BusinessMirror April 22, 2015

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

U.N. Media Award 2008

BusinessMirror A broader look at today’s business

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TfridayNovember

Wednesday, April18, 22,2014 2015Vol. Vol.1010No. No.40195

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panel of EXPERTS SAY LAWMAKERS SHOULD LIMIT EXEMPTIONS IN FINAL VERSION OF FAIR COMPETITION ACT

‘Don’t water down competition law’

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By Catherine N. Pillas

Govt rejects 10-yr Treasury bond tenders on high rates

conomists and legal experts said lawmakers should not give in to lobbying from some sectors that aim to water down the proposed Fair Competition Act—which is now inching closer to approval in Congress—through various exemption provisions.

At the Ayala University of the Philippines School of Economics (UPSE) Economic Forum on Monday afternoon, experts said the better option is to give the planned Fair Competition Commission more flexibility in going after firms that are demonstrating anticompetitive behavior or practices.

“The exemptions in the bills may be negating the aim of promoting fair

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competition. The versions should clean up exemptions and leave the decision-making [as to who are exempted] to the [Philippine Fair Competition] Commission,” said lawyer Anthony Abad, CEO of TA Trade Advisory Group, at the forum.

Abad said that, for years, the different versions of the Fair Competition bill filed in Congress have been Continued on A8

CHINA CRITICIZES U.S., PHL DRILLS IN DISPUTED SEA

xpanded war games in the South China Sea between the Philippines and its allies are inappropriate and run counter to efforts to ease territorial tensions in the waters, China’s state-run Global Times said in an editorial.

The comments come, as more than 11,000 soldiers from the Philippines, the US and Australia are set to take part in the joint drills near contested islands, with the Philippines’s military chief calling China’s building work on disputed reefs “worrisome” and a source of friction with its neighbors.

Twice as many troops as last year will join the exercises off Palawan province. Disputes over the sea, of which China claims about four-fifths under a so-called nine-

By David Cagahastian

dash line drawn on a 1940s map, have escalated, as China expands the reach of its military to back its territorial interests.

While Philippine President Aquino says the drills aren’t targeted at China, “few believe he means it,” the Global Times said in the editorial on Tuesday on its English- language website.

“Can anyone believe that China can be bluffed to make compromises when others show off their military muscle? We will simply find it laughable, while imagining Philippine personnel stumbling after US forces.”

“The thunder of guns made by Washington and Manila there is inappropriate and of little use.”

Continued on A2

PESO exchange rates n US 44.2300

Spanish Ambassador to the Philippines Luis Antonio Calvo and BusinessMirror Publisher T. Anthony C. Cabangon participate in discussions during The Round Table of the ALC Media Group in Makati City. The Round Table highlights the long-standing relationship between Spain and the Philippines. STEPHANIE TUMAMPOS

‘Help Spain translate maps, documents’

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By Recto Mercene

side from advising claimant parties to the West Philippine Sea to abide by the United Nations Convention on the Law of the Sea (Unclos), Spanish Ambassador to the Philippines Luis Antonio Calvo urged the Philippines to help his country’s efforts to translate voluminous documents during the Spanish Occupation.

In the course of translations, Calvo said Filipinos might be able to find texts that would help show that the many shoals and reefs in the West Philippine Sea belong to the Philippines.

One example is “Bajo de Masinloc,” a Spanish term which translates to “under Masinloc.” Bajo de Masinloc is a town in Zambales that has

jurisdiction over what is now called Panatag Shoal and Scarborough Shoal on some international maps.

“The solutions to the South China Sea could be found in history,” Calvo said during a forum on Tuesday, dubbed as The Roundtable,” which was attended by the publisher, editors and reporters of the BusinessMirror and other media companies belonging to the ALC Media Group.

At the moment, the Philippines and China are engaged in arbitration in the Permanent Court of Arbitration in The Hague, and are asking Unclos to define the limits of China’s excessive claims in the West Philippine Sea. He said Spain is helping train many Filipinos to be proficient in Spanish, so they can help trans-

late some 5 million pieces of documents deposited in the archives in his country.

He said these documents contain all the political, economic and cultural activities of Spain during its 300-year occupation of the Philippines. Nonetheless, Calvo suggested that the Philippines must find other means to settle its differences with China.

“China and the Philippines must find ways to find a common ground, because they share many economic and cultural exchanges in the past,” Calvo said.

He added that, during the Spanish Occupation, there was a meeting of three cultures in the Philippines shared among the Chinese and the Spaniards and the Filipinos.

Continued on A2

he government thumbed down all bids tendered for reissued 10-year Treasury bonds (T-bonds) on Tuesday, which would have generated P25 billion, because the market wanted unreasonably high interest rates for the IOUs. At the Bureau of the Treasury (BTr), the various government securities dealers demanded interest rates ranging from 3.629 percent to as high as 3.659 percent.

Although the bond sale was greeted by a deluge of offers totaling P49.588 billion versus an offering of only P25 billion, the market demanded a premium of at least 10.4 basis points higher than the rates fetched by government securities at the secondary market. The offered 10-year Tbonds carried a coupon rate of 4.125 percent.

According to the BTr, interest rates at the secondary market for government securities averaged only 3.567 percent.

Finance Secretary Gil S. Beltran said the auction committee made a split decision, resulting in the eventual rejection of all tenders for the T-bonds.

“We didn’t feel that an interest 10 basis points higher than the rate at the secondary market is something that the government should be paying,” Beltran said.

He said the government can afford the luxury of rejecting high offers for the T-bonds, because it sits on a supply of cash to fund its operations without the compulsion to borrow right away.

n japan 0.3709 n UK 65.9027 n HK 5.7071 n CHINA 7.1321 n singapore 32.7994 n australia 34.1413 n EU 47.4986 n SAUDI arabia 11.7947 Source: BSP (21 April 2015)

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News

BusinessMirror

Wednesday, April 22, 2015

news@businessmirror.com.ph

China criticizes US, phl drills in disputed sea Continued from A1

China’s actions have caused unease among neighbors such as Vietnam and the Philippines, which also claim some of the area.

It has raised concern among countries that use the sea lanes for trade and commerce, Gen. Gregorio Pio Catapang told reporters in Manila on Monday. “The size of this reclamation is making us wonder what the real intention is,” he said.

‘Military purposes’

China’s reclamation “will cause tensions among claimant countries not only because it could deter freedom of navigation but also due to its possible military purposes,” Catapang said.

The military drills, which run until April 30, seek to “improve our interoperability and enhance our national defense capability,” Philippine Foreign Affairs Undersecretary Evan Garcia told reporters after the opening of the annual Balikatan—shoulder-to-shoulder in Filipino—exercises on Monday. “Our armed forces needs to improve its own capacity in order to better serve and protect our country.”

Catapang said a US plan to deploy advanced air force and naval equipment in the Philippines is in the works. “ We w ill offer them facilities that we can jointly use because of the situation now obtaining in the West Philippine Sea,” he said, referring to the South China Sea. US Pacific Fleet Commander Harry Harris, who has previously described China as building a “great wall of sand” in the area, said in a speech on Tuesday in Jakarta that China is “responsible for a rise in tensions and provocations in the South China Sea.”

Mischief reef

Even so, Adm. Harris said he didn’t think there was a risk of a major “force-on-force” conflict in the waters. “I have to be ready for that, but I’m concerned about the small tactical actions that have strategic consequences throughout the region.”

China has often stated its right to carry out construction work in the South China Sea, with recent satellite photos showing images of Chinese dredgers at work at Mischief Reef on the Spratly Islands, a feature also claimed

by Vietnam, the Philippines and Taiwan.

Asked at a regular briefing in Beijing about the Balikatan drills, Foreign Ministry Spokesman Hong Lei said China called on countries to work together to boost security in the South China Sea, and “contribute to regional peace and stability.”

‘More wisdom’

China continues to offer bilateral negotiations to solve territorial disputes, the Global Times said.

“However, the Philippines insists on diverting to another path even after meeting obstacles,” it said. “We wish Manila can deal with the issue with more wisdom.”

Aquino will bring up China’s reclamation work at the Association of Southeast Asian Nations summit in Malaysia next week, Foreign Affairs Assistant Secretary Luis Cruz told reporters on Monday in Manila. “We would always aim for a collective statement, this time on the issue of the reclamation of some features in the South China Sea,” he said.

Cruz said Vietnam had sought a meeting with Aquino at the summit. Catapang also accused China of tolerating environmentally harmful fishing practices by its fishermen occupying Scarborough Shoal. Bloomberg News

Recto Mercene (from left), reporter of the BusinessMirror; Alma Anonas-Carpio, associate editor of the Philippine Graphic; Rey Langit, DWIZ station manager; Luis Calvo, ambassador of Spain to the Philippines; T. Anthony Cabangon-Chua, BusinessMirror publisher; Jun Vallecera, BusinessMirror editor in chief; and Frederick Alegre, BusinessMirror vice president for the Corporate Affairs grace The Round Table of the ALC Media Group in Makati City on Tuesday. STEPHANIE TUMAMPOS

‘Help Spain translate maps, documents’. . .

“There is much more to be gained through discussion rather than talks of entitlement or polemics,” Calvo said.

Meanwhile, Calvo added Spain is celebrating the 450th year of the Galleon Trade, which also marks the 450th year of the Sanduguan or the blood compact, between datu Sikatuna, the reigning Datu or lord in Bohol, and Spanish explorer Miguel Lopez de Legazpi.

He said the Sanduguan, or alliance between the two, happened in Loay, Bohol, where he is involved in restoring some

of the old Spanish churches destroyed by the earthquake.

At the same time, the Spanish envoy said this year also marks the 200 years of the end of the Manila Galleon and the 150th year of the establishment of the Manila Observatory. Previously named Observatorio Meteorologico del Ateneo Municipal de Manila, it was founded in 1865 by the Jesuits.

When the Manila Galleon ended, Calvo said the Philippines “dramatically progressed” economically.

Continued from A1

Calvo also said Spain is committed to assist Bohol in restoring several churches destroyed by the earthquake.

He said he would go back there, after visiting Bohol last Sunday because the province is high on the agenda of Spain.

The Spanish influence is pronounced in Boholano culture and society. For one, Spanish family names are still being used

by Boholanos, a news report of his visit said.

Spain-assisted organizations have been providing assistance to Bohol to help in its rehabilitation and development.

news@businessmirror.com.ph

The Nation BusinessMirror

Editor: Dionisio L. Pelayo • Wednesday, April 22, 2015 A3

SC declares Comelec-Smartmatic P268.8-M deal illegal

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By Joel R. San Juan

AGUIO CITY—The Supreme Court on Tuesday unanimously struck down the P268.8-million contract entered into by the Commission on Elections, (Comelec) and Smartmatic-Total Information Management (TIM) for being illegal.

SC Spokesman Theodore Te said the justices granted the consolidated petition filed by the Integrated Bar of the Philippines (IBP) and the Automated Election System (AES) Watch, led by Bishop Broderick Pabillo, seeking to scap the midnight deal.

Te said the Court held that Comelec Resolution 9922, which awarded to Smartmatic the contract for the diagnosis and minor repair services for 80,000 Precinct Count Optical Scan (Pcos) machines to be used in 2016 elections, as well as the extended warranty contract given to the company, violates several laws.

“It is clear that the Comelec committed grave abuse of discretion and, thus, its Resolution 9922 and the Extended Warranty Program [Part 1] should be stricken down and, necessarily, all amounts paid to Smartmatic-TIM pursuant to said contract, if any, being public funds should be returned to the government,” the Court ruled.

Bigger war games with US next year

By Rene Acosta

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EFENSE Secretary Voltaire Gazmin said this year’s Balikatan military exercises, involving more than 11,000 Filipino and American troops, is a preview to bigger war games between the two countries under the Enhanced Defense Cooperation Agreement (Edca).

In fact, Gazmin said that, as both forces trained, the US and the country should also begin working for operations under the Edca, whose approval by the Court is being sought by the Aquino administration as it has been initially crafted as part of the country’s overall defense plan, while the military is arming itself.

“Certainly, the Philippines-United States Exercise Balikatan 2015 would contribute in preparing us to work together as provided for by our existing Mutual Defense Treaty. We shall undertake this exercise, as we work toward operationalizing, if permitted by our Supreme Court, the Edca, which would enable us to conduct combined exercise more efficiently and effectively,” Gazmin said.

Defense and military officials earlier said that, had the Edca been implemented upon its signing last year, then China would have been disuaded from taking construction activities in its occupied reefs in the West Philippine Sea or at least it has slowed down.

In fact, at the time the Edca was being hammered out, China has slowed down in its activities, including its intrusions and appearances in the country’s territory, other than maintaining its near presence in Ayungin Shoal.

Some say China took advantage of the Edca review, brought about by constitutional questions raised by some groups and individuals, by hastening construction on eight reefs that it occupies.

“They want to finish the construction before the court can rule on the Edca,” one official said.

Gazmin is not accepting a rejection of the Edca by the court, since its rejection would bring the country’s overall defense security plan “back to square one.”

As proposed, the Edca will see the “rotational” deployment of US forces and their equipment in upgraded military camps and bases around the country.

Aquino sees no need to convene NSC yet

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ALACAÑANG on Tuesday said President Aquino does not yet see the need to convene the National Security Council amid increasingly aggressive Chinese reclamation projects in the West Philippine Sea. “In the President’s view, at this time, none,” Palace Deputy Spokesman Abigail Valte said.

She, however, indicated that the matter is already being handled by a Cabinet security cluster which includes the heads of the Department of Defense and the Armed Forces, among others.

“We have dealt with other national security-related issues as well as other matters, through the mechanism of the security cluster,” Valte said.

“And allow me to say that you may be used to the usual members of the security cluster but from time to time, relevant agencies are asked to go or asked to participate whenever there are matters that fall under that department’s competence.”

Valte added: “And it is also in this venue wherein the security cluster and other members of the Cabinet discuss matters relative to the West Philippine Sea issue.”

Earlier, fishermen from Zambales reported that they were assaulted with water cannons by Chinese coast guard personnel, when they tried to fish at the Scarborough Shoal or Bajo de Masinloc. Butch Fernandez

The SC ruled that the Comelec failed to justify its resort to direct contracting with Smartmatic-TIM under Section 50, Article XVI of the Government Procurement Reform Act (GPRA).

The Comelec earlier said that it chose to approve Smartmatic’s extended-warranty proposal, instead

of conducting a public bidding, owing to “tight time schedule” in the preparations for the 2016 elections if public bidding were to be conducted.

The poll body also reasoned out that it would be “too great a risk” to give the refurbishment and repair of the PCOS machines to any third party other than Smartmatic,

considering the highly technical nature of the refurbishment aand repairs of the machines.

The Court ruled that the Comelec failed to show that any of the condition under Section 50, Article XVI of the GPRA existed.

It added that the Comelec’s claims of impracticality were not supported

by any independently verifiable data and its perceived “warranty extension” is, in reality, a circumvention of the procurement law.

The IBP and the AES, in their consolidated petitions, argued that the Pcos machines repaircontract blatanly violated Republic Act 9184, or the GPRA.

A6 Wednesday, April 22, 2015

Opinion BusinessMirror

editorial

On the Chinese yuan as a reserve currency

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HIS is a case where theoretical considerations will have to give way to objective realities.

US has a point in saying that the Chinese yuan will have to be made “fully convertible” before it can be included in the International Monetary Fund’s (IMF) special drawing rights (SDR), an artificial currency the IMF offers to supplement nations’ foreign-exchange reserves. Of what use is a currency whose exchange rate is controlled by the issuing country’s government? Where capital-account flows, in and out, are tightly managed by that government? Who would want to hold that currency as its reserve currency when its value is set by fiat rather than by market forces?

China is currently involved in a worldwide campaign to make the yuan one of the world’s reserve currencies, along with the US dollar, the European Union’s euro, the Japanese yen and the British pound. It has enlisted Canada to serve as its launching pad.

Last week it inaugurated the Industrial and Commercial Bank of China Ltd., Canadian unit, in Toronto to begin functioning as the clearinghouse for all China-related transactions, first inside Canada, then inside the US and later inside countries “south of the border.”

It is an audacious move, and the Chinese government is making no bones about it—its ultimate objective is to replace the dollar as the main reserve currency of the trading world.

The yuan is bound to succeed in entering the IMF’s SDR. But whether it can replace the dollar as the reserve currency of choice of trading countries is another matter.

Right now, 44 percent of global transactions use the dollar for settlement and 66 percent of central-bank holdings in the world are in dollars. The yuan’s share in global transactions is 1.8 percent.

The US is pushing a sound theoretical argument, but many suspect the argument is selfserving, since it bestows on the US a high privilege given only to countries whose currencies function as reserve currencies. All that the US has to do is print money to purchase imports, not to produce a surplus in the current account as everybody else must do.

At the same time, realities on the ground buttress the Chinese position. The yuan’s share in total world settlements may be small, but it is rapidly growing.

As matters stand, more and more countries are trading with China, and transactions in yuan are increasing by leaps and bounds. Some observers are already saying that the Chinese yuan will weigh in more heavily than the Japanese yen and the British pound if the SDR is recalculated.

Meanwhile, IMF Managing Director Christine Legarde is saying that China’s admission into the SDR coterie “is only a matter of time.”

What is the significance of all these to the Philippines?

For one, we can increase our reserves in yuan on the ground that a broad base is superior to a narrow one.

But we must set up safeguards so that the value of what will be our yuan reserves does not become hostage to Chinese government manipulation.

Where do your contributions go?

Susie G. Bugante

All About Social Security

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s a Social Security System (SSS) member, your right to socialsecurity benefits is assured by the number of contributions you have made to the pension fund. For instance, to be entitled to sickness benefits, you only need at least three monthly contributions within the 12-month period preceding the semester of illness. To qualify for disability or death pension, the minimum number of contributions required is 36 months; for retirement pension, 120 months. Your contributions keep the pension fund going and finance the benefits you receive.

Last year the SSS collected more than P120.6 billion in contributions, out of which over P102.6 billion were paid in benefits to almost 3 million beneficiaries. Under the Social Security law, funds not immediately needed to pay benefits are put on

reserve and are invested with skill, care, prudence and diligence.

Over the years, the SSS has built an asset pool amounting to P427.17 billion as of end-2014. It invested more than P394.5 billion of its assets and earned more than

P34.5 billion from its investments in government securities, private equities, loans to members (salary, educational, housing), corporate notes and bonds, bank deposits (short-term money placement) and developmental loans. Minus operating expenses incurred in running a service-delivery network of 283 branches and service offices here and abroad, the SSS posted a net profit of P44.5 billion as of year-end 2014.

Based on the 2011 actuarial valuations with updates as of December 2013, the life of the SSS pension fund is estimated to last until 2042.

This means that it can pay all its obligations—retirement, sickness, maternity, death, disability, funeral benefits—until 2042, which is 27 years from now. Some might think this is a long period of time, but financial experts say otherwise, stating that a pension fund must aim for perpetuity or an actuarial life, of at

Asia’s growing China problem William Pesek

BLOOMBERG VIEW

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SIA has a China problem.

Beijing has just initiated its biggest cut in bank-reserve requirements since 2008, a move that underscores just how worried it is about its economy. But the cut is also a stark wake-up call for neighbors that have gotten used to riding China’s boom.

For years, China’s steady growth served as a welcome antidote to an otherwise gloomy global scene. Now, even China is sputtering in ways that should worry officials from Seoul to Jakarta.

The People’s Bank of China (PBOC) betrayed a sense of heightened anxiety this week. Normally, the central bank tweaks the amount of cash lenders must set aside as reserves by 50 basis points, at most.

Slashing it by 1 percentage point leaves little doubt that, amid a collapse in the price of commodities, like iron ore (down 30 percent this year), China is decelerating faster than President Xi Jinping had expected.

What’s more, the contradictory signals coming out of Beijing suggest that policy-makers are at odds over how to respond. The PBOC’s cut—which will allow banks to add $194 billion of new lending to the

economy—came two days after the China Securities and Regulatory Commission clamped down on margin trading to curb froth in the stock market. Even as Beijing has been warning its 1.3 billion people not to bet too heavily on stocks, it has been loosening rules to allow investors to open as many as 20 trading accounts.

That latter policy should be particularly worrying for anyone hoping the Chinese economy will avoid an outright crash. “When a stock market doubles in six months,” investor Patrick Chovanec of Silvercrest Asset Management quips, “you usually take away the punchbowl— not China.”

China’s economic policy-makers, who are attempting a managed slowdown on an unprecedented scale, probably feel they lack other options.

Since 2008 they had relied on huge infrastructure projects and thriving real-estate markets to put a floor under weakening growth. But those sectors are now wildly overcapacity.

And that has forced Xi and PBOC chief Zhou Xiaochuan to depend almost entirely on inducing a stockmarket rally.

Whether that’s a sustainable strategy is another question, of course. Economic policy that’s overly reliant on the stock market, economist Adam Slater of Oxford Economics says, “raises the risk of serious negative feedback effects, for example from bad loans, banking sector problems and a flight of foreign capital.”

What’s clear is that any economic collapse in China would immediately be felt across the continent. China’s $9.2 trillion economy is, by far, Asia’s biggest—nearly twice the size of Japan’s—and it is the region’s main trading partner.

China’s downshift is already unmasking Asia’s underlying cracks.

After a decade of stellar performance the region is expanding no faster than in the early 2000s. “Risks in emerging markets—half of global

least 60 to 70 years. To achieve this goal, the SSS must continue with its reform agenda, seeking to gradually lengthen the actuarial life of the fund and prudently discharge its fiduciary duties so that you, your children and your children’s children will still enjoy the benefits the SSS provides.

Having said all these, let me go back to the question: “Where do your contributions go?” They go back to you or your beneficiaries in the form of benefits that you or they can enjoy for life.

For more information about the SSS and its programs, call our 24-hour call center at (632) 920-6446 to 55, Monday to Friday, or send an e-mail to member_relations@sss.gov.ph.

Susie G. Bugante is the vice president for public affairs and special events of the Social Security System. Send comments about this column to susiebugante.bmirror@gmail.com.

GDP—have, in our view, clearly increased,” Slater says. Now, Slater says, developing-economy growth, excluding China, will be only about 2 percent this year “with risks still to the downside.”

Asia needs a growth plan that relies less on China and more on domestic demand. It’s hard to craft uniform prescriptions for such a large and diverse region, but, at risk of generalizing, Asia’s developing economies should start by lowering trade barriers; reducing red tape; attacking corruption; improving infrastructure; and reducing taxes on regionally made goods to increase exports and, in turn, wages.

“Asia has had an easy ride for many years, initially enjoying the fruits of reforms implemented much earlier and then seeing its run extended by an extraordinary monetary stimulus,” warns HSBC economist Frederic Neumann. “This, however, led to a neglect of further reforms, with easy gains dispelling any sense of urgency to sustain progress with politically painful policy decisions.”

It’s hard to exaggerate how devastating a Chinese crash would be for Asia. Even an orderly deceleration of China’s economy will likely prove a crisis. But, perhaps, that won’t be a bad thing for a region that has long delayed standing on its own.

Opinion BusinessMirror

opinion@businessmirror.com.ph

Pillar of neoliberal thinking is vacillating

Doctrine of Condonation explained

Inter press service

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OME—This month’s World Economic Outlook released by the International Monetary Fund (IMF) only confirms that consequences of the collapse of the financial system, which started six years ago, are serious. And they are accentuated by the aging of the population, not only in Europe but also in Asia, the slowing of productivity and weak private investment.

another term. Removal cannot extend beyond the term during which the alleged misconduct was committed.

The doctrine of condonation is a limited empowerment of the electorate over the accountabilities of their elective local officials. It is limited because it does not cover criminal accountabilities. It is a legal fiction grounded upon a presumed knowledge of all the activities and behavior of the elective local official. It is presumed that when the electorate exercised their right to choose, they were all aware of “all” the misconducts of the public official.

Reelection is the manifestation of the people’s will. The rationale for this condonation doctrine was provided by American authorities, specifically the 1887 case of Conant v Brogan, which has found unwavering adoption in Philippine jurisprudence.

Aguinaldo explained, citing Pascual v Hon. Provincial Board of Nueva Ecija: “The Court should never remove a public officer for acts done prior to his present term of office. To do otherwise would be to deprive the people of their right to elect their officers. When the people have elected a man to office, it must be assumed

and the payments for the assailed retainer continued to be paid during the succeeding term (Salalima v Guingona, 1996) or where the assailed contract was signed during the previous term and the deliveries under the contracts were made during the succeeding term (Garcia v Mojica, 1999). The presumption under this jurisprudence is that the two incidents pertain to a single administrative offense. The recourse against the erring official would be through a criminal prosecution.

The condonation would not apply where the offense was committed while the public official was still an appointive official and he had been elected for the first time. The condonation of an administrative offense takes place only when the public official is reelected despite the pendency of an administrative case against him (Ombudsman v Torres, 2008).

A challenge to a preventive suspension order becomes moot and academic upon expiration of the term of office of petitioner and petitioner’s reelection to the same post (Dumlao v Diaz, 1969). Of course, this condonation of misconduct committed during the expired term of the public officer by virtue of his reelection to office for a new term applies only to his administrative and not to his criminal guilt. The condonation would still apply even if the anomalies were discovered, and the administrative complaints were filed only after his reelection. The remedy then would be to file the appropriate civil and criminal actions.

Average growth before the financial crisis in 2008 was around 2.4 percent. It fell to 1.3 percent between 2008 and 2014 and now the estimates are that it will stabilize at 1.6 percent until 2020, in what economists call the “new normal”. In other words, “normality” is now unemployment, anaemic growth and, obviously, a difficult political climate.

For the emerging countries, the overall picture does not look much better. It is expected that potential growth is expected to decline further, from an average of about 6.5 percent between 2008 and 2014 to 5.2 percent during the period 2015 to 2020. The case of China is the best example. Growth is expected to fall from an average 8.3 percent in the last 10 years to somewhere around 6.8 percent. The result is that the Chinese contraction has worsened the balance of exports of raw materials everywhere.

The crisis is especially strong in Latin America, and in Brazil the fall in exports has contributed to worsening the country’s serious crisis and increasing the unpopularity of President Dilma Rousseff, already high because of economic mismanagement and the Petrobras scandal.

This, by the way, opens up a reflection that is fundamental. From Marx to Keynes, redistribution theories were all basically built on stable or expanding economies.

Progressive parties were able to build their success during economic expansion but the Left has not developed much economic science on what to do in period of crisis. What it tends to do is mimic the receipts and proposals from the Right and, when the crisis is over, it has lost its identity and has declined in the eyes of the electorate.

From this perspective, the situation in Europe is exemplary. All those right-wing xenophobic parties which have sprouted up—even in countries long held to be models of democracy such as the Nordic countries—have developed since 2008, the beginning of the financial crisis. In the same period of time, all progressive parties have lost weight and credibility. And now that the IMF sees some improvement in the European economy, it is not the traditional progressive parties that are the beneficiaries.

The term that the IMF gives to the current economic moment is “new mediocrity”—which is a franker way of saying “new normal”—and it observes that in the coming five years, we will face serious problems for public policies like fiscal sustainability and job creation.

In fact, every day, the macroeconomic figures, which have become

the best way to hide social realities, are becoming less and less realistic if we go back to microeconomics as we have done during the last 50 years.

The best example is the United Kingdom, which is the champion of liberalism. Each year it has cut public spending and now claims to have growth in employment, with 600,000 new jobs in the last year.

The only problem is that if you look into the structure of those jobs, you will find that the large majority are part-time or underpaid, and employment in the public sector is at its lowest since 1999.

A clear indicator is the number of people who visit the food banks created to meet the needs of the indigent. In the world’s sixth largest economy, their numbers have grown from 20,000 before the crisis seven years ago to over 1 million last year.

And the same has happened all over Europe, albeit to a lesser extent in the Nordic countries.

UK economists have published studies on how austerity has affected growth. According to the Office for Budgetary Responsibility, established by the UK government, austerity blocked economic growth by 1 percent between 2011 and 2012. But, according to Simon Wren-Lewis of Oxford University, the figure is actually about 5 percent (or £100 billion).

In other words, fiscal austerity reduces growth, and this creates large deficits which call for more fiscal austerity. It is a trap that Nobel laureate Keynesian economists Joseph Stiglitz and Paul Krugman have described in detail to no avail. We are all following the “liberal order” of Germany, which think its reality should be the norm and that deviations should be punished.

Now, while we can all agree that much of this is obvious to the average citizen in terms of its impact on everyday life, what is important and new is that the IMF, the fiscal guardian which has imposed the Washington Consensus (basically a formula of austerity plus free market at any cost) all over the Third World with tragic results, has woken up to reality.

Don’t get me wrong—I’m not implying that the IMF is becoming a progressive organization, but there are signs that an important pillar of neoliberal thinking is vacillating.

Of course, those responsible for the global crisis—bankers—have come out with impunity. The world has exacted over $3 trillion from its citizens to put banks back on their feet. The over $140 billion in fines that banks have paid since the beginning of the crisis is the quantitative measure of illegal and criminal activities.

al-Qaeda and Islamic State are more violent than what we have seen in the past. n The last player in the equation is the Muslim Brotherhood, which has a presence in all the Sunni states and all too often opposes the traditional regimes. Two Middle East states—Turkey and Qatar—are supporting this player in one way or another.

This entire chaotic situation is reflected in a dangerous way on the borders of Israel.

In the north, where there once was Lebanon, we find an Iranian proxy known to all as Hezbollah, a

terrorist organization that reportedly has around 100,000 missiles and rockets. East of Lebanon—on the other side of the Golan Heights, where there once was Syria—we find Jabhat al-Nusra, an offspring of al-Qaeda.

On Israel’s southern border, along the Sinai desert, we face Ansar Beit al-Maqdis, an offspring of Islamic State. And as if that is not enough, on the northeastern part of Sinai, in Gaza, where there once was the Palestinian Authority, Israel faces not one but two terrorist organizations—the Palestinian Islamic Jihad, another Iranian proxy, and

Hamas, an offspring of the Egyptian Muslim Brotherhood.

Make no mistake, Israel in 2015 is the strongest regional power and can successfully face all of these challenges and others not mentioned here (like the Iranian nuclear challenge). Still, the 8 million people living 6,200 miles east of Chicago are worried. Their concern has to do with maintaining a stability that has been achieved since the establishment of the Jewish state 67 years ago. This stability—political, economic, social and military—is being challenged day in and day out.

INSURANCE FORUM

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VERY now and then, we excuse ourselves from discussing insurance matters to tackle issues relating to national concerns. Besides, both subjects serve the interest of the public-at-large. Today, we tackle the Doctrine of Condonation in administrative law.

This doctrine has recently been brought to the fore when Makati Mayor Junjun Binay used it as an argument to secure an injunction order from the Court of Appeals against the preventive suspension order issued by the Ombudsman.

We shall explain this condonation by reelection as it is established in jurisprudence, with no political leaning or bias.

Pursuant to the 1992 case of Aguinaldo v Santos, a public official cannot be removed for misconduct committed during a prior or previous term; his reelection operates as a condonation of the officer’s previous misconduct, reiterated in Malinao v Reyes, 1996 (see Provincial Board of Zamboanga del Norte v Guzman, 1967). This Aguinaldo ruling was based on the fact that the term of office during which the misconduct was committed expired before the petition questioning the validity of the administrative decision removing the respondent could be decided (see Reyes v Comelec).

Reyes v Comelec explains the rationale: If a public official is not removed before his term of office expires, he can no longer be removed if he is thereafter reelected for

The chaos that surrounds Israel

By Roey Gilad Chicago Tribune/TNS

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HEN President Franklin D. Roosevelt delivered his famous 1933 inaugural address in which he said that “the only thing we have to fear is fear itself,” he added an important clarification describing this fear as “a nameless, unreasoning, unjustified terror.” The terror that the people in Israel are facing, as was reflected in the outcome of the last elections, has a name—reason—and it is justified. Facing regional chaos, it is only natural that people are leaning more toward conservatism.

The storm that took over the Middle East during the last four years, a storm once called the Arab Spring, left behind plenty of

debris and an ocean of instability. In this ocean, Israel, the Jewish state, which maintains the only island of stability, faces four regional players.

n The first, and assuredly the most dangerous, is the Shiite Crescent—led by Iran and stretching over to Iraq, Syria and all the way down to Hezbollah in south Lebanon. n The second player is the Sunni moderates, led by Saudi Arabia and Egypt and including Jordan, the Arab Gulf states and states in North Africa. n Against the failure of those moderate Sunni states to successfully face the Shiite challenge, we are witnessing the emergence of a third player—the nonstate Sunni radical actor. Young members of

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that they did this with the knowledge of his life and character, and that they disregarded or forgave his fault or misconduct, if he had been guilty of any. It is not for the court, by reason of such fault or misconduct, to practically overrule the will of the people.”

The Doctrine of Condonation does not apply to criminal acts committed by the reelected official during his prior or previous term (Ingco v Sanchez, 1967; People v Jalosjos, 2000). Accordingly, the pendency of a criminal case under Republic Act 3019 may be the legal basis for the suspension from office in a subsequent term in the event of an elective official’s reelection (Libanan v Sandiganbayan, 1994). The ruling that a public officer cannot be removed for acts done prior to his present term of office applies only to administrative liabilities committed during the previous term of an elective official. The rationale for the foregoing distinction is that the administrative liability of a public officer is separate and distinct from his penal liability.

There is no condonation in criminal cases as guilt is determined by the courts and not the electorate. The rationale for the noncondonation of the criminal liability was explained in Oliveros v Villaluz.

The condonation of the administrative liability would still be recognized as having been granted during the previous term and the public officer will have no administrative liability during his succeeding term, where the misconduct was committed during the previous term and is continued to be perpetrated during the succeeding term, such as where the assailed retainer agreement was executed during the previous term

Dennis B. Funa

Roberto Savio

Wednesday, April 22, 2015

Atty. Dennis B. Funa is the Insurance Commission’s deputy commissioner for legal services. Send comments to dennisfuna@yahoo.com.

2nd Front Page BusinessMirror

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PUBLIC TO BENEFIT FROM PANEL’S DECISION ON MANILA WATER CASE

By Vg Cabuag

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he international arbitration panel conducting the hearings on the rate dispute between Manila Water Co. and the Philippine government has decided to reduce the water concessionaire’s rates.

The company, backed by the Ayala group and the concessionaire for the East Zone of Metro Manila, said the decision decreased its rate by P2.77 per cubic meter, and the adjustment should be carried out starting this year through 2017.

The panel reduced the company’s rate-rebasing adjustment for 2013 to 2017 by 11.05 percent, based on the company’s 2012 average basic water charge of P25.07 per cubic meter.

“While the ruling resolved specific issues raised by Manila Water in the dispute, we are deeply concerned about the finding of the appeals panel that Manila Water is a public utility,” said Gerardo Ablaza Jr., the company’s president “This, in our view, fundamentally changes the concession agreement, which characterizes the company as an agent and contractor of MWSS [Metropolitan Waterworks and Sewerage System],” he said.

Ablaza said the company will study the full implications of the ruling and expect the MWSS, the state-owned agency overseeing the operations of its two concessionaires, to also look

for ways to resolve what Manila Water called as “regulatory challenge.”

The panel ordered to reduce the company’s rate by P1.66 per cubic meter starting this year, another P0.55 per cubic meter by next year and P0.55 per cubic meter by 2017.

An adjustment for the consumer price index of 4.19 percent will also be made to the basic water charge in 2015, equivalent to P1.08 per cubic meter.

“Annual consumer price index adjustments will continue to be made consistent with the company’s concession agreement with the MWSS,” the company said.

The decision of the International Chamber of Commerce concludes a three-year rate-rebasing process that started in March 2012, when Manila Water submitted its business plan that included an increase in water rates.

More than a year later, MWSS decided in September 2013 that the rates should be reduced by 29.47 percent, or an average of P7.24 per cubic meter.

The other concessionaire, Maynilad Water Services Inc., which operates the West Zone, also asked an international panel to intervene.

The two firms sought to hike their base rates every three years as mandated by their concession contracts.

In the decision for Maynilad, which is led by Metro Pacific Investments Corp., the panel ordered an increase in its rates.

www.businessmirror.com.ph

PHL carriers outperformed Asean peers in 2014–Capa

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By Lorenz S. Marasigan

ILIPINO carriers bucked the general trend in the airline industry in the Asean last year, as market conditions in the Philippines improved due to mergers and resource rationalization, an aviation think tank said in an analysis.

The Philippine market benefited from consolidation and capacity reductions, while overcapacity plagued all the other major markets in Southeast Asia. This was reflected in the Centre for Asia Pacific Aviation’s (Capa) tally that showed that only seven out of 18 airlines in the Asean posted profits last year, two of which are from the Philippines.

Ranking third was Cebu Pacific, the leading budget carrier in the Philippines. Meanwhile, Philippine Airlines, the country’s flag carrier, rose to seventh place, after swinging

into the black from years in the red.

Tigerair Philippines ranked 10th, with a loss of $19 million, while AirAsia Philippines followed at 11th, with a $22-million loss last year.

“Challenging market conditions and overcapacity have taken a huge toll on Southeast Asia’s airline sector. An overwhelming majority of the region’s airlines were unprofitable in 2014 across both the lowcost and full-service models,” the research agency said in a report published on Tuesday.

Combined, the 18 publicly traded airlines—a number of which are subsidiaries of listed carriers—incurred operating losses of nearly $1 billion in 2014, compared to a slight profit of about $150 million in 2013.

“The big year-over-year swing is a reflection of the challenging market conditions throughout the region as it metamorphosed. Of the 18 airlines in this sampling, only six achieved improved operating figures in 2013, including four from the Philippines,” Capa said.

Improving market conditions in the Philippines, brought about by consolidations and capacity reductions, propelled some of the local airlines to greater heights, the think tank noted.

“The consolidation included the early 2014 acquisition by Cebu Pacific of Tigerair Philippines, which Cebu Pacific was able to quickly turn around. Tigerair Philippines incurred a net loss of only $4 million between March 20, 2014, the date the acquisition closed, and December 31, 2014. The low-cost carrier incurred a loss of about $54 million in 2013 and a loss of about $15 million in the first 80 days of 2014, based on figures from the Singapore-based Tigerair Group,” Capa explained.

AirAsia Philippines acquired Zest Airways in 2013, and the two carriers are now in the process of merging. The AirAsia Group is confident its Philippine operation can turn the corner in 2015, after narrowing losses in 2014.

“But by far the biggest improvement in the Philippine market and Southeast Asia overall has come at

flag-carrier Philippine Airlines,” the think tank said.

The legacy carrier, the last of Southeast Asia’s publicly listed airlines to report results for 2014, recently posted an operating profit of $7 million for 2014, compared to an operating loss of $283 million in 2013.

Now, despite hitting headwinds last year, these carriers will start seeing better bottomlines in 2015, as market conditions in the region improve from last year.

“The outlook for 2015 is brighter.

Market conditions began improving in the second half of 2014. Most of the losses booked for 2014 were incurred in the first half of the year,” Capa said. “More capacity adjustments and consolidation may be needed for the Southeast Asian airline sector to return to the profit levels of a couple years ago. The year 2014 was an extremely challenging year. The sector has passed through the eye of the storm, but some turbulence remains.”

As most airlines emerge from more expensive fuel hedges, the impact of substantially lower fuel costs will feed through and should deliver a much-needed boost to the bottom lines of many airlines, the think tank explained.

“The only caveat here is whether the positive revenue impact will be offset by discounting and a new round of capacity expansion,” it said.

EU revokes illegal-fishing ‘yellow card’ vs Manila

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he European Union (EU) on Tuesday said it has revoked the “yellow card”warning it issued to the Philippines, after Manila rolled out various measures to fight illegal, unreported and unregulated (IUU) fishing.

The yellow card was issued to the Philippines in June 2014 for “not doing enough” to stop IUU fishing. The EU cited Manila’s“concrete shortcomings,” such as the lack of a system of sanctions to deter IUU activities or absence of measures to address deficiencies in monitoring, control and surveillance of fisheries.

While the warning did not affect

bilateral trade, the EU could have banned fish products from the Philippines if Manila did not take steps to improve efforts to fight illegal fishing.

“The Philippines has taken responsible action, amended its legal systems, and switched to a proactive approach against illegal fishing,” European Commissioner for Environment, Maritime Affairs and Fisheries Karmenu Vella said in a statement.

“The Philippines has taken responsible action, amended its legal systems and switched to a proactive approach against illegal fishing,”EU Ambassador to the Philippines Guy Ledoux said.

Since an official dialogue started, the EU said the Philippines embarked on a series of reforms to upgrade its fisheries governance and successfully aligned it to international law.

“Achievements made by the Philippines include the adoption of a new Fisheries Code with a deterrent scheme of sanctions, the improvement of the traceability and catch certification schemes, reinforced cooperation with Papua New Guinea for inspection and control and coverage of the activities of the long distant fleet operating beyond Philippines waters,” the EU said.

‘Don’t water down competition law’ Continued from A1

peppered with exemptions as to what constitutes anticompetitive behavior, giving abusive firms loopholes to work on. To avoid this, he said, lawmakers should limit exemption clauses or put flexibility in the wording of the bill.

“The commission should be the one to decide if an agreement or conduct is anticompetitive or not, but, early on, they are already inserting [in the bill] what constitutes [anticompetitiveness] and what doesn’t. The effect of this is that lawyers of these companies can reason that the company’s contribution to economic progress or efficiency outweighs the anticompetitive behavior,” Abad explained.

“In the legislation of the European Union, they exempt some activities if they contribute to technological development, for example.

But their use ‘may not be considered as anticompetitive behavior,’ so it can still be open for discussion,” Abad added.

Using less definitive language in the exemption provisions of the bill will also allow for further investigation by the Commission to determine if anticompetitive behavior is at work, instead of being let off the hook immediately.

Examples of these exemptions are found in Sections 5 and 6 of the House of Representatives’s Philippines Fair Competition Act, or House Bill 5286, which deals with exemptions on anticompetitive agreements and abuses of dominant position, respectively.

In both provisions, if the agreement, or the conduct, is seen as contributing to improving production or boosting market efficiency, they are not considered to be either an abuse of a dominant position or considered an anticompetitive agreement.

The Senate version, which has already been passed by the upper chamber of Congress last December, allows for more leeway to investigate anti-competitive practices, as the exemption provisions are upon the determination of the commission.

Economist Dr. Ma. Joy V. Abrenica of the UPSE also stressed that the Fair Competition bill must not be too quick in ruling the illegality of actions taken by companies that enjoy market dominance.

“The law will be better off using a rule of reason [ROR] approach, as this is more adaptable to the business sector and will give more flexibility to small and medium enterprises,” Abrenica said during her presentation in

the forum.

The ROR approach analyzes the market outcome and gauges the positive and negative effects of a company’s action before determining it as a prohibited, anticompetitive conduct. This is the opposite of the “per se prohibition,” which is enshrined in the bill’s House version, which automatically considers certain activities—having the appearance of being anticompetitive—as illegal. “ T here shou ld a lways be proper economic analysis. No dominant position should ever be ruled as ‘per se prohibited,’ unless it has been proven that there has been abuse of that dominant position; this is the way of ROR,” Abad echoed.

The recommendations are expected to be incorporated come the bicameral conference committee, when both houses of Congress will meet to consolidate the differing provisions of their respective versions.

Senate Committee for Trade, Commerce and Entrepreneurship Chairman Bam Aquino expects the House of Representatives to be finished with its version, after the congressional break in June, and for the legislation to be up for approval before the Chief Executive’s State of the Nation Address in July.