Issuu

Motoring » E2-E3

Clarified and electrified

media partner of the year

United nations

2015 environmental Media Award leadership award 2008

BusinessMirror A broader look at today’s business

www.businessmirror.com.ph

Friday, November 10, 2017 Vol. 13 No. 30

Unfazed by inflation risks, BSP keeps key policy rates

TPP talks revived at Apec meet minus US

By Bianca Cuaresma @BcuaresmaBM

he monetary authorities on Thursday acknowledged a number of pressure points on prices remaining in place over the policy horizon, but had great confidence that their existence do not at all threaten continued price stability. Such confidence allowed the policy-making Monetary Board of the Bangko Sentral ng Pilipinas to keep the policy-rate structure unchanged since so-called operational adjustments were made in June last year.

3.5% The headline inflation rate in October

T his had the impact of keeping the rate at which the BSP borrows from banks unchanged at 3 percent. T he rate at which it lends to financia l institutions, the special deposit rates, as wel l as the banks’ deposit reser ves, have similarly been kept intact. Continued on A2

See “Tpp,” A2

business news source of the year

P25.00 nationwide | 6 sections 34 pages | 7 days a week

The antidote to smuggling Dr. Jesus Lim Arranza

Make Sense Part Five

nderdeclaration, misdeclaration and misclassification are other forms of technical smuggling that are causing tremendous revenue losses to the government. And while some Customs observers say these forms of technical smuggling cannot be controlled so long as collusion between corrupt Customs officials and unscrupulous importers continue at the Bureau of Customs (BOC), these illicit activities can, in fact, be stopped, if only the BOC will adapt or enforce the following measures: a. Compliance to description of goods— Customs officials should strictly enforce the compliance to the Har monized System (HS) code in the description of

imported goods by importers, as provided for in Sect ion 130 8 of t he Ta r i f fs and Customs Code of the Philippines. Continued on A11

Indonesia adopts PHL’s PPP model in addressing infra-financing woes

alks aimed at salvaging a Pacific Rim trade pact rejected by President Donald J. Trump resumed on Thursday on the sidelines of the annual summit of the A sia-Pacific Economic Cooperation (Apec) forum. Trade and foreign ministers of 11 members of the Trans-Pacific Partnership (TPP) were seeking to agree in principle on how to proceed without United States involvement, after Trump pulled out from the formerly US-led initiative earlier this year. Trump and other leaders are heading to Vietnam for the 21-member Apec summit, which begins on Friday in this coastal resort city. As a developing country with a fast-growing export sector, Vietnam has a strong interest in the TPP’s success. At the outset of Thursday’s meeting, Tran Tuan Anh, the trade minister, emphasized “the importance of reaching an agreement in principle right here.” Japan and Australia, likewise, have shown strong enthusiasm for reaching a framework agreement that drops a requirement that it be ratified by at least six memberc ou nt r i e s w it h a c o m b i ne d GDP equal to 85 percent of the original accord. Since the US GDP accounted for 60 percent of that total, its withdrawal meant the pact had to be amended.

2016 ejap journalism awards

By Lorenz S. Marasigan @lorenzmarasigan

J LARGEST CHRISTMAS BEAR Megaworld lights up the Philippines’s largest Christmas bear, which sits on the rooftop of the freshly unveiled 30-story Alliance Global Tower in Uptown Bonifacio in Taguig. The bear is 50-foot tall and 70-foot wide, and is visible in Makati, Ortigas and C-5. Leading the lighting ceremony are (from left) Megaworld SVP and Head of Lifestyle Malls Kevin L. Tan, Megaworld Chairman and CEO Dr. Andrew L. Tan and Megaworld COO Lourdes T. Gutierrez-Alfonso. ALYSA SALEN

Sugar price still falling as TRAIN-wary traders cut demand By Jasper Emmanuel Y. Arcalas @jearcalas

he domestic price of sugar plummeted below P1,300 per 50-kilogram bag (LKg), as traders are war y of the possible decline in demand for it once Congress approves the proposed tax on sugar-sweetened beverages (SSBs). Philippine Sugar Millers Association Inc. (PSMA) Executive President Francisco D. Varua said the mill-site price of “B” sugar, or those for domestic consumption, declined by 5.48

PESO exchange rates n US 51.3840

₧1,276 The current price of 50-kg bag of “B” sugar, down 5.48 percent since October 15

percent to P1,276 per LKg as of November 8. “Traders just buy what they can sell to the market as they are trying to read

what exactly the situation would be [next year],” Varua told the B usiness M irror in an interview. “They want to find out the impact of the tax on SSBs.” Even as the Christmas season draws nearer, Varua said traders are not buying as much as they did last year, when the price of “B” sugar reached P1,500 per LKg. “We hope the price of sugar would recover within the next two to three weeks. But we are still awaiting the final version of the Tax Reform for Acceleration and Inclusion [TRAIN] bill,” he said. See “Sugar,” A2

AKARTA, Indonesia—While taking a back seat in the Duterte administration’s infrastructure-development program, the Filipino brand of public-private partnership (PPP) has been adopted by Jakarta as the new cornerstone of Indonesia’s plan to bridge its own infrastructure gap. Minister of National Development Planning of Indonesia Bambang Permadi Soemantri Brodjonegoro said his country has identified the need for private-sector intervention—at least in terms of financing infrastructure development—to help win the battle against infrastructure underspending. “We first learnt about the program from the Philippines, which is already ahead in terms of implementing PPPs. We would like to do the same, simply because we still have a 77-percent gap for infrastructure financing for the five-year period ending 2019,” he said during a news conference at the Indonesian Infrastructure Week. The Indonesian government has recognized a $450-billion infrastructurefunding requirement for five years starting 2015. Brodjonegoro said the country has only spent more than 20 percent of the said capital requirement through 2017. “We need private-sector involvement, not only foreign participation, but also domestic participation,” he said. Indonesia has implemented a new scheme

for funding infrastructure, the Pembiayaan Investasi Non Anggaran (Non-State Budget Investment Financing), or simplified as Pina, a program that aims to accelerate infrastructure spending while reducing pressure on state budget for financing such developments. The program is similar to the Philippines’s PPP Program.

‘Not perfect, but instrumental’

Former PPP Center Executive Director Cosette V. Canilao said the Philippines was able to establish a “good framework” for private-sector infrastructure funding— including policies, procedures, institutional roles and governance—through the help of development partners. “While it is not perfect, it was instrumental in delivering critical infrastructure projects. The Philippines now has a baseline and data points to compare PPP via other modes of procurement, and hopefully further improve it, especially the implementation component,” she told the B usinessM irror. The impact of the program to the local and national economy can be clearly seen in the four completed and operational projects, with a total project cost of P31.77 billion, as follows: the MuntinlupaCavite Expressway Project, the PPP for School Infrastructure Project Phase I, the Automatic Fare Collection System Project, and the Ninoy Aquino International Airport Expressway Phase II Project.

n japan 0.4515 n UK 67.4158 n HK 6.5896 n CHINA 7.7482 n singapore 37.7463 n australia 39.4372 n EU 59.6003 n SAUDI arabia 13.7024

Continued on A2

Source: BSP (9 November 2017 )

A2 Friday, November 10, 2017

BMReports BusinessMirror

Unfazed by inflation risks, BSP keeps key policy rates Continued from A1

At the seventh and final ratesetting meeting this year, the seven-member Monetary Board made it very clear that headline inf lation and threats to its continued stability should remain m a n a ge a ble t h rou g hout t he policy horizon. Such was their confidence that forecast inflation this year was kept steady at 3.2 percent, although the forecast inflation next year was recast higher to 3.4 percent, from 3.2 percent originally. The events the monetary authorities cited for the higher inflation forecast in 2018 include expectations of higher crude-oil prices, the anticipated rise in domestic liquidity now seen growing

13 percent to 14 percent on average, the weak peso and the higher-thanprojected October and September inflation prints. Ten-month inflation average 3.1 percent, or well within the government’s target rate this year of 2 percent to 4 percent. According to BSP Governor Nestor A. Espenilla Jr., risks to the inflation outlook tilts to the upside due to the tax-reform program proposed by the national government, whose final form should have transitory impact on prices. “While inflation has trended higher due mainly to higher utility rates and fuel prices, latest forecasts continue to show the future inf lation path staying within the government’s [2 percent-to-4 percent] target range

for 2018 to 2019,” Espenilla told financial reporters. “Based on t hese considerations, the Monetary Board believes that prevailing monetary policy settings continue to be appropriate,” the governor added. B SP De put y Gover nor for the Monetary Stability Sector Diwa C. Guinigundo also spoke of “very little to no reason to c h a nge t he monet a r y- pol ic y stance at this point,” despite the apparent tightening bias of other central banks, particularly the US Federal Reserve (the Fed). “We have different economic and business cycles, and adjustments in monetar y polic y by the US Fed does not necessarily warrant a corresponding response of monetar y policy from

the BSP,” Guinig undo said. T he BSP makes monetar ypolicy adjustments on the basis of its outlook on inf lation, domestic demand conditions and credit and liquidity levels. Espenilla said that, while geopolitical tensions and uncertainty over macroeconomic policies in advanced economies present downside risks to near-term prospects for global economic growth, the outlook for domestic economic activity remains firm as supported by positive consumer and business sentiment and ample liquidity. Credit is also seen to continue to expand in line with output growth. “ T he BSP w il l continue to monitor price and output development for any risks to the inf lation outlook and will ad-

just its policy settings as necessar y to ensure sable prices and sustainable economic growth,” Espenilla said.

Reserve requirement adjustments

On the banks’ deposit reserves, of f ic i a l s ac k nowle d ge d t h at adjustments that free up still more money in the system has “always on the table” at some undetermined point for ward. T he deposit reser ves st i l l stands at 20 percent of the banks’ unimpaired capital. Espenilla said the Monetary Board is always cognizant of global market developments and domestic events when introducing f inancia l-market reforms, particularly those that deepen the domestic debt market.

Indonesia adopts PHL’s PPP model in addressing infra-financing woes Continued from A1

Aside from the completed projects, the 11 other ongoing awarded projects, which include the Metro Manila Skyway Stage 3, MactanCebu International Airport New Passenger Terminal Project, PPP for School Infrastructure Phase II and Metro Rail Transit (MRT) Line 7, are expected to provide significant contributions to the economy. The previous administration gift-wrapped a PPP pipeline of 53 deals worth roughly P1.5 trillion. These projects were considered intergenerational, spanning to as much as three decades worth of contracts that the private sector can implement.

PHL must also recognize need for PPPs

Andre C. Palacios, also a former executive director of the center, said the Philippine government must also recognize the need for the PPP program’s continuity, as Indonesia has identified it as a

viable means to save the country from its infrastructure crisis. “The Philippine PPP program is recognized as a global model for developing countries facing an infrastructure crisis. Asia-Pacific countries wish to learn from our PPP success. We need to build on this and enhance, not abandon our PPP program,” he told the BusinessMirror. The Duterte administration took an apparent shift in bias toward developmental financing from private sector-led funding on infrastructure development, which was the cornerstone infrastructure-development program of the Aquino administration. Aside from pronouncements from different economic managers, government data will prove that it has, indeed, changed its preference on project financing toward official development assistance (ODA) and state coffers. From a staggering 14 projects under procurement in the first half of 2016, data from the PPP

Center now showed that there are only three PPP deals that are up for bidding as of end-September. This does not mean that the projects were awarded to their respective winners, but most of them were simply snatched from the pipeline, and was added to the Duterte administrations “Build, Build, Build” (BBB) program. Touted as the government’s “most ambitious infrastructure plan,” the BBB program lists 70 priority infrastructure projects that are seen to solve the infrastructure crisis that the Philippines faces today. The new infrastructure thrust was born out of Duterte’s policy on increased infrastructure spending, an avenue wherein the previous administration failed miserably, with underspending plaguing government agencies tasked to develop crucial infrastructure, such as roads, rails and ports. The majority of the projects under the newly minted program—roughly 39 of 70 deals—

were contracts either signed, implemented and started during the administration of former President Benigno S. Aquino III, according to estimates made by the BusinessMirror. Likewise, a thorough analysis of the project pipeline under the BBB program would show that in terms of financing options, the majority of the projects will be funded by the General Appropriations Act. This is followed by ODA grants and loans, while private-sector funding comes in last. Should the current administration decide to also put prime importance to the private-sector funding, Palacios believes that it could be a new international framework for infrastructure development that other countries can also learn from. “With our BBB program, we can again become a global model—this time, on how to successfully blend all sources of funds,” he said. The Philippines is in the midst

of ushering the country into the so-called golden age of infrastructure, with Duterte issuing a policy on increased infrastructure spending throughout his term. His mandate is to increase the budget for infrastructure development to as much as 7 percent of the country’s GDP from a mere 2.9 percent. Over the next six years, the government will spend roughly P8.4 trillion to build, modernize and rehabilitate new and old infrastructure, as the country plays catch-up with its neighbors in terms of adequacy of transportation facilities, energy and water supply and other socioeconomic needs. Inf ra st r uc t u re h a s a lways been the Achilles’ heel of the Philippines. Just recently, the World Economic Forum reported that the country ranked 97th out of 137 nations in terms of underinvestment in infrastructure, ma k ing interest in the Philippine economy low, despite ranking 22nd in terms of macroeconomic environment.

www.businessmirror.com.ph

Sugar. . .

Continued from A1

The TRAIN, the first package of the Duterte administration’s tax-reform program, is originally targeted for implementation in January. Among its features is a levy on sugary drinks. Earlier, stakeholders in the sugar industry said imposing an excise tax on SSBs could cut the demand for sugar, as sweetened drinks could become more expensive. Data from the Sugar Regulatory Administration (SRA) showed the mill-site price of “B” sugar at the start of crop year 2017-2018 reached P1,376 per LKg. Since the start of October, however, the price of “B” sugar started to decline and fell to P1,357.16 per LKg on October 15. Varua said he is now doubtful that the price of “B” sugar would rebound and reach P1,500 per LKg by December, as what his group had earlier projected. SRA data also showed the country has produced 137,241 metric tons (MT) of raw sugar as of October 29. The volume is 7.31 percent lower than the 148,060 MT recorded in the same period last year. Total volume of sugarcane milled as of October 29 was also lower. SRA data showed sugarcane milled so far in the current crop year declined by 8.29 percent to 1.669 million metric tons (MMT), from last year’s 1.820 MMT.

TPP. . .

Continued from A1

It’s unclear if the TPP members will manage to reach a consensus on the trade pact that was billed by the administration of former President Barrack Obama as the “gold standard” for trade rules for the 21st century. While Apec operates by consensus and customarily issues nonbinding statements, TPP commitments would eventually be ratified and enforced by its members. In Danang reaching agreement on a draft of even the nonbinding Apec declaration appeared to be a struggle. Apec foreign and trade ministers extended their talks for an extra morning on Thursday, as the officials sought to close gaps in their positions. It was unclear what those sticking points might have been.But the US pushback on “free trade,” evidenced in “America first” policy, has raised eyebrows in the region after decades of US pressure on opening markets. “Over the last year, things have changed a lot,” Alan Bollard, executive director of the Singaporebased Apec Secretariat, said in an interview. “The new US administration does have a markedly different view about trade policies and regional economic integration,” he said. “We’re trying to get more clarity about what they’re comfortable with and what the response of other members is.” For Vietnam, the summit is an occasion to showcase the progress its economy has made, thanks largely to foreign investment and trade. Danang, Vietnam’s thirdlargest city, is in the midst of a construction boom as dozens of resorts and smaller hotels pop up along its scenic coastline. The country is a major garment exporter and the largest production base for Samsung Electronics’ mobile phones. But even though its economy grew at a brisk 6.2-percent pace last year, its GDP per capita is still one of the lowest among Apec members at less than $2,200. Many of its 95 million people remain poor and vulnerable to natural disasters, such as storms that lashed the coast near Danang just days before the Apec meetings. Apec’s members are Australia, Brunei Darussalam, Canada, Chile, China, Hong Kong, Indonesia, Japan, South Korea, Malaysia, Mexico, New Zealand, Papua New Guinea, Peru, the Philippines, Russia, Singapore, Taiwan, Thailand, the US and Vietnam. AP

Along the stretch of Boracay's White Beach, at the hushed down Station 3, is Boracay Sands, a 52 room and suites Mediterranean-inspired hotel that matches its surroundings with top-notch services and amenities.

A MEDITERRANEAN OASIS IN A

TROPICAL PARADISE W

By Jt Nisay

HERE do you look when strolling along a beach? Is it downward to watch the sand embracing your feet at every step, or straight ahead to get lost at the infinity of the sea? Directions don't really matter at the famed White Beach of Boracay Island, where beauty unfolds in every corner as a panoramic tropical paradise. Outside its serene sights of sea, sand, and sun, however, along the rows of palm trees and bland buildings, shines a pearl of a Mediterranean façade that is inviting in feel and elegant in style. That sense of warmth and grace actually reaches inside, and spreads throughout, Boracay Sands Hotel. Located at the hushed down Station 3 of White Beach in the defending two-time Conde

Naste Traveler “Best Island in the World,” Boracay Sands matches its unparalleled surroundings with top-notch services and amenities. There are 52 rooms that exude a refined and environmental vibe through a modern design featuring wooden materials and tones of either dark green or deep blue. Comprising the total room count are 45 Deluxe Suites, five Ocean View Suites and two Presidential Suites. The Ocean View Suite enjoys the luxury of a king-sized bed, spacious bathroom and a balcony with loungers for full enjoyment of the suite's namesake.

Each Suite at Boracay Sands is equipped with a flat-screen TV, iPod speakers, and a strong Wi-fi connection, while the Presidential Suite is fitted with its own Jacuzzi.

Boracay Sands offers a pool for those looking for a more peaceful dip in fresh waters. The pool comes alive at night with a fascinating underwater lighting of vibrant hues.

The hotel’s Spa is perfect for the weary or the beach bum gearing up for the next activity. Its bestselling offerings include the Hot Stone Massage, Sandstorm Massage, and Hilot Pinoy.

Each Deluxe Suite comes with two twin beds that can be arranged together or apart. It is equipped with a flat screen TV, iPod speakers and a strong Wi-fi connection. The toilet and bath in these spaces are designed according to international standards. The Ocean View Suite has all of those, too, except it has a king-sized bed, spacious bathroom and a balcony with loungers for full enjoyment of the suite’s namesake. For the top of the heap, the two Presidential

Suites pack all the offerings of Ocean View Suites, but with a much bigger space befitting of VIPs. It also comes with your own jacuzzi. Rooms aren’t the only place for relaxation at Boracay Sands. Beachfront loungers are available in front of the hotel facing the tranquil waters. Come and relax under the shine of the bright sun and the sound of the calm waves. Here, it’s just you and your own space. Boracay Sands understands that dining is a key

component of leisure and travel. The Boracay Sands Cafe presents an array of international selection, specializing in Italian cuisine, courtesy of veteran head chef Ricky Irider. This food and beverage outlet has 70 food items and 72 varieties of hot and cold beverages. Featured under these diverse collections are the Filipino favorite Adobo, the rich-flavored crispy Lechon Kawali and the refreshing Mango and Avocado Shakes. Of course, Chef Ricky made sure that Italian food gems are included in the menu. Go for the Spaghetti that perfectly mixes the richness of tomato sauce with the zing of pesto, served with homebaked bread. Baking is another strong suit of Chef Ricky, and the cafe offers fresh, homemade bread to customers. The Boracay Sands Café is open from 6am to 10pm, offering anything from breakfast buffet to serving a la carte dishes by the pool. Speaking of which, the hotel offers a pool for both adults and kids looking for a more peaceful dip in fresh waters. Open until 10pm, it comes alive at night with a mesmerizing underwater lighting of vibrant hues. Featured at the center are glittering specs that form the letter “S.” Complete your Boracay getaway

experience with Boracay Sands Hotel’s Spa. Guests are treated here the moment they step in with a soothing scent of eucalyptus, dim setting and gentle ambiance. It is perfect for the drained and weary or the beach bum gearing up for the next island activity. The Spa’s best-selling offerings include the Hot Stone Massage (a hit among Korean guests) and the signature service, the Sandstorm Massage. It also has a slew of new offers, including the Kahuna Massage, or the therapeutic massage technique from ancient Hawaiian “kahunas” meaning “wise man” or “shaman,” and the Hilot Pinoy, a traditional Filipino massage that uses banana leaves. The next time you find yourself strolling along Boracay Island's White Beach, remember that the beauty of the eye-catching Mediterranean building in Station 3 goes beyond the façade, and deep into the holistic experience it offers. Spending the long weekend or the upcoming holidays in Boracay? Call Boracay Sands to book in advance : (02) 510.10.99 (Manila Office); (036) 288.4966 to 67 (Boracay) or visit www. sandshotelboracay.com. For updates on promo, activities and other perks, follow our official FB page boracaysandshotel or on IG boracaysandsofficial.

Economy

A4 Friday, November 10, 2017 • Editors: Vittorio V. Vitug and Max V. de Leon

BusinessMirror

www.businessmirror.com.ph

Lapeña sets talks with China Customs Higher power rates on export, import volume ‘discrepancy’ this month–Meralco

By Rea Cu

@ReaCuBM

ustoms Commissioner Isidro S. Lapeña has set a meeting with his Chinese counterpart this month to discuss the “discrepancies” in Chinese export volumes to the Philippines and the shipment figures reported in the country by importers, according to the Department of Finance (DOF). During a recent DOF executive committee meeting, Lapeña said he had been invited by the Customs chief of China to meet and discuss ongoing trade relations between the two countries this November. Lapeña told Finance Secretary Carlos G. Dominguez III that he is bound for China to personally look into the trade discrepancies between both countries and to check the Philippine export records of the Bureau of Customs (BOC) Chinese counterpart agency. The BOC claims it has uncovered a massive gap between China’s export volumes to the Philippines and the shipment figures officially reported here by importers. Last year it was reported by the DOF that discrepancies amounting to P1.8 trillion have been found between the volume

₧231B The reported discrepancy in Chinese export volumes as against shipment figures reported in the country by importers, representing 2 percent of the Philippines’s GDP

of imports reported here and actual figures recorded by countries exporting to the Philippines. T h e v a l u e g a p t r a n s l a t e s i nt o

foregone revenues estimated be around P231 billion, representing 2 percent of the GDP of the Philippines, according to Dominguez. However, the finance chief raised the possibility that the trade gap could just be the result of timing issues, and the inclusion or exclusion of particular commodities in reporting. According to Lapeña, the wide discrepancy between China’s recorded exports and imports to the Philippines may be attributed to the gross misdeclaration or undervaluation of goods in terms of either volume or weight and the possible use of “consignees for hire,” which leads to goods released to hidden traders and not to the consignees on record. The latter practice allow the importer to evade the scrutiny of the Bureau of Internal Revenue, Lapeña said. He added that in both instances, misdeclaration or undervaluation and the use of consignees for hire, benchmarking and the submission of fake documents, allow traders to get away with underhanded schemes. Dominguez has instructed Lapeña to focus on China’s trade records and arrange a meeting with the Customs chief of that country to discuss and find possible solutions to bridge the massive trade gap. Lapeña said that during his visit to China, he will also discuss the government’s ongoing efforts to institute reforms in the BOC, on running after smugglers and improving revenue collections.

By Lenie Lectura

@llectura

ower rates this month will increase by P0.3436 per kilowatt hour (kWh) for a typical residential household, thereby bringing the overall rate from last month’s P9.2836 per kWh to P9.6272 per kWh. T he r ate i nc rea se t h i s mont h amounts to a P68.72 increase in the total bill of a typical residential household consuming 200 kWh, the Manila Electric Co. (Meralco) said on Thursday. The November rate increase is mainly due to the P0.1925 per kWh increase in generation charge, the largest component of an electric bill. Overall generation charge increased this November by P0.1925 per kWh, from P4.7155 per kWh in October to P4.9080 per kWh this month is primarily due to higher Wholesale Electricity Spot Market (WESM) charges and the depreciation of the peso against the greenback. Charges from the WESM increased by P0.4810 per kWh. Despite the reduction in Luzon power demand this month, spot-market prices increased due to tighter supply conditions. The share of WESM purchases to Meralco’s total requirements this month was 15 percent. Cost of power from independent power producers (IPPs) and powersupply agreements (PSAs) registered increases due to the weakening of the peso against the US dollar. Peso depreciation had a much larger

impact on IPP costs because around 97 percent of IPP costs are dollar denominated. On the other hand, the impact of peso depreciation on PSA costs was moderated by a lower share of costs in US dollars at around 58 percent. The P0.2868 per kWh increase in the cost of IPPs may also be attributed to lower average plant dispatch due to the scheduled outage of San Lorenzo Module 50 for the entire supply month. Despite higher fuel prices, the increase in cost of PSAs was tempered to P0.0076 per kWh due to improvement in average plant dispatch. The shares of IPPs and PSAs to Meralco’s total requirements stood at 41 percent and 44 percent, respectively. Transmission charge of residential customers increased by P0.0860 per kWh due to higher Nationnal Grid Corp. of the Philippines ancillary service charges. Consequently, taxes and other charges also went up by P0.0651 per kWh this month. Meralco’s distribution, supply and metering charges, meanwhile, have remained unchanged for 28 months after the registered reductions in July 2015. Meralco reiterated that it does not earn from the pass-through charges, such as the generation and transmission charges. Payment for the generation charge goes to the power suppliers, while payment for the transmission charge goes to the NGCP. Taxes and other public policy charges like the Feed in Tariff Allowance are collected by government.

BusinessMirror

www.businessmirror.com.ph

President and Chief Executive Officer (PCEO) the acceptance or non-acceptance of the proposal. The PCEO then endorses the recommendation of either acceptance or nonacceptance to the Board for approval. Acceptance of the proposal by the Board does not confer Original Proponent Status (OPS) to the proponent. OPS will only be given after the approval by both parties of the Certification of Successful Negotiation.

RATIONALE

Section 8 of Executive Order (EO) No. 423 dated 30 April 2005 mandates the National Economic and Development Authority (NEDA) to issue guidelines to govern joint venture (JV) agreements with private entities with the objective of promoting transparency, competitiveness, and accountability in government transactions, and, where applicable, complying with the requirements of an open and competitive bidding. In compliance, NEDA issued the Guidelines and Procedures for entering into JV agreements between the government and private entities (NEDA JV Guidelines) in 2008.

The NEDA JV Guidelines was subsequently revised in 2013. The revised NEDA JV Guidelines explicitly exempts from its coverage JV activities of government corporate entities in the exercise of its primary mandate to dispose government assets and properties. BCDA’s primary mandate under Republic Act (RA) No. 7227 or the Bases Conversion and Development Act of 1992, as amended, involves the disposition and/or development of government properties and assets, particularly the lands covered under the 1947 Military Bases Agreement between the Philippines and the United States of America. Thus, BCDA is exempt from the NEDA JV Guidelines and may craft its own rules and procedures to govern joint venture agreements with private entities. The Office of the Government Corporate Counsel (OGCC) confirmed the foregoing in its Opinion No. 145, Series of 2014, which states that BCDA may adopt its own guidelines in the development and disposition of its assets and operations of its facilities through JV arrangements, provided that principles of fairness, transparency and competitiveness are observed.

3. 4. 5. 6.3

These JV Guidelines, however, do not preclude BCDA from disposing or privatizing its assets, properties and facilities through other means. Pursuant to its approved Assets Disposition Plan, BCDA may dispose its lands and other assets through long-term lease or sale. PRINCIPLES

1.2 1.3 1.4 III.

The JV activity shall be consistent with the mandate and authority of BCDA under RA No. 7227, as amended, EO No. 62 prescribing the policies and guidelines to implement R.A. 7227, EO No. 429 amending EO No. 62, and other relevant laws, Executive Orders, and rules and regulations, to the extent applicable. The JV activity shall maximize the value of BCDA assets or shall be efficient or potentially efficient towards earning potential profits for BCDA while providing reasonable returns for the private sector partner; The JV activity shall not result in a conflict of interest for BCDA and shall delineate its role as regulator and as JV partner; and The JV activity may allow take-over by the private sector partner of the BCDA’s share in the JV Activity subject to BCDA’s divestment procedures and other requirements under relevant laws.

These Guidelines are issued for the following objectives: To prescribe the rules, regulations, guidelines and procedures in entering into JV Agreements with PSEs for projects/undertakings consistent with BCDA’s primary mandate;

1.2

To maximize the value of BCDA assets, properties and facilities through the proper development, disposition, and operations thereof;

1.3

To encourage participation of PSEs possessing expertise and technical capabilities in property, facilities, and projects development, and in operations and management, to enter into JV agreements with BCDA;

1.4

To make partnership with the private sector a viable, efficient, and practical alternative in pursuing the development goals of BCDA; and

1.5

To ensure that all JV agreements by BCDA are entered into through fair, objective and transparent processes and procedures that promote accountability in government transactions.

IV.

COVERAGE

Feasibility Study or a Business Case/Pre-feasibility Study of the Proposed Project;

iii.

Draft contract reflecting the terms and conditions in undertaking the JV activity, including the contractual obligations of the contracting parties and the ownership of the JV activity, project, or property after the termination of the JV Agreement. The draft contract shall include provisions on the following matters, as far as practicable: a. b. c.

BCDA shall create a Joint Venture Selection Committee (JVSC), which shall have five (5) members and composed of the following: a. b. c. d. e.

Chairperson – At least a third ranking officer of BCDA; One (1) Officer from the BCDA Legal Department; One (1) Officer knowledgeable in Finance; One (1) Officer knowledgeable in Project or Business Management and Operations; and One (1) Officer knowledgeable with the Technical Aspects/Requirements of the Project/ Business Undertaking.

The quorum in meetings of JVSC members shall consist of three (3) members. Each member is entitled to one (1) vote. 1.2

1.3

1.4

BCDA may opt to enter into a JV contractual agreement (unincorporated JV) or form a separate JV Company (incorporated JV) depending on which JV mode will provide the most efficient and viable financial arrangement for the JV partners. In either case, the JV agreement should clearly state BCDA’s intent to undertake a specific activity that is responsive to national development goals and objectives, as well as consistent with the BCDA’s mandate under its charter.

In case of an incorporated JV, the Corporation shall be formed by BCDA and the private sector partner under the following parameters:

The JV Company shall be permitted to derive income from the activities authorized under the JV Agreement during the term thereof. BCDA and the private sector partner shall be entitled to receive dividends from the net profits that would constitute portion of the unrestricted retained earnings of the company in each year in accordance with the JV Agreement; and The JV Company shall stipulate a fixed term of existence of fifty (50) years, which may be extended for another fifty (50) years, by an amendment of the articles of incorporation, pursuant to the Corporation Code of the Philippines, as amended. BCDA’s continued participation in the JV Company shall be determined by the attainment of BCDA’s objective in pursuing the investment. After attaining such objectives, BCDA may divest its interest in the JV Company based on existing laws, rules and regulations. Further, the withdrawal of BCDA’s capital contribution before the expiration of the said period is likewise encouraged; provided, that the divestment is made through competitive selection, initial public offering, or any other means that promote competition, fairness and transparency. In drafting the incorporation documents of the JV Company and other contracts governing the relationship between the BCDA and the private sector participant, the parties should consider the following guidelines, among others: (1) clearly defined business objectives; (2) specified degree of participation and the management roles of each party in the JV activity; (3) defined contribution of capital and ownership rights to property; (4) specified division of the profits, risks and losses; (5) identified dispute mechanism to avoid management impasses that may produce deadlock or litigation; (6) specified termination/liquidation of the JV Company and indicate buy-out provisions; (7) specified confidentiality terms; and (8) stipulated indemnification mechanisms.

1.5

The above parameters and other provisions pertaining to incorporated JVs shall also govern unincorporated JVs to the extent applicable.

1.6

In all cases, full divestment should be undertaken in accordance with all the related laws, rules and regulations, guidelines, legal issuances, as may be applicable with disposition of government assets and properties.

1.7

BCDA may select JV partners through either solicited or unsolicited mode. In either case, it must ensure that the process of selection, award, and approval are conducted in a transparent and competitive process that promotes accountability and efficiency through publication of the relevant terms and conditions of the competitive challenge/selection.

VI.

PROCESS FOR ENTERING INTO JV AGREEMENTS

1.1

Requirements/Conditions for proposed JV Activity. The proposed JV Activities shall comply with the following requirements/conditions: a.

The proposed JV activity is within the mandate of BCDA;

The proposed JV activity is responsive in meeting national or specific development goals and objectives; The JV activity proposal clearly describes the proposed investment, including its total cost, activities, objectives, sources of funding, extent and nature of the proposed participation of BCDA, and the relevant terms and conditions;

Ownership and nationality requirements under the Constitution and other pertinent laws shall be complied with; provided, that BCDA’s equity contribution in the JV Company shall be no more than fifty percent (50%) of the outstanding capital stock of the JV Company. BCDA’s contribution may be through assets (including equipment, land, utility franchise, development rights, leasehold rights, intellectual property, cash or anything of value), which shall be subject to a third party independent valuation. For as long as BCDA is involved in the JV undertaking, the private sector partner shall not sell/ transfer its interest in the JV Company without the express written consent of BCDA; BCDA shall be represented in the Board of the JV Company in proportion to its investment;

k. l.

The JV Company shall be incorporated and registered as a stock corporation in accordance with the provisions of Batas Pambansa Bilang 68, otherwise known as the Corporation Code of the Philippines, as amended, and the prevailing and applicable rules and regulations promulgated by the Securities and Exchange Commission (SEC);

1.2

The JVSC shall be responsible for all aspects of the selection process, including the preparation of selection/tender documents, publication of the invitation to apply for eligibility and to submit a proposal, pre-qualification of prospective private sector participants, conduct of preselection conferences and issuance of supplemental notices, interpretation of rules regarding the selection process, conduct of the selection process, evaluation of financial and technical proposals, resolution of disputes between private sector participants, and recommendation for the acceptance of the proposal and/or the award of the contract. The JVSC shall also be responsible for the processing of unsolicited proposals, from the receipt of proposals, the initial evaluation, and all other steps until rejection or contract award.

n. o.

p. q. r. s. t.

1.5

1.6

Selection Form reflecting the required information to properly evaluate the technical and financial proposal;

Forms of technical and financial proposals and performance securities; and

vi.

Other documents as may be required by the JVSC and other requirements of concerned regulatory agencies as may be pertinent or applicable to the JV activity.

Publication of Invitation to Apply for Eligibility and to Submit a Proposal (IAESP). The IAESP shall be advertised at least once in a newspaper of general nationwide circulation, and posted continuously at the website of BCDA. Interested PSEs shall be given at least thirty (30) calendar days from the last date of publication of the IAESP to apply for eligibility and to submit a proposal. Notwithstanding, BCDA may adjust said period as may be appropriate for the nature, scope, size and complexity of the proposed JV activity; provided, that the principles of transparency, competition and accountability are observed.

Decision to Award. Within seven (7) calendar days from the submission by the PCEO of the recommendation to award, the BCDA Board shall approve or reject the same. The approval shall be manifested by signing and issuing the “Notice of Award” to the Winning Private Sector Participant within seven (7) calendar days from approval thereof. BCDA shall post a corresponding “Notice” on its website declaring the award of the contract/JV undertaking to the Winning Private Sector Participant.

Notice of Award. The “Notice of Award” to be issued by the BCDA shall contain, among others, an instruction to the Winning Private Sector Participant to comply with conditions precedent for the execution of the JV Agreement and to submit compliance statements with regard thereto, within thirty (30) calendar days from receipt of the “Notice of Award” unless otherwise specified or extended by BCDA.

Supplemental Competitive Selection Bulletins and Pre-Selection Conferences.

Performance Security. Conditions precedent for the execution of the contract shall include the posting of a Performance Security in favor of BCDA. The JVSC shall determine which form of Performance Security it will require, which may be in the form of cash, bank draft or guarantee confirmed by a local bank (in the case of foreign bidders bonded by a foreign bank), letter of credit issued by a reputable bank, surety bond callable on demand issued by Government Service Insurance System (GSIS) or by a surety or insurance companies duly accredited by the Insurance Commission as follows:

Legal Capacity. The prospective private sector participant must meet the nationality and ownership requirements under the Constitution and other applicable laws and issuances. In case of a corporation or partnership, it must be duly incorporated or established under the laws of the jurisdiction of its incorporation or establishment.

Technical Capability. The prospective JV Partner, by itself or through member-firm/s in case of a consortium, or through consultant(s)/contractor(s) which the prospective JV Partner may engage for the project, must have successfully undertaken project(s) similar or related to the JV activity being proposed or bidded out. The cost and the relevant period in which the similar projects were undertaken shall be determined by the JVSC depending on the scope and value of the proposed Project or JV Activity. The individual firms and/or its consultant(s)/ contractor(s) may individually specialize on any or several phases of the project(s). A consortium proponent shall be evaluated based on the individual or collective experience of the member-firms and of the consultant(s)/contractor(s) that it has engaged for the project.

1.7

1.8

Eligible and Ineligible. BCDA, through its JVSC, shall, within a period of fifteen (15) calendar days after the deadline for submission of eligibility documents, complete the evaluation of the eligibility documents of the prospective JV Partners and determine which among them are “eligible” and “ineligible”. Within seven (7) calendar days after such determination, the JVSC shall duly inform the prospective JV partners in writing of their eligibility or ineligibility. In case of the latter, the grounds for ineligibility must be stated in the notice. Issuance of Tender Documents. BCDA shall make available the related competitive selection documents to all eligible private sector participants as soon as practicable to provide them ample time to examine the same and to prepare their respective proposals prior to the date of opening of the proposals. The time period from the last day of the issuance of tender documents to the date of opening of the proposal shall not exceed sixty (60) calendar days. The proposal parameters for the proposed JV activity should be transparent and fair. It should not, in any way, be tailor-made for or be meant to favor or give advantage to a particular private sector participant.

1.9

1.10

Supplemental Notices. On or before the pre-selection conference, a prospective private sector participant may submit to BCDA a written request for clarification as to any data or requirements or any part of the selection documents. Any substantive interpretation given by BCDA shall be issued in the form of a Supplemental Notice, and be furnished to all prospective private sector participants. BCDA may also issue Supplemental Notices to all prospective private sector participants at any time for purposes of clarifying any provisions of the selection documents, provided that the same are issued within a reasonable period to allow all private sector participants to consider the same in the preparation of their proposals.

Pre-Selection Conference. BCDA shall conduct a pre-selection conference at least thirty (30) calendar days before the deadline for the submission of proposals. Notwithstanding, BCDA may adjust said period as may be appropriate for the nature, scope, size, and complexity of the proposed JV activity; provided, that the principles of fairness, transparency, competition and accountability are observed.

i. ii. iii. iv. v. vi.

Debt

•

A notarized statement/certification from a domestic universal/commercial bank or any international bank recognized by the Bangko Sentral ng Pilipinas attesting that the prospective Project Proponent and/or members of the consortium are banking with them, and that they are in good financial standing and/or are qualified to obtain credit accommodations from such banks to finance the project.

For this purpose, the prospective JV Partner must submit Audited Financial Statements for the period/s as may be required by the JVSC, to prove its financial capability. d.

Acceptance of Criteria and Waiver of Rights to Enjoin JV Activity. In addition to the above, all prospective private sector participants shall be required to submit, as part of their qualification documents, a statement stipulating that the private sector participant: (i) has accepted the qualification criteria established by the JVSC of BCDA; and (ii) waives any right it may have to seek and obtain a writ of injunction or prohibition or restraining order against BCDA or its JVSC to prevent or restrain the qualification

Extension of Validity of Proposals. When an extension of validity of proposals is considered necessary, those who submitted proposals shall be requested in writing to extend the validity of their proposals before the expiration date of the same. However, private sector participants shall not be allowed to modify or revise the price or other substantial aspect of their proposals. Further, private sector participants must correspondingly extend the validity of their Proposal Security as a condition for the extension of the validity of their proposals. Private sector participants shall not refuse such request for extension except on the following grounds: (1) loss of interest in the Project, and (2) unforeseen financial meltdown/crisis. Private sector participants who refuse the request based on these grounds shall not forfeit their Proposal Security; provided that, in case of refusal based on unforeseen financial meltdown/crisis, private sector participant must submit an affidavit attesting to the facts alleged, and other specific documents proving the same.

iii. iv.

1.11

Submission of late proposals. Proposals submitted after the deadline for submission prescribed in the “Instructions to Private Sector Participants” shall be considered late and shall be stamped with the date and time received and be returned unopened.

1.12

Opening and Evaluation of Proposals

BCDA is not precluded from specifying other requirements for the technical and financial proposals that are best suited for the specific JV activity.

iii.

Single Responsive Bid. A single and responsive bid shall be considered for award if it falls under any of the following circumstances:

Compliance statements with regard to the financial parameters stated in the tender documents; Proposed cost of the JV activity, operation and maintenance cost, the amount of equity to be infused and debt to be obtained for the project, sources of financing, and all other related costs; and Financial proposal corresponding to the parameters set by BCDA.

ii.

Other documents to support the private sector participant’s technical proposal, as may be required by BCDA.

The Financial Proposal shall contain the following, as the case may be: i.

Validity and Return of Proposal and Performance Securities. The execution of the JV Agreement shall be made within the period of the validity of the Proposal Security. The required Proposal Security shall be valid for a reasonable period, but in no case beyond one hundred eighty (180) calendar days following the opening of the proposals. Unless earlier forfeited, Proposal Securities shall be returned to all private sector participants upon signing of the JV Agreement by the winning private sector participant. The Performance Security shall be valid within the period of one (1) year after the expiration of the JV agreement or end of the JV period, or as may be stipulated in the JV agreement. Upon certification by BCDA that there are no claims filed against the Winning Private Sector Participant after the expiration of the JV agreement or end of the JV period, the Performance Security shall be released by the former. As may be agreed upon in the JV agreement, a portion of the Performance Security shall be released upon compliance with corresponding milestones.

In the case of an Original Proponent of an unsolicited proposal, the Original Proponent shall post the Proposal Security on the first day of the publication of the Invitation to Apply for Eligibility and to Submit a Comparative Proposal in the amount and form stated in the tender documents. vii.

ii.

Opening of the Envelope for the Technical Proposal. At the date and time of the proposal opening stipulated in the “Instructions to Private Sector Participants”, the JVSC shall open only the first envelope containing the technical proposal and ascertain: (a) whether the same is complete in terms of the data/information required; and (b) whether the same is accompanied by the required Proposal Security in the prescribed form, amount, and period of validity. All private sector participants or their representatives present at the opening of the envelopes containing the Technical Proposal shall sign a register of the proposal opening.

Prospective Bidder/s Compliant with the Technical Requirements. In case no technically qualified prospective bidder is able to comply with financial requirements, BCDA may conduct negotiation on the financial terms/proposal in accordance with Section 6.13 (i) hereof.

Negotiation on the Financial Terms/Proposal under the Competitive Selection Process. In case the private sector participants, whose Technical Proposals are rated “passed”, are not able to comply with the financial requirements, BCDA shall request said participants to submit new Financial Proposals. Thereafter, the JVSC shall notify and negotiate with the proponent with the most advantageous Financial Proposal. The Technical Proposal shall remain valid and binding. In the event the JVSC fails to successfully negotiate with said proponent within thirty (30) calendar days reckoned from the date of notification, the JVSC shall negotiate with the next ranked most advantageous financial proposal, and so on and so forth, until a successful negotiation has been concluded. In case of a single technically qualified participant, BCDA may conduct negotiations on the financial terms or on the Financial Proposal and shall conclude said negotiation within thirty (30) calendar days. The Technical Proposal shall remain valid and binding. If there is no successful negotiation, BCDA shall conduct another competitive selection. In case of a second failure of competitive selection, BCDA may resort to Negotiated JV.

Opening of the Envelope for the Financial Proposal. Only the Financial Proposals of private sector participants who passed the technical proposal evaluation shall be opened for further evaluation. The financial proposals tendered by private sector participants who failed the technical proposal evaluation shall not be considered further, and shall be returned unopened, together with a notice stating the reasons for disqualification. The JVSC shall notify the private sector participants qualifying for the second stage of evaluation of the date, time and place of the opening of the envelopes for the financial proposal. The opening thereof shall follow the same procedure prescribed for the opening of the envelopes containing Technical Proposals. Evaluation of the Financial Proposal. The evaluation of the Financial Proposal shall involve the assessment and comparison of the Financial Proposals against the financial parameters stated in the tender documents and proposal parameters set by BCDA. The proposed financing plan must show that the same adequately meets the costs relative to the JV activity. The evaluation of Financial Proposals shall be completed by the JVSC within fifteen (15) calendar days.

Simultaneous Evaluation of the Technical and Financial Proposals. Simultaneous evaluation of the Technical and Financial proposals may be resorted to if the JVSC determines that the nature of the JV activity requires the appreciation of both the Technical and Financial Proposals as a whole in order to determine the best proposal. In such case, the proposal documents shall explicitly state the evaluation procedure. Simultaneous evaluation of the Technical and Financial proposals shall be completed within thirty (30) calendar days from the date the proposals are opened.

Prescriptive Periods. The periods stated for the evaluation of the Technical and Financial Proposals are prescriptive. The JVSC may adjust said periods as may be appropriate for the nature, scope, size, and complexity of the proposed JV activity. Provided, that the principles of fairness, transparency, competition and accountability are observed.

Rejection of Proposals. Non-compliance to the information required on either the first or second envelope shall be grounds for rejection of proposals.

Withdrawal and/or Modification of Proposals. Withdrawal and/or modification of proposals may be allowed upon written notice by the private sector participant concerned to the JVSC prior to the time and date set for the opening of the envelope containing the Technical Proposal as specified in the “Instructions to Private Sector Participants”. No proposals shall thereafter be modified or withdrawn. Proposal modifications received after said period shall be considered late and will be returned unopened. Withdrawal of proposals after the proposal opening date shall cause the forfeiture of the private sector participant’s Proposal Security.

Right to Reject All Proposals. BCDA reserves the right to reject any or all proposals, waive any minor defects therein and accept the offer it deems most advantageous to the government.

Breaking Tie Bids. In case tie bids occur under competitive selection or competitive challenge, the procedure for breaking tie bids shall be done through drawing of lots or similar methods that are non-discretionary and non-discriminatory such that it is based on sheer luck or chance.

Right to Outbid.

When the proposed JV Activity involves the development and/or privatization of a property which is subject of an on-going legal case or ownership claims, and the original private sector proponent is willing to assume any and all legal risks appurtenant to the property or facility subject of the proposed JV Activity;

When the proposed JV Activity involves the development and/or privatization of a property which requires the clearing and/or relocation of informal settlers and/or replication of military structures and facilities, the cost of which shall be for the account of the original private sector proponent;

ii.

When the proposed JV Activity involves the development and/or privatization, or management and operation of utilities and facilities within the BCDA– administered economic zones; and

iii.

When the proposed JV Activity involves a new or pioneering concept and/or innovative technology or method.

If BCDA determines in the foregoing cases that an offer made by a comparative private sector participant (challenger) other than the original proponent is superior or more advantageous to the government than the original proposal, the original proponent shall be given the right to outbid the better offer of the challenger. Outbidding by the original proponent of the challenger’s offer shall be subject to terms and parameters to be approved by the BCDA Board. The outbidding shall be within thirty (30) calendar days from receipt of notification from the BCDA of the results of the competitive challenge. If the original proponent submits a better offer than the one submitted by the challenger within the prescribed period, the JV activity shall be awarded to the original proponent. However, should there be no better offer received from the original proponent within the prescribed period, the JV activity shall be awarded to the challenger submitting the most advantageous proposal. In case, however, that no comparative proposal is received by the BCDA challenging the original proposal, the JV activity shall immediately be awarded to the original proponent.

If, after advertisement, only one PSE submits eligibility documents within the deadline stipulated in the IAESP, and such PSE meets the eligibility requirements and submits a bid which is responsive to the technical and financial requirements; If, after advertisement, multiple PSEs submit eligibility documents in accordance with the provisions of these Guidelines, but only one meets the eligibility requirements and such eligible PSE submits a bid which is responsive to the technical and financial requirements; If, after the eligibility check, multiple PSEs meet the eligibility requirements but only one submits a bid, and its bid is found to be responsive to the technical and financial requirements; or If, after qualification/evaluation of proposals, only one PSE meets the technical requirements but is not able to comply with financial requirements, and a negotiation on the financial terms/proposal in accordance with Section 6.13 (i) hereof is conducted and is successful.

Evaluation of the Technical Proposal. The evaluation of the first envelope containing the Technical Proposal shall involve the assessment of the technical, operational, environmental, and financing viability of the proposal, vis-à-vis the prescribed requirements and criteria/minimum standards, and basic parameters prescribed in the competitive selection documents. The JVSC shall complete the evaluation of the Technical Proposal within thirty (30) calendar days from the date the proposals are opened. Only those proposals that have positively passed the evaluation of the Technical Proposal shall be qualified and considered for the evaluation of the Financial Proposal.

Cash, manager’s check, irrevocable letter of credit, bank draft — a minimum of two percent (2%) of the private sector participant’s contribution to the JV activity; Bank Guarantee — a minimum of five percent (5%) of the private sector participant’s contribution to the JV activity; Surety Bond — a minimum of ten percent (10%) of the private sector participant’s contribution to the JV activity. Failure to comply with the conditions precedent for the execution of the contract within the prescribed thirty (30)-calendar day period or as specified or extended by BCDA will result in confiscation of the Performance Security. Within seven (7) calendar days from receipt of the compliance statements from the winning private sector participant, BCDA shall determine the sufficiency of the same, and notify the winning private sector participant accordingly.

Compliance statements with regard to the technical parameters as stated in the tender documents; Operational feasibility; Technical soundness, including proposed project timeline; Preliminary environmental assessment Cost and financing plan of the JV activity Proposal Security in the amount to be determined by BCDA, but which shall not be more than ten percent (10%) of the cost of the JV activity subject of the selection process. The Proposal Security shall be in the form of a bank manager’s check or cashier’s check issued by a universal or commercial bank.

a minimum amount of equity to the project measured in terms of the net worth of the company, or in the case of a consortium, the net worth of the lead member or the combined net worth of members, Set-aside deposit equivalent to the minimum equity required, or

iii.

The Technical Proposal shall contain the following, as applicable:

Financial capability shall be measured in terms of the ability of the prospective JV Partner to provide a minimum amount of equity to the JV activity, which shall be determined by the JVSC depending on the scope and value of the proposed project. The minimum equity shall be measured in terms of proof of the ability of the prospective Project Proponent and/or consortium to provide: •

ii.

Submission and Receipt of Proposals. Private sector participants shall be required to submit their proposals on or before the deadline stipulated in the “Instructions to Participants”. For eligible participants, proposals shall be submitted in two (2) separate sealed envelopes, the first being the technical proposal and the second the financial proposal.

The Right to Outbid provision is not an automatic right bestowed upon the original private sector proponent. This right shall only be applicable in the following cases:

•

Unsolicited JV Proposal. For purposes of these Guidelines, an unsolicited proposal shall refer to a project proposal submitted by the private sector, not in response to a formal solicitation or request by BCDA.

Responsibility of the Private Sector Participant. The prospective private sector participant shall be solely responsible for examining and understanding the requirements and terms and conditions of the selection documents with respect to the cost, duration and execution/operation of the project as it affects the preparation and submission of its proposal. BCDA shall not assume any responsibility regarding erroneous interpretations or conclusions by the prospective private sector participant from information furnished or indicated in the competitive selection documents.

Financial capability eligibility requirements. The JVSC shall determine before evaluation of eligibility, the minimum amount of equity needed for the JV activity.

Equity

Negotiated JV and Competitive Challenge Procedure.

brief description of the consortium, the individual members of the consortium and the nature and extent of the participation (capital of each member in relation to the whole capital); the lead member of the consortium, who is authorized by all the members to represent and sign any and all documents related to this bidding including the joint venture agreement with BCDA; and agreement of all members to be jointly and severally liable for the obligations of the consortium under the award/contract.

Each consortium participant should submit the required eligibility documents.

Qualification of Private Sector Participants. Any individual, partnership, corporation, firm, or consortium, whether local or foreign, may participate subject to the limits set herein:

The JV activity proposal shall contain all the required approvals needed to be secured from other government agencies/offices, if applicable.

Upon completion of the preliminary evaluation, the JVSC shall recommend to the BCDA

Clearly defined purpose and objective/s, contractual/agreement mode (whether incorporated or unincorporated JV), term and scope of the JV; Total cost of the JV activity, project specifications and features; The relationship between the parties, management roles in the JV activity, and a statement that the parties are actually co-venturers for the project, whether or not the contract is in the name of all members; The establishment of a fund by the parties to finance the work, together with the amount, type (cash, assets, etc.), and valuation of committed contributions of each party and when such contributions will be made, with the fund being deposited in a special bank account under dual control and all progress payments and other revenues being deposited in such account. If the equity/ contribution of the private sector is to be borrowed, a statement that there shall be no government guarantee for said loan; Procedure for additional capital infusions, if required, and a statement that there shall be no government guarantee for loans to be incurred by the private sector in case the additional contribution of the private sector is to be borrowed; A declaration of the participation of the parties and percentage in which profits and losses are shared, in proportion to the contributions of the party to the working fund. The amount of contribution of funds by the parties can be increased or decreased, depending on the contributions of equipment or expertise; Specified termination/liquidation of the JV Company, buy-out provisions, and details on the transfer of ownership of the JV activity/facility including provisions on what happens to the JV’s assets after the expiration of the JV agreement or end of the JV period. If equity other than cash is to be contributed, a statement as to how the property will be appraised and valued during and after the effectivity of the JV Agreement; Implementation milestones, regular meeting schedules, financial and periodic JV and progress reporting procedure; Definition of items which are to be considered as costs to the JV for the purpose of determining profit or loss and a description of items which are not reimbursable to members of the JV, and specified division of the profits and risks and losses; Performance security requirements of the project and the bonding obligations of the co-venturers; Undivided pro-rata interests held by the co-venturers on all assets of the JV; Restriction regarding assignment of private sector participant’s undivided prorata interests in assets of the JV; Cost recovery scheme, including payment to the government of royalties/ rights, the form/description and amount of earnings (cash, asset, etc.), whether they are in absolute amounts or variable, and the period and timing such earnings or payment shall be received. In case of non-cash payment or payment in form of asset, a statement/provision on how it will be valuated, the minimum value of the asset, and the determination/selection of asset such as how and who will determine/select the asset; Indemnification and liquidated damages; performance and warranty bonds; minimum insurance coverage; acceptance tests and procedures; validity of the performance security, warranty period and procedures; Grounds for and effects of contract termination/default including modes for settling disputes, procedure for handling guarantees, defects and insurance after termination, and threshold (in terms of amount, time/period, or both) for which non-payment or delay in payment and delay in starting the project/s shall be grounds for termination/rescission of the JV contract/agreement; The manner and procedures for the resolution of warranty against corruption; Compliance with all other laws, rules and regulations; Procedure and/or period for withdrawal by the government entity of its contribution to the JV, or exit divestment by the government entity of its interest in the JV, and substitution or addition of parties; Payout of funds; and Disputes arbitration clause.

iv.

The JV activity proposal establishes all the components in determining the over-all feasibility of the proposed JV activity, including the technical, financial, economic, and legal aspects. Moreover, in project risks distribution among JV partners, expertise and management track record of the JV partners in handling such risks (i.e., political, governance and economic) must be considered; and

When BCDA receives a proposal from the private sector for a JV activity, the JVSC shall conduct a preliminary evaluation. The preliminary evaluation shall be completed by the JVSC within thirty (30) calendar days upon submission of complete documents by the private sector proponent. The JVSC shall determine on preliminary evaluation the completeness of the proposal and whether the proposed JV activity meets the requirements of Section 6.1 hereof.

•

Minimum Design, Performance Standards/Specification, and other Financial and Economic Parameters. This shall include appropriate environmental standards by the Department of Environment and Natural Resources (DENR) and other standards by BCDA and other concerned regulatory agencies as may be pertinent or applicable to the JV activity. For the purpose of evaluating proposals, the following economic parameters, among others and where applicable, shall be prescribed: (i) discount rate, foreign exchange rate and inflation factor; (ii) maximum period of project construction; (iii) fixed term and price indices to be used in the adjustments of tolls/fees/rentals/ charges, and (iv) minimum period of repayment;

ii.

These guidelines shall apply to all JV agreements for the development and/or disposition of BCDA properties, whether owned, administered or controlled; the operations of BCDA assets and facilities; and the privatization and assignment of BCDA’s other vested rights and development projects. V. GENERAL GUIDELINES 1.1

Recommendation to Award. Within fifteen (15) calendar days from the completion of the evaluation procedure by the JVSC, the JVSC shall endorse its evaluation/ assessment of the proposals to the PCEO. Within seven (7) calendar days from the endorsement of the evaluation/assessment of the proposals by the JVSC, the PCEO shall recommend to the BCDA Board the approval of the award to the Winning Private Sector Participant. The PCEO’s Memorandum to the Board recommending the award should contain the JVSC recommendation, including minutes of negotiation meetings duly signed by all its members, and the JVSC evaluation/assessment report on the proposals explaining in clear terms the basis of its recommendations.

•

6.4 Selection/Tender Documents. The JVSC is responsible for the preparation of the selection/ tender documents appropriate for the mode of selection and the particular project. These may include: Instructions to Private Sector Participants. This contains the general description and objectives of the JV activity; proposal submission procedures and requirements; amount, form and validity period of proposal security; milestones; method, parameters and criteria for the evaluation of the proposals; minimum amount of equity required from the JV Partner; requirements of concerned regulatory bodies/agencies as may be pertinent or applicable to the JV activity; revenue sharing arrangement, dividends policy, if any; and nationality and ownership requirements as required by law;

Award and Approval of Contract a.

Should the parties not agree by the end of the negotiation period, BCDA shall have the option to reject the proposal by informing the PSE in writing of the grounds for rejection and thereafter accept a new proposal from another PSE, or to pursue the proposed activity through alternative routes other than JV.

1.13

If the private sector participant is a consortium, it must also submit a copy of the Consortium Agreement, which shall include the following information: •

Competitive Challenge. In case of unsolicited proposals, and in all cases where BCDA directly negotiates with a PSE for a proposed JV undertaking, the negotiated terms shall be subjected to a competitive challenge wherein other PSEs shall be invited to submit comparative proposals.

PURPOSE

1.1

Within seven (7) days after the successful negotiation, BCDA and the authorized representative of the PSE shall issue a signed certification that an agreement has been reached and both agree to submit the proposal to competitive challenge. Said certification shall also state that BCDA has found the PSE eligible to enter into the proposed JV activity and shall confer OPS to the latter. After the award of the OPS, the selection documents for the competitive challenge, including the draft contract, are prepared. The draft contract for the JV shall be reviewed by the OGCC.

BCDA may enter into a joint venture arrangement with a private sector entity (PSE) consistent with the following principles: 1.1

Cover Letter indicating the basic information of the Unsolicited Proposal such as: • Description of the Proposed Project (Rationale, Objectives) • Land Area and Location of the Proposed Development • Project Implementation Schedule • General Description of new technology or new concept • Other relevant information Company Profile • SEC Papers or the equivalent document from the country of incorporation which includes the Articles of Incorporation and the By-Laws • Latest General Information Sheet (GIS) • Latest Tax Returns Business Case or Concept Plan and Feasibility/Pre-feasibility study Draft Contract/Term Sheet Other Documents that are needed even if proprietary in nature

The BCDA and PSE shall negotiate on the terms and conditions of the proposed JV activity – i.e. legal, technical and financial components. The negotiation shall, as far as practicable, comply with the same process, requirements and conditions as in the case of solicited JV proposals. The negotiation shall be completed within sixty (60) calendar days upon acceptance by the BCDA of the proposal.

Accordingly, BCDA hereby issues these guidelines and procedures in establishing joint venture partnerships with the private sector with the aim of accelerating the development and maximizing the value of BCDA assets and properties.

II.

proceedings related thereto, the award of the contract to a successful private sector participant, and the carrying out of the awarded contract.

In case similar proposals are received after acceptance of the first proposal but before conferment of OPS, BCDA may either reject all such proposals or subject it to competitive selection/public bidding. Otherwise, the JVSC shall evaluate the proposals using a first-in time approach. Under this approach, the first complete proposal is evaluated and decided upon. The second complete proposal will only be entertained if the first one is rejected, or if there is a failure in the negotiation of the first proposal, and so on until an OPS is conferred. A complete proposal shall contain the following documents:

GUIDELINES ON THE PRIVATIZATION AND DISPOSITION OF BCDA PROPERTIES PROCEDURES FOR ENTERING INTO JOINT VENTURE (JV) AGREEMENTS WITH PRIVATE ENTITIES

Friday, November 10, 2017 A5

Failure of Competitive Selection. There shall be a failure of competitive selection in any of the following instances: i. ii. iii. iv.

No prospective bidder/s is/are eligible; No bids or proposals are received; No prospective bidder/s is/are able to comply with technical requirements; or No successful negotiation on the financial terms/proposal as provided under Section 6.13 (i) hereof.

In the event of a failed competitive selection brought about by instances stipulated above, the JVSC shall review the Terms of Reference (TOR)/bidding documents and conduct another competitive selection. In case of second failure of competitive selection, BCDA may resort to Negotiated JV. j.

Execution/Approval of the JV Agreement. The authorized signatory(ies) of the Winning Private Sector Participant and BCDA, shall execute and sign the JV Agreement, within seven (7) calendar days after BCDA notifies the Winning Private Sector Participant of its compliance to the conditions or requirements precedent to the execution of the contract. In the event of refusal, inability or failure of the Winning Private Sector Participant to enter into contract with BCDA within the time provided therefore, BCDA shall forfeit its Proposal Security. In such event, BCDA shall consider the private sector participant with the next ranked complying proposal as the Winning Private Sector Participant, and notify said private sector participant accordingly. If the next ranked complying private sector participant shall likewise refuse or fail to enter into contract with BCDA, its Proposal Security shall likewise be forfeited and BCDA shall consider the next ranked complying proposal, and so on, until a contract shall have been entered into. In the event that BCDA is unable to execute the contract with any of the complying private sector participants, a failure of competitive selection will be declared and the JV may be subjected to a competitive selection again.

Deviations and Amendments to the JV Agreement. BCDA shall not proceed with the award and signing of the contract if there are material deviations from the parameters, terms and conditions set forth in the proposal/tender documents that tend to increase the financial exposure, government liabilities and risks or any other factor that would cause disadvantage to government and any deviation that will cause prejudice to losing private sector participants. Violation of this provision shall render the award and/or the signed JV Agreement invalid.

Other Approvals for Contract. The entity tasked under the JV Agreement shall, as may be required under existing laws, rules and regulations, secure any and all other approvals for the contract, or the implementation thereof, from government agencies or bodies including the regulator, in the case of public utility projects. BCDA may provide the necessary assistance to its JV Partner in securing all the required clearances. The contract shall provide milestones in securing such other approvals required for the implementation of the contract. In case of unsolicited JV projects, BCDA will ensure that required approvals under existing laws shall be complied with as condition precedents prior to contract effectivity. Prior to the execution of the JV Agreement, the OGCC as the statutory counsel of BCDA, shall issue the corresponding Counsel’s Opinion.

Contract Effectivity. The contract shall be effective upon signing thereof by the President of BCDA unless another date is stipulated therein.

1.14

Process Flow. Proposals shall be processed following the flowchart in Annex A of these Guidelines, which indicates the basic activities in the evaluation of proposals and the minimum number of days by which proposals are processed.

1.15

Appeals Mechanism. Decisions of the JVSC may be appealed in writing to the BCDA Board: Provided, however, that the appellant has filed a prior motion for reconsideration and the same has been resolved by the JVSC. The appeal must be filed within seven (7) calendar days from receipt by the appellant of the resolution of the JVSC denying its motion for reconsideration. An appeal may be made by filing a verified position paper with the BCDA Board, accompanied by the payment of a non-refundable appeal fee, which shall not be less than one-half (1/2) of one percent (1%) of the project cost. The BCDA Board, or its authorized representative, shall act on the appeal within thirty (30)-calendar days. The decision of the BCDA Board, or its authorized representative, on the appeal shall be final and immediately executory. If the appeal is not resolved within said period, the appeal is deemed denied.

1.16

Amendments. These Guidelines may be amended and/or modified from time to time by BCDA, in consultation with the Office of the Government Corporate Counsel.

1.17

Separability. If any provision of these Guidelines is held or declared void or unenforceable by final judgment of a court of competent jurisdiction, the other provisions unaffected thereby shall remain in full force and effect.

1.18

Effectivity. These Guidelines and any subsequent amendment or modification thereto shall take effect immediately after publication.

APPROVED by the Board of Directors of the BCDA during its 6 September 2017 meeting.

The World BusinessMirror

Friday, November 10, 2017

Alaska signs gas-pipeline project deal with China

NCHORAGE, Alaska—The state of Alaska took a major step toward realizing a long-sought pipeline to move natural gas from the North Slope to Asia, siding with interests from China after major oil companies stepped back from the project.

The agreement Alaska Gov. Bill Walker signed last Thursday in Beijing with Sinopec, China Investment Corp. and the Bank of China does not guarantee a pipeline will be built, but it gives the lingering liquefied natural gas (LNG) project a jolt of life. “This is the market responding, and we’re very, very pleased with that,” Walker told reporters in a teleconference from Beijing. T he agreement was signed as both United States President Donald J. Trump and Chinese President Xi Jinping watched. No financial terms were released, but it’s been estimated that the project could cost $43 billion. The agreement means all parties will work on various aspects of the project, including marketing and financing with a status check in 2018. The goal, Walker said, is to have definitive contracts signed

by the end of 2018. Construction would start the following year, with the goal to have the pipeline operational by 2024 or 2025. Representatives of Sinopec and the Bank of China toured operations on the North Slope and visited facilities in Anchorage before making their decision, which had to be approved by the Chinese government. “This has been a long courtship with these folks,” said Keith Meyer, the president of the Alaska Gasline Development Corp., the state-sponsored entity advancing the project. Negotiations began in May, he added. In the agreement, Sinopec would be the customer buying the gas, the bank would be the lender for Sinopec and China Investment Corp. would be an investor if there were to be an equity investment in

the project. The Alaska corporation would retain majority ownership, Meyer, said. About 75 percent of the LNG would go to China, with Alaska retaining 25 percent for other regional markets in Asia, including Japan, South Korea and Vietnam. “I look forward to seeing the details but, at first glance, this joint development agreement is very encouraging for the thousands of Alaskans who never lost hope that a natural gas pipeline could one day become a reality,” Alaska House Speaker Bryce Edgmon, a Democrat, said in a statement. ”A pipeline project will bring jobs, investment and, perhaps most importantly a renewed sense of hope that Alaska’s best days are ahead of us, not behind.” The pipeline as envisioned would rival the famed trans-Alaska oil pipeline, a major building project of a generation ago. The natural gas pipeline is intended to tap into the rich natural gas reserves on the North Slope. Similar in length to the oil pipeline, it would transport the gas 800 miles (1,287 kilometers) to the coast on the Kenai Peninsula, where it would be liquefied and shipped to Asia. Such a pipeline has been a dream for Alaskans for years, seen as a way to provide economic certainty as oil production from

the North Slope declines.Estimates have put proven gas reserves on the North Slope overall at 35 trillion cubic feet. Alaska cou ld prov ide a generat ion’s worth of LNG to China, Walker told the Chinese president when Xi stopped in Anchorage on a layover in April. Millions have been spent a pipeline project, which has been marred in recent years by changes in direction, waning interest among state legislators and low natural gas prices. The state took lead on the project with the blessing of major oil companies, who plan to provide gas to the project from their leased North Slope fields but focused priorities elsewhere. Walker has said this would be a make-or-break year for the proposed project, and he’s been working to secure commitments from countries in Asia to buy the gas or be partners in the project. The state opened an office in Tokyo to help market its gas, and Walker himself has traveled abroad looking for commitments. This comes on the heels of a June announcement that the state-owned Alaska Gasline Development Corp. signed an agreement with the Korea Gas Corp., establishing a cooperative framework for the development of Alaska’s natural gas infrastructure. AP

US at climate talks may be like unhappy dinner guest

A SHINGTON—How’s this for awkward? The United States has a delegation at international climate talks in Bonn that will be telling other nations what they should do on a treaty that the president wants no part of. President Donald J. Trump has promised to withdraw the US from the 2015 Paris climate pact, where nations set their own goals to reduce the emissions of heat-trapping gases, but because of legal technicalities, America can’t get out until November of 2020. “It’s like having a guest at a dinner party who complains about the food but stays anyway,” said Nigel Purvis, who worked climate issues in the State Department for former presidents Bill Clinton and George W. Bush— and dealt with a similar situation. In 2001 Purvis was a climate negotiator for the US State Department when the new president, George W. Bush, had pulled out of a landmark global warming agreement the previous administration had championed. The US position is not just awkward, it’s potentially bad for the environment, scientists say. Most of the Bonn meeting will be coming up with rules on how countries report emissions of heat-trapping gases and how transparent they are. The US used to be the leading force in pushing for tougher rules and more openness, Purvis and other experts said. The rules probably won’t be

Delegates arrive at the convention center during the COP 23 Fiji UN Climate Change Conference in Bonn, Germany, on November 6. AP

as strong now, Purvis said. “If it’s left to Chinese leadership, which is what’s left, you will have less transparency,” said Massachusetts Institute of Technology management professor Henry Jacoby, who cofounded the Joint Program on the Science and Policy of Global Change. T he US gove r n me nt i s becoming increasingly isolated on climate change. On Tuesday, the Syrian government, mired in war and the last United Nations country not to sign the Paris accord, announced it would sign the pact. That means the US will be alone when it pulls out. State Department Spokesm a n He at he r Nau e r t re sponded to the Syrian decision by attacking its government. “If the government of Syria cared so much about what was put in the air, then it wouldn’t be gassing its own people,” she said. In a not-so subtle jab at Trump, French President Emmanuel Macron plans a separate “One Planet

Summit” in Paris to push his “Make Our Planet Great Again” agenda on December 12, the anniversary date of the climate accord. He invited more than 100 world leaders to his event, but not Trump. Instead, he invited lower-level US diplomats. “The rest of the world needs to get on and negotiate...and treat the US as more of an observer in the process, and the US should act that way,” said Greenpeace International Director Jennifer Morgan, who has been at these negotiations for more than 20 years. That’s not what the US plans. As meetings started on Monday, US negotiator Trigg Talley said, “ The president has made clear that we will engage countries on energy and climate-change related issues, and we look forward to working with colleagues and partners to advance the work here over these two weeks and beyond.” The administration is hosting a panel on “the clean and

efficient use of fossil fuels and nuclear power,” White House Deputy Press Secretary Raj Shah said on Tuesday. “It is undeniable that fossil fuels will be used for the foreseeable future, and it is in everyone’s interest that they be efficient and clean.” Of the major fossil fuels, coal is by far the biggest climate-change culprit. In 2014 coal accounted for 46 percent of the globe’s carbon-dioxide emissions, but was only 29 percent of its energy supply, accord ing to the Inter national Energy Agency. Three US governors, some mayors, corporate leaders and students will also be attending the Bonn talks. “We have one major player who is on the sidelines,” California Gov. Jerry Brown told The Associated Press. “ The rest of us will do ever ything we can to keep advancing efforts and keep doing what is needed to reduce carbon emissions. There is no time to wait.” AP

www.businessmirror.com.ph

US tightens travel rules to Cuba, bars businesses

ASHINGTON— A mer icans seek ing to visit Cuba must navigate a complicated maze of travel, commerce and financial restrictions unveiled on Wednesday by the Trump administration, part of a new policy to further isolate the island’s communist government. Now of f-limits to United States citizens are dozens of Cuban hotels, shops, tour companies and other businesses included on a lengthy American blacklist of entities that have links to Cuba’s military, intelligence or security services. And most Americans will once again be required to travel as part of heavily regulated, organized tour groups run by US companies, rather than voyaging to Cuba on their own. The stricter rules mark a return to the tougher US stance toward Cuba that existed before former President Barack Obama and Cuban President R au l Castro restored d iplo matic relations in 2015. They come as President Donald J. Trump tries to show he’s taking action to prevent US dollars from helping prop up the Cuban government. “ T hese measures confir m there is a serious reversal in bilateral relations thatz has occurred as a result of the decisions taken by the government of President Donald J. Trump,” said Josefina Vidal, the top Cuban diplomat for North America. Still, the policy is only a partial rollback of Obama’s changes. Cruise-ship visits and direct commercial flights between the countries will still be permitted. Embassies in Washington and Havana stay open. The rules are designed to steer US economic activity away from Cuba’s military, intelligence and security services, which dominate much of the economy through state-controlled corporations. The goal is to encourage financial support for Cuba’s growing private sector, said senior Trump administration officials, who briefed reporters on a conference call on condition they not be quoted by name. To that end, the Treasury Department said it is expanding and simplifying a license that allows some US exports to Cuba despite the embargo. They include tools and equipment to build or renovate privately owned buildings. “We have strengthened our Cuba policies to channel economic activity away from the Cuban military and to encourage the government to move toward greater political and economic freedom for the Cuban people,” Treasury Secretary Steven Mnuchin said. Trump announced his new policy in June during a speech i n M i a m i ’s L i t t l e H a v a n a neighborhood, the cradle of Cuba n-A mer ic a n resi st a nce to Castro’s government. The administration took several months to finalize the details of the new rules, on Thursday. The new policy maintains several categories of travel to Cuba that are permitted despite the embargo, which carries on decades after the Cold War’s end. Americans can still travel on educational and “people to people” trips,z as well as visits designed to support the Cuban people by patronizing privately owned small businesses that have popped up across the island in recent years. But those traveling to support Cuba’s people must have a daylong schedule of activities designed to expose them to Cubans and steer dollars toward citizens,

such as renting rooms in private homes. Those on organized, people to people or educational visits must be accompanied by a representative of the US-based group organizing the trip. Vidal, the Cuban diplomat who was the public face of Cuba’s opening with the US during the Obama administration, said the policy would harm Cuba’s economy, A mer ican citizens and US businesses. The rules were also quickly denounced by travel groups and proponents of closer US ties to the island. “Cuba is still open for business,” said Charel van Dam of the Cuba Travel Network. “It is still possible for people to travel, but I think these announcements will serve mainly as something to scare off people who want to visit.” Sen. Patrick Leahy, DemocratVermont, a vocal advocate of improved US-Cuban relations, noted the announcement came as Trump was in China pushing more US business engagement with another communist-run country. “The hypocrisy of the White House ideologues is glaring,” Leahy said. The rules come amid deep strains in the US-Cuba relationship stemming from invisible, unexplained attacks that have harmed more than two dozen US government personnel in Havana since 2016. The attacks led the Trump administration to order most of its diplomats to leave Cuba in September and issue a sweeping travel warning urging Americans to stay away. Officials insisted that the new, tougher rules had no connection to the attacks. The US first complained to Cuba’s government about the attacks in February, four months before Trump announced his broader policy intentions. Some e xcept ions w i l l accom mod ate A mer ic a ns who a l ready pl a n to v isit Cuba. T hose who booked “people to people” tr ips before Tr ump’s June announcement w il l be e xempt, a long w it h A mer icans who organized education tr ips before the r u les star t on T hursday. Business dea ls a lready reached w ith entities on the prohibited list w il l be a l lowed to proceed. It’s unclear how aggressively the US will police the new rules. Officials said they would use information obtained from several US agencies to catch violators, who could be subject to penalties and criminal prosecution. The blacklist bars business w ith the large militar y-r un corporations that dominate the Cuban economy. These include GAESA and CIMEX, holding companies that control most retail business on the island; Gaviota, the largest tourism compa ny ; a nd Habag u a ne x, which runs Old Havana. It also targets a new cargo port and special trade zone outside the city of Mariel that has been the focus of Cuba’s efforts to draw foreign investment in manufacturing and distribution. Bl ac k l isted hotels inc lude the Manzana Kempinski, which opened w it h g reat fanfa re t h is yea r as Cuba’s f irst t o m e e t t h e i nt e r n at i o n a l f ive -st a r st a nd a rd. T he overall impact on American business with Cuba will likely be limited. Trade is sparse. Many American travelers a lready stay at hotels not on the no-go list, and the company that imports most A mer ic a n food produc ts to Cuba is similarly unaffected. Bringing home limited quantities of rum and Cuban cigars is still allowed, officials said. AP

The World BusinessMirror

www.businessmirror.com.ph

Friday, November 10, 2017

North Korea going online

YONGYANG, North Korea—Ever so cautiously, North Korea is going online. Doctors can consult via live, online video conferencing, and lectures at prestigious Kim Il Sung University are streamed to faraway factories and agricultural communes. People use online dictionaries and text each other on their smartphones. In the wallets of the privileged are “Jonsong” or “Narae” cards for e-shopping and online banking. Cash registers at major department stores are plugged into the Web.

It’s just not the World Wide Web. This is all done on a tightly sealed intranet of the sort a medium-sized company might use for its employees. The free flow of information is anathema to authoritarian regimes, and with the possible exception of the African dictatorship of Eritrea, North Korea is still the least Internet-friendly country on Earth. Access to the global Internet for most is unimaginable. Hardly anyone has a personal computer or an e-mail address that isn’t shared, and the price for trying to get around the government’s rules can be severe. But for Kim Jong Un, the country’s first leader to come of age with the Internet, the idea of a more wired North Korea is also attractive. It comes with the potential for great benefits to the nation from information technology—and for new forms of social and political control that promise to be more effective than anything his father and grandfather could have dreamed of. It also allows for the possibility of cyberattacks on the West. Pyongyang’s solution is a twotiered system where the trusted elite can surf the Internet with relative freedom while the masses are kept inside the national intranet, painstakingly sealed off from the outside world, meticulously surveilled, and built in no small part on pilfered software.

The regime created, in other words, an online version of North Korea itself.

Surfing the intranet

RISING from Ssuk Island in the Taedong River, which divides Pyongyang east and west, is a building shaped like a colossal atom. The “knowledge sector” is a key priority for Kim, and the sprawling, glassy Sci-Tech Complex, a center for the dissemination of science-related information throughout the country, is one of his signature development projects. It houses North Korea’s biggest e-library, with more than 3,000 terminals, where factory workers participate in tele-learning, kids in their bright red scarves watch cartoons and university students do research. Pak Sung Jin, a 30-year-old postgraduate in chemistry, came to work on an essay. It’s a weekday and the e-library is crowded. Unlike most North Koreans, Pak has some experience with the Internet, though on a supervised, need-only basis. If Pak needs anything from the Internet, accredited university officials will find it for him. As a scholar and a scientist, Pak says, it’s his patriotic duty to be on top of the most up-to-date research. He echoes the official condemnation that the Internet has been poisoned by the American

In this May 5, 2015, file photo, a man sits in front of portraits of the late North Korean leaders Kim Il Sung (left) and Kim Jong Il as he uses his smartphone in Pyongyang, North Korea. AP

imperialists and their stooges. “There ought to be a basic acceptance the Internet should be used peacefully,” he says. Today, he is relying on the Internet’s North Korean alter ego, the national intranet. Below a red label that states his black “Ullim” desktop computer was donated by Dear Respected Leader Kim Jong Un, what’s on Pak ’s screen is for North Korean eyes only. The internet protocol address, 10.76.1.11, indicates he’s on the walled-off network North Koreans call Kwangmyong, which means brightness or light. Using the “Naenara” browser—the name means “my country” but it’s a modified version of FireFox—Pak visits a restaurant page, his university web site, and cooking and online shopping sites. There are very few actual sites on Kwangmyong. An official at the Sci-Tech Center said they number 168. They are spread across separate networks for government agencies, schools and libraries and companies. It’s all domestically run, though governmentapproved content culled from the Internet can be posted by administrators, primarily for researchers like Pak. North Korea’s national intranet concept is unique and extreme even when compared with other information-wary countries. China and Cuba, for example, are well-known for the extent of control the government exerts over what citizens can see. But that is done primarily through censorship and blocking, not complete separation. Like most Nor th Korean computers, the desktops at the Sci-Tech Complex run on the “Red Star” operating system, which was developed by the Korea Computer Center from Linux open-source coding. Red Star 3.0 has the usual widgets: the Naenara browser, e-mail, a calendar and time zone settings, even “kPhoto” (with an icon that looks a lot like iPhoto). Older versions featured a Windows XP user interface, but it now it has a Mac design, right down to the “spinning beach ball” wait icon. Versions of Red Star that have made it out of North Korea and into the hands of foreign coding experts also reveal some

rather sinister, and for most users invisible, features. A ny at te mpt to c h a n ge it s core f unctions or disable v ir us checkers resu lts in an automatic reboot c ycle. Files dow nloaded f rom u n iversa l ser i a l bu s a re watermarked so that authorities can identif y and trace cr imina l or subversive activ it y, a secur it y measure that ta kes aim at the

spread of unauthor ized content f rom Sout h Korea, C h ina a nd elsewhere. Red Star also uses a trace viewer that takes regular screenshots of what is being displayed. The screenshots can’t be deleted or accessed by the typical user but are available for checking if a trained government official decides to take a look. Outside North Korea, Android phones have a similar trace-viewer feature, noted Will Scott, who taught computer science at the Pyongyang University of Science and Technology in 2013, and is now a doctoral student at the University of Washington. But the Red Star version reflects the regime’s very specific surveillance and violationbusting priorities. It doesn’t collect much more than the Android would; however, it is designed to make getting at that information easier for a local authority who isn’t an expert programmer. Scott said the North has been “very effective” in using such technology to serve its goals. Nat Kretchun, deputy director of the Open Technology Fund, said the kinds of censorship and surveillance software in Red Star and the mobile operating systems of phones and tablets reveal a new information control strategy. Under Kim’s predecessors, the flow of information was primarily controlled through a resource-intensive human network—the State Security Ministry’s “thought police,” for example, or Pyongyang’s iconic traffic controllers—that kept tabs on what people were up to. But the advent of the Internet and advances in communication technology poked holes in that strategy, particularly among the better educated, younger and more affluent, the very segment of society that could be most likely to pose a political threat. So, while maintaining its old

school tactics on the ground and enforcing the blackout of the global Internet, North Korean officials have learned to adapt by using the online devices themselves as yet another tool for surveillance. “In North Korea cell phones and intranet-enabled devices are on balance pro-surveillance and control,” said Kretchun, who has been studying North Korea’s relationship to the Internet for years.

Smartphone, iPad

THE most common online experience for North Koreans isn’t on a laptop or desktop. It’s on a smartphone. A decade ago, only a small cadre of select regime and military officials had access to smartphones. Now, according to the main provider’s most recent financial reports, there are an estimated 2.5-3 million mobile phones in North Korea, a country of 25 million. T he rapid spread of mobi le phones is one of the biggest success stories of the Kim Jong Un era. After a couple of false starts, the North’s foray into mobile telecoms began in earnest in 2008 under Kim Jong Il. But it has truly blossomed over the past five years with the introduction of 3G services, thanks in large part to two foreign investors—Loxley Pacific of Thailand and Egypt’s Orascom Telecom Media and Technology. Like the walled-off intranet, North Korea’s phones deny access to the outside world. Local phones allow North Koreans to call and text each other, play games, surf the domestic intranet and access some other services. Users have hundreds of ring tones to choose from, and can get weather updates, look words up in dictionaries and snap selfies. But they cannot receive or place calls to numbers outside that network—the rest of the world, in other words. Continued on A8

The World BusinessMirror

Friday, November 10, 2017

Pope Francis seeks to defuse Korea tension, push nuclear disarmament

ATICAN CITY—Pope Francis is seeking to defuse rising nuclear tensions on the Korean Peninsula and to boost support for disarmament with a Vatican conference that will bring together 11 Nobel Peace Prize winners, United Nations and the North Atlantic Treaty Organization officials, and representatives from a handful of countries with the bomb. For some analysts, Francis’s address at the gathering on November 10 will provide a welcome break in the heated war of words between US President Donald J. Trump and North Korean leader Kim Jong Un as Trump continues his first trip to Asia as president. The Vatican hopes the conference will do more by further discrediting the Cold War-era idea that atomic weapons serve a purpose for deterrence and global security. “For some people, it’s pie in the sky,” conference organizer and top papal adviser Msgr. Silvano Tomasi said. “But at this time, I think it’s very important to alert public opinion that the presence in the world of thousands of atomic bombs doesn’t guarantee the security of anyone.” The conference is the first major international gathering since 122 countries approved a new UN treaty in July calling for the complete elimination of nuclear weapons. However, none of the nuclear powers and no Nato members signed on. They argued the treaty’s lofty ideals were unrealistic, given the rapid expansion of North Korea’s nuclear weapons program.

Oil nears $57 after roller-coaster day as US output reaches record

IL traded near $57 a barrel after swinging wildly in the previous session, as investors focused on US crude production that climbed to the highest in more than three decades. Futures were little changed in New York. Prices on Wednesday closed 0.7 percent lower after soaring 1.3 percent as multiple platforms suspended operations in the Gulf of Mexico. US output expanded for a third week to 9.62 million barrels a day, the highest in weekly Energy Information Administration data going back to 1983. Crude inventories rose 2.24 million barrels last week, compared with a 2.45-million drop forecast in a Bloomberg survey. Oil has advanced about 20 percent since the start of September on signs the Organization of Petroleum Exporting Countries and its allies will extend output cuts past March. An anticorruption probe in Saudi Arabia, the world’s top exporter, has added to price gains as arrests were seen as consolidating power for the crown prince who has supported prolonging the production reductions. “Higher prices are a definite factor in bringing production back on—this is a problem for Opec,” said Michael McCarthy, a chief strategist at CMC Markets in Sydney. “The first response comes from the most agile producers, but once it looks like oil prices could be sustained at higher levels, then even less agile producers can come back online.” West Texas Intermediate for December delivery was at $56.89 a barrel on the New York Mercantile Exchange, up 8 cents, at 7:50 a.m. in London. Total volume traded was about 27 percent below the 100-day average. Prices lost 39 cents to $56.81 on Wednesday, falling for a second session. Bloomberg News

The treaty received a boost from the Nobel committee when it awarded the peace prize this year to the International Campaign to Abolish Nuclear Weapons, an advocacy group that was instrumental in getting the pact approved. ICAN’s executive director, Beatrice Fihn, is one of the Nobel laureates who will address the Vatican conference. “What’s so significant about this conference is that it draws attention to and underscores the treaty and the Nobel prize, and says, ‘This is serious stuff,’” said George Lopez, who served on an experts panel that advised the UN Security Council on North Korea sanctions. Francis is “keeping the issue alive and adding a new dimension,” said Lopez, who is attending the conference as a member of a delegation from the University of Notre Dame. The Holy See has consistently opposed nuclear weapons and supported nonproliferation and disarmament efforts, and history’s first Latin American pope has strongly backed that line. But Francis brings to the table arguments based on his other papal

Archbishop Silvano Maria Tomasi speaks to The Associated Press during an interview in Rome on November 8, ahead of an International conference at the Vatican on Friday on nuclear weapons. AP

priorities: that atomic weapons are a threat to the environment, that the costs of developing them could be put to far better use, and that the world would be a far safer place if dialogue prevailed over confrontation. To m a s i s a i d t h e Va t i c a n hopes to send both Washington and Pyongyang a clear message through the conference: that the only way forward is dialogue, without “excessive aggression” in rhetoric. Francis “keeps saying we need to build channels of communication and not walls,” Tomasi said in an interview. “If the conference that we are organizing succeeds in conveying this message, we have done our jobs.” One outcome the Vatican is ruling out—at least publicly—is that the conference could lead to a mediation role of some kind. The Vatican under Francis has facilitated talks between the US and Cuba and, more recently, between the Venezuelan government and opposition. But it has denied any interest in mediating the Korean standoff and suggested that other experienced facilitators, such

as Norway, could play that role. The United States is set to be represented at the conference by its deputy ambassador to the Holy See. Ambassador Calista Gingrich hasn’t presented her credentials yet and can’t participate in official Vatican events. Russia is sending a top nuclear expert, and Nato’s deputy secretary-general, Rose Gottemoeller, is scheduled to speak. China and North Korea have been invited, but organizers said they do not know if the countries would send representatives. Neither has diplomatic relations with the Holy See. B e yond t he c u r rent K orea n st a ndof f, t here i s a g row i ng con sen su s — a s e v idenced by t he 122 cou nt r ies bac k ing t he U N t reat y—t h at gover nments shou ld no longer regard nuc lea r c apabi l it y a s t he de f i n i ng ba rometer of n at ion a l , re g ion a l or g lob a l s e c u r it y, Tom a si sa id. “Instead of ‘Let’s guarantee peace or security with the threat of mutual destruction,’ let’s try to construct in a positive way a sense of trust, solidarity, cooperation,” he added. AP

Saudi billionaires said to move funds to escape asset freeze

OME Saudi billionaires and millionaires are seeking to move assets from the kingdom and the wider Gulf Cooperation Council (GCC) region as what authorities call a crackdown on corruption intensifies, according to six people with knowledge of the matter. The country’s wealthiest people are in talks with banks, asset managers and advisers to try to shift cash and other liquid holdings from Saudi Arabia and neighboring states, amid concerns that funds could be frozen and more arrests will be made, the people said. They asked not to be identified because the matter is private. Saudi security forces arrested more than 10 princes, as well as dozens of ministers, former officials and businessmen in a surprise weekend purge. The central bank asked lenders in the kingdom to freeze the accounts of dozens of individuals who aren’t under arrest, as well as the assets of those being detained, people familiar with the matter said. The Saudi attorney general said in a statement released on Monday that the weekend arrests were only “phase one” of the crackdown. The arrests have prompted investors from within the region to sell, pushing benchmark stock indexes lower. The selloff across the GCC has cost stocks $17.6 billion as of Wednesday, dragging the collective market capitalization for bourses in the region to

$900 billion, according to data compiled by Bloomberg. Gulf investors sold a net $92.5 million of Dubai stocks on Tuesday, the most since February. The shift in assets is “unsurprising given a true corruption cleanup would go much further than the events of the weekend,” said Emad Mostaque, co-chief investment officer of emergingmarkets hedge fund Capricorn Fund Managers Ltd. The central bank “has strong systems in place to track flows and excellent relationships with major banks globally so any assets moved offshore could be frozen and returned if from corruption.” The benchmark Tadawul All Share Index was down 0.4 percent at 11:40 a.m. in Riyadh. The United Arab Emirates central bank asked financial institutions to provide information on the accounts of 19 Saudi citizens, people familiar with the matter said on Thursday. The regulator requested to be informed of any accounts, deposits, investments, financial instr uments, credit facilities, safe deposit boxes or financial transfers linked to the people, according to a circular seen by Bloomberg.

Transformation plan

THE crackdown has reinforced speculation that King Salman is clearing any remaining obstacles to the accession of his son, Prince Mohammed bin Salman, to the throne. It comes at a time when

the economy is struggling to cope with the slump in oil prices: Unemployment among Saudis is rising and non-oil gross domestic product is barely expanding. Saudi Arabia is also in the midst of implementing a transformation plan aimed at weaning the economy off oil. As part of these efforts, the government plans to create the world’s largest sovereign fund and sell hundreds of state assets, including Saudi Arabian Oil Co., as well as stakes in the stock exchange, soccer teams and flour mills. The short-term impact of the crackdown is “uncertainty,” said Allison Wood, Middle East and North Africa analyst at the Control Risks strategy firm, which advises companies on investments, on Wednesday. “Whether there will be a positive long term impact, I think that would depend on if he is able to establish the rules for the new business environment in Saudi Arabia.’’

Renewed confrontation

PRINCE Mohammed has consolidated his grip on power since his father took the throne in 2015, and now controls defense, oil and economic policies. King Salman this week also dismissed Prince Miteb bin Abdullah from his post as head of the powerful National Guard, taking out one of the last princes who had survived a series of cabinet reshuff les promoting allies of the crown prince. Bloomberg News

www.businessmirror.com.ph

North Korea going online Continued from A7

It’s easy enough for North Koreans to buy phones, though the phones must be registered and approved. A good “Pyongyang” or “Arirang” model smart phone costs from $200 to $400. More basic phones go for much less, especially if the phone is secondhand. On the second floor of the Pottonggang IT center, a clerk stands behind a glass display cabinet filled with tablets and USB flash drives. Signs on the wall behind her advertise antivirus software and apps to put on mobile phones, which they can do by Bluetooth at the store. One of the most popular apps is a role-playing game based on “Boy General,” a locally created hit animé series. It costs $1.80. Foreigners in North Korea are relegated to a different network and cannot make calls to, or receive calls from, local numbers. They can buy local phones if they want, but the devices will be stripped of the apps and features that they normally carry and securely coded so that the apps can’t be added on later. Wi-fi use is banned for North Koreans, and tightly restricted and monitored to block surreptitious piggybacking on foreigners’ signals. North Korea undoubtedly imports and rebrands some of its IT products. But over the past few months, two companies have generated quite a stir among Apple fans with products billed to be wholly domestic: the “Jindallae (Azalea) III” mobile phone and the “Ryonghung iPad.” T he g ad get s’ i n souc i a nt similarit y to Apple products, and the f lat-out appropr iation of the “ iPad ” name, isn’t espec i a l ly su r pr i si ng. K i m Jong Un l i kes Apple produc t s — he h a s b e e n photo graphed w ith a MacBook Pro on his pr ivate jet, and even had a 21-inch iMac on the desk beside him when state media showed him rev iew ing a nuclear “US mainland strike plan” four years ago. It seems North Korean coders have also lifted some ideas from Apple. Outside experts believe a program similar to what Apple uses in its OS X and iOS is believed to be the basis of the booby-trap that thwarts attempts to disable security functions in Red Star. It’s now a staple on North Korean phones. And by 2014, all mobile-phone operating systems had been updated to include the watermarking system to reject apps or media that don’t carry a government signature of approval. It’s the same mechanism used by Apple to block unauthorized applications from the App Store, but in North Korea’s case serves instead to control access to information. “The stakes are infinitely higher in North Korea, where communications are monitored and being caught talking about the wrong thing could land you in a political prison camp,” Kretchun noted.

Wired elites

WHILE blocking off the masses, North Korea allows more Internet access to a small segment of society, including the country’s elite and its cybersoldiers. To create a snapshot of the online behavior of the elite, US-based cyber-threat intelligence company Recorded Future and Team Cymru, a nonprofit Internet security group, analyzed activity in IP ranges believed to be used by North Korea from April to July this year. They found that the limited number of North Koreans

with access to the Internet are much more active and engaged in the world and with contemporary services and technologies than many outsiders had previously thought, according to Priscilla Moriuchi, Recorded Future’s director of strategic threat development and a former NSA agent. “North Korean leaders are not disconnected from the world and the consequences of their actions,” she said. How deep the access goes isn’t k now n. R ecorded Future and Team Cy mr u officia ls contacted by T he A P ref used to comment on details of t heir d ataset, inc lud ing how many “elite” users were obser ved a nd how fore ig n tour ists or residents in the Nor th were excluded. Even so, it stands to reason at least some members of the North Korean leadership have the access they need to keep up on world events and that specialist agents are allowed to monitor and cull intelligence from the Internet. There is also strong evidence that North Korea allows people involved in hacking or cyber operations the access necessary for a deep engagement in cyber attacks and cybercrime. According to the FBI, the North ’s bigger hacks include the recent WannaCry ransomware attack, which infected hu nd red s of t hou s a nd s of computers in May and crippled par ts of Br ita in’s Nationa l Health Ser vice. It has been linked to attacks on the Bangladeshi central bank last year and on banks in South Korea going back to 2013. There was also the 2014 hack of Sony Pictures over the release of the Interview, a black comedy t h at g raph ic a l ly por t rayed Kim Jong Un being killed. US authorities recently dubbed North Korea’s cyber presence “Hidden Cobra.” Weapon i z i ng c y bers pace is a log ica l opt ion for t he Nor th because it can be done at relatively low cost and, at the same time, denied, according to a Congressiona l repor t submitted in Aug ust. Pyong yang has denied hacking allegations, but the ability to carr y out sophisticated c yber operations is a powerful military weapon in the hands of a state. Just as assuredly as North Korea is developing its nuclear and missile capabilities, most experts assume, it’s honing its cyber warfare tool box. Beau Woods, the deputy director of the Cyber Statecraft Initiative at the Atlantic Council, cautioned of a “preponderance of question marks” regarding North Korea’s cyber skills. But he warned of how potentially devastating a more cyber-active North Korea could be. Those concerns are turned on their head back at the Sci-Tech Center in Pyongyang. Pak, the chemist, supports the official line in North Korea that the increasing danger of cyber attacks and slanderous Internet propaganda comes from the US against Pyongyang. The government says that justifies “protective” walls to shield the masses from aggressive propaganda, and virtually requires extensive cybersecurity measures in the name of national defense. “Don’t you see how severe the anti-Republic slander of our enemies on the Internet is? ” Pak said, although the restr ictive policies make it difficult for him to carry out his research. “There are a lot of cases where the Internet is being used to raise hostility against us.” AP

www.businessmirror.com.ph

Banking&Finance BusinessMirror

Editor: Jun B. Vallecera • Friday, November 10, 2017

Higher productivity, thinning provisions push EastWest net income 60 percent higher

By Bianca Cuaresma

@BcuaresmaBM

otianun-led EastWest Bank reported nine-month net income totaling P3.75 billion, up 60 percent over the same period last year, which sustained the 60-percent growth posted in the first half this year. Its net interest margin (NIM), or what is left after the interest it pays out for deposits and other services is deducted from its interest earnings, stood at an above-industry rate of 7.8 percent. NIM, net of provisions for loan losses, a metric that makes comparison among banks more meaningful, stood at 6.1 percent. The lender’s recurring earnings grew 24 percent to P18.0 billion as net interest income and fee-based income, excluding trading gains, rose 22 percent and 30 percent percent, respectively. Total noninterest income grew 5 percent year-on-year, tempered by the 70-percent dip in profits from securities trading. Net revenues

reached P18.4 billion, 17 percent higher year-on-year. Operating expenses were at P9.9 billion, and increased at a slightly slower pace of 16 percent. “We are happy to note that our higher income is mainly due to improving productivity and lower loan-loss provisions. These two items more than offset the much lower trading revenues and the substantial increase in taxes even as our NPL loan loss coverage significantly improved,” EastWest President Bobby Reyes said. Total assets grew 17 percent to P314.9 billion, driven by the growth in the bank’s loan portfolio. Total loans increased 18 percent to P216.3 billion. Consumer loans,

which grew 29 percent, account for 72 percent of total loans. Growth in consumer loans was led by the bank’s auto-loans business, which was also recently awarded Auto Loan Product of the Year at The Asian Banker Philippine Country Awards 2017. Total deposits rose 19 percent to P257.1 billion. Low-cost deposits grew 23 percent. “Our third quarter results prove that we are on the right track. EastWest is a true retail bank whose strength lies in its core operations. As we had projected, we are enjoying the early fruits of our store network expansion, which enabled us to generate more deposits, which in turn allowed us to fund more loans and enhance our profitability,” Reyes added. EastWest Bank has 446 stores nationwide. EastWest reported a return on equity of 13.8 percent and a return on assets of 1.7 percent at the end of the period. On income guidance, EastWest CEO Tony Moncupa Jr. said, “We are on track to end 2017 with a net income of P4.8 billion, or 41 percent higher, versus the P3.4 billion booked in 2016,” affirming the income guidance the bank gave earlier.

China Bank nine-month income up 17 percent C

hina Banking Corp. (China Bank) reported doubledigit net profits generated, mainly from its core and fee-based businesses. In a regulator y filing, the lender reported P5.7-billion net income in the January-to-September period this year, up 17 percent from last year. It attributed the stronger-thanexpected growth to higher net interest revenues of 16 percent to P14.26 billion, as well as to the 17-percent growth in noninterest income to P4.9 billion. China Bank grew its noninterest income despite the P611.43-million drop in trading gains. Its core operating income excluding trading gains and nonrecurring income grew 19 percent compared to last year. This reflected continued robust growth in service charges, fees from investment banking and trust, as well as income from asset sales, the bank said. “China Bank continues to deliver positive results on the back of strong growth in our core banking businesses. The betterthan-expected results reflect the fruits of our significant strategic initiatives since we began our expansion phase 10 years ago with the Manila Bank acquisition.” China Bank President William Whang said.

W ha ng took t he hel m on November 1. China Bank ’s performance translated to a 10.41-percent return on equity and a 1.16 percent return on assets on consolidated basis. Its loan portfolio grew by 25 percent to P434.81 billion as consumer loans grew 28 percent even as the corporate segment expanded by 32 percent on strong demand. The bank’s total assets grew 23 percent to P692 billion, but kept its nonperforming loans (NPL) ratio low to only 1.76 percent. Consolidated NPL coverage ratio averaged only 91.29 percent. China Bank’s deposits grew 22 percent to P578.04 billion during

the period, as its low-cost current accounts and savings account deposits grew 25 percent. The bank attributed its strong deposits growth to the setting up of new branches across the country. “Our distribution network has grown almost four times from only 148 branches in 2007 to 569 branches as of September 2017, of which 158 are from China Bank Savings,” Whang said. Total capital funds reached P82.38 billion, up 29 percent from the same period last year folloing China Bank’s P15-billion capital, raising exercise in May. Its common equity Tier 1 ratio hit 13.85 percent and total capital adequacy ratio stood at 14.65 percent. Bianca Cuaresma

Case clippings

By Justice S J Ranada Jr.

DANGEROUS DRUGS–essential elements To ensure conviction in illegal possession of dangerous drugs, the following elements must be established: (1) the accused was in possession of the dangerous drugs; (2) such possession was not authorized by law; and (3) the accused was freely and consciously aware of being in possession of the dangerous drugs. As in illegal sale, the dangerous drug illegally possessed by and confiscated from the accused constitutes the corpus delicti of the offense. People v. Del Mundo 20 Sep 2017

GR 208095 Martires, J

French bank thrives on exotic deals

decade after losses on complex financial products threatened to upend Natixis SA, the French bank is thriving on its taste for exotic deals. Natixis is creating US collateralized loan obligations (CLOs) and equity derivatives as it embraces what its executives have called “financial engineering.” A securities-financing unit that’s puzzled analysts helped boost earnings, while products, including structured investments for Taiwanese insurers, add to growth in Asia, a region where the

Paris-based bank had scaled back after the credit crisis. Those are some examples of the deal making that helped drive a jump in investment banking revenue this year, at a time when most rivals across Europe and the US are struggling. CEO Laurent Mignon, 53, has spurned more straightfor ward trading businesses in favor of complex transactions that can be more lucrative as record-low interest rates and postcrisis rules render making money a challenge. “The bank has come back from

the ashes,” said Gildas Surry, a former bank analyst at BNP Paribas SA, who now helps manage €1.2 billion ($1.4 billion) in financialsector debt at Axiom Alternative Investments in London, including Natixis debt. “But good growth never comes without risk. They very much have to strike the right balance.” Natixis’s corporate and investment bank posted a 12-percent gain in revenue in the first nine months. Income from trading jumped 17 percent, a faster pace than at virtually all the big

The 2018 national budget Part Two

t is assuring to note that the 2018 national budget is part of a packaged plan that stretches out contemporaneous with the term of the Duterte administration, which takes responsibility for the spending and results. It is not proposed in isolation but is meant to be understood as a continuing “live” spending guide with targeted outcomes, with set parameters matching on the one hand the expenditures and, on the other hand, the revenues and borrowings, in a manner that is believed to be a manageable fiscal program. So the budget establishes the premise that, “The government adopts an expansionary fiscal policy in the medium term to allow more spending for priority expenditures, such as infrastructure and social services. This will help the economy grow by 7 percent to 8 percent and reduce the debt-to-GDP ratio to 38.1 percent in 2022, from 40.6 percent in 2017.” This premise is significant for budget watchers. The government is going to very deliberately increase spending to prime, support and sustain the momentum of economic growth. This economic growth means releasing through government spending a wide range of mutually reinforcing forces of economic activities—stimulating start-up enterprises, encouraging business expansion, promoting robust business growth, opening up employment opportunities, increasing corporate profit and individual incomes, as well as generating wider bases and higher levels of taxes. As production rises, so does consumption, translating to improved economic prosperity overall. The expansionary fiscal policy can be seen and understood through this simplified cause-and-effect sequencing scenario. As we might realize, the government has to borrow to partly finance the programmed spending, as the projected rev-

investment banks, except for Jefferies Group Llc. Deutsche Bank AG, Goldman Sachs Group Inc., JPMorgan Chase & Co. and others suffered declines. A 9-percent drop in third-quarter trading that the bank reported this week was the smallest decline among the French securities firms. The corporate and investment bank had a 15.5-percent return on equity so far in 2017, the highest profitability among Natixis’s three main businesses and ahead of its targets. The unit is run by Francois

FINEX free enterprise Santiago F. Dumlao Jr. enues are not adequate to cover all expenditures. This is the fiscal deficit incurred when government spending exceeds the collected revenues. Incurring fiscal deficits is accepted practice so long as the debt is kept manageable, usually measured in its reasonableness by its proportion to GDP. For this, the fiscal deficit target is 3 percent of GDP. But a broader measure of “debt manageability” is to look at total government debt as a percentage of GDP. While the borrowing is increasing, so is the GDP expanding faster. Consequently, the debt as a percentage of GDP even becomes smaller through the years, from 42.2 percent in 2016 to 38.8 percent by 2020. By comparison, the debt-toGDP ratios (2016) of some selected countries from the International Monetary Fund/Wikipedia, are: Indonesia 24 Thailand 36.54 Malaysia 55.47 Singapore 111 Japan 237.9 (highest) United States 106.71 In a coordinated monetary policy, the Bangko Sentral ng Pilipinas (BSP) governor has announced that he intends to inject more liquidity into the financial system, putting more money into the hands of consumers. This will be done by reducing the reserve requirements for banks, thus making more available funds for consumer and business lending. All these reinforce and drive economic growth and undergird the budget objectives. Like all plans, the national budget makes some major assumptions, and planners have to be discrimi-

Riahi and industry veteran Marc Vincent. Riahi used to work at the Elysee palace under President Nicolas Sarkozy, along with Francois Perol, the head of Natixis’s parent Groupe BPCE. “We used to be a player of more modest size,” Mignon told reporters in August. “We are catching up.” Created in 2006 by two cooperative lenders, Natixis posted the biggest net losses of any French bank from the subprime crisis. It has been profitable every quarter since a mid-2009 re-

nating in the choice of the macro indicators that tell how the budget assumptions are playing out and impacting on the budget. There is a collective thinking going into the formulation of the national budget, represented by the, Development Budget Coordination Committee (DBCC), which chooses the key assumptions that anchor the budget: the GDP; the inflation rate; interest rate; and foreign-exchange rate. The budget secretary chairs the DBCC, with the finance secretary, National Economic and Development Authority head and the Executive Secretary as members. Notably, the BSP is made officially as a resource institution, which is good. In some countries, we might find fiscal and monetary authorities not quite aligned in their policies and prescriptions for economic growth and stability. And what if the macro indicators change, and they do change? How will the budget be impacted? The DBCC has figured it out for us. When the GDP-growth rate grows by one percentage point, the government generates an additional P21.4 billion in revenues. For every one percentage-point increase in inflation rate, revenues will increase by P20.7 billion. For every one percentage-point increase in Treasury bill (interest) rate, there’s an increase of P1.0 billion from withholding taxes. It also increases the cost of the country’s debt by P2 billion. A P1 depreciation against the United States dollar increases tax revenues by P9.5 billion; and also increases the cost of foreign-denominated debt by P2.1 billion. A one percentage-point increase in merchandise imports can increase revenues by P4.2 billion. These are the dynamics in the budget assumptions, the macro indicators that the Department of Budget and Management monitors as every budget cycle progresses, the cue from which budget adjustments are made in a continuing work-in-progress.

shuffle when Mignon took over. During the early years of his tenure, the bank received guarantees from its parent to wind down more than €30 billion of dubious assets, trimmed most of its exotic operations and retrenched in Asia. Since then, Mignon has embarked on a fresh expansion in Asia and the US, where it’s become a top arranger of CLOs, entities that pool high-yield debts and then slice them into securities of varying risk and return that are sold to investors. Bloomberg news

A10 Friday, November 10, 2017 • Editor: Angel R. Calso

Opinion BusinessMirror

www.businessmirror.com.ph

editorial

Broken justice

e have all probably at one time or another seen a rendition of Lady Justice the statue based on the ancient Roman art known as Justitia. The personification of justice balancing the scales dates back to ancient Egypt. The sword she holds represents authority and the idea that justice can be swift and final. The blindfold was added in a 1543 Swiss sculpture to show impartiality without regard to wealth, power, or other status. The recent “Doing Business 2018” report from the World Bank created a stir in the Philippines, as our ranking on the ease of doing business dropped significantly. We lost ground not only in comparison to others but in terms of our previous scores. The interesting aspect of this report is that it uses real-world examples, such as the procedures to actually build an P8-million warehouse in Quezon City to how many steps it takes for a company to pay income taxes or to get an export license. Commentary about this report lamented the complex and overlapping bureaucracy required to start a business. If you are a newly formed corporation, you need a briefcase full of your Securities and Exchange Commission registration documents to hand out to various national and government agencies. The report had a detailed checklist of the 16 major steps that a simple corporation had to pass through, from the barangay to the national level, just to begin business. But we know all that and we also know that this is due in large measure to the many local government units involved. The national government has tried to cut through the red tape and bureaucracy for large companies with the establishment of special economic zones. In fact, it may be relatively easier to set up a large manufacturing operation than a local restaurant. However, the World Bank report was about “doing business” and not just the “ease of doing business,” and one critical aspect of the report was almost ignored in the local press and media. The Philippines showed dismal performance in “starting a business,” ranking at 173 out of 190 nations. Overall, though, the Philippines ranked 113th. Perhaps more important is what the World Bank calls the Distance to Frontier (DTF). This is the distance of each economy to the “frontier,” which represents the best performance in each of the indicators since 2005. DTF is measured from 0 to 100, where 0 represents the lowest performance and 100 represents the frontier. The Philippines’s lowest DTF scores came in “Enforcing Contracts” (46) and “Protecting Minority Investors” (40). A general assessment of the situation regarding legal protections and—for want of a better term—justice is the “Strength of Legal Rights Index.” This is a scale of 0 to 12. Four economies rank a 12. The average for East Asia and the Pacific is 7.2. The country’s score for its Strength of Legal Rights is 1. A clan of hyenas living in an African savanna might rate a lower score than the Philippines. Or maybe not. By comparison, our regional neighbors have scored as follows: Lao PDR and Indonesia, 6; Thailand, 7; and Malaysia, 8. This is a completely unacceptable situation that has endured for decades. There is no reasonable excuse. We can try to rationalize the problem. “The judicial system is politicized.” “The system needs procedural reform. ”“The laws are archaic and outdated.” However, a nation and economy that is not ruled by law will never attain its potential. Since 2005

BusinessMirror A broader look at today’s business ✝ Ambassador Antonio L. Cabangon Chua Founder

Publisher

T. Anthony C. Cabangon

Editor in Chief

Jun B. Vallecera

Managing Editor Associate Editor City & Assignments Editor

Max V. de Leon Jennifer A. Ng Vittorio V. Vitug

Senior Editors

Lorenzo M. Lomibao Jr., Gerard S. Ramos Lyn B. Resurreccion, Efleda P. Campos Dennis D. Estopace

Online Editor Social Media Editor

Ruben M. Cruz Jr. Angel R. Calso

Creative Director Chief Photographer

Eduardo A. Davad Nonilon G. Reyes

Chairman of the Board & Ombudsman President VP-Finance VP Advertising Sales Advertising Sales Manager Group Circulation Manager

Judge Pedro T. Santiago (Ret.) Benjamin V. Ramos Adebelo D. Gasmin Marvin Nisperos Estigoy Aldwin Maralit Tolosa Rolando M. Manangan

BusinessMirror is published daily by the Philippine Business Daily Mirror Publishing, Inc., with offices on the 3rd floor of Dominga Building III 2113 Chino Roces Avenue corner De La Rosa Street, Makati City, Philippines. Tel. Nos. (Editorial) 817-9467; 813-0725. Fax line: 813-7025. (Advertising Sales) 893-2019; 817-1351, 817-2807. (Circulation) 893-1662; 814-0134 to 36. E-mail: news@businessmirror.com.ph.

www.businessmirror.com.ph

Printed by brown madonna Press, Inc.–San Valley Drive KM-15, South Superhighway, Parañaque, Metro Manila MEMBER OF

Public service announcement James Jimenez

spox

ew things to remember about the ongoing voter registration. Voter registration happens Monday to Saturday, including holidays, at all local Commission on Elections (Comelec) offices nationwide, until November 30, 2017. Registration hours are from 8 a.m. to 5 p.m. If you’re 15 to 17 years old and you registered in July 2016, or from November 2016 to April 2017, you don’t have to register now. Your name is already on the roster of Sangguniang Kabataan (SK) voters, and you will be able to vote only for SK officials in the May 14, 2018, Barangay and Sangguniang Kabataan elections (BSKE). If you’re 15 to17 years old and you registered in July 2016, or from November 2016 to April 2017, and you’re turning 18 on or before the date of the 2018 BSKE, your name will be automatically submitted to the Election Registration Board (ERB). If the ERB approves your “application,” you will be included in the list of barangay voters for the 2018 BSKE; you will be voting for both SK and barangay officials.

If you’re a registered SK voter now—which means you’re 15 to 30 years old— but you’re turning 31 on or before the date of the 2018 BSKE, then you will be automatically removed from the SK list of voters. On election day, you will only be voting for barangay officials. Local Comelec offices during this period will entertain applications for new registration, i.e., firsttime voters, as well as applications for reactivation, change or correction of entries, and inclusion or reinstatement in the list of voters. Registered voters who haven’t voted in two consecutive national elections automatically have their voter registration deactivated. In order to vote again, an application for reactivation must be filed. An application for change or correc-

Local Comelec offices during this period will entertain applications for new registration, i.e., first-time voters, as well as applications for reactivation, change or correction of entries, and inclusion or reinstatement in the list of voters. Registered voters who haven’t voted in two consecutive national elections automatically have their voter registration deactivated. In order to vote again, an application for reactivation must be filed.

tion of entries is generally intended to make the records reflect a new civil status, i.e., from “single” to “married,” for example, and to address any errors in the record. An application for reinstatement or inclusion is necessary if you’ve lost and recently reacquired the right to vote, or if you have been incorrectly excluded from the list of voters. No applications for transfer of registration will be entertained during this registration cycle. This includes all forms of transfers— transfers to a different city or mu-

nicipality, and transfers within the same city or municipality. If your registration has been deactivated and you want to have it reactivated, you can only do that in the same city or municipality where you were originally registered; reactivation anywhere else counts as a transfer, and will not be entertained. Bring a valid picture identification card. You may also be asked to provide documents which prove your residence, such as a billing statement in your name. In some cases, particularly for SK registrants, you may be required to provide a valid birth certificate to prove your age. There is currently no voter registration in the province of Lanao del Sur, owing to the safety and security conditions still prevailing in that area. As a rule of thumb, the Comelec constantly strives to increase the public’s access to electoral processes, like voter registration, as this will greatly improve the inclusivity of elections. Thus, local Comelec offices may conduct satellite registration during this period. Those who want to have satellite registration in their locality may approach their local election officer for detailed information and instructions on how to make that happen.

Russia’s role in securing Asia’s prosperity

By Vladimir Putin | Bloomberg View

ussia values the Asia-Pacific Economic Cooperation (Apec) forum—which begins this week in Danang, Vietnam—for the opportunities it affords all participants to engage in discussions and coordinate positions on a variety of economic, social, environmental and cultural issues. Member-states strive to cooperate based on the principles of consensus and voluntary participation, mutual respect and willingness to compromise, regardless of the political situation. This is what the Apec’s spirit of partnership is all about.

As a major Eurasian power with vast Far Eastern territories that boast significant potential, Russia has a stake in the successful future of the Asia-Pacific region, and in promoting sustainable and comprehensive growth throughout its territory. We believe that effective economic integration based on the principles of openness, mutual benefit and the universal rules of the World Trade Organization (WTO) is the primary means of achieving this goal. We support the idea of forming an Asia-Pacific free-trade area. We believe this is in our practical interest and represents an opportunity to strengthen our positions in the region’s rapidly growing markets. Indeed, over the past five years, the share of Apec economies in Russia’s foreign trade

has increased, from 23 percent to 31 percent, and from 17 percent to 24 percent in exports. We have no intention of stopping there. Of course, in creating the Apec free-trade area, we can draw on the experience of other key integration agreements in the Asia-Pacific region and Eurasia, including the Eurasian Economic Union, in which Russia cooperates with Armenia, Belarus, Kazakhstan and Kyrgyzstan. Our union has been developing dynamically, and we are eager to build relations with all countries and associations that are interested in doing so. Vietnam, the host of this year’s Apec meeting, was the first state to sign a free-trade agreement with the union. As a result, our trade grew significantly and became more diversified. Talks on

a similar agreement with China concluded a short while ago. Talks with Singapore have begun, and we are working on the possibility of signing a free-trade agreement with the Association of Southeast Asian Nations. On a related note, I would like to mention our idea to create the Greater Eurasian Partnership. We suggested forming it on the basis of the Eurasian Economic Union and China’s “Belt and Road” initiative. To reiterate, this is a flexible modern project open to other participants. Comprehensive development of infrastructure, including transportation, telecommunications and energy, will serve as the basis for effective integration. Today, Russia is modernizing its sea and air ports in the Russian Far East, developing transcontinental rail routes, and building new gas and oil pipelines. We are committed to bilateral and multilateral infrastructure projects that will link our economies and markets—such as the Energy Super Ring that unites Russia, China, Japan and the Republic of Korea, and the Sakhalin-Hokkaido transport link. We are particularly focused on integrating Russia’s Siberian and Far Eastern territories into this

broader network. This includes a range of measures to enhance the investment appeal of our regions and to integrate Russian enterprises into international production chains. For Russia, the development of our Far East is a national priority for the 21st century. We are talking about creating territories of advanced economic growth in that region, pursuing large-scale development of natural resources and supporting advanced high-tech industries, as well as investing in human capital, education and health care, and forming competitive research centers. We hope that our foreign partners, primarily from Apec economies, will play an active role in these projects. All the more so, as foreign participants of the annual Eastern Economic Forum held in Vladivostok already had a chance to gain confidence in the prospects and feasibility of our plans. We have an equally serious approach to involving small and medium businesses in Apec economic integration processes, and supporting female entrepreneurship and start-up companies run See “Russia,” A11

Opinion BusinessMirror

www.businessmirror.com.ph

Cardinal Tagle to keynote Servant Leadership in Business

Friday, November 10, 2017 A11

Minding manners in hospitals Tito Genova Valiente

annotations

Rev. Fr. Antonio Cecilio T. Pascual

SERVANT LEADER

am inviting everyone to listen to His Eminence Manila Archbishop Luis Antonio Cardinal Tagle as he keynotes the forthcoming Servant Leadership in Business Conference slated on January 31, 2018, at the Rizal Ballroom of Shangri-La Hotel, Makati City.

The one-day conference will center on the qualities of true servant leaders, which aims to instill among the participants the desire and commitment to practice servant leadership as an integral part of business. Servant leadership is an act of service or a way of leading, which ensures that other people’s highest priority needs are being acted upon, according to author Kent Keith. Vision and values are established up-front and common goals are shared by both the servant leader and his followers. The difference is the intent to serve first, then to aspire to lead. The first Servant Leadership Conference was held in June 2013, at the SMX Convention Center, Mall of Asia, in Pasay City, coinciding with the “Year of the Faith,” which was declared by Pope Emeritus Benedict XVI. It was intended for and attended by a thousand Church leaders, from both the clergy and the laity. Responding to the call of Pope Francis on leadership, the Serviam CCC Foundation held the second conference, “Servant Leadership in Public Service” on July 2 and 3, 2015, at the grand ballroom of Crowne Plaza Manila Galleria, Ortigas Center, Quezon City. It is part of Serviam’s advocacy to propagate servant leadership as a way of life in all facets of society, i.e., the family, in the government, business, church, media, etc. Conference fees is at P3,000 from October 1 to November 15, 2017, P3,500 from November 16

Russia’s. . .

continued from A10

by young entrepreneurs. Of course, we attach special importance to strengthening our cultural ties and expanding our contacts in the spheres of science and education. Looking ahead, we will work to form a common education hub, perhaps through the Far Eastern Federal University in Vladivostok. We believe that establishing effective cooperation to support innovation is the most important task we face. As such, Russia has put forward a number of specific initiatives. These include unifying digital economy and trade rules, harmonizing technical standards, coordinating strategies for forming high-tech markets and creating a uniform conceptual framework for the digital space. We have also shared with our partners our experience in providing e-services to the public. In addition, we suggest starting consultations within Apec

Servant Leadership in Business Conference is organized and presented by Serviam CCC Foundation, which was established in June 2003 by Catholic lay leader Antonio B. de los Reyes, with the blessing of His Eminence Jaime Cardinal Sin who graciously offered the use of his Episcopal motto, Serviam, Latin for “I will serve,” as its name. It is currently chaired by His Eminence Luis Antonio Cardinal Tagle, with yours truly serving as its spiritual director. to December 31, 2017, and P4,000 from January 1 to January 31, 2018. Servant Leadership in Business Conference is organized and presented by Serviam CCC Foundation, which was established in June 2003 by Catholic lay leader Antonio B. de los Reyes, with the blessing of His Eminence Jaime Cardinal Sin who graciously offered the use of his Episcopal motto, Serviam, Latin for “I will serve,” as its name. It is currently chaired by His Eminence Luis Antonio Cardinal Tagle with yours truly serving as its spiritual director.

I, however, belong to a generation that believes in good breeding as never correlated with social class. To borrow a turn of phrase from an old film, no one has the monopoly of unyielding good taste. Let me set a location. Last week I was hospitalized again due to an affliction in the same right leg. It was not in the complicated brain and not in the mystical, mysterious heart but in the leg! Do not get me wrong, I am perfectly aware that, like vicious cousins, diseases cannot be chosen. So there I was in the Catholic hospital in our city, in a room with a view of overripe calamansi and a soft sunset courtesy of the kindest month of November. With the tiny birds crowning the trees and the quiet crucifix on the wall just to my left, I am left with hours ruminating, meditating not on death, naah, but on life and how we can control things while we are still alive. Here are thus notes on manners that good health workers and attendants should master and embed in their soul. First, we should take note of the patient. Unlike the label appended

To the nurses, good manners still apply in the hospital room. If you want to inspect the afflicted leg of the patient, ask his permission if you can raise his hospital gown that, as designed, already makes him stupidly sexy and delicate. Do not go near him and without a hello, raise the cover to his leg. What if the opposite happens, and the patient raises your skirt as you approach him? to him, the patient does not live up to that virtue of patience. He is cranky, impertinent, and, ah, impatient. Take note also that most patients are not dying. Hospitals are generally for healing. This is for student-nurses. When you take the blood pressure of the patient, you are required no less than having the savvy of a diplomat. If you have a buddy, tell him not to say, “Wow, he is really hyper-

The antidote to smuggling Dr. Jesus Lim Arranza

For more information, contact the Conference Secretariat at (02) 897 2143, or 0908 4109759 or at serviamslc2015@gmail.com. on international information security and protection of computer software. Preventing and providing relief after natural disasters and manmade accidents, epidemics and pandemics is another challenge that requires a joint response. In addition, we need to tackle foodsecurity issues together. As one of the world’s exporters of grain, vegetable oils and fish, Russia expects to become the leading supplier of ecologically clean food to our neighbors in the Asia-Pacific region. We are taking measures to increase agricultural output and improve productivity. We intend to engage in substantive discussions on all these topics at the 25th Apec Economic Leaders’ Meeting this week. I am confident that, acting together, we will find solutions to the challenge of supporting the steady, balanced and harmonious growth of our shared region, and securing its prosperity. Russia is ready for such a collaborative effort.

his article comes with a caveat—that hospitals in this country are served by workers who are vastly underpaid and grossly overworked.

Continued from A1

t is strongly recommended that in the event an importer declares its importation in the generic name and not according to the HS Code, a 100-percent inspection of said shipment should be conducted.

One glaring example of this form of technical smuggling is in the importation of flat steel products. There are several kinds of steel products with different HS Codes, like the hot-rolled steel sheets and coils, cold-rolled steel sheets and coil, and coated galvanized steel and coils. The hot-and cold-rolled steel sheets and coils have a 3-percent tax rate based on its HS Code, while the coated galvanized steel sheets and coils has a 10 percent tax rate based on its HS Code, as well. Some importers, however, declare their coated galvanized steel and coils importation as steel sheets and coils and/or steel sheets and coils secondary grade, both steel products have no HS Codes, to avoid paying the 10 percent tariff of coat-

ed galvanized steel coils based on its HS Code. b. Real-time access to Inward Foreign Manifest (IFM)—The private sector must be given copies of the shipping lines’ IFM within a mandated time schedule, before the ship’s arrival at its port of destination, to help alert the officials of the BOC, Department of Agriculture (for agricultural products) and the Department of Trade and Industry (for nonagricultural products) regarding all incoming imported goods, to enable them to react accordingly. The IFM will help detect misdeclaration, underdeclaration and misclassification. Moreover, the IFM will give Customs officials and the private sector advance knowledge of the importations coming in,

A Brexit glitch that could hurt Europe

ew doubt that the British economy will be severely hurt if the United Kingdom leaves the European Union w ithout a new agreement on trade and regulation. But there are risks for the EU, too. One that’s received too little attention concerns bank resolution. A cliff-edge Brexit could make it much harder for EU authorities to impose losses on investors in the event of bank failure. This, in turn, would put Europe’s taxpayers at greater risk.

The EU’s new resolution regime says that when a bank fails, its bondholders must share some of the burden through a so-called bail-in mechanism. Many bank bonds are written under British law. So long as the UK is in the EU, decisions by the EU’s resolution authorities to impose losses on creditors will automatically apply. Once Br it a in leaves t he EU, they won’t. The relevant European Union authorities are aware. The Sin-

The EU and the UK need to sign a cooperation agreement that would tell their courts to recognize resolution decisions taken in either jurisdiction. This would be to both sides’ advantage. The EU would not see its bail-in arrangements crippled overnight, and Britain would retain more of its legal-services business, since banks operating in the EU could continue to issue bonds under British law. gle Resolution Board (SRB), the agency responsible for failing banks, has war ned European lenders that debt issued under British law may not comply with

EU law after Brexit. Meanwhile, though, the SRB is asking banks to build adequate buffers of securities that can be subject to bail in, so the scale of

tensive.” Again, language does the trick. During situations like this, I like it when a medical worker in his or her mellowest tone tells me that my blood pressure is slightly elevated. The word makes you feel you have been promoted or that you have reached some kind of record. Still for the student-nurses: do not converse as if there is no patient listening to you. Be conscious of the pair of eyes darting from you and to your classmate. He is wondering why he is not part of the conversation when, in fact, he is the subject matter of your talk. To the nurses, good manners still apply in the hospital room. If you want to inspect the afflicted leg of the patient, ask his permission if you can raise his hospital gown that, as designed, already makes him stupidly sexy and delicate. Do not go near him and without a hello, raise the cover to his leg. What if the opposite happens, and the patient raises your skirt as you approach him? Remember that consensual seems no excuse

for Harvey Weinstein. Friendliness is good when done in moderation. The hospital room is not a ballroom-dancing hall. While it is good to praise a patient, be circumspect. At six in the morning do not holler, “Sir, you look so fresh while I am already looking so haggard.” The patient does not really care about how you look. He cares about how he is feeling that day. Besides, do not begrudge the patient if he is looking mightily good. It is his right. As for you looking haggard, a dash of lipstick should do wonders. More than the makeup though, you must utter lots of prayers that you, as health workers, stay good and healthy and that wages be soon raised and the prices of medicine inside the hospital pharmacy be lowered. Do not mind the patient too much. He knows if he is going to live or die. In that condition, manners are unnecessary because at that point, the universe takes over and the universe, for all the dumb claims of beauty pageants, is beyond us.

such as, what are these goods and the required permits and certifications for their importation. The IFM copy must, however, directly come from the shipping lines, not the BOC, to avoid its being sanitized by some corrupt Customs officials. c. Access to shipping lines stowage plan—Bureau of Customs officials and the private sector should be given access to the shipping line’s stowage plan, to enable them to help the BOC in determining the real weight of importations, whether bulk or containerized. The stowage plan refers to the actual balance and weight of a ship’s cargo to ensure its safe voyage. Hence, this data is the best reference for counterchecking the underdeclaration of weight of all shipment. The stowage plan should enable Customs officials and the private sector to check all shipment for underdeclaration of volume and weight, among others, even before the ship’s arrival at its port of destination. d. Tighten accreditation procedures at the BOC—During the various Senate hearings on smuggling at the Bureau of Customs, it was discovered that consigneesfor-hire thrive at the BOC. These are the consignees usually used by smugglers to facilitate their illegal importations. And many of these consignees-for-hire’s ad-

dresses were nonexistent. It is strongly recommended then for the private sector to be involved in the accreditation process of importers at the BOC, like the verification of addresses of importers, among others. This would check collusion between consignees-for-hire and some corrupt Customs officials in the accreditation of importers. It is also recommended that in the event an accredited importer moves to another address, the BOC should be notified of the transfer within 10 days from actual date of transfer. Otherwise, it could be grounds for the cancellation of the importer’s accreditation at the BOC. A portion of the application form for accreditation with the BOC should be for the applicant’s undertaking, stating, among others, the applicant’s prior knowledge and agreement to the BOC’s change-of-address notification policy. All the aforementioned measures are doable, so long as the Bureau of Customs is determined to adapt them. And with Lapeña’s leadership, we in the private sector are hopeful that these recommendations would be adapted by the BOC. For my next column, I will discuss the antidote to smuggling in Customs bonded warehouses and economic zones.

the problem is growing. In theory, after Brexit, banks could insert a clause into existing bond contracts say ing t h e i n s t r u m e nt s w e r e s u b ject to the EU’s resolution dec isions. But investors m ight not agree to the change, because it would make them more vulnerable to losses. The EU and the UK need to sign a cooperation agreement that would tell their courts to recognize resolution decisions t a ken in eit her jur isd ict ion.

This would be to both sides’ advantage. The EU would not see its ba i l-in a r ra ngements crippled overnight, and Britain would retain more of its legal-ser v ices business, since banks operating in the EU could continue to issue bonds under British law. Britain has far more to lose from a disorderly Brexit than the European Union does. But close cooperation before and after Brexit is something the EU should want as well. Bloomberg View

2nd Front Page BusinessMirror

A12 Friday, November 10, 2017

Time for Asean to unlock region’s manufacturing potential–Duterte

By Elijah Felice E. Rosales @alyasjah

resident Duterte on Thursday sought for an Association of Southeast Asian Nations that will not only harvest its own raw materials, but will also develop and manufacture them into goods within the region.

In a speech at the Asia-Pacific Economic Cooperation (Apec) CEO Summit, the President said it is high time the Asean improved its industries by not relying on an import-dependent, export-oriented economy. He added it will be better for the region to adopt an economic policy ā laEuropean Union that will allow Asean countries to process their own raw materials into goods. “I will bring [up] this matter forcefully in the Asean summit. We have to have integration, cohesiveness and we must act as one,” Duterte said. “[If] Europe can do it with its union and America is starting to revive its industries,

why can’t we, the Asean, do it?” Duterte lamented the alleged unequal relations between the Asean and the West, as the latter has taken advantage of the former’s abundance in resources, importing raw materials from the region then selling them back “four times the cost.” “ We’ve only [prov ided] the

raw mater ia ls. We send it to t he i mproved cou nt r ies, t he industr ia lized countr ies, and we get the finished product,” the President said. Duterte added: “ That’s the essence of how we can sort out this thing that we export the raw materials, then we import them again into finished products, but four times the cost of what our raw materials are valued. That is globalization.” The Chief Executive also said he understands why United States President Donald J. Trump is keen on implementing protectionist policies in the US, citing the need to lure back American companies to bolster his “America first” policy. With a nationalized industry, the President concluded a lot of Filipinos would not have to travel to another country to seek job opportunities. “Even the Filipinos—all the plumbers, all the electricians— that…have the masters certifi-

If Europe can do it with its union and America is starting to revive its industries, why can’t we, the Asean, do it?”—Duterte

cate of a trade, are in the Middle East. So the Philippines is having a boom in real estate, but yet it has to find the workers, and that leaves us behind in terms of how long it would take you to complete a project because then you have to scrape the bottom to find out who can work with us,” Duterte said. As much as globalization and free trade are needed, the President said, the two have damaged the poor so much there is now an ever-pressing need for some remedial measures. Make no mistake, Duterte added, he is not against globalization, but the Apec and Asean economies have to address some of its drawbacks. “The rich would become richer and the poor would become poorer, unless things are changed for those who are left behind,” Duterte said. The President is presently in Danang, Vietnam, for the Apec summit, where he is expected to hold bilateral meetings with Russian President Vladimir Putin and Vietnam President Tran Dai Quang and a pull-aside meeting with Hong Kong Chief Executive Carrie Lam. Duterte is scheduled to return home on Saturday, in time for the 31st Asean summit, which will be the concluding event of the Philippines’s chairmanship.

STUDY SHOWS RIDE-SHARING SERVICES CAN KEEP A MILLION PRIVATE CARS OFF MM ROADS By Catherine N. Pillas @c_pillas29

ranspo rt - n e two rk company Uber said ride-sharing services can help reduce the volume of private vehicles on Metro Manila roads by about a million, thus, easing the traffic congestion in the metropolis. U b e r re ce nt l y co m m i s s i o n e d a Boston Consulting Group sur vey in 10 Asian cities to compare benefits of ride sharing in the region, and underscored that in Manila, there would be a reduction of as many as a million private vehicles if the idea of completely relying on ride-sharing would continue gaining traction. “With ride sharing, personal-car needs of Manila residents could be met with one-third of private cars we have today— that’s almost a million fewer vehicles,” said Laurence Cua, general manager of Uber Philippines, at the “Unlock Manila” media event on Thursday. Uber pointed out that its service is not meant to supplant public modes of transport, but private vehicles for personal use. This is consistent with the result of the Boston Consulting Group study, which concluded that to ease traffic congestion, ride sharing should be seen as a substitute to private vehicles and not public transport. Also, in a survey, 71 percent of Metro

Manila residents already consider ridesharing services as an alternative to owning a car, Cua added. Manila residents still cover the most number of miles in their travels via public transport. The study said 51 percent of total kilometers traveled annually are still via public transportation. Private cars, as a mode of transpor tation, landed at second place. Ride sharing, meanwhile, at the moment, takes up only 5 percent of the total miles traveled by commuters in a year. This is a disadvantage, as ridesharing is estimated to be “1.8 more transpor t- efficient [people kilometers] than private vehicles.” Jason Moy, principal of Boston Consulting Group, elaborated in their broader study a scenario where ridesharing adoption substitutes the most popular private vehicle—in the case of Manila, this points to cars, as opposed to motorcycles. With ride-sharing services replacing private vehicles as the second most-used transport mode, and these ride-sharing groups advocate more pooling (i.e., Uber Pool as the first choice rather than Uber X), the 2.5 million total number of vehicles in Metro Manila can be reduced to 1.5 million. Cua, while declining to mention specific numbers, said on a monthly basis, Uber has over a million people using its ride-sharing services.

PHL chicken exports declining even before discovery of bird flu

Lawmaker seeks reactivation of Gulf crisis team

By Jasper Emmanuel Y. Arcalas @jearcalas

party-list lawmaker on Thursday sought the activation of the Presidential Middle East Preparedness Team (PMEPT) in view of rising tensions in the Gulf region. Party-list Rep. Aniceto Bertiz III of the ACTS OFW said the activation of the PMEPT, headed by former Armed Forces of the Philippines Chief of Staff and current Environment Secretary Roy A. Cimatu, is needed to review contingency plans for overseas Filipino workers (OFWs) in the region. The lawmaker also recommended that the composition of the PMEPT be expanded to include a representative from the National Economic and Development Authority. He said the PMEPT should also examine how rising tensions in the Middle East would affect the price of oil, which, in turn, would affect domestic prices. The PMEPT was created by virtue of an executive order issued by then-President Gloria Macapagal-Arroyo, with Cimatu as the head of the team. In October 2016 President Duterte appointed Cimatu as special envoy to the Middle East and head of the PMEPT. B e r t i z m a d e a s t ate m e nt a f te r recent developments in the Middle East, particularly in Saudi Arabia, where the government’s anti-corruption efforts have led to the detention of senior members of the royal family. “O ur national interest lies with maintaining good relations with our allies in the Gulf region, while ensuring the protection and welfare of millions of Filipino workers in the Middle East,” he said. “The activation of the Middle East Preparedness Team would help the national leadership draw up an appropriate plan to attain this objective.” He added that Cimatu has the experience and track record needed to review and, when necessary, update existing contingency plans, and look at potential security and economic risks that may affect Filipino workers in the Gulf region. “The activation of the PMEPT will not take too much of the environment secretary’s time, considering that contingency plans are already in place,” Bertiz said. “We keep advising our workers to stay calm and focus on their work, it is to the nation’s interest to make sure that the government is wellprepared for any eventuality. The activation of the PMEPT is a cautious step toward that direction.” Jovee Marie N. dela Cruz

www.businessmirror.com.ph

President Duterte speaks on the second day of the Apec CEO Summit taking place ahead of the Asia-Pacific Economic Cooperation Leader’s Summit in the central Vietnamese city of Danang on Thursday. AP/Dinh Hoang

‘NTBs offset trade gains in SE Asia’ By Cai U. Ordinario @cuo_bm

he increase in nontariff barriers (NTBs) had offset the gains in intraregional trade achieved by the Association of Southeast Asian Nations through the removal of tariffs, according to experts from the Asian Development Bank (ADB). In an Asian Development Blog, ADB Lead Economist for Trade and Regional Cooperation Jayant Menon and Economist Anna Fink said the while intraregional trade has continued to recover, reforms are needed especially in addressing the rise of NTBs. The region, the ADB economists said, is also faced with challenges, particularly those coming from Fourth Industrial Revolution (4IR) that could potentially widen inequality in the region. “The 4IR, therefore, provides an opportunity for the Asean to meet its goal of greater inclusion

by integrating micro, small and medium enterprises [MSMEs] into global value chains,” Menon and Fink said. “But it also presents a challenge to the region to invest in human capital to continue to trade and attract investment, and to enable innovation-driven economies.” The ADB economists said embracing the 41R, and inclusive, innovation-led growth will be essential to securing another 50 years of peace in the region. The 4IR could mean job losses due to automation, particularly through advanced robotics and artificial intelligence. This also means low-skilled jobs, such as assembly line workers, will be most at risk, and service jobs, such as those in business-process outsourcing, will also be threatened. The Asean, the economists said, must respond by enabling greater mobility of unskilled workers, which would cut unemployment in sending countries.

The economists said this will require Asean member-countries to start increasing their investments in human capital today. This means that workers’ skills must go beyond technical capabilities to include creativity and “innovative” problem-solving. Citizens of Asean countries, they said, will also need adult training and lifelong learning. Further, the introduction of “ disruptive technologies’ will empower MSMEs. More than 90 percent of enterprises within the Asean are MSMEs and they provide most of the employment in member-states. They also said block-chain technology has the potential to dramatically increase the security of cross-border financial transactions and logistics even in countries where these services are relatively underdeveloped. This technology has could benefit the smallest firms in the poorest countries of the Asean.

ven before avian influenza (AI) struck Central Luzon, Philippine chicken expor ts have been declining as government data indicated a double-digit drop in the volume of outbound shipments in the January-to-July period. Data from the Bureau of Animal Industry (BAI) obtained by the B usiness M irror showed the country’s chicken-meat exports during the seven-month period reached 2,609.374 metric tons (MT), 12.23 percent lower than last year’s 2,973.064 MT. BAI data indicated that Japan was the sole buyer of chicken products exported by the Philippines during the period. Last year the United Arab Emirates bought 40.101 MT of chicken meat from the Philippines. BAI Assistant Director Simeon S. Amurao Jr. attributed the decline in shipments to the stiff competition posed by neighboring Southeast Asian countries, particularly Thailand. “Probably the reason would be competition issues, especially with Thailand, because they produce cheaper chicken. And Thailand has announced that they will ramp up their chicken exports this year,” Amurao told the B usiness M irror. In an earlier interview, Amurao said the Philippines has lost a chunk of its market share in Japan when it started importing chicken from Thailand in January 2014. Tokyo announced the lifting of a decadelong ban on poultry products, including raw chicken meat, from Thailand in December 2013. Thailand’s chicken industry was nearly crippled after it was hit by bird flu in 2004. Thai chicken meat is widely used in Japanese dishes, such as fried chicken (karaage), chicken and egg rice (oyakodon) and chicken hot pot, and in popular Thai dishes in Japan, such as green curry, grilled chicken, kaprao kai, as well as in Chinese food. Last year the Philippines shipped 5,000.121 MT of chicken meat. The bulk, or 4,965.020 MT, was bought by Japan. A recent Global Agricultural Information Network (Gain) report indicated that Japan may import more chicken from Thailand to meet domestic demand as it has also closed its borders to Brazilian meat products. “Exports to Japan increased by 17 percent when Japan turned in more purchases from Thai suppliers after reports of a spoiled meat scandal in Brazil,” the Gain report read. “Japan currently accounts for 51 percent

of Thai chicken-meat exports in the first seven [months] of 2017, up from 49 percent in the same period of 2016,” it added. An online news report indicated that Thailand is targeting to expand its shipments of frozen chicken products to Japan by 19.71 percent to 150,000 MT, from last year’s 125,295 MT. Since mid-August Japan has restricted the entry of chicken meat from the Philippines after Manila confirmed the outbreak of bird flu in some Central Luzon towns. Tokyo informed Manila of its decision to prohibit the entr y of Philippine poultry products in Japan via an official communication dated August 14. Japan’s Chief Veterinary Officer Norio Kumagai addressed his letter to Agriculture Assistant Secretary for Livestock Enrico P. Garzon Jr. “This is to inform you that we have suspended the import of poultry products [other than feather and down] from the Philippines as of August 12, based on the information on the detection of HPAI [virus serotype H5] at a poultry farm in the Philippines, which was notified to OIE [World Organisation for Animal Health] by your authority,” the letter read, a copy of which was obtained by the BusinessMirror. Kumagai, who is also the director of Animal Health Division of Japan’s Ministry of Agriculture, Forestry and Fisheries’s Food Safety and Consumers Affairs Bureau, said the import ban will be imposed “indefinitely.” “We would like you to provide us with detailed information of the outbreak, including date of stamping out and disinfection for affected premises when it becomes available to let us review this suspension appropriately,” he said. In a recent interview, BAI Officer in Charge Ronnie D. Domingo said the Philippines may regain its bird flu-free status before the end of the year, as the government would soon be able to complete the roll out of all the necessary measures to manage the AI virus. Domingo added that they plan to notify the OIE that the Philippines is already bird flu-free by December 20, more than four months after the virus was discovered in some towns in Central Luzon. “International bodies like the OIE [requires official report] so we can regain our bird flu-free status. Our target is to inform them by December 20,” he said. “We will inform them that we have already conducted disinfection procedures and have controlled the movement of animals.”