limit the acceptance of carry-on items for carriage in passenger cabin to conform to security regulations or others.

8 Collection and Delivery of Baggage 1. The passenger shall collect his or her baggage as soon as it is available for collection at places of destination or stopover.

2. Only the bearer of the baggage identification tag, delivered to the passenger at the time the baggage was checked, is entitled to delivery of baggage. JJA is under no obligation to ascertain that the bearer of the baggage identification tag is entitled to delivery of the baggage and JJA is not liable for any loss, damage or expense arising out of or in connection with its failure so to ascertain. Except as provided in Subparagraph 4 below, delivery will be at the destination shown in the baggage check.

3. If the provisions of Subparagraph 2 above are not complied with by a person claiming the baggage, JJA will deliver the baggage only on condition that such person established to JJA’s satisfaction his rights thereto and, if required by JJA, such person shall furnish adequate security to indemnify JJA for any loss, damage or expense which may be incurred

by JJA as a result of such delivery.

4. At the request of the bearer of the baggage identification tag, checked baggage may be delivered at the place of departure or at an intermediate stopping place upon the same condition provided for in subparagraph above, unless precluded by government regulations and 2 unless time

and circumstances do not permit. In delivering baggage at the place of departure or at an intermediate stopping place, JJA shall be under no obligation to refund any charges paid for such baggage.

5. Acceptance of baggage by the bearer of the baggage identification tag without written complaint at the time of delivery is sufficient evidence that the baggage has been delivered in good condition and in accordance with the Contract of Carriage.

9 Excess Value Charges 1. A passenger may declare a value for baggage in excess of US$ 20 (250French Gold Francs) or its equivalent per kilogram in the case of checked baggage and US$ 400 (5,000 French Gold Francs) or its equivalent per passenger in the case of unchecked baggage or other property. When such declaration is made, a charge for such excess value will be assessed by JJA for the carriage performed by JJA at the rate of US$ 0.50 for each US$ 100 or fraction thereof, subject to the valuation limits of Subparagraph 2 below.

2. Except as otherwise provided in applicable tariffs, excess value charges will be payable at the point of origin for the entire journey to final destination; provided that, if at a stopover en route a passenger declares a higher excess value than that originally declared, additional excess value charges for the increased value from such stopover point to final destination will be payable.

3. No baggage or other property of any one passenger having a declared value in excess of US$ 2,500 will be accepted for carriage by JJA, unless advance arrangement is made.

4. In case a passenger is rerouted or his carriage cancelled, the provisions which govern with respect to the payment of additional fares or the refunding of fares shall likewise govern the payment or the refunding of excess value charges, but no refund of value charges will be made when a portion of the carriage has been completed.

10 Animals JJA will not accept any animals to checked baggage and carry-on item.

ARTICLE 10 SCHEDULES, DELAYS AND CANCELLATIONS OF FLIGHTS 1 Schedules The times shown in timetables or elsewhere are approximate and JJA may be obliged to change the time of flights, open for reasons beyond JJA’s control, and consequently, times in timetables or elsewhere are not guaranteed, and thus form no part of the contract of carriage. Schedules are subject to change without notice and JJA assumes no responsibility for making connections. JJA will not be responsible for errors or omissions either in timetables or other published schedules.

2 Cancellations 1. JJA may, without notice, substitute alternate carrier or aircraft.

2. JJA may, without notice, cancel, terminate, divert, postpone or delay any flight or the further right of carriage or reservation of traffic accommodations and determine if any departure or landing should be made, without any liability except to refund in accordance with these Conditions of Carriage the fare and charges for any unused portion of the ticket: (1) because of any fact beyond its control (including, but without limitation, meteorological conditions, acts of God, force majeure, strikes, riots, civil commotions, embargoes, wars, hostilities, disturbances, or unsettled international conditions), actual, threatened or reported, or because of any delay, demand, condition, circumstances or requirement due, directly or indirectly, to such fact; (2) because of any fact not to be foreseen, anticipated or predicted; (3) because of any government regulations order, demand or requirement; or (4) because of shortage of labor, fuel or facilities, or labor difficulties of JJA or others.

In the event JJA fails to operate a flight or delays its air transportation service by purpose or mistake, the compensation shall be implemented by JJA according to the related provisions of General Conditions of Carriage, applicable tariffs, regulations or law.

3. JJA may cancel the right or further right of carriage of the passenger and his baggage upon refusal of the passenger, after demand by JJA, to pay the fare or portion thereof so demanded, or to pay any charge so demanded and assessable with respect to the baggage of the passenger, without being subject to any liability therefore except to refund, in accordance with these Conditions of Carriage, the unused portion of the fare and charge(s) previously paid, if any.

3 Lengthy Tarmac Delays at U.S Airports Jeju Air’s Contingency Plan for Lengthy Tarmac Delays required under 14 C.F.R.§ 259.4, which does not form any part of these Conditions of Carriage, shall apply at covered U.S.airports.

ARTICLE 11 REFUNDS 1 General Refund by JJA for an unused ticket or portion thereof Miscellaneous Charges Order will be made in accordance with the following conditions, except as otherwise provided in Paragraph 6 below ; 1. Application for refund should be made during the period of validity of the ticket or Miscellaneous Charges Order, and JJA will refuse refund when application there for is made more than 30 days after expiration date of the ticket or Miscellaneous Charges Order.

2. Person requesting refund must surrender to JJA all unused flight coupon(s) of the ticket of Miscellaneous Charges Order.

3. Except as provided below, refund will be made to the person named as the passenger on the ticket or Miscellaneous Charges Order.

(1) Refund of tickets or Miscellaneous Charges Orders issued:/li> (2) Pursuant to a Prepaid Ticket Advice will be made to the person who paid JJA for them; If, at the time of purchase, the purchaser designates a person to whom refund shall be made, refund will be made to the person so designated.

(3) If, at the time of application for refund, satisfactory evidence is submitted that a company purchased the ticket or Miscellaneous Charges Order on behalf of its employee, or the travel agent had made refund to its client, JJA will refund directly to the employee’s company or the travel agent, respectively.

4. Refund made in accordance with this rule to a person representing himself as the person, company or travel agent named or designated in the document presented for refund will be a valid refund and JJA will not be liable to the true person for another refund.

5. JJA may refuse refund on a ticket which has been presented to government officials of a country or to JJA as evidence of intention to depart there from unless the passenger establishes to JJA’ s satisfaction that he has permission to remain in the country or that he will depart there from by another carrier or conveyance.

2 Currency All refunds will be subject to government laws, rules, regulations or orders of the country in which the ticket or Miscellaneous Charges Order was originally purchased and of the country in which the refund is being made.

Subject to the foregoing provisions, refunds will normally be made in the currency in which the fare was paid, or in lawful currency of Korea or of the country where the refund is made or in the currency of the country in which the ticket or Miscellaneous Charges Order was purchased, in an amount equivalent to the amount due in the currency in which the fares were originally collected.

3 Refund Handling JJA will make refunds through its respective office, and will require prior written applications for refunds to be prepared by passengers on special forms furnished by JJA. 4 Involuntary Refund 1. For the purpose of this paragraph, the term “Involuntary Refund” means any refund made because the passenger is prevented from using the carriage provided for in his ticket because of cancellation of flight, or inability of JJA to provide previously confirmed space, or substitution of a different type of equipment or class of service by JJA, or missed connections, or postponement or delay of flight, or omission of scheduled stop, or refusal to carry under conditions prescribed in Article 8.

2. The amount of an involuntary refund will be as follows; (1) When no portion of the trip has been made, the amount of refund will be the amount of fare paid.

(2) When a portion of the ticket has been made, the amount of refund will be the amount computed as shown in a. and b. below, whichever is higher: a. Either an amount equal to the one-way fare less the same rate of discount, if any, that was applied in computing the original one-way fare (or on round trip or circle trip tickets, one-half of the round trip fare less the same rate of discount, if any) and charges applicable to the unused transportation from the point of termination to the destination or stopover point named on the ticket or to the point at which transportation is to be resumed; or b. The difference between the amount fare paid and the amount of fare for the transportation used.

5 Voluntary Refund 1. The term “Voluntary Refund”, for the purpose of this Paragraph, means any refund of a ticket or Miscellaneous Charges Order other than “Involuntary Refund” as defined in Paragraph 4 above.

2. The amount of a voluntary refund will be as follows: (1) When no portion of the ticket has been used, the amount of refund will be the amount of fare paid, less any applicable service charges and communication expenses.

(2) When a portion of the trip has been made, the amount of refund will be the difference, if any, between the full amounts of fare paid and the amount of fare and charges applicable between the points between which the ticket has been used, less any applicable service charges and communication expenses.

6 Lost Ticket (MCO issued) The following provisions will govern refund of a lost ticket or unused portion thereof: 1. JJA will refund a lost ticket or lost portion thereof after receipt of written request and receipt of proof of loss satisfactory to JJA. Such written application must be made not more than 30 days after the expiration date of the lost ticket. Refund will only be made provided that the lost ticket or lost portion thereof has not been honored for transportation of, or refunded, upon surrender by any person prior to the time the refund is made and further provided that the passenger agrees to indemnify JJA and hold JJA harmless against any loss, damage, claim or expense, including (but without limitation) reasonable attorney fees, which JJA may suffer or incur by reason of such refund and/or the subsequent presentation of said ticket(s) for transportation, refund or any other sue whatsoever. Refund will be made on one of the following bases, whichever is applicable: (1) If no portion of the ticket has been used: a. if the passenger has not purchased a replacement ticket, refund will be the full amount of the fare paid ; b. if the passenger has purchased a replacement ticket with the same condition of the lost ticket, JJA will refund to the passenger the amount of the fare paid for such replacement ticket. However, if the passenger has purchased a replacement ticket with conditions different from the lost ticket, the amount of refund will be calculated according to the applicable tariffs.

(2) If a portion of the ticket has been used; a. If the passenger has not purchased a replacement ticket, refund will be the difference, if any, between the full amount of fare paid and the amount of fare and charges applicable between the points between which the ticket has actually been used; b. If the passenger has purchased a replacement ticket with the same condition of the lost ticket, JJA will refund to the passenger the amount of the fare paid for such replacement ticket. However, if the passenger has purchased a replacement ticket with conditions different from the lost ticket, the amount of refund will be calculated according to the applicable tariffs.

(3) The refunds described in the provisions of (1) and (2) above will be subject to any expenses incurred by JJA as a result of such loss.

ARTICLE 12 GROUND TRANSFER SERVICES Except as otherwise specified in applicable tariffs, JJA does not maintain, operate or provide ground transfer service within airports or between airport and downtown. Except where ground transfer service is directly operated

by JJA, it is agreed that any such service is performed by independent operators who are not and shall not be deemed to be agents or servants of JJA. Anything done by an employee, agent or representative of JJA in assisting the passenger to make arrangements for such ground transfer service shall in no way make JJA liable for the acts or omissions of such an independent operator.

In cases where JJA maintains and operates for its passengers such ground transfer services, the terms, conditions, rules and regulations of JJA, including (but without limitation) those stated or referred to in their tickets, baggage checks and baggage valuation agreements shall be deemed applicable to such ground transfer services. No portion of the fare shall be refundable in the event ground transfer services are not used.

ARTICLE 13 HOTEL ACCOMMODATIONS AND IN-FLIGHT MEALS 1 Hotel Accommodations 1. Hotel expenses are not included in passenger fares.

2. In the case of scheduled overnight or other stops on through flights, hotel accommodation may be borne by JJA at its option.

3. When requested by passengers, JJA may make application on their behalf for hotel reservations, but the availability thereof is not guaranteed.

All expenses, incurred by JJA or its representatives in arranging, or attempting to arrange for reservations will be chargeable to passengers 2 In-flight Meals In-flight meals, if served, will be free of charge, except as otherwise specified in applicable tariffs.

3 Arrangements made by JJA In making arrangements for hotel or other housing and board accommodation for passenger, whether or not the cost of such arrangements is for the account of JJA, JJA acts only as agent for the passenger and JJA is not liable for loss, damage or expense of any nature

whatsoever incurred by the passenger as a result of or in connection with the use by the passenger of such accommodation or the denial of the use thereof to the passenger by any other person, company or agency.

ARTICLE 14 ADMINISTRATIVE FORMALITIES 1 Compliance with Regulations The passenger is responsible for obtaining all required travel documents and visas and for complying with all laws, regulations, orders, demands and travel requirements of countries to be flown from, into or through which he transit. JJA shall not be liable for the consequences to any passenger resulting from his failure to obtain such documents or visas or to comply with such laws, regulations, orders, demands, requirements or instructions.

2 Passports and Visas 1. The passenger must present all exit, entry and other documents required by laws, regulations, orders, demands or requirements of the countries concerned. JJA will refuse carriage to any passenger who has not complied with applicable laws, regulations, orders, demands or requirements, or whose documents do not complete. JJA is not liable to the passenger for loss or expense due to the passenger’s failure to comply with this provision, and if damage is caused to JJA because of passenger’s failure to comply with this provision, the passenger shall indemnify JJA there for.

2. Subject to applicable laws and regulations, the passenger agrees to pay the applicable fare whenever JJA, on government order, is required to return a passenger to his point of origin or elsewhere due to the passenger’s inadmissibility into a country, whether of transit or of destination. JJA will apply to the payment of such fares any funds paid to JJA for unused carriage, or any funds of the passenger in the possession of JJA. The fare collected for carriage to the point of refusal of entry deportation will not be refunded by JJA. 3 Customs Inspection If required, the passenger must attend inspection of his or her baggage, checked or unchecked, by customs or other government officials. JJA accepts no responsibility toward the passenger if the latter fails to observe this condition. If damage is caused to JJA because of the passenger’s failure to observe this condition, the passenger shall indemnify JJA there for.

4 Government Regulations No liability shall attach to JJA if JJA in good faith reasonably determines that what it understands to be applicable law, government regulation, demand, order or requirement requires that it refuse and it does refuse to carry a passenger.

ARTICLE 15 LIABILITY OF CARRIERS 1 Successive Carriers Carriage to be performed under one ticket or under a ticket and any conjunction ticket issued in connection therewith by several successive carriers is regarded as a single operation.

2 Laws and Provisions Applicable 1. Carriage hereunder is subject to the rules relating to liability and limitation established either by the Warsaw Convention, in case of international carriage as defined by the Warsaw Convention, or by the Warsaw Convention as amended at The Hague, 1955, in case of international carriage as defined by the Warsaw Convention as amended at The Hague, 1955, or in case of international carriage other than that defined by the Convention.

2. to the extent not in conflict with the provisions of Subparagraph 1. Above, all carriage and other services performed by JJA are subject to: (1) Applicable laws (including national laws implementing the Convention or extending the rules of the Convention to carriage which is not “international carriage” as defined in the Convention), government regulations, orders and requirements, (2) These Conditions of Carriage and applicable tariffs, regulations and timetables (but not the times of departure and arrival therein specified), which may be inspected at any of its offices and in any airport from which it operates regular services.

3. Carrier’s name may be abbreviated in the ticket and carrier’s address shall be the airport of departure shown opposite the first abbreviation of carrier’s name in the ticket; and for the purpose of the Convention, the agreed stopping place are those places, except the place of departure and The place of destination, set forth in the ticket and any conjunction ticket issued therewith or shown in carrier’s timetables as scheduled stopping places on the passenger’s route. A list giving the full name and its abbreviation of each carrier is set forth in applicable tariffs.

3 Scope of Liability Except as the Convention of other applicable law may otherwise require: JJA is not liable for any death, injury, delay, loss or claim of whatsoever nature (hereinafter in this Conditions of Carriage collectively referred to as “damage”) arising out of or in connection with carriage or other services performed by JJA incidental thereto 1. Unless such damage is proved to have been caused by the negligence or willful fault of JJA and any liability JJA has for damage will be reduced by any negligence on passenger’s part which causes or contributes to the damage, except as otherwise provided in Paragraph 3. (1), (2) 2. JJA is not liable for any damage directly and indirectly arising out of compliance with laws or with government regulations, orders or requirements, or from failure of the passenger to comply with same, or out of any cause beyond JJA‘s control.

3. With respect to carriage performed by JJA and with respect only to claims made by passenger of JJA or members of their families, but not with respect to any claim made by or on behalf of any other party: (1) As to any claim arising out of death of or, wounding or other bodily injury to, a passenger within the meaning of the Convention, JJA shall not avail itself of any defense under Article 20 (1) of the Warsaw Convention, nor invoke the limitation of liability in Article 22 (1) of the Warsaw Convention as amended at the Hague, 1955 with respect to that portion of such claim which does not exceed 100,000 SDRs. (2) In the case of carriage subject to the Montreal Convention, as to any claim arising under Article 17 of the Convention, JJA shall not avail itself of any defense under Article 20(1) of the Convention with respect to that portion of such claim which does not exceed 113,000 SDRs. (3) Except as otherwise provided in Subparagraphs (1) and (2) hereof, JJA reserves all defenses available under the Convention to any such claim, JJA also reserves all rights of recourse against any other person, including without limitation, rights of contribution and indemnity.

(4) Neither the waiver of limits nor the waiver of defense shall be applicable in respect of claims made by public social insurance or similar bodies (except with respect to any such bodies of the United States) however asserted, such claims shall be subject to the limit in Article 22(1) and to defenses under Article 20(1) of the Convention.

4. The foregoing waiver limitation of liability notwithstanding Subparagraphs 3 (1) and 3 (2) above, shall not apply with respect to any claim made by, on behalf of, or against any passenger or person who has willfully caused the death, wounding or other bodily injury of passenger. As to such claims, JEJU AIR reserves the right to assert all defenses available under the Convention and other applicable law. Except, respect to any such bodies of the United States.

5. In any event liability of JJA for delay of passenger shall not exceed the limitation set forth in the Convention.

6. Any liability for Checked and Unchecked Baggage (1) Any liability of JJA is limited to 250 French Gold Francs (approximately USD 20.00) per kilogram in the case of Checked Baggage, and 5,000 French Gold Francs (approximately USD 400.00) for each passenger in the case of Unchecked Baggage or other property. The liability of JJA is limited to 1,131 SDRs for checked and unchecked baggage where the Montreal Convention applies to your journey.

(2) If in the case of checked baggage a higher value is declared in advance and additional charges are paid pursuant to paragraph 9 of Article 9, the liability of JJA shall be limited to such higher declared value.

(3) In no case JJA’s liability shall not exceed the amount of proven damage.

All claims are subject to proof of actual loss suffered by the passenger.

(4) Under no circumstances will JJA be liable for damage to unchecked baggage not attributable to the negligence of JJA. Assistance rendered to the passenger

by JJA’s employees in loading, unloading or transshipping unchecked baggage shall be considered as gratuitous service to the passenger.

(5) In the event of delivery to the passenger of part but not all of his/ her checked baggage, or in the event of damage of part but not all of such baggage, the liability of JJA with respect to the undelivered or damaged portion shall be reduced proportionately on the basis of weight, notwithstanding the value of any part of the baggage or contents thereof.

(6) JJA is not liable for damage to a passenger’s baggage caused by property contained in the passenger’s baggage. Any passenger whose property caused damage to another passenger’s baggage or the property of JJA shall indemnify JJA for all losses and expenses incurred by JJA as a result thereof.

(7) JJA is not liable for the damage resulted from the inherent defect of the baggage. In addition, JJA shall not be responsible for minor scratches, scuffs, dents, general wear, resulting from the ordinary and normal baggage handling process.

(8) For International transportation, JJA’s liability limit for delay, damage or loss to checked baggage including, but not limited to, electronic devices such as laptop computers, cellular phones, cameras, camcorders, MP3 players, fragile or perishable articles, money, jewelry, negotiable papers, securities or other valuables, medicines, keys, passports and other identification documents, samples or business documents is governed by the Montreal Convention or the General Conditions of Carriage.

7. JJA may refuse to accept any articles which do not constitute baggage as such term is defined herein, but if delivered to and received by JJA, such article shall be deemed to be within the baggage valuation and limit of liability, and shall be subject to the published rates and charges of JJA. 8. When JJA issues a ticket or checks baggage for carriage over the lines of another carrier, JJA does so only as agent of such carrier. JJA shall not be liable for the death, injury or delay of a passenger or the loss, damage or delay of unchecked baggage and/or checked baggage, not occurring on its own line; except that the passenger shall have a right of action for such loss, damage or delay on the terms herein provided against JJA, when JJA is the first carrier or the last carrier under the agreement to carry.

9. The sum mentioned in terms of SDR above shall mean the Special Drawing Rights as defined by the International Monetary Fund. Conversion of the sum into national currencies shall, in case of judicial proceedings, be made according to the exchange rate of such currencies applicable on the date of final judgment by the court, or, in case of other than judicial proceedings, according to the exchange rate of such currencies applicable on the date when the damages to be paid is agreed upon.

10. JJA shall not be liable in any event for indirect, consequential, special or any other form of no compensatory damage arising from carriage subject to these Conditions of Carriage and applicable tariffs, irrespective of JJA’s recognition of the damage in advance.

11. Any exclusion or limitation of liability of JJA under these Conditions of Carriage and applicable tariffs shall apply to agents, servants or representatives of JJA acting within the scope of their employment and also to any person whose aircraft is used by JJA for carriage and his/her agent, servants or representatives acting within the scope of their employment.

4 Reasons for Claims or Actions In the carriage of passenger and baggage, any action for damage, however founded, whether in contract or in tort or otherwise, can only be brought subject to the conditions and limits set out in the Convention. However, the Convention shall not affect in determining the persons who have the right to bring suit and what are their respective rights.

ARTICLE I6 TIME LIMITATIONS ON CLAIMS AND ACTIONS 1 Time Limitation on Claims No action shall lie in the case of damage to checked baggage unless the person entitled to delivery complains to an office of JJA forthwith after the discovery of the damage at the latest within 7 days from the date of receipt; and, in the case of delay or loss, unless the complaint is made at the latest within 21 days from the date on which the baggage has been placed at his disposal (in the case of delay) or should have been placed at his disposal (in the case of loss). Every complaint must be in writing and dispatched within the time aforesaid. Where carriage is not “international carriage “as defined in the Convention, failure to give such notice of complaint shall not be a bar to suit where claimant proves that; 1. It was not reasonably possible for him to give such notice; 2. Such notice was not given due to fraud on the part of JJA or 3. JJA had knowledge of damage to passenger’s baggage.

2 Time Limitation on Actions Any right to damage against JJA shall be extinguished if an action in not brought within 2 years reckoned from the date of arrival at the destination, or from the date on which the aircraft ought to have arrived, or from the date on which the carriage stopped.

ARTICLE 17 OVERRIDING LAW Insofar as any provision contained or referred to in the ticket or in the Conditions of Carriage or other applicable tariffs may be contrary to mandatory law, government regulations, orders or requirements, such provision shall remain applicable to the extent that it is not overridden thereby. The invalidity of any provision shall not affect any other part.

ARTICLE 18 MODIFICATION AND WAIVER No agent, servant or representative of JJA has authority to alter, modify or waive any provision of the contract of carriage or of these Conditions of Carriage or other applicable tariffs.

ARTICLE 19 ORIGINAL COPY OF CONDITIONS OF CARRIAGE These Conditions of Carriage may be published in English, and in the event of any inconsistency or conflict between Korean text and English text, the former shall prevail.